<PAGE>

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

                             ______________________

                                   FORM 10-QSB
                             ______________________


(Mark One)
[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the quarterly period ended June 30, 2003



[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934
         For the transition period                    to



                        Commission file number: 001-15835



                               US DATAWORKS, INC.
        (Exact name of small business issuer as specified in its charter)



                 NEVADA                                84-1290152
    (State or other jurisdiction of      (I.R.S. employer identification number)
     incorporation or organization)

     5301 HOLLISTER ROAD, SUITE 250
             HOUSTON, TEXAS                               77040
(Address of principal executive offices)                (Zip Code)

                    Issuer's telephone number: (713) 934-3855


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

Number of shares of Common Stock outstanding as of June 30, 2003:  65,719,546.

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

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS

                                                              US DATAWORKS, INC.
                                                                        CONTENTS
                                                                     (unaudited)
                                                                   June 30, 2003

--------------------------------------------------------------------------------
                                                                         Page
FINANCIAL STATEMENTS

     Balance Sheet                                                     F-2 - F-3

     Statements of Operations                                             F-4

     Statements of Cash Flows                                          F-5 - F-6

     Notes to Unaudited Financial Statements                          F-7 - F-17



                                      F-1
<PAGE>
<TABLE>

                                                                          US DATAWORKS, INC.
                                                                               BALANCE SHEET
                                                                                 (unaudited)
                                                                               June 30, 2003
--------------------------------------------------------------------------------------------
<CAPTION>



                                     ASSETS
CURRENT ASSETS
<S>                                                                          <C>
   Cash and cash equivalents............................................     $        68,012
   Accounts receivable, net of allowance for doubtful accounts of $0....             208,328
   Prepaid expenses and other current assets............................             297,485
                                                                             ----------------
         Total current assets...........................................             573,825

PROPERTY AND EQUIPMENT, net.............................................             754,289
GOODWILL, net...........................................................          14,133,629
OTHER ASSETS............................................................              22,424
                                                                             ----------------
              TOTAL ASSETS                                                   $    15,484,167
                                                                             ================

        The accompanying notes are an integral part of these financial statements.
</TABLE>

                                           F-2
<PAGE>
<TABLE>

                                                                                                     US DATAWORKS, INC.
                                                                                                          BALANCE SHEET
                                                                                                            (unaudited)
                                                                                                          June 30, 2003
-----------------------------------------------------------------------------------------------------------------------
<CAPTION>


                                 LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S>                                                                                                     <C>
   Notes payable ..................................................................................     $        85,600
   Notes payable - related parties.................................................................           1,392,000
   Current portion of capital lease obligations....................................................               3,040
   Current portion of convertible promissory notes, net of unamortized discount of $55,841.........             529,732
   Deferred revenue................................................................................              36,938
   Accounts payable................................................................................           1,493,828
   Accrued expenses, including $43,000 related parties.............................................             478,491
   Interest payable, including $134,554 related parties............................................             144,949
   Note payable related to discontinued operations.................................................             880,184
                                                                                                        ----------------
         Total current liabilities.................................................................           5,044,762

CONVERTIBLE PROMISSORY NOTE, net of current portion................................................             398,627
                                                                                                        ----------------
         Total liabilities.........................................................................           5,443,389

COMMITMENTS

SHAREHOLDERS' EQUITY
   Convertible Series A preferred stock, $0.0001 par value
     800,000 shares authorized, 540,000 shares issued and outstanding, $2.50 liquidation preference,
     accumulated, undeclared dividends of $536,580.................................................                  54
   Convertible Series B preferred stock, $0.0001 par value
     700,000 shares authorized, 629,666 shares issued and outstanding, $0.75 liquidation preference,
     accumulated, undeclared dividends of $111,553.................................................                  63
   Common stock, $0.0001 par value
     90,000,000 shares authorized and 65,719,546 shares issued and outstanding.....................               6,571
   Common stock committed, 15,619,609 shares.......................................................           1,525,537
   Additional paid-in capital......................................................................          43,300,560
   Accumulated deficit.............................................................................         (34,792,007)
                                                                                                        ----------------
         Total shareholders' equity................................................................          10,040,778
                                                                                                        ----------------
              TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                $    15,484,167
                                                                                                        ================

                       The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                          F-3
<PAGE>
<TABLE>

                                                                               US DATAWORKS, INC.
                                                                         STATEMENTS OF OPERATIONS
                                                                                      (unaudited)
                                                              For the Three Months Ended June 30,
-------------------------------------------------------------------------------------------------
<CAPTION>

                                                                       2003               2002
                                                                  -------------      -------------
<S>                                                               <C>                <C>
REVENUES
   Software licensing revenues .............................      $    147,567       $    502,650
   Software maintenance revenues ...........................            49,146             55,817
   Software service revenues ...............................           290,050            214,664
                                                                  -------------      -------------
     Total revenues ........................................           486,763            773,131

COST OF SALES ..............................................           144,112            168,269
                                                                  -------------      -------------
     Gross profit ..........................................           342,651            604,862

OPERATING EXPENSES
   General and administrative ..............................           926,713            846,903
   Depreciation and amortization ...........................            68,507             77,791
                                                                  -------------      -------------
      Total operating expense ..............................           995,220            924,694
                                                                  -------------      -------------

LOSS FROM OPERATIONS .......................................          (652,569)          (319,832)
                                                                  -------------      -------------

OTHER INCOME (EXPENSE)
   Financing costs..........................................        (1,033,000)           (16,782)
   Interest expense ........................................          (297,868)          (238,518)
   Interest expense - related parties ......................           (64,037)           (11,712)
   Other income (expense) ..................................                --              1,592
                                                                  -------------      -------------
      Total other income (expense) .........................        (1,394,905)          (265,420)
                                                                  -------------      -------------

LOSS BEFORE PROVISION FOR INCOME TAXES .....................        (2,047,474)          (585,252)
PROVISION FOR INCOME TAXES .................................                --                 --
                                                                  -------------      -------------

NET LOSS ...................................................      $ (2,047,474)      $   (585,252)
                                                                  =============      =============
BASIC AND DILUTED LOSS PER SHARE
  From continuing operation ................................      $      (0.03)      $      (0.01)
  From dividends paid ......................................                --                 --
                                                                  -------------      -------------
      Total basic and diluted loss per share ...............      $      (0.03)      $      (0.01)
                                                                  =============      =============
BASIC AND DILUTED WEIGHTED-AVERAGE SHARES OUTSTANDING ......        60,841,738         54,987,474
                                                                  =============      =============

                  The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                     F-4
<PAGE>
<TABLE>

                                                                                                US DATAWORKS, INC.
                                                                                           STATEMENTS OF CASH FLOW
                                                                                                       (unaudited)
                                                                               For the Three Months Ended June 30,
------------------------------------------------------------------------------------------------------------------
<CAPTION>
                                                                                        2003              2002
                                                                                    ------------      ------------
<S>                                                                                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss from continuing operations .......................................      $(2,047,474)      $  (585,252)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization of property and equipment .................           68,507            77,791
     Interest charges on convertible promissory notes ........................          263,113           192,619
     Issuance of stock for accrued interest ..................................           27,645                --
     Issuance of stock for services rendered .................................               --           140,622
     Issuance of stock for legal settlement ..................................               --             2,900
     Issuance of stock for lock-up agreement .................................               --               400
     Issuance of warrants for extension of notes payable due date ............          568,000                --
     Issuance of warrants for settlement of dispute ..........................          500,000                --
     Issuance of warrants for services .......................................               --             1,875
     (Increase) decrease in
       Accounts receivable ...................................................          261,453          (331,968)
       Work in progress ......................................................               --            11,312
       Prepaid expenses and other current assets .............................         (116,565)         (126,158)
       Other assets ..........................................................               --            (7,750)
     Increase (decrease) in
       Deferred revenue ......................................................         (204,513)         (137,020)
       Accounts payable ......................................................          719,592           310,552
       Accrued expenses ......................................................         (135,152)          193,896
       Interest payable ......................................................           (3,118)            1,805
       Interest payable - related parties ....................................           40,479            11,712
                                                                                    ------------      ------------
Net cash used in continuing operations .......................................          (58,033)         (242,664)
Net cash used in discontinued operations .....................................               --           (45,952)
                                                                                    ------------      ------------
Net cash used in operating activities ........................................          (58,033)         (288,616)
                                                                                    ------------      ------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Purchase of property and equipment ........................................               --                --
   Repayments to related parties .............................................               --           (78,506)
                                                                                    ------------      ------------
Net cash used in investing activities ........................................               --           (78,506)
                                                                                    ------------      ------------

