U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB
     (Mark  One)

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

          For  fiscal  year  ended:  December  31,  2004
                                     -------------------

OR

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

          For  the  transition  period  from  ___________________to ____________

     Commission  file  number          333-75956
                                       ---------

                                NS8 Corporation
                                ----------------
        (Exact Name Of Small Business Issuer As Specified In Its Charter)

             Delaware                                             13-4142621
             --------                                             ----------
  (State  or  Other  Jurisdiction                              (IRS  Employer
Of  Incorporation  or Organization                          Identification  No.)

One Union Square Center, 600 University Street, Suite 1525, Seattle, WA    98101
    ----------------------------------------------------------------------------
(Address of Principal Executive Offices)                              (Zip Code)

     Issuer's  Telephone  Number  (206)  331-4545
                                  ---------------

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

Securities  registered  under  section  12(g)  of  the  Act:  None
                                                              ----

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

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


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<PAGE>

     State  registrant's  revenues  for  its  most  recent  fiscal  year:
$0.00
--------

     As  of  March  16,  2005,  there were 98,674,833 shares of the registrant's
common stock, par value $0.0001 issued and outstanding and 7,225,722 unexchanged
shares  of  CanOnline  Global Media Inc ("CGMI").  Of the issued and outstanding
common  shares  of  the registrant, approximately 69,642,761 shares were held by
non-affiliates of the registrant. All of the unexchanged shares of CGMI are held
by  non-affiliates  of  the  registrant.  The market value of securities held by
non-affiliates  is  approximately US$11,142,842 based on the average closing bid
and  asked  bid  price  of the registrant's common stock on March 16, 2005.  The
market  value  of  the  unexchanged  shares of CGMI is US$1,156,115 based on the
average  closing  bid  and asked price of the registrant's common stock on March
16,  2005, had the unexchanged shares be exchanged into shares of the registrant
on  that  date.

Transitional  small  business  disclosure  format  (check  one):
Yes  [  ];   No  [x]

Documents  Incorporated  By  Reference:  None
                                         ----


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<PAGE>

TABLE  OF  CONTENTS

Item  Number and  Caption                                                   Page
-------------------------                                                   ----

Forward-Looking  Statements                                                   4

PART  I                                                                       5
  ITEM  1.  Description  of  Business                                         5
  ITEM  2.  Description  of  Property                                        19
  ITEM  3.  Legal  Proceedings                                               20
  ITEM  4.  Submission  of  Matters  to  a  Vote  of  Security  Holders      20
PART  II                                                                     20
  ITEM  5.  Market  for  Common  Equity and Related Stockholder Matters      21
  ITEM  6.  Management's Discussion and Analysis of Financial Condition and
            Results  of  Operations                                          23
  ITEM  7.  Financial  Statements                                            30

  ITEM  8.  Changes in and Disagreements with Accountants on Accounting and
            Financial  Disclosure                                            30
  ITEM  8A. Controls  and  Procedures.                                       30
PART  III                                                                    30
  ITEM  9.  Directors,  Executive  Officers, Promoters and Control Persons;
            Compliance  with  Section  16(A)  of  the  Exchange  Act         30
  ITEM  10. Executive  Compensation                                          34
  ITEM  11. Security  Ownership Of Certain Beneficial Owners And Management  41
  ITEM  12. Certain  Relationships  and  Related  Transactions               42
  ITEM  13. EXHIBITS,  List  and  Reports  on  Form  8-K                     43


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<PAGE>

Forward-Looking  Statements

     Except  for  historical  information,  this report contains forward-looking
statements  within  the meaning of Section 27A of the Securities Act of 1933 and
Section  21E  of  the  Securities  Exchange  Act  of 1934.  Such forward-looking
statements  involve  risks  and  uncertainties,  including,  among other things,
statements  regarding  our  business  strategy,  future revenues and anticipated
costs  and  expenses.  Such  forward-looking  statements  include, among others,
those  statements  including  the  words  "expects,"  "anticipates,"  "intends,"
"believes"  and  similar  language.  Our actual results may differ significantly
from  those  projected  in  the  forward-looking statements.  Factors that might
cause  or  contribute to such differences include, but are not limited to, those
discussed  in  the  section  "Management's  Discussion and Analysis of Financial
Condition  and  Results  of Operations" and "Business-Risk Factors".  You should
carefully  review  the  risks  described in other documents we file from time to
time  with  the  Securities  and  Exchange Commission.  You are cautioned not to
place  undue  reliance on the forward-looking statements, which speak only as of
the  date  of  this  report.  We undertake no obligation to publicly release any
revisions  to  the forward-looking statements or reflect events or circumstances
after  the  date  of  this  document.

Industry  Data

In  this  report,  we  refer  to  information regarding the growth of high-speed
internet  lines  in the United States between homes and businesses from the U.S.
Federal  Communications  Commission  (the "FCC"), an independent U.S. government
agency  charged  with  regulating interstate and international communications by
radio,  television,  wire,  satellite  and  cable.  We also refer to information
regarding  households  in  the  United  States  that  are  capable  of receiving
video-on-demand  from  the  Leichtman  Research  Group,  Inc.,  a  research  and
consulting  firm  independent  of  industry participants that specializes in the
broadband,  media  and  entertainment  industries.  We also refer to information
from  Yankee  Group  Research,  Inc.  ("Yankee  Group"), a Boston based research
products  and  consulting services firm primarily serving the telecommunications
and  wireless  industry, the consumer, entertainment and media industry, and the
information  technology  ("IT")  hardware, software and services segments of the
technology industry.  We believe that all of the information in this form 10-KSB
that  is  based on statements from the FCC, the Leichtman Research Group and the
Yankee  Group  is  independent  and  reliable.

Currency

Unless  we  otherwise  indicate  in  this  registration statement, references to
"USD",  "Dollars"  or  "$" are to the lawful currency of the United States.  Any
references  to  "CAD",  "Dollars  Canadian"  or  similar terms are to the lawful
currency  of  Canada.


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<PAGE>

                                     PART I

ITEM  1.     Description  of  Business

Corporate  History

NS8  Corporation  ("NS8Corp",  the  "Company"),  was incorporated under the name
Delivery  Now  Corp.  in  the  State  of  Delaware  on  October  3,  2000.

Until  December 17, 2003, we delivered envelopes by bike messengers and packages
by  van  in  the  New  York  City  metropolitan  area  through  our wholly owned
subsidiary  BMW  Messenger Services, Inc. ("BMW"). BMW received phone calls from
customers seeking such deliveries and then dispatched its messengers via two-way
radio  to  deliver  the  envelopes and packages via bicycle or van. BMW obtained
these job orders through referrals from existing customers and through its sales
force.

BMW was formed on September 23, 1999 in the State of New York and operated as an
S  Corporation  from  inception  through October 3, 2000 when we acquired it. On
October  3,  2000,  we  acquired  100%  of  BMW's  common  stock in exchange for
2,500,000  shares  of  our common stock. At the time of the transaction, Michael
Conte  was  our  sole  shareholder.

On  December  17,  2003,  we  changed  our  name  to  NS8  Corporation.

On December 18, 2003, we discontinued the messenger delivery service business in
connection  with  the  merger  transaction  described  below.

     Merger  with  CanOnline  Global  Media,  Inc.

On  November  3,  2003,  we  entered  in to an Agreement and Plan of Merger (the
"Merger  Agreement")  with  CanOnline  Global  Media,  Inc.  ("CanOnline"),  a
Washington corporation, and DLVN Acquisition, Inc. ("Acquisition Subsidiary"), a
Delaware  corporation.  Acquisition  Subsidiary  was our wholly owned subsidiary
prior  to  the  transaction.

On  December  18,  2003  the  transactions  contemplated by the Merger Agreement
closed,  and  a  merger  (the  "Merger")  was  effected  among us, CanOnline and
Acquisition  Subsidiary

Pursuant  to  the  Merger  Agreement, (i) Acquisition Subsidiary was merged into
CanOnline with CanOnline becoming the surviving corporation, (ii) the holders of
the 66,670,346 shares of issued and outstanding CanOnline common stock exchanged
their  CanOnline  common  stock  for shares of our common stock at a one for one
ratio,  receiving  in  the  aggregate  66,670,346  shares of our common stock in
exchange  for  their  shares  of  CanOnline  common  stock, (iii) the holders of
options to acquire an aggregate of 14,886,702 shares of CanOnline's common stock
exchanged their options for options to acquire our common stock at a one for one
ratio,  receiving  in  the aggregate options to acquire 14,886,702 shares of our
common  stock,  and  the  100  shares  of common stock of Acquisition Subsidiary
issued  and  outstanding  prior  to the Merger were converted into 100 shares of
CanOnline  common  stock,  with  CanOnline becoming our wholly owned subsidiary.


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<PAGE>

Simultaneously  with the closing of the Merger, we transferred all of the issued
and  outstanding  stock  of  our wholly owned subsidiary, BMW Messenger Service,
Inc.  ("BMW"),  to  Michael  Conte and Brian Seinwels in exchange for 24,950,000
shares  of our common stock. Mr. Conte was our director, chief executive officer
and  president, and Mr. Seinwels was our Vice President until the closing of the
Merger.  These shares were cancelled and restored to our authorized and unissued
capital  stock.

Prior  to  the  Merger,  our  operations  consisted  primarily  of the messenger
delivery  service  conducted  by  BMW.  This business is now wholly owned by Mr.
Conte  and  Mr.  Seinwels  and  is  no  longer  operated  by  us.

Our  primary  operation  now  consists  of  the  operations  of  CanOnline.

The  number  of  shares  of  our common stock exchanged for the CanOnline common
stock was determined in arms-length negotiations between our Boards of Directors
and  the board of directors of CanOnline. The negotiations took into account the
value  of  CanOnline's  financial  position,  results  of  operations, products,
prospects and other factors relating to CanOnline's business. At the time of the
Merger,  there were no material relationships between CanOnline and us or any of
our  affiliates, any of our directors or officers or any associate of any of our
officers  or  directors.

The  number  of shares of our common stock transferred to us in exchange for the
BMW  common  stock  was determined by our Board of Directors, which included Mr.
Conte  and Mr. Seinwels. This transaction was approved and ratified by the Board
of  Directors  of  CanOnline,  which  was  independent  with  respect  to  this
transaction.

The exchange of CanOnline shares for our shares was exempt from the registration
requirements  of  the  Securities Act of 1933, as amended, under section 4(2) of
that  Act.

General

We  are  a  technology  research  and  development  company  focused on creating
software  tools  which secure, trace and record the distribution of intellectual
property  across internet protocol based channels.  Our mission is to facilitate
the advanced distribution of on-demand options to the consumer.  We believe this
can  be accomplished by concurrently addressing the security and licensing needs
of  content owners while also meeting the bandwidth delivery and revenue capture
requirements of content distributors.   Our software is delivered through normal
high-speed internet connections and does not require download or installation on
resident  computer  systems.  We  developed  it  to use the Internet's extensive
network and delivery capabilities without imposing excessive broadband, resident
memory  consumption  or  hardware  limitations.

We  operate  through  two wholly-owned subsidiaries, CanOnline Media Corporation
("CMC")  and  CanOnline.  CMC was incorporated on June 18, 1999 and is a British
Columbia,  Canada  corporation.   CMC  conducts  all  our proprietary technology
research  and  development  activities.  CanOnline was incorporated on March 15,
2000  as a Washington corporation and is focused on the marketing, licensing and
commercialization  of  the  products  and  technology  of  CMC.


                                        6
<PAGE>

We  are  a  development  stage  company  with  minimal  revenues  to  date.

Industry

In  2004,  significant changes occurred within the competitive and technological
business landscape of providing interactive broadband service to consumers, such
as  cable  companies  beginning  to  deploy voice services and traditional phone
companies  beginning to deploy videoWe believe that these changes established a
foundation  for  the  convergence  of  services delivered over Internet Protocol
("IP")  based  networks.  The  business  case  for  convergence now rests on the
principles  of  lowering  network  equipment  and  infrastructure costs, network
administration costs and overall costs associated with the delivery of services.
We  believe  that  IP  networks are conducive to lowering delivery costs in that
they  can  easily  be scaled to provide a multitude of services and applications
that  can  be  bundled  for  sale  to  interactive  broadband  consumers.

Convergence has caused the telecommunications industry to expand its traditional
focus  by  offering  services  to  compete  within  the  boundaries of cable and
satellite  service.  Telecommunications  operators  are  now  diversifying their
service  offerings  with  local  exchange,  long-distance  telephone,  wireless,
high-speed Internet and internet video on demand services to remain competitive.
At  the  same  time,  cable companies have been upgrading their digital networks
with capacity to carry larger quantities of data at faster rates that allow them
to  offer  additional  services such as voice and video-on-demand ("VOD").  As a
result,  once  disparate  industries  are  now competing head-to-head by rapidly
rolling  out  overlapping  services  and  applications to capture and keep their
valuable  subscribers.

According  to  the  U.S.  Federal Communications Commission, high-speed internet
lines  between  homes  and  businesses  in  the U.S. totaled 32.5 million in the
second  half  of 2004. VOD has been a driving force for the adoption of advanced
digital  service  packages  delivered to the home. The Leichtman Research Group,
Inc.  conducted  surveys in December 2004 of households in four U.S markets. The
group,  which  specializes in research and analysis on broadband, found that the
percent of digital cable subscribers who have used VOD is now 50-69%, or roughly
twice  the  rate  found a year and a half ago. According to the Leichtman Group,
there  are  currently  22 million VOD-capable households in the United States, a
number it expects to grow to 32.2 million by 2008. A 2004 Yankee Group Research,
Inc.  study  found that the bundling of video, voice and data services increases
average  revenue  per  user,  while  decreasing  churn.

We  believe  that the increase in VOD programming and on-demand viewers presents
an  opportunity  for broadband service providers, as well as the advertisers and
merchants  wanting  to  reach  those  growing  viewers. The one-to-one nature of
delivering  content and services in an IP based network provides opportunity for
advertisers  to  better target and track the efficiency of their advertisements.
It  also  offers  retail  merchants  the  opportunity  to  participate  in  new
television-based  distribution  channels.

We  believe  that  the  large  capital  outlay  by  cable  companies  and  large
telecommunications  firms,  such  as  SBC  Communications Inc., to upgrade their
digital  networks is a validation of the importance these industries are placing


                                        7
<PAGE>

on  the  delivery  of  VOD  and  other  advanced  interactive  services  as  a
differentiator to their subscribers.  We believe that although VOD will continue
to  be  an  important  strategic  differentiator  for  broadband  providers, the
addition  of  multiple  advanced  interactive  services  bundled  with  and
complimentary  to  VOD  will  ultimately  be  the  competitive  lynch-pin.

Our  Products  and  Technologies
--------------------------------

We  designed  our suite of software products to address five growing problems in
the  industry,  namely  the  inability:

-    to  effectively  protect  digital  content  as  it is delivered through the
Internet;

-    to  accurately account for the usage of the content as it is distributed by
the  service  provider  to  its  consumers;

-    to  accurately  capture  revenue  each  time  digital  content is consumed;

     to  meet  growing  consumer demand for real-time access to digital content;
and

-    to  provide  consumers  with  complete portable media access using a single
service  provider.

We  seek  to  address  these  problems  through  three  principal  technologies:

-    Behavioral  Network  Management  Systems.  Our  NS8  Library  Distribution
Management  System  is  an  easy  to  deploy,  server rendered visual management
console  for  multi-format encoding (MPEG2, WMV, MPEG4), distribution licensing,
distribution  management  and  media  program  scheduling of digital content for
distribution  over  IP  networks.

-    Persistent  Media  Distribution  Security.  Our  NS8  Security  Protocol
Integration  ("SPi")  provides  embedded content security aimed at ensuring that
intellectual  property  rights,  payment  auditing,  territorial licenses, usage
auditing, and distribution polices are enforced on a persistent basis throughout
the  internet  distribution  and  consumer  usage cycle.  SPi-enabled files lose
usable  integrity  if  tampered  with  in  any  way.

-    Non-Resident  Server  Based Software Systems.  Our NS8 Interactive Consumer
Programming  and  Shopping Guide  is a light-weight server based VOD programming
and  consumer  interactive  guide  accessible  through  PC, MAC and digital IPTV
set-top-box  for a complete portable media viewing experience that is capable of
running  on  normal  high-speed internet lines such as ADSL, DSL, XDSL and WiFi.

The  combination of these technologies constitutes a patent-pending solution for
content  distribution  via  the  Internet  to  the  consumer  through a personal
computer  or  an  IP-based  set-top  box on a television. These technologies are
comprised  of  software modules intended to fortify security during distribution


                                        8
<PAGE>

and  consumer  use,  increase  delivery  efficiency  through  normal  broadband
networks,  ensure  royalty  and  usage  payment  to all participating users, and
improve  overall  content quality to the consumer. These software modules can be
applied  as  stand-alone  solutions  or  combined  to produce end-to-end service
portals  for  specific  industry  verticals,  such  as  content studios, service
providers,  advertising  and merchandising firms. To date, we have developed and
completed  two  online  management  platforms.  The  first platform is Reelindie
Global  Network ("RGN"), an online business collaboration and management system,
targeted  at  professionals  and businesses in the entertainment industry (film,
television,  music,  fashion  and  advertising).  The system includes a suite of
interactive  online  services and applications designed to manage and coordinate
project  planning  and  execution,  human  resources,  production supply chains,
promotions  and  communications.  The  second  platform  is  Kaozz Entertainment
Network  ("KAOZZ"),  an  online  distribution and communication platform for the
secure  commercialization  of  digital content and intellectual property (music,
film,  video  and  software).

We  offer  RGN  and  KAOZZ  in combination with our three core technologies in a
comprehensive  solution called iWaveTM interactive systems for on-demand content
and  interactive  media  delivery to the consumers of regional telecommunication
companies.  The  iWaveTM  system consists of third-party servers to be installed
at  the  client's  facilities  and  that  are  pre-installed  with  our software
applications. Each system configuration is scalable and flexible to the client's
consumer-base  and  distribution  requirements.  We  believe  that  an  open,
custom-integrated  and  cost-efficient solution spanning both asset delivery and
management  will  prevail  in  our  market  space.

On  January  13,  2005,  we  announced that Long Distance Billing Services, Inc.
("LDBS")  of Brookneal, Virginia selected us to lead the technology solution and
deployment  architecture  for  the  implementation of interactive computer video
on-demand  (VOD)  systems  in  Virginia and Chicago.  On February 22, 2005, LDBS
filed  for  bankruptcy  protection under Chapter 11 of the U.S. Bankruptcy Code.
LDBS's  bankruptcy proceeding is ongoing. Accordingly, we will not be proceeding
with  the  foregoing  commercial  program  at this time.  In addition, we do not
anticipate  proceeding  with  our  possible acquisition of LDBS's parent, ezTel,
LLC.


Our  target  primary  customers
-------------------------------

We  believe  that customers for our products and services will include owners of
entertainment  and/or  advertising content as well as the retail distributors of
this  content,  multiple  service  operators  ("MSOs")  that  sell direct to the
consumer.  MSOs  include  cable,  telephone  and  satellite companies. There are
potentially thousands of entertainment and advertising content owners around the
world  who  can use our products and services.  We are not bound by geographical
restraints  in  the  selling of our products and services. The market for retail
distributors,  while  considerably  smaller  and  defined  by  geography,  is
nonetheless  a substantial market that is seeking competitive differentiators to
sell  value-added  services  to  consumers.  We  believe  that  our products and
services  meet  the  demands of both market segments, and therefore, we will not
depend  upon  one  or  a  few  major  customers.

We  break  our  potential  customers  down  into  the  following  segments:


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<PAGE>

-    Owners  of  entertainment  content,  including  motion picture, television,
specialty  video, and animation for theatrical, television or DVD release or for
viewing  over  the  Internet;

-    Advertising content owners and distributors, such as advertising firms that
place  commercial  advertisements and other short-form video insertions directly
to  a  consumer  environment;

-    Regional  telecommunications  companies  offering  broadband  high-speed
internet  and  related  digital  services  directly  to  their  consumers;

-    Network  management  firms  and  internet  service  providers  that provide
infrastructure  hardware  for  internet services and digital storage facilities;
and

-    Medium  to  large  retail  merchandising  companies wishing to extend sales
channels  and  offer  direct  interactive commerce to consumers over a broadband
operator's  network.

Marketing
---------

Our  business focus is to provide interactive consumer distribution and advanced
royalty  management  software platforms as a backbone to the VOD and interactive
internet  environment  of  regional telecommunication companies. In addition, we
seek  to address, within its technological design, the ability to integrate with
Internet  Protocol  Television  (IPTV) as part of an integrated service offering
for  customers  of  those  regional  telecommunication  companies.

We  intend  to  market  our  technologies  and  services  through:

-    An  enhanced  partnership  program  through  regional  telecommunication
companies;

-    Through  third-party  hardware  providers  and  partnerships as part of the
service  offering  of  those  hardware  companies;  and

-    Through  re-sale  networks  primarily  consisting  of  internet  service
providers.

We  intend  to  sell  our  systems in complete turn-key end-to-end systems or as
independent  systems  to  our various customer segments.  Although each customer
segment  is  independent of each other, we believe that our iWaveTM system would
integrate  each segment toward a single or multiple service provider system that
serves  a  large  consumer  base  connected  to  the  internet.

We  do  not  carry  inventory for our iWaveTM systems but rather intend to build
each  iWaveTM  system  according  to our client's requirements once we have been
engaged  to  provide  them  with  an  interactive  on-demand  solution for their
internet services. In addition, we do not intend to carry inventory with respect
to  hardware provided by resale partnerships in order to offer their products to
our  customer  base.

Our  business  model
--------------------


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<PAGE>

We  seek  to  generate  revenue  from  three  primary  sources:

-    The  sale  and  licensing  of  our  software products to our target primary
customer  segments,  including  entertainment content owners, advertising firms,
regional  telecommunications  companies,  network  management  firms,  Internet
service  providers  ("ISPs")  and  retail  merchants;

-    The re-sale of hardware component products provided by third-party partners
including  server  manufactures,  set-top  box  manufactures  and other IP-based
consumer  electronic  products  manufactured  for  converging  regional
telecommunications  markets;  and

-    Revenue  sharing with technology re-seller and joint-venture partners, such
as  content  distribution  firms,  network  management  firms  and  ISPs.

According  to  our  business  plan, revenue will come principally from the sale,
re-sale  or  partnered  deployment  of  our  following  lines  of  products:

-    iWave Interactive Service Provider Systems, a PC or IPTV-based VOD content,
advertising  and  merchandise  catalogue  receiving,  distribution  and  royalty
management  system  for  service  providers;

-    iWave  Interactive Content Provider Systems, a PC or IPTV-based VOD content
catalogue  placement,  distribution  and  royalty  management system for content
owners  and  distributors;

-    iWave  Interactive  Advertiser  Systems,  a  PC  or  IPTV-based interactive
advertisement  catalogue  placement,  distribution  and  consumer  intelligence
management  system  for  advertising  and  media  buying  firms;

-    iWave  Interactive  Retail Merchant Systems, a PC or IPTV-based interactive
merchandise  catalogue  placement,  distribution  and  transaction  fulfillment
management  system  for  medium  and  large  on-line  retailers;

-    RGN,  an  online  business collaboration and management system, targeted at
professionals  and  businesses  in  the  entertainment  industry;  and

-    KAOZZ,  an  online  distribution  and communication platform for the secure
commercialization  of  digital  content  and  intellectual  property.

We  expect  to  license  our  software  products  within  multi-year  licensing
agreements  negotiated  and  executed  with  primary  customers,  re-sellers and
partners,  which  are  comprised  of  the  following  fee  categories:

-    Annual  variable  technology  licensing,  software  maintenance  and custom
integration  fees;

-    Annual  security  maintenance,  monitoring  and  enforcement  fees;


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<PAGE>

-    Variable  "per  view"  consumer  usage  fees;

-    Variable  advertisement  placement  and  distribution  fees;  and

-    Variable  point-of-sale  commerce  fulfillment  fees.

We  expect  to  negotiate  and realize on a case-by-case basis revenue generated
from  third-party  hardware  component  or  service  re-sales  as  well  as from
revenue-sharing  agreements  executed  with  partners.

Proprietary  Technologies

We currently have filed, through CanOnline, two U.S. patent applications and one
Patent  Cooperation  Treaty  application.  These  are:

-    U.S. Patent Application filed on February 4, 2004 for "Method and Apparatus
For  Converting  Objects  Between  Weakly  And  Strongly  Typed  Programming
Frameworks";

-    U.S. Patent Application filed on February 4, 2004 for "Method and Apparatus
For  Presenting  Multimedia  Content  And  For  Facilitating  Third  Party
Representation  Of  An  Object";

-    Patent Cooperation Treaty Application filed on February 4, 2004 for "Method
and  Apparatus  For  Converting  Objects  Between  Weakly  And  Strongly  Typed
Programming  Frameworks".

