UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



AMENDMENT
NO. 2 TO

FORM 10-KSB\A







|(MARK ONE)                                    
|----------------------------------------------
|                                              
|ý                                             
|                                              
|FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003   
|                                              
|                                              
|                                              
|o                                             
|                                              
|FOR THE TRANSITION PERIOD                   TO



COMMISSION FILE NUMBER 0-31193



|USIP.COM, INC.                                                
|--------------------------------------------------------------
|(Name of small business issuer as specified in its charter)   
|                                                              
|UTAH                                                          
|(State or other jurisdiction of
incorporation or organization)
|                                                              
|7325 Oswego Rd.
Liverpool, N.Y.                               
|(Address of principal
executive offices)                      
|                                                              
|Issuers telephone number, including area code: (315) 451-7515



Securities Registered Pursuant to Section 12(b) of The Exchange Act: None

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



Common Stock, $.01 Par Value

(Title of Class)



Check whether the issuer (1) filed all reports required to be filed by Sections 13 or 15(d) of the Exchange Act during the past 12 months (or 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 ý No o



Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of 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. o



State issuers revenues for its most recent fiscal year: $670,381



As of December 31, 2003 the aggregate market value of the common stock held by non-affiliates was approximately $1,660,644 based upon the closing price on December 31, 2003 of $0.38. As of December 31, 2003, there were 17,804,388 shares of common stock outstanding.



Documents incorporated by reference: None



Transitional Small Business Disclosure Format: Yes o  No ý





---



TABLE OF CONTENTS



|PART I   |                                                                                                                 
|-------- | ----------------------------------------------------------------------------------------------------------------
|         |                                                                                                                 
|Item 1.  | Description of Business                                                                                         
|         |                                                                                                                 
|Item 2.  | Description of Property                                                                                         
|         |                                                                                                                 
|Item 3.  | Legal Proceedings                                                                                               
|         |                                                                                                                 
|Item 4.  | Submission of Matters to a Vote of Security Holders                                                             
|         |                                                                                                                 
|PART II  |                                                                                                                 
|         |                                                                                                                 
|Item 5.  | Market for Common Equity and Related Stockholder Matters                                                        
|         |                                                                                                                 
|Item 6.  | Managements Discussion and Analysis or Plan of Operation                                                        
|         |                                                                                                                 
|Item 7.  | Financial Statements                                                                                            
|         |                                                                                                                 
|Item 8.  | Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure                            
|         |                                                                                                                 
|Item 8A  | Controls and Procedures                                                                                         
|         |                                                                                                                 
|PART III |                                                                                                                 
|         |                                                                                                                 
|Item 9.  | Directors, Executive Officers, Promoters and Control persons;
Compliance with Section 16(a) of the Exchange Act.
|         |                                                                                                                 
|Item 10. | Executive Compensation                                                                                          
|         |                                                                                                                 
|Item 11. | Security ownership of Certain Beneficial Owners and Management                                                  
|         |                                                                                                                 
|Item 12. | Certain Relationships and Related Transactions                                                                  
|         |                                                                                                                 
|PART IV  |                                                                                                                 
|         |                                                                                                                 
|Item 13. | Exhibits and Reports on Form 8-K                                                                                
|         |                                                                                                                 
|Item 14. | Principal Accountant Fees and Services                                                                          
|         |                                                                                                                 
|         | Signatures                                                                                                      





2



---

PART I



ITEM 1.  DESCRIPTION OF BUSINESS



GENERAL OVERVIEW



USIP.Com, Inc. (USIP, the Company, we, our or us) was incorporated under the laws of the State of Utah on April 6, 1978 as Derby Farms, Inc. On January 19, 1982 our Articles of Incorporation were amended and the name of our company was changed to Commerce Oil of Kentucky, Inc.



On January 31, 2000 Datone Communications, Inc., (Datone), a New York corporation and an independent payphone provider (IPP) merged into our company. All the Datone shares were retired. Datone shareholders received 7,268,388 restricted shares of common stock for their stock. On February 4, 2000 we amended our Articles of Incorporation and changed our name to USIP.Com, Inc.



On April 29, 2000 we purchased all the shares of NB Payphones, Ltd., (NB), the owner of 466payphones in Pennsylvania and Cointel Leasing, Inc., (Cointel), the owner of 45 payphones in Syracuse, New York, from Riviera Bay Holding Trust, a Gibraltar Trust, for 8,750,000 restricted shares of our common stock. NB is a USIP wholly owned subsidiary.



On August 30, 2000 we incorporated Datone, Inc. as a Delaware company. Datone, Inc. is a USIP wholly owned subsidiary. All the revenue generating assets and related expenses that we received from the Datone Communications Merger were subsequently moved via an intercompany transfer from USIP into Datone, Inc. Datone, Inc., was capitalized with $1,017. All of the Datone, Inc., shares were given to USIP. On October 1, 2000 we merged Cointel into Datone, Inc. by way of an inter company transaction. Management decided that it would not benefit our company to have two companies that are in the same business and location; we therefore combined the two in an effort to save money.



On December 14, 2001 we incorporated The Platinum Funding Corporation  (Platinum), as a New York wholly owned subsidiary for the purpose of developing a real estate based mortgage brokerage business. Platinum has had no activity since December 14, 2001. We are continuing our efforts to find a suitable candidate that will help us develop a real estate based mortgage brokerage business as originally intended.



SMART PAYPHONE TECHNOLOGY.



Our payphones utilize smart technology which provides voice synthesized calling instructions, detects and counts coins deposited during each call, informs the caller at certain intervals of the time remaining on each call, identifies the need for and the amount of an additional deposit in order to continue the call, and provides other functions associated with the completion of calls. Through the use of a non-volatile, electronically erasable, programmable memory chip, the payphones can also be programmed and reprogrammed from our central computer facilities to update rate information or to direct different types of calls to particular carriers. Our payphones can also distinguish coins by size and weight, report to our central host computer the total amount of coin in the coin box, perform self-diagnosis and automatically report problems to a pre-programmed service number.



CUSTOMER SERVICE.



The technology we use enables us to (i) respond quickly to equipment malfunctions and (ii) maintain accurate records of payphone activity, which can be verified by customers. We strive to minimize downtime on our payphones by identifying service problems as quickly as possible. We employ both advanced telecommunications technology and trained field technicians as part of our commitment to provide superior customer service. The records generated through our technology also allow for the more timely and accurate payment of commissions to Location Owners.



OPERATIONS



As of December 31, 2003 we owned and operated approximately 567 payphones in two states, and as of  December 31, 2002 we owned and operated approximately  681 payphones in three states.





1



---

COIN CALLS



Our payphones generate coin revenues primarily from local calls. Historically, the maximum rate that LECs and IPPs could charge for local calls was generally set by state regulatory authorities and in most cases was $0.25 through October 6, 1997.We charge $0.25, $0.35, and $0.50 in New York, and $0.35, and $0.50 in Pennsylvania. In ensuring fair compensation for all calls, the FCC determined that local coin rates from payphones should be generally deregulated by October 7, 1997, but provided for possible modifications or exemptions from deregulation upon a detailed demonstration by an individual state that there are market failures within the state that would not allow market-based rates to develop. On July 1, 1997, a federal court issued an order that upheld the FCCs authority to deregulate local coin call rates. In accordance with the FCCs ruling and the court order, certain RBOCs, LECs and IPPs, including our Company, began to increase rates for local coin calls from $0.25 to $0.35 after October 7, 1997.



Long distance carriers that have contracted to provide transmission services to our payphones typically carry long distance coin calls. We pay a charge to the long-distance carrier each time the carrier transports a long-distance call for which we receive coin revenue from an end user.



NON-COIN CALLS



We also receive revenue from non-coin calls made from our payphones. Traditional non-coin calls include credit card, calling card, prepaid calling card, collect and third party billed calls where the caller dials 0 plus the number or simply dials 0 for an operator.



The services needed to complete a non-coin call include providing an automated or live operator to answer the call, verifying billing information, validating calling cards and credit cards, routing and transmitting the call to its destination, monitoring the calls duration and determining the charge for the call, and billing and collecting the applicable charge. We have contracted with operator service providers to handle these calls and perform all associated functions, while paying us a commission on the revenues generated.



REGULATIONS AND DIAL-AROUND COMPENSATION



On September 20, 1996 the Federal Communications Commission (FCC) adopted rules, which became effective November 7, 1996 (the 1996 Payphone Order), initially mandating dial-around compensation for both access code calls and 800 subscriber calls at a flat rate of $45.85 per payphone per month (131 calls multiplied by $0.35 per call). Commencing October 7, 1997 and ending October 6, 1998 the $45.85 per payphone per month rate was to transition to a per-call system at the rate of $0.35 per call. Several parties challenged certain of the FCC regulations including the dial-around compensation rate. On July 1, 1997 a federal court vacated certain portions of the FCCs 1996 Payphone Order, including the dial-around compensation rate.



In accordance with the courts mandate, on October 9, 1997 the FCC adopted a second order (the 1997 Payphone Order), establishing a rate of $0.284 per calls for the first two years of per-call compensation (October 7, 1997 through October 6, 1999). The IXCs were required to pay this per-call amount to payphone service providers, beginning October 7, 1997. On May 15, 1998 the court again remanded the per-call compensation rate to the FCC for further explanation without vacating the $0.284 default rate.



