U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                  FORM 10-KSB/A


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

                    FOR FISCAL YEAR ENDED: DECEMBER 31, 2003

                                       OR

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

For the transition period from                          To
                              -------------------------    ---------------------


Commission file number         0-28417
                       ---------------------------------------------------------

                        KNOWLEDGE TRANSFER SYSTEMS, INC.
                 (Name of small business issuer in its charter)

            Nevada                                              76-0599457
--------------------------------                            --------------------
 State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization                              Identification No.)


                 62 Crestmont Drive, Oakland, California, 94619
                 ----------------------------------------------
               (Address of principal executive offices) (zip code)

                    110 Broadway, Oakland, California, 94607
                    ----------------------------------------
                        (Former name and former address)


Issuer's telephone number                               (510) 251-6230
                                                       ---------------


Securities registered under Section 12(b) of the Act: NONE Securities registered
under Section 12(g) of the Act:

                          Common Stock Par Value $0.001
                                (Title of class)



<PAGE>




     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the past 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes X No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [X]


         The aggregate  market value of the voting and  non-voting  common stock
held by  non-affiliates of the registrant as of March 31, 2004 was approximately
$264,903. The registrant had issued and outstanding 254,736 shares of its common
stock on March 31, 2004.
































                                        2

<PAGE>




                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

Item Number and Caption                                                                                       Page
PART I

<S>                                                                                                          <C>
Item 1.     Description of Business                                                                               4

Item 2.     Description of Property                                                                               6

Item 3.     Legal Proceedings                                                                                     6

Item 4.     Submission of Matters to a Vote of Security Holders                                                   6


PART II

Item 5.     Market for Common Equity and Related Stockholder Matters                                              7

Item 6.     Management's Discussion and Analysis or Plan of Operations                                            8

Item 7.      Financial Statements                                                                                10

Item 8.      Changes in and Disagreements With Accountants on Accounting and
                 Financial Disclosure                                                                            10

PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
                Compliance with Section 16(a) of the Exchange Act                                                10

Item 10.   Executive Compensation                                                                                11

Item 11.   Security Ownership of Certain Beneficial Owners and Management                                        11

Item 12.   Certain Relationships and Related Transactions                                                        12

Item 13.   Exhibits and Reports on Form 8-K                                                                      12

Item 14.   Controls and Procedures                                                                               13

Item 15.   Principal Accountant Fees & Services                                                                  14
</TABLE>

                                       3
<PAGE>

                                     PART I

         This Report,  including all documents incorporated herein by reference,
includes certain "forward- looking  statements"  within the meaning of that term
in Section 13 or 15(d) of the  Securities  Act of 1934,  and  Section 21E of the
Exchange Act, including, among others, those statements preceded by, followed by
or  including  the  words  "believes,"   "expects,"   "anticipates"  or  similar
expressions.

         These  forward-looking  statements  are based  largely  on our  current
expectations and are subject to a number of risks and uncertainties.  Our actual
results  could  differ  materially  from these  forward-looking  statements.  In
addition to the other risks  described  in the "Factors  That May Affect  Future
Results"  discussion  under Item 6,  Management's  Discussion  and  Analysis  of
Financial  Condition  and  Results  of  Operations  in Part  II of this  Report,
important  factors to consider in  evaluating  such  forward-looking  statements
include:

         o        changes in our  business  strategy or an  inability to execute
                  our strategy due to unanticipated changes in the market,
         o        various competitive factors that may prevent us from competing
                  successfully in the marketplace,
         o        changes  in  external  competitive  market  factors  or in our
                  internal  budgeting  process  which might impact trends in our
                  results of operations, and
         o        our  ability to raise  sufficient  capital  to meet  operating
                  requirements.

         In light of these risks and  uncertainties,  there can be no  assurance
that the events contemplated by the forward-looking statements contained in this
Report will, in fact, occur.



                         ITEM 1 DESCRIPTION OF BUSINESS


ORGANIZATION- On August 1, 1992 Missaticum, Inc. dba QtrainCorp was incorporated
under the laws of the State of  California.  On October  4,  1996,  its name was
changed  to KT  Solutions,  Inc.  It was formed  for the  purpose of  developing
technology based training solutions.  It creates software programs that are used
to teach and train  individuals  how to operate  popular  business  and home use
software programs.

On June 1, 2000, the former  shareholders of KT Solutions,  Inc.  entered into a
stock exchange  agreement with enSurge,  Inc. (enSurge) whereby enSurge acquired
all of the  outstanding  common  shares of KT  Solutions,  Inc.  from its former
shareholders in exchange for the issuance of 500,000 shares of enSurge's  common
stock and options to purchase  250,000 shares of enSurge's common stock at $4.00
per share.  In addition,  enSurge issued  warrants to purchase  50,000 shares of
common  stock at $0.10 per share as a finder's  fee.  As a result,  the  Company
became a wholly-owned subsidiary of enSurge, Inc.

The acquisition of KT Solutions, Inc. was recorded by enSurge using the purchase
method of accounting.  The 500,000 common shares issued and the 300,000  options
issued were  recorded at their fair values of  $2,240,000  ($4.48 per share) and
$1,120,000,  respectively.  The value of the  options was  determined  using the
Black-Scholes  option  pricing model with the following  assumptions:  risk free
interest rate of 6.0%,

                                        4

<PAGE>



expected dividend yield of 0%, volatility of 577% and expected life of 5 years.

For  financial  reporting  purposes,  KT  Solutions,  Inc. was  considered a new
reporting entity on June 1, 2000. The accompanying  financial statements reflect
the  operations of KT Solutions,  Inc. from June 1, 2000. The purchase price was
allocated to the assets and  liabilities at their fair value.  The excess of the
purchase price over the fair value of the net assets acquired was $4,342,278 and
was allocated to goodwill.  Goodwill was being  amortized over five years by the
straight-line method.

REORGANIZATION - On April 25, 2001, enSurge,  Inc.  consummated a stock exchange
agreement with GoThink!.com,  Inc., a publicly held Nevada corporation,  whereby
all of the  1,368,387  outstanding  common  shares of KT  Solutions,  Inc.  were
transferred  to   GoThink!.com   Inc.  in  exchange  for  8,000,000   shares  of
GoThink!.com,  Inc.  common  stock.  As a  result  of  the  stock  exchange,  KT
Solutions,  Inc.  became  a  wholly-  owned  subsidiary  of  GoThink!.com,  Inc.
GoThink!.com, Inc. had 496 shares of common stock outstanding prior to the stock
exchange but after a 1-for-100 reverse stock split.

The stock exchange has been accounted for as the reorganization of KT Solutions,
Inc.  Accordingly,  the accompanying  financial statements have been restated to
reflect the effects of the 5.84-for-1  equivalent stock split that resulted from
8,000,000  shares of  GoThink!.com,  Inc. being issued in exchange for 1,368,387
previously outstanding shares of KT Solutions,  Inc.  GoThink!.com,  Inc. had no
assets or operations prior to or at the date of the reorganization. Accordingly,
the acquisition of GoThink!.com,  Inc. was not considered a business combination
but was  considered  the issuance of common stock in exchange for the assumption
of  liabilities.   The  496  common  shares  held  by  the  GoThink!.com,   Inc.
shareholders  that remained  outstanding were recorded as issued in exchange for
the assumption of $57,560 of accounts  payable.  The operations of GoThink!.com,
Inc. have been included in the accompanying  financial  statements from April 1,
2001  (which  was  the   beginning  of  the   accounting   period  during  which
GoThink!.com, Inc. was purchased).

On April 23, 2001,  the articles of  incorporation  of  GoThink!.com,  Inc. were
amended  to change  its name to  Knowledge  Transfer  Systems,  Inc.  (hereafter
referred to as the Company) and to modify the authorized capital for the Company
such that the Company is  authorized  to issue  10,000,000  shares of  preferred
stock  having a par value of $0.001 per share and  100,000,000  shares of common
stock  having a par  value of  $0.001  per  share.  The  accompanying  financial
statements have been adjusted to reflect the change in the authorized capital.