These  applications  claim  priority  to U.S. Provisional Patent Application No.
60/444,672, filed by CanOnline on February 4, 2003, titled "Method and Apparatus
for Facilitating Third Party Representation Of An Object", which is incorporated
in  its  entirety  in  the  new  filings.

We  have  also  filed  one provisional patent application with the United States
Patent  and  Trademark Office, U.S. Provisional Patent Application filed on July
16,  2004  for  "Method  and  System  for Managing the Authorized Use of Digital
Works".

These  patent  applications  relate  to  new  developments  within  the areas of
non-resident  software  systems;  automated  coding  architecture; digital media
formatting,  filtering,  conversion  and  distribution  technologies;  encrypted
signatures,  processing,  sampling,  royalty  and  encoding  methods;  secure
communications  and  collaboration  systems;  and  business  processes.

None  of the above-mentioned patent applications have been granted, or rejected,
at  this  time.  All  of  these  patent  applications  have  been  filed through
CanOnline.

Trademarks

CanOnline  filed  a trademark application for the trademark "CANONLINE" with the
Canadian  Trademark Office on June 18, 2003.  On April 30, 2004, CanOnline filed
an  application  for  the  trademark  "SPI"  with  the  United States Patent and


                                       12
<PAGE>

Trademark Office.  On June 1, 2004, CanOnline filed applications for two classes
for  the trademark "NS8" with the U.S. Patent and Trademark Office.  On July 26,
2004, CanOnline filed two new applications for the trademarks "SECURITY PROTOCOL
INTEGRATION"  and  "SECURE  DIGITAL CONTENT DISTRIBUTION" with the United States
Patent  and  Trademark  Office.

During  2004,  we  also  initiated  applications, through CanOnline, to file the
"NS8"  trademark in Canada, China, the European Community and Japan, including:

-    The  application  for  registration of the "NS8" trademark filed, with the
priority  claim,  in  Canada  on  November  30,  2004;

-    Separate  applications filed in Classes 9 and 42, with priority claims, in
China  on  November  29,  2004;

-    The  "NS8"  trademark  application  filed  in  Classes  9 and 42, with the
priority  claim,  in  the  European  Community  on  December  1,  2004;  and

-    The  "NS8"  mark and logo filed as a composite mark in Classes 9 and 42 in
Japan  on  December  1,  2004.

None of these applications have been granted, or rejected, at this time.  We are
currently  pursuing  the  filing  of  other  trademarks with the U.S. Patent and
Trademark  Office  in  relation to the development of its products and marketing
initiatives.

Competition

Our  products  and  technologies  are  part  of a highly competitive marketplace
covering the end-to-end delivery system of content from the content owner to the
consumer.  Within  this  delivery system, we compete in four primary areas. Each
area  contains multiple competitors including well-established companies such as
Microsoft,  Sony and Motorola, as well as medium-sized and start-up companies.

-    Content  Aggregation.  Content  aggregators  gather  content from multiple
producers or owners for further distribution to the market.  Primary competitors
in  this  area  include  TVN Entertainment Corporation and iN DEMAND L.L.C., who
aggregate  contact  for  existing  VOD  deployments.  Starz  Entertainment Group
L.L.C. also offers aggregated programming obtained from major Hollywood studios.
Other competitors include ViewNow , who partners with video server and streaming
provider,  Kasenna,  IncThe  alliance  between  ViewNow  and  Kasenna,  Inc.
constitutes  direct  competition  to  us.

-    Digital  Rights  Management  ("DRM").  DRM  allows a vendor to control and
restrict  use  of  digital  content  as  specified  by the vendor. Typically the
content  is  a  copyrighted  work  to  which  the  vendor holds specific rights.
Cable-based multiple service operators ("MSOs") have relied primarily on set-top
boxes  with  integrated conditional access systems to control digital rights for
their  content-on-demand  services.  The  leading providers of set-top boxes are
Motorola,  Inc.  and  Scientific-Atlanta,  IncOther  companies  offering  DRM
technologies  to  control  distribution  of  digital  content  on-demand include
Microsoft  Corporation,  Sony  Corporation, Nagravision S.A, NDS Group Plc., and
Widevine  Technologies,  Inc.


                                       13
<PAGE>

-    Video  Server  Systems.  Seachange International, nCube Corporation (now a
division  of  C-COR  Incorporated)  and  Concurrent Computer Corporation are the
three  primary video server/video streaming software vendors providing equipment
for  most  current VOD deployments. These competitors have focused mainly on the
cable  MSO  sectors  because  it  is  where  most  current  VOD deployments have
occurred.  Other  competitors  include  Kasenna,  Inc.  and  N2  Broadband, Inc.
(recently acquired by Tandberg Television), which supply open-platform (hardware
independent)  software  solutions  for  delivering  and  managing  VOD.

-    Middleware and Electronic Program Guides ("EPG").  Most of the established
and  larger  video  server  companies  offer  accompanying  delivery management,
back-office,  and  usage  reporting  software  as part of their end-to-end video
delivery  system  package.  nCube  licenses its office support software to third
parties.  Other  widely deployed middleware/EPG system vendors include Microsoft
Corporation  (TV  Foundation), Myrio Corporation, Minerva Networks, Inc., OpenTV
Corporation,  NDS  Group  Plc.  and  GemStar-TV  Guide  International,  Inc.

Some  competitors  specialize  within  one  or  two specific areas, while others
partner  with  other  complimentary specialists and offer a complete solution to
MSOs.  This  market  sector has attracted top level technology providers because
DRM  and  server-based software is the cornerstone of delivering digital content
on-demand.

Recent  Developments

On  February  10,  2005,  we  entered  into  an Option Agreement with ezTel, LLC
("ezTel")  pursuant  to which we were granted an option to purchase 100% of  all
equity,  membership  and ownership interests in ezTel for $1,500,000.  ezTel and
its  subsidiaries provide discount long-distance telephone services and wireless
broadband  internet  services.  On  July  30,  2002,  ezTel  and  several of its
subsidiaries  filed  for  protection  under  Chapter  11 of the Bankruptcy Code.
EzTel's  bankruptcy  proceeding  is  ongoing.  The  option  to  acquire ezTel is
exercisable  at  our  sole  discretion,  subject  to  confirmation of the Option
Agreement  by  the  Bankruptcy  Court  and  confirmation  of  a  revised Plan of
Reorganization  by  the  Bankruptcy  Court  in  a  final,  non-appealable order.

As  consideration for the Option Agreement, we advanced a $200,000 term loan due
August  1, 2005 to Long Distance Billing Services, Inc. ("LDBS"), a wholly owned
subsidiary  of  ezTel.  If we choose to acquire ezTel, ezTel must first repay to
us  the  amount of the term loan to LDBS plus all accrued interest.  On February
22,  2005,  LDBS  filed  for protection under Chapter 11 of the Bankruptcy Code.
LDBS's  bankruptcy  proceeding  is  ongoing. Accordingly, at this time we do not
anticipate  exercising  our  option  to  acquire  ezTel  pursuant  to the Option
Agreement.  We  cannot  assure  you  that  the term loan to LDBS will be repaid.

Government  Regulation

The market for VOD and other internet-related business solutions is evolving. We
anticipate that certain countries will be establishing new regulatory bodies and
policies  that  might  have  an  impact  on  current  telecommunication policies


                                       14
<PAGE>

generally and possibly in the new industry sector where we intend to operate. As
an  example,  the  U.S. Congress enacted the Digital Millennium Copyright Act in
1998  addressing  the  impact of new digital technologies on the distribution of
content and related copyright infringement issues. Since December 1992, the U.K.
government  has  been  working  on  a Video-On-Demand Code of Practice to ensure
there  is  adequate  protection  for  users  through  self-regulatory processes.
Similar  initiatives  have  been pursued in Honk Kong since 1996. It is possible
that  similar  practices  might  be  adopted in various countries where we might
operate.  It is not possible at this time to properly evaluate the likely impact
of  any  such  governmental  initiatives.  However,  due  to  the high degree of
flexibility  and  scalability  of our technologies, we do not anticipate that we
will  experience  major  problems  in  adapting  our  technologies  and business
practices  to  future  government  or  industry  regulations.

Research  and  Development

We  expense  all  costs as incurred for research and development activities. For
the  years  ended December 31, 2004 and 2003, the research and development costs
were  $1,079,824  and  $1,382,000,  respectively.

Employees

As  of  December  31,  2004,  we  had  35  full-time  employees,  consisting  of
Operations,  Marketing  and  Research  and  Development.  We  intend  to  hire
additional  personnel  as  the  development  of  our  business makes such action
appropriate.  The  loss  of  the services of key employees could have a material
adverse effect on our business. Since there is intense competition for qualified
personnel  knowledgeable  of  our industry, we cannot assure you that we will be
successful  in  retaining  and  recruiting  needed  personnel.

Our  employees  are  not  represented  by a labor union and are not covered by a
collective bargaining agreement. We believe that we have good relations with our
employees.

Risk  Factors

We are subject to various risks that may materially harm our business, financial
condition  and  results  of operations.  You should carefully consider the risks
and  uncertainties  described  below  and  the other information described below
before  deciding  to  purchase  our  common  stock.  If  any  of  these risks or
uncertainties  actually  occurs,  our business, financial condition or operating
results  could  be  materially  harmed.  In  that case, the trading price of our
common  stock  could  decline and you could lose all or part of your investment.

We  have  had  no  profits  and  insignificant  revenues  since  inception

We  are  a  development  stage company and have had no profits and insignificant
revenues  since  commencement  of operations in March, 2000. For the years ended
December 31, 2004 and 2003, the Company experienced a net loss of $9,781,920 and
$3,925,394, respectively. Our accumulated deficit was $15,257,009 as of December
31,  2004.  Future losses are likely to occur, as we depend on spending money to
pay  for  our  operations.  We  cannot  assure you that we will be successful in
reaching  or  maintaining  profitable operations. Accordingly, we may experience


                                       15
<PAGE>

liquidity and cash flow problems. If our losses continue, our ability to operate
may  be  severely  impacted.

We  may  need  to raise additional capital or debt funding to sustain operations

Unless  we  can  become  profitable  with  the existing sources of funds we have
available,  we  will require additional capital to sustain operations and we may
need  access  to  additional  capital  or  additional debt financing to grow our
sales.  In  addition,  to  the extent that we have a working capital deficit and
cannot offset the deficit from profitable sales, we may have to raise capital to
repay the deficit and provide more working capital to permit growth in revenues.
We  cannot  assure  that  financing,  whether  from  external sources or related
parties,  will  be available, if needed, or on favorable terms.  An inability to
obtain  adequate  financing  would  result  in  the  need  to reduce the pace of
business  operations.  Any  of  these  events could be materially harmful to our
business  and  may  result  in  a  lower  stock  price.

We  may  not  be  able  to  continue  as  a  going  concern

Our  consolidated  financial  statements  have  been prepared on a going concern
basis,  which  contemplates  the  realization  of assets and the satisfaction of
liabilities  in  the  normal  course of business. We have a history of operating
losses  that are likely to continue in the future. Our auditors have included an
explanatory  paragraph  in  their  Independent  Auditor's Report included in our
audited  financial  statements  for the year ended December 31, 2004 and 2003 to
the  effect  that  our  significant losses from operations and our dependence on
equity  and debt financing raise substantial doubt about our ability to continue
as a going concern. Our financial statements do not include any adjustments that
might  be  necessary  should  we  be  unable  to  continue  as  a going concern.

We are subject to a working capital deficit, which means that our current assets
on December 31, 2004 were not sufficient to satisfy our current liabilities and,
therefore,  our  ability  to  continue  operations  is  at  risk

As  of  December  31,  2004,  the  date  of  our  most  recent audited financial
statements, we had a working capital deficit of $1,422,342, which means that our
current  liabilities  as of that date exceeded our current assets by $1,422,342.
Current  assets  are assets that are expected to be converted to cash within one
year  and, therefore, may be used to pay current liabilities as they become due.
We had insufficient working capital meaning our current assets were insufficient
to  satisfy  all  of  our  current liabilities on December 31, 2004. Our ongoing
operations must begin to provide sufficient profitability to improve our working
capital  position.  If  we  are unable to become profitable we may have to raise
additional  capital  or  debt  to  fund  the operations or curtail future plans.

Our  obligations  under the secured convertible debentures are secured by all of
our  assets

Our  obligations under the Secured Debentures which we issued to Cornell Capital
Partners  are secured by all of our assets. As a result, if we default under the
terms  of  the  secured debentures, Cornell Capital Partners could foreclose its
security interest and liquidate all of our assets.  This would cause us to cease
operations.


                                       16
<PAGE>

We  could fail to attract or retain key personnel, which could be detrimental to
our  operations

Our  success  largely  depends  on  the  effort  and  abilities of key executive
officers.  The  loss  of the services of any of our key executive officers could
materially  harm  our business because of the cost and time necessary to replace
and train a replacement. Such a loss would also divert management attention away
from  operational  issues.  We have taken out a Group Accident Policy on our key
executives  effective  January 1, 2005, but we do not presently maintain key-man
life insurance policies on any of our key executive officers. We also have other
key  employees who manage our operations, and if we were to lose their services,
senior  management  would be required to expend time and energy to replace these
employees  and  train  replacements.  To the extent that we are smaller than our
competitors and have fewer resources, we may not be able to attract a sufficient
number  and  quality  of  staff.

Severance  payments  are  due  to  top  executive  officers  if  any of them are
terminated  without  cause

Our  Chief  Executive  Officer  has a severance payment clause in his employment
agreement  for  $450,000.  The  severance  payment would be due if the executive
officer  was  terminated  without  cause.  The Chief Executive Officer and other
Corporate  Officers  reside in British Columbia and are protected by the British
Columbia  Employment  Standards Act, which provides for one week of pay for each
year  of  service  upon  termination. The officers' employment agreements do not
have  termination dates. Payment of the severance payments would have a negative
effect  on  our  ability  to  operate  and may make it difficult to remove these
executive  officers  without  cause.

Our  new  products,  services  and  technologies  may  never  be  profitable

We  have made significant investments in research, development and marketing for
new  products,  services  and technologies. Revenue from new product and service
investments  may  not  be  achieved  for a number of years, if at all. Moreover,
these  products  and  services  may  never  be  profitable.

If  we  fail to adequately protect our intellectual property rights, competitors
may  use  our  technology  and  trademarks,  which  would weaken our competitive
position  and  may  result  in  the  failure  of  our  business.

Our success depends upon our proprietary technology. We rely on a combination of
patent  pending,  copyright,  trademark and trade secret rights, confidentiality
procedures  and  licensing arrangements to establish and protect our proprietary
rights.  To  date,  we  have  filed  two U.S. patent applications and one Patent
Cooperation  Treaty  application  with the U.S. Patent and Trademark Office, and
the  trademark  applications described above in the Trademarks subsection of the
Proprietary  Technologies  section.  As  of  this  date  none  of  the trademark
applications  have been granted or rejected. It is possible that other companies
could  successfully  challenge the validity or scope of our patents and that our
patents  may not be granted or provide a competitive advantage to us. As part of
our  confidentiality  procedures,  we  generally  enter  into  non-disclosure
agreements  with  our  employees,  distributors  and corporate partners and into
license  agreements  with  respect  to  our  software,  documentation  and other


                                       17
<PAGE>

proprietary  information. Despite these precautions, third parties could copy or
develop  similar  technology  independently.  The  protection of our proprietary
rights  may  not  be  adequate  and  our competitors could independently develop
similar  technology,  duplicate our products, or design around patents and other
intellectual  property  rights  that  we  hold.

We  need  to  establish  and  maintain  strategic  and  licensing relationships.

Our  success  will  depend  in  part  upon our ability to establish and maintain
licensing relationships with companies in related business fields, including but
not  limited  to  communications companies, owners of digital media content, DVD
authoring  facilities  and  replicators,  consumer  electronics  hardware
manufacturers,  and CD-ROM mastering facilities and replicators. We believe that
these  relationships  are  needed to allow us access to manufacturing, sales and
distribution  resources.  However,  the  amount  and  timing  of resources to be
devoted  to these activities by such other companies are not within our control.
We cannot assure you that we will be able to maintain our existing relationships
or  enter  into  beneficial relationships in the future, that other parties will
perform  their  obligations  as expected or that our reliance on others will not
result in unforeseen problems. We cannot assure you that our potential licensees
will  not  develop  or pursue alternative technologies either on their own or in
collaboration with others, including with our competitors. The failure of any of
our current or future collaboration efforts would have a material adverse effect
on  our  ability  to  introduce new products or applications and therefore would
have  a material adverse effect on our business, financial condition and results
of  operations.

We  face  intense  competition  from  better  funded  companies.

We  face  intense  competition  from  better  funded  companies in the fields of
Internet  software  services,  digital  security and asset management, and media
distribution.  We  expect  that  competition  will  continue  to  intensify. Our
competitors  may  develop products or services that are superior to ours or have
greater  market  acceptance  than we hope to obtain. If we are unable to compete
successfully  against  our competitors our business and financial condition will
be  adversely  affected.

A  breach  of  customer  confidential  information  could expose us to excessive
liability

Any  breach  of security relating to confidential information of customers could
result  in  legal  liability for us and a reduction in customer use or the total
cancellation  of  their participation. We anticipate that we will receive highly
confidential  information  from customers that will be stored in our internal or
third-party  computer  systems.  We  anticipates  that we will possess sensitive
customer information or data for storage as part of our services, which could be
valuable  to  competitors  or  other  similar  companies  if  misappropriated or
accessed. We will enter into comprehensive customer services and confidentiality
agreements with all expected customers. Our security procedures and protocols to
protect  the  customer against the risk of inadvertent disclosure or intentional
breach  of  security  might  fail,  thereby  exposing  customers  to the risk of
disclosure  of  their  confidential  information.


                                       18
<PAGE>

Our  products  and  services  are  subject  to  government regulations which, if
changed,  could  adversely  affect  the  availability  of  our  products

The laws and regulations that govern our business with respect to e-commerce and
online  content  and data distribution are rapidly changing. The U.S. government
and  the  governments  of  other  states and foreign countries have attempted to
regulate  activities on the Internet. Evolving areas of law that are relevant to
our  business include privacy laws, proposed encryption laws, content regulation
and  potential  sales  and  tax laws. Due to this rapidly evolving and uncertain
regulatory environment, we cannot predict how such proposed or contemplated laws
and regulations might affect our business. In addition, these uncertainties will
make  it  difficult to ensure compliance with the laws and regulations governing
the  Internet.  These  laws  and  regulations  could  harm our overall growth by
subjecting  us to liability or forcing us to change our method of conducting and
distributing  our  primary  online  services  and  product  technologies.

ITEM  2.     Description  of  Property

Our  main office is located in Seattle, Washington. Our research and development
activities  and  some administrative functions are located in Vancouver, British
Columbia, Canada.  We do not own any real property. The following table presents
certain  information  about  our  leased  properties:

<TABLE>
<CAPTION>

Location                             Square Feet         Use         Monthly Rent     Lease Expiration Date
---------------------------------  ----------------  ------------  -----------------  ----------------------
<S>                                <C>               <C>           <C>                <C>

601 Union Street                                                                      January 12, 2005
Suite 4200                                           Administrative                  (was not
Seattle, Washington 98101                       200  offices       $           3,547  renewed)
---------------------------------  ----------------  ------------  -----------------  ----------------------

600 University Street, Suite 1525                    Administrative
Seattle, Washington 98101                     4,070  offices       $           8,230  December 31, 2007
---------------------------------  ----------------  ------------  -----------------  ----------------------

1311 Howe Street                                     Research and
Suite 700                                            development and
Vancouver, B.C.                                      administrative
Canada                                        3,525  offices       $8,783 (Canadian)  November 30, 2006
---------------------------------  ----------------  ------------  -----------------  ----------------------

1311 Howe Street                                     Research and
Suite 603                                            development and
Vancouver, B.C.                                      administrative
Canada                                        1,380  offices       $3,094 (Canadian)  November 30, 2006
---------------------------------  ----------------  ------------  -----------------  ----------------------

1311 Howe Street                                     Research and
Suite 500                                            development and
Vancouver, B.C.                                      administrative
Canada                                          900  offices       $2,018 (Canadian)  November 30, 2006
---------------------------------  ----------------  ------------  -----------------  ----------------------

HQ Global Workplaces
7701 France Avenue South                                                               May 31, 2005
Suite 200                                            Administrative                   (will not be
Edina, Minnesota                                100  offices       $             150  renewed)
---------------------------------  ----------------  ------------  -----------------  ----------------------
</TABLE>

We  believe that we can obtain additional facilities required to accommodate our
projected  needs  without  difficulty  and  at  commercially  reasonable prices,
although  we  cannot  assure  you  that  we  will  be  able  to  do  so.
Insurance

We  have  obtained  directors'  and  officers' liability insurance and intend to
obtain  property  and  general liability insurance, intellectual property rights
insurance and other insurance coverage in amounts deemed adequate and affordable
by  management  in the future.  We cannot assure you that any future claims will
not exceed applicable insurance coverage. Furthermore, we cannot assure you that
liability  insurance  will  be available at a reasonable cost or that we will be
able  to  maintain  adequate  levels  of  liability  insurance  in  the  future.

ITEM  3.     Legal  Proceedings

We  aware  of  neither  any  pending  or  threatened  legal proceedings that, if
adversely  determined,  would  have  a  material adverse effect on us nor of any
proceeding  that  a government agency is contemplating initiating against us. We
anticipate  that we might be involved in certain Bankruptcy Court proceedings in
connection  with  the $200,000 term loan that we advanced to LDBS.  That loan is
secured  by  a  Security  Agreement  charging substantially all of the assets of
LDBS.  On  February  22, 2005, LDBS filed for protection under Chapter 11 of the
Bankruptcy  Code.  LDBS's  bankruptcy  proceeding  is  ongoing.

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

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


                                       19
<PAGE>

                                     PART II

ITEM  5.     Market  for  Common  Equity  and  Related  Stockholder  Matters
Market  Information

Our  common  stock  began  trading  on  the NASD Over-the Counter Bulletin Board
("OTCBB")  on June 7, 2002 under the symbol "DLVN". Prior to June 7, 2002, there
was  no  public trading market on which our common stock was traded. On December
22,  2003,  our symbol changed to "NSEO" in connection with our name change from
Delivery  Now  Corp. to NS8 Corporation. The following table sets forth, for the
fiscal  quarters  indicated, the high and low bid prices per share of our common
stock  as  reported  on  the  OTCBB. The quotations reflect inter dealer prices,
without  retail  mark-up,  mark-down or commissions and may not represent actual
transactions.

<TABLE>
<CAPTION>

Year Ending December 31, 2003  High Bid   Low Bid
<S>                            <C>        <C>
First quarter . . . . . . . .  $     .05  $    .05
Second quarter. . . . . . . .  $     .10  $    .05
Third quarter . . . . . . . .  $     .10  $    .10
Fourth quarter. . . . . . . .  $    1.70  $    .10

Year Ending December 31, 2004  High Bid   Low Bid
First quarter                  $    1.70  $   1.04
Second quarter                 $    1.38  $    .97
Third quarter                  $    1.10  $    .83
Fourth quarter                 $    1.14  $    .46
</TABLE>

Our  common  stock  had  a  10  for  1  forward stock split on October 24, 2003.

On  March  16,  2005,  the  closing  bid  price  for our common stock was $0.16.
Holders
There  are  approximately  one hundred 131 record holders of common equity as of
December  31,  2004.

Equity  Compensation  Plans
On June 29, 2001, we adopted the 2001 Stock Option Plan. On February 4, 2004, we
adopted the 2004 NS8 Corporation Employee Stock Option Plan.  We do not have any
other  equity  compensation  plans  as  of  the  date  of  this  report.

Dividends

As  of  the  date  of  this  report, no cash dividends have been declared on our
common  stock. We presently intend to retain future earnings, if any, for use in
our  business  and have no present intention to pay cash dividends on our common
stock.  In  addition,  the  debentures  we  issued  to  Cornell Capital Partners
prohibit  the payment of dividends on our common stock without the prior written
consent  of  the  secured  party  to  those  debentures.


