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

                             FORM 10-KSB

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

              For the fiscal year ended March 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
         For the transition period from ________ to ________
                      Commission file # 0-19949

                        Scarab Systems, Inc.
       (Exact Name of Registrant as Specified in its Charter)

                       Colorado                        84-1153522
          (State or other jurisdiction of           (I.R.S. Employer
          incorporation or organization)         Identification number)

528-666 Burrard Street, Vancouver,  British Columbia     V6C 2X8
     (Address of principal executive offices)           (Zip Code)


              Issuer's telephone number: (604) 639-3178

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

 Securities registered pursuant to Section 12(g) of the Act: Common
                       Stock, $0.001 par value

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

Check  if there is no disclosure of delinquent filers in response  to
Item  405 of Regulation S-B contained in this form, and no disclosure
will  be  contained, to the best of Issuer's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. [   ]

The Issuer had no revenue for the fiscal year ended March 31, 2004.

As  of April 26, 2004, the aggregate market value of the Common Stock
of  the  Issuer, based upon the average bid and asked prices of  such
Common  Stock, held by non-affiliates of the Issuer was approximately
$6,307,459.

As of April 26, 2004, 12,173,319 shares of Common Stock of the Issuer
were  outstanding.  EXCEPT  WHERE AND  AS  OTHERWISE  STATED  TO  THE
CONTRARY  IN  THIS  ANNUAL REPORT, ALL SHARE, PRICES  PER  SHARE  AND
EXERCISE PRICES HAVE BEEN ADJUSTED TO GIVE RETROACTIVE EFFECT TO  THE
CHANGE IN THE PRICE PER SHARE OF THE COMMON STOCK RESULTING FROM  THE
ONE-FOR-TEN SHARE CONSOLIDATION OF THE COMMON STOCK THAT TOOK  EFFECT
ON JANUARY 20, 2004.

Transitional Small Business Disclosure Format (Check one): Yes [ ] No
[X]


<PAGE>
                     FORWARD LOOKING STATEMENTS

Certain  statements  made in this Annual Report are  "forward-looking
statements" (within the meaning of the Private Securities  Litigation
Reform  Act of 1995) regarding the plans and objectives of management
for  future  operations. Such statements involve  known  and  unknown
risks, uncertainties and other factors that may cause actual results,
performance or achievements of the Company to be materially different
from  any  future results, performance or achievements  expressed  or
implied  by  such  forward-looking  statements.  The  forward-looking
statements made in this Report are based on current expectations that
involve  numerous  risks and uncertainties. The Company's  plans  and
objectives  are based, in part, on assumptions involving  the  growth
and  expansion  of  business. Assumptions relating to  the  foregoing
involve  judgments  with  respect  to,  among  other  things,  future
economic,  competitive  and  market conditions  and  future  business
decisions,  all  of  which  are difficult or  impossible  to  predict
accurately  and many of which are beyond the control of the  Company.
Although  the  Company believes that its assumptions  underlying  the
forward-looking  statements are reasonable, any  of  the  assumptions
could prove inaccurate and, therefore, there can be no assurance that
the  forward-looking statements made in this Report will prove to  be
accurate. In light of the significant uncertainties inherent  in  the
forward-looking statements made in this Report, the inclusion of such
information should not be regarded as a representation by the Company
or any other person that the objectives and plans of the Company will
be achieved.

As used in this annual report, the terms "we", "us", "our", "Company"
and "Scarab" means Scarab Systems Inc., unless otherwise indicated.

PART I

ITEM 1.     DESCRIPTION OF BUSINESS

General Overview

We  are a development stage company and are not presently engaged  in
any  business. Since our formation, we have explored and entered into
various businesses but have since ceased any business operations.  We
continue  to  seek  projects of merit and if  we  require  additional
capital  in  connection with any potential acquisition,  we  plan  to
raise such additional funds through equity or debt of the Company.

Corporate History

Scarab  Systems,  Inc. (the "Company" or "Scarab") is  a  development
stage  company that was formed by the merger of Scarab Systems, Inc.,
a Nevada corporation into iRV, Inc., a Colorado corporation.

Scarab   Systems,  Inc.  (Nevada)  was  a  privately   owned   Nevada
corporation  that  was  incorporated  on  October  8,  2001.  It  was
initially  formed  in  order to provide services  to  the  e-commerce
industry, and in particular to provide marketing services, e-commerce
development  services  and the sale and distribution  of  transaction
processing and payment services, including rechargeable stored  value
payment  and  money  transfer systems that could  be  used  for  both
electronic commerce and point of sale purchases.

The  effective date of the merger transaction between Scarab Systems,
Inc.  (Nevada)  and iRV, Inc. was July 17, 2002.  On  that  date  the
shareholders of Scarab Systems, Inc. (Nevada) received ten shares  of
the  common stock of iRV, Inc. for each share of Scarab Systems, Inc.
(Nevada) common stock owned. The number of outstanding shares of iRV,
Inc.  increased from 1,446,299 to 9,706,290. The 8,260,000 shares  of
iRV,  Inc.'s  stock  issued  to  the former  shareholders  of  Scarab
Systems, Inc. (Nevada) represented, immediately after their issuance,
86%  of the total issued and outstanding shares of iRV, Inc.'s common
stock following the merger. This reorganization was accounted for  as
though  it were a re-capitalization of Scarab Systems, Inc.  (Nevada)
<PAGE>
and a sale of shares by Scarab Systems, Inc. (Nevada) in exchange for
the  net  assets  of  iRV,  Inc.  Subsequent  to  completion  of  the
reorganization,  Scarab Systems, Inc. (Nevada)  transferred  all  its
assets  and  liabilities  to  iRV, Inc. and  ceased  operations.  The
directors  and  executive  officers of iRV,  Inc.  were  subsequently
reconstituted.  iRV, Inc. changed its name to Scarab Systems, Inc. on
March 24, 2003. The corporate charter of Scarab Systems Inc. (Nevada)
was revoked in 2002.

On January 30, 2002, we were given two options in fiscal year 2002 to
acquire all the issued and outstanding shares of 485017 B.C. Ltd.,  a
British Columbia company doing business as MarketEdge Direct ("MED"),
as security against a subscription receivable of $337,500 for 675,000
shares  from  the  shareholders of MED. MED was in  the  business  of
providing  a wide range of marketing products and services. Effective
August 7, 2002, we exercised both of the options and acquired all the
issued  and outstanding shares of MED. Due to disappointing financial
results of MED, on March 28, 2003, we entered into an agreement  with
the  former  shareholders of MED to sell MED  back  to  them.   As  a
result, all the issued and outstanding shares of MED we acquired were
sold  back to the former MED shareholders for the return to  treasury
of 540,000 of our common shares.

On  March 28, 2003, we acquired all the issued and outstanding shares
of  Catalyst  Technologies,  Inc.,  a  British  Columbia  corporation
("Catalyst"). Catalyst is a Vancouver based, web design and  Internet
application developer. Catalyst specializes in the development of web-
sites  and  Internet software design, primarily for  the  Health  and
Nutraceutical industry. Our acquisition of Catalyst was treated as  a
non-material business combination in the fiscal year 2003.

Due  to a lack of working capital and disappointing financial results
of Catalyst during the current period, our board of directors decided
on March 15, 2004, that it would abandon Catalyst, the Company's only
subsidiary.  The  Company's operations related to  Catalyst  did  not
generate material traffic or revenues in the current period.

On January 20, 2004, as approved by the requisite number of shares at
the  Special Meeting of Shareholders of the Company on September  24,
2002,  a one-for-ten share consolidation of the Company's stock  took
effect for shareholders of record. All per share information for  all
prior periods have been adjusted accordingly.

Our Current Business

We  are a development stage company and are not presently engaged  in
any  business.  Accordingly, the auditor's report  on  our  financial
statements  notes  that we will need additional financing  or  future
profitability to continue as a going concern. Since our formation, we
have  explored  and entered into various businesses  but  have  since
ceased  any  business operations.  We continue to  seek  projects  of
merit  and  if we require additional capital in connection  with  any
potential acquisition, we plan to raise such additional funds through
equity or debt of the Company.

We  were  previously engaged in providing e-commerce services.  These
services  have  been comprised of marketing, e-commerce  development,
web  design,  internet  application  development  and  the  sale  and
distribution   of   transaction  processing  and  payment   services,
including  rechargeable  stored  value  payment  and  money  transfer
systems  that can be used for both electronic commerce and  point  of
sale  purchases.   In  fiscal year 2003 we substantially  ceased  all
operations  with respect to our e-commerce services  due  to  nominal
revenue.

We currently have no facilities and no employees.  Our administrative
affairs are conducted by our officers as independent contractors. Our
address  is 528-666 Burrard Street, Vancouver, British Columbia   V6C
2X8. Our telephone number is (604) 639-3178.

<PAGE>
Plan of Operations

We  actively seek acquisition candidates. We believe the Company  can
offer  owners  of  potential  merger or  acquisition  candidates  the
opportunity  to  access  public markets.  The  target  company  will,
however,  incur  significant post-merger or acquisition  registration
costs  in  the  event target company shareholders  wish  to  offer  a
portion  of  their shares for subsequent sale. Further, while  target
company  shareholders  will receive "restricted  securities"  in  any
merger  or acquisition transaction, those restricted securities  will
represent,  if  a  trading  market develops  for  our  common  stock,
ownership  in  a  "publicly-traded" as opposed to a  "privately-held"
company.  We also believe target company shareholders may benefit  in
obtaining  a  greater ownership percentage in the  Company  remaining
after  a  merger or acquisition than may be the case in the  event  a
target  company offered its shares directly for sale to  the  public.
Nevertheless,  our officers and directors have not  conducted  market
research  and  are not aware of statistical data which would  support
the  perceived  benefits of a merger or acquisition  transaction  for
target company shareholders.

We   expect  to  concentrate  primarily  on  the  identification  and
evaluation  of  prospective merger or acquisition  "target"  entities
including private companies, partnerships or sole proprietorships. We
do  not  intend to act as a general or limited partner in  connection
with  partnerships  we  may  merge  with  or  acquire.  We  have  not
identified  any  particular area of interest  within  which  we  will
concentrate our efforts.

It  should be noted, however, that our independent accountants  audit
report  for  the  fiscal  year  ended  March  31,  2004  contains   a
qualification  and  explanatory language that due  to  our  recurring
losses  from  operations and working capital deficiency,  substantial
doubts exist about our ability to continue as a going concern.

Plan of Acquisition

We plan to follow a systematic approach to identify our most suitable
acquisition candidates. In the past, our officers and directors  have
not  used  consultants  in  an effort to  identify  potential  target
companies, although it is possible that such consultants may be  used
in the future.

We  intend  to  concentrate on identifying any number of  preliminary
prospects which may be brought to the attention of management through
present associations and personal contacts of our affiliates.  As  is
customary  in  the industry, we may pay a fee to a non-affiliate  for
locating a merger or acquisition candidate. If any such fee is  paid,
it  will  be  approved  by  our Board of Directors  and  will  be  in
accordance with industry standards. After preliminary candidates  are
identified, we will then apply certain of our broad criteria  to  the
prospects. Essentially, this will entail a determination by us as  to
whether  or  not  the  prospects are in  an  industry  which  appears
promising  and whether or not the prospects themselves have potential
within  their own industries. During this initial screening  process,
we  will  ask  and  receive answers to questions  framed  to  provide
appropriate threshold information, depending upon the nature  of  the
prospects' businesses. Such evaluation is not expected to be  an  in-
depth  analysis of the target company's operations although  it  will
encompass  a  look  at  most, if not all, of the  same  areas  to  be
examined  once one or more target companies are selected for  an  in-
depth review. For example, at this stage, we may look at a prospect's
unaudited balance sheet.  Once a prospect is selected for an in-depth
review,  we  will review the prospect's audited financial statements.
Nevertheless,  this  evaluation is anticipated  to  provide  a  broad
overview  of  the business of the target company and should  allow  a
large  percentage  of  preliminary prospects to  be  eliminated  from
further consideration.