On February 4, 1999 the FCC released a third order (the 1999 Payphone Order), in which the FCC abandoned its efforts to derive a market based default dial-around compensation rate and instead adopted a cost based rate of $0.24 per dial-around call. This rate became effective on April 21, 1999 and served as a default rate through January 31, 2002.



In a decision released January 31, 2002 (the 2002 Payphone Order) the FCC partially addressed the remaining issues concerning the true-up required for interim and intermediate period compensation. The FCC adjusted the per-call rate to $0.229, for the interim period only, to reflect a different method of calculating the delay in IXC payments to PSPs for the interim period, and determined that the total interim period compensation should be $33.89 per payphone per month ($0.229 times an average of 148 calls per payphone per month). The 2002 Payphone Order deferred to a later order its determination of the allocation of this total compensation rate among the various carriers required to pay compensation for the interim period.



2



---



On October 23, 2002 the FCC released its Fifth Order on Reconsideration and Order on Remand (The Interim Order), which resolved the remaining issues surrounding the interim/intermediate period true-up and specifically how monthly per-phone compensation owed to PSPs is to be allocated among the relevant dial-around carriers. The Interim Order also resolves how certain offsets to such payments will be handled and a host of other issues raised by parties in their remaining FCC challenges to the 1999 Payphone Order and the 2002 Payphone Order. In the Interim Order the FCC ordered a true-up for the interim period and increased the adjusted monthly rate to $35.22 per payphone per month, to compensate for the three-month payment delay inherent in the dial-around payment system. The new rate of $35.22 per payphone per month is a composite rate, allocated among approximately five hundred carriers based on their estimated dial-around traffic during the interim period. The FCC also ordered a true-up requiring PSPs, to refund an amount equal to $0.046 (the difference between the old $0.284 rate and the current $0.238 rate) to each carrier that compensated the PSP on a per-call basis during the intermediate period. Interest on additional payments and refunds is to be computed from the original payment date, at the IRS prescribed rate applicable to late tax payments.



On August 2, 2002 and September 2, 2002 respectively, the APCC and the RBOCs filed petitions with the FCC to revisit and increase the dial-around compensation level. Using the FCCs existing formula, as approved by the Court in its June 26, 2000 order, and adjusted only to reflect current costs and call volumes, the APCC and RBOCs petitions support approximately doubling of the current $0.24 rate. In response to the petitions, on September 2, 2002 the FCC put them out for comment and reply comment by interested parties, seeking input on how the Commission should proceed to address the issues raised by the filings.



We believe that the fair compensation requirements of Section 276 of the Telcom Act mandate that the FCC promptly review and adjust the dial-around compensation rate level. While no assurances can be given as to the timing or amount of any increase in the dial-around rate level, we believe an increase in the rate is reasonably likely given the significant reduction in payphone call volumes, and other relevant changes since the FCC set the $0.24 rate level.



Our objectives are to continue to review our overall cost structure, improve route density and service quality, monitor and take action on our under performing telephones and place an emphasis on expanding in economically favorable territories. We have implemented the following strategy to meet our objectives.



SERVICE AND MAINTENANCE



We employ field service technicians, who collect coin boxes, and clean and maintain a route of payphones. Our technicians also respond to trouble calls made by Location Owners, by users of payphones or by the telephone itself as part of its internal diagnostic procedures. Some of our technicians are also responsible for the installation of new payphones.





CUSTOMERS, SALES AND MARKETING



The Location Owners with whom we contract are a diverse group of small and medium sized businesses, which are frequented by individuals needing payphone access. The majority of our payphones are located at convenience stores, truck stops, service stations, grocery stores, colleges and hospitals. As of December 31, 2003 our payphone accounts of 20 or more payphones represented approximately 5% of our installed payphone base. Approximately 70% of our customers are a result of acquisitions from (ITOCs), Independent Telephone Operating Companies.



We install our payphones in convenience stores, truck stops, service stations, grocery stores, colleges and hospitals. Before we install a phone, we search for, and utilize historical revenue information about each payphone location. In locations where historical revenue information is not available, we rely on our site survey to examine geographic factors, population density, traffic patterns and other factors in determining whether to install a payphone. We recognize, however, that recent changes in payphone traffic volumes and usage patterns being experienced on an industry-wide basis warrant a continued assessment of the location deployment of our payphones.



Our location agreements may provide for revenue sharing with the applicable location owners based on fixed percentages of revenues. Our agreements also provide for monthly billing for payphone service. We can terminate a location agreement on 30 days notice to the Location Owner if the payphone does not generate sufficient revenue.





SERVICE AND EQUIPMENT SUPPLIERS



Our primary suppliers provide payphone components, local line access, long-distance transmission and operator services. To promote acceptance by end users accustomed to using RBOC or LEC-owned payphone equipment, we utilize payphones designed to be similar in appearance and operation to payphones owned by LECs.

3



---



We purchase circuit boards from various manufacturers for repair and installation of our payphones. We primarily obtain local line access from various LECs, including Verizon, Citizens Communications and various other incumbent and competitive suppliers of local line access. New sources of local line access are expected to emerge as competition continues to develop in local service markets. Long-distance services are provided to our company by various long-distance and operator service providers, including AT&T, Qwest, ILD Telecommunications, Inc., and others.



We expect the basic availability of such products and services to continue in the future; however, the continuing availability of alternative sources cannot be assured. Although we are not aware of any current circumstances that would require us to seek alternative suppliers for any material portion of the products or services used in the operation of our business, transition from our existing suppliers, if necessary, could have a disruptive effect on our operations and could give rise to unforeseen delays and/or expenses.



ASSEMBLY AND REPAIR OF PAYPHONES



We assemble and repair payphone equipment for our use. The assembly of payphone equipment provides us with technical expertise used in the operation, service, maintenance and repair of our payphones. We assemble, refurbish or replace payphones from standard payphone components either obtained from our sizable inventory or purchased from component manufacturers. These components include a metal case, an integrated circuit board incorporating a microprocessor, a handset and cord, and a coin box and lock. On the occasion when components are not available from inventory, we can purchase the components from several suppliers. We do not believe that the loss of any single supplier would have a material adverse effect on our assembly operations.



Our payphones comply with all material regulatory requirements regarding the performance and quality of payphone equipment and have all of the operating characteristics required by the applicable regulatory authorities, including free access to local emergency (911) telephone numbers, dial-around access to all available carriers, and automatic coin return capability for incomplete calls.



TECHNOLOGY



The payphone equipment we install makes use of microprocessors to provide voice synthesized calling instructions, detect and count coin deposits during each call, inform the caller at certain intervals of the time remaining on each call, identify the need for and the amount of an additional deposit and other functions associated with completion of calls. Through the use of non-volatile, electronically erasable, programmable read-only memory chips, our payphones can also be programmed and reprogrammed from our central computer facilities to update rate information or to direct different kinds of calls to particular carriers.



Our payphones can distinguish coins by size and weight, report to a remote location the total coins in the coin box, perform self-diagnosis and automatically report problems to a pre-programmed service number, and immediately report attempts at vandalism or theft. Many of our payphones operate on power available from the telephone lines, thereby avoiding the need for and reliance upon an additional power source at the installation location.



We provide all technical support required to operate the payphones, such as computers and software and hardware specialists, at our headquarters in Liverpool New York. Our assembly and repair support operations provide materials, equipment, spare parts and accessories to the field. Each of our division offices and each of our technicians vehicles maintain inventories for immediate deployment in the field.





MAJOR CUSTOMERS



No individual customer accounted for more than 5% of our consolidated revenues in 2002 and 2003.



COMPETITION



We compete for payphone locations directly with RBOCs, LECs and other IPPs. We also compete, indirectly, with long-distance companies, which can offer Location Owners commissions on long-distance calls made from LEC-owned payphones. We compete with LECs and long-distance companies who may have substantially greater financial, marketing and other resources.

4



---



We believe that our principal competition is from providers of wireless communications services for both local and long distance traffic. Certain providers of wireless communication services have introduced rate plans that are competitively priced with certain of the products offered by us, and have negatively impacted the usage of payphones throughout the nation.



We believe that the competitive factors among payphone providers are (1) the commission payments to a Location Owner, (2) the ability to serve accounts with locations in several LATAs or states, (3) the quality of service and the availability of specialized services provided to a Location Owner and payphone users, and (4) responsiveness to customer service needs. We believe that we are currently competitive in each of these areas.



Additionally, a number of domestic IPPs continue to experience financial difficulties from various competitive and regulatory factors impacting the pay telephone industry generally, which may impair their ability to compete prospectively. While no assurances can be given, we believe that these circumstances create an opportunity for us to obtain new location agreements and reduced site commissions going forward. There are no guarantees that we will be able to obtain new location agreements that are advantageous to our company.



We compete with long-distance carriers that provide dial-around services that can be accessed through our payphones. Certain national long-distance operator service providers and prepaid calling card providers have implemented extensive advertising promotions and distribution schemes which have increased dial-around activity on payphones owned by LECs and IPPs, including our company, thereby reducing traffic to our primary providers of long-distance service. While we do receive compensation for dial-around calls placed from our payphones, regulatory efforts are underway to improve the collection system and provide us with the ability to collect that portion of dial-around calls that are owed.



