##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



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|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004



-OR-



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------



For the transition period from
 to



Commission file number 001-15775



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GLOBAL EPOINT, INC.

(Name of small business issuer as specified in its charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|NEVADA                                                         |  | 33-0423037                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer identification No.)



339 S. Cheryl Lane,
City of Industry, California 91789

(Address of principal executive offices)



(909) 869-1688

(Issuers telephone number)



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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



As of August 15, 2004 there were 10,881,788 shares of Common Stock ($.03 par value) outstanding.



Traditional Small Business Disclosure
Format.    Yes  x    No ̈



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##### Table of Contents

LOGO



GLOBAL EPOINT, INC.

QUARTERLY REPORT ON FORM 10-QSB

FOR THE PERIOD ENDED JUNE 30, 2004



TABLE OF CONTENTS



|                                                                                                  |  |     
|------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                  |  | Page
|Part I. FINANCIAL INFORMATION                                                                     |  |     
|                                                                                                  | 
|Item 1. Interim Financial Statements (unaudited):                                                 |  |     
|                                                                                                  | 
|Condensed Consolidated Balance Sheet June 30, 2004                                                |  | 3   
|                                                                                                  | 
|Condensed Consolidated Statements of Operations Three and Six Months Ended June 30, 2004 and 2003 |  | 4   
|                                                                                                  | 
|Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2004 and 2003           |  | 5   
|                                                                                                  | 
|Condensed Consolidated Statement of Stockholders Equity Six Months Ended June 30, 2004           |  | 6   
|                                                                                                  | 
|Notes to Unaudited Condensed Consolidated Financial Statements                                    |  | 7   
|                                                                                                  | 
|Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations     |  | 13  
|                                                                                                  | 
|Item 3.
Controls and Procedures                                                                   |  | 23  
|                                                                                                  | 
|Part II.
OTHER INFORMATION                                                                        |  |     
|                                                                                                  | 
|Item 1.
Legal Proceedings                                                                         |  | 24  
|                                                                                                  | 
|Item 2.
Change in Securities                                                                      |  | 24  
|                                                                                                  | 
|Item 3.
Defaults Upon Senior Securities                                                           |  | 24  
|                                                                                                  | 
|Item 4.
Submission of Matters to a Vote of Security Holders                                       |  | 24  
|                                                                                                  | 
|Item 5.
Other Information                                                                         |  | 24  
|                                                                                                  | 
|Item 6.
Exhibits and Reports on Form 8-K                                                          |  | 24  
|                                                                                                  | 
|SIGNATURES                                                                                        |  | 25  



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



CONDENSED CONSOLIDATED BALANCE SHEET

(UNAUDITED)



AS OF JUNE 30, 2004



|                                                                                                        |  |   |        |  
|------------------------------------------------------------------------------------------------------- |  | - | ------ | -
|(Thousands of dollars, except per share amounts)                                                        |  |   |       
|ASSETS                                                                                                  |  |   |        |  
|CURRENT ASSETS:                                                                                         |  |   |        |  
|Cash and cash equivalents                                                                               |  | $ | 357    |  
|Accounts receivable, net                                                                                |  |   | 2,578  |  
|Accounts receivable - related parties                                                                   |  |   | 46     |  
|Inventory                                                                                               |  |   | 3,014  |  
|Other current assets                                                                                    |  |   | 333    |  
|                                                                                                        |  |   |        |  
|Total current assets                                                                                    |  |   | 6,328  |  
|                                                                                                        |  |   |        |  
|Property, plant and equipment, net                                                                      |  |   | 723    |  
|Card dispensing equipment and related parts                                                             |  |   | 985    |  
|Goodwill                                                                                                |  |   | 6,437  |  
|Other intangibles                                                                                       |  |   | 1,187  |  
|Deposits and other assets                                                                               |  |   | 509    |  
|                                                                                                        |  |   |        |  
|Total other assets                                                                                      |  |   | 9,841  |  
|                                                                                                        |  |   |        |  
|Total assets                                                                                            |  | $ | 16,169 |  
|                                                                                                        |  |   |        |  
|Liabilities and Stockholders equity                                                                    |  |   |        |  
|Current Liabilities:                                                                                    |  |   |        |  
|Accounts payable                                                                                        |  | $ | 1,874  |  
|Accounts payable - related parties                                                                      |  |   | 4,178  |  
|Accrued expenses                                                                                        |  |   | 593    |  
|Customer deposits                                                                                       |  |   | 109    |  
|Due to related parties                                                                                  |  |   | 1,280  |  
|Due to stockholder                                                                                      |  |   | 145    |  
|                                                                                                        |  |   |        |  
|Total current liabilities                                                                               |  |   | 8,179  |  
|                                                                                                        |  |   |        |  
|Loan payable                                                                                            |  |   | 1,000  |  
|                                                                                                        |  |   |        |  
|STOCKHOLDERS EQUITY:                                                                                   |  |   |        |  
|Preferred stock, no par value, 2,000,000 shares authorized, no shares issued or outstanding             |  |   |       |  
|Common stock, $.03 par value, 50,000,000 shares authorized and 10,881,788 shares issued and outstanding |  |   | 326    |  
|Paid-in capital                                                                                         |  |   | 7,989  |  
|Accumulated deficit                                                                                     |  |   | (1,325 | )
|                                                                                                        |  |   |        |  
|Total stockholders equity                                                                              |  |   | 6,990  |  
|                                                                                                        |  |   |        |  
|Total liabilities and stockholders equity                                                              |  | $ | 16,169 |  
|                                                                                                        |  |   |        |  



See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 and 2003



|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|------------------------------------------------ |  | -------------------------- | ------ | - | ------------------------ | - | ----- | ------------- |  | - | ------------- | - |  | - | ----- | -
|                                                 |  | For the three months ended |        |   | For the six months ended |  
|(Thousands of dollars, except per share amounts) |  | June 30, 2004              |        |   | June 30, 2003            |   |       | June 30, 2004 |  |   | June 30, 2003 |  
|                                                 |  |                            |       
|Net sales                                        |  | $                          | 5,558  |   |                          | $ | 2,034 |               |  | $ | 10,397        |   |  | $ | 4,493 |  
|Cost of sales                                    |  |                            | 4,591  |   |                          |   | 1,412 |               |  |   | 8,355         |   |  |   | 3,132 |  
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Gross profit                                     |  |                            | 967    |   |                          |   | 622   |               |  |   | 2,042         |   |  |   | 1,361 |  
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Operating Expenses                               |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Selling and marketing                            |  |                            | 668    |   |                          |   | 571   |               |  |   | 1,088         |   |  |   | 987   |  
|General and administrative                       |  |                            | 1,441  |   |                          |   | 439   |               |  |   | 2,343         |   |  |   | 707   |  
|Research and development                         |  |                            | 255    |   |                          |   | 221   |               |  |   | 506           |   |  |   | 362   |  
|Depreciation and amortization                    |  |                            | 46     |   |                          |   | 13    |               |  |   | 63            |   |  |   | 24    |  
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Total operating expenses                         |  |                            | 2,410  |   |                          |   | 1,244 |               |  |   | 4,000         |   |  |   | 2,080 |  
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Loss from operations                             |  |                            | (1,443 | ) |                          |   | (622  | )             |  |   | (1,958        | ) |  |   | (719  | )
|Other income (expense)                           |  |                            | (16    | ) |                          |   | 1     |               |  |   | 137           |   |  |   | 1     |  
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Loss before income tax provision                 |  |                            | (1,459 | ) |                          |   | (621  | )             |  |   | (1,821        | ) |  |   | (718  | )
|Income tax benefit                               |  |                            |       |   |                          |   |      |               |  |   |              |   |  |   | (132  | )
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Net Loss                                         |  | $                          | (1,459 | ) |                          | $ | (621  | )             |  | $ | (1,821        | ) |  | $ | (586  | )
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Loss per share - basic                           |  | $                          | (0.13  | ) |                          | $ | (0.10 | )             |  | $ | (0.17         | ) |  | $ | (0.10 | )
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Loss per share - fully diluted                   |  | $                          | (0.13  | ) |                          | $ | (0.10 | )             |  | $ | (0.17         | ) |  | $ | (0.10 | )
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  
|Weighted average shares and share equivalents    |  |                            | 10,848 |   |                          |   | 5,921 |               |  |   | 10,844        |   |  |   | 5,921 |  
|                                                 |  |                            |        |   |                          |   |       |               |  |   |               |   |  |   |       |  



See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



FOR THE SIX MONTHS ENDED JUNE 30, 2004 and 2003



|                                                     |  |      |        |   |      |   |        |  
|---------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|(Thousands of dollars)                               |  | 2004 |        |   | 2003 |  
|                                                     |  |     
|CASH FLOWS PROVIDED/(USED) BY OPERATING ACTIVITIES:  |  |      |        |   |      |   |        |  
|Net (loss) income                                    |  | $    | (1,821 | ) |      | $ | (586   | )
|Adjustments to reconcile net loss to net cash flows  |  |      |        |   |      |   |        |  
|provided/(used) by operating activities:             |  |      |        |   |      |   |        |  
|Depreciation                                         |  |      | 63     |   |      |   | 24     |  
|Provision for bad debt                               |  |      | 46     |   |      |   | 20     |  
|Increase/(decrease) from changes in:                 |  |      |        |   |      |   |        |  
|Accounts receivable                                  |  |      | (887   | ) |      |   | (392   | )
|Accounts receivable - related parties                |  |      | 3,830  |   |      |   | (1,515 | )
|Inventory                                            |  |      | (33    | ) |      |   | (581   | )
|Other current assets                                 |  |      | (115   | ) |      |   | (174   | )
|Accounts payable                                     |  |      | 1,036  |   |      |   | 570    |  
|Accounts payable - related parties                   |  |      | (1,359 | ) |      |   | 2,442  |  
|Accrued expenses                                     |  |      | (83    | ) |      |   | (128   | )
|Customer deposits                                    |  |      | 46     |   |      |   | (89    | )
|Taxes payable                                        |  |      | (12    | ) |      |   | 8      |  
|                                                     |  |      |        |   |      |   |        |  
|Net cash provided/(used) by operating activities     |  |      | 711    |   |      |   | (401   | )
|                                                     |  |      |        |   |      |   |        |  
|CASH FLOWS PROVIDED/(USED) BY INVESTMENT ACTIVITIES: |  |      |        |   |      |   |        |  
|Additions to property and equipment                  |  |      | (392   | ) |      |   | (54    | )
|Goodwill and other intangibles                       |  |      | (3,802 | ) |      |   | (500   | )
|Additions to other assets                            |  |      | (117   | ) |      |   | (366   | )
|                                                     |  |      |        |   |      |   |        |  
|Net cash used in investing activities                |  |      | (4,311 | ) |      |   | (920   | )
|                                                     |  |      |        |   |      |   |        |  
|CASH FLOWS PROVIDED/(USED) BY FINANCING ACTIVITIES:  |  |      |        |   |      |   |        |  
|Loan payable                                         |  |      | 947    |   |      |   |       |  
|Borrowings from related parties                      |  |      | 1,279  |   |      |   | 1,000  |  
|Advances from stockholder                            |  |      | (9     | ) |      |   | 245    |  
|Proceeds from exercise of stock options              |  |      | 96     |   |      |   |       |  
|                                                     |  |      |        |   |      |   |        |  
|Net cash provided by financing activities            |  |      | 2,313  |   |      |   | 1,245  |  
|                                                     |  |      |        |   |      |   |        |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS            |  |      | (1,287 | ) |      |   | (76    | )
|CASH AND CASH EQUIVALENTS, beginning of period       |  |      | 1,644  |   |      |   | 170    |  
|                                                     |  |      |        |   |      |   |        |  
|CASH AND CASH EQUIVALENTS, end of period             |  | $    | 357    |   |      | $ | 94     |  
|                                                     |  |      |        |   |      |   |        |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:   |  |      |        |   |      |   |        |  
|Income taxes paid                                    |  | $    | 16     |   |      | $ |       |  
|                                                     |  |      |        |   |      |   |        |  
|Interest paid                                        |  | $    |       |   |      | $ | 37     |  
|                                                     |  |      |        |   |      |   |        |  