                  The accompanying notes are an integral part of these financial statements.
</TABLE>

                                                     F-5
<PAGE>
<TABLE>

                                                                             US DATAWORKS, INC.
                                                                        STATEMENTS OF CASH FLOW
                                                                                    (unaudited)
                                                            For the Three Months Ended June 30,
-----------------------------------------------------------------------------------------------
<CAPTION>

                                                                        2003            2002
                                                                     ----------      ----------
<S>                                                                  <C>             <C>
CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on capital lease obligations ......................         (3,688)         (2,998)
   Proceeds from notes payable ................................         10,000          30,000
   Repayment of notes payable .................................        (97,389)        (29,785)
   Proceeds from notes payable - related party ................             --         175,000
   Repayment of notes payable - related party .................        (96,000)
   Proceeds from convertible promissory notes .................        300,000         240,000
   Repayment of convertible promissory notes ..................        (10,000)        (10,000)
   Repayment of note payable related to discontinued operations        (81,442)             --
   Proceeds from subscription receivables .....................             --          21,010
   Proceeds from exercise of warrants .........................             --           1,500
                                                                     ----------      ----------
Net cash provided by financing activities .....................        117,481         328,737
                                                                     ----------      ----------
Net increase (decrease) in cash and cash equivalents ..........         59,448         (38,385)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................          8,564         134,016
                                                                     ----------      ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ......................      $  68,012       $  95,631
                                                                     ==========      ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   INTEREST PAID ..............................................      $  20,024       $  37,322
                                                                     ==========      ==========
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

During the three months ended June 30, 2003, the Company completed the
following:

         o        In April 2003, issued 362,434 shares of common stock that it
                  had committed to issue during the year ended March 31, 2003.

         o        Two notes payable to former officers of the Company amounting
                  to $220,000 were forgiven pursuant to their terms that stated
                  if the Company had not raised cumulative gross proceeds from
                  debt and/or equity financing of $5,000,000 by the second
                  anniversary of the notes, then the notes would be forgiven. As
                  the Company did not raise these proceeds, the notes have been
                  forgiven.

         o        In June 2003, pursuant to the Series A Convertible Preferred
                  Stock conversion terms, the holder converted 100,000 shares of
                  Series A Convertible Preferred Stock and the Company issued
                  2,873,564 shares of the Company's common stock.

         o        Recorded a discount on notes payable of $48,045 related to the
                  issuance of warrants attached to the promissory notes to
                  purchase 275,000 shares of common stock

         o        Recorded interest expense of $500,000 related to warrants to
                  purchase up to $1,000,000 of common stock. These warrants were
                  issued to settle the Company's obligations under notes and
                  warrants entered into in 2001 and 2002 with an investor.

         o        Recorded interest expense of $568,000 related to warrants to
                  purchase 2,840,000 shares of common stock that were issued to
                  four investors in connection with their agreement to convert
                  80.37% of the principal and accrued interest underlying their
                  existing $887,500 promissory notes.

         o        Recorded interest expense of $251,955 related to the issuance
                  of convertible promissory notes with fixed conversion
                  features.

     During the three months ended June 30, 2002, the Company completed the
following:

         o        In April and May 2002, issued 1,424,259 shares of common stock
                  that it had committed to issue during the year ended March 31,
                  2002.

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

                                      F-6
<PAGE>

                               US DATAWORKS, INC.

                     NOTES TO UNAUDITED FINANCIAL STATEMENTS

1.   ORGANIZATION AND BUSINESS

     US Dataworks, Inc. (the "Parent" or the "Company"), a Nevada corporation,
develops, markets, and supports payment processing software for the financial
services industry. Its customer base includes many of the largest financial
institutions as well as credit card companies, government institutions, and
high-volume merchants in the United States. It also has a strategic alliance
with BancTec, Inc. and through October 2002, with CheckFree Corporation to
license the Company's software for its banking customers and Thomson Financial
Publishing, a unit of Thomson Corporation, to incorporate its EPICWare database
into the Company's products. Prior to acquiring US Dataworks, Inc., a Delaware
corporation, effective March 31, 2001, the Company was a financial services
company specializing in the integration of proprietary software applications
with Applications Service Provider ("ASP") services and an internet service
provider ("ISP"). During July and December 2001, the Company started shutting
down its ISP and ASP operations, respectively, and at March 31, 2002 all ISP and
ASP activities had ceased.

     As of May 18, 1999, the Company, previously known as New World Publishing,
Inc. ("New World"), a Colorado corporation, entered into an Agreement and Plan
of Reorganization with Communications Television, Inc. ("CTV"), a California
corporation (incorporated on July 20, 1998), whereby all of the outstanding
shares of common stock of CTV were exchanged for an aggregate of 19,020,167
shares of New World. For accounting purposes, the transaction has been treated
as a recapitalization of CTV, with CTV as the accounting acquirer (reverse
acquisition), and has been accounted for in a manner similar to a pooling of
interests. The operations of New World have been included with those of CTV from
the acquisition date. New World was incorporated in Colorado on December 28,
1994. New World had minimal assets and liabilities at the date of the
acquisition and did not have significant operations prior to the acquisition. As
of November 11, 1999, CTV's name was changed to Sonicport.com, Inc.

     On October 12, 1999, a special meeting of the shareholders was held, and
the shareholders approved the following actions: (i) the change of name to
"Sonicport.com, Inc." from "New World Publishing, Inc." (ii) the adoption of the
1999 Stock Option Plan, and (iii) the change of the state of incorporation to
Nevada from Colorado. As of October 18, 1999, New World Publishing, Inc.'s named
was changed to Sonicport.com, Inc. In February 2000, Sonicport.com, Inc.
effected its change of state of incorporation from Colorado to Nevada. In
February 2001, Sonicport.com, Inc.'s name was changed to Sonicport, Inc. On
March 21, 2002, the Company dissolved Sonicport.com, Inc., a California
corporation. As of March 26, 2002, Sonicport, Inc.'s name was changed to US
Dataworks, Inc. On May 23, 2002, the Company combined with US Dataworks, Inc., a
Delaware corporation, and US Dataworks, Inc., a Delaware corporation, was
dissolved.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation
     ---------------------

     The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America for
interim financial information and with the instructions to Form 10-QSB and
Regulation S-B.

     Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. In the opinion of management, all
normal, recurring adjustments considered necessary for a fair presentation have
been included. The financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB/A for the year ended March 31, 2003. The results of
operations for the three months ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the year ended March 31,
2004.

                                      F-7
<PAGE>

     Going Concern
     -------------

     The Company has received a report from its independent auditors that
includes an explanatory paragraph describing the uncertainty as to the Company's
ability to continue as a going concern. These consolidated financial statements
contemplate the ability to continue as such and do not include any adjustments
that might result from this uncertainty.

     Revenue Recognition
     -------------------

     The Company recognizes revenues in accordance with the provisions of the
American Institute of Certified Public Accountants' Statement of Position 97-2,
"Software Revenue Recognition." The Company licenses its software products under
nonexclusive, nontransferable license agreements. These arrangements do not
require significant production, modification, or customization, therefore,
revenue is recognized when a license agreement has been signed, delivery of the
software product has occurred, the related fee is fixed or determinable, and
collectibility is probable. If professional services were provided in
conjunction with the installation of the software licensed, revenue is
recognized when these services have been provided.

     For license agreements that include a separately identifiable fee for
contracted maintenance services, such revenues are recognized on a straight-line
basis over the life of the maintenance agreement noted in the agreement, but
following any installation period of the software.

     Cash and Cash Equivalents
     -------------------------

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

     Property and Equipment
     ----------------------

     Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over estimated useful lives as follows:


         Furniture and fixtures                            5 years
         Telephone equipment                               5 to 10 years
         Computer equipment                                5 years
         Computer software                                 5 years
         Leasehold improvements                            Shorter of initial
                                                           lease period or
                                                           useful life of asset

     Maintenance and minor replacements are charged to expense as incurred.
Gains and losses on disposals are included in the results of operations.

     Impairment of Long-Lived Assets
     -------------------------------

     The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets.

     Goodwill
     --------

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which was
effective for fiscal years beginning after December 15, 2001. SFAS 142 prohibits
the amortization of goodwill and intangible assets with indefinite useful lives
but requires that these assets be reviewed for impairment at least annually or
on an interim basis if an event occurs or circumstances change that could
indicate that their value has diminished or been impaired. Other intangible
assets will continue to be amortized over their estimated useful lives. The
Company evaluates the remaining useful lives of these intangibles on an annual
basis to determine whether events or circumstances warrant a revision to the
remaining period of amortization. Pursuant to SFAS 142, goodwill is no longer
being amortized.