<PAGE>
Assuming  we are able to complete the preliminary evaluation  process
and  select a limited number of companies for further study, of which
there can be no assurance, we may enter into preliminary negotiations
with  target company management in order to obtain detailed financial
and   operational   information.  Following  our  receipt   of   such
information,  we expect conduct an in-depth analysis  of  five  major
areas of concern with respect to the target company as follows:

1.    Managerial and Financial Stability. We expect to review audited
financial  statements of the target company, to the extent available,
and will also research the background of each director and member  of
management  of  the  target company in order to discern  whether  the
stability  of  the  company  is such that  further  negotiations  are
warranted.

2.    Industry  Status. We expect to research the  potential  of  the
target company's industry, in order to determine whether the industry
is  in  the growth, stagnant or declining stage. The concern here  is
whether the industry is in a growth, stagnant or declining stage.

3.    Production of Product. If the target company is a manufacturer,
we  intend to review whether it has the necessary resources or access
to  the necessary resources and supplies to produce a quality product
in a timely manner.

4.    Acceptance  and Potential of Product. We expect to  review  the
acceptance  of the target company's product in the market  place  and
assess  the competition. We intend to also review whether or not  the
product  is realistic (ie. whether there is potential for the product
to be workable and to fulfill our intended purpose).

5.    Development of Target Company. We expect to review  the  target
company's  stage  of  development (e.g. start-up  stage,  established
company, etc.).

The  foregoing is an outline of the areas of concern which most often
arise  and  merit  careful  scrutiny by management.  Because  of  the
possible  varieties  of  target  companies  which  may  come  to  our
attention, additional factors will most likely be considered  in  any
given  analysis.  Also, the procedures used  in  such  a  review  are
expected to vary depending upon the target company being analyzed. We
may  select a target company for further negotiations even though the
target may not receive a favorable evaluation as to some of the  five
areas of concern.

We  expect  to  enter into further negotiations with  target  company
management   following  successful  conclusion   of   financial   and
evaluation studies. Negotiations with target company management  will
be  expected  to focus on the percentage of the company  that  Target
company  shareholders would acquire in exchange for their  shares  in
the  target  company. Depending upon, among other things, the  target
company's  assets  and  liabilities, our  shareholders  will  in  all
likelihood hold a lesser percentage ownership interest in the Company
following   any  merger  or  acquisition.  Assets  of  a  merger   or
acquisition  candidate  would  be  valued  at  historical  cost   for
transactional  purposes. The percentage ownership may be  subject  to
significant  reduction in the event we acquire a target company  with
substantial  assets.  Any  merger or acquisition  we  effect  can  be
expected  to have a significant dilutive effect on the percentage  of
shares held by our then shareholders.

The  final  stage of any merger or acquisition to be effected  by  us
will  require  us  to  retain the services of  legal  counsel  and  a
qualified  accounting firm in order to properly effect the merger  or
acquisition. We may be expected to incur significant legal  fees  and
accounting  costs during the final stages of a merger or acquisition.
Also,  if  the  merger or acquisition is successfully  completed,  we
anticipate  that certain costs will be incurred for public relations,
such  as  the  dissemination of information to  the  public,  to  the
shareholders  and  to the financial community. If we  are  unable  to
complete the merger or acquisition for any reason, our capital may be
substantially depleted if legal fees and accounting costs  have  been
incurred. We intend to retain legal and accounting services  only  on
an  as-needed  basis  in the latter stages of a  proposed  merger  or
acquisition.

<PAGE>
We  anticipate  that  it may be necessary to raise  additional  funds
within  the  next  12  months  to  meet  expenditures  required   for
operations. There are no current plans or commitments in this regard,
and there can be no assurance that we will be able to raise the funds
necessary to continue our limited operations.

It  is  possible  that  acquisition targets are  seeking  a  business
combination  with  us  as part of their efforts to  raise  additional
capital.  We may raise capital, either through the public or  private
sale  of  equity  or debt securities to enable us to  provide  bridge
capital to any potential acquisition candidate. In addition,  we  may
borrow  funds or use proceeds of any equity or debt offering to  make
payments to our management, promoters, or their respective affiliates
or associates.

Role of Management in Acquisition Process

The consummation of any acquisition may result in a change in control
of  the  Company,  pursuant  to  which the  officers,  directors  and
principal  shareholders  of  the  acquired  company  will  be  issued
sufficient  numbers of shares of our common stock to exercise  voting
control  immediately  following  the acquisition.  In  addition,  the
transaction   may   involve  the  sale  by  our   current   principal
shareholders of all or a portion of their beneficial ownership of our
common  stock  to the control persons of the acquired  company.  Such
sale  would be upon terms privately negotiated between the principals
of   the  acquired  company  and  our  principal  shareholders.   Our
shareholders   will,  in  all  likelihood,  not  be   provided   with
information,  including financial statements, of  a  business  to  be
acquired nor be afforded an opportunity to approve or consent to  any
stock  buy-out  transaction  involving  our  principal  shareholders.
Moreover,  our  other  shareholders in all  likelihood  will  not  be
offered  an opportunity to sell their shares of our common  stock  on
the same or similar terms and conditions. We have not adopted and  do
not plan to adopt in the future any policy that would restrict, limit
or prohibit management or our principal shareholders from negotiating
a   buy-out   of  their  stock  in  connection  with  an  acquisition
transaction.

Competition

We  will  remain an insignificant participant among the  firms  which
engage  in  mergers  with  and  acquisitions  of  privately  financed
entities.  There are many established venture capital  and  financial
concerns  that  have  significantly greater financial  and  personnel
resources and technical expertise than we do. In view of our combined
limited  financial resources and limited management availability,  we
will  continue  to  be  at  a  significant  competitive  disadvantage
compared to our competitors. Also, we will be competing with numerous
other small, blank check public companies.

Regulation and Taxation

We could be subject to regulation under the Investment Company Act of
1940  in the event we obtain and continue to hold a minority interest
in  a  number  of entities. Our plan of operation is  based  upon  us
obtaining a controlling interest in any merger or acquisition  target
company  and,  accordingly,  we may be required  to  discontinue  any
prospective  merger  or  acquisition  of  any  company  in  which   a
controlling interest will not be obtained.

We  could  also be required to register under the Investment  Company
Act  of  1940  in  the  event it comes within the  definition  of  an
Investment Company contained in that Act due to our assets consisting
principally of shares held in a number of other companies. We  intend
to   seek  at  most  one  or  two  mergers  or  acquisitions,   which
transactions  we believe will not result in the Company being  deemed
an  "investment company" since our interests will be in  majority  or
wholly  owned  subsidiaries which themselves will not  be  investment
companies.

<PAGE>
Any  securities that we acquire in exchange for our common stock will
be  "restricted securities" within the meaning of the Securities  Act
of  1933  (the "1933 Act"). If we elected to resell such  securities,
such  sale could not proceed unless a registration statement had been
declared  effective by the Securities and Exchange Commission  or  an
exemption from registration was available. Section 4(1) of  the  1933
Act,  which exempts sales of securities not involving a distribution,
would  in  all  likelihood be available to permit a private  sale  if
various  restrictions pertaining to such a sale  are  complied  with.
Although  our  plan  of  operation does  not  contemplate  resale  of
securities  acquired,  in the event such a sale  were  necessary,  we
would be required to comply with the provisions of the 1933 Act.

As  a condition to any merger or acquisition, it is possible that the
target  company  management may request registration  of  our  common
stock  to be received by target company shareholders. In such  event,
we  could  incur  registration costs, and we intend  to  require  the
target  company  to bear most, if not all, of the cost  of  any  such
registration.  If  we  do  contribute  toward  the   cost   of   such
registration, our maximum contribution will be limited to the  extent
that  we  have assets available for such contribution. Alternatively,
we  may  issue  "restricted  securities" to  any  prospective  target
company, which securities may be subsequently registered for sale  or
sold in accordance with Rule 144 of the Securities Act of 1933.

We intend to structure a merger or acquisition in such a manner as to
minimize  federal and state tax consequences to the Company  and  any
target company.

Employees and Consultants

The  Company's  President, Chief Executive Officer,  Chief  Financial
Officer  and  Secretary  is  Thomas E.  Mills.  The  Company's  Chief
Operations Officer is Lou Hilford.

The Company has no employees. Management services are provided to the
Company  by  Thomas  E. Mills and Lou Hilford, without  compensation.
There  is no employment or consulting agreements between the  Company
and Mr. Mills or Mr. Hilford.

ITEM 2.     DESCRIPTION OF PROPERTY

The Company does not own any real property either for its own use  or
for  investment purposes.  Office space for our corporate offices  is
currently provided at no charge by our President, Thomas E. Mills.

ITEM 3.     LEGAL PROCEEDINGS

The Company is not presently a party to any legal proceedings.

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

We  did  not  submit any matters to a vote of our securities  holders
during the fourth quarter ended March 31, 2004.

PART II

ITEM 5.     MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
SMALL BUSINESS ISSUERS PURCHASES OF EQUITY SECURITIES

The outstanding shares of the Company's common stock are traded over-
the-counter on an electronic bulletin board under the symbol  "SBSY".
The  Company's  transfer  agent is Computershare  Investor  Services,
located at 350 Indiana Street, Suite 800, Golden, Colorado, 80401.

<PAGE>
The  following table summarizes the reported high and low bid and ask
prices  for the Company's Common Stock for the last two fiscal  years
based  on  OTCBB  quotations. Since the  quotations  do  not  include
commissions or the amounts that a dealer may mark-up or markdown  the
stock  in  a  particular transaction, quotations may  not  accurately
reflect the actual transactions that were completed during the fiscal
period.  All  prices  per share before January 20,  2004,  take  into
account  the one-for-ten share consolidation which has the effect  of
multiplying the pre-consolidated price per share by a factor of ten.

<TABLE>
<S>            <C>                 <C>            <C>

               2003 Fiscal Year    High           Low
               ----------------    -----          -----
               First Quarter       $1.70          $0.60
               Second Quarter      $0.90          $0.10
               Third Quarter       $0.40          $0.20
               Fourth Quarter      $0.30          $0.10

               2004 Fiscal Year    High           Low
               ----------------    -----          -----
               First Quarter       $0.20          $0.10
               Second Quarter      $0.20          $0.10
               Third Quarter       $0.20          $0.10
               Fourth Quarter      $0.51          $0.05

</TABLE>

As  of  March  31,  2004,  there were 188 owners  of  record  of  the
Company's common stock. Approximately 1,490,857 were held in the name
of  Cede & Co., an institution that holds stock for a large number of
beneficial owners.

Recent Sales of Unregistered Securities

In  February, 2004, we issued 510,000 shares of common stock upon the
conversion of debt in the amount of $51,000 to our President,  Thomas
E.  Mills. Mr. Mills is a non-U.S. person and the shares were  issued
in reliance on Regulation S under the Securities Act of 1933.

In  February,  2004,  we  issued 1,200,000  shares  of  common  stock
pursuant  to  a  private  placement in exchange  for  aggregate  cash
payments of $120,000. We issued 750,000 of the common shares  to  two
non-U.S. persons for aggregate payments of $75,000 and in reliance on
Regulation S under the Securities Act of 1933. We also issued 450,000
of  the common shares to two U.S. persons for aggregate cash payments
of  $45,000 and in reliance on Section 4(2) under the Securities  Act
of 1933.

Dividend Policy

Our  Board  of Directors may declare and pay dividends on outstanding
shares of common stock out of funds legally available therefor in our
sole  discretion;  however, to date no dividends have  been  paid  on
common stock and we do not anticipate the payment of dividends in the
foreseeable future.

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

Certain  statements in this Management's Discussion and  Analysis  of
Financial  Condition  and  Results  of  Operations  which   are   not
historical  facts are forward-looking statements such  as  statements
relating   to   future  operating  results,  existing  and   expected
competition,  financing and refinancing sources and availability  and
plans  for  future  development or expansion activities  and  capital
expenditures.  Such forward-looking statements involve  a  number  of
risks  and  uncertainties that may significantly affect the Company's
liquidity and results in the future and, accordingly, actual  results
may  differ  materially from those expressed in  any  forward-looking
statements. The following discussion and analysis should be  read  in
conjunction with the financial statements and notes thereto appearing
elsewhere in this report.

