UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2004
                        Commission file number 000-31713

                                 RAPIDTRON, INC
                 (Name of small business issuer in its charter)

                     Nevada                              88-0455472
          (State or other jurisdiction                 (IRS Employer
                of incorporation)                    Identification No.)

         3151 Airway Avenue, Building Q                    92626
             Costa Mesa, California                     (Zip Code)
    (Address of principal executive offices)

                     Issuers telephone number  949-798-0652

    Securities registered pursuant to Section 12(b) of the Exchange Act: None

   Securities registered pursuant to Section 12(g) of the Exchange Act:  Common
                                                                         Stock

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

Check  if there is no disclosure of delinquent filers in response to Item 405 of
Regulation  S-B  is  not  contained  in  this  form,  and  no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  form  10-KSB  [x]

Issuer's  revenues  for  its  most  recent  fiscal  year:  $2,037,130.

The  aggregate  market  value  of the Common Stock held by non-affiliates of the
Registrant  as  of  March  28, 2005, was approximately $6,000,409 based upon the
closing  price  of  the  Registrant's  Common  Stock  on  such  date.

There  were  20,691,067 shares of Common Stock outstanding as of March 28, 2005.

Documents  incorporated  by  reference.  Our  definitive  proxy  solicitation on
Schedule  14A  for  our  annual meeting of the stockholders to be filed with the
Commission  on  or  before  120  days  following  the end of our fiscal year, is
incorporated  herein  by  reference  in  Items  5,  9,  10,  11,  12, 13 and 14.
Transitional  Small  Business  Disclosure  Format (Check one): Yes     ; No  X
                                                                   ---      ---


<PAGE>
TABLE OF CONTENTS



ITEM  1.  DESCRIPTION  OF  BUSINESS. . . . . . . . . . . . . . . . . . . . . . 2

ITEM  2.  DESCRIPTION  OF  PROPERTY. . . . . . . . . . . . . . . . . . . . . . 8

ITEM  5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL
BUSINESS  ISSUER  PURCHASER  OF  EQUITY  SECURITIES  . . . . . . . . . . . . . 8

ITEM  6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS .  . . . . . . . . . . . . .10

ITEM  7.  FINANCIAL  STATEMENTS . . . . . . . . . .  . . . . . . . . . . . . .21

ITEM  8A. CONTROLS  AND  PROCEDURES . . . . . . . .  . . . . . . . . . . . . .49

ITEM  8B. OTHER  INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .49

ITEM  9.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT . . . . . .51

ITEM  10. EXECUTIVE  COMPENSATION . . . . . . . . .  . . . . . . . . . . . . .51

ITEM  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED  STOCKHOLDER  MATTERS . . . . . . . . . . . . . . . . . .  . . . . . .51

ITEM  12. CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS . . . . . . . . .51

ITEM  13. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

ITEM  14. PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES . . . . . . . . . . . . .52

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53


<PAGE>
ITEM  1.  DESCRIPTION  OF  BUSINESS

     Overview

We are headquartered in Costa Mesa, California, and we intend to become the
leading provider of Radio Frequency ("RF") smart card access control and
ticketing/membership systems by providing the premier technology for
operator-free entry and exit turnstiles.

We are currently the exclusive North American distributor for Axess AG, an
Austrian developer and manufacturer of software and equipment for entry and exit
control utilizing bar code and Smart chip technology. The equipment consists of
cards, card readers, turnstiles, radio frequency emitters and other equipment
which may be identified as useful in a particular market. Axess AG manufactures
some of the equipment components and assembles others manufactured by various
European vendors. Axess AG has installed its RF smart card technology in over
5,000 smart access gates and 2,100 point-of-sale systems to transit companies
and vacation resorts in Europe.

We provide marketing research, sales, installation, software integration and
customer service for products purchased from Axess AG and sold under the
Rapidtron brand name. We contract additional marketing research from Equus
Marketing, a related party. We sell turnstiles with door, counter and handheld
readers manufactured by Axess AG to the fitness, university, and winter resorts
industries in North America utilizing two technologies, RF smart chip (ISO
standard smart cards, key cards and ID bracelets) and bar code tickets. The RF
smart cards are contactless with multilevel read/write capabilities for
debit/credit, affinity/loyalty programs, access, parking, and doors. The bar
code tickets are an inexpensive, read only medium for access operations.

In Europe, Axess AG provides a complete software package as part of the system
it sells. In North America, the resort, fitness and university markets prefer to
buy their software solutions separately and do not purchase turnkey solutions
because they often customize the software for their individual enterprises. We
develop the interface software and own the rights to these interfaces.

We are currently selling the access products to fitness clubs, winter resorts
and universities. We continue to work with Axess AG to research and develop new
products for these industries and other markets in North America.

     Corporate  History

Rapidtron, Inc., a Nevada corporation, was formerly known as The Furnishings
Club and was formed March 22, 2000, with the intent to be an online retailer of
furniture and home accessories. However, as a result of the difficulty in
raising additional working capital to execute the business plan, the company
abandoned its plan of operation and sought to acquire another business.

On September 30, 2002, we changed our name to Rapidtron, Inc., a Nevada
corporation, in anticipation of a merger with Rapidtron, Inc., a Delaware
corporation ("Rapidtron Delaware"). We closed the acquisition of Rapidtron
Delaware on May 8, 2003. Immediately prior to the acquisition, we had 20,000,000
shares authorized and 19,993,752 shares of common stock issued and outstanding.
Pursuant to the acquisition, all of the 10,052,000 issued and outstanding shares
of Rapidtron Delaware (including 128,000 shares for the settlement of accrued
salaries) were exchanged for 9,600,000 shares of our company on a 0.955 to 1
basis. Concurrent with our acquisition of Rapidtron Delaware, 13,943,750 shares
of our common stock were cancelled. As a result, immediately after the
acquisition, we had 15,650,002 shares of common stock issued and outstanding.


<PAGE>
Immediately after the acquisition, the officers and directors of the company
resigned and management of Rapidtron Delaware took control of such positions,
therefore effecting a change of control. As a result, the transaction was
recorded as a "reverse merger" whereby Rapidtron Delaware was considered the
accounting acquirer as it retained control of the company after the merger.
However, legally Rapidtron Delaware became a wholly-owned subsidiary of the
company after the acquisition. Since The Furnishings Club's continuing
operations and balance sheet are insignificant, all financial data and
management, discussion and analysis are those of Rapidtron Delaware, before and
after the acquisition.

     Principal  products  and  services  and  their  markets

We distribute the access control systems manufactured by or on behalf of Axess
AG. We have an exclusive distribution agreement for the North American market
with Axess AG. We sell, install and service all North American installations for
Axess AG. Axess AG developed and manufactured these systems based in part on our
market research completed over the past six years. These systems are versatile
and read either bar code or RF smart cards and other media (tags, ID bracelets,
etc.). This dual capability allows a venue to issue and re-issue numerous types
and durations of access privilege cards. Bar code tickets and cards are commonly
found in grocery stores where they are read at check-out counters. Bar code
tickets and cards are also common at fitness clubs where they are checked by
operator-assisted manual scanning done at front desk entry, and athletic and
amusement venues where tickets are manually checked, or manually scanned by
staff members at entry to the arena or amusement park.

RF smart cards, a technology that has been in existence since 1988, but
primarily in Europe, incorporate an antenna and a 2K memory chip and
microprocessor laminated between two plastic sheets. Our RF smart cards provide
passive contact-less identification technology. These cards require no
electrical contacts, or visual contact. Our RF smart cards operate in harsh
environmental conditions such as skiing at winter resorts in extreme
temperatures. They also provide handsfree operation at the turnstile, as the
long range antennas can read the cards in the pockets of the skier without being
removed and placed near the reader. Our RF smart cards have read/write memory,
which means the card, when read by one of our RF ID readers, can read the data
on the card, debit (points or cash) and write new data in addition to the value
stored on the card.

Our RF smart card is passive, which means it is powered by the reader field,
unlike an active card (transponder) with a battery. Our card and reader has a
reading range of 10 to 120 centimeters. This allows the card to be utilized for
hands-free operation. The range of 10 to 120 centimeters is totally dependent on
the size of the antenna. Our indoor system of satellite readers provides
proximity reading of smart cards at a range of up to 10 centimeters, and our
resort systems with long range antennas can read cards at a range of up to 120
centimeters for hands free operation. The Rapidtron smart card utilizes a 13.56
MHZ transponder for fast communication speed. We currently utilize the ISO 15693
standard chip.

Our automated system allows a fitness club to use its existing bar code
membership cards to start and upgrade to smart cards at any time. We can
incorporate smart card debit/credit technology for retail purchases for a
wallet-less workout or visit. Our system offers a variety of read/write smart
media: cards, key fobs, and ID bracelets, for multifunctional capabilities
including access, debit/credit and affinity/loyalty programs, parking and other
uses. Our unique printers can issue both bar code tickets and smart cards. Our
smart cards come with four color printing on the front with the client's design.
Utilizing our Thermo printer, the reverse side can be printed on site with
photos and copy that can be removed and reprinted when re-programming the smart
cards on the printer. As a result, our Thermo read/write smart cards are 100%
recyclable.


<PAGE>
Our proven technology has been in operation for six years with approximately
5,200 access and 2,350 point of sale systems in Europe and North America. The
European installations were sold, installed and serviced by Axess AG.

The products sold by Axess AG in Europe include a "turnkey" software solution
that integrates the access control equipment with the home office software used
by the customer to manage its consumer information. In North America, our Axess
AG products include an open architecture software that allows us to customize
the integration software that communicates between the access control equipment
and the customer's home office. In 2004, we acquired a COM DLL integration
software developed exclusively for us by a Canadian software company. This
integration software makes it easy for our customers to integrate their existing
operating software with the software used in the smart card turnstile system.
This allows them to begin using the turnstiles to automatically communicate to
their main computer program they used prior to purchasing our system. Because it
is a COM DLL software, the customer can change parts of its operating software
or update the software used in the smart card turnstile system without requiring
a reconfiguration of either software.

We have and continue to research the North American market for applications of
the Axess systems and report back to Axess AG's research and development
department regarding what changes in software and equipment are required to met
the needs of specific industries. Please see subheading "Research and
Development" below for further detail about our R&D investment.

We have defined the following three industries that we are currently targeting:
(1) fitness, (2) winter resorts, and (3) universities.

We have established a presence in the North American marketplace by providing
the smart card access control systems manufactured by Axess AG to Copper
Mountain in Colorado, Park City Resort in Utah, and Tamarack Ski Resort in New
York, and the bar code system to the University of California, Berkeley, and the
University of California at Los Angeles and several leading fitness clubs. We
anticipate having additional orders from Park City, Copper Mountain, UC
Berkeley, and several other winter resorts and fitness clubs in 2005.

Rapidtron works with Axess AG and develops new and enhanced products for our
targeted markets. When testing these products, Rapidtron and Axess AG select
Beta sites to test the new product under agreements with Rapidtron. We strive to
contract with industry leaders to perform the Beta testing. Concurrently with
the testing of the Beta sites, Rapidtron markets the new product to key players
in the market, identified by Rapidtron during its market research phase.
Rapidtron sells the products and provides customer service support for both the
equipment and the software, some of which is provided through its distribution
agreement with Axess AG, and some of which Rapidtron provides directly.

     Distribution  methods  of  the  products  or  services

All our products and services are currently sold through commissioned sales
representatives or direct selling. We currently have 9 commissioned independent
sales representatives.

After successfully testing in the market at the Beta sites mutually agreed upon
by Rapidtron and Axess AG, we launch our marketing programs and new equipment at
the next major trade show. Prior to the trade show, we provide information to
the market through advertising, public relations programs and our web site. We
develop and publish marketing materials such as brochures and manuals specific
to each industry. We train sales representatives working directly with Rapidtron
or through agreements with outside agencies. We educate the sales
representatives about our product benefits and the estimated return on
investment based upon our market research.


<PAGE>
We then sell the products and provide customer service support for both the
equipment and the software, some of which is provided through our distribution
agreement with Axess AG, and some of which Rapidtron provides directly. The
majority of our equipment is supplied by Axess AG, while other peripheral items
such as ADA gates and platforms are supplied by local vendors. We also plan to
sell service contracts in the future to large customers with several options
including full service with parts, software support and yearly visits.

We issue purchase orders to Axess AG, which delivers the equipment with shipping
terms of "FOB place of shipment". We generate our orders based upon the orders
generated and sales forecasts that are made based on leads generated by contacts
made by our sales representatives, at trade shows and mailers. Our orders are
updated monthly with a rolling one year forecast.

We receive shipments from Axess AG, assemble them with IP addresses and make
other modifications as required by each order. We then ship the products to the
customer with an accompanying packing slip and invoice to each location as
specified. We coordinate and provide installation of the equipment and software
for a fee, or for large clients, we provide the integration software and
training so the customer can provide their own installation service.

As part of our distribution process, we develop plans for software (firmware)
and equipment and the manufacturing of smart cards and assembly of the access
control products, primarily indoor and outdoor turnstiles and bar code and smart
card readers.

     Competition

We have focused on two main niche markets in the lifestyle and active sports
industries, namely Fitness and Winter Resorts. We know of only one competitor in
the winter resort market, Ski Data. As of the date of this annual report, we
believe that Ski Data has not successfully interfaced with any of the ski slope
software providers in North America. We have successfully interfaced with all
three providers (Comptrol, Siriusware and RTP), which resulted in the sale to
Copper Mountain (Siriusware), Park City (RTP), and Tamarack Resort (RTP).

We believe we offer the broadest range of products with access readers and
turnstiles offering both smart and Bar Code technology in the North American
fitness market. We also believe that we are the only company in the fitness
market that has developed a product that successfully interfaces with the seven
leading software management providers in the fitness industry, Aphelion, ASF,
CSI, Check Free, Twin Oaks, Computer Outfitters and CSI.

The transit industry has several large access system providers, who are
primarily magnetic stripe based but are now offering smart card systems as well.
We have had no sales to the transit industry since 2002. We are not currently
targeting this industry, but we may do so in the future.

Our partner, Axess AG, has been successful in installing its access platform in
most of the large winter resorts in Europe over the past six years and has
approximately 5,000 access systems and 2,100 POS (point of sale) stations in
operation. Axess AG manages the sales and service to the European market, while
Rapidtron manages the sales and service to the North American market.

     Principal  supplier  and  sources  and  availability  of  raw  materials

We rely upon Axess AG for our supply of inventory. Our agreement with Axess AG
expires upon the last day of April following at least 12-months advance written
notice. No notice to terminate has been delivered by either party to date.


<PAGE>
Axess AG has its own printing and assembly plant for four color bar code tickets
and RF smart cards. Axess AG orders RF chips primarily from Texas Instruments
(ISO 15963) and laminates them to a special plastic that will not delaminate at
extreme temperatures for the winter resort industry. Axess AG can print four
colors on both sides and have a special coating on the reverse side to accept
thermo printing so that the client can erase printing while reprogramming the
smart card using the Axess AG printer.

Axess AG has the manufacturing capabilities to meet the growth projected in the
North American market over the next five years and has not experienced problems
in sourcing raw materials in five years of production. Rapidtron has identified
additional manufacturing facilities within the United States that could be
utilized to meet other product needs if the demand exceeds the production
capacity of Axess AG.

     Dependence on one or a few major customers

During the year ended December 31, 2004, approximately 67% of our sales were
derived from sales to one major customer, Bally Total Fitness. Our strategy is
to develop a mix of markets and clients that will reduce our dependence on any
one major customer.

     Distribution  Agreement

Rapidtron Delaware entered into an exclusive distribution agreement dated May 6,
2000 with Axess AG. The term of the agreement is open-ended, but either party
may terminate the agreement at the end of April of any year following at least
12-months advance written notice. Purchase Obligations under this agreement were
waived by Axess AG.

Under the terms of the distribution agreement, we have the exclusive right to
market Axess AG access control systems in North America to the transportation,
fitness club, amusement park and ski resort industries and to universities and
colleges. Axess AG assists us with our marketing efforts, providing Rapidtron
with product and marketing images, customer testimonies and other sales. In
addition, Axess AG provides Rapidtron with technical assistance and product
support as needed at no additional cost.

     Government  approval  of  principal  product

Axess AG supplies Rapidtron its Radio Frequency (RF) readers and long-range
antennas (AX400 series). As part of our agreement and contract with Axess AG,
they are responsible for passing all standards required by the Federal
Communications Commission (FCC).

The FCC regulates our RF readers and long-range antennas for health and safety
issues and to prevent interference with other radio frequency uses such as
airports, cell phones and traditional radios. Testing laboratories (sometimes
referred to as underwriting laboratories) are accredited by the FCC to conduct
tests required for FCC approval, and to grant the approval subject to FCC
review. Axess AG is preparing test equipment for Rapidtron to submit to a local
accredited underwriter laboratory for review and documentation including
pictures. The equipment is scheduled to be submitted in September of this year.
Our personnel with technical support from Axess AG will be on hand through the
testing process until final approval is reached (a process of one to two days).
New equipment is being tested by Axess AG at this time to meet or exceed all
regulations and will be submitted to the testing certification lab in September.
The required equipment we will submit for testing is our long-range radio
frequency antenna with accompanying reader. Austria and the European Union have
similar regulations. Axess AG has passed all European standards with an
accredited testing laboratory in Vienna. We expect to receive approval in the
United States in the third quarter of 2005.

We must also meet governmental standards applicable to general consumer and
industrial products covering issues such as what temperature does a product
become combustible (fire) and if the product can


<PAGE>
explode if dropped from a set minimum height. There is a common standard
acceptable by all European agencies. Our complete system of turnstile, reader,
power supply and antenna is also in the process of passing the underwriter
laboratory's standards for fire, explosion and drop damage in Austria. This
underwriter laboratory has been accredited by the U.S. government for testing,
documenting and issuing approvals for regulations set by the government. When
approved, our test results are forwarded to the respective governmental agency
and is automatically approved unless notified of a problem. Canada and the U.S.
have reciprocal agreements that will accept the results of the underwriter
laboratory, and therefore, our products will meet the government requirements
once we have met the standards set by the underwriter laboratory.