                                      F-8
<PAGE>

     Fair Value of Financial Instruments
     -----------------------------------

     The Company measures its financial assets and liabilities in accordance
with generally accepted accounting principles. For certain of the Company's
financial instruments, including cash and cash equivalents, accounts receivable,
prepaid expenses and other current assets, accounts payable, accrued expenses,
and due to related party, the carrying amounts approximate fair value due to
their short maturities. The amounts shown for notes payable, notes payable -
related parties, and note payable - affiliate also approximate fair value
because current interest rates offered to the Company for debt of similar
maturities are substantially the same or the difference is immaterial.

     Stock Options
     -------------

     SFAS No. 123, "Accounting for Stock-Based Compensation," establishes and
encourages the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current implicit
value accounting method specified in Accounting Principles Bulletin ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," to account for
stock-based compensation. The Company has elected to use the implicit value
based method and has disclosed the pro forma effect of using the fair value
based method to account for its stock-based compensation.

     Income Taxes
     ------------

     The Company accounts for income taxes under the asset and liability method,
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 period-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. The provision for income taxes, if
applicable, represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.

     Loss per Share
     --------------

     The Company calculates loss per share in accordance with SFAS No. 128,
"Earnings per Share." Basic loss per share is computed by dividing the 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 stock
equivalents had been issued and if the additional common shares were dilutive.

     The following potential common stock equivalents have been excluded from
the computation of diluted net loss per share for the periods presented because
the effect would have been anti-dilutive (Options and Warrants typically convert
on a one for one basis, see conversion details of the preferred stock in
footnote 9 for the common stock shares issuable upon conversion):

                                      F-9
<PAGE>
<TABLE>
<CAPTION>
                                                                         FOR THE THREE MONTHS ENDED
                                                                                  JUNE 30,
                                                                -------------------------------------------------
                                                                        2003                     2002
                                                                        ----                     ----
     <S>                                                               <C>                       <C>
     Options outstanding under the Company's stock option
       plans                                                           1,410,000                 2,222,500
     Options granted outside the Company's stock
       option plans                                                      621,750                 1,050,250
     Warrants issued in conjunction with convertible Series B
       preferred stock                                                   629,667                   629,667
     Warrants issued in conjunction with private placements              531,500                   531,500
     Warrants issued as a financing cost for notes payable
       and convertible notes payable                                   1,847,518                 3,332,500
     Warrants issued in conjunction with lock-up
       agreements                                                        729,759                   729,759
     Warrants issued for services rendered                             1,792,000                 1,748,250
     Warrants issued as part of the acquisition of
       the Subsidiary                                                    336,000                   336,000
     Convertible Series A preferred stock                                540,000                   640,000
     Convertible Series B preferred stock                                629,666                   629,666
</TABLE>

     Reclassifications
     -----------------

     Certain amounts included in the prior year financial statements have been
reclassified to conform with the current year presentation. Such
reclassification did not have any effect on reported net loss.

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

     The Company sells its products throughout the United States and extends
credit to its customers. It also performs ongoing credit evaluations of such
customers. The Company does not obtain collateral to secure its accounts
receivable. The Company evaluates its accounts receivable on a regular basis for
collectibility and provides for an allowance for potential credit losses as
deemed necessary.

     Three customers of the Company accounted for 26%, 22% and 12% of the
Company's net sales for the three months ended June 30, 2003. Two customers of
the Company accounted for 19% and 18% of the Company's net sales for the three
months ended June 30, 2002. Additionally, the Company's strategic resellers
accounted for 26% and 56% of the Company's net sales for the three months ended
June 30, 2003 and 2002, respectively.

     At June 30, 2003, amounts due from strategic resellers or significant
customers accounted for 18% and 51% of accounts receivable.

3.   ACQUISITION

     Effective March 31, 2001, and with a closing date of April 2, 2001, the
Parent acquired 100%, or 3,571,429 shares, of the outstanding common stock of US
Dataworks, Inc. (the "Subsidiary"), a Delaware corporation (formerly known as
Allstate Dataworks, Inc.), in exchange for 14,666,667 new shares of the Parent's
common stock and warrants to purchase 1,000,000 shares of the Parent's common
stock. The warrants have an exercise price of $0.73, vest immediately, and
expire on April 2, 2006. In addition, certain shareholders of the Parent
transferred their ownership in 4,000,000 shares of the Parent's common stock to
the shareholders of the Subsidiary and committed to return 2,200,000 shares of
the Parent's common stock to the Parent in exchange for promissory notes in the
amount of $220,000. These shareholders had returned 1,528,000 shares at June 30,
2001. Of the Subsidiary's shares, 878,572 were acquired from officers of the
Subsidiary who are also officers of the Parent.

                                      F-10
<PAGE>

     The acquisition has been recorded using the purchase method, which is in
conformity with generally accepted accounting principles in accordance with APB
16, "Business Combinations." The purchase price has been allocated to the assets
acquired and liabilities assumed based on the estimated fair values at the date
of acquisition. The excess of the purchase price over the estimated fair value
of the net assets acquired is attributed to goodwill. The results of operations
of US Dataworks have been included in the Company's financial statements from
April 1, 2001.

     The aggregate purchase price was $17,437,262. The value of the 14,666,667
new shares of the Parent's common stock issued and the 4,000,000 shares
transferred by certain shareholders of the Parent to the shareholders of the
Subsidiary of $16,893,334 was determined based on the average closing market
price of the Parent's common stock over the period consisting of two days before
and after the terms of the acquisition agreement were agreed to and announced.
The value of the warrants to purchase 1,000,000 shares was determined to be
$543,928 and was derived using the Black Scholes option pricing model using the
following assumptions: expected life of 2 years, risk-free interest rate of
5.49%, expected volatility of 100% and expected dividend yield of 0%.

4.   PROPERTY AND EQUIPMENT

     Property and equipment at June 30, 2003 consisted of the following:

           Furniture and fixtures                               $        21,067
           Office and telephone equipment                                81,097
           Computer equipment                                           146,015
           Computer software                                          1,183,000
           Leasehold improvements                                        13,517
                                                                ----------------
                                                                      1,444,696
           Less accumulated depreciation and amortization              (690,407)
                                                                ----------------
           TOTAL                                                $       754,289
                                                                ================

     Depreciation and amortization expense for the three months ended June 30,
2003 and 2002 was $68,507 and $77,791, respectively.

5.   NOTES PAYABLE

     Notes payable at June 30, 2003 consisted of the following:
<TABLE>
<CAPTION>
           <S>                                                                  <C>
           Notes payable, interest at 10% per annum, unsecured, due in
                February 2003 through April 2003.                               $       25,000
           Notes payable, interest at 12.2% per annum, unsecured, due in
                July 2003.                                                               1,789
           Note payable, interest at 8% per annum, unsecured, due in October
                2003. 8,267 Other Note Payable                                          52,333
                                                                                ---------------
                                                                                        87,389
           Less current portion                                                        (87,389)
                                                                                ---------------
                Long-term portion                                               $            -
</TABLE>

                                      F-11
<PAGE>

     In July 2003, the 10% promissory notes payable due in February 2003 through
April 2003 and the 12.2% promissory note due July 2003 were paid in full.

     On August 1, 2003, the Other Note Payable was paid in full.

6 .  NOTES PAYABLE - RELATED PARTIES

     On January 22, 2001, the Company entered into a note payable with an
advisory board member and shareholder for $50,000. The note is
non-interest-bearing, is unsecured, and is due on demand. As of June 30, 2003,
the outstanding balance on the note payable was $39,000.

     On April 1, 2003, two notes payable to former officers of the Company
amounting to $220,000 were forgiven pursuant to their terms that stated if the
Company had not raised cumulative gross proceeds from debt and /or equity
financing of $5,000,000 by the second anniversary of the notes, then the notes
would be forgiven. As the Company did not raise these proceeds, the notes have
been forgiven.

     During fiscal 2003 and 2002, we issued promissory notes in an aggregate
principal amount of $1,353,000 to Mr. Ramey, our Chief Executive Officer bearing
an interest rate of 12% per annum. On July 10, 2003, we consolidated these
promissory notes into one promissory note for $1,353,000, bearing an interest
rate of 7% per annum, pursuant to the Subordinated, Convertible Note and Warrant
Agreement. Subject to shareholder approval, this promissory note may be
converted into shares of our common stock at a conversion price equal to the
lesser of (i) $0.16 per share or (ii) the closing bid price of our common stock
as listed on the American Stock Exchange on the trading day immediately prior to
the date of a change of control of US Dataworks or the date of Mr. Ramey's
notice of voluntary conversion of the promissory note. Alternatively, if the
Company sells shares of Series C Preferred Stock for gross proceeds of
$7,500,000, then the promissory note will automatically convert into shares of
Series C Preferred Stock at a conversion price equal to the Series C Preferred
Stock purchase price. In connection with this promissory note, we issued to Mr.
Ramey a warrant to purchase 8,456,250 shares of our common stock at an exercise
price of $0.16 per share. The principal amount and accrued interest is due and
payable upon demand after July 10, 2004.