OUR EMPLOYEES



We currently have five full time employees. We may, from time to time, supplement our regular work force as necessary with temporary and contract personnel. None of our employees are represented by a labor union. We believe we have a good relationship with our employees.



A NOTE ABOUT FORWARD-LOOKING STATEMENTS



This report (including the foregoing Description of Business and the section below entitled Managements Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements that involve risks and uncertainties. You should exercise extreme caution with respect to all forward-looking statements contained in this report. Specifically, the following statements are forward-looking:





statements regarding our overall strategy for expansion of our company, including without limitation our intended markets and future products;





statements regarding our research and development efforts;





statements regarding the plans and objectives of our management for future operations, including, without limitation, plans to explore other non telecommunication business along with the size and nature of the costs we expect to incur and the people and services we may employ;





statements regarding the future of our company, our competition or regulations that may affect us;





statements regarding our ability to compete with third parties;





any statements using the words anticipate, believe, estimate, expect, intend, and similar words; and





any statements other than historical fact.

5



---



We believe that it is important to communicate our future expectations to our shareholders. Forward-looking statements reflect the current view of management with respect to future events and are subject to numerous risks, uncertainties and assumptions, including, without limitation, the factors listed in Risks Associated with Our Business. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Should any one or more of these or other risks or uncertainties materialize or should any underlying assumptions prove incorrect, actual results are likely to vary materially from those described in this report. There can be no assurance that the projected results will occur, that these judgments or assumptions will prove correct or that unforeseen developments will not occur.



Any person or entity may read and copy our reports filed with the Securities and Exchange Commission at the SECs Public Reference Room at 450 Fifth Street, NW, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC toll free at 1-800-SEC-0330. The SEC also maintains an Internet site at HTTP://WWW.SEC.GOV where reports, proxies and informational statements on public companies may be viewed by the public.



ITEM 2.   DESCRIPTION OF PROPERTY



We lease approximately 5600 square feet of space in Liverpool, New York. This location provides office space and space for assembly and repair of payphones.



ITEM 3.  LEGAL PROCEEDINGS



Not Applicable



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



Not Applicable





6



---



PART II



ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS



In the third calendar quarter of 2001 our common stock was included in the NASDs Bulletin Board system under the symbol USPO. The following table sets forth for the respective periods indicated the prices of the common stock in the over-the-counter market, as reported and summarized by the OTC Bulletin Board. Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.



|Calendar Quarter Ended |  | High Bid ($) |      | Low Bid ($) |  
|---------------------- |  | ------------ | ---- | ----------- | -
|                       |  |              |      |             |  
|March 31, 2002         |  | $            | 2.40 |             | $
|June 30, 2002          |  | $            | 1.75 |             | $
|September 30, 2002     |  | $            | 2.00 |             | $
|December 31, 2002      |  | $            | 1.05 |             | $
|                       |  |              |      |             |  
|March 31, 2003         |  | $            | 0.38 |             | $
|June 30, 2003          |  | $            | 0.65 |             | $
|September 30, 2003     |  | $            | 0.65 |             | $
|December 31, 2003      |  | $            | 0.65 |             | $



Since inception, no dividends have been paid on our common stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future. At December 31, 2003 there were approximately 378 holders of record of our common stock.





Any future dividends will be at the discretion of the board of directors, after taking into account various factors, including among others, operations, current and anticipated cash needs and expansion plans, the income tax laws then in effect, the requirements of Utah law, and any restrictions that may be imposed by our future credit arrangements.



On December 23, 2003 we issued twenty five thousand unregistered shares of common stock to Carl E. Worboys, a resident of the State of New York, and eighty thousand unregistered shares to Jass Equities, Inc., a resident of the State of New York in lieu of services rendered to our company. The shares were issued under Section 4(2) of the Securities Act of 1933, as amended.



ITEM 6.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS



The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes.



Certain statements contained below are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.



GENERAL



As of December 31, 2003 we owned and operated a network of approximately 567 payphones.  Our installed payphone base generated revenue for the fiscal year 2002 and 2003 from the following three sources.



1. Commission Income. Commission income includes commissions from operator service telecommunications companies and commissions for toll free calls from all payphones. The commissions for operator services are paid 45 days in arrears. Dial Around compensation is billed quarterly and received three and one half months behind the billed quarter.



2. Coin calls. Coin calls represent calls paid for by customers who deposit coins into the payphones. Coin call revenue is recorded as the actual amount of coins collected from the payphones. Some coin collections are made on a daily basis and others more often if the particular payphone has significant usage. The coins are counted in house and deposited weekly.



7



---



3. Payphone sales, repairs and pre-paid phone cards. We derive income from the sale and repair of a payphone. We can negotiate the sale, of a payphone to a site owner when it becomes cost prohibitive to maintain or if a customer offers to buy the phone at a price that is favorable to our company. The new owner or lessee becomes responsible for the maintenance and operational costs of the payphone.  We sell pre-paid phone cards at some of our payphone locations. We also derive a profit from any commission split that is negotiated between the parties as a result of a sale or lease of a payphone. Sales and repairs of payphones and the sale of pre-paid phone cards are not subject to the same collection delays as the other types of operating income.



The principal costs related to the ongoing operation of the Companys payphones include telephone charges, commissions, and service, maintenance and network costs.  Telephone charges consist of payments made by the Company to local exchange carriers and long distance carriers for the line charge and use of their networks.  Commission expense represents payments to owners of locations where the Companys payphones are installed.  Service, maintenance and network costs represent the cost of servicing and maintaining the payphones on an ongoing basis.



Weather conditions affect our revenue stream because we operate in the Northeastern part of the country. Revenues drop off significantly during the winter because most of our phones are outdoors. The spring and summer periods show a significant increase in payphone usage. Revenues are generally lowest in the first quarter and highest in the third quarter.



The increase use of wireless communication services has substantially impacted the publics use of payphones, and we believe that this trend will continue to increase as the cost for wireless usage declines.  However, we have attempted to minimize some of the impact from wireless use by avoiding traditional travel locations where wireless communication is high.  There are no guarantees that we will be successful in minimizing the effects of wireless usage.



YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002



Revenues



Total revenue decreased by $103,066 or approximately 13.33%, from $773,447 in the year ended December 31, 2002 to $670,381 in the year ended December 31, 2003.  This decrease was primarily attributable to removal of unprofitable phone locations and lower call volumes on our payphones resulting from the growth in wireless communications.  We reduced our network from approximately 681 payphones on 2002 to approximately 567 in 2003.



Commissions decreased by $51,056 approximately 60.1%, from $84,923 in the year ended December 31, 2002 to $33,867 in the year ended December 31, 2003.  This decreased was a result of our reduction in payphones, fewer operator assisted calls, and the increase competition from the wireless communication industry.



Coin call revenues decreased by $141,741 or approximately 43.4%, from $326,697 in year ended December 31, 2002 to $184,956 in the year ended December 31, 2003.  The decrease in coin call revenue was primarily attributable to the reduced number of payphones we operated, coupled with the increased competition from wireless communication services.



Non-coin call revenue, which is comprised primarily of dial-around revenue and operator service revenue increased $122,481 approximately 65.5% from $187,017 in the year ended December 31, 2002 to $309,498 in the year ended December 31, 2003.   Approximately $92,200 of this increase is attributable to a one-time settlement brought forth by the FCCs Order on the Compensation True-up.  This order resolved a hosts of open dial-around compensation issues and most importantly, setting forth the terms for the true-up of past dial-around payments for the so-called interim and intermediate time periods.  The order reconciles prior FCC and Court decisions regarding dial-around compensation payments and basically brings all prior payments in line with the 24 cents per call rate (the current and ongoing rate).  The remaining increase of $30,281 was primarily attributable to the WorldCom, Inc. chapter 11 bankruptcy in 2002 which reduced our non-coin revenue in 2002.



Service & Repair Sales increased by $5,519, when compared to the same period in 2002.   Equipment sales decreased by $2,636, from $9,256 for the year ending December 31, 2002 to $6,620 in the year ending December 31, 2003.   Our phone card and ATM revenue decreased by $35,633 when compared to 2002.  This decrease is due to increased competition from other phone card vendors along with loss of various locations.   The increased competition forced us to reduce our phone card sites by approximately 42% in addition to losing our ATM sites in 2003.



8



---

Cost of Sales



Our overall cost of sales decreased for the year ending December 31, 2003 by $275,383 or approximately 35.1% when compared to the year ending December 31, 2002.   Our telecommunication costs decreased by $167,195, the cost of providing telephone service to 567 payphones in 2003 as compared to 681 payphones in 2002. This number reflects an overall reduction of 114 payphones due to our ongoing strategy of identifying and removing unprofitable payphones.  Once a low revenue payphone is identified, we offer the site owner an opportunity to purchase the equipment.  If the site owner does not purchase the payphone, we remove it from the site.