                                       20
<PAGE>

Unregistered  Issuances  of  Equity  Securities

Please  see  "Item  6.  -  Management's  Discussion  and  Analysis  of Financial
Condition  and  Results  of  Operations  -  Liquidity and Capital Resources" for
information  regarding our issuances of equity securities during 2004 which were
not  registered  under  the  Securities  Act  of  1933,  as  amended.
Securities  Authorized  for  Issuance  under  Equity  Compensation  Plans

We  adopted  our  2001  Stock Option Plan on June 29, 2001 authorizing 5,000,000
shares  under  the  plan.  We  have  not issued any options or rights under this
plan.

We  adopted  our 2004 Stock Option Plan in February 2004, authorizing 30,000,000
shares  under  the  plan.  During  2004, we issued 8,289,412 options to purchase
common  shares under the plan to certain of our employees and consultants.  None
of  these  options  have  been  exercised and 1,036,500 have been cancelled as a
result  of employment terminations. The balance of the options outstanding as of
December  31,  2004  is  23,176,114.

     The  following  table  sets  forth the securities that have been authorized
under  equity  compensation  plans  as  of  December  31,  2004.

<TABLE>
<CAPTION>

                                                                                   NUMBER OF
                                                                                   SECURITIES
                                                                                   REMAINING
                                                                                 AVAILABLE FOR
                                              NUMBER OF                         FUTURE ISSUANCE
                                            SECURITIES TO                         UNDER EQUITY
                                           BE ISSUED UPON    WEIGHTED-AVERAGE     COMPENSATION
                                             EXERCISE OF      EXERCISE PRICE         PLANS
                                             OUTSTANDING      OF OUTSTANDING       (EXCLUDING
                                              OPTIONS,           OPTIONS,          SECURITIES
                                            WARRANTS AND       WARRANTS AND       REFLECTED IN
                                               RIGHTS             RIGHTS          COLUMN (A))
                                                 (A)               (B)                (C)
<S>                                        <C>               <C>                <C>
Equity compensation plans approved by
security holders(1) . . . . . . . . .         23,176,114          $0.377           11,823,886

Equity compensation plans not approved by
security holders. . . . . . . . . . . . .       NONE            $     -                 0

TOTAL . . . . . . . . . . . . . . . . . .     23,176,114          $0.377           11,823,886
                                           ===============  ===============    ================
</TABLE>
(1)  Includes  the  Company's  2001  Stock  Option  Plan.


                                       21
<PAGE>

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

The  following  discussion  and  analysis should be read in conjunction with the
Consolidated  Financial  Statements and related notes included elsewhere in this
Report.

Plan  of  Operations

The  year  ended  December  31, 2004 (the "2004 Period") represented a period of
growth  and  maturity  in  our corporate environment and technology development.
During  the  2004  Period,  we focused on completing, refining and preparing our
technologies  toward a salable product line. And reached the development targets
that  we  established  during  our  planning  stage,  bringing  us closer to the
commercialization  of  our products.  We also prepared our corporate environment
for  customer  fulfillment,  deployment  and support as we neared the end of our
fiscal year and understood that within our corporate objectives, 2005 would mark
our  year  of  product  commercialization.

As  part  of  this  commercialization  process,  we have put our Company under a
management  refinement  microscope to identify where our strengths are and where
to  enhance  our weaknesses in order to assure a good preparation and successful
deployment  for  our  commercialization strategies in 2005. We took our business
processes  and  established  new  development  and  sales  fulfillment  systems,
customer  deployment procedures and processes, and solidified our human resource
requirements  to  ensure  that  we  have  the  right personnel to compliment and
support  our  go-to-market  objectives.

Our  plan  of  operations  and  commercialization strategy targets the owners of
entertainment  and/or  advertising content as well as the retail distributors of
content  and  multiple  service  operators  ("MSOs")  that  sell  direct  to the
consumer.  During  the  2004  period,  we  spent  a  considerable amount of time
visiting trade events specific to our industry, meeting with key content owners,
service  providers  and potential hardware and merchandise alliances in order to
start  building  awareness  of  our Company and our capabilities in our industry
sector.  In  addition,  we  completed  a  series  of  commercial  alliances  and
relationships  in the hardware, storage facilitation, broadband and distribution
system  providers  that  service  the  telecommunications,  IPTV  and  on-demand
industries.  During  2004, we worked with companies such as Amino Communications
LLC in the digital set-top-box arena where we successfully integrated and tested
our  SPI  security  and  LDMS  distribution  environment to deliver high quality
content  to  televisions  via  the  internet.  We  worked  with  server hardware
companies  such  as Midstream Technologies Inc. and Dell Computer Corporation to
integrate our software technologies into a deliverable and tangible product line
for  our  target market. We entered into a lab agreement with EchoStar Broadband
L.L.C.  (affiliated  with  EchoStar  Satellite  L.L.C.)  and  currently  conduct
technology  integration  development to certain IP driven devices for testing in
2005.  We  were  successful  in acquiring non-public use content from Disney and
Warner  Brothers  in  order  to  test  our  content  distribution,  security and
management  systems  in  our  laboratories  and  share  those results with those
content  providers.  Certain  of these co-developments and alliances have proven
positive  test results for our technologies that have enabled us to successfully
complete  our  first  product  line  called  iWave  Interactive  Systems in late
December  of  2004.


                                       22
<PAGE>

We  plan  to  continue  our  research  and  development  activities  to  further
facilitate  the necessary refinements and enhancements to our iWave product line
to  deliver  a  successful  and  supportable  product line that can be delivered
turn-key  or  in  separate  components  for various commercial applications that
might  not  require  an entire iWave Interactive system. We anticipate that this
product  flexibility will enable us to shorten our sales cycle, expand our value
offering in certain niche or existing customer deployments and provide us with a
greater  opportunity  to effect an immediate sale of our product line during our
2005  commercialization  year.

During  the  next  twelve months, we expect to purchase additional equipment for
laboratory  integration,  testing  and  customer  support. Since we do not carry
hardware  inventory  for  our  product  line,  we  expect  to  set up a showroom
environment  at  our  facilities  in  Seattle, Washington so that we can further
demonstrate  our  services  and  true  value  offering  to this emerging digital
content  distribution  and  on-demand  industry.  In  addition  to our sales and
marketing  efforts  in  2005, we plan to pursue further relationships with other
technology  providers,  content  owners and service providers in order to expand
our  sales  capabilities  and  resale  opportunities.  We  plan  to  continue to
solidify  our 2004 relationships and alliances to further our product validation
and  enhance  our  distribution  opportunities  in  our  target  market  space.

We  anticipate  changes  in  the  number of our employees during the next twelve
months  in  order  to support the anticipated growth and expected changes in our
operations.

Results  of  Operations

Research  and  development  expenses  for the 2004 Period, decreased by 21.9% to
$1,079,824  from  $1,382,000  during the year ended December 31, 2003 (the "2003
Period").  During  the  2003  Period,  we  issued  stock  grants to research and
development  employees  which  resulted  in  significant compensation charges of
$687,417.  Conversely,  during  the  2004  Period,  we  issued  stock options to
research  and  development  employees  which  resulted  in  minimal compensation
charges  for  the  stock  options.  During  the  2004  Period,  we  employed
approximately  19  employees for research and development activities compared to
16  employees  in  the  2003  Period.  Wages  and  benefits  for  research  and
development  personnel during the 2004 Period were $925,014 compared to $611,626
during  the  2003  Period.  The  total research and development expense incurred
during  the  2004  fiscal  year  represents  approximately  11.5%  of  our total
operating  expenses  for  the  2004  Period.  The  majority  of these funds were
utilized  for  the  compensation  of our research and development personnel, and
$143,543  of  this  amount  was  spent  on  equipment  relating  to research and
development  activities.  During the 2003 Period, $82,957 was spent on equipment
relating  to  research  and  development  activities.

General  and  administrative expenses for the 2004 Period increased by 330.5% to
$8,323,294  from  $2,518,058 during the 2003 Period.  The increase resulted from
hiring  additional staff in each of the following areas: Executives, Operations,
Sales  and  Marketing.  During  the  2004  Period,  we employed approximately 16
employees for general and administrative activities, compared to 14 employees in
the  2003  Period.  Some  of the additional staff members are executives who are
compensated  at a much higher level in comparison to the average employee.  With
this  growth,  our  office  space  expanded from approximately 4,425 square feet
during  the  2003 Period to 6,405 square feet in 2004 Period.  General operating


                                       23
<PAGE>

expenses for our Operations also increased as a result of the expansion.  During
the 2004 Period, we hired a public relations firm, marketing company and various
consultants to develop marketing strategies, along with  operations and business
strategies.  As  a  result,  the  advertising, promotion and consulting expenses
increased  from  $182,152 in the 2003 Period to $618,172 in the 2004 Period.  In
addition,  certain  consultants were granted options or warrants as specified in
their  consulting  agreements.  The  compensation  charge  recognized  for these
options  and  warrants  during  the  2004 Period amounted to $3,541,400.  Travel
expenses  for the 2004 Period were $277,144, up $125,265 from 2003 Period.  This
increase  in  travel  resulted  from  meetings  regarding  bridge  financing, in
addition  to  marketing meetings and attendance at technology conferences.  Fees
for  professional  services  in  the  2004 Period were $1,427,889, approximately
$1,268,948  higher  than  for  the 2003 Period.  This increase results from fees
associated  with  our financing arrangements, legal fees attributed to corporate
financing and securities filings, U.S. patent applications, trademarks, employee
stock  option  agreements and other employment matters.  Accounting expenses for
audit  fees and public reporting obligations also contributed to the increase in
professional  service  expenses.

We  generated  sales  of  $0 and $27,594 during the 2004 Period and 2003 Period,
respectively.  The  sales  generated  in the 2003 Period are classified as other
income  and  are  not  related  to  our  research  and  development  activities.

Interest  expense  for  the  2004  Period  increased  by 678.9% to $359,069 from
$52,930  for  the  2003  Period.  We  obtained  additional  funding  to  finance
operations through the issuance of promissory notes with detachable warrants and
convertible  debentures  which  resulted  in  the  increase in interest expense.

As a result of the foregoing, we incurred a net loss of $9,781,920, or $0.11 per
share, during the 2004 Period, as compared to a net loss of $3,925,394, or $0.07
per  share,  during  the  2003  Period.  We  incurred  a loss from operations of
$9,403,118  during  the  2004  Period,  as compared to a loss from operations of
$3,900,058  during  the  2003  Period.

Liquidity  and  Capital  Resources

We  have  financed our research and development activities to date with proceeds
from  the  sale  of  our  common  stock,  proceeds  from the sale of convertible
debentures  and  loans  from  our officers and shareholders. The following table
sets  forth  the  amount of funds we received from these sources for the periods
indicated:


                                       24
<PAGE>

<TABLE>
<CAPTION>

                                   Year ended December 31, 2004   Year ended December 31, 2003
                                   -----------------------------  -----------------------------
<S>                                <C>                            <C>
Sale of common stock               $                     400,000  $                   2,445,000
---------------------------------  -----------------------------  -----------------------------
Sale of convertible debentures     $                   1,500,000  $                     600,000
---------------------------------  -----------------------------  -----------------------------
Loans from officers/ shareholders  $                   4,145,000  $                     400,000
---------------------------------  -----------------------------  -----------------------------
Short term loans                   $                     100,000  $                     225,000
---------------------------------  -----------------------------  -----------------------------
</TABLE>

We  have  suffered  recurring  losses  from  operations  and have an accumulated
deficit  of  $15,257,009  at  December  31, 2004.  Primarily as a result of  our
recurring  losses  and  our  lack  of liquidity, we have received a report  from
our  independent  auditors  that  includes  an  explanatory paragraph describing
the  uncertainty  as  to  our  ability  to  continue  as  a  going  concern.

Financing  Activities

Our  financing  activities  in  the  2004 Period consisted of loans, the sale of
secured  convertible  debentures and entering into a Standby Equity Distribution
Agreement.

During  2004,  we  received  loans  for  various  parties,  including:

-    During  March  2004,  a loan received from Turbo International, Inc. in the
amount  of $250,000. The loan was due on March 11, 2005 and bore interest at the
rate  of  10% per annum. The due date on the loan has been extended to September
11,  2005,  and  the rate of interest is 10% for the additional six months. Upon
repayment  of  the  loan  to  Turbo, we will issue to Turbo warrants to purchase
100,000  shares  of  our  common  stock.

-    During  April  2004, a loan received from 4Com Corporation in the amount of
$150,000.  The  loan  was  due on July 25, 2004 and bore interest at the rate of
8.5%  per annum. Upon the date of the loan with 4Com, we issued to 4Com warrants
to  purchase  75,000  shares  of  common stock at an exercise price of $0.61 per
share  with a term of two years from the date of issuance. The loan plus accrued
interest  was  repaid  in  June  2004,  and  the  warrants  remain  unexercised.

-    During  May  2004,  a  loan  received from Turbo International, Inc. in the
amount  of $150,000. The loan is due on due May 12, 2005 and bears interest at a
rate  of  10%  per  annum.

-    During  May  2004, a loan received from Martin Calvert, a director of ours,
for $95,000. The loan was initially due on May 13, 2005 and bore interest at the
rate  of  8%  per annum, but on June 1, 2004, the loan plus accrued interest was
fully  paid  to  Martin  Calvert.  Pursuant  to  the terms of the loan, upon its
repayment, we issued to Mr. Calvert warrants to purchase 47,500 shares of common
stock  at  an exercise price equal to the market price of the shares on the date
the  warrants  were  issued  with a term of two years from the date of issuance.
The  warrants  remain unexercised and have an exercise price of $0.61 per share.


                                       25
<PAGE>

During  August  2004, a loan received from Ming Capital Enterprises, Inc. in the
amount  of  $200,000.  The loan is due on demand and bears interest at a rate of
10%  per  annum.

-    In  August  2004, a loan received from Martin Calvert, then a director, for
$100,000.  The  loan  is  due on August 12, 2005 and bears interest at a rate of
9.5%  per  annum. Upon repayment of the loan to Martin Calvert, we will issue to
Mr.  Calvert  warrants  to  purchase  50,000  shares  of  our common stock at an
exercise  price equal to market price on the date the warrants are issued with a
term  of two years from the date of issuance. A portion of the loan plus accrued
interest  was  repaid  in September 2004. The balance remaining on the loan plus
accrued  interest was repaid in December 2004.  The warrants were issued with an
exercise  price  of  $0.61  per  share  and  remain  unexercised.

-    In  September  2004, a loan received from Ming Capital Enterprises, Inc. in
the  amount of $175,000. The loan is due on September 7, 2005 and bears interest
at  a  rate  of  10%  per  annum.

-    During  September  2004, received a loan received from Turbo International,
Inc.  in the amount of $175,000. The loan is due on September 24, 2005 and bears
interest  at  a  rate  of  10%  per  annum.

-    In  September  2004,  a  loan received from Aton Select Fund Limited in the
amount  of $100,000. The loan is due on September 27, 2005 and bears interest at
the  rate  of  10%  per  annum.

-    On  October 14, 2004, a loan received from Turbo International, Inc. in the
amount  of  $175,000.  The loan is due on October 14, 2005 and bears interest at
the  rate  of  10%  per  annum.

-    On  October 28, 2004, a loan received from Turbo International, Inc. in the
amount  of  $175,000.  The loan is due on October 28, 2005 and bears interest at
the  rate  of  10%  per  annum.

-    On December 10, 2004, a loan received from Cornell Capital in the amount of
$2,500,000.  The  loan bears interest at the rate of 12% per annum and is due on
July  1,  2005.

In  May  2004, we entered into a $1.5 million Securities Purchase Agreement with
Cornell  Capital Partners for the sale of secured convertible debentures. On May
19,  2004,  Cornell  Capital Partners purchased $750,000 principal amount of the
Secured  Convertible  Debenture.  On  June  25,  2004,  Cornell Capital Partners
purchased  the  additional  $750,000 principal amount of the Secured Convertible
Debenture  after  we  filed  on June 22, 2004 a Form SB-2 registration statement
relating  to  the  shares  of  common stock resulting from the conversion of the
Secured  Convertible  Debenture.


                                       26
<PAGE>

On  May  19,  2004,  we  entered  into  a  Standby Equity Distribution Agreement
("SEDA") with Cornell Capital Partners. Under the SEDA, we may issue and sell to
Cornell  Capital  Partners  common  stock  for  a  total purchase price of up to
$20,000,000.  The  purchase price for the shares is equal to their market price,
which  is defined in the SEDA as the lowest volume weighted average price of the
common stock during the five trading days following the date we give notice that
we  desire  an  advance.  The  amount of each advance is subject to an aggregate
maximum  advance  amount  of  $750,000,  with  no advance occurring within seven
trading  days  of  a prior advance. Cornell Capital Partners received a one-time
commitment fee of 925,234 shares of our common stock valued at $990,000. Cornell
Capital Partners is paid a fee equal to 5% of each advance, which is retained by
Cornell  Capital  Partners  from each advance.  The shares of common stock to be
issued  to  Cornell  under  the SEDA may be resold by Cornell under an effective
registration  statement filed by us with the Securities and Exchange Commission.
Cornell  Capital  Partners  will  apply the proceeds from the sale of the shares
issued  under  the  SEDA  to  the  repayment of the loan.   In November 2004, we
issued  5,597,544  shares  of  our  common stock, valued at $400,000, to Cornell
Capital  Partners  through  the  SEDA.

We  agreed to escrow twenty-four requests for advances under the SEDA each in an
amount  not  less than $100,000 and one request for an advance under the SEDA in
an  amount  not  less  than  $197,808.  We issued 5,000,000 shares of our common
stock to David Gonzalez, Esq., Attorney for Cornell Capital Partners, to be held
in  escrow  subject  to  the terms of the loan.  The escrowed shares are only an
estimation  of  the  shares of our common stock necessary to repay the principal
amount  and  interest due on the loan. In the event that proceeds from the sales
of  the  escrowed  shares  are  insufficient to repay all amounts due to Cornell
Capital  Partners, irrevocable transfer agent instructions have been provided to
our transfer agent, Continental Stock Trust & Transfer, reserving the balance of
the SEDA shares and authorizing the issuance to David Gonzalez, Esq., to be held
in  escrow subject to the terms of the loan, such number of shares of our common
stock  so  that  the  proceeds of the sale of such shares shall be sufficient to
repay  all  amounts  due  on  the  loan.   On  February  24,  2005,  the  joint
disbursement  instructions  on the promissory note were revised. Beginning March
14,  2005, the advance notices and stock disbursements schedule was amended, and
the  advance amounts were amended to $50,000 per advance.  On March 1, 2005, the
balance  of the shares available under the Standby Equity Distribution agreement
dated  May  19,  2004  were issued to David Gonzalez, Esq., to be held in escrow
subject  to  the  terms  of  the  loan.  The  number of common shares issued was
13,094,045.

Our  current  cash  on hand is projected to sustain operations until April 2005.
Additional  funding  is expected to be obtained through the SEDA or new vehicles
currently  being  pursued, however, we cannot assure you that required financing
will be obtained. Our ability to meet operating and capital requirements depends
upon  financing from external sources, and the ability to generate revenues from
the  core  technologies  we  have  developed.  We cannot assure you that we will
obtain  sufficient financing or develop profitable operations prior to utilizing
all  of the current resources available to us. In addition, if we do not receive
the  funds  in  a  timely  manner,  we  may be forced to curtail our operations.

On May 19, 2004, NS8Corp entered into a Placement Agent Agreement with Newbridge
Securities Corporation, a registered broker-dealer, in connection with the SEDA.
Pursuant  to  the  Placement Agent Agreement, we paid a one-time placement agent
fee  of  9,346  restricted shares of common stock equal to approximately $10,000
based  on  our  stock  price  on  May  19,  2004.


                                       27
<PAGE>

With  respect to the sale of these securities, all transactions were exempt from
registration  pursuant  to  Section  4(2)  of  the  Securities  Act of 1933, and
Regulation  D  promulgated  under  the  Act. In each instance, the purchaser had
access  to  sufficient  information  regarding  us  so  as  to  make an informed
investment  decision.  More  specifically,  we had a reasonable basis to believe
that  each  purchaser was an "accredited investor" as defined in Regulation D of
the  Act and otherwise had the requisite sophistication to make an investment in
the  our  securities.


The  following  table  sets forth certain information concerning our contractual
obligations  and  other  commercial  commitments  as  of  December  31,  2004:

                                              Payments due by Period
                                              ----------------------
                                            Less than    1-3     4-5    After 5
Contractual Obligations:            Total    1 year     years   years   years
---------------------------------  -------  ---------  -------  ------  -------
Short-Term Loans                    325,000   325,000       -       -        -
---------------------------------  -------  ---------  -------  ------  -------
Loans from shareholders, net      3,790,106 3,790,106       -       -        -
---------------------------------  -------  ---------  -------  ------  -------
Convertible Debenture, net        1,160,716           1,160,716      -        -
---------------------------------  -------  ---------  -------  ------  -------
Capital Lease Obligations            15,880    10,010    5,870       -        -
---------------------------------  -------  ---------  -------  ------  -------
Operating Leases                    555,829   226,858   328,971      -        -
---------------------------------  -------  ---------  -------  ------  -------
Unconditional Purchase
Obligations                              -          -        -       -        -
---------------------------------  -------  ---------  -------  ------  -------
Other Long-Term Obligations              -          -        -       -        -
---------------------------------  -------  ---------  -------  ------  -------
Total Contractual Cash
Obligations                       5,847,531 4,351,974 1,495,557      -        -
---------------------------------  -------  ---------  -------  ------  -------

                                Amount of Commitment Expiration Per Period
                                ------------------------------------------
                                  Total
                                 Amounts   Less than  1-3    4-5    Over 5
Other Commercial Commitments    Committed   1 year    years  years   years
------------------------------  ---------  ---------  -----  -----  ------
Lines of Credit                         -          -      -      -       -
------------------------------  ---------  ---------  -----  -----  ------
Standby Letters of Credit               -          -      -      -       -
------------------------------  ---------  ---------  -----  -----  ------
Guarantees                              -          -      -      -       -
------------------------------  ---------  ---------  -----  -----  ------
Standby Repurchase Obligations          -          -      -      -       -
------------------------------  ---------  ---------  -----  -----  ------
Other Commercial Commitments            -          -      -      -       -
------------------------------  ---------  ---------  -----  -----  ------
Total Commercial Commitments            -          -      -      -       -
------------------------------  ---------  ---------  -----  -----  ------


                                       28
<PAGE>

ITEM  7.     Financial  Statements

     The  financial  statements  and  supplementary  data are included beginning
immediately  following  the  signature  page  to  this  report.

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

The  disclosure  called  for  by  this Item has been previously disclosed in our
Current  Report  on  Form  10-KSB  dated  January  13,  2004.

ITEM  8A.      Controls  and  Procedures.

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

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

ITEM  8B.  Other  Information.

Not  applicable.

                                    PART III

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

Directors  serve  until the next annual meeting of the stockholders, until their
successors  are  elected  or  appointed  and  qualified  or  until  their  prior
resignation or removal. Officers serve for such terms as determined by our board
of  directors.  Each  officer  holds  office  until  such officer's successor is
elected  or  appointed and qualified or until such officer's earlier resignation
or  removal.  No family relationships exist between any of our present directors
and  officers.


                                       29
<PAGE>

Our  executive  officers, directors and key employees, their positions and their
ages  at  March  8,  2005  are  as  follows:


Executive  Officers,         Age           Position
Directors  and  Key
Employees

Anthony  Alda                 36       Chairman  of  the  Board  of  Directors,
                                       Chief Executive Officer, President and
                                       Chief Technology  Architect

Leslie  J.  Ames              55       Senior  Vice  President,  Legal
                                       Affairs,  Secretary  and  Director

Brent  R.  Bysouth            32       Chief  Software  Architect  and
                                       Director

Ricardo  Rosado               37       Chief  Financial  Officer,  Vice
                                       President  of  Product  Management
                                       and  Director

Melanie  Thomson              28       Chief  Operating  Officer

Michael  W.  Waage            56       Director


Executive  Officers  and  Directors

Pursuant  to  the  terms of the Merger Agreement, effective on December 18, 2003
the  directors  and senior officers of CanOnline became the directors and senior
officers  of  NS8Corp.

Mr.  Alda  is  one  of the founding principals of CanOnline and NS8 Corporation.
From  1999  to  2002,  Mr.  Alda  acted  as  its  head  of  business and product
development.  Anthony  currently devotes his full-time as the Chairman and Chief
Executive  Officer  of  NS8  Corporation  (USA),  Chief  Technology Architect of
CanOnline  and  CMC,  research  and  development  center  (Canada).  He recently
accepted the additional position of President of NS8 in November 2004. He is the
principal  business  and  technology  architect  of the Reelindie Global Network
(RGN)  (2001  to  June 2003); principal creator of Security Protocol Integration
(SPI)  (March  2000  completed  in  September  2003);  co-architect  of  NS8
(Non-Resident  Software)  designed in July 2002 completed in June 2003; Morpheus
Video  on  Demand  EPG  systems  November 2002; Kaozz Entertainment Distribution
Network  launched  in November of 2003; and co-architect to the NS8-DDN (Digital
Distribution  Network)  Server  Management  and IPTV Distribution System (2004).
Prior  to  CanOnline  and  NS8  Corporation, Mr. Alda managed his own management
consulting  firm  from 1994 to 1998 where he provided services to U.S. companies
in  the  areas  of  management  buyouts,  corporate  restructuring, and start-up
business  management.