Most of the equipment we have sold to date utilizes the bar code scanner and not
the RF reader, and therefore is not subject to FCC regulations. We have very few
RF antennas in operation unlike Europe that is almost completely RF. If the RF
products cannot pass the tests after all changes have been tried, we will have
to cease and desist from selling the RF product and remove all current products
in use until we can produce a new unit that can pass. Rapidtron has sold only 23
long-range RF antennas to date and will not be selling more until August 2005,
when we hope to have passed all tests. If we had to remove and change the
current antennas the costs to replace and re-install would be about $23,000.
Axess AG would participate in the cost, depending upon the problem.

The equipment we sell has been in use for ten years in Europe without any
problems arising from customers and employees passing through the entries and
exits where the equipment and specifically the RF antennas are placed. As a
result, we do not anticipate any problem with meeting the U.S. government
standards for safety.

     Research  and  development

We have spent approximately $228,000 for software development and $12,000 for
product development since our inception in January 2000, none of which are
directly or indirectly borne by any existing or future clients, including
approximately $25,000 for the year ended December 31, 2004. We hope to be able
to allocate up to 5% of our operating expenses to additional software
development and interface expenses with outside software suppliers over the next
12 months.

We continue product review and research through the year and report our findings
to Axess AG for review and implementation on a quarterly basis. The result from
this research and input is a new circuit board for quicker response times, and
the development of the new AX500 indoor turnstile and reader system for
application in the Fitness and University markets. Rapidtron's management makes
quarterly visits to Axess AG to promote efficiency and coordinate all programs
of marketing, product development, pricing and manufacturing.

Axess AG's process starts with product specification, development and testing.
Our product development process also includes styling and manufacturing cost
analysis. We order the various components that have been successfully tested. An
outside vendor under contract with Axess AG mills the turnstile and reader
heads. Axess AG then assembles all components for a finished product and quality
control tests every order before shipping to Rapidtron. Rapidtron quality tests
all product prior to shipping.

Software development is an on-going process, and Rapidtron tests software with
certain equipment on a regularly scheduled basis.

Our product and service development strategy is to present solutions and
programs that create new functionality and revenue opportunities for us and our
customers. We recently developed and installed our new automatic ADA (Americans
with Disabilities Act) gate and automatic, drop arm (panic) release


<PAGE>
turnstile at the University of California, Berkeley. In July of 2005, we are
scheduled to introduce and begin selling a new streamline indoor system that
will be sold to Fitness and University customers.

We are in the process of developing a platform that may create new revenue
opportunities to fitness centers and other potential industries by using our
smart card with an e-purse and debit back office system. Our secure smart card
technology could be programmed to act as a debit card, which allows members to
use their admittance card for purchases at health clubs. We have presented our
smart card platform to four large fitness chains in the past four months, and
plan to evaluate and test the concept in one or more health clubs in 2005. To be
successful, we will need to demonstrate that the benefits of our smart card
platform, including data management, revenue potential and member acceptance,
outweigh the cost associated with switching from inexpensive bar code card
legacy systems.

Since September 11th, there has been renewed interest in biometric technology
for admittance and other uses. We are currently testing both finger scanning and
face recognition for use in tandem with smart cards. This could increase
processing speed and the accuracy of the biometric technology, the primary
barriers for commercializing this technology. Our system is designed and
engineered to accommodate new advances and additions such as biometrics to help
mitigate this problem and allow our clientele to constantly upgrade as required
or desired.

     Employees

We currently have 6 full time and 2 part time employees and 9 commissioned sales
representatives. We anticipate the need to hire additional staff, continue
development and refine our operations to meet customer needs. We may hire
between two to three new employees, a software and hardware support technician
and one to two software engineers during the next 12 months.

ITEM  2.  DESCRIPTION  OF  PROPERTY

We lease our principal corporate and executive offices at 3151 Airway Avenue,
Building Q, Costa Mesa, CA 92626, on a month-to-month basis from a related
party. We do not currently maintain any investments in real estate, real estate
mortgages or securities of persons primarily engaged in real estate activities,
nor do we expect to do so in the foreseeable future.

                                     PART II

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

Our common stock is quoted on the OTC Bulletin Board which is sponsored by the
National Association of Securities Dealers (NASD). The OTC Bulletin Board is a
network of security dealers who buy and sell stock. The dealers are connected by
a computer network which provides information on current "bids" and "asks" as
well as volume information. Our common shares commenced trading in April 2001.

The high and low bid quotations of our common stock on the OTC Bulletin Board as
reported by the NASD were as follows:


<PAGE>
<TABLE>
<CAPTION>
<S>                  <C>         <C>
PERIOD               HIGH        LOW

2004
FIRST QUARTER        $1.90       $1.23
SECOND QUARTER        1.46        0.48
THIRD QUARTER         0.59        0.15
FOURTH QUARTER        0.88        0.22

2003
FIRST QUARTER         2.08        1.38
SECOND QUARTER        2.10        1.83
THIRD QUARTER         2.12        1.30
FOURTH QUARTER        1.62        1.21
</TABLE>

The above quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission and may not necessarily represent actual transactions.

As of March 28, 2005, we had 20,691,067 shares of common stock issued and
outstanding, held by 137 registered shareholders.

The declaration of dividends on our shares is within the discretion of our board
of directors and will depend upon the assessment of, among other factors,
results of operations, capital requirements and the operating and financial
condition of Rapidtron. The Board has never declared a dividend. At the present
time, we anticipate that all available funds will be invested to finance the
growth of our business.

<TABLE>
<CAPTION>
                                Equity Compensation Plan Information
                                ------------------------------------

-------------------------------------------------------------------------------------------------
                                                                           Number of securities
                                                                         remaining available for
                                                                          future issuance under
                       Number of securities to      Weighted-average       equity compensation
                       be issued upon exercise     exercise price of         plans (excluding
                       of outstanding options,    outstanding options,   securities reflected in
       category          warrants and rights      warrants and rights          column (a))
                                 (a)                      (b)                      (c)
---------------------  ------------------------  ----------------------  ------------------------
<S>                    <C>                       <C>                     <C>
---------------------  ------------------------  ----------------------  ------------------------
Equity compensation
plans approved by              910,000                 $  1.00                11,090,000
security holders
---------------------  ------------------------  ----------------------  ------------------------
Equity compensation
plans not approved by        5,552,505                 $  0.97                     0
security holders
-------------------------------------------------------------------------------------------------
</TABLE>

As a result of current trading prices, our common stock may be subject to the
penny stock rules under the Securities Exchange Act of 1934. Unless an exemption
from those rules is available, broker-dealers making a market in the common
stock will be required to provide disclosure to their customers on the risks
associated with the common stock, its investment suitability for the customer,
information on bid and ask prices for the common stock and information about any
compensation the broker-dealer will receive for a transaction in the common
stock. The application of these rules will likely reduce market-making
activities in the common stock by impairing its liquidity.


<PAGE>
Information regarding our existing securities authorized for issuance under
equity compensation plans is incorporated by reference to our definitive proxy
solicitation on Schedule 14A, to be filed with the Commission within 120 days
following the end of our fiscal year.

ITEM  6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS

     Cautionary  Statements

This year-end Report on Form 10-KSB contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. We intend that such forward-looking
statements be subject to the safe harbors created by such statutes. The
forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. Accordingly, to the extent
that this year-end Report contains forward-looking statements regarding the
financial condition, operating results, business prospects or any other aspect
of our company, please be advised that our actual financial condition, operating
results and business performance may differ materially from that projected or
estimated by us in forward-looking statements. The differences may be caused by
a variety of factors, including but not limited to adverse economic conditions
and intense competition, including intensification of price competition and the
expansion of competition in providing end-to-end product and system solutions as
more fully described in management's discussion in this report. This report on
Form 10-KSB contains, in addition to historical information, forward-looking
statements that involve substantial risks and uncertainties, including those set
forth on pages 3-13 of our Amended Registration Statement on Form SB-2/A, filed
with the Commission on June 9, 2004, incorporated by reference herein. Our
actual results could differ materially from the results anticipated by us and
discussed in the forward-looking statements.

The following analysis of our operations refers primarily to those in the
fitness, winter resort, amusement, and universities, which constitute the
majority of our business activities.

     Critical  Accounting  Policies:

Our significant accounting policies are outlined within Note 1 to our December
31, 2004 and 2003 financial statements contained elsewhere in this annual
report. Our consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue and
expenses and the related disclosures of contingent assets and liabilities.

We base our estimates on historical experience and on various assumptions that
we believe to be reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
materially differ from these estimates under different assumptions or
conditions.

     Revenue  Recognition  Policy

We recognize revenues when all of the following criteria have been met:

     -    persuasive  evidence  of  an  arrangement  exists,


<PAGE>
     -    delivery  has  occurred,

     -    the  fee  is  fixed  or  determinable,  and

     -    collectibility  is  reasonably  assured.

Generally, these criteria are met when we deliver our products to our customer.

In accordance with Statement of Financial Accounting Standards ('SFAS") No. 48,
"Revenue Recognition when Right of Return Exists," revenue is recorded net of an
estimate of markdowns, price concessions and warranty costs. Such reserve is
based on management's evaluation of historical experience and current industry
trends and estimated costs. Such reserve was immaterial to the operations of the
company.

Management believes that the company's revenue recognition policies comply with
Staff Accounting Bulletin No. 104 ("SAB 104") issued by the Securities Exchange
Commission.

          Foreign  Currency  Transactions
          -------------------------------

We record all transactions with our foreign supplier, Axess AG, in accordance
with SFAS No. 52, "Foreign Currency Translation." All invoices received from
Axess AG are denominated in Euros. When an invoice is received, we translate
these amounts to US Dollars at the exchange rate effective on the invoice date.
If the exchange rate changes between the time of purchase and the time payment
is made, a foreign currency exchange gain or loss results.

Additionally, we compute a foreign currency exchange gain or loss at each
balance sheet date on all recorded foreign currency denominated transactions
that have not been settled. The difference between the exchange rate that could
have been used to settle the transaction at the date it occurred (the invoice
date), and the exchange rate at the balance sheet date, is the unrealized gain
or loss recognized in current operations.

          Accounts  Receivable
          --------------------

We periodically review the collectability of our accounts receivable balances.
Where significant doubt exists with regard to the collection of a certain
receivable balance, an allowance and a charge to the statement of operations is
recorded. Allowances for doubtful accounts are based on estimates of management.
At December 31, 2004, we had allowances for doubtful accounts of approximately
$135,000.

          Product  Warranties
          -------------------

We warrant our access systems for a period of one to two years for all hardware
and 1 year for readers and scanners. Axess AG warrants our equipment for one
year. We have seen no significant product warranty issues to date. As the types
of services or replacements provided during the warranty period may vary, costs
related to our warranties may exceed the amount of our reserve. At December 31,
2004, we had reserves for potential warranty issues of approximately $18,000

     Significant  Recent  Accounting  Pronouncements

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are
to provide guidance on the identification of entities for which control is
achieved through means other than voting rights (variable


<PAGE>
interest entities, or "VIEs") and how to determine when and which business
enterprise should consolidate the VIE. This new model for consolidation applies
to an entity for which either: (1) the equity investors do not have a
controlling financial interest; or (2) the equity investment at risk is
insufficient to finance that entity's activities without receiving additional
subordinated financial support from other parties. In addition, FIN No. 46
requires that both the primary beneficiary and all other enterprises with a
significant variable interest in a VIE make additional disclosures. As amended
in December 2003, the effective dates of FIN No. 46 for public entities that are
small business issuers, as defined ("SBIs"), are as follows: (a) For interests
in special-purpose entities ("SPEs"): periods ended after December 15, 2003; and
(b) For all other VIEs: periods ended after December 15, 2004. The December 2003
amendment of FIN No. 46 also includes transition provisions that govern how an
SBI which previously adopted the pronouncement (as it was originally issued)
must account for consolidated VIEs. Management has concluded that the company
does not have an interest in any SPEs, and is evaluating the other effects of
FIN No. 46 (as amended) on its future consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity, and
is effective for public companies as follows: (i) in November 2003, the FASB
issued FASB Staff Position ("FSP") FAS 150-3 ("FSP 150-3"), which defers
indefinitely (a) the measurement and classification guidance of SFAS No. 150 for
all mandatorily redeemable non-controlling interests in (and issued by)
limited-life consolidated subsidiaries, and (b) SFAS No. 150's measurement
guidance for other types of mandatorily redeemable non-controlling interests,
provided they were created before November 5, 2003; (ii) for financial
instruments entered into or modified after May 31, 2003 that are outside the
scope of FSP 150-3; and (iii) otherwise, at the beginning of the first interim
period beginning after June 15, 2003. The company adopted SFAS No. 150 (as
amended) on the aforementioned effective dates. The adoption of this
pronouncement did not have a material impact on the company's results of
operations or financial condition.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of ARB No. 43, Chapter 4," which clarifies the accounting for abnormal amounts
of idle facility expense, freight, handling costs and wasted material. In
Chapter 4 of ARB 43, paragraph 5 previously stated that " under some
circumstances, items such as idle facility expense, excessive spoilage, double
freight, and re-handling costs may be so abnormal as to require treatment as
current period charges ." SFAS No. 151 requires that such items be recognized as
current-period charges, regardless of whether they meet the criterion of so
abnormal (an undefined term). This pronouncement also requires that allocation
of fixed production overhead to the costs of conversion be based on the normal
capacity of the production facilities. SFAS No. 151 is effective for inventory
costs incurred in years beginning after June 15, 2005.

In December 2004, the FASB issued SFAS No. 123-R, "Share-Based Payment," which
requires that the compensation cost relating to share-based payment transactions
(including the cost of all employee stock options) be recognized in the
financial statements. That cost will be measured based on the estimated fair
value of the equity or liability instruments issued. SFAS No. 123-R covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. SFAS No.123-R replaces SFAS No. 123, "Accounting
for Stock-Based Compensation," and supersedes Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." As
originally issued, SFAS No. 123 established as preferable a fair-value-based
method of accounting for share-based payment transactions


<PAGE>
with employees. However, that pronouncement permitted entities to continue
applying the intrinsic-value model of APB Opinion 25, provided that the
financial statements disclosed the pro forma net income or loss based on the
preferable fair-value method. Small Business Issuers are required to apply SFAS
No. 123-R in the first interim or annual reporting period that begins after
December 15, 2005. Thus, the company's consolidated financial statements will
reflect an expense for (a) all share-based compensation arrangements granted
after January 1, 2006 and for any such arrangements that are modified,
cancelled, or repurchased after that date, and (b) the portion of previous
share-based awards for which the requisite service has not been rendered as of
that date, based on the grant-date estimated fair value.

The FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of
APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments
made by SFAS No. 153 are based on the principle that exchanges of nonmonetary
assets should be measured using the estimated fair value of the assets
exchanged. SFAS No. 153 eliminates the narrow exception for nonmonetary
exchanges of similar productive assets, and replaces it with a broader exception
for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has "commercial substance" if the future cash flows of the
entity are expected to change significantly as a result of the transaction. This
pronouncement is effective for nonmonetary exchanges in fiscal periods beginning
after June 15, 2005.

Other recent accounting pronouncements issued by the FASB (including its
Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed
by management to have a material impact on the company's present or future
consolidated financial statements.

     Results  of  Operations

The twelve months ended December 31, 2004 compared to the twelve months ended
December 31, 2003.

          Revenue
          -------

During the twelve months ending December 31, 2004, we had revenues of
$2,037,130, an increase of $1,091,525 (115%) from the $945,605 for the same
period in fiscal year 2003.

For the twelve month period ended December 31, 2004, the $1,091,525 increase in
our sales revenue was due primarily to the increased sales to national fitness
chains. Sales in fitness are expected to continue to expand into several major
national fitness chains through 2005.

We have chosen to focus our sales efforts on fitness clubs, winter resorts, and
universities and colleges, niche markets where our system has penetrated key
venues. During the year ended December 31, 2004, we made notable installations
of our products with Bally Total Fitness, the world's largest fitness club
chain, Park City Resort, Utah, Copper Mountain, Colorado, and Tamarack Ski
Resort, New York, well-known four-season resorts, along with the University of
California, Berkeley, and the University of California, Los Angeles leading U.S.
universities. We targeted these specific customers due to their leadership
position in each of their industries and the potential for sizeable revenues
related to their individual contracts and future contracts. Because of the
success of our equipment at these sites, we are forecasted to expand our
implementation at all locations listed in 2005. We increased our focus in
selling to the leading fitness chains in 2004 which resulted in two sales orders
totaling 125 access control systems that shipped throughout 2004. We have had
additional meetings with other leading fitness chains that have shown interest
in implementing our access control systems in their clubs. We are currently in
the process of evaluating the specific needs and software integration
requirements for a pilot program with one of the largest national fitness chains
in North America. Following our installation at UCLA John Wooden Center and UC
Berkley and sales presentations to more than 250 universities, we anticipate
increased sales in the


<PAGE>
next twelve months. We are currently working with several California State
Universities on proposals and design layouts for potential implementations into
their fitness and recreation centers. While the winter resort business is now
preparing for its 2005/2006 season, we have expanded our presence with more
installations at Park City, Utah, Copper Mountain and Tamarack ski resorts. We
expect increased sales in each of the three targeted venues of fitness clubs,
universities, and winter resorts over the next twelve months.

We expect to increase our revenues in the targeted venues of fitness clubs,
winter resorts, and universities in the upcoming 12 months. We continue to base
these revenue growth expectations on the assumption that the successful sales,
installations, and operation of our Rapidtron systems to date with industry
leading customers in targeted venues will result in other customers within each
venue emulating the leader in making their purchase decisions. For example, our
Rapidtron system has now been operational in over 125 locations with a national
fitness club, and we expect to continue to expand in the club's other locations
over the next 12 months. In addition, we are forecasting 50 or more
installations over the next twelve months with another leading national fitness
chain. In the twelve months of 2004, we received approximately 89% of our
revenue from fitness clubs, with 67% of revenues derived from Bally Total
Fitness. We expect to continue our growth in sales to fitness clubs, winter
resorts and universities in the upcoming twelve months. We hope to increase and
diversify our revenue received through sales in the fitness industry.