Our commissions payable decreased by $1,395 due to a decrease in payphone usage, a direct response to increase use of cellular phones and pre-paid phone cards.  In 2003 our contractors fees decreased by $38,674 this decrease is due to the elimination of contractors and the re-organization of routes to manage them more efficiently.  Depreciation expense decreased by $74,926 when compared to the same period in 2002. This decrease is due to certain assets being fully depreciated and our on going strategy of identifying unprofitable payphones, and selling them to the site owners.  Once a payphone is sold to the site owner it is removed from our assets and depreciation schedules.  We own telephone equipment and motor vehicles, which provide a service for a number of years.  The term of service is commonly referred to as the useful life of the asset.  Because an asset such as telephone equipment or motor vehicle is expected to provide service for many years, it is recorded as an asset, rather than an expense, in the year acquired.   A portion of the cost of the long-lived asset is reported as an expense during the cost of an asset to expense over its life in a rational and systematic manner.



Our cost of sales for repairs, service, travel and supplies increased by $12,992 a direct result of utilizing employees to provide service over contractors.  Our phone card expenses decreased by $6,185 in 2003.  This decrease is due to the reduced number of phone card machine sites in 2003.



Operation and Administrative Expenses



Operating expenses decreased by $104,149 or approximately 19.92% over the same period in 2002.   This decrease in operating expense is a direct result of our management teams ongoing efforts to cut expenses and run the company as efficiently as possible.  Salaries and related payroll taxes were reduced by $41,375 when compared to the same expenses for 2002. This decrease is due the elimination of three employees, one technician and two clerical assistants. Our insurance expense decreased by $12,992 when compared to the fiscal year 2002.  This decrease is primarily attributable to the decrease in payroll.   Rent decreased by $1,338 when compared to 2002.  Telephone, utilities, office, and other miscellaneous expenses, account for a decrease of $16,247 when compared to the same period ending December 31, 2002.  Professional fees decreased by $24,456 over 2002.  These are fees we pay to accountants and attorneys throughout the year for various tasks.  Expenses for outside services increased by $6,191 over 2002. This increase is due in part to utilizing an outside consulting company. Vehicle expense decreased by $13,932 in 2003 when compared to 2002.  This decrease is primarily attributable to the replacement of older vehicles with new vehicles that require less maintenance.



Interest expense in the year ended December 31, 2003 increased by $12,063 from $37,225 in the year ended December 31, 2002 to $49,288 in the year ended December 31, 2003.  This increase is attributable to increased borrowing levels related to our line of credit.  We drew $34,200 on our line of credit in 2003.



GOING CONCERN QUALIFICATION



In his Independent Auditors Report, our auditor states that we have incurred annual losses since inception raising substantial doubt about our ability to continue as a going concern.





LIQUIDITY AND CAPITAL RESOURCES



Cash Flow



Our primary sources of liquidity have been cash from operations and borrowing from various credit facilities.   As of December 31, 2003 we have a note payable to Key Bank in the amount of $84,559.  We have an additional unsecured line of credit with the Lilly Beter Capital Group, Ltd. in the amount of $500,000. As of December 31, 2003 we have used $444,500.





9



---

RISKS ASSOCIATED WITH OUR BUSINESS



In addition to the other information in this report, the following risks should be considered carefully in evaluating our business and prospects:



UNLESS WE CAN REVERSE OUR HISTORY OF LOSSES, WE MAY HAVE TO DISCONTINUE OPERATIONS.



If we are unable to achieve or sustain profitability, or if operating losses increase in the future, we may not be able to remain a viable company and may have to discontinue operations. Our expenses have historically exceeded our revenues and we have had losses in all fiscal years of operation, including those in fiscal years 2002 through 2003, and the losses are projected to continue in 2004. Our net losses were $872,178 and $308,260 for fiscal years ended 2002, 2003 respectively. We have been concentrating on the development of our products, services and business plan. Our management believes that we can be profitable and that our business plan will be successful; however, there is no assurance that we will be successful in implementing our business plan or that we will be profitable now or in the future.



WE MAY NOT SUCCEED OR BECOME PROFITABLE.



We will need to generate significant revenues to achieve profitability and we may be unable to do so. Even if we do achieve profitability, we may not be able to sustain or increase profitability in the future. We expect that our expenses will continue to increase and there is no guarantee that we will not experience operating losses and negative cash flow from operations for this fiscal year or for the foreseeable future. If we do not achieve or sustain profitability, then we may be unable to continue our operations.



WE WILL NEED ADDITIONAL CAPITAL FINANCING IN THE FUTURE.



We may be required to seek additional financing in the future to respond to increased expenses or shortfalls in anticipated revenues, accelerate product development and deployment, respond to competitive pressures, develop new or enhanced products, or take advantage of unanticipated acquisition opportunities. We cannot be certain we will be able to find such additional financing on reasonable terms, or at all. If we are unable to obtain additional financing from Lilly Beter Capital Group, Ltd. or Key Bank when needed, we could be required to modify our business plan in accordance with the extent of available financing.



IF WE ENGAGE IN ACQUISITIONS, WE MAY EXPERIENCE SIGNIFICANT COSTS AND DIFFICULTY ASSIMILATING THE OPERATIONS OR





PERSONNEL OF THE ACQUIRED COMPANIES, WHICH COULD THREATEN OUR FUTURE GROWTH.



If we make any acquisitions, we could have difficulty assimilating the operations, technologies and products acquired or integrating or retaining personnel of acquired companies. In addition, acquisitions may involve entering markets in which we have no or limited direct prior experience. The occurrence of any one or more of these factors could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition, pursuing acquisition opportunities could divert our managements attention from our ongoing business operations and result in decreased operating performance. Moreover, our profitability may suffer because of acquisition-related costs or amortization of acquired goodwill and other intangible assets. Furthermore, we may have to incur debt or issue equity securities in future acquisitions.  The issuance of equity securities would dilute our existing stockholders.



IF WE CANNOT ATTRACT, RETAIN, MOTIVATE AND INTEGRATE ADDITIONAL SKILLED PERSONNEL, OUR ABILITY TO COMPETE WILL BE IMPAIRED.



Many of our current and potential competitors have more employees than we do. Our success depends in large part on our ability to attract, retain and motivate highly qualified management and technical personnel. We face intense competition for qualified personnel. The industry in which we compete has a high level of employee mobility and aggressive recruiting of skilled personnel. If we are unable to continue to employ our key personnel or to attract and retain qualified personnel in the future, our ability to successfully execute our business plan will be jeopardized and our growth will be inhibited.



10



---

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS OR MAY BE SUED BY THIRD PARTIES FOR INFRINGEMENT OF THEIR PROPRIETARY RIGHTS.



The telecommunications industry is characterized by the existence of a large number of patents and frequent litigation based on allegations of trade secret, copyright or patent infringement. We may inadvertently infringe a patent of which we are unaware. In addition, because patent applications can take many years to issue, there may be a patent application now pending of which we are unaware that will cause us to be infringing when it is issued in the future. If we make any acquisitions, we could have similar problems in those industries. Although we are not currently involved in any intellectual property litigation, we may be a party to litigation in the future to protect our intellectual property or as a result of our alleged infringement of anothers intellectual property, forcing us to do one or more of the following:





Cease selling, incorporating or using products or services that incorporate the challenged intellectual property;





Obtain from the holder of the infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms; or



Redesign those products or services that incorporate such technology.



A successful claim of infringement against us, and our failure to license the same or similar technology, could adversely effect our business, asset value or stock value. Infringement claims, with or without merit, would be expensive to litigate or settle, and would divert management resources.



Our employees may be bound by confidentiality and other nondisclosure agreements regarding the trade secrets of their former employers. As a result, our employees or we could be subject to allegations of trade secret violations and other similar violations if claims are made that they breached these agreements.



BECAUSE OUR OFFICERS AND DIRECTORS ARE INDEMNIFIED AGAINST CERTAIN LOSSES, WE MAY BE EXPOSED TO COSTS ASSOCIATED WITH LITIGATION.



If our directors or officers become exposed to liabilities invoking the indemnification provisions, we could be exposed to additional unreimbursable costs, including legal fees. Our articles of incorporation and bylaws provide that our directors and officers will not be liable to us or to any shareholder and will be indemnified and held harmless for any consequences of any act or omission by the directors and officers unless the act or omission constitutes gross negligence or willful misconduct. Extended or protracted litigation could have a material adverse effect on our cash flow.



WE WILL DEPEND ON OUTSIDE MANUFACTURING SOURCES AND SUPPLIERS.



We may contract with third party manufacturers to produce our products and we will depend on third party suppliers to obtain the raw materials necessary for the production of our products. We do not know what type of contracts we will have with such third party manufacturers and suppliers. In the event we outsource the manufacture of our products, we will have limited control over the actual production process. Moreover, difficulties encountered by any one of our third party manufacturers, which result in product defects, delayed or reduced product shipments, cost overruns or our inability to fill orders on a timely basis, could have an adverse impact on our business. Even a short-term disruption in our relationship with third party manufacturers or suppliers could have a material adverse effect on our operations. We do not intend to maintain an inventory of sufficient size to protect ourselves for any significant period of time against supply interruptions, particularly if we are required to obtain alternative sources of supply.



OUR STOCK PRICE MAY BE VOLATILE.



The market price of our common stock will likely fluctuate significantly in response to the following factors, some of which are beyond our control:





Variations in our quarterly operating results;



Changes in financial estimates of our revenues and operating results by securities analysts;



Changes in market valuations of telecommunications equipment companies;



Announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;



Additions or departures of key personnel;





11



---





Future sales of our common stock;



Stock market price and volume fluctuations attributable to inconsistent trading volume levels of our stock;



Commencement of or involvement in litigation.



