SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-KSB

[X]	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended March 31, 2003
[_]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____ to _____.

Commission File No.: 0-13992

CYBER DIGITAL, INC. .

(Name of small business issuer in its charter)

New York .	11-2644640 .
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

>

400 Oser Avenue, Hauppauge, New York	11788
(Address of principal executive offices)	(Zip Code)

Issuer's telephone number: (631) 231-1200

Securities registered under Section 12(b) of the Exchange Act:
Title of Classes	Name of Each Exchange on Which Registered
Common Stock, $.01 par value	N/A

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the 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 disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this Form 10-KSB, 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. [_]

Issuer's revenues for its most recent fiscal year: $0

As of June 26, 2003, Registrant had 22,305,498 shares of Common Stock outstanding ($.01 par value). On that Date, the aggregate market value of the Common Stock held by persons other than those who may be deemed affiliates of Registrant was $3,737,700 (based on the last sale price reported on over-the-counter market electronic bulletin board on such date).

Transitional Small Business Disclosure Format (check one):

Yes [_] No [X]

PART 1

We have provided a glossary of terms for your convenience beginning on page 12.

ITEM 1 - DESCRIPTION OF BUSINESS

Overview

We design, develop software, manufacture and market a vast array of high performance Internet infrastructure systems such as routers, gateways, firewalls and servers for the creation of next-generation digital broadband and virtual private network (VPN) services by Internet service providers. We also design, develop software, manufacture and market a range of advanced digital voice switching infrastructure equipment for private and public switched voice network operators worldwide, especially for developing countries. Our mission is to become the leading supplier of (i) digital broadband systems in the U.S., and (ii) digital voice switches to developing countries. We believe that service providers can offer affordable yet modern voice and broadband Internet services by exclusively using our vast array of voice and Internet systems without buying any equipment from our competitors.

Unlike our competitors systems, our systems are neither labor nor capital intensive but are software intensive. This capability, in contrast to that of our competitor's, makes our systems more affordable for both voice and Internet network operators worldwide. Our digital voice switching and Internet Protocol (IP) infrastructure systems are based on our proprietary operating system software, which provides high performance, reliability and functionality.

Our vast array of both digital voice and Internet infrastructure systems address every facet of building affordable yet modern telecommunication and digital broadband networks. Our voice and Internet switching systems can use fiber optic or digital wireless transmission, which enable developing countries such as Nigeria to easily and rapidly deploy telecommunications services to consumers within months rather than years. We believe that we are one of a very few, if not the only, company in the world with proprietary technology of distributed digital switching. Our systems are ideally suited for the U.S., in the aftermath of the recent telecommunication meltdown, as well as developing countries such as Nigeria. During fiscal year 2003, we continued to develop a stronger foothold in the Nigerian telecommunication market by having our digital wireless telephone network solution accepted by five states. Since we offer an affordable telecommunications as well as Internet capability, the Nigerian authorities have selected us as the ideal supplier of telephone and Internet systems.

In the aftermath of the telecommunication meltdown in the U.S., which essentially occurred due to the failure of the Telecommunication Act of 1996 and lack of local-loop voice and digital broadband networks in place, we believe that we are poised to be the leading supplier of local-loop voice and digital broadband systems. In addition, Federal Communications Commission's (FCC) new ruling on phone policy announced February 20, 2003, requires that local switching for business customers will no longer be unbundled; thereby access to Bell switches for voice and data by Bell's competitors is eliminated. This ruling forces the Bell's competitors to build their own local switching facilities, presumably using our affordable digital voice switches and broadband systems which are ideal for business segment market. There is abundant capacity of optically enabled IP backbone networks between all major cities in the U.S., but as yet businesses or consumers do not have adequate access to that capacity. Our vast array of digital voice switches and high-performance distribution routers are specifically designed to allow Bell's competitors to meet the requirements of local-loop voice and digital broadband networks. We believe that we will establish a strong market position with early adopters of this technology and will build on this position as the market reestablishes itself.

In October 2002, we targeted the burgeoning Homeland Security market with our digital broadband systems. Our VPN solution creates secure high-speed data networks between remote locations to facilitate information sharing between government departments. We plan to market our secure VPN solution to U.S. Federal government agencies as an aid in the war against terrorism.

We are a New York corporation formed on April 4, 1983. Our executive offices are located at 400 Oser Avenue, Suite 1650, Hauppauge, NY 11788 and our telephone number is (631)-231-1200. Our Website is www.cyberdigitalinc.com.

Industry Background

A $250 Billion International Target Market

The tremendous growth of the Internet has revolutionized the communications industry. Today, the Internet connects millions of people around the world who are able to share information instantly without geographic boundaries. The Internet is bound only by the voice-network upon which it resides; without this network in place users cannot take advantage of powerful Internet applications.

In developed countries, such as the United States, the requisite voice network is already in place, hence the number of Internet users is growing at unprecedented rates. In developing countries such as Nigeria, China, India and Brazil, there is little or no basic voice network, leaving many of these nations struggling to take part in the Internet revolution.

The demand for Internet applications, such as distance learning, municipal virtual private networks and medical/emergency communications systems have induced developing countries to aggressively invest in communications infrastructure. These countries must first build a basic voice network, the platform of the Internet, before they can become part of this information revolution.

The following table shows projected five-year communication infrastructure spending for selected countries, according to Pyramid Research:

Projected Communication Infrastructure Investment by 2005
Country	Number Lines Built (000s)	Cumulative Investment (US$Millions)
China	91,042	172,077
India	41,387	44,366
Brazil	15,881	34,009
Nigeria	5,000	7,000

Unlike technologically advanced countries, where the existing public voice telephone network consists of monolithic centralized digital switches, developing countries are seeking an alternative cost-effective approach, such as our distributed digital wireless switching systems. We believe that the trend in the telecommunications industry towards distributed switching from monolithic centralized switching is similar to the trend in the computer industry towards distributed networking personal computers from monolithic centralized mainframe computers. Similar to the computer industry where personal computing has been brought closer to the users, our distributed wireless switching systems are also being installed closer to groups of subscribers, thereby dramatically reducing the cost of cabling. We believe that with our distributed wireless switching system, the public telephone operating companies in developing countries can rapidly provide telephone services to their customers. It is substantially easier to install small, distributed switches than large monolithic centralized switches with their corresponding long cabling infrastructure. We believe that our digital wireless voice switches are well suited for developing countries.

A $32 Billion Domestic Market

We believe that a substantial market opportunity exists in the United States as a result of the convergence of seven factors:

the growing demand for high-speed access to the Internet and virtual private networks (VPNs);

the inherent limitations of modems as a connection to data networks;

the need for large companies to create enterprise-wide networks to improve the productivity of their branch-office workers;

the need for small and medium sized businesses to have an integrated gateway solution for their networking requirements;

emergence of Internet Protocol (IP) frame-relay or private-line packet switched "broadband" technology;

the need for "firewall" or data security by businesses; and

the failure of the 1996 Telecommunications Act, as amended, and FCC's new phone policy.

Growing Demand for High-Speed Access to the Internet and Virtual Private Networks

Currently, business spending for connecting remote workers, branch offices and corporate headquarters to each other and to customers, suppliers and partners either through the Internet or VPN is large and growing. IDC estimates that the investment in U.S. market for network service provision by digital "broadband" means will grow from $17 billion in 1999 to $32 billion by 2003. Much of that growth is expected to result from increased demand for e-mail, web hosting services, e-commerce, B2B e-services, software application services, IT and Web-site operations, real-time video services and applications.

Limitations of Dial-up, ISDN and DSL

The vast majority of Internet users access data networks through slow dial-up modems, an integrated services digital network (ISDN) line or a digital subscriber line (DSL) line offering typically 56 Kbps, 128Kbps and 640 Kbps respectively. DSL technology is very sensitive to the quality of the voice grade existing lines. Therefore, DSL service is severely limited by the length of wire from the central office of an Incumbent Local Exchange Carrier (ILEC) to a subscriber location. This is generally less than 12,000 feet, which represents less than 10% of the total market. This shortcoming is created by the Incumbent Local Exchange Carriers (ILEC) existing voice grade lines and is incurable. A local loop digital broadband solution using CIAN distribution router provides 1.5Mbps (T1) to 45Mbps (T3) service without any distance limitations and does not use ILEC voice lines.

Large Businesses Need to Create Enterprise-wide Networks to Improve Branch-Office-Worker Productivity

Many large companies are currently interconnecting increasing numbers of branch and remote offices by point-to-point high-speed T1 carrier grade lines to their local area networks. This approach is very expensive. These companies face the challenge of finding a cost effective way to make their branch and remote office workers as productive as those who have access to all of the high performance communications and networking resources available to workers located at corporate headquarters. A high-speed VPN solution, such as Cyber Virtual Private Network (CVPN), that encompasses access to the corporate local area network, the Internet, the corporate video conferencing system, customers, suppliers and partners could substantially increase branch office worker productivity.

Small and Medium Businesses Need an Integrated Gateway Solution

A significant number of small and medium sized businesses cannot afford to connect to Internet at broadband speeds as they have to purchase various expensive customer end equipment such as router, Ethernet-to-T1 converter, IP frame-relay and private-line equipment, CSU/DSU, firewall, e-mail server, web server, etc. These businesses must contend with the cost and complexity of retaining multiple vendor products and suffer from more points of failure. We believe that these businesses can benefit from the uniqueness of our CBIG gateway, which combines all the functions and features required by a customer end network in one box, about the size of a reference handbook.

Emergence of Internet Protocol (IP) Frame-Relay or Private-Line Packet Switched "broadband" Technology

"Internet Protocol (IP) frame-relay or private-line" is a packet-switching based "broadband" technology that dramatically increases the data-carrying capacity over standard T1 or T3 carrier-grade copper lines. It also dramatically increases the reliability of packet data transmission because of end-to-end integrity and connectivity. We believe IP frame-relay or private-line packet-based networks are significantly more efficient than traditional point-to-point networks, and allow end users to connect to any location that can be assigned an Internet Protocol address. Traditional point-to-point networks, including the traditional telephone network and private data networks, are less efficient because they require a dedicated connection between two locations. Our CBIG gateway IP frame-relay or private-line packet-based networks allow multiple users to share connections between locations.

Businesses Need "Firewall" or Data Security

Security of data transmission over the Internet is of paramount importance to businesses and is referred to in the industry as "firewall". This firewall must exist at the customers premises. Our CFW and CBIG provides the "Ultimate Firewall" by IP packet filtering, IP masquerading, IP tunneling and IP encryption security (IPSec). This firewall capability makes an enterprise-wide VPN a reality. International Data Corporation (IDC) estimates that the worldwide sales of hardware-based VPN and firewall equipment, such as our CFW and CVPN, will grow from $0.9 billion in 2000 to $4 billion in 2005.

Failure of 1996 Telecommunications Act and FCC's new phone policy

The 1996 Telecommunications Act, as amended, allows competitive carriers to leverage limited parts of the existing Incumbent Local Exchange Carrier (ILEC) infrastructure, as opposed to building a competing similar infrastructure. The 1996 Telecommunications Act requires all ILECs to allow competitive carriers to co-locate their access (DSL) equipment only (no digital switches, packet switches or broadband routers) along with ILECs equipment in ILECs central offices, which enables competitive carriers to access end users through existing telephone line connections. ILECs existing telephone line infrastructure is a "narrowband" network, however, and suitable for analog voice transmission or DSL service limited to 12,000 feet. The infrastructure limitation of (a) low bandwidth and (b) lack of integrated packet switching imposed by the current ILECs network does not make economic or technical justification for IP backbone service providers to enter the Internet market using ILECs network. The result is the telecommunications meltdown in the U.S., when most DSL service providers filed bankruptcy due to poor grade of service from ILECs and the "narrowband" nature of the network. While the companies that supplied equipment to them - including Cisco Systems, Nortel Networks, and Lucent Technologies - have suffered a significant drop in their business. In addition, business and residential users of the Internet now only have very expensive alternative to narrowband access. It is now clear to most IP backbone providers who have built an over capacity of optically enabled IP network between major cities that in order to enter the lucrative Internet market they must build their own local-loop digital broadband networks to reach out businesses and consumers. We believe our CIAN distribution routers are specifically designed to allow Internet service providers to build local-loop digital broadband networks including in multiple tenant unit buildings. According to a report by Cahners In-Stat Group, the sales of broadband equipment and services, such as our CIAN, tailored to the multiple tenant unit buildings alone will reach $4.8 billion by 2004, up from $0.37 billion in 2000 in the United States. In addition, Federal Communications Commission's (FCC) new ruling on phone policy announced February 20, 2003, requires that local switching for business customers will no longer be unbundled; thereby access to Bell switches for voice and data by Bell's competitors is eliminated. This ruling forces the Bell's competitors to build their own local switching facilities, presumably using our affordable digital voice switches and broadband systems which are ideal for business segment market.