Our Rapidtron system has been operational at Copper Mountain since November 2001
and Park City, Utah since November 2002, with an expansion scheduled for the
2005/2006 season. We expect continued sales to Park City in 2005, and we are in
discussions with Copper Mountain for additional orders in the second quarter of
2005. In the twelve months of 2004, we received less than ten percent (10%) of
our revenue from sales to winter resorts. We are in discussions with several
other major winter resorts that we hope will result in increased sales in the
winter resort industry. Our Rapidtron system has been operational at University
of California, Berkeley since May 2002 and UCLA since October 2003. In the
twelve months of 2004, we received less than ten percent (10%) of our revenue
from sales to these universities.

Actual results may differ from our expectations as a result of delay in sales to
the customers in the targeted venues.

               Gross  Profit
               -------------

For the twelve months ended December 31, 2004, our gross profit for the period
was $603,172, compared to gross profit of $143,944 for the same period of the
preceding year. This represents an increase of $427,708 from the same period of
the preceding year. The increase in gross profit is primarily due to the result
of the increased sales in fitness sales to national chains, as well as
negotiated discounts with our primary supplier in 2004. The improved gross
margin was partially offset by the unfavorable foreign currency exchange rate of
the euro to the dollar.

We expect to improve our gross profit through increased sales in the targeted
venues of fitness clubs, winter resorts, and universities in the coming 12
months based on the same assumptions identified in our discussion of revenues
above. In the first and second quarter of 2005, we expect the majority of our
sales will be generated from fitness accounts with resort sales increasing with
third and fourth quarter installations at winter resorts. The unfavorable
currency variance of the dollar to the euro continues to negatively impact gross
profit margins in 2005 due to our purchasing from a European supplier. We expect
the unfavorable currency variance of the dollar to the euro to continue in 2005,
and to continue to negatively impact gross profit margins due to our plan to
continue purchasing equipment, readers, and cards from our European supplier.
Research and development and re-engineering of our equipment with Axess AG are
currently underway to enhance our system. We expect these enhancements to reduce
our costs and thereby improve margins. We expect to see the benefits of these
enhancements in 2005 with new equipment introduced into the market in the third
quarter of 2005.


<PAGE>
Actual results may differ from our expectations as a result of delay in sales
revenues, and gross profit from those revenues to the customers in the targeted
venues.

          Operating  Expenses
          -------------------

For the twelve months ended December 31, 2004, our selling, general &
administrative expenses totaled $3,420,633, an increase of $516,780, or 18%,
from the $2,903,853 incurred during the same period of the preceding year. The
increased expenses are related to increases in professional fees in 2004. The
professional fees increased from approximately $1,619,000 in 2003 to $2,014,000
in 2004, an increase of $395,000. The increased professional fees are due to the
following: 1) $425,000 increase in consulting services related to management
consulting and financing, 2) $402,000 increase in outside marketing services,
and 3) $432,000 decrease in financing fees. A majority of the increased
professional fees in 2004 were related to one time expenses.

We expect operating expenses in the ordinary course of business (not taking into
consideration the one time expenses related to certain professional fees and
financing activities) to increase modestly over the next 12 months as a result
of operating, marketing, selling, service and sales commission expenses related
to increased revenues in the fitness club, winter resort, and university. The
commissions paid to independent sales representatives are less than 1% of
selling, general and administrative expenses during the year ended December 31,
2004; however, they will increase as a percentage of sales in the coming 12
months.

Actual results may differ from our expectations, and operating expenses will
continue to secure and may precede sales to the customers in the targeted
venues.

          Loss  From  Operations
          ----------------------

The loss from operations for the twelve months of fiscal 2004 was $2,817,461
compared to a loss from operations of $2,759,908 in the same period in the prior
year.

The loss from operations for the twelve months ended December 31, 2004, was
primarily the result of the following (a) increased professional fees related to
financing activities, (b) unfavorable foreign currency exchange variance, and
(c) slower than anticipated sales growth in winter resort sales. Software
interfaces with all major software providers in the fitness and resort
industries have now been completed to capitalize on increased sales in these two
targeted areas.

We expect the overall loss from operations to decrease over the next 12 months
as a result of increases in revenues and gross margin related to those sales.
Actual results may differ from our expectations if we experience delays in sales
revenues from installation as we expect to continue to incur operating expenses
related to marketing to customers in the targeted venues.

          Interest  Expense
          -----------------

Our interest expense for the twelve-month period was $129,562. In the same
period of the preceding year, our interest expense was $80,801.

The increase in interest expense in the twelve months was primarily the result
of increased interest expense related to the new asset based line of credit
implemented in 2004 to support sales growth plus new convertible debt. At
December 31, 2004, we owed $235,657 on our accounts receivable credit facility.
At December 31, 2004, we owed $250,271 on notes due to related parties, compared
to $324,269 at December 31, 2003. Additionally, we owed $382,577 on convertible
notes payable at December 31, 2004, compared to $0 at December 31, 2003.


<PAGE>
We expect interest expense to decrease over the twelve-months as a result of
debt repayments and conversion of debt to equity. Actual results may differ from
our expectations as a result of taking on additional debt necessary to finance
operations, if we do not meet sales expectations.

          Other  Expenses
          ---------------

Pursuant to the terms of our agreement with Smart Card Integrators, we forgave
an account receivable in the amount $250,000 as a result of our failure to
satisfy certain conditions to close the merger contemplated by the agreement.

          Assets  and  Liabilities
          ------------------------

At December 31, 2004, we had total assets of $942,692 compared to total assets
of $1,055,243 at December 31, 2003. Cash was $750 as of December 31, 2004, down
from the $84,256 cash balance as of December 31, 2003. For the twelve-months
ended December 31, 2004, cash used in operations was $1,521,400; cash used in
investing activities was $1,905; and cash provided by financing activities was
$1,439,799, with net decrease in cash during the current period being $83,506.

Our net accounts receivable were $434,812 at December 31, 2004, an increase of
$117,425 (37%) from the $317,387 at December 31, 2003. The increase in accounts
receivable is primarily due to new customers and sales in the fitness club
industry.

Our net inventories decreased $223,460 (40%) during the twelve-months ended
December 31, 2004, to $334,742, from the $558,202 at December 31, 2003. The
decrease in inventory is due to the timing of purchases receipt and shipments to
support fitness customers.

Our net fixed assets totaled $72,074 at December 31, 2004, compared to $15,342
at December 31, 2003. The increase in fixed assets is related to the purchase of
COM DLL software from Pioneer Innovations for the integration/interface of our
equipment with the back office accounting systems of our fitness customers. The
software was purchased for $96,271.

Our purchases of fixed assets totaled $98,176 during the period, while our
depreciation totaled $41,444 resulting in a net increase in fixed assets of
$56,732. The majority of fixed asset purchases were related to the purchase of
the COM DLL software integration tool and computer equipment purchases.

Our total liabilities at December 31, 2004 were $2,661,684, an increase of
$1,238,048 (87%) from the $1,423,636 at December 31, 2003. Our accounts payable
and accrued liabilities totaled $1,697,647 at December 31, 2004, an increase of
$693,136 (69%) from the $1,004,511 at December 31, 2003. There was an increase
in accounts payable of $555,773 and an increase in accrued liabilities of
$137,363. Our payables primarily increased as a result of 1) increased payables
to our primary supplier of approximately $400,000 due to increased sales and
extended terms (Rapidtron has reached the maximum credit line of $800,000
extended by Axess AG), and 2) increased foreign currency exchange variance of
$90,000. Accrued liabilities increased as a result of an increase of $130,000 in
accrued salaries to executives.

Our accrued payroll totaled $226,657 at December 31, 2004, compared to $96,164
at December 31, 2003. Our accrued interest payable, which is included in
accounts payable and accrued liabilities, was $17,155 at December 31, 2004, an
increase of $10,481 from the $6,674 at December 31, 2003.

Our notes payable and other debt totaled $872,750 at December 31, 2004, an
increase of $540,970 (163%) from the $331,780 at December 31, 2003. Our total
notes payable increased due to 1) $2,072,794 in


<PAGE>
borrowings, 2) less $1,421,724 in repayments, and 3) less $110,100 in debt
discounts related to a convertible note payable issued with detachable stock
purchase warrants.

During the twelve-month period ended December 31, 2004, the company borrowed
approximately $675,000 in bridge loans of which approximately $238,000 was
repaid. Such notes bore interest at rates ranging from 10% to 15%, and are
secured by substantially all assets of the company. The notes bare a default
provision where the outstanding principal can be converted into the company's
restricted common stock at approximately $0.33 per share, and all principal and
interest was due within one year.

          Stockholder's  Deficit
          ----------------------

Our stockholder's deficit was $1,718,992 at December 31, 2004, a decrease of
$1,350,599 from the $368,393 deficit at December 31, 2003. The changes in
stockholder's deficit were as follows:

<TABLE>
<CAPTION>
<S>                                             <C>
Balance as of December 31, 2003                     ($368,393)
Net Loss                                           (3,300,304)
Common Stock issued for services                      229,371
Exercise of Warrants                                  400,000
Receipt of Stock Subscription Receivable              535,000
Purchase of Common Shares and Warrants                200,000
Warrants granted for services                         438,534
Warrants granted with convertible note payable        146,800
                                                -------------
Balance as of December 31, 2004                   ($1,718,992)
</TABLE>

     Liquidity  and  Capital  Resources

As of December 31, 2003, we had $1,055,243 in total assets, including $84,256 in
cash, $317,387 in accounts receivable, $558,202 in inventories, and $67,676 in
prepaid expenses and other current assets. As of December 31, 2004, we had
$942,692 in total assets, including $750 in cash, $434,812 in accounts
receivable, $334,742 in inventories, and $87,934 in prepaid expenses and other
current assets. We consider the accounts receivable to have a high probability
of collection, as a majority of the receivables are from large customers in the
fitness club industry.

Our inventories consist primarily of readers, turnstiles and equipment. We
intend to use our inventory as current product models during 2005. We will
acquire additional inventory for fitness club, university, and winter resort
sales in 2005.

Our fixed assets consist primarily of computers, office furniture and equipment,
software, and test equipment. Due to the age and proprietary nature of most of
the fixed assets, these assets probably have limited value to third parties.

At December 31, 2004, our total liabilities were $2,661,684, including accounts
payable and accrued liabilities of $1,697,647, and obligations to related
parties of $341,558. Loans from related parties included $95,009 payable to John
Creel and Steve Meineke, directors and executive officers of our company at
December 31, 2004. Steve Meineke has since resigned as an executive officer.

We had a working capital deficit (current assets minus current liabilities) of
$1,803,446 at December 31, 2004. Our negative cash flow from operations resulted
primarily from our operating losses, and increased receivables which were
partially offset by a decrease in inventory, and increased payables and accrued


<PAGE>
liabilities. Our cash flow needs were met through year-end December 31, 2004
through revenues, secured borrowings from our accounts receivable credit
facility, bridge loans, and private equity placements.

We expect to continue operating at a negative cash flow through at least the
first quarter of fiscal year 2005 as we continue our efforts to develop our
business in fitness and winter resorts. Thus, our success, including our ability
to fund future operations, depends largely on our ability to secure additional
funding. We cannot assure you that we will be able to consummate debt or equity
financings in a timely manner, on a basis favorable to the company, or at all.

As of December 31, 2004, we owed $46,250 plus interest to LDM Enterprises, LLC
and continue to owe this amount plus interest and expenses. This loan is in
default. The loan is secured by all of our assets. We require additional
investment through the sale of equity in order to pay this debt. Until we pay
this debt, the lender may foreclose on our assets.

          Cash  Flow
          ----------

In addition to needing cash to pay off the foregoing debt, we need cash flow of
approximately $120,000 per month during the first quarter of 2005 to pay for our
rent, salary, marketing, services, software interface, inventory, and
receivables, excluding the anticipated increase in expenses related to sales and
marketing efforts and new business development. We expect to receive cash flow
from revenues averaging at least approximately $250,000 to $450,000 per month
during 2005.

During 2005, we expect to need additional equity or debt financing of
approximately $1,500,000 for operating expenses, new business development,
potential merger opportunities, marketing, services, and software development
for interface with business systems in targeted industries, inventory and
receivables. We anticipate that we will receive cash flow from operating
revenues totaling approximately $3,000,000 to $5,500,000, in 2005.

Historically, we have financed our operations through cash flow from operations,
debt proceeds and the sale of equity securities. It is anticipated that we may
be required to sell additional equity securities and/or incur additional debt
until such time as we can generate sufficient revenues from our operations to
cover operating expenses. We currently have no external sources of liquidity.
The allocation of cash flow in operating the business will be dictated by where
those resources can optimize results through the production of sustained revenue
growth. If we do not raise the necessary capital or earn sufficient revenue to
cover the foregoing expenses, we will reduce variable overhead, such as
marketing expenses, travel and entertainment, software development, and
reduction of personnel as feasible. In the event we are unable to generate
capital from loans, the sale of stock, or revenues, we will be forced to sell
our assets or curtail operations until additional capital is available.

          Financing  Activities  Subsequent  to  September  30,  2004
          -----------------------------------------------------------

On February 11, 2005, we sold 228,009 shares of our common stock for a total
purchase price of approximately $62,950. We used the proceeds of this investment
for the following:

<TABLE>
<CAPTION>
<S>                      <C>
Commissions on the sale  $ 6,295

Legal fees               $ 3,000

Payment of debt          $10,000

Working capital          $43,655
</TABLE>


<PAGE>
We have spent all of the proceeds of this investment, and we are seeking
additional investment through the private sale of equity in order to meet our
monthly cash needs.

We also borrowed additional funds, described in Item 8B below, incorporated by
reference. We used the proceeds of these loans for the following:

<TABLE>
<CAPTION>
<S>                      <C>
Pre-paid legal expenses  $25,000

Payroll                   53,000

Sales Taxes              $27,000
</TABLE>

          Contractual  Obligations
          ------------------------

As  of  December  31,  2004,  we  had  the following contractual obligations and
commercial  commitments:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
CONTRACTS WITH CONSULTANTS
------------------------------------------------------------------------------------------------------------
Name                           Termination Date         Payment Terms
------------------------------------------------------------------------------------------------------------
<S>                            <C>                      <C>
                                                        4,166 per month plus ten  shares of common
Pioneering Innovation Com Dll  Dec 15, 2005             stock per satellite installed, up to 40,000 shares
------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------------------------------------------
NOTES PAYABLE
------------------------------------------------------------------------------------------------------------
                                                        Balance as of December 31, 2004, and Payment
Payee                          Maturity                 Terms
------------------------------------------------------------------------------------------------------------
Comerica/John Creel and        Ending upon payment
Steve Meineke                  per agreement            Interest only; balance due of $37,750 + interest
------------------------------------------------------------------------------------------------------------
Equus/Vineyard Bank            On demand                $ 150,000 + interest
------------------------------------------------------------------------------------------------------------
Larry Williams                 October 31, 2005         $ 5,262 + interest
------------------------------------------------------------------------------------------------------------
Steve Meineke                  On demand                $ 15,000 + interest
------------------------------------------------------------------------------------------------------------
John Creel                     On demand                $ 26,000 + interest
------------------------------------------------------------------------------------------------------------
John Creel                     On demand                $ 16,259 + interest
------------------------------------------------------------------------------------------------------------
Oceanus Value Fund             March 31,2005            400,000 + interest (1)
------------------------------------------------------------------------------------------------------------
LDM                            On demand                46,250 + interest (2)
------------------------------------------------------------------------------------------------------------
CAPITAL LEASES
------------------------------------------------------------------------------------------------------------
Lessor                         Lease Term               Payment Terms
------------------------------------------------------------------------------------------------------------
                               Between 14 to 35 months
6 Computer Leases              left on leases           436 per month for all six leases
------------------------------------------------------------------------------------------------------------
</TABLE>

Footnotes  to  Contractual  Obligations:
---------------------------------------

     (1) We are currently in default of this loan. At this time, we are in
discussions with Oceanus pursuant to which it expected that we will be able to
cure those defaults. Until we reach such an agreement or otherwise are able to
cure the default, Oceanus may convert the outstanding balance into our common
stock at a conversion price of the lesser of (i) $0.33 per share or (ii) eighty
percent (80%) of the lowest closing bid price for the common stock (as reported
by Bloomberg) in any of the five (5) trading days immediately preceding the
conversion date. If the conversion date were April 14, 2005, then the conversion
price would be $0.24 per share (based on the average closing bid price of $.30).
In addition, the balance is secured by all of our accounts, equipment, general
intangibles, inventory, and other rights to


<PAGE>
collect money. Oceanus may at any time proceed to foreclose on this collateral
at any time until we cure the default and may collect from our company the cost
of such proceedings.

     (2) We are currently in default of this loan. Until we cure the default,
interest will accrue at 14%. In addition, the loan is secured by all of our
assets, which security interest is subordinate to the security interest held by
Silicon Valley Bank. The loan is also guaranteed by our Chief Executive Officer,
John Creel. LDM may at any time proceed to foreclose on the security interest or
seek recovery from Mr. Creel under the guaranty until we cure the default and
may collect from our company the cost of such proceedings. We would owe Mr.
Creel under the guaranty for any payments made to LDM under the guaranty.

Currently, our total contractual obligations related to long-term debt, capital
leases, and certain contracts is approximately $990,000 arising out of
obligations related to employment and consulting agreements. In addition, we
have approximately $696,000 due under notes payable on demand or in the next
twelve months.

We anticipate that we will have to raise capital during the next 12 months to
meet our current obligations including trade accounts payable and liabilities to
related parties. We intend to raise the capital required to fund our financing
needs by issuance of debt and equity. We cannot assure you that financing will
be available or accessible on reasonable terms.

          Inflation
          ---------

We do not believe that inflation has had a significant impact on our
consolidated results of operations or financial condition.