See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

(UNAUDITED)



FOR THE SIX MONTHS ENDED JUNE 30, 2004



|                                           |  |              |  |        |     |                            |   |                                         |  |   |                            |   |  |   |        |  
|------------------------------------------ |  | ------------ |  | ------ | --- | -------------------------- | - | --------------------------------------- |  | - | -------------------------- | - |  | - | ------ | -
|                                           |  |              |  |        |     | Additional Paid in Capital |   | RetainedEarnings/ (Accumulated Deficit) |  |   | Total Stockholders Equity |  
|                                           |  | Common Stock |  |        |    
|                                           |  | Shares       |  | Amount |     |                            |  
|                                           |  |              |  |        |    
|Balances, December 31, 2003                |  | 10,822       |  | $      | 324 |                            | $ | 7,894                                   |  | $ | 496                        |   |  | $ | 8,714  |  
|Common stock issued upon options exercised |  | 60           |  |        | 2   |                            |   | 95                                      |  |   |                            |   |  |   | 97     |  
|Net loss                                   |  |              |  |        |     |                            |   |                                         |  |   | (1,821                     | ) |  |   | (1,821 | )
|                                           |  |              |  |        |     |                            |   |                                         |  |   |                            |   |  |   |        |  
|Balances, June 30, 2004                    |  | 10,882       |  | $      | 326 |                            | $ | 7,989                                   |  | $ | (1,325                     | ) |  | $ | 6,990  |  
|                                           |  |              |  |        |     |                            |   |                                         |  |   |                            |   |  |   |        |  



See accompanying notes
to condensed consolidated financial statements.



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



JUNE 30, 2004



1. Basis of presentation



The accounting and reporting policies of Global ePoint, Inc. (Global, or
Global ePoint or the Company) conform to accounting principles generally accepted in the United States of America. The condensed consolidated financial statements as of June 30, 2004 and for the three and six months ended
June 30, 2004 and 2003 are unaudited and do not include all information or footnotes necessary for a complete presentation of financial condition, results of operations and cash flows. The interim financial statements include all adjustments,
consisting only of normal recurring accruals, which in the opinion of management are necessary in order to make the condensed consolidated financial statements not misleading. These condensed consolidated financial statements should be read in
conjunction with the Companys December 31, 2003 audited financial statements, which are included in the Companys Annual Report on Form 10-KSB for the year ended December 31, 2003. The results of operations for the three and six months
ended June 30, 2004 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2004.



2. Summary of significant accounting policies



Nature of business Global ePoint, Inc. was incorporated under the laws of the state of Nevada in March 1990 and is now headquartered in the City of Industry,
California. The primary areas of our business are operated from three divisions: our contract manufacturing division, aviation division and our digital technology division. Our contract manufacturing division manufactures customized computing
systems for industrial, business and consumer markets, with the capability of specialized, custom-manufacture of other electronic products and systems. Our newly acquired aviation division provides digital technology and other electrical
applications to the airline industry. Our digital technology division designs and markets digital video technology primarily for surveillance systems.



Principles of consolidation The accompanying condensed consolidated financial statements include 100% of the accounts of the Company and its wholly-owned
subsidiaries, McDigit, which was incorporated under the laws of the state of California in November 2002, Best Logic LLC (Best Logic), which was organized in California in November 2000, and Global Telephony, which was incorporated under
the laws of Nevada in 2001, and are collectively referred to as the Company in these condensed consolidated financial statements. All significant inter-company balances and transactions have been eliminated.



Merger and basis of presentation On August 8, 2003, Global ePoint, McDigit, and Best
Logic completed a reverse acquisition (the Merger) where the prior owner of McDigit and Best Logic received approximately 50.1% ownership interest of Global ePoint in the transaction. Under reverse acquisition accounting,
Global ePoint continues as the acquiring legal entity, but the historical financial statements of Global ePoint include only those of McDigit and Best Logic prior to the Merger date, and those of the combination of all the companies subsequent to
the Merger date. Additionally, the assets of the Perpetual division of Next Venture, Inc. d/b/a Sierra Group and the flight support business of Greenick, Inc. d/b/a AirWorks, Inc. were acquired in April 2004 (see footnote 8).



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



2. Summary of significant accounting policies (continued)



Accounting for stock options Global ePoint has adopted the disclosure-only provisions for employee stock options under SFAS No. 123. Accordingly, no compensation cost has been recognized for employee stock
option plans under the intrinsic-value method prescribed by APB No. 25. Had compensation for Global ePoints three stock option plans been determined based on the fair value at the grant date for awards, Global ePoints net income (loss)
and income (loss) per share would have been decreased (increased) to the pro forma amounts indicated below for the three and six months ended June 30 (in thousands, except per share amounts):



|                                                                                                     |  |                                    |        |   |                                  |   |       |      |  |   |        |   |  |   |       |  
|---------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | -------------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                                                                                     |  | For the three months ended June 30 |        |   | For the six months ended June 30 |  
|                                                                                                     |  | 2004                               |        |   | 2003                             |   |       | 2004 |  |   | 2003   |  
|As reported, net income (loss)                                                                       |  | $                                  | (1,459 | ) |                                  | $ | (621  | )    |  | $ | (1,821 | ) |  | $ | (586  | )
|Stock-based employee compensation determined under the fair value method, net of related tax effects |  |                                    | (56    | ) |                                  |   | (44   | )    |  |   | (112   | ) |  |   | (49   | )
|                                                                                                     |  |                                    |        |   |                                  |   |       |      |  |   |        |   |  |   |       |  
|Pro forma                                                                                            |  | $                                  | (1,515 | ) |                                  | $ | (665  | )    |  | $ | (1,933 | ) |  | $ | (635  | )
|                                                                                                     |  |                                    |        |   |                                  |   |       |      |  |   |        |   |  |   |       |  
|Earnings (loss) per common share, basic and fully diluted:                                           |  |                                    |        |   |                                  |   |       |      |  |   |        |   |  |   |       |  
|As reported                                                                                          |  | $                                  | (0.13  | ) |                                  | $ | (0.10 | )    |  | $ | (0.17  | ) |  | $ | (0.10 | )
|Pro forma                                                                                            |  | $                                  | (0.14  | ) |                                  | $ | (0.11 | )    |  | $ | (0.18  | ) |  | $ | (0.11 | )



3. Inventories



Inventories consisted of the following as of June 30, 2004 (in thousands):



|                                                                  |  |   |      
|----------------------------------------------------------------- |  | - | -----
|Computer component parts                                          |  | $ | 2,140
|Video and data recording component parts                          |  |   | 552  
|Cockpit door surveillance system and wire harness component parts |  |   | 322  
|                                                                  |  |   |      
|Total                                                             |  | $ | 3,014
|                                                                  |  |   |      



4. Property and equipment



Property and equipment consisted of the following as of June 30, 2004 (in
thousands):



|                                |  |   |      |  
|------------------------------- |  | - | ---- | -
|Furniture and equipment         |  | $ | 330  |  
|Computer equipment and software |  |   | 103  |  
|Building improvements           |  |   | 362  |  
|Tooling and demo units          |  |   | 34   |  
|Vehicles                        |  |   | 29   |  
|                                |  |   |      |  
|Totals                          |  | $ | 858  |  
|Less accumulated depreciation   |  |   | (135 | )
|                                |  |   |      |  
|Property and equipment, net     |  | $ | 723  |  
|                                |  |   |      |  



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GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



5. Business concentrations



Sales
and purchases For the six months ended June 30, 2004, four customers accounted for 79% of the Companys sales and 86% of the accounts receivable. For the six months ended June 30, 2004, three vendors accounted for 40% of the Companys
purchases. A substantial amount of sales and purchase transactions are conducted with related parties, as discussed in Note 6.



6. Related party transactions



Loans Mr. John Pan, the Companys Chairman, Chief Financial Officer and majority stockholder, made pre-Merger advances to McDigit amounting to approximately
$341,000, of which $187,000 was repaid during 2003. All of the loans relate to pre-Merger activities. As of June 30, 2004, the remaining balance on these loans was $145,000. The loans are unsecured and, currently, payable on demand. However, the
Company intends to replace these loans with convertible promissory notes with an interest rate and other terms subject to Board approval.



On June 18, 2004 the Company entered into a loan agreement with Mr. John Pan. The total principal amount of the loan is $1 million, the proceeds of which were used to
complete the asset purchase of Airworks. The interest rate is subject to change based on changes in the index which is the Bank of the West Prime Rate. The interest rate to be applied and paid monthly on the unpaid principal balance of the loan will
be at a rate of .25 percentage points over the index. The unpaid principal balance of the loan, plus accrued and unpaid interest, is due no later than December 15, 2005.



Rent agreement Mr. John Pan, the Companys Chairman, Chief Financial Officer and majority stockholder, leases a facility to the
Company and to Avatar Technologies, Inc. (Avatar), a Related Party (as defined below). Facility rental costs, including additional square footage to accommodate more offices for administrative staff, more equipment for production and
assembly, and more warehouse space, totaled $167,000 and $236,000 for the three and six months ended June 30, 2004, respectively. Rental costs for manufacturing and assembly equipment were approximately $21,000 and $43,000 for the three and six
months ended June 30, 2003 respectively.



Other arrangements The Company
had various sales and purchase transactions with companies that are owned or controlled by the Companys Chairman, Chief Financial Officer and majority stockholder, Mr. John Pan (Related Parties). Those types of transactions
occurred with the Related Parties prior to the completion of the Merger and have continued subsequent to the Merger, although there can be no assurances that these arrangements will continue given that the Related Parties are not obligated to
continue dealing with the Company. One of those transactions, a subcontracted purchase order, allowed the Company to manufacture computers for distribution into Latin America through one of the Related Parties. Another ongoing transaction allows the
Company to use Related Parties to globally source computer components for the Companys manufacturing business. The Related Parties can generally purchase components in greater quantity than the Company can on its own and thereby can provide
the Company with more favorable pricing due to volume discounts. The outstanding balances due from and to Related Parties as of June 30, 2004 and 2003 were as follows:



|                                                   |  |                |       |      |   |      
|-------------------------------------------------- |  | -------------- | ----- | ---- | - | -----
|                                                   |  | As of June 30,
|(Thousands of dollars)                             |  | 2004           |       | 2003
|Balances due from Related Parties were as follows: |  |                |       |      |   |      
|(A) (50% owned by CFO/Chairman)                    |  | $              | 46    |      | $ | 156  
|(B) (100% owned by CFO/Chairman)                   |  |                |      |      |   | 1,516
|(C) (100% owned by CFO/Chairman)                   |  |                |      |      |   |     
|(D) (95% owned by CFO/Chairman)                    |  |                |      |      |   | 103  
|                                                   |  |                |       |      |   |      
|Totals                                             |  | $              | 46    |      | $ | 1,775
|                                                   |  |                |       |      |   |      
|Balances due to Related Parties were as follows:   |  |                |       |      |   |      
|(A) (50% owned by CFO/Chairman)                    |  | $              |      |      | $ |     
|(B) (100% owned by CFO/Chairman)                   |  |                |      |      |   | 2,146
|(C) (100% owned by CFO/Chairman)                   |  |                |      |      |   |     
|(D) (95% owned by CFO/Chairman)                    |  |                | 5,457 |      |   | 668  
|                                                   |  |                |       |      |   |      
|Totals*                                            |  | $              | 5,457 |      | $ | 2,814
|                                                   |  |                |       |      |   |      