Our Range of Internet Systems

Cyber Digital has fully developed Internet infrastructure systems such as Cyber Business Internet Gateway (CBIG), Cyber Internet Access Network (CIAN) distribution router, Cyber Firewall (CFW) IPSec based firewall appliance and Cyber Web Server (CWEB). We intend to enhance our systems by new technologies and software when the market requires.

Cyber Business Internet Gateway

We have developed and marketed the Cyber Business Internet Gateway (CBIG) as customer end equipment. Our CBIG is a powerful Internet Protocol (IP) Frame Relay and Private Line based gateway that replaces many single function equipment such as router, network address translator, Ethernet-to-T1 converter, IP frame-relay and private-line equipment, CSU/DSU, firewall equipment, e-mail server and web server. We believe that our CBIG gateway is unique in the industry as it combines all the functions and features required by a customer-end network in one box, about the size of a reference handbook. In addition, our CBIG gateway offers a capacity of 0.05 gigabits per second that is the industry's fastest router for customer-end applications. Our CBIG dramatically increases the reliability of the customer-end network by eliminating many such devices while also lowering the overall cost of network acquisition by 60% to 80%.

Our CBIG offers built-in standard security features and enhanced security options, making it what we believe to be an ideal enterprise-wide virtual private network (VPN). The firewalls are provided by IP filtering, IP masquerading and IP tunneling. We believe that our VPN offering is the most advanced in the industry.

Cyber Internet Access Network

We have developed and marketed our Cyber Internet Access Network (CIAN) high-end distribution router, which permits multiple business users to simultaneously access the Internet at a fixed committed bandwidth rate (CBR) and an "always on" basis. Our CIAN creates a 'Mini-POP' (Points of Presence) and brings the Internet closer to users thus eliminating bottlenecks, reducing network delays and increasing reliability. Our CIAN distribution router has the capacity of 0.1Gbps and is suitable for T1 to T3 carrier grade applications. . Our CIAN distribution routers are specifically designed to allow Internet service providers to build local-loop digital broadband networks.

Cyber Firewall

In January 2001, we developed and introduced simple-do-it-yourself installation software on our proprietary standalone Cyber Firewall (CFW) series IPSec firewall appliance for business -to-business e-commerce secure access and virtual private network applications. IPSec is an industry-wide standard for assuring the privacy, integrity and authenticity of information crossing public IP networks. Adhering to IPSec standards makes Internet "wiretapping" entirely impractical. Based on our proprietary software technology, our CFW IPSec firewall provides a cost-effective way of creating an enterprise-wide virtual private network (VPN) by enabling secure use of the Internet. Our CFW series firewall appliance is standalone and totally independent of customer's computing operating system platform. Our CFW firewall is fully interoperable with Cisco Systems, Check Point Software Technologies, and Nortel Networks firewalls. Our CFW series firewalls include IP Packet Filtering, IP Masquerading, IP Tunneling and IP Security (IPSec) capabilities. We believe that our IPSec based VPN offering is the most advanced in the industry.

Cyber Web Server

We have developed and marketed our Cyber Web Server (CWEB) that is based on Linux Operating System and Intel Pentium Processors. We believe that our CWEB servers are robust and proven-in for high performance web applications. We do not intend to compete in the low performance server market created by PC manufacturers.

Our Range of Digital Voice Switches

We intend to constantly develop additional new technologies and software. Our commitment to research and development has enabled us to create new systems, employing SS7 and C7 signaling and wireless attributes. These systems are Cyber Distributed Central Office (CDCO), Cyber Tandem Exchange (CTSX) and Cyber Rural Exchange (CRX) for various applications, primarily for use in developing countries and for domestic Competitive Local Exchange Carriers (CLECs) attempting to bypass Incumbent Local Exchange Carriers (ILECs). We believe that these systems are capable of providing the functions for which they have been designed.

Cyber Distributed Central Office

We have developed and marketed our Cyber Distributed Central Office (CDCO) which is designed to provide digital voice communications to subscribers in densely populated urban areas. Our CDCO system is a digital switch with trunk and tandem exchange capabilities enabling it to connect subscribers served by other exchanges. Our CDCO system is designed to interface with both modern digital telecommunications networks and older analog telephone networks. Our CDCO system consists of nodes connected by standard digital links, which permit optimization of the network with respect to specific size, required traffic capacity and desired applications. We believe the modular nature of the nodal structure of our CDCO will provide an economical digital switching exchange from as little as a few hundred lines to as many as 1,000,000 lines of capacity.

We expect the nodal structure of the system to permit changes to the function of the system simply by the use of different software with the same common hardware. The expected flexibility of our CDCO system will offer a vast array of system configurations to telephone operating companies and administrations to fulfill a wide range of applications, including the following:

Local Cyber Distributed Central Office (CDCO) exchange serves subscribers in cities and towns.

Cyber Tandem Exchange (CTSX), a regional exchange connecting to various local exchanges.

Toll and transit Cyber Distributed Central Officer (CDCO) exchanges for long distance national service and international gateway.

Integrated local and tandem exchanges.

Integrated local, tandem and toll exchanges.

Integrated local, tandem, toll and transit exchanges.

Cyber Multi-tenant exchange (CMT) for subscribers in large office complexes and buildings where many business tenants can be served by a resident exchange.

The control functions of our CDCO system are totally distributed in autonomous processing sub-systems or nodes. Node processors are loosely coupled and exchange information through standardized inter-nodal communication digital links. We believe the distributed approach will permit switching systems to be located closer to groups of subscribers or at subscribers' premises, which could dramatically reduce the cost of wiring and cabling and should result in instant installation. Moreover, a failure in one node should not affect other nodes. In addition, the distributed approach should eliminate bottlenecks, as the system offers multiple routes for call completion.

Cyber Rural Exchange

We have developed and marketed our Cyber Rural Exchange (CRX), which is a specialized version of Cyber Distributed Central Office (CDCO). Our CRX is designed to handle the traffic requirements of widely dispersed single-line users, such as users in a small town or rural area.

Cyber Switch Exchange

We have developed and marketed our Cyber Switch Exchange (CSX), which is a digital switching system designed for use as a private branch exchange (PBX) for offices, universities, hospitals and other large organizations.

Customer, Sales and Marketing

Internet Systems

Under the AT&T Alliance program, we provided Internet services to many medium and small businesses in Boston area for a period of one-year ending February 2001, when our agreement with AT&T terminated. During this period we successfully tested all our Internet systems, including CBIG, CIAN, CFW and CWEB, for both local-loop digital broadband and VPN applications. Our Internet systems provided network availability in excess of 99.999% when we provided Internet services in alliance with AT&T. We believe that our systems are ideally suited for the next-generation of local-loop digital broadband networks requiring increased reliability, performance, scalability, interoperability and flexibility. Our strategy is to market our Internet systems to Internet service providers who are willing to build the next-generation local-loop digital broadband networks in the aftermath of the telecommunications meltdown in the U.S. (See "Business - Industry Background - Failure of the 1996 Telecommunications Act, and FCC's new phone policy.")

We expect to market our CFW series IPSec firewall appliance through major strategic partners, resellers and distributors on a worldwide basis. We have also targeted the burgeoning Homeland Security market with our secure broadband data systems such as CIAN, CFW and CVPN. Our CVPN creates secure high-speed data networks between remote locations to facilitate information sharing between government departments. We plan to market CVPN to U.S. Federal government agencies such as the Homeland Security, Department of Defense, Immigration and Naturalization, U.S. Navy, Defense Communications Agency, National Guard, U.S. Air Force and the U.S. Coast Guard as an aid in the war against terrorism. We have had a history of relationships in working with U.S. Federal government agencies.

Digital Voice Switches

To date, we have sold approximately 76 digital voice switches to the defense agencies of the U.S. federal government and to China serving over 60,000 lines.

During the fiscal year 2003, we continued to develop a stronger foothold in the Nigerian telecommunication market by having our digital wireless telephone network solution accepted by five states. In addition, we were recently selected, over established companies such as Alcatel and Siemens, to provide Nigeria with a 10,000-line telephone network. Since we offer an affordable telecommunications as well as Internet capability, the Nigerian authorities have selected us as the ideal supplier of telephone and Internet systems. We envisage supplying $42 million of our wireless systems to three states, $26 million of our fiber optic landline systems to the government of Nigeria, and $11.6 million of our wireless systems to 2 Systems Technologies, Ltd., a private telephone operator.

Due to FCC's new phone policy announced February 20, 2003, our strategy is to market our digital voice switches to telecommunications service providers in the U.S. who are intending to build their critical 'last mile' local-loop networks. (See "Business - Industry Background - Failure of the 1996 Telecommunications Act, and FCC's new phone policy.").

Competition

Internet Systems

The Internet related networking products business is characterized by intense competition, except for certain products for niche markets such as the market for our CBIG gateway, CIAN distribution routers and CFW firewall products. The server market faces fierce competition from commodity PC manufacturers, who have lately ventured into this market. We compete with numerous well-established foreign and domestic companies, many of which possess substantially greater financial, marketing, personnel and other resources than we do. These companies have established reputations for success in the development, sale and service of Internet products.

IP Backbone Routers

Up to a few years ago, Cisco Systems used to command the entire market for IP backbone routers. Today, it maintains its monopoly by holding approximately 90% of this market. It has lost about 10% of the market to newcomers such as Juniper Networks, a niche player. Juniper Networks developed router products for the IP backbone network or for the POP (Points of Presence). Capacities of such routers are 1 gigabits per second, 2.5 gigabits per second and 10 gigabits per second to match the bandwidth requirements of optical IP backbone. Juniper Network's products are priced about 30% lower than comparable Cisco's products. Network service providers are looking for lower cost alternatives to Cisco's products to compete effectively in the their market and to lower their capital investment for building Internet infrastructure.

Local-Loop Digital Broadband Systems

Currently, there is virtually no competition in the local-loop digital broadband market due to the novelty of this market. Cisco Systems and others are focusing on increasing the bandwidth capacity of their existing centralized IP backbone routers i.e. increasing the bandwidth of the POPs. Our focus is to introduce an intermediate stage distribution router or Mini-POP to alleviate congestion of IP data traffic between customer-end point and POP. Our CIAN distribution routers have a capacity of 0.1 gigabits per second, which is more than sufficient for this application. Our CIAN distribution routers are competitively priced to be about 50% to 65% of Juniper Networks' and Cisco Systems' scaled down version of their products.

Customer Premise Products

With respect to the market for customer premise end router and other networking products, the competition is intense, with numerous players ranging from small manufacturers to giants like Cisco Systems and Nortel Networks. Our CBIG gateway is uniquely positioned to become a leader in this market, as it combines many single purpose networking products such as customer-end router, network address translator, Ethernet to T1 interface, IP frame relay or private-line protocol device, CSU/DSU device, e-mail server, web server and firewall device, into one software driven universal product. Our CBIG gateway dramatically increases the reliability of the customer-end network by eliminating many such devices while also lowering the overall cost of network acquisition by about 60% to 80%. Our CBIG gateway is unique in the industry as it combines all the functions and features required by a customer-end network in one box, about the size of a reference handbook. In addition, our CBIG gateway offers a capacity of 0.05 gigabits per second, which is industry's fastest router for customer-end applications.

Firewalls

Firewalls are offered in the market in two distinct forms. One set of firewall is implemented by software only on customer's computing platform. The other set is implemented by hardware and software on a standalone basis independent of customer's computing platform. The current leader in the software firewalls is Check Point Software Technologies Ltd., while Cisco Systems maintains the number one position in standalone firewalls. Software based firewalls are dependent on customer's computing operating system platform such as Windows NT, Windows 95, UNIX, HP-UX, Solaris, SunOS, BSD/OS, etc., hence need to be integrated into customer's environment by specialists, often a costly proposition. Standalone firewalls are totally independent of customer's computing operating system platforms and are easily implemented by in-house staff of users. Software firewalls prices vary from $3,000 to $40,000 for basic firewall to fully IPSec compliant firewall, respectively from over a hundred software suppliers. Comparatively, the number of standalone firewall suppliers are few, namely Cisco Systems, Galea Network Security, Radguard, and Secant Network technologies with their prices ranging from $4,500 to $52,000 for similar offerings.

Our CFW series firewall products are standalone and totally independent of customer's computing operating system platform. Our CFW firewalls are competitively priced ranging from $2,000 to $18,000 for basic firewall to fully IPSec compliant firewall, respectively. In addition, our CFW series firewalls are fully interoperable with Cisco Systems, Check Point Software and Nortel Networks firewalls. Furthermore, our CFW IPSec product costs 50% less than comparable Cisco Systems products.

Servers

Our CWEB servers are based on Linux Operating System and Intel Pentium Processors. They cost 15% to 20% less than servers produced by Cobalt Networks (now Sun Microsystems). Our CWEB servers are robust and proven-in for high performance web applications.

Digital Voice Switches

The telecommunications and related networking industries are characterized by intense competition. We compete with numerous well-established foreign and domestic companies, many of which possess substantially greater financial, marketing, personnel and other resources than us. These companies have established reputations for success in the development, sale and service of high-speed digital switching and networking and related products.

