Edgar Filing: ONSPAN NETWORKING INC

United States
Securities and Exchange Commission
Washington, D.C. 20549

FORM 10-KSB

(Mark One)

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

For the fiscal year ended September 30, 2004
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _________

Commission file number 000-22991
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Onspan Networking, Inc.
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(Name of small business issuer in its charter)

Nevada
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(State of other jurisdiction of incorporation or organization)

87-0460247
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(I.R.S. Employer Identification No.)

1000 Clint Moore Road, Suite 102, Boca Raton, Florida 33487
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(Address of principal executive offices) (Zip Code)

Issuer's telephone number 561-988-2334
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Securities registered under Section 12(b) of the Exchange Act:

None
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(Title of each class)

Name of each exchange on which registered

Not applicable
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Securities registered under Section 12(g) of the Exchange Act:

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

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

State issuer's revenues for its most recent fiscal year were None.

As of December 31, 2004, the registrant had outstanding 1,090,677 shares of its
Common Stock, par value $.012 its only class of voting securities. The aggregate
market value of the shares of Common Stock of the registrant held by
non-affiliates on January 11, 2005, was approximately $630,273 based on its
closing price on the OTC: Bulletin Board on that date. (See Item 5).

DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into this Report except those
Exhibits so incorporated as set forth in the Exhibit index.

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

TABLE OF CONTENTS

INTRODUCTION

PART I

Item 1. Business..............................................................4

Item 2. Properties............................................................9

Item 3. Legal Proceedings.....................................................9

Item 4. Submission of Matters to a vote of security holders..................11

PART II

Item 1. Market for common equity and related stockholder matters.............11

Item 2. Management's discussion and analysis or plan or operation............12

Item 3. Other Information....................................................15

Item 4. Consolidated Financial Statements....................................16

PART III

Item 8. Changes & Disagreements with Accountants.............................36

Item 8A. Controls & Procedures................................................36

Item 9. Directors, Executive officers, Promoters and Control persons
Compliance with Section 16(a) of the Exchange Act....................36

Item 10. Executive Compensation...............................................39

Item 11. Security Ownership of certain beneficial owners and
Management...........................................................42

Item 12. Certain relationships and related transactions.......................43

Item 13. Exhibits and Reports on Form 8-K.....................................43

Item 14. Principal Accounting Fees and Services ..............................45

PART I

ITEM 1. HISTORY OF BUSINESS

Originally incorporated in 1985, as Network Information Services, Inc., Network
Systems International, Inc. ("NESI"), a Nevada corporation, was the surviving
corporation of a reverse merger completed in April 1996. The Company became a
publicly traded entity in connection with the re-organization. On July 10, 1998,
the Company's stock was officially approved for listing on the NASDAQ Small Cap
market and the Company's common stock began trading on NASDAQ Small Cap under
the symbol NESI. As of April 2, 2002, the securities were de-listed from the
NASDAQ Small Cap market and now trade on the Over-The-Counter Bulletin Board
under the symbol ONSP. Effective February 10, 2001, the Company changed its name
from Network Systems International, Inc., to Onspan Networking, Inc. (the
"Company" or "Onspan"). On October 9, 2001, the Company effected a 1 for 12
reverse stock split of its issued and outstanding common stock. Prior to August
5, 2002, the Company, a Nevada corporation, was a holding company, that through
its wholly owned subsidiary, InterLAN Communications, Inc. ("InterLAN"),
developed data communications and networking infrastructure solutions for
business, government and education. On August 5, 2002, the Company completed the
sale of its operating division InterLAN and announced a change in its strategy
of business as discussed under Discontinued Operations below. April 22, 2003 the
Company created a new subsidiary, Coventry 1 Inc. that is a Nevada Corporation.
The Company's other subsidiary Onspan SmartHouse, Inc., is a Florida
Corporation. Currently the Company has 3 full time employees.

DISCONTINUED DIVISION

On May 27, 2004, the Company entered into a stock purchase agreement with
Herbert Tabin, its President and Chief Executive Officer, and Gary Schultheis,
an employee of the Company, pursuant to which the Company sold its wholly-owned
subsidiary, Coventry 1, Inc., to Messrs. Tabin and Schultheis. The sole asset of
the subsidiary was a single family home and lot located in Woodfield Country
Club, Boca Raton, Florida and related country club golf membership. The purchase
price for the shares of the subsidiary was $1,509,972, The purchase price for
the subsidiary was based on a comprehensive certified appraisal as defined by
the Uniform Standards of Professional Appraisal Practice (USPAP), and the report
conforms to applicable FIRREA guidelines and or requirements. Messrs Tabin and
Schultheis bore the cost of the appraisal. The purchase includes the country
club golf membership, and the purchaser is responsible for all costs and fees
associated with the membership. In addition, the Purchaser shall be responsible
for all expenses associated with the property comprising the Subsidiary whether
accrued or outstanding or subsequently to be outstanding, including outstanding
tax balance of $21,188, due to Palm Beach County, Florida for the year 2003,
outstanding fees including electric, security etc. totaling $12,768, as well as
an outstanding insurance payable of $17,043. Messrs. Tabin and Schultheis also

agreed to pay the Company 0.75% of the gross sales amount of the property upon
any subsequent sale provided the gross sales price exceeds $2,000,001 The
Company, which had received engineering plans, had intended to renovate and
expand the existing home on the property. The Company sold the real estate
project in order to service mounting legal expenses associated with litigation.
The Company used the proceeds from the sale of this division to pay off its
debt, which included a note payable to Evolve One , Inc and notes to related
parties.

RISK FACTORS

SIGNIFICANT CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL CAPITAL.

The Company's capital requirements have been and will continue to be
significant. The Company has been dependent primarily on existing capital and a
credit line. Future capital needs may be satisfied by either the private
placement of equity securities and/or debt financings. The Company based on its
cash requirements and exposure to liability from shareholder lawsuits is unsure
if existing capital will be sufficient for the next twelve months. In the event
that the Company's plans (due to unanticipated expenses, delays, problems, or
otherwise), the Company would be required to seek additional funding. Any such
additional funding could be in the form of additional equity capital. The
Company is currently, contemplating, pursuing potential funding opportunities.
However, there can be no assurance that any of such opportunities will result in
actual funding or that additional financing will be available to the Company
when needed, on commercially reasonable terms, or at all. If the Company is
unable to obtain additional financing if needed, it will likely be required to
curtail its plans and may possibly cease its operations. Any additional equity
financings may involve substantial dilution to the Company's then-existing
shareholders.

MANAGEMENT OF GROWTH AND ATTRACTION AND RETENTION OF KEY PERSONNEL.

Management of the Company's growth may place a considerable strain on the
Company's management, operations and systems. The Company's ability to execute
any future business strategy will depend in part upon its ability to manage the
demands of a growing business. Any failure of the Company's management team to
effectively manage growth could have a material adverse affect on the Company's
business, financial condition or results of operations. The Company's future
success depends in large part on the continued service of its key management
personnel. The Company believes that its future success also depends on its
ability to attract and retain skilled technical, managerial and marketing
personnel. Competition for qualified personnel is intense. The Company has from
time to time experienced difficulties in recruiting qualified personnel. Failure
by the Company to attract and retain the personnel it requires could have a
material adverse affect on the financial condition and results of operations of
the Company.

VOLATILITY OF MARKET PRICE; ISSUANCE OF SUBSTANTIAL NUMBER OF SHARES; AUTHORIZED
SHARES; PROXY RULES.

The Company's Common Stock has been traded since 1994. The Company believes that
factors such as (but not limited to) the sale of common stock issued on
conversion of the Company's debentures, announcements of developments related to
the Company's business, fluctuations in the Company's quarterly or annual
operating results, failure to meet expectations, general economic conditions,
interest rate changes or money supply fluctuations and developments in the
Company's relationships with clients and suppliers will cause the price of the
Company's Common Stock to fluctuate substantially. In recent years the stock
market has experienced extreme price fluctuations, which have often been
unrelated to the operating performance of affected companies. Such fluctuations
could adversely affect the market price of the Company's Common Stock.

PENNY STOCK REGULATIONS AND REQUIREMENTS FOR LOW PRICED STOCK.

The Commission adopted regulations which generally define a "penny stock" to be
any non-Nasdaq equity security that has a market price of less than $5.00 per
share, subject to certain exceptions. Based upon the price of the Company's
Common Stock as currently traded on the OTC Bulletin Board, the Company's stock
is subject to Rule 15g-9 under the Exchange Act which imposes additional sales
practice requirements on broker-dealers which sell securities to persons other
than established customers and "accredited investors." For transactions covered
by this Rule, a broker-dealer must make a special suitability determination for
the purchaser and have received a purchasers' written consent to the transaction
prior to sale. Consequently, the Rule may have a negative effect on the ability
of shareholders to sell common shares of the Company in the secondary market.

MANAGEMENT CONTROLS THE COMPANY'S FUNDS.

Management has broad discretion over how to spend the funds held by the Company.
Although management will endeavor to act in the best interests of the
shareholders, there can be no assurance that the decision to utilize proceeds
will prove profitable to the Company.

THE COMPANY RELIES ON ITS MANAGEMENT.
The Company is dependent upon the members of management set forth herein. If the
current management is no longer able to provide services to the Company, its
business will be negatively affected.

ADDITIONAL DEBT, OR EQUITY FINANCING MAY AFFECT INVESTOR'S ABILITY TO SELL
COMMON STOCK.