---

|* | Balances due to Related Parties include trade payables for purchases of component parts from Related Parties as well as advances for working capital purposes. These balances are
included in Accounts Payable  Related Parties or Due to Related Parties on the accompanying condensed consolidated balance sheet as of June 30, 2004 based on the nature of the related activity.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



6. Related party transactions (continued)



Other arrangements (continued)



|                                                        |  |                           |       |                         |   |              |  |              |       |  |   |      
|------------------------------------------------------- |  | ------------------------- | ----- | ----------------------- | - | ------------ |  | ------------ | ----- |  | - | -----
|                                                        |  | For the threemonths ended |       | For the sixmonths ended
|(Thousands of dollars)                                  |  | June 30,2004              |       | June 30,2003            |   | June 30,2004 |  | June 30,2003
|Product purchases from Related Parties were as follows: |  |                           |       |                         |   |              |  |              |       |  |   |      
|(A) (50% owned by CFO/Chairman)                         |  | $                         |      |                         | $ |             |  | $            |      |  | $ |     
|(B) (100% owned by CFO/Chairman)                        |  |                           | 372   |                         |   | 661          |  |              | 577   |  |   | 1,131
|(C) (100% owned by CFO/Chairman)                        |  |                           | 1     |                         |   | 3            |  |              | 1     |  |   | 13   
|(D) (95% owned by CFO/Chairman)                         |  |                           | 748   |                         |   | 160          |  |              | 2,246 |  |   | 358  
|                                                        |  |                           |       |                         |   |              |  |              |       |  |   |      
|Totals                                                  |  | $                         | 1,121 |                         | $ | 824          |  | $            | 2,824 |  | $ | 1,502
|                                                        |  |                           |       |                         |   |              |  |              |       |  |   |      
|Product sales to Related Parties were as follows:       |  |                           |       |                         |   |              |  |              |       |  |   |      
|(A) (50% owned by CFO/Chairman)                         |  | $                         | 36    |                         | $ | 110          |  | $            | 75    |  | $ | 161  
|(B) (100% owned by CFO/Chairman)                        |  |                           | 1,599 |                         |   |             |  |              | 2,548 |  |   |     
|(C) (100% owned by CFO/Chairman)                        |  |                           | 9     |                         |   | 1            |  |              | 9     |  |   | 1    
|(D) (95% owned by CFO/Chairman)                         |  |                           | 1,487 |                         |   | 13           |  |              | 1,797 |  |   | 60   
|                                                        |  |                           |       |                         |   |              |  |              |       |  |   |      
|Totals                                                  |  | $                         | 3,131 |                         | $ | 124          |  | $            | 4,429 |  | $ | 222  
|                                                        |  |                           |       |                         |   |              |  |              |       |  |   |      



7. Basic and fully diluted per
share calculation



Statement of Financial Accounting Standards No. 128
(SFAS 128), Earnings Per Share requires presentation of basic earnings per share and dilutive earnings per share.



The computation of basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of outstanding common shares
during the period. Diluted earnings per share gives the effect to all dilutive potential common shares outstanding during the period. The computation of diluted earnings per share does not assume conversion, exercise or contingent exercise of
securities that would have an anti-dilutive effect on losses.



Although Global
ePoint is the surviving legal entity after the Merger, the Merger has been treated as an acquisition of Global ePoint by McDigit for accounting and financial reporting purposes. Therefore, the weighted average number of common shares previously
reported by McDigit has been adjusted to reflect the shares issued in the Merger. The weighted average number of common shares reported for 2003 assumes the shares issued in the Merger were outstanding throughout the year.



-10-



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



7. Basic and fully diluted per share calculation



The computations for basic and fully diluted income (loss) per share are as follows (in thousands, except per share amounts):



|                                          |  |                 |        |   |                     |        |                 |   |       |  
|----------------------------------------- |  | --------------- | ------ | - | ------------------- | ------ | --------------- | - | ----- | -
|                                          |  | Loss(Numerator) |        |   | Shares(Denominator) |        | Per-shareAmount |  
|For the three months ended June 30, 2004: |  |                 |        |   |                     |        |                 |   |       |  
|Basic and fully diluted loss per share    |  |                 |        |   |                     |        |                 |   |       |  
|Loss available to common stockholders     |  | $               | (1,459 | ) |                     | 10,848 |                 | $ | (0.13 | )
|For the six months ended June 30, 2004:   |  |                 |        |   |                     |        |                 |   |       |  
|Basic and fully diluted loss per share    |  |                 |        |   |                     |        |                 |   |       |  
|Loss available to common stockholders     |  | $               | (1,821 | ) |                     | 10,844 |                 | $ | (0.17 | )
|For the three months ended June 30, 2003: |  |                 |        |   |                     |        |                 |   |       |  
|Basic and fully diluted loss per share    |  |                 |        |   |                     |        |                 |   |       |  
|Loss available to common stockholders     |  | $               | (621   | ) |                     | 5,921  |                 | $ | (0.10 | )
|For the six months ended June 30, 2003:   |  |                 |        |   |                     |        |                 |   |       |  
|Basic and fully diluted loss per share    |  |                 |        |   |                     |        |                 |   |       |  
|Loss available to common stockholders     |  | $               | (586   | ) |                     | 5,921  |                 | $ | (0.10 | )



8. Acquisitions



On April 5, 2004, the Company and Next Venture, Inc. d/b/a Sierra Group, a California
corporation (Next Venture) executed an Asset Purchase Agreement. Pursuant to that agreement the Company purchased substantially all of the assets used in Next Ventures Perpetual digital division (Perpetual), including
intellectual property and ongoing supply agreements. Perpetual is a systems integrator and supplier of digital video recording systems for commercial and industrial security surveillance. In consideration for the assets, the Company paid $353,000 in
cash. In addition to the cash, the Company agreed to forgive the collection of an account receivable from Next Venture in the amount of approximately $152,000. The Company will be required to pay up to $2,750,000 in Common Stock, subject to the
acquired operations achieving certain sales targets in the 12-month period following the closing of the acquisition. In no event will the purchase price exceed $3,300,000. If the acquired operations meet the sales levels required for receipt of the
stock by the seller, the Company would be required to issue the stock approximately one year from the date of the acquisition at the average price of the Companys stock over the 30 trading days prior to the issuance of the stock. If the
Company is required to issue its stock to the seller, the Companys current stockholders would experience dilution of their ownership interests and, potentially, the Companys earnings per share may be diluted. There can be no assurance
that this acquisition will be successfully integrated into the Companys operations.



On April 26, 2004, the Company acquired certain assets from Insolvency Services Group, Inc. (ISG), which had acquired those assets from Greenick, Inc. d/b/a AirWorks, Inc. (AirWorks) pursuant
to a general assignment. This assignment by AirWorks to ISG was part of an assignment for the benefit of creditors of AirWorks. Pursuant to the assignment from ISG, the Company acquired AirWorks flight support business including aircraft
electronic and communications assets and operations, including intellectual property, and contracts and purchase orders from major aircraft manufacturers. In consideration for the assets, the Company paid a total of approximately $3.3 million in
cash, approximately $2.3 million of which was paid at closing and an additional $1 million was paid in June 2004. In addition to the purchase price the Company paid approximately $200,000 in acquisition costs and $346,000 relating to subsequent
amendments to the asset purchase agreement. A contingency payment of up to $3,000,000 in cash may also be payable for the assets. In order to receive any contingency payment, certain financial performance benchmarks must be attained. Upon attaining
a certain benchmark, a proportional payment will be made until a second benchmark is attained at which point any remaining contingency payments up to an aggregate of $3,000,000 will be made. The contingency payments, if any, are due the later of
December 1, 2004, or the date 30 days after the benchmark is first attained. However, no contingency payments will be required if the benchmarks are not attained within one year of the closing date. The contingency payments, if any, may be reduced
if certain enumerated items materialize or fail to occur following the closing.



The following table summarizes the estimated fair values of the assets acquired at the date of acquisition. Global ePoint is in the process of obtaining valuations of certain assets; thus, the allocation of the purchase price is subject to
refinement.



|                      |  |          |       |           |   |       |  |   |      
|--------------------- |  | -------- | ----- | --------- | - | ----- |  | - | -----
|                      |  | Airworks |       | Perpetual |   | Total
|Current assets        |  | $        | 194   |           | $ | 221   |  | $ | 415  
|Plant and equipment   |  |          | 206   |           |   |      |  |   | 206  
|Intangible assets     |  |          | 550   |           |   |      |  |   | 550  
|Goodwill              |  |          | 2,896 |           |   | 284   |  |   | 3,180
|                      |  |          |       |           |   |       |  |   |      
|Total assets acquired |  |          | 3,846 |           |   | 505   |  |   | 4,351
|                      |  |          |       |           |   |       |  |   |      



The $550,000 of acquired intangible
assets was assigned to the Supplemental Type Certificates (STC) with a useful life of approximately five years. These certificates are required by the FAA to install equipment into aircraft. The goodwill was assigned to the aviation and digital
technology segments in the amounts of $2.896 million and $284,000, respectively and may include other intangible assets which have not yet been identified.



The following selected financial data reflects consolidated pro forma information as if the acquisition of Airworks had occurred January 1, 2004 and January 1, 2003,
respectively.



|                                 |  |                           |        |   |                         |   |       |      |  |   |        |   |  |   |       |  
|-------------------------------- |  | ------------------------- | ------ | - | ----------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ----- | -
|                                 |  | Three Months EndedJune 30 |        |   | Six Months EndedJune 30 |  
|                                 |  | 2004                      |        |   | 2003                    |   |       | 2004 |  |   | 2003   |  
|Pro Forma Consolidated Net Sales |  | $                         | 5,591  |   |                         | $ | 3,475 |      |  | $ | 11,029 |   |  | $ | 8,272 |  
|Pro Forma Net (Loss) Income      |  |                           | (1,468 | ) |                         |   | (744  | )    |  |   | (2,188 | ) |  |   | (915  | )
|Loss per share:                  |  |                           |        |   |                         |   |       |      |  |   |        |   |  |   |       |  
|Basic and diluted, pro forma     |  | $                         | (0.14  | ) |                         | $ | (0.13 | )    |  | $ | (0.20  | ) |  | $ | (0.15 | )



9. Segment reporting



The Company operates in three business segments; marketing, developing
and distributing advanced digital technology products related to digital video, audio and data transmission and recording products (digital technology), flight support business including aircraft electronics and communications systems (aviation) and
the assembly and distribution of computer systems and computer related components (contract manufacturing). The Corporate category primarily relates to activities associated with income and expense of non-core continuing business of the pre-merged
public entity. The Company evaluates segment performance based on income from operations and total assets. All inter-company transactions between segments have been eliminated. Information with respect to the Companys operating (loss) income
by segment is as follows (in thousands):