Systems that perform many of the functions similar to our digital voice switches are readily available from several competitors, including Lucent Technologies, Nortel Networks, Ericsson, Alcatel and Siemens. However, our competitors systems are based on previous generation single-function centralized switching technology offering poor reliability, low performance, no scalability and no flexibility. Furthermore, these systems are large in physical size with fixed capacity, consume more power, and are cumbersome to use with modern wireless and optical technologies. We have developed our systems on a next generation multi-function distributed switching technology offering superior reliability, performance, scalability and flexibility. Our systems offer modular growth in increments of 1,000 to unlimited number of subscribers and typically occupy 1/20^th the space that of our competitors offerings. Most importantly, we have developed specialized software for modern wireless and optical technologies. We can easily and rapidly implement future advancements in our systems through software. On the other hand, our competitors also have the research and development capabilities and financial and technical resources necessary to enable them to respond to technical advances as well as evolving industry requirements and standards.

We believe that our systems have the following three strengths:

1. the installed cost of our digital voice switches (wireless or landline) is less than those of the competition;
2. our switches can be engineered, installed and put into service much more quickly; and
3. distributed architecture of our switches eliminates stranding capacity and capital.

Proprietary Technology

We do not hold any patents or copyrights and have no patent or copyright applications pending. We regard our software technology and certain components of our system hardware as proprietary and rely for protection upon copyright and trade secret laws and confidentiality agreements with our employees. In addition, we require our customers to enter into a license and confidentiality agreement permitting the customer the exclusive use of the system operating software, which is furnished to the customer in object or binary form only.

We believe that these protections are sufficient to protect our rights to our systems and software. Despite these protections, however, it is possible that competitors, employees, licensees or others may copy one or more of our systems or our technology or obtain information that we regard as proprietary. In addition, there can be no assurance that others will not independently develop systems or technologies similar to those of ours, that confidentiality agreements will not be breached or that we will have adequate resources to protect our proprietary technology. We believe that because of the rapid pace of technological change in the digital switching and networking industries, protection for our systems is less significant than the knowledge, ability and experience of our employees, the frequency of product enhancements and the level of service and support provided to customers by us.

Government Regulation and Industry Standards

The telecommunications and related networking industries in which we compete are highly regulated in both the United States and internationally. Imposition of public carrier tariffs and taxation of telecommunications services could materially adversely affect demand for our systems. Furthermore, regulation or deregulation of public carrier services by the United States and other governments, including permitting local carriers to manufacture switching equipment, may determine the extent to which we will be able to penetrate markets in the United States and internationally and may result in significantly increased competition, which would significantly impact our future operating results. In addition, our systems must comply with equipment, interface and installation standards promulgated by communications regulatory authorities, including the Federal Communications Commission.

We are required to obtain a license from the Department of Commerce prior to exporting to certain countries. A denial of an export license to us, however, would probably be based upon a policy, which would also affect other U.S. companies exporting similar systems.

Industry standards organizations, such as International Telephone Union ("ITU"), Bellcore in the U.S., and Internet Engineering Task Force ("IETF") have created committees to address the matter of standards within the telecommunications and Internet industries. The purpose of such standards is to facilitate the inter-operability of products from various vendors and, through standardization, create a competitive environment, which is anticipated to result in lower product costs. During the past few years, many new standards have been adopted and more are pending. The International Standards Organization (ISO), one of the primary standard setting bodies in the communications industry, has developed a framework for network standards called the Open System Interconnection Reference Model (the "OSI Model"). The OSI Model represents a standard approach by which information can be communicated throughout a network, so that a variety of independently developed computer and communications devices can inter-operate. The design of our systems incorporates the OSI Model and accommodates most existing and pending ISDN, AIN, SS7, C7, X.25, Frame Relay, Private Line, and IPSec standards, including applicable ITU, Bellcore and IETF specifications. In most foreign countries, government departments or ministries set industry standards.

Changes in government policies, regulations and interface and installation standards or industry standards imposed by domestic and foreign carriers in the future could require our company to alter methods of operation, resulting in additional costs, which could have a material adverse effect on our company.

Production and Supply

We are engaged in manufacturing, software programming, assembly, system testing and quality assurance at our facility in Hauppauge, New York. Our operations involve the creation of the required system software, the inspection of system components manufactured by third parties, programming of microchips and microprocessors, assembly of the components of the system hardware and quality control and testing to certify final performance specification. We believe that we have sufficient excess production capacity to satisfy any increased demand for our systems in the foreseeable future.

We are dependent on third-party manufacturers for the production of all of the component parts incorporated into our systems. We purchase our component parts from numerous third-party manufacturers and believe that numerous alternative sources of supply for most component parts are readily available, except for a few semiconductor components purchased from single source vendors. These are Pentium processors from Intel Corp., programmable gate array chips from Altera Corp., and certain telecom chips from Motorola, Inc., Rockwell Semiconductors Systems and PMC-Sierra Corp. If these are discontinued by their respective manufacturers, we would be required to redesign some of our systems by using other vendors components, which could cause delays in delivery of systems. We believe that alternative sources of supply for such components are available. We are substantially dependent on the ability of our suppliers, among other things, to satisfy performance and quality specifications and dedicate sufficient production capacity for parts within scheduled delivery times. We do not maintain contracts with any of our suppliers. We purchase components pursuant to purchase orders placed from time to time in the ordinary course of business. Our ability to deliver systems on timely and competitive basis could be adversely affected due to failure or delay in delivery of parts caused by our suppliers.

We offer a one-year warranty for sales covering operating defects, during which period we will replace parts and make repairs to the system components at our expense.

Research and Development

Since the inception we have devoted substantial resources to the design and development of our systems. For the fiscal years ended March 31, 2003 and 2002, we expended approximately $132,778 and $108,432, respectively, on research and development. During the year ended March 31, 2002, most research and development expenditures were attributable to enhancements to our CDCO and CTSX for the Nigerian market, and to the creation of secure VPN for homeland security market. Although our systems are fully developed such as our CBIG, CIAN, CFW, CDCO, CTSX, CRX and CSX, we are continually seeking to refine and enhance our systems, including enhancements to comply with emerging regulatory or industry standards or the requirements of a particular customer or country.

The markets for our systems are characterized by rapidly changing technology and evolving industry standards, often resulting in rapid systems obsolescence. Accordingly, our ability to compete depends on timely introduction of our systems to the marketplace, continual enhancements to our systems, and adapting to technological changes and advances in the communications industry, including assuring continuing compatibility with evolving industry standards. There can be no assurance that we will be able to compete successfully, that competitors will not develop technologies or products that render our systems obsolete or less marketable, or that we will be able to keep pace with the technological demands of the marketplace or successfully enhance and adapt our systems to satisfy industry standards.

Service and Support

We believe that service, support and training are important factors in promoting sales and customer satisfaction. Services we provide our customers include feasibility studies, site surveys, engineering planning, project estimating, network planning, network design, system planning, site preparation, system installation, customer training and maintenance.

Since, our system hardware consists of a cabinet with shelves having printed circuit boards inserted into physical slots, a substantial part of repair and maintenance can be accomplished by simply substituting the component in need of repair. In addition, our systems are designed to be accessible by computer from our headquarters, allowing our service personnel to remotely call up, diagnose and otherwise support systems, thereby reducing response time and cost. In addition, we intend to enter into agreements with third party service providers to provide customer support on a local basis in foreign markets, as needed.

Employees

As of the date hereof, we have four full and two part time employees, of which two were engaged in marketing and sales activities, two were engaged in research and development, and two were in administration. None of our employees is represented by a labor union. We consider our employee relations satisfactory.

GLOSSARY OF TERMS
Analog	Analog transmission employs continuously variable signal.
Backbone	An element of the network infrastructure that provides high-speed, high capacity connections among the networks physical points of presence. The backbone is used to transport end user traffic across the metropolitan areas and across the United States.
Bandwidth	Refers to the maximum amount of data that can be transferred through a communication channel in a given time. It is usually measured in bits per second for digital communications.
Broadband	Broadband systems transmit data at high speed using high bandwidth capacity communication channel.
Central Office	Incumbent carrier facility where subscriber lines are connected to ILEC switching equipment.
Collocation	A location where a competitive carrier network interconnects with the network of an incumbent carriers central office.
Competitive Local Exchange Carrier (CLEC)	Category of telephone service provider that offers local exchange services in competition with those of the incumbent carrier.
Copper Line or Loop	A pair of traditional copper telephone lines using electric current to carry signals.
Digital	Digital transmission and switching technologies employ a sequence of binary digits to convey information.
DSL	Digital Subscriber Line. An analog transmission technology where binary digits are sent over analog transmission lines or local copper loop.
E-Commerce	Electronic Commerce. An internet service that supports electronic transactions between customers and vendors to purchase goods and services.
Firewall	A computer device that separates a local area network from the internet and prevents unauthorized access to the local area network through the use of electronic security mechanisms.
Frame Relay	A form of packet switching with variable length frames that may be used with a variety of communication protocols.
Incumbent Local Exchange Carrier (ILEC)	A company providing local exchange services, such as the Bells..
Internet	An array of interconnected networks using a common set of protocols defining the information coding and processing requirements that can communicate across hardware platforms and over many links.
Internet Protocol	A standard network protocol that allows computers with different architectures and operating system software to communicate with other computers on the internet. Advanced packet systems employ the Internet Protocol (IP) standard.
ISDN	Integrated Services Digital Network. A transmission method that provides circuit-switched access to the public network at speeds of 64 or 128 Kbps for voice or data transmission.
Internet Service Provider	A company that provides direct access to the internet.
Kbps.	Kilobits per second. 1,000 bits per second.
Mbps	Megabits per second. 1,000,000 bits per second.
Modem	An abbreviation of Modulator-Demodulator. An electronic signal-conversion device used to convert digital signals from a computer to analog form for transmission over the telephone network.
Packets	Information represented as bytes grouped together through a communication node with a common destination address and other attribute information.
Private Line	A form of packet switching with fixed length bytes that may be used with a variety of communication protocols.
Router	A device that accepts the Internet Protocol from a local area network and switches/routes Internet Protocol packets across a network backbone.
T-1	This is a Bell System term for a digital transmission link with a capacity of 1.544 Mbps.

ITEM 2 - Description of Property

Our executive offices and assembly operations are located in approximately 8,200 square feet of leased space in Hauppauge, New York. The lease provides for annual rent of $55,350 and expires on March 31, 2004. We believe that our facility is adequate for our current needs. We believe that additional physical capacity at our current facility will accommodate expansion, if required.

ITEM 3 - Legal Proceedings

Although, as of the date hereof, no legal action has commenced against our company by our former legal counsel, Mr. Rajan K. Pillai and Uniworld Communications Co., ("UCC"), a New York company, in which Mr. Pillai is the principal, Mr. Pillai has threatened our company for a possible litigation arising due to the contention that our company refused to remove restrictive legend on 500,000 shares of our common stock held by UCC. Our company had issued 500,000 restricted shares to UCC pursuant to a stock option agreement for the purposes of UCC to deliver "Cyber India Project". On March 23, 2000, Mr. Pillai notified our company officially, for the first time, that he or UCC did not intend to deliver "Cyber India Project". Mr. Pillai was also our companys Managing Director (Asia) from June 1997 until his resignation on March 9, 2000. Our company believes that Mr. Pillais or UCCs threatened claims, if any, are without merit and our company will vigorously defend its position, if and when required.

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

None.

PART II

ITEM 5 - Market for Common Equity and Related Stockholder Matters

Our common stock is quoted on the Over-the-Counter Bulletin Board under the symbol "CYBD." The following table shows the quarterly high and low trade prices on the Over-the-Counter Bulletin Board. The prices reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions.

		Price Per Share .
		High	Low
Fiscal Year Ended March 31, 2003
	First Quarter	$1.11	$0.55
	Second Quarter	0.64	0.33
	Third Quarter	0.43	0.09
	Fourth Quarter	0.51	0.10
Fiscal Year Ended March 31, 2002
	First Quarter	$2.00	$0.35
	Second Quarter	1.01	0.46
	Third Quarter	0.90	0.36
	Fourth Quarter	1.15	0.41

On March 31, 2003, the closing trade price of our common stock as reported on the Bulletin Board was $0.30 per share. On that date, there were approximately 500 stockholders of record of our common stock. We believe that on March 31, 2003, there were more than 2,400 beneficial holders of our common stock.

To date, we have not paid any dividends on our common stock and we do not expect to declare or pay any dividends in the foreseeable future. We intend to retain all earnings for use in our business operations.

ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

When used in this report, press releases and elsewhere by the management of our company from time to time, the words "believes", "anticipates", and "expects" and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. Additionally, certain statements contained in this discussion may be deemed forward-looking statements that involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially or adversely are the following: the ability of our company to meet its working capital and liquidity needs, the status of relations between our company, its primary customers and distributors, the availability of long-term credit, unanticipated changes in the U.S. and international economies, business conditions and growth in the international and the U.S. telecommunications industry, level of growth in both voice and internet systems sales generally, the timely development and acceptance of new products, the impact of competitive products and pricing, changes in the cost of component materials, changes in product mix, the outcome of litigation in which our company is involved, along with product delays and other risks detailed from time to time in our companys SEC reports, including but not limited to this Annual Report on Form 10-KSB for the year ended March 31, 2003. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. Our company undertakes no obligation to publicly release the results of any events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

We are a manufacturer, software developer and provider of a vast array of high performance Internet infrastructure systems such as routers, gateways, firewalls and servers for the creation of next-generation digital broadband and virtual private network (VPN) services by Internet service providers. We are also a manufacturer and software developer of a range of advanced software driven digital voice switching infrastructure equipment for private and public switched voice network operators worldwide, especially for developing countries. Our mission is to become the leading provider of (i) digital broadband systems in the U.S., and (ii) digital voice switches to developing countries. We believe that service providers can offer affordable yet modern voice and broadband Internet services by exclusively using our vast array of voice and Internet systems without buying any equipment from our competitors.

Under the AT&T Alliance program, we provided Internet services to many medium and small businesses in the Boston area for a period of one-year ending February 2001, when our agreement with AT&T terminated. During this period we successfully tested all our Internet systems, including CBIG, CIAN, CFW and CWEB, for both local-loop digital broadband and VPN applications. Our Internet systems provided network availability in excess of 99.999% when we provided Internet services in alliance with AT&T. We believe that our systems are ideally suited for the next-generation of local-loop digital broadband networks requiring increased reliability, performance, scalability, interoperability, and flexibility. Our strategy is to market our Internet systems to Internet service providers who are willing to build the next-generation local-loop digital broadband networks in the aftermath of the recent telecommunications meltdown in the U.S. (See "Business Industry Background Failure of 1996 Telecommunications Act, and FCC's new phone policy.")

In the aftermath of that telecommunications meltdown, and the subsequent new phone ruling by FCC on February 20, 2003, we believe that we are poised to be the leading supplier of local-loop voice and digital broadband systems for critical 'last mile' applications. There is abundant capacity of optically-enabled IP backbone network between all major cities in the United States, but as yet businesses or consumers do not have adequate access to that capacity. Our distributed CDCO and CTSX voice switches, and CIAN high-performance distribution routers are specifically designed to allow competitive service providers to meet the requirements of local-loop digital voice and broadband networks including in multiple tenant unit buildings. According to a report by Cahners In-Stat Group, the sales of broadband equipment and services, such as our CIAN, tailored to the multiple tenant unit buildings alone will reach $4.8 billion by 2004, up from $0.37 billion in 2000 in the United States. We believe that we will establish a strong market position with early adopters of this technology and will build on this position as the market reestablishes itself, however, there can be no assurance that we will be successful in this market.

International Data Corporation (IDC) estimates that the worldwide sales of hardware-based VPN and firewall equipment, such as our CFW and CVPN, will grow from $0.9 billion in 2000 to $4 billion in 2005. We expect to market our CFW series IPSec firewall appliance through major strategic partners, resellers and distributors on a worldwide basis. We have also targeted the burgeoning Homeland Security market with our secure broadband data systems such as CIAN, CFW and CVPN. Our CVPN creates secure high-speed data networks between remote locations to facilitate information sharing between government departments. We plan to market CVPN to U.S. Federal government agencies such as the Homeland Security, Department of Defense, Immigration and Naturalization, U.S. Navy, Defense Communications Agency, National Guard, U.S. Air Force and the U.S. Coast Guard as an aid in the war against terrorism. We have had a history of relationships in working with U.S. Federal government agencies, in the past, however that does not guarantee that we will be successful in securing any Homeland Security business.

During fiscal year 2003, we continued to develop a stronger foothold in the Nigerian telecommunications market by having our digital wireless telephone network solution accepted by five states. In addition, we were recently selected, over established companies such as Alcatel and Siemens, to provide Nigeria with a 10,000-line telephone network. Since we offer an affordable telecommunications as well as Internet capability, the Nigerian authorities have selected us as the ideal supplier of telephone and Internet systems. We envisage supplying $42 million of our wireless systems to three states, $26 million of our fiber optic landline systems to the government of Nigeria, and $11.6 million of our wireless systems to 2 Systems Technologies, Ltd., a private telephone operator. Generally, payment terms for these sales consist of some cash-in-advance and the remaining balance paid through an irrevocable confirmed letters of credit. However, there can be no assurance that we will be successful in supplying any of our systems to the Nigerian Telecommunications market.

Results of Operations

Year Ended March 31, 2003, Compared to Year Ended March 31, 2002

Net sales

Net sales for the year ended March 31, 2003 (referred to as "fiscal year 2003"), were $0 from $0 for the year ended March 31, 2002 (referred to as "fiscal year 2002"). Zero sales were due to our strategic shift to enter the Nigerian telecommunications market. Since no payments have been made against the initial engineering services rendered no sales have been recorded.

Gross margin

We include in our cost of goods and services sold the materials and labor used, subcontractor costs and overhead incurred in the manufacture of our systems. Gross margins unchanged from 0% to 0% of net sales from fiscal year 2002 to fiscal year 2003. Zero gross margins were primarily attributable to no sales recorded from the Nigerian market.

Selling, general and administrative

Selling, general and administrative expenses decreased from $835,410 in fiscal year 2002 to $561,590 in fiscal year 2003, representing a decrease of $273,820. These expenses in fiscal year 2002 and fiscal year 2003 were principally due to the result of initial engineering and selling expenses incurred in Nigeria, respectively.

Research and development

Research and development expenses increased from $108,432 in fiscal year 2002 to $132,778 in fiscal year 2003, representing an increase of $24,346 or approximately 22%. These expenses were primarily due to certain enhancements made to our CDCO and CTSX systems for the Nigerian market. All development costs are expensed in the period incurred.

Income (loss) from operations

Loss from operations in fiscal year 2003 was $(694,398) or $(.04) per share as compared with a loss of $(943,842) or $(.05) per share in fiscal year 2002.

Net income (loss) available to Common Stockholders

As a result of the foregoing, the net loss in fiscal year 2003 was $(758,848) or $(.04) per share as compared to a net loss of $(942,315) or $(.05) per share in fiscal year 2002.

Liquidity and Capital Resources

Our ability to generate cash adequate to meet our needs results primarily from sale of preferred and common stock and cash flow from operations. Total working capital increased by $322,811 to $(23,614) at March 31, 2003 from $(346,425) at March 31, 2002. The current ratio of current assets to current liabilities increased to 1.0 to 1 as at March 31, 2003 from 0.7 to 1 as at March 31, 2002. Current levels of inventory are adequate to meet sales for the next six months. We believe that our current sources of liquidity will be sufficient to meet our needs for many years because of our entry into the Nigerian telecommunications market. In addition, as of March 31, 2003, there remains a maximum available balance of $2 million under our private equity line agreement with an accredited institutional investor. We believe that we will be able to obtain additional funds beyond those available under the equity line agreement, if required for future needs. We have no off-balance sheet arrangements.

We used $0 and $0 during fiscal year 2003 and fiscal year 2002, respectively, for investing activities. The cash used for investing activities relates primarily to purchases of equipment in fiscal year 2003 and fiscal year 2002.

Net cash provided (used) in financing activities was $539,039 and $564,091 for fiscal year 2003 and fiscal year 2002, respectively.

On July 11, 1996, we concluded a private placement of its Series A preferred stock and accompanying warrants to accredited institutional investors and received net proceeds of approximately $7.1 million. The Series A preferred stock was issued without registration in reliance on Regulation S promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended. Some of the proceeds from this offering have been used to retire long-term debt, redeem Series A preferred shares prior to conversion and to fund research and development, marketing and production expenses. All of the Series A preferred stock has been converted or redeemed and there are no such shares outstanding. On July 10, 2001, 824,013 warrants expired in connection with the offering of Series A preferred stock at an exercise price of $6.35 per share.

On December 30, 1996, we concluded a private placement of 2,000 shares of its Series B-1 preferred stock to Syndicated Communications Venture Partners III, L.P. and received net proceeds of $1.7 million. The Series B-1 preferred stock was issued without registration in reliance on Section 4(2) of the Securities Act of 1933, as amended. On each of December 30, 1997 and December 30, 1998, the Series B-1 preferred stockholders received a 10% stock dividend of 200 and 220 shares, respectively, of Series B-1 preferred stock in accordance with the terms of the private placement. On April 14, 1999, all of outstanding Series B-1 preferred stock was converted into 861,230 shares of our common stock at a conversion price of $2.89 per share.

On July 12, 1999, we concluded a private placement of 310 shares of its Series C preferred stock, par value $.05 per share, and accompanying warrants to accredited investors and received net proceeds of approximately $310,000. In connection with this placement, we issued warrants to accredited investors to purchase an aggregate of 12,710 shares of our common stock, par value $.01 per share, at an exercise price of $6.00 per share. The Series C preferred stock was issued without registration in reliance on Section 4(2) of the Securities Act of 1933, as amended. As of July 11, 2002, all 12,710 warrants expired at an exercise price of $6.00 per share.

On October 5, 1999, we concluded a private placement of 3,000 shares of our Series D1 preferred stock, par value $.05 per share, and accompanying warrants to an accredited institutional investor and received net proceeds of approximately $2.7 million. In connection with this placement, we issued warrants to the accredited institutional investor to purchase an aggregate of 190,678 shares of our common stock, par value $.01 per share, at an exercise price of $5.70 per share for an aggregate amount of $1,086,865. In connection with this transaction, the Zanett Securities Corporation, financial advisor to our company, has been issued a warrant to purchase 45,000 shares of our common stock, par value $.01 per share, at an exercise price of $5.70 per share. The Series D1 preferred stock was issued without registration in reliance on Section 4(2) of the Securities Act of 1933, as amended. All of the Series D1 preferred stock has been converted or redeemed and there are no such shares outstanding. On October 4, 2002, all accompanying warrants in the aggregate amount of 235,678 expired in connection with the offering of Series D1 preferred stock at an exercise price of $5.70 per share.

In March 2001, we concluded a private placement of 645,253 restricted shares of our common stock, par value $.01 per share, to certain accredited investors and received net proceeds of $300,000. These securities were issued without registration in reliance on Section 4(2) of the Securities Act of 1933, as amended.

On July 2, 2001, we concluded a firm commitment of $6 million private equity line from an accredited institutional investor. We are able to draw down, at our discretion, up to a maximum of $250,000 and a minimum of $100,000 per month, during a term of thirty months from July 2, 2001. We are allowed to make a maximum of 24 draw downs over this period, including a cushion period of 7 days during which no draw down can be made. If we do not draw down in a specific month, our available equity line reduces by $250,000. During the years ended March 31, 2003 and 2002, we drew down $413,000 and $209,000 against the equity line and issued 842,934 and 453,004 shares of common stock, respectively. As of March 31, 2003, there remains a maximum available balance of $2 million under this private equity line. In consideration for the accredited institutional investors commitment to purchase shares of our common stock under our equity-line agreement with them, we have issued to the institutional investor a warrant to purchase 250,000 of our shares of our common stock at $4.10 per share and a warrant to purchase 125,000 of our shares of our common stock at $5.15 per share. We have also issued to Ladenburg Thalmann & Co. Inc., in consideration for their having introduced us to the institutional investor, a warrant to purchase 250,000 of our shares of our common stock at $4.10 per share and a warrant to purchase 125,000 of our shares of our common stock at $5.15 per share. All four warrants expire on July 1, 2005.

On March 12, 2002, we borrowed $325,000 from J.C. Chatpar, president of our company, under a promissory note with one-year maturity date and applicable interest rate of ten percent per annum. The promissory note and all amounts due thereunder are secured by all assets of our company. We may prepay the principal amount, in whole or in part, at any time, without premium or penalty.

On December 10, 2002, in lieu of foregone salaries by all employees in the aggregate amount of $516,658, the Board of Directors approved the issuance of 516,658 incentive stock options to all employees for their dedication and in recognition of them forego one-half of their salary since October 17, 2000. These options were granted at $.15 per share which was above 100% of fair market value on the date of the grant.

In December 2002, we concluded a private placement of 500,000 restricted shares at a price of $0.20 per share of our common stock, par value $.01 per share, to certain accredited investors and received net proceeds of $100,000. The accredited investors also received accompanying warrants in the aggregate to purchase 100,000 shares of our common stock at an exercise price of $0.40 per share. These warrants expire on December 20, 2004. These securities were issued without registration in reliance on Section 4(2) of the Securities Act of 1933, as amended. These securities were issued pursuant to Rule 144 promulgated under the Act that require, among other conditions, a one year holding period prior to the resale (in limited amounts) of securities acquired by these accredited investors in a non-public offering without having to satisfy the registration requirements under the Act.

Based on amounts received in the Series A, Series B, Series C, Series D1 preferred stock and private equity line financings, together with the expected exercise of options and warrants and expected cash flow from operations, we believe that our sources of capital will be adequate to satisfy anticipated capital needs until March 31, 2004.