The Company's common stock currently trades on the OTC Bulletin Board under the
symbol ONSP. Stocks trading on the OTC Bulletin Board generally attract a
smaller number of market makers and a less active public market and may be
subject to significant volatility. If the Company raises additional money from
the sale of its Common Stock, the market price could drop and investor's ability
to sell stock could be diminished. Further, even if the Company is able to
increase its authorized shares, there can be no assurance that it will be able
to obtain sufficient shareholder votes in the future for any such increase,
which votes are required by Nevada law.

THE COMPANY'S STRATEGY INCLUDES PURSUING STRATEGIC ACQUISITIONS THAT MAY NOT BE
SUCCESSFUL

The Company will consider acquiring businesses that are intended to add products
and or services. Acquisitions involve a number of operational risks that the
acquired business may not be successfully integrated, may distract management
attention, may involve unforeseen costs and liabilities, and possible regulatory
costs, some or all of which could have a materially adverse effect on the
Company's financial condition or results of operations. Additionally, the
Company may make acquisitions with cash or with stock, or a combination thereof.
If the Company does make any such acquisitions, various associated risks may be
encountered, including potential dilution to the Company's then current
shareholders, as a result of additional shares of common stock being issued in
connection with the acquisitions.

THE COMPANY'S STOCK PRICE WILL FLUCTUATE AND MAY FALL BELOW EXPECTATIONS OF
SECURITIES ANALYSTS AND INVESTORS, WHICH COULD SUBJECT THE COMPANY TO LITIGATION

The market price of the Company's common stock may fluctuate significantly in
response to a number of factors, some of which are beyond its control. These
factors include:

- quarterly variations in operating results;

- changes in accounting treatments or principles;

- existing litigation;

- announcements by the Company or its competitors of new products and
services offerings, significant contracts, acquisitions or strategic
relationships;

- additions or departures of key personnel;

- any future sales of the Company's common stock or other securities;

- stock market price and volume fluctuations of publicly-traded companies
in general and Internet-related companies in particular; and

- general political, economic and market conditions.

It is likely that in some future quarter the Company's operating results may
fall below the expectations of securities analysts and investors, which could
result in a decrease in the trading price of the Company's common stock. In the
past, securities class action litigation has often been brought against a
company following periods of volatility in the market price of its securities.
The Company may be the target of similar litigation in the future. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could seriously harm the Company's business and operating
results.

THERE IS A LIMITED PUBLIC MARKET FOR THE COMPANY'S COMMON STOCK AND THERE ARE NO
ASSURANCES OF A CONTINUED TRADING MARKET FOR THE COMPANY'S COMMON STOCK

The Company's common stock is currently quoted on the OTC Bulletin Board (R)
Market (OTCBB) under the symbol "ONSP". The Company's common stock is thinly
traded. There are no assurances the Company will maintain its OTC Bulletin Board
(R) listing. If the Company's common stock should be delisted from the OTC
Bulletin Board(R) Market, it is likely that the stock would then be quoted on
the Pink Sheets Market, which could materially and / or adversely effect any
future liquidity in the Company's common stock.

INABILITY TO SECURE AN INDEPENDENT AUDIT COMMITTEE MEMBER

Due to the potential exposure to litigation and small compensation, it may be
difficult to secure and Independent Audit Committee Member. If the Company is
unable to secure an Independent Audit Committee Member, it may be in violation
of current standards and may be subject to possible de-listing of which could
have a materially adverse affect on the Company's financial condition or results
of operations.

ITEM 2. DESCRIPTION OF PROPERTY

The Company's principal executive offices were located in approximately 2,108
square feet of commercial office space sub-leased from Millennium Holdings
Group, Inc., under a three-year lease signed on July 1, 2003 at a rate of
$34,907 per annum plus 5% per annum. As of November 1, 2004, the company
relocated its offices to approximately 1,545 square feet of commercial office
space sub-leased from Evolve One, Inc a company related through common ownership
under a five year sublease signed November 1, 2004 at a rate of $2,000 per month
plus 5% per annum. The Company believes its current facilities are adequate for
its current needs.

ITEM 3. LEGAL PROCEEDINGS

1. Network Systems International of North Carolina, Inc. v Network Systems
International, Inc. and OnSpan Networking, Inc. (02-CvS-10154) (Complaint filed
September 13, 2002). This action asserts a claim for breach of contract against
the Company, seeking certain tax refunds obtained by the Company. The plaintiff,
a former subsidiary of the Company, claims that these tax refunds belong to the
plaintiff. The Company filed counterclaims for refund of monies paid by the
Company and owed by the Plaintiff, as well as for a declaratory judgment that
any tax liability of the Company owed to the North Carolina Department of
Revenue must be reimbursed by the Plaintiff. The parties agreed to settle all
claims, and the action was dismissed on October 26, 2004. Pursuant to the
settlement agreement, the Company paid the Plaintiff $39,800, and the Company
and the Plaintiff each released all claims. Additionally, several shareholders
affiliated with the Plaintiff agreed to transfer their shares to the Company.
Those shares will be cancelled upon surrender. The number of shares to be
cancelled is currently undetermined.

2. Securities Actions:

a. D. Mark White v OnSpan Networking, Inc. and Herbert Tabin, Case No. 352198686
03 (District Court, Tarrant County Texas) (Complaint filed May 2, 2003). This
action had asserted claims for violation of Texas securities law, fraud, and
breach of fiduciary duties. The action was seeking unspecified damages,
restitution in the amount of $300,000, treble damages, pre-judgment interest,
the plaintiffs' attorneys' fees and costs, and certain other relief. On August
31, 2004, the action was settled for $62,500.

claims and filed an Amended Complaint asserting claims against Tabin, both
individually and derivatively, on behalf of the Company. Plaintiffs also
asserted claims against the Company. Plaintiffs sought damages in the amount of
$300,000.00 each, as well as punitive damages. The Company retained independent
counsel to conduct an investigation into the allegations by Plaintiffs made
derivatively on behalf of the Company and, based on that investigation,
determined that no action on behalf of the Company was warranted. Defendants
also filed a Motion to Dismiss all of the allegations in the Amended Complaint.
On October 19, 2004, Plaintiffs filed a Second Amended Complaint in which they
dropped the Company as a defendant and dropped the derivative shareholder
claims. Plaintiffs added Gary Schultheis as an individual defendant. The Second
Amended Complaint alleges claims against Tabin and Schultheis individually.
Because the Second Amended Complaint was a different version than that which was
approved for filing by the Court, Tabin filed a motion to strike and dismiss the
Second Amended Complaint. A hearing was held on Tabin's motion to strike and
dismiss and on December 3, 2004, the Magistrate Judge entered a Report and
Recommendation to the Court recommending that the Court not strike or dismiss
the Second Amended Complaint. On December 20, 2004, an Order allowed Plaintiffs
to proceed under their Second Amended Complaint. This Order confirms that the
Company is no longer a party. The Court also ordered the amount of $4,000, to be
paid by the Plaintiffs to the Company by January 19, 2004. The Company is
currently exploring all methods of recovering attorneys' fees, including a
malicious prosecution action on behalf of the Company against Clark and Holt as
well as a Rule 11 motion for attorneys' fees with respect to, at a minimum, the
derivative action.

3. Potential Tax Liability:

The North Carolina Department of Revenue has contacted the Company with regard
to state income taxes for the tax year ended September 30, 1999. Upon
investigation, the Company has determined that former management did not file a
state income tax return in North Carolina for that year, although a return was
filed in Florida for that year and returns were filed in North Carolina for two
then subsidiaries of the company. The Company is in the process of investigating
the situation and of evaluating what action should be taken as a result of the
inquiry by the North Carolina Department of Revenue. The Company has been unable
to estimate with any reasonable certainty what liability it may have to the
State of North Carolina.

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

None.

PART II

ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

From July 1998, until February 9, 2001, the Company's common stock was traded
under the symbol NESI, on the NASDAQ Small Cap market. Beginning February 10,
2001, it began trading under the symbol ONSP. As of April 2, 2002, the
securities were de-listed from the NASDAQ Small Cap market. The Company's common
stock is now traded on the Over-The-Counter Bulletin Board under the symbol
ONSP. On October 9, 2001, the Company effected a 1 for 12 reverse stock split of
its issued and outstanding common stock. The total number of authorized Shares
of its common stock before the stock split was 100,000,000; the total number of
authorized shared of common stock after the stock split was 8,333,333. The total
number of issued and outstanding shares of its common stock on the record date
were 11,574,619; giving effect to the stock split, there were 964,552 shares of
common stock issued and outstanding after the split. All information contained
in this annual report gives proforma effect to this stock split.

The following table sets forth, for the periods from October 1, 2002, through
September 30, 2004, the quarterly high and low closing bid sale prices for the
Company's Common Stock as reported on the OTC Bulletin. The prices represent
quotations by dealers without adjustment for retail mark ups, mark-downs or
commissions and may not represent actual transactions.

HIGH LOW
FISCAL YEAR 2004 ---- ---
First Quarter $5.00 $.40
Second Quarter $3.80 $.40
Third Quarter $3.80 $.85
Fourth Quarter $ .85 $.45

HIGH LOW
FISCAL YEAR 2003 ---- ---
First Quarter $ .85 $.10
Second Quarter $1.07 $.51
Third Quarter $ .55 $.30
Fourth Quarter $2.75 $.30

As of September 30, 2004, there were approximately 318 holders of record of the
Company's common stock, an undetermined number of which represent more than one
individual participant in securities positions with the Company.