<PAGE>
ITEM  7.     FINANCIAL  STATEMENTS




                                 RAPIDTRON, INC.
                         (FORMERLY THE FURNISHING CLUB)
                        CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2004


<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
<S>                                                                                               <C>
Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . .  F-1

Consolidated Balance Sheet as of December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . .  F-3

Consolidated Statements of Operations for the Years Ended December 31,
    2004 and 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-4

Consolidated Statements of Stockholders' Deficit for the Years Ended
    December 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-5

Consolidated Statements of Cash Flows for the Years Ended December
    31, 2004 and 2003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-7

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-9
</TABLE>


<PAGE>
                        REPORT OF INDEPENDENT REGISTERED
                             PUBLIC ACCOUNTING FIRM



To  the  Board  of  Directors  and  Stockholders
Rapidtron,  Inc.  (formerly  The  Furnishing  Club)

We  have  audited the accompanying consolidated balance sheet of Rapidtron, Inc.
(the "Company") as of December 31, 2004, and the related consolidated statements
of  operations,  stockholders'  deficit,  and  cash  flows  for  the years ended
December  31,  2004 and 2003.  These financial statements are the responsibility
of  the  Company's  management.  Our  responsibility is to express an opinion on
these  financial  statements  based  on  our  audits.

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

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material  respects,  the  consolidated  financial  position of
Rapidtron,  Inc.  as of December 31, 2004, and the results of its operations and
cash  flows  for  the  years ended December 31, 2004 and 2003 in conformity with
accounting  principles  generally  accepted  in  the  United  States of America.

The  accompanying  consolidated financial statements have been prepared assuming
that the Company will continue as a going concern.  As of December 31, 2004, the
Company  has  a  working  capital deficit of approximately $1,803,000, recurring
losses  from  operations, an accumulated deficit of approximately $7,686,000 and
has generated an operating cash flow deficit of approximately $1,521,000 for the
year then ended.  As discussed in Note 1 to the financial statements, additional
capital  will  be  necessary  to fund the Company's long-term operations.  These
conditions, among others, raise substantial doubt about the Company's ability to
continue  as  a  going  concern.  Management's plans regarding these matters are
also described in Note 1.  The accompanying consolidated financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.



/s/ Squar, Milner, Reehl & Williamson, LLP


March  25,  2005
Newport  Beach,  California


<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                           CONSOLIDATED BALANCE SHEET
                             AS OF DECEMBER 31, 2004
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                     ASSETS

CURRENT ASSETS
<S>                                                       <C>
  Cash                                                    $       750
  Accounts receivable, net                                    434,812
  Inventory, net                                              334,742
  Prepaid expenses and other current assets                    87,934
                                                          ------------
                                                              858,238

PROPERTY AND EQUIPMENT, NET                                    72,074

DEPOSITS AND OTHER ASSETS                                      12,380
                                                          ------------

                                                          $   942,692
                                                          ============


                      LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
  Accounts payable                                        $ 1,363,044
  Accrued liabilities                                         334,603
  Secured borrowings                                          235,657
  Due to related party                                         91,287
  Loans due to related parties                                250,271
  Notes payable, net of discount                              382,577
  Obligations under capital lease                               4,245
                                                          ------------
                                                            2,661,684

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
  Preferred stock, par value $0.001 per share; 5,000,000
    shares authorized; no shares issued or outstanding              -
  Common stock, par value $0.001 per share; 100,000,000
    shares authorized; 20,463,061 shares issued and
    outstanding                                                20,463
  Additional paid-in capital                                5,946,399
  Stock subscription receivable                                  (305)
  Accumulated deficit                                      (7,685,549)
                                                          ------------
                                                           (1,718,992)
                                                          ------------

                                                          $   942,692
                                                          ============
</TABLE>


-------------------------------------------------------------------------------
Page  F-3          The  accompanying  notes  are  an  integral  part  of  these
                   consolidated  financial  statements.
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                             2004          2003
                                         ------------  ------------
<S>                                      <C>           <C>
NET SALES                                $ 2,037,130   $   945,605

COST OF GOODS SOLD                         1,433,958       801,661
                                         ------------  ------------

GROSS PROFIT                                 603,172       143,944

SELLING, GENERAL AND ADMINISTRATIVE
  EXPENSES                                 3,420,633     2,903,853
                                         ------------  ------------

LOSS FROM OPERATIONS                      (2,817,461)   (2,759,909)

OTHER INCOME (EXPENSE)
  Interest expense                          (129,562)      (80,801)
  Loss on write-off of note receivable      (250,000)            -
  Foreign currency exchange loss             (99,974)      (62,794)
                                         ------------  ------------
                                            (479,536)     (143,595)
                                         ------------  ------------

LOSS BEFORE PROVISION FOR INCOME TAXES    (3,296,997)   (2,903,504)

PROVISION FOR INCOME TAXES                     3,307           800
                                         ------------  ------------

NET LOSS                                 $(3,300,304)  $(2,904,304)
                                         ============  ============

BASIC AND DILUTED NET LOSS PER COMMON
  SHARE                                  $     (0.16)  $     (0.19)
                                         ============  ============

BASIC AND DILUTED WEIGHTED AVERAGE
  NUMBER OF COMMON SHARES
  OUTSTANDING                             20,345,000    15,106,000
                                         ============  ============
</TABLE>


--------------------------------------------------------------------------------
Page  F-4           The  accompanying  notes  are  an  integral  part  of  these
                    consolidated  financial  statements.
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                             ADDITIONAL
                                   COMMON STOCK        TREASURY STOCK          PAID-         STOCK
                                -------------------  ---------------------      IN       SUBSCRIPTION   ACCUMULATED
                                 SHARES     AMOUNT    SHARES      AMOUNT      CAPITAL     RECEIVABLE      DEFICIT        TOTAL
                                ---------  --------  ---------  ----------  -----------  -------------  ------------  ------------
<S>                             <C>        <C>       <C>        <C>         <C>          <C>            <C>           <C>
                                ---------  --------  ---------  ----------  -----------  -------------  ------------  ------------
BALANCE -
     DECEMBER 31, 2002          9,924,000  $10,120    196,000   $(196,000)  $   74,865   $          -   $(1,480,941)  $(1,591,956)
Shares issued to settle
accrued salaries at $0.50
per share                         128,000      128          -           -       63,872              -             -        64,000
Effects of reverse merger       5,598,002    5,598          -           -       (5,598)             -             -             -
Treasury shares retired in
connection with reverse
 merger                                 -     (196)  (196,000)    196,000     (195,804)             -             -             -
Debt converted to equity at
approximately $1.00 per
share, in connection with
reverse merger                  1,599,000    1,599          -           -    1,646,425              -             -     1,648,024
Shares issued for services at
1.00, in connection with
reverse merger                    400,000      400          -           -      399,600              -             -       400,000
Shares sold at approximately
 $1.00 per share                  245,700      246          -           -      257,568              -             -       257,814
Shares issued for services at
1.19 per share                     37,815       38          -           -       44,962              -             -        45,000
Debt converted to common
shares at $1.00 per share          60,000       60          -           -       59,940              -             -        60,000
Shares and warrants issued
 at $1.25 per share in
connection with Unit
Purchase Agreement              1,280,000    1,280          -           -    1,598,720       (535,305)            -     1,064,695
Debt and payables converted
to equity at $1.00 per
share, in connection with
Unit Purchase Agreement           348,334      348          -           -      347,986              -             -       348,334
</TABLE>

                                   (continued)


--------------------------------------------------------------------------------
Page  F-5               The  accompanying  notes  are  an integral part of these
                        consolidated  financial  statements.
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                 COMMON STOCK      TREASURY STOCK    ADDITIONAL        STOCK
                             -------------------  -----------------    PAID-IN     SUBSCRIPTIONS    ACCUMULATED
                               SHARES    AMOUNT    SHARES   AMOUNT     CAPITAL      RECEIVABLE        DEFICIT        TOTAL
                             ----------  -------  --------  -------  -----------  ---------------  -------------  ------------
<S>                          <C>         <C>      <C>       <C>      <C>          <C>              <C>            <C>
Debt converted to stock
and warrants at $1.25
per share, in
connection with Unit
Purchase Agreement              192,000      192         -        -      239,808               -              -       240,000
Net loss                              -        -         -        -            -               -     (2,904,304)   (2,904,304)
                             ----------  -------  --------  -------  -----------  ---------------  -------------  ------------
BALANCE -
     DECEMBER 31, 2003       19,812,851   19,813         -        -    4,532,344        (535,305)    (4,385,245)     (368,393)
Shares issued for services
at $1.38 per share               50,000       50         -        -       68,947               -              -        68,997
Shares issued for services
at $1.33 per share              120,000      120         -        -      159,880               -              -       160,000
Shares issued for services
at $1.78 per share                  210        -         -        -          374               -              -           374
Exercise of warrants at
1.25 per share                 320,000      320         -        -      399,680               -              -       400,000
Purchase of shares and
warrants at $1.25 per
share                           160,000      160         -        -      199,840               -              -       200,000
Warrants granted for
services                              -        -         -        -      438,534               -              -       438,534
Receipt of stock
subscription receivable               -        -         -        -            -         535,000              -       535,000
Warrants issued with debt             -        -         -        -      146,800               -              -       146,800
Net loss                              -        -         -        -            -               -     (3,300,304)   (3,300,304)
                             ----------  -------  --------  -------  -----------  ---------------  -------------  ------------

BALANCE -
     DECEMBER 31, 2004       20,463,061  $20,463         -  $     -  $ 5,946,399  $         (305)  $ (7,685,549)  $(1,718,992)
                             ==========  =======  ========  =======  ===========  ===============  =============  ============
</TABLE>


--------------------------------------------------------------------------------
Page  F-6               The  accompanying  notes  are  an integral part of these
                        consolidated  financial  statements.
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                     2004          2003
                                                                 ------------  ------------
<S>                                                              <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                         $(3,300,304)  $(2,904,304)
Adjustments to reconcile net loss to net cash used in operating
  activities:
    Depreciation                                                      41,444         7,754
    Provision for bad debts                                          115,044        15,000
    Provision for warranty reserve                                    17,794             -
    Common shares issued for services                                209,371       445,000
    Warrants issued to outside consultants for services              438,534             -
    Unrealized foreign exchange loss                                  85,599        19,909
    Loss on write-off of note receivable                             250,000             -
    Amortization of note payable discount related to
      detachable warrants issued with debt                            36,700             -
    Changes in operating assets and liabilities:
      Accounts receivable                                           (232,469)     (253,228)
      Inventory                                                      223,460      (305,766)
      Prepaid expenses and other current assets                      (20,258)        6,235
      Deposits and other assets                                            -         1,521
      Accounts payable                                               490,174       (79,046)
      Accrued liabilities                                            119,569       429,043
      Due to related party                                             3,942       (80,830)
                                                                 ------------  ------------
NET CASH USED IN OPERATING ACTIVITIES                             (1,521,400)   (2,698,712)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment                                   (1,905)       (3,941)
                                                                 ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES                                 (1,905)       (3,941)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans due to related parties                           250,000     1,777,910
Principal payment of loans due to related parties                   (323,998)     (322,212)
Proceeds from secured borrowings                                     951,523             -
Principal payment of secured borrowings                             (715,866)            -
Proceeds from issuance of notes payable                              525,000             -
Principal payment of notes payable                                  (378,594)            -
Principal payment of capital lease obligations                        (3,266)       (2,133)
Proceeds from issuance of stock                                      200,000       257,814
Proceeds from exercise of warrants                                   400,000     1,064,695
Proceeds from stock subscriptions                                    535,000             -
                                                                 ------------  ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                          1,439,799     2,776,074
                                                                 ------------  ------------

NET INCREASE (DECREASE) IN CASH                                      (83,506)       73,421

CASH - beginning of period                                            84,256        10,835
                                                                 ------------  ------------
CASH - end of period                                             $       750   $    84,256
                                                                 ============  ============
</TABLE>
                                   (continued)


--------------------------------------------------------------------------------
Page  F-7               The  accompanying  notes  are  an integral part of these
                        consolidated  financial  statements.
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                             2004       2003
                                                           --------  ----------
<S>                                                        <C>       <C>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION
Cash paid during the period for:
  Income taxes                                             $  3,307  $      800
                                                           ========  ==========
  Interest                                                 $ 67,479  $   42,431
                                                           ========  ==========

Non-cash investing and financing activities:
  Stock issued to settle accounts payable                  $ 20,000  $        -
                                                           ========  ==========
  Acquisition of software for note payable                 $ 96,271  $        -
                                                           ========  ==========
  Allocation of proceeds from convertible note payable to
    detachable stock purchase warrants                     $146,800  $        -
                                                           ========  ==========
  Borrowings used to fund note receivable                  $250,000  $        -
                                                           ========  ==========
  Cancellation of treasury stock                           $      -  $  196,000
                                                           ========  ==========
  Equipment acquired via capital lease                     $      -  $    6,085
                                                           ========  ==========
  Effects of reverse merger on common stock                $      -  $    5,598
                                                           ========  ==========
  Common stock issued to retire debt                       $      -  $1,712,352
                                                           ========  ==========
  Common stock and warrants issued to retire debt          $      -  $  240,000
                                                           ========  ==========
</TABLE>


--------------------------------------------------------------------------------
Page  F-8               The  accompanying  notes  are  an integral part of these
                        consolidated  financial  statements.
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

BUSINESS

Rapidtron, Inc. (formerly The Furnishing Club, the "Parent") was incorporated in
the  State  of  Nevada  in March 2000. The Parent's wholly owed subsidiary, also
named  Rapidtron,  Inc.  (collectively,  the "Company"), was incorporated in the
State  of  Delaware in January 2000. The Company is headquartered in Costa Mesa,
California  and  provides  Radio  Frequency  ("RF")  smart  access  control  and
ticketing/  membership  systems (the "System") to the fitness and ski industries
and  universities  in  North America. The System facilitates rapid operator-free
entry  and  exit through automated turnstiles or portals and optional hands-free
entry.  The Company incorporates "smart card" debit/credit technology for retail
purchases and promotional/loyalty programs. The System is versatile and utilizes
either read-write RF smart cards or bar code paper tickets. This dual capability
allows  a  venue  to  issue  and re-issue numerous types and durations of access
privilege  cards.  Its  open  architecture  allows  for  an  easy interface with
existing  back  office  software.

During  the year ended December 31, 2003, the Company completed a reverse merger
(see  Note  2).  The common stock of the merged entity is quoted on the Over the
Counter  Bulletin  Board  under  the  symbol  "RPDT.OB".

GOING  CONCERN  AND  LIQUIDITY  CONSIDERATIONS

The  accompanying  consolidated financial statements have been prepared assuming
the  Company  will  continue as a going concern, which contemplates, among other
things,  the realization of assets and satisfaction of liabilities in the normal
course  of business.  As of December 31, 2004, the Company has a working capital
deficit  of  approximately  $1,803,000,  recurring  losses  from  operations, an
accumulated  deficit  of approximately $7,686,000 and has generated an operating
cash  flow  deficit  of  approximately  $1,521,000 for the year then ended.  The
Company  intends  to fund operations through increased sales and debt and equity
financing  arrangements,  which  may  be  insufficient  to  fund  its  capital
expenditures,  working  capital  and other cash requirements for the year ending
December  31,  2005.

Thereafter, the Company will be required to seek additional funds to finance its
long-term  operations.  The  successful  outcome  of future activities cannot be
determined at this time, and there is no assurance that if achieved, the Company
will  have  sufficient  funds  to execute its intended business plan or generate
positive  operating  results,  which  may  result  in  the  discontinuance  of
operations.

In  response  to  these  problems, management has planned the following actions:

     -    Management intends to raise additional funds through future private
          placement offerings.
     -    Management expects its increased marketing efforts to result in future
          sales  increases.  There  can  be  no  assurances,  however,  that
          management's  expectations  of  future  sales  will  be  realized.

These factors, among others, raise substantial doubt about the Company's ability
to  continue  as  a  going  concern.  The  accompanying  consolidated  financial
statements  do not include any adjustments that might result from the outcome of
this  uncertainty.

PRINCIPLES  OF  CONSOLIDATION

The  accompanying  consolidated  financial  statements  have  been  prepared  in
accordance with accounting principles generally accepted in the United States of
America  and include the accounts of the Parent and its wholly owned subsidiary.
All  significant  intercompany accounts and transactions have been eliminated in
consolidation.


--------------------------------------------------------------------------------
Page F-9
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

USE  OF  ESTIMATES

The  preparation  of  consolidated  financial  statements  in  conformity  with
accounting  principles  generally  accepted  in  the  United  States  of America
requires  management  to make estimates and assumptions that affect the reported
amounts  of  assets  and  liabilities  and  disclosure  of contingent assets and
liabilities  at  the  date  of  the  consolidated  financial  statements and the
reported  amounts  of  revenues  and  expenses  during  the  reporting  years.
Significant  estimates  made  by management include, among others, provision for
losses  on  accounts receivable, realization of inventory and long-lived assets,
warranty  reserves  and the valuation allowance for deferred tax assets.  Actual
results  could  differ  from  those  estimates.

CONCENTRATIONS
Financial  instruments  that  may  subject  the  Company  to credit risk include
uninsured  cash-in-bank  balances.  At  times,  the  Company's  bank balance may
exceed  the  amount  insured  by  the  Federal  Deposit  Insurance  Corporation.

The  Company  grants credit to customers and requires collateral, in the form of
cash  deposits,  on  a  case-by-case  basis.  Deposits from customers, which are
included  in accrued liabilities in the accompanying consolidated balance sheet,
totaled  $12,900  at  December  31,  2004.  The  Company's  ability  to  collect
receivables  is affected by economic fluctuations in the geographic areas served
by  the  Company. Reserves for uncollectible amounts are provided, based on past
experience  and  a  specific analysis of the accounts, which management believes
are  sufficient.  Receivables that have been allowed for are written-off against
the allowance for doubtful accounts when management has exhausted all collection
efforts  and  deems the receivables to have no chance of collection.  Management
has  provided  an  allowance  for  doubtful accounts of $135,044 at December 31,
2004.  Although  management  expects  to collect amounts due, actual collections
may  differ  from  the  estimated  amounts.

At  December  31,  2004,  two  customers  accounted for approximately 82% of net
accounts  receivable.  One customer accounted for approximately 67% of net sales
during  the  year  ended  December 31, 2004, and no other customer accounted for
more than 10% of net sales for the year then ended.  For the year ended December
31,  2003,  two  customers  accounted  for  approximately  54%  of  net  sales.