In addition, the equity markets have experienced volatility that has particularly effected the market prices of equity securities issued by technology companies and that often has been unrelated or disproportionate to the operating results of those companies. These broad market fluctuations may adversely effect the market price of our common stock.



WE DO NOT ANTICIPATE PAYING ANY DIVIDENDS ON OUR COMMON STOCK.



We have not paid any dividends on our Common Stock since inception and do not anticipate paying any dividends on our Common Stock in the foreseeable future. Instead, we intend to retain any future earnings for use in the operation and expansion of our business.



IF WE ARE SUBJECT TO SEC REGULATIONS RELATING TO LOW-PRICED STOCKS, THE MARKET FOR OUR COMMON STOCK COULD BE ADVERSELY EFFECTED.



The Securities and Exchange Commission has adopted regulations concerning low-priced (or penny) stocks. The regulations generally define penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our shares are offered at a market price less than $5.00 per share, and do not qualify for any exemption from the penny stock regulations, our shares may become subject to these additional regulations relating to low-priced stocks.



The penny stock regulations require that broker-dealers who recommend penny stocks to persons other than institutional accredited investors make a special suitability determination for the purchaser, receive the purchasers written agreement to the transaction prior to the sale and provide the purchaser with risk disclosure documents that identify risks associated with investing in penny stocks. Furthermore, the broker-dealer must obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before effecting a transaction in penny stock. These requirements have historically resulted in reducing the level of trading activity in securities that become subject to the penny stock rules.



The additional burdens imposed upon broker-dealers by these penny stock requirements may discourage broker-dealers from effecting transactions in the common stock, which could severely limit the market liquidity of our common stock and our shareholders ability to sell our common stock in the secondary market.

12



---



ITEM 7.   FINANCIAL STATEMENTS





USIP.COM, INC.



CONSOLIDATED FINANCIAL STATEMENTS





TABLE OF CONTENTS



INDEPENDENT AUDITORS REPORT



|FINANCIAL STATEMENTS
|--------------------
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    
|                    



13



---



INDEPENDENT AUDITORS REPORT



To the Board of Directors and Shareholders

USIP.COM, Inc.





We have audited the accompanying consolidated balance sheet of USIP.COM, Inc. as of December 31, 2003 and the related consolidated statement of income, stockholders equity, and cash flows for the year then ended.  These financial statements are the responsibility of the USIP.COM, Inc. management.  Our responsibility is to express an opinion on these financial statements based on our audits.  The financial statements of USIP.Com, Inc. As of December 31, 2002, were audited by other auditors whose report dated February 21, 2003, expressed an unqualified opinion on those statements.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  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 2003 financial statements referred to above present fairly, in all material respects, the financial position of USIP.COM, Inc as of December 31, 2003, and the results of its operations, stockholders equity and its cash flows for the year then ended 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 10 to the financial statements, the Company has incurred annual operating losses since inception.  As of December 31, 2003, the Company has increased its line of credit borrowings to meet operating costs, and has seen stockholders equity declining.  The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of the foregoing uncertainties.



Respectfully submitted,



/s/Robison,
Hill & Co.

Certified Public Accountants



Salt Lake City, Utah

January 4, 2005

14



---





USIP.COM, INC

CONSOLIDATED BALANCE SHEET

December 31

|                                         |                            |         |                             |           |             | 2003          |                | 2002            
|---------------------------------------- | -------------------------- | ------- | --------------------------- | --------- | ----------- | ------------- | -------------- | ----------------
|ASSETS                                   |                            |         |                             |           |             |               |                |                 
|CURRENT ASSETS                           |                            |         |                             |           |             |               |               
|Cash                                     |                            |         |                             |           |             | $       6,121 |                | $          7,021
|Commissions and Sales Receivable, Net    |                            |         | 109,639                     |           | 125,276    
|Inventory                                |                            |         |                             |           | 20,289      |               | 50,782        
|Prepaid Expenses                         |                            |         |                             |           | 4,989       |               | 3,932         
|                                         |                            |         | TOTAL CURRENT ASSETS        | 141,038   |             | 187,011      
|FIXED ASSETS                             |                            |         |                             |           |             |               |               
|Telephone and Office Equipment           |                            |         | 1,882,353                   |           | 1,899,122  
|Vehicle                                  |                            |         |                             |           |             | 76,367        |                | 76,367          
|                                         |                            |         |                             |           |             | 1,958,720     |                | 1,975,489       
|Less: Accumulated Depreciation           |                            |         | (1,358,594)                 |           | (1,151,240)
|                                         |                            |         |                             |           |             |               |                |                 
|Net Fixed Assets                         |                            |         |                             | 600,126   |             | 824,249      
|                                         |                            |         |                             |           |             |               |                |                 
|                                         |                            |         | TOTAL ASSETS                |           | $   741,164 |               | $    1,011,260
|                                         |                            |         |                             |           |             |               |                |                 
|LIABILITIES AND STOCKHOLDERS' EQUITY     |                            |         |                             |          
|Current Liabilities                      |                            |         |                             |           |             |               |               
|Accounts Payable                         |                            |         |                             |           | $   175,060 |               | $      201,812
|Line of Credit                           |                            |         |                             |           | 508,356     |               | 501,852       
|Accrued Payroll and Payroll Taxes        |                            |         | 5,706                       |           | 5,896      
|Accrued State Gross Receipts Taxes       |                            |         | 7,049                       |           | 9,621      
|Other Accrued Expenses                   |                            |         |                             | 2,960     |             | 28,663       
|Current Portion of Long-Term Debt        |                            |         | -                           |           | 18,253     
|                                         |                            |         |                             |           |             |               |                |                 
|                                         |                            |         | TOTAL CURRENT LIABILITIES   | 699,131   |             | 766,097      
|                                         |                            |         |                             |           |             |               |                |                 
|Long-Term Liabilities                    |                            |         |                             |           |             |               |               
|Notes Payable                            |                            |         |                             |           | 138,179     |               | 72,302        
|Less Current Portion                     |                            |         |                             | 0         |             | 18,253       
|                                         |                            |         |                             |           |             |               |                |                 
|                                         |                            |         | TOTAL LONG-TERM LIABILITIES | 138,179   |             | 54,049       
|                                         |                            |         |                             |           |             |               |                |                 
|                                         | TOTAL LIABILITIES          |         |                             |           | 837,310     |               | 820,146       
|                                         |                            |         |                             |           |             |               |                |                 
|STOCKHOLDERS' EQUITY                     |                            |         |                             |           |             |              
|Common Stock, $.01 par value  25,000,000 |                            | 178,044 |                             | 176,994  
|Shares authorized, 17,804,388 shares     |                            |         |                             |           |            
|issued and outstanding                   |                            |         |                             |           |             |              
|                                         |                            |         |                             |           |             |               |                |                 
|Additional Paid In Capital               |                            |         |                             | 1,462,558 |             | 1,442,608    
|                                         |                            |         |                             |           |             |               |                |                 
|Retained Earnings                        |                            |         |                             |           | (1,736,748) |               | (1,428,488)   
|                                         |                            |         |                             |           |             |               |                |                 
|                                         | TOTAL STOCKHOLDERS' EQUITY |         | (96,146)                    |           | 191,114    

|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $   741,164 |  | $    1,011,260 | 
|------------------------------------------ | ----------- |  | -------------- | 



See Accountants Report and Notes To Financial Statement

15



---

USIP.COM, INC.

CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS



FOR THE YEARS ENDED DECEMBER 31



|                               |  |             |                         |           | 2003              |           | 2002    
|------------------------------ |  | ----------- | ----------------------- | --------- | ----------------- | --------- | --------
|SALES                          |  |             |                         |           |                   |          
|Commissions                    |  |             | $         33,867        |           | $          84,923
|Coin Collections               |  |             | 184,956                 |           | 326,697          
|Dial Around                    |  |             |                         | 309,498   |                   | 187,017  
|Equipment Sales                |  |             | 6,620                   |           | 9,256            
|Phone Card Sales               |  |             | 8,597                   |           | 36,070           
|ATM Revenue                    |  |             | -                       |           | 8,160            
|Service and Repair Sales       |  | 126,843     |                         | 121,324  
|Total Sales                    |  |             | 670,381                 |           | 773,447          
|                               |  |             |                         |           |                   |           |         
|COST OF SALES                  |  |             |                         |           |                  
|Telecommunications Costs       |  | 217,762     |                         | 384,957  
|Commissions                    |  |             | 2,741                   |           | 4,136            
|Contractor Fees                |  |             | 9,568                   |           | 48,242           
|Repairs and Service Supplies   |  | 45,001      |                         | 33,548   
|Depreciation                   |  |             |                         | 214,674   |                   | 289,600  
|Phone Cards and Phone Costs    |  | 8,344       |                         | 14,529   
|Travel                         |  |             |                         | 11,221    |                   | 9,682    
|Total Cost of Sales            |  |             | 509,311                 |           | 784,694          
|                               |  |             |                         |           |                   |           |         
|                               |  |             | GROSS PROFIT            |           | 161,070           |           | (11,247)
|                               |  |             |                         |           |                   |           |         
|OPERATING EXPENSES             |  |             |                         |          
|Salaries and Wages             |  |             | 184,088                 |           | 220,681          
|Payroll Taxes                  |  |             | 16,112                  |           | 20,894           
|Insurance                      |  |             |                         | 44,664    |                   | 57,656   
|Telephone                      |  |             |                         | 13,564    |                   | 23,307   
|Outside Services               |  |             | 20,231                  |           | 14,040           
|Utilities                      |  |             |                         | 8,277     |                   | 8,305    
|Vehicle Expenses               |  |             | 2,767                   |           | 16,699           
|Rent                           |  |             |                         | 61,318    |                   | 62,656   
|Professional Fees              |  |             | 55,466                  |           | 79,922           
|Travel and Entertainment       |  | 2,718       |                         | 4,763    
|Office Expense                 |  |             | 9,521                   |           | 13,952           
|Total Operating Expenses       |  | 418,726     |                         | 522,875  
|                               |  |             |                         |           |                   |           |         
|                               |  |             | OPERATING INCOME (L0SS) | (257,656) |                   | (534,122)
|                               |  |             |                         |           |                   |           |         
|OTHER INCOME (EXPENSE)         |  |             |                         |          
|Interest Income                |  |             | -                       |           | 53               
|Gain on Sale of Equipment      |  | 6,871       |                         | 2,293    
|Loss on Equipment Obsolescence |  | -           |                         | (292,666)
|Prov For State Tax             |  |             | (8,187)                 |           | (10,511)         
|Interest Expense               |  |             | (49,288)                |           | (37,225)         
|Total Other Income             |  |             | (50,604)                |           | (338,056)        
|                               |  |             |                         |           |                   |           |         
|                               |  |             | NET INCOME (LOSS)       | (308,260) |                   | (872,178)
|                               |  |             |                         |           |                   |           |         
|RETAINED EARNINGS - BEGINNING  |  | (1,428,488) |                         | (556,310)
|                               |  |             |                         |           |                   |           |         

|RETAINED EARNINGS - ENDING         |  | $   (1,736,748)    |  | $    (1,428,488)   
|---------------------------------- |  | ------------------ |  | -------------------
|                                   |  |                    |  |                    
|Weighted Common Shares Outstanding |  | 17,804,388         |  | 17,699,388         
|                                   |  |                    |  |                    
|Net Loss per Common Share          |  | $           (0.02) |  | $            (0.05)



See Accountants Report and Notes To Financial Statement

16



---



USIP.COM, INC

CHANGES IN STOCKHOLDERS EQUITY

For the Years Ended December 31, 2002 and 2003



|                                |            |            |                |                |                |                | Additional        |                    |                     |                   | Total        
|------------------------------- | ---------- | ---------- | -------------- | -------------- | -------------- | -------------- | ----------------- | ------------------ | ------------------- | ----------------- | -------------
|                                |            |            |                | Common Stock   |                |                | Paid-in           |                    | Retained            |                   | Stockholder's
|                                |            |            | Shares         |                | Amount         |                | Capital           |                    | Earnings            |                   | Equity       
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Balance  as of January 1,       |            | 17,619,388 |                | $      176,194 |                | $    1,382,358 |                   | $        (556,310) |                     | $       1,002,242
|2002                            |            |            |                |                |                |                |                   |                    |                     |                   |              
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Issuance of Common Stock        | 20,000     |            | 200            |                | 15,850         |                |                   |                    | 16,050             
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Issuance of Common Stock        | 60,000     |            | 600            |                | 44,400         |                |                   |                    | 45,000             
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Net Loss - 2002                 |            |            |                |                |                |                |                   | (872,178)          |                     | (872,178)        
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Balance  as of December 31,     | 17,699,388 |            | $      176,994 |                | $    1,442,608 |                | $     (1,428,488) |                    | $         191,114  
|2002                            |            |            |                |                |                |                |                   |                    |                     |                   |              
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Balance  as of January 1,       |            | 17,699,388 |                | 176,994        |                | 1,442,608      |                   | (1,428,488)        |                     | 191,114          
|2003                            |            |            |                |                |                |                |                   |                    |                     |                   |              
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Issuance of Common Stock        | 80,000     |            | 800            |                | 15,200         |                |                   |                    | 16,000             
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Issuance of Common Stock        | 25,000     |            | 250            |                | 4,750          |                |                   |                    | 5,000              
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Net Loss-2003                   |            |            |                |                |                |                |                   | (308,260)          |                     | (308,260)        
|                                |            |            |                |                |                |                |                   |                    |                     |                   |              
|Balance as of December 31, 2003 | 17,804,388 |            | 178,044        |                | $1,462,558     |                | $     (1,736,748) |                    | $          (96,146)



See Accountants Report and Notes To Financial Statement



17



---



USIP.COM, INC

CONSOLIDATED STATEMENT OF CASH FLOWS

Years Ended December 31,



|                                                   |                                               |          |          |                   |                   |                   | 2003               |  | 2002
|-------------------------------------------------- | --------------------------------------------- | -------- | -------- | ----------------- | ----------------- | ----------------- | ------------------ |  | ----
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Cash Flows From Operating Activities:              |                                               |          |          |                   |                  
|Net (Loss)                                         |                                               |          |          |                   | $      (308,260)  |                   | $      (872,178)  
|Adjustments to reconcile net  (loss) to net        |                                               |          |          |                  
|cash provided (used) by operating activities:      |                                               |          |          |                  
|                                                   | Depreciation Expense                          |          |          |                   | 214,674           |                   | 289,600           
|                                                   | Gain on Sale of Equipment                     |          |          | (6,871)           |                   | (2,293)          
|                                                   | Loss on Equipment Obsolesence                 |          |          | -                 |                   | 292,666          
|                                                   | (Increase) Decrease in Commission Receivables |          | 15,637   |                   | 19,496           
|                                                   | (Increase) Decrease in Inventory              |          |          | 30,493            |                   | (4,372)          
|                                                   | (Increase) Decrease in Prepaid Insurance      |          | 1,057    |                   | (1,066)          
|                                                   | Increase (Decrease) in Accounts Payable       |          | (26,752) |                   | (92,794)         
|                                                   | Increase (Decrease) in Accrued Expenses       |          | 12,993   |                   | 5,788            
|                                                   | Increase (Decrease) in Gross Receipts Tax     |          | (2,572)  |                   | (3,415)          
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Net cash (used) by operating activities            |                                               | (69,601) |          | (368,568)        
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Cash Flows From Investing Activities:              |                                               |          |          |                   |                  
|                                                   | Proceeds from Sale of Equipment               |          |          | 16,769            |                   | -                
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Net cash (used) by investing activities            |                                               | 16,769   |          | -                
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Cash Flows From Financing Activities:              |                                               |          |          |                   |                  
|                                                   | Proceeds received from Line of Credit         |          | 82,614   |                   | 300,300          
|                                                   | Proceeds from issuance of Notes Payable       |          | -        |                   | 54,143           
|                                                   | Payments on Notes Payable                     |          |          | (18,682)          |                   | (23,279)         
|                                                   | Payments on Lines of Credit                   |          |          | (33,000)          |                   | (11,400)         
|                                                   | Proceeds from issuance of stock               |          |          | 21,000            |                   | 45,000           
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Net cash provided by financing activities          |                                               | 51,932   |          | 364,764          
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Net Increase (Decrease)  in cash                   |                                               |          | (900)    |                   | (3,804)          
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Cash - Beginning of Period                         |                                               |          |          | 7,021             |                   | 10,825           
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Cash - End of Period                               |                                               |          |          | $           6,121 |                   | $           7,021
|                                                   |                                               |          |          |                   |                   |                   |                    |  |     
|Supplemental Disclosures of Cash Flow Information: |                                               |          |          |                  
|Cash Paid During Period The Period For:            |                                               |          |          |                  
|Interest                                           |                                               |          |          |                   | $         10,402  |                   | $         25,446  
|Income Taxes                                       |                                               |          |          |                   | $           8,937 |                   | $                -



18



---

USIP.COM, INC.

CONSOLIDATED NOTES TO THE FINANCIAL STATEMENTS

December 31, 2003







NOTE 1.

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



NATURE OF BUSINESS



USIP.COM, Inc. is currently a provider of both privately owned and company owned payphones (COCOTs) and stations in New York State and Pennsylvania. The Company receives revenues from the collection of the payphone coinage, a portion of usage of service from each payphone and a percentage of long distance calls placed from each payphone from the telecommunications service providers. In addition, the Company also receives revenues from the service and repair of privately owned payphones, sales of payphone units and the sales of prepaid phone cards.



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



MANAGEMENT ESTIMATES



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



PRINCIPLES OF CONSOLIDATION



The accompanying consolidated Financial Statements include the accounts of USIP.COM, Inc. and its wholly owned subsidiaries, Datone, Inc. and NB Payphone, Inc. Intercompany transactions and balances have been eliminated in consolidation and combination.



CONCENTRATIONS OF CREDIT RISK



The Companys payphones are located primarily in New York State and parts of Pennsylvania and usage of those phones may be affected by economic conditions in those areas.  The company has experienced about a 30% drop in revenues, due to increased competition from other payphone providers and increase usage of wireless communications.



The Company maintains cash balances with a financial institution insured by the Federal Deposit Insurance Corporation up to $100,000. There are no uninsured balances at December 31, 2003.