RECENT ISSUANCES OF SECURITIES

The Company has reserved 500,000 shares of common stock for the grant of
qualified incentive options or non-qualified options to employees and directors
of the Company or its parents or subsidiaries, and to non-employee directors,
consultants and advisors and other persons who may perform significant services
for or on behalf of the Company under the Plan. Prices for incentive stock
options must provide for an exercise price of not less than 100% of the fair
market value of the common stock on the date the options are granted unless the
eligible employee owns more than 10% of the Company's common stock for which the
exercise price must be at least 110% of such fair market value. Non-statutory
options must provide for an exercise price of not less than 85% of the fair
market value.

On January 26, 2004, Gary Schultheis exercised 122,000 employee stock options.
These options had an exercisable price of .30 a share,

DIVIDENDS

The Company has never paid cash dividends on its common stock, and intends to
utilize current resources to expand its operations. Therefore, it is not
anticipated that cash dividends will be paid on the Company's common stock in
the foreseeable future.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

FORWARD LOOKING INFORMATION

The following discussion and analysis of the Company's financial condition and
results of operations should be read with the condensed consolidated financial
statements and related notes contained in this annual report on Form 10-KSB
("Form 10-KSB"). All statements other than statements of historical fact
included in this Form 10-KSB are, or may be deemed to be, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements involve
known and unknown risks, uncertainties and other factors that may cause the
Company's actual results, levels of activity, performance or achievements to be
materially different than any expressed or implied by these forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"

"believes," "estimates," "predicts," "potential," "continue," or the negative of
these terms or other comparable terminology. Important factors that could cause
actual results to differ materially from those discussed in such forward-looking
statements include: 1. General economic factors including, but not limited to,
changes in interest rates and trends in disposable income; 2. Information and
technological advances; 3. Cost of products sold; 4. Competition; and 5. Success
of marketing, advertising and promotional campaigns. The Company is subject to
specific risks and uncertainties related to its business model, strategies,
markets and legal and regulatory environment You should carefully review the
risks described in this Form 10-KSB and in other documents the Company files
from time to time with the SEC. You are cautioned not to place undue reliance on
the forward-looking statements, which speak only as of the date of this Form
10-KSB. The Company undertakes no obligation to publicly release any revisions
to the forward-looking statements to reflect events or circumstances after the
date of this document.

Effective May 27, 2004, the Company completed the sale of its operating line of
business as discussed under Discontinued Division in Item 1, accordingly, the
following discussion will deal with the Company's Plan of Operation. The
operations of Coventry 1, for the nine months June 30, 2004, have been
reclassified as loss from discontinued division.

CRITICAL ACCOUNTING POLICIES

The Company has identified the policies outlined below as critical to its
business operations and an understanding of its results of operations. The
listing is not intended to be a comprehensive list of all of the Company's
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by accounting principles generally accepted
in the United States, with no need for management's judgment in their
application. The impact and any associated risks related to these policies on
the Company's business operations is discussed throughout Management's
Discussion and Analysis or plan of operations where such policies affect the
Company's reported and expected financial results. For a detailed discussion on
the application of these and other accounting policies, see the Notes to
Consolidated Financial Statements. The Company's preparation of the financial
statements requires it to make estimates and assumptions that affect the
reported amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the Company's financial statements, and the reported
amounts of revenue and expenses during the reporting period. There can be no
assurance that actual results will not differ from those estimates.

PLAN OF OPERATION

Prior to August 5, 2002, the Company, a Nevada corporation, was a holding
Company, that through its wholly owned subsidiary, InterLAN Communications, Inc.
("InterLAN"), developed data communications and networking infrastructure
solutions for business, government and education. Following August 5, 2002, the
Company, announced a change in its strategy and subsequently sold its operating
division InterLAN. In April of 2003, the Company changed its focus to investing
in and revitalizing single family homes in established residential neighborhoods
in suburban areas. The Company had acquired its first property on June 19, 2003.

The Company, which had received engineering plans for the real estate project,
had intended to renovate and expand the existing single-family home on this
site. However on May 27, 2004 the Company completed the sale of Coventry 1, Inc.
and utilized the cash received for legal expenses. The Company is currently a
party to several legal proceedings and although the Company will vigorously
defend all of these actions, the Company is unable to estimate with any
reasonable certainty what liability it may have to these litigants. There are no
assurances that the Company will be successful in defending these legal
proceedings, or if successful the cost of defending these legal proceedings may
significantly deplete the capital of the Company impairing the Company's ability
to continue as a going concern.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at cost and is depreciated on a
straight-line basis over the estimated useful lives of such assets. Changes in
circumstances such as technological advances, changes to the Company's business
model or changes in the Company's capital strategy could result in the actual
useful lives differing from the Company's estimates. In those cases where the
Company determines that the useful life of property, plant and equipment should
be shortened, the Company will depreciate the net book value in excess of the
estimated salvage value over its revised remaining useful life.

DEFERRED TAX ASSETS

The Company records a valuation allowance to reduce the carrying value of its
deferred tax assets to an amount that is more likely than not to be realized.
While the Company has considered future taxable income and prudent and feasible
tax planning strategies in assessing the need for the valuation allowance,
should the Company determine that it would not be able to realize all or part of
its net deferred tax assets in the future, an adjustment to the carrying value
of the deferred tax assets would be charged to income in the period in which
such determination was made.

RESULTS OF OPERATIONS

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE -

The Company's selling, general and administrative expenses, including salaries
and wages amounted to $611,322 during the twelve months ended September 30,
2004, as compared to $363,166 for the twelve months ended September 30, 2003.
The increase is a result of higher compensation costs of $22,500, increased
legal fees due to lawsuits of $197,203, increased rent of $21,939, increased
travel due to persuing potential ventures of $14,340.

INCOME TAXES

The Company recorded $193,111 in deferred income tax benefit for the
twelve-month period ended September 30, 2004, a 100% valuation allowance was
taken against this amount as of September 30, 2004. The Company recorded $54,036
in deferred income tax benefit for the twelve-month period ended September 30,
2003, a 100% valuation allowance was taken against this amount as of September
30, 2003

LIQUIDITY AND CAPITAL RESOURCES

During the twelve months ended September 30, 2004, working capital decreased
$618,222 to $64,210 from $682,432. The primary reasons for the decrease is the
decrease of ($675,000) in loan payable off set by an decrease in inventory -
home of $1,464,344, and increase in accrued wages of $145,000 off set by
increase in cash of $201,887. During this same period, stockholders' equity
decreased $618,222 to $64,210 from $682,432. The decrease in stockholders'
equity is primarily due to the net loss for the year of ($657,961), and
increases in paid in capital of $36,600 primary due to the exercise of stock
options

There are no assurances that the Company will be successful in achieving the
above plans, or that such plans, if consummated, will enable the Company to
obtain profitable operations or continue as a going concern.

ITEM 3. OTHER INFORMATION

None.

ITEM 4. CONSOLIDATED FINANCIAL STATEMENTS

INDEX

Page #

Report of Independent Registered Public Accounting Firm .....................17

Consolidated balance sheet....................................................18

Consolidated statements of operations.........................................19

Consolidated statements of changes in stockholders' equity....................20

Consolidated statements of cash flows.........................................21

Notes to consolidated financial statements....................................23

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

The Board of Directors
Onspan Networking, Inc. and Subsidiary
(f/k/a Network Systems International, Inc.)

We have audited the accompanying consolidated balance sheet of Onspan
Networking, Inc. and Subsidiary as of September 30, 2004 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended September 30, 2004, and 2003. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Onspan Networking,
Inc. and Subsidiary as of September 30, 2004, and the results of its operations
and its cash flows for the years ended September 30, 2004 and 2003 in conformity
with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. However, the Company has suffered
recurring losses from operations and had negative cash flows from operations
that raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans regarding those matters are also described in Note
15. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

/s/ Daszkal Bolton LLP
Boca Raton, Florida
December 2, 2004

ONSPAN NETWORKING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2004

ASSETS

CURRENT ASSETS
Cash and cash equivalents ................................... $ 241,961

Property and equipment, net ................................... 3,158
Website ....................................................... 20,000
-----------
23,158
-----------
$ 265,119
===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable ............................................ $ 24,963
Accrued dividend ............................................ 30,946
Accrued wages ............................................... 145,000
-----------
-----------
Total current liabilities ..................................... 200,909

STOCKHOLDERS' EQUITY
Preferred stock; $.001 par value; authorized 12,500
shares; issued and outstanding 2,713 shares;
liquidation preference $271,300 ........................... 2
Common stock, $.012 par value. Authorized 8,333,333
shares; issued and outstanding 1,090,677 shares ............ 13,088
Paid-in capital ............................................. 7,908,845
Accumulated deficit ......................................... (7,857,725)
-----------
Total stockholders' equity .................................... 64,210
-----------
$ 265,119
===========

See accompanying notes to consolidated financial statements.