<PAGE>
Overview

Our  business  was  to  provide services to the e-commerce  industry.
Historically,  these services have been comprised  of  marketing,  e-
commerce  development  and the sale and distribution  of  transaction
processing and payment services, including rechargeable stored  value
payment  and  money  transfer systems  that  can  be  used  for  both
electronic commerce and point of sale purchases. We ceased  to  offer
these services and we are seeking new opportunities.

The Company has been in the development stage since its inception. It
has  earned no significant operating revenue to date, has accumulated
losses  of  $883,317 and will require additional working  capital  to
sustain its minimal operations. These circumstances raise substantial
doubt as to its ability to continue as a going concern.

We  intend  to continue to identify and review opportunities  in  the
technology and resources sectors. We are currently reviewing  various
financing  alternatives, including the possibility of  an  additional
private  equity  offering. There can be no assurance,  however,  that
such  opportunities or financings will be available to us, or  if  it
is,  that it will be available on terms acceptable to us. If  we  are
unable  to  obtain the financing necessary to support our operations,
we may be unable to continue as a going concern.

We currently have no facilities and no employees.

Results of Operations

For the Year Ended March 31, 2004 Compared to the Year Ended March
31, 2003

Operating  Expenses  from  Continued Operations.  Operating  expenses
consisted  of  consulting fees, management fees,  professional  fees,
stock  based  compensation  and  other  general  corporate  expenses.
Operating  expenses were $411,651 for the year ended March 31,  2004,
compared  with  $347,045  for the year  ended  March  31,  2003.  The
increase  was  a  result of the Company recording $195,740  in  stock
based  compensation  for stock options granted to consultants  during
the  year ended March 31, 2004, compared with no such expense for the
year  ended  March  31, 2003. Excluding the stock based  compensation
charge  of  $195,740, the operating costs decreased by  $131,134,  or
38%,  due  to  the curtailing of substantially all of  the  Company's
operating  activities during the current year. Consulting  fees  were
$169,059  for  the year ended March 31, 2004, compared with  $170,469
for  the  year ended March 31, 2003. During the current  period,  the
Company  recorded  $100,000 in consulting services for  restructuring
efforts and the balance of $69,059 was related to consulting services
for  managing our operations and reporting requirements.  During  the
comparative  period in 2003, consultants were engaged to  manage  the
operations  of  the Company. Professional fees were $65,780  for  the
year  ended March 31, 2003, compared with no such fees for  the  year
ended March 31, 2004. Professional fees incurred in fiscal year  2003
consisted  of financial consulting fees for the negotiation  of  debt
financing  for our operations. Audit and legal fees were $14,924  for
the  year ended March 31, 2004 compared to $20,181 for the year ended
March  31,  2003.  Legal and accounting fees  related  to  the  costs
associated  with  the  Company's  audited  statements  and   periodic
reporting obligations. General office expenses were $21,501  for  the
year  ended March 31, 2004, compared with $30,756 for the year  ended
March  31,  2003 when the Company was operating. Interest costs  were
$8,948 for the year ended March 31, 2004 compared with $7,621 for the
year ended March 31, 2003.

Gain  on Settlement of Debt. We recorded a gain on the settlement  of
debt of $37,045 for the year ended March 31, 2004 compared to no such
gain  during  the  year ended March 31, 2003.  The  gains  were  from
negotiated settlements with creditors to the benefit of the  Company.
We also recorded gains on the settlement of related party debt in the
amount  of $110,527 for the year ended March 31, 2004. However,  debt
settlements with related parties are treated as contributed surpluses
in the statement of stockholders' deficit instead of the statement of
operations.

<PAGE>
Net  Income from Discontinued Operations. We ceased substantially all
of  our  operating businesses during the fiscal year ended March  31,
2003  and, as a result, combined all operating revenues and  expenses
related  to the previous business under discontinued operations.  The
Company  recorded no net income from discontinued operations for  the
year ended March 31, 2004, compared with a net income of $21,082  for
the year ended March 31, 2003.

Net  Loss for the Period.  We recorded a net loss of $374,606 for the
year  ended March 31, 2004, compared with a net loss of $396,277  for
the year ended March 31, 2003.

Liquidity and Capital Resources

Our cash on hand was $12,621 as at March 31, 2004 compared to no cash
at  March  31,  2003. Our working capital deficit was $15,261  as  at
March 31, 2004, including $27,882 in accounts payable that existed at
the  end  of  the previous fiscal year. This compares  to  a  working
capital deficit of $210,227 as at March 31, 2003.

Our  improved cash position and working capital deficit was  achieved
though  receipt  of gross proceeds of $216,000 from the  issuance  of
common stock, from $37,045 in debt forgiveness by creditors and  from
$110,527  in debt forgiveness by related party creditors  during  the
year  ended  March  31,  2004. This compares with  $40,000  in  gross
proceeds  from  the issuance of common stock and no debt  forgiveness
for the year ended March 31, 2003.

During  the  year ended March 31, 2004, we received $7,500  from  the
issuance  of a promissory note and by the end of the year had  repaid
all of the existing promissory notes totaling $59,109 and converted a
$40,000  promissory note, along with $11,000 in accrued interest,  to
common  shares.  During the comparative period in 2003,  we  received
gross proceeds of $90,921 from the issuance of promissory notes.

Other  than  the  foregoing,  we  know  of  no  trends,  demands   or
uncertainties  that are reasonably likely to have an  impact  on  the
Company's liquidity or capital resources.

We  will require additional financing in order to complete our stated
plan  of  operations for the next twelve months. We believe  that  we
will  require  an  additional $60,000 to sustain  minimum  operations
during the next twelve months.

New Accounting Pronouncements

In  April  2003, the FASB issued SFAS No. 149, Amendment of Statement
133  on Derivative Instruments and Hedging Activities. This Statement
amends   and   clarifies  financial  accounting  and  reporting   for
derivative  instruments,  including  certain  derivative  instruments
embedded in other contracts (collectively referred to as derivatives)
and  for  hedging  activities under SFAS No. 133. This  Statement  is
effective for contracts entered into or modified after June 30, 2003.
The adoption of SFAS No. 149 does not have an impact on the Company's
financial statements.

In  May  2003, the FASB issued SFAS No. 150, Accounting  for  Certain
Financial  Instruments with Characteristics of Both  Liabilities  and
Equity.  This  Statement  establishes standards  for  how  an  issuer
classifies   and   measures   certain  financial   instruments   with
characteristics of both liabilities and equity. It requires  that  an
issuer classify a financial instrument that is within its scope as  a
liability  (or  an  asset in some circumstances). This  Statement  is
effective  for  financial instruments entered into or modified  after
May  30,  2003,  and otherwise is effective at the beginning  of  the
first  interim period beginning after June 15, 2003. The adoption  of
SFAS  No.  150  does  not have an impact on the  Company's  financial
statements.

<PAGE>
In December 2003, the FASB Issued SFAS No. 132(R), a revision to SFAS
No.   132,   Employer's   Disclosure   about   Pensions   and   Other
Postretirement   Benefits.  SFAS  No.  132(R)   requires   additional
disclosure  about  assets, obligations, cash flows and  net  periodic
benefit  cost  of  defined benefit pension plans  and  other  defined
benefit  postretirement plans, SFAS No. 132(R) is effective  for  the
financials  statements with fiscal years ending  after  December  15,
2003,  with  the  exception  of disclosure  requirements  related  to
foreign  plans  and  estimated  future  benefit  payments  which  are
effective  for  the  fiscal years ending after  June  15,  2004.  The
adoption  of SFAS No. 132(R) does not have an impact on the Company's
financial position or results of operations.

In December, 2003 the American Institute of certified Public Accounts
and  the  Securities  and Exchange Commission ("SEC")  expressed  the
opinion that rate-lock commitments represent written put options, and
therefore  be  valued  as a liability. The SEC  expressed  that  they
expect  registrants to disclose the effect on the financial statement
of  recognizing the rate-lock commitments as written put options, for
quarters  commencing  after  march 15, 2004,  Additionally,  the  SEC
recently issued Staff Accounting Bulletin (SAB) No. 105. SAB No.  105
clarifies  the SEC's position that the inclusion of cash  flows  from
servicing or ancillary income in the determination of the fair  value
of interest rate lock commitments is not appropriate. The Company has
not  yet determined the impact on the financial statements of SAB No.
105,  which must be implemented for loan commitments entered into  on
or after April 1, 2004. The Company is currently analyzing the impact
of  the  SEC's position and will, if required, account for  its  loan
origination commitments as prescribed.

In  January 2003, the FASB released FASB Interpretation No. 46  ("FIN
46"),  "Consolidation of Variable Interest Entities." FIN 46 requires
that   all   primary  beneficiaries  of  variable  interest  entities
consolidate that entity. FIN 46 is effective immediately for variable
interest  entities  created after January 31, 2003  and  to  variable
interest  entities in which an enterprise obtains an  interest  after
that  date.  It  applies in the first fiscal year or  interim  period
beginning after June 15, 2003 to variable interest entities in  which
an  enterprise holds a variable interest it acquired before  February
1,  2003. In December 2003, the FASB published a revision to  FIN  46
("FIN  46R")  to clarify some of the provisions of the interpretation
and  to  defer  the  effective  date of  implementation  for  certain
entities.  Under the guidance of FIN 46R, entities that do  not  have
interests  in  structures that are commonly referred  to  as  special
purpose  entities  are  required  to  apply  the  provisions  of  the
interpretation in financial statements for periods ending after March
14, 2004. The Company did not create a variable interest entity after
January 31, 2003 and does not have a variable interest entity  as  of
December 31, 2003. The Company expects that the full adoption of  FIN
46R  in  2004  will  not  have a material  impact  on  the  Company's
financial position or results of operations

Application of Significant Accounting Policies

Cash and Cash Equivalents

Cash  equivalents comprise certain highly liquid instruments  with  a
maturity  of  three months or less when purchased.  As at  March  31,
2004 and 2003, cash and cash equivalents consist of cash only.

Accounting Estimates

The  preparation  of  the  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  at  the date of the financial  statements  and  the
reported  amounts  of  revenues  and expenses  during  the  reporting
period.   Actual  results  could  differ  from  those  estimates  and
assumptions.

<PAGE>
Furniture

Furniture is recorded at cost. Depreciation is based on the estimated
useful  lives  of  the  assets and is computed  using  the  declining
balance method as follows:

     Furniture and fixtures                  30%

Concentration of Credit Risk

The  Company  places its cash and cash equivalents with  high  credit
quality financial institutions.  As of March 31, 2004 the Company had
no balance in a bank beyond insured limits.

Foreign Currency Transactions

The  Company  maintains its accounting records in  U.S.  Dollars,  as
follows:

At  the  transaction date, each asset, liability, revenue and expense
is  translated into U.S. dollars by the use of the exchange  rate  in
effect  at  that  date.   At  the period  end,  monetary  assets  and
liabilities  are remeasured by using the exchange rate in  effect  at
that  date.  The  resulting foreign exchange  gains  and  losses  are
included in operations.

Fair Value of Financial Instruments

The   Company's  financial  instruments  consist  of  cash  and  cash
equivalents, accounts payable and accrued liabilities and  promissory
notes.   The   carrying  amount  of  accounts  payable  and   accrued
liabilities approximates fair value due to the short-term  nature  of
these  items.  The promissory notes also approximate fair value based
on  evaluations of market interest rates and short-term nature of the
payable.

Income Taxes

The  Company has adopted Statement of Financial Accounting  Standards
(SFAS")  No.  109, "Accounting for Income Taxes", which requires  the
Company  to  recognize deferred tax liabilities and  assets  for  the
expected  future tax consequences of events that have been recognized
in  the  Company's  financial statements or  tax  returns  using  the
liability  method.  Under this method, deferred tax  liabilities  and
assets are determined based on the temporary differences between  the
financial  statements and tax bases of assets and  liabilities  using
enacted tax rates in effect in the years in which the differences are
expected to reverse.