Since  its  incorporation,  Mr.  Ames  has  served as Corporate Secretary to NS8
Corporation,  and  its  wholly  owned subsidiaries, CanOnline and CMC.  In March


                                       30
<PAGE>

2000,  he  was  appointed  to  the  Board  of Directors of CanOnline, and to the
position  of Senior Vice President, Legal Affairs and since December 18, 2003 he
has  also held those positions in NS8 Corporation. In June 2002, he accepted his
appointment  as  General  Legal Counsel to the CanOnline group of companies. Mr.
Ames  graduated  from the University of British Columbia with a Bachelor of Arts
Degree  (BA)  in  May  1971 and received a Bachelor of Law Degree (LLB) from the
University  of  British  Columbia  in  May  1978.  Mr. Ames was a Partner of the
Vancouver  law  firm of Liddle, Burns & Ames, Barristers & Solicitors, from 1989
until  1995.  In  1995,  he  established  Leslie J. Ames Law Corporation and has
served  as  its  President  since  that  date.

Mr.  Bysouth  is  a  founding  principal  and  Director  of CanOnline, and since
December  18,  2003, he has also been a Director of NS8 Corporation. Mr. Bysouth
continues  to  serve  as a Director and President of our wholly owned subsidiary
CMC  where  all  technology  and product development is currently conducted. Mr.
Bysouth  currently  oversees  sensitive  research  and  development  of  core
integration applications currently deployed on all our products.  Mr. Bysouth is
the  principal  developer,  inventor  and  co-architect  of several intellectual
properties  including  AOCA  (Automated  Object  Code  Architecture), SPi Member
Distribution  Security  process and the integrated (AS) converters (the database
conversion-adaptation  system  underlying NS8). Mr. Bysouth has over 10 years of
information  technology, program-engineering and analytical business experience.
During  the  past  several  years,  Mr.  Bysouth has participated in and managed
programming  contracts  for large Canadian corporations such as the Loewen Group
Inc.  (1997-1999),  GE Capital (1996-1998), and Chevron Canada Ltd. (1994-1995).
His  expertise  is  primarily  in  the  areas  of  object-oriented  analysis,
architecture  and  programming,  specification  management, development and test
administration,  and relational database design and implementation.  Mr. Bysouth
attended  the University of British Columbia (Department of Geography) from 1990
to  1995.

Mr.  Rosado  has  served  as  our  Chief  Financial Officer and Chief Operating
Officer  from  November,  2003  to November 26, 2004.  On November 26, 2004, Mr.
Rosado resigned as Chief Operating Officer as part of our reorganization of our
executive  officers and assumed the role of Vice President of Product Management
in  addition  to his responsibility as Chief Financial Officer.  Mr. Rosado is a
founding principal and Director of CanOnline and since December 18, 2003, he has
also  been  a  Director  of  NS8  Corporation.  Mr. Rosado joined CMC as Head of
Product  Design  in November 2000.  Mr. Rosado has contributed to various of our
intellectual property claims in the areas of virtual collaborative environments,
graphic  rendering and video filtering applications. In October 2002, Mr. Rosado
accepted  the  position  of  Chief Compliance Officer of intellectual properties
until  November  2003,  when  he  was named interim Chief Operating Officer and
Chief  Financial Officer of CanOnline.  In November 2004, Mr. Rosado resigned as
Chief  Operating  Officer  so that he could contribute and dedicate more of his
expertise  in product architecture and development management. Mr. Rosado brings
us  over  twelve  years  of  multimedia,  film  and  television  production  and
direction; commercial broadcasting and management expertise. Prior to CanOnline,
Mr. Rosado was one of the original founders of Videocomunicacion y Servicios SCP
(Videocom's),  a  renowned  multimedia  production  company  in the southeast of
Mexico,  where  he  also  performed  as Director/Producer and Head of Multimedia
Development.  Mr.  Rosado  graduated  in  1991  with  a  Bachelor  of  Arts  in
Communications  Science  from University of Mayab in his native Merida, Yucatan,
Mexico.  From  1994  to  1996, Mr. Rosado pursued graduate studies obtaining his


                                       31
<PAGE>

Master's  degree in Strategic Marketing from the University of Mayab/Anahuac. He
is  currently  a  Ph.D.  Candidate in the part-time program at the University of
British  Columbia.

Ms.  Thomson  has  been  the  Director of Operations and Human Resources for NS8
Corporation  and  its  subsidiaries  CanOnline and CMC from March 2003 until her
recent  appointment in November 2004 as Chief Operating Officer.  Ms. Thomson is
currently  responsible  for  operations  management,  human resources functions,
inter-departmental communication and coordination, establishment and enforcement
of  corporate  policies/procedures,  and  coordination of all SEC filings.  From
December  2002  to  March  2003, Ms. Thomson held the position of Operations and
Human  Resources Manager.  In that position, Ms. Thomson was responsible for the
organization  and management of administrative and human resources activities of
NS8Corp  and  its  subsidiaries.  From  August 2000 to January 2002, Ms. Thomson
worked  with  Novus Telecom Group, Inc. located in British Columbia in the Legal
and  Human  Resources  Departments  and was a contributor to the growth of Novus
from  start  up to operational maturity.  Ms. Thomson completed a Human Resource
Management Certificate at the British Columbia Institute of Technology (BCIT) in
2002  and  is  currently  enrolled  at  Simon Fraser University working toward a
degree  in  Integrated  Liberal  and  Business  Studies.

Mr.  Waage  joined  CanOnline  in  October  1999  to  contribute to the areas of
management development, sales and strategic partnerships. On March 15, 2000, Mr.
Waage  was  appointed  to the Board of Directors of CanOnline and served in this
capacity  until  January 10, 2005. On December 18, 2003, Mr. Waage was appointed
as  a  Director  of  NS8  Corporation and continues to serve in this role. Since
1995,  Mr. Waage has been the president of his own firm that provides consulting
services  in  areas  of  mergers,  acquisitions  and turn-arounds and management
consulting  throughout  the  United  States. He also served in a senior business
development  position  of Advanced Technology Development for Honeywell from the
period  of  1987  to  1994.  At  Honeywell, he continued to provide service with
respect  to  sensitive  technology development for the department of defense and
was  awarded  the  Honeywell Top Performers Award in 1989. Prior to his business
profession,  Mr. Waage served in the United States Air Force as a Senior Command
Instructor  and Fighter Pilot for the Air National Guard. Mr. Waage retired from
the  Air  Force in 1995, as a Lieutenant Colonel, and received the Distinguished
Meritorious  Service  Award in 1991. He was awarded a Masters Certificate of Jet
Flight Instruction and has been a member in good standing with the United States
Chamber  of  Commerce,  Association  of Old Crows (Electronic Warfare), American
Institute  of  Aeronautics  and Astronautics and U.S. Air Force Reserve Officers
Association  (past  President). He has also been a member of the Alumni board of
Directors  of  Evangel University where he received a Bachelor of Science degree
in  Mathematics  &  Physics  (1970).  Mr.  Waage  also  holds  a  Masters Degree
(equivalent)  from  the  U.S.  Air  Force  (Management,  Leadership,  and
Aviation-Aeronautics)  (1990).

Compliance  with  Section  16(A)  of  the  Exchange  Act

Our common stock is not registered pursuant to Section 12 of the Exchange Act of
1934,  as amended (the "Exchange Act"). Accordingly, our officers, directors and
principal  shareholders  are  not  subject to the beneficial ownership reporting
requirements  of  Section  16(a)  of  the  Exchange  Act.


                                       32
<PAGE>

Code  of  Ethics

A  Code  of  Ethics  that  applies  to  our executive officers as well as to all
employees  has  been  approved  and  adopted by our Board of Directors.  You may
obtain  a copy of our code of ethics on our website, www.NS8corp.net.  We do not
                                                     ---------------
incorporate  by  reference  any  information  from our website into this report.

ITEM  10.     Executive  Compensation

The  following  table sets forth certain information concerning the compensation
paid  to  Anthony  Alda,  our  current  CEO,  and  the  four  other  most highly
compensated  executive  officers who earned at least $100,000 during the periods
described  below:

<TABLE>
<CAPTION>

Summary  Compensation  Table

                                                                                        Long  Term  Compensation
                                                                                       -------------------------
                            Annual  Compensation                                         Awards        Payouts
                     ----------------------------------                                ------------  -----------
                                                                        Restricted     Securities
                                                         Other Annual      Stock       Underlying       LTIP        All other
Name &                   Year ended  Salary      Bonus    Compensation     Awards       Options/SARs     Payouts  Compensations
Principal Position      December 31,  ($)          ($)         ($)            ($)           (#)            ($)        ($)
<S>                     <C>         <C>          <C>     <C>            <C>            <C>             <C>        <C>
Peter . . . . . . .          2004   153,241        -           -               -           300,000         -          -
Hogendoorn, . . . .          2003   191,964        -           -               -         1,000,000         -          -
President & CEO (1),(4)      2002      -           -           -               -               -           -          -


Anthony Alda, . . .          2004    256,562       -           -               -           370,000         -          -
Chairman of . . . .          2003    222,718       -           -               -         7,720,000(3)      -          -
the Board of. . . .          2002    154,958       -           -               -              -            -          -
Directors (1),(4)


Leslie J. Ames, . .          2004    209,186       -           -               -           400,000         -          -
Senior Vice . . . .          2003    200,413       -           -               -          1,250,000        -          -
President Legal . .          2002    102,500       -           -               -              -            -          -
Affairs and Secretary (4)


Brent Bysouth,. . .          2004    182,111       -           -               -           350,000         -          -
Chief Software. . .          2003    179,362       -           -               -          1,150,000(3)     -          -
Architect (2),(4) . .        2002    201,309       -           -               -                           -          -


Ricardo Rosado, . .          2004    173,022       -           -               -            350,000        -          -
Chief Financial . .          2003    168,643       -           -               -           1,050,000       -          -
Officer and Chief .          2002         -        -           -               -               -           -          -
Operations Officer.(4)


Thomas Routt                 2004    166,385              -           -              -    2,000,000             -         -
President and                2003       -                 -           -              -        -                 -         -
Co-Chief Architect           2002       -                 -           -              -        -                 -         -

Marc Strauch                 2004    104,167              -           -              -    1,500,000             -         -
Chief Marketing              2003       -                 -           -              -        -                 -         -
Officer                      2002       -                 -           -              -        -                 -         -
</TABLE>
(1) Mr. Hogendoorn served as the Company's President through January 2004 and as
CEO  through  June  2004.  Mr.  Alda  was  appointed  CEO  on  July  15,  2004.


                                       33
<PAGE>

(2)  Includes  amounts  paid  to  Mr.  Bysouth's  wholly  owned company, Phoenix
Management  Consulting  Group,  Inc.
(3)  Phoenix  Management  Consulting  Group,  Inc.,  a  British Columbia, Canada
corporation  ("Phoenix")  holds  options  to  purchase  1,750,000 shares, of the
Company. Brent Bysouth owns 100% of Phoenix. Anthony J. Alda has an option until
January 1, 2009 to purchase 80% of Phoenix for $1,000. Assuming this option will
be  exercised  for  the  purposes  of  this table, Mr. Alda is deemed to hold an
option  to purchase 1,400,000 of our shares and Mr. Bysouth is deemed to hold an
option  to  purchase 350,000 of our shares, out of the 1,750,000 options held by
Phoenix.
(4)  Annual  salary  figures include wages accrued but not paid under management
agreements.

Stock  Option  Plans

     2001  Stock  Option  Plan

We  adopted  our  2001 stock option plan on June 29, 2001. The Plan provides for
the  grant  of options intended to qualify as "incentive stock options", options
that  are  not  intended to so qualify or "nonstatutory stock options" and stock
appreciation  rights.  The  total  number of shares of common stock reserved for
issuance  under  the  plan is 5,000,000, subject to adjustment in the event of a
stock split, stock dividend, recapitalization or similar capital change, plus an
indeterminate  number  of  shares  of common stock issuable upon the exercise of
"reload  options"  described below. We have not yet granted any options or stock
appreciation  rights  under  the  plan.

The  plan is presently administered by our board of directors, which selects the
eligible  persons  to  whom  options  shall be granted, determines the number of
common  shares  subject  to  each  option,  the exercise price therefore and the
periods  during  which options are exercisable, interprets the provisions of the
plan  and,  subject  to  certain  limitations,  may  amend the plan. Each option
granted  under the plan shall be evidenced by a written agreement between us and
the  optionee.

Options  may  be granted to our employees (including officers) and directors and
certain  of  our  consultants  and  advisors.

The exercise price for incentive stock options granted under the plan may not be
less  than  the  fair market value of the common stock on the date the option is
granted,  except  for  options  granted  to  10% stockholders which must have an
exercise  price  of  not  less  than 110% of the fair market value of the common
stock  on  the  date  the option is granted. The exercise price for nonstatutory
stock  options  is determined by the board of directors. Incentive stock options
granted  under  the  plan  have  a  maximum  term  of  ten years, except for 10%
stockholders  who  are  subject  to  a  maximum  term of five years. The term of
nonstatutory  stock  options  is  determined  by the board of directors. Options
granted  under  the  plan  are  not transferable, except by will and the laws of
descent  and  distribution.

The  board  of  directors  may  grant  options  with a reload feature. Optionees
granted  a  reload  feature shall receive, contemporaneously with the payment of
the  option  price  in  common  stock, a right to purchase that number of common


                                       34
<PAGE>

shares  equal  to  the  sum  of (i) the number of shares of common stock used to
exercise  the  option,  and (ii) with respect to nonstatutory stock options, the
number of shares of common stock used to satisfy any tax withholding requirement
incident  to  the  exercise  of  such  nonstatutory  stock  option.

Also,  the  plan  allows the board of directors to award to an optionee for each
share  of  common  stock  covered  by  an  option,  a  related  alternate  stock
appreciation  right,  permitting the optionee to be paid the appreciation on the
option  in  lieu  of  exercising  the  option. The amount of payment to which an
optionee  shall  be  entitled upon the exercise of each stock appreciation right
shall be the amount, if any, by which the fair market value of a share of common
stock  on  the exercise date exceeds the exercise price per share of the option.

     2004  Stock  Option  Plan

We adopted our 2004 Stock Option Plan on February 4, 2004. The Plan provides for
the  grant of "nonstatutory stock options." The total number of shares of common
stock  reserved for issuance under the plan is 30,000,000, subject to adjustment
in  the  event  of  a  stock  split, stock dividend, recapitalization or similar
capital  change.  We  have  granted  the options to acquire shares of our common
stock  to  certain  employees  and  consultants pursuant to the Plan, and, as of
December  31,  2004,  the  following  options  were  outstanding:

-    250,000  shares  at  an  exercise  price  of  $1.25  per  share;
-    55,000  shares  at  an  exercise  price  of  $1.55  per  share;
-    1,500,000  shares  at  an  exercise  price  of  $1.40  per  share;
-    2,000,000  shares  at  an  exercise  price  of  $1.33  per  share;
-    5,500  shares  at  an  exercise  price  of  $1.10  per  share;
-    27,500  shares  at  an  exercise  price  of  $1.05  per  share;
-    25,000  shares  at  an  exercise  price  of  $0.85  per  share;
-    75,000  shares  at  an  exercise  price  of  $0.90  per  share;
-    55,000  shares  at  an  exercise  price  of  $0.96  per  share;
-    247,000shares  at  an  exercise  price  of  $1.01  per  share;
-    29,412  shares  at  an  exercise  price  of  $1.36  per  share;
-    50,000  shares  at  an  exercise  price  of  $0.62  per  share;
-     3,855,000  shares  at  an  exercise  price  of  $0.64  per  share;
-    35,000  shares  at  an  exercise  price  of  $0.65  per  share;
-    5,000  shares  at  an  exercise  price  of  $0.68  per  share;  and
-    75,000  shares  at  an  exercise  price  of  $0.93  per  share.

Option  Grants  in  Last  Fiscal  Year
The  following  table sets forth information concerning stock options granted to
each  of  the  executives named in the summary compensation table for the fiscal
year  ending  December  31,  2004:


                                       35
<PAGE>

<TABLE>
<CAPTION>

                                     Percentage of Total of
                  Number of Shares     Options Granted to
                     Underlying         Employees During      Exercise Price
   Name            Options Granted         Fiscal Year           Per Share     Expiration Date
<S>               <C>                <C>                      <C>              <C>
Peter Hogendoorn        300,000               3.6%                $ .640        Dec. 14, 2009

Anthony Alda . .        370,000               4.5%                $ .640        Dec. 14, 2009

Leslie J. Ames .        400,000               4.8%                $ .640        Dec. 14, 2009

Brent Bysouth. .        350,000               4.2%                $ .640        Dec. 14, 2009

Ricardo Rosado .        350,000               4.2%                $ .640        Dec. 14, 2009

Thomas Routt...       2,000,000               24.13%              $1.330        Feb.  2, 2009

Marc Strauch          1,500,000               18.10%              $1.400        Feb. 18, 2009
</TABLE>

Options Exercised In Last Fiscal Year and Fiscal Year-End Option Values

<TABLE>
<CAPTION>
                     Shares                 Number of Shares                 Value of Unexercised In-the-
                  Acquired on   Value     Underlying Unexercised                  Money  Options  at
Name                Exercise   Realized   Options at  Fiscal Year-End           Fiscal  Year-End  (1)
                                         Exercisable    Unexercisable        Exercisable     Unexercisable
                                        ------------    -------------        ------------    -------------
<S>               <C>          <C>      <C>             <C>                <C>               <C>
Peter Hogendoorn           -         -    1,000,000       300,000              $460,000          $138,000
Anthony Alda . .           -         -    7,720,000(2)    370,000            $3,551,200          $170,200

Leslie J. Ames .           -         -    1,250,000       400,000              $575,000          $184,000

Brent Bysouth. .           -         -    1,150,000(2)    350,000              $529,000          $161,000
Ricardo Rosado .           -         -    1,050,000       350,000              $483,000          $161,000
Thomas Routt               -         -      833,332     1,166,668              $383,333          $536,667
Marc Strauch               -         -      625,000       875,000              $287,500          $402,500
</TABLE>

(1)  Based  on  the December 31, 2004, closing bid price for our common stock of
$0.46  per  share.

(2)  Phoenix  Management  Consulting  Group,  Inc.,  a  British Columbia, Canada
corporation ("Phoenix") holds options to purchase 1,750,000 of our shares. Brent
Bysouth  owns  100%  of  Phoenix. Anthony J. Alda has an option until January 1,
2009  to  purchase  80%  of  Phoenix  for  $1,000.  Assuming this option will be
exercised  for  the purposes of this table, Mr. Alda is deemed to hold an option
to  purchase 1,400,000 of our shares and Mr. Bysouth is deemed to hold an option
to purchase 350,000 of our shares, out of the 1,750,000 options held by Phoenix.

Director's  Compensation  and  Committees

We  have  not  paid  and  do  not  presently  propose to pay compensation to any
director  for  acting in such capacity, except for the grant of shares of common
stock  or  options  and  reimbursement  for reasonable out-of-pocket expenses in
attending  meetings.


                                       36
<PAGE>

We  do  not  have  an  audit  committee. Accordingly, we have not designated any
director  as  an  "audit committee financial expert", as that term is defined in
the  rules  of  the  Securities  and  Exchange  Commission.

The  Board  of  Directors  does  not  have  a  standing  nominating  committee.
Nominations  for  election to the Board of Directors may be made by the Board of
Directors  or  by any shareholder entitled to vote for the election of directors
in  accordance  with  our  bylaws  and  Delaware  law.

Meetings may be held from time to time to consider matters for which approval of
our  Board  of  Directors  is  desirable  or  is  required  by  law.

Executives'  Compensation  Policies.

Compensation  of our executives is intended to attract, retain and award persons
who  are  essential  to  the corporate enterprise. The fundamental policy of our
executive  compensation  program  is  to  offer  competitive  compensation  to
executives that appropriately rewards the individual executive's contribution to
corporate  performance.  The board of directors utilizes subjective criteria for
evaluation  of individual performance and relies substantially on our executives
in  doing  so.  The  Board  focuses on two primary components of our executives'
compensation  program,  each  of  which  is  intended  to reflect individual and
corporate  performance:  base  salary  and  long-term  incentive  compensation.

Executives'  base salaries are determined primarily by reference to compensation
packages  for  similarly  situated executives of companies of similar size or in
comparable lines of business with whom we expect to compete for executive talent
and  with reference to revenues, gross profits and other financial criteria. The
Board  also  assesses  subjective  qualitative  factors  to discern a particular
executive's  relative  value  to  the  corporate enterprise in establishing base
salaries.

It  is  the  Board's  philosophy  that significant stock ownership by management
creates  a  powerful  incentive  for  executives  to build long-term shareholder
value.  Accordingly,  the board believes that an integral component of executive
compensation  is  the  award  of equity-based compensation, which is intended to
align  executives' long-term interests with those of our shareholders. The board
believes  that  option  grants  should  be  considered  on  an  annual  basis.
During  2004,  the  Board  of  Directors  created  a  Compensation  Committee to
formulate  control  policies  with respect to the qualification and treatment of
cash,  benefits and securities compensation for all of our employment agreements
and  consulting agreements.  The Compensation Committee created the compensation
guidelines for its executive officers.   The Compensation Committee is comprised
of  up  to  five  people  who  oversee all matters with respect to  compensation
including  the  review  and evaluation of the conduct and performance of our top
executives  for the purpose of assessing their merits and making recommendations
as  to  their  respective  compensation.  Currently,  our Compensation Committee
consists  of  Melanie  Thomson,  Ricardo  Rosado, Les Ames and Anthony Alda.  In
2004,  the  Compensation  Committee  met  four  times.


                                       37
<PAGE>

Employment  Agreements  with  Executive  Officers

NS8Corp has executed employment agreements with its top five executive officers.
Below  is  a  summary  of  the  major  terms  of  these  employment  agreements.

Anthony J. Alda, Co-Chief Architect, Chairman of the Board of Directors and CEO,
signed  an employment agreement with us on May 24, 2002. This agreement does not
have a termination date. Under the agreement, Mr. Alda receives a base salary of
$150,000  per year, a monthly car allowance and expense of approximately $1,225,
a  monthly personal expense account of $2,000, an annual vacation travel expense
of  $6,000,  relocation fees of $9,500 per month, if necessary,  and a severance
payment  of  36  months  of  salary, which would currently be $450,000, if he is
terminated  without  cause.  As  of  December 31, 2004, Mr. Alda has $320,659 in
accrued  wages which have not been paid.  These accrued wages may be distributed
at the discretion of management on a pro rata basis if there are sufficient cash
flows available. Mr. Alda also has an employment agreement with CMC, under which
he  receives  a  base salary of $84,000 CAD per year, a monthly car allowance of
$750  CAD  per  month plus insurance and maintenance, a monthly personal expense
account  of  $2,000 CAD and severance payments, if necessary, in accordance with
the  British  Columbia  Employment  Standards  Act.

Brent  Richard  Bysouth,  Chief  Software  Architect  and  Director,  signed  an
employment  agreement  with  CMC  on  December  1, 2004 which replaces all prior
employment  agreements  with us. The agreement does not have a termination date.
Under  the  agreement,  he  receives  a  base salary of $105,000 CAD per year, a
monthly  car  allowance  of  $750  CAD plus insurance and maintenance, a monthly
personal  expense account of $3,000 CAD and severance payments, if necessary, in
accordance  with  the British Columbia Employment Standards Act.  As of December
31,  2004,  Mr.  Bysouth  has  $440,530  in  accrued  wages  under  his previous
employment  agreement  which  have  not  been  paid.  As  per  the  terms of Mr.
Bysouth's  new  employment  agreement, these accrued wages may be distributed at
the  discretion  of  management on a pro rata basis if there are sufficient cash
flows  available.