ONSPAN NETWORKING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, 2004 AND 2003

2004 2003

COSTS AND EXPENSES:
Salaries and wages ............................. 179,500 157,000
Other selling, general and
administrative expenses ...................... 431,822 236,166
----------- -----------
611,322 393,166
----------- -----------
Loss from operations ............................. (611,322) (393,166)

OTHER INCOME (EXPENSE):
Interest income ................................ 825 9,580
Loss on sale of marketable
equity securities ............................ - (28,866)
Unrealized gain (loss) on
marketable equity securities ................. - -
Interest expense ............................... (4,632) (110,008)
Other expense .................................. (42,832) -
----------- -----------
Total other income (expense) ................. (46,639) (129,294)
----------- -----------

LOSS BEFORE INCOME TAXES ......................... (657,961) (522,460)
INCOME TAX (BENEFIT) EXPENSE ..................... - -
----------- -----------
LOSS FROM CONTINUING OPERATIONS .................. (657,961) (522,460)
LOSS FROM EARNINGS OF A DISCONTINUED DIVISION .... - (3,139)
----------- -----------
NET LOSS APPLICABLE TO
COMMON SHARES .................................. $ (657,961) $ (525,599)
=========== ===========

BASIC AND DILUTED NET LOSS PER SHARE
CONTINUED OPERATIONS ........................... $ (0.63) $ (0.54)
=========== ===========
DISCONTINUED OPERATIONS ........................ $ - $ (0.00)
=========== ===========
TOTAL ......................................... $ (0.63) $ (0.54)
=========== ===========

WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC AND DILUTED .............................. 1,051,570 968,677
=========== ===========

See accompanying notes to consolidated financial statements.

ONSPAN NETWORKING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2004 AND 2003
(UNAUDITED)

Preferred Stock Common Stock Paid-in Accumulated
Shares Par Value Shares Par Value Capital Deficit Total
------ --------- --------- --------- ----------- ------------ -----------

BALANCE, September 30, 2002 ........ 2,713 $ 2 968,677 $ 11,624 $ 7,773,134 $ (6,677,304) $ 1,107,456
Issuance of options for loan payable - - - - 100,575 - 100,575
Net (loss) ......................... - - - - - (525,599) (525,599)
----- --- --------- --------- ----------- ------------ -----------

BALANCE, September 30, 2003 ........ 2,713 2 968,677 $ 11,624 $ 7,873,709 $ (7,202,903) $ 682,432

Exercise of Stock Options .......... - - 122,000 1,464 35,136 - 36,600

Sale of Coventry 1 ................. - - - - - 3,139 3,139

Net (loss) ......................... - - - - - (657,961) (657,961)
----- --- --------- --------- ----------- ------------ -----------

BALANCE, September 30, 2004 ........ 2,713 $ 2 1,090,677 $ 13,088 $ 7,908,845 $ (7,857,725) $ 64,210
===== === ========= ========= =========== ============ ===========

See accompanying notes to consolidated financial statements.

ONSPAN NETWORKING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004 AND 2003

2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .............................................$ (657,961) $ (525,599)
Less: (Loss) from discontinued operations, net .......$ - $ (3,139)
----------- -----------
(Loss) from continuing opertions .....................$ (657,961) $ (522,460)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation ....................................... 1,131 912
Stock options granted in loan agreement ............ - 100,575
Unrealized loss from marketable securities ......... - -
Gain on sale of marketable securities .............. - 28,866
Change in assets and liabilities
Income tax receivable ............................ - 45,147
Inventory ........................................ 1,509,972 -
Prepaid expenses ................................. - 11,833
Accounts payable ................................. (32,173) 51,598
Accrued interest ................................. (9,433) 9,433
Accrued wages payable ............................ 145,000 -
Amounts due to purchasers of discontinued
operations ...................................... (55,929) 30,000
----------- -----------
Net cash used in operating activities ................ 900,607 (244,096)
----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities ........ - 51,134
Capital expenditures ............................... (22,922) -
----------- -----------
Net cash used in investing activities ................ (22,922) 51,134
----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Loan from EONE ..................................... (675,000) -
Loan Payable, Related Party ........................ 250,000 -
Proceeds from payments on loan payable-related party (250,000) -
Exercise of Stock Option ........................... 36,600 -
Payment to settle litigation ....................... (102,500) -
----------- -----------
Net cash provided by financing activities ............ (740,900) -
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS FROM
CONTINUING OPERATIONS .............................. 136,785 (192,962)
NET CASH USED IN (PROVIDED BY) DISCONTINUED OPERATIONS 101,027 (833,500)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 237,812 (1,026,462)
CASH AND CASH EQUIVALENTS, beginning of period
from continuing operations ......................... 4,149 1,030,611
----------- -----------
CASH AND CASH EQUIVALENTS, end of period .............$ 241,961 $ 4,149
=========== ===========
Continued
See accompanying notes to consolidated financial statements.

ONSPAN NETWORKING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2004 AND 2003

(CONTINUED)
2004 2003
SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for interest and income taxes are as
follows:
Interest ........................................... $28,856 $ -
Income taxes .......................................$ - $ -

See accompanying notes to consolidated financial statements.

ONSPAN NETWORKING , INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

1. BACKGROUND INFORMATION

Originally incorporated in 1985, as Network Information Services, Inc., Network
Systems International, Inc. ("NESI"), a Nevada corporation, was the surviving
corporation of a reverse merger completed in April 1996. The Company became a
publicly traded entity in connection with the re-organization. On July 10, 1998,
the Company's stock was officially approved for listing on the NASDAQ Small Cap
market and the Company's common stock began trading on NASDAQ Small Cap under
the symbol NESI. As of April 2, 2002, the securities were de-listed from the
NASDAQ Small Cap market and now trade on the Over-The-Counter Bulletin Board
under the symbol ONSP. Effective February 10, 2001, the Company changed its name
from Network Systems International, Inc., to Onspan Networking, Inc. (the
"Company" or "Onspan"). On October 9, 2001, the Company effected a 1 for 12
reverse stock split of its issued and outstanding common stock. Prior to August
5, 2002, the Company, a Nevada corporation, was a holding company, that through
its wholly owned subsidiary, InterLAN Communications, Inc. ("InterLAN"),
developed data communications and networking infrastructure solutions for
business, government and education. On August 5, 2002, the Company completed the
sale of its operating division InterLAN and a changed its strategy of business.
On April 22, 2003 the Company created a new subsidiary, Coventry 1 Inc. that is
a Nevada Corporation. The Company's other subsidiary Onspan SmartHouse, Inc., is
a Florida Corporation.

On May 27, 2004, the Company entered into a stock purchase agreement with
Herbert Tabin, its President and Chief Executive Officer, and Gary Schultheis,
an employee of the Company, pursuant to which the Company sold its wholly-owned
subsidiary, Coventry One, Inc., to Messrs. Tabin and Schultheis. The sole asset
of the subsidiary was a single family home and lot located in Woodfield Country
Club, Boca Raton, Florida and related country club golf membership. The purchase
price for the shares of the subsidiary was $1,509,972, The purchase price for
the subsidiary was based on a comprehensive certified appraisal as defined by
the Uniform Standards of Professional Appraisal Practice (USPAP), and the report
conforms to applicable FIRREA guidelines and / or requirements. Messrs Tabin and
Schultheis bore the cost of the appraisal. The purchase includes the country
club golf membership, and the purchaser is responsible for all costs and fees
associated with the membership. In addition, the Purchaser shall be responsible
for all expenses associated with the property comprising the Subsidiary whether
accrued or outstanding or subsequently to be outstanding, including outstanding
tax balance of $21,188, due to Palm Beach County, Florida for the year 2003,
outstanding fees including electric, security etc. totaling $12,768, as well as
an outstanding insurance payable of $17,043. Messrs. Tabin and Schultheis also
agreed to pay the Company 0.75% of the gross sales amount of the property upon
any subsequent sale provided the gross sales price exceeds $2,000,001. The
Company, which had received engineering plans,

had intended to renovate and expand the existing home on the property. The
Company sold the real estate project in order to service mounting legal expenses
associated with litigation. The Company used the proceeds from the sale of this
division to pay off its debt, which included a note payable to Evolve One , Inc
and notes to related parties.

2. SUMMARIES OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -

The financial statements at September 30, 2004 and 2003, include the accounts of
the Company and the discontinued operations of Coventry 1, Inc.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements for the period ended
September 30, 2004 include the accounts of Onspan Networking, Inc. and its
subsidiary, Onspan Smarthouse Inc. All significant intercompany accounts and
transactions have been eliminated.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with maturity
of three months or less to be cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash and cash equivalents, accounts payable and accrued
wages approximate fair value as of September 30, 2004, because of the short
maturity of these instruments.

INVENTORY HOME

The carrying value of the Inventory - home is reflected at cost.

PREFERRED STOCK

At September 30, 2004, the Company had 2,713 shares outstanding of its Series A
Convertible Preferred Stock ("Series A"). Series A has a stated liquidation
preference value of $100 per share redeemable at the Company's option, has no
voting rights, and each preferred share is convertible to 4 shares of the
Company's common stock as adjusted for the 1 for 12 reverse stock split.
Dividends on the Series A were to be paid monthly in cash at a rate of 12% of
the original issue. The Company's Board of Directors, elected to suspend the
payment of Series A dividends. This decision was made in light of the general
economic conditions. In particular, the Board took such actions as necessary to
preserve the Company's working capital in order to ensure the continued
viability of the Company. The Board of Directors is unable at this time to

predict if the Company will resume the payment of cash dividends on its Series A
12% Cumulative Convertible Preferred Stock. However, the Company has accrued
dividends on these shares in the amount of $30,946 at September 30, 2004.

STOCK OPTION PLAN

The Company applies the intrinsic value-based method of accounting prescribed by
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations, in accounting for its stock option
plan. As such, compensation expense would be recorded on the date of grant only
if the current market price of the underlying stock exceeded the exercise price.

SFAS No. 123 "Accounting for Stock Based Compensation" ("SFAS 123"), requires
the Company to disclose pro forma information regarding option grants made to
its employees. SFAS 123 specifies certain valuation techniques that produce
estimated compensation charges that are included in the pro forma results below.
These amounts have not been reflected in the Company's Statement of Operations,
because Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees," specifies that no compensation charge arises when the price of the
employees' stock options equal the market value of the underlying stock at the
grant date, as in the case of options granted to the Company's employees.