Comprehensive Income

The  Company adopted SFAS No. 130, "Reporting Comprehensive  Income",
which requires inclusion of foreign currency translation adjustments,
reported  separately  in  its Statement of Stockholders'  Equity,  in
other  comprehensive  income. The Company had no other  comprehensive
income for the year ended March 31, 2004.

Advertising Expenses

The  Company  expenses advertising costs as incurred. There  were  no
advertising  expenses incurred by the Company  for  the  years  ended
March 31, 2004 and 2003.

Loss Per Share

Loss  per  share  is  computed using the weighted average  number  of
shares outstanding during the year. The Company has adopted SFAS  No.
128,  "Earnings Per Share".  Diluted loss per share is equivalent  to
basic  loss per share as the   stock options to acquire common shares
as disclosed in the notes are anti-dilutive.

<PAGE>
Stock-based Compensation

The  Company has adopted the disclosure-only provisions of  SFAS  No.
123,  "Accounting for Stock-based Compensation", as amended  by  SFAS
No.  148  "Accounting for Stock-based Compensation -  Transition  and
Disclosure - An amendment of SFAS No. 123".  SFAS No. 123 encourages,
but  does  not require, companies to adopt a fair value based  method
for  determining  expense  related to stock-based  compensation.  The
Company accounts for stock-based compensation issued to employees and
directors  using  the  intrinsic value  method  as  prescribed  under
Accounting  Principles  Board Opinion No. 25, "Accounting  for  Stock
Issued   to  Employees"  and  related  interpretations.  The  Company
initiated  a  2004 Non-Qualified Stock Option Plan. During  the  year
ended March 31, 2004, the Company granted 1,060,000 stock options  to
non-employees.

Goodwill and Intangible Assets

Goodwill  represents the excess of cost over fair value of assets  of
business  acquired.   Goodwill and intangible assets  acquired  in  a
business combination and determined to have an indefinite useful life
are  not  amortized,  but instead are tested for impairment  at  lest
annually  in accordance with the provisions of Statement of Financial
Accounting  Standards ("SFAS") No. 142.  SFAS No. 142  also  requires
that  intangible assets with estimable useful lives be amortized over
their  respective estimated useful lives to their estimated  residual
values, and reviewed for impairment in accordance with SFAS No.  144,
Accounting for Impairment or Disposal of Long-Lived Assets.

Accounting for Derivative Instruments and Hedging Activities

The  Company has adopted Statement of Financial Accounting  Standards
No.  133 (SFAS 133) Accounting for Derivative and Hedging Activities,
which  requires  companies to recognize all derivative  contracts  as
either assets or liabilities in the balance sheet and to measure them
at  fair  value. If certain conditions are met, a derivative  may  be
specifically  designated as a hedge, the objective  of  which  is  to
match  the  timing  of  gain  and loss  recognition  on  the  hedging
derivative with the recognition of (i) the changes in the fair  value
of  the hedged asset or liability that are attributable to the hedged
risk   or   (ii)  the  earnings  effect  of  the  hedged   forecasted
transaction. For a derivative not designated as a hedging instrument,
the gain or loss is recognized in income in the period of change. The
Company  has  not entered into derivative contracts either  to  hedge
existing risks or for speculative purposes.

Long-Lived Assets Impairment

Long-term  assets  of  the  Company  are  reviewed  when  changes  in
circumstances require as to whether their carrying value  has  become
impaired,  pursuant to guidance established in Statement of Financial
Accounting  Standards  No.  144  (SFAS  144),  Accounting   for   the
Impairment  or  Disposal of Long-Lived Assets.  Management  considers
assets  to  be  impaired  if the carrying value  exceeds  the  future
projected  cash  flows from the related operations (undiscounted  and
without  interest  charges). If impairment is deemed  to  exist,  the
assets will be written down to fair value.

<PAGE>
ITEM 7.        FINANCIAL STATEMENTS

               SCARAB SYSTEMS, INC.
               (A development stage enterprise)

               Financial Statements
               (Expressed in U.S. Dollars)

               March 31, 2004 and 2003



               Index

               Report of Independent Auditors

               Balance Sheets

               Statements of Stockholders' Deficiency

               Statements of Operations

               Statements of Cash Flows

               Notes to Financial Statements






<PAGE>
MOORE STEPHENS ELLIS FOSTER LTD.
CHARTERED ACCOUNTANTS

1650 West 1st Avenue
Vancouver, BC  Canada   V6J 1G1
Telephone:  (604) 734-1112  Facsimile: (604) 714-5916
Website:  www.ellisfoster.com


REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
SCARAB SYSTEMS, INC.
(A development stage enterprise)

We  have  audited  the balance sheets of Scarab  Systems,  Inc.  (the
"Company") (a development stage enterprise) as at March 31, 2004  and
2003, the related statements of stockholders' deficit from October 8,
2001  (inception) to March 31, 2004 and the statements of  operations
and  cash  flows for the years ended March 31, 2004,  2003  and  from
October  8,  2001  (inception) to March  31,  2004.  These  financial
statements  are the responsibility of the Company's management.   Our
responsibility is to express an opinion on these financial statements
based on our audits.

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

In  our  opinion, these financial statements present fairly,  in  all
material respects, the financial position of the Company as at  March
31,  2004  and 2003 and the results of its operations and cash  flows
for  the  years ended March 31, 2004, 2003 and from October  8,  2001
(inception)  to March 31, 2004 in conformity with generally  accepted
accounting principles 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 not generated any
revenue  from  operations  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.




Vancouver, Canada                  "MOORE STEPHENS ELLIS FOSTER LTD."
April 7, 2004                                Chartered Accountants




<PAGE>
SCARAB SYSTEMS, INC.
(A development stage enterprise)
Balance Sheets

(Expressed in U.S. Dollars)
================================================================================

                                               March 31                 March 31
                                                   2004                     2003
--------------------------------------------------------------------------------
ASSETS

Current assets
  Cash and cash equivalents                   $  12,621            $           -
--------------------------------------------------------------------------------

Total current assets                                  -                        -

Furniture, net of accumulated depreciation            -                    1,305
--------------------------------------------------------------------------------

Total assets                                  $  12,621            $       1,305
================================================================================

LIABILITIES

Current liabilities
  Accounts payable and accrued liabilities    $  27,882            $     124,306
  Promissory notes                                    -                   85,921
--------------------------------------------------------------------------------

Total current liabilities                        27,882                  210,227

Promissory notes - non current                        -                    5,000
--------------------------------------------------------------------------------

Total liabilities                                27,882                  215,227
--------------------------------------------------------------------------------

STOCKHOLDERS' DEFICIT

Share capital

  Authorized: 100,000,000 common shares with a par value of $0.001 per share

  Issued and outstanding: 12,173,319 Common shares
     (March 31, 2003 - 9,166,299)             $  12,173            $       9,166

Additional paid in capital                      855,883                  245,123

Share subscriptions received                          -                   40,500

Deficit accumulated during
    the development stage                     (883,317)                (508,711)
--------------------------------------------------------------------------------

Total stockholders' deficit                    (15,261)                (213,922)
--------------------------------------------------------------------------------

Total liabilities and
    stockholders' (deficit)                   $  12,621            $       1,305
================================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S>                                              <C>         <C>            <C>           <C>           <C>          <C>
SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Stockholders' Deficit
For the period from October 8, 2001 (inception) to March 31, 2004
(Expressed in US Dollars)
==================================================================================================================================
                                                                                                            Deficit
                                                                                                 Share  accumulated
                                                       Common stock           Additional  subscription       during          Total
                                                  ---------     ---------        Paid-in     received/  development  shareholders'
                                                     Shares        Amount        capital  (receivable)        stage        deficit
----------------------------------------------------------------------------------------------------------------------------------
Stock issued for cash at $0.001 per share
   in October, 2001                               5,425,000  $      5,425   $          -   $        -   $         -   $      5,425

Stock issued for intangible asset acquisition
   at $0.001 per share in October,2001              200,000           200              -            -             -            200

Issued 1,440,000 common stock at
   $0.001 per share in October, 2001              1,440,000         1,440              -      (1,440)             -              -

Stock issued at $0.50 per share
   in November, 2001                                675,000           675        336,825    (337,500)             -              -

Stock issued for cash at $0.50 per share
   in January, 2002                                 390,000           390        194,610            -             -        195,000

 Net (loss) for the period                                -             -              -            -     (112,434)      (112,434)
----------------------------------------------------------------------------------------------------------------------------------

Balance, March 31, 2002                           8,130,000  $      8,130   $    531,435   $(338,940)  $  (112,434)   $     88,191

Stock issued for cash at $0.25 $0.50 per share
   in April 2003                                    130,000           130         39,870            -             -         40,000

Recapitalization to effect the acquisition
   of iRV, Inc.                                   1,446,299         1,446        (1,446)            -             -              -

Acquisition of MarketEdgeDirect                           -             -              -      337,500             -        337,500

Proceeds of share subscriptions                                                                 1,440                        1,440

Return of stocks in connection of
   disposal of MarketEdgeDirect                   (540,000)         (540)      (358,042)            -             -      (358,582)

Proceeds of 96,000 share subscriptions
   at $0.40 to $0.50 per share                                                                 40,500                       40,500

241,020 Shares allotted for services
   rendered at $0.10 to $0.40 per share                                           33,306            -                       33,306

 Net (loss) for the period                                -             -              -            -     (396,277)      (396,277)
----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003                           9,166,299   $     9,166   $    245,123   $   40,500   $ (508,711)   $  (213,922)
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S>                                              <C>         <C>            <C>           <C>           <C>          <C>
SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Stockholders' Deficit
For the period from October 8, 2001 (inception) to March 31, 2004
(Expressed in US Dollars)
==================================================================================================================================
                                                                                                            Deficit
                                                                                                Share   accumulated
                                                       Common stock           Additional  subscription       during          Total
                                                  ---------     ---------        Paid-in     received/  development  shareholders'
                                                     Shares        Amount        capital  (receivable)        stage        deficit
----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2003                           9,166,299   $     9,166   $    245,123   $   40,500   $ (508,711)   $  (213,922)

Stocks issued for services rendered and
   recorded in fiscal year 2003                     241,020           241          (241)            -             -              -

Stocks issued at $0.40 to $0.50 per share
   in fiscal year 2003                               96,000            96         40,404     (40,500)             -              -

Stocks issued for conversion of debt
   at $0.10 per share in February 2004              510,000           510         50,490            -             -         51,000

Stocks issued for cash at $0.10 per share
   in February and March 2004                     1,200,000         1,200        118,800            -                      120,000

Stocks issued for exercise of stock options
   at $0.10 per share in February and March 2004    960,000           960         95,040            -             -         96,000

Issuance of stock options as compensation                 -             -        195,740            -             -        195,740

Forgiveness of debt - related party                       -             -        110,527            -             -        110,527

 Net (loss) for the period                                -             -              -            -     (374,606)      (374,606)
----------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2004                          12,173,319     $  12,173   $    855,883   $        -   $ (883,317)   $   (15,261)
==================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S>                                    <C>               <C>               <C>
SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Operations
(Expressed in U.S. Dollars)
==========================================================================================
                                            Cumulative              Year              Year
                                       October 8, 2001             Ended             Ended
                                        (inception) to         March 31,         March 31,
                                        March 31, 2004              2004              2003

General and administrative expenses
  Consulting                           $       400,620   $       169,059   $       170,469
  Interest expense on long term debt            16,569             8,948             7,621
  Legal and accounting                          55,478            14,924            20,181
  Office and Miscellaneous                      60,513            21,501            30,756
  Professional fees                             65,780                 -            65,780
  Rent                                          43,383                 -            29,485
  Stock based compensation                     195,740           195,740                 -
  Telephone                                     16,594               232            15,252
  Travel                                        16,453             1,247             7,501
------------------------------------------------------------------------------------------

Operating (loss)                             (871,130)         (411,651)         (347,045)