7 .  CONVERTIBLE PROMISSORY NOTES

     Convertible promissory notes at June 30, 2003 consisted of the following:
<TABLE>
<CAPTION>
<S>                                                                             <C>
     Convertible promissory note, interest at 8% per annum, secured by a
          personal guarantee by the Chief Executive Officer of the Company,
          quarterly payments of $20,000 due on March 29,  2004.                 $            445,000

     Convertible promissory notes, interest at 10% per annum, unsecured, due
          May 2003 through June 2004, net of unamortized discount of $2,930.                 362,070
     Convertible promissory notes, interest at 10% per annum, secured by a
          lien upon certain leasehold interests in real property of the
          guarantor, due September 2003 net of unamortized discount of
          $52,911.                                                                           121,289
                                                                                ---------------------
                                                                                             928,359
     Less current portion                                                                   (529,732)
                                                                                ---------------------
          Long-term portion                                                     $            398,627
                                                                                =====================
</TABLE>

     In June 2003, the Company executed a new note with an existing Convertible
Promissory Note holder in the amount of $480,000. This note replaces the
existing note of $150,000 and includes penalties and interest from a settlement
with the Company of $330,000. A payment of $35,000 was due upon signing and
principal and interest payments of $20,000 are due on a quarterly basis through
November of 2004. On that date all remaining principal and interest outstanding
is due. This note bears interest at 8% and is guaranteed by the Chief Executive
Officer of the Company. The balance of this note at June 30, 2003 was $445,000.

                                      F-12
<PAGE>

     In addition to the note, the Company issued a warrant to purchase up to
$1,000,000 of the Company's common stock not to exceed 11,500,000 shares. The
exercise price of the warrant is 50% of the average stock price for 10
consecutive days immediately prior to the exercise, but not less than $0.06 per
share. The warrant is exercisable in thirds after specific number of days
following the earlier of 1) the Company receiving an Effectiveness Notice
confirming the completion of a registration statement filed with the Securities
and Exchange Commission or 2) one year from the date of issue.

     On May 7, 2002 through February 26, 2003, the Company entered into
Subscription Agreements in exchange for gross proceeds of $822,500. The units
issued consisted of 48 convertible promissory notes and warrants to purchase
495,250 shares of the Company's common stock. The holders of forty-three of the
promissory notes for a total of $562,500 have the option to convert the notes at
any time after 31 days following the issuance date of the note. The holders of
five of the promissory notes for a total of $260,000 have the option to convert
the notes at any time after 91 days following the issuance date of the note. The
balance of these notes at June 30, 2003 was $362,070

     At June 30, 2003, the Company is in default under five convertible
promissory notes in the total aggregate amount of $40,000 that were due on
various dates between May 7 and June 27, 2003.

     The Company has the option to redeem $562,500 of the notes at any time
prior to the notes' maturity date at 105% of the face value of the note, plus
accrued interest, if any, at any time prior to the maturity date. The notes are
convertible at 80% of the average closing price for the 20 trading days
immediately preceding the conversion date, but not less than prices ranging from
$0.20 per share to $0.10 per share. The notes earn interest at 10% per annum,
the principal and any unpaid interest are due one year following the issuance
date of the note, and interest is payable in cash on a quarterly basis.

     The Company has the option to redeem $260,000 of the notes at any time
prior to the notes' maturity date at 110% of the face value of the notes if the
notes are redeemed within 90 days of the issuance date of the notes, or at 105%
of the face value of the notes if the notes are redeemed more than 90 days from
the issuance date of the notes. The notes are convertible at 80% of the average
closing price for the 20 trading days immediately preceding the conversion date,
but not less than $0.12 to $0.13 per share. The notes earn interest at 10% per
annum, the principal and any unpaid interest are due one year following the
issuance date of the notes, and interest is payable in cash on a quarterly
basis.

     The warrants to purchase 495,250 shares of the Company's common stock are
exercisable at prices ranging from $0.09 to $0.23 per share and expire two to
three years from the date of issuance.

     The Company allocates the proceeds received from debt or convertible debt
with detachable warrants or shares of common stock 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 $50,405 and will be recognized as
interest expense over the period until the notes mature. 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. During
the three months ended June 30, 2003, the Company recognized $11,158 in interest
expense related to the accretion of the debt discount.

     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 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 time at which the notes first become convertible. The Company
recognized interest expense of $251,955 related to this conversion feature in
the accompanying statement of operations for the three months ended June 30,
2003.

     On June 25, 2003, we amended four convertible promissory notes totaling
$887,500 that were issued in March 2001 such that 80.37% of the outstanding
principal and accrued and unpaid interest converted into 10,444,745 shares of
the Company's common stock at a conversion price of $0.07 per share. At the
holders' option, the remaining balance may convert at an exercise price of $0.07
per share on September 30, 2003. (See footnote 9 for additional information.)
The balance of this note at June 30, 2003 was $121,289.

                                      F-13
<PAGE>

8.   COMMITMENTS AND CONTINGENCIES

     Litigation
     ----------

     On July 19, 2002, an individual and former director of US Dataworks, H. J.
Frazier, filed a lawsuit against US Dataworks in Los Angeles Superior Court
alleging breach of debenture agreement. In the complaint, the plaintiff prays
for damages in the amount of $275,000, plus prejudgment interest and cost of
suit. US Dataworks and Mr. Frazier have reached a settlement pursuant to which
US Dataworks will make monthly payments in the amount of $23,800 per month until
March 1, 2003. On March 1, 2003, US Dataworks has the option to pay the
remaining balance or to make monthly payments in the amount of $26,167 through
August 1, 2003. US Dataworks also agreed to pay Mr. Frazier's attorney's fees
and costs, up to a maximum of $5,000, and reimburse Mr. Frazier for the cost of
the suit. Upon payment in full, Mr. Frazier will dismiss the lawsuit with
prejudice. On August 1, 2003, the settlement amount was paid in full.

9.   STOCKHOLDERS' EQUITY

     PREFERRED STOCK

     The Company has 10,000,000 authorized shares of $0.0001 par value preferred
stock. 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.

     Convertible Series A Preferred Stock
     ------------------------------------

     The Company has 800,000 authorized shares of $0.0001 par value convertible
Series A preferred stock. On April 11, 2000, the Company issued 800,000 shares
of its voting convertible Series A preferred stock (the "Series A") to an
investor for gross proceeds of $2,000,000. The Series A has a liquidation
preference of $2.50 per share and carries a 15% cumulative dividend payable on
each April 1 and October 1. The Company has the right to redeem the Series A at
any time after issuance at a redemption price of $2.70 per share, plus any
accrued but unpaid dividends, except if the Company redeems the Series A within
60 days of issuance, the redemption price shall be $2.50. The Series A is
convertible into shares of common stock as determined by dividing $2.50 by 60%
of the average closing bid price of the Company's common stock for the 10
trading days prior to the conversion. On May 19, 2000, the Company redeemed
160,000 shares of the Series A for $400,000. In June 2003, pursuant to the
Series A conversion terms, the holder converted 100,000 shares of Series A and
was issued 2,873,564 shares the Company's common stock.

     At June 30, 2003, there were accumulated, undeclared dividends in arrears
of $536,580, or $0.99 per share.

     Subsequent to June 30, 2003, 280,000 shares of Series A were converted by
the holder and the Company was obligated to issue 5,244,109 shares of the
Company's common stock pursuant to the Series A conversion terms.

     Convertible Series B Preferred Stock
     ------------------------------------

     The Company has 700,000 authorized shares of $0.0001 par value convertible
Series B preferred stock.

     In August and October 2000, the Company issued 509,333 and 133,666 units
respectively, in a private placement for gross proceeds of $382,000 and
$100,250, respectively. Each unit consisted of one share of its voting
convertible Series B preferred stock (the "Series B") and a warrant to purchase
one share of the Company's common stock. The Series B has a liquidation
preference of $0.75 per share and carries a 10% cumulative dividend payable on
each March 1 and September 1. The Company has the right to redeem the Series B
at any time after issuance at a redemption price of $0.83 per share, plus any
accrued but unpaid dividends. The Series B is convertible upon issuance into
common stock at $0.75 per share. The warrant entitles the holder to purchase one
share of the Company's common stock at $1.25 per share, which represents 115% of
the market value of the Company's stock at the closing date.