CASH AND CASH EQUIVALENTS



The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents for purposes of classification in the balance sheets and statement of cash flows. Cash and Cash equivalents consists of cash in bank (checking) accounts.



FIXED ASSETS AND DEPRECIATION



Fixed assets are stated at cost. Depreciation is calculated on a straight-line basis over the useful lives of the related assets, which range from five to seven years.



INCOME TAXES



Income taxes are accounted for in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under SFAS No. 109, deferred income taxes are recognized using the asset and liability method by applying tax rates to cumulative temporary differences based on when and how they are expected to affect the tax return. Deferred tax assets and liabilities are adjusted for income tax rate changes.





19



---

NET (LOSS) PER COMMON SHARE



Net loss per common share has been calculated by taking the net loss for the current period and dividing by the weighted average shares outstanding at the end of the period.



REVENUE RECOGNITION



The Company derives its primary revenue from the sources described below, which includes dial around revenues, coin collections, and telephone equipment repairs and sales. Other revenues generated by the company include, phone card sales, and commissions.



Dial around revenues are generated from calls to gain access to a different long distance carrier than is already programmed into the phone. Revenues from dial around calls are recorded based upon estimates until the coin collection revenues are generated when callers deposit coins into the phones to make calls. Coin revenues are recorded in an amount equal to the coins collected.  Revenues on commissions, phone card sales, and telephone equipment repairs and sales are realized when the services are provided.



ADVERTISING



The corporation expenses advertising costs as incurred. Advertising expense amounted to $ -0- and $2,691 for the years ended December 31, 2003 and 2002  respectively.



NOTE 2.

INVENTORY



Inventory is valued at the lower of cost, determined on the first-in, first-out basis (FIFO), or market value. At December 31, inventory consists of the following:



|                      | 2003    | 2002   
|--------------------- | ------- | -------
|Calling Cards         | $4058   | $10,156
|Parts and Accessories | 16,231  | 40,626 
|                      | $20,289 | $50,782









NOTE 3.

COMMISSIONS AND SALES RECEIVABLE



Commissions and Sales Receivable consists of the following at December 31:





|                                      | 2003     | 2002    
|------------------------------------- | -------- | --------
|                                      |          |         
|Commissions Receivable                | $108,806 | $113,030
|Sales Receivable                      | 833      | 12,245  
|Commissions and Sales Receivable, Net | $109,639 | $125,275









NOTE 4.

LINE OF CREDIT



REVOLVING LINE OF CREDIT



The Company has revolving lines of credit, of which $ 508,356 and $501,852 was outstanding at December 31, 2003 and 2002 respectively. Bank advances on the credit line are payable on demand and carry an interest rate of  8%-10%.





20



---

NOTE 5.

LONG-TERM DEBT



|Long-term debt as of December 31 is as follows: | 2003 | 2004
|----------------------------------------------- | ---- | ----
|                                                |      |     

|Note payable, Vehicle, Monthly payments of $462 with interest at 9.25% | $6,401   | $11,106
|---------------------------------------------------------------------- | -------- | -------
|                                                                       |          |        
|Note payable, Vehicle, Monthly payments of $261 with interest at 12.4% | 2,327    | 4,654  
|                                                                       |          |        
|Note payable, Bank, Monthly payments of $1,825 with interest at 7.5%   | 84,559   | -0-    
|                                                                       |          |        
|Note payable, vehicles, Monthly payment of $535 w/interest at 8.2%     | 23,613   | 28,251 
|                                                                       |          |        
|Note payable, vehicles, Monthly payment of $589 w/interest at  8.2%    | 21,114   | 26,515 
|                                                                       |          |        
|Lease on ATM Machine                                                   | 165      | 1,776  
|                                                                       | $138,179 | $72,302







Aggregate annual maturities required on long-term debt at December 31, 2003  are as follows:



|2004       | $27,592 
|---------- | --------
|2005       | 36,301  
|2006       | 43,700  
|2007       | 24,614  
|2008       | 5,972   
|Thereafter | -0-     
|           | $138,179



NOTE 6.  OPERATING LEASES



The Company leases its corporate offices that are accounted for as a non-cancelable operating lease.  The lease has a term of 36 months expiring December 2005.  Future minimum lease payments through maturity are as follows:



|Years Ending
December 31, |         
|------------------------- | --------
|2004                      | 60,641  
|2005                      | 60,641  
|                          | $121,282















NOTE

7.

MAJOR DIAL AROUND COMPENSATION PROVIDERS (COMMISSIONS)



The Company received approximately 95% of total dial around and zero-plus compensation (commissions) from two providers.





NOTE 8.

INCOME TAXES



As of December 31, 2003, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $1,776,400 that may be offset against future taxable income through 2021.  Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.  No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carry-forwards will expire unused.  Accordingly, the potential tax benefits of the loss carry-forwards are offset by a valuation allowance of the same amount.



21



---

| |  | 2003 |  | 2002
| |  | ---- |  | ----
| |  |      |  |     

|Net operating losses   |  | $603,981                     |  | $399,656                    
|---------------------- |  | ---------------------------- |  | ----------------------------
|Equipment Obsolescence |  | (99,506)                     |  | (99,506)                    
|Valuations allowance   |  | (404,968)                    |  | (300,150)                   
|                       |  | $                          - |  | $                          -



The provision for income taxes differs from the amount computed using the federal US statutory income tax rate as follows:

|Provision (Benefit) at US Statutory rate   |  | $(104,808)                   |  | (296,541)                   
|------------------------------------------ |  | ---------------------------- |  | ----------------------------
|Equipment Obsolescence                     |  | -                            |  | -                           
|Increase (Decrease) in Valuation Allowance |  | 104,808                      |  | (296,541)                   
|                                           |  | $                          - |  | $                          -

The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and causes a change in management's judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.





NOTE 9.              FIXED ASSETS



The Company has chosen to write down the carrying value of equipment for about $292,000 during the year ended December 31, 2002 and the corresponding loss was recorded.  This adjustment was due to obsolescence of some the Companys telephone equipment.









NOTE 10.            GOING CONCERN CONSIDERATIONS



The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplates the Company as a going concern.  However, the Company has sustained substantial operating losses in recent years, it has increased its line of credit borrowings to $500,000 to meet operating costs, while revenues have declined over 13% for the year ended December 31, 2003.  The Company also had one of its credit lines converted to fixed note during 2003.  The company has a current ratio of just .2, and has a deficit in stockholders equity.   The Companies ability to continue as a going concern is dependent upon obtaining the additional capital as well as additional revue to be successful in its planned activity.  Management believes that actions presently being taken to revise the Companys operating and financial requirements provide them with the opportunity to continue as a going concern.



These financial statements do not reflect adjustments that would be necessary if the Company were unable to continue as a going concern.  While management believes that the actions already taken or planned, will mitigate the adverse conditions and events which raise doubt about the validity of the going concern assumption used in preparing these financial statements, there can be no assurance that these actions will be successful.



If the Company were unable to continue as a going concern, then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used.







NOTE 11.            SUBSEQUENT EVENTS



On May 24, 2004 The Company entered into an agreement and plan of merger with Cornerstone Services Group, Inc. (Cornerstone).  Upon the consummation of the Merger, the owners of cornerstone shall collectively own, on a fully diluted basis, approximately seventy-four and 85\100 percent of the outstanding shares of common stock of the Company.  As of the date of this report this agreement and plan of merger has not been completed.

22



---





PART III



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



|Name                 |  | Age |  | Position with Company |  | Director
Continuously
Since
|-------------------- |  | --- |  | --------------------- |  | ---------------------------
|                     |  |     |  |                       |  |                            
|Craig H. Burton      |  | 42  |  | President             |  | January 2000               
|                     |  |     |  |                       |  |                            
|Joseph J. Passalaqua |  | 30  |  | Secretary/Treasurer   |  | January 2000               
|                     |  |     |  |                       |  |                            
|Lilly O. Beter       |  | 69  |  | Director              |  | January 2000               



Craig H. Burton attended the University of South Carolina-Coastal and was a duly licensed real estate agent in the State of New York. He began working in marketing for a long distance carrier in 1996 and then moved to Datone as Director of Marketing for payphones and prepaid cards.



Joseph J. Passalaqua has served as a technical support employee for Datone Communications, Inc., a payphone company. He was elected an officer and director of Datone in 1999. Several other payphone companies in the Central New York area have employed him.



Lilly O. Beter is the former President of Lilly Beter Capital Group, Ltd. The firm was founded over 30 years ago when she had been associated with her husband, Dr. Peter David Beter, in his law practice until his death in 1987. Dr. Beter had been General Counsel for the Export-Import Bank of Washington, co-founder of a mining exploration company in Zaire, and represented international financial interests in Europe, South America, and the Middle East. Ms. Beter provided government representation to their clients. Ms. Beter, having lived extensively abroad, is now active in overseas investment management.



BOARD OF DIRECTORS; ELECTION OF OFFICERS



All directors hold office until the next annual meeting of shareholders and until their successors are duly elected and qualified. Any vacancy occurring in the Board of Directors may be filled by the shareholders, the Board of Directors, or if the Directors remaining in office constitute fewer than a quorum of the Board of Directors, they may fill the vacancy by the affirmative vote of a majority of the Directors remaining in office. A director elected to fill a vacancy is elected for the unexpired term of his predecessor in office. Any directorship filled by reason of an increase in the number of directors shall expire at the next shareholders meeting in which directors are elected, unless the vacancy is filled by the shareholders, in which case the term shall expire on the later of (i) the next







23



---



meeting of the shareholders or (ii) the term designated for the director at the time of creation of the position being filled.