For the three months ended June 30,
2004



|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|-------------------------------- |  | ----------------- | ----- | - | -------- | - | ----- | --------------------- |  | - | --------- | - |  | ----- | ----- | - |  | - | ------ | -
|                                 |  | DigitalTechnology |       |   | Aviation |   |       | ContractManufacturing |  |   | Corporate |   |  | Total |      
|Net Sales                        |  | $                 | 250   |   |          | $ | 659   |                       |  | $ | 4,649     |   |  | $     |      |   |  | $ | 5,558  |  
|Cost of sales                    |  |                   | 154   |   |          |   | 403   |                       |  |   | 4,034     |   |  |       |      |   |  |   | 4,591  |  
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Gross profit                     |  |                   | 96    |   |          |   | 256   |                       |  |   | 615       |   |  |       |      |   |  |   | 967    |  
|Operating Expenses               |  |                   | 673   |   |          |   | 527   |                       |  |   | 725       |   |  |       | 485   |   |  |   | 2,410  |  
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Income (loss) from operations    |  |                   | (577  | ) |          |   | (271  | )                     |  |   | (110      | ) |  |       | (485  | ) |  |   | (1,443 | )
|Other income (expense)           |  |                   |      |   |          |   |      |                       |  |   | (54       | ) |  |       | 38    |   |  |   | (16    | )
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Loss from operations             |  | $                 | (577  | ) |          | $ | (271  | )                     |  | $ | (164      | ) |  | $     | (447  | ) |  | $ | (1,459 | )
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Total assets as of June 30, 2004 |  | $                 | 2,252 |   |          | $ | 4,750 |                       |  | $ | 4,288     |   |  | $     | 4,879 |   |  | $ | 16,169 |  
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  



For the three months ended June 30,
2003



|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|-------------------------------- |  | ----------------- | ----- | - | -------- | - | --------------------- |  | --------- | ----- | ----- | - | - |  | - | ----- | -
|                                 |  | DigitalTechnology |       |   | Aviation |   | ContractManufacturing |  | Corporate |       | Total |  
|Net Sales                        |  | $                 |      |   |          | $ |                      |  | $         | 2,034 |       | $ |  |  | $ | 2,034 |  
|Cost of sales                    |  |                   |      |   |          |   |                      |  |           | 1,412 |       |   |  |  |   | 1,412 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Gross profit                     |  |                   |      |   |          |   |                      |  |           | 622   |       |   |  |  |   | 622   |  
|Operating Expenses               |  |                   | 653   |   |          |   |                      |  |           | 591   |       |   |  |  |   | 1,244 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Income (loss) from operations    |  |                   | (653  | ) |          |   |                      |  |           | 31    |       |   |  |  |   | (622  | )
|Other income (expense)           |  |                   |      |   |          |   |                      |  |           | 1     |       |   |  |  |   | 1     |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Loss from operations             |  | $                 | (653  | ) |          | $ |                      |  | $         | 32    |       | $ |  |  | $ | (621  | )
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Total assets as of June 30, 2003 |  | $                 | 1,367 |   |          | $ |                      |  | $         | 4,263 |       | $ |  |  | $ | 5,630 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  



For the six months ended June 30, 2004



|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|-------------------------------- |  | ----------------- | ------ | - | -------- | - | ----- | --------------------- |  | - | --------- | - |  | ----- | ----- | - |  | - | ------ | -
|                                 |  | DigitalTechnology |        |   | Aviation |   |       | ContractManufacturing |  |   | Corporate |   |  | Total |      
|Net Sales                        |  | $                 | 281    |   |          | $ | 659   |                       |  | $ | 9,457     |   |  | $     |      |   |  | $ | 10,397 |  
|Cost of sales                    |  |                   | 179    |   |          |   | 403   |                       |  |   | 7,773     |   |  |       |      |   |  |   | 8,355  |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Gross profit                     |  |                   | 102    |   |          |   | 256   |                       |  |   | 1,684     |   |  |       |      |   |  |   | 2,042  |  
|Operating Expenses               |  |                   | 1,167  |   |          |   | 527   |                       |  |   | 1,614     |   |  |       | 692   |   |  |   | 4,000  |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Income (loss) from operations    |  |                   | (1,065 | ) |          |   | (271  | )                     |  |   | 70        |   |  |       | (692  | ) |  |   | (1,958 | )
|Other income (expense)           |  |                   | (2     | ) |          |   |      |                       |  |   | (7        | ) |  |       | 146   |   |  |   | 137    |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Loss from operations             |  | $                 | (1,067 | ) |          | $ | (271  | )                     |  | $ | 63        |   |  | $     | (546  | ) |  | $ | (1,821 | )
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Total assets as of June 30, 2004 |  | $                 | 2,252  |   |          | $ | 4,750 |                       |  | $ | 4,288     |   |  | $     | 4,879 |   |  | $ | 16,169 |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  



For the six months ended June 30, 2003



|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|-------------------------------- |  | ----------------- | ----- | - | -------- | - | --------------------- |  | --------- | ----- | ----- | - | - |  | - | ----- | -
|                                 |  | DigitalTechnology |       |   | Aviation |   | ContractManufacturing |  | Corporate |       | Total |  
|Net Sales                        |  | $                 | 41    |   |          | $ |                      |  | $         | 4,452 |       | $ |  |  | $ | 4,493 |  
|Cost of sales                    |  |                   | 26    |   |          |   |                      |  |           | 3,106 |       |   |  |  |   | 3,132 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Gross profit                     |  |                   | 15    |   |          |   |                      |  |           | 1,346 |       |   |  |  |   | 1,361 |  
|Operating Expenses               |  |                   | 981   |   |          |   |                      |  |           | 1,099 |       |   |  |  |   | 2,080 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Income (loss) from operations    |  |                   | (966  | ) |          |   |                      |  |           | 247   |       |   |  |  |   | (719  | )
|Other income (expense)           |  |                   |      |   |          |   |                      |  |           | 1     |       |   |  |  |   | 1     |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Loss from operations             |  | $                 | (966  | ) |          | $ |                      |  | $         | 248   |       | $ |  |  | $ | (718  | )
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Total assets as of June 30, 2003 |  | $                 | 1,367 |   |          | $ |                      |  | $         | 4,263 |       | $ |  |  | $ | 5,630 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  



-11-



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##### Table of Contents

GLOBAL EPOINT, INC. AND SUBSIDIARIES

(Formerly McDigit, Inc. and Best Logic, LLC)



10. Subsequent Events



On August 5,
2004, Global ePoint, Inc. completed the private placement sale of convertible preferred stock and common stock purchase warrants to three equity funds managed by Mercator Advisory Group, LLC, of Los Angeles, California. The gross proceeds were $5.5
million and the net proceeds to the Company after fees and expenses totaled $4.95 million. The preferred stock is initially convertible into common shares at $4.55 per share. In the event of any conversions of the preferred stock after the
120thday from the closing date, if the market price of the Companys common stock is less than $4.76, then the
conversion price applicable to that particular conversion shall be adjusted to a price that shall equal eighty-five percent (85%) of the market price on such conversion date; provided, that, in no event shall the adjusted conversion price be less
than $3.00 per share. In addition to the preferred stock, the Company issued warrants to purchase 330,000 shares of common stock at an exercise price of $4.76 per share. The exercise price of the warrants is not subject to adjustment other than
customary anti-dilution adjustments.



-12-



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



OVERVIEW



In August 2003, we completed a reverse acquisition transaction with McDigit, Inc. and Best Logic, LLC in which the prior owner of McDigit and Best Logic received approximately 50.1% of the then outstanding
shares of Global ePoint. Under reverse acquisition accounting, Global ePoint continues as the acquiring legal entity, but the historical presentations of Global ePoints consolidated financial statements include only those of McDigit and Best
Logic prior to the merger date, and those of all of the companies combined after the merger date. No adjustments have been made to McDigits and Best Logics historical carrying values.



The following discussion and analysis of results of operations and financial condition
relates to our financial statements after giving effect to the reverse acquisition accounting discussed above. For a further discussion about the merger and its related financial impact, see our definitive proxy statement filed on July 1, 2003.



Additionally, in April 2004, we acquired the assets of the Perpetual division
of Next Venture, Inc. d/b/a Sierra Group and the flight support business of Greenick, Inc. d/b/a AirWorks, Inc. The Perpetual business is a systems integrator and supplier of digital video recording systems for commercial and industrial security
surveillance and is part of our digital technology division. The Airworks business provides digital video surveillance solutions to the aircraft industry as well as other electronic solutions and is part of our aviation division. The goal of these
acquisitions is to enhance our product lines to expand our presence within the digital technology marketplace. Our operations currently consist of three divisions: contract manufacturing and sales of industrial, business, and consumer computers;
digital technology development and distribution of video, audio, and data transmission systems and flight support business including aircraft electronics and communications.



RESULTS OF OPERATIONS  COMBINED



The following is a schedule showing the combined operations for our contract manufacturing, digital technology and aviation divisions, with a corporate category primarily
relating to activities associated with income and expense of non-core continuing business of the pre-reverse-acquisition company, as well as general overall corporate expenses.



For the three months ended June 30, 2004



|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|-------------------------------- |  | ----------------- | ----- | - | -------- | - | ----- | --------------------- |  | - | --------- | - |  | ----- | ----- | - |  | - | ------ | -
|                                 |  | DigitalTechnology |       |   | Aviation |   |       | ContractManufacturing |  |   | Corporate |   |  | Total |      
|Net Sales                        |  | $                 | 250   |   |          | $ | 659   |                       |  | $ | 4,649     |   |  | $     |      |   |  | $ | 5,558  |  
|Cost of sales                    |  |                   | 154   |   |          |   | 403   |                       |  |   | 4,034     |   |  |       |      |   |  |   | 4,591  |  
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Gross profit                     |  |                   | 96    |   |          |   | 256   |                       |  |   | 615       |   |  |       |      |   |  |   | 967    |  
|Operating Expenses               |  |                   | 673   |   |          |   | 527   |                       |  |   | 725       |   |  |       | 485   |   |  |   | 2,410  |  
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Income (loss) from operations    |  |                   | (577  | ) |          |   | (271  | )                     |  |   | (110      | ) |  |       | (485  | ) |  |   | (1,443 | )
|Other income (expense)           |  |                   |      |   |          |   |      |                       |  |   | (54       | ) |  |       | 38    |   |  |   | (16    | )
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Loss from operations             |  | $                 | (577  | ) |          | $ | (271  | )                     |  | $ | (164      | ) |  | $     | (447  | ) |  | $ | (1,459 | )
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Total assets as of June 30, 2004 |  | $                 | 2,252 |   |          | $ | 4,750 |                       |  | $ | 4,288     |   |  | $     | 4,879 |   |  | $ | 16,169 |  
|                                 |  |                   |       |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  



For the three months ended June 30,
2003



|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|-------------------------------- |  | ----------------- | ----- | - | -------- | - | --------------------- |  | --------- | ----- | ----- | - | - |  | - | ----- | -
|                                 |  | DigitalTechnology |       |   | Aviation |   | ContractManufacturing |  | Corporate |       | Total |  
|Net Sales                        |  | $                 |      |   |          | $ |                      |  | $         | 2,034 |       | $ |  |  | $ | 2,034 |  
|Cost of sales                    |  |                   |      |   |          |   |                      |  |           | 1,412 |       |   |  |  |   | 1,412 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Gross profit                     |  |                   |      |   |          |   |                      |  |           | 622   |       |   |  |  |   | 622   |  
|Operating Expenses               |  |                   | 653   |   |          |   |                      |  |           | 591   |       |   |  |  |   | 1,244 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Income (loss) from operations    |  |                   | (653  | ) |          |   |                      |  |           | 31    |       |   |  |  |   | (622  | )
|Other income (expense)           |  |                   |      |   |          |   |                      |  |           | 1     |       |   |  |  |   | 1     |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Loss from operations             |  | $                 | (653  | ) |          | $ |                      |  | $         | 32    |       | $ |  |  | $ | (621  | )
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Total assets as of June 30, 2003 |  | $                 | 1,367 |   |          | $ |                      |  | $         | 4,263 |       | $ |  |  | $ | 5,630 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  