                                      F-14
<PAGE>

     In May 2001, an investor in the Company's convertible Series B preferred
stock rescinded its acquisition and returned 13,333 shares and warrants for the
purchase of 13,333 shares of common stock to the Company in exchange for the
return of its investment of $10,000.

     At June 30, 2003, there were accumulated, undeclared dividends in arrears
of $111,553 or $0.18 per share.

     COMMON STOCK

     Financing Agreement
     -------------------

     On June 30, 2003, we entered into an agreement with an institutional
investor for an equity line financing of up to $4,000,000. The institutional
investor has agreed to purchase our common stock at 87% percent of the volume
weighted average price on the date in question during each draw down pricing
period, subject to certain adjustments as set forth in the agreement. We may
sell up to $4,000,000 of our common stock, with a minimum commitment of
$1,500,000, to the institutional investor under the equity line on trading days
on which our closing price per share is $0.10 or more. Subject to the
satisfaction of the minimum closing price and certain other conditions, we have
the right to determine the timing and amount of each sale so long as the sale
will not cause the institutional investor to own more than 4.999% of our
outstanding common stock. Pursuant to a registration rights agreement, we agreed
to file a registration statement for the resale of the shares of our common
stock issued to the institutional investor in connection with the equity line.

     Common Stock and Warrants
     -------------------------

     During the three months ended June 30, 2003, the Company completed the
following:

     o    In April 2003, issued 362,434 shares of common stock that it had
          committed to issue during the year ended March 31, 2003.

     o    In May and June 2003, $270,000 of convertible promissory notes and
          accrued interest thereon were converted into 3,192,876 shares of
          common stock. During June 2003, stock certificates for 2,947,876
          shares of common stock were issued. At June 30, 2003, the stock
          certificates for 244,991 shares of common stock on $20,000 of the
          convertible promissory notes converted had not been issued and
          therefore this amount is included in common stock committed.

     o    On June 25, 2003, we amended four convertible promissory notes
          totaling $887,500 that were issued in March 2001 such that 80.37% of
          the outstanding principal and accrued and unpaid interest converted
          into 10,444,745 shares of our common stock at a conversion price of
          $0.07 per share. At the holder's option, the remaining balance may
          convert at an exercise price of $0.07 per share on September 30, 2003.
          At June 30, 2003, the 10,444,745 shares of common stock had not been
          issued and therefore this amount is included in common stock
          committed.

     o    In June 2003, a $200,000 Convertible Promissory Note was converted
          into 2,857,143 shares pursuant to terms of the note. At June 30, 2003,
          the stock certificate for these shares had not been issued and
          therefore this amount is included in common stock committed.

     o    In June 2003, we issued to an accredited investor an 8% Convertible
          Promissory Note for $200,000, and also issued warrants to purchase
          200,000 shares of our common stock at an exercise price $0.07. On June
          30, 2003, in accordance with the terms of the warrant, the investor
          elected to exercise the warrant through a net issuance. As a result,
          an aggregate of 136,364 shares of our common stock are issuable to the
          investor at June 30, 2003 and have been included in common stock
          committed.

     o    In June 2003, pursuant to the Series A Convertible Preferred Stock
          conversion terms, the holder converted 100,000 shares of Series A
          Convertible Preferred Stock and the Company issued 2,873,564 shares of
          the Company's common stock.

                                      F-15
<PAGE>

     Common Stock and Warrants as a Financing Cost
     ---------------------------------------------

     o    In May and June 2003, the Company issued 2,840,000 warrants to several
          note holders as consideration for the note holders extending the
          maturity date of $887,500 of their promissory notes with the Company.
          Under the terms of the agreement, the holders exercised the warrants
          through a net issuance exercise. By doing so, the aggregate number of
          shares to be issued due to the exercise of the warrants is 1,936,364
          shares. As of June 30, 2003, stock certificates for these shares had
          not been issued and therefore this amount is included in common stock
          committed.

     o    In June of 2003, as partial settlement of an existing note and warrant
          agreement, the Company issued a warrant to purchase up to $1,000,000
          of the Company's common stock not to exceed 11,500,000 shares. The
          exercise price of the warrant is 50% of the average stock price for 10
          consecutive days immediately prior to the exercise, but not less than
          $0.06 per share. The warrant is exercisable in thirds after specific
          amounts of days following the earlier of 1) the Company receiving an
          Effectiveness Notice confirming the completion of a registration
          statement filed with the Securities and Exchange Commission or 2) one
          year from the date of issue.

10.  SUBSEQUENT EVENTS

     Advisory Agreement
     ------------------

     On July 2, 2003, the Company entered into a one-year advisory agreement for
general financial advisory and strategic/competitive analysis services. The
agreement calls for an initial payment of $25,000 and monthly payments of $5,000
in addition to the issuance of a warrant to purchase 500,000 shares of the
Company's common stock at an exercise price of $0.23 per share. Either party can
terminate the agreement at any time by giving the other party 30 days written
notice after an initial 6 month term.

     Issuance of and Conversions of Convertible Promissory Notes
     -----------------------------------------------------------

     In July 2003, $50,000 of convertible promissory notes were converted into
333,334 shares of common stock pursuant to the terms of the notes.

     Sale of Common Stock
     --------------------

     On June 30, 2003, we agreed to sell to five accredited investors an
aggregate of 5,555,554 shares of our common stock for an aggregate purchase
price of $500,000 pursuant to a Securities Purchase Agreement. The investors
purchased these shares from the Company on July 9, 2003. In connection with this
agreement, we issued warrants to purchase an aggregate of 750,000 shares of our
common stock with an exercise price of $0.268 per share. The warrants may be
exercised at any time after June 30, 2003. However, an investor will not be
permitted to exercise a warrant to the extent that the number of shares of
common stock beneficially owned by such investor taken together with the number
of shares to be issued upon exercise of the warrant equals or exceeds 4.999% of
our then issued and outstanding shares of common stock. Pursuant to a
registration rights agreement, we agreed to file a registration statement for
the resale of the shares of our common stock purchased by the investors,
including shares issued upon exercise of the warrants.

     On August 4, 2003, the five accredited investors agreed to surrender their
common stock in exchange for convertible promissory notes totaling $500,000, due
August 4, 2004 with interest at 10% per annum, and warrants to purchase an
additional 75,000 shares of common stock with an exercise price of $0.268 per
share. The warrants may be exercised at any time after August 4, 2003. The
promissory notes are convertible into common stock at $0.09 per share.

                                      F-16
<PAGE>

     Issuance of Convertible Debentures
     ----------------------------------

     On June 30, 2003, we entered into a Convertible Debentures and Warrants
Agreement with an accredited investor. Pursuant to this agreement, on July 29,
2003, the investor purchased a debenture in the principal amount of $500,000
bearing an interest rate of 5% per annum. In addition, the investor may purchase
additional debentures, at our sole discretion, in an amount not to exceed 60% of
the net proceeds from the investor's sale of the Company's common stock issued
upon conversion of the investor's shares of the Company's Series A Convertible
Preferred Stock. The debentures may be converted into shares of the Company's
common stock at any time at a conversion price equal to the closing bid price of
the common stock as listed on the American Stock exchange on the trading day
immediately before the date of conversion. The investor will also receive
warrants to purchase 1,000 shares of the Company's common stock for every
$10,000 paid in connection with the purchase of a debenture. The exercise price
will be equal to $0.301 per share. The aggregate number of shares issued upon
conversion of the debentures and exercise of the warrants may not equal more
than 13,110,150 shares, or 19.99% of the outstanding shares of the Company's
common stock.

                                      F-17
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

     The following discussion and analysis of our financial condition and
results of operations should be read with the unaudited consolidated financial
statements and related notes included elsewhere in this Report.

     When used in this Report, the words "expects," "anticipates," "believes,"
"plans," "will" and similar expressions are intended to identify forward-looking
statements. These are statements that relate to future periods and include, but
are not limited to, statements as to statements regarding benefits related to
our strategic alliances, our critical accounting policies, installation of our
software, expectations regarding our revenue, adequacy of cash, expectations
regarding net losses and cash flow, statements regarding our growth and
profitability, investments in marketing, promotion, and operating
infrastructure, our need for future financing, our dependence on personnel and
our ability to respond to rapid technological change. Forward-looking statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those projected. These risks and uncertainties
include, but are not limited to, those discussed below, as well as risks related
to our ability to develop and timely introduce products that address market
demand, the impact of alternative technological advances and competitive
products, market fluctuations, our ability to obtain future financing, and the
risks set forth below under "Factors that May Affect Our Results." These
forward-looking statements speak only as of the date hereof. US Dataworks
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in the our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

     All references to "US Dataworks," "we," "us" or "our" means US Dataworks,
Inc.