Leslie  J.  Ames,  Senior Vice President, Legal Affairs, Secretary and Director,
signed  an  employment agreement with CMC on November 1, 2004 which replaces all
prior  employment  agreements with us. The Agreement does not have a termination
date. Under the agreement, he receives a base salary of $125,000 CAD per year, a
monthly  car  allowance  of  $750  CAD plus insurance and maintenance, a monthly
personal  expense account of $3,000 CAD and severance payments, if necessary, in
accordance  with  the  British Columbia Employment Standards Act. As of December
31,  2004,  Mr. Ames has $369,769 in accrued wages under his previous employment
agreement  which  have  not  been  paid.  As  per  the  terms  of  Mr. Ames' new
employment  agreement,  these accrued wages may be distributed at the discretion
of  management on a pro rata basis if there are sufficient cash flows available.

Ricardo  Rosado,  Chief Financial Officer, Chief Operating Officer and Director,
signed  an  employment agreement with CMC on December 1, 2004 which replaces all
prior  employment  agreements with us. The Agreement does not have a termination
date.  Under the agreement, he receives a base salary of $90,000 CAD per year, a
monthly  car  allowance  of  $750  CAD plus insurance and maintenance, a monthly
personal  expense  account  of  $2,000  and severance payments, if necessary, in


                                       38
<PAGE>

accordance  with  the  British Columbia Employment Standards Act. As of December
31, 2004, Mr. Rosado has $252,142 in accrued wages under his previous employment
agreement  which  have  not  been  paid.  As  per  the terms of Mr. Rosado's new
employment  agreement,  these accrued wages may be distributed at the discretion
of  management on a pro rata basis if there are sufficient cash flows available.

Marc Strauch, Chief Marketing Officer, Worldwide business Development, signed an
employment  agreement  with us on February 24, 2004.  The fixed remuneration for
Mr.  Strauch was of $125,000 USD per annum for the first year of employment.  In
addition to his fixed remuneration, Mr. Strauch received (i) 2,000,000 shares of
our  common  stock  as restricted shares, and (ii) nonqualified stock options to
acquire  One  and  One-half Million (1,500,000) shares of our common stock at an
exercise price of $1.40 USD per share, which equaled the closing market price of
the  stock  as  of the effective date of the agreement.  Mr. Strauch resigned as
our  Chief Marketing Officer effective February 16, 2005.  As a consequence, his
basic salary will be paid up until March 15, 2005 for a total of $10,416.66, and
benefit  coverage  will be provided until March 31, 2005.  Mr. Strauch forfeited
his  2,000,000 stock grants in November 2004, and as a result of his resignation
the  1,500,000  stock option agreement dated February 20, 2004 was rescinded and
replaced  with  a  new  stock  option  agreement  for  525,000  options  as full
consideration  for  his  employment.

Peter  Hogendoorn,  our former CEO and President, signed an employment agreement
with  us  on  January  15,  2003. The Agreement did not have a termination date.
Under  the  agreement, he received a base salary of $150,000 per year, a monthly
car  allowance  and  expense of approximately $1,225, a monthly personal expense
account  of $2,000, an annual vacation travel expense of $6,000, relocation fees
of $9,500 per month, if necessary, and severance payment of 36 months of salary,
which  would have been $450,000, in the event of a termination without cause. In
June  2004, the employment agreement was terminated, and Mr. Hogendoorn became a
consultant  to  us.  For his consulting services, Mr. Hogendoorn receives $7,000
CAD  currency  per  month  and reimbursement of business related expenses. As of
December  31,  2004,  Mr.  Hogendoorn  has  $227,160  in accrued wages under his
previous employment agreement which have not been paid.  As per the terms of Mr.
Hogendoorn's consulting agreement, these accrued wages may be distributed at the
discretion  of management on a pro rata basis if there are sufficient cash flows
available.

Dr.  Thomas  Routt  resigned  as  Chief  Scientist  of NS8 Corporation effective
January  21, 2005.  As a consequence of Dr. Routt's resignation his basic salary
would  be  paid  up  until February 28, 2005 for a total of $22,500, and benefit
coverage would be provided until March 31, 2005. Dr. Routt is able to retain his
2,000,000  stock  options  for  the  full  term as specified in his Stock Option
Agreement.

Michael  Waage  resigned as Senior Vice President, Global Sales and Marketing of
NS8  Corporation  effective  January  10, 2005.  As a consequence of Mr. Waage's
resignation  his  basic salary would be paid up until March 15, 2005 for a total
of  $16,250,  and  benefit  coverage  would be provided until March 31, 2005. In
addition, Mr. Waage will receive options to purchase 97,500 shares of our common
stock  at  an  exercise  price  of  $0.20.


                                       39
<PAGE>

ITEM  11.     Security  Ownership  Of  Certain  Beneficial Owners And Management

The  following  table presents information known to us, as of December 31, 2004,
relating  to  the  beneficial  ownership  of  common  stock  by:

-    each  person who is known by us to be the beneficial holder of more than 5%
of  our  outstanding  common  stock;

-    each  of  our  named  executive  officers, directors and key employees; and

-    our  directors  and  executive  officers  as  a  group.

We  believe  that all persons named in the table have sole voting and investment
power  with  respect  to all shares beneficially owned by them, except as noted.
Unless  otherwise indicated, the address of each stockholder listed in the table
is  care  of  CMC,  200-1311  Howe  Street, Vancouver, British Columbia, Canada.

Percentage  ownership  in  the  following table is based on 86,310,975 shares of
common  stock  outstanding as of December 31, 2004. A person is deemed to be the
beneficial  owner  of  securities  that can be acquired by that person within 60
days  from  December  31,  2004  upon  the  exercise  of  options,  warrants  or
convertible  securities.  Each  beneficial  owner's  percentage  ownership  is
determined by dividing the number of shares beneficially owned by that person by
the  base  number  of  outstanding  shares,  increased  to  reflect  the  shares
underlying  options,  warrants  or other convertible securities included in that
person's  holdings,  but  not  those underlying shares held by any other person.

<TABLE>
<CAPTION>
                                              OPTIONS
                               BASIC          VESTED      OPTIONS                PERCENT
NAME                        OUTSTANDING  (UNEXERCISED)  (UNVESTED)    TOTAL      OF CLASS
--------------------------  -----------  -------------  ----------  -----------  --------
<S>                         <C>          <C>            <C>         <C>          <C>
Brent Richard Bysouth (1).   11,903,105      1,150,000    350,000   13,403,105      13.14%
--------------------------  -----------  -------------  ----------  -----------  --------
Anthony J. Alda (2). . . .    9,748,300      7,720,000    370,000   17,838,300      16.83%
--------------------------  -----------  -------------  ----------  -----------  --------
Martin L. Calvert(3) **. .    4,360,000      2,016,702    375,000    6,751,702       6.88%
--------------------------  -----------  -------------  ----------  -----------  --------
Peter Hogendoorn(4). . . .    8,707,143      1,000,000    300,000   10,007,143      10.11%
--------------------------  -----------  -------------  ----------  -----------  --------
Leslie J. Ames (5) . . . .    3,060,000      1,250,000    400,000    4,710,000       4.76%
--------------------------  -----------  -------------  ----------  -----------  --------
Thomas Routt** . . . . . .                    833,332   1,166,668    2,000,000          *
--------------------------   -----------  -------------  ----------  -----------  --------
Ricardo Rosado . . . . . .    2,545,667      1,050,000    350,000    3,945,667       4.00%
--------------------------   -----------  -------------  ----------  -----------  --------
Michael Waage. . . . . . .    1,350,000        700,000     50,000    2,100,000       2.32%
--------------------------  -----------  -------------  ----------  -----------  ---------
Marc Strauch** . . . . . .                     625,000    875,000    1,500,000          *
--------------------------  -----------  -------------  ----------  -----------  ---------
Melanie Thomson. . . . . .      425,000                   275,000      700,000          *
--------------------------   -----------  -------------  ----------  -----------  --------
David Aisenstat. . . . . .    5,814,286              _               5,814,286       6.31%
--------------------------  -----------  -------------  ----------  -----------  ---------
Total of all Executive . .
Officers and Directors as
a Group (8 persons)          29,032,072     13,328,332  3,836,668   46,197,072      32.92%
--------------------------  -----------  -------------  ----------  -----------  --------
</TABLE>
*  Less  than  1%.
**  Address:  NS8Corp,  Two  Union  Square Center, 601 Union Street, Suite 4200,
Seattle,  WA  98101


                                       40
<PAGE>

(1)  Phoenix  Management  Consulting  Group,  Inc.,  a  British Columbia, Canada
corporation ("Phoenix") owns 8,279,125 shares, and options to purchase 1,750,000
shares,  of  Registrant. Brent Bysouth owns 100% of Phoenix. Anthony J. Alda has
an  option until January 1, 2009 to purchase 80% of Phoenix for $1,000. Assuming
this  option  will  be  exercised,  currently  Mr.  Alda has voting control over
6,623,300  Registrant  shares  held  by  Phoenix,  which is 80% of the 8,279,125
Registrant  shares  held  by  Phoenix.  Additionally,  Mr. Alda has an option to
purchase  1,400,000  options  held  by  Phoenix  to purchase 1,750,000 shares of
Registrant's  shares,  which  is 80% of the options held by Phoenix. Mr. Bysouth
has  voting  control  over 1,655,825 Registrant shares held by Phoenix, which is
20%  of  the  8,279,125 Registrant shares held by Phoenix. Mr. Bysouth also owns
10,247,280  shares  of  Registrant  directly.

(2)  In addition to having voting control over 6,623,300 shares held by Phoenix,
and  the  option  to purchase 1,400,000 options held by Phoenix, Anthony J. Alda
also  has  voting  control  over  the  following  shares: 850,000 shares held by
Anthony  J. Alda in Trust for Brittany Billingsley; 525,000 shares held by Pat &
Lutz Alda; 175,000 shares held by Tamara Billingsley; and 450,000 shares held by
Euro  Partners, Ltd. Mr. Alda also owns 1,125,000 shares of Registrant directly.

(3)  This  includes  the  following  shares  held by the three minor children of
Martin Calvert, which Martin Calvert has voting control over: 20,000 shares held
by  Spencer  Calvert;  20,000 shares held by Callahan Calvert; and 20,000 shares
held  by  Christina  Calvert.

(4)  This  includes the following shares held by the two minor children of Peter
Hogendoorn,  which Peter Hogendoorn has voting control over: 100,000 shares held
by  Molly Hogendoorn; 100,000 shares held by Thea Hogendoorn; and 500,000 shares
held  by  Barbara  Hogendoorn,  Mr.  Hogendoorn's  wife.

(5)  This  includes  2,760,000  shares  held  by Leslie J. Ames Law Corporation.

ITEM  12.     Certain  Relationships  and  Related  Transactions

Transactions  with  David  Aisenstat:

     David  Aisenstat  loaned CanOnline $100,000 on April 30, 2003, and $100,000
on  May  27,  2003.  Each loan is subject to 8% interest, and due on demand.  On
October  29,  2003,  Mr.  Aisenstat  demanded  repayment  of  $50,000.  In  Mr.


                                       41
<PAGE>

Aisenstat's  demand  for  repayment he agreed to accept 100,000 common shares of
CanOnline  for  the  principle  amount  of $50,000.  Mr. Aisenstat's election to
convert  the debt to shares was agreed to and accepted by the Board of Directors
of  CanOnline. The balance of the two loans outstanding is $150,000 plus accrued
interest.  On December 20, 2004, we repaid the loans plus accrued interest.  The
total  amount  repaid  was  $171,106.85.

Transaction  with  Martin  Calvert:

On May 13, 2004, Martin Calvert, a director of ours, loaned us $95,000. The loan
was initially due on May 13, 2005 and bore interest at the rate of 8% per annum,
but  on  June  1,  2004, the loan plus accrued interest was fully paid to Martin
Calvert  in  amount  of $95,333.15.  Pursuant to the terms of the loan, upon its
repayment, we issued to Mr. Calvert warrants to purchase 47,500 shares of common
stock at an exercise price of $0.61 per share.  The warrants remain unexercised.


On August 12, 2004, Martin Calvert, then a director of ours, loaned us $100,000.
The  loan  is  due  on  August 12, 2005 and bears interest at a rate of 9.5% per
annum.  Upon  repayment  of  the  loan  to  Martin Calvert, we will issue to Mr.
Calvert  warrants  to  purchase 50,000 shares of our common stock at an exercise
price  equal  to market price on the date the warrants are issued with a term of
two years from the date of issuance. A portion of the loan plus accrued interest
was  repaid  in  September  2004. The balance remaining on the loan plus accrued
interest was repaid in December 2004 which amounted to $27,108.21.  The warrants
were  issued  with  an exercise price of $0.61 per share and remain unexercised.

ITEM  13.     EXHIBITS,  List  and  Reports  on  Form  8-K

<TABLE>
<CAPTION>

(a) Exhibit
    Number   Description
<S>          <C>
     2.1     Agreement  and  Plan  of Merger dated November 3, 2003 among Registrant,
             DLVN  Acquisition,  Inc.  and  CanOnline  Global  Media,  Inc.  (1)
     2.2     Correction  Agreement  dated  November  3,  2003  among Registrant, DLVN
             Acquisition,  Inc.  and  CanOnline  Global  Media,  Inc.  (1)
     2.3     Certificate  of  Merger  filed  with  Delaware  Secretary  of  State (1)
     2.4     Certificate  of  Merger  filed  with  Washington  Secretary of State (1)
     3.1     Certificate  of  Incorporation  (2)
     3.2     Amendment  of Certificate of Incorporation-dated October 13, 2003 (3)
     3.3     Amendment of Certificate of Incorporation-dated December 17, 2003 (3)
     3.4     By-Laws  (2)
     3.5     Amended  By-Laws  (2)
     10.1    Stock  Option  Plan  of  2001  (2)
     10.2    Stock  Option  Plan  of  2004
     10.3    Employment  Agreement of Ricardo Rosado with CanOnline Global
             Media  Corp.  (4)
     10.4    Amended Employment Agreement of Ricardo Rosado with CanOnline
             Global  Media  Corp.  (4)
</TABLE>


                                       42
<PAGE>

<TABLE>
<CAPTION>
<S>          <C>
     10.5    Amendment  to Employment Agreement of Ricardo Rosado with NS8
             Corp.
     10.6    Addendum  to  Amendment  to  Employment  Agreement of Ricardo
             Rosado  with  NS8  Corp.
     10.7    Employment  Agreement  of  Anthony Alda with CanOnline Global
             Media  Corp.  (4)
     10.8    Amended  Employment  Agreement of Anthony Alda with CanOnline
             Global  Media  Corp.(4)
     10.9    Employment  Agreement of Leslie J. Ames with CanOnline Global
             Media  Corp.  (4)
     10.10   Amended  Employment  Agreement  of  Leslie J. Ames with CanOnline
             Global  Media  Corp.  (4)
     10.11   Amendment  to  Employment  Agreement  of  Leslie J. Ames with NS8
             Corp.
     10.12   Addendum  to  Amendment to Employment Agreement of Leslie J.
             Ames  with  NS8  Corp.
     10.13   Employment  Agreement  of  Brent S. Bysouth with CanOnline Global
             Media  Corp.  (4)
     10.14   Amended  Employment  Agreement of Brent S. Bysouth with CanOnline
             Global  Media  Corp.  (4)
     10.15   Amendment  to Employment Agreement of Brent Bysouth with NS8
             Corp.
     10.16   Addendum  to  Amendment  to  Employment  Agreement  of Brent
             Bysouth  with  NS8  Corp.
     10.17   Employment  Agreement of Thomas Routt with CanOnline Global Media
             Corp.  (4)
     10.18   Employment Agreement of Ricardo Rosado with CanOnline Media Corp.(4)
     10.19   Amended  Employment  Agreement  of  Ricardo Rosado with CanOnline
             Media  Corp.
     10.20   Employment  Agreement  of Anthony Alda with CanOnline Media Corp.(4)
     10.21   Amended  Agreement  of  Anthony  Alda  with CanOnline Media Corp.
     10.22   Agreement  of  Leslie  J.  Ames  with  CanOnline  Media Corp. (4)
     10.23   Amended  Agreement  of  Leslie J. Ames with CanOnline Media Corp.
     10.24   Agreement  of  Brent  Bysouth  with  CanOnline  Media  Corp.  (4)
     10.25   Amended  Agreement  of  Brent  Bysouth with CanOnline Media Corp.
     10.26   Employment  Agreement  of  Melanie  Thomson  with CanOnline Media
             Corp.
     10.27   Amended  Employment  Agreement  of Melanie Thomson with CanOnline
             Media  Corp.
     10.28   Employment  Agreement  of  Peter Hogendoorn with CanOnline Global
             Media  Corp.  (4)
     10.29   Consulting  Agreement  between  Peter  Hogendoorn  and  NS8
             Corporation,  Inc.
     31.1    Rule  13(a)-14(a)/15(d)-14(a)  Certification  of  Principal
             Executive  Officer
     31.2    Rule  13(a)-14(a)/15(d)-14(a) Certification of Principal Financial
             Officer
     32.1    Section  1350  Certification  of  Chief  Executive  Officer
     32.2    Section  1350  Certification  of  Chief  Financial  Officer
</TABLE>

(1)   Previously  filed  in  Registrant's  Form  8-K/A filed on January 31, 2004
(2)   Previously  filed  in  Registrant's  Form  SB-2 filed on December 26, 2001


                                       43
<PAGE>

(3)   Previously  filed in Registrant's Form 10-KSB for the year ended September
30,  2003  filed  on  January  1,  2004
(4)   Previously  filed  in Registrant's Form 10-KSB for the year ended December
31,  2003  filed  on  April  15,  2004

(b)     Reports  on  Form  8-K

The  Company  filed the following reports on Form 8-K during the last quarter of
2004:

     1.     Report  on  Form 8-K, dated November 26, 2004.  Item 5.02. Departure
of  Directors  or  Principal  Officers;  Election  of  Directors; Appointment of
Principal  Officers.

     2.     Report  on Form 8-K, dated December 14, 2004.  Item 2.03 Creation of
a  Direct  Financial  Obligation  or  an  Obligation  under an Off-Balance Sheet
Arrangement  of  the  Registrant;  Item  9.01 Financial Statements and Exhibits.
3.     Report  on  Form 8-K/A, dated December 14, 2004.  Item 2.03 Creation of a
Direct  Financial  Obligation  or  an  Obligation  under  an  Off-Balance  Sheet
Arrangement  of  the  Registrant;  Item  9.01 Financial Statements and Exhibits.

     4.     Report on Form 8-K, dated December 23, 2004.  Item 1.01 Entry into a
Material  Definitive  Agreement;  Item  3.02  Unregistered  Sales  Of  Equity
Securities.

     Registrant  filed  a  Report on Form 8-K/A on January 30, 2004 reporting on
the merger with CanOnline. The event reported was amended information concerning
the  merger.

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES.

(1)  Audit  Fees

The  aggregate  fees  billed  for professional services rendered by Singer Lewak
Greenbaum  &  Goldstein,  LLP for the audit of the Registrant's annual financial
statements  and  review of the financial statements included in the Registrant's
Forms  10-QSB  or  services  that  are  normally  provided  by the accountant in
connection with statutory and regulatory filings or engagements for fiscal years
2004  and  2003  were  approximately  $143,878  and  $  44,264,  respectively.

(2)  Audit  Related  Fees

There  were  no  audit related fees for professional services rendered by Singer
Lewak  Greenbaum  &  Goldstein,  LLP  for  fiscal  years  2004  and  2003.

(3)  Tax  Fees

The  fees  billed for professional services rendered by Singer Lewak Greenbaum &
Goldstein,  LLP  for  the preparation of the registrant's tax returns, including
tax  planning  for  fiscal years 2004 and 2003 were approximately $2,663 and $0,
respectively.

(4)  All  Other  Fees


                                       44
<PAGE>

Not  applicable.

(5)  Audit  Committee  Policies  and  Procedures

The  Registrant  does not have an audit committee. The Board of Directors of the
Registrant  approved  all  of  the services rendered to the Registrant by Singer
Lewak  Greenbaum  &  Goldstein,  LLP  for  fiscal  years  2004  and  2003.

(6)  Audit  Work  Attributed  to  Persons  Other  than  Singer Lewak Greenbaum &
Goldstein,  LLP  Full-time,  Permanent  Employees.

The  Registrant  has  engaged  Hall  & Company, Chartered Accountants to perform
audit  work  and  tax  preparation  for  CMC.



                                       45
<PAGE>

                                   SIGNATURES

     In  accordance  with  the  requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                            NS8  CORPORATION
                                           (Registrant)


Date:  March  31,  2005                     By:  /s/  Anthony  J.  Alda
                                                 ----------------------
                                                 Anthony J. Alda, CEO (Principal
                                                 Executive  officer)




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

Date:  March  31,  2005                     By:  /s/  Anthony  J.  Alda
                                            ------------------------------------
                                            Chairman of the Board of Directors,
                                            President and CEO (Principal
                                            Executive  Officer)

Date:  March  31,  2005                     By:  /s/  Ricardo  Rosado
                                            ------------------------------------
                                            Ricardo Rosado, Chief Financial
                                            Officer and  Director

Date:   March  31,  2005                    By:  /s/  Leslie  J.  Ames
                                            ------------------------------------
                                            Leslie  J.  Ames,  Director

Date:  March  31,  2005                     By:  /s/  Michael  W.  Waage
                                            ------------------------------------
                                            Michael  W.  Waage,  Director

Date:  March  31,  2005                     By:  /s/  Brent  R.  Bysouth
                                            ------------------------------------
                                            Brent  R.  Bysouth,  Director


                                       46
<PAGE>

                                                                 NS8 CORPORATION
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                                        CONTENTS
                                                               December 31, 2004
--------------------------------------------------------------------------------

                                                                            Page

INDEPENDENT  AUDITOR'S  REPORT                                              F-2

CONSOLIDATED  FINANCIAL  STATEMENTS

     Consolidated  Balance  Sheet                                           F-3

     Consolidated  Statements  of  Operations                               F-4

     Consolidated  Statements  of  Comprehensive  Loss                      F-5

     Consolidated  Statements  of  Shareholders' Equity (Deficit)           F-6

     Consolidated  Statements  of  Cash  Flows                        F-7 - F-8

     Notes  to  Consolidated  Financial  Statements                  F-9 - F-38


                                      F-1
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To  the  Board  of  Directors
NS8  Corporation


We  have  audited  the  consolidated  balance  sheet  of  NS8  Corporation  and
subsidiaries  (a  developmental  stage company) as of December 31, 2004, and the
related consolidated statements of operations, comprehensive loss, shareholders'
equity  (deficit)  and  cash flows for each of the two years in the period ended
December 31, 2004, and the period from June 18, 1999 (inception) to December 31,
2004.  These  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audits.

We  conducted  our audits in accordance with 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  provided  a  reasonable  basis  for  our  opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in all material respects, the financial position of NS8 Corporation and
subsidiaries  (a  developmental  stage company) as of December 31, 2004, and the
results  of  their  operations and their cash flows for each of the two years in
the  period  ended  December  31,  2004,  and  the  period  from  June  18, 1999
(inception)  to  December  31,  2004, in conformity with U.S. generally accepted
accounting  principles.