Impact of Inflation

Inflation has historically not had a material effect on our operations.

ITEM 7 - Financial Statements

The Financial Statements of the Company are filed as part of this Form 10-KSB.

ITEM 8 - Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

PART III

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

The directors, executive officers and key employees of our company are:

Name	Age	Office
Jawahar C. Chatpar	55	Chairman of the Board, President, and Chief Executive Officer
Jack P. Dorfman	65	Director
Jatinder V. Wadhwa	68	Director
Terry L. Jones	55	Director
Andrew Van Etten	41	Director
Larry S. Shluger	64	Vice President of Operations and Secretary
Dale A. Johnson	39	Controller and Treasurer

Jawahar C. Chatpar is a founder of our company and has served as Chairman of the Board, Chief Executive Officer and President since March 1991, as Chairman of the Board, Chief Executive Officer and Secretary from November 1986 until March 1991, and as President and Chief Executive Officer since inception until November 1986. Mr. Chatpar has also served as a director since inception. Mr. Chatpar founded our company in 1983 as a successor to a Canadian corporation of the same name, which he founded in 1982. From 1980 to 1982, Mr. Chatpar was employed by Bayly Engineering Limited, a manufacturer of digital telecommunication systems and a member of A.E.G. Telefunken Group, as a General Manager of Digital Transmission and Fiber Optics Engineering (research and development). From 1974 to 1980, Mr. Chatpar served in various engineering, general management and marketing positions with Northern Telecom. He holds an B.Tech (honors) degree in Electrical Engineering from the Indian Institute of Technology, Bombay, India and an M.S. degree in Electrical Engineering from the University of Waterloo, Canada.

Jack P. Dorfman joined our company as a Director in November 1993, and has served as Secretary from October 1995 until March 2000. Mr. Dorfman has otherwise been retired since June 1996. Prior thereto, since 1992, Mr. Dorfman served as consultant and manager for a number of pharmacies. From 1990 to 1992, he served as a management consultant for Clark Container, a division of Mark IV Industries, a conglomerate. From 1988 to 1990, he served as Vice President and Treasurer of US Distribution, a transportation company. Prior to 1988, he owned, managed and operated an independent community pharmacy for over fifteen years.

Jatinder Wadhwa has served as a Director of our company since 1986 and as Treasurer from August 1997 until March 2000. He had been the Secretary of our company from 1993 to 1995. Since 1994, Mr. Wadhwa has served as the Chief Executive Officer of Security First Financial Corp., a financial institution dealing with first and second mortgages on residential and commercial properties. From 1989 to 1994, Mr. Wadhwa had served as a management consultant to Gibbons Goodwin van Amerongen, an investment banking firm, Wells Aluminum Corporation, a manufacturer of aluminum extrusion products and Sealy Mattress Company. From 1970 to 1990, Mr. Wadhwa had served as Chief Operating Officer and Vice President of Operations of EZ Por Corporation, a manufacturer of aluminum products.

Terry L. Jones has served as a Director of our company since November 1997. He has been the President of Syndicated Communications, Inc. ("Syncom"), a communications venture capital investment company, since 1990. He joined Syncom in 1978 as a Vice President. Mr. Jones serves in various capacities, including director, president, general partner and vice president for various other entities affiliated with Syncom. He also serves on the Board of Directors of Radio One, Inc. Mr. Jones earned his B.S. degree from Trinity College, his M.S. from George Washington University and his M.B.A. from Harvard Business School.

Andrew Van Etten joined our company as a Director in March 2000. He is currently serving as Senior Director, Strategic Business Development, Electronics and Information Business Division at Mitsui & Company, (USA) Inc. He joined Mitsui & Company in 1988. Mitsui & Company is one of the oldest and largest international trading companies headquartered in Japan. Mr. Etten is Mitsuis representative as shareholder for PageMart Wireless, Inc. and portfolio manager for America Online, Inc. and America Online Japan. He also serves on the Board of Directors of Lana Film Company. Mr. Etten holds an B.S. degree in Business Administration from Plymouth State College of the University of New Hampshire.

Larry S. Shluger has been Vice President of Operations of our company from August 1996 and Secretary since March 2000. From 1991 to 1996, Mr. Shluger was Director of Purchasing and Operations at Cashtek Corporation, a company which designs, develops and manufactures computerized gaming systems. From 1975 to 1991, he was Director of Purchasing and Operations at Kenilworth Systems Corporation until its acquisition by Cashtek Corporation. Prior to 1975 he was employed in various management positions at Ecologic Instruments Corporation, a company which designs, develops and manufactures test equipment for the environment and pollution control fields, and Dynamic Instruments Corporation, a manufacturer of battery chargers.

Dale A. Johnson has been Controller of our company from March 1998, and Treasurer since March 2000. She joined our company on March 1995 as an Accountant. From 1984 to 1994, she worked as Accountant for various CPA firms. She holds a B.B.A. degree in Accounting from Dowling College, NY.

We have no family relationship among our directors and officers. All our executive officers are appointed annually by and serve at the discretion of the board of directors. All our executive officers and key employees are at-will employees.

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), requires our company's directors and executive officers, and persons who own more than ten (10%) percent of a registered class of our company's equity securities, to file with the Securities and Exchange Commission (the "Commission") initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of our company. Reporting persons are required by Commission regulations to furnish our company with copies of all Section 16(a) forms they file.

To our company's knowledge, based solely on review of the copies of such reports furnished to our company, all such persons, on a timely basis, filed the reports required by Section 16(a) of the 1934 Act.

Summary Compensation Table

The following table sets forth information concerning the compensation for services in all capacities for the fiscal years ended March 31, 2003, 2002 and 2001 of those persons who were, at March 31, 2003 the chief executive officer (the "named officer"). During such periods, no executive officer of our company received compensation in excess of $100,000.

	Annual Compensation				Long Term Compensation			All Other Compensation
					Awards		Payouts
Name and Principal Position	Year	Salary ($)	Bonus ($)	Other Annual Compens- Ation ($)(1)	Restricted Stock Awards ($)	Securities Underlying Options/ SARs(#)	LTIP Payouts ($)
J.C. Chatpar, Chairman of the Board, President and Chief Executive Officer	2003 2002 2001	$92,500 $92,500 $123,900	None None None	None None None	None None None	230,366(4) 5,000,000(3) 110,000(2)	None None None	None None None

____________

(1) We have concluded that the aggregate amount of perquisites and other personal benefits paid to each of the named officers named in the table did not exceed the lesser of 10% of such officer's total annual salary and bonus for the 2003, 2002 and 2001 fiscal years or $50,000, thus, such amounts are not included in the table.

(2) In fiscal year 2001, Mr. Chatpar was granted options to purchase 110,000 shares of our common stock at an exercise price of $1.50 per share.

(3) In fiscal year 2002, Mr. Chatpar was granted options to purchase 1,000,000 shares of our common stock at an exercise price of $0.40. Mr. Chatpar was also granted options to purchase 1,000,000 shares of our common stock at an exercise price of $0.50. In addition, Mr. Chatpar was granted conditional performance based options with a three-year exercise term as follows: (a) stock options to purchase 1,000,000 shares of our common stock at an exercise price of $0.50 per share, provided the 10 day moving average stock price is above $5.00, (b) additional stock options to purchase 1,000,000 shares of our common stock at an exercise price of $0.50 per share, provided the 10 day moving average stock price is above $10.00, and (c) additional stock options to purchase 1,000,000 shares of our common stock at an exercise price of $0.50 per share, provided the 10 day moving average stock price is above $15.00.

(4) In fiscal year 2003, Mr. Chatpar was granted options to purchase 230,366 shares of our common stock at an exercise price of $0.15 per share.

Option Grants In Last Fiscal Year

The following table sets forth information concerning stock option grants made during fiscal year 2003 to the named officers. We have not granted any stock appreciation rights.

Individual Grants
	Number of Securities	% of Total Options Granted	Exercise	Expiration
	Underlying Options	To Employees in	Price	Date
	Granted	Fiscal Year End	($/Share)
Name	(#)	(1)	(2)
J.C. Chatpar	230,366	44.5%	$0.15	12/09/07(3)

_________________

(1) During fiscal year 2002, options to purchase an aggregate of 230,366 shares of our common stock were granted to Mr. Chatpar and options to purchase an aggregate of 286,292 shares of our common stock were granted to five other employees.

(2) The exercise price of the options granted was equal to the fair market value of the underlying stock on the date of grant.

3. Options are immediately exercisable.

Aggregated Fiscal Year End Option Values

The following table sets forth information concerning the number of unexercised options and the Fiscal 2003 year-end value of unexercised options on an aggregated basis held by the named officers. We have not granted any stock appreciation rights in Fiscal 2003.

	Number of Securities Underlying Unexercised Options at Fiscal Year-End (#)			Value of Unexercised In-The-Money Options at Fiscal Year-End ($)
Name	Exercisable	Unexercisable	Exercisable		Unexercisable
J.C. Chatpar	3,885,366	3,000,0000	$34,555		0

____________

(1) Options are "in-the-money" if, on March 31, 2003, the market price of the Common Stock ($0.30) exceeded the exercise price of such options. The value of such options is calculated by determining the difference between the aggregate market price of our common stock underlying the options on March 31, 2003 and the aggregate exercise price of such options.

Compensation of Directors

We pay our directors $250 per board meeting. During Fiscal 2003, the board of directors met two times and each director attended at least 75% of the meetings of the board of directors. In addition, we currently reimburse each director for expenses incurred in connection with his attendance at each meeting of the board of directors.

Committees of the Board of Directors

We have a standing compensation committee composed of all members of the board of directors. The compensation committee reviews and acts on matters relating to compensation levels and benefit plans for our executive officers and key employees, including salary and stock options. The compensation committee is also responsible for granting stock awards, stock options and stock appreciation rights and other awards to be made under our existing incentive compensation plans. We also have a standing audit committee composed of Messrs. Jones, Etten and Dorfman. The audit committee assists in selecting our independent auditors and in designating services to be performed by, and maintaining effective communication with, those auditors.

Employment Agreements and Insurance

We have entered into an amended and restated employment agreement with Mr. J.C. Chatpar dated as of August 4, 1997 (the "Employment Agreement") for a three year term. Such three-year term shall be automatically extended for successive three-year terms unless either party gives the other party 120 days prior written notice of termination before the end of any such three-year period. Our board, however, has the authority to terminate such extension upon cause. "Cause" is defined as conviction of a felony or willful misconduct. Mr. Chatpar is entitled to receive a salary of $150,000 per annum, with an annual increase of 10%. In recognition of the complex scientific and technical leadership which Mr. Chatpar brings to our company, we have also agreed that our board of directors may raise his salary during the term of his employment as soon as our financial resources and other business conditions permit. In such event, Mr. Chatpar's salary shall be at a level comparable to that of chief executive officers of other comparable technology-driven publicly held companies.

In addition to his base salary, Mr. Chatpar shall be entitled to receive a bonus based upon the following formula: (a) 1% of gross revenues for each fiscal year in excess of $3 million provided, however, that our company shall be profitable, plus (b) 5% of net income after deduction of the bonus provided for in (a) above, and plus (c) 10% of the increase in net income over that of the prior fiscal year after deduction of the bonus provided for in (a) above.

In the event of a termination of Mr. Chatpar's employment due to disability, he shall receive royalty payments of 5% of the gross revenues earned by our company ("Royalties") for a period of 15 years following termination. In the event of Mr. Chatpar's death, his wife, if any, or his estate, shall receive a payment equal to six months of his base salary and Royalties for 15 years. In the event of a termination of Mr. Chatpar's employment for any reason other than pursuant to disability, death or for cause, or if there is a change of control (as defined in the Employment Agreement) of our company which results in an actual or constructive termination of employment (as defined therein), he shall receive a payment equal to three years of his base salary plus three times his prior year's bonus, Royalties for 15 years, and all of his outstanding options will be deemed immediately vested and exercisable for a period of one year from the effective termination date.

We do not have employment contracts with any other officer or director.

Employee Benefit Plan

We offer basic health, major medical and life insurance to our employees. We have not adopted any retirement, pension or similar programs.

ITEM 11 - Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding beneficial ownership of our company's common stock as of March 31, 2003, for (i) each person or group that is known to us to be a beneficial owner of more than 5% of the outstanding shares of our common stock, (ii) each of the named officers and directors, and (iii) all directors and executive officers of our company as a group. Except as otherwise indicated, we believe that such beneficial owners, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws, where applicable.

Names and Address Of Beneficial Owners	Number of Shares		Percentage Owned (1)(2)
J.C. Chatpar(3) c/o Cyber Digital, Inc. 400 Oser Avenue Hauppauge, NY 11788	8,923,578		33.9%
Jack P. Dorfman(4)	260,000		1.0%
Jatinder V. Wadhwa(5)	257,812		1.0%
Terry L. Jones (6)	60,000		*
Andrew Van Etten(7)	40,000		*
All directors and executive officers as a group: (5) persons	9,541,390	36.3%

*less than 1%

(1) For purposes of computing the percentage of outstanding shares of Common Stock held by each person or group of persons named above, any security which such person or persons have or have the right to acquire within 60 days is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage of ownership of any other person.