     MICRworks, Returnworks, Remitworks and Remoteworks are trademarks of US
Dataworks. Other trademarks referenced herein are the property of their
respective owners.

OVERVIEW

     US Dataworks is a developer of payment processing software, serving several
of the top banking institutions, credit card issuers, and the United States
Government. We generate revenue from the licensing, system integration and
maintenance of our core products: MICRworks, Returnworks, Remitworks and
Remoteworks for the financial services industry. The software developed by us is
designed to enable organizations to transition from traditional paper-based
payment and billing processes to electronic solutions. US Dataworks' products
include check processing, point-of-purchase transactions and turnkey Automated
Clearing House, or ACH, payments. Our products are designed to provide
organizations with an in-house solution that will complement and enhance such
organizations' existing technologies, systems and operational workflow. US
Dataworks' strategy is to identify, design and develop products that fill
specific niches in the financial transaction processing industry.

CRITICAL ACCOUNTING POLICIES

     The following discussion and analysis of our financial condition and
results of operations is based upon our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate these estimates, including
those related to revenue recognition and concentration of credit risk. We base
our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

     We believe that of the significant accounting policies used in the
preparation of our consolidated financial statements (see Note 2 to the
Financial Statements), the following are critical accounting policies, which may
involve a higher degree of judgment, complexity and estimates.

     REVENUE RECOGNITION

     We recognize revenues in accordance with the provisions of the American
Institute of Certified Public Accountants' Statement of Position 97-2, "Software
Revenue Recognition." We license our software products under non-exclusive,
non-transferable license agreements. These arrangements do not require


                                       1
<PAGE>

significant production, modification, or customization, therefore, revenue is
recognized when a license agreement has been signed, delivery of the software
products has occurred, the related fee is fixed or determinable, and
collectibility is probable. If professional services are provided in conjunction
with the installation of the software license, revenue is recognized when these
services have been provided.

     For license agreements that include a separately identifiable fee for
contracted maintenance services, such revenues are recognized on a straight-line
basis over the life of the maintenance agreement noted in the license agreement,
but following any installation period of the software.

     CONCENTRATIONS OF CREDIT RISK

     We extend credit to our customers and perform ongoing credit evaluations of
our customers. We do not obtain collateral from our customers to secure our
accounts receivables. We evaluate our accounts receivable on a regular basis for
collectibility and provide for an allowance for potential credit losses as
deemed necessary.

RESULTS OF OPERATIONS

     The results of operations reflected in this discussion include the
operations of US Dataworks for the three months ended June 30, 2003 and 2002.

     REVENUE

     Revenue decreased by $286,368 or 37% to $486,763 for the three months ended
June 30, 2003 from $773,131 for the three months ended June 30, 2002. The
decrease in revenue was primarily attributable to a decrease of $355,083 or 71%
in license fees offset somewhat by an increase in service revenue of $75,386 or
35%. The decrease in license fees is due to a decrease in the number of license
agreements we entered into in the three months ended June 30, 2003 compared to
the three months ended June 30, 2002.

     COST OF SALES

     Cost of sales decreased by $24,157 or 14% to $144,112 for the three months
ended June 30, 2003 from $168,269 for the three months ended June 30, 2002. The
decrease was primarily attributable to a decrease in the number of license
agreements we entered into in the three months ended June 30, 2003 compared to
the three months ended June 30, 2002.

     OPERATING EXPENSES

     Total operating expenses increased by $70,526 or 8% to $995,220 for the
three months ended June 30, 2003 from $924,694 for the three months ended June
30, 2002. The increase was primarily attributable to increases in labor costs.

     OTHER EXPENSES

     Other expenses, including interest expense and financing costs, increased
$1,129,485 or 426% to $1,394,905 for the three months ended June 30, 2003 from
$265,420 for the three months ended June 30, 2002. The increase was primarily
due to the non-cash financing charges related to the issuance of warrants to
purchase shares of our common stock. We incurred non-cash interest expense of
$500,000 related to a warrant to purchase up to $1,000,000 of our common stock.
This warrant was issued to settle our obligations under notes and warrants
issued in 2001 and 2002 to an investor. In a separate transaction , we incurred
non-cash interest expense of $568,000 related to warrants to purchase an
aggregate of 2,840,000 shares of our common stock that were issued to four
investors in connection with their agreement to convert 80.37% of the principal
and accrued interest underlying their existing $887,500 promissory notes.

     NET LOSS

     Net loss increased by $1,462,222 or 250% to a net loss of $2,047,474 for
the three months ended June 30, 2003 from $585,252 for the three months ended
June 30, 2002.

                                       2
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents increased by $59,448 to $68,012 at June 30, 2003
from $8,564 at March 31, 2003. Cash used for operating activities was $58,033 in
the three months ended June 30, 2003 compared to $288,616 to the same period in
the prior year. Net loss from continuing operations reduced cash by $2,047,474
and $585,252 in the three months ended June 30, 2003 and 2002, respectively.

     Cash used for investing activities of $78,506, in the three months ended
June 30, 2002 consisted primarily of repayments to our affiliates. We did not
use cash for investing activities in the three months ended June 30, 2003.

     Financing activities provided cash of $117,481 in the three months ended
June 30, 2003 and included the issuance of $10,000 in promissory notes and
$300,000 in convertible promissory notes. Subsequent to June 30, 2003, we
received an aggregate of $1,000,000 pursuant to five convertible promissory
notes and a convertible debenture.

     Financing activities provided cash of $328,737 for the three months ended
June 30, 2002 and included the issuance of $205,000 in promissory notes,
$240,000 in convertible promissory notes and $1,500 proceeds from the exercise
of warrants.

     We recognize the need for the infusion of cash during fiscal 2004 and are
actively pursuing various financing options. However, there can be no assurance
that we will be able to raise additional funds on favorable terms or at all.

FACTORS THAT MAY AFFECT OUR RESULTS

WE HAVE A GENERAL HISTORY OF LOSSES AND CANNOT ASSURE YOU THAT WE WILL OPERATE
PROFITABLY IN THE FUTURE.

     We have incurred significant losses for the last two fiscal years. Although
we anticipate achieving profitable operations in the future, our net losses and
negative cash flow may continue for the foreseeable future. As of June 30, 2003,
our accumulated deficit was $34,792,007. Our auditors have included an
explanatory paragraph in their Independent Auditor's Report included in our
audited financial statements for the years ended March 31, 2003 and 2002 filed
with our annual report on Form 10-KSB/A for fiscal year ended March 31, 2003, to
the effect that our loss from operations for the year ended March 31, 2003, and
the accumulated deficit at March 31, 2003 raise substantial doubt about our
ability to continue as a going concern. We believe that our planned growth and
profitability will depend in large part on our ability to continue to promote
our brand name and gain clients and expand our relationship with clients for
whom we would provide licensing agreements and system integration. Accordingly,
we intend to invest heavily in marketing, strategic partnerships, development of
our client base, and development of our marketing technology and operating
infrastructure. If we are not successful in promoting our brand name and
expanding our client base, it will have a material adverse effect on our
financial condition and our ability to continue to operate our business.

WE WILL NEED TO RAISE ADDITIONAL CAPITAL IN THE NEXT SIX MONTHS.

     We believe we currently have adequate cash to fund anticipated cash needs
for at least the next six months. We will need to raise additional capital and
are actively pursuing various financing options. Any equity financing may be
dilutive to stockholders, and debt financing, if available, will increase
expenses and may involve restrictive covenants. We may be required to raise
additional capital, at times and in amounts, which are uncertain, especially
under the current capital market conditions. Under these circumstances, if we
are unable to acquire additional capital or are required to raise it on terms
that are less satisfactory than desired, it may have a material adverse effect
on our financial condition, which could require us to curtail our operations
significantly, sell significant assets, seek arrangements with strategic
partners or other parties that may require us to relinquish significant rights
to products, technologies or markets, or explore other strategic alternatives
including a merger or sale of US Dataworks.

FUTURE CONVERSION OF OUR CONVERTIBLE SECURITIES MAY EXCEED THE NUMBER OF
AUTHORIZED SHARES OF OUR COMMON STOCK.

     Currently, we do not have a sufficient number of shares of common stock
available for issuance upon conversion of our outstanding convertible
securities. We have asked our stockholders to approve a reverse stock split at
our annual meeting of stockholder to be held on September 10, 2003. If the
stockholders approve the reverse stock split, we will have a sufficient number
of shares of common stock available for issuance upon conversion of all our
outstanding convertible securities. In the event the stockholders do not approve
the reverse stock split, we will be unable to honor the conversion of some or
all of our convertible securities and this may have a material adverse effect on
our ability to continue to operate our business.