As of September 15, 2003 the Company was in the development stage.

BANKRUPTCY  OF  SUBSIDIARY  - On  September  15,  2003,  KT  Solutions,  Inc., a
California  corporation  and wholly owned  subsidiary of the Company,  filed for
Chapter 7 bankruptcy in Alameda County, Oakland, California.

BUSINESS  CONDITION - The Company has an accumulated  deficit as of December 31,
2003 and 2002 of $8,286,929  and  $8,165,506,  respectively.  As of December 31,
2003 and 2002,  the  Company  had a working  capital  deficit  of  $108,302  and
$55,731,  and the Company's  wholly owned  subsidiary,  KT Solutions,  Inc., has
filed chapter 7 bankruptcy.  These conditions raise  substantial doubt about the
Company's  ability to continue as a going  concern.  The Company needs to obtain
additional  financing  to fund  payment of  obligations  and to provide  working
capital for operations.  Management is seeking additional financing,  and is now
looking for a merger or acquisition  candidate.  The Company  intends to acquire
interests in various business opportunities, which in the opinion of management,
will provide a profit to the Company.  Management  believes  these  efforts will
generate  sufficient  cash flows from  future  operations  to pay the  Company's
obligations  and  working  capital  needs.  There is no  assurance  any of these
transactions will occur. The financial statements do not include any adjustments
relating to the recoverability and

                                        5

<PAGE>



classification  of asset carrying  amounts or the amount and  classification  of
liabilities  that might  result  should the  Company be unable to  continue as a
going concern.

PRODUCTS AND SERVICES

         As of December 31, 2003, the Company has no products or services. Prior
to 2003, the Company's  main products and services  revolved  around  e-learning
courses and solutions.

COMPETITION

         The Company expects to encounter substantial competition in its efforts
to  locate  attractive   opportunities,   primarily  from  business  development
companies,  venture  capital  partnerships  and  corporations,  venture  capital
affiliates  of  large  industrial  and  financial  companies,  small  investment
companies,   and  wealthy   individuals.   Many  of  these  entities  will  have
significantly greater experience, resources and managerial capabilities than the
Company and will  therefore be in a better  position  than the Company to obtain
access to attractive business opportunities.

EMPLOYEES

         As of December 31, 2003, the Company has no employees.



                         ITEM 2 DESCRIPTION OF PROPERTY


         Our corporate  headquarters are located at 62 Crestmont Drive, Oakland,
California 94619. This property is owned by our President,  Steven K. Burke. The
office space is supplied on a gratis basis.

         On January 1, 2003, the Company was in default under its previous lease
obligation for certain office space located at 110 Broadway, Oakland, California
94607, and is attempting to work out a settlement with the landlord.


                            ITEM 3 LEGAL PROCEEDINGS


         None.





                        ITEM 4 SUBMISSION OF MATTERS TO A
                            VOTE OF SECURITY HOLDERS


         There were no matters submitted to a vote of shareholders.

                                        6

<PAGE>





                                     PART II



                       ITEM 5 MARKET FOR COMMON EQUITY AND
                           RELATED STOCKHOLDER MATTERS


         The Company's common stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market under the trading symbol "KTSI". The common
stock  prices  reflect  inter-dealer  prices,  do not  include  retail  markups,
markdowns or commissions and do not necessarily represent actual transactions.

         The following table set forth, for the quarters indicated, the high and
low sales price per share for the Company's Common Stock, as reported by Nasdaq:

<TABLE>
<CAPTION>

                 2003:                              HIGH                 LOW
<S>                                              <C>                 <C>
First Quarter                                    $         0.014     $         0.001
Second Quarter                                   $         0.010     $         0.002
Third Quarter                                    $         0.014     $         0.004
Fourth Quarter                                   $         0.019     $         0.003

                 2002:                              HIGH                 LOW
First Quarter                                    $         0.510     $         0.070
Second Quarter                                   $         0.200     $         0.030
Third Quarter                                    $         0.070     $         0.020
Fourth Quarter                                   $         0.040     $         0.020
</TABLE>

HOLDERS

          The number of shareholders of record of the Company's  common stock as
of March 31, 2004 was approximately 2100.

DIVIDENDS

         The  Company  does not  anticipate  paying  any cash  dividends  in the
foreseeable  future and intends to retain all working  capital and earnings,  if
any, for use in the Company's  operations  and in the expansion if its business.
Any future determination with respect to the payment of dividends will be at the
discretion of the Board of Directors  and will depend upon,  among other things,
the  Company's   results  of   operations,   financial   condition  and  capital
requirements,  general business conditions,  and such other factors as the Board
of Directors deems relevant.

RECENT SALES OF UNREGISTERED SECURITIES.


                                        7

<PAGE>



         On May 7, 2003,  the Company  issued  2,000 shares of common stock at a
fair market value of  approximately  $0.002 for professional  services  rendered
amounting to a charge to operations of $2,000.

         On August 15, 2003,  the Company  filed a  Certificate  of  Designation
which was  approved by the Board of  Directors to issue a new class of Preferred
Stock. The designation  consists of 100,000 shares of Series "B: Preferred Stock
with a "Stated  Value" of $1,000 per share.  As of December 31, 2003,  no shares
have been issued.

         On August 23, 2003, the Company sold the Business  Development  Series,
e-learning  content and software from  Innovative  Software  Technologies,  Inc.
(Innovative) in exchange for 875,000 of the Company's  Series A preferred shares
with a stated value of $1.00 per share. The preferred  shares were  convertible,
at the discretion of Innovative to the Company's common stock at 95% of the fair
market  value  of  the  Company's  common  stock  based  on a five  day  average
proceeding the date of conversion.  The President and Chief Executive Officer of
Innovative is the former President and Chief Executive Officer of Ensurge, Inc.,
which was the parent  company of KT  Solutions,  Inc. At the time of the sale of
the Business  Development Series to Innovative Software  Technologies,  Inc. for
875,000  of  the  Company's  preferred  shares,   there  was  no  related  party
relationship  between the  companies  and/or the officers  and  directors of the
companies at the time of the transaction.

         On August 23,  2003,  the Company  signed a Content  License and Resale
Agreement  with  Innovative  Software  Technologies,  Inc.  (IST),  a California
corporation.  The  Company  sold  $125,000  (retail  value) of on-line  training
products to IST in exchange for 3,800 common shares of the Company's stock which
were held by IST.

         On July 29,  2004,  the Company  authorized  a 1 for 500 reverse  stock
split of the Company's  common stock.  The stock split  provided that in no case
shall any shareholders  holdings be reduced to less than 100 shares. The reverse
stock split reduced the number of outstanding  common shares from  49,843,268 to
254,736.  All  references  to  the  Company's  common  stock  in  the  financial
statements have been restated to reflect the reverse stock split.


                       ITEM 6 MANAGEMENT'S DISCUSSION AND
                         ANALYSIS OR PLAN OF OPERATIONS


         The following  discussion  includes statements that are forward looking
in nature.  The accuracy of such statements depends on a variety of factors that
may affect the business and operations of the Company.

         When  used  in  this  discussion,  the  words  "expect(s)",  "feel(s)",
"believe(s)",   "will",  "may",  "anticipate(s)"  and  similar  expressions  are
intended to identify  forward-looking  ual results could differ  materially from
those  projected.  Readers are  cautioned  not to place undue  reliance on these
forward-looking  statements,  and are urged to carefully review and consider the
various disclosures elsewhere in this Form 10- KSB.

PLAN OF OPERATION

         The Company has an accumulated deficit as of December 31, 2003 and 2002
of $8,286,929 and  $8,165,506,  respectively.  As of December 31, 2003 and 2002,
the  Company had a working  capital  deficit of $108,302  and  $55,731,  and the
Company's  wholly owned  subsidiary,  KT  Solutions,  Inc.,  has filed chapter 7
bankruptcy. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The Company needs to obtain additional financing
to fund payment of obligations  and to provide  working  capital for operations.
Management is seeking additional  financing,  and is now looking for a merger or
acquisition  candidate.  The  Company  intends to acquire  interests  in various
business  opportunities,  which in the  opinion of  management,  will  provide a
profit  to  the  Company.   Management  believes  these  efforts  will  generate
sufficient  cash flows from future  operations to pay the Company's  obligations
and working capital

                                        8

<PAGE>



needs. There is no assurance any of these transactions will occur. The financial
statements do not include any  adjustments  relating to the  recoverability  and
classification  of asset carrying  amounts or the amount and  classification  of
liabilities  that might  result  should the  Company be unable to  continue as a
going concern.