SFAS No. 123 pro forma numbers are as follows for the years ended September 30,
2004 and 2003:

2004 2003

Actual net income (loss) .......... $(657,961) $(525,599)
========= =========
Pro forma net income (loss) ....... $(657,961) $(667,119)
========= =========
Pro forma basic and diluted net
Income (loss) per share ......... $ (.63) $ (.69)
========= =========

EARNINGS PER SHARE

The financial statements are presented in accordance with Statement of Financial
Accounting Standards No. 128 ("SFAS 128"), "Earnings Per Share". Basic earnings
per share is computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share reflect the potential
dilution from the exercise or conversion of securities into common stock.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from these estimates.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Expenditures for significant renewals
and improvements are capitalized. Repairs and maintenance are charged to expense
as incurred. Depreciation is computed using an accelerated method for both
financial and income tax purposes based upon the useful lives of the assets.

WEBSITE

Monies paid for acquisition of www.VOIS.com of $20,000, were capitalized on the
Company's balance sheet as of September 30, 2004. In accordance with Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", the Company follows the policy of evaluating all
qualifying assets as of the end of each reporting quarter. For the year ended
September 30, 2004, no charges to operations were made for impairments in the
future benefit of this asset. The Company will amortize the asset over three
years when operations using the domain site commense.

RECLASSIFICATION

Certain prior year amounts have been reclassified to conform with current year
presentation.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities
(VIE)," (revised December 2003 by FIN No. 46R), which addresses how a business
enterprise should evaluate whether it has a controlling financial interest in an
entity through means other than voting rights and accordingly should consolidate
the entity. For variable interests in VIEs created before January 1, 2004, the
Interpretation will be applied beginning on January 1, 2005. For any VIEs that
must be consolidated under FIN No. 46R that were created before January 1, 2004,
the assets, liabilities and non-controlling interests of the VIE initially would
be measured at their carrying amounts with any difference between the net amount
added to the balance sheet and any previously recognized interest being
recognized as the cumulative effect of an accounting change. If determining the
carrying amounts is not practicable, fair value at the date FIN No. 46R first
applies may be used to measure the assets, liabilities and non-controlling
interest of the VIE. The adoption of FIN No. 46R did not have a material impact

on the Company's financial position, results of operations or cash flows as the
Company does not have any VIEs.

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments." EITF 03-01 provides guidance on
other-than-temporary impairment models for marketable debt and equity securities
accounted for under SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," and SFAS No. 124, "Accounting for Certain Investments
Held by Not-for-Profit Organizations," and non-marketable equity securities
accounted for under the cost method. The EITF developed a basic three-step model
to evaluate whether an investment is other-than-temporarily impaired. In
September 2004, the FASB issued FASB Staff Position EITF 03-01-1, which delays
the effective date until additional guidance is issued for the application of
the recognition and measurement provisions of EITF 03-01 to investments in
securities that are impaired; however, the disclosure requirements are effective
for annual periods ending after June 15, 2004. The adoption of the disclosure
provisions of EITF 03-01 did not have a material effect on the Company's results
of operations or financial condition.

In November 2004, the FASB issued SFAS 151, Inventory Costs--an amendment of ARB
No. 43, Chapter 4 . The Statement amends the guidance of ARB No. 43, Chapter 4,
Inventory Pricing , by clarifying that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials (spoilage) should be
recognized as current-period charges and by requiring the allocation of fixed
production overheads to inventory based on the normal capacity of the production
facilities. It does not appear that this Statement will have a material effect
on the financial position, operations or cash flows of the Company when it
becomes effective in 2006.

In December 2004, the FASB issued SFAS No. 123R "Share-Based Payment" ("SFAS
123R"), a revision to SFAS No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123"), and superseding APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and its related implementation guidance. SFAS 123R establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services, including obtaining employee services
in share-based payment transactions. SFAS 123R applies to all awards granted
after the required effective date and to awards modified, repurchased, or
cancelled after that date. Adoption of the provisions of SFAS 123R is effective
as of the beginning of the first interim or annual reporting period that begins
after June 15, 2005. The Company is currently in the process of evaluating the
potential impact that the adoption of SFAS 123R will have on its consolidated
financial position and results of operations.

3. PROPERTY AND EQUIPMENT

Property and equipment, which are reflected at cost, consist of the following at
September 30, 2004 and 2003:

2004 2003
---- ----

Computer equipment ..................... $ 6,612 $ 3,689
------- -------
Total property and equipment ........... $ 6,612 $ 3,689
Less: accumulated depreciation ......... (3,454) (2,322)
------- -------
Property and equipment, net ............ $ 3,158 $ 1,367
======= =======

Depreciation expense for the year ended September 30, 2004 and 2003 is $1,131
and $912, respectively.

4. DISCONTINUED OPERATIONS

2004 2003
---- ----

Net loss from discontinued division - Coventry 1 ........ $ - $(3,139)

Net (loss) from discontinued operations ................. $ - $(3,139)
===== =======
Net (loss) per common share
Basic ............................................... (.00) (.00)
Diluted ............................................. (.00) (.00)

5. REVOLVING CREDIT NOTE

The Company had a demand line of credit with a related party (Evolve One Inc),
totaling $1,000,000, under which the Company could borrow on an unsecured basis
at 5% annually. On April 1, 2004 The Company repaid to Evolve One, Inc $22,000
in accrued interest. On May 27, 2004 the Company repaid the remaining
outstanding balance of $684,602 including accrued interest. This note has been
paid in full and cancelled as of September 30, 2004.

The terms of the demand line of credit stated that the Company must issue
options to purchase common stock equal to 10% of the dollar amount of the loan
advance at an exercise price of $0.10 per share, and options to purchase common
stock equal to 90% of the dollar amount of the loan advance at the ten trading
day average at the time of the draw ($0.30 at June 30, 2003). Under these terms,
the Company issued 675,000 stock options resulting in a charge to interest
expense of $110,008 in 2003.

6. CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash deposits. Accounts at each institution
are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000.
At September 30, 2004 and 2003, the Company had approximately $140,000 and $0 in
excess of FDIC insured limits, respectively.

7. NOTE PAYABLE - SHAREHOLDER

The Note Purchase agreement, a Convertible Promissory Note for $100,000 was
issued by the Company on October 24, 2003 to Mr. Tabin. This note was due on
July 31, 2004, and accrued interest at a rate of 5.25% per annum payable at
maturity.

On February 27, 2004 the Company entered into a Secured Promissory Note with our
President, Herbert Tabin. The Note Agreement, was a Secured Promissory Note for
$50,000 that was issued by the Company on February 27, 2004 to Mr. Tabin. This
note was due on August 1, 2004, and accrued interest at a rate of 5.25% per
annum payable at maturity. The note was secured by a security interest in
property located at 3764 Coventry Lane, Boca Raton

On March 31, 2004 the Company entered into a Secured Promissory Note with our
President, Herbert Tabin. The Note Agreement, was a Secured Promissory Note for
$25,000 that was issued by the Company on March 31, 2004 to Mr. Tabin. This note
was due on August 1, 2004, and accrued interest at a rate of 5.25% per annum
payable at maturity The note was secured by a security interest in property
located at 3764 Coventry Lane, Boca Raton .

On May 31, 2004 the Company repaid our President, Herbert Tabin $179,060. In
satisfaction of repayment on the three outstanding Promissory Notes including
accrued interest.

On April 8, 2004 the Company entered into a Secured Promissory Note with an
employee, Gary Schultheis. The Note Agreement, was a Secured Promissory Note for
$75,000 that was issued by the Company on April 8, 2004 to Mr. Schultheis this
note accrued interest at a rate of 5.25% per annum payable at maturity. On May
31, 2004 the Company repaid Gary Schultheis $75,572 in satisfaction of the
Promissory Note including accrued interest.

As of September 30, 2004 there are no outstanding notes and all accrued interest
has been paid .

8. RELATED PARTY

In 2004 the Company accrued $72,000 in salaries with its President Herbert
Tabin.

On October 15, 2004 The Company purchased 150,000 shares for $.18 per share for
an aggregate purchase price of $27,000. (1,200,000 shares post split ) of Evolve
One, Inc, a related party where certain officers and directors of the Company
are also officers and directors of Evolve One Inc. in a private transaction
exempt from registration under the Securities Act of 1933 in reliance on an
exemption provided by Section 4(2) of the Securities Act.

9. STOCKHOLDERS EQUITY

On June 19, 2003, the Company granted 675,000 stock options to Evolve One Inc in
a revolving note agreement (See Footnote 5). The options have an exercise price
of $.10 per share. These options have an exercise price of $.10 and $.30 per
share. The Company recognized a non-cash interest expense of $100,575, during
the twelve month period ended September 30, 2003.

On January 26, 2004 , Gary Schultheis exercised employee stock options to obtain
122,000 shares of common stock. These options had an exercisable price of .30 a
share. The company received $36,600 in proceeds.

10. EMPLOYEE INCENTIVE STOCK OPTION AGREEMENTS

During 1999, the Company adopted the Onspan Networking, Inc. f/k/a Network
Systems International, Inc. "1999 Long Term Stock Incentive Plan." The maximum
number of shares authorized and available under the plan was amended to be
increased from 41,667 to 500,000 shares, this amendment was approved at the
annual shareholder meeting held December 31, 2001. Under the terms of the plan,
the options expire after 10 years, as long as the employees remain employed with
the Company. The Company has reserved 500,000 shares of common stock for the
grant of qualified incentive options or non-qualified options to employees and
directors of the Company or its parents or subsidiaries, and to non-employee
directors, consultants and advisors and other persons who may perform
significant services for or on behalf of the Company under the Plan. Prices for
incentive stock options must provide for an exercise price of not less than 100%
of the fair market value of the common stock on the date the options are granted
unless the eligible employee owns more than 10% of the Company's common stock
for which the exercise price must be at least 110% of such fair market value.
Non-statutory options must provide for an exercise price of not less than 85% of
the fair market value.