                                       3
<PAGE>

OUR OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS CAUSED BY MANY FACTORS WHICH
COULD CAUSE US TO FAIL TO ACHIEVE OUR REVENUE OR PROFITABILITY EXPECTATIONS.

     Our operating results can vary significantly depending upon a number
factors, many of which are outside our control. Factors that may affect our
quarterly operating results include:

     o    market acceptance of and changes in demand for our products and
          services;

     o    gain or loss of clients or strategic relationships;

     o    announcement or introduction of new software, services and products by
          us or by our competitors;

     o    our ability to build brand recognition;

     o    timing of sales to customers;

     o    price competition;

     o    our ability to upgrade and develop systems and infrastructure to
          accommodate growth;

     o    our ability to attract and integrate new personnel in a timely and
          effective manner;

     o    our ability to introduce and market products and services in
          accordance with market demand;

     o    changes in governmental regulation;

     o    reduction in or delay of capital spending by our clients due to the
          effects of terrorism, war and political instability; and

     o    general economic conditions, including economic conditions specific to
          the financial services industry.

     In addition, each quarter we derive a significant portion of our revenue
from agreements signed at the end of the quarter. Our operating results could
suffer if the timing of these agreements is delayed. Depending on the type of
agreements we enter into, we may not be able to recognize revenue under these
agreement in the quarter in which they are signed. Some of all of these factors
could negatively affect demand for our products and services, and our future
operating results.

     Most of our operating expenses are relatively fixed in the short-term. We
may be unable to adjust spending rapidly to compensate for any unexpected sales
shortfall, which could harm our quarterly operating results. Because of the
emerging nature of the markets in which we compete, we do not have the ability
to predict future operating results with any certainty. Because of the above
factors, you should not rely on period-to-period comparisons of results of
operation as an indication of future performances.


BECAUSE A SMALL NUMBER OF CUSTOMERS HAS HISTORICALLY ACCOUNTED FOR AND MAY IN
FUTURE PERIODS ACCOUNT FOR SUBSTANTIAL PORTIONS OF OUR REVENUE, OUR REVENUE
COULD DECLINE BECAUSE OF DELAYS OF CUSTOMER ORDERS OR THE FAILURE TO RETAIN
CUSTOMERS.

     We have a small number of customers that account for a significant portion
of our revenue. Our revenue could decline because of a delay in signing
agreements with a single customer or the failure to retain an existing customer.
We may not obtain additional customers. The failure to obtain additional
customers and the failure to retain existing customers will harm our operating
results.

                                       4
<PAGE>

OUR BUSINESS IS DEPENDENT ON GENERAL ECONOMIC AND BUSINESS CONDITIONS.

     The revenue growth and profitability of our business depends on the overall
demand for computer software and services in the product segments in which we
compete. Because our sales are primarily to major banking and government
customers, our business also depends on general economic and business
conditions. A softening of demand caused by a weakening of the economy may
result in decreased revenue or lower growth rates. There can be no assurances
that we will be able to effectively promote future license revenue growth in our
application business.


WE MAY NOT BE ABLE TO ATTRACT, RETAIN OR INTEGRATE KEY PERSONNEL, WHICH MAY
PREVENT US FROM SUCCEEDING.

     We may not be able to retain our key personnel or attract other qualified
personnel in the future. Our success will depend upon the continued service of
key management personnel. The loss of services of any of the key members of our
management team or our failure to attract and retain other key personnel could
disrupt operations and have a negative effect on employee productivity and
morale and harm our financial results.


WE OPERATE IN A MARKET THAT IS INTENSELY AND INCREASINGLY COMPETITIVE.

     The market for financial services software is relatively new and highly
competitive. Our future success will depend on our ability to adapt to rapidly
changing technologies, evolving industry standards, product offerings and
evolving demands of the marketplace.

     Some of our competitors have longer operating histories, larger installed
customer bases, greater name recognition and longer relationships with clients
and significantly greater financial, technical, marketing and public relations
resources than US Dataworks. Our competitors may also be better positioned to
address technological and market developments or may react more favorably to
technological changes. We compete on the basis of a number of factors, including
the breadth and quality of services, creative design and systems engineering
expertise, pricing, and technological innovation and understanding clients'
strategies and needs. Competitors may develop or offer strategic services that
provide significant technological, creative, performance, price or other
advantages over the services offered by US Dataworks. If we fail to gain market
share or lose existing market share, our financial condition, operating results
and business could be adversely affected and the value of the investment in us
could be reduced significantly. We may not have the financial resources,
technical expertise or marketing, distribution or support capabilities to
compete successfully.


WE MAY BE RESPONSIBLE FOR MAINTAINING THE CONFIDENTIALITY OF OUR CLIENT'S
SENSITIVE INFORMATION.

     The services we provide for our clients may grant us access to confidential
or proprietary client information. Although we have implemented policies to
prevent such client information from being disclosed to unauthorized parties or
used inappropriately, any unauthorized disclosure or use could result in a claim
against us for substantial damages. Our contractual provisions attempting to
limit these damages may not be enforceable in all instances or may otherwise
fail to adequately protect us from liability for damages.


OUR PRINCIPAL SHAREHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS HAVE SIGNIFICANT
VOTING POWER AND MAY TAKE ACTIONS THAT MAY NOT BE IN THE BEST INTEREST OF OUR
OTHER SHAREHOLDERS.

      Our principal shareholders, executive officers, directors and their
affiliates, in the aggregate, own more than 31% of our outstanding common stock.
These shareholders, if they act together, will be able to control our management
and affairs and all matters requiring shareholder approval, including the
election and removal of directors and approval of significant corporate
transactions. This influence over our affairs might be adverse to the interest
of our other shareholders. In addition, this concentration of ownership may
delay or prevent a change in control and might have an adverse effect on the
market price of our common stock.


FUTURE SALES OF OUR COMMON STOCK MAY CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO DECLINE.

     As of June 30, 2003, there were approximately 65,719,546 shares of common
stock outstanding, of which at least 22,163,720 are restricted securities under
the Securities Act, a minority of which are held by affiliates of US Dataworks.
These restricted securities will be eligible for sale from time to time upon
expiration of applicable holding periods under Rule 144 under the Securities
Act. If these holders sell in the public market, these sales could cause the
market price of our common stock to decline. This also could make it more
difficult for us to raise funds through future offerings of our common stock.

                                       5
<PAGE>

OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY MAY HINDER OUR ABILITY TO
COMPETE.

     We rely on a combination of patent, trademark, trade secrets,
confidentiality procedures and contractual procedures to protect our
intellectual property rights. If we are unable to adequately protect our
intellectual property, our business may suffer from the piracy of our technology
and the associated loss in revenue. Any patents that we may hold may not
sufficiently protect our intellectual property and may be challenged by third
parties. Our efforts to protect our intellectual property rights, may not
prevent the misappropriation of our intellectual property. Other parties may
also independently develop similar or competing products that do not infringe
upon our intellectual property rights. These infringement claims or any future
claims could cause us to spend significant time and money to defend our
products, redesign our products or develop or license a substitute technology.
We may be unsuccessful in acquiring or developing substitute technology and any
required license may be unavailable on commercially reasonable terms, if at all.
In the event of litigation to determine the validity of any third party claims
or claims by us against such third party, such litigation, whether or not
determined in our favor, could result in significant expense and divert the
efforts of our technical and management personnel, regardless of the outcome of
such litigation.

ITEM 3.  CONTROLS AND PROCEDURES

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain
"disclosure controls and procedures," as such term is defined in Rule 13a-14(c)
under the Securities Exchange Act of 1934 (the "Exchange Act"), that are
designed to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in Securities and
Exchange Commission rules and forms, and that such information is accumulated
and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. In designing and evaluating our disclosure controls and
procedures, management recognized that disclosure controls and procedures, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the disclosure controls and
procedures are met. Additionally, in designing disclosure controls and
procedures, our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible disclosure controls and
procedures. The design of any disclosure controls and procedures also is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.

     Based on their evaluation as of a date within 90 days prior to the filing
date of this Quarterly Report, our Chief Executive Officer and Chief Financial
Officer have concluded that, subject to the limitations noted above, our
disclosure controls and procedures were effective to ensure that material
information relating to us, including our consolidated subsidiaries, is made
known to them by others within those entities, particularly during the period in
which this Annual Report was being prepared.

     (b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in our
internal controls or, to our knowledge, in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.