For the six months ended June 30, 2004



|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|-------------------------------- |  | ----------------- | ------ | - | -------- | - | ----- | --------------------- |  | - | --------- | - |  | ----- | ----- | - |  | - | ------ | -
|                                 |  | DigitalTechnology |        |   | Aviation |   |       | ContractManufacturing |  |   | Corporate |   |  | Total |      
|Net Sales                        |  | $                 | 281    |   |          | $ | 659   |                       |  | $ | 9,457     |   |  | $     |      |   |  | $ | 10,397 |  
|Cost of sales                    |  |                   | 179    |   |          |   | 403   |                       |  |   | 7,773     |   |  |       |      |   |  |   | 8,355  |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Gross profit                     |  |                   | 102    |   |          |   | 256   |                       |  |   | 1,684     |   |  |       |      |   |  |   | 2,042  |  
|Operating Expenses               |  |                   | 1,167  |   |          |   | 527   |                       |  |   | 1,614     |   |  |       | 692   |   |  |   | 4,000  |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Income (loss) from operations    |  |                   | (1,065 | ) |          |   | (271  | )                     |  |   | 70        |   |  |       | (692  | ) |  |   | (1,958 | )
|Other income (expense)           |  |                   | (2     | ) |          |   |      |                       |  |   | (7        | ) |  |       | 146   |   |  |   | 137    |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Loss from operations             |  | $                 | (1,067 | ) |          | $ | (271  | )                     |  | $ | 63        |   |  | $     | (546  | ) |  | $ | (1,821 | )
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  
|Total assets as of June 30, 2004 |  | $                 | 2,252  |   |          | $ | 4,750 |                       |  | $ | 4,288     |   |  | $     | 4,879 |   |  | $ | 16,169 |  
|                                 |  |                   |        |   |          |   |       |                       |  |   |           |   |  |       |       |   |  |   |        |  



For the six months ended June 30, 2003



|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|-------------------------------- |  | ----------------- | ----- | - | -------- | - | --------------------- |  | --------- | ----- | ----- | - | - |  | - | ----- | -
|                                 |  | DigitalTechnology |       |   | Aviation |   | ContractManufacturing |  | Corporate |       | Total |  
|Net Sales                        |  | $                 | 41    |   |          | $ |                      |  | $         | 4,452 |       | $ |  |  | $ | 4,493 |  
|Cost of sales                    |  |                   | 26    |   |          |   |                      |  |           | 3,106 |       |   |  |  |   | 3,132 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Gross profit                     |  |                   | 15    |   |          |   |                      |  |           | 1,346 |       |   |  |  |   | 1,361 |  
|Operating Expenses               |  |                   | 981   |   |          |   |                      |  |           | 1,099 |       |   |  |  |   | 2,080 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Income (loss) from operations    |  |                   | (966  | ) |          |   |                      |  |           | 247   |       |   |  |  |   | (719  | )
|Other income (expense)           |  |                   |      |   |          |   |                      |  |           | 1     |       |   |  |  |   | 1     |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Loss from operations             |  | $                 | (966  | ) |          | $ |                      |  | $         | 248   |       | $ |  |  | $ | (718  | )
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  
|Total assets as of June 30, 2003 |  | $                 | 1,367 |   |          | $ |                      |  | $         | 4,263 |       | $ |  |  | $ | 5,630 |  
|                                 |  |                   |       |   |          |   |                       |  |           |       |       |   |   |  |   |       |  



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##### Table of Contents

RESULTS OF OPERATIONS  DIGITAL TECHNOLOGY DIVISION



For the Three and Six Months Ended June 30, 2004 Compared to June 30, 2003



We formed our digital technology division in January 2004 to focus on the
development of digital products and technologies for the purpose of broadening our product lines and enhancing our existing mobile digital products. In April 2004, we acquired the assets of the Perpetual division of Next Venture, Inc. to continue
the build out of product offerings within the digital technology division. The division is in its early stages of growth, and continues to concentrate on developing and acquiring new products and technologies and has not yet produced significant
revenues.



Revenues for the three and six months ended June 30, 2004 totaled
$250,000 and $281,000, respectively, compared to $0 and $41,000 for the same three and six month periods in 2003. Gross margins were 38.6% and 36.4% for the three and six months ended June 30, 2004.



Product development costs increased to $255,000 and $506,000 for the three and six months
ended June 30, 2004 from approximately $193,000 and $287,000 during the same three and six month periods of 2003. This increase is primarily the result of the divisions investment in research and development personnel beginning in January
2004.



Selling expenses decreased 46% and 38% for the three and six months
ended June 30, 2004 to $173,000 and $321,000 from $320,000 and $520,000 during the same periods of the prior year. This decrease is related to the reduction in non-essential sales personnel.



General and administrative expenses totaled $237,000 and $326,000 compared to $137,000 and
$149,000 for the three and six month periods ending June 30, 2004 and 2003, respectively. This comparative increase of $100,000 was due to additional personnel, rent and other expenses resulting from the acquisition of the Perpetual business. The
remaining increase was primarily the result of minimal general and administrative expenses in the first quarter 2003, as office and administrative personnel were added in subsequent periods to support higher levels of business activities.



Due to our continued investment in research and development of new digital
technologies and products, and the acquisition of the Perpetual business in the second quarter of 2004 the digital technology division incurred a net loss of $577,000 and $1.1 million for the three and six months ended June 30, 2004 versus a net
loss of $653,000 and $966,000 for the three and six months ended June 30, 2003.



RESULTS OF OPERATIONS  AVIATION DIVISION



The aviation
division is comprised of our newly acquired flight support business, which we refer to as Global Airworks. The divisions current products include Cockpit Door Surveillance Systems (CDSS) which uses digital video technology to allow
the pilot to view activity behind the secured cockpit door from the cockpit. The division has also developed an Electronic Flight Bag that uses digital technology to store and retrieve flight manuals and procedures. The division also provides wire
and harness solutions for various electrical applications within an aircraft. We acquired the assets comprising our Global Airworks business on April 26, 2004. Accordingly, the following discussion of this divisions results of operations
relates to results from April 26, 2004 thru June 30, 2004.



Revenues for the
quarter ended June 30, 2004 totaled $659,000 of which $439,000 pertained to ongoing (core) operations and $220,000 to non core operations resulting from the interim operating agreement. These non core revenues were to complete a seat refurbishment
project which will not be part of operations going forward.



Cost of goods sold
for the quarter ended June 30, 2004 was $229,000 and $174,000 for core and non core operations, respectively, resulting in gross margins of 47.7% for the core operations and 21.1% for the non core operations. The blended gross margin was 39% for the
second quarter 2004.



Operating expenses totaled $527,000 for the quarter ended
June 30, 2004. Significant expenses included salaries totaling $267,000 of which $100,000 was accrued and partially paid as a bonus to a key employee. Rent expense totaled $68,000 for the second quarter of 2004. The Company moved to a new facility
and entered into a new lease agreement effective June 1, 2004. The terms of the new lease are expected to result in a reduction in rent expense of $8,500 per month through the term of the lease which expires May 31, 2007. The relocation required FAA
certification of the new manufacturing facility. The certification process and relocation resulted in a six week period of minimal production and $21,000 in integration expenses to consolidate operations.



The consolidation, certification and integration of the newly acquired division resulted in a
$271,000 net loss for the aviation division in the second quarter of 2004.



RESULTS OF OPERATIONS  CONTRACT MANUFACTURING DIVISION



Our contract manufacturing division manufactures customized computing systems for the industrial, business and consumer markets, with the capability of specialized, custom-manufacture of other electronic products and systems. In addition to
custom manufacturing the division also sources and distributes electronic components and parts.



For the Three and Six Months Ended June 30, 2004 Compared to June 30, 2003



|                   |  |                            |       |                          |   |       |   |      |   |       |  |       |  |   |       |   |  |       |   |   |   |       |  |      
|------------------ |  | -------------------------- | ----- | ------------------------ | - | ----- | - | ---- | - | ----- |  | ----- |  | - | ----- | - |  | ----- | - | - | - | ----- |  | -----
|                   |  | Three Months Ended June 30 |       | Six Months Ended June 30
|                   |  | 2004                       |       |                          | % |       |   | 2003 |   | %     |  | 2004  |  |   | %     |   |  | 2003  |   | %
|Net sales          |  | $                          | 4,649 |                          |   | 100.0 |   |      | $ | 2,034 |  | 100.0 |  | $ | 9,457 |   |  | 100.0 |   |   | $ | 4,452 |  | 100.0
|Cost of sales      |  |                            | 4,034 |                          |   | 86.8  |   |      |   | 1,412 |  | 69.4  |  |   | 7,773 |   |  | 82.2  |   |   |   | 3,106 |  | 69.8 
|                   |  |                            |       |                          |   |       |   |      |   |       |  |       |  |   |       |   |  |       |   |   |   |       |  |      
|Gross profit       |  |                            | 615   |                          |   | 13.2  |   |      |   | 622   |  | 30.6  |  |   | 1,684 |   |  | 17.8  |   |   |   | 1,346 |  | 30.2 
|Operating expenses |  |                            | 725   |                          |   | 15.6  |   |      |   | 591   |  | 29.1  |  |   | 1,614 |   |  | 17.1  |   |   |   | 1,099 |  | 24.7 
|                   |  |                            |       |                          |   |       |   |      |   |       |  |       |  |   |       |   |  |       |   |   |   |       |  |      
|Operating income   |  |                            | (110  | )                        |   | (2.4  | ) |      |   | 31    |  | 1.5   |  |   | 70    |   |  | 0.7   |   |   |   | 247   |  | 5.5  
|Other income       |  |                            | (54   | )                        |   | (1.2  | ) |      |   | 1     |  | 0.0   |  |   | (7    | ) |  | (0.1  | ) |   |   | 1     |  | 0.0  
|                   |  |                            |       |                          |   |       |   |      |   |       |  |       |  |   |       |   |  |       |   |   |   |       |  |      
|Net income         |  | $                          | (164  | )                        |   | (3.6  | ) |      | $ | 32    |  | 1.5   |  | $ | 63    |   |  | 0.6   |   |   | $ | 248   |  | 5.5  
|                   |  |                            |       |                          |   |       |   |      |   |       |  |       |  |   |       |   |  |       |   |   |   |       |  |      



Net sales for the second quarter ended
June 30, 2004 increased to $4.6 million from $2.0 million in the second quarter ended June 2003. Net sales increased to $9.5 million for the six months June 30, 2004 from $4.5 million for the six months ended June 2003. The year over year increase
in net sales was primarily attributed to the increase in sales in the consumer PC market and sales of computer and electronic component parts. Of the $5.0 million increase in net sales year over year, $2.5 million resulted from an increase in sales
in the consumer PC market to Avatar, a Related Party, for the manufacture of consumer PCs for a large electronics retailer, $1.5 million increase in sales of computer and electronic component parts to Prophecy Technologies LLC, a Related Party, and
approximately $800,000 of gaming PCs, a new product line. Net sales for industrial computer products declined by $600,000 for the second quarter of 2004 compared to the second quarter 2003 due to a delay in orders from one of the divisions
primary customers. This delay in orders for industrial computer products during the second quarter of 2004 caused net sales of these products for the six months ended June 30, 2004 to be approximately the same as net sales of industrial computer
products for the six months ended June 30, 2003.



Cost of sales for the second
quarter ended June 30, 2004 was $4.0 million, or 86.8% of sales, compared to $1.4 million, or 69.4% of sales, in the second quarter of 2003. The increase in the cost of sales as a percentage of net sales was due to lower margin products, such as
consumer PCs and electronic and computer component parts, constituting a greater proportion of our overall sales mix in the second quarter of 2004 compared to the same period in 2003. Consumer PC and computer component parts sales totaled $1.7
million and $1.0 million, in the second quarter of June 30, 2004 respectively, with no comparable sales of these products in the second quarter of June 30, 2003. As a result, the blended gross margin for the second quarter of 2004 was 13.2%, based
on a sales mix comprised of approximately 35% for industrial computer products and 65% for consumer PC sales and electronic and computer component parts, compared to a gross margin of 30.6% in the second quarter of 2003, which were entirely
industrial computer products. The higher margins for industrial computer sales are due to the customization required over and above the consumer PC architecture. For the six months ended June 30, 2004, the increase in the percentage of total net
sales for the consumer PC and electronic and computer component parts resulted in a decline in blended gross margin to 17.8% from 30.2% for the six months ended June 30, 2003. The increase in net sales and the change in product mix resulted in an
increase in cost of sales of $4.7 million to $7.8 million for the six months ended June 30, 2004 from $3.1 million as of June 30, 2003.