Other income (expense)
  Gain on settlement of debt                    37,045            37,045                 -
  Write-off of goodwill                       (70,114)                 -          (70,114)
  Write-off of Smart-e-Card
     Distribution Rights                         (200)                 -             (200)
------------------------------------------------------------------------------------------

Loss from continued operations               (904,399)         (374,606)         (417,359)

Net income from discontinued operations         21,082                 -            21,082
------------------------------------------------------------------------------------------

Net loss for the period                $     (883,317)   $     (374,606)   $     (396,277)
==========================================================================================

Basic and diluted earning (loss) per share,
  Loss from continued operations                         $        (0.04)   $        (0.05)
  Net income from discontinued operations                           0.00              0.00
------------------------------------------------------------------------------------------

Net (loss) for the year                                  $        (0.04)   $        (0.05)
==========================================================================================

Weighted average number of
  common shares outstanding                                    9,481,502         8,802,948
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<S>                                    <C>               <C>               <C>
SCARAB SYSTEMS, INC.
(A development stage enterprise)
Statements of Cash Flows
(Expressed in U.S. Dollars)
==========================================================================================
                                            Cumulative              Year              Year
                                       October 8, 2001             Ended             Ended
                                        (inception) to         March 31,         March 31,
                                        March 31, 2004              2004              2003

Cash flows from (used in) operating activities
  Net (loss) for the period            $     (883,317)   $     (374,606)   $     (396,277)
  Adjustment to reconcile net loss to
   net cash used in operating activities:
    - amortization                               2,194             1,305               559
    - stock based compensation                 195,740           195,740                 -
    - foreign exchange                         (5,989)             2,688                 -
    - write-off of goodwill                     70,114                 -            70,114
    - debt forgiven                            103,140           103,140                 -
    - write-off of Smart-e-Card
        Distribution Rights                        200                 -               200
    - net income from the discontinued
        operations                            (21,082)                 -          (21,082)
    - shares allotted for service rendered      33,306                 -            33,306
  Changes in non-cash working capital items:
    - prepaid expenses and deposits                  -                 -             8,515
    - accounts payable and accrued liabilities  35,269          (80,037)           116,877
------------------------------------------------------------------------------------------

Net cash used in operating activities        (470,425)         (151,770)         (187,788)
------------------------------------------------------------------------------------------

Cash flows used in investing activities
  Loan to Healthnet (Note 4)                  (62,684)                 -                 -
  Acquisition of fixed assets                  (2,195)                 -                 -
------------------------------------------------------------------------------------------

Net cash used in investing activities         (64,879)                 -                 -
------------------------------------------------------------------------------------------

Cash flows provided by financing activities
  Proceeds from issuance of common stock       547,925           216,000            40,000
  Proceeds from promissory notes                     -             7,500            90,921
  Repayment of promissory notes                      -          (59,109)                 -
  Proceeds from share subscriptions                  -                 -            41,940
------------------------------------------------------------------------------------------

Net cash provided by financing activities      547,925           164,391           172,861
------------------------------------------------------------------------------------------

Increase (decrease) in cash
   and cash equivalents                         12,621            12,621          (14,927)
------------------------------------------------------------------------------------------

Cash and cash equivalents,
   beginning of period                               -                 -            14,927
------------------------------------------------------------------------------------------

Cash and cash equivalents,
   end of period                       $        12,621   $        12,621   $             -
==========================================================================================
 Interest expenses paid                $         5,513   $         3,801   $         1,712
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.

<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

1.   Incorporation and Continuance of Operations

     Scarab  Systems,  Inc.  (formerly called iRV,  Inc.)  was  incorporated  in
     Colorado on August 1, 1999.

     The financial statements presented are those of Scarab Nevada (see below).

     The  original  Scarab Systems, Inc. ("Scarab Nevada") was  incorporated  on
     October 8, 2001 under the laws of the State of Nevada.  Scarab Nevada was a
     development stage enterprise and was seeking business opportunities.

     On  March 25, 2002, iRV, Inc. ("iRV") entered into an Agreement and Plan of
     Reorganization  with Scarab Nevada, whereby iRV issued 8,260,000  share  of
     its  common  stock in exchange for all of the outstanding common  stock  of
     Scarab   Nevada.  As  part  of  the  definitive  agreement  and   plan   of
     reorganization,  iRV  transferred all its assets  and  liabilities  to  its
     subsidiaries  and  then spun off the subsidiaries and  iRV  became  a  non-
     operating  shell  company  without any assets or  liabilities.  Immediately
     prior to the Agreement and Plan of Reorganization, iRV had 1,446,299 shares
     of  common stock issued and outstanding. The acquisition was accounted  for
     as  a  recapitalization of Scarab Nevada because the shareholders of Scarab
     Nevada  controlled iRV after the acquisition. Scarab Nevada was treated  as
     the  acquiring  entity for accounting purposes and iRV  was  the  surviving
     entity  for  legal  purposes. The issued and outstanding  common  stock  of
     Scarab  Nevada  prior  to  the completion of acquisition  was  restated  to
     reflect the 8,260,000 common stock issued by iRV.

     Subsequent   to  the  completion  of  the  reorganization,  Scarab   Nevada
     transferred all its assets and liabilities to iRV and Scarab Nevada  ceased
     to exist, and iRV changed its name to Scarab Systems, Inc. Accordingly, the
     financial  statements are the continuation of Scarab Nevada.  The effective
     date of the Agreement and Plan of Reorganization was July 17, 2002.

     These  financial statements have been prepared in accordance with generally
     accepted  accounting  principles  applicable  to  a  going  concern,  which
     contemplates the realization of assets and the satisfaction of  liabilities
     and  commitments  in the normal course of business.  The  Company  has  not
     generated  any  revenue  and  requires additional  funds  to  maintain  its
     operations. Management's plans in this regard are to raise equity financing
     as required.

     These  conditions  raise substantial doubt about the Company's  ability  to
     continue as a going concern.  These financial statements do not include any
     adjustments that might result from this uncertainty.

     The Company has not generated any material operating revenues to date.

     On  March  15,  2004,  the Company abandoned its only subsidiary,  Catalyst
     Technologies, Inc.

     In  fiscal year 2004, the Company consolidated its common stock by  issuing
     one  new  share  for  ten old shares. The financial  statements  have  been
     restated to reflect the stock consolidation.


2.   Significant Accounting Policies

     a)   Cash and Cash Equivalents

          Cash  equivalents  comprise certain highly liquid instruments  with  a
          maturity of three months or less when purchased.  As at March 31, 2004
          and 2003, cash and cash equivalents consist of cash only.

     b)   Accounting Estimates

          The  preparation  of  the  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  at  the  date of the financial  statements  and  the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates and assumptions.

<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.   Significant Accounting Policies   (continued)

     c)   Furniture

          Furniture  is recorded at cost. Depreciation is based on the estimated
          useful lives of the assets and is computed using the declining balance
          method as follows:

               Furniture and fixtures                  30%

     d)   Concentration of Credit Risk

          The  Company  places its cash and cash equivalents  with  high  credit
          quality financial institutions.  As of March 31, 2004 the Company  had
          no balance in a bank beyond insured limits.

     e)   Foreign Currency Transactions

          The  Company  maintains its accounting records  in  U.S.  Dollars,  as
          follows:

          At the transaction date, each asset, liability, revenue and expense is
          translated into U.S. dollars by the use of the exchange rate in effect
          at  that date.  At the period end, monetary assets and liabilities are
          remeasured  by  using the exchange rate in effect at  that  date.  The
          resulting   foreign  exchange  gains  and  losses  are   included   in
          operations.

     f)   Fair Value of Financial Instruments

          The   Company's  financial  instruments  consist  of  cash  and   cash
          equivalents,  accounts payable and accrued liabilities and  promissory
          notes. The carrying amount of accounts payable and accrued liabilities
          approximates  fair value due to the short-term nature of these  items.
          The  promissory notes also approximate fair value based on evaluations
          of market interest rates and short-term nature of the payable.

     g)   Income Taxes

          The  Company  has adopted Statement of Financial Accounting  Standards
          (SFAS")  No.  109, "Accounting for Income Taxes", which  requires  the
          Company  to  recognize deferred tax liabilities  and  assets  for  the
          expected  future tax consequences of events that have been  recognized
          in  the  Company's  financial statements  or  tax  returns  using  the
          liability  method.   Under this method, deferred tax  liabilities  and
          assets  are determined based on the temporary differences between  the
          financial  statements  and tax bases of assets and  liabilities  using
          enacted tax rates in effect in the years in which the differences  are
          expected to reverse.

     h)   Comprehensive Income

          The  Company  adopted SFAS No. 130, "Reporting Comprehensive  Income",
          which  requires inclusion of foreign currency translation adjustments,
          reported separately in its Statement of Stockholders' Equity, in other
          comprehensive  income. The Company had no other  comprehensive  income
          for the year ended March 31, 2004.

     i)   Advertising Expenses

          The  Company  expenses advertising costs as incurred.  There  were  no
          advertising expenses incurred by the Company for the years ended March
          31, 2004 and 2003.

<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.   Significant Accounting Policies   (continued)

     j)   Loss Per Share

          Loss per share is computed using the weighted average number of shares
          outstanding  during the year. The Company has adopted  SFAS  No.  128,
          "Earnings Per Share".  Diluted loss per share is equivalent  to  basic
          loss  per  share as the    stock options to acquire common  shares  as
          disclosed in the notes are anti-dilutive.

     k)   Stock-based Compensation

          The  Company  has adopted the disclosure-only provisions of  SFAS  No.
          123, "Accounting for Stock-based Compensation", as amended by SFAS No.
          148   "Accounting  for  Stock-based  Compensation  -  Transition   and
          Disclosure  - An amendment of SFAS No. 123".  SFAS No. 123 encourages,
          but does not require, companies to adopt a fair value based method for
          determining  expense related to stock-based compensation. The  Company
          accounts   for  stock-based  compensation  issued  to  employees   and
          directors  using  the  intrinsic  value  method  as  prescribed  under
          Accounting  Principles  Board Opinion No. 25,  "Accounting  for  Stock
          Issued to Employees" and related interpretations.

          The  Company initiated a 2004 Non-Qualified Stock Option Plan.  During
          the  year  ended  March 31, 2004, the Company granted 1,060,000  stock
          options to non-employees.

     l)   Goodwill and Intangible Assets

          Goodwill  represents the excess of cost over fair value of  assets  of
          business  acquired.   Goodwill and intangible  assets  acquired  in  a
          business combination and determined to have an indefinite useful  life
          are  not  amortized,  but instead are tested for  impairment  at  lest
          annually  in accordance with the provisions of Statement of  Financial
          Accounting  Standards ("SFAS") No. 142.  SFAS No.  142  also  requires
          that  intangible assets with estimable useful lives be amortized  over
          their  respective  estimated useful lives to their estimated  residual
          values,  and reviewed for impairment in accordance with SFAS No.  144,
          Accounting for Impairment or Disposal of Long-Lived Assets.

     m)   Accounting for Derivative Instruments and Hedging Activities

          The  Company  has adopted Statement of Financial Accounting  Standards
          No.  133  (SFAS 133) Accounting for Derivative and Hedging Activities,
          which  requires  companies to recognize all  derivative  contracts  as
          either assets or liabilities in the balance sheet and to measure  them
          at  fair  value.  If certain conditions are met, a derivative  may  be
          specifically designated as a hedge, the objective of which is to match
          the timing of gain and loss recognition on the hedging derivative with
          the  recognition of (i) the changes in the fair value  of  the  hedged
          asset  or liability that are attributable to the hedged risk  or  (ii)
          the  earnings  effect  of  the hedged forecasted  transaction.  For  a
          derivative not designated as a hedging instrument, the gain or loss is
          recognized in income in the period of change.

          The  Company has not entered into derivative contracts either to hedge
          existing risks or for speculative purposes.