                                       6
<PAGE>

                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     On July 19, 2002, an individual and former director of US Dataworks, H. J.
Frazier, filed a lawsuit against US Dataworks in Los Angeles Superior Court
alleging breach of debenture agreement. In the complaint, the plaintiff prays
for damages in the amount of $275,000, plus prejudgment interest and cost of
suit. US Dataworks and Mr. Frazier have reached a settlement pursuant to which
US Dataworks will make six monthly payments in the amount of $23,800 per month
until March 1, 2003. On March 1, 2003, US Dataworks has the option to pay the
remaining balance of $142,800 or to make monthly payments in the amount of
$26,167 through August 1, 2003. US Dataworks also agreed to pay Mr. Frazier's
attorney's fees and costs, up to a maximum of $5,000, and reimburse Mr. Frazier
for the cost of the suit. Upon payment in full, Mr. Frazier will dismiss the
lawsuit with prejudice. On August 1, 2003, the settlement amount was paid in
full.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

     The exhibits listed below are required by Item 601 of Regulation S-B.

       EXHIBIT
        NUMBER                     DESCRIPTION OF DOCUMENT
        ------                     -----------------------

         4.1      Piggyback Registration Rights Agreement dated June 30, 2003
                  between the Registrant and Bridgewater Capital.

         10.1     Note and Warrant Purchase Agreement by and among the
                  Registrant, Charles E. Ramey and La Jolla Cove LA Investors,
                  Inc., dated June 6, 2003.

         10.2     Form of Warrant Agreement between the Registrant and La Jolla
                  Cove Investors, Inc.

         10.3     Debenture and Warrant Agreement dated June 30, 2003 by and
                  between the Registrant and Societe Financiere Privee, S.A.

         10.4     Warrant Agreement dated June 30, 2003 between the Registrant
                  and Societe Financiere Privee, S.A.

         10.5     Warrant Agreement dated July 10, 2003 between the Registrant
                  and Charles E. Ramey.

         10.6     Subordinated Convertible Note and Warrant Agreement dated July
                  10, 2003 between the Registrant and Charles E. Ramey.

         10.7     Warrant Agreement dated June 25, 2003 between the Registrant
                  and Barry Venison.

         10.8     Voting Agreement dated June 30, 2003 by and between the
                  Registrant and Societe Financiere Privee, S.A.

         10.9     Form of 8% Subordinated Promissory Note dated June 6, 2003
                  between the Registrant and La Jolla Cove Investors, Inc.

         10.10    5 % Convertible Debenture between the Registrant and Societe
                  Financiere Privee, S.A.

         10.11    Convertible Subordinated Promissory Note dated July 10, 2003
                  between the Registrant and Charles Ramey.

         10.12    8% Convertible Promissory Note between the Registrant and
                  Barry Venison.

         10.13    Form of Note and Warrant Conversion Agreement dated June 25,
                  2003 between the Registrant, Barry Venison, Brad Friedel, John
                  Barnes and Darren Ridge.

                                       7
<PAGE>

       EXHIBIT
        NUMBER                     DESCRIPTION OF DOCUMENT
        ------                     -----------------------

         10.14    Form of Replacement Warrant Agreement between the Registrant
                  and each of Barry Venison, Brad Friedel, John Barnes and
                  Darren Ridge.

         10.15    Promissory Note dated December 31, 2002 between the Registrant
                  and ACI Communications Holdings, Inc. f/k/a AllState
                  Communications, Inc.

         10.16    Amendment No. 1 to Settlement Agreement dated December 31,
                  2002 between the Registrant, Frank Montelione, Russel
                  Leventhal, ACI Communications Holdings, Inc. f/k/a/ AllState
                  Communications Inc.

         10.17    Security Agreement dated December 31, 2002 between the
                  Registrant and ACI Communications Holdings, Inc. f/k/a/
                  AllState Communications Inc.

         10.18+   Nonstatutory Stock Option Agreement dated May 21, 2003
                  Agreement between the Registrant and Mario Villarreal.

         10.19+   Nonstatutory Stock Option Agreement dated May 21, 2003 between
                  the Registrant and Terry E. Stepanik.

         31.1     Certification by Chief Executive Officer pursuant to
                  13a-14(a).

         31.2     Certification by Chief Financial Officer pursuant to
                  13a-14(a).

         32.1     Statement of Chief Executive Officer and Chief Financial
                  Officer under 18 U.S.C.ss. 1350.

-----------------------
         + Indicates management contract or compensatory plan or arrangement.

     (b) Reports on Form 8-K.

     The Company has filed a current report on Form 8-K on April 18, 2003
reporting under Item 5 its intention to restate its financial statements for the
2002 and 2001 fiscal years and certain quarterly periods in 2001 and 2002.

     The Company has filed a current report on Form 8-K on June 16, 2003
reporting under Item 5 the restatement of its financial statements for the 2002
and 2001 fiscal years and for certain quarterly periods in 2001 and 2002.

     The Company has filed a current report on Form 8-K on June 17, 2003 and
Form 8-K/A on June 26, 2003 reporting under Item 4 a change in the Company's
certifying accountants.

                                       8
<PAGE>



                                    SIGNATURE

     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.

     Dated:  August 14, 2003

                               US DATAWORKS, INC.



                               By              /s/ John S. Reiland
                                  ---------------------------------------------
                                                 John S. Reiland
                                             Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

                                       9
<PAGE>

                                  EXHIBIT INDEX

       EXHIBIT
        NUMBER                     DESCRIPTION OF DOCUMENT
        ------                     -----------------------

         4.1      Piggyback Registration Rights Agreement dated June 30, 2003
                  between the Registrant and Bridgewater Capital.

         10.1     Note and Warrant Purchase Agreement by and among the
                  Registrant, Charles E. Ramey and La Jolla Cove LA Investors,
                  Inc., dated June 6, 2003.

         10.2     Form of Warrant Agreement between the Registrant and La Jolla
                  Cove Investors, Inc.

         10.3     Debenture and Warrant Agreement dated June 30, 2003 by and
                  between the Registrant and Societe Financiere Privee, S.A.

         10.4     Warrant Agreement dated June 30, 2003 between the Registrant
                  and Societe Financiere Privee, S.A.

         10.5     Warrant Agreement dated July 10, 2003 between the Registrant
                  and Charles E. Ramey.

         10.6     Subordinated Convertible Note and Warrant Agreement dated July
                  10, 2003 between the Registrant and Charles E. Ramey.

         10.7     Warrant Agreement dated June 25, 2003 between the Registrant
                  and Barry Venison.

         10.8     Voting Agreement dated June 30, 2003 by and between the
                  Registrant and Societe Financiere Privee, S.A.

         10.9     Form of 8% Subordinated Promissory Note dated June 6, 2003
                  between the Registrant and La Jolla Cove Investors, Inc.

         10.10    5 % Convertible Debenture between the Registrant and Societe
                  Financiere Privee, S.A.

         10.11    Convertible Subordinated Promissory Note dated July 10, 2003
                  between the Registrant and Charles Ramey.

         10.12    8% Convertible Promissory Note between the Registrant and
                  Barry Venison.

         10.13    Form of Note and Warrant Conversion Agreement dated June 25,
                  2003 between the Registrant, Barry Venison, Brad Friedel, John
                  Barnes and Darren Ridge.

         10.14    Form of Replacement Warrant Agreement between the Registrant
                  and each of Barry Venison, Brad Friedel, John Barnes and
                  Darren Ridge.

         10.15    Promissory Note dated December 31, 2002 between the Registrant
                  and ACI Communications Holdings, Inc. f/k/a AllState
                  Communications, Inc.

         10.16    Amendment No. 1 to Settlement Agreement dated December 31,
                  2002 between the Registrant, Frank Montelione, Russel
                  Leventhal, ACI Communications Holdings, Inc. f/k/a/ AllState
                  Communications Inc.

         10.17    Security Agreement dated December 31, 2002 between the
                  Registrant and ACI Communications Holdings, Inc. f/k/a/
                  AllState Communications Inc.

         10.18+   Nonstatutory Stock Option Agreement dated May 21, 2003
                  Agreement between the Registrant and Mario Villarreal.

         10.19+   Nonstatutory Stock Option Agreement dated May 21, 2003 between
                  the Registrant and Terry E. Stepanik.

                                       10
<PAGE>

       EXHIBIT
        NUMBER                     DESCRIPTION OF DOCUMENT
        ------                     -----------------------

         31.1     Certification by Chief Executive Officer pursuant to
                  13a-14(a).

         31.2     Certification by Chief Financial Officer pursuant to
                  13a-14(a).

         32.1     Statement of Chief Executive Officer and Chief Financial
                  Officer under 18 U.S.C.ss. 1350.

-----------------------
         + Indicates management contract or compensatory plan or arrangement.



                                       11