(2) Assumes the exercise of the warrants to purchase in the aggregate 750,000 shares of our common stock issued in connection with the private equity line agreement. Assumes the exercise of all other outstanding warrants to purchase in the aggregate 550,000 shares of our common stock.

(3) Includes 3,885,366 shares as to which Mr. Chatpar holds non-qualified stock options, which are exercisable at any time. Excludes 3,000,000 shares as to which Mr. Chatpar holds non-qualified stock options, which are not exercisable until certain conditions are attained. Does not include 476,000 shares owned by his wife, Sylvie Chatpar, to which shares Mr. Chatpar disclaims beneficial ownership.

(4) Includes 140,000 shares as to which Mr. Dorfman holds a non-qualified stock option, which are exercisable at any time. Does not include 360,000 shares owned by his wife, Sandra Dorfman, to which shares Mr. Dorfman disclaims beneficial ownership.

(5) Includes 100,000 shares as to which Mr. Wadhwa holds non-qualified stock options which are exercisable at any time.

(6) Terry Jones is a general partner of a limited partnership that is the general partner of Syndicated Communications Venture Partners III, L.P. ("Syncom III"), a fund which on April 14, 1998, Syncom III converted all of its outstanding Series B-1 preferred stock into 861,230 shares of our common stock at a conversion price of $2.89 per share. Includes 60,000 shares as to which Mr. Jones holds non-qualified stock options which are exercisable at any time.

(7) Includes 40,000 shares as to which Mr. Van Etten holds non-qualified stock options that are exercisable at any time.

ITEM 12 - Certain Relationships and Related Transactions

On December 30, 1996, we consummated a private placement of its Series B-1 convertible preferred stock, par value $.05 per share, to Syncom III. We issued 2,000 shares of its Series B-1 stock to Syncom III in return for $2,000,000. On April 14, 1998, Syncom III converted all of its outstanding Series B-1 preferred stock into 861,230 shares of common stock at a conversion price of $2.89 per share.

Terry Jones, a director, is the general partner of WJM Partners III, L.P. ("WJM"), the general partner of Syncom III. Pursuant to the terms of the stock purchase agreement so long as Syncom III holds our common stock, our company's board of directors shall consist of not less than five members and that we shall use our best efforts to cause Terry Jones (or another partner of WJM) to be elected as a director.

ITEM 13 - Exhibits and Reports on Form 8-K

1. Exhibits.

3.1	Composite Amended and Restated Certificate of Incorporation of the Company (including the Certificate of Amendment for the Series D1 Preferred Stock) (incorporated herein by reference to Exhibit 3.1 to the Companys Report on Form 8-K filed on October 8, 1999 (the "8-K").
3.2	Composite Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-QSB for the period ended September 30, 1997 (the "September 1997 Form 10-QSB")).
4.1	Form of Warrant Certificate (incorporated herein by reference to Exhibit 4.1 to the 8-K).
4.2	Form of Registration Rights Agreement, dated as of September 30, 1999, relating to the Series D1 Preferred Stock (incorporated herein by reference to Exhibit 4.2 to the 8-K).
10.1	1993 Stock Incentive Plan (incorporated herein by reference to Exhibit 10(a) to the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 1994 (the "1994 Form 10-K").
10.2	Amended and Restated Employment Agreement dated as of August 4, 1997, between the Company and J.C. Chatpar (incorporated herein by reference to Exhibit 10.1 to the September 1997 Form 10-QSB).
10.3	Manufacturing License Contract between the Company and National Telecommunications Co., dated as of December 4, 1995 (incorporated herein by reference to Exhibit 10(c) to the Companys 1996 Form 10-KSB/A).
10.4	Manufacturing License Contract between the Company and Gujarat Communications and Electronics, Ltd. dated as of May 30, 1996 (incorporated herein by reference to Exhibit 10.5 to the Companys Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997).
10.5	Securities Purchase Agreement, dated as of September 30, 1999, by and among the Company and the Purchaser named therein, relating to the Series D1 Preferred Stock (incorporated herein by reference to Exhibit 10.1 to the 8-K).
10.6	1997 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Companys 1999 Form 10-KSB/A).
10.7	Private equity line of credit agreement dated as of July 2, 2001, between Cyber Digital and Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.7 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
10.8	Registration rights agreement between Cyber Digital and Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.8 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
10.9	Form of warrant dated July 2, 2001, issued by Cyber Digital to Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.9 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
10.10	Form of warrant dated July 2,2001, issued by Cyber Digital to Ladenburg Thalmann & Co. Inc. (incorporated herein by reference to Exhibit 10.10 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
99.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports of Form 8-K. Current Report on Form 8-K, Item 4 - Changes in Registrant's Certifying Accountant, filed on May 28, 2003.

SIGNATURES

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

Dated: June 27, 2003

CYBER DIGITAL, INC.

By: /s/ J.C. Chatpar

J.C. Chatpar

Chairman of the Board, President and Chief Executive Officer

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

Signature	Title	Date
/s/ J.C. Chatpar J.C. Chatpar	Chairman of the Board, President and Chief Executive Officer (Principal Executive and Financial Officer)	June 27, 2003
/s/ Dale A. Johnson Dale A. Johnson	Controller and Treasurer (Principal Accounting Officer)	June 27, 2003
/s/ Jack P. Dorfman Jack P. Dorfman	Director	June 27, 2003
/s/ Jatinder Wadhwa Jatinder Wadhwa	Director	June 27, 2003
/s/ Terry Jones Terry Jones	Director	June 27, 2003
/s/ Andrew Van Etten Andrew Van Etten	Director	June 27, 2003

CERTIFICATIONS OF

CHIEF EXECUTIVE OFFICER AND

CHIEF FINANCIAL OFFICER

PURSUANT TO

SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, J.C. Chatpar, certify that:

1. I have reviewed this annual report on Form 10-KSB of Cyber Digital, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the fiscal year covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the fiscal years presented in this annual report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

   a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

   b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

   c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

   a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and

   b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

June 27, 2003

/s/ J.C. Chatpar

J.C. Chatpar

Chief Executive Officer and

Chief Financial Officer

Exhibit 99.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Cyber Digital, Inc. (the "Company") on Form 10-KSB for the fiscal year ending March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, J.C. Chatpar, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to ' 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ J.C. Chatpar

J.C. Chatpar

Chief Executive Officer and

Chief Financial Officer

June 27, 2003

Index to Exhibits

Exhibit No.	Description of Document
3.1	Composite Amended and Restated Certificate of Incorporation of the Company (including the Certificate of Amendment for the Series D1 Preferred Stock) (incorporated herein by reference to Exhibit 3.1 to the Companys Report on Form 8-K filed on October 8, 1999 (the "8-K").
3.2	Composite Amended and Restated Bylaws of the Company (incorporated herein by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-QSB for the period ended September 30, 1997 (the "September 1997 Form 10-QSB")).
4.1	Form of Warrant Certificate (incorporated herein by reference to Exhibit 4.1 to the 8-K).
4.2	Form of Registration Rights Agreement, dated as of September 30, 1999, relating to the Series D1 Preferred Stock (incorporated herein by reference to Exhibit 4.2 to the 8-K).
10.1	1993 Stock Incentive Plan (incorporated herein by reference to Exhibit 10(a) to the Companys Annual Report on Form 10-K for the fiscal year ended March 31, 1994 (the "1994 Form 10-K").
10.2	Amended and Restated Employment Agreement dated as of August 4, 1997, between the Company and J.C. Chatpar (incorporated herein by reference to Exhibit 10.1 to the September 1997 Form 10-QSB).
10.3	Manufacturing License Contract between the Company and National Telecommunications Co., dated as of December 4, 1995 (incorporated herein by reference to Exhibit 10(c) to the Companys 1996 Form 10-KSB/A).
10.4	Manufacturing License Contract between the Company and Gujarat Communications and Electronics, Ltd. dated as of May 30, 1996 (incorporated herein by reference to Exhibit 10.5 to the Companys Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997).
10.5	Securities Purchase Agreement, dated as of September 30, 1999, by and among the Company and the Purchaser named therein, relating to the Series D1 Preferred Stock (incorporated herein by reference to Exhibit 10.1 to the 8-K).
10.6	1997 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the Companys 1999 Form 10-KSB/A).
10.7	Private equity line of credit agreement dated as of July 2, 2001, between Cyber Digital and Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.7 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
10.8	Registration rights agreement between Cyber Digital and Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.8 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
10.9	Form of warrant dated July 2, 2001, issued by Cyber Digital to Grenville Finance Ltd. (incorporated herein by reference to Exhibit 10.9 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
10.10	Form of warrant dated July 2,2001, issued by Cyber Digital to Ladenburg Thalmann & Co. Inc. (incorporated herein by reference to Exhibit 10.10 to the Company's Registration Statement on Form SB2 dated August 2, 2001).
99.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

CYBER DIGITAL, INC.

FINANCIAL STATEMENTS

AND

AUDITORS REPORT

MARCH 31, 2003 AND 2002

		TABLE OF CONTENTS
			Page
Independent Auditors Report
Financial Statements
	Balance Sheets		2
	Statements of Operations		3
	Statements of Changes in Shareholders' Equity (Deficit)		4
	Statements of Cash Flows		5
	Notes to Financial Statements		6 -16

B L A N C H F I E L D, K O B E R & C O M P A N Y, P.C.

CERTIFIED PUBLIC ACCOUNTANTS

1200 VETERANS MEMORIAL HIGHWAY SUITE 350 HAUPPAUGE, NEW YORK 11788 (631) 234-4200 FAX 234-4272

INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders

Cyber Digital, Inc.

Hauppauge, New York

We have audited the accompanying balance sheet of Cyber Digital, Inc. (a New York Corporation) as of March 31, 2003 and the related statements of operations, shareholders' equity (deficit), and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Cyber Digital, Inc. as of March 31, 2002 were audited by other auditors whose report dated June 21, 2002 expressed an unqualified opinion on those statements.

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

In our opinion, the financial statements referred in the first paragraph present fairly, in all material respects, the financial position of Cyber Digital, Inc. as of March 31, 2003 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Blanchfield, Kober & Company, P.C.

Hauppauge, New York

June 21, 2003.

A L B R E C H T , V I G G I A N O , Z U R E C K

& C O M P A N Y , P . C .

CERTIFIED PUBLIC ACCOUNTANTS

25 SUFFOLK COURT

HAUPPAUGE, NY 11788

(631) 434-9500

INDEPENDENT AUDITORS REPORT

To the Board of Directors and Shareholders

Cyber Digital, Inc.

Hauppauge, New York

We have audited the accompanying balance sheets of Cyber Digital, Inc. (a New York Corporation) as of March 31, 2002 and 2001 and the related statements of operations, shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred in the first paragraph present fairly, in all material respects, the financial position of Cyber Digital, Inc. as of March 31, 2002 and 2001 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Albrecht, Viggiano, Zureck and Company, P.C.

Hauppauge, New York

June 21, 2002, (except for Note 13, dated August 14, 2002

and Note 14, dated June 24, 2003)

						CYBER DIGITAL, INC.
						BALANCE SHEETS
						March 31, 2003 and 2002
								2003		2002
ASSETS
Current Assets
	Cash and cash equivalents						$	7,445	$	13,330
	Inventories							582,575		622,117
	Prepaid and other current assets							44,334		35,339
					Total Current Assets			634,354		670,786
Property and Equipment, net								13,458		56,887
Other Assets								26,374		26,374
TOTAL ASSETS							$	674,186	$	754,047
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
	Accounts payable, accrued expenses, and taxes						$	287,368	$	692,211
	Officer note payable							366,600		325,000
	Settlement payable-current portion							4,000		0
					Total Current Liabilities			657,968		1,017,211
Long Term Debt
		Settlement payable						24,223		0
Total Liabilities								682,191		1,017,211
Commitments and Contingencies
Shareholders' Equity (Deficit)
	Preferred stock - $.05 par value; cumulative, convertible and
			Participating; authorized 10,000,000 shares
			Series C; issued and outstanding 310 shares at
			March 31, 2002 and 2001					16		16
	Common stock - $.01 par value; authorized 60,000,000 shares;
			issued and outstanding 21,978,287 and 20,650,352
			shares at March 31, 2003 and 2002, respectively					219,784		206,504
	Additional paid-in-capital							18,733,860		17,733,133
	Accumulated deficit							(18,961,665)		(18,202,817)
				Total Shareholders' Equity (Deficit)				(8,005)		(263,164)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY							$	674,186	$	754,047
See independent accountant's report and notes to financial statements.
Page 2