         The Company  intends to seek,  investigate  and, if such  investigation
warrants, acquire an interest in one or more business opportunities presented to
it by persons or firms who or which  desire to seek  perceived  advantages  of a
publicly held corporation.

         The Company  will not  restrict  its search to any  specific  business,
industry or geographical location, and the Company may participate in a business
venture of virtually any kind or nature. The discussion of the proposed business
under this caption and throughout is purposefully general and is not meant to be
restrictive of the Company's  virtually  unlimited  discretion to search for and
enter into potential business opportunities.

         The  Company  may obtain  funds in one or more  private  placements  to
finance the operation of any acquired business, if necessary. Persons purchasing
securities in these placements and other  shareholders  will likely not have the
opportunity  to  participate in the decision  relating to any  acquisition.  The
Company's  proposed business is sometimes  referred to as a "blind pool" because
any investors will entrust their investment  monies to the Company's  management
before they have a chance to analyze any  ultimate  use to which their money may
be put.  Consequently,  the Company's  potential success is heavily dependent on
the Company's management,  which will have unlimited discretion in searching for
and entering  into a business  opportunity.  There can be no assurance  that the
Company will be able to raise any funds in private placement.

CRITICAL ACCOUNTING POLICIES

         The discussion  and analysis of our financial  condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America.  The preparation of these financial  statements
requires the Company to make  estimates and  judgments  that affect the reported
amounts of assets and liabilities, revenues and expenses, and related disclosure
of contingent  assets and  liabilities  at the date of the  Company's  financial
statements.  Actual  results may differ  from these  estimates  under  different
assumptions or conditions.

         Critical  accounting  policies are defined as those that are reflective
of significant judgments and uncertainties, and potentially result in materially
different  results  under  different  assumptions  and  conditions.  The Company
believes that its critical  accounting  policies  include those described below.
For a  detailed  discussion  on the  application  of these and other  accounting
policies,  see  Note 1 in the  accompanying  consolidated  financial  statements
included in this  Company's  Form 10-KSB for the fiscal year ended  December 31,
2003.

GOODWILL AND INTANGIBLE ASSETS

         Effective  January 1, 2002, the Company  adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets (SFAS 142). This statement affects
the Company's  treatment of goodwill and other intangible  assets. The statement
requires that goodwill existing at the date of adoption be reviewed for possible
impairment and that  impairment  tests be periodically  repeated,  with impaired
assets  written  down  to  fair  value.  Additionally,   existing  goodwill  and
intangible assets must be assessed and classified within

                                        9

<PAGE>



the  statement's  criteria.  Intangible  assets  with finite  useful  lives will
continue to be  amortized  over those  periods.  Amortization  of  goodwill  and
intangible assets with indeterminable lives will cease.

         During the second  quarter 2002 and within the first interim  period of
adoption of SFAS No.  142,  the  Company  tested  goodwill  for  impairment  and
determined  that an  impairment  charge was  necessary as of June 30, 2002.  The
impairment charge as of June 30, 2002 was 2,967,223.  This impairment charge was
recognized as a change in accounting  principle and the income per share effects
of the accounting change were separately disclosed.



                           ITEM 7 FINANCIAL STATEMENTS


         The  financial  statements  of the Company and  supplementary  data are
included beginning  immediately following the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.




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


         There are not and have not been any  disagreements  between the Company
and its  accountants  on any  matter  of  accounting  principles,  practices  or
financial statements disclosure.


                                    PART III


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


EXECUTIVE OFFICERS AND DIRECTORS

         The  following  table sets forth the name,  age,  and  position of each
executive officer and director of the Company:

DIRECTOR'S   NAME                   AGE              OFFICE

Steven K. Burke                     49              President, CEO, and Chairman

         As of  December  31,  2003,  Steven K.  Burke is the sole  officer  and
director of the Company.

STEVE K. BURKE - PRESIDENT, CHAIRMAN AND CHIEF EXECUTIVE OFFICER

                                       10

<PAGE>




         Mr. Burke brings more than 25 years experience in Marketing, operations
and information  technology to Knowledge  Transfer Systems,  Inc. In his role as
chairman  and CEO, he has been  focused on guiding the company to be a leader in
the  eLearning  market.  During his  tenure,  Mr.  Burke has  implemented  a new
corporate  identity and company  strategy.  His  leadership  has  positioned the
company for rapid growth in the industry. Prior to joining KTSI, Mr. Burke was a
principal  partner at Emerson  Capital  Corporation,  a business  brokerage  and
investment firm in San Francisco.  In addition, he has held several senior sales
and marketing  management  positions over the years.  Mr. Burke graduated with a
bachelor's degree in Business  Administration  and a masters in Finance from the
University of Wyoming.

AUDIT COMMITTEE FINANCIAL EXPERT

         The  Company's  board of  directors  does not have an "audit  committee
financial   expert,"  within  the  meaning  of  such  phrase  under   applicable
regulations  of the  Securities  and Exchange  Commission,  serving on its audit
committee.  The  board of  directors  believes  that all  members  of its  audit
committee are financially literate and experienced in business matters, and that
one or more  members of the audit  committee  are  capable of (i)  understanding
generally accepted accounting principles ("GAAP") and financial statements, (ii)
assessing the general  application  of GAAP  principles  in connection  with our
accounting for estimates,  accruals and reserves, (iii) analyzing and evaluating
our  financial   statements,   (iv)  understanding  our  internal  controls  and
procedures  for  financial  reporting;  and (v)  understanding  audit  committee
functions,  all of which are attributes of an audit committee  financial expert.
However,  the board of directors  believes that there is not any audit committee
member who has obtained these attributes through the experience specified in the
SEC's definition of "audit committee financial expert." Further, like many small
companies,  it is difficult  for the Company to attract and retain board members
who qualify as "audit  committee  financial  experts," and competition for these
individuals is significant.  The board believes that its current audit committee
is able to  fulfill  its  role  under  SEC  regulations  despite  not  having  a
designated "audit committee financial expert."



                         ITEM 10 EXECUTIVE COMPENSATION


         Steve K. Burke served as CEO of Knowledge Transfer Systems, Inc. during
2003 and was not compensated by the Company during that time period.




               ITEM 11   SECURITY OWNERSHIP OF BENEFICIAL OWNERS
                                 AND MANAGEMENT


PRINCIPAL SHAREHOLDERS

         The table  below sets forth  information  as to each  person  owning of
record or who was known by the Company to own  beneficially  more than 5% of the
254,736  shares of issued and  outstanding  Common Stock,  including  options to
acquire stock of the Company as of August 27, 2004 and information as to the

                                       11

<PAGE>



ownership of the Company's Stock by each of its directors and executive officers
and by the  directors  and  executive  officers as a group.  Except as otherwise
indicated,  all shares are owned  directly,  and the persons  named in the table
have  sole  voting  and  investment  power  with  respect  to  shares  shown  as
beneficially owned by them.

<TABLE>
<CAPTION>
                           NAME AND ADDRESS                   AMOUNT & NATURE                    PERCENT
TITLE OF CLASS             OF BENEFICIAL OWNER                OF BENEFICIAL OWNER                OF CLASS

<S>                        <C>                                <C>                                <C>
Common Stock               Steven K. Burke                    24,000 shares                        9.42
                           62 Crestmont Dr.                   President, CEO
                         Oakland, CA 94619 and Director

DIRECTORS AND EXECUTIVE OFFICERS

Common Stock               Steven K. Burke                    24,000       shares                  9.42
                           62 Crestmont Dr.                   President, CEO
                         Oakland, CA 94619 and Director
</TABLE>




             ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


         As of December  31,  2003 and 2002,  notes  payable to related  parties
amounted  to  $302,967  and  $486,992,  respectively.  These  notes  are part of
discontinued operations as of December 31, 2003.