Operating expenses for the quarter ended June 30, 2004 were $725,000, or 15.6% of sales, compared to $591,000, or 29.1% of sales, in the quarter ended June 30, 2003. The
increase in costs was due to additional salaries, selling and administrative costs, and marketing and promotional costs associated with Vicious PC, our new consumer gaming product, rent expense, and other administrative costs. Selling and
administrative costs associated with Vicious PC totaled $110,000 for the second quarter of 2004 with no corresponding expenses in the second quarter of 2003. Rent expense increased $43,000 for the second quarter of 2004 compared to the second
quarter of 2003. The contract manufacturing division leased additional facility space beginning in January 2004 to accommodate increases in office space, production line and warehouse space needs to support higher sales. Operating expenses for the
first six months of 2004 increased by $515,000 to $1.6 million. The increase is due to an increase in salaries, and related payroll tax expense of $180,000 due to additional production and quality control personnel hired for additional sales volume.
Operating expenses for the first six months of 2004, consisting primarily of salaries, advertising and promotion and professional fees, for Vicious PC totaled $230,000. Vicious PC sales were launched during the fourth quarter of



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##### Table of Contents

2003; therefore, there were no comparable expenses in 2003. Rent expense increased by $85,000 in the first six months of 2004, compared to the first six
months of 2003. However, despite the increases described above, costs as a percentage of sales were reduced, due to economies of scale from higher production levels. We initiated sales into the consumer PC market, which has historically been a low
margin market, to improve production capacity utilization. We believe the use of excess capacity for consumer PCs will result in incremental profitability for the division. However, the delay in orders for higher margin industrial PCs caused a
heavier weighted product mix for consumer PCs resulting in a loss for the second quarter of 2004.



As a result of the above, net loss for the contract manufacturing division for the three months ended June 30, 2004 was $164,000, compared to net income of $31,000 for the three months ended June 30, 2003. Net income
for the six months ended June 30, 2004 was $63,000 compared to $248,000 for the six months ended June 30, 2003.



RESULTS OF OPERATIONS - CORPORATE



As a result of the completion of the reverse acquisition transaction with McDigit and Best Logic in August 2003, the historical results of operations of Global ePoint
reflect those of McDigit and Best Logic for the entire period. The pre-merger operations related to Global ePoint, the public entity prior to the acquisition, have not been shown in the historical financial statements. However, those operations
subsequent to August 2003 are shown as part of results of operations. During the six months ended June 30, 2004, corporate general and administrative costs totaled $692,000 including approximately $372,000 in professional fees associated with a
public company and $300,000 in salaries and compensation. Other income was $146,000 of which $107,000 is earn-out revenue from contingent payments based on performance of the company that acquired Global ePoints prior business. The net result
for corporate operations was a net loss of $546,000 in the six months ended June 30, 2004.



SUMMARY



As a net result of the
combined operations of our contract manufacturing division, aviation division, digital technology division, and corporate activities, Global ePoint incurred a net loss of $1.5 million, or $(.13) per share for the three months ended June 30, 2004,
and a net loss of $1.8 million, or $(.17) per share, for the six months ended June 30, 2004, compared to a net loss of $622,000, or $(.11) per share and $586,000, or $(.10) per share, during the three and six months ended June 30, 2003.



SUBSEQUENT EVENTS



On August 5, 2004, we completed the private placement sale of convertible preferred stock and common stock purchase warrants to three equity
funds managed by Mercator Advisory Group, LLC, of Los Angeles, California. The gross proceeds were $5.5 million, the net proceeds to Global ePoint after fees and expenses totaled $4.95 million. The preferred stock is initially convertible into
common shares at $4.55 per share. In the event of any conversions of the preferred stock after the 120thday from
the closing date, if the market price of our common stock is less than $4.76, then the conversion price applicable to that particular conversion shall be adjusted to a price that shall equal eighty-five percent (85%) of the market price on such
conversion date; provided, that, in no event shall the adjusted conversion price be less than $3.00 per share. In addition to the preferred stock, we issued warrants to purchase 330,000 shares of common stock at an exercise price of $4.76 per share.
The exercise price of the warrants is not subject to adjustment other than customary anti-dilution adjustments.



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LIQUIDITY AND CAPITAL RESOURCES



During the six months ended June 30, 2004, net cash provided by operating activities totaled $711,000 This cash was provided primarily by a
decrease in the net accounts receivable from Related Parties offset by funding necessary for working capital requirements. Net cash received from financing activities, for the six months ended June 30, 2004, totaled $2.3 million all of which was
borrowed from Related Parties to fund the purchase of the Perpetual and AirWorks businesses. As of June 30, 2004, the total outstanding balance on loans from Related Parties was $2.3 million. As a result of the total cash activities, net cash
decreased $1.3 million from December 31, 2003 to June 30, 2004.



On August 5,
2004, we completed the private placement sale of convertible preferred stock and common stock purchase warrants resulting in net proceeds to the Company of $4.95 million. The proceeds from the offering are intended to fund working capital
requirements. It is also likely that we will need to raise additional funds to finance our activities beyond the next 12 months or to consummate acquisitions of other businesses, products, or technologies. In the event we need to raise additional
financing, there can be no assurance that any such financing will be available on acceptable terms. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be
adversely affected. Debt financing will increase expenses and must be repaid regardless of operating results. Equity financing could result in dilution to existing stockholders.



Our future capital requirements may vary materially from those now anticipated. We anticipate that the amount of capital that we will need
in the future will depend on many factors, including:



| |  | the overall levels of sales of our products and gross profit margins;
| | - | ---------------------------------------------------------------------



| |  | market acceptance of the technology and products from our digital technology division;
| | - | --------------------------------------------------------------------------------------



| |  | our business, product, capital expenditure and research and development plans, and product and technology roadmaps;
| | - | -------------------------------------------------------------------------------------------------------------------



| |  | the overall levels of sales of our products and gross profit margins;
| | - | ---------------------------------------------------------------------



| |  | the levels of promotion and advertising that will be required to launch our new products and achieve and maintain a competitive position in the marketplace;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | volume price discounts and customer rebates;
| | - | --------------------------------------------



| |  | the levels of inventory and accounts receivable that we maintain;
| | - | -----------------------------------------------------------------



| |  | acquisition opportunities;
| | - | --------------------------



| |  | capital improvements to new and existing facilities;
| | - | ----------------------------------------------------



| |  | technological advances;
| | - | -----------------------



| |  | our competitors responses to our products;
| | - | -------------------------------------------



| |  | our relationships with suppliers and customers; and
| | - | ---------------------------------------------------



| |  | the effectiveness of our expense and product cost control and reduction efforts.
| | - | --------------------------------------------------------------------------------



CASH FLOWS



Net cash provided by operations decreased in the six months ended June 30, 2004 by $1.8 million as compared to the corresponding period of 2003 due primarily to an
increase in the operating loss. The primary uses of cash for operating activities in the 2004 period resulted from an increase in accounts receivables in the normal course of our sales cycles and the net change in accounts receivable and payable
with Related Parties. The primary sources of cash were from borrowings offset by the asset acquisitions of Perpetual and AirWorks and an increase in accounts payable. The primary source of net cash provided by operating activities for the six month
period ended June 30, 2003 was $1,000,000 from Related Parties and an increase in accounts payables offset by funding of the operating loss and an increase in accounts receivable in the normal course of our sales cycle.



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FORWARD-LOOKING STATEMENTS



All statements included or incorporated by reference in this Report, other than statements or characterizations of historical fact, are
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, estimates and projections about our industry, managements beliefs,
and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as anticipates, expects, intends, plans, predicts,
believes, seeks, estimates, may, will, should, would, could, potential, continue, similar expressions, and variations or
negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions.Our actual results could differ materially and adversely from those expressed
in any forward-looking statement.



Important factors that
may cause a difference include, but are not limited to, the items discussed in the Certain Risk Factors discussion below. We disclaim any obligation to update information contained in any forward-looking statement.



CERTAIN RISK FACTORS



We rely on Related Parties for a substantial portion of our revenues and as the primary source for our component and subsystem
purchases. The loss of business from any of these Related Parties would adversely affect our business.



In the ordinary course of our business, we purchase from, sell products to and perform contract manufacturing services for a number of Related Parties that are owned or
otherwise controlled by Mr. John Pan, our Chief Financial Officer, Chairman, and majority stockholder. During 2003 and the first six months of 2004 we purchased approximately $12.6 and $2.8 million, respectively, worth of products from a number of
these Related Parties. This represents 65% and 34% of our overall cost of goods for the year ended December 31, 2003 and the six months ended June 30, 2004, respectively. In addition, during 2003 and the first six months of 2004, we sold
approximately $11.8 and $4.4 million, respectively, worth of products and contract manufacturing services to a number of these Related Parties. This represents 55% and 43% of our overall sales for the year ended December 31, 2003 and the six months
ended June 30, 2004, respectively. We believe that these Related Party relationships provided access to attractively priced components and products and an additional and substantial amount of sales revenues. However, there are no agreements, written
or otherwise, between Global ePoint and these Related Parties obligating such parties to transact business with us in the future. As a result, these types of Related Party transactions could cease at any time. If our transactions with these Related
Parties cease, our business would be adversely affected.



Our current
revenues and purchases are dependent on a limited number of customers and suppliers, most of which are Related Parties.



For the years ended December 31, 2003 and 2002, three and two customers, respectively, accounted for 83% and 86%, respectively, of our sales. For the six months ended
June 30, 2004 and 2003, four and two customers, respectively, accounted for 79% and 87%, respectively, of our sales. Two of these customers in 2004 were Related Parties. During the fiscal years 2003 and 2002, two vendors accounted for 65% and 83%,
respectively, of our purchases. During the six months ending June 30, 2004 three vendors accounted for 40% of our purchases. Two of these vendors were Related Parties. If we were to lose one or more of those customers before we are able to secure
sales from other customers, our income and financial condition would be materially adversely affected. If we are unable to enter into and maintain satisfactory distribution arrangements with leading suppliers and an adequate supply of products, our
sales could be adversely affected.



We are an emerging growth company
with limited operating history.



Following the acquisition of McDigit
in August 2003, and having essentially ceased operations of prior businesses, we recommenced operations as a new business engaged in designing and selling industrial, business and consumer computers and computing solutions and digital video, audio
and data transmission and recording products. As a result, we have a limited operating history operating our current businesses and forecasting our sales. The future success of our business will depend on our ability to successfully operate
McDigits businesses, both of which are in highly competitive markets. Moreover, our digital technology division operates in a new and emerging market and has not made any material revenues to date. As a new company, it will be necessary for us
to implement additional operational, financial and other controls and procedures in order to be successful.



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Our digital technology business is new and based on emerging technologies. Market demand for digital technologies
is uncertain.