<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

     2.   Significant Accounting Policies   (continued)

     n)   Long-Lived Assets Impairment

          Long-term  assets  of  the  Company  are  reviewed  when  changes   in
          circumstances  require as to whether their carrying value  has  become
          impaired,  pursuant to guidance established in Statement of  Financial
          Accounting Standards No. 144 (SFAS 144), Accounting for the Impairment
          or  Disposal of Long-Lived Assets. Management considers assets  to  be
          impaired if the carrying value exceeds the future projected cash flows
          from   the  related  operations  (undiscounted  and  without  interest
          charges). If impairment is deemed to exist, the assets will be written
          down to fair value.

     o)   New Accounting Pronouncements

          In  April  2003, the FASB issued SFAS No. 149, Amendment of  Statement
          133  on  Derivative Instruments and Hedging Activities. This Statement
          amends and clarifies financial accounting and reporting for derivative
          instruments,  including  certain derivative  instruments  embedded  in
          other  contracts  (collectively referred to as  derivatives)  and  for
          hedging activities under SFAS No. 133. This Statement is effective for
          contracts  entered into or modified after June 30, 2003. The  adoption
          of  SFAS  No.  149 does not have an impact on the Company's  financial
          statements.

          In  May  2003,  the FASB issued SFAS No. 150, Accounting  for  Certain
          Financial  Instruments with Characteristics of  Both  Liabilities  and
          Equity.  This  Statement  establishes  standards  for  how  an  issuer
          classifies   and   measures   certain   financial   instruments   with
          characteristics  of both liabilities and equity. It requires  that  an
          issuer classify a financial instrument that is within its scope  as  a
          liability  (or  an  asset in some circumstances).  This  Statement  is
          effective for financial instruments entered into or modified after May
          30,  2003,  and otherwise is effective at the beginning of  the  first
          interim period beginning after June 15, 2003. The adoption of SFAS No.
          150 does not have an impact on the Company's financial statements.

          In  December 2003, the FASB Issued SFAS No. 132(R), a revision to SFAS
          No. 132, Employer's Disclosure about Pensions and Other Postretirement
          Benefits. SFAS No. 132(R) requires additional disclosure about assets,
          obligations,  cash  flows  and net periodic benefit  cost  of  defined
          benefit pension plans and other defined benefit postretirement  plans,
          SFAS No. 132(R) is effective for the financials statements with fiscal
          years ending after December 15, 2003, with the exception of disclosure
          requirements  related  to foreign plans and estimated  future  benefit
          payments  which are effective for the fiscal years ending  after  June
          15,  2004. The adoption of SFAS No. 132(R) does not have an impact  on
          the Company's financial position or results of operations.

          In  December, 2003 the American Institute of certified Public Accounts
          and  the  Securities  and Exchange Commission  ("SEC")  expressed  the
          opinion that rate-lock commitments represent written put options,  and
          therefore be valued as a liability. The SEC expressed that they expect
          registrants  to  disclose  the effect on the  financial  statement  of
          recognizing  the  rate-lock commitments as written  put  options,  for
          quarters  commencing  after  march 15,  2004,  Additionally,  the  SEC
          recently issued Staff Accounting Bulletin (SAB) No. 105. SAB  No.  105
          clarifies  the  SEC's position that the inclusion of cash  flows  from
          servicing  or ancillary income in the determination of the fair  value
          of  interest rate lock commitments is not appropriate. The Company has
          not  yet determined the impact on the financial statements of SAB  No.
          105, which must be implemented for loan commitments entered into on or
          after April 1, 2004. The Company is currently analyzing the impact  of
          the  SEC's  position  and  will, if required,  account  for  its  loan
          origination commitments as prescribed.

<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

2.   Significant Accounting Policies   (continued)

     o)   New Accounting Pronouncements   (continued)

          In  January 2003, the FASB released FASB Interpretation No.  46  ("FIN
          46"),  "Consolidation of Variable Interest Entities." FIN 46  requires
          that   all   primary  beneficiaries  of  variable  interest   entities
          consolidate that entity. FIN 46 is effective immediately for  variable
          interest  entities  created after January 31,  2003  and  to  variable
          interest  entities  in which an enterprise obtains an  interest  after
          that  date.  It  applies in the first fiscal year  or  interim  period
          beginning after June 15, 2003 to variable interest entities  in  which
          an enterprise holds a variable interest it acquired before February 1,
          2003.  In December 2003, the FASB published a revision to FIN 46 ("FIN
          46R")  to clarify some of the provisions of the interpretation and  to
          defer the effective date of implementation for certain entities. Under
          the  guidance  of  FIN  46R, entities that do not  have  interests  in
          structures  that are commonly referred to as special purpose  entities
          are  required  to  apply  the  provisions  of  the  interpretation  in
          financial  statements for periods ending after  March  14,  2004.  The
          Company  did  not create a variable interest entity after January  31,
          2003  and does not have a variable interest entity as of December  31,
          2003.  The Company expects that the full adoption of FIN 46R  in  2004
          will not have a material impact on the Company's financial position or
          results of operations


3.   Smart-e-Card Distribution Rights

     In October, 2001, the Company entered into an agreement with BentleyTel USA
     Inc.  ("Bentley"),  pursuant to which the Company was granted  a  perpetual
     worldwide exclusive agency to Bentley's Smart-e-Cards.  The Company  issued
     200,000  shares  of  its common stock at $0.001 each for  the  distribution
     rights.  In fiscal year 2003, the Company abandoned Smart-e-Card sales  and
     distribution operations and charged the cost to operations.


4.   Business Acquisition

     In  fiscal  year 2002, the Company loaned the sum of $62,684  to  Healthnet
     International, Inc. ("Healthnet").  The loan bore interest at 15% per annum
     and  was  convertible into stocks in Healthnet at $0.50 per share  (125,000
     shares).

     On  March 28, 2003, Healthnet sold Catalyst Technologies, Inc. ("Catalyst")
     to  the  Company in satisfaction of the related debt owing.   Catalyst  was
     incorporated under the law of the Province of British Columbia, Canada, and
     is  in  the business of providing e-commerce services to bricks and  mortar
     retailers. The acquisition was accounted for using the purchase  method  of
     accounting  and  accordingly,  the purchase  price  was  allocated  to  the
     tangible  and  intangible  net  assets  acquired  on  the  basis  of  their
     respective fair values on the acquisition date.

     The allocation of the purchase price was as follows:

         ----------------------------------------------------
          Net liabilities acquired               $    (7,430)
          Consideration                                62,684
         ----------------------------------------------------
          Goodwill                                     70,114
          Impairment of Goodwill                     (70,114)
         ----------------------------------------------------
          Balance                                $          -
         ====================================================

     In  accordance with SFAS No. 142 and 144, the Company has written down  the
     goodwill  arising  from  the  acquisition of Catalyst  to  nil,  being  the
     estimated fair value of the goodwill at year-end.

     On  March 15, 2004, the Company abandoned Catalyst. There was no effect  on
     the financials statements because the subsidiary had a nil carrying value.
<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

5.   Discontinued Operations

     Effective   August  7,  2002,  in  connection  with  the   675,000   shares
     subscription receivable, the Company exercised its option to acquire all of
     the outstanding shares of 485017 B.C. Ltd., a Canadian company involved  in
     marketing and advertising services. On March 28, 2003, the Company  entered
     into  an agreement with the former shareholders of 485017 B.C. Ltd. to sell
     485017 B.C. Ltd. to the former shareholder for the return of 540,000 shares
     of  the  Company which were valued at the $358,582 (the original investment
     of  $337,500 plus net income of 485017 B.C. Ltd. totalling $21,082 from the
     period of August 7, 2002 to March 28, 2003).


6.   Promissory Notes

     --------------------------------------------------------------------
                                                       2004          2003
     --------------------------------------------------------------------
     Promissory notes - related party           $         -   $    41,361
     Promissory notes - convertible
      at $0.05 to $0.075 per share                        -        16,531
     Promissory notes - unrelated party                   -        33,029
     --------------------------------------------------------------------
     Total                                                -        90,921
     Less:  Long-term portion                             -       (5,000)
     --------------------------------------------------------------------
                                                $         -   $    85,921
     ====================================================================

     Promissory notes are unsecured and bearing interest at 0% to 20% per  annum
     and repayable on maturity.


7.   Share Issuances

     In  fiscal  year  2004, the Company received $120,000 for the  issuance  of
     1,200,000 shares at $0.10 per share.


8.   Stock Options

     a)   On  February  10, 2004, the Company's Board of Directors  adopted  the
          2004  Non-Qualified  Stock  Option Plan (the  "Plan").  The  aggregate
          number  of  shares of common stock that may be granted by the  Company
          under  the  Plan will not exceed a maximum of 1,800,000 shares  during
          the  period of the Plan. The Plan shall terminate upon the earlier  of
          February  10,  2014  or the issuance of all shares granted  under  the
          Plan.  The  option prices per share are determined  by  the  Board  of
          Directors when the stock option is granted.

     b)   During  the  year,  the  Company granted 1,060,000  stock  options  to
          consultants.  These options have vesting periods ranging from
          immediately to over seven months, expiring two (2) years from date of
          grant.  The Company charged $195,740 stock-based compensation expense
          to operations for the options granted to the consultants using the
          Black-Scholes option pricing model with the following weighted average
          assumptions:

          * Dividend yield of 0%, volatibility of 159%, risk-free interest  rate
            of  2.75% and expended life of two (2) years.  The weighted  average
            fair  value  of  the stock option granted in 2004  fiscal  year  was
            estimated at $0.19.

<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

8.        Stock Options  (continued)

          As   at  March  31,  2004,  the  Company  had  100,000  stock  options
          outstanding under the Plan with a weighted average exercise  price  of
          $0.10.  The weighted average remaining contractual life of the options
          outstanding is 1.89 years.

          ----------------------------------------------------------------------
                                                                        Weighted
                                                             Weighted    Average
                                                              Average  Remaining
                                                     Stock   Exercise       Life
                                                   Options      Price     (yrs.)
          Outstanding at April 1, 2003  and 2002         -  $       -          -

          Granted                                1,060,000  $    0.10
          Exercised                              (960,000)  $    0.10
          ----------------------------------------------------------------------

          Outstanding at March 31, 2004            100,000  $    0.10       1.89
          Exercisable at March 31, 2004             25,000  $    0.10       1.89
          ======================================================================

          As   required  by  SFAS  123,  the  Company  will  disclose  pro-forma
          information  regarding its net income as if it has accounted  for  its
          employee  stock options granted under the fair value method.  However,
          the Company did not grant any stock options to officers, directors  or
          employees  during the fiscal year 2004 and 2003 and as  such,  no  pro
          forma information has been provided.


9.   Income Taxes

     As at March 31, 2004, the Company has estimated tax losses carryforward for
     tax purposes of $543,500. This amount may be applied against future federal
     taxable  income. The Company evaluates its valuation allowance requirements
     on an annual basis based on projected future operations. When circumstances
     change  and  this  causes  a  change in management's  judgement  about  the
     realizability  of  deferred tax assets, the impact of  the  change  on  the
     valuation allowance is generally reflected in current income.

     The  tax  effects of temporary differences that give rise to the  Company's
     deferred tax asset (liability) are as follows:

          ------------------------------------------------
                                         2004         2003
          ------------------------------------------------
          Loss carry forwards      $  190,000   $  182,000
          Valuation allowance       (190,000)    (182,000)
          ------------------------------------------------
                                   $        -   $        -
          ================================================

<PAGE>
SCARAB SYSTEMS INC.
(A development stage enterprise)
Notes to Consolidated Financial Statements
March 31, 2004 and 2003
(Expressed in U.S. Dollars)

10.  Related Party Transactions

     a)   In  fiscal  year 2004, the Company accrued consulting fees of  $59,413
          (2003  -  $84,516) to the directors and officers of  the  Company.  In
          fiscal year 2004, the related parties released the Company of $110,527
          of  accrued consulting fees and expenses and this was recorded  as  an
          additional   paid-in  capital  on  the  statement   of   stockholders'
          deficiency.

     b)   Included in the accounts payable and promissory notes are $nil (2003 -
          $50,600)  and  $nil  (2003 - $41,361), respectively,  payable  to  the
          directors and officers of the Company.

     c)   On  February  2,  2004, a $40,000 unsecured promissory  note  with  an
          officer  of  the Company, along with $11,000 in accrued interest,  was
          converted  into 510,000 common shares of the Company at  a  price  per
          share of $0.10.