			CYBER DIGITAL, INC.
			STATEMENTS OF OPERATIONS
			March 31, 2003 and 2002
					2003		2002
Net Sales				$	0	$	0
Cost of Sales					0		0
		Gross Profit			0		0
Operating Expenses
	Selling, general and administrative expenses			$	561,590	$	835,410
	Research and development				132,778		108,432
		Total Operating Expenses			694,368		943,842
		Loss from Operations			(694,368)		(943,842)
Other Income (Expense)
	Interest income				17		93
	Loss on disposal of fixed assets				0		(2,335)
	Interest expense				(34,922)		0
	Other income				0		4,149
	Other expense				(28,223)		0
		Total Other Income (Expense)			(63,128)		1,907
		Loss before Income Taxes			(757,496)		(941,935)
Provision for Income Taxes					1,352		380
Net Loss					(758,848)		(942,315)
Preferred Stock Dividend					0		0
Income Available to Common Shareholders				$	(758,848)	$	(942,315)
Net Loss Per Share of Common Stock (See Note 7)
		Loss from Operations - Basic		$	(.04)	$	(.05)
		Diluted		$	(.04)	$	(.05)
		Net Loss - Basic		$	(.04)	$	(.05)
		Diluted		$	(.04)	$	(.05)
Weighted average number of common shares outstanding					21,278,473		20,308,448
See independent accountant's report and notes to financial statements.
Page 3

							CYBER DIGITAL, INC.
	STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
				Years ended March 31, 2003 and 2002
		Preferred Stock										Shareholders'
		Series C			Series D-1			Common Stock		Paid in	Accumulated	Equity
		Shares Amount			Shares Amount			Shares	Amount	Capital	Deficit	(Deficit)
Balance at March 31, 2001		310	$ 16		-0-	$ -0-		20,197,348	$ 201,974	$ 17,528,572	$ (17,260,502)	$ 470,060
Issuance of Common Stock								453,004	4,530	204,561		209,091
Net Loss											(942,315)	(942,315)
Balance at March 31, 2002		310	$ 16		-0-	$ -0-		20,650,352	$ 206,504	$ 17,733,133	$ (18,202,817)	$ (263,164)
Issuance of Common Stock								1,347,935	13,480	505,159		518,639
Retirement of Common Stock								(20,000)	(200)	(21,000)		(21,200)
Issuance of Stock Options										516,658		516,658
Net Loss											(758,848)	(758,848)
Balance at March 31, 2003		310	$ 16		-0-	$ -0-		21,978,287	$ 219,784	$ 18,733,860	$ (18,961,665)	$ (8,005)
See independent accountant's report and notes to financial statements.
Page 4

				CYBER DIGITAL, INC.
				STATEMENTS OF CASH FLOWS
				Years ended March 31, 2003 and 2002
						2003		2002
Cash Flows from Operating Activities
	Net loss				$	(758,848)	$	(942,315)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Depreciation				43,429		67,713
		Inventory valuation allowance				39,542		0
		Loss on disposal of property and equipment				0		2,335
		(Increase) decrease in operating assets:
		Accounts receivable				0		390
		Inventories				0		41,490
		Prepaid and other current assets				(8,995)		(2,256)
		Other assets				0		0
		Increase (decrease) in operating liabilities:
		Accounts payable, accrued expenses and taxes				111,725		201,271
		Settlement payable				28,223		0
			Net Cash Used in Operating Activities			(544,924)		(631,372)
Cash Flows from Financing Activities
	Issuance of common stock					497,439		239,091
	Proceeds from officer loan					41,600		325,000
			Net Cash Provided by Financing Activities			539,039		564,091
Net Decrease in Cash and Cash Equivalents						(5,885)		(67,281)
Cash and Cash Equivalents at Beginning of Period						13,330		80,611
Cash and Cash Equivalents at End of Period					$	7,445	$	13,330
Supplemental Disclosures of Cash Flow Information
	Cash paid during the period for:
		Income taxes			$	1,287	$	0
Noncash Operating and Financing Activities
	Stock issued for services				$	5,001	$	0
	Stock options issued to satisfy liabilities				$	561,568	$	0
See independent accountant's report and notes to financial statements.
Page 5

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 1 - Summary of Significant Accounting Policies

Description of Business

Cyber Digital, Inc. (the "Company") was incorporated in the State of New York in April 1983. The Company designs, develops, manufactures and markets digital switching, internet and networking systems that enable simultaneous communication of voice and data to a large number of users. The Company's systems are based on its proprietary software technology which permits "modemless" transmission of data between a variety of incompatible and dissimilar end-user equipment, such as personal computers, printers, work stations and data terminals, over standard telephone lines.

Operating and Financing Matters

Since inception, the Company has devoted substantial resources to the design and development of the Company's systems and technology. As such, the Company has not achieved revenue growth and has incurred operating losses. At March 31, 2003, the Company had an accumulated deficit of $(18,961,665) and a shareholders' deficit of $(8,005). The decrease in equity from March 31, 2002 to March 31, 2003 is due mainly to a net operating loss during the fiscal year ended March 31, 2003. During the fiscal years ended March 31, 2003 and 2002, the Company received advances of $41,600 and $325,000 respectively, from the Chief Operating Officer. In addition, the Company issued common stock under an equity line of credit of $416,366 and $210,000 for the years ended March 31, 2003 and 2002 respectively. An additional $100,000 was raised in December 2002 from a private placement of unregistered restricted common stock. The Company historically has generated sufficient cash flow to support its operations mainly from issuances of debt and equity securities. The Company anticipates additional issuances of debt and/or equity. The viability of the Company is dependant upon future revenues and additional issuances of equity.

Estimates

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

Fair Value of Financial Instruments

The carrying amounts of financial instruments including cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses, approximate fair value due to the relatively short maturity of these instruments. The estimated fair value amounts have been determined by the Company using available market information and the appropriate valuation methodologies. Considerable judgment is necessarily required in the interpreting of market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.

Page 6

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 1 - Summary of Significant Accounting Policies (continued)

Inventories

The Company uses a cost system which approximates the first-in, first-out method. Inventories are valued at the lower of cost or market.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation and amortization are computed by the straight-line method over their estimated useful lives. Repairs and maintenance are charged against operations as incurred.

Revenue Recognition

The Company recognizes product system sales upon shipment and acceptance by the customer. Component parts and software sales are recognized upon shipment to the customer.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.

Deferred taxes also are recognized for operating losses that are available to offset future federal income taxes. The Company accounts for investment tax credits using the flow-through method, and thus reduces income tax expense in the year the related assets are placed in service.

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred.

Research and Development Costs

Research and development costs are charged to expense when incurred.

Warranty Expense

The Company records warranty expense as incurred and does not make a provision as shipments are made. Such expense has not been significant.

Page 7

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 1 - Summary of Significant Accounting Policies (continued)

Impairment of Long-Lived Assets

The Financial Accounting Standards Board has issued Statement No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (FASB 121), which the Company has adopted effective April 1, 1996. FASB No. 121 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for possible impairment whenever events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. FASB No. 121 also requires that long-lived assets and certain identifiable intangibles held for sale be reported at the lower of carrying amount of fair value less cost to sell. The Company determined that no impairment loss need be recognized for the applicable assets.

Stock-Based Compensation

The Company accounts for stock options as prescribed by Accounting Principles Board ("APB") Opinion No. 25 and includes pro forma information in the stock-based compensation footnote, as permitted by Financial Accounting Standards Board ("FASB") Statement No. 123, Accounting for Stock-Based Compensation ("SFAS 123"). Accordingly, no compensation cost is recognized for stock options granted in 2003 and 2002 since the option exercise price is not less than the market price of the underlying stock on the date of grant. In March 2000, the FASB issued FASB Interpretation No. 44, "Accounting For Certain Transactions Involving Stock-an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB No. 25 and among other issues clarifies the definition of an employee for purposes of applying APB Opinion No. 25. The Company adopted FIN 44 in the first quarter of 2001 with no material effect on the Companys financial position, results of operations or cash flows.

Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 provides new guidance on the accounting for a business combination at the date a business combination is completed. Specifically, it requires use of the purchase method of accounting for all business combinations initiated after June 30, 2001, thereby eliminating use of the pooling-of-interest method. SFAS No. 142 establishes new guidance on how to account for goodwill and intangible assets after a business combination is completed. Among other things, it requires that goodwill and certain other intangible assets will no longer be amortized and will be tested for impairment at least annually and written down only when impaired. This statement will apply to existing goodwill and intangible assets, beginning with fiscal years starting after December 15, 2001. Early adoption of the statement will be permitted for companies with a fiscal year beginning after March 15, 2001, for which the first quarter financial statements have not been issued.

In June 2001, the FASB issued SFAS no. 143, "Accounting for Asset Retirement Obligations". SFAS No. 143 provides new guidance on the accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset. This statement will apply to all financial statements issued for fiscal years beginning after June 15, 2002.

Page 8

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 1 - Summary of Significant Accounting Policies (continued)

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides new guidance on the accounting for the disposal of long-lived assets. The statement states that a long-lived asset to be abandoned, exchanged for a similar productive asset, distributed to owners in a spinoff to be held and used until its disposal. This statement will apply to all financial statements issued for fiscal years beginning after December 15, 2001.

The Company is currently evaluating these statements but does not expect that they will have a material impact on the Companys financial position, results of operations, or cash flows.

Concentration of Credit Risk

The Company places most of temporary cash investments with financial institutions and may exceed the FDIC limit. The Company has not experienced any losses to date resulting from this policy.

Earnings (Loss) Per Share

Effective for the Company's financial statements for the year ended March 31, 1998, the Company adopted SFAS No. 128, "Earnings per Share," which replaces the presentation of primary earnings per share ("EPS") and fully diluted EPS with a presentation of basic EPS and diluted EPS, respectively. Basic EPS excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Similar to fully diluted EPS, diluted EPS assumes conversion of the convertible preferred stock, the elimination of the related preferred stock dividend requirement, and the issuance of common stock for all other potentially dilutive equivalent shares outstanding.

Note 2 - Inventories

Inventories consist of the following at March 31:

5555:

		2003		2002
Raw materials	$	515,918	$	554,915
Finished goods		66,657		67,202
	$	582,575	$	622,117

Note 3 - Property and Equipment

Major classes of property and equipment consist of the following at March 31:

		2003		2002	Useful Lives
Machinery and equipment	$	337,973	$	337,973	5 years
Furniture and fixtures		64,355		64,355	7 years
Leasehold improvements		4,786		4,786	Lease term
		407,114		407,114
Less: Accumulated depreciation		393,656		350,227
	$	13,458	$	56,887

Page 9

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 4 - Other Assets

Other assets consist of various security deposits.

Note 5 Officer Loan Payable

During the 2002 fiscal year the Company issued a promissory note to its Chief Executive Officer, J.C Chatpar, in the amount of $325,000. The note is secured by all assets of the Company. The note was due on March 11, 2003 with interest accrued at 10%. Overdue principal and, to the extent permitted by applicable law, overdue interest shall bear interest at the applicable rate plus 2% per annum and shall be payable upon demand.

During the 2003 fiscal year the Company received additional advances from J.C. Chatpar in the amount of $41,600. These additional advances bear the same interest rate as the promissory note, are unsecured and are due on demand. Interest expense for the years ended March 31, 2003 and 2002 was $34,992 and $1,729 respectively.

Note 6 Line of Credit

During July 2001, the Company secured a $6,000,000 equity line of credit. The line allows for the Company to take advances a maximum of twenty-four times during the thirty month term of the agreement. The line expires in December 2003. The maximum amount of each draw down is $250,000. The available credit decreases by $250,000 after each draw down period, which is approximately every six weeks. For the years ended March 31, 2003 and 2002, the Company utilized approximately $413,000 and $209,000, respectively, of this equity line. As of March 31, 2003, $4,000,000 has expired on the line.

Note 7 - Earnings (Loss) Per Share

Earnings per share ("EPS") has been computed and presented pursuant to the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share.

		2003		2002
Net Loss	$	(758,848)	$	(942,315)
Dividends paid on Preferred Stock		0		0
Income Available to Common Shareholders	$	(758,848)	$	(942,315)
Weighted Average Common Shares Outstanding		21,278,473		20,308,448
Basic EPS	$	(.04)	$	(.05)
Diluted EPS	$	(.04)	$	(.05)

Diluted earnings per share does not include any stock warrants, options, or convertible preferred stock as the inclusion of these items would be antidilutive to earnings per share.

Note 8 Common Stock Transactions

During the years ended March 31, 2003 and 2002 the Company issued 842,934 and 453,004 shares of common stock under the equity line of credit.

Page 10

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 8 Common Stock Transactions (continued)

In December 2002, the Company issued 500,000 shares and 100,000 warrants to purchase shares of restricted unregistered common stock in a private placement for gross proceeds of $100,000.

During the year ended March 31, 2003 the Company issued 5,001 shares of restricted unregistered common stock to various vendors for providing services.

In April 2002 the Company retired 20,000 shares of common stock that were issued for services that were not performed.