We have a limited history of marketing and selling our
digital video products, and have, to date, not realized any material revenues from the sale of these products. We continue to assess internal and external feedback relating to these products but cannot guarantee that we will be able to successfully
sell products based on those technologies. We initially focused on law enforcement and the military as potential markets for our digital video products and recently began to focus on other potential market segments, including industrial, commercial
and homeland security. Demand for our digital video, audio and data transmission and recording products is uncertain as, among other reasons, our customers and potential customers may:



| | not accept our emerging technologies or shift to other technologies;
|- | --------------------------------------------------------------------



| | experience technical difficulty in installing or utilizing our products; or
|- | ---------------------------------------------------------------------------



| | use alternative solutions to achieve their business objectives.
|- | ---------------------------------------------------------------



The recent global economic slowdown and the decline in information technology spending adversely affected our revenues and any future decline would adversely impact
our markets and revenues.



We believe that sales of our products were
negatively impacted by the recent worldwide economic slowdown, especially in the information technology markets. Although there are signs of an economic recovery, if general economic and industry conditions fail to improve or again deteriorate,
demand for our products could continue to be adversely affected, as could the financial health of our customers, suppliers and the Related Parties. We believe that reductions in state and federal budgets as a result of current economic conditions
have also adversely affected our potential sales to many customers in the public sector. In addition, war and the related political and economic uncertainties, terrorist attacks, national and international responses to terrorist attacks, and other
acts of war or hostility could materially adversely affect our future operating results and financial condition.



The lengthy and variable sales cycle for products sold by our digital technology division makes it difficult to predict sales and may result in fluctuations in
quarterly operating results.



Because customers often require a
significant amount of time to evaluate products sold by our digital technology division before purchasing, the sales cycle associated with these products can be lengthy (up to six months to more than one year). The sales cycles for these products
also varies from customer to customer and are subject to a number of significant risks over which we have little or no control.



During the evaluation period, customers may defer, scale down, or decide not to proceed with proposed orders for various reasons, including:



| | changes in budgets and purchasing priorities;
|- | ---------------------------------------------



| | reduced need to upgrade existing systems;
|- | -----------------------------------------



| | deferral of purchases in anticipation of enhancements or new products;
|- | ----------------------------------------------------------------------



| | introduction of products by our competitors; and
|- | ------------------------------------------------



| | lower prices offered by our competitors.
|- | ----------------------------------------



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Additionally, other factors, many of which are outside of our control, can cause fluctuations in our quarterly operating
results, including:



| | the size, timing, terms and conditions of orders from and shipments to customers;
|- | ---------------------------------------------------------------------------------



| | unanticipated delays or problems in releasing new products;
|- | -----------------------------------------------------------



| | the timing and success of deployment of products and services;
|- | --------------------------------------------------------------



| | unanticipated technological problems with our products;
|- | -------------------------------------------------------



| | our ability to enter into new business transactions under favorable terms; and
|- | ------------------------------------------------------------------------------



| | the amount and timing of investments in research and development activities.
|- | ----------------------------------------------------------------------------



As a result of the long sales cycles for these products and the potential for not consummating a sale due to reasons beyond our control, it is difficult to forecast
sales from one quarter to the next. The deferral or loss of one or more significant sales could materially decrease operating results in any fiscal quarter, particularly if there are significant sales and marketing expenses associated with the
deferred or lost sales. Current and future expense levels are based on internal operating plans and sales forecasts, and therefore our operating costs are, to a large extent, fixed. As a result, we may not be able to sufficiently reduce our costs in
any quarter to compensate for an unexpected near-term shortfall in revenues.



Our future success will depend upon our ability to react to changes in our primary markets and identify new markets for potential expansion.



The markets for our products are characterized by rapidly changing technology, evolving industry standards, changes in customer requirements
and frequent new product introductions and enhancements. The introduction of products embodying new technology and the emergence of new industry standards can render our existing products obsolete and unmarketable and can exert price pressures on
existing products. Additionally, our failure to identify new, viable markets for our products and applications may not allow us to maximize our potential returns. It is critical to our success to be able to anticipate changes in technology or in
industry standards and to successfully develop and introduce new, enhanced, and competitive products on a timely basis. There can be no assurance that we will successfully develop new products, introduce new applications for existing products,
identify new markets, that new products and applications will achieve market acceptance or that the introduction of new products or technological developments by others will not render our products obsolete.



If we are unable to compete successfully, our business, financial condition and
operating results could suffer.



The global market for computers and
digital video, audio and data transmission and recording products is intensely competitive, both in the number and breadth of competing companies and products and the manner in which products are sold. The market for our products is characterized by
aggressive pricing by several large branded and numerous generic competitors, short product life cycles, and price sensitivity by customers. We compete primarily on the basis of price, quality, in-time, scaleable production capabilities and customer
service. To the extent we are unable to compete successfully, our revenues and business prospects would be affected adversely. We expect these competitive pressures to continue into the foreseeable future.



Competitors may be able to develop more quickly or adapt faster to new or emerging
technologies and changes in customer requirements, or devote greater resources to the development, promotion, and sale of their products. Substantially all of our competitors have longer operating histories, larger customer bases, longer standing
relationships with customers, greater name recognition and significantly greater financial, technical, marketing, customer service, public relations, distribution and other resources. New competitors or alliances among competitors could emerge and
rapidly gain significant market share. In addition, some customers may in the future decide to develop internally their own solutions instead of purchasing them from us. Increased competition could force us to lower our prices or take other actions
to differentiate our products, which could result in decreased revenues and increased expenditures.



We are dependent on securing contracts with a number of government agencies for our digital technology products.



During the foreseeable future, a portion of the anticipated growth in our digital technology division will be dependent on the expansion of relationships with
government agencies, including law enforcement agencies. Government contracts are subject to many risks and uncertainties, some of which are not found in contracts with private parties. Some of these risks include:



| | decreases in the levels of government expenditures and authorizations for law enforcement and security related programs;
|- | ------------------------------------------------------------------------------------------------------------------------



| | resource allocation shifts to programs in areas where we do not provide products;
|- | ---------------------------------------------------------------------------------



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| | prevention from entering into new government contracts or extending existing contracts based on violations or suspected violations of procurement laws or regulations;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | failure to receive security clearances required to sell products to governments or revocation of such security clearances;
|- | --------------------------------------------------------------------------------------------------------------------------



| | impairment of our reputation or relationship with government agencies;
|- | ----------------------------------------------------------------------



| | changes in government procurement procedures; and
|- | -------------------------------------------------



| | suspension of our ability to contract with a domestic or foreign government, or any significant law enforcement agency.
|- | -----------------------------------------------------------------------------------------------------------------------



Government regulation of communications monitoring could cause a decline in the use of
our digital video surveillance products, result in increased expenses, or subject us and our customers to regulation or liability.



As the communications industry continues to evolve, governments may increasingly regulate products that monitor and record voice, video, and data transmissions over
public communications networks. For example, the products we sell to law enforcement agencies, which interface with a variety of wireline, wireless, and Internet protocol networks must comply in the United States with the technical standards
established by the Federal Communications Commission pursuant to the Communications Assistance for Law Enforcement Act and in Europe by the European Telecommunications Standard Institute. The adoption of new laws governing the use of our products or
changes made to existing laws could cause a decline in the use of our products and could result in increased costs, particularly if we are required to modify or redesign products to accommodate these new or changing laws.



Failure to develop strategic alliances could limit our ability to grow.



As part of our ongoing growth strategy, we intend to pursue new
strategic alliances and transactions with third parties. No assurances can be given that we will be able to effect these alliances and transactions on commercially reasonable terms or at all. Furthermore, no assurances can be given that any benefits
will be realized from such arrangements.



Our products may contain
undetected technological defects, which could impair their market acceptance.



We market and sell products that are technologically complex. Our products may contain undetected defects or errors, particularly when first introduced or as new versions are released. We may incur significant costs to correct undetected
defects or errors in our products and these defects or errors could result in future lost sales. In addition, product defects or errors may result in product liability claims, which could cause adverse publicity and impair market acceptance of our
products. Our digital video surveillance products have not been manufactured in production volumes to date and may contain undetected defects that manifest themselves only after we produce them in production volumes. Technical defects or errors may
not be discovered until after a product has been released and used by the customer. Moreover, our products and technology must interface with the technologies of many other technology and product providers in order to satisfy the end-users
needs. If a third-partys products are not operating properly or contain errors, the timing of shipments of our products could be delayed. For example, in the fourth quarter of 2003, the operating system software that was to be installed on the
consumer PCs that we were shipping to Avatar for sale to a customer in Latin America contained errors that had to be corrected by the software vendor. These errors caused a delay in the shipment of orders of our products to this market until the
problem was corrected in the first quarter of 2004.



Our intellectual
property rights may not be adequate to protect our business.



We
currently do not hold any patents for our products. To date, we have filed one patent application relating to certain elements of the technology underlying our digital video surveillance products. Although we expect to continue filing, where
applicable, patent applications related to our technology, no assurances can be given that any patent will be issued on our patent application or any other application that we may file in the future or that, if such patents are issued, they will be
sufficiently broad to adequately protect our technology. In addition, we cannot assure you that any patents, which may be issued to us, will not be challenged, invalidated, or circumvented.



Even if we are issued patents they may not stop a competitor from illegally using our
patented applications and materials. In such event, we would incur substantial costs and expenses, including lost time of management in addressing and litigating, if necessary, such matters. Additionally, we rely upon a combination of copyright,
trademark and trade secret laws, license agreements and nondisclosure agreements with third parties and employees having access to confidential information or receiving unpatented proprietary know-how, trade secrets and technology to protect our
proprietary rights and technology. These laws and agreements provide only limited protection. We can give no assurance that these measures will adequately protect us from misappropriation of proprietary information.



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Our products may infringe on the intellectual property rights of others, which could lead to costly disputes or
disruptions.



The information technology industry is characterized by
frequent allegations of intellectual property infringement. In the past, third parties have asserted that certain of our digital video surveillance products infringe their intellectual property and they may do so in the future. Any allegation of
infringement could be time consuming and expensive to defend or resolve, result in substantial diversion of management resources, cause product shipment delays or force us to enter into royalty, license, or other agreements rather than dispute the
merits of such allegation. If patent holders or other holders of intellectual property initiate legal proceedings, we may be forced into protracted and costly litigation. We may not be successful in defending such litigation and may not be able to
procure any required royalty or license agreements on acceptable terms or at all.



If our products infringe on the intellectual property rights of others, we may be required to indemnify customers for any damages they suffer.



We generally indemnify our customers with respect to infringement by our products of the proprietary rights of third parties in the event
any third party asserts infringement claims directly against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these
claims succeed, we may be forced to pay damages on behalf of our customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to
stop using, or in the case of value added resellers, selling our products.



Failure to hire and retain qualified personnel could limit our ability to grow.



We depend on the continued services of our executive officers and other key personnel including our current Chief Executive Officer and Chief Financial Officer. If we were to lose the services of one or more of our
key personnel our business would be adversely affected. In addition, in connection with the shifted focus of our business we may need to attract and retain a substantial number of new employees, particularly sales and marketing personnel and
technical personnel who understand and have experience with our emerging products and services. If we are unable to attract and retain qualified employees, our ability to grow could be impaired. Competition for qualified personnel is intense, and we
have experienced difficulty in recruiting qualified personnel due to the market demand for their services.



Reliance on Suppliers.



We
require a high volume of quality products and components for our contract manufacturing operations, substantially all of which we obtain from outside suppliers. Most of our current suppliers are Related Parties. In some circumstances we maintain
single-source supplier relationships. If the supply of a key material product or component is delayed or curtailed, our ability to ship in desired quantities and in a timely and cost-effective manner could be adversely affected. We seek to mitigate
such risks by having dual sources of supply where appropriate and by using reputable and reliable suppliers. However, even where multiple suppliers are available, certain key components are at times subject to industry-wide availability and pricing
pressures. If the cost of our components increases for any reason, our gross margins will be negatively impacted. Moreover, in cases where we need to switch to another supplier and alternative sources of supply are available, qualification of the
sources and establishment of reliable supplies could result in delays and possible reduction in our sales.