Effective  May  1,  2000,  the  Company  entered  into an exclusive distribution
agreement  with Axess AG ("Axess"), an Austrian company, where the Company would
sell,  primarily  to the North American market, access control devices developed
and  manufactured  by  Axess.  The  Company  purchases  substantially all of its
inventory  from  Axess.

RISKS  AND  UNCERTAINTIES

The  Company  operates  in  an  emerging  industry  that  is  subject  to market
acceptance  and  technological  change.  The Company's operations are subject to
significant  risks  and  uncertainties,  including  financial,  operational,
technological  and  other  risks associated with operating an emerging business,
including  the  potential  risk  of  business  failure.

CASH  EQUIVALENTS

The Company considers all highly liquid temporary cash investments with original
maturities  of  three months or less to be cash equivalents.  The Company has no
cash  equivalents  at  year-end.


--------------------------------------------------------------------------------
Page F-10
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

INVENTORY

Inventory  is  stated  at  the  lower of cost (first-in, first-out) or estimated
market  and  is  primarily comprised of finished goods.  Market is determined by
comparison with recent sales or net realizable value.  Such net realizable value
is  based  on  management's  forecasts  for  sales  of the Company's products or
services  in  the  ensuing  years.  Should the demand for the Company's products
prove  to  be significantly less than anticipated, the ultimate realizable value
of the Company's inventory could be substantially less than amounts shown in the
accompanying  consolidated  balance  sheet.

PROPERTY  AND  EQUIPMENT

Property  and  equipment  are  stated  at  cost  less  accumulated depreciation.
Depreciation  is  provided on the straight-line method over the estimated useful
lives  of the respective assets, generally three years.  Equipment under capital
lease  obligations  are capitalized at the lesser of their estimated fair market
value  or  the  present value of the minimum lease payments, and are depreciated
over  the shorter of the estimated useful life or the term of the related lease.
Betterments,  renewals,  and  extraordinary repairs that extend the lives of the
assets  are  capitalized;  other repairs and maintenance charges are expensed as
incurred.  The  cost  and  related accumulated depreciation applicable to assets
sold  or  retired  are  removed  from  the  accounts,  and  the  gain or loss on
disposition  is  recognized  in  current  operations.

IMPAIRMENT  OF  LONG-LIVED  ASSETS

Statement  of  Financial  Accounting Standards ("SFAS") No. 144, "Accounting for
the  Impairment  of  Long-Lived  Assets and for Long-Lived Assets to be Disposed
Of." addresses financial accounting and reporting for the impairment or disposal
of  long-lived  assets. SFAS No. 144 requires that long-lived assets be reviewed
for  impairment  whenever events or changes in circumstances indicate that their
carrying amounts may not be recoverable. If the cost basis of a long-lived asset
is greater than the projected future undiscounted net cash flows from such asset
(excluding  interest),  an  impairment loss is recognized. Impairment losses are
calculated  as  the  difference  between  the  cost  basis  of  an asset and its
estimated  fair  value.

SFAS  No.  144  also  requires  companies  to  separately  report  discontinued
operations  and  extends  that reporting to a component of an entity that either
has  been  disposed  of  (by  sale,  abandonment,  or  in  a  distribution  to
stockholders)  or  is  classified  as  held  for sale. Assets to be disposed are
reported  at  the lower of the carrying amount or fair value less costs to sell.
The  provisions of this statement for assets held for sale or other disposal are
generally  required  to  be applied prospectively after the adoption date to any
newly  initiated  commitment  to  a plan to sell such assets by management. As a
result, the Company cannot determine the potential effects that adoption of SFAS
No.  144  will  have  on  the  consolidated financial statements with respect to
future  disposal  decisions,  if  any.  As  of December 31, 2003, management has
determined  that  no  such  impairment exists and therefore, no adjustments have
been  made  to  the  carrying  values  of  long-lived  assets.  There  can be no
assurance,  however,  that  market  conditions will not change or demand for the
Company's  products will continue which could result in impairment of long-lived
assets  in  the  future.

REVENUE  RECOGNITION

Revenues on product sales are recognized when all of the following criteria have
been  met: persuasive evidence for an arrangement exists; delivery has occurred;
the  fee  is  fixed  or  determinable; and collectibility is reasonably assured.
Installation  revenues,  which  are  billed  separately  from product sales, are
generally  recorded  upon  completion of services.  Management believes that the
Company's revenue recognition policies comply with Staff Accounting Bulletin No.
104  ("SAB  104")  issued  by  the  Securities  Exchange  Commission  ("SEC").


--------------------------------------------------------------------------------
Page F-11
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

FOREIGN  CURRENCY  TRANSACTIONS

The  Company  records  all  transactions  with  its foreign supplier, Axess (see
above),  in  accordance  with  SFAS No. 52, "Foreign Currency Translation."  All
invoices  received  from  Axess  are  denominated  in Euros.  When an invoice is
received,  the  Company  translates  these amounts to US Dollars at the exchange
rate  effective  on  the invoice date.  If the exchange rate changes between the
time  of purchase and the time payment is made, a foreign currency exchange gain
or loss results.  The Company recorded a realized foreign currency exchange gain
(loss)  of  approximately $11,000 and $(43,000) for the years ended December 31,
2004  and  2003,  respectively.

Additionally,  the  Company computes a foreign currency exchange gain or loss at
each  balance  sheet  date  on  all  recorded  foreign  currency  denominated
transactions  that  have  not been settled.  The difference between the exchange
rate that could have been used to settle the transaction at the date it occurred
(the  invoice  date),  and  the  exchange rate at the balance sheet date, is the
unrealized  gain or loss recognized in current operations.  The Company recorded
an  unrealized  foreign  currency  exchange  loss  of  approximately $87,000 and
$20,000  for  the  years  ended  December  31,  2004  and  2003,  respectively.

The  Company  does  not  use  derivative  instruments  to  hedge against foreign
currency  fluctuations.

ADVERTISING

The  Company  expenses  the  cost  of  advertising  when  incurred.  Advertising
expenses  are  included  in  selling, general and administrative expenses in the
accompanying  consolidated statements of operations and approximated $92,000 and
$156,000  for  the  years  ended  December  31,  2004  and  2003,  respectively.

SHIPPING  AND  HANDLING  COSTS

Shipping  and  handling  costs  are  included  in  cost  of  goods  sold  in the
accompanying  consolidated  statements of operations in accordance with Emerging
Issues Task Force ("EITF") No. 00-10, "Accounting for Shipping and Handling Fees
and  Costs."  Freight  costs for the years ended December 31, 2004 and 2003 were
approximately  $89,000  and  $70,000,  respectively.

SOFTWARE  DEVELOPMENT  COSTS

The  Company  develops software to allow its products to interface with existing
back  office  software  used  by  its customers.  Software development costs are
charged  to  expense as incurred in accordance with SFAS No. 86, "Accounting for
the  Costs  of  Computer  Software  to  Be Sold, Leased, or Otherwise Marketed."
Software  development costs approximated $21,000 and $58,000 for the years ended
December  31,  2004 and 2003, respectively, and are included in selling, general
and  administrative  expenses  in  the  accompanying  consolidated statements of
operations.

INCOME  TAXES

Income  taxes  are accounted for using the asset and liability method.  Deferred
tax  assets  and  liabilities  are  recognized  for  the future tax consequences
attributable  to differences between the financial statement carrying amounts of
existing  assets  and  liabilities  and their respective tax bases and operating
loss  and  tax  credit  carryforwards.  Deferred  tax assets and liabilities are
measured  using  enacted  tax  rates  expected to apply to taxable income in the
years  in  which  those  temporary  differences  are expected to be recovered or
settled.  The  effect  on deferred tax assets and liabilities of a change in tax
rates  is  recognized  in  operations  in the period that includes the enactment
date.  A  valuation  allowance  is  provided for significant deferred tax assets
when  it  is  more  likely  than  not  that  such  assets will not be recovered.


--------------------------------------------------------------------------------
Page F-12
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

STOCK  BASED  COMPENSATION

The  Company accounts for stock-based compensation issued to employees using the
intrinsic  value method as prescribed by Accounting Principles Board Opinion No.
25  "Accounting  for  Stock Issued to Employees" ("APB 25"). Under the intrinsic
value method, compensation is the excess, if any, of the fair value of the stock
at the grant date or other measurement date over the amount an employee must pay
to acquire the stock. Compensation, if any, is recognized straight-line over the
applicable  service  period,  which is usually the vesting period.  SFAS No. 123
"Accounting  for  Stock-Based  Compensation",  as  amended  by  SFAS  No.  148,
"Accounting  for  Stock-Based  Compensation  -  Transition  and  Disclosure,  an
amendment  of  FASB  Statement  No. 123" and interpreted by Financial Accounting
Standards  Board ("FASB") Interpretation ("FIN") No. 44, "Accounting for Certain
Transactions  Involving  Stock  Compensation,  an  Interpretation of APB 25," if
fully adopted, changes the method of accounting for all stock-based compensation
to  the  fair  value  method.  For  stock  options  and  warrants, fair value is
determined using an option pricing model that takes into account the stock price
at  the  grant  date,  the  exercise  price,  the expected life of the option or
warrant  and  the  annual  rate of quarterly dividends. Compensation expense, if
any,  is  recognized  over  the  applicable service period, which is usually the
vesting  period.

The  adoption  of  the  accounting  methodology of SFAS No. 123 for employees is
optional,  and  the  Company  has elected to continue accounting for stock-based
compensation  issued  to employees using APB 25; however, pro forma disclosures,
as  if the Company adopted the cost recognition requirements under SFAS No. 123,
are  required  to  be  presented.

As  of December 31, 2004, the Company has granted options to employees under one
stock-based compensation plan (see Note 8). The Company accounts for such grants
under  the  recognition  and  measurement  principles  of  APB  25,  and related
Interpretations.  No  stock-based employee compensation cost is reflected in net
loss, as all options granted had an exercise price equal to the estimated market
value  of  the  underlying  common  stock  on  the  date  of  grant.

The  following table illustrates the effect on net income and earnings per share
if  the  Company  had  applied the fair value recognition provisions of SFAS No.
123,  as  amended,  to  stock-based  employee  compensation  for the years ended
December  31:.

<TABLE>
<CAPTION>
                                                                 2004          2003
                                                             ------------  ------------

Net loss:
<S>                                                          <C>           <C>
  As reported                                                $(3,300,304)  $(2,904,304)
  Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards     (193,500)       (5,400)
                                                             ------------  ------------

      Pro forma                                              $(3,493,804)  $(2,909,704)
                                                             ============  ============

Basic and diluted net loss per share:
  As reported                                                $     (0.16)  $     (0.19)
                                                             ============  ============

  Pro forma                                                  $     (0.17)  $     (0.19)
                                                             ============  ============
</TABLE>


--------------------------------------------------------------------------------
Page F-13
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

COMPREHENSIVE  INCOME

SFAS  No.  130,  "Reporting  Comprehensive  Income,"  establishes  standards for
reporting  and  display of comprehensive income and its components in a full set
of  general-purpose  financial statements. For the years ended December 31, 2004
and  2003,  the  Company had no items of other comprehensive income.  Therefore,
net  loss  equals  comprehensive  loss for the years ended December 31, 2004 and
2003.

EARNINGS  PER  SHARE

The  Company computes net loss per common share using SFAS No. 128 "Earnings Per
Share."  Basic  loss  per common share is computed based on the weighted average
number  of shares outstanding for the period. Diluted loss per share is computed
by  dividing  net  loss  by the weighted average shares outstanding assuming all
dilutive  potential  common shares were issued. There were no dilutive potential
common shares at December 31, 2004 and 2003 as all options (Note 8) and warrants
(Note  9) to acquire common stock, plus convertible notes payable (Note 6), were
deemed  to  be under water.  Because the Company has incurred net losses and has
no  potentially dilutive common shares, basic and diluted loss per share are the
same.  Additionally,  for  purposes of calculating diluted loss per share, there
were  no  adjustments  to  net  loss.

TREASURY  STOCK

The  Company  accounts for acquisitions of treasury stock under the cost method.
Treasury  stock  is recorded as a separate component of stockholders' deficit at
cost,  and  paid-in  capital  accounts  are not adjusted until the time of sale,
retirement  or  other  disposition.

SEGMENTS  OF  A  BUSINESS

SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information," changed the way public companies report information about segments
of  their  business  in  their quarterly reports issued to stockholders. It also
requires  entity-wide  disclosures  about  the  products  and services an entity
provides,  the  material countries in which it holds assets and reports revenues
and  its  major  customers.  The  Company  currently operates in one segment, as
disclosed  in  the  accompanying  consolidated  statements  of  operations.

SIGNIFICANT  RECENT  ACCOUNTING  PRONOUNCEMENTS

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are
to  provide  guidance  on  the  identification  of entities for which control is
achieved  through means other than voting rights (variable interest entities, or
"VIEs")  and  how  to  determine  when  and  which  business  enterprise  should
consolidate  the  VIE. This new model for consolidation applies to an entity for
which  either:  (1)  the  equity  investors  do not have a controlling financial
interest;  or  (2) the equity investment at risk is insufficient to finance that
entity's  activities without receiving additional subordinated financial support
from  other  parties.  In  addition,  FIN  No. 46 requires that both the primary
beneficiary  and all other enterprises with a significant variable interest in a
VIE  make  additional  disclosures.  As  amended in December 2003, the effective
dates  of  FIN  No.  46  for public entities that are small business issuers, as
defined  ("SBIs"), are as follows: (a) For interests in special-purpose entities
("SPEs"):  periods  ended  after  December 15, 2003; and (b) For all other VIEs:
periods ended after December 15, 2004. The December 2003 amendment of FIN No. 46
also  includes  transition  provisions  that  govern how an SBI which previously
adopted  the  pronouncement  (as  it  was  originally  issued)  must account for
consolidated  VIEs.  Management  has concluded that the Company does not have an
interest  in  any  SPEs,  and  is evaluating the other effects of FIN No. 46 (as
amended)  on  its  future  consolidated  financial  statements.


--------------------------------------------------------------------------------
Page F-14
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

SIGNIFICANT  RECENT  ACCOUNTING  PRONOUNCEMENTS  (continued)

In  May  2003,  the  FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments  with  Characteristics of both Liabilities and Equity." SFAS No. 150
establishes  standards  for  how  a  company  classifies  and  measures  certain
financial  instruments  with characteristics of both liabilities and equity, and
is  effective  for  public  companies as follows: (i) in November 2003, the FASB
issued  FASB  Staff  Position  ("FSP")  FAS  150-3  ("FSP  150-3"), which defers
indefinitely (a) the measurement and classification guidance of SFAS No. 150 for
all  mandatorily  redeemable  non-controlling  interests  in  (and  issued  by)
limited-life  consolidated  subsidiaries,  and  (b)  SFAS  No. 150's measurement
guidance  for  other  types of mandatorily redeemable non-controlling interests,
provided  they  were  created  before  November  5,  2003;  (ii)  for  financial
instruments  entered  into  or  modified after May 31, 2003 that are outside the
scope  of  FSP 150-3; and (iii) otherwise, at the beginning of the first interim
period  beginning  after  June  15,  2003.  The Company adopted SFAS No. 150 (as
amended)  on  the  aforementioned  effective  dates.  The  adoption  of  this
pronouncement  did  not  have  a  material  impact  on  the Company's results of
operations  or  financial  condition.

In  November 2004, the FASB issued SFAS No. 151, "Inventory Costs - an amendment
of  ARB  No. 43, Chapter 4," which clarifies the accounting for abnormal amounts
of  idle  facility  expense,  freight,  handling  costs and wasted material.  In
Chapter  4  of  ARB  43,  paragraph  5  previously  stated  that  "  under  some
circumstances,  items  such as idle facility expense, excessive spoilage, double
freight,  and  re-handling  costs  may be so abnormal as to require treatment as
current  period  charges ."  SFAS No. 151 requires that such items be recognized
as  current-period  charges, regardless of whether they meet the criterion of so
abnormal  (an undefined term).  This pronouncement also requires that allocation
of  fixed  production overhead to the costs of conversion be based on the normal
capacity  of the production facilities.  SFAS No. 151 is effective for inventory
costs  incurred  in  years  beginning  after  June  15,  2005.

In  December  2004, the FASB issued SFAS No. 123-R, "Share-Based Payment," which
requires that the compensation cost relating to share-based payment transactions
(including  the  cost  of  all  employee  stock  options)  be  recognized in the
financial  statements.  That  cost  will be measured based on the estimated fair
value  of  the  equity or liability instruments issued.  SFAS No. 123-R covers a
wide  range  of  share-based  compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans.  SFAS No.123-R replaces SFAS No. 123, "Accounting
for  Stock-Based  Compensation,"  and  supersedes  Accounting  Principles  Board
("APB")  Opinion  No.  25,  "Accounting  for  Stock  Issued  to  Employees."  As
originally  issued,  SFAS  No.  123 established as preferable a fair-value-based
method  of  accounting  for  share-based  payment  transactions  with employees.
However,  that  pronouncement  permitted  entities  to  continue  applying  the
intrinsic-value  model of APB Opinion 25, provided that the financial statements
disclosed  the  pro  forma net income or loss based on the preferable fair-value
method. Small Business Issuers are required to apply SFAS No. 123-R in the first
interim  or  annual reporting period that begins after December 15, 2005.  Thus,
the  Company's consolidated financial statements will reflect an expense for (a)
all  share-based compensation arrangements granted after January 1, 2006 and for
any  such  arrangements  that are modified, cancelled, or repurchased after that
date, and (b) the portion of previous share-based awards for which the requisite
service has not been rendered as of that date, based on the grant-date estimated
fair  value.

The  FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment of
APB  Opinion  No.  29, Accounting for Nonmonetary Transactions."  The amendments
made  by  SFAS  No. 153 are based on the principle that exchanges of nonmonetary
assets  should  be  measured  using  the  estimated  fair  value  of  the assets
exchanged.  SFAS  No.  153  eliminates  the  narrow  exception  for  nonmonetary
exchanges of similar productive assets, and replaces it with a broader exception
for  exchanges  of  nonmonetary assets that do not have commercial substance.  A
nonmonetary  exchange has "commercial substance" if the future cash flows of the
entity  are  expected  to  change  significantly as a result of the transaction.
This  pronouncement  is  effective  for  nonmonetary exchanges in fiscal periods
beginning  after  June  15,  2005.