         On April 24, 2001,  Mr. Steve Burke,  President and CEO of the Company,
purchased  24,000  shares of Common  Stock of the  Issuer at a price of $.05 per
share utilizing a loan, in the principal amount of $600,000,  made pursuant to a
Promissory  Note dated April 25, 2001.  According to the terms and conditions of
the Promissory  Note, Mr. Burke agreed to pay the Company a principal sum of six
hundred thousand dollars ($600,000) together with interest on the unpaid balance
thereof at a rate of six percent  (6%) per annum with the  principal of the note
due in full by December 31, 2004. No interest is accrued on the note until it is
paid. The notes  receivable are partial  recourse notes in that each investor is
unconditionally  obligated to pay 10% of the amount of their note in addition to
the return of the shares of common stock in the event of default under the terms
of the notes.



                   ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K


      (a) The following documents are filed as part of this report.


                                       12

<PAGE>

<TABLE>
<CAPTION>
1. FINANCIAL STATEMENTS                                                                                         PAGE

<S>                                                                                                            <C>
Report of Robison, Hill & Co., Independent Certified Public Accountants.........................................F-1
Balance Sheets
  December 31, 2003, and 2002...................................................................................F-2
Statements of Loss
  For the Years Ended December 31, 2003, and 2002...............................................................F-3
Statement of Stockholders' Equity
  For the Years Ended December 31, 2003, and 2002...............................................................F-4
Statements of Cash Flows
  For the Years Ended December 31, 2003, and 2002...............................................................F-6
Notes to Financial Statements
  December 31, 2003, and 2002...................................................................................F-7
</TABLE>

2.     FINANCIAL STATEMENT SCHEDULES

     All schedules are omitted  because they are not  applicable or the required
information is shown in the financial statements or notes thereto.

3.     EXHIBITS
                        The  following  exhibits  are  included  as part of this
report:
Exhibit
Number           Title of Document


31       Certification  Pursuant  to Section  302 of the  Sarbanes-Oxley  Act of
         2002.
32       Certification  Pursuant  to Section  906 of the  Sarbanes-Oxley  Act of
         2002.

     (b) REPORTS FILED ON FORM 8-K

         None.



                        ITEM 14. CONTROLS AND PROCEDURES


         The Company's Chief Executive  Officer and Chief Financial Officer have
concluded,  based on an evaluation  conducted within 90 days prior to the filing
date of this  annual  report  on Form  10-KSB,  that  the  Company's  disclosure
controls and  procedures  have  functioned  effectively  so as to provide  those
officers the information necessary whether:

                  (i) this  annual  report on Form  10-KSB  contains  any untrue
                  statement of a material fact or omits to state a material fact
                  necessary  to  make  the  statements  made,  in  light  of the
                  circumstances  under  which such  statements  were  made,  not
                  misleading  with respect to the period  covered by this annual
                  report on Form 10-KSB, and


                                       13

<PAGE>



                  (ii) the financial statements, and other financial information
                  included in this annual report on Form 10-KSB,  fairly present
                  in all material respects the financial  condition,  results of
                  operations  and cash flows of the Company as of, and for,  the
                  periods presented in this annual report on Form 10-KSB.

         There  have  been no  significant  changes  in the  Company's  internal
controls or in other factors since the date of the Chief Executive Officer's and
Chief  Financial  Officer's  evaluation  that could  significantly  affect these
internal controls,  including any corrective actions with regards to significant
deficiencies and material weaknesses.



                  ITEM 15. PRINCIPAL ACCOUNTANT FEES & SERVICES


         The following is a summary of the fees billed to us by Robison,  Hill &
Company for professional services rendered for the years ended December 31, 2003
and 2002:

<TABLE>
<CAPTION>

           Service                                     2003                   2002
------------------------------                  ------------------     ------------------
<S>                                             <C>                    <C>
Audit Fees                                      $           10,760     $           11,720
Audit-Related Fees                                               -                      -
Tax Fees                                                     1,200                      -
All Other Fees                                                   -                      -
                                                ------------------     ------------------
Total                                           $           11,960     $           11,720
                                                ==================     ==================
</TABLE>

AUDIT FEES.  Consists of fees billed for professional  services rendered for the
audits  of  our  consolidated  financial  statements,  reviews  of  our  interim
consolidated  financial  statements  included  in  quarterly  reports,  services
performed in connection  with filings with the Securities & Exchange  Commission
and related  comfort  letters and other  services that are normally  provided by
Robison,  Hill & Company in connection with statutory and regulatory  filings or
engagements.

TAX FEES. Consists of fees billed for professional  services for tax compliance,
tax  advice  and tax  planning.  These  services  include  assistance  regarding
federal,  state and local tax compliance  and  consultation  in connection  with
various transactions and acquisitions.

Audit  Committee  Pre-Approval of Audit and  Permissible  Non-Audit  Services of
Independent Auditors

         The Audit Committee, is to pre-approve all audit and non-audit services
provided by the independent auditors. These services may include audit services,
audit-related  services,  tax services  and other  services as allowed by law or
regulation.  Pre-approval  is  generally  provided  for up to one  year  and any
pre-approval  is detailed as to the  particular  service or category of services
and is generally  subject to a specifically  approved  amount.  The  independent
auditors  and  management  are  required  to  periodically  report  to the Audit
Committee regarding the extent of services provided by the independent  auditors
in accordance  with this pre- approval and the fees incurred to date.  The Audit
Committee may also pre-approve particular services on a case-by-case basis.

         The Audit Committee pre-approved 100% of the Company's 2003 audit fees,
audit-related  fees,  tax fees,  and all other fees to the  extent the  services
occurred  after May 6, 2003,  the effective  date of the Securities and Exchange
Commission's final pre-approval rules.


                                       14

<PAGE>
                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)

                                       -:-

                        CONSOLIDATED FINANCIAL STATEMENTS
                                       AND
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                           DECEMBER 31, 2003 AND 2002





<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                                                                         PAGE

<S>                                                                                                       <C>
Report of Robison, Hill & Co., Independent Certified Public Accountants...................................F - 1

Consolidated Balance Sheets  - December 31, 2003 and 2002.................................................F - 2

Consolidated Statements of Operations for the Years Ended December 31, 2003 and 2002,
     and the Cumulative Period from September 15, 2003 (Inception of Development Stage)
     to December 31, 2003.................................................................................F - 3

Consolidated Statements of Stockholders' Equity for the Period From
     June 1, 2000 (inception) to December 31, 2003........................................................F - 4

Consolidated Statements of Cash Flows for the Years Ended December 31, 2003 and 2002
     and the Cumulative Period from September 15, 2003 (Inception of Development Stage)
     to December 31, 2003.................................................................................F - 6

Notes to the Consolidated Financial Statements............................................................F - 7
</TABLE>


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



<PAGE>







               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and the Shareholders
  Knowledge Transfer Systems, Inc.
  (A Development Stage Company)

         We  have  audited  the  accompanying   consolidated  balance  sheet  of
Knowledge  Transfer  Systems,  Inc. and Subsidiary (a development stage company)
(the  Company) as of December  31, 2003 and 2002,  and the related  consolidated
statements of  operations,  and cash flows for the two years ended  December 31,
2003 and 2002 and the cumulative  period from  September 15, 2003  (inception of
development  stage) to December  31,  2003,  and the  consolidated  statement of
stockholders'  equity from June 1, 2000  (inception) to December 31, 2003. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material  respects,  the financial  position of Knowledge
Transfer  Systems,  Inc. and  Subsidiary  (a  development  stage  company) as of
December 31, 2003 and 2002,  and the results of their  operations and their cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

         The accompanying  financial statements have been prepared assuming that
the Company  will  continue as a going  concern.  As  discussed in Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
and has a net capital  deficiency that raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note 1. The  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