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



SINGER  LEWAK  GREENBAUM  &  GOLDSTEIN  LLP

Los  Angeles,  California
March  31,  2005


                                      F-2
<PAGE>

<TABLE>
<CAPTION>
                                                                 NS8 CORPORATION
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                      CONSOLIDATED BALANCE SHEET
                                                               December 31, 2004
--------------------------------------------------------------------------------

                                 ASSETS
<S>                                                       <C>
Current assets
  Cash and cash equivalents                               $  1,562,040
  Prepaid, consulting services                               3,098,622
  Prepaid, other                                                85,804
                                                          -------------

    Total current assets                                     4,746,466

Property and equipment, net                                    174,395
                                                          -------------

        Total assets                                      $  4,920,861
                                                          =============

                  LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities
  Accounts payable and accrued expenses                   $    351,132
  Accrued payroll and related expenses                       1,695,020
  Current portion of capital lease obligations                   7,550
  Notes payable                                                325,000
  Notes payable - shareholders, net of debt discount
    of $9,894                                                3,790,106
                                                          -------------

    Total current liabilities                                6,168,808

Capital lease obligations, net of current portion                5,155

Convertible debentures, net of debt discount of $339,284     1,160,716
                                                          -------------

      Total liabilities                                      7,334,679
                                                          -------------

Commitments and contingencies

Shareholders' deficit
  Preferred stock, $0.0001 par value
    5,000,000 shares authorized
    no shares issued and outstanding                                 -
  Common stock, $0.0001 par value
    200,000,000 shares authorized
    86,310,975 shares issued and outstanding                     8,631
  Additional paid-in capital                                12,878,821
  Deferred compensation                                              -
  Accumulated other comprehensive loss                         (44,261)
  Deficit accumulated in the development stage             (15,257,009)
                                                          -------------

      Total shareholders' deficit                           (2,413,818)
                                                          -------------

        Total liabilities and shareholders' deficit       $  4,920,861
                                                          =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-3
<PAGE>

<TABLE>
<CAPTION>

                                                                   NS8 CORPORATION
                                                     (A DEVELOPMENT STAGE COMPANY)
                                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                    For the Years Ended December 31, 2004 and 2003
                                                                               and
                                     for the Period from June 18, 1999 (Inception)
                                                              to December 31, 2004
----------------------------------------------------------------------------------

                                                                        For the
                                                                      Period from
                                                                        June 18,
                                             For the Year Ended          1999
                                                 December 31,        (Inception) to
                                     ------------------------------   December 31,
                                           2004            2003          2004
                                     ----------------  ------------  -------------
<S>                                  <C>               <C>           <C>
Operating expenses
  Research and development           $     1,079,824   $ 1,382,000   $  2,678,896
  General and administrative               8,323,294     2,518,058     12,210,274
                                     ----------------  ------------  -------------

    Total operating expenses               9,403,118     3,900,058     14,889,170
                                     ----------------  ------------  -------------

Loss from operations                      (9,403,118)   (3,900,058)   (14,889,170)
                                     ----------------  ------------  -------------

Other (expense) income
  Other (expense) income                     (19,733)       27,594         56,189
  Interest expense                          (359,069)      (52,930)      (424,028)
                                     ----------------  ------------  -------------

    Total other expense                     (378,802)      (25,336)      (367,839)
                                     ----------------  ------------  -------------

Net loss                             $    (9,781,920)  $(3,925,394)  $(15,257,009)
                                     ================  ============  =============

Basic and diluted loss per share     $         (0.11)  $     (0.07)
                                     ================  ============

Weighted-average shares outstanding       88,208,761    58,900,389
                                     ================  ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-4
<PAGE>

<TABLE>
<CAPTION>

                                                                  NS8 CORPORATION
                                                    (A DEVELOPMENT STAGE COMPANY)
                                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                   For the Years Ended December 31, 2004 and 2003
                                                                              and
                                    for the Period from June 18, 1999 (Inception)
                                                             to December 31, 2004
----------------------------------------------------------------------------------


                                                                       For the
                                                                     Period from
                                                                       June 18,
                                            For the Year Ended          1999
                                                December 31,        (Inception) to
                                    ------------------------------   December 31,
                                          2004            2003          2004
                                    ----------------  ------------  -------------
<S>                                 <C>               <C>           <C>
Net loss                            $    (9,781,920)  $(3,925,394)  $(15,257,009)

Other comprehensive loss
  Foreign currency exchange losses           (9,001)      (37,934)       (44,261)
                                    ----------------  ------------  -------------

Comprehensive loss                  $    (9,790,921)  $(3,963,328)  $(15,301,270)
                                    ================  ============  =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-5
<PAGE>

<TABLE>
<CAPTION>

                                                                                                                   NS8 CORPORATION
                                                                                                     (A DEVELOPMENT STAGE COMPANY)
                                                                         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
                                                                For the Period from June 18, 1999 (inception) to December 31, 2004
----------------------------------------------------------------------------------------------------------------------------------


                                                                                        Accumulated       Deficit
                                                                                           Other        Accumulated
                                                         Additional                    Comprehensive      in the
                               Common        Stock        Paid-In        Deferred         Income        Development
                             -----------  ------------  ------------
                               Shares        Amount       Capital      Compensation       (Loss)           Stage         Total
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------
<S>                          <C>          <C>           <C>           <C>             <C>              <C>            <C>
Balance, June 18, 1999                -   $         -   $         -   $           -   $            -   $          -   $         -
                             (inception)
Issuance of shares for cash   4,130,000           413         5,203                                                         5,616
Conversion of debt to
  common stock               29,281,406         2,928        36,885                                                        39,813
Net loss                                                                                                    (31,905)      (31,905)
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------

Balance, December
31, 1999                     33,411,406         3,341        42,088               -                -        (31,905)       13,524
Exercise of stock options     2,000,000           200          (200)              -
Options granted
  for services                                                3,400                                                         3,400
Issuance of shares for
  services                       20,000             2         1,018                                                         1,020
Issuance of shares for cash   3,239,112           324       283,815                                                       284,139
Issuance of shares for                -
  offering costs                150,000            15        22,485                                                        22,500
Offering costs                  (33,242)                                                                                  (33,242)
Foreign exchange
  translation                                                                                   (681)                        (681)
Net loss                                                                                                   (232,829)     (232,829)
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------

Balance, December
31, 2000                     38,820,518   $     3,882   $   319,364   $           -   $         (681)  $   (264,734)  $    57,831
Conversion of debt to
  common stock                   35,667             4         5,346                                                         5,350
Exercise of options             450,000            45           (45)                                                            -
Issuance of shares for
  service                        50,000             5           195                                                           200
Buy-back of shares           (1,025,000)         (103)       (2,559)                                                       (2,662)
Foreign exchange
  translation                                                                                  5,873                        5,873
Net loss                                                                                                   (391,930)     (391,930)
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------

Balance, December
31, 2001                     38,331,185   $     3,833   $   322,301   $           -   $        5,192   $   (656,664)  $  (325,338)
Conversion of debt to
  common stock                7,923,448           793       151,507                                                       152,300
Issuance of shares for
  employee compensation       2,310,000           231        80,619         (56,000)                                       24,850
Cancellation of shares       (1,000,000)         (100)          100                                                             -
Foreign exchange
  translation                                                                                 (2,518)                      (2,518)
Net loss                                                                                                   (893,031)     (893,031)
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------

Balance, December
31, 2002                     47,564,633   $     4,757   $   554,527   $     (56,000)  $        2,674   $ (1,549,695)  $(1,043,737)
Conversion of debt           12,385,714         1,239       684,782                                                       686,021
Issuance of shares for cash   4,833,334           483     2,444,517                                                     2,445,000
Issuance of shares for                -
  employee compensation       3,720,000           372       947,933          56,000                                     1,004,305
Issuance of shares for
  services                      500,000            50        17,450                                                        17,500
Issuance of shares to
  pre-reverse
  merger shareholders        15,250,000         1,525        (1,525)                                                            -
Foreign exchange
  translation                                                                                (37,934)                     (37,934)
Net loss                                                                                                 (3,925,394)   (3,925,394)
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------

Balance, December
31, 2003                     84,253,681   $     8,426   $ 4,647,684   $           -   $      (35,260)  $ (5,475,089)  $  (854,239)
Issuance of shares for cash     597,544            60       399,940                                                       400,000
Issuance of shares for
  employee compensation               -                           -                                                             -
Issuance of shares for
  services                      525,170            52       546,947                                                       546,999
Issuance of shares for
  offering costs                934,580            93           (93)                                                            -
Offering costs                                              (21,000)                                                      (21,000)
Debt discount for valuation
  of warrants issued with
  notes payable                                             126,857                                                       126,857
Beneficial conversion
  feature on convertible
  notes payable                       -                     428,571                                                       428,571
Warrants issued for
  Services rendered                   -                   5,724,021                                                     5,724,021
Compensation charge for
  warrants issued "in the
  money" to non-employees             -                      20,000                                                        20,000
Options issued for
  services rendered                   -                     896,000                                                       896,000
Compensation charge for
  stock options issued "in
  the money" to employees             -                     110,100                                                       110,100
Foreign exchange
  translation                                                  (206)                          (9,001)                      (9,207)
Net loss                              -             -             -               -                -     (9,781,920)   (9,781,920)
                             -----------  ------------  ------------  --------------  ---------------  -------------  ------------

Balance, December
31, 2004                     86,310,975   $     8,631   $12,878,821   $           -   $      (44,261)  $(15,257,009)  $(2,413,818)
                             ===========  ============  ============  ==============  ===============  =============  ============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-6
<PAGE>

<TABLE>
<CAPTION>

                                                                           NS8 CORPORATION
                                                             (A DEVELOPMENT STAGE COMPANY)
                                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 For the Years Ended December 31, 2004 and
                                                                                  2003 and
                                             for the Period from June 18, 1999 (Inception)
                                                                      to December 31, 2004
------------------------------------------------------------------------------------------

                                                                                For the
                                                                              Period from
                                                                               June 18,
                                                   For the Year Ended            1999
                                                       December 31,          (Inception) to
                                             ------------------------------    December 31,
                                                 2004            2003            2004
                                             ------------  ----------------  -------------
<S>                                          <C>           <C>               <C>
Cash flows from operating activities
  Net loss                                   $(9,781,920)  $    (3,925,394)  $(15,257,009)
  Adjustments to reconcile net loss to net
    cash used in operating activities
      Depreciation and amortization               51,183            26,343         95,394
      Compensation charge for
        in-the-money stock options               110,100                          110,100
      Compensation charge for
        in-the-money warrants                     20,000                           20,000
      Accretion of warrants issued as
        a debt discount                          117,138                          117,138
      Accretion of interest issued as
        a debenture discount                      89,287                           89,287
      Issuance of stock for services             547,000            17,500        565,720
      Issuance of stock for compensation               -         1,004,305      1,029,155
      Issuance of warrants for compensation    5,724,021                        5,724,021
      Options granted for services               896,000                 -        899,400
      (Increase) decrease in
        Accounts receivable                            -                 -              -
        Prepaid expenses and other
          current assets                      (3,143,801)          (62,686)    (3,217,658)
      Increase (decrease) in
        Accounts payable and accrued
          expenses                               206,087             8,820        382,153
        Accrued payroll                          476,304           611,366      1,728,252
                                             ------------  ----------------  -------------

Net cash used in operating activities         (4,688,601)       (2,319,746)    (7,714,047)
                                             ------------  ----------------  -------------

Cash flows from investing activities
  Purchase of property and equipment            (116,691)          (90,760)      (220,768)
                                             ------------  ----------------  -------------

Net cash used in investing activities           (116,691)          (90,760)      (220,768)
                                             ------------  ----------------  -------------

Cash flows from financing activities
  Payments on notes payable                  $         -   $        (1,967)  $          -
  Proceeds from notes payable                          -                 -              -
  Proceeds from convertible debentures         1,500,000           600,000      2,100,000
  Proceeds from issuance of common
    stock                                        400,000         2,445,000      3,157,254
  Proceeds from loans from officers/
    shareholders                               4,145,000           400,000      5,017,650
  Payments on loans from officers/
    shareholders                                (495,000)          (70,361)      (565,361)
  Proceeds from short term loans                 100,000           225,000        325,000
  Payments for redemption of shares                    -                 -         (2,662)
  Offering costs                                 (21,000)                -        (54,242)
  Payments on convertible debentures                   -          (400,000)      (400,000)
  Payments on capital lease obligations           (4,880)          (24,573)       (32,075)
                                             ------------  ----------------  -------------

Net cash provided by financing activities      5,624,120         3,173,099      9,545,564
                                             ------------  ----------------  -------------

Effect of exchange rate changes
  on cash                                        (13,449)          (37,934)       (48,709)
                                             ------------  ----------------  -------------

Net increase in cash and cash
  equivalents                                    805,379           724,659      1,562,040

Cash and cash equivalents,
  beginning of period                            756,661            32,002              -
                                             ------------  ----------------  -------------

Cash and cash equivalents,
  end of period                              $ 1,562,040   $       756,661   $  1,562,040
                                             ============  ================  =============
Supplemental disclosures of
  cash flow information

  Interest paid                              $    92,422   $         6,849   $    118,043
                                             ============  ================  =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                      F-7
<PAGE>

                                                                 NS8 CORPORATION
                                                   (A DEVELOPMENT STAGE COMPANY)
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                             For the Years Ended December 31, 2004 and 2003, and
              for the Period from June 18, 2000 (Inception) to December 31, 2004
--------------------------------------------------------------------------------


Supplemental  schedule  of  non-cash  investing  and  financing  activities
During  the  year  ended December 31, 2004, the Company completed the following:

-    The  Company  issued  525,170  shares of common stock for services rendered
     valued  at  $546,999.
-    The  Company  issued  934,580  shares of its common stock as offering costs
     pursuant  to  a  Standby  Equity  Distribution  Agreement.
-    The  Company  recorded  a  debt  discount in the amount of $126,857 for the
     valuation  of  warrants  issued  with  notes  payable.
-    The  Company  issued  7,439,504  warrants  for  services rendered valued at
     $5,724,021.
-    The  Company issued 1,700,000 stock options for services rendered valued at
     $896,000.
-    The  Company  recorded a beneficial conversion feature on convertible notes
     payable  of  $428,571.
-    The  Company  recorded  compensation of $20,000 for warrants issued "in the
     money"  to  non-employees.
-    The  Company  recorded  a compensation charge of $110,100 for stock options
     issued  "in  the  money"  to  employees.


                                      F-8
<PAGE>

NOTE  1  -  ORGANIZATION  AND  LINE  OF  BUSINESS

CanOnline  Global  Media, Inc. ("CGMI") was formed in the state of Washington on
March 15, 2000.  On September 12, 2000, CGMI entered into a Share Consideration,
Assignment,  and  Transfer Agreement, whereby it acquired all of the outstanding
common stock of CanOnline Media Corporation ("CMC") in exchange for an aggregate
of 38,405,517 shares of newly issued common stock.  For accounting purposes, the
transaction  has  been  treated  as  a  recapitalization of CMC, with CMC as the
accounting  acquirer  (reverse  acquisition).  Accordingly,  the  financial
statements  of  CGMI reflect the historical financial statements of CMC from its
incorporation  on  June 18, 1999 in Vancouver, British Columbia, Canada, and the
operations  of  CGMI  subsequent  to  September 12, 2000.  CGMI did not have any
assets  or  liabilities  at  the  date  of  the acquisition and did not have any
operations  prior  to  the  acquisition. Therefore, pro forma information is not
presented.

On  December 18, 2003, CGMI closed a merger agreement with Delivery Now Corp., a
Delaware  corporation  and  publicly  traded  company  (the  "Parent"), and DLVN
Acquisition  Co.,  a  Delaware  corporation and wholly owned subsidiaries of the
Parent  (the "Merger Sub").  Delivery Now Corp. was incorporated in the state of
Delaware  on  October  3,  2000.  As part of the reverse merger, on December 17,
2003,  Delivery  Now  Corp.  changed  its  fiscal  year end from September 30 to
December  31  and  changed  its  name  to  NS8  Corporation  ("NS8").

NS8,  CGMI  and  CMC  (collectively,  the  "Company")  design and produce online
business  applications in the areas of streaming software, digital media rights,
data-content management, audio-video communications, and corporate collaboration
systems.

NOTE  2  -  GOING  CONCERN

The  accompanying  financial  statements  have  been prepared in conformity with
accounting  principles generally accepted in the United States of America, which
contemplate  continuation  of  the  Company as a going concern.  During the year
ended  December  31, 2004, the Company incurred a net loss of $9,781,920 and had
negative cash flows from operations of $4,688,601.  In addition, the Company had
an accumulated deficit of $15,257,009 at December 31, 2004.  These factors raise
substantial  doubt  about  the Company's ability to continue as a going concern.

Recovery of the Company's assets is dependent upon future events, the outcome of
which  is  indeterminable.  Management  plans  to  continue  to  provide for its
capital needs during the year ended December 31, 2005 by issuing debt and equity
securities  and  by  the  continued  development of its products.  The financial
statements  do  not  include  any adjustments relating to the recoverability and
classification  of  recorded  asset  amounts  or  amounts  and classification of
liabilities  that might be necessary should the Company be unable to continue in
existence.


                                      F-9
<PAGE>


NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

Principles  of  Consolidation
-----------------------------
The consolidated financial statements include the accounts of NS8 and its wholly
owned  subsidiaries,  CGMI  and CMC.  All significant inter-company accounts and
transactions  are  eliminated  in  consolidation.

Development  Stage  Enterprise
------------------------------
The  Company is a development stage company as defined in Statement of Financial
Accounting  Standards  ("SFAS")  No. 7, "Accounting and Reporting by Development
Stage  Enterprises."  The  Company  is devoting substantially all of its present
efforts  to  establish a new business, and its planned principal operations have
not  yet  commenced. All losses accumulated since inception have been considered
as  part  of  the  Company's  development  stage  activities.

Comprehensive  Loss
-------------------
The  Company  utilizes  SFAS  No.  130,  "Reporting Comprehensive Income."  This
statement  establishes  standards  for reporting comprehensive income (loss) and
its components in a financial statement.  Comprehensive income (loss) as defined
includes  all  changes  in  equity  (net  assets) during a period from non-owner
sources.  Examples of items to be included in comprehensive income (loss), which
are  excluded  from  net  income  (loss),  include  foreign currency translation
adjustments,  minimum  pension  liability  adjustments, and unrealized gains and
losses  on  available-for-sale  securities.

Cash  and  Cash  Equivalents
----------------------------
For the purpose of the statements of cash flows, the Company consider all highly
liquid investments purchased with original maturities of three months or less to
be  cash  equivalents.

Property  and  Equipment
------------------------
Property  and  equipment  are  stated  at  cost.  The  Company  provides  for
depreciation  and  amortization using the double-declining method over estimated
useful  lives  of  five to seven years. Expenditures for maintenance and repairs
are  charged  to  operations  as  incurred  while  renewals  and betterments are
capitalized.  Gains  or  losses  on  the  sale  of  property  and  equipment are
reflected  in  the  statements  of  operations.

Fair  Value  of  Financial  Instruments
---------------------------------------
The  Company's  financial instruments include cash and cash equivalents, prepaid
expenses  and  other  current assets, accounts payable and accrued expenses, and
accrued  payroll.  The fair value  of  these financial  instruments  are
representative  of  their  carrying amounts due to their short maturities.

                                      F-10
<PAGE>

NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)

Advertising  Costs
------------------
The company expenses advertising costs as incurred. For the years ended December
31,  2004  and 2003, advertising costs were $181,099, and $103,427 respectively.

Software  Development  Costs
----------------------------
Pursuant to the provisions of SFAS No. 86, "Accounting for the Costs of Computer
Software  to  Be  Sold,  Leased or Otherwise Marketed," we capitalize internally
developed  software  and  software  purchased  from third parties if the related
software  product  under development has reached technological feasibility or if
there  are  alternative  future uses for the purchased software. These costs are
amortized on a product-by-product basis typically over the estimated life of the
software product using the greater of the ratio that current gross revenue for a
product  bears  to the total of current and anticipated future gross revenue for
that  product  or the straight-line method over the remaining estimated economic
life  of  the  product.  At  each  balance  sheet  date,  we  evaluate  on  a
product-by-product  basis  the unamortized capitalized cost of computer software
compared  to the net realizable value of that product.   The amount by which the
unamortized  capitalized  costs  of  a  computer software product exceed its net
realizable  value  is  written off.  At December 31, 2004, all costs incurred to
internally  development  our  software  had  been  expensed.

Stock-Based  Compensation
-------------------------
SFAS  No.  123,  "Accounting  for  Stock-Based Compensation," as amended by SFAS
No.148,  "Accounting  for  Stock-Based  Compensation-Transition  and
Disclosure,"  defines  a  fair  value based method of accounting for stock-based
compensation.  However,  SFAS  No.  123  allows an entity to continue to measure
compensation  cost  related to stock and stock options issued to employees using
the  intrinsic  method  of  accounting prescribed by Accounting Principles Board
("APB")  Opinion  No.  25,  "Accounting for Stock Issued to Employees." Entities
electing  to  remain  with the accounting method of APB Opinion No. 25 must make
pro  forma disclosures of net income and earnings per share as if the fair value
method  of  accounting defined in SFAS No. 123 had been applied. The Company has
elected  to  account  for  its  stock-based  compensation to employees under APB
Opinion  No.  25  using  the  intrinsic  value  method.


                                      F-11
<PAGE>

NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)

Stock-Based  Compensation  (Continued)
-------------------------
If the Company had elected to recognize compensation expense based upon the fair
value  at  the  grant  date  for  awards  under  its  plan  consistent  with the
methodology  prescribed  by  SFAS  No.  123, the Company's net loss and loss per
share  would  be  reduced to the pro forma amounts indicated below for the years
ended  December  31,  2004  and  2003:

<TABLE>
<CAPTION>

                                                        2004           2003
                                                    -------------  ------------
<S>                                                 <C>            <C>
  Net loss
    As reported                                     $ (9,781,920)  $(3,925,394)
    Add stock based employee compensation
      expense included in net income, net of tax                             -
    Deduct total stock based employee compensation
      expense determined under fair value method
      for all awards, net of tax                      (1,697,040)     (446,601)
                                                    -------------  ------------

        Pro forma                                   $(11,478,960)  $(4,371,995)
                                                    =============  ============

                                                            2004          2003
                                                    -------------  ------------
  Loss per common share
    Basic - as reported                             $      (0.11)  $     (0.07)
    Basic - pro forma                               $      (0.13)  $     (0.07)
    Diluted - as reported                           $      (0.11)  $     (0.07)
    Diluted  pro forma                              $      (0.13)  $     (0.07)
</TABLE>

For  purposes  of  computing the pro forma disclosures required by SFAS No. 123,
the  fair  value  of each option granted to employees and directors is estimated
using the Black-Scholes option-pricing model with the following weighted-average
assumptions  for  the  year  ended  December  31,  2004:  dividend  yield of 0%;
expected  volatility  of  100%;  risk-free  interest rate of 3.15%; and expected
life of  five  years.  The weighted-average fair value of options granted during
year  ended  December  31,  2004  for which the exercise price equals the market
price  on the grant date was $1.273, and the weighted-average exercise price was
$1.273.  The  weighted-average  fair  value of options granted during year ended
December  31, 2004 for which the exercise price is less than the market price on
the  grant  date  was $1.37, and the weighted-average exercise price was $1.321.
The  weighted-average  fair  value of options granted during year ended December
31,  2004  for  which the exercise price is greater than the market price on the
grant  date  was  $1.311,  and  the  weighted-average exercise price was $1.479.


                                      F-12
<PAGE>

NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)

Loss  Per  Share
----------------
The  Company  utilizes SFAS No. 128, "Earnings per Share."  Basic loss per share
is  computed  by  dividing  loss  available  to  common  shareholders  by  the
weighted-average number of common shares outstanding.  Diluted loss per share is
computed  similar  to  basic  loss  per  share  except  that  the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common  shares  were  dilutive.  Common  equivalent shares are excluded from the
computation  if  their  effect  is  anti-dilutive.

The following potential common shares have been excluded from the computation of
diluted  net  loss  per share for the periods presented because the effect would
have  been anti-dilutive.

<TABLE>
<CAPTION>

                                2004        2003
                             ----------  ----------
<S>                          <C>         <C>
  Options outstanding under
    the Company's stock
    option plans             23,176,114  14,886,702
  Warrants                    9,112,001           -
</TABLE>

Research  and  Development
--------------------------
Research  and  Development  costs  are  charged  to  operations  as  incurred.

Income  Taxes
-------------
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the  recognition  of deferred tax assets and liabilities for the expected future
tax  consequences  of events that have been included in the financial statements
or tax returns.  Under this method, deferred income taxes are recognized for the
tax  consequences in future years of differences between the tax bases of assets
and  liabilities and their financial reporting amounts at each year-end based on
enacted  tax laws and statutory tax rates applicable to the periods in which the
differences  are  expected  to  affect taxable income.  Valuation allowances are
established,  when  necessary,  to  reduce  deferred  tax  assets  to the amount
expected  to  be  realized.

Foreign  Currency  Translation
------------------------------
Assets and liabilities in foreign currencies are translated at the exchange rate
prevailing  at  the balance sheet date.  Revenues and expenses are translated at
the  exchange  rate  prevailing at the transaction date, and the resulting gains
and  losses  are  reflected  in  the statements of operations.  Gains and losses
arising from translation of a subsidiary's foreign currency financial statements
are  shown as a component of shareholders' equity (deficit) as accumulated other
comprehensive  income  (loss).


                                      F-13
<PAGE>

NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (Continued)

Estimates
---------
The  preparation  of  financial statements requires management to make estimates
and  assumptions  that affect the reported amounts of assets and liabilities and
disclosure  of  contingent  assets  and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period.  Actual  results  could  differ  from  those  estimates.

Concentrations  of  Credit  Risk
--------------------------------
Financial instruments which potentially subject the Company to concentrations of
credit  risk  consist of cash and cash equivalents.  The Company places its cash
and  cash  equivalents  with  high  credit,  quality financial institutions.  At
times,  such  cash  and cash equivalents may be in excess of the Federal Deposit
Insurance  Corporation  insurance  limit  of  $100,000.  The  Company  has  not
experienced  any  losses  in such accounts and believes it is not exposed to any
significant  credit  risk  on  cash  and  cash  equivalents.