--------------------------------------------------------------------------------
Page F-15
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

1.  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING POLICIES (continued)

SIGNIFICANT  RECENT  ACCOUNTING  PRONOUNCEMENTS  (continued)

Other  recent  accounting  pronouncements  issued  by  the  FASB  (including its
Emerging  Issues Task Force), the AICPA, and the SEC did not or are not believed
by  management  to  have  a  material  impact on the Company's present or future
consolidated  financial  statements.

FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The  Company's financial instruments include cash, accounts receivable, accounts
payable,  accrued liabilities, notes payable and capital lease obligations.  The
Company believes that the fair value of these financial instruments approximates
their  carrying  amounts  based on current market indicators, such as prevailing
market  rates  and the short-term maturities of these financial instruments.  It
is  not practical to estimate the fair value of amounts due to related party and
loans  due  to related parties due to their related party nature (see Note 5 for
more  information  on  related  party  payables  and  debt).

2.  REVERSE  MERGER

On  May  8,  2003, The Furnishing Club and subsidiary ("TFC"), a publicly traded
"shell"  company  (the  previous  public registrant), completed a reverse merger
under  an  Agreement and Plan of Merger (the "Plan" or "Merger") with Rapidtron,
Inc.,  a  Delaware  corporation  (the  "Private  Company"),  in a tax-free share
exchange  under  Section  368(a)(1)(B)  of the Internal Revenue Code of 1986, as
amended.  Immediately  prior  to  the  Merger,  TFC had 20,000,000 common shares
authorized  and  19,993,752  shares  of  common  stock  issued  and outstanding.
Pursuant  to  the Merger, all of the 10,052,000 issued and outstanding shares of
common stock of the Private Company (including 128,000 shares for the settlement
of accrued salaries, as discussed in Note 6) were exchanged for 9,600,000 common
shares of TFC, on a 0.955 to 1 basis. Concurrent with the closing of the Merger,
13,943,750  shares of common stock of TFC were canceled, and the Private Company
issued  5,598,002  shares  of  common  stock. As a result, immediately after the
Merger  15,650,002  shares  of  common  stock  were  issued  and outstanding. In
addition,  the  Company  issued 400,000 shares of restricted common stock to two
finders  associated  with  the  merger.

Immediately after the Merger, the officers and directors of TFC resigned and the
management  of  the  Private  Company  took control of such positions, therefore
effecting  a  change  of control. As a result, the transaction was recorded as a
"reverse  merger"  whereby  the  Private  Company  was considered the accounting
acquirer  as  it  retained control of TFC after the merger, however, legally the
Private  Company  became  a  wholly owned subsidiary of TFC after the Merger. In
connection  with  the  Merger,  TFC  changed  its  name  to  Rapidtron,  Inc.

3.  NOTE  RECEIVABLE

In  July  19, 2004, the Company entered into a Memorandum of Understanding (MOU)
with Smart Cards Integrators, Inc. (SCI), whereby the Company could purchase SCI
for stock and warrants if certain conditions were met by November 30, 2004. Such
conditions were not met and the acquisition was not completed. Prior to November
30,  2004, the Company loaned $250,000 to SCI. Pursuant to the terms of the MOU,
the  Company  forgave such account receivable in the amount $250,000 as a result
of its failure to satisfy certain conditions to close the merger contemplated by
the MOU.


--------------------------------------------------------------------------------
Page F-16
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

4.  PROPERTY  AND  EQUIPMENT

Property  and  equipment  consist  of  the  following  at  December  31,  2004:

<TABLE>
<CAPTION>
<S>                            <C>
Furniture and fixtures         $  5,339
Computer equipment               26,144
Software                         96,271
                               ---------
                                127,754
Less accumulated depreciation   (55,680)
                               ---------
                               $ 72,074
                               =========
</TABLE>

Included  in property and equipment are several computers acquired under capital
leases  with  costs  totaling  $10,637  and  related accumulated depreciation of
$6,611  at  December  31,  2004.  Depreciation  of such leased equipment totaled
$3,034  and $2,156 for the years ended December 31, 2004 and 2003, respectively.

5.  RELATED  PARTY  TRANSACTIONS

DUE  TO  RELATED  PARTY

Equus  Marketing  and  Design,  Inc. ("Equus") is a party related to the Company
through  commonality  of  ownership.  The  Company shares a facility and certain
administrative  personnel  with  Equus  (Equus is the lessee of the property and
employer of certain personnel).  Additionally, Equus provides marketing services
to  the  Company.

On  January  1,  2002,  the  Company  entered  into  an  administrative expenses
agreement  and  a  marketing  services  agreement with Equus on a month-to-month
basis.  Under the administrative expenses agreement, the Company is to reimburse
Equus  monthly  for  certain  costs  directly  attributable  to the Company plus
approximately  30%  to  50%  of  shared  costs  such as rent, utilities, certain
employees'  payroll  costs, etc.  Management believes that the allocated amounts
are reasonable and at fair market values.  For the years ended December 31, 2004
and  2003,  Equus  charged  the  Company  approximately  $175,000  and $277,000,
respectively,  for  administrative  expenses.

The marketing services agreement requires a monthly marketing retainer of $2,500
to  be  paid  to  Equus.  Additionally,  the Company is billed for certain other
direct  advertising  and marketing costs.  For the years ended December 31, 2004
and  2003,  marketing  and  advertising  expenses  charged by Equus approximated
$110,000  and  $207,000,  respectively.

At  December  31,  2004, the Company owed Equus approximately $91,000 for unpaid
administrative and marketing expenses, which is included in due to related party
on  the  accompanying  consolidated  balance  sheet.

LOANS  DUE  TO  RELATED  PARTIES

The Company had the following loans due to related parties at December 31, 2004:

<TABLE>
<CAPTION>
<S>                                                                 <C>
Loans due to stockholders, unsecured, accrue interest at the Prime
  rate (5.0% at December 31, 2004), due on demand.                  $ 62,521
Loan payable to stockholders, unsecured, accrues interest at the
  Prime rate plus 2%, due on demand.                                  37,750
Loan payable to Equus, unsecured, accrues interest at the Prime
  rate plus 1%, due on demand.                                       150,000
                                                                    --------
                                                                    $250,271
                                                                    ========
</TABLE>


--------------------------------------------------------------------------------
Page F-17
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

5.  RELATED  PARTY  TRANSACTIONS  (continued)

LOANS  DUE  TO  RELATED  PARTIES  (continued)

During  the  year  ended  December  31, 2004, the Company borrowed approximately
$250,000  from  related  parties,  and  made  repayments with cash approximating
$324,000.

MANAGEMENT  SERVICES  AGREEMENT

Effective  January  1,  2002,  the  Company  entered  into a management services
agreement  with  Meineke  Consulting, LLC ("Meineke"). The proprietor of Meineke
Consulting, LLC is a member of the Board of Directors of the Company. Under such
agreement Meineke is to provide general management services to the Company until
December  31,  2004, unless terminated earlier. Such agreement was terminated on
March  1,  2004.  Fees  for  each  of the years ended December 31, 2004 and 2003
approximated  $11,250  and  $100,000,  respectively.  The  Management  Services
Agreement with Meineke was terminated in February 2004.

CONSULTING AGREEMENT

The  Company  has entered into a 36-month consulting services agreement with Lee
Guthrie  &  Associates  ("LGA")  to  provide  sales, marketing, distribution and
business  development  strategies and assistance. Lee Guthrie, the owner of LGA,
is  the  Company's  Vice  President of Fitness Sales. The agreement commenced on
June  1,  2002,  and may be terminated by either party with 30 days notice. Such
agreement  requires  monthly  payments  of $4,000 plus annual bonuses if certain
targets  are  met.  In addition, the Company granted options to purchase 150,000
shares  of  the  Company's  common stock at an exercise price of $1.00 per share
(see  Note  8).  The  Company  incurred consulting fees related to this contract
totaling  $48,000 during each of the years ended December 31, 2004 and 2003. The
Consulting Agreement with Guthrie was terminated in November 2004.

EMPLOYMENT  AGREEMENTS

During  the  year  ended  December 31, 2003, the Company entered into employment
agreements  with certain employees.  Such agreements expire on December 31, 2004
and  November  30, 2006 and can only be terminated prior to such dates by either
party for "cause", as defined. Agreements expiring on December 31, 2004 have not
been renewed, but the employees continue to work for the Company on an "at will"
basis  with  payment  terms similar to their previous employment agreements. The
one  agreement  that  has  not  expired  has provisions that include base salary
amounts,  various  benefits,  the  granting  of  stock options (see Note 8), and
covenants  not  to  compete.  Upon  a  resignation with cause by the employee or
termination  without cause by the Company, the Company is to immediately pay all
accrued  compensation,  and  must  continue  paying  the base salary for 6 to 12
months  following termination. Total base salaries to be paid to these employees
are  as  follows  for  the  years  ending  December  31:

<TABLE>
<CAPTION>
<S>        <C>
2005       $115,000
2006        115,000
           --------
           $230,000
           ========
</TABLE>

Other  related  party transactions are discussed elsewhere in these notes to the
consolidated  financial  statements.


--------------------------------------------------------------------------------
Page F-18
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

6.  DEBT

SECURED  BORROWINGS

Effective  June  29,  2004,  the  Company  entered  into  an Accounts Receivable
Purchase  Agreement  with Silicon Valley Bank ("SVB"). Under such agreement, the
Company  can request SVB to purchase, with full recourse, certain trade accounts
receivable.  If SVB accepts such offer, they will advance 70% to 80% of the face
amount  of the "purchased" receivable to the Company. The Company is required to
pay  $20,000  yearly as a Facility Fee, plus a monthly Finance Charge of 1.5% on
the  average  daily  Account  Balance  outstanding, as defined. Advances may not
exceed  $1,750,000  (with  the  underlying "purchased" receivables not exceeding
$2,500,000).  Advances  are  secured by substantially all assets of the Company.

The  Agreement  has  a one-year term, and then continues on a year-to-year basis
thereafter.  The  Company  is  recording advances under the agreement as secured
borrowings. The Company is obligated to repurchase transferred receivables under
the  agreement, and, therefore, the transaction does not qualify as a sale under
the  terms of SFAS No. 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." As of December 31, 2004, the Company
has  received  advance  totaling  $235,657  against  the  "purchase"  of  trade
receivables  totaling  $336,653.

NOTES  PAYABLE

On  October  8,  2004, the Company borrowed $350,000 under a convertible secured
promissory  note.  Such  note  bears interest at 10% per annum and principal and
interest  is  due  in-full  on  November 8, 2004. The debt is secured by certain
assets  of  the  Company,  including  the  note  receivable (see Note 3), and is
guaranteed  by  the president and CEO of the Company.  On November 22, 2004, the
note  was amended to extend the maturity date to December 15, 2004 and allow the
Company  to  borrow  an  additional  $25,000.  Such  debt is subordinated to the
secured  borrowings  with SVB, as described above.  Upon an event of default, as
defined,  the  lender  may  convert  the note to the Company's restricted common
shares  at the lesser of a) $0.33 per share or b) the average lowest closing bid
price  during the five trading days immediately prior to the Conversion Date, as
defined.  No beneficial conversion feature was recorded as the fair value of the
underlying  stock  was  not  deemed  to  be  materially  different from the most
beneficial  conversion  price  at the commitment date. If the note is converted,
the  Company  shall,  at its own expense, file a registration statement with the
SEC  within six months after the conversion date.  In December 2004, the Company
repaid $337,500 following the maturity date.  As a result, a late fee of $18,750
became  due  and  interest  began to accrue at 14% per annum.  Until the Company
cures  the  default,  interest  will  accrue  at  14%.  In addition, the loan is
secured  by  all of the Company's assets, which security interest is subordinate
to  the  security  interest  held  by  Silicon Valley Bank.  LDM may at any time
proceed  to  foreclose  on  the  security  interest  until the Company cures the
default  and  may  collect  from  the  Company  the  cost  of  such proceedings.

On  December  1, 2004, the Company borrowed $400,000 under a secured convertible
promissory  note with detachable stock purchase warrants (see Note 9). Such note
bears  interest at 15%, is  due on March 31, 2005, is guaranteed by the officers
of  the  Company,  and  is  secured  by substantially all assets of the Company.
Interest  totaling $15,000 was prepaid by the Company. Of this total, $5,000 has
been  expensed during the year ended December 31, 2004 and the remaining $10,000
is  included  in  prepaid  expenses and other current assets on the accompanying
consolidated  balance  sheet.  Thereafter,  interest is due monthly. The debt is
subordinated  to  the  secured  borrowings  with  SVB,  as described above.  The
Company has recorded a debt discount of $146,800 to allocate the proceeds to the
detachable  stock  purchase  warrants  based  on  their relative fair value. The
lender  may  convert  the note to the Company's common stock at the lesser of a)
$0.33  per  share  or  b) 80% of the average lowest closing bid price during the
five  trading days immediately prior to the conversion date.  In accordance with
EITF  Issue  No.  98-05,  the Company calculated a beneficial conversion feature
("BCF")  of  $146,800 at the commitment date, but will not record such BCF until
an  event of Default has occurred. The Company was also obligated to prepare and
file  with  the  SEC  no  later than December 31, 2004, a registration statement
covering  all  shares issuable under the detachable stock purchase warrants, for
continuous  offering pursuant to Rule 415 under the Securities Act of 1933.  The
Company  is  obligated to pay an additional $8,000 to the holder of the note for
every  30  days  after  December  31,  2004, until the registration statement is
declared  effective  by  the  Commission.


--------------------------------------------------------------------------------
Page F-19
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

6.  DEBT  (continued)

CAPITAL  LEASE  OBLIGATIONS

Included  in  property and equipment (see Note 4) are several computers acquired
under  capital leases.  The leases accrue interest at an imputed rate of 19.99%,
require principal and interest payments approximating $350 per month, and expire
on  various  dates  through  October  2006.

7.  EQUITY  TRANSACTIONS

In  January  2003, the Company issued 128,000 shares of the Company's restricted
common  stock  to  an  employee  to  settle accrued salaries payable of $64,000.

Immediately  after  the  Merger  (see  Note  2),  the  Company  converted  loans
approximating  $1,648,000  into  1,599,000  shares  of  the Company's restricted
common  stock.

In  connection  with the Merger, the Company issued 400,000 shares of restricted
common stock as finder's fees to certain individuals. Such shares were valued at
$1  per share based on recent stock sales and conversions of debt to equity. The
Company  recorded  acquisition  costs  totaling  $400,000,  which is included in
selling,  general  and  administrative expenses in the accompanying consolidated
statements  of  operations.

In  July  2003, a convertible note payable holder converted $60,000 of principal
into  60,000  shares  of  the  Company's  restricted  common  stock.

During  the year ended December 31, 2003, the Company sold 245,700 shares of its
restricted  common stock at approximately $1.00 per share for cash approximating
$258,000.

On  August  29, 2003, the Company filed with the SEC Form S-8 to register 37,815
shares  of  the  Company's  restricted common stock pursuant to a legal services
agreement  with the Company's legal counsel. Under such agreement, legal counsel
may  convert  past due amounts due from the Company into registered common stock
at  $1.19 per share (estimated to be the fair market value of such shares on the
date  of  the  agreement). The Company issued all 37,815 shares registered under
such  Form  S-8.

On  November  12, 2003, the Company closed the unregistered sale of common stock
and  warrants  under  a Unit Purchase Agreement, as more fully described in Unit
Purchase  Agreement  below.

Effective  April  1, 2004, the Company sold in a private placement to Generation
Capital  Associates  ("Generation  Capital"),  an  accredited  investor, 160,000
"Units"  consisting  of  one share of restricted common stock and one warrant to
purchase restricted common stock at a price of $1.46 for up to five years, for a
total purchase price of $200,000. If prior to April 1, 2006, the Company files a
new  registration  statement  with  the  SEC,  excluding  any  amendments  to or
refilings  of  registration  statements currently on file with the SEC, then the
Company  is  to  include  Generation  Capital's  resale  of  its  shares in such
registration statement on the same terms and conditions as provided to the other
selling  securities  holders.

In  connection  with  the  Pioneering  Innovations  Agreement (see Note 10), the
Company  issued  210 shares of restricted common stock in June 2004 for services
approximating  $400.

On  February  27,  2004,  a warrant holder converted warrants to acquire 320,000
shares  of  the  Company's  common  stock  for  cash  totaling  $400,000.


--------------------------------------------------------------------------------
Page F-20
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

7.  EQUITY  TRANSACTIONS  (continued)

On  January  1,  2004,  the  Company  entered  into a public financial relations
agreement  with  Liolios  Group, Inc. ("Liolios"), pursuant to which the Company
will  pay  Liolios  $5,000  per  month  for  six  months,  plus 50,000 shares of
restricted common stock, in six equal monthly installments beginning on February
1,  2004.  As  of December 31, 2004, the Company has issued all 50,000 shares of
common  stock  under  this  agreement  and has recorded approximately $69,000 of
public  relations expenses during the year then ended related to such issuances.

In  November  2003, the Company entered into a consulting agreement with Big Sky
Management Ltd ("Big Sky"). Such agreement required the Company to issue 120,000
shares of its restricted common stock plus warrants to acquire 120,000 shares of
common stock (collectively, the "Units") in exchange for $160,000 of services to
be  performed during a 12-month period beginning on November 12, 2003. The Units
were  approved  by  the  Board  of  Directors  and  issued in February 2004. The
warrants are exercisable upon issuance at a price of $1.25 per share at any time
up  to  February  12, 2005 and, thereafter, at a price of $1.50 per share at any
time  up  to  February 12, 2006, at which time such warrants shall expire. Under
this agreement, the Company is required to file a registration statement on Form
S-8 to register the common shares and the common shares acquirable upon exercise
of  the warrants under the Securities Act of 1933, as amended.  During the years
ended  December  31,  2004  and 2003, the Company incurred consulting expense of
$140,000  and  $20,000,  respectively,  under  this  agreement.