                                                    Respectfully submitted


                                                    /s/ Robison, Hill & Co.
                                                    ----------------------------
                                                    Certified Public Accountants

Salt Lake City, Utah
August 24, 2004

                                      F - 1

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                          DECEMBER 31,
                                                                             --------------------------------------
                                                                                    2003                2002
                                                                             ------------------  ------------------
                                      ASSETS
<S>                                                                          <C>                 <C>
CURRENT ASSETS                                                               $                -  $                -
                                                                             ------------------  ------------------

     TOTAL CURRENT ASSETS                                                                     -                   -
                                                                             ------------------  ------------------

NET ASSETS OF DISCONTINUED OPERATIONS                                                    51,664             853,427
                                                                             ------------------  ------------------

     TOTAL ASSETS                                                            $           51,664  $          853,427
                                                                             ==================  ==================

                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
     TRADE ACCOUNTS PAYABLE                                                  $          108,302  $           55,731
                                                                             ------------------  ------------------

     TOTAL CURRENT LIABILITIES                                                          108,302              55,731
                                                                             ------------------  ------------------

NET LIABILITIES OF DISCONTINUED OPERATIONS                                            1,452,283           1,532,094
                                                                             ------------------  ------------------

     TOTAL LIABILITIES                                                                1,560,585           1,587,825
                                                                             ------------------  ------------------


STOCKHOLDERS' EQUITY
     PREFERRED STOCK - $0.001 PAR VALUE; 10,000,000 SHARES AUTHORIZED
        SERIES A CONVERTIBLE PREFERRED STOCK; -0- SHARES AND 875,000
           SHARES ISSUED AND OUTSTANDING; $1.00 STATED VALUE                                  -             875,000
        SERIES B CONVERTIBLE PREFERRED STOCK; -0- SHARES ISSUED AND
           OUTSTANDING; $1,000.00 STATED VALUE                                                -                   -
     COMMON STOCK - $0.001 PAR VALUE; 100,000,000
        SHARES AUTHORIZED; 254,736 SHARES AND 256,536
        SHARES OUTSTANDING                                                                  254                 256
     ADDITIONAL PAID-IN CAPITAL                                                       7,377,754           7,155,852
     NOTES RECEIVABLE FROM STOCKHOLDERS                                                (600,000)           (600,000)
     RETAINED DEFICIT                                                                (8,263,081)         (8,165,506)
     DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE                                       (23,848)                  -
                                                                             ------------------  ------------------
Total Stockholders' Equity                                                           (1,508,921)           (734,398)
                                                                             ------------------  ------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                   $           51,664  $          853,427
                                                                             ==================  ==================
</TABLE>



   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                      F - 2

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                                    CUMULATIVE
                                                                                                       FROM
                                                                                                  SEPTEMBER 15,
                                                             FOR THE             FOR THE               2003
                                                            YEAR ENDED          YEAR ENDED         INCEPTION OF
                                                           DECEMBER 31,        DECEMBER 31,        DEVELOPMENT
                                                               2003                2002               STAGE
                                                        ------------------  ------------------  ------------------

<S>                                                     <C>                 <C>                 <C>
SALES                                                   $                -  $                -  $                -
                                                        ------------------  ------------------  ------------------

OPERATING EXPENSES                                                  23,848              37,908              23,848
                                                        ------------------  ------------------  ------------------

INCOME (LOSS) FROM OPERATIONS                                      (23,848)            (37,908)            (23,848)
                                                        ------------------  ------------------  ------------------

DISCONTINUED OPERATIONS
     INCOME (LOSS) FROM OPERATIONS OF KT SOLUTIONS
       TO BE DISPOSED, NET OF TAX EFFECTS OF $0                    (97,575)           (598,145)                  -
                                                        ------------------  ------------------  ------------------

NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT                        (121,423)           (636,053)            (23,848)
                                                        ------------------  ------------------  ------------------
     EFFECTS OF ACCOUNTING CHANGE

CUMULATIVE EFFECTS OF ACCOUNTING CHANGE
     NET OF TAX                                                          -          (2,967,223)                  -
                                                        ------------------  ------------------  ------------------

NET INCOME (LOSS)                                       $         (121,423) $       (3,603,276) $          (23,848)
                                                        ==================  ==================  ==================

BASIC AND DILUTED INCOME (LOSS) PER SHARE:
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECTS OF
     EFFECTS OF ACCOUNTING CHANGE                       $           (0.48)  $           (2.62)
                                                        ==================  ==================

CUMULATIVE EFFECTS OF ACCOUNTING CHANGE,
     NET OF TAX                                         $                -  $          (12.21)
                                                        ==================  ==================

NET INCOME (LOSS)                                       $           (0.48)  $          (14.83)
                                                        ==================  ==================

Weighted Average Number of Common
  Shares Used in Per Share Calculation                             256,481             247,599
                                                        ==================  ==================
</TABLE>



   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                      F - 3

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                                                         CUMULATIVE
                                                                                                                           FROM
                                                                                                                       SEPTEMBER 15,
                                                                                                  Notes                    2003
                                                                                  ADDITIONAL    Receivable              INCEPTION OF
                                      PREFERRED STOCK        COMMON STOCK          PAID-IN        FROM          RETAINED DEVELOPMENT
                                        -------------    ---------------------
                                       SHARES  AMOUNT    SHARES        AMOUNT      CAPITAL     STOCKHOLDERS      DEFICIT      STAGE
                                        -----   -----   ---------    ---------   -----------    -----------    -----------    -----
<S>                                     <C>     <C>     <C>          <C>         <C>            <C>            <C>            <C>
STOCK ISSUED FOR NET ASSETS              --     $--       166,328    $     166   $ 3,583,834    $      --      $      --      $--
   ACQUIRED, JUNE 1, 2000
EXPENSES PAID BY SHAREHOLDER             --      --           728            1       231,295           --             --       --
CASH CONTRIBUTED BY SHAREHOLDER          --      --           626            1       198,999           --             --       --
NOTES PAYABLE AND ACCRUED INTEREST
   ASSUMED BY SHAREHOLDER                --      --           624            1       198,400           --             --       --
NET LOSS FOR THE PERIOD                  --      --          --           --            --             --       (1,177,091)    --
                                        -----   -----   ---------    ---------   -----------    -----------    -----------    -----

BALANCE - DECEMBER 31, 2000              --      --       168,306          169     4,212,528           --       (1,177,091)    --
EXPENSES PAID BY SHAREHOLDER             --      --         1,097            1       348,621           --             --       --
ACCOUNTS PAYABLE AND INTEREST PAID
   BY SHAREHOLDER                        --      --         1,725            2       548,012           --             --       --
ASSUMPTION OF NOTE PAYABLE
   FROM SHAREHOLDER                      --      --           (78)        --         (25,000)          --             --       --
SHARES ISSUED FOR SERVICES               --      --         8,000            8       199,992           --             --       --
SHARES ISSUED FOR NOTES RECEIVABLE
   FROM STOCKHOLDERS, $.05 PER SHARE     --      --        46,100           46     1,152,454     (1,042,500)          --       --
SHARES ISSUED FOR NOTES RECEIVABLE
   FROM STOCKHOLDERS, $.10 PER SHARE     --      --         5,030            5       251,495       (181,500)          --       --
SERVICES RECEIVED IN SATISFACTION OF
   NOTES RECEIVABLE FROM STOCKHOLDERS    --      --          --           --            --          360,000           --       --
ACQUISITION OF GOTHINK!.COM              --      --           496         --            --             --             --       --
PRIVATE PLACEMENT OFFERING FOR CASH      --      --         1,680            2       209,998           --             --       --
FOREIGN PRIVATE PLACEMENT OFFERING
   FOR CASH                              --      --           473         --          21,570           --             --       --
CANCELLATION OF COMMON STOCK AND
   RELATED NOTE RECEIVABLE               --      --            (5)        --            (250)           250           --       --
CASH RECEIVED ON NOTES RECEIVABLE
   FROM STOCKHOLDERS                     --      --          --           --            --           75,000           --       --
</TABLE>