11.  Non-cash Activities

     a)   In  fiscal  year  2004, the Company issued 510,000  common  shares  in
          connection with the conversion of a $40,000 unsecured promissory note,
          along with $11,000 of accrued interest, to a related party.

     b)   Pursuant to the grant of 1,060,000 stock options to consultants during
          the fiscal year 2004, the Company recorded stock based compensation
          charges of $195,740.

     c)   In fiscal year 2004, the amount totalling $110,527 owing to the
          directors and officers of the Company was released.


12.  Comparative Figure

     Certain of the comparative figures have been reclassified to conform to the
current year's presentation.


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

We adopt by reference the disclosure made in item 4 and exhibit 16 of Form 8-K/A
filed  by  us  with the Securities and Exchange Commission on  August  9,  2002.
Except  as  already  disclosed  in this item,  there  were  neither  changes  in
accountants  nor  disagreements of the type required to be reported  under  this
item  between us and our independent accountants during the fiscal  years  ended
March 31, 2004 or 2003.

ITEM 8a. CONTROLS AND PROCEDURES

As  required  by  Rule  13a-15 under the Exchange Act, we have  carried  out  an
evaluation  of  the effectiveness of the design and operation of  our  company's
disclosure controls and procedures as of the end of the period covered  by  this
annual  report, being March 31, 2004. This evaluation was carried out under  the
supervision  and  with the participation of our company's management,  including
our company's president and chief executive officer. Based upon that evaluation,
our company's president and chief executive officer concluded that our company's
disclosure controls and procedures are effective. There have been no significant
changes  in  our  company's internal controls or in other factors,  which  could
significantly affect internal controls subsequent to the date we carried out our
evaluation.

Disclosure  controls and procedures are controls and other procedures  that  are
designed  to  ensure that information required to be disclosed in our  company's
reports  filed  or  submitted  under the Exchange Act  is  recorded,  processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's  rules  and  forms. Disclosure  controls  and  procedures
include,  without limitation, controls and procedures designed  to  ensure  that
information  required to be disclosed in our company's reports filed  under  the
Exchange  Act  is  accumulated  and communicated to  management,  including  our
company's president and chief executive officer as appropriate, to allow  timely
decisions regarding required disclosure.

                                    PART III

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

Directors and Executive Officers

The name, position with the Company, age of each Director and executive officer
of the Company is as follows:

Name             Age   Position              Director/Officer Since
---------------  ---   --------------------  ----------------------
Thomas E. Mills   36   Chief Executive               2002
                       Officer, President
                       Chief Financial
                       Officer, Secretary &
                       Director

Lou Hilford       59   Chief Operations              2002
                       Officer & Director

On  March 2, 2004, John Allen resigned as Chief Financial Officer and Secretary.
Thomas  E. Mills was appointed the Chief Financial Officer and Secretary.

Thomas  E.  Mills  has served as our President, Chief Executive  Officer  and  a
Director  since  2002, Chief Financial Officer and Secretary since March  2004.
He was President of Scarab Systems, Inc. (Nevada),  until  it ceased to exist in
2002.  From  2000  to  2001,  Mr.  Mills  was  in-house  counsel  for  Healthnet
International,  Inc.  of  Colorado.   During  Mr.  Mills'  tenure  at Healthnet,
the  company's  common  stock was quoted on the NASD  over-the-counter bulletin
board under the trading symbol "HLNT". Previously, Mr.  Mills  was  an associate
with  McRae, Holmes & King, a firm of Barristers  and  Solicitors  in Vancouver,
British  Columbia.  Mr.  Mills  received  a  Bachelor  of  Arts  degree from the
University  of  Waterloo  in  1992,  and a  Bachelor  of  Laws  degree from the
University of British Columbia in 1996.

<PAGE>
Lou  Hilford  has  served as our Chief Operations Officer and a  Director  since
2002.  For the five years previous, Mr. Hilford has been the President of Loudon
Consultants  Incorporated,  a privately held consulting  firm,  specializing  in
casino,  bingo and card room design and marketing, government lobbies, community
studies, horse racing, charity and First Nations gaming.

All  directors serve for terms of one year each, and are subject to  re-election
at our regular Annual Meeting of Shareholders, unless they earlier resign.

There  are  no material proceedings to which any of our directors,  officers  or
affiliates, any owner of record or beneficially of more than five percent of any
class  of our voting securities, or any associate of any such director, officer,
affiliate,  or  security  holder  is  a party  adverse  to  us  or  any  of  our
subsidiaries  or  has  a  material  interest  adverse  to  us  or  any  of   our
subsidiaries.

We  have  attempted and will continue to continue to attempt to insure that  any
transactions between us and our officers, directors, principal shareholders,  or
other  affiliates have been and will be on terms no less favorable  to  us  than
could be obtained from unaffiliated third parties on an arm's-length basis.

Audit Committee

During the fiscal years ending March 31 2004 and 2003, we had an Audit Committee
comprised of the Board of Directors.  The members of the Audit Committee for the
fiscal  year  ending in 2004 and 2003 were Thomas E. Mills and Lou  Hilford.  No
member  of  the Audit Committee receives any compensation for his service  as  a
member of that Committee.  During the fiscal years ending in 2004 and 2003,  the
Audit Committee held no formal meetings.

The  Audit  Committee  is  responsible for providing  assurance  that  financial
disclosures  made by us reasonably portray our financial condition,  results  of
operations,  plan  and  long-term commitments. To  accomplish  this,  the  Audit
Committee  oversees the external audit coverage, including the annual nomination
of  the  independent public accountants, reviews accounting policies and  policy
decisions,  reviews  the  financial  statements,  including  interim   financial
statements  and  annual financial statements, together with auditor's  opinions,
inquires  about  the  existence  and substance  of  any  significant  accounting
accruals,  reserves  or estimates made by us, reviews with us  the  Management's
Discussion and Analysis section of the Annual Report, and reviews the letter  of
Management Representations given to the independent public accountants.

Our  Board  of  Directors has determined that it does not have a member  of  our
audit  committee  that  qualifies as an "audit committee  financial  expert"  as
defined  in Item 401(e) of Regulation S-B, and is "independent" as the  term  is
used  in  Tem 7(d)(3)(iv) of Schedule 14A under the Securities Exchange  Act  of
1934,  as  amended. We believe that retaining an independent director who  would
qualify  as  an  "audit committee financial expert" would be overly  costly  and
burdensome and is not warranted in our circumstances given the early  stages  of
our development and the fact that we have not generated revenues to date.

Compensation Committee

During  the  fiscal  year  ending in 2004 and 2003  the  Compensation  Committee
consisted  of  Thomas  E. Mills and Lou Hilford. No member of  the  Compensation
Committee  receives any additional compensation for his service as a  member  of
that  Committee.  During  the  fiscal  years  ending  in  2004  and  2003,   the
Compensation  Committee  held  no  meetings.   The  Compensation  Committee   is
responsible for reviewing pertinent data and making recommendations with respect
to  compensation standards for the executive officers, including  the  President
and  Chief Executive Officer, establishing guidelines and making recommendations
for the implementation of management incentive compensation plans, and reviewing
the performance of the President and Chief Executive Officer.

<PAGE>
Involvement in Certain Legal Proceedings

Except  as  noted herein or below, during the last five-(5) years  none  of  our
directors or officers have:

(1)  had any bankruptcy petition filed by or against any business of which  such
person  was  a general partner or executive officer either at the  time  of  the
bankruptcy or within two years prior to that time;

(2)  been  convicted in a criminal proceeding or subject to a  pending  criminal
proceeding;

(3)  been  subject to any order, judgment, or decree, not subsequently reversed,
suspended  or  vacated, of any court of competent jurisdiction,  permanently  or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; or

(4)  been  found  by  a court of competent jurisdiction in a civil  action,  the
Commission  or  the  Commodity Futures Trading Commission  to  have  violated  a
federal  or state securities or commodities law, and the judgment has  not  been
reversed, suspended, or vacated.

Indemnification and Limitation on Liability of Directors

The   Company's  Articles  of  Incorporation  provide  that  the  Company  shall
indemnify,  to  the  fullest  extent permitted by Colorado  law,  any  director,
officer,  employee or agent of the corporation made or threatened to be  made  a
party  to  a  proceeding,  by reason of the former or present  official  of  the
person, against judgments, penalties, fines, settlements and reasonable expenses
incurred  by  the person in connection with the proceeding if certain  standards
are  met. At present, there is no pending litigation or proceeding involving any
of  our  directors, officers, employees or agents where indemnification will  be
required or permitted. Insofar as indemnification for liabilities arising  under
the  Securities  Act  of  1933 may be permitted to our directors,  officers  and
controlling persons pursuant to the foregoing provisions, or otherwise, we  have
been  advised  that  in  the opinion of the Commission such  indemnification  is
against public policy as expressed in the Act and is, therefore, unenforceable.

Our  Articles  of  Incorporation limit the liability of  our  directors  to  the
fullest  extent  permitted by the Colorado Corporation Code.  Specifically,  our
directors  will  not  be personally liable for monetary damages  for  breach  of
fiduciary duty as directors, except for (i) any breach of the duty of loyalty to
the  Company  or our stockholders, (ii) acts or omissions not in good  faith  or
that  involved  intentional  misconduct or a knowing  violation  of  law,  (iii)
dividends  or  other distributions of corporate assets that are in contravention
of  certain  statutory or contractual restrictions, (iv) violations  of  certain
laws,  or  (v)  any  transaction  from which the director  derives  an  improper
personal benefit. Liability under federal securities law is not limited  by  the
Articles. Our executive officers will dedicate sufficient time to fulfill  their
fiduciary  obligations to our affairs. We have no retirement, pension or  profit
sharing plans for our officers and directors.

Compliance with Section 16(a) of the Exchange Act

Under  the  Securities Laws of the United States, the Company's  Directors,  our
Executive  (and certain other) Officers, and any persons holding more  than  ten
percent of the Company's common stock are required to report their ownership  of
the  Company's common stock and any changes in that ownership to the  Securities
and  Exchange  Commission.  Specific  due dates  for  these  reports  have  been
established and the Company is required to report in this report any failure  to
file by these dates.

All  of  these  filing  requirements were satisfied by the  Company's  Officers,
Directors, and ten-percent holders.

In  making these statements, we have relied on the written representation of our
Directors  and Officers or copies of the reports that they have filed  with  the
Commission.

<PAGE>
Code of Ethics

The Company has adopted a Code of Ethics for Senior Financial Officers that is
applicable to our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. A copy of our Code of Ethics for Senior Financial Officers is filed
as an exhibit to this annual report on Form 10-KSB.

ITEM 10.      EXECUTIVE COMPENSATION

The  following tables and discussion set forth information with respect  to  all
plan  and  non-plan  compensation awarded to, earned by or  paid  to  our  Chief
Executive Officer ("CEO") for all services rendered in all capacities to us  and
our subsidiaries for each of our last three completed fiscal years.

TABLE 1

SUMMARY COMPENSATION TABLE

             Annual Compensation                 Long Term Compensation
                                            Awards                  Payouts
(1)                                   Other                                  All
Name and                             Annual  Restricted                    Other
Principal                           Compen-       Stock  Options    LTIP Compen-
Position      Year  Salary   Bonus sation(2)     Awards    /SARs Payouts  sation
------------- ----- ------  ------ --------- ---------- -------- ------- -------
Thomas E.     2004     nil     nil   $19,804        nil      nil     nil     nil
Mills, (3)    2003     nil     nil   $22,930        nil      nil     nil     nil
President     2002     nil     nil   $25,830        nil      nil     nil     nil


      (1) No  executive officer received greater than $100,000  in
          salary  during the fiscal years ended March 31, 2004  or
          2003.   Furthermore,  no  executive   officer   received
          perquisites and other personal benefits, which,  in  the
          aggregate, exceeded the lesser of either $50,000 or  10%
          of  the total of annual salary and bonus paid during the
          respective fiscal years.