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE



Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors and persons who own more than 10% of a registered class of our equity securities to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the SEC). Such persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.



Based solely on review of the copies of such forms received by us with respect to fiscal year 2003, or written representations from certain reporting persons, we believe that all filing requirements applicable to its directors, officers and persons who own more than ten percent of a registered class of the Companys equity securities have been complied with.



Item 10.   EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE



|NAME AND PRINCIPAL POSITION                |  | FISCAL
YEAR PAID |  | SALARY |        | BONUS |    
|------------------------------------------ |  | ---------------- |  | ------ | ------ | ----- | ---
|                                           |  |                  |  |        |        |       |    
|Craig H. Burton, President                 |  | 2003             |  | $      | 40,040 |       | -0-
|                                           |  |                  |  |        |        |       |    
|Joseph  J, Passalaqua, Secretary/Treasurer |  | 2003             |  | $      | 27,040 |       | -0-



We have health insurance for our employees. We do not have retirement, pension, profit sharing, stock options, or other similar programs for the benefit of our employees.



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



The following table sets forth information, as of December 31, 2003, concerning all persons known by us to own beneficially more than 5% of our common stock and concerning shares beneficially owned by each director and executive officer and by all directors and executive officers as a group. Unless expressly indicated otherwise, each stockholder exercises sole voting and investment power with respect to the shares beneficially owned. The address for each of our executive officers and directors is 7325 Oswego Rd., Liverpool, N.Y., 13090.







24



---



SHARES BENEFICIALLY OWNED (1)



|PERSON OR GROUP                                             |  | NUMBER  |  | PERCENT (2) | 
|----------------------------------------------------------- |  | ------- |  | ----------- | 
|                                                            |  |         |  |             | 
|NAMED EXECUTIVE OFFICERS AND DIRECTORS:                     |  |         |  |             | 
|Craig H. Burton                                             |  | 150,000 |  | *           | 
|Joseph J. Passalaqua                                        |  | 200,000 |  | *           | 
|Lilly O. Beter                                              |  |        |  | *           | 
|All directors and executive officers as a group (3 persons) |  | 350,000 |  | *           | 



BENEFICIAL OWNERS OF 5% OR MORE OF
OUR OUTSTANDING COMMON STOCK



|NAME AND ADDRESS OF BENEFICIAL OWNER |  | NUMBER    |  | PERCENT (2) |  
|------------------------------------ |  | --------- |  | ----------- | -
|                                     |  |           |  |             |  
|Epic Events Trust                    |  | 6,086,111 |  | 34.4        | %
|Gibraltar                            |  |           |  |             |  
|Riviera Bay Holding Trust            |  | 6,798,161 |  | 38.4        | %
|Gibraltar                            |  |           |  |             |  
|International Caribbean Trust, Ltd.  |  | 1,601,839 |  | 9.1         | %
|Gibraltar                            |  |           |  |             |  





*

Represents less than one percent.



(1)

Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of any securities as to which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power or as to which such person has the right to acquire such voting  and/or investment power within 60 days.



(2)

Percentage of beneficial ownership as to any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of unissued shares as to which such person has the right to acquire voting and/or investment power within 60 days. The number of shares shown includes outstanding shares of Common Stock owned as of December 31, 2003 by the person indicated. Our total issued and outstanding stock as of December 31, 2003 was 17,804,388 shares.



ITEM  12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Not Applicable.



ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K



(a)

Exhibits







25



---



|EXHIBIT
NO. |  | DESCRIPTION                                                                                                                                       
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                   
|3           |  | Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Companys Form 10-SB) filed on July 28, 2000(the 2000 10SB).         
|3.1         |  | Amended Articles of Incorporation (incorporated by reference to Exhibit 3.1 of the Companys Form 10-SB) filed on July 28, 2000(the 2000 10-SB).
|3.2         |  | Amended Articles of Incorporation (incorporated by reference to Exhibit 3.2 of the Companys Form 10-SB) filed on July 28, 2000(the 2000 10SB). 
|3.3         |  | Bylaws (incorporated by reference to Exhibit 4 of the 2000 10-SB).                                                                                
|4.1         |  | Specimen Stock Certificate (incorporated by reference to Exhibit 5 of the 2000 10SB).                                                             
|21.1        |  | Subsidiaries of the Registrant. (1)                                                                                                               
|31.1        |  | Sarbanes-Oxley Act of 2002 Section 302 Certification by Craig Burton                                                                              
|31.2        |  | Sarbanes-Oxley Act of 2002 Section 302 Certification by Kathy Christopher                                                                         
|32.1        |  | Sarbanes-Oxley Act of 2002 Section 906 Certification by Craig Burton                                                                              
|32.2        |  | Sarbanes-Oxley Act of 2002 Section 906 Certification by Kathy Christopher                                                                         





(1)

Filed herewith.



(b)

Reports on Form 8K



No reports on Form 8-K were filed in the fourth quarter of 2003.



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES



Aggregate fees billed by the Companys principal accountants, Anderson, Forse & Co., Ltd., for audit services related to the most recent two fiscal years, and for other professional services billed in the most recent two fiscal years, were as follows:



|                      |  | Fiscal 2003 |        | Fiscal 2002 |  
|--------------------- |  | ----------- | ------ | ----------- | -
|                      |  |             |        |             |  
|Audit Fees      (1)   |  | $           | 20,800 |             | $
|Audit-Related Fees    |  | 0           |        | 0           |  
|Tax Fees          (2) |  | 4,000       |        | 4,000       |  
|All Other Fees        |  | 0           |        | 0           |  
|                      |  |             |        |             |  
|Total                 |  | $           | 24,800 |             | $





(1) Comprised of the audit of the Companys annual financial statements and reviews of the Companys quarterly financial statements, as well as consents related to and reviews of other documents filed with the Securities and Exchange Commission.



(2) Comprised of preparation of all federal and state corporate income tax returns for the Company and its subsidiaries.







26



---



Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Companys independent accountants must now be approved in advance by the Audit Committee to assure that such services do not impair the accountants independence from the Company. The Company does not have an Audit Committee, therefore, the Board of Directors reviews and approves audit and permissible non-audit services performed by Anderson, Forse & Co., Ltd., as well as the fees charged by Anderson, Forse & Co., Ltd. for such services.



SIGNATURES



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



|    |  | USIP.COM, INC.       
|--- |  | ---------------------
|    |  | Date:  March 24, 2004
|    |  |                      
|By: |  | /s/ CRAIG H. BURTON  
|    |  | CRAIG H. BURTON      
|    |  | President            



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.



|SIGNATURE                 |  | TITLE |                     | DATE
|------------------------- |  | ----- | ------------------- | ----
|                          |  |       |                     |     
|/s/  CRAIG H. BURTON      |  |       | President           |     
|Craig H. Burton           |  |       |                     |     
|                          |  |       |                     |     
|/s/  JOSEPH J. PASSALAQUA |  |       | Secretary/Treasurer |     
|Joseph J. Passalaqua      |  |       |                     |     
|                          |  |       |                     |     
|/s/  LILLY O. BETER       |  |       | Director            |     
|Lilly O. Beter            |  |       |                     |     







27



---



EXHIBIT 21



SUBSIDIARIES OF THE REGISTRANT



The following companies are subsidiaries of the Registrant:





Datone, Inc., a Delaware corporation



NB Payphones, Ltd., a Pennsylvania corporation



The Platinum Funding Corporation, a New York corporation





28



---



Exhibit 31.1



CERTIFICATION



I, Craig Burton, certify that:



1. I have reviewed this annual report on Form 10-KSB of USIP.Com, Inc.;



2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;



3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and



c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|Date: March 24, 2004 |                        
|-------------------- | -----------------------
|                     |                        
|                     |                        
|                     | /s/ Craig Burton       
|                     | Craig Burton, President







29



---







Exhibit 31.2



CERTIFICATION



I, Kathy Christopher, certify that:



1. I have reviewed this annual report on Form 10-KSB of USIP.Com, Inc.;



2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;



3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b) evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the Evaluation Date); and



c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;



5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions):



a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



|Date: March 24, 2004 |                              
|-------------------- | -----------------------------
|                     |                              
|                     |                              
|                     | Kathy Christopher, Controller





30



---



Exhibit 32.1



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of USIP.Com, Inc. (the Company) on Form 10-KSB for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Craig Burton, President of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:



(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



|/s/ Craig Burton          | 
|------------------------- | 
|Craig Burton             
|President, USIP.Com, Inc.
|March 24, 2004           





31



---



Exhibit 32.2



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



In connection with the Annual Report of USIP.Com, Inc. (the Company) on Form 10-KSB for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Kathy Christopher, Controller of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:



(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



|/s/ Kathy Christopher      | 
|-------------------------- | 
|Kathy Christopher         
|Controller, USIP.Com, Inc.



March 24, 2004



USIP.Com, Inc. does not have a Chief Financial Officer, Kathy Christopher is the principal financial and accounting officer.







32