                                     F - 4
<PAGE>

                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                                                         Cumulative
                                                                                                                           From
                                                                                                                       September 15,
                                                                                                 Notes                     2003
                                                                                 ADDITIONAL   Receivable                Inception of
                                       PREFERRED STOCK         COMMON STOCK        PAID-IN       FROM      ACCUMULATED   Development
                                     --------------------    ----------------
                                      SHARES      AMOUNT     SHARES    AMOUNT      CAPITAL    STOCKHOLDERS    DEFICIT       Stage
                                     --------    --------    -------    -----    -----------    --------    -----------    -------
<S>                                  <C>         <C>         <C>        <C>      <C>            <C>         <C>            <C>
Net loss for the year                    --      $   --         --      $--      $      --      $   --      $(3,385,139)   $  --
                                     --------    --------    -------    -----    -----------    --------    -----------    -------

BALANCE - DECEMBER 31, 2001              --          --      232,824      233      6,919,420    (788,750)    (4,562,230)      --
ISSUANCE OF COMMON STOCK                 --          --       18,112       18        311,687        --             --         --
ISSUANCE OF COMMON STOCK FOR
   SERVICES PROVIDED                     --          --        6,100        6        113,494        --             --         --
CANCELLATION OF COMMON STOCK
   AND RELATED NOTE RECEIVABLE           --          --         (500)      (1)       (24,999)     25,000           --         --
ISSUANCE OF SERIES A PREFERRED
   STOCK FOR SOFTWARE                 875,000     875,000       --       --             --          --             --         --
CANCELLATION OF NOTE RECEIVABLE
   FROM SHAREHOLDERS                     --          --         --       --         (163,750)    163,750           --         --
NET INCOME (LOSS) FOR YEAR               --          --         --       --             --          --       (3,603,276)      --
                                     --------    --------    -------    -----    -----------    --------    -----------    -------

BALANCE - DECEMBER 31, 2002           875,000     875,000    256,536      256      7,155,852    (600,000)    (8,165,506)      --
ISSUANCE OF COMMON STOCK FOR
   SERVICES PROVIDED                     --          --        2,000        2          1,998        --             --         --
CANCELLATION OF COMMON STOCK
   FOR CAPITALIZED SOFTWARE              --          --       (3,800)      (4)        (7,596)       --             --         --
CANCELLATION OF PREFERRED STOCK
   FOR CONTENT LICENSE AND
   RESALE AGREEMENT                  (875,000)   (875,000)      --       --             --          --             --         --
CAPITAL CONTRIBUTED BY SHAREHOLDER       --          --         --       --          227,500        --             --         --
NET INCOME (LOSS) FOR YEAR               --          --         --       --             --          --          (97,575)   (23,848)
                                     --------    --------    -------    -----    -----------    --------    -----------    -------


BALANCE - DECEMBER 31, 2003              --      $   --      254,736    $ 254    $ 7,377,754    $(600,000)  $(8,263,081)   $(23,848)
                                     ========    ========    =======    =====    ===========    ========    ===========    =======
</TABLE>


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

                                      F - 5

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                                  CUMULATIVE
                                                                                                     FROM
                                                                                                 SEPTEMBER 15,
                                                            FOR THE             FOR THE              2003
                                                           YEAR ENDED          YEAR ENDED        INCEPTION OF
                                                          DECEMBER 31,        DECEMBER 31,        DEVELOPMENT
                                                              2003                2002               STAGE
                                                       ------------------  ------------------  -----------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                    <C>                 <C>                 <C>
     NET LOSS                                          $         (121,423) $       (3,603,276) $         (23,848)
     ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
        USED IN OPERATING ACTIVITIES:
     CUMULATIVE EFFECT OF ACCOUNTING CHANGE                             -           2,967,223                  -
     NET LOSS FROM DISCONTINUED OPERATIONS                         97,575             598,145                  -

     CHANGES IN ASSETS AND LIABILITIES:
     TRADE ACCOUNTS PAYABLE                                        23,848              37,908             23,848
                                                       ------------------  ------------------  -----------------

     NET CASH PROVIDED BY (USED IN) CONTINUING                          -                   -                  -
        ACTIVITIES
                                                       ------------------  ------------------  -----------------
     NET CASH PROVIDED BY (USED IN) DISCONTINUED                  (15,976)           (399,320)                 -
                                                       ------------------  ------------------  -----------------
        ACTIVITIES
     NET CASH PROVIDED BY (USED IN) OPERATING                     (15,976)           (399,320)                 -
                                                       ------------------  ------------------  -----------------
        ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
     NET CASH FROM DISCONTINUED ACTIVITIES                         15,976             399,320                  -
                                                       ------------------  ------------------  -----------------


NET INCREASE/(DECREASE) IN CASH                                         -                   -                  -
CASH AT BEGINNING OF PERIOD                                             -                   -                  -
                                                       ------------------  ------------------  -----------------
CASH AT END OF PERIOD                                  $                -  $                -  $               -
                                                       ==================  ==================  =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
     CASH PAID FOR INTEREST                            $           14,388  $           50,534  $               -
                                                       ==================  ==================  =================

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
     SALE OF INVENTORY HELD ON CONSIGNMENT             $                -  $           19,277  $               -
     CANCELLATION OF COMMON STOCK AND RELATED
        NOTE RECEIVABLE                                                 -              25,000                  -
     PURCHASE OF SOFTWARE IN EXCHANGE FOR SERIES A
        PREFERRED STOCK                                                 -             875,000                  -
     COMMON STOCK ISSUED FOR SERVICES PROVIDED                      2,000                   -                  -
     CANCELLATION OF COMMON STOCK FOR CONTENT
        LICENSE AGREEMENT                                          (7,600)                  -                  -
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

                                      F - 6

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

ORGANIZATION- On August 1, 1992 Missaticum, Inc. dba QtrainCorp was incorporated
under the laws of the State of  California.  On October  4,  1996,  its name was
changed  to KT  Solutions,  Inc.  It was formed  for the  purpose of  developing
technology based training solutions.  It creates software programs that are used
to teach and train  individuals  how to operate  popular  business  and home use
software programs.

On June 1, 2000, the former  shareholders of KT Solutions,  Inc.  entered into a
stock exchange  agreement with enSurge,  Inc. (enSurge) whereby enSurge acquired
all of the  outstanding  common  shares of KT  Solutions,  Inc.  from its former
shareholders in exchange for the issuance of 500,000 shares of enSurge's  common
stock and options to purchase  250,000 shares of enSurge's common stock at $4.00
per share.  In addition,  enSurge issued  warrants to purchase  50,000 shares of
common  stock at $0.10 per share as a finder's  fee.  As a result,  the  Company
became a wholly-owned subsidiary of enSurge, Inc.

The acquisition of KT Solutions, Inc. was recorded by enSurge using the purchase
method of accounting.  The 500,000 common shares issued and the 300,000  options
issued were  recorded at their fair values of  $2,240,000  ($4.48 per share) and
$1,120,000,  respectively.  The value of the  options was  determined  using the
Black-Scholes  option  pricing model with the following  assumptions:  risk free
interest rate of 6.0%,  expected  dividend  yield of 0%,  volatility of 577% and
expected life of 5 years.

For  financial  reporting  purposes,  KT  Solutions,  Inc. was  considered a new
reporting entity on June 1, 2000. The accompanying  financial statements reflect
the  operations of KT Solutions,  Inc. from June 1, 2000. The purchase price was
allocated to the assets and  liabilities at their fair value.  The excess of the
purchase price over the fair value of the net assets acquired was $4,342,278 and
was allocated to goodwill.  Goodwill was being  amortized over five years by the
straight-line method.

REORGANIZATION - On April 25, 2001, enSurge,  Inc.  consummated a stock exchange
agreement with GoThink!.com,  Inc., a publicly held Nevada corporation,  whereby
all of the  1,368,387  outstanding  common  shares of KT  Solutions,  Inc.  were
transferred  to   GoThink!.com   Inc.  in  exchange  for  8,000,000   shares  of
GoThink!.com,  Inc.  common  stock.  As a  result  of  the  stock  exchange,  KT
Solutions,  Inc.  became  a  wholly-  owned  subsidiary  of  GoThink!.com,  Inc.
GoThink!.com, Inc. had 496 shares of common stock outstanding prior to the stock
exchange but after a 1-for-100 reverse stock split.