      (2) The  other  annual  compensation  represents  consulting
          fees.

      (3) In  February 2004, Mr. Mills released the Company of all
          debt  resulting from the accrued consulting fees  during
          fiscal 2003 and 2004.

Employment Matters

In  July  2002,  we appointed Thomas E. Mills and Lou Hilford to  the  Board  of
Directors.  The  members of our Directors do not receive  any  compensation  for
their services as directors.

In  July  2002,  we appointed Thomas E. Mills as President and  Chief  Executive
Officer,  Lou  Hilford  as Chief Operations Officer, and  John  Allen  as  Chief
Financial  Officer.   In  March  2004, John Allen resigned  as  Chief  Financial
officer  and  was  replaced  by Thomas E. Mills. These  Officers  provide  their
services  as  independent contractors pursuant to consulting agreements  entered
into with us.  Each such agreement provides that the officer will receive $2,152
(CAD$3,000)  per  month  to provide the services reasonably  necessary  for  the
fulfillment of his position.  In an effort to keep the costs of the Company to a
minimum,  Mr.  Mills,   Mr. Hilford and Mr. Allen agreed that  their  respective
consulting  agreements would terminate effective January 1, 2004. Management  of
the  Company has agreed to provide management services without compensation  for
the immediate future.

<PAGE>
2004 Non-Qualified Stock Option Plan

In February 2004, the Board of Directors authorized the 2004 Non-Qualified Stock
Option Plan (the "Plan) for our executive, employees and outside consultants and
advisors.  Under  the  Plan, executives, employees and outside  consultants  and
advisors  may  receive  awards  of non-qualified stock  options.  A  maximum  of
1,800,000  shares of the Company's common stock are subject to the Plan.  As  of
the  date  of this Annual Report, 1,060,000 stock options have been  granted  to
consultants under the Plan to purchase 1,060,000 shares of the Company's  common
stock.  The  purpose  of the Plan is to provide executives, employees  and  non-
employee  consultants  and  advisors  with  an  increased  incentive   to   make
contributions  to the Company. As of March 31, 2004, there were 100,000  options
to purchase shares of our common stock outstanding.

The  following table sets forth certain information concerning the  granting  of
incentive  stock options during the last completed fiscal year to  each  of  the
named executive officers and the terms of such options:

TABLE 2
Option/SAR Grants in the Last Fiscal Year
Individual Grants


                        Number of    % of Total
                        Securities   Options/SARs
                        Underlying   Granted to
                        Options/SARs Employees in   Exercise or Base  Expiration
     Name               Granted (#)  Fiscal Year    Price ($/Share)   Date
     ----------------   -----------  -------------  ----------------  ----------
     Thomas E. Mills    nil          n/a            n/a               n/a

The  following table sets forth certain information concerning the  exercise  of
incentive  stock options during the last completed fiscal year by  each  of  the
named executive officers and the fiscal year-end value of unexercised options on
an aggregated basis:

TABLE 3
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
                                                               Value of
                                                Number of      Unexercised
                                                Unexercised    In-the-Money
                                                Options/SAR    Options/SARs
                   Shares          Value        at FY-End(#)   at FY-End($)(2)
                   Acquired        Realized(1)  Exercisable/   Exercisable/
Name               on Exercise(#)  ($)          Unexercisable  Unexercisable
---------------    --------------  -----------  -------------  -----------------
Thomas E. Mills    -0-             -0-          0/0            0/0


   (1) Value Realized is determined by calculating the difference
       between  the  aggregate exercise price of the options  and
       the aggregate fair market value of the Common Stock on the
       date the options are exercised.
   (2) The   value  of  unexercised  options  is  determined   by
       calculating  the difference between the fair market  value
       of  the  securities underlying the options at fiscal  year
       end and the exercise price of the options.

<PAGE>
ITEM  11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT  AND
RELATED STOCKHOLDERS MATTERS

The following table sets forth, as of April 7, 2004 and as adjusted for the sale
of  option and warrant stock, the stock ownership of (i) each person known by us
to  be  the  beneficial owner of five (5%) percent or more of our Common  Stock,
(ii) all Directors individually, (iii) all Executive Officers individually,  and
(iv)  all  Directors and Executive Officers as a group.  Each  person  has  sole
voting and investment power with respect to the shares shown, except as noted.

Title    Name & Address                            Shares Beneficially Owned (2)
of Class of Beneficial Owner                          Number      Percent(1)
-------- ---------------------------------------    -----------   ---------

Common   Thomas E. Mills                              710,000        5.8%
Stock    2708-939 Homer Street
         Vancouver, British Columbia V6B 2W6

Common   Lou Hilford                                  200,000        1.6%
Stock    7866 Vivian Drive
         Vancouver, British Columbia V6S 2V9

Common   All Executive Officers                       910,000        7.4%
Stock    and Directors
         as a Group (2 Persons)

(1)     Shares  not  outstanding but beneficially owned by virtue  of  the
        individuals' right to acquire them as of the date of  this  Annual
        Report  or  within  sixty  days  of  such  date,  are  treated  as
        outstanding  when determining the percent of the  class  owned  by
        such individual.
(2)     Beneficial ownership is based on information provided to  us,  and
        the  beneficial  owner  has  no obligation  to  inform  us  of  or
        otherwise report any changes in beneficial ownership indicated.

                      Equity Compensation Plan Information

                                                         Number of
                                                         securities
                       Number of       Weighted-         remaining
                     securities to      average        available for
                    be issued upon   exercise price   future issuance
Plan category         exercise of    of outstanding     under equity
                      outstanding       options,        compensation
                       options,       warrants and    plans (excluding
                     warrants and        rights          securities
                        rights                          reflected in
                                                        column (a))
------------------   --------------   -------------   ---------------
                          (a)              (b)                (c)
Equity
compensation plans          0              N/A                  0
approved        by
security holders

Equity
compensation plans    100,000            $0.10            760,000
not  approved   by    -------            -----            -------
security holders

Total                 100,000            $0.10            760,000
                      -------            -----            -------

ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other  than  as  disclosed below, there have been no transactions,  or  proposed
transactions,  which have materially affected or will materially  affect  us  in
which  any director, executive officer or beneficial holder of more than 10%  of
the  outstanding  common stock, or any of their respective  relatives,  spouses,
associates  or affiliates, has had or will have any direct or material  indirect
interest.

<PAGE>
On  March  15,  2003, the Company issued to our President, Thomas E.  Mills,  an
unsecured promissory note in the amount of $40,000 bearing interest at the  rate
of twenty percent per year, that was due and payable on March 15, 2004. The note
was issued in respect of $40,000 advanced on behalf of the Company by Mr. Mills.
The  Board of Directors convened to evaluate the fairness of the promissory note
without  the benefit of advice from any third party or reference materials.   It
was  resolved  by  the  Board  of  Directors (Mr.  Mills  abstaining)  that  the
promissory  note  was  fair  and  further that  the  Company  should  issue  the
promissory  note  to  Mr.  Mills. On February 2,  2004,  the  $40,000  unsecured
promissory  note,  along with $11,000 in accrued interest,  was  converted  into
510,000 common shares of the Company at a price per share of $0.10.

Over the year ended March 31, 2004, our company incurred consulting fees in  the
amount  of  $59,413. The consulting fees were charged by Thomas  E.  Mills,  Lou
Hilford  and John Allen, directors and officers of our Company. During  February
2004, all of the aforementioned consulting fees were forfeited by the respective
individuals for the purpose of improving the Company's working capital position.

ITEM 13.      EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits

    Exhibit   Title
    No.

    3.1       Restated Articles of Incorporation, Scarab Systems,
              Inc., incorporated by reference from the Form 10-
              KSB/A filed February 11, 2004.
    3.2       Bylaws, Scarab Systems, Inc., incorporated by
              reference from the Form 10-KSB/A filed February 11,
              2004.
    4.1*      Form of Stock certificate.
    10.1      Scarab  Systems,  Inc.  2004  Non-Qualified   Stock
              Option  Plan,  incorporated by reference  from  the
              Form S-8 filed February 19, 2004.
    14*       Code of Ethics for Senior Financial Officers.
    23.1*     Consent of Certifying Accountants.
    31.1*     Certification of Chief Executive Officer and Chief
              Financial Officer pursuant to 17CFR 240.13a-14(a) or
              17CFR 240.15d-14(a).
    32.1*     Certifications pursuant to 18 U.S.C. Section 1350.

* filed herewith

(b)  Reports on Form 8-K

On  April 8, 2003, we filed a current report on Form 8-K advising of a change of
name  of  the Registrant, the appointment of a director, a non-material business
combination and the termination of a non-material business combination.

On  July  8, 2003, we filed a current report on Form 8-K advising under  Item  5
that it was withdrawing a Form 15 filed June 30, 2003.

On  July  31,  2003,  we  filed a current report on Form  8-K  advising  of  the
resignation of a director.

On February 2, 2004, we filed a report on Form 8-K advising of the conversion of
a  promissory  note  to common stock and the undertaking of a  $120,000  private
placement.

On March 4, 2004, we filed a report on Form 8-K advising of the completion of  a
$120,000 private placement and the resignation on an officer.

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

Our  board  of  directors  had appointed Moore Stephens  Ellis  Foster  Ltd.  as
independent  auditors to audit our financial statements for the  current  fiscal
year.  The  aggregate  fees  billed by Moore  Stephens  Ellis  Foster  Ltd.  for
professional services rendered for the audit of our annual financial  statements
included  in this Annual Report on Form 10-KSB for the fiscal years ended  March
31, 2004 and March 31, 2003 were $12,000 and $6,000, respectively.

<PAGE>
Audit Related Fees

For the fiscal years ended March 31, 2004 and March 31, 2003, the aggregate fees
billed  for  assurance and related services by Moore Stephens Ellis Foster  Ltd.
relating to our quarterly financial statements which are not reported under  the
caption "Audit Fees" above, were nil, respectively.

Tax Fees

For the fiscal years ended March 31, 2004 and March 31, 2004, the aggregate fees
billed  for  tax  compliance,  by Moore Stephens Ellis  Foster  Ltd.  were  nil,
respectively.

All Other Fees

For the fiscal years ended March 31, 2004 and March 31, 2003, the aggregate fees
billed  by  Moore  Stephens Ellis Foster Ltd. for other  non-audit  professional
services, other than those services listed above, totaled nil, respectively.

Effective May 6, 2003, the Securities and Exchange Commission adopted rules that
require  that before Moore Stephens Ellis Foster Ltd. is engaged by  us  or  our
subsidiaries to render any auditing or permitted non-audit related service,  the
engagement be:

 - approved by our audit committee; or

 - entered  into  pursuant to pre-approval policies and procedures  established
   by  the audit committee, provided the policies and procedures are detailed as
   to  the  particular service, the audit committee is informed of each service,
   and  such  policies  and procedures do not include delegation  of  the  audit
   committee's responsibilities to management.

The  audit  committee  pre-approves all services  provided  by  our  independent
auditors. The pre-approval process has just been implemented in response to  the
new  rules.  Therefore,  the  audit committee does  not  have  records  of  what
percentage  of  the  above fees were pre-approved. However,  all  of  the  above
services  and  fees  were  reviewed and approved by the audit  committee  either
before or after the respective services were rendered.

The  audit committee has considered the nature and amount of the fees billed  by
Moore  Stephens  Ellis  Foster Ltd., and believes  that  the  provision  of  the
services  for  activities unrelated to the audit is compatible with  maintaining
Moore Stephens Ellis Foster Ltd. independence.


                                   SIGNATURES

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

                                   SCARAB SYSTEMS, INC.

Date:  April 28, 2004              By:/s/ Thomas E. Mills
                                      Thomas E. Mills, Chief Executive, Chief
                                      Financial Officer, President & Secretary


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

                         TITLE                       DATE
SIGNATURE
/s/ Thomas E. Mills      Chief Executive, Chief      April 28, 2004
Thomas E. Mills          Financial Officer,
                         President, Secretary &
                         Director

/s/ Lou Hilford          Chief Operations Officer &  April 28, 2004
Lou Hilford              Director