Pursuant to the Plan on September 2, 2003, the Company granted 122,000
non-qualified stock options and 366,000 incentive stock options to certain
directors and employees. The stock options are immediately exercisable. The
following is a summary of option activity for the years ended September 30, 2004
and 2003.

OPTIONS
OPTIONS OUTSTANDING
AVAILABLE WEIGHTED AVERAGE
FOR GRANT OPTIONS EXERCISE PRICE
--------- ------- --------------
Balance; September 30, 2002 485,666 14,334 $13.08
Granted ................... (488,000) 488,000 .30
Exercised ................. - - -
Cancelled ................. 2,667 (2,667) -
Balance; September 30, 2003 333 499,667 .67
-------- -------- ------
Granted ................... - - -
Exercised ................. (122,000) (122,000) .30
Cancelled ................. - - -

Balance; September 30, 2004 122,333 377,667 .67
-------- -------- ------

11. INCOME TAXES

The provision for income taxes for the years ended September 30, consists of the
following components:

2004 2003
---- ----
Continuing operations
Federal:
Deferred ................... $ - $ -
---- ----
$ - $ -
==== ====

Discontinued Operations
Federal
Deferred ................... - -
==== ====

Total income tax expense (benefit) $ - $ -
==== ====

Reconciliation of the Federal Statutory Income Tax rate to the Company's
effective income tax rate is as follows:

2004 2003
---- ----

Computed at the Statutary rates (34%) .............. $(223,707) $(178,704)
Non deductible expenses ............................ 401 625
State income taxes net of federal tax benefit ...... (23,841) (19,704)
Unrealized loss on marketable securities ........... - 143,747
--------- ---------
Reinstatement /Change in valuation Allowance ....... 247,147 54,036
--------- ---------
Tax provision (benefit) ............................ $ - $ -
========= =========

The significant temporary differences that give rise to a deferred tax asset as
of September 30, 2004 and 2003 are as follows:

2004 2003
---- ----
Deferred tax asset:

Unrealized loss on marketable securities ........... $ - $ -
Capital loss Carryforward .......................... 41,798 41,798
NOL Carryforward ................................... 610,907 417,796
--------- ---------
Total deferred tax asset ...................... 652,705 459,594
Less valuation allowance ..................... (652,705) (459,594)
--------- ---------
Net deferred tax asset ........................ $ - $ -
========= =========

The net change in the total valuation allowance for the year ended September 30,
2004 was an increase of $193,111.

In assessing the reliability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers
projected future taxable income and tax planning strategies in making this
assessment.

The net operating loss carry forward originated September 30, 2002; the amount
is $1,735,828 and expires in 2024.

During the year ended September 30, 2003 a refund of $45,147 was received from
the Internal Revenue Service for prior year overpaid income taxes for former
subsidiary InterLAN Communications as per the sale agreement.

12. LEASE COMMITMENT

OPERATING LEASES

The Company had entered into a sub-lease agreement with Millennium Holdings
Group, Inc for a three-year term commencing July 1, 2003, for office space in
Boca Raton, Florida. The lease provided for base monthly rentals of $2,908 plus
the Company's proportionate share of certain expenses with 5% annual increases
through June 30, 2006. As of November 1, 2004 the company relocated its offices
to approximately 1,545 square feet of commercial office space sub-leased from
Evolve One, Inc a company related through common ownership under a five year
sublease signed November 1, 2004 at a rate of $2,000 per month plus 5% per annum

Minimum future obligations over the term of the lease are as follows:

Year ended September 30,
------------------------
2005 $ 22,000
2006 25,100
2007 26,355
2008 27,670
2009 29,056
2010 2,413
--------

$132,612
========

Rent expense for the years ended September 30, 2004 and 2003 aggregated $35,165
and $13,226 respectively.

13. LEGAL PROCEEDINGS

2. Securities Actions:

a. D. Mark White v OnSpan Networking, Inc. and Herbert Tabin, Case No. 352198686
03 (District Court, Tarrant County Texas) (Complaint filed May 2, 2003). This
action had asserted claims for violation of Texas securities law, fraud, and
breach of fiduciary duties. The action had was seeking unspecified damages,
restitution in the amount of $300,000, treble damages, pre-judgment interest,
the plaintiffs' attorneys' fees and costs, and certain other relief. In August
31, 2004, the action was settled for $62,500.

b.Richard T. Clark and Joel C. Holt v. Herbert Tabin and Gary Schultheis, United
States District Court Northern District of Oklahoma, Case No. 03-CV-289K(J). On
March 28, 2003, Plaintiffs Richard Clark and Joel Holt ("Plaintiffs") filed a
petition in the Tulsa County District Court alleging claims against the Company
and its President, CEO and Director, Herbert Tabin ("Tabin"), for, among other
things, fraud, breach of fiduciary duty, and breach of contract. On May 1, 2003,
the Company, along with Tabin, removed this action to the United States District
Court for the Northern District of Oklahoma and filed a Motion to Dismiss all
claims. On October 15, 2003, Plaintiffs withdrew their claims and filed an
Amended Complaint asserting claims against Tabin, both individually and
derivatively, on behalf of the Company. Plaintiffs also asserted claims against
the Company. Plaintiffs sought damages in the amount of $300,000.00 each, as
well as punitive damages. The Company retained independent counsel to conduct an
investigation into the allegations by Plaintiffs made derivatively on behalf of
the Company and, based on that investigation, determined that no action on
behalf of the Company was warranted. Defendants also filed a Motion to Dismiss
all of the allegations in the Amended Complaint. On October 19, 2004, Plaintiffs
filed a Second Amended Complaint in which they dropped the Company as a
defendant and dropped the derivative shareholder claims. Plaintiffs added Gary
Schultheis as an individual defendant. The Second Amended Complaint alleges
claims against Tabin and Schultheis individually. Because the Second Amended
Complaint was a different version than that which was approved for filing by the
Court, Tabin filed a motion to strike and dismiss the Second Amended Complaint.
A hearing was held on Tabin's motion to strike and dismiss and on December 3,
2004, the Magistrate Judge entered a Report and Recommendation to the Court
recommending that the Court not strike or dismiss the Second Amended Complaint.
On December 20, 2004, an Order allowed Plaintiffs to proceed under their Second
Amended Complaint. This Order confirms that the Company is no longer a party.
The Court also ordered the amount of $4,000, to be paid by the Plaintiffs to the
Company by January 19, 2004. The Company is currently exploring all methods of
recovering attorneys' fees, including a malicious prosecution action on behalf
of the Company against Clark and Holt as well as a Rule 11 motion for attorneys'
fees with respect to, at a minimum, the derivative action.

3. Potential Tax Liability:

14. EARNINGS PER SHARE

Basic earning (loss) per share is computed by dividing earnings available to
common stockholders by the weighted average number of common shares outstanding
during the period. Diluted earnings per share reflect per share amounts that
would have resulted if dilutive potential common stock had been converted to
common stock. The following reconciles amounts reported in the financial
statements:

2004 2003
---- ----

(Loss) from continuing operations ...................... $ (657,961) $(522,460)
(Loss) from discontinued operations .................... - (3,139)
---------- ---------

Net (loss) ............................................. $ (657,961) $(525,599)
========== =========

Denominator for basic earnings per share -
Weighted average shares ................................ 1,051,570 968,677
Effect of dilutive securities - stock options .......... - -
---------- ---------
Denominator for diluted earnings per share -
Weighted average shares adjusted for dilutive securities 1,051,570 968,677
========== =========

Basic and diluted (loss) per common share:
(Loss) from continuing operations ...................... $ (.63) $ (.54)
(Loss) from discontinued operations .................... - -
---------- ---------

Net (loss) ............................................. $ (.63) $ (.54)
========== =========

15. GOING CONCERN

The accompanying condensed financials were prepared assuming that the Company
will continue as a going concern. There are no assurances that the Company will
be successful in achieving the above plans, or that such plans, if consummated,
will enable the Company to obtain profitable operations or continue as a going
concern.

16. SUBSEQUENT EVENTS

On October 15, 2004 The Company purchased 150,000 shares for $.18 per share for
an aggregate purchase price of $27,000. (1,200,000 shares post split) of Evolve
One, Inc, a related party where certain officers and directors of the Company
are also officers and directors of Evolve One Inc. in a private transaction
exempt from registration under the Securities Act of 1933 in reliance on an
exemption provided by Section 4(2) of the Securities Act.

PART III

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

None.

ITEM 8A. CONTROLS AND PROCEDURES

The Company's Principal Executive Officer and Principal Financial and Accounting
Officer have concluded, based on their evaluation within 90 days of the filing
date of this report, that the Company's disclosure controls and procedures (as
defined in Exchange Act Rules 13a -14(c) and 15d-14(c)) were adequate and
designed to ensure that material information relating to the Company and its
consolidated subsidiaries would be made known to them by others within those
entities. There have been no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the previously mentioned evaluation.

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

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:

The following table sets forth the names, ages and current positions with the
Company held by the Directors and Executive Officers, together with the date
such positions were assumed. The Company is not aware of any arrangement or
understanding between any Director or Executive Officer and any other person
pursuant to which he was elected to his current position.