The stock exchange has been accounted for as the reorganization of KT Solutions,
Inc.  Accordingly,  the accompanying  financial statements have been restated to
reflect the effects of the 5.84-for-1  equivalent stock split that resulted from
8,000,000  shares of  GoThink!.com,  Inc. being issued in exchange for 1,368,387
previously outstanding shares of KT Solutions,  Inc.  GoThink!.com,  Inc. had no
assets or operations prior to or at the date of the reorganization. Accordingly,
the acquisition of GoThink!.com,  Inc. was not considered a business combination
but was  considered  the issuance of common stock in exchange for the assumption
of  liabilities.   The  496  common  shares  held  by  the  GoThink!.com,   Inc.
shareholders  that remained  outstanding were recorded as issued in exchange for
the assumption of $57,560 of accounts  payable.  The operations of GoThink!.com,
Inc. have been included in the accompanying  financial  statements from April 1,
2001  (which  was  the   beginning  of  the   accounting   period  during  which
GoThink!.com, Inc. was purchased).



                                      F - 7

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(Continued)

On April 23, 2001,  the articles of  incorporation  of  GoThink!.com,  Inc. were
amended  to change  its name to  Knowledge  Transfer  Systems,  Inc.  (hereafter
referred to as the Company) and to modify the authorized capital for the Company
such that the Company is  authorized  to issue  10,000,000  shares of  preferred
stock  having a par value of $0.001 per share and  100,000,000  shares of common
stock  having a par  value of  $0.001  per  share.  The  accompanying  financial
statements have been adjusted to reflect the change in the authorized capital.

BANKRUPTCY  OF  SUBSIDIARY  - On  September  15,  2003,  KT  Solutions,  Inc., a
California  corporation  and wholly owned  subsidiary of the Company,  filed for
Chapter 7 bankruptcy in Alameda County, Oakland, California.

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

BUSINESS  CONDITION - The Company has an accumulated  deficit as of December 31,
2003 and 2002 of $8,286,929  and  $8,165,506,  respectively.  As of December 31,
2003 and 2002,  the  Company  had a working  capital  deficit  of  $108,302  and
$55,731,  and the Company's  wholly owned  subsidiary,  KT Solutions,  Inc., has
filed chapter 7 bankruptcy.  These conditions raise  substantial doubt about the
Company's  ability to continue as a going  concern.  The Company needs to obtain
additional  financing  to fund  payment of  obligations  and to provide  working
capital for operations.  Management is seeking additional financing,  and is now
looking for a merger or acquisition  candidate.  The Company  intends to acquire
interests in various business opportunities, which in the opinion of management,
will provide a profit to the Company.  Management  believes  these  efforts will
generate  sufficient  cash flows from  future  operations  to pay the  Company's
obligations  and  working  capital  needs.  There is no  assurance  any of these
transactions will occur. The financial statements do not include any adjustments
relating to the  recoverability  and classification of asset carrying amounts or
the amount and  classification  of  liabilities  that  might  result  should the
Company be unable to continue as a going concern.

NATURE OF  OPERATIONS - The  Company,  through its wholly  owned  subsidiary  KT
Solutions,  Inc., was involved in developing  technology-based training products
and marketing  those products.  On September 15, 2003, KT Solutions,  Inc. filed
Chapter 7  bankruptcy,  and  management  has decided to change the direction the
Company is going and is now looking for a merger or acquisition  candidate.  The
Company intends to acquire interests in various business opportunities, which in
the opinion of management will provide a profit to the Company.  As of September
15, 2003, the Company was in the development stage.

FINANCIAL   INSTRUMENTS-The   carrying  amounts  reported  in  the  accompanying
financial  statements  for  cash,  trade  accounts  receivable,  trade  accounts
payable,  accrued  liabilities,  capital  lease  obligations  and notes  payable
approximate their fair values because of the immediate or short-term  maturities
of these financial instruments.


                                      F - 8

<PAGE>



                KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                         (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
(Continued)

PRINCIPLES OF CONSOLIDATION - The consolidated  financial statements include the
accounts of Knowledge  Transfer  and KT  Solutions.  All material  inter-company
accounts and transactions have been eliminated.

CASH  EQUIVALENTS  - For the  purpose  of  reporting  cash  flows,  the  Company
considers all highly liquid debt  instruments  purchased  with maturity of three
months or less to be cash equivalents to the extent the funds are not being held
for investment purposes.

NET LOSS PER  COMMON  SHARE - Basic net loss per  common  share is  computed  by
dividing net loss by the weighted  average  number of common shares  outstanding
during the year.  Diluted net loss per common share ("Diluted EPS") reflects the
potential  dilution  that could  occur if stock  options or other  common  stock
equivalents  were exercised or converted into common stock.  The  computation of
Diluted EPS does not assume exercise or conversion of securities that would have
an antidilutive effect on net loss per common share.

NOTE 2 - STOCKHOLDERS' EQUITY

         On February 5, 2002, the Company issued 3,006 shares of common stock in
a private placement to individual investors for cash totaling $72,440.

         On February 26, 2002,  the Company issued 760 shares of common stock in
a private placement to an individual investor for cash totaling $25,000.

         On March 6, 2002,  the Company  issued 770 shares of common  stock in a
private placement to individual investors for cash totaling $64,899.

         On March 26, 2002, the Company issued 1,592 shares of common stock in a
private placement to individual investors for cash totaling $23,836.

         On April 26, 2002, the Company issued 2,508 shares of common stock in a
private placement to individual investors for cash totaling $35,219.

         On June 7, 2002,  the Company  issued 7,327 shares of common stock in a
private placement to individual investors for cash totaling $78,002.

         On June 30, 2002,  the Company issued 1,000 shares of common stock at a
fair market value of  approximately  $0.06 for  professional  services  rendered
amounting to a charge to operations of $29,500.

         On July 11, 2002,  the Company issued 1,549 shares of common stock in a
private placement to individual investors for cash totaling $9,684.

         On July 11, 2002,  the Company issued 5,000 shares of common stock at a
fair market value of  approximately  $0.03 for  professional  services  rendered
amounting to a charge to operations of $82,500.

         On September 20, 2002, the Company issued 500 shares of common stock at
a fair market value of approximately  $0.03 for professional  services  rendered
amounting to a charge to operations of $1,500.

                                     F - 9

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - STOCKHOLDERS' EQUITY (Continued)

         On September 20, 2002,  the Company  cancelled 500 shares of its common
stock and the related note payable of $25,000.

         On September 23, 2002, the Company  purchased the Business  Development
Series,  e-learning content and software from Innovative Software  Technologies,
Inc.  (Innovative)  in exchange for 875,000 of the Company's  Series A preferred
shares  with a  stated  value of $1.00  per  share.  The  preferred  shares  are
convertible,  at the  discretion of Innovative to the Company's  common stock at
95% of the fair market value of the  Company's  common stock based on a five day
average  proceeding  the date of conversion.  The President and Chief  Executive
Officer of Innovative is the former  President  and Chief  Executive  Officer of
Ensurge, Inc., which was the parent company of KT Solutions, Inc. At the time of
the sale of the Business Development Series to Innovative Software Technologies,
Inc. for 875,000 of the Company's  preferred shares,  there was no related party
relationship  between the  companies  and/or the officers  and  directors of the
companies at the time of the transaction.

         On September 27, 2002, the Company issued 600 shares of common stock in
a private placement to individual investors for cash totaling $2,625.

         On May 7, 2003,  the Company  issued  2,000 shares of common stock at a
fair market value of  approximately  $0.002 for professional  services  rendered
amounting to a charge to operations of $2,000.

         On August 15, 2003,  the Company  filed a  Certificate  of  Designation
which was  approved by the Board of  Directors to issue a new class of Preferred
Stock. The designation  consists of 100,000 shares of Series "B: Preferred Stock
with a "Stated  Value" of $1,000 per share.  As of December 31, 2003,  no shares
have been issued.