UNIT  PURCHASE  AGREEMENT

On  November  12, 2003, the Company closed the unregistered sale of common stock
and warrants under a Unit Purchase Agreement, as more fully described below. The
Company  sold  1,472,000  "Units"  at  a  cash purchase price of $1,600,000 plus
satisfaction  of  existing  debt totaling $240,000 in four separate tranches, as
follows:

     -    Tranche  1  on  or  about  November  12,  2003,  for 576,000 Units for
          proceeds  of  $720,000;
     -    Tranche  2  on  or  about  December  18,  2003,  for 416,000 Units for
          proceeds  of  $520,000;
     -    Tranche  3  on  December  31,  2003  for 288,000 Units for proceeds of
          $360,000;  and
     -    Tranche  4  on  December 31, 2003 for 192,000 Units in satisfaction of
          $240,000  of  existing  debt.

Each  "Unit" consists of one share of the Company's restricted common stock, and
one  warrant  for the purchase of one share of common stock for a purchase price
of $1.25, through the first anniversary of the date of issuance, and $1.50 up to
the  second  anniversary  of  the  date of issuance, upon which the warrant will
expire.

The  Company  is  required  to  register  the common stock issued as part of the
Units,  and  if  necessary,  keep a shelf-registration statement effective for a
period  of  2 years following the issuance of the Units. The Company is required
to  pay  all  costs  and  expenses  associated  with  the registration. Proceeds
approximating  $50,000  from  the  sale of the Units were set aside to cover the
cost  of  the  registration.  The  Company  incurred costs approximating 126,000
related  to  this  registration  statement.  Additional  costs  may  be required
depending  upon  the number of supplements or amendments that the Company may be
required  to  file.  Additional  costs  must  be  paid from operating revenue or
through  additional  investments.

The  Company  was  required to use the proceeds from the sale to satisfy certain
outstanding  payables and future expenses related to registration of securities,
with  $385,000  set  aside  for  paying  general  operating  expenses.

In  addition,  the Company cannot use any of the proceeds to pay debt to related
parties. As a condition of receiving the foregoing proceeds, related parties and
employees were required to accept a total of 348,334 shares of restricted common
stock  in  exchange  for  $348,334  of  outstanding  debt.


--------------------------------------------------------------------------------
Page F-21
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

7.  EQUITY  TRANSACTIONS  (continued)

UNIT  PURCHASE  AGREEMENT  (continued)

The  Company  did not receive approximately $535,000 of the total proceeds under
the  Unit  Purchase Agreement as of December 31, 2003; therefore such amount was
recorded  as  stock  subscription  receivable  on  the accompanying consolidated
statements  of  stockholders' deficit.  The Company received $535,000 during the
year  ended  December  31,  2004.

Prior to the Merger (see Note 2), Ceres Financial Limited acquired shares of the
Company's  restricted  common  stock  in another private placement. On March 31,
2003,  Rapidtron  Delaware  borrowed  $150,000  from  Ceres  Financial  Limited,
evidenced  by  a note with interest at 12% per annum, due September 30, 2003 and
payable  upon  demand  thereafter. On December 31, 2003, Ceres Financial Limited
tendered  the principal balance of $150,000 for 120,000 Units under the terms of
the  Unit  Purchase  Agreement  dated  November  12,  2003,  as  amended.

On  July  17,  2003,  the  Company  borrowed  $150,000 from Corvus Holding Ltd.,
evidenced  by  a  promissory note with interest at 6% per annum, due October 17,
2003  and  payable upon demand thereafter. The Company agreed to convert $60,000
of  this debt to 60,000 shares of its restricted common stock on August 22, 2003
(as  noted  above).  On  December  31,  2003,  Corvus  Holding Ltd. tendered the
remaining  principal  balance of $90,000 for 72,000 Units under the terms of the
Unit  Purchase  Agreement  dated  November  12,  2003,  as  amended.

In  connection  with  the  Unit  Purchase  Agreement,  certain executives of the
Company  made certain representations and warranties to the investors related to
the Company's forecasted performance and agreed that such representations were a
material  inducement  to  the  investment  in the Units. In connection with such
forecasts,  the  executives,  as  principal  shareholders,  each entered into an
Escrow  and  Contribution Agreement under which they agree to place their common
shares  into  escrow  and  to  contribute  their pro rata share of such escrowed
shares  to  the  Company  in  the  event of a breach of such representations and
warranties  or  the  issuance  of  stock  or  stock options in excess of certain
limits.  The  executives placed 9,124,392 shares into escrow. Under the terms of
the  Escrow  and Contribution Agreement, these shareholders agreed to contribute
to  the  Company one share of common stock for (i) each $1.00 that the Company's
gross  revenue  for the 15 month period ending December 31, 2004 falls below the
gross revenue forecast of $10,880,000 for such period, (ii) each share of common
stock issued and each option (or other securities exercisable to acquire a share
of  common  stock)  granted  by  the  Company after November 12, 2003, under all
compensatory or other arrangements in excess of 400,000 shares in the aggregate,
and (iii) each share of common stock issued and each option (or other securities
exercisable to acquire a share of common stock) granted by Rapidtron which fails
to  satisfy certain criteria, including a minimum share price of $1.25 per share
and  certain vesting requirements in connection with option grants.  The Company
had  sales approximating 2,395,000 during the 15 month period ended December 31,
2004.  As  such, management estimates that approximately 8,485,000 common shares
will  be  returned  to  the  Company  from escrow.  The remaining 639,000 common
shares  will  be returned to the shareholders.  The investors shall make a claim
within  15  days  following the date that the December 31, 2004 annual report is
filed  with  the  SEC.  Such  transaction  has not been recorded at December 31,
2004,  but  will  be recorded once the investors' claim is accepted and settled.


8.  STOCK  OPTIONS

The  Company  adopted  the  2003  Stock  Plan (the "Plan") during the year ended
December 31, 2003. The Plan permits the Company to issue up to 12 million shares
of  common  stock  to employees and consultants, in the form of options or stock
awards.  The plan received stockholder approval in 2004. The Company's officers,
directors,  employees  and  consultants are expected to participate in the Plan.


--------------------------------------------------------------------------------
Page F-22
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

8.  STOCK  OPTIONS  (continued)

No  stock  options were granted during the year ended December 31, 2004.  During
the  year  ended December 31, 2003, the Company granted to certain employees, in
connection  with  employment agreements and the Plan, options to acquire 910,000
shares of the Company's restricted common stock.  Of these options, 900,000 vest
half  on January 1, 2004 and half on January 1, 2005, and have an exercise price
of  $1.00  per  share.  The  other 10,000 options vested immediately and have an
exercise  price  of  $1.25  per  share.  All such options have a five year life.
Additionally,  options  to  acquire  150,000  shares  granted prior to 2003 were
cancelled  in  connection  with  the  Merger  (see  Note  2).

A  summary  of  the aggregate stock option activity for the years ended December
31,  2004  and  2003  is  presented  below:

<TABLE>
<CAPTION>
                                  EXERCISE PRICE   WEIGHTED AVERAGE
                         SHARES        RANGE       PRICE PER SHARE
                       ---------  ---------------  -----------------
<S>                    <C>        <C>              <C>

Options outstanding -
  December 31, 2002     150,000   $          1.00  $            1.00
Options granted         910,000   $ 1.00 to $1.25  $            1.00
Options exercised             -                 -  $               -
Options expired or
  forfeited            (150,000)  $          1.00  $            1.00
                       ---------  ---------------  -----------------
Options outstanding -
  December 31, 2003     910,000   $ 1.00 to $1.25  $            1.00
Options granted               -                 -  $               -
Options exercised             -                 -  $               -
Options expired or
  forfeited                   -                 -  $               -
Options outstanding -
  December 31, 2004     910,000   $ 1.00 to $1.25  $            1.00
                       =========  ===============  =================

Options exercisable -
  December 31, 2004     460,000   $ 1.00 to $1.25  $            1.01
                       =========  ===============  =================
</TABLE>

The  weighted  average  life  of  options  outstanding  at December 31, 2003 was
approximately  four years.  The weighted average grant-date fair value per share
of  options  granted  during  2003  was $0.43.  Such fair value was estimated by
using  the  Black-Scholes stock option pricing model based on the exercise price
per  share,  the  estimated  market price of the Company's common stock, and the
weighted-average  assumptions  set  forth  below for issuances in the year ended
December  31,  2003:

<TABLE>
<CAPTION>
<S>                      <C>
Expected life            5 Years
Estimated volatility     44%
Risk-free interest rate  3.4%
Dividends                None
</TABLE>


9.  WARRANTS

In  connection with the Unit Purchase Agreement (see Note 7), the Company issued
warrants  to  acquire  1,472,000  shares  of  the  Company's common stock.  Such
warrants  have  a  purchase price of $1.25, through the first anniversary of the
date  of  issuance,  and  $1.50  up  to  the  second  anniversary of the date of
issuance,  upon which the warrants will expire.  No warrants have been exercised
or  forfeited  as  of  December  31,  2003.


--------------------------------------------------------------------------------
Page F-23
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

9.  WARRANTS  (continued)

Warrants to acquire 120,000 shares of the Company's common stock were granted in
February  2004  as  part  of  the Big Sky Management agreement (see Note 7). The
Company  has estimated the grant date fair value of such options to be $0.45 per
share.

Warrants  to  acquire 320,000 common shares at $1.25 per share were exercised on
February  27,  2004  (see  Note  7).

Effective  January 1, 2004, the Company entered into a consulting agreement with
Mark  Adair  Financial  Accounting  Services  ("Adair"),  pursuant  to which the
Company will pay Adair $12,500 per month for 12 months, plus warrants to acquire
250,000  shares of restricted common stock in exchange for financial, accounting
and  strategic  business  planning  consulting  services.  Such warrants have an
exercise price of $1.25 per share between January 1, 2004 and December 31, 2004,
and  thereafter  at $1.50 per share until five years following the expiration or
termination  of the Adair Consulting Agreement. Such warrants are exercisable on
the  date  of grant. Total compensation of $145,000 has been estimated using the
Black-Scholes  option  pricing model was amortized over the one-year life of the
Adair  Consulting Agreement. Such agreement, as amended, requires the Company to
register  the  underlying  250,000  shares by filing a registration statement on
Form  S-8 by December 31, 2004.  No registration statements have been filed with
the  SEC  regarding  such  warrants.

Warrants to acquire 160,000 shares of the Company's common stock were granted in
April  2004  in  connection  with  the Generation Capital Associates purchase of
Units  (see Note 7). The Company has estimated the grant date fair value of such
options  to  be  $0.65  per  share.

On  April  1,  2004,  the  Company entered into a two-year management consulting
agreement  with Amothy Corporation ("Amothy") pursuant to which the Company will
issue  warrants  for  up  to  1,000,000  shares  of its restricted common stock,
exercisable  at  the  rate  of  $1.46 per share for five years from the date the
warrants  are  vested.  The  warrants  will vest as follows: 600,000 on or about
April 1, 2004, 200,000 on or about July 1, 2004, and 200,000 on or about October
1,  2004.  The  warrants have piggyback registration rights. If the warrants are
not  registered at any time 12 months after the respective vesting dates of such
warrants,  then the warrants will have a cashless exercise provision at Amothy's
option  until such time as the shares underlying the warrants are registered. No
registration  statements  have  been filed with the SEC regarding such warrants.
Based on the fair value of the warrants on the grant date, the Company estimates
that it will record consulting fees approximating $650,000 over the life of this
agreement. Expense approximating $244,000 was charged to expense during the year
ended  December  31,  2004.

As  part  of  the  Silicon  Valley  Bank  ("SVB")  Accounts  Receivable Purchase
Agreement  (see  Note  6),  the  Company granted SVB warrants to acquire 150,862
shares of common stock at $0.58 per share for five years from the date of grant.
Such  warrants  are  immediately  exercisable.  The  Company  recorded  expense
approximating  $50,000  based  on  the  estimated  fair  value  of the warrants.

On  December  1,  2004,  in  connection  with the Oceanus Value Fund Convertible
Promissory  Note  (see  Note 6), the Company granted warrants to acquire 800,000
restricted  common  shares  at  $0.33  per share.  Such warrants are immediately
exercisable and have a term of five years.   The Company has estimated the grant
date  fair  value  of  such  options  to  be  $0.29  per  share.


--------------------------------------------------------------------------------
Page F-24
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

9.  WARRANTS  (continued)

A  summary  of  the  aggregate warrant activity for the years ended December 31,
2004  and  2003  is  presented  below:

<TABLE>
<CAPTION>
                                    EXERCISE PRICE   WEIGHTED AVERAGE
                          SHARES         RANGE       PRICE PER SHARE
                        ----------  ---------------  -----------------
<S>                     <C>         <C>              <C>

Warrants outstanding -
  December 31, 2002             -                 -  $               -
Warrants granted        1,472,000   $          1.25  $            1.25
Warrants exercised              -                 -  $               -
Warrants expired or
  forfeited                     -                 -  $               -
                        ----------  ---------------  -----------------
Warrants outstanding -
  December 31, 2003     1,472,000   $          1.25  $            1.25
Warrants granted        2,480,862   $ 0.33 to $1.46  $            1.01
Warrants exercised       (320,000)  $          1.25  $            1.25
Warrants expired or
  forfeited                     -                 -  $               -
                        ----------  ---------------  -----------------
Warrants outstanding -
  December 31, 2004     3,632,862   $ 0.33 to $1.46  $            0.97
                        ==========  ===============  =================

Warrants exercisable -
  December 31, 2004     3,632,862   $ 0.33 to $1.46  $            0.97
                        ==========  ===============  =================
</TABLE>

The  weighted  average  life  of  warrants  outstanding at December 31, 2004 was
approximately three years.  The weighted average grant-date fair value per share
of  warrants  granted  during  2004  and 2003 was $0.20 and $0.34, respectively.
Such fair value was estimated using the Black-Scholes stock option pricing model
based  on  the  exercise  price  per  share,  the  estimated market price of the
Company's common stock, and the weighted-average assumptions set forth below for
issuances  in  the  years  ended  December  31:

<TABLE>
<CAPTION>
                           2004      2003
                         --------  --------
<S>                      <C>       <C>
Expected life             5 Years   2 Years
Estimated volatility      47%       44%
Risk-free interest rate   3.3%      3.4%
Dividends                 None      None
</TABLE>


--------------------------------------------------------------------------------
Page F-25
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

10.  COMMITMENTS  AND  CONTINGENCIES

PURCHASE  COMMITMENTS

At  December 31, 2002, the Company was under a distribution agreement with Axess
AG  (its  principal  supplier),  to  purchase  a minimum of $3,000,000 of access
control  devices  through April 2003. On December 11, 2002, Axess AG agreed that
if  the  Company  made certain payments and met certain conditions, the purchase
commitment  would be released. As of December 31, 2004, management believes that
all  payments  have been made and conditions have been met, as required by Axess
AG.

To  obtain the release of inventory on orders from Axess AG, the Company filed a
UCC-1 Financing Statement on September 23, 2003, securing the related payable to
Axess  AG of approximately $100,000. Such payable is secured by certain accounts
receivable  totaling $100,000. Management believes that as of December 31, 2004,
the  Company  has  met  all  conditions and obligations required by the security
agreement.

To  obtain  the  release  of  additional  inventory  on order from Axess AG, the
Company  filed  a  UCC-1  Financing  Statement  on  April 27, 2004, securing the
related  payable to Axess AG of approximately $250,000. Such payable was secured
by  the  Company's  accounts  receivable.  The  Company  met  all conditions and
obligations  required  by  the  security  agreement,  and Axess AG released this
security  agreement  prior  to  December  31,  2004.

CONSULTING  AGREEMENT

The  Company  entered  into  a  software  development  agreement with Pioneering
Innovations  Inc.  ("Pioneering  Innovations")  on  January 13, 2004. Pioneering
Innovations  has  developed a piece of software titled COM DLL, which allows the
Company's  products  to  interface with customers existing back office software.

In  accordance  with this agreement, the Company purchased COM DLL for $100,000,
to  be  paid  in 24 equal monthly installments of $4,166.67. As no interest rate
was  specified  in  the  agreement,  the  Company  has  applied a rate of 4% and
recorded  the  related  debt  and  asset at $96,271. Additionally, the agreement
provides  for  support and maintenance services, related to new installations of
the  Company's  products, by Pioneering Innovations over its three-year term. As
consideration  for such services, the Company will pay Pioneering Innovations 10
shares  of  the  Company's  restricted  common  stock per product installed that
becomes fully integrated and operational with COM DLL, up to 40,000 shares. Such
shares  are  due  within  30 days of the end of each quarter. For the year ended
December  31,  2004,  the  Company  completed  26 relevant installations and has
issued  Pioneering  Innovations  260 shares of restricted common stock (see Note
7).

LEGAL

The  Company  may  be  involved  from  time to time in various claims, lawsuits,
disputes with third parties, actions involving allegations and incriminations or
breach  of contract actions incidental to the normal operations of the business.
The  Company  is  currently  not involved in any such litigation that management
believes  could  have  a  material  adverse impact on its consolidated financial
position  or  consolidated  results  of  operations.


--------------------------------------------------------------------------------
Page F-26
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

11.  INCOME  TAXES

There  is  no  material income tax expense recorded for the years ended December
31,  2004  and  2003,  due  to  the  Company's  net  losses.