Impact  of  Recent  Accounting  Pronouncements
----------------------------------------------

In  November 2004, the FASB issued SFAS No. 151,"Inventory Costs".  SFAS No. 151
amends  the  accounting  for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage) under the guidance in ARB No. 43,
Chapter 4,"Inventory Pricing".  Paragraph 5 of ARB No. 43, Chapter 4, previously
stated  that  "under  some  circumstances, items such as idle facility expense,
excessive  spoilage,  double freight, and rehandling costs may be so abnormal as
to  require  treatment  as current period charges" This Statement requires that
those  items  be recognized as current-period charges regardless of whether they
meet  the  criterion of "so abnormal." In addition, this Statement requires that
allocation  of fixed production overheads to the costs of conversion be based on
the  normal  capacity  of the production facilities. This statement is effective
for  inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does not expect adoption of SFAS No. 151 to have a material impact on
the  Company's  financial  statements.

In  December  2004,  the  FASB  issued  SFAS No. 152,"Accounting for Real Estate
Time-Sharing  Transactions".  The  FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2,"Accounting for Real
Estate  Time-Sharing  Transactions".  SOP  04-2  applies  to  all  real  estate
time-sharing  transactions.  Among other items, the SOP provides guidance on the
recording  of  credit  losses  and  the treatment of selling costs, but does not
change  the revenue recognition guidance in SFAS No. 66,"Accounting for Sales of
Real  Estate",  for  real estate time-sharing transactions.  SFAS No. 152 amends
Statement  No.  66 to reference the guidance provided in SOP 04-2.  SFAS No. 152
also  amends SFAS No. 67, "Accounting for Costs and Initial Rental Operations of
Real  Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting  for  incidental  operations  and  costs  related to the sale of real
estate time-sharing transactions.  SFAS No. 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited.  This  statement  is  not  applicable  to  the  Company.


                                      F-14
<PAGE>

In  December  2004,  the  FASB  issued  SFAS  No. 153, "Exchanges of Nonmonetary
Assets,"  an  amendment  to  Opinion  No.  29,"Accounting  for  Nonmonetary
Transactions".  Statement No. 153 eliminates certain differences in the guidance
in  Opinion  No. 29 as compared to the guidance contained in standards issued by
the  International  Accounting Standards Board.  The amendment to Opinion No. 29
eliminates  the  fair  value  exception  for  nonmonetary  exchanges  of similar
productive  assets  and  replaces  it  with a general exception for exchanges of
nonmonetary  assets  that do not have commercial substance. Such an exchange has
commercial  substance  if  the  future  cash flows of the entity are expected to
change  significantly as a result of the exchange. SFAS No. 153 is effective for
nonmonetary  asset exchanges occurring in periods beginning after June 15, 2005.
Earlier  application  is  permitted  for nonmonetary asset exchanges occuring in
periods  beginning after December 16, 2004.  Management does not expect adoption
of SFAS No. 153 to have a material impact on the Company's financial statements.

In  December  2004, the FASB issued SFAS No. 123(R),"Share-Based Payment".  SFAS
123(R)  amends  SFAS  No. 123,"Accounting for Stock-Based Compensation", and APB
Opinion  25,"Accounting for Stock Issued to Employees."  SFAS No.123(R) requires
that  the  cost  of  share-based  payment  transactions  (including  those  with
employees  and  non-employees)  be recognized in the financial statements.  SFAS
No.  123(R)  applies  to all share-based payment transactions in which an entity
acquires  goods  or services by issuing (or offering to issue) its shares, share
options,  or  other  equity instruments (except for those held by an ESOP) or by
incurring  liabilities  (1)  in amounts based (even in part) on the price of the
entity's  shares  or  other  equity  instruments,  or  (2)  that require (or may
require)  settlement  by  the  issuance  of  an  entity's shares or other equity
instruments. This statement is effective for the Company as of the first interim
period  or  fiscal  year  beginning  after  December  15,  2005.  Management  is
currently  assessing  the  effect  of SFAS No. 123(R) on the Company's financial
statements.


NOTE  4  -  PROPERTY  AND  EQUIPMENT

Property  and  equipment  at  December  31,  2004  consisted  of  the following:

     Computer  equipment  and  software               $     155,797
     Furniture  and  equipment                               79,655
     Vehicles                                                27,113
     Leasehold  improvements                                  8,958
                                                      -------------
                                                            271,523
     Less accumulated depreciation and amortization          97,128
                                                      -------------

          Total                                       $     174,395
                                                      =============

Depreciation  and amortization expense was $50,327, $26,343, and $94,538 for the
years  ended  December  31,  2004  and  2003  and  the period from June 18, 1999
(inception)  to  December  31,  2004,  respectively.


                                      F-15
<PAGE>

NOTE  5  -  NOTES  PAYABLE

Amounts  due  under  notes  payable  include  the  following:

-     Short  term  loans for gross proceeds of $225,000. The loans earn interest
at  8%  per  annum,  and  the  principal  and any unpaid interest are payable on
demand.

-     Promissory  note agreement for gross proceeds of $100,000.  The note earns
interest  at  10%  per  annum,  and the principal and any unpaid interest is due
September  27,  2005.

Future  minimum  payments under these notes payable at December 31, 2004 were as
follows:

<TABLE>
<CAPTION>

Year Ending                            Notes
December 31,                          Payable
------------------------------------  --------
<S>                                   <C>
2005                                  $376,885
2006                                         -
2007                                         -
2008                                         -
2009                                         -
    Thereafter                               -
                                      --------

                                       376,885
  Less amount representing interest     51,885
                                      --------

    Notes Payable                     $325,000
                                      ========
</TABLE>

Interest  expense  was $32,638, $2,040, and $34,678 for the years ended December
31,  2004 and 2003 and the period from June 18, 1999 (inception) to December 31,
2004,  respectively.


                                      F-16
<PAGE>

NOTE  6  -  CONVERTIBLE  DEBENTURES:  RELATED  PARTY

During  May and June 2004, the Company issued two convertible secured debentures
in  the  amount  of $750,000 each to one Investment Company for a total price of
$1,500,000.  The  convertible  debentures  bear  interest  at 5.0% per annum and
mature  on May 19, 2007 and June 25, 2007.  The debentures are secured by all of
the  assets  of  the  Company.

The  secured  debentures  are  convertible  into  the  Company's  common  stock
at the  holder's option  any time up to maturity at a conversion  price equal to
the  lower  of:
     -    120%  of  the  closing bid price of the common stock as of the closing
          date,  or
     -    80%  of  the  lowest  closing bid price of the common stock during the
          five  trading  days  immediately  preceding  the  conversion  date.

At  maturity,  the  Company  has  the  option  to  either  pay  the  holder  the
outstanding  principal  balance  and  accrued  interest  or  to  convert  the
debenture  into shares of common  stock at a  conversion price  similar  to  the
terms  described  above.  The Company has the right to redeem the debenture upon
three  business  days  notice  for  120%  of  the  amount  redeemed.  Upon  such
redemption,  the  holder shall receive warrants equal to 50,000 shares of common
stock  for  each  $100,000  redeemed  pro  rata.

Each  warrant  entitles the holder to purchase one share of the Company's common
stock  at an exercise price equal to 120% of the closing bid price of the common
stock  on  the  closing  date.  The  warrant  shall have "piggy-back" and demand
registration  rights  and  shall survive for two years from the closing date. If
the  Company  elects  to  redeem  a  portion  or  all of the debentures prior to
maturity  the  amount  allocated  to  the  warrants  as  a debt discount will be
calculated  and  recognized  as  an  expense  at  that  time.


                                      F-17
<PAGE>

NOTE  6  -  CONVERTIBLE  DEBENTURES:  RELATED  PARTY  (Continued)

In  accordance  with  generally  accepted  accounting principles, the difference
between  the  conversion  price  and  the  Company's  stock price on the date of
issuance  of  the  notes  was  calculated  at  $428,571  and is considered to be
interest  expense.  It  will be recognized in the statement of operations during
the  period  from  the  issuance of the notes to the maturity date of the notes.
The  Company  recognized  interest  expense  of  $89,287  in  the  accompanying
statements  of  operations  for  the  year  ended  December  31,  2004.

Future  minimum  payments  under  these  debentures at December 31, 2004 were as
follows:
<TABLE>
<CAPTION>

Year Ending                             Notes
December 31,                           Payable
------------------------------------  ----------
<S>                                   <C>
2005                                  $        -
2006                                           -
2007                                   1,725,000
2008                                           -
2009                                           -
    Thereafter                                 -
                                      ----------

                                       1,725,000
  Less amount representing interest      225,000
                                      ----------

    Total                             $1,500,000
    Less discount                        339,284
                                      ----------

        Convertible debenture         $1,160,716
                                      ==========
</TABLE>

Interest  expense was $42,021, $25,503, and $67,524 for the years ended December
31,  2004 and 2003 and the period from June 18, 1999 (inception) to December 31,
2004,  respectively.


                                      F-18
<PAGE>

NOTE  7  -  COMMITMENTS  AND  CONTINGENCIES

Leases
------
The Company leases its facilities under various non-cancelable operating leases,
which  require  monthly  payments ranging from $150 to $8,230 and expire through
December  2007.  In addition, the Company leases various equipment under capital
lease  obligations,  which  require  monthly payments ranging from $301 to $470,
bear  interest  at  approximately  20%  per  annum, and expire through May 2006.

Future  minimum  lease payments under these non-cancelable operating and capital
lease  obligations  at  December  31,  2004  were  as  follows:

<TABLE>
<CAPTION>

Year Ending                           Operating   Capital
December 31,                            Leases     Leases
------------------------------------  ----------  --------
<S>                                   <C>         <C>
2005                                  $  226,858  $ 10,010
2006                                     220,899     5,870
2007                                     108,072         -
                                      ----------  --------

                                         555,829    15,880
                                      ==========
  Less amount representing interest                  3,175
                                                ----------

                                                    12,705
  Less current portion                               7,550
                                                ----------

    Long-term portion                           $    5,155
                                                ==========
</TABLE>

Rent  expense  was $164,992, $119,997, and $327,996 for the years ended December
31,  2004 and 2003 and the period from June 18, 1999 (inception) to December 31,
2004,  respectively.


                                      F-19
<PAGE>

NOTE  7  -  COMMITMENTS  AND  CONTINGENCIES  (Continued)

Leases  (Continued)
------
Leased  capital  assets  included in property and equipment at December 31, 2004
were  estimated  to  be  as  follows:

     Computer  equipment                $     23,128
     Vehicles                                 27,113
                                        ------------

                                              50,241
     Less  accumulated  depreciation          36,480
                                        ------------

          Total                         $     13,761
                                        ============

Depreciation  expense  for  assets under capital leases was $5,454, $12,143, and
$33,852  for the years ended December 31, 2004 and 2003 and the period from June
18,  1999  (inception)  to  December  31,  2004,  respectively.

Employment  Agreements
----------------------
The  Company  has  entered  into  employment agreements with its Chief Executive
Officer  ("CEO"),  Chief  Scientist,  Chief  Marketing  Officer,  Chief Software
Architect,  Chief  Operating  Officer,  Chief Financial Officer, and Senior Vice
President,  Legal  Affairs,  for  annual  base  salaries  of $214,537, $180,000,
$125,000,  $80,672,  $64,537,  $69,147,  and  $96,038,  respectively.  The CEO's
annual  compensation  is comprised of two separate Employment agreements, one is
held  with  NS8  and  the other is held with CMC. The CEO's Employment agreement
with  NS8  has  a  termination  without  cause severance payment of 36 months of
salary,  which at December 31, 2004 would be $450,000.  The CEO's CMC Employment
agreement  along  with  the  other  officers  who  reside  in Vancouver, British
Columbia  are  protected by the British Columbia Employment Standards Act, which
entitles  them  to  one  week  of compensation for each year of service with the
Company.  Each  of  these  employment  agreements do not have termination dates.

Litigation
----------
The  Company  may  become involved in certain legal proceedings and claims which
arise  in  the  normal course of business.  Management does not believe that the
outcome  of  any  such  matter  will  have  a  material  effect on the Company's
financial  position  or  results  of  operations.

                                      F-20
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT

Preferred  Stock
----------------
The  Company has 50,000,000 authorized shares of non-voting preferred stock with
a  $0.0001 par value.  The preferred stock may be issued in series, from time to
time,  with such designations, rights, preferences, and limitations as the Board
of  Directors  may  determine  by  resolution.  The  Company  did  not  have any
preferred  stock  issued  and  outstanding  at  December  31,  2004.

Common  Stock
-------------
During  the  year  ended  December 31, 2004, the Company completed the following
transactions:

-     In  November  2004,  the Company issued 5,597,544 common shares to Cornell
Capital  Partners  through the Equity Distribution Agreement valued at $400,000.

-     In  October  2004,  the  Company  issued  500,000 common shares to Maximum
Ventures  in  connection  with  financial  advisory  services rendered valued at
$510,000.

-     During  October 2004, the Company filed a SB-2 registration statement with
the Securities and Exchange Commission for the purpose of registering 33,746,226
shares  for  sale.  The  shareholders  consist  of  Cornell Capital Partners who
intends  to  sell  up  to 28,297,379 shares of common stock, 18,691,589 of which
are  under  the Equity  Distribution  Agreement,  8,680,556  of  which are under
the  Convertible  Secured  Debenture  (the  "Secured  Debenture") and 925,234 of
which  were received from  NS8Corp  as  a  one-time  commitment  fee  under  the
Equity  Distribution  Agreement.  In  addition  to  Cornell  Capital  Partners,
the  other  stockholders  selling  shares  under  this  offering  are  Newbridge
Securities  Corporation ("Newbridge"),  who  intends  to sell up to 9,346 shares
and  MVI,  who  intends  to  sell  up  to  5,439,501  shares.


                                      F-21
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT  (Continued)

Common  Stock  (Continued)
-------------
-     In  May  2004,  the  Company  entered  into an Standby Equity Distribution
Agreement  ("SEDA")  with  Cornell  Capital  Partners.  Under  the agreement the
Company  may issue and sell to Cornell Capital common stock for a total purchase
price  of  up  to $20,000,000.  The  purchase  price  for the shares is equal to
their market price,  which is defined in the SEDA as the lowest volume  weighted
average  price  of the common stock during the five trading days  following  the
date  notice  is given by the Company that it desires an advance.  The amount of
each advance is subject to an aggregate maximum advance amount of $750,000, with
no  advance  occurring  within  seven  trading days of a prior advance.  Cornell
Capital  received  a one-time commitment fee of 925,234 registered shares of the
Company's common stock valued at $990,000 which has been recorded as an offering
cost  in  the  accompanying financial statements.  Cornell Capital is paid a fee
equal  to  5%  of each advance, which is retained by them from each advance.  On
May  19,  2004,  the  Company  entered into a Placement Agent Agreement  with  a
registered  broker-dealer  in  connection  with  the  SEDA.  Pursuant  to  the
Placement  Agent Agreement, the Company  paid  a one-time placement agent fee of
9,346  restricted  shares  of     the  Company's  common  stock  valued  at
$10,000.

-     In  January  and  February  2004,  the  Company  entered  into  employment
agreements with its President and its Chief Marketing Officer at annual salaries
of  $180,000  and $125,000, respectively.  In addition, each officer was granted
2,000,000  restricted,  unregistered  shares  of  common  stock  and  options to
purchase  2,000,000  and  1,500,000  shares  of  common  stock, respectively, at
exercise prices equal to the Company's stock price on the date of the employment
agreement.  The  stock  vests  over  one  year  from  the  date  of  employment
agreements.  The  Company  recorded  deferred compensation of $5,460,000 for the
value  of  the  shares.  In  November  2004, the employees voluntarily forfeited
their  stock  grants,  4,000,000  shares  were  returned  to  the  Company.

-     issued  25,170  shares  of  common  stock  to  a  third party for services
rendered  valued  at  $37,000.

-     recorded  compensation  cost  of  $110,100  for the value of stock options
granted  to  employees at exercise prices less than the Company's stock price on
the  date  of  grant


                                      F-22
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT  (Continued)

Common  Stock  (Continued)
-------------
During  the  year  ended  December 31, 2003, the Company completed the following
transactions:

-     issued  2,100,000  shares  of  common  stock  for  cash totaling $495,000.
Offering  costs  were  not  incurred  in  connection  with  this  transaction.

-     issued  1,166,667  units  for an aggregate of cash proceeds of $1,750,000.
This  offering  is  being conducted pursuant to Regulation D and Regulation S as
adopted by the Securities and Exchange Commission pursuant to the Securities Act
of 1933.  Each unit consists of two shares of the Company's common stock and one
warrant  to purchase one share of the Company's common stock at a purchase price
of  $1.50 per unit.  The warrants vest immediately and expire two years from the
date  of grant.  As offering costs, the Company issued warrants exercisable into
233,333  shares  of  the Company's common stock at an exercise price of $1.  The
warrants  vest  immediately  and  expire  two years from the date of grant.  The
value  of  the  warrants  was  determined  to  be  immaterial.

-     issued 400,000 shares of common stock for cash proceeds of $200,000.  This
offering  is  being  conducted  pursuant  to  Regulation  D  as  adopted  by the
Securities  and  Exchange  Commission  pursuant  to  the Securities Act of 1933.

-     issued  3,720,000 shares of common stock valued at $1,004,305 to employees
of  the Company as compensation.  Between October 2002 and October 2003, certain
employees  of  CGMI  were  granted  shares  by  CGMI's  Board  in recognition of
exemplary  service.  The Company did not have a stock ownership plan at the time
of  any  of  the  stock  grants. The shares vested over 18 months from the grant
date.  One  of  the terms of the vesting of the shares was that all shares would
immediately  become  vested  if  more than 50% of the voting shares of CGMI were
sold  or  transferred or otherwise disposed of to an individual or entity.  This
transfer  of  voting control was deemed to have occurred when Delivery Now Corp.
acquired  100%  of  the  outstanding shares of CGMI on December 18, 2003 and the
vesting  of  the  shares was accelerated so that the shares were fully vested on
that  date.

-     issued  500,000  shares  of  common  stock  to  a third party for services
rendered  valued  at  $17,500.

-     issued  12,385,714 shares of common stock for the conversion of loans from
officers/shareholders  and  accrued  interest  payable  totaling  $686,021


                                      F-23
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT  (Continued)

Common  Stock  (Continued)
-------------
During  the  year  ended  December 31, 2002, the Company completed the following
transactions:

-     issued  7,923,448  shares  of  common  stock  for the conversion of a note
payable  of  $152,300.

-     between  October and December 2002, the Company issued 2,310,000 shares of
common  stock  valued  at  $80,850 to employees of the Company in recognition of
exemplary  service.  The  shares  vest  over 18 months from the grant date.  The
Company  recognized  $24,850  in  compensation  expense  during  the  year ended
December  31,  2002  for  the  vested  portion of the shares issued and recorded
deferred  compensation  of  $56,000 for the value of the unvested portion of the
shares  issued.

-     canceled 1,000,000 shares of common stock that were transferred to a Board
advisor  as  a  result  of  terminating this individual's position on the Board.

During  the  year  ended  December 31, 2001, the Company completed the following
transactions:

-     issued  50,000  shares  of  common  stock  to  a  third party for services
rendered  valued  at  $200.

-     issued  35,667 shares of common stock for the conversion of a note payable
of  $5,350.

-     redeemed  1,025,000  shares  of  common  stock  in  exchange  for  $2,662.

-     issued  450,000  shares of common stock upon the exercise of stock options
on  a  cashless  basis.


                                      F-24
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT  (Continued)

Common  Stock  (Continued)
-------------
During  the  year  ended  December 31, 2000, the Company completed the following
transactions:

-     issued  20,000  shares  of  common  stock  to  a  third party for services
rendered  valued  at  $1,020.

-     issued 2,000,000 shares of common stock upon the exercise of stock options
on  a  cashless  basis.

-     granted  500,000  stock  options as payment for services rendered by third
parties  valued  at  $3,400.

-     issued  3,239,112  shares  of  common  stock  for  cash totaling $284,139.
Offering  costs consisting of cash of $10,742 and 150,000 shares of common stock
valued  at  $22,500  were  incurred  in  connection  with  these  transactions.

During  the  period  from  June  18,  1999 (inception) to December 31, 1999, the
Company  completed  the  following  transactions:

-     issued  29,281,406  shares  of  common  stock  for the conversion of notes
payable  to  officers  of  $39,813.

-     issued  4,130,000  shares  of  common  stock  for  cash  totaling  $5,616.
Offering  costs  were  not  incurred  in  connection  with  this  transaction.


                                      F-25
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT  (Continued)

Employee  Stock  Options
------------------------
The  following  summarizes the stock options transactions under the stock option
plans:

<TABLE>
<CAPTION>

                                     Weighted-
                                      Average
                                   Stock Options   Exercise
                                    Outstanding      Price
                                   --------------  ---------
<S>                                <C>             <C>
  Outstanding, December 31, 2003      14,886,702   $   0.035
      Granted                          4,342,500   $   1.345
                                   --------------

  Outstanding, March 31, 2004         19,229,202   $   0.331
      Cancelled                         (537,500)  $   1.271
      Granted                            205,912   $   1.017
                                   --------------

  Outstanding, June 30, 2004          18,897,614   $   0.312
      Cancelled                          (50,000)  $   1.028
      Granted                            350,000   $   0.973
                                   --------------

  Outstanding, September 30, 2004     19,197,614   $   0.322
      Cancelled                          (66,500)  $   0.893
      Granted                          4,045,000   $   0.641
                                   --------------

  Outstanding, December 31, 2004      23,176,114   $   0.377
                                   ==============

  Exercisable, December 31, 2004      16,514,694   $   0.164
                                   ==============
</TABLE>

<TABLE>
<CAPTION>
                                      Options Outstanding              Options Exercisable
                                 ----------------------------    -------------------------------
<S>            <C>               <C>               <C>           <C>                 <C>
                                    Weighted
                    Number           Average         Weighted          Number          Weighted
  Range of      Outstanding at      Remaining         Average      Exercisable at       Average
Exercise         December 31,      Contractual       Exercise       December 31,       Exercise
Prices              2004              Life             Price            2004             Price
-------------  ----------------  ----------------  ------------  -------------------  ----------
$0.035-$1.00        19,061,702              3.42       $0.1708           14,900,452     $0.0358
$1.00 - $1.55        4,114,412              4.12       $1.3324            1,614,242     $1.3520
               ----------------  ----------------  ------------  -------------------  ----------

                    23,176,114              3.54        $0.377           16,514,694      $0.164
               ================  ================  ============  ===================  ==========
</TABLE>


                                      F-26
<PAGE>

NOTE  8  -  SHAREHOLDERS'  DEFICIT  (Continued)

Employee  Stock  Options  (Continued)
------------------------
The Black-Scholes option valuation model was developed for use in estimating the
fair  value  of  traded  options, which do not have vesting restrictions and are
fully  transferable.  In  addition, option valuation models require the input of
highly  subjective  assumptions,  including the expected stock price volatility.
Because  the Company's employee stock options have characteristics significantly
different  from  those  of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models  do  not  necessarily  provide a reliable single
measure  of  the  fair  value  of  its  employee  stock  options.

Warrants
--------
On  May  18, 2004, NS8 entered into an Exclusive Advisory Agreement with Maximum
Ventures,  Inc. ("MVI"). Based in New York, MVI specializes in business strategy
and corporate advisory services for emerging growth companies. Pursuant  to  the
agreement,  MVI  agreed  to  act  as  a business advisor to NS8 with respect  to
equity  and  debt  financings,  strategic  planning,  mergers  and acquisitions,
and  business  development  activities. Upon the execution of the agreement, NS8
issued  to  MVI  warrants  to  purchase 5,439,501 shares of common stock,  which
equaled  4.99%  of  the  shares  of  NS8 common  stock  then outstanding,  on  a
fully  diluted  basis.  The warrants were issued with an exercise price of $2.00
per  share  and  a  term  of  five  years  from  the  date  of  issuance.  The
Exclusive  Advisory  Agreement  with  MVI  has  a  term of one year. The Company
recorded  a  prepaid  expense  of $4,134,021 for the value of the warrants.  The
Company  recorded consulting expense of $2,583,764 for the value of the warrants
earned  during  the twelve months ended December 31, 2004. During December 2004,
due  to  fluctuations  in  the  price of the Company's common stock all warrants
outstanding were re-priced to an exercise price of $0.61 per share.  The Company
did  not record any adjustments to consulting expense as a result of the warrant
re-pricing.