         On August 23, 2003, the Company sold the Business  Development  Series,
e-learning  content and software from  Innovative  Software  Technologies,  Inc.
(Innovative) in exchange for 875,000 of the Company's  Series A preferred shares
with a stated value of $1.00 per share. The preferred  shares were  convertible,
at the discretion of Innovative to the Company's common stock at 95% of the fair
market  value  of  the  Company's  common  stock  based  on a five  day  average
proceeding the date of conversion.  The President and Chief Executive Officer of
Innovative is the former President and Chief Executive Officer of Ensurge, Inc.,
which was the parent  company of KT  Solutions,  Inc. At the time of the sale of
the Business  Development Series to Innovative Software  Technologies,  Inc. for
875,000  of  the  Company's  preferred  shares,   there  was  no  related  party
relationship  between the  companies  and/or the officers  and  directors of the
companies at the time of the transaction.

         On August 23,  2003,  the Company  signed a Content  License and Resale
Agreement  with  Innovative  Software  Technologies,  Inc.  (IST),  a California
corporation.  The  Company  sold  $125,000  (retail  value) of on-line  training
products to IST in exchange for 3,800 common shares of the Company's stock which
were held by IST.




                                     F - 10

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - DISCONTINUED OPERATIONS

         On September 15, 2003, KT Solutions, Inc., a California corporation and
wholly  owned  subsidiary  of the  Company,  filed for Chapter 7  bankruptcy  in
Alameda County, Oakland, California.

         The assets and  liabilities  of KT  Solutions,  Inc.  consisted  of the
following:
<TABLE>
<CAPTION>
                                                                                         December 31,       December 31,
                                                                                             2003               2002
                                                                                      ------------------  -----------------

<S>                                                                                   <C>                 <C>
Cash                                                                                  $            3,924  $             419
Trade accounts receivable net of $9,378 and $9,960
   allowance for doubtful accounts, respectively                                                       -                  -
Inventory                                                                                         37,951             37,952
Property and Equipment, net of $39,573 and $109,306
   accumulated depreciation, respectively                                                          4,461            809,728
Deposits                                                                                           5,328              5,328
                                                                                      ------------------  -----------------
         Total assets                                                                 $           51,664  $         853,427
                                                                                      ------------------  -----------------

Trade accounts payable                                                                $          495,505  $         488,318
Accrued liabilities                                                                              394,121            299,465
Deferred revenue                                                                                  45,063             52,692
Other current liabilities                                                                         10,000                  -
Capital lease obligation - current portion                                                         1,856              1,856
Notes payable - current portion                                                                  202,771            202,771
Notes payable - related parties                                                                  302,967            486,992
                                                                                      ------------------  -----------------
         Total liabilities                                                                     1,452,283          1,532,094
                                                                                      ------------------  -----------------

         Net liabilities to be disposed of                                            $       (1,400,619) $        (678,667)
                                                                                      ==================  =================
</TABLE>

         Net assets  and  liabilities  to be  disposed  of have been  separately
classified in the accompanying  consolidated balance sheet at December 31, 2003.
The  December  31, 2002  balance  sheet has been  restated  to conform  with the
current year's presentation.

         The Company received $10,000 in the second quarter as a deposit against
the sale of certain  KT  Solutions,  Inc.  assets.  The  closing of this sale of
assets is contingent upon the ability of the companies to meet certain terms and
conditions precedent to close.

         Operating  results of this  discontinued  operation  for the year ended
December  31,  2003  are  shown  separately  in  the  accompanying  consolidated
statement of operations. The operating statement for 2002 has





                                     F - 11

<PAGE>



                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - DISCONTINUED OPERATIONS (Continued)

been restated to conform with the current year's presentation and are also shown
separately.  The operating results of this discontinued  operation for the years
ended December 31, 2003 and 2002 consist of:

<TABLE>
<CAPTION>
                                                                                              For the years ended
                                                                                                  December 31,
                                                                                     --------------------------------------
                                                                                            2003                2002
                                                                                     ------------------   -----------------

<S>                                                                                  <C>                  <C>
Sales                                                                                $           18,820   $         371,803
Cost of Sales                                                                                         -              (3,799)
Operating Expenses                                                                             (330,736)           (851,219)
Gain on Sale of Capitalized Software                                                            293,489                   -
Interest Expense                                                                                (79,148)           (114,930)
                                                                                     ------------------   -----------------
Net Income (Loss)                                                                    $          (97,575)  $        (598,145)
                                                                                     ==================   =================
</TABLE>

NOTE 4 - GOODWILL IMPAIRMENT

         On  January 1,  2002,  the  Company  adopted  SFAS 142 and as  required
discontinued  amortization of goodwill and certain  intangible assets determined
to have  indefinite  useful lives acquired prior to July 1, 2001. This statement
also required that within the first interim  period of adoption,  the intangible
assets with  indefinite  lives should be tested for impairment as of the date of
adoption,  and that if any  impairment  results,  it should be  recognized  as a
change in accounting principle. Additionally, SFAS 142 requires that, within six
months of adoption,  goodwill be tested for  impairment  at the  reporting  unit
level as of the date of adoption. If any impairment is indicated to have existed
upon adoption,  it should be measured and recorded before the end of the year of
adoption.  SFAS 142 requires that any goodwill  impairment  loss recognized as a
result  of  initial  application  be  reported  in the first  interim  period of
adoption  as a change in  accounting  principle  and that the  income  per share
effects of the accounting change be separately disclosed.

         During 2002 and within the first interim period of adoption of SFAS No.
142,  the  Company  tested  goodwill  for  impairment  and  determined  that  an
impairment  charge was necessary as of June 30, 2002. This impairment charge was
recognized as a change in accounting  principle and the income per share effects
of the accounting change were separately disclosed.  In addition,  the financial
information presented that includes the periods that precede the period in which
the  transitional  goodwill  impairment  loss is  measured  was  presented  on a
restated basis. The impairment charge as of June 30, 2002 was $2,967,223.

NOTE 5 - RELATED PARTY TRANSACTIONS

         On April 24, 2001,  Mr. Steve Burke,  President and CEO of the Company,
purchased  24,000  shares of Common  Stock of the  Issuer at a price of $.05 per
share utilizing a loan, in the principal amount of $600,000,  made pursuant to a
Promissory  Note dated April 25, 2001.  According to the terms and conditions of
the Promissory  Note, Mr. Burke agreed to pay the Company a principal sum of six
hundred thousand dollars ($600,000) together with interest on the unpaid balance
thereof at a rate of six percent  (6%) per annum with the  principal of the note
due in full by December 31, 2004. No interest is accrued on the note until it is
paid. The notes  receivable are partial  recourse notes in that each investor is
unconditionally  obligated to pay 10% of the amount of their note in addition to
the return of the shares of common stock in the event of default under the terms
of the notes.

                                     F - 12

<PAGE>


                 KNOWLEDGE TRANSFER SYSTEMS, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6 - SUBSEQUENT EVENTS

         On July 29,  2004,  the Company  authorized  a 1 for 500 reverse  stock
split of the Company's  common stock.  The stock split  provided that in no case
shall any shareholders  holdings be reduced to less than 100 shares. The reverse
stock split reduced the number of outstanding  common shares from  49,843,268 to
254,736.  All  references  to  the  Company's  common  stock  in  the  financial
statements have been restated to reflect the reverse stock split.





                                     F - 13

<PAGE>







                                   SIGNATURES


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

                        KNOWLEDGE TRANSFER SYSTEMS, INC.

Dated: August 31, 2004            By  /S/     Steve K. Burke
                                      ------------------------------------------

                                      Steve K. Burke
                                      President and Chief Executive Officer
                                     (Principal Executive and Financial Officer)

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 31st day of August, 2004.

Signatures                            Title

/S/     Steve K. Burke
-----------------------------------
Steve K. Burke                        President, CEO
                                     (Principal Executive and Financial Officer)






















                                       15