Position or Office Date Name Age
------------------ ---- ---- ---
President/CEO/Director Jul/2000 Herbert Tabin 37
Treasurer/CFO/Director Sep/2000 Marissa Dermer 36
Director 2001 Elizabeth Capra 42

HERBERT TABIN is currently the President, CEO and a Director of the Company. He
is also a Director and founder of Evolve One, Inc., a related party, and
currently serves as its Director of Marketing. Mr. Tabin has been a Director of
Evolve One, Inc. since February 1998, a publicly traded company. Mr. Tabin is
also currently Vice President of Millennium Holdings Group, Inc. a private
Florida-based venture capital firm. Mr. Tabin has been Vice President with
Millennium Holdings since 1996. In February 1999, Mr. Tabin became President of
Interactive Golf Marketing a publicly traded company that became WowStores.com.
In August 1999, Mr. Tabin resigned as President of WowStores.com following its
acquisition by StockFirst.com. Previously, Mr. Tabin was a Vice President of
Marketing with LBI Group, Inc., a merchant banking and venture capital group
from April 1995 to December 1996. From September 1993 to March 1995 Mr. Tabin
was a vice president with HBL Associates a financial relations firm in New York
City. From 1989 to August 1993 Mr. Tabin was employed with the American Stock
Exchange and New York-based Stock Brokerage firms Stratton Securities,
Continental Broker-Dealer and Kensington Wells, Inc. Mr. Tabin received a
Bachelor of Science in Business Economics from the State University of New York
At Oneonta in 1989. In March 2000, the State University of New York At Oneonta
named their campus' largest computer lab, the Tabin Computer Lab.

MARISSA DERMER is a Director of the Company and is currently the Chief Financial
Officer. Ms. Dermer is also currently controller of publicly traded Evolve One,
Inc. From September 1997 to April 2000, Ms. Dermer was an assistant controller
with Mitchell Hutchins Asset Management, Inc., the mutual fund advisory group of
Paine Webber Inc. Prior to her employment with Paine Webber, Ms. Dermer was a
manager of David Berdon and Company LLP, a prominent public accounting firm
headquartered in New York City from 1990 to 1997. Ms. Dermer graduated in 1990
from the State University of New York at Albany with a degree in
Business/Accounting.

ELIZABETH CAPRA is a Director of the Company. Mrs. Capra is also currently an
Executive Assistant with Publicly Traded Evolve One, Inc. From October 1992 to
July 1999, Mrs. Capra was simultaneously a Property Manager for upscale
properties, Reflections of Boca, Inc. and Sanctuary of Boca Raton, Inc., both
located in Boca Raton, Florida. From 1984 to 1991 Mrs. Capra was the Assistant
to the Vice President of The International Department of Marsh & McLennan -
insurance and reinsurance broking, investment management and consulting
businesses worldwide. Mrs. Capra graduated in 1983 from Roberts Walsh Business
School with a degree in Business Administration.

CODE OF ETHICS

Effective November 1, 2003, our board of directors adopted a Code of Business
Conduct and Ethics that applies to, among other persons, our company's President
(being our principal executive officer) as well as all employees. As adopted,
our Code of Business Conduct and Ethics sets forth written standards that are
designed to deter wrongdoing and to promote:

- honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;

- full, fair, accurate, timely, and understandable disclosure in reports and
documents that we file with, or submit to, the Securities and Exchange
Commission and in other public communications made by us;

- compliance with applicable governmental laws, rules and regulations;

- the prompt internal reporting of violations of the Code of Business Conduct
and Ethics to an appropriate person or persons identified in the Code of
Business Conduct and Ethics; and

- accountability for adherence to the Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics requires, among other things, that all
of our company's personnel shall be accorded full access to our President with
respect to any matter that may arise relating to the Code of Business Conduct
and Ethics. Further, all of our company's personnel are to be accorded full
access to our company's board of directors if any such matter involves an
alleged breach of the Code of Business Conduct and Ethics by our President .

In addition, our Code of Business Conduct and Ethics emphasizes that all
employees, and particularly managers and/or supervisors, have a responsibility
for maintaining financial integrity within our company, consistent with
generally accepted accounting principles, and federal, provincial and state
securities laws. Any employee who becomes aware of any incidents involving
financial or accounting manipulation or other irregularities, whether by
witnessing the incident or being told of it, must report it to his or her
immediate supervisor or to our company's President. If the incident involves an
alleged breach of the Code of Business Conduct and Ethics by the President, the
incident must be reported to any member of our board of directors. Any failure
to report such inappropriate or irregular conduct of others is to be treated as
a severe disciplinary matter. It is against our company policy to retaliate
against any individual who reports in good faith the violation or potential
violation of our company's Code of Business Conduct and Ethics by another.

Our Code of Business Conduct and Ethics is filed herewith with the Securities
and Exchange Commission as Exhibit 14 to this annual report. We will provide a
copy of the Code of Business Conduct and Ethics to any person without charge,
upon request. Requests can be sent to: OnSpan Networking, Inc., 1000 Clint Moore
Road, Suite 101, Boca Raton, FL 33487

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

None.

ITEM 10. EXECUTIVE COMPENSATION

The following table shows the cash compensation of the Company's chief executive
officer and each officer whose total cash compensation exceeded $100,000, for
the three fiscal years ended September 30, 2002, 2003 and 2004.

SUMMARY COMPENSATION TABLE - ANNUAL COMPENSATION

Other
Annual
Name and Principal Position Year Salary Bonus Compensation
--------------------------- ---- ------ ----- ------------
Herbert Tabin 2004 N/A N/A N/A
Chairman of the Board 2003 N/A N/A N/A
And Chief Executive Officer 2002 N/A N/A N/A
Since July 25, 2000

Marissa Dermer 2004 N/A N/A N/A
Chief Financial Officer 2003 N/A N/A N/A
Since September 2000 2002 N/A N/A N/A

SUMMARY COMPENSATION TABLE - LONG-TERM COMPENSATION

Securities
Underlying
Options
Name and principal position Year SAR's
--------------------------- ---- ----------
Herbert Tabin 2004 N/A
Chairman of the Board 2003 122,000(1)
And Chief Executive Officer 2002 N/A
Since July 25, 2000

Marissa Dermer 2004 N/A
Chief Financial Officer 2003 122,000(1)
Since September 2000 2002 N/A
________

(1) The Company issued Mr. Tabin, and Ms Dermer options to purchase 122,000
shares each of its common stock, exercisable at $.33 and $.30 per share
respectively, as compensation for their services to the Company in fiscal
2003.

Long-Term Stock Incentive Plan

In April 1999, the Board of Directors of the Company adopted, subject to
stockholder approval, the Company's Stock Incentive Plan (the "Stock Incentive
Plan"). The purposes of the Stock Incentive Plan are to closely associate the
interests of the key associates (management and certain other employees) of the
Company and its adopting subsidiaries with the stockholders by reinforcing the
relationship between participants' rewards and stockholder gains, to provide key
associates with an equity ownership in the Company commensurate with Company
performance, as reflected in increased stockholder value, to maintain
competitive compensation levels, and to provide an incentive to key associates
for continuous employment with the Company.

Under the Stock Incentive Plan, the Company may grant (i) incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) options that are not qualified as
incentive stock options ("nonqualified stock options"). Executive officers,
management and other employees of the Company capable of making a substantial
contribution to the success of the Company are eligible to participate in the
Stock Incentive Plan.

The Stock Incentive Plan is administered by a Committee consisting of three
members appointed by the Board of Directors of the Company (the "Committee").
The Committee is currently comprised of Messr. Tabin and Ms. Dermer. and Ms
Capra The Committee, in its sole discretion, has the authority to: (i) designate
the key associates or classes of key associates eligible to participate in the
Stock Incentive Plan; (ii) to grant awards provided in the Stock Incentive Plan
in the form and amount determined by the Committee; (iii) to impose such
limitations, restrictions and conditions upon any such award as the Committee
shall deem appropriate; and (iv) to interpret the Stock Incentive Plan.

The maximum aggregate number of shares of common stock available for issuance
under the Stock Incentive Plan is 500,000 shares. At September 30, 2004, there
were options to purchase 377,667 shares of the Company's common stock
outstanding under the Stock Incentive Plan. The shares of common stock available
for issuance under the Stock Incentive Plan are subject to adjustment for any
stock dividend or distribution, recapitalization, merger, consolidation,
split-up, combination, exchange of shares or the like. Shares issued may consist
in whole or in part of authorized but unissued shares or treasury shares. Shares
tendered by a participant as payment for shares issued upon exercise of an
option shall be available for issuance under the Stock Incentive Plan.

Any shares of common stock subject to an option, which for any reason is
terminated unexercised or expires shall again be available for issuance under
the Stock Incentive Plan. Subject to the provisions of the Stock Incentive Plan,
the Committee may award incentive stock options and nonqualified stock options
and determine the number of shares to be covered by each option, the option
price therefore and the conditions and limitations applicable to the exercises
of the option. Each option shall be exercisable at

such times and subject to such terms and conditions as the Committee may specify
in the applicable award or thereafter.

Incentive stock options granted under the Stock Incentive Plan are intended to
qualify as such under section 422 of the Code. No incentive stock option granted
under the Stock Incentive Plan may be exercisable more than 10 years from the
date of grant.