                                      F-27
<PAGE>

NOTE  9  -  INCOME  TAXES

The  provision  for  income taxes differs from the amount that would result from
applying  the  federal  statutory rate for the years ended December 31, 2004 and
2003  as  follows:

<TABLE>
<CAPTION>

                                                  2004    2003
                                                 -------  -------
<S>                                              <C>      <C>      <C>
  Statutory regular federal income benefit rate  (34.0)%  (34.0)%
  State income taxes, net of federal benefit       (5.8)    (5.8)
  Change in valuation allowance                    39.7     39.6
  Other                                             0.1      0.2
                                                 -------  -------

    Total                                              %       - %
                                                 =======  =======
</TABLE>

The  components  of the deferred income tax assets (liabilities) at December 31,
2004  were  as  follows:

     Net  operating  loss  carry-forwards     $     4,127,200
     State  taxes                                    (435,500)
     Accrued  payroll                                 799,800
                                                      -------

                                                    4,491,500
     Valuation  allowance                          (4,491,500)
                                                   -----------

          Total                               $             -
                                              ================

The  valuation  allowance  increased by approximately $2,347,000 during the year
ended December 31, 2004.  As of December 31, 2004, the Company had net operating
loss  carryforwards  for  federal and state income tax purposes of approximately
$12,139,000 and $12,139,000, respectively.  The net operating loss carryforwards
begin expiring in 2020 and 2010, respectively.  The utilization of net operating
loss  carryforwards  may  be  limited  due  to  the  ownership  change under the
provisions  of  Internal  Revenue Code Section 382 and similar state provisions.


                                      F-28
<PAGE>

NOTE  10  -  RELATED  PARTY  TRANSACTIONS

Notes  Payable  -  Shareholders
-------------------------------
Loans  from  officers/shareholders  at December 31, 2004 consisted of loans from
several  officers/shareholders to finance the Company's operations.  At December
31, 2004, $3,790,106 was due to the officers/shareholders. Various due dates and
interest  rates  are  stated  below  for  the  year  ended  December  31,  2004.

Note  and  Warrant  to  Shareholder
-----------------------------------
On  December 10, 2004, the Company entered into a promissory note agreement with
Cornell  Capital  for  gross proceeds of $2,500,000.  The note earns interest at
12%  per  annum, and the principal and any unpaid interest is due June 30, 2005.
As  disclosed  in  the Shareholder's Deficit section, the Company had previously
entered  into  a  Standby  Equity  Distribution  Agreement ("SEDA") with Cornell
Capital, pursuant to which the Company agreed to sell shares of its common stock
to  the  Cornell  Capital.  The  shares  of common stock to be issued to Cornell
Capital  under the SEDA may be resold by Cornell under an effective registration
statement  filed  by  the Company with the Securities and Exchange Commission on
November  1,  2004. Cornell Capital will apply the proceeds from the sale of the
shares  issued  under  the  SEDA  to  the  repayment  of  the  loan.

The Company agreed to escrow twenty-four requests for advances under the SEDA in
an amount not less than $100,000 and one request for an advance in an amount not
less  than  $197,808,  and  has  issued 5,000,000 shares of the Company's Common
Stock  to David Gonzalez, Esq., to be held in escrow subject to the terms of the
loan.

The escrowed shares are only an estimation of the shares of the Company's common
stock  necessary  to  repay the principal amount and interest due on the loan as
the actual number of shares to be issued is based on a Variable Weighted Average
Price  ("VWAP")  calculation.  In  the event that proceeds from the sales of the
escrowed  shares  are  insufficient to repay all amounts due to Cornell Capital,
Irrevocable  Transfer  Agent  Instructions  have  been provided to the Company's
transfer agent, Continental Stock Trust & Transfer, reserving the balance of the
SEDA  shares and authorizing the issuance to David Gonzalez, Esq., to be held in
escrow  subject to the terms of the loan, such number of shares of the Company's
common stock so that the proceeds of the sale of such shares shall be sufficient
to  repay all amounts due on the loan.  The Company has classified the amount as
a  liability  at  December  31, 2004 in accordance with SFAS 150, Accounting for
Certain  Financial  Instruments  with  Characteristics  of  both Liabilities and
Equity,  as  the  obligation will be settled by issuing a variable number of the
Company's  equity  shares.


                                      F-29
<PAGE>

NOTE  10  -  RELATED  PARTY  TRANSACTIONS  (Continued)

Note  and  Warrant  to  Shareholder  (Continued)
-----------------------------------
On October 28, 2004, the Company entered into a promissory note agreement with a
shareholder  for gross proceeds of $175,000.  The note earns interest at 10% per
annum,  and  the  principal  and  any  unpaid  interest is due October 28, 2005.

On October 14, 2004, the Company entered into a promissory note agreement with a
shareholder  for gross proceeds of $175,000.  The note earns interest at 10% per
annum,  and  the  principal  and  any  unpaid  interest is due October 14, 2005.

On September 24, 2004, the Company entered into a promissory note agreement with
a  shareholder  for  gross proceeds of $175,000.  The note earns interest at 10%
per  annum, and the principal and any unpaid interest is due September 24, 2005.

On  September 9, 2004, the Company entered into a promissory note agreement with
a  shareholder  for  gross proceeds of $175,000.  The note earns interest at 10%
per  annum,  and the principal and any unpaid interest is due September 9, 2005.

On  August 23, 2004, the Company entered into a promissory note agreement with a
shareholder  for gross proceeds of $200,000.  The note earns interest at 10% per
annum,  and  the  principal  and  any  unpaid  interest  is due August 23, 2005.

On  August  12, 2004, the Company entered into a promissory note agreement and a
warrant  agreement with a shareholder to purchase 50,000 shares of the Company's
common  stock for gross proceeds of $100,000 earning interest at 9.5% per annum.
During  September 2004, $75,000 plus accrued interest was repaid and in December
2004  the  balance  of  the  note plus accrued interest was repaid, the warrants
remain  unexercised.

Each  warrant  entitles the holder to purchase one share of the Company's common
stock  at  an  exercise price equal to the closing market price per share on the
warrant issue date, and expires two years from the date of issuance. The Company
allocates  the  proceeds  received from debt or convertible debt with detachable
warrants using the relative fair value of the individual elements at the time of
issuance.  The  amount  allocated  to  the  warrants  as  a  debt  discount  was
calculated at $20,319 and will be recognized as interest expense over the period
until  the  note matures or is converted.  Because the debt was settled prior to
the maturity date, the company recognized the entire $20,319 as interest expense
during  the  year  ended  December  31,  2004.  During  December  2004,  due  to
fluctuations in the price of the Company's common stock all warrants outstanding
were  re-priced  to  an  exercise price of $0.61 per share.  The Company did not
record  any  adjustments  to  the  interest  expense  as a result of the warrant
re-pricing.

                                      F-30
<PAGE>

NOTE  10  -  RELATED  PARTY  TRANSACTIONS  (Continued)

Note  and  Warrant  to  Shareholder  (Continued)
-----------------------------------
On  May  13,  2004,  the  Company entered into a promissory note agreement and a
warrant  agreement with a shareholder to purchase 47,500 shares of the Company's
common  stock  for  gross  proceeds of $95,000 earning interest at 8% per annum.
The  note  plus  accrued  interest was repaid in June, 2004, the warrants remain
unexercised.

Each  warrant  entitles the holder to purchase one share of the Company's common
stock  at  an  exercise price equal to the closing market price per share on the
warrant issue date, and expires two years from the date of issuance. The Company
allocates  the  proceeds  received from debt or convertible debt with detachable
warrants using the relative fair value of the individual elements at the time of
issuance.  The  amount  allocated  to  the  warrants  as  a  debt  discount  was
calculated at $20,781 and will be recognized as interest expense over the period
until  the  note matures or is converted.  Because the debt was settled prior to
the maturity date, the company recognized the entire $20,781 as interest expense
during  the  quarter  ended  June  30,  2004.  During  December  2004,  due  to
fluctuations in the price of the Company's common stock all warrants outstanding
were  re-priced  to  an  exercise price of $0.61 per share.  The Company did not
record  any  adjustments  to  the  interest  expense  as a result of the warrant
re-pricing.

On  May  12,  2004,  the Company entered into a promissory note agreement with a
shareholder  for gross proceeds of $150,000.  The note earns interest at 10% per
annum,  and  the  principal  and  any  unpaid  interest  is  due  May  12, 2005.

On  April  26,  2004, the Company entered into a promissory note agreement and a
warrant  agreement with a shareholder to purchase 75,000 shares of the Company's
common  stock for gross proceeds of $150,000 earning interest at 8.5% per annum.
The  note  plus  accrued  interest was repaid in June, 2004, the warrants remain
unexercised.

Each  warrant  entitles the holder to purchase one share of the Company's common
stock  at  $1.00 per share, and expires two years from the date of issuance. The
Company  allocates  the  proceeds  received  from  debt or convertible debt with
detachable  warrants using the relative fair value of the individual elements at
the  time  of issuance.  The amount allocated to the warrants as a debt discount
was  calculated  at  $34,170 and will be recognized as interest expense over the
period  until  the  note  matures  or is converted. Because the debt was settled
prior  to  the  maturity  date,  the  company  recognized  the entire $34,170 as
interest  expense during the quarter ended June 30, 2004.  During December 2004,
due  to  fluctuations  in  the  price of the Company's common stock all warrants
outstanding were re-priced to an exercise price of $0.61 per share.  The Company
did  not  record  any  adjustments  to  the  interest expense as a result of the
warrant  re-pricing.

                                      F-31
<PAGE>

NOTE  10  -  RELATED  PARTY  TRANSACTIONS  (Continued)

Note  and  Warrant  to  Shareholder  (Continued)
-----------------------------------
On  March  11,  2004, the Company entered into a promissory note agreement and a
warrant agreement with a shareholder to purchase 100,000 shares of the Company's
common stock for gross proceeds of $250,000.  The note earns interest at 10% per
annum,  and  the  principal  and  any  unpaid interest is due on March 11, 2005.

Each  warrant  entitles the holder to purchase one share of the Company's common
stock  at  $1.00 per share, and expires two years from the date of issuance. The
Company  allocates  the  proceeds  received  from  debt or convertible debt with
detachable  warrants using the relative fair value of the individual elements at
the  time  of  issuance. The amount allocated to the warrants as a debt discount
was  calculated  at  $51,587 and will be recognized as interest expense over the
period  until the note matures or is converted. In the event the debt is settled
prior  to  the  maturity  date,  an  expense  will  be  recognized  based on the
difference  between  the  carrying  amount  and  the  amount of the payment. The
Company  recognized  $41,693 as interest expense related to the accretion of the
debt  discount  during  the  year  ended  December  31,  2004.

Future  minimum  payments under these notes payable at December 31, 2004 were as
follows:

<TABLE>
<CAPTION>

Year Ending                             Notes
December 31,                           Payable
------------------------------------  ----------
<S>                                   <C>
2005                                  $4,109,349
2006                                           -
2007                                           -
2008                                           -
2009                                           -
    Thereafter                                 -
                                      ----------

                                       4,109,349
  Less amount representing interest      309,349
                                      ----------
  Total                                3,800,000
  Less discount                            9,894
                                      ----------
    Notes Payable- shareholders       $3,790,106
                                      ==========
</TABLE>

Interest  expense was $76,400, $18,977, and $95,727 for the years ended December
31,  2004 and 2003 and the period from June 18, 1999 (inception) to December 31,
2004,  respectively.


                                      F-32
<PAGE>

NOTE  11  -  CONTRACTS

In  November 2004, the Company entered into a consulting services agreement with
Peter  Hogendoorn.  The  services  to  be  performed  by  Mr. Hogendoorn include
shareholder  communications,  market  and  finance  consultation,  international
finance  correspondence, and any other duties as assigned by Company management.
The  term  of  the  consulting services agreement is one year ending November 1,
2005, unless terminated by Mr. Hogendoorn or the Company on 30 days notice.  Mr.
Hogendoorn  will  be paid a consulting fee of $7,000 CAD per month.  The Company
and  Mr.  Hogendoorn  both  acknowledge  and  affirm  that  Mr.  Hogendoorn  had
previously  executed  an Employment Agreement with the Company, and all previous
Employment Agreements are implied and explicitly deemed cancelled and void as of
August  6,  2004.  All  accrued  wages  due  to  Mr.  Hogendoorn  prior  to  the
cancellation  date  will  be  paid  on a pro rata basis at the discretion of the
Board  of  Directors  as  such  funds  become  available.

In  November  2004,  the  Company entered into an addendum to the QED Management
("QED") consulting services agreement.  The Company engaged two consultants from
QED  to  perform  the  roles and responsibilities of Chief Executive Advisor and
Chief  Advisor  Finance.  The  consulting  fees  payable  to  QED  for  the  two
consultants  are  as  follows:

-     Chief  Executive  Advisor  -  Consulting fee of $15,833 per month, monthly
personal  expense  allowance  and car allowance of $2,000 and $700 respectively,
2,000,000 options to purchase the Company's common stock at an exercise price of
$0.37  per share for a period of five years; however, the 2,000,000 options will
be  held  in  trust  by  the  Company  until  September  2,  2005.

-     Chief  Finance  Advisor  -  Consulting fee of $17,076.96 for the period of
November  15,  2004 to December 16, 2004, monthly personal expense allowance and
car  allowance  of  $2,000  and  $700  respectively.

In  October  2004,  SRG  LLC  asserted  a  claim  against the Company based on a
professional  consulting agreement dated December 2003. Under the agreement, SRG
LLC was granted options to acquire 250,000 shares of common stock at an exercise
price  of  $0.50 per share. SRG LLC had certain piggyback registration rights in
the event that the Company filed a registration statement for the sale of common
stock.

The Company terminated the agreement on the grounds of failure of consideration,
non-performance  and  material  breach in June 2004. SRG LLC claimed that it was
entitled  to  have the shares underlying the option included in the registration
statement  filed  by  the Company on June 22, 2004. In October 2004, the Company
agreed  to settle all of SRG LLC's claims for a cash payment of $70,000, SRG LLC
released  the  Company from all liabilities and the stock options were cancelled
effective  as  of  December  2003.

                                      F-33
<PAGE>

NOTE  11  -  CONTRACTS  (Continued)

The  original  consulting  agreement  with QED was entered into during September
2004. The services to be performed by QED as outlined in the original consulting
agreement  include  consultation,  special  projects  and  representation of the
Company  concerning  strategy  development,  execution and business development.
The term of the consulting services agreement is two years, unless terminated by
QED  or  the  Company on 30 days notice. The September 2004 consulting agreement
provided  $10,000  per month in consideration for QED's services, and subject to
the  conditions of the agreement 350,000 stock options to purchase the Company's
common  stock.  The  Company  will  grant  QED  the  options,  as  follows:

-     225,000  options  issued  upon  execution  of  the  consulting  services
agreement,  at  an exercise price of $1.01 per share. The options were issued on
September  1,  2004,  and  vest  fully upon grant with a term of five years. The
value  of  the options is $173,250 and is included in prepaid expenses and other
current  assets.  Compensation  expense  will be recognized over the life of the
consulting  services  (two  years).

-     125,000  options  to  be  issued  one year and one day after the agreement
date,  at  an exercise price equal to the market price of the stock on the issue
date.  The  options  will  vest  fully upon grant with a term of five years. The
value  of these options will be assessed on the grant date which is one year and
one  day  after  the  agreement  date.

On September 1, 2005, subject to the satisfactory completion of established work
objectives  the  Company  will pay QED a lump sum of $12,000 and the monthly fee
will  increase  to  $11,000  for  the  duration  of  the  agreement.

During  September  2004, the company entered into a Letter of Understanding with
Lifelong Educational Properties Inc. ("LEAP"). LEAP agreed to assist the Company
with  the  marketing and sales of the Company's products in certain countries in
Europe,  Asia  and  Latin  America.  The term of the agreement is two years, and
continues  thereafter  until  terminated  by  either  party  on  90 days notice.

                                      F-34
<PAGE>

NOTE  11  -  CONTRACTS  (Continued)

In  consideration  for  LEAP's  services,  the Company will pay LEAP $20,000 per
month,  $10,000 in cash and $10,000 as an accrual of debt. The debt accrual will
be  paid  when  the  Company  has  adequate  capital  from revenues or financing
transactions. At the election of LEAP, the debt accrual may be paid with Company
common stock. LEAP will also earn commissions of 7% of sales it completes and 5%
of  compensation  realized  from strategic partnerships it arranges. The Company
also  issued  to  LEAP  warrants  to  purchase 2,000,000 shares of the Company's
common  stock.  The  exercise  price  is  $1.03  per  share for 1,000,000 of the
warrants  and  $1.13  per share for 1,000,000 of the warrants. The warrants were
issued on October 7, 2004, and have a term of five years. The Company recorded a
prepaid  expense  of  $1,590,000  for  the  value  of the warrants.  The Company
recorded  consulting  expense  of  $198,750 for the value of the warrants earned
during  the  twelve months ended December 31, 2004. During December 2004, due to
fluctuations in the price of the Company's common stock all warrants outstanding
were  re-priced  to  an  exercise price of $0.61 per share.  The Company did not
record  any  adjustments  to  consulting  expense  as  a  result  of the warrant
re-pricing.

NOTE  12  -  SUBSEQUENT  EVENTS

Option  Agreement
-----------------
On  February  10, 2005, the Company entered into an Option Agreement with ezTel,
LLC  ("ezTel")  pursuant  to which the Company was granted an option to purchase
100%  of  the  equity interests of ezTel for a purchase price of $1,500,000 (the
"Option").  The  Option  is  exercisable  at the sole discretion of the Company,
subject  to  confirmation of the Option by the Bankruptcy Court and confirmation
of  a  revised  Plan  of  Reorganization  by  the  Bankruptcy  Court in a final,
non-appealable order. The Company is under no obligation to exercise the Option.
If  the  Company  chooses  to  exercise  the Option, the Company's obligation to
close  its  purchase  of  the  equity  interest  in  ezTel  will  be  subject to
fulfillment  of  certain  conditions,  including  but  not  limited  to:

(i)     Completion  of  due  diligence  satisfactory  to the Company in its sole
discretion;

(ii)     Receipt  of  all  necessary  third  party  consents,  including  (x)
approval  by  the  Bankruptcy  Court  and the confirmation of the Plan discussed
above  and  (y)  the  consent and waiver of certain negative covenants by one of
the  Company's  lenders  and  investors;  and

                                      F-35
<PAGE>

NOTE  12  -  SUBSEQUENT  EVENTS  (Continued)

Option  Agreement  (Continued)
-----------------

(iii)     Repayment  of the Loan discussed below. If the Company acquires ezTel,
the  Company intends to enter into a management agreement with Patric Boggs, the
president  and  chief  executive  officer  of ezTel, pursuant to which Mr. Boggs
would  provide  management  services  to  ezTel.

As  consideration  for the Option, the Company advanced a Term Loan (the "Loan")
in  the  amount  of  $200,000  to  Long  Distance  Billing  Services,  Inc.,  a
wholly-owned  subsidiary  of  ezTel  ("LDBS")  pursuant  to  a  Promissory Note,
Security  Agreement  and Deed of Covenants.  The Loan is in the principal amount
of  $200,000,  contains  customary  events of default and provides for an annual
rate  of  interest  equal  to  12%.

The  entire  principal  balance  and any accrued interest on the Loan is due and
payable  on  August 1, 2005.  Following any default under the terms of the Loan,
the  Company  may  elect  to  (i)  declare the Note due and payable, and/or (ii)
increase  the  rate  of interest payable under the Loan by three percent (3.00%)
per  annum.  LDBS's obligations under the Loan are secured by a pledge of all of
the  assets  of  LDBS,  and  the  Company  will have all the rights and remedies
available  upon  default  to  a secured party under the Uniform Commercial Code.
LDBS  will  use  the  proceeds  of the Loan only for working capital, payment of
outstanding tax liabilities and other costs and expenses approved by the Company
in  writing.  Although  the  Promissory Note evidencing the Loan was dated as of
February  3,  2005, the Loan proceeds were not advanced to LDBS until the Option
was  executed  on  February  10,  2005.

On  February  22,  2005  LDBS  filed  for  protection  under  Chapter  11 of the
Bankruptcy  Code.  The  Company anticipates taking appropriate action to protect
its  collateral  security. LDBS's bankruptcy proceeding is ongoing. Accordingly,
at  this  time  we  do  not  anticipate  exercising  our option to acquire ezTel
pursuant  to  the  Option  Agreement. We cannot assure you that the term loan to
LDBS  will  be  repaid.

Notes  Payable
--------------
On  February  28,  2005,  the  company  received  an  extension  on the $250,000
promissory  note  due on March 11, 2005. The due date of the promissory note was
extended  six  months  to  September 11, 2005, the interest rate remains 10% per
annum.

Stock  Options
--------------
In February 2005, the Company granted stock options to purchase 50,000 shares of
common  stock  to  certain  employees

Employee  Resignations
----------------------
On  February 18, 2005 the Chief Marketing Officer of the Company resigned.  As a
consequence of the resignation, the Company agreed to pay one month of severance
totaling $10,416.66, and continuation of employee benefits until March 31, 2005.
The  stock  option  agreement  received by the employee on February 20, 2004 for
1,500,000  stock  options  was  rescinded  and  replaced with a new stock option
agreement  for  525,000  options.

                                      F-36
<PAGE>

NOTE  12  -  SUBSEQUENT  EVENTS  (Continued)

Employee  Resignations  (Continued)
----------------------
On  January  21,  2005  the  Chief  Scientist  of  the  Company  resigned.  As a
consequence  of  the  resignation,  the  Company  agreed to pay one and one half
months  of  severance  totaling  $22,500,  and continuation of employee benefits
until  March  31,  2005.  The employee will retain their 2,000,000 stock options
for  the  full  amount of the remaining term in accordance with the Stock Option
Agreement.

On  January  10,  2005,  as  part  of  a  corporate  reorganization  the Company
terminated  the  Senior  Vice  President,  Global Sales and Marketing of NS8 and
CanOnline Global Media Inc. In addition, the individual was also given notice of
termination  as  a  Director  of  CanOnline  Global  Media  Inc.;  however,  the
individual  will  continue  to act as a Director of NS8. As a consequence of the
termination,  the  Company  agreed  to  pay two and one half months of severance
totaling  $16,250,  and  continuation of employee benefits until March 31, 2005.
In  addition,  Mr.  Waage  will receive options to purchase 97,500 shares of the
Company's  common  stock  at  an  exercise  price  of  $0.20  per  share.

Contracts
---------
On  March  15,  2005 30 days advance written notice of termination were given to
QED Management.  As per the terms of the consulting agreement, QED shall receive
compensation for any earned but unpaid compensation plus additional compensation
for  the  30  days  notice  period  at the compensation rate then in effect plus
expenses  submitted by QED within 30 days of the date of termination.  QED shall
be paid all amounts owing pursuant to the consulting agreement within 10 days of
receipt  of  the  expense  statement  or  invoice.

Conversion  of  Convertible  Debenture
--------------------------------------
As of March 11, 2005, the Company received three conversion notices from Cornell
Capital  totaling  $200,000 which represents a conversion under the terms of the
Convertible  Debenture.  The  Company  issued  1,495,536  free trading shares to
Cornell  Capital  at  an  average  price  of  $0.13  per share.  The Convertible
Debenture  outstanding  is  $1,300,000  plus accrued interest less the remaining
debt  discount  for  warrants.

                                      F-37
<PAGE>

NOTE  12  -  SUBSEQUENT  EVENTS  (Continued)

Conversion  of Promissory  Note
-------------------------------
On  January 10, 2005, Cornell Capital began converting their escrow requests for
advances  under  the SEDA into the Company's common stock.  As of March 21, 2005
Cornell has converted $550,000 into 2,375,127 common shares.  The balance of the
promissory  note  outstanding  is  $1,950,000  plus  accrued  interest.

The Company agreed to escrow twenty-four requests for advances under the SEDA in
an amount not less than $100,000 and one request for an advance in an amount not
less  than  $197,808,  and  has  issued 5,000,000 shares of the Company's Common
Stock  to David Gonzalez, Esq., to be held in escrow subject to the terms of the
loan.

On February 24, 2005, the joint disbursement instructions on the promissory note
were  revised.  Beginning  March  14,  2005,  the  advance  notices  and  stock
disbursements  schedule  was  amended,  and  the advance amounts were amended to
$50,000  per  advance.

On  March  1, 2005, the balance of the shares available under the Standby Equity
Distribution  agreement  dated May 19, 2004 were issued to David Gonzalez, Esq.,
to  be  held  in  escrow  subject to the terms of the loan. The number of common
shares  issued  were  13,094,045.

Contribution  of  Capital
-------------------------
During  January  2005, Anthony Alda made a contribution of capital in the amount
of  $34,386.


                                      F-38
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