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

                                   FORM 10-QSB

                 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004

                                       or

                   TRANSITION REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                           Commission file No. 0-12641


                          DALRADA FINANCIAL CORPORATION
             (Exact name of registrant as specified in its charter)
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<CAPTION>
<S>                                                             <C>
DELAWARE . . . . . . . . . . . . . . . . . . . . . . . . . . .             33-0021693
(State or other jurisdiction of incorporation or organization)  (IRS Employer ID No.)
</TABLE>

                          9449 BALBOA AVENUE, SUITE 211
                               SAN DIEGO, CA 92123
                    (Address of principal executive offices)

       Registrant's telephone number, including area code:  (858) 451-6120

                        IMAGING TECHNOLOGIES CORPORATION
                               17075 VIA DEL CAMPO
                              SAN DIEGO, CA  92127
             (Former name and address, if changed since last report)

Check  whether  the registrant (1) has filed all reports required to be filed by
Section  13  or  15(d) of the Securities Exchange Act of 1934 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

The  number of shares outstanding of the registrant's common stock as of May 10,
2004  was  394,950,974

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

<PAGE>
TABLE  OF  CONTENTS
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<CAPTION>
<S>                                                                                              <C>
PART I - FINANCIAL INFORMATION

ITEM 1.  Consolidated Financial Statements
     Consolidated Balance Sheet - March 31, 2004 (unaudited). . . . . . . . . . . . . . . . . .   3
     Consolidated Statements of Operations - 3 months ended March 31, 2004 and 2003 (unaudited)   4
     Consolidated Statements of Operations-9 months ended March 31, 2004 and 2003  (unaudited).   5
     Consolidated Statements of Cash Flows - 9 months ended March 31, 2004 and 2003 (unaudited)   6
     Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . . . . . . .   8

ITEM 2.  Management's Discussion and Analysis or Plan of Operations . . . . . . . . . . . . . .  17

ITEM 3.   Controls and Procedures


PART II - OTHER INFORMATION

ITEM 1.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
ITEM 2.  Changes In Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
ITEM 3.  Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .  29
ITEM 4.  Submission of Matters To A Vote of Security Holders. . . . . . . . . . . . . . . . . .  30
ITEM 5.  Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
ITEM 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . .  30

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
CERTIFICATIONS
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<PAGE>

PART  I.  -  FINANCIAL  INFORMATION

ITEM  1.   CONSOLIDATED  FINANCIAL  STATEMENTS

                 DALRADA FINANCIAL CORPORATION AND SUBSIDIARIES
                   (formerly Imaging Technologies Corporation)
                           CONSOLIDATED BALANCE SHEET
                        (in thousands, except share data)
                                   (unaudited)
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<CAPTION>
<S>                                                                                   <C>
ASSETS
                                                                                      MARCH 31, 2004
Current assets
     Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $           199
     Accounts receivable, net of  allowance of $80 . . . . . . . . . . . . . . . . .              122
     Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .               15
     Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . .               33
                                                                                      ----------------
          Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .              369
Patent, net of accumulated amortization of $150. . . . . . . . . . . . . . . . . . .            1,468
Property and equipment, net of accumulated depreciation. . . . . . . . . . . . . . .              176
                                                                                      ----------------
 Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $         2,013
                                                                                      ================

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

Current liabilities
     Borrowings under bank notes payable . . . . . . . . . . . . . . . . . . . . . .  $         3,145
     Notes payable, current portion (including related party note of $1,500) . . . .            1,789
     Convertible debentures, net of discounts of $64 . . . . . . . . . . . . . . . .              684
     Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            4,831
     Obligations under capital lease . . . . . . . . . . . . . . . . . . . . . . . .               11
     PEO payroll taxes and other payroll deductions. . . . . . . . . . . . . . . . .            5,237
     Advances from related party . . . . . . . . . . . . . . . . . . . . . . . . . .               30
     Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            7,285
                                                                                      ----------------
          Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . .           23,012
                                                                                      ----------------
Long-term liabilities:
     Long-term capital lease . . . . . . . . . . . . . . . . . . . . . . . . . . . .               50
     Long-term convertible debentures, less discounts of $798. . . . . . . . . . . .              487
     Long-term notes payable (including related party note of $268). . . . . . . . .              488
                                                                                      ----------------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           24,037
                                                                                      ----------------

Shareholders' deficiency
   Series A convertible, redeemable preferred stock, $1,000 par value, 7,500 shares
     authorized, 20.5 shares issued and outstanding. . . . . . . . . . . . . . . . .              420
  Common stock, $0.005 par value, 500,000,000 shares authorized; 394,950,974
     shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . .            1,975
     Common stock warrants and options . . . . . . . . . . . . . . . . . . . . . . .              475
     Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           83,033
     Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (107,927)
                                                                                      ----------------
          Total shareholders' deficiency . . . . . . . . . . . . . . . . . . . . . .          (22,524)
                                                                                      ----------------
 Total liabilities and shareholders' deficiency. . . . . . . . . . . . . . . . . . .  $         2,013
                                                                                      ================

See accompanying notes to these consolidated financial statements.
</TABLE>

<PAGE>

                 DALRADA FINANCIAL CORPORATION AND SUBSIDIARIES
                   (formerly Imaging Technologies Corporation)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2004 AND 2003
                        (in thousands, except share data)
<TABLE>
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<S>                                                                   <C>             <C>
(In thousands, except per share amounts)
                                                                               2004             2003
                                                                      --------------  ---------------
Revenues
     Sales of products . . . . . . . . . . . . . . . . . . . . . . .  $          91   $          162
     Software sales, licenses and royalties. . . . . . . . . . . . .             30               62
     Temporary staffing services . . . . . . . . . . . . . . . . . .          2,892                -
     PEO services (gross billings of $3,205 and $2,694
       respectively; less worksite employee payroll costs of $2,730
       and $2,845, respectively) . . . . . . . . . . . . . . . . . .            475              155
                                                                      --------------  ---------------
 Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .          3,488              379
                                                                      --------------  ---------------

Costs of revenues
     Cost of products sold . . . . . . . . . . . . . . . . . . . . .             28               48
     Cost of software sales, licenses and royalties. . . . . . . . .              -                9
     Cost of temporary staffing. . . . . . . . . . . . . . . . . . .          2,663                -
     Cost of PEO services. . . . . . . . . . . . . . . . . . . . . .            384               58
                                                                      --------------  ---------------
 Total cost of revenues. . . . . . . . . . . . . . . . . . . . . . .          3,075              115
                                                                      --------------  ---------------

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .            413              264

Operating expenses
     Selling, general, and administrative. . . . . . . . . . . . . .            (71)             818

                                                                                (71)             818
                                                                      --------------  ---------------
Income (loss) from operations. . . . . . . . . . . . . . . . . . . .            484             (554)
                                                                      --------------  ---------------

Other income (expense):
     Interest and finance costs, net . . . . . . . . . . . . . . . .           (434)            (411)
     Gain on extinguishment of debt. . . . . . . . . . . . . . . . .            228            1,262
     Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              1                -
                                                                      --------------  ---------------
                                                                               (205)             851
                                                                      --------------  ---------------
Income (loss) before provision for income taxes and
     discontinued operations . . . . . . . . . . . . . . . . . . . .            279              297
Provision for income taxes . . . . . . . . . . . . . . . . . . . . .              -                -
                                                                      --------------  ---------------

Net income (loss) from continuing operations . . . . . . . . . . . .            279              297

Discontinued operations:
     Gain on disposition of discontinued operations. . . . . . . . .          5,049                -
     Loss from operations of discontinued operations . . . . . . . .           (693)            (255)
                                                                      --------------  ---------------
                                                                              4,356             (255)
                                                                      --------------  ---------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . .  $       4,635   $           42
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . . .             (5)              (5)
                                                                      --------------  ---------------
Net income (loss) attributed to common shareholders. . . . . . . . .  $       4,630   $           37
                                                                      ==============  ===============

Earnings (loss) per common shares (See Note 4)
     Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       0.013   $        0.000
     Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $       0.009   $        0.000

Weighted average common shares - basic and diluted . . . . . . . . .        348,926          140,754
                                                                      ==============  ===============

See accompanying notes to  these consolidated financial statements.
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<PAGE>
                 DALRADA FINANCIAL CORPORATION AND SUBSIDIARIES
                   (formerly Imaging Technologies Corporation)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    NINE MONTHS ENDED MARCH 31, 2004 AND 2003
                        (in thousands, except share data)
                                   (unaudited)
<TABLE>
<CAPTION>
<S>                                                                    <C>               <C>
(In thousands, except per share amounts)
                                                                                  2004            2003
                                                                       ----------------  --------------
Revenues
     Sales of products. . . . . . . . . . . . . . . . . . . . . . . .  $           546   $         742
     Software sales, licenses and royalties . . . . . . . . . . . . .               66             241
     Temporary staffing services. . . . . . . . . . . . . . . . . . .            6,328               -
     PEO services (gross billings of $12,077 and $2,694
       respectively; less worksite employee payroll costs of $13,949
       and $2,439, respectively). . . . . . . . . . . . . . . . . . .            2,545             809
                                                                       ----------------  --------------
 Total revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . .            9,485           1,792
                                                                       ----------------  --------------

Costs of revenues
     Cost of products sold. . . . . . . . . . . . . . . . . . . . . .              156             365
     Cost of software sales, licenses and royalties . . . . . . . . .                3              71
     Cost of temporary staffing . . . . . . . . . . . . . . . . . . .            5,657               -
     Cost of PEO services . . . . . . . . . . . . . . . . . . . . . .            2,280             201
                                                                       ----------------  --------------
 Total cost of revenues . . . . . . . . . . . . . . . . . . . . . . .            8,096             637
                                                                       ----------------  --------------

Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . .            1,389           1,155

Operating expenses
     Selling, general, and administrative . . . . . . . . . . . . . .            4,006           3,983

                                                                                 4,006           3,983
                                                                       ----------------  --------------
Loss from operations. . . . . . . . . . . . . . . . . . . . . . . . .           (2,617)         (2,828)
                                                                       ----------------  --------------

Other income (expense):
     Interest and finance costs, net. . . . . . . . . . . . . . . . .           (1,363)         (1,522)
     Gain on extinguishment of debt . . . . . . . . . . . . . . . . .              853           1,918
     Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              (18)             25
                                                                       ----------------  --------------
                                                                                  (528)            421
                                                                       ----------------  --------------
Income (loss) before provision for income taxes and
      discontinued operations . . . . . . . . . . . . . . . . . . . .           (3,145)         (2,407)
Provision for income taxes. . . . . . . . . . . . . . . . . . . . . .                -               -
                                                                       ----------------  --------------

Net income (loss) from continuing operations. . . . . . . . . . . . .           (3,145)         (2,407)

Discontinued operations:
     Gain on disposition of discontinued operations . . . . . . . . .            5,049               -
     Loss from operations of discontinued operations. . . . . . . . .           (2,052)           (255)
                                                                       ----------------  --------------
                                                                                 2,997            (255)
                                                                       ----------------  --------------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .  $          (148)  $      (2,662)
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . .              (15)            (15)
                                                                       ----------------  --------------
Net income (loss) attributed to common shareholders . . . . . . . . .  $          (163)  $      (2,677)
                                                                       ================  ==============

Earnings (loss) per common shares  (See Note 4)
     Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $        (0.001)  $      (0.028)
     Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $        (0.001)  $      (0.028)

Weighted average common shares. . . . . . . . . . . . . . . . . . . .          292,602          96,316
                                                                       ================  ==============

See accompanying notes to  these consolidated financial statements.
</TABLE>

<PAGE>

                 DALRADA FINANCIAL CORPORATION AND SUBSIDIARIES
                   (formerly Imaging Technologies Corporation)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    NINE MONTHS ENDED MARCH 31, 2004 AND 2003
                        (in thousands, except share data)
                                   (unaudited)
<TABLE>
<CAPTION>
<S>                                                                  <C>             <C>
                                                                              2004             2003
                                                                     --------------  ---------------
Cash flows from operating activities
   Net loss from continuing operations. . . . . . . . . . . . . . .  $      (3,145)  $       (2,407)
   Adjustments to reconcile net loss to net
     cash from operating activities
       Depreciation and amortization. . . . . . . . . . . . . . . .            265               94
       Writedown of fixed assets. . . . . . . . . . . . . . . . . .              -               55
       Stock issued for services. . . . . . . . . . . . . . . . . .            368              659
       Amortization of debt discount. . . . . . . . . . . . . . . .            626              606
       Value of service for exercise of warrants. . . . . . . . . .              -              166
       Value of warrants issued for services. . . . . . . . . . . .              -               70
      Gain on forgiveness of inter-company debt
           from Greenland . . . . . . . . . . . . . . . . . . . . .         (1,375)               -
       Gain on extinguishments of debt. . . . . . . . . . . . . . .              -           (1,918)
  Changes in operating assets and liabilities:
     Accounts receivable. . . . . . . . . . . . . . . . . . . . . .            (21)             494
     Inventories. . . . . . . . . . . . . . . . . . . . . . . . . .              -              117
     Prepaid expenses and other . . . . . . . . . . . . . . . . . .            (13)            (470)
     Accounts payable and accrued expenses. . . . . . . . . . . . .            230                5
     PEO liabilities. . . . . . . . . . . . . . . . . . . . . . . .          1,467            1,780
     Other assets . . . . . . . . . . . . . . . . . . . . . . . . .             38                -
                                                                     --------------  ---------------
 Net cash used in operating activities
   from continuing operations . . . . . . . . . . . . . . . . . . .         (1,560)            (749)
                                                                     --------------  ---------------
Net cash provided by (used in) operating activities of
  discontinued operations . . . . . . . . . . . . . . . . . . . . .           (678)              82
Net cash used in operating activities . . . . . . . . . . . . . . .         (2,238)            (667)
                                                                     --------------  ---------------

Cash flows from investing activities
   Purchase of furniture & equipment. . . . . . . . . . . . . . . .           (158)            (101)
                                                                     --------------  ---------------
Net cash used in investing activities . . . . . . . . . . . . . . .           (158)            (101)
                                                                     --------------  ---------------

Cash flows from financing activities
   Change in cash overdraft, net. . . . . . . . . . . . . . . . . .            (87)               -
   Net borrowings under bank notes payable. . . . . . . . . . . . .            (25)             (76)
   Issuance of convertible debentures . . . . . . . . . . . . . . .            800              435
   Repayment of notes payable . . . . . . . . . . . . . . . . . . .           (165)               -
   Repayment of capital lease obligation. . . . . . . . . . . . . .             (6)               -
   Net proceeds from issuance of common stock . . . . . . . . . . .            177              546
                                                                     --------------  ---------------
Net cash provided by (used in) financing activities
    from continuing operations. . . . . . . . . . . . . . . . . . .            694              905
                                                                     --------------
Net cash provided by (used in) financing activities of
  discontinued operation. . . . . . . . . . . . . . . . . . . . . .            678              (49)
                                                                     --------------  ---------------
Net cash provided by financing activities . . . . . . . . . . . . .          1,372              856
                                                                     --------------  ---------------

Net increase (decrease) in cash and cash equivalents. . . . . . . .         (1,024)              88
Cash and cash equivalents, beginning of period. . . . . . . . . . .          1,223               43
                                                                     --------------  ---------------
Cash and cash equivalents, end of period. . . . . . . . . . . . . .  $         199   $          131
                                                                     ==============  ===============

See  accompanying notes to these consolidated financial statements.
</TABLE>

<PAGE>

                  DALRADA FINANCIAL CORPORATION AND SUBSIDIARIES
                   (formerly Imaging Technologies Corporation)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                    NINE MONTHS ENDED MARCH 31, 2004 AND 2002
                        (in thousands, except share data)
                                   (unaudited)

NON-CASH  INVESTING  AND  FINANCING  ACTIVITIES

During  the  nine months ended March 31, 2004, the Company issued: (1) 7,445,000
shares  of  its  common  stock  for  services valued at $160,150; (2) 10,272,110
shares  of  its common stock for compensation valued at $140,332; (3) 25,297,220
shares  of  its common stock for debt of $471,542; and (4) 141,204,581 shares of
its  common  stock for the conversion of convertible debentures in the amount of
$1,342,464.

During  the  nine months ended March 31, 2003, the Company (1) rescinded $70,000
conversion of convertible notes payable into common stock, (2) converted $80,000
of  debt  into  8,000,000 shares of common stock, (3) issued 4,020,000 shares of
common stock for services valued at $56,300, (4) issued 500,000 shares of common
stock  for compensation valued at $7,500, (5) issued 12,500,000 shares of common
stock  for  the  acquisition  of  Quick Pix, Inc. valued at $150,000, (6) issued
12,190,013  shares  of  common stock for conversion of convertible debentures in
the  amount  of  $88,129  and  (7)  issued  100,000  shares  of  common stock in
connection  with  the  acquisition  of  Dream  Canvas  Technologies,  Inc.

<PAGE>

                 DALRADA FINANCIAL CORPORATION AND SUBSIDIARIES
                   (formerly Imaging Technologies Corporation)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        (in thousands, except share data)
                                   (unaudited)

NOTE  1.  BASIS  OF  PRESENTATION

The  accompanying  unaudited  consolidated  financial  statements  of  Dalrada
Financial  Corporation  and  Subsidiaries  (the  "Company"  or "DRDF") have been
prepared  pursuant  to  the rules of the Securities and Exchange Commission (the
"SEC")  for  quarterly  reports  on  Form  10-QSB  and do not include all of the
information  and  note  disclosures  required by accounting principles generally
accepted  in  the United States of America. These financial statements and notes
herein  are  unaudited,  but  in  the  opinion  of  management,  include all the
adjustments  (consisting  only  of normal recurring adjustments) necessary for a
fair  presentation  of  the Company's financial position, results of operations,
and  cash  flows for the periods presented. These financial statements should be
read  in  conjunction  with the Company's audited financial statements and notes
thereto  for  the  years  ended  June  30,  2003, 2002, and 2001 included in the
Company's  annual  report  on  Form  10-K  filed with the SEC. Interim operating
results  are  not  necessarily  indicative  of  operating results for any future
interim  period  or  for  the  full  year.

NOTE  2.  GOING  CONCERN  CONSIDERATIONS

The  accompanying unaudited consolidated financial statements have been prepared
assuming  that the Company will continue as a going concern. For the nine months
ended  March  31,  2004,  the  Company  had a loss from continuing operations of
$2,617,000.  As  of  March  31, 2004, the Company had a negative working capital
deficiency  of $22,643,000 and had a shareholders' deficiency of $22,024,000. In
addition,  the  Company is in default on certain note payable obligations and is
being  sued  by  numerous  trade  creditors  for  nonpayment of amounts due. The
Company  is  also deficient in its payments relating to payroll tax liabilities.
These conditions raise substantial doubt about the Company's ability to continue
as  a  going  concern.

On  August  20,  1999,  at  the  request of Imperial Bank, the Company's primary
lender,  the  Superior  Court of San Diego appointed an operational receiver who
took  control of the Company's day-to-day operations on August 23, 1999. On June
21,  2000, in connection with a settlement agreement reached with Imperial Bank,
the  Superior  Court  of  San  Diego  issued an order dismissing the operational
receiver.

The Company must obtain additional funds to provide adequate working capital and
finance  operations. However, there can be no assurance that the Company will be
able  to complete any additional debt or equity financings on favorable terms or
at  all, or that any such financings, if completed, will be adequate to meet the
Company's  capital  requirements  including  compliance  with  the Imperial Bank
settlement agreement. Any additional equity or convertible debt financings could
result  in substantial dilution to the Company's shareholders. If adequate funds
are  not  available,  the  Company may be required to delay, reduce or eliminate
some  or  all  of  its  planned  activities,  including any potential mergers or
acquisitions.  The  Company's  inability  to fund its capital requirements would
have  a  material adverse effect on the Company. The financial statements do not
include  any adjustments that might result from the outcome of this uncertainty.

NOTE  3.  STOCK  BASED  COMPENSATION

The  Company  accounts  for employee stock options in accordance with Accounting
Principles  Board  Opinion  ("APB")  No.  25,  "Accounting  for  Stock Issued to
Employees".  Under  APB  25, the Company does not recognize compensation expense
related  to  options  issued  under  the  Company's employee stock option plans,
unless the option is granted at a price below market price on the date of grant.
In  1996,  SFAS  No.  123  "Accounting  for  Stock-Based  Compensation",  became
effective  for  the  Company.  SFAS No. 123, which prescribes the recognition of
compensation  expense  based  on  the  fair  value of options on the grant date,
allows  companies  to  continue applying APB 25 if certain pro forma disclosures
are made assuming hypothetical fair value method, for which the Company uses the
Black-Scholes  option-pricing  model.

For  non-employee stock based compensation, the Company recognizes an expense in
accordance with SFAS No.  123 and values the equity securities based on the fair
value of the security on the date of grant. For stock-based awards, the value is
based  on  the  market value for the stock on the date of grant and if the stock
has  restrictions  as  to  transferability,  a  discount is provided for lack of
tradability.  Stock  option  awards  are  valued  using  the  Black-Scholes
option-pricing  model.

The  Company  applies  Accounting  Principles  Board  Opinion No. 25 and related
Interpretations  in accounting for its stock option plans. The Company has opted
under  SFAS  No.  123 to disclose its stock-based compensation with no financial
effect.  The pro forma effects of applying SFAS No. 123 in this initial phase-in
period  are not necessarily representative of the effects on reported net income
or  loss  for  future  years.  Had  compensation expense for the Company's stock
option  plans  been  determined  based upon the fair value at the grant date for
awards  under  these plans consistent with the methodology prescribed under SFAS
No. 123, the Company's pro forma net loss and net loss per share would have been
as  follows  for  the  nine  months  ended  March  31,2004:
<TABLE>
<CAPTION>
<S>                                          <C>           <C>
(In thousands, except share amounts). . . .         2004          2003
                                             ------------  ------------
Loss from continuing operations
As reported . . . . . . . . . . . . . . . .  $    (3,145)  $    (2,407)
Compensation recognized under APB No. 25. .            -             -
Compensation recognized under SFAS No. 123.         (825)         (250)
                                             ------------  ------------
Pro forma . . . . . . . . . . . . . . . . .  $    (3,970)  $    (2,657)
                                             ============  ============

Basic earnings (loss) per share
As reported . . . . . . . . . . . . . . . .  $     (0.01)  $     (0.02)
                                             ============  ============
Pro forma . . . . . . . . . . . . . . . . .  $     (0.02)  $     (0.03)
</TABLE>

This  option  valuation  model  requires input of highly subjective assumptions.
Because  the Company's employee stock options have characteristics significantly
different  from  those  of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  model  does  not  necessarily provide a reliable single
measure  of  fair  value  of  its  employee  stock  options.

The  weighted average fair value of the options granted during fiscal years 2004
and  2003  is  estimated  on  the  date  of  grant  using  the  Black-Scholes
option-pricing  model.  All options granted in fiscal years 2004 and 2003 vested
immediately.  The  weighted average fair values and weighted average assumptions
used in calculating the fair values were as follows for the years ended June 30:
<TABLE>
<CAPTION>
<S>                             <C>      <C>
                                  2004    2003
                                -------  ------

Fair Value of options granted.  $0.025   $0.01
Risk free interest rate. . . .     3.5%    3.5%
Expected life (years). . . . .       3       3
Expected volatility. . . . . .     426%    421%
Expected dividends . . . . . .       0%   0%0-
</TABLE>

NOTE  4.  EARNINGS  (LOSS)  PER  COMMON  SHARE

The  Company  reports earnings (loss) per share in accordance with SFAS No. 128,
"Earnings  per  Share." Basic earnings (loss) per share are computed by dividing
income (loss) available to common shareholders by the weighted average number of
common  shares  available. Diluted earnings (loss) per share is computed similar
to  basic  earnings (loss) per share except that the denominator is increased to
include  the number of additional common shares that would have been outstanding
if  the  potential  common  shares  had been issued and if the additional common
shares  were dilutive. Diluted earnings (loss) per share have not been presented
since  the  effect of the assumed conversion of options and warrants to purchase
common shares would have an anti-dilutive effect. The following potential common
shares have been excluded from the computation of diluted net loss per share for
the  nine months ended March 31, 2004: warrants - 21,563,435 and stock options -
39,158,100.

Below  is  a  computation  of  earning  (loss)  per  share:
<TABLE>
<CAPTION>
<S>                                      <C>                           <C>      <C>     <C>     <C>        <C>        <C>
(in thousands, except per share). . . .  THREE MONTHS ENDED MARCH 31,
                                         ----------------------------
                                                                                                               2004       2003
  INCOME/ . . . . . . . . . . . . . . .  PER                           INCOME/  PER
---------------------------------------
  (LOSS). . . . . . . . . . . . . . . .  SHARES                        SHARE    (LOSS)  SHARES  SHARE
---------------------------------------  ----------------------------  -------  ------  ------  ---------
BASIC EARNINGS (LOSS) PER SHARE

Net income (loss) from continuing
operations                                                                                      $    279   $    297
Preferred stock dividends                                                                             (5)        (5)
                                                                                                ---------  ---------
                                                                                                                274        292
Discontinued operations                                                                            4,356       (255)
                                                                                                ---------  ---------
Net income (loss) attributed to common
stockholders                                                                                    $  4,630   $     37
                                                                                                =========  =========

Weighed shares outstanding                                                                       348,926    140,754

  Continuing operations                                                                         $  0.001   $  0.002
  Discontinued operations                                                                       $  0.012   $ (0.002)
                                                                                                ---------  ---------
                                                                                                           $  0.013   $  0.000
                                                                                                           =========  ========

DILUTED EARNINGS (LOSS) PER SHARE

Net income (loss) from continuing
operations                                                                                      $    279   $    297
Preferred stock dividends                                                                             (5)        (5)
Interest on convertible debentures                                                                    41         52
Amortization of discounts on
convertible debentures                                                                               151        153
                                                                                                ---------  ---------
                                                                                                                466        292
Discontinued operations                                                                            4,356       (255)
                                                                                                ---------  ---------
Net income (loss) attributed to common
stockholders                                                                                    $  4,822   $     37
                                                                                                =========  =========

Weighed shares outstanding                                                                       348,926    140,754
Conversion of convertible debentures
into common stock                                                                                193,619    183,929
                                                                                                ---------  ---------
                                                                                                            542,545    324,683
                                                                                                           =========  ========

  Continuing operations                                                                         $  0.001   $  0.001
  Discontinued operations                                                                       $  0.008   $ (0.001)
                                                                                                ---------  ---------
                                                                                                           $  0.009   $  0.000
                                                                                                           =========  ========
</TABLE>
<TABLE>
<CAPTION>
<S>                                      <C>                          <C>      <C>     <C>     <C>        <C>       <C>
(in thousands, except per share). . . .  NINE MONTHS ENDED MARCH 31,
                                         ---------------------------
                                                                                                             2004      2003

  INCOME/ . . . . . . . . . . . . . . .  PER                          INCOME/  PER
  (LOSS). . . . . . . . . . . . . . . .  SHARES                       SHARE    (LOSS)  SHARES  SHARE
BASIC EARNINGS (LOSS) PER SHARE

Net income (loss) from continuing
operations                                                                                     $ (3,145)  $(2,407)
Preferred stock dividends                                                                           (15)      (15)
                                                                                               ---------  --------
                                                                                                           (3,160)   (2,422)

Discontinued operations                                                                           2,997      (255)
                                                                                               ---------  --------
Net income (loss) attributed to common
stockholders                                                                                   $   (163)  $(2,677)
                                                                                               =========  ========

Weighed shares outstanding                                                                      292,602    96,316

  Continuing operations                                                                        $ (0.011)  $(0.025)
  Discontinued operations                                                                      $  0.010   $(0.003)
                                                                                               ---------  --------
                                                                                                          $(0.001)  $(0.028)
                                                                                                          ========  ========

DILUTED EARNINGS (LOSS) PER SHARE --
N/A
</TABLE>

NOTE  5.  RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS

During  April  2003,  the  FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative  Instruments and Hedging Activities", effective for contracts entered
into  or  modified  after  September  30,  2003,  except as stated below and for
hedging  relationships  designated after September 30, 2003. In addition, except
as  stated  below,  all provisions of this Statement were applied prospectively.
The  provisions  of  this  Statement that relate to Statement 133 Implementation
Issues  that  were  effective  for  fiscal quarters that began prior to June 15,
2003,  were  applied  in  accordance  with  their respective effective dates. In
addition,  paragraphs 7(a) and 23(a), which relate to forward purchases or sales
of  when-issued  securities or other securities that do not yet exist, should be
applied  to  both  existing  contracts  and  new  contracts  entered  into after
September  30,  2003.  The Company does not participate in such transactions and
accordingly,  the  adoption  of FASB 149 did not have an impact on the Company's
consolidated  financial  statements.

During  May  2003,  the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments  with Characteristics of both Liabilities and Equity", effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is  effective  for  public entities at the beginning of the first interim period
beginning  after  June 15, 2003. This Statement establishes standards for how an
issuer  classifies  and  measures  certain  financial  instruments  with
characteristics  of  both  liabilities  and  equity.  It requires that an issuer
classify  a  freestanding  financial  instrument  that  is within its scope as a
liability  (or  an  asset in some circumstances). Many of those instruments were
previously  classified  as  equity. Some of the provisions of this Statement are
consistent with the current definition of liabilities in FASB Concepts Statement
No.  6, Elements of Financial Statements. The Company has adopted FASB 150 which
did  not  have  an  impact  on  the Company's consolidated financial statements.

In  January  2003,  the  FASB  issued  Interpretation  No. 46, "Consolidation of
Variable Interest Entities." Interpretation 46 changes the criteria by which one
company  includes  another  entity  in  its  consolidated  financial statements.
Previously,  the  criteria  were  based  on  control  through  voting  interest.
Interpretation  46  requires  a variable interest entity to be consolidated by a
company  if  that  company is subject to a majority of the risk of loss from the
variable  interest  entity's activities or entitled to receive a majority of the
entity's  residual  returns  or  both.  A  company  that consolidates a variable
interest  entity  is  called  the  primary  beneficiary  of  that  entity.  The
consolidation  requirements  of  Interpretation 46 apply immediately to variable
interest entities created after January 31, 2003. The consolidation requirements
apply  to  other  entities  in the first fiscal year or interim period beginning
after  December  15,  2003.  Certain of the disclosure requirements apply in all
financial  statements  issued  after  January  31,  2003, regardless of when the
variable  interest  entity was established. In December 2003, the FASB concluded
to  revise  certain  elements  of FIN 46, which will be issued shortly. The FASB
also  modified  the  effective  date  of  FIN  46.  For  all  entities that were
previously  considered  special  purpose  entities,  FIN 46 should be applied in
periods  ending  after December 15, 2003. Otherwise, FIN 46 is to be applied for
registrants who file under Regulation SX in periods ending after March 15, 2004,
and  for  registrants  who  file  under  Regulation  SB, in periods ending after
December  15,  2004. The Company does not expect the adoption to have a material
impact  on  the  Company's  consolidated  financial  position  or  results  of
operations.

In  December  2003,  the  FASB  concluded  to revise certain elements of FIN 46,
primarily  to clarify the required accounting for interests in variable interest
entities.  FIN-46R  replaces  FIN-46  that  was  issued in January 2003. FIN-46R
exempts  certain  entities  from  its  requirements  and  provides  for  special
effective  dates  for entities that have fully or partially applied FIN-46 as of
December  24,  2003. In certain situations, entities have the option of applying
or  continuing  to  apply  FIN-46  for  a  short  period of time before applying
FIN-46R.  In  general,  for all entities that were previously considered special
purpose  entities,  FIN  46  should  be  applied  for registrants who file under
Regulation  SX  in  periods ending after March 31, 2004, and for registrants who
file under Regulation SB, in periods ending after December 15, 2004. The Company
does  not  expect  the  adoption  to  have  a  material  impact on the Company's
financial  position  or  results  of  operations.

In  December  2003,  the  FASB  issued  a  revised  SFAS  No.  132,  "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which replaces the
previously  issued  Statement.  The  revised  Statement  increases  the existing
disclosures  for  defined  benefit  pension  plans  and  other  defined  benefit
postretirement plans. However, it does not change the measurement or recognition
of  those  plans  as  required  under  SFAS  No.  87, "Employers' Accounting for
Pensions,"  SFAS No. 88, "Employers' Accounting for Settlements and Curtailments
of  Defined  Benefit  Pension  Plans and for Termination Benefits," and SFAS No.
106,  "Employers'  Accounting  for Postretirement Benefits Other Than Pensions."
Specifically,  the  revised  Statement  requires companies to provide additional
disclosures  about  pension  plan  assets,  benefit obligations, cash flows, and
benefit  costs  of  defined  benefit  pension  plans  and  other defined benefit
postretirement  plans.  Also,  companies  are required to provide a breakdown of
plan  assets  by  category, such as debt, equity and real estate, and to provide
certain  expected  rates  of  return and target allocation percentages for these
asset  categories.  The  Company  has  implemented  this  pronouncement  and has
concluded that the adoption has no material impact to the consolidated financial
statements.

NOTE  6.  REVENUE  RECOGNITION  RELATED  TO  PEO  SEGMENT

The Company recognizes its revenues associated with its PEO business pursuant to
EITF  99-19  "Reporting  Revenue  Gross  as a Principal versus Net as an Agent."
Previously, the Company reported its worksite employees as a component of direct
costs.  The Company's revenues are now reported net of worksite employee payroll
cost  (net  method).  To  conform  to  the  net method, the Company reclassified
worksite  employee  payroll  costs  for  each of its quarters in the fiscal year
ended  June  30,  2003  and its Form 10K for the year ended June 30, 2002. These
reclassifications  had  no  effect on gross profit, operating loss, or net loss.

NOTE  7.  CONVERTIBLE  NOTES  PAYABLE

Listed  below  is  a  roll-forward  schedule  of  the  convertible  debentures:
<TABLE>
<CAPTION>
<S>                                                           <C>
(In Thousands)

Balance at June 30, 2003 . . . . . . . . . . . . . . . . . .  $       1,857

Issuance of convertible debentures during the nine months
    ended March 31, 2004 . . . . . . . . . . . . . . . . . .            800
Increase in debt discount and beneficial conversion feature.           (770)
Converted into common stock. . . . . . . . . . . . . . . . .         (1,342)
Amortization of value of warrants and preferential
  conversion feature . . . . . . . . . . . . . . . . . . . .            626
                                                              --------------
Balance at March 31, 2004. . . . . . . . . . . . . . . . . .  $       1,171
                                                              ==============
</TABLE>

NOTE  8.  SHAREHOLDERS'  DEFICIENCY

Stock  Issuances
----------------

During  the  nine  months  ended  March  31,  2004,  DRDF  issued the following:

-     7,445,000  shares  of  its  common stock for legal and consulting services
valued  at  $160,150.  The value of the services was determined using the market
value  of  DRDF's  common  stock  on  the  date  of  issuance;

-     10,272,110 shares of its common stock for compensation valued at $140,332.
The value of the services was determined using the market value of DRDF's common
stock  on  the  date  of  issuance;

-     25,297,220  shares  of  its  common  stock  for  debt  of  $471,542;

-     141,204,581  shares  of its common stock for the conversion of convertible
debentures  in  the  amount  of  $1,342,464;  and

-     29,500,000  shares  of  its  common  stock  upon  the exercise of options.

NOTE  9.  SEGMENT  INFORMATION

The  Company  managed  and  internally  reported the Company's business as three
reportable  segments,  principally,  (1) products and accessories, (2) software,
(3)  temporary  staffing,  and  (4)  PEO  services.

Segment  information  for  the  nine  months ended March 31, 2004 is as follows:
<TABLE>
<CAPTION>
<S>                          <C>          <C>         <C>        <C>             <C>
(in thousands)
                             TEMPORARY
                             PRODUCTS     SOFTWARE    STAFFING   PEO SERVICES    TOTAL
                             -----------  ----------  ---------  --------------  --------
9-months ended 3/31/04
---------------------------
    Revenues. . . . . . . .  $      546   $      66   $   6,328  $       2,545   $ 9,485
    Operating income (loss)        (733)     (2,999)        204            911    (2,617)

9-months ended 3/31/03
---------------------------
    Revenues. . . . . . . .  $      742   $     241   $       -  $         809   $ 1,792
    Operating income (loss)         (58)       (265)          -         (2,505)   (2,828)
</TABLE>

NOTE  10.  ACQUISITION  AND  DISPOSITION  OF  GREENLAND  CORPORATION

ACQUISITION

On  January  14,  2003,  the  Company  completed  the  acquisition  of  shares,
representing  controlling  interest,  of  Greenland  Corporation  ("Greenland").
Under the terms of the Greenland acquisition, DRDF acquired 19,183,390 shares of
common  stock  of  Greenland  and  received  warrants  to purchase an additional
95,319,510  shares of Greenland common stock contingent upon the contribution of
certain  PEO  contracts  to Greenland.  The payment of the exercise price of the
warrants  was  made  via  the  contribution  of the required PEO contracts.  The
purchase  price  was  $2,225,000  in  the  form  of a promissory note payable to
Greenland  and  is  convertible into shares of DRDF common stock at the maturity
date,  the number of which will be determined by a formula applied to the market
price  of  the  shares  at  the time that the promissory note is converted.  The
promissory  note  of $2,225,000 is payable to Greenland and is eliminated during
the  consolidation.

The Company contributed the required PEO contracts to Greenland resulting in the
warrants  being exercised.  115.1 million Greenland common shares were issued to
DRDF  and  delivered  pursuant  to  the  terms  of  the  Closing Agreement.  The
conditions  of  the  exercise of warrants pursuant to the Closing Agreement were
met.  Accordingly, DRDF holds voting rights to 115.1 million shares of Greenland
common  stock, representing approximately 85% of the total outstanding Greenland
common  shares.

On  January  14,  2003,  four new directors were elected to serve on Greenland's
Board  of  Directors  as  nominees  of  DRDF

The  purchase  price  was  determined  through analysis of Greenland's financial
reports  as  filed with the Securities and Exchange Commission and the potential
future performance of Greenland's ExpertHR subsidiary.  The total purchase price
was  arrived  at  through  negotiations.

Greenland's ExpertHR subsidiary provides professional employer services (PEO) to
niche  markets.  Greenland's  Check  Central  subsidiary  is  an  information
technology  company  that has developed the Check Central Solutions' transaction
processing  system software and related MAXcash  Automated Banking Machine  (ABM
kiosk  designed  to  provide  self-service  check  cashing  and  ATM-banking
functionality.  Greenland's  common stock trades on the OTC Bulletin Board under
the  symbol  GRLC.

Pursuant  to the terms of the Agreement, the actual purchase price was $0, based
on  the  stated  purchase  price of $2,225,000 per the agreement less promissory
note  payable  to  $2,225,000  to  Greenland,  which  was  eliminated  in  the
consolidation.

The  operating  results  of Greenland beginning January 14, 2003 are included in
the  accompanying  consolidated  statements  of  operations.

The  total  purchase  price was valued at approximately $0 and is summarized and
allocated  as  follows  in  accordance  with  SFAS  No.  141  and  142:
<TABLE>
<CAPTION>
<S>                                           <C>
(in thousands)
Other current assets . . . . . . . . . . . .  $           4
Property and equipment . . . . . . . . . . .             90
Other non-current assets . . . . . . . . . .             18
Accounts payable and accrued
    expenses, and other current liabilities.         (3,202)
Other long-term liabilities. . . . . . . . .            (28)
Goodwill . . . . . . . . . . . . . . . . . .          3,118
                                              --------------
Purchase price . . . . . . . . . . . . . . .  $           -
                                              ==============
</TABLE>

The  excess  purchase  price  was  allocated to goodwill, as there were no other
identifiable  intangible  assets  of  Greenland in which to allocate part of the
purchase  price.

The  pro  forma consolidated results of operations have not been presented as if
the acquisition of Greenland, Inc. had occurred at July 1, 2002, due to the sale
of  Greenland  stock  back  to  Greenland effective March 1, 2004. The pro forma
information  is  not  meaningful  due  to  sale  of  Greenland.

DISPOSITION

In  January 2004, the Company determined to discontinue operations of Greenland,
Inc.,  its  professional  employment  business  division, and sold its shares in
Greenland,  Inc.,  back  to  Greenland.  Effective  March  1,  2004, the Company
completed  the  sale  of  Greenland. Effective March 1, 2004, four new directors
were  elected  to serve on Greenland's Board of Directors due to the resignation
of  the  four  directors  nominated  by  DRDF

The  terms of the sale are as follows: the Company returned all common shares of
Greenland  except  for  $19,183,390  common  shares; assign or grant all rights,
title  and  interest  the  Company  had in acquiring any or all interest in ePEO
Link, Inc. to Greenland; Greenland canceled a convertible promissory note in the
amount of $2.225,000 issued by the Company to Greenland; and Greenland agreed to
forgive  and  cancel the inter-company transfer debt of the Company to Greenland
of  approximately  $1.3  million.

Greenland's  revenues  were  $5,211,000  for the period starting July 1, 2003 to
March  31,  2004, and were $197,000 for the period January 14, 2003 to March 31,
2003.  The  results  of operations of Greenland have been reported separately as
discontinued  operations.

The  assets  sold consisted primarily of accounts receivable, deposits, property
and equipment, and other assets. The Greenland also assumed all accounts payable
and  accrued  liabilities.

Actual  operating  losses  of  Greenland  during the period from January 1, 2004
through  February 29, 2004, were $693,000, and the gain on the sale of Greenland
is  estimated  to  be  $5,049,000  (net of income taxes of $0). Accordingly, the
accompanying Statement of Operations for the three month period ending March 31,
2004  includes  a  gain  of  $4,356,000.

Greenland's  revenues for the period starting January 1, 2004 to March 31, 2004,
and for the period starting March 17, 2003 date of acquisition to March 31, were
$732,000  and  $197,000,  respectively.

The  following  is  a  summary  of  the  net  assets  sold at February 28, 2004:
<TABLE>
<CAPTION>
<S>                                          <C>                 <C>
(in thousands). . . . . . . . . . . . . . .  February 28, 2004   June 30, 2003
                                             ------------------  --------------
Assets:
  Cash. . . . . . . . . . . . . . . . . . .  $                -  $        1,043
  Accounts receivable . . . . . . . . . . .                 406             365
  Other current assets. . . . . . . . . . .                 135             394
  Property and equipment, net . . . . . . .                  77              64
  Other assets. . . . . . . . . . . . . . .               3,830           4,101
                                             ------------------  --------------
Total assets. . . . . . . . . . . . . . . .  $            4,448  $        5,967

Liabilities:
  Accounts payable. . . . . . . . . . . . .  $            1,237  $        1,015
  Notes payable . . . . . . . . . . . . . .                 830             914
  PEO payroll taxes and payroll deduction .               3,993           2,899
  Accrued liabilities . . . . . . . . . . .               1,265           1,907
  Other non-current liabilities . . . . . .                 798             854
                                             ------------------  --------------
Total liabilities . . . . . . . . . . . . .  $            8,123  $        7,589
                                             ------------------  --------------

Net liabilities of discontinued operations.  $            3,675  $        1,622
                                             ==================  ==============
</TABLE>

NOTE  11.  SUBSEQUENT  EVENTS

On  April  16, 2004, the Company transferred its ColorBlind software technology,
including  intellectual  property  to  its  Quik  Pix,  Inc.  subsidiary.

<PAGE>

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

The  following  discussion  and  analysis should be read in conjunction with the
consolidated  financial statements and notes thereto appearing elsewhere in this
Quarterly Report on Form 10-QSB. The statements contained in this Report on Form
10-QSB  that are not purely historical are forward-looking statements within the
meaning  of  Section  27A of the Securities Act of 1933, as amended, and Section
21E  of  the  Securities  Exchange Act of 1934, as amended, including statements
regarding  our  expectations,  hopes,  intentions  or  strategies  regarding the
future.  Forward-looking statements include statements regarding: future product
or product development; future research and development spending and our product
development  strategies,  and are generally identifiable by the use of the words
"may",  "should",  "expect",  "anticipate", "estimates", "believe", "intend", or
"project"  or  the  negative  thereof  or other variations thereon or comparable
terminology.  Forward-looking  statements  involve  known  and  unknown  risks,
uncertainties  and  other factors that may cause our actual results, performance
or  achievements (or industry results, performance or achievements) expressed or
implied  by  these  forward-looking  statements  to be materially different from
those  predicted.  The factors that could affect our actual results include, but
are  not  limited  to,  the following: general economic and business conditions,
both  nationally and in the regions in which we operate; competition; changes in
business  strategy  or development plans; our inability to retain key employees;
our  inability  to obtain sufficient financing to continue to expand operations;
and  changes  in  demand  for  products  by  our  customers.

OVERVIEW

We  provide a variety of financial services to small and medium-size businesses.
These  services  allow  our  customers  to outsource many human resources tasks,
including payroll processing, workers' compensation insurance, health insurance,
employee  benefits, 401k investment services, personal financial management, and
income tax consultation. In November 2001, we began to provide these services to
relieve  some of the negative impact they have on the business operations of our
existing  and  potential customers. To this end, through strategic acquisitions,
we  became  a  professional  employer  organization  ("PEO").

We  provide  financial  services  principally through our wholly-owned SourceOne
Group,  Inc.  ("SOG") subsidiary. These units provide a broad range of financial
services,  including:  benefits  and payroll administration, health and workers'
compensation  insurance  programs,  personnel  records  management, and employer
liability management. Through our Jackson Staffing subsidiary (and MedicalHR and
CallCenterHR  operating  units), we provide temporary staffing services to small
and  medium-sized businesses - primarily to call centers and medical facilities.

In  January  2003,  we  completed  the  acquisition  of  controlling  interest
(approximately  85%)  in  the  shares  of Greenland Corporation whose shares are
traded  on  the  NASD  Electronic  Bulletin  Board  under  the  symbol  GRLC.
Subsequently,  in  March  2004,  we  entered into an agreement with Greenland to
return  most of our shares in Greenland in return for Greenland's forgiveness of
certain  DRDF  indebtedness  and  business  opportunities.

In January 2003, we completed the acquisition of a controlling interest (85%) in
the  shares  of  Quik  Pix,  Inc. ("QPI"). QPI shares are traded on the National
Quotation  Bureau  Pink Sheets  under the symbol QPIX. QPI is a visual marketing
support  firm  located  in  Buena  Park, California. Its principal service is to
provide  photographic  and  digital  images  mounted  for  customer  displays in
tradeshow  and other displays .Its principal product, PhotoMotion  is a patented
color  medium of multi-image transparencies. The process uses existing originals
to create the illusion of movement, and allows for three to five distinct images
to  be  displayed  with  an  existing  lightbox.

In September 2003, we hired two key persons, the operations, and results thereof
of  the temporary staffing service then owned by Jackson Staffing, LLC. In order
to  formalize  this  arrangement,  we entered into an acquisition agreement with
Jackson  Staffing  effective  September  1,  2003 and accordingly, the financial
statements  of  Jackson  Staffing  for the three and nine months ended March 31,
2004  are  included  in  our  financial  statements.

In  April  2004,  we  transferred  our  ColorBlind  software  technology to QPI.
ColorBlind  software  provides color management to improve the accuracy of color
reproduction  -  especially  as  it  relates to matching color between different
devices  in  a  network,  such  as  monitors  and  printers. ColorBlind software
products  are  marketed  internationally through direct distribution, resellers,
and  on  the  internet  through  our  color.com  website.

Our  business  continues  to  experience  operational  and liquidity challenges.
Accordingly, year-to-year financial comparisons may be of limited usefulness now
and  for  the next several periods due to anticipated changes in our business as
these  changes relate to potential acquisitions of new businesses and changes in
products  and  services.

Our  current strategy is: to expand our financial services businesses, including
PEO  services  and  temporary staffing, and to continue to commercialize imaging
technologies,  including  PhotoMotion  Images  and  ColorBlind  color management
software  through  our  QPI  subsidiary.

To  successfully  execute  our  current  strategy,  we  will need to improve our
working  capital  position.  The report of our independent auditors accompanying
our  June  30,  2003  financial  statements  includes  an  explanatory paragraph
indicating there is a substantial doubt about our ability to continue as a going
concern, due primarily to the decreases in our working capital and net worth. We
plan  to  overcome  the  circumstances that impact our ability to remain a going
concern  through  a  combination  of achieving profitability, raising additional
debt  and  equity  financing,  and  renegotiating  existing  obligations.

In  recent  years, we have been working to reduce costs through the reduction in
staff  and reorganizing our business activities. Additionally, we have sought to
reduce  our  debt  through debt to equity conversions. We continue to pursue the
acquisition  of  businesses  that  will  grow  our  business.

There  can  be no assurance that we will be able to complete any additional debt
or  equity financings on favorable terms or at all, or that any such financings,
if  completed, will be adequate to meet our capital requirements. Any additional
equity  or  convertible  debt financings could result in substantial dilution to
our  shareholders.  If  adequate  funds are not available, we may be required to
delay,  reduce or eliminate some or all of our planned activities, including any
potential  mergers  or  acquisitions.  Our  inability  to  fund  our  capital
requirements  would  have  a  material  adverse  effect on the Company. Also see
"Liquidity and Capital Resources." and "Risks and Uncertainties - Future Capital
Needs."

RESTRUCTURING  AND  NEW  BUSINESS  UNITS

During  the  year-ended June 30, 2003, we suspended our sales efforts related to
the  resale  of  products from other manufacturers, including printers, copiers,
and  other  digital  imaging  products  in  order  to  concentrate  on providing
financial  services  to  small  and  medium-size  businesses.

Additionally, in April 2004, we transferred our ColorBlind software products and
technologies  to  our QPI subsidiary in order to focus on financial services and
enable  QPI  to  concentrate  on  imaging  technology  products  and  services.

ACQUISITIONS,  DISPOSITIONS  AND  SALE  OF  BUSINESS  UNITS

In  August 2002, we entered into an agreement to acquire controlling interest in
Greenland  Corporation.  Greenland  shares are traded on the Electronic Bulletin
Board  under  the symbol GRLC. On January 14, 2003, we completed the acquisition
of  shares,  representing  controlling  interest, of Greenland. The terms of the
acquisitions  were  disclosed  on  Form  8-K  filed  January  21,  2003.

Pursuant  to a mutual agreement between the Board of Directors of both Greenland
Corporation  and  us,  Greenland has been separated from us, effective February,
23,  2004. Under the separation agreement, Greenland forgave its note receivable
from  us  of  $2,250,000  together  with  any  accrued  interest  thereon  in
consideration  for  our  granting our acquisition rights to acquire ePEO Link to
Greenland.  In  addition,  for  returning  95,949,610 shares of Greenland common
stock  acquired  by  us  pursuant to our acquisition agreement with Greenland in
January  2003,  Greenland  forgave its inter-company account receivable from us,
which  amount  aggregated  approximately  $1,375,000.  Further,  the  agreement
provided  for  us  to effect the resignation of our Directors who also served on
the  Board  of  Directors  of  Greenland,  which  was  completed  in March 2004.

In  March  2003, we purchased certain PEO contracts from Staff Pro Leasing 2 and
Staff Pro Leasing, Inc. for $269,000. The purchase price was paid via an initial
cash  payment  of $45,000 and the remainder of the purchase price is in the form
of  a  promissory  note  to  be paid over 24 months. The value attributed to the
purchased  PEO  contracts is included as a component of intangible assets in the
accompanying consolidated balance sheet and is being amortized over the expected
life  of  the  contracts  of  5  years.

In September 2003, we hired two key persons, the operations, and results thereof
of  the temporary staffing service then owned by Jackson Staffing, LLC. In order
to  formalize  this  arrangement,  we entered into an acquisition agreement with
Jackson  Staffing  effective  September  1,  2003 and accordingly, the financial
statements  of  Jackson  Staffing  for the three and nine months ended March 31,
2004  are  included  in  our  financial  statements.

SIGNIFICANT  ACCOUNTING  POLICIES  AND  ESTIMATES

Management's  Discussion  and  Analysis  of  Financial  Condition and Results of
Operations  discusses  our  consolidated  financial  statements, which have been
prepared  in  accordance  with  accounting  principles generally accepted in the
United  States  of  America.  The  preparation  of  these consolidated financial
statements  requires  us  to  make  estimates  and  assumptions  that affect the
reported  amounts  of  assets  and  liabilities  at the date of the consolidated
financial  statements  and  the reported amounts of revenues and expenses during
the  reporting  period.  On  an  on-going  basis,  we evaluate our estimates and
judgments,  including those related to allowance for doubtful accounts, value of
intangible  assets and valuation of non-cash compensation. We base our estimates
and  judgments  on  historical  experiences and on various other factors that we
believe  to be reasonable under the circumstances, the results of which form the
basis  for  making  judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these  estimates under different assumptions or conditions. The most significant
accounting  estimates  inherent in the preparation of our consolidated financial
statements  include  estimates  as  to the appropriate carrying value of certain
assets  and  liabilities  which  are  not  readily  apparent from other sources,
primarily  allowance  for  doubtful  accounts,  estimated  fair  value of equity
instruments  used for compensation, estimated tax liabilities fro PEO operations
and  estimated  liabilities  associated  with Worker's Compensation liabilities.
These  accounting policies are described at relevant sections in this discussion
and  analysis and in the notes to the consolidated financial statements included
in  our  Annual  Report  on  Form  l0-K for the fiscal year ended June 30, 2003.

REVENUE  RECOGNITION  RELATED  TO  PEO  SEGMENT

We  recognize  revenues  associated with its PEO business pursuant to EITF 99-19
"Reporting  Revenue Gross as a Principal versus Net as an Agent." Previously, we
reported our worksite employees as a component of direct costs, our revenues are
now  reported  net of worksite employee payroll cost (net method). To conform to
the  net method, we reclassified worksite employee payroll costs for each of its
quarters  within  the  fiscal  year ended June 30, 2003 and the annual report on
Form 10K for the year ended June 30, 2002. These reclassifications had no effect
on  gross  profit,  operating  loss,  or  net  loss.

RESULTS  OF  OPERATIONS

Revenues
--------

Total  revenues  were  $3.5 million and $379 thousand for the three-month period
ended March 31, 2004 and 2003, respectively; an increase of $3.1 million (820%).
The  increase  was due primarily to the addition of temporary staffing services,
which  contributed  $2.9  million  (83%)  of  revenues  in  the  2004  quarter.

Total revenues for the nine-month period ended March 31, 2004 and 2003 were $9.5
million and $1.8 million, respectively; and increase of $7.7 million (429%). The
increase was due primarily to the addition of temporary staffing services, which
has contributed $6.3 million (67%) of revenues in the nine month period of 2004.
Additionally,  we  had  an  increase  of  $1.7  (214%)  in PEO services from the
prior-year  period, which is attributed to an increase in our PEO customer base.

PEO  Services

PEO  revenues for the three-month period ended March 31, 2004 and 2003 were $475
thousand  and  $155 thousand, respectively; and increase of $320 thousand (206%)
due  primarily  to  an  increase  in  our  PEO  customer  base.

PEO  revenues  for the nine month period ended March 31, 2004 and 2003 were $2.5
million and $809 thousand, respectively; an increase of $1.7 million (210%). The
increase  in revenues was due primarily to an increase in our PEO customer base.

Temporary  Staffing

In  September  2003,  we  entered  the  temporary  staffing business through the
organization  of  CallCenterHR  and  MedicalHR  and  the  acquisition of Jackson
Staffing.  There  were  no  revenues  from temporary staffing in the 2003 fiscal
year.

For  the  three-month  and  nine-month  period ended March 31, 2004, we had $2.9
million  and  $6.2 million in revenues, respectively from our temporary staffing
business.

Imaging  Products

Sales  of  imaging  products were generated principally from our QPI subsidiary.

For  the  three-month  period  ended  March  31, 2004 and 2003, imaging products
revenues  were  $91  thousand and $162 thousand, respectively, a decrease of $71
thousand (44%). The decrease in product sales was due to the suspension of sales
and  marketing activities associated with the resale of office products in order
to  concentrate  on color management products and services, including ColorBlind
software  and  PhotoMotion  Images.

For  the  nine-month  period  ended  March  31,  2004 and 2003, imaging products
revenues  were $576 thousand and $742 thousand, respectively; a decrease of $166
thousand  (22%).The decrease in product sales was due to the suspension of sales
and  marketing  activities  associated  with  the  resale  of office products as
described  above.

For the three-months ended March 31, 2004 and 2003, revenues from software sales
were  $30  thousand  and  $62  thousand, respectively. The reduction in software
revenues was due to a delay in completing certain versions of our software which
can be used with multiple computer operating systems. Revenues from licenses and
royalties  for  the  periods  were  insignificant.

For  the nine-months ended March 31, 2004 and 2003, revenues from software sales
were  $66  thousand and $241 thousand, respectively; a decrease of $175 thousand
(73%).  The  reduction  in  software revenues was due to circumstances described
above.  Royalties from the licensing of ColorBlind source code are insignificant
and  are  reported  as  part  of  software  sales.

Royalties  and  licensing fees vary from quarter to quarter and are dependent on
the  sales  of  products  sold  by  OEM  customers using our technologies. These
revenues  continue  to  decline  as  we  have elected to transfer our ColorBlind
software  to  QPI,  which  has  accelerated  product  development  and  begun to
implement  a  more  aggressive  product  sales  program.

COST  OF  PRODUCTS  SOLD

Cost  of  PEO  services for the three month period ended March 31, 2004 and 2003
were $384 thousand (81% of PEO revenues) and $58 thousand (37% of PEO revenues),
respectively.  The  decrease in gross profit is due primarily to increased costs
of workers' compensation insurance premiums, which could not be passed on to our
clients.  These costs tend to vary from period-to-period, depending on timing of
new  contracts  and  employee risk classifications. However, as noted above, the
impact  of  changes  in accrued payroll taxes and workers' compensation serve to
offset  some  of  the  decrease.

For  the  nine  month period ended March 31, 2004 and 2003, cost of PEO services
were  $2.3  million  (90%  of  PEO revenues) and $201,000 (25% of PEO revenues),
respectively.  The  decrease in gross profit is due primarily to increased costs
of workers' compensation insurance premiums, which could not be passed on to our
clients.  These costs tend to vary from period-to-period, depending on timing of
new  contracts  and  employee risk classifications. However, as noted above, the
impact  of  changes  in accrued payroll taxes and workers' compensation serve to
offset  some  of  the  decrease.

For  the  three-month  and  nine-month  period ended March 31, 2004, the cost of
temporary  staffing  were  $2.7 million (92% of temporary staffing revenues) and
$5.7  million  (89% of temporary staffing revenues), respectively. There were no
such  revenues  in  the  prior-year  period.

For  the three-month period ended March 31, 2004 and 2003, cost of products sold
were  $28  thousand  (31%  of  product  sales)  and $48 thousand (30% of product
sales),  respectively.  Product  sales  continue to decline as we concentrate on
other  products  and  services.  The  decrease  in  margins  in  not  material.

For  the  nine month period ended March 31, 2004 and 2003, cost of products sold
were  $156  thousand  (29%  of  product sales) and $365 thousand (49% of product
sales),  respectively.  The  decrease  in margins is due primarily to changes in
product  mix  and  our  competitive  position  with  customers.

For  the  three-month  period  ended  March 31, 2004 and 2003, cost of software,
licenses  and  royalties were $0 and $9 thousand, respectively. Costs associated
with  the  production  of  software  and  providing  licenses  is  negligible.

For  the  nine-month  period  ended  March  31, 2004 and 2003, cost of software,
licenses  and  royalties  were  $3  thousand (5% of associated revenues) and $71
thousand  (29%  of  associated  revenues),  respectively.  The  decrease  is due
primarily  to  decreased  business activity while awaiting the completion of new
releases  of  ColorBlind  software.

SELLING,  GENERAL  AND  ADMINISTRATIVE  EXPENSES

Selling,  general  and  administrative  expenses  have  consisted  primarily  of
salaries  and commissions of sales and marketing personnel, salaries and related
costs for general corporate functions, including finance, accounting, facilities
and  legal,  advertising  and  other  marketing  related  expenses, and fees for
professional  services.

Selling,  general  and  administrative expenses for the three-month period ended
March  31,  2004  and 2003 were negative $71 thousand and $818 thousand (216% of
total  revenues), respectively. As disclosed in "Significant Accounting Policies
and  Estimates",  we  rely  on  estimates for such liabilities related to, among
other  areas,  workers' compensation and accrued payroll taxes. During the three
month  period  ended  March  31,  2004,  we  changed  our  estimate  of workers'
compensation and accrued payroll taxes, which resulted in a negative cost of PEO
operations.  The  cumulative  changes in estimates for these accounts aggregated
approximately  $1.2  million  in  the  quarterly  period  ended  March 31, 2004.

Selling,  general  and  administrative  expenses for the nine month period ended
March  31,  2004  and  2003,  were  $4.0  million (42% of total revenues) and $4
million  (222%  of  total  revenues),  respectively.

The  increase  in  expenses,  after  considering the $1.2 million adjustment for
changes  in  estimates of certain payroll and workers' compensation liabilities,
for  both  the  three-month  and nine-month period of fiscal 2004 over the prior
year  is  due  primarily  with increased employee and outside consultants' costs
related  to  the  acquisition and integration of Greenland and QPI. However, the
decrease  in the percentage of total revenues of such costs is due to an overall
increase  in  revenues  and  business  activity.

OTHER  INCOME  AND  EXPENSE

For the three-month period ended March 31, 2004 and 2003, interest and financing
costs  were  $434  thousand  and $411 thousand, respectively; an increase of $23
thousand (6%), which was due, primarily, to a reduction of amortization of debt.

For  the nine-month period ended March 31, 2004 and 2003, interest and financing
costs  were $1.4 million and $1.5 million, respectively. The 10% decrease is due
to  less  amortization  of  debt  discounts  in  the  current  period.

GAIN  ON  EXTINGUISHMENT  OF  DEBT

For the three-month period ended March 31, 2004 and 2003, gain on extinguishment
of  debt  was  $228  thousand and $1.3 million, respectively. For the nine-month
period  ended  March  31, 2004 and 2003, gain on extinguishment of debt was $853
thousand  and  $1.9 million, respectively. These amounts are related to accounts
payable,  which  had  become  stale  and  uncollectible.  Pursuant to an opinion
provided by counsel, we elected to record these gains pursuant to the Statute of
Limitations  in  the  State  of  California.

LIQUIDITY  AND  CAPITAL  RESOURCES

Historically,  we  have financed our operations primarily through cash generated
from  operations,  debt  financing,  and  the  sale  of  equity  securities.
Additionally,  in  order  to facilitate our growth and future liquidity, we have
made  some  strategic  acquisitions.

As  a  result  of some of our financing activities, there has been a significant
increase  in  the number of issued and outstanding shares. During the nine month
period  ended  March 31, 2004, we issued an additional 213,718,911 shares. These
shares  of  common stock were issued primarily for corporate expenses in lieu of
cash,  for  the conversion of convertible debentures and other debt, and for the
exercise  of  warrants.

As  of  March  31,  2004,  we  had  negative  working capital of $21 million, an
increase  in  working capital of approximately $5.8 million since June 30, 2003.
This  increase  was  due  primarily to our disposition of Greenland Corporation,
gains  on  the  disposition  of  debt,  and  a change in estimates as previously
discussed.

Net cash used in operating activities was $1.6 million for the nine months ended
March  31,  2004  as  compared  to  $749  thousand for the prior-year period; an
increase  of  $811  thousandThe  increase  was  due  primarily  to increases in
selling, general and administrative expenses associated with the acquisitions of
Greenland  Corporation  and  QPI.

Cash  used  in  investing activities was $158 thousand for the nine-month period
ended  March 31, 2004, an increase of $57 thousand from the year-earlier period.

We  have  no  material  commitments for capital expenditures. Our 5% convertible
preferred  stock  (which  ranks  prior  to our common stock), carries cumulative
dividends,  when  and  as  declared,  at an annual rate of $50.00 per share. The
aggregate  amount  of  such  dividends  in  arrears  at  March  31,  2004,  was
approximately  $396  thousand.

Our capital requirements depend on numerous factors, including market acceptance
of  our  products and services, the resources we devote to marketing and selling
our  products  and  services,  and  other factors. The report of our independent
auditors  accompanying  our  June  30,  2003  financial  statements  includes an
explanatory  paragraph indicating there is a substantial doubt about our ability
to  continue  as  a going concern, due primarily to the decreases in our working
capital  and  net  worth.

RISKS  AND  UNCERTAINTIES

Risks  Relating  to  our  Business:
-----------------------------------

IF  WE  ARE  UNABLE  TO SECURE FUTURE CAPITAL, WE WILL BE UNABLE TO CONTINUE OUR
OPERATIONS.

Our business has not been profitable in the past and it may not be profitable in
the  future.  We may incur losses on a quarterly or annual basis for a number of
reasons,  some within and others outside our control. See "Potential Fluctuation
in  Our  Quarterly  Performance."  The  growth  of our business will require the
commitment  of  substantial  capital  resources. If funds are not available from
operations,  we  will need additional funds. We may seek such additional funding
through  public  and  private  financing,  including  debt  or equity financing.
Adequate  funds  for  these  purposes, whether through financial markets or from
other  sources,  may  not  be  available  when  we  need them. Even if funds are
available,  the  terms  under  which  the  funds  are available to us may not be
acceptable  to  us.  Insufficient  funds  may  require  us  to  delay, reduce or
eliminate  some  or  all  of  our  planned  activities.

To  successfully  execute  our  current  strategy,  we  will need to improve our
working  capital  position.  The report of our independent auditors accompanying
the  Company's  June  30,  2003  financial  statements  includes  an explanatory
paragraph indicating there is a substantial doubt about the Company's ability to
continue  as  a  going  concern,  due  primarily to the decreases in our working
capital  and  net  worth.  The  Company plans to overcome the circumstances that
impact  our ability to remain a going concern through a combination of increased
revenues  and  decreased  costs,  with  interim  cash  flow  deficiencies  being
addressed  through  additional  equity  financing.

IF  OUR  QUARTERLY  PERFORMANCE  CONTINUES  TO FLUCTUATE, IT MAY HAVE A NEGATIVE
IMPACT  ON  OUR  BUSINESS.

Our  quarterly  operating  results  can  fluctuate  significantly depending on a
number  of factors, any one of which could have a negative impact on our results
of  operations. We may experience significant quarterly fluctuations in revenues
and  operating  expenses as we introduce new products and services. Accordingly,
any  inaccuracy  in our forecasts could adversely affect our financial condition
and  results  of  operations.  Demand  for  our  products  and services could be
adversely  affected  by  a  slowdown  in the overall demand for imaging products
and/or  financial  and  PEO services. Our failure to complete shipments during a
quarter  could  have  a material adverse effect on our results of operations for
that  quarter.  Quarterly  results  are  not  necessarily  indicative  of future
performance  for  any  particular  period.

SINCE  MANY  OF  OUR  COMPETITORS HAVE GREATER FINANCIAL AND MARKETING RESOURCES
THAN  WE  DO,  WE  MAY  EXPERIENCE  A  REDUCTION  IN  MARKET SHARE AND REVENUES.

The  markets  for  our  products and services are highly competitive and rapidly
changing.  Some  of  our  current and prospective competitors have significantly
greater financial, technical, and marketing resources than we do. Our ability to
compete  in  our  markets depends on a number of factors, some within and others
outside our control. These factors include: the frequency and success of product
and  services  introductions by us and by our competitors, the selling prices of
our  products  and  services  and of our competitors' products and services, the
performance  of  our  products  and  of  our  competitors'  products,  product
distribution  by  us  and  by  our  competitors,  our  marketing ability and the
marketing  ability  of  our  competitors,  and  the  quality of customer support
offered  by  us  and  by  our  competitors.

The  PEO  industry  is  highly  fragmented.  While  many of our competitors have
limited  operations,  there  are  several  PEO  companies equal or substantially
greater  in size than ours. We also encounter competition from "fee-for-service"
companies  such  as  payroll  processing  firms,  insurance companies, and human
resources consultants. The large PEO companies have substantially more resources
than  us  and  provide  a  broader  range  of  resources  than  we  do.

IF  WE  ACQUIRE  COMPLEMENTARY  BUSINESSES,  WE  MAY  NOT BE ABLE TO EFFECTIVELY
INTEGRATE  THEM  INTO  OUR  CURRENT OPERATIONS, WHICH WOULD ADVERSELY AFFECT OUR
OVERALL  FINANCIAL  PERFORMANCE.

In  order  to  grow  our business, we may acquire businesses that we believe are
complementary.  To  successfully  implement  this  strategy,  we  must  identify
suitable  acquisition  candidates, acquire these candidates on acceptable terms,
integrate  their  operations  and  technology  successfully  with  ours,  retain
existing  customers  and  maintain the goodwill of the acquired business. We may
fail  in  our  efforts  to  implement  one  or more of these tasks. Moreover, in
pursuing  acquisition opportunities, we may compete for acquisition targets with
other companies with similar growth strategies. Some of these competitors may be
larger  and  have  greater financial and other resources than we do. Competition
for  these  acquisition  targets likely could also result in increased prices of
acquisition  targets  and  a  diminished  pool  of  companies  available  for
acquisition.  Our overall financial performance will be materially and adversely
affected  if  we  are  unable  to  manage  internal  or acquisition-based growth
effectively.  Acquisitions  involve  a  number  of risks, including: integrating
acquired  products  and  technologies in a timely manner, integrating businesses
and  employees  with our business, managing geographically-dispersed operations,
reductions  in  our  reported operating results from acquisition-related charges
and  amortization of goodwill, potential increases in stock compensation expense
and  increased  compensation  expense  resulting from newly-hired employees, the
diversion  of  management  attention,  the  assumption  of  unknown liabilities,
potential  disputes  with  the  sellers  of  one  or more acquired entities, our
inability to maintain customers or goodwill of an acquired business, the need to
divest  unwanted  assets  or  products,  and  the possible failure to retain key
acquired  personnel.

Client satisfaction or performance problems with an acquired business could also
have  a  material  adverse  effect  on our reputation, and any acquired business
could  significantly  under  perform  relative to our expectations. We cannot be
certain  that  we  will  be  able  to integrate acquired businesses, products or
technologies successfully or in a timely manner in accordance with our strategic
objectives,  which could have a material adverse effect on our overall financial
performance.

In  addition,  if  we  issue  equity  securities as consideration for any future
acquisitions, existing stockholders will experience ownership dilution and these
equity  securities  may have rights, preferences or privileges superior to those
of  our  common  stock.

IF  WE  ARE UNABLE TO DEVELOP AND/OR ACQUIRE NEW PRODUCTS IN A TIMELY MANNER, WE
MAY  EXPERIENCE  A SIGNIFICANT DECLINE IN SALES AND REVENUES, WHICH MAY HURT OUR
ABILITY  TO  CONTINUE  OPERATIONS.

The  markets  for our products are characterized by rapidly evolving technology,
frequent  new  product  introductions  and  significant  price  competition.
Consequently, short product life cycles and reductions in product selling prices
due  to  competitive pressures over the life of a product are common. Our future
success  will  depend  on our ability to continue to develop new versions of our
ColorBlind  software  and  to successfully market PhotoMotion Images. We monitor
new  technology  developments  and  coordinate  with suppliers, distributors and
dealers  to enhance our products and to lower costs. If we are unable to develop
and  acquire  new,  competitive  products  in  a  timely  manner,  our financial
condition  and  results  of  operations  will  be  adversely  affected.

IF  WE ARE FOUND TO BE INFRINGING ON A COMPETITOR'S INTELLECTUAL PROPERTY RIGHTS
OR  IF  WE  ARE  REQUIRED  TO  DEFEND AGAINST A CLAIM OF INFRINGEMENT, WE MAY BE
REQUIRED  TO REDESIGN OUR PRODUCTS OR DEFEND A LEGAL ACTION AT SUBSTANTIAL COSTS
TO  US.

We currently hold only one patent through our QPI subsidiary for its Photomotion
product.  Our  software  products  are  copyrighted  and  trademarked.  However,
copyright  protection  does  not  prevent  other  companies  from  emulating the
features  and  benefits provided by our software. We protect our software source
code  as  trade  secrets  and  make our proprietary source code available to OEM
customers  only  under  limited  circumstances  and  specific  security  and
confidentiality  constraints.

IF  OUR  DISTRIBUTORS  REDUCE OR DISCONTINUE SALES OF OUR PRODUCTS, OUR BUSINESS
MAY  BE  MATERIALLY  AND  ADVERSELY  AFFECTED.

Some  of  our  products  are marketed and sold through a distribution channel of
value  added  resellers,  manufacturers'  representatives,  retail  vendors, and
systems  integrators. We have a small network of dealers and distributors in the
United States and internationally. We support our worldwide distribution network
and  end-user  customers  through  operations  headquartered  in  San  Diego and
Anaheim,  California.

Portions  of  our  sales  are made through distributors, who may carry competing
product  lines.  These  distributors  could  reduce  or discontinue sales of our
products,  which  could  adversely affect us. These independent distributors may
not  devote  the  resources  necessary  to provide effective sales and marketing
support  of  our  products.  In  addition,  we  are dependent upon the continued
viability and financial stability of these distributors, many of which are small
organizations  with  limited  capital.  These  distributors,  in  turn,  are
substantially  dependent on general economic conditions and other unique factors
affecting  our  markets.

INCREASES  IN  HEALTH  INSURANCE  PREMIUMS,  UNEMPLOYMENT  TAXES,  AND  WORKERS'
COMPENSATION  RATES  WILL  HAVE  A  SIGNIFICANT  EFFECT  ON OUR FUTURE FINANCIAL
PERFORMANCE.

Health  insurance  premiums, state unemployment taxes, and workers' compensation
rates  are,  in  part,  determined  by our PEO companies' claims experience, and
comprise  a  significant  portion of our direct costs. We employ risk management
procedures  in an attempt to control claims incidence and structure our benefits
contracts  to  provide  as  much  cost stability as possible. However, should we
experience  a  large increase in claims activity, the unemployment taxes, health
insurance  premiums,  or  workers'  compensation  insurance  rates  we pay could
increase. Our ability to incorporate such increases into service fees to clients
is  generally  constrained  by  contractual  agreements  with  our  clients.
Consequently,  we  could  experience  a  delay  before  such  increases could be
reflected  in the service fees we charge. As a result, such increases could have
a  material  adverse effect on our financial condition or results of operations.

WE CARRY SUBSTANTIAL LIABILITY FOR WORKSITE EMPLOYEE PAYROLL AND BENEFITS COSTS.

Under  our  client  service  agreements,  we  become  a  co-employer of worksite
employees  and we assume the obligations to pay the salaries, wages, and related
benefits  costs  and  payroll  taxes  of such worksite employees. We assume such
obligations  as  a  principal, not merely as an agent of the client company. Our
obligations include responsibility for (a) payment of the salaries and wages for
work  performed  by worksite employees, regardless of whether the client company
makes  timely  payment  to  us  of the associated service fee; and (2) providing
benefits  to worksite employees even if the costs incurred by us to provide such
benefits  exceed  the  fees paid by the client company. If a client company does
not  pay  us,  or if the costs of benefits provided to worksite employees exceed
the  fees paid by a client company, our ultimate liability for worksite employee
payroll  and  benefits  costs  could  have  a material adverse effect on the our
financial  condition  or  results  of  operations.

AS A MAJOR EMPLOYER, OUR OPERATIONS ARE AFFECTED BY NUMEROUS FEDERAL, STATE, AND
LOCAL  LAWS  RELATED  TO  LABOR,  TAX,  AND  EMPLOYMENT  MATTERS.

By  entering  into a co-employer relationship with employees assigned to work at
client  company locations, we assume certain obligations and responsibilities or
an  employer under these laws. However, many of these laws (such as the Employee
Retirement  Income  Security  Act ("ERISA") and federal and state employment tax
laws)  do  not  specifically  address  the  obligations  and responsibilities of
non-traditional  employers  such as PEOs; and the definition of "employer" under
these  laws is not uniform. Additionally, some of the states in which we operate
have  not  addressed  the  PEO  relationship  for  purposes  of  compliance with
applicable  state  laws  governing  the employer/employee relationship. If these
other  federal or state laws are ultimately applied to our PEO relationship with
our worksite employees in a manner adverse to us, such an application could have
a  material  adverse effect on our financial condition or results of operations.

While  many  states  do not explicitly regulate PEOs, over 20 states have passed
laws  that  have  licensing  or  registration requirements for PEOs, and several
other  states  are  considering  such  regulation.  Such laws vary from state to
state,  but  generally  provide for monitoring the fiscal responsibility of PEOs
and,  in  some  cases,  codify  and  clarify  the co-employment relationship for
unemployment,  workers'  compensation, and other purposes under state law. There
can  be  no  assurance that we will be able to satisfy licensing requirements of
other  applicable  relations  for  all  states.  Additionally,  there  can be no
assurance  that  we  will  be  able  to  renew  our  licenses  in  all  states.

THE  MAINTENANCE  OF HEALTH AND WORKERS' COMPENSATION INSURANCE PLANS THAT COVER
WORKSITE  EMPLOYEES  IS  A  SIGNIFICANT  PART  OF  OUR  BUSINESS.

The  current  health and workers' compensation contracts are provided by vendors
with  whom  we have an established relationship, and on terms that we believe to
be  favorable.  While  we believe that replacement contracts could be secured on
competitive  terms without causing significant disruption to our business, there
can  be  no  assurance  in  this  regard.

OUR  STANDARD AGREEMENTS WITH PEO CLIENTS ARE SUBJECT TO CANCELLATION ON 60-DAYS
WRITTEN  NOTICE  BY  EITHER  THE  COMPANY  OR  THE  CLIENT.

Accordingly,  the  short-term  nature  of  our client service agreements make us
vulnerable  to  potential  cancellations  by  existing  clients,  which  could
materially  and  adversely  affect  our  financial  condition  and  results  of
operations. Additionally, our results of operations are dependent, in part, upon
our  ability  to  retain  or  replace  client  companies upon the termination or
cancellation  of  our  agreements.

A  NUMBER  OF  PEO  INDUSTRY  LEGAL ISSUES REMAIN UNRESOLVED WITH RESPECT TO THE
CO-EMPLOYMENT  AGREEMENT  BETWEEN  A  PEO  AND ITS WORKSITE EMPLOYEES, INCLUDING
QUESTIONS  CONCERNING  THE  ULTIMATE  LIABILITY FOR VIOLATIONS OF EMPLOYMENT AND
DISCRIMINATION  LAWS.

Our  client  service  agreement  establishes  a  contractual  division  of
responsibilities  between  our  clients  and us for various personnel management
matters,  including  compliance  with  and  liability  under  various government
regulations.  However,  because  we  act  as a co-employer, we may be subject to
liability  for  violations  of  these  or  other  laws despite these contractual
provisions,  even  if  we  do  not  participate in such violations. Although our
agreement  provides  that  the  client  is  to  indemnify  us  for any liability
attributable to the conduct of the client, we may not be able to collect on such
a  contractual indemnification claim, and thus may be responsible for satisfying
such  liabilities.  Additionally,  worksite  employees  may  be deemed to be our
agents,  subjecting  us to liability for the actions of such worksite employees.

IF THE SUPERIOR SECURITY INTEREST HELD BY IMPERIAL BANK IS REMOVED AND IF ALL OF
THE  LAWSUITS  CURRENTLY  FILED WERE DECIDED AGAINST US AND/OR ALL THE JUDGMENTS
CURRENTLY OBTAINED AGAINST US WERE TO BE IMMEDIATELY COLLECTED, WE WOULD HAVE TO
CEASE  OUR  OPERATIONS.

Throughout  fiscal  2001,  2002  and  2003, and through the date of this filing,
approximately  fifty  trade  creditors  have  made  claims  and/or filed actions
alleging  the  failure  of  us  to pay our obligations to them in a total amount
exceeding  $3  million.  These actions are in various stages of litigation, with
many  resulting in judgments being entered against us. Several of those who have
obtained  judgments  have filed judgment liens on our assets. These claims range
in  value  from less than one thousand dollars to just over one million dollars,
with  the  great majority being less than twenty thousand dollars.  Should we be
required  to  pay the full amount demanded in each of these claims and lawsuits,
we  may  have  to cease our operations.  However, to date, the superior security
interest held by Imperial Bank has prevented nearly all of these trade creditors
from  collecting  on  their  judgments.

IF OUR OPERATIONS CONTINUE TO RESULT IN A NET LOSS, NEGATIVE WORKING CAPITAL AND
A  DECLINE  IN  NET WORTH, AND WE ARE UNABLE TO OBTAIN NEEDED FUNDING, WE MAY BE
FORCED  TO  DISCONTINUE  OPERATIONS.

For  several  recent  periods,  up  through  the  present, we had a net loss and
negative  working  capital,  which raises substantial doubt about our ability to
continue  as  a  going  concern.  Our  losses  have  resulted  primarily from an
inability  to  achieve  revenue targets due to insufficient working capital. Our
ability  to  continue operations will depend on positive cash flow, if any, from
future operations and on our ability to raise additional funds through equity or
debt  financing.  Although we have reduced our work force, suspended some of our
operations, and entered into new market segments (financial services), if we are
unable  to  achieve the necessary revenues or raise or obtain needed funding, we
may  be  forced  to  discontinue  operations.

IF  AN  OPERATIONAL RECEIVER IS REINSTATED TO CONTROL OUR OPERATIONS, WE MAY NOT
BE  ABLE  TO  CARRY  OUT  OUR  BUSINESS  PLAN.

On  August  20,  1999,  at the request of Imperial Bank, our primary lender, the
Superior Court, San Diego appointed an operational receiver to us. On August 23,
1999,  the  operational  receiver  took control of our day-to-day operations. On
June  21,  2000,  the  Superior  Court, San Diego issued an order dismissing the
operational  receiver as a part of a settlement of litigation with Imperial Bank
pursuant  to  the  Settlement  Agreement  effective  as  of  June 20, 2000.  The
Settlement  Agreement  requires  that  we  make  monthly payments of $150,000 to
Imperial  Bank  until  the indebtedness is paid in full. This agreement does not
require us to pay any interest unless we default on the settlement agreement and
fail  to  cure the default.  Regardless, we have continued to accrue interest on
this  debt until it has been paid and there is no possibility that such interest
will  become due and payable. However, in the future, without additional funding
sufficient  to  satisfy  Imperial  Bank  and  our  other  creditors,  as well as
providing  for  our  working  capital,  there  can  be  no  assurances  that  an
operational  receiver  may  not  be  reinstated.  If  an operational receiver is
reinstated, we will not be able to expand our products nor will we have complete
control  over  sales  policies  or  the  allocation  of  funds.

The  penalty  for  noncompliance  of  the  Settlement  Agreement is a stipulated
judgment  that  allows  Imperial  Bank  to immediately reinstate the operational
receiver  and  begin liquidation proceedings against us. Our current arrangement
with  Imperial  Bank  reduces  are  monthly  payments  to $50,000. The remaining
balance  due  is  approximately  $3.1  million.

WE  HAVE  NOT  REMAINED  CURRENT  IN OUR PAYMENT OF FEDERAL AND STATE INCOME AND
OTHER  PAYROLL-RELATED  TAXES  WITHHELD  IN  OUR  PEO  BUSINESS.

We have not been able to remain current in our payments of federal and state tax
obligations  related  to  our  PEO operations. We are currently working with the
Internal  Revenue  Service  and  state  agencies  to  resolve  these  issues and
establish  repayment plans. If we are not able to establish repayment plans that
allow us to continue our operations, we may be forced to cease doing business in
the  financial  services  marketplace.

Risks  Relating  to  our  Stock:
-------------------------------

THE ISSUANCE OF THE SHARES PURSUANT TO OUTSTANDING CONVERTIBLE NOTES WILL RESULT
IN  DILUTION.

There  are  a  large  number of shares underlying convertible notes and warrants
that  may  be available for future sale and the sale of these shares may depress
the  market  price  of  our  common  stock and may cause substantial dilution to
existing  stockholders.

The  number  of  shares  of common stock issuable upon conversion of convertible
notes  may increase if the market price of our stock declines. Nearly all of the
shares  issuable  upon  conversion  of notes and debentures and upon exercise of
warrants,  may  be  sold  without  restriction.  The  sale  of  these shares may
adversely  affect  the  market price of our common stock. The issuance of shares
upon  conversion of convertible notes and debentures and exercise of outstanding
warrants  will  also  cause  immediate  and  substantial  dilution  to  existing
stockholders  and  may  make  it  difficult  to  obtain  additional  capital.

THE  OVERHANG  AFFECT FROM THE RESALE OF SELLING SHAREHOLDERS' SECURITIES ON THE
MARKET  COULD  RESULT  IN  LOWER  STOCK  PRICES  WHEN  CONVERTED

Overhang  can translate into a potential decrease in our market price per share.
The  common  stock  underlying unconverted debentures represents overhang. These
outstanding  debentures  are  converted  into  common stock at a discount to the
market price providing the debenture holder the ability to sell his or her stock
at or below market and still make a profit, which is incentive for the holder to
sell  the  shares as quickly as possible to ensure as much profit as possible in
case  the  stock  price  falls. If the share volume cannot absorb the discounted
shares,  our  market  price  per share will likely decrease. As the market price
decreases,  each subsequent conversion will require a larger quantity of shares.

SHORT  SELLING  COMMON STOCK BY WARRANT AND DEBENTURE HOLDERS MAY DRIVE DOWN THE
MARKET  PRICE  OF  OUR  STOCK.

The  warrant  and  debenture  holders may sell shares of our common stock on the
market  before  exercising the warrant or converting the debenture. The stock is
usually  offered  at  or  below  market  since the warrant and debenture holders
receive  stock  at  a discount to market. Once the sale is completed the holders
exercise  or  convert  a like dollar amount of shares. If the stock sale lowered
the  market  price,  upon  exercise  or  conversion, the holders would receive a
greater  number  of  shares  then  they  would  have absent the short sale. This
pattern  may  result  in  the  spiraling  down  of  our  stock's  market  price.

THE  MARKET PRICE OF OUR COMMON STOCK HISTORICALLY HAS FLUCTUATED SIGNIFICANTLY.

Our  stock  price  could  fluctuate  significantly  in the future based upon any
number  of  factors  such  as:  general  stock  market  trends, announcements of
developments  related  to our business, fluctuations in our operating results, a
shortfall  in  our  revenues or earnings compared to the estimates of securities
analysts,  announcements  of  technological  innovations,  new  products  or
enhancements  by  us  or  our  competitors, general conditions in the markets we
serve,  general  conditions in the worldwide economy, developments in patents or
other  intellectual  property rights, and developments in our relationships with
our  customers  and  suppliers.

In  addition,  in  recent  years the stock market in general, and the market for
shares  of  technology  and  other  stocks  have  experienced  extreme  price
fluctuations,  which  have  often been unrelated to the operating performance of
affected  companies.  Similarly,  the  market  price  of  our  common  stock may
fluctuate  significantly  based  upon  factors  unrelated  to  our  operating
performance.

OUR  COMMON  STOCK  IS  SUBJECT  TO  THE  "PENNY STOCK" RULES OF THE SEC AND THE
TRADING  MARKET  IN  OUR  SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN OUR
STOCK  CUMBERSOME  AND  MAY  REDUCE  THE  VALUE  OF  AN INVESTMENT IN OUR STOCK.

Our  shares  of  Common Stock are "penny stocks" as defined in the Exchange Act,
which are quoted in the over-the-counter market on the OTC Bulletin Board.  As a
result,  an investor may find it more difficult to dispose of or obtain accurate
quotations  as  to  the price of the shares of the Common Stock being registered
hereby. In addition, the "penny stock" rules adopted by the Commission under the
Exchange  Act  subject  the  sale  of  the shares of the Common Stock to certain
regulations  which  impose  sales  practice  requirements on broker-dealers. For
example,  broker-dealers  selling  such  securities must, prior to effecting the
transaction, provide their customers with a document that discloses the risks of
investing  in  such  securities.  Included in this document are: (1) the bid and
offer  price  quotes  for the penny stock, and the number of shares to which the
quoted  prices  apply;  (2) the brokerage firm's compensation for the trade; and
(3)  the  compensation  received  by  the  brokerages firm's salesperson for the
trade.

In  addition,  the  brokerage  firm  must send the investor: (1) monthly account
statement  that  gives  an  estimate  of  the  value of each penny stock in your
account;  (2)  a  written  statement  of your financial situation and investment
goals;  and  (3)  legal remedies, which may be available to you, are as follows:
(a) if penny stocks are sold to you in violation of your rights listed above, or
other  federal or state securities laws, you may be able to cancel your purchase
and get your money back.; (b) if the stocks are sold in a fraudulent manner, you
may  be able to sue the persons and firms that caused the fraud for damages; and
(c) if you have signed an arbitration agreement, however, you may have to pursue
your  claim  through  arbitration.

If  the  person  purchasing  the  securities is someone other than an accredited
investor or an established customer of the broker-dealer, the broker-dealer must
also  approve  the  potential  customer's  account  by  obtaining  information
concerning  the  customer's  financial  situation,  investment  experience  and
investment objectives.  The broker-dealer must also make a determination whether
the  transaction  is  suitable  for  the  customer  and whether the customer has
sufficient  knowledge  and  experience  in  financial  matters  to be reasonably
expected  to  be  capable  of  evaluating  the  risk  of  transactions  in  such
securities.  Accordingly,  the  Commission's  rules  may  limit  the  number  of
potential  purchasers  of  the  shares  of  the  Common  Stock.

RESALE RESTRICTIONS ON TRANSFERRING "PENNY STOCKS" ARE SOMETIMES IMPOSED BY SOME
STATES,  WHICH  MAY MAKE TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE THE
VALUE  OF  AN  INVESTMENT  IN  OUR  STOCK.

Various state securities laws impose restrictions on transferring "penny stocks"
and  as  a  result, investors in the Common Stock may have their ability to sell
their  shares  of  the  Common Stock impaired.  For example, the Utah Securities
Commission  prohibits  brokers  from soliciting buyers for "penny stocks", which
makes  selling  them  more  difficult.

OUR  ABSENCE  OF DIVIDENDS OR THE ABILITY TO PAY THEM PLACES A LIMITATION ON ANY
INVESTORS  RETURN.

We  anticipate  that,  for the foreseeable future, earnings will be retained for
the  development  of  its  business.  Accordingly,  we  do not anticipate paying
dividends  on  the common stock in the foreseeable future. The payment of future
dividends  will  be  at  the  sole discretion of our Board of Directors and will
depend  on  our  general  business  condition.

Information  about  forward-looking  statements
-----------------------------------------------

This  report  contains  certain  forward-looking  statements,  which  involve
substantial  risks  and  uncertainties.  These  forward-looking  statements  can
generally be identified because the context of the statement includes words such
as  "may,"  "will,"  "except,"  "anticipate,"  "intend," "estimate," "continue,"
"believe,"  or  other  similar  words.  Similarly, this prospectus also contains
forward-looking  statements about our future. Forward-looking statements include
statements  about our plans, objectives, goals, strategies, expectations for the
future,  future  performance  and  events, underlying assumptions for all of the
above,  and  other  statements,  which  are  not statements of historical facts.

These  forward-looking  statements  involve risks and uncertainties discussed in
the  risk  factor  section,  which  could cause our actual results to materially
differ  from  our  forward-looking  statements.  We  make  these forward-looking
statements based on our analysis of internal and external historical trends, but
there  can  be  no assurance that we will achieve the results set forth in these
forward-looking statements. Our forward-looking statements are expressed in good
faith  and  we  believe  that  there  is a reasonable basis for us to make them.

We  have  no  obligation to update or revise these forward-looking statements to
reflect  future  events.

ITEM  3.  CONTROLS  AND  PROCEDURES

As  required by SEC rules, we have evaluated the effectiveness of the design and
operation  of  our  disclosure  controls and procedures at the end of the period
covered  by  this  report. This evaluation was carried out under the supervision
and  with the participation of our management, including our principal executive
officer  and  principal  financial  officer.  Based  on  this  evaluation, these
officers have concluded that the design and operation of our disclosure controls
and procedures are effective. There were no changes in our internal control over
financial  reporting  or  in other factors that have materially affected, or are
reasonably  likely  to  materially  affect,  our internal control over financial
reporting.

Disclosure  controls  and  procedures are our controls and other procedures that
are  designed  to  ensure that information required to be disclosed by us in the
reports  that  we  file or submit under the Exchange Act is recorded, processed,
summarized  and  reported,  within the time periods specified in the SEC's rules
and  forms.  Disclosure  controls  and  procedures  include, without limitation,
controls  and  procedures  designed  to  ensure  that information required to be
disclosed  by  us  in  the  reports  that  we  file  under  the  Exchange Act is
accumulated  and  communicated  to our management, including principal executive
officer  and  principal  financial  officer,  as  appropriate,  to  allow timely
decisions  regarding  required  disclosure.

<PAGE>

PART  II  -  OTHER  INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

On  August  22,  2002,  we  were sued by our former landlord, Carmel Mountain #8
Associates,  L.P.  or past due rent on its former facilities at 15175 Innovation
Drive,  San  Diego, CA 92127. The amount related to this obligation was included
as  an  expense  in  the  year  ended  June  30,  2003.

We have been sued in Illinois state court along with AIA/Merriman, our insurance
brokers,  by the Arena Football League-2 ("AF2"). Damages payable to AF2, should
they  win  the suit, could exceed $700,000. We expect to defend our position and
rely on representations of our insurance brokers.  We have also issued a counter
suit  against  the  AF2  for  failure  to  disclose  information required by our
contract  and  other material misrepresentations management believes the AF2 has
made.  We  are  also  now considering suing AIA/Merriman, our insurance brokers,
for  material  errors  and  omissions.

Over  the  past  few  years,  and through the date of this filing, approximately
fifty trade creditors have made claims and/or filed actions alleging the failure
of  us  to pay our obligations to them in a total amount exceeding $3.0 million,
which  has  been  reduced  to $1.8 million during the 2003. These actions are in
various  stages  of  litigation,  with many resulting in judgments being entered
against  us.  Several  of  those who have obtained judgments have filed judgment
liens  on  our  assets.  These claims range in value from less than one thousand
dollars  to  just  over  one million dollars, with the great majority being less
than  twenty  thousand  dollars.

In  connection  with  the  Company's acquisition of controlling interest of Quik
Pix,  Inc.,  we  are  unaware  of  any  pending  litigation.

From  time  to  time  we  and/or  our  subsidiary  companies  may be involved in
litigation  relating to claims arising out of operations in the normal course of
business.

ITEM  2.  CHANGES  IN  SECURITIES

Common  Stock
-------------

During  the  nine  months  ended  March  31,  2004,  we  issued  the  following:

-     7,445,000  shares  of  its  common stock for legal and consulting services
valued  at  $160,150.  The value of the services was determined using the market
value  of  our  common  stock  on  the  date  of  issuance;

-     10,272,110 shares of its common stock for compensation valued at $140,332.
The  value  of  the services was determined using the market value of our common
stock  on  the  date  of  issuance;

-     25,297,220  shares  of  its  common  stock  for  debt  of  $471,542;

-     141,204,581  shares  of its common stock for the conversion of convertible
debentures  in  the  amount  of  $1,342,464;  and

-     29,500,000  shares  of  its  common  stock  upon  the exercise of options.

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

The Company is currently in default on certain bank loans that have an aggregate
outstanding  balance  at  March  31,  2004  of  $3,145,000.

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

We have filed a Definitive Proxy Statement on Form 14A and the Annual Meeting of
Shareholders  is  scheduled  for  May  20,  2003 in San Diego, California at our
principal  offices.  There  are  three  proposals  included  in  the  Statement,
including  (1)  election  of  directors,  (2)  amendment  of  our  Articles  of
Incorporation to increase the authorized amount of common stock to 1,000,000,000
shares,  and  (3)  appointment  of  auditors.  We will report the results of the
shareholders'  vote  on these proposals as soon as possible following the Annual
Meeting.

ITEM  5.  OTHER  INFORMATION

None

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     Exhibits

31.1     Rule  13a-14(a)  Certification

32.1     Certification  Pursuant  to 18 U.S.C. Section 1350, as Adopted Pursuant
to  Section  906  of  the  Sarbanes-Oxley  Act  of  2002

10.1     Agreement  of Acquisition between the Company and Quik Pix, Inc., dated
April  16,  2004.

(b)     Reports  on  Form  8-K

On  January  13,  2004,  we  filed  a  Current Report on Form 8-L announcing the
appointment  and  subsequent  resignation of Thomas Brown as our Chief Financial
Officer.

On  March  4, 2004, we filed a Current Report on Form 8-K announcing that we had
entered  into  an  agreement  to  dispose  of  Greenland  Corporation.

<PAGE>

                                   SIGNATURES
                                   ----------

Pursuant  to  the  requirements  of  the  Securities  Exchange  Act of 1934, the
registrant  has  duly  caused  this  report  to  be  signed on its behalf by the
undersigned  thereunto  duly  authorized.

Dated:  May  19,  2004

DALRADA  FINANCIAL  CORPORATION
(Registrant)


By:  /S/  Brian  Bonar
_____________________________________
Brian  Bonar
Chairman  ,  Chief  Executive  Officer,  and  Acting  Chief  Financial  Officer