Note 9 - Stock Option Plans

The Companys Board of Directors adopted, on November 7, 1997, the 1997 Stock Incentive Plan (the "1997 Plan"). The 1997 plan is a successor to the 1993 plan, which has been terminated. Under the terms of the 1997 Plan, 850,999 shares were reserved for issuance to officers, directors, other employees and consultants meeting certain qualifications. During March 2001, the 1997 plan was amended to increase the number of shares reserved for issuance from 850,999 to 2,850,999. Under the 1997 Plan, incentive stock options are granted at 100% of fair market value on the date of grant. The right to exercise the options accrues equally on each of the first, second, third and fourth anniversaries of the date of grant. Options granted under the plan expire on the day before the tenth anniversary of the plan.

Pursuant to the 1997 Plan, incentive stock options, nonqualified stock options, restricted stock and stock appreciation rights may be granted to such officers, directors, and employees of the Company, and to such consultants to the Company and such other persons or entities, as the Stock Option Committee of the Board of Directors (the "Committee") shall select. All incentive stock options ("ISO"), which may be granted only to employees and which provide certain tax advantages to the optionee, must have an exercise price of at least 100 percent of the fair market value of a share of common stock on the date the option is granted. No ISOs will be exercisable more than 10 years after the date of grant. ISOs granted to ten percent shareholders must have an exercise price of at least 110 percent of fair market value and may not be exercisable after the expiration of five years from grant. The exercise price and the term of nonqualified stock options will be determined by the Committee at the time of grant.

Stock appreciation rights ("SARS") may be granted independently or in connection with all or any part of any option granted under the 1997 Plan, either at the time of grant of the option or at any time thereafter. The holder of a SAR has the right to receive from the Company, in cash or in shares as the Committee shall determine, an amount equal to the excess of the fair market value of the shares covered by the SAR at the date of exercise over the exercise price set at the date of grant of the SAR. At the request of the holder of an option, the committee may at its discretion substitute for the exercise of the option, compensation (in cash or in shares) in an amount equal to or less than the excess of the fair market value of the shares covered by the option at the request date over the exercise price set at the grant of the option.

A restricted stock award, entitling the recipient to acquire shares of common stock for a purchase price at least equal to par value may be granted to such persons and in such amounts and subject to such terms and conditions

Page 11

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 9 - Stock Option Plans (continued)

as the Committee may determine. Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specified in the 1997 Plan or the written agreement governing the grant. The Committee, at the time of grant, will specify the date or dates on which the nontransferability of the restricted stock shall lapse. During the 90 days following the termination of the grantee's employment for any reason, the Company has the right to require the return of any shares to which restrictions on transferability apply, in exchange for which the Company shall repay to the grantee any amount paid by the grantee for such shares.

Unless sooner terminated by the Board, the provisions of the 1997 Plan regarding the grant of ISOs shall terminate on the tenth anniversary of the adoption of the 1997 Plan by the Board. No ISOs shall thereafter be granted under the Plan, but all ISOs granted theretofore shall remain in effect in accordance with their terms.

In addition to these plans, the Company has issued non-qualified stock options and warrants upon the approval by the Board of Directors. Such options and warrants are granted at 100% of fair market value on the date of the grant. Information with respect to non-qualified stock options and warrants are summarized as follows:

>

		Price	Shares
Outstanding, April 1, 2002		$ .75 to $10.00	8,959,859
	Canceled	$3.00 to $10.00	(346,359)
	Granted	$ .15 to $ .40	616,568
Outstanding, March 31, 2003			9,230,068

A summary of options and warrants as of March 31, 2003 follows:

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Outstanding at 3/31/03	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price	Exercisable as of 3/31/03	Weighted Average Exercise Price
$ .15 to $1.50	$ 516,568	4.70	$ .15	$ 516,568	$ .15
$ .40 to $1.50	6,370,000	4.50	.57	2,762,500	.67
$2.43 to $3.00	1,230,000	5.72	2.68	980,000	2.67
$4.00 to $5.15	760,000	2.27	4.45	760,000	4.45
$5.70 to $6.00	353,500	1.38	6.00	353,500	6.00
	$ 9,230,068	4.37	$ 1.35	$ 5,372,568	$ 1.87

In October 1995, the Financial Accounting Standards Board issued Statement No. 123 "Accounting for Stock-Based Compensation" ("FASB 123"), which is effective for the Companys year beginning April 1, 1996. As permitted under FASB 123, the Company has elected not to adopt the fair value based method of accounting for its stock-based compensation plans, but will continue to account for such compensation under the provisions of Accounting Principles Board Opinion No. 25. Pro forma information regarding net income and earnings per share is required by FASB 123, and has been determined as if the Company had accounted

Page 12

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 9 - Stock Option Plans (continued)

for its stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model.

The following assumptions were employed to estimate the fair value of stock options granted:

	Fiscal Years Ended March 31,
	2003	2002
Expected dividend yield	0.00%	0.00%
Expected price volatilities	23.00%	23.00%
Risk-free interest rate	1.20%	5.41%
Expected life (years)	5	9.50

For pro forma purposes, the estimated fair value of the Companys stock options is amortized over the options vesting period. The Company pro forma information follows:

				2003		2002
Weighted average fair value of
Options granted			$	0.01	$	0.10
Net Loss
	As reported		$	(758,848)	$	(942,315)
	Pro Forma			(764,014)		(1,081,560)
Net Loss Per Share
	As reported
		Basic	$	(.04)	$	(.05)
		Diluted	$	(.04)	$	(.05)
	Pro Forma
		Basic	$	(.04)	$	(.05)
		Diluted	$	(.04)	$	(.05)

Note 10 Convertible, Cumulative and Participating Preferred Stock

In July 1999, the Company completed a private placement of its 6% Series C preferred stock. The Company sold 310 shares at $1,000 per share. The private placement resulted in the Company receiving proceeds of $310,000. As of March 31, 2002, there are undeclared dividends of $86,002 on the Series C preferred stock.

The 6% Series C preferred stock is convertible into restricted common shares at a price to be determined based upon the following:

1. If the notice of conversion is given within ninety (90) days of issuance of the preferred shares, the conversion will be $6.00 per restricted common share.
2. If the notice of conversion is given after ninety (90) days of the issuance of the preferred shares, the conversion price will be the lesser of the fixed conversion price of $6.00 per restricted common share or eighty-five percent (85%) of the average closing price of the Companys common stock for the five trading days prior to the conversion date, but not less than 50% of the fixed conversion price.

The Company has a right to redeem the Series C preferred stock at a price of 120% of the original Series C issue price, plus all unpaid dividends at the date of redemption.

Page 13

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 10 Convertible, Cumulative and Participating Preferred Stock (continued)

However, the holder has the right to block the redemption by delivering a notice of conversion to the Company within seven (7) trading days of the stockholders receipt of a notice of general redemption.

In September 1999, the Company completed a private placement of its 8% Series D-1 preferred stock. The Company sold 3,000 shares at $1,000 per share. The private placement resulted in proceeds of $2,700,000, which is net of the stock issuance costs.

The 8% Series D-1 preferred stock is convertible into common shares at a price to be determined based upon the following:

1. If the Company fails to list all its shares of common stock on the New York Stock Exchange, the NASDAQ SmallCap Market or the NASDAQ National Market within ninety (90) days of the original issuance date, the conversion price will be the lesser of:
   1. 115% of the arithmetic average of the closing bid price of the common stock for the ten (10) trading days preceding the issuance date.
   2. 80% of the lesser of the average of the three lowest closing sales prices of common stock during the twenty (20) consecutive trading days prior to the conversion or the closing bid price on such date.
      2. The Company has a right to redeem the Series D-1 preferred stock if the conversion price drops below $3.00 per common share at the following prices:
         1. Prior to April 4, 2000, a price of $1,150 per share plus all accrued dividends.
         2. Between April 5, 2000 and October 4, 2000, a price of $1,200 per share plus all accrued dividends.

After October 4, 2000, the preferred stock cannot be redeemed by the Company.

During the fiscal years ended March 31, 2003 and 2002, the Company did not pay dividends to the Series D-1 preferred stockholders who converted their Series D-1 preferred stock.

Note 11 - Income Taxes

The Company has net operating loss carryforwards for tax purposes amounting to approximately $10.6 million that may be offset against future taxable income which expire through 2022. In addition, the Company has investment and research and development tax credits for tax purposes amounting to approximately $196,000 which expire through 2003.

Deferred income taxes are recognized for differences between the bases of assets and liabilities for financial statement and income tax purposes. The utilization of these tax attributes is contingent upon the Company's ability to generate future taxable income and tax before the tax attributes expire as well as Internal Revenue Code limitations. As a result, a valuation allowance equal to the full extent of the deferred tax asset has been established.

Page 14

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 and 2002

Note 11 - Income Taxes

The change in the deferred tax asset (as well as the valuation account) was approximately $376,000 for the

fiscal year ended March 31, 2003.

Note 12 - Commitments and Contingencies

Employment Contract

On August 3, 2001, the Company renewed the employment agreement with the Chairman. The agreement is for a three year period covering August 4, 2001 through August 3, 2004. This agreement is renewable for successive three-year periods.

Under this employment agreement, the Company is obligated to pay the Chairman $150,000 for the period ending August 3, 1998 with an annual increase of 10% for each subsequent year under the terms of employment. The Company also agrees that its Board of Directors may raise the Chairmans salary as soon as the financial resources of the Company and other business conditions permit. In such event, the Chairmans salary shall be comparable to that of chief executive officers of other technology driven publicly held companies.

This employment agreement can terminate for one of the following reasons: (1) disability, (2) death, (3) for cause, and (4) without cause, change in control.

The following payout terms apply if this agreement is terminated:

1. In the case of disability, the Chairman shall be paid until the end of the month in which such disability occurs. The Chairman will receive royalties of 5% of the gross revenues earned by the Company each month for a period of fifteen years from the effective date of termination.

2. If the agreement terminates due to the death of the Chairman, the agreement shall terminate immediately, except that the Chairmans wife, if any, or otherwise his estate, shall receive the Chairmans salary until the termination date, payments in the amount of the Chairmans base salary for a period of six months from the date of termination and the aforementioned royalty.

3. If the agreement terminates due to cause, the Chairman shall receive his regular salary until the end of the month in which such termination occurs. Cause is defined as willful misconduct by the executive or the conviction of a felony. The Chairman must be notified at least ten days prior of his termination.

4. If the agreement terminates due to a change in control or without cause, the Chairman shall receive his salary until the end of the month in which he is terminated in an amount equal to three years base salary plus three times the prior year bonus, the aforementioned royalties and all of the Chairmans outstanding options will be deemed immediately vested and exercisable for a period of one year from the effective date of termination.

Operating Leases

The Company leases space under a noncancelable operating lease in Hauppauge, New York. This lease is for a five year period and expires on March 31, 2004. This location is the Companys executive offices and operations. Rent expense was $65,800 and $69,600 for the years ended March 31, 2003 and 2002, respectively.

Page 15

CYBER DIGITAL, INC.

NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 AND 2002

Note 12 - Commitments and Contingencies (continued)

Operating Leases (continued)

The Company also has noncancelable operating leases for vehicles and equipment. The monthly rental is $835. The amount charged to expense was $12,956 and $9,672 for the years ended March 31, 2003 and 2002, respectively.

Future minimum rentals are as follows:

For years ending March 31, 2004	$ 74,778
2005	9,566
	$ 84,344

Government Regulation

The Company's operations are highly sensitive to regulations promulgated by the United States and throughout the world in which the Company has targeted its marketing efforts. These regulations or deregulations could affect both the competition for the Company's product as well as the costs associated with doing business abroad.

Pending Litigation

The Company is a defendant in an action arising from an alleged wrongful termination of a purported agreement with Brockington Securities, Inc. Brockington Securities, Inc. is seeking damage of $1,000,000 due to wrongful termination of that agreement to provide investment banking services in exchange for options to purchase shares of the Company. The Company has asserted counter claims and intends to vigorously defend its position. The outcome and range of damages or settlement (if any) is unknown.

Although, as of the issuance date, no legal action has commenced against the Company or its directors by Uniworld Communications Co., ("UCC"), a New York company, they have threatened the Company and its directors for a possible litigation arising due to the contention that the Company refused to remove restrictive legend on 500,000 shares of common stock of the Company held by UCC. The Company had issued 500,000 restricted shares to UCC pursuant to a stock option agreement. The Company believes that UCCs threatened claims, if any, are without merit and the Company will vigorously defend its position.

The Company is a defendant in an action arising from an alleged improper termination of a licensing and lease agreement with Cummings Properties, LLC. In June 2003, this action was settled. The settlement requires the Company to pay $28,223 over 36 months. The settlement bears interest at 15%. The Company has charged the cost of the settlement to other expense.

Note 13 - Foreign Operations

During the fiscal year ended March 31, 1998, the Company formed a wholly owned subsidiary, Cyber Digital (India) Private Limited, under the rules and regulations of the government of India. The subsidiary has not begun operations and has no assets as of March 31, 2003 and 2002.

During the fiscal year ended March 31, 2002, the Company financed a wholly owned subsidiary, Cyber Digital (Nigeria) Ltd. under the rules and regulations of the government of Nigeria. The subsidiary has not begun operations has no assets as of March 31, 2003 and 2002.

Page 16