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

                      ---------------------

                           FORM 10-QSB

(Mark One)

[X]   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the period ended June 30, 2005

     OR

[ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

                Commission file number: 000-30382

                  DataLogic International, Inc.
-----------------------------------------------------------------------
      (Exact name of registrant as specified in its charter)



          Delaware                              33-0755473
          --------                              ---------
(State or other jurisdiction of    (I.R.S. Employer Identification No.)
incorporation or organization)


    18301 Von Karman Ave, Suite 250, Irvine, California 92612
-----------------------------------------------------------------
             (Address of principal executive offices)

                          (949) 260-0120
                  -----------------------------
                 (Registrant's telephone number)


Indicate by check mark 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 preceding 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 [ ]

As of July 31, 2005, there were 40,010,192 shares of the issuer's Common Stock
outstanding.

Transitional Small Business Disclosure Format (Check One): Yes [X]  No [ ]

=============================================================================






                                1

<PAGE>



                              INDEX


PART I.  FINANCIAL INFORMATION..............................................3
  Item 1. Consolidated Financial Statements.................................3

          Unaudited Consolidated Balance Sheet as of June 30, 2005 .........3

          Unaudited Consolidated Statements of Operations -
          Three and Six Months Ended June 30, 2005 and 2004 ................4

          Unaudited Consolidated Statements of Cash Flows -
          Six Months Ended June 30, 2005 and 2004...........................5

          Notes to Unaudited Consolidated Financial
          Statements........................................................7

  Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations........................................24

  Item 3. Quantitative and Qualitative Disclosures About Market Risk.......33

  Item 4. Controls and Procedures..........................................33


PART II.  OTHER INFORMATION................................................34

  Item 1. Legal Proceedings................................................34
  Item 2. Changes in Securities............................................34
  Item 3. Defaults upon Senior Securities..................................34
  Item 4. Submission of Matters to a Vote of Security Holders..............34
  Item 5. Other Information................................................34
  Item 6. Exhibits.........................................................35


SIGNATURES.................................................................36


                                2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
              CONSOLIDATED BALANCE SHEET (UNAUDITED)
                          JUNE 30, 2005

ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                     $   424,625
  Accounts receivable, net of allowance
   for doubtful accounts of $115,312                              1,645,958
  Marketable securities available for sale                            7,500
  Inventories                                                       455,964
  Prepaid expenses                                                  307,381
                                                                ------------
    Total current assets                                          2,841,428

Restricted cash                                                     972,095
Property and equipment, net                                         154,331
Loan origination costs, net                                         207,332
Intangible assets, net                                               10,927
Deposits                                                              9,111
                                                                ------------
                                                                $ 4,195,224
                                                                ============

              LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable and accrued expenses                         $ 1,870,479
  Deferred revenue                                                  602,801
  Notes payable - officers                                           55,624
  Notes payable                                                     255,000
  Current portion of convertible debt                               769,692
                                                                ------------
    Total current liabilities                                     3,553,596

Convertible debt, net of current portion                          1,066,848
                                                                ------------
    Total liabilities                                             4,620,444
                                                                ------------
Commitments and contingencies                                             -

STOCKHOLDERS' DEFICIT:
  Common stock, $.001 par value; 10,000,000 shares
    authorized, 39,434,092 shares issued and outstanding             39,434
  Additional paid-in-capital                                      3,533,512
  Shares to be issued                                               225,290
  Unamortized consulting fees                                       (23,804)
  Accumulated deficit                                            (4,199,652)
                                                                ------------
    Total stockholders' deficit                                    (425,220)
                                                                ------------
                                                                $ 4,195,224
                                                                ============

      The accompanying notes are an integral part of these
                consolidated financial statements.

                                3
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<TABLE>
<CAPTION>

             DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (UNAUDITED)



                                      For the three months         For the six months
                                          ended June 30,              ended June 30,
                                        2005         2004           2005        2004
                                  ------------- ------------- ------------- -------------
<S>                               <c>           <c>           <c>           <c>

Net revenue                       $  4,484,178  $  4,007,156  $  7,852,446  $  8,008,743

Cost of revenue                      3,958,087     2,775,953     6,891,587     5,780,277
                                  ------------- ------------- ------------- -------------

Gross profit                           526,091     1,231,203       960,859     2,228,466

Operating expenses                     696,917       696,145     1,371,478       968,901
                                  ------------- ------------- ------------- -------------

Income (loss) from operations         (170,826)      535,058      (410,619)    1,259,565

Non-operating expense:
  Interest expense                    (113,942)      (13,286)     (260,855)      (24,249)
  Other than temporary write-down
    of marketable securities
    available for sale                (196,000)            -      (196,000)            -
  Factoring expense                          -       (32,694)            -       (99,926)
                                  ------------- ------------- ------------- -------------
    Total non-operating expense       (309,942)      (45,980)     (456,855)     (124,175)
                                  ------------- ------------- ------------- -------------
Income (loss) before income
  taxes and minority interest         (480,768)      489,078      (867,474)    1,135,390

Income taxes                                 -             -         3,200         1,600

Minority interest                            -        (9,270)            -      (174,450)
                                  ------------- ------------- ------------- -------------

Net income (loss)                 $   (480,768) $    479,808  $   (870,674) $    959,340
                                  ============= ============= ============= =============

Basic earnings (loss) per share   $     (0.012) $      0.013  $     (0.022) $      0.026
                                  ============= ============= ============= =============
Basic weighted average
 shares outstanding                 39,434,092    36,859,832     39,382,631   36,834,924
                                  ============= ============= ============= =============
Diluted earnings (loss)
 per share                        $     (0.012) $      0.011  $     (0.022) $      0.023
                                  ============= ============= ============= =============
Diluted weighted average
  shares outstanding                39,434,092    41,917,325     39,382,631   41,892,737
                                  ============= ============= ============= =============


Weighted average number of shares used to compute basic and diluted loss per share in 2005
is the same since the effect of dilutive securities is anti-dilutive for the three and six
months ended June 30, 2005.



            The accompanying notes are an integral part of these
                     consolidated financial statements.