Income  tax expense for the years ended December 31, 2004 and 2003 differed from
the  amounts computed by applying the U.S. federal income tax rate of 34 percent
for  the  following  reasons:

<TABLE>
<CAPTION>
                                                                    2004         2003
                                                                ------------  ----------
<S>                                                             <C>           <C>
Income tax benefit at U.S. federal statutory rates              $(1,122,000)  $(987,000)
Valuation allowance                                               1,122,000     987,000
State and local income taxes, net of federal income tax effect        3,307         800
                                                                ------------  ----------

                                                                $     3,307   $     800
                                                                ============  ==========
</TABLE>

The  Company  has a deferred tax asset and like amount of valuation allowance of
approximately  $2,511,000  at  December  31, 2004, relating primarily to tax net
operating loss carryforwards ($2,239,000) and acquisition costs deferred for tax
purposes  but  expensed  for  book purposes ($272,000).  The valuation allowance
increased  by  approximately $1,122,000 during the year ended December 31, 2004.
In  assessing  the  realizability  of  deferred tax assets, management considers
whether  it is more likely than not that some portion or all of the deferred tax
assets  will not be realized. The ultimate realization of deferred tax assets is
dependent  upon  the  generation  of future taxable income during the periods in
which  temporary  differences  become deductible. Management considers projected
future  taxable  income  and  tax planning strategies in making this assessment.
Based  upon  the  level  of historical taxable losses and projections for future
taxable  income  (losses)  over  the  periods  which the deferred tax assets are
deductible,  management believes it is more likely than not the Company will not
realize  the  benefits  of  these  deductible  differences.

As  of  December  31,  2004,  the  Company  had net operating loss carryforwards
("NOLs")  of approximately $6,585,000 available to offset future taxable income.
The  federal  carryforward  expires  in  varying  years  through  2025.

In  the  event  the  Company  were  to  experience  a greater than 50% change in
ownership,  as  defined  in  Section  382  of  the  Internal  Revenue  Code, the
utilization  of  the  Company's  tax  net  operating loss carryforwards could be
severely  restricted.

12.  SUBSEQUENT  EVENTS  (Unaudited)

On  February 11, 2005, the Company sold 228,009 shares of our common stock for a
total purchase price of approximately $62,950.  The Company used the proceeds of
this  investment  for  the  following:

<TABLE>
<CAPTION>
<S>                      <C>
Commissions on the sale  $ 6,295

Legal fees               $ 3,000

Payment of debt          $10,000

Working capital          $43,655
</TABLE>

     On  February  8,  2005,  the  Company  entered  into a Convertible Note and
Warrant  Purchase  Agreement  with  Ceres  Financial,  Limited, a British Virgin
Islands  company ("Ceres"), the lead investor under the Unit Purchase Agreement,
dated  November  12, 2003.  The Company issued to Ceres a convertible promissory
note  in the face amount of $30,000, plus interest at 8% per annum, and received
net  proceeds in the amount of $30,000.  The principal amount shall be converted
into  shares  of  the  Company's  common  stock  at the close of its next equity


--------------------------------------------------------------------------------
Page F-27
<PAGE>
--------------------------------------------------------------------------------
                                 RAPIDTRON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2004
--------------------------------------------------------------------------------

financing  in  a  single  transaction  or  series of transactions yielding gross
proceeds  of  $200,000  or more, at a conversion rate of price per share in such
equity  financing.  In addition, at the option of the holder, the balance of the
note  may  be converted into common stock at the rate of the lesser of (a) $0.33
per  share,  or  (b)  80% of the lowest closing bid price during the immediately
preceding five-day trading period. The Company also issued a warrant to purchase
60,000 shares of its common stock at any time through February 7, 2010, at $0.33
per  share.  The  conversion price may be adjusted one time during the five-year
period  to  the  closing price on the date immediately preceding notice from the
holder.

On  March 7, 2005, the Company entered into another Convertible Note and Warrant
Purchase  Agreement  with  Ceres, for a loan of $75,000, upon the same terms and
conditions  as  described  above.  The  Company  issued  to  Ceres a convertible
promissory  note  in  the face amount of $75,000, plus interest at 8% per annum,
and  received net proceeds in the amount of $75,000.  The principal amount shall
be  converted  into  shares  of  the Company's common stock on the same terms as
described  above.  The  Company also issued a warrant to purchase 150,000 shares
of  its  common  stock  at  any time through March 6, 2010, on the same terms as
described  above.


--------------------------------------------------------------------------------
Page F-28
<PAGE>
ITEM  8A.  CONTROLS  AND  PROCEDURES

We  maintain disclosure controls and procedures that are designed to ensure that
information  required  to  be disclosed in the periodic reports filed by us with
the  Commission  is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC and that such information is
accumulated  and  communicated  to  our  management.  Based on their most recent
evaluation,  which  was  completed during the period covered by this report, our
Chief  Executive Officer and Chief Financial Officer believe that our disclosure
controls and procedures (as defined in Rules 13a-14 and 15d-14 of the Securities
Exchange Act of 1934, as amended) were effective as of December 31, 2004.  There
were  no  significant  changes in our internal controls or in other factors that
could significantly affect these internal controls subsequent to the date of the
most  recent  evaluation.

ITEM  8B.  OTHER  INFORMATION

ITEM  1.01  ENTRY  INTO  A  MATERIAL  DEFINITIVE  AGREEMENT.

In  November  2004,  we  terminated  our consulting agreement with Lee Guthrie &
Associates, eliminating the $4,000 monthly payment. We are currently negotiating
a new agreement for services for 2005.

On  November  22,  2004,  we  amended  the  note  and  loan  agreement  with LDM
Enterprises,  LLC,  as  described under the heading "Item 2.04 Triggering Events
That  Accelerate  or  Increase  a  Direct Financial Obligation," incorporated by
reference.

On  February  8,  2005,  we entered into a Convertible Note and Warrant Purchase
Agreement  with  Ceres  Financial,  Limited,  a  British  Virgin Islands company
("Ceres"),  the  lead investor under the Unit Purchase Agreement, dated November
12,  2003.  We  issued to Ceres a convertible promissory note in the face amount
of  $30,000,  plus interest at 8% per annum, and we received net proceeds in the
amount  of  $30,000.  The principal amount shall be converted into shares of our
common  stock  at the close of our next equity financing in a single transaction
pr  series  of  transactions  yielding  gross proceeds of $200,000 or more, at a
conversion  rate  of  price per share in such equity financing.  In addition, at
the  option  of the holder, the balance of the note may be converted into common
stock at the rate of the lesser of (a) $0.33 per share, or (b) 80% of the lowest
closing  bid  price during the immediately preceding five-day trading period. We
also  issued a warrant to purchase 60,000 shares of our common stock at any time
through  February  7,  2010,  at  $0.33  per share.  The conversion price may be
adjusted  one  time during the five-year period to the closing price on the date
immediately  preceding notice from the holder.  Until June 5, 2005, or until the
note is converted or paid in full, we may not, without the prior written consent
of  Ceres  Financial  Limited,  do  any  one  of  the  following:

     1. enter into any material contract or commitment, or violating, amending
or otherwise modifying or waiving any of the terms of any of our material
contracts in any case, other than in the ordinary course of business.

     2. issue, deliver or sell or authorize or propose the issuance, delivery or
sale of, or purchase or propose the purchase of, any shares of our capital stock
or securities convertible into, or subscriptions, rights, or options to acquire,
or other agreements or commitments of any character obligating us to issue, any
such shares or other convertible securities, other than the issuance of shares
of our common stock pursuant to the exercise of stock options or other rights
therefor outstanding as of February 8, 20005;

     3. Convey, license, assign or otherwise transfer to any person or entity
any rights to our intellectual property rights or assets other than in the
ordinary course of business;

     4. Enter into or amend any agreements pursuant to which any other party is
granted exclusive marketing or other exclusive rights of any type or scope with
respect to any of our products or technology;

     5. Sell, lease, license or otherwise dispose of or encumber any of our
properties or assets which are material individually or in the aggregate, to us
and our business, taken as a whole, except in the ordinary course of business;

     6. Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others;

     7. Enter into any operating lease in excess of $20,000;

     8. Pay, discharge or satisfy in an amount in excess of $10,000 in any one
case or $50,000 in the aggregate, any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise) arising other


                                                                              49
<PAGE>
than in the ordinary course of business, other than the payment, discharge or
satisfaction of liabilities reflected or reserved against in our financial
statements for the quarter ended September 30, 2004 or incurred in the ordinary
course of business;

     9. Make any capital expenditures, capital additions or capital improvements
in excess of $25,000, except in the ordinary course of business;

     10. Materially reduce the amount of any material insurance coverage
provided by existing insurance policies;

     11. Terminate or waive any right of substantial value, other than in the
ordinary course of business;

     12. Adopt or amend any employee benefit or stock purchase or option plan
obligating us to issue more than 100,000 shares of common stock in aggregate,
pay any special bonus or special remuneration exceeding $5,000 individually or
$20,000 in the aggregate to any employee or director (except payments made
pursuant to written agreements outstanding on the date of this Agreement), or
increase the salaries or wage rates of our employees except in the ordinary
course of business;

     13. Grant any severance or termination pay (i) to any director or officer
or (ii) to any other employee except (A) payments made pursuant to written
agreements outstanding on the date hereof or (B) grants which are made in the
ordinary course of business in accordance with our standard past practice;

     14. Commence a lawsuit other than (i) for the routine collection of bills
or (ii) in such cases where we, in good faith, determine that failure to
commence suit would result in the material impairment of a valuable aspect of
our business;

     15. Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets which are material individually or in the aggregate, to our business,
taken as a whole;

     16. Other than in the ordinary course of business, make or change any
material election in respect of taxes, adopt or change any accounting method in
respect of taxes, settle any material claim or assessment in respect of taxes;
or

     18. Revalue any of our assets, including without limitation writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business or as required by US GAAP.

On March 7, 2005, we entered into another Convertible Note and Warrant Purchase
Agreement with Ceres, for a loan of $75,000, upon the same terms and conditions
as described above. We issued to Ceres a convertible promissory note in the face
amount of $75,000, plus interest at 8% per annum, and we received net proceeds
in the amount of $75,000. The principal amount shall be converted into shares of
our common stock on the same terms as described above. We also issued a warrant
to purchase 150,000 shares of our common stock at any time through March 6,
2010, on the same terms as described above.

On or about April 14, 2005, we terminated the Memorandum of Understanding with
Smart Card Integrators ("SCI"). The terms of the Memorandum of Understanding are
described in our Form 8-K filed with the Commission on August 3, 2004,
incorporated herein by reference. Pursuant to our termination agreement with
SCI, we have forgiven the outstanding balance of the $250,000 loan made pursuant
to the memorandum, and both parties have otherwise fully waived and released the
other party from any and all claims arising under the memorandum.


ITEM 2.04 TRIGGERING EVENTS THAT ACCELERATE OR INCREASE A DIRECT FINANCIAL
OBLIGATION.

On October 8, 2004, we borrowed $350,000 under a convertible secured promissory
note, as more fully described in our Form 8-K filed with the Commission on
October 15, 2004, incorporated herein by reference. On November 22, 2004, we
amended the note to extend the maturity date to December 15, 2004 and to borrow
an additional $25,000. We did not make the required payment on December 15,
2004, and we are now in default under the loan agreement, the note and the
security agreement. As a result, a late fee of $18,750 became due and interest
began to accrue at


                                                                              50
<PAGE>
14% per annum. We repaid $347,500 following the maturity date. Until we cure the
default, interest will accrue at 14%. In addition, the loan is secured by all of
our assets, which security interest is subordinate to the security interest held
by Silicon Valley Bank. The lender may at any time proceed to foreclose on the
security interest until the we cure the default and may collect from the company
the cost of such proceedings.

On December 1, 2004, we borrowed $400,000 under a secured convertible promissory
note with detachable stock purchase warrants, as more fully described in our
Form 8-K filed with the Commission on January 11, 2005, incorporated herein by
reference. The full balance was due on March 31, 2005, and we have not made any
payments to the lender. We are currently in default under the note and will
remain in default until the full balance is paid in full. We were also obligated
to prepare and file with the SEC no later than December 31, 2004, a registration
statement covering all shares issuable under the detachable stock purchase
warrants. We have not filed the registration statement to date. As a result, we
are obligated to pay an additional $8,000 to the holder of the note for every 30
days after December 31, 2004, until the registration statement is declared
effective by the Commission.

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding the name, age and position of each person who currently
serves as a director and/or executive officer of our company as of December 31,
2004, is incorporated by reference to our definitive proxy solicitation on
Schedule 14A, to be filed with the Commission within 120 days of the end of our
fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

Information regarding the executive compensation of our named executive officers
is incorporated by reference to our definitive proxy solicitation on Schedule
14A, to be filed with the Commission within 120 days of the end of our fiscal
year.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information regarding the security ownership of certain beneficial owners and
management and related stockholder matters is incorporated by reference to our
definitive proxy solicitation on Schedule 14A, to be filed with the Commission
within 120 days of the end of our fiscal year.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding certain relationships and related transactions is
incorporated by reference to our definitive proxy solicitation on Schedule 14A,
to be filed with the Commission within 120 days of the end of our fiscal year.

ITEM 13. EXHIBITS

<TABLE>
<CAPTION>
<S>      <C>
Exhibit
Number   Description
----------------------------------------------------------------------------------------------
2.1      Agreement and Plan of Merger (1)
2.2      Amendment to Agreement and Plan of Merger (2)
3.1      Articles of Incorporation (3)
3.2      Amended Articles of Incorporation(3)
3.3      Amended Articles of Incorporation(4)
3.4      Amended Articles of Incorporation(5)
3.5      Bylaws(3)
10.1     Registration Rights Agreement
10.2     Security Agreement
10.3     Warrant To Purchase Common Stock
10.4     15% Secured Convertible Promissory Note
10.5     Securities Purchase Agreement


                                                                              51
<PAGE>
Exhibit
Number   Description
---------------------------------------------------------------------------------------------------
10.6     Convertible promissory Note
10.7     Loan Agreement
10.8     Security Agreement
10.9     Amendment No. 1 to Loan Agreement
10.10    Allonge to Convertible Promissory Note
10.11    Unit Purchase Agreement dated November 12, 2003(6)
10.12    Amended and Restated Amendment No. 1 to Unit Purchase Agreement dated November
         12, 2003(6)
10.13    Registration Rights Agreement dated November 12, 2003(6)
10.14    Escrow and Contribution Agreement dated November 12, 2003(6)
10.15    Consulting Agreement with Big Sky Management Ltd dated November 12, 2003(6)
10.16    Agreement between Rapidtron, Inc. and Market Street Publishing Ltd., dated November,
         2003(6)
10.17    Release of Security Agreement with Axess AG dated November 24, 2003(6)
10.18    Stock Plan(6)
10.19    Agreement between Rapidtron and Pioneering Innovation Inc., dated January 13, 2004.
         (6)
10.20    Purchase Order from National Fitness Club Chain (7)
10.21    Letter Agreement with John Creel Regarding Repayment of Debt, dated December 29,
         2003 (6)
10.22    Letter Agreement with Equus Marketing Regarding Repayment of Debt, dated December
         31, 2003 (6)
10.23    Letter Agreement with Peter Dermutz Regarding Repayment of Debt, dated December 31,
         2003 (6)
10.24    Letter Agreement with Steve Meineke Regarding Repayment of Debt, dated December
         31, 2003 (6)
10.25    Employment Agreement with Chris Perkins, dated December 1, 2003, as amended (6)
10.26    Memorandum of Understanding (8)
10.27    Termination Agreement (9)
10.28    Director Service and Indemnification Agreement
10.29    Repacement Promissory Note
10.30    Accounts Receivable Purchase Agreement (10)
10.31    Intellectual Property Security Agreement with Rapidtron, Inc., a Nevada Corporation
10.32    Intellectual Property Security Agreement with Rapidtron, Inc., a Delaware Corporation (10)
10.33    Warrant to Purchase Stock (10)
10.34    Registration Rights Agreement (10)
10.35    Amendment to Consulting Agreement (10)
10.36    Financial Public Relations Agreement, Dated January 1, 2004 (11)
10.37    Employment Termination Agreement, Dated March 1, 2004 (11)
10.38    Director Service and Indemnification Agreement, Dated March 1, 2004 (11)
10.39    Unit Purchase Agreement, Dated April 1, 2004 (11)
10.40    Letter Agreement with Amothy Corporation, Dated March 17, 2004 (11)
21.1     Subsidiaries (6)
31.1     Certification Of Chief Executive Officer Pursuant To 15d-14.
31.2     Certification Of Chief Financial Officer Pursuant To 15d-14.
32.1     Certification Of Chief Executive Officer Pursuant To 18 U.S.C. Sec.1350, As Adopted
         Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
32.2     Certification Of Chief Financial Officer Pursuant To 18 U.S.C. Sec.1350, As Adopted
         Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002.
<FN>

(1)     Incorporated  by  reference  to  our Form 8-K filed with the Commission on January 23,
        2003.
(2)     Incorporated  by reference to our Form 8-K filed with the Commission on April 2, 2003.
(3)     Incorporated  by  reference  to our Form 10-SB filed with the Commission on October 6,
        2000.
(4)     Incorporated  by  reference  to our Form 8-K filed with the Commission on November 15,
        2002.
(5)     Incorporated  by  reference  to  our  Form 10-QSB filed with the Commission on May 19,
        2003.
(6)     Incorporated  by  reference to our Registration Statement on Form SB-2, filed with the
        Securities  and  Exchange  Commission  on  February  5,  2004.
(7)     Incorporated  by  reference  to  our  Form  8-K filed with the Securities and Exchange
        Commission  on  January  14,  2004.
(8)     Incorporated by reference to our Form 8-K filed with the Commission on August 3, 2004.
(9)     Incorporated by reference to our Form 8-K filed with the Commission on March 1, 2004.
(10)    Incorporated by reference to our Form 10-QSB filed with the Commission on August 16, 2004.
(11)    Incorporated by reference to our Form 10-QSB filed with the Commission on May 17, 2004.
</TABLE>

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

Information regarding our principal accountant fees and services is set forth in
our  definitive  proxy  solicitation  on  Schedule  14A,  to  be  filed with the
Commission  within  120  days  of  the  end  of  our  fiscal  year


                                                                              52
<PAGE>
                                   SIGNATURES

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


RAPDITRON, INC.


Date: April 15, 2005

By: /s/ John Creel
-----------------------------------------------------------
John Creel, Chairman, President and
Chief Executive Officer


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

Date: April 15, 2005

By: /s/ John Creel
-----------------------------------------------------------
John Creel, Chairman, President and
Chief Executive Officer

By: /s/ Peter Dermutz
-----------------------------------------------------------
Peter Dermutz, Chief Financial Officer
(Principal Financial Officer), Corporate Secretary,
Executive Vice President and Treasurer


                                                                              53
<PAGE>