The option price per share for nonqualified stock options and incentive stock
options must at least equal the fair market value of the common stock on the
date the option is granted. For a 10% shareholder must equal at least 110%. Each
option shall be evidenced by a written stock option agreement, in such form as
the Committee may from time to time determine, executed by the Company and the
grantee, stating the number of shares of common stock subject to the option. The
Committee may at any time and from time to time terminate or modify or amend the
Stock Incentive Plan in any respect, except that without stockholder approval
the Committee may not (i) increase the maximum number of shares of common stock
which may be issued under the Stock Incentive Plan, (ii) extend the period
during which any award may be granted or exercised, (iii) extend the term of the
Stock Incentive Plan, or (iv) change the associates/employees or group of
associates/employees eligible to receive incentive stock options.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

Percent of total
Number of options/SARs
Securities grated to Exercise or
Underlying Options/ employees in Base Expiration
Name SARs granted (#) fiscal year Price ($/Sh) Date
---- ------------------- ----------------- ------------ ----------
None

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

Number of
securities VALUE OF
underlying UNEXERCISED
unexercised IN-THE-MONEY
Shares options/SARs at OPTIONS/SARs
Acquired FY-end (#) At FY-end ($)
On Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ --------------- -------------
NONE $0

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates all persons who, as of September 30, 2004, the
most recent practicable date, are known by the Company to own beneficially more
than 5% of any class of the Company's voting securities and all Directors of the
Company and all Officers who are not Directors of the Company, as a group. The
Company's common stock is the only class of its voting securities. As of
September 30, 2004, there were 1,090,677 shares of the Company's common stock
outstanding. Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with respect to
securities and includes any securities which the person has the right to acquire
within 60 days through the conversion or exercise of any security or other
right. Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
its common stock beneficially owned by them. The information as to the number of
shares of the Company's common stock owned by each named person or group is
based upon the information contained in a record list of the Company's
shareholders at September 30, 2004.

Title of Amount & Nature of % of
Class Name & Address of Beneficial Owner Beneficial Owner Class
-------- ---------------------------------- ------------------ -----

Common Herbert Tabin 369,902(1) 30.29%
1000 Clint Moore Rd,
Suite 101
Boca Raton, FL 33487

Common Marissa Dermer 124,500(2) 10.24%
1000 Clint Moore Rd,
Suite 101
Boca Raton, FL 33487

Common Elizabeth Capra 122,000(3) 10.06%
1000 Clint Moore Rd,
Suite 101
Boca Raton, FL 33487

Common Gary Schultheis 158,500 14.53%
1000 Clint Moore Rd,
Suite 101
Boca Raton, FL 33487

Common All directors and executive 774,902 52.80%
officers as a group (four persons)
_________
(1) Includes an option granted to Mr. Tabin on October 23, 2000 for 8,333 shares
with an exercise price of $13.56 per share, and an option granted on September
2, 2003 for 122,000 shares with an exercise price of $.33 per share, the closing
price for the stock on that date as reported on the NASDAQ Small Cap Market. The
options were granted by the Board of Directors in lieu of current compensation
agreements.

(2) Includes an option granted to Ms. Dermer on October 23, 2000 for 2,500
shares with an exercise price of $13.56 per share, and an option granted on
September 2, 2003 for 122,000 shares with an exercise price of $.30 per share,
the closing price for the stock on that date as reported on the Nasdaq SmallCap
Market. The options were granted by the Board of Directors in lieu of current
compensation agreements.

(3) Includes an option granted to Ms. Capra on September 2, 2003 for 122,000
shares with an exercise price of $.30 per share, the closing price for the stock
on that date as reported on the Nasdaq SmallCap Market. The options were granted
by the Board of Directors in lieu of current compensation agreements.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

"There is no immediate family relationship between or among any of the Directors
and Executive Officers, except Ms. Dermer who is the sister-in-law of Mr. Tabin.
Related transactions include 1) Mr. Tabin is also a director of EvolveOne, Inc.
who Onspan sub leases its office space from.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

The following documents are filed as a part of this report or are incorporated
by reference to previous filings, if so indicated:

(a) EXHIBITS

EXHIBIT NUMBER DESCRIPTION

4.0 Long Term Incentive Stock Options Plan (1)

10.1 Stock Purchase Agreement Dated May 27, 2004 (2)

14 Onspan Code of Business Conduct and Ethics Adopted
by the Board of Directors On November 1, 2003

31.1 Certification of Principal Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

31.2 Certification of Principal Accounting and
Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

32.1 Certification of Principal Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002

32.2 Certification of Principal Accounting and
Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
_________
(1) Incorporated by reference to the Company's report on Form S-8 dated
July 27, 2001, filed on July 27, 2001.
(2) Incorporated by reference to the Company's report on Form 8-K dated
May 27 2004, filed on June 7, 2004.

(b) REPORTS ON FORM 8-K

1. 8-K filed with the Securities and Exchange Commission on June 7,
2004 announcing on May 27, 2004 the Company entered into a stock purchase
agreement with Herbert Tabin, its President and Chief Executive Officer, and
Gary Schultheis, an employee of the Company, pursuant to which the Company sold
its wholly-owned subsidiary, Coventry One, Inc., to Messrs. Tabin and
Schultheis. The sole asset of the subsidiary was a single family home and lot
located in Woodfield Country Club, Boca Raton, Florida and related country club
golf membership. The purchase price for the shares of the subsidiary was
$1,509,972, and Messrs. Tabin and Schultheis also assumed responsibility for all
expenses associated with the property comprising the subsidiary, including an
existing tax balance of $21,188 due to Palm Beach County, Florida, outstanding
fees totaling $21,768 and an insurance payable of $17,043. Messrs. Tabin and
Schultheis also agreed to pay the Company 0.75% of the gross sales amount of the
property upon any subsequent sale provided the gross sales price exceeds
$2,000,001. The purchase price for the subsidiary was based on a comprehensive
certified appraisal. Messrs Tabin and Schultheis bore the cost of the appraisal.
The Company, which had received engineering plans, had intended to renovate and
expand the existing home on the property

2. Form 8-K filed with the Securities and Exchange Commission August 8,
2002 announcing on August 5, 2002, the Company sold and transferred the stock of
its wholly-owned subsidiary, InterLAN Communications, Inc. to G. Anthony Munno,
Martin Sainsbury Carter and Brian Ianniello, who were executives and employees
of InterLAN. In exchange for the assignment of the InterLAN stock, Messrs.
Munno, Carter and Ianniello transferred 20,833 shares of Onspan common shares,
and Onspan was relieved of substantially all obligations and guarantees provided
to third parties. Onspan also retained the right to a certain tax refund owing
to InterLAN. These individuals also resigned in all capacities as directors,
officers and/or employees of Onspan. InterLAN provides data communications and
network solutions and consulting services.

3. Form 8-K filed with the Securities and Exchange Commission October
16, 2001 announcing the Onspan Networking, Inc. (the "Company"), filed a
Certificate pursuant to Section 78.207 of the Nevada Statutes whereby the
Company decreasing the number of issued and outstanding shares of common stock,
par value $.012, at a rate of one for twelve (1:12), and proportionately
decreasing the number of authorized shares of common stock at a rate of one for
twelve (1:12). As a result, the Company's authorized common stock has been
reduced from 100,000,000 shares to 8,333,333 shares, and the number of issued
and outstanding shares of common stock were reduced from 11,574,619 to
approximately 964,552 shares.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

The aggregate audit fees billed by Daszkal Bolton LLP for professional
services rendered for the audit of our annual financial statements included in
our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004
and for the review of quarterly financial statements included in our Quarterly
Reports on Form 10-QSB for the quarters ending December 31, March 31, and June
30, 2004 were $14,000.

The aggregate audit fees billed by Daszkal Bolton LLP for professional
services rendered for the audit of our annual financial statements included in
our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2003
and for the review of quarterly financial statements included in our Quarterly
Reports on Form 10-QSB for the quarters ending December 31, March 31, and June
30, 2003 were $17,100.

AUDIT RELATED FEES

For the fiscal years ended September 30, 2004 and 2003, the aggregate
fees billed for assurance and related services by Daszkal Bolton LLP relating to
the performance of the audit of our financial statements which are not reported
under the caption "Audit Fees" above was $0 and $0, respectively.

TAX FEES

For the fiscal years ended September 30, 2004 and 2003 the aggregate
fees billed for tax compliance, tax advice and tax planning, include the
preparation of federal and state corporate income tax returns. The aggregate tax
fees billed to Onspan by Daszkal Bolton LLP for the fiscal years ended September
30, 2004 and 2003 were approximately $768 and $925, respectively.

ALL OTHER FEES

Other than fees relating to the services described above under "Audit
Fees," "Audit-Related Fees" and "Tax Fees," there were no additional fees billed
by Daszkal Bolton LLP for services rendered to Onspan for the fiscal years ended
September 30, 2004 and 2003.

AUDIT COMMITTEE POLICIES

Effective May 6, 2003, the Securities and Exchange Commission adopted
rules that require that before our independent auditor is engaged by us 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, including those set forth above. The audit committee has
considered the nature and amount of fees billed by Daszkal Bolton LLP and
believes that the provision of services for activities unrelated to the audit is
compatible with maintaining Daszkal Bolton LLP's independence.

SIGNATURES

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

ONSPAN NETWORKING, INC.

By: /s/ Herbert Tabin
---------------------
Herbert Tabin, Principal Executive Officer January 12, 2005

In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

SIGNATURES

By: /s/ Herbert Tabin
---------------------
Herbert Tabin, Principal Executive Officer January 12, 2005

By: /s/ Marissa Dermer
----------------------
Marissa Dermer, Principal Accounting and Financial Officer January 12, 2005