Our reliance on third-party suppliers of key products and components also exposes us to potential product quality issues that could affect the reliability and performance of our products. If we are unable to ship our
products and solutions in desired quantities and in a timely manner due to a delay or curtailment of the supply of material products or components, or product quality issues due to faulty products or components manufactured by third-party suppliers,
the market for our products or services could be adversely affected with a resulting reduction in revenues and gross margin.



Risks of Acquisitions, Joint Ventures and Strategic Alliances; Dilution.



In the past, we have acquired companies and assets and entered into certain strategic alliances, including the purchase of assets from Next
Venture, Inc. and AirWorks, Inc. in April 2004. We also may make additional acquisitions and enter into joint ventures in the future. While we believe we will effectively integrate such businesses, joint ventures, or strategic alliances with our
own, we may be unable to successfully do so and may be unable to realize expected cost savings and/or sales growth. Regarding the assets purchased from Next Venture and AirWorks, the acquired businesses are in emerging markets and their performance
is subject to the inherent volatility of such markets. Furthermore, AirWorks assets were purchased from an assignee for the benefit of creditors, which means that the business was not successful in the past. Acquisitions, joint ventures and
strategic alliances may involve significant other risks and uncertainties, including distraction of managements attention away from normal business operations, insufficient revenue generation to offset liabilities assumed and expenses
associated with the transaction, and unidentified issues not discovered in our due diligence process, such as product quality and technology issues and



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legal contingencies. In addition, in the case of acquisitions, we may be unable to smoothly integrate the acquired companies marketing, technology,
production, development, distribution and management systems. Our operating results could be adversely affected by any problems arising during or from acquisitions or from modifications or termination of joint ventures and strategic alliances or the
inability to effectively integrate any future acquisitions. We may be required to assume more debt or issue Common Stock to support our recent purchases of assets from Next Venture and AirWorks assignee. We will be required to issue Common
Stock in consideration for the assets purchased from Next Venture if certain performance goals are attained. Furthermore, we have borrowed money to support the purchase of AirWorks assets and we may be required to borrow additional funds
and/or issue stock to cover additional payments required by the asset purchase agreement with AirWorks. If additional Common Stock is issued, current stockholders ownership percentage and earnings per share would become diluted.



Additional funding may be required.



It is likely that we will need to raise additional funds to finance our activities beyond
the next 12 months. In the event we need to raise additional financing, there can be no assurance that any such financing will be available on acceptable terms. If such financing is not available on satisfactory terms, we may be unable to continue
or expand our business as desired and operating results may be adversely affected. Debt financing will increase expenses and must be repaid regardless of operating results. Equity financing could result in dilution to existing stockholders.



In addition, any financing arrangement may have potentially adverse effects on
us or our stockholders. Debt financing (if available and undertaken) may involve restrictions limiting our operating flexibility. Moreover, if we issue equity securities to raise additional funds, the following results may occur:



| | the percentage ownership of our existing stockholders will be reduced;
|- | ----------------------------------------------------------------------



| | our stockholders may experience additional dilution in net book value per share; or
|- | -----------------------------------------------------------------------------------



| | the new equity securities may have rights, preferences or privileges senior to those of the holders of our Common Stock.
|- | ------------------------------------------------------------------------------------------------------------------------



No assurances can be given that continued expenditures on research and development will
prove beneficial.



We intend to continue significant expenditures on
research and development to develop new products and enhance its existing products, especially in its digital technology division. While we believe that these current research and development expenditures will be beneficial in the long-term
development of its business, there can be no assurance that our development and enhancement of products will be successful. Research and development expenditures are incurred substantially in advance of related revenue and in some cases do not
result in the generation of revenue.



Orders for our computer products
are generally cancelable or may be delayed by our customers without substantial penalties.



Orders for our computer products have been cancelled or delayed by our customers in the past. In general we attempt to work with our customers if there is a need to delay or cancel an order. There can be no assurance
that similar cancellations or delays will not occur in the future. In the event that cancellations or order delays occur, our operating results will be negatively impacted.



We may be obligated to issue more shares of Common Stock to the prior stockholders of McDigit based on our future financial
performance.



Pursuant to the Reorganization and Stock Purchase
Agreement related to the acquisition of McDigit, we may be obligated to issue additional shares of our Common Stock to Mr. John Pan based on the achievement by the Company of specific financial milestones in 2004 and 2005 and on the occurrence of
other specific conditions. Accordingly, the final number of shares of our Common Stock that may be issued pursuant to this Agreement may not be known until sometime in 2006; provided, that we know that the aggregate number of shares of Common Stock
that may be issued pursuant to the agreement will not exceed 85% of the then issued and outstanding shares of our Common Stock. If additional shares of Common Stock are issued to Mr. Pan pursuant to the Reorganization Agreement, then current
stockholders ownership percentage and earnings per share may become diluted.



Two of our former employees and directors have made negative assertions about us, and similar assertions in the future could harm our reputation and cause us to expend resources in response.



Following the restructuring of our digital technology division in January 2004, two former
employees of this division who were also directors of Global ePoint, resigned from the Board. These resignations were reported in our current report on Form 8-K dated January 26, 2004. At the time of their resignation and for several months prior to
that time, these individuals had made a number of allegations against the company and our Board of improper acts and business practices. In response to these allegations, our Audit Committee, composed of independent directors, investigated the
specific allegations which were brought to the attention of the officers and directors of the Company by these individuals. The Audit Committee solicited the advice of legal counsel and independent accountants in connection with its investigation.
Following its investigation, the Audit



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Committee concluded that there was no basis for the allegations that had been made. Since the date of their resignations, Global ePoint has not received any
further contact from these individuals. However, there can be no assurance that claims will not be brought by these individuals.



ITEM 3. CONTROLS AND PROCEDURES



As of June 30,
2004, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Exchange Act Rule 13a-15(e) and Rule 15d-15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the our disclosure controls and procedures are effective at a
reasonable level in timely alerting them to material information relating to the company that is required to be included in our periodic filings with the Securities and Exchange Commission. There has been no change in our internal control over
financial reporting that occurred during our most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.



Our management, including our Chief Executive Officer and Chief Financial Officer, do not
expect that our disclosure controls and procedures or internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met due to numerous factors, ranging from errors to conscious acts of an individual, or individuals acting together. In addition, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations in a cost-effective control system, misstatements due to error and/or fraud may occur and not be detected.



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PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



None.



ITEM 2. CHANGES IN SECURITIES



On
August 5, 2004, we filed with the Secretary of State of Nevada, a certificate of designations which designates 55,000 shares of our preferred stock as Series A Convertible Preferred Stock. All 55,000 of these shares were issued on August 5, 2004 in
connection with the equity private placement discussed elsewhere in this report. Our Series A Convertible Preferred Stock has certain dividend rights and liquidation preferences that rank senior to our common stock, but does not have voting rights.
The certificate of designations for the Series A Convertible Preferred Stock is included as Exhibit 3.1 to our Current Report on Form 8-K filed on August 11, 2004.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



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



None.



ITEM 5. OTHER INFORMATION



None.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (A) | EXHIBITS:
| | --- | ---------



|     |  |                                                                                                                                                                                                                                                                           
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.  |  | Description                                                                                                                                                                                                                                                               
|2.1  |  | Asset Purchase Agreement, dated April 5, 2004, by and among Global ePoint, Inc. and Next Venture, Inc. (Incorporated by reference to Exhibit 2.1 to Form 8-K filed on May 3,
2004).                                                                                       
|     | 
|2.2  |  | Bill of Sale, dated April 26, 2004, by and among Global ePoint, Inc. and Insolvency Services Group, Inc. (Incorporated by reference to Exhibit 2.1 to Form 8-K filed on May 11,
2004).                                                                                    
|     | 
|2.3  |  | Asset Agreement, dated April 24, 2004, by and among Global ePoint, Inc. and Greenick, Inc., effective April 15, 2004. (Incorporated by reference to Exhibit 2.2 to Form 8-K filed on May 11,
2004).                                                                       
|     | 
|2.4  |  | Addendum to Asset Agreement, dated April 21, 2004, by and among Global ePoint, Inc. and Greenick, Inc. (Incorporated by reference to Exhibit 2.3 to Form 8-K filed on May 11,
2004).                                                                                      
|     | 
|2.5  |  | Second Addendum to Asset Agreement, dated May 10, 2004, by and among Global ePoint, Inc. and Greenick, Inc. (Incorporated by reference to Exhibit 2.4 to Form 8-K filed on May 11,
2004).                                                                                 
|     | 
|2.6  |  | Agreement dated April 21, 2004, by and among Global ePoint, Inc. and Greenick, Inc. (Incorporated by reference to Exhibit 2.5 to Form 8-K filed on May 11, 2004).                                                                                                         
|     | 
|3.1  |  | Certificate of Designations of Preferences and Rights of Series A Convertible Preferred Stock of Global ePoint, Inc. (Incorporated by reference to Exhibit 3.1 to Form 8-K filed on August 11,
2004).                                                                     
|     | 
|10.1 |  | Subscription Agreement by and among Global ePoint, Inc. and Mercator Advisory Group LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP and Monarch Pointe Fund, Ltd. (Incorporated
by reference to Exhibit 10.1 to Form 8-K filed on August 11, 2004).       
|     | 
|10.2 |  | Registration Rights Agreement by and among Global ePoint, Inc. and Mercator Advisory Group LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP and Monarch Pointe Fund, Ltd.
(Incorporated by reference to Exhibit 10.2 to Form 8-K filed on August 11, 2004).
|     | 
|10.3 |  | [Form of] Warrant to Purchase Common Stock granted to Mercator Advisory Group LLC, Mercator Momentum Fund, LP, Mercator Momentum Fund III, LP and Monarch Pointe Fund, Ltd. (Incorporated by
reference to Exhibit 10.3 to Form 8-K filed on August 11, 2004).             
|     | 
|31.1 |  | Certification of CEO  Rule 13a  14(a) or 15d  14(a)*                                                                                                                                                                                                                   
|     | 
|31.2 |  | Certification of CFO  Rule 13a  14(a) or 15d  14(a)*                                                                                                                                                                                                                   
|     | 
|32   |  | Certification pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002+                                                                                                                                                   



---

|* | Filed herewith
|- | --------------



|+ | Furnished herewith
|- | ------------------



(B) REPORTS ON FORM 8-K:



During the quarter ended June 30, 2004, the Company filed five reports on Form 8-K.



| | (1) | On April 13, 2004, we filed a report on Form 8-K under Items 7 and 12 disclosing our financial results for the fourth quarter and year ended December 31, 2003
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | On May 3, 2004, we filed a report on Form 8-K under Items 5 and 7 relating to our acquisition of the Perpetual digital division from Next Venture, Inc.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | On May 11, 2004, we filed a report on Form 8-K under Items 2, 5 and 7 relating to our acquisition of the AirWorks flight support business. We amended this Form 8-K on July 12, 2004
to include the required financial statements and pro forma financial information.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (4) | On May 27, 2004, we filed a report on Form 8-K under Items 7 and 12 disclosing our financial results for the first quarter of 2004.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



In accordance with the requirements of
the exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.



|                      |  |  |  |                                     
|--------------------- |  |  |  | ------------------------------------
|                      |  |  |  | GLOBAL EPOINT, INC.                 
|                      |  | 
|Date: August 23, 2004 |  |  |  | /s/ Toresa Lou                      
|                      |  |  |  | Toresa Lou,                         
|                      |  |  |  | Chief Executive Officer             
|                      |  | 
|Date: August 23, 2004 |  |  |  | /s/ John Pan                        
|                      |  |  |  | John Pan,                           
|                      |  |  |  | Chief Financial Officer and Chairman



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