                                      4

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<PAGE>
<TABLE>
<CAPTION>



                DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)

                                                                For the six months
                                                                   ended June 30,
                                                                 2005           2004
                                                           -------------- --------------

                                                        <c>            <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                        $    (870,674) $     959,340
  Adjustments to reconcile net income (loss)
  to net cash provided by (used in) operating activities:
     Depreciation and amortization                               119,090         34,959
     Bad debt expense                                              2,312              -
     Issuance of shares for services                                   -        191,425
     Issuance of shares for interest                              19,987              -
     Other than temporary write-down of marketable
      securities available for sale                              196,000              -
     Minority interest                                                 -        174,450
     (Increase) decrease in current assets:
        Accounts receivable                                      (17,700)    (1,765,352)
        Inventories                                             (402,437)        11,905
        Prepaid expenses                                        (179,077)       (10,390)
     Increase in current liabilities:
        Accounts payable and accrued expenses                    555,958        243,807
        Deferred revenue                                         602,801              -
                                                            ------------- --------------
  Total adjustments                                              896,934     (1,119,196)
                                                            ------------- --------------

        Net cash provided by (used in) operating activities       26,260       (159,856)
                                                            ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Sale of treasury stock                                               -        150,904
  Acquisition of property and equipment                          (60,217)       (14,351)
                                                            ------------- --------------

        Net cash provided by (used in) investing activities      (60,217)       136,553
                                                            ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from convertible debt                                       -      3,000,000
  Decrease (increase) in restricted cash                         286,594     (1,250,000)
  Payment of debt issuance costs                                       -       (311,000)
  Payments to factor                                                   -       (854,301)
  Proceeds from loan                                                   -         75,000
  Payments of loans                                             (474,859)             -
  Payments on line of credit                                           -       (429,406)
  Proceeds from line of credit                                         -        182,631
  Proceeds from exercise of stock options                          3,000              -
                                                            ------------- --------------

        Net cash provided by (used in) financing activities     (185,265)       412,924
                                                            ------------- --------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            (219,222)       389,621

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                   643,847        253,517
                                                            ------------- --------------

CASH AND CASH EQUIVALENTS, ENDING OF PERIOD                 $    424,625  $     643,138
                                                            ============= ==============

                                      5

</TABLE>
<PAGE>
<TABLE>
<CAPTION>

                                                                For the six months
                                                                   ended June 30,
                                                                 2005           2004
                                                           -------------- --------------

                                                        <c>            <c>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid during the period                            $      42,251  $      12,130
Income taxes paid during the period                        $       1,600  $         800


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the six months ended June 30, 2005, the Company issued 252,525 and 47,588 shares of common
stock in payment of principal and interest of $106,061 and $19,987, respectively, on the notes
payable.

The Company issued 539,294 shares of common stock for management services amounting
$191,425 during the six months ended June 30, 2004.






            The accompanying notes are an integral part of these
                     consolidated financial statements.


                                      6

</TABLE>
<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business
-----------------------

DataLogic International, Inc. ("DataLogic" or the "Company"), through its
wholly owned subsidiaries, provides Information Technology ("IT") outsourcing
and consulting services to a wide range of U.S. and international governmental
agencies and commercial enterprises.   The Company's services capitalize on
the ongoing trend toward strategic IT outsourcing and address growing markets
such as public safety and homeland security.  The Company also leverages its
technology expertise, customer relationships and supplier channels to develop
solutions addressing rapidly growing communications markets, including VoIP
("Voice over Internet Protocol") communications and GPS vehicle tracking.

The Company's wholly owned subsidiaries include DataLogic Consulting, Inc.
("DCI"), IPN Communications, Inc. ("IPN") and DataLogic New Mexico, Inc.
("DNM").  DCI provides complete IT consulting services that include, but are
not limited to, project management and systems analysis, design,
implementation, testing and maintenance.  The services can be provided at the
clients' locations or off-site at the Company's U.S. or affiliated offshore
facilities.  DCI also provides short and long-term staffing solutions to IT
clients, healthcare providers and other businesses.

IPN Communications, Inc., a California corporation, provides VoIP telephony
products and services worldwide.  IPN derives its VoIP revenues from phone
sets, communication servers, software and hardware licenses and residual
global long distance airtime sales.  The Company increased its ownership of
IPN from 51% to 100% on November 5, 2004.

On January 13, 2004, the Company acquired the Machine-to-Machine ("M2M")
technology from two technologists and entered into the mobile asset tracking
business.  Panther Trak(TM) is the Company's first product in the M2M mobile
asset tracking vertical market.  This GPS based mobile asset tracking device
was designed to focus largely on theft, recovery and tracking services.  The
Company derives its M2M revenues from the sale of mobile tracking units,
software and hardware licenses and residual income from monthly user
subscription fees.

DNM was formed in the first quarter of 2005 as a result of the acquisition of
the assets of IS Solutions, LLC (see Note 16).  DNM is a technical solution
provider for public safety and homeland security agencies.

                                7

<PAGE>



           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION, continued

Basis of Presentation
---------------------

The accompanying consolidated interim financial statements have been prepared
in accordance with the rules and regulations of the Securities and Exchange
Commission ("SEC") for the presentation of interim financial information.
These interim consolidated financial statements are unaudited and, in the
opinion of management, include all adjustments (consisting of normal recurring
adjustments and accruals) necessary to present fairly the consolidated balance
sheet, consolidated operating results and consolidated cash flows for the
periods presented in accordance with accounting principles generally accepted
in the United States of America ("GAAP").  Operating results for the three and
six months ended June 30, 2005 are not necessarily indicative of the results
that may be achieved for the year ending December 31, 2005 or for any other
interim period during such year.  Certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP
have been omitted in accordance with the rules and regulations of the SEC.
These interim consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto contained
in the Company's Form 10-KSB for the year ended December 31, 2004.

Going Concern
-------------

The Company's consolidated financial statements are prepared using the accrual
method of accounting in accordance with GAAP, and have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business.  The Company has
an accumulated deficit of $4,199,652 at June 30, 2005.  Management has taken
various steps to revise its operating and financial requirements, which it
believes will be sufficient to provide the Company with the ability to
continue its operations for the next twelve months.  Management has also
devoted considerable effort during the six months ended June 30, 2005 towards
management of liabilities and improvement of the Company's operations.
Further, the Company has secured a material contract to provide its
PantherTrak product.  This contract can provide the Company with an increased
level of revenues that should support the Company's current overhead expenses
and provide for increasing cash flows to allow the Company to continue its
operations through the next twelve months.

In view of the matters described above, recoverability of a major portion of
the recorded asset amounts shown in the accompanying consolidated balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations.  The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The accompanying financial statements include the accounts and transactions of
DataLogic International, Inc. and its subsidiaries.  Intercompany transactions
and balances have been eliminated in consolidation.  The minority owners'
interest in a subsidiary represents the 49% interest in IPN Communications in
2004 and has been reflected as minority interest in the consolidated financial
statements as of June 30, 2004.


                                8

<PAGE>


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Significant estimates include the
collectibility of accounts receivable, the realizability of inventories, the
recoverability of long-lived assets and the fair value of marketable
securities available for sale.  Actual results could differ from those
estimates.

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

The Company performs ongoing credit evaluations of customers and adjusts
credit limits based upon payment history and the customer current
creditworthiness, as determined by its review of their current credit
information.  The Company continuously monitors collections and payments from
its customers and maintains a provision for estimated credit losses based upon
its historical experience and any customer-specific collection issues that it
has identified.

Marketable Securities Available for Sale
----------------------------------------

The Company's securities are classified as available for sale and, as such,
are initially recorded at cost and adjusted to their fair value at each
balance sheet date.  Securities classified as available for sale may be sold
in response to changes in interest rates, liquidity needs and for other
purposes and accordingly, are classified as current assets in the accompanying
consolidated balance sheet.

Unrealized holding gains and losses on available for sale securities are
excluded from earnings and reported, net of tax, as other comprehensive
income, a separate component of stockholder's equity.  Any decline in value of
available for sale securities below cost that is considered to be "other than
temporary" is recorded as a reduction of the cost basis of the security and is
included in the statement of operations as a realized loss.

Inventories
-----------

Inventories are valued at the lower of cost (determined on a weighted average
basis) or market.  Management compares the cost of inventories with their
market value and an
allowance is made to write down the inventories to their market value, if
lower. Inventories at June 30, 2005 were comprised of finished phone, GPS and
video communications products.

Property and Equipment
----------------------

Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets.  The
useful lives for the related assets range from five to seven years.

                                9

<PAGE>


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Maintenance and repairs are charged to expense as incurred.  Renewals and
improvements of a major nature are capitalized.  At the time of retirement or
other disposition of property and equipment, the cost and accumulated
depreciation are removed from the accounts and any resulting gains or losses
are reflected in the consolidated statement of operations.

Loan Origination Costs
----------------------

Loan origination costs are amortized using the straight-line method over the
term of the related debt instrument.

Intangible Assets
-----------------

Intangible assets consist of website development costs, software licenses and
client lists and are recorded at cost.  Intangible assets are amortized using
the straight-line method over their estimated useful lives of 5 years.

Long-Lived Assets
-----------------

The Company accounts for its long-lived assets in accordance with Statement of
Financial Accounting Standards  ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the historical cost carrying value of an asset may
no longer be appropriate.  The Company assesses recoverability of the carrying
value of an asset by estimating the future net cash flows expected to result
from the asset, including eventual disposition.  If the future net cash flows
are less than the carrying value of the asset, an impairment loss is recorded
equal to the difference between the asset's carrying value and fair value or
disposable value. As of June 30, 2005, the Company does not believe there has
been any impairment of its long-lived assets.  There can be no assurances,
however, that demand for the Company's products and services will continue,
which could result in an impairment of long-lived assets in the future.

Beneficial Conversion Feature
-----------------------------

The convertible feature of the debt provides for a rate of conversion that is
below market value.  This feature is normally characterized as a beneficial
conversion feature ("BCF"), which is recorded by the Company pursuant to
Emerging Issues Task Forces ("EITF") Issue No. 98-5 ("EITF 98-05"),
"Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios," and EITF Issue No. 00-27,
"Application of EITF Issue No. 98-5 to Certain Convertible Instruments."

The Company's convertible debt is recorded net of the debt discount related to
the BCF.  The Company records the debt discount in proportion to principal
advances and amortizes the discount to interest expense over the life of the
debt on a straight-line basis, which approximates the effective interest
method.

                                10
<PAGE>


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Fair Value of Financial Instruments
-----------------------------------

The Company's financial instruments consist of cash and cash equivalents,
marketable securities available for sale, accounts receivable, accounts
payable and accrued expenses, notes payable and convertible debt.  Pursuant to
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments," the
Company is required to estimate the fair value of all financial instruments at
the balance sheet date.  The Company cannot determine the estimated fair value
of notes payable   officers as the transaction originated with related parties
and instruments similar to the convertible debt could not be found.  Other
than these items, the Company considers the carrying values of its financial
instruments in the financial statements to approximate their fair values.

Revenue Recognition
-------------------

Revenue is recognized when earned.  The Company recognizes revenue on its
software products in accordance with all applicable accounting regulations,
including the American Institute of Certified Public Accountants' ("AICPA")
Statement of Position ("SOP") 97-2, "Software Revenue Recognition", and SOP
98-9, "Modification of SOP 97-2, With Respect to Certain Transactions."
Expenses are recognized in the period in which the corresponding liability is
incurred.

For sales of phone products, our revenue recognition policies are in
compliance with Staff Accounting Bulletin ("SAB") 104.  Sales revenue is
recognized at the date of shipment to customers when a formal arrangement
exists, the price is fixed or determinable, the delivery is completed, no
other significant obligations by us exist and collectibility is reasonably
assured.  Payments received before all of the relevant criteria for revenue
recognition are satisfied are recorded as deferred revenue in the accompanying
consolidated balance sheet.

Revenues and costs of revenues from consulting contracts are recognized during
the period in which the service is performed.

The Company has contracts with various governments and governmental agencies.
Government contracts are subject to audit by the applicable governmental
agency.  Such audits could lead to inquiries from the government regarding the
allowability of costs under applicable government regulations and potential
adjustments of contract revenues.  To date, the Company has not been involved
in any such audits.

Net Loss per Share
------------------

The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
("EPS").  SFAS No. 128 provides for the calculation of basic and diluted
earnings per share.   Basic EPS includes no dilution and is computed by
dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period.  Diluted EPS
reflects the potential dilution of securities that could share in the earnings
or losses of the entity.  Such amounts include shares potentially issuable
pursuant to shares to be issued, convertible debentures and outstanding
options and warrants.  Had such shares been included in diluted EPS, they
would have resulted in weighted-average common shares of 39,434,092 and
39,382,631 for the three and six months ended June 30, 2005, respectively.

                                11

<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Issuance of Shares for Non-Cash Consideration
---------------------------------------------

The Company accounts for the issuance of equity instruments to acquire goods
and/or services based on the fair value of the goods and services or the fair
value of the equity instrument at the time of issuance, whichever is more
reliably determinable.  The majority of equity instruments have been valued at
the market value of the shares on the date issued.

Stock-Based Compensation
------------------------

The Company accounts for employee stock-based compensation under the
"intrinsic value" method prescribed in Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," as opposed to the
fair value method prescribed by SFAS No. 123, "Share-Based Payment."  Pursuant
to the provisions of APB Opinion 25, the Company generally does not record an
expense for the value of stock-based awards granted to employees.  The Company
has adopted the disclosure only provisions of SFAS No. 123.

Concentrations of Credit Risk
-----------------------------

The Company maintains its cash balances at financial institutions that are
insured by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000.
From time-to-time, the Company's cash balances exceed the amount insured by
the FDIC.  Management believes the risk of loss of cash balances in excess of
the insured limit to be low.

Two major customers accounted for 82% of the net revenue for the six months
ended June 30, 2005.  Accounts receivable from these major customers amounted
to approximately $1,058,000 as of June 30, 2005.

Two major customers accounted for 73% of the net revenue for the six months
ended June 30, 2004.

A significant portion of the Company's business is located in Rhode Island and
New Mexico and is subject economic conditions and regulations in those areas.

The Company extends credit to its customers based upon its assessment of their
credit worthiness and generally does not require collateral.

The Company utilizes a limited number of suppliers for the VoIP phones and GPS
device components.

Reclassifications
-----------------

Certain amounts in the June 30, 2004 consolidated financial statements have
been reclassified to conform to the June 30, 2005 presentation.  Such
reclassifications had no effect on net income as previously reported.

Recent Accounting Pronouncements
--------------------------------

The Financial Accounting Standards Board ("FASB") has issued SFAS No. 123R,
"Share-Based Payment."  The new rule requires that the compensation cost
relating to share-based payment transactions be recognized in the financial
statements.  That cost will be measured based on the fair value of the equity
or liability instruments issued.  This


                                12

<PAGE>


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

statement precludes the recognition of compensation expense under APB Opinion
No. 25's intrinsic value method.  Small business issuers will be required to
apply Statement 123R in the first annual reporting period that begins after
December 15, 2005.  The Company has not yet determined the effect the adoption
of SFAS No. 123R will have on its consolidated financial statements.

In November 2004, The FASB issued SFAS No. 151, "Inventory Costs," an
amendment of ARB No. 43, Chapter 4 to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs and spoilage.  SFAS
No. 151 requires that these costs  be expensed as incurred and not included in
overhead.  SFAS No. 151 also requires that allocation of fixed production
overhead to conversion costs be based on normal capacity of the production
facilities.  This standard is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005.  The Company does not believe the
adoption of the statement will result in a significant impact to the Company's
consolidated financial statements.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-Monetary
Assets," an amendment of APB Opinion No. 29, "Accounting for Non-Monetary
Assets."  The amendments made by SFAS No. 153 are based on the principle that
exchanges of non-monetary assets should be measured based on the fair value of
the assets exchanged.  Further, the amendments eliminate the narrow exception
for non-monetary exchanges of similar productive assets and replace it with a
broader exception for exchanges of non-monetary assets that do not have
"commercial substance."  The provisions in SFAS No. 153 are effective for
non-monetary asset exchanges occurring in fiscal periods beginning after June
15, 2005.  Early application is permitted and companies must apply the
standard prospectively.  The Company does not believe the adoption of the
statement will result in a significant impact to the Company's consolidated
financial statements.


NOTE 3 - MARKETABLE SECURITIES AVAILABLE FOR SALE

During the quarter ended June 30, 2005, Company management has determined that
the decline in the market value of securities available for sale is
"other-than-temporary."  Accordingly, the cost bases of the securities were
adjusted to their market value as of June 30, 2005 and the accumulated other
comprehensive loss was recorded as a realized loss in the accompanying
consolidated statement of operations.

Following is a summary of marketable securities available for sale as of June
30, 2005:

                                            Adjusted
                                            Cost        Fair      Unrealized
                                            Basis       Value     Loss

Marketable securities available for sale    $ 7,500     $ 7,500   $ 0


Unrealized holding gains and losses for the six months ended June 30, 2005 and
2004 were zero and $8,500, respectively.  Realized losses on the
"other-than-temporary" write-down of marketable securities available for sale
were $196,000 and zero for the three and six months ended June 30, 2005 and
2004, respectively.


                                13
<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



NOTE 4 - RESTRICTED CASH

In connection with the Company's private placement of a convertible term note
with Laurus Master Fund, Ltd. ("Purchaser") (see Note 11), $972,095 of the
principal amount of the convertible term note is held in a restricted account
by the Company but under the sole dominion and control of the Purchaser as
security for the Company's obligations under the Securities Purchase
Agreement.  Funds will be released to the Company from this account upon
conversion of principal once the Company has reduced the unrestricted
principal amount of the note ($1,836,540) to zero or upon the satisfaction of
other specified conditions.  The restricted cash account earns interest at the
rate of 3.25% per annum.  Interest income was $7,576 and $ 0 for the quarters
ended June 30, 2005 and 2004, respectively.


NOTE 5 - LOAN ORIGINATION COSTS

Loan origination costs as of June 30, 2005 were as follows:

      Loan origination costs            $   311,000

      Less accumulated amortization        (103,668)
                                        ------------

                                        $   207,332
                                        ============

Amortization of the loan origination costs was $25,917 and $14,771 for the
quarters ended June 30, 2005 and 2004, respectively.

NOTE 6 - INTANGIBLE ASSETS

      Website development costs         $     4,900
      Software licenses                      39,000
      Client lists                           33,086
                                        ------------
                                             76,986

Less Accumulated amortization               (66,059)
                                        ------------

                                        $    10,927
                                        ============

Amortization expense was $3,657 and $3,658 for the quarters ended June 30,
2005 and 2004, respectively.


Future aggregate amortization of the intangible assets is as follows:

      2005                             $     7,314
      2006                                   3,613
                                       ------------

      Total                            $    10,927
                                       ============


                                14


<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at June 30, 2005 consist of the
following:

    Accounts payable                 $   818,203
    Accrued payroll and payroll taxes    606,769
    Accrued sales taxes                  169,679
    Accrued interest expense             134,368
    Accrued expenses- other              141,460
                                     ------------
                                     $ 1,870,479
                                     ============


NOTE 8 - DUE TO FACTOR

On August 23, 2002, the Company entered into a factoring and security
agreement to sell certain accounts receivable at a discount of 1.75% of the
face value.  The Company discontinued the services of factor as of June 30,
2004 and all the outstanding balances due to the factor have been paid in
full.  The outstanding balances were secured by all of the Company's accounts
receivable, inventories and computer hardware.  In connection with the
factoring agreement, the Company incurred fees of $99,926 during the six
months ended June 30, 2004.


NOTE 9 - NOTES PAYABLE - OFFICERS

Notes payable to officers are unsecured, past due, payable on demand and bear
interest at an annual rate of 6 percent on the unpaid principal balance.  The
Company repaid $66,800 and $33,200 of the notes payable to officers during the
three and six month periods ended June 30, 2005.  The balance on the notes
payable to the officers amounted to $55,624 as of June 30, 2005.  Interest
expense on these notes for the six months ended June 30, 2005 and 2004
amounted to $2,357 and $9,132, respectively.


NOTE 10 - NOTES PAYABLE AND LINE OF CREDIT

Notes payable consisted of the following as of June 30, 2005:

Unsecured note, interest rate 10%, interest only payable on last
 day of each month, past due and immediately payable               $   25,000
Unsecured note, interest rate 6%, interest payable at the
 end of the term or on demand, past due and immediately payable        80,000
Unsecured note, interest rate 6%, interest payable at the
 end of the term or on demand, past due and immediately payable       150,000
                                                                  -----------
                                                                  $   255,000
                                                                  ===========

Interest expense on these notes for the six months ended June 30, 2005 and
2004 was $8,316 and $6,640, respectively.


                                15

<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



NOTE 11 - CONVERTIBLE DEBT

On June 25, 2004, the Company entered into a Securities Purchase Agreement
with Laurus Master Fund, Ltd. ("Purchaser" or "Laurus") in connection with the
private placement of a convertible term note issued by the Company in the
principal amount of $3,000,000, due June 25, 2007.   The note is convertible
into shares of the Company's common stock at conversion prices of $0.42 for
the first $450,000 of aggregate principal converted and $0.66 thereafter and
bears an interest rate at prime plus 2%.  Additionally, the note provisions
include cashless warrants that provide for the purchase of up to 705,000
shares of common stock at exercise prices ranging from $0.73 to $0.79, until
June 25, 2011.  $950,000 of the principal amount of the note is held in a
restricted account by the Company but under the sole dominion and control of
the Purchaser as security for the Company's obligations under the Securities
Purchase Agreement.  Funds will be released to the Company from this account
upon conversion of principal once the company has reduced the unrestricted
principal amount of the note ($1,836,540) to zero or upon the satisfaction of
other specified conditions.  The note is secured by all the Company's assets.

On January 28, 2005, the Purchaser made available $300,000 of the principal
amount held in the restricted account and the note was amended.  The Company
recorded a BCF associated with the amendment of $1,948.  Amortization of the
BCF associated with the amendment for the six months ended June 30, 2005 and
2004 was $545 and zero, respectively.

The Company incurred $311,000 as a loan origination cost for the debt.  The
Company is amortizing the cost over the period of the loan.  Loan origination
cost amortization for the six months ended June 30, 2005 and 2004 was $51,834
and $1,420, respectively.  The Company recorded a BCF associated with the
conversion feature of the debt of $431,818 a BCF associated with the warrants
for $430,050.  These costs are shown as a reduction of the long-term portion
of the convertible debt in the accompanying consolidated balance sheet and are
being amortized over term of the note.  Amortization expense related to the
beneficial conversion feature amounted $103,530 and $2,812 for the six months
ended June 30, 2005 and 2004, respectively.  In February 2005, 300,113 shares
were issued as payment of principal and interest of $106,061 and $19,987,
respectively.

The balance of the convertible debt (net of beneficial conversion feature of
$654,802) as of June 30, 2005 was $769,692 for the current portion and
$1,066,848 for the long-term portion.


NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company's headquarters consists of approximately 2,900 square feet of
office space and is leased until August 31, 2006.  The Company also leases six
other office facilities with one lease expiring August 31, 2005, one lease
expiring October 31, 2005 and the other four under month-to-month leases.
Rent expense for the six months ended June 30, 2005 and 2004 was $62,301 and
$54,501, respectively.  Minimum future rental payments under the leases are as
follows:

       Years Ending:

       December 31, 2005      $  40,625
       December 31, 2006      $  49,500


                                16

<PAGE>



           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004

Indemnities and Guarantees
--------------------------

During the normal course of business, the Company has made certain indemnities
and guarantees under which it may be required to make payments in relation to
certain transactions.  These indemnities include certain agreements with the
Company's officers under which the Company may be required to indemnify such
persons for liabilities arising out of their employment relationship, lease
agreements where the Company may be required to indemnify landlords and the
Laurus agreement where the Company may be required to indemnify Laurus.  The
duration of these indemnities and guarantees varies, and in certain cases, is
indefinite.  The majority of these indemnities and guarantees do not provide
for any limitation of the maximum potential future payments the Company would
be obligated to make.  Historically, the Company has not been obligated to
make significant payments for these obligations and no liability has been
recorded for these indemnities and guarantees in the accompanying consolidated
balance sheet.


NOTE 13 - STOCKHOLDERS' DEFICIT

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

During the six months ended June 30, 2005, the Company issued 300,113 shares
of its common stock as payment of principal and interest valued at $106,061
and $ 19,987, respectively.  In addition, the Company issued 20,000 shares
from the exercise of stock options totaling $3,000.

During the six months ended June 30, 2004, the Company issued 370,370 shares
of common stock for management fees amounting to $100,000.  The shares were
issued as part of the management agreement between the Company and IPN
management for services to be provided in 2004, as specified in the agreement.
$50,000 was expensed during the six months ended June 30, 2004.

The Company entered into a consulting agreement on February 27, 2004 under
which it will issue 180,000 shares as consideration for the consulting
services to be provided under the agreement. The Company had issued 131,424
shares as of June 30, 2004 and recorded the cost of the services provided
based on the 20-day average of the Company's stock price at the date of
agreement amounting to $160,200.  The cost is being amortized over the one
year term of the agreement.  The Company expensed $26,700 and $53,400 for the
six months ended June 30, 2005 and 2004, respectively.

Additionally, the Company issued 30,000 shares of common stock for consulting
services amounting $22,200 and recorded $4,275 for 7,500 shares of common
stock to be issued for consulting services during the six months ended June
30, 2004.

As of June 30, 2005, the balance in Shares to be Issued consisted of $50,000
related to the purchase of certain assets of ISS (see Note 16), officer
compensation of $107,333 and consulting services of $67,957.  All of these
Shares to be Issued, totaling 576,100 shares, were issued in July, 2005.

Treasury stock
--------------

The Company sold its treasury stock during the six months ended June 30, 2004
for $150,904.

                                17

<PAGE>


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004


Stock Options
-------------

The Company has three stock option plans:  The 2003 Stock Compensation Plan
(the "2003 Plan"), the 2004 Non-Qualified Stock and Stock Option Plan (the
"2004 Plan") and the 2005 Non-Qualified Stock and Stock Option Plan (the "2005
Plan").Under the 2003 Plan, ten million shares of the Company's stock are
reserved for grant to directors, key employees and certain independent
contractors.  The option prices are at least equal to the fair market value of
the stock on the date of grant and carry terms of ten years or less.  The 2003
Plan is administered by the Board of Directors and all grants are determined
at the sole discretion of the Board.

Under the 2004 Plan, two million shares of the Company's common stock are
reserved for grant to officers, directors, employees, consultants and others.
Under the 2005 Plan, five million shares of the Company's common stock are
reserved for grant to officers, directors, employees, consultants and others.
Both the 2004 and 2005 Plans are administered by the Compensation Committee of
the Board of Directors.  All options must be granted within ten years of the
adoption of the plan.  Additionally, any options granted to a shareholder who
owns at least a ten percent interest in the Company have a maximum term of ten
years.  All expenses of administering the 2004 and 2005 Plans are borne by the
Company.

Following is a summary of the stock option activity:

            Outstanding at December 31, 2002                   600,000
                Granted                                      1,150,000
                Forfeited                                            -
                Exercised                                            -
                                                            -----------
            Outstanding at December 31, 2003                 1,750,000

                Granted                                      2,905,000
                Forfeited
                Exercised                                     (987,500)
                                                            -----------
            Outstanding at December 31, 2004                 3,667,500

                Granted                                      5,910,000
                Forfeited                                   (1,500,000)
                Exercised                                      (20,000)
                                                            -----------
            Outstanding at June 30, 2005                     8,057,500
                                                            ===========

Following is a summary of the status of options outstanding at June 30, 2005:

                         Outstanding Options        Exercisable Options
                  -------------------------------  --------------------------
                            Weighted
                            Average      Weighted                  Weighted
                           Remaining     Average                   Average
                           Contractual   Exercise                  Exercise
Exercise Price    Number     Life        Price       Number        Price
--------------   --------- -----------  ----------- ------------  -----------
$ 0.06-$0.24       762,500     4.91       $  0.13    1,387,500     $  0.13
$ 0.23-$0.76     7,295,000     5.00       $  0.35    2,651,250     $  0.35


                                18

<PAGE>


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



No compensation cost was recognized for the six months ended June 30, 2005 and
2004 as the options granted during the periods were at or above fair market
value of the stock on the date of grant.

The assumptions used in calculating the fair value of options granted using
the Black-Scholes option-pricing model are as follows:

                                                     2005          2004
                                                     ----          -----
Risk-free interest rate                               4.0%          4.73%
Expected life of the options                          5.00 years    5.00 years
Expected volatility                                   282%          100%
Expected dividend yield                                 0             0

Had the Company determined employee stock based compensation cost based on a
fair value model at the grant date for its stock options under SFAS 123, the
Company's net earnings (loss) per share would have been adjusted to the pro
forma amounts for the six months ended June 30, 2005 and 2004 as follows ($ in
thousands, except per share amounts):

                                                       For the six months
                                                          Ended June 30,
                                                         2005        2004
                                                  ------------- -----------

           Net income (loss) - as reported        $       (871) $      959
           Stock-Based employee compensation
             expense included in reported net
             income (loss), net of tax                       -           -
           Total stock-based employee
             compensation expense determined
             under fair-value-based method for
             all rewards, net of tax                      (309)       (133)
                                                    ----------- -----------
           Pro forma net income (loss)              $   (1,180) $      826
                                                    =========== ===========
           Income (loss) per share:
           Basic, as reported                       $   (0.022) $    0.026
           Diluted, as reported                     $   (0.022) $    0.023
           Basic, pro forma                         $   (0.030) $    0.022
           Diluted, pro forma                       $   (0.030) $    0.020

                                19

<PAGE>



           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



                                                       For the three months
                                                           Ended June 30,
                                                            2005    2004
                                                    ------------ -------------
           Net income (loss) - as reported          $      (481) $        479
           Stock-Based employee compensation
             expense included in reported net
             income (loss), net of tax                        -             -
           Total stock-based employee
             compensation expense determined
             under fair-value-based method for
             all rewards, net of tax                        (41)          (39)
                                                    ------------ -------------
           Pro forma net income (loss)              $      (522) $        440
                                                    ============ =============
           Income (loss) per share:
           Basic, as reported                       $    (0.012) $      0.013
           Diluted, as reported                     $    (0.012) $      0.011
           Basic, pro forma                         $    (0.013) $      0.012
           Diluted, pro forma                       $    (0.013) $      0.010


NOTE 14 - SEGMENT REPORTING

The Company has two reportable segments consisting of consulting services and
communications.  The Company evaluates performance based on sales, gross
profit margins and operating profit before income taxes.  The following is
information for the Company's reportable segments for the three and six months
June 30, 2005 and 2004 (in thousands):

Three months ended June 30, 2005:

                           Consulting  Communications
                             Segment      Segment     Unallocated    Total
                          ------------ -------------- ----------- ------------
Net revenue               $     3,313  $       1,171  $        -  $     4,484

Gross profit                      344            182           -          526

Depreciation and
  amortization                    (38)            (6)          -          (44)

Interest expense                 (110)            (4)          -         (114)

Loss from continuing
 operations before
 income taxes                    (458)           (23)          -         (481)

Identifiable assets             3,720            475           -        4,195

Capital expenditures               12              -           -           12





                                20

<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



Three months ended June 30, 2004:

                           Consulting  Communications
                             Segment      Segment     Unallocated    Total
                          ------------- ------------- ----------- ------------
Net revenue               $      3,005  $      1,002  $        -  $     4,007

Gross profit                       876          355            -        1,231

Depreciation and
 amortization                      (13)          (6)           -          (19)

Interest expense                   (11)          (2)           -          (13)

Income (loss) from
 continuing operations
 before income taxes               500           10          (30)         480

Identifiable assets              4,814          879            -        5,693

Capital expenditures                 3           11            -           14



Six months ended June 30, 2005:

                          Consulting  Communications
                            Segment      Segment     Unallocated    Total
                         ------------- ------------- ----------- ------------
Net revenue              $      6,598  $      1,254  $       -   $     7,852

Gross profit                      747           214          -           961

Depreciation and
  amortization                   (107)          (12)         -          (119)

Interest expense                 (255)           (6)         -          (261)

Loss from continuing
 operations before
 income taxes                    (765)          (102)        -          (867)

Identifiable assets             3,720            475         -         4,195

Capital expenditures               60              -         -            60



                                21

<PAGE>

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



Six months ended June 30, 2004:


                            Consulting  Communications
                              Segment      Segment     Unallocated    Total
                           ------------- ------------- ----------- -----------
Net revenue                $      6,197  $      1,811  $        -  $    8,008

Gross profit                      1,397           831           -       2,228

Depreciation and
  amortization                      (15)          (12)         (8)        (35)

Interest expense                    (19)           (5)          -         (24)

Income (loss) from
 continuing operations
 before income taxes                816           182         (39)        959

Identifiable assets               4,814           879           -       5,693

Capital expenditures                  3            11           -          14


NOTE 15 - RELATED PARTY TRANSACTIONS

The Company issued 370,370 shares of common stock for management fees
amounting $100,000.  These shares have been issued to the management of IPN as
part of the management agreement between the Company and IPN for services that
were provided in 2004.  Zero and $50,000 has been expensed for the six months
ended June 30, 2005 and 2004, respectively.  The Company also entered into a
service agreement with IPN principals in which the Company granted 1,500,000
options to IPN management to be vested over a period of two years.

Effective January 19, 2005, the Company entered into employment agreements
with its two principal shareholders as officers of the Company.  Under the
terms of the agreements, the principals will earn an annual salary of $140,000
in 2005 and $160,000 in 2006, payable in a combination of cash and common
stock over the term of the agreements.  Further, they shall receive stock
option grants of no less than 100,000 shares per quarter vesting over two
years with an exercise price equal to the average closing price for the
Company's common stock for the five trading days immediately preceding and
following the grant date.

On November 5, 2004, the Company acquired the remaining 49% of the issued and
outstanding shares of capital stock of IPN Communications not already owned by
the Company.  In exchange for the remaining 49% interest, the Company issued
IPN shareholders three hundred thousand ($300,000) dollars in restricted
common stock.  On April 25, 2005, these shares were cancelled and have not
been included in computation of weighted average shares outstanding or in the
statement of stockholders' deficit in the accompanying consolidated financial
statements.

NOTE 16 - ACQUISITION OF ASSETS

On March 1, 2005, the Company completed the purchase of certain assets of I.S.
Solutions, LLC ("ISS").  The Company agreed to pay $50,000 in cash and $50,000
in restricted common stock of the Company for all of ISS's contracts with
existing customers, customer lists and certain equipment used in ISS's
information technology

                                22

<PAGE>



           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
    FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004



business.  Moreover, under the agreement, the Company may pay an earn out up
to $400,000, payable in the Company's restricted common stock if certain
levels of revenues and net income before taxes are achieved during any
consecutive 12 months following the closing.  The earn out expires three years
following the closing.  The acquired assets are held in DNM.  DNM is an IT
consultancy and solutions provider for government, public safety and homeland
security agencies.

The purchase price was determined in arms-length negotiations between the
parties.  A summary of the assets acquired and consideration is as follows:


                                             Allocated Amount

     Equipment and Customer Lists               $  100,000
                                                -----------
                                                $  100,000
                                                -----------

         Consideration paid                       Amount

     117,664 shares of restricted common stock  $   50,000
     Cash                                           50,000
                                                -----------
                                                $  100,000
                                                -----------


                                23

<PAGE>

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


The following discussion and analysis should be read in conjunction with our
consolidated financial statements and notes to the consolidated financial
statements included elsewhere in this report.  This report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, or the Securities Act, and Section 21E of the
Securities Exchange Act of 1934, as amended, or the Exchange Act.  We intend
that the forward-looking statements be subject to the safe harbors created by
those sections.

The forward-looking statements generally include management's plans and
objectives for future operations, including plans, objectives and expectations
relating to our future economic performance, business prospects, revenues,
working capital, liquidity, ability to obtain financing, generation of income
and actions of secured parties not to foreclose on our assets.  The
forward-looking statements may also relate to our current beliefs regarding
revenues we might earn if we are successful in implementing our business
strategies.  The forward-looking statements generally can be identified by the
use of the words "believe," "intend," "plan," "expect," "forecast," "project,"
"may," "should," "could," "seek," "pro forma," "estimates," "continues,"
"anticipate" and similar words.  The forward-looking statements and associated
risks may include, relate to, or be qualified by other important factors,
including, without limitation:

     .   anticipated trends in our financial condition and results of
         operations (including expected changes in our gross margin and
         general, administrative and selling expenses);

     .   our ability to finance our working capital and other cash
         requirements;

     .   our business strategy for expanding our presence in the information
         security products and services markets; and

     .   our ability to distinguish ourselves from our current and future
         competitors.

We do not undertake to update, revise or correct any forward-looking
statements.  The forward-looking statements are based largely on our current
expectations and are subject to a number of risks and uncertainties.  Actual
results could differ materially from these forward-looking statements.
Important factors to consider in evaluating forward-looking statements
include:

     .   changes in external competitive market factors or in our internal
         budgeting process that might impact trends in our results of
         operations;

     .   changes in our business strategy or an inability to execute our
         strategy due to unanticipated changes in the markets; and

     .   various other factors that may prevent us from competing
         successfully in the marketplace.

The information contained in this report is not a complete description of our
business or the risks associated with our common stock.  Before making
investment decisions about our common stock, you should carefully review and
consider this entire report and the other materials filed with the Securities
and Exchange Commission that discuss our business in greater detail and the
risks, uncertainties and other factors that affect our business results of
operations and/or financial condition.



                                24

<PAGE>

RISKS THAT ARE UNIQUE OUR BUSINESS

We have purposefully omitted risk factors the average investor would consider
too broad and/or generic, i.e. those risks that describe circumstances or
factual situations that are equally applicable to other similarly situated
businesses.  If any of the following risks occur, our business, financial
condition and results of operations will suffer. Any of these risk factors can
harm our business and future results of operations.
We provide Information Technology outsourcing and consulting services to a
wide range of U.S. and international governmental agencies and commercial
enterprises.  However, we depend on a few major customers for the majority of
our revenues.  This creates a significant financial risk to the Company
because if a major customer were to terminate or materially reduce, for any
reason, its business relationship with us, we would suffer an immediate and
substantial decline in revenue.

Some of our government agency customers are subject to unique political and
budgetary constraints.  This constraint imposed upon our customers makes it
difficult to predict the timing and amount of revenue to expect from these
customers in future periods.  In addition, our government agency customers
have special contracting requirements that affect our ability to obtain new
government customers.

OUR STOCK PRICE IS VOLATILE

The price of our shares and the trading volume of our shares have been
volatile historically and may continue to be volatile.  Volatility may be
caused by a number of factors including but not limited to:

    .  Actual or anticipated quarterly variations in operating results;

    .  Rumors about our performance or merger and acquisition activity;

    .  Changes in expectations of future financial performance or changes in
       estimates of securities analysts;

    .  Governmental regulatory action;

    .  Client relationship developments;

    .  Purchases or sales of Company stock;

    .  Changes occurring in the markets in general; and

    .  Other factors, many of which are beyond our control.

ABILITY OF DEREK NGUYEN AND KHANH NGUYEN TO EXERCISE CONTROL

Two of our directors and principal shareholders beneficially owned
approximately 36% of the outstanding shares of our common stock at June 30,
2005, which makes it possible for them to have significant influence over the
outcome of all matters submitted to our shareholders for approval, including
the election of our directors and other corporate actions, which influence may
be alleged to conflict with our interests and the interests of our other
shareholders.

INTERNAL CONTROL ASSESSMENT

We have identified areas of weaknesses in our internal controls for our wholly
owned subsidiary, IPN Communications, Inc., which existed during the six
months ended June 30, 2005.  Although we have taken steps to remedy these
weaknesses, our ability to implement and maintain a full system of internal
controls and proper corporate governance will depend upon our ability to
attract both capital and human resources.  If we are unsuccessful, we risk
being in violation of our public company reporting obligations in the future,
which could give rise to potential regulatory and/or shareholder actions that
could have a material adverse effect upon our business and financial condition
and the market value of our stock.


                                25

<PAGE>

Based on our current size, we lack of a systematic and formal system of checks
and balances in our corporate governance; we have a very small finance and
accounting staff; and we do not have the optimum segregation of accounting and
finance duties.  We believe that our current system of internal controls, in
light of the changes we have made recently, are generally adequate.

We plan to engage in future acquisitions, which may be expensive and
time-consuming and from which we may not realize anticipated benefits.  We may
acquire additional businesses, technologies, products and services if we
determine that these additional businesses, technologies, products and
services are likely to serve our strategic goals. We currently have no
commitments or agreements with respect to any acquisitions.  The specific
risks we may encounter in these types of transactions include the following:

     .  Potentially dilutive issuances of our securities, the incurrence of
        debt and contingent liabilities and amortization expenses related to
        intangible assets, which could adversely affect our results of
        operations and financial condition;

     .  Difficulty in predicting and responding to issues related to product
        transition such as development, distribution and customer support;

     .  The possible adverse impact of such acquisitions on existing
        relationships with third-party partners and suppliers of technologies
        and services;

     .  The possibility that staff or customers of the acquired company might
        not accept the new ownership and may transition to different
        technologies or attempt to renegotiate contract terms or
        relationships;

     .  The possibility that the due diligence process in any such
        acquisition may not completely identify material issues associated
        with product quality, intellectual property issues, key personnel
        issues or legal and financial contingencies; and

     .  Difficulty in integrating acquired operations due to geographical
        distance and language and cultural differences.

A failure to successfully integrate acquired businesses or technology for any
of these reasons could have a material adverse effect on our results of
operations.

THE COMPANY WILL ISSUE ADDITIONAL SECURITIES, INCLUDING COMMON STOCK

The sale of our common stock by Laurus Master Fund may cause dilution and
could cause the price of our common stock to decline.  We intend to raise
additional funds through the issuance of equity, equity-related or convertible
debt securities.  The issuance of additional common stock dilutes existing
stockholdings.  In connection with our transaction with Laurus, as of August
10, 2005, we may issue up to 3,692,959 shares of common stock throughout the
three year term, and accordingly, our stockholders may experience dilution.
Further procurement of additional financing through the issuance of equity,
equity-related or convertible debt securities or preferred stock may further
dilute existing stock.  Further, the perceived risk of dilution may cause the
selling stockholder, as well as other holders, to sell their shares, which
would contribute to downward movement in the price of the shares.

THE COMPANY PLEDGED ALL ITS ASSETS TO SECURE A CONVERTIBLE NOTE TO LAURUS

On June 25, 2004, we issued a $3,000,000 convertible note to Laurus.  Events
of default under the note include:

                                26

<PAGE>



     .  failure to pay interest and principal payments when due;
     .  a breach by us of any material covenant or term or condition of the
        note or any agreement made in connection therewith;
     .  a breach by us of any material representation or warranty made in the
        note or in any agreement made in connection therewith;
     .  an assignment for the benefit of our creditors or a receiver
        or trustee is appointed for us;
     .  any form of bankruptcy or insolvency proceeding is instituted by or
        against us;
     .  any money judgment entered or filed against us for more than $50,000;
     .  failure to timely deliver shares of common stock when due upon
        conversions of the note; and
     .  trading of our common stock is suspended for 5 consecutive days or 5
        days during any 10 consecutive days from a principal market.

If we default on the note and the holder demands all payments due and payable,
we will be required to pay 130% of the outstanding principal amount of each
note and any interest accrued thereon.  The cash required to pay such amounts
will most likely come out of working capital.  Since we rely on our working
capital for our day-to-day operations, such a default on the note could
materially adversely effect our business, operating results or financial
condition to such extent that we are forced to restructure, file for
bankruptcy, sell assets or cease operations, any of which could put your
investment dollars at significant risk.  Further, our obligations under the
note are secured by all of our and our subsidiaries' assets.  Failure to
fulfill our obligations under the note and related agreements could lead to
loss of these assets, which would be detrimental to our operations put the
Company out of business.

COMPANY OVERVIEW

DataLogic International, Inc., ("DataLogic" or the "Company") through its
wholly owned subsidiaries provides Information Technology ("IT") outsourcing
and consulting services to a wide range of U.S. and international governmental
agencies and commercial enterprises.   The Company's services capitalize on
the ongoing trend toward strategic IT outsourcing and address growing markets
such as public safety and homeland security.  The Company also leverages its
technology expertise, customer relationships and supplier channels to develop
solutions addressing rapidly growing communications markets, including VoIP
("Voice over Internet Protocol") communications and GPS vehicle tracking.

The Company's wholly owned subsidiaries include DataLogic Consulting, Inc.
("DCI"), IPN Communications, Inc. ("IPN") and DataLogic New Mexico, Inc.
("DNM").  DCI provides complete IT consulting services that include, but are
not limited to, project management and systems analysis, design,
implementation, testing and maintenance.  The services can be provided at the
clients' locations or off-site at the Company's U.S. or affiliated offshore
facilities.  DCI also provides short and long-term staffing solutions to IT
clients, healthcare providers and other businesses.

IPN Communications, Inc., a California corporation, provides VoIP telephony
products and services worldwide.  IPN derives its VoIP revenues from phone
sets, communication servers, software and hardware licenses and residual
global long distance airtime sales.  The Company increased its ownership of
IPN from 51% to 100% on November 5, 2004.

On January 13, 2004, the Company acquired the Machine-to-Machine ("M2M")
technology from two technologists and entered into the mobile asset tracking
business.  Panther Trak(TM) is the Company's first product in the M2M mobile
asset tracking vertical market.  This GPS based mobile asset tracking device
was designed to focus largely on theft, recovery and tracking services.  The
Company derives its M2M revenues from the sale of mobile tracking units,
software and hardware licenses and residual income from monthly user
subscription fees.

DNM was formed in the first quarter of 2005 as a result of the acquisition of
the assets IS Solutions, LLC.  The company is a technical solution provider
for public safety and homeland security agencies.

                                27

<PAGE>

The Company now consists of two core businesses: Consulting Services and
Communications.

Company Strategy

Our strategy is the maintenance and growth of our core businesses. Among the
key elements central to this strategy are:

      o   Continued development and enhancement of select products, services
          and solutions for target markets;

      o   Continued investments in the Company's infrastructure including but
          not limited to product development, sales, implementation and
          support;

      o   Continued efforts to make infrastructure investments within an
          overall context of maintaining reasonable expense discipline; and

      o   Addition of new customers through maintaining and expanding sales,
          marketing and service and product development activities.

As a whole, we are pursuing an aggressive growth strategy with a combination
of organic and acquired growth in all our business segments.

Organically, our plans include expanding service offerings to existing
clients, revisiting past client relationships to rekindle revenue streams and
generally capturing market share in the growth industries the Company
services.  Our strategy for expanding our market share involves a strong focus
on quality customer service and competitive rates. We plan to achieve this by
leveraging our efficient operation and utilizing the economies of scale to
provide quality and economic products, services and solutions to our clients.

We are also pursuing a growth strategy through acquisitions that can provide
1.) new service offerings that can be marketed to existing clients, 2.) new
clients and contracts and 3.) products and services that support our
communications products and provide recurring, predictable service and
maintenance revenue streams.

For our acquisition strategy, we are targeting companies that have an
established market presence in their respective fields, along with a loyal
customer base that can be used to cross-sell other products and services.  The
success of our acquisition strategy depends not only on our ability to
identify and acquire businesses on a cost-effective basis, but also upon our
ability to integrate the acquired operations into our organization
effectively, to retain clients of the acquired businesses, to retain the
personnel of the acquired companies and to obtain additional financing.

Each of our business units has unique opportunities and strategies as follows:


Communications

Mobile Asset Tracking.  We provide complete solutions for real-time vehicle
and asset management services.  Our competitively priced Panther Trak(TM)
device harnesses wireless connectivity and the Global Positioning System (GPS)
to allow a complete range of customer-defined options in keeping track of
valuable vehicular assets.

Panther Trak allows complete control from a user's cell phone, PC, or
landline, including customized functions, such as notification when the
vehicle or asset is moved, disabling the vehicle or even unlocking the vehicle
doors with a cell phone from anywhere in the world.  In the event of a
kidnapping, a hidden microphone can be activated to listen to what is
happening in the vehicle.

Secured Mobile Communications.  Through our recent acquisition of the assets
of IS Solutions, LLC (New Mexico), we now offer a next-generation encryption
and two-factor authentication product, EncrypTAC(TM). EncrypTAC allows law
enforcement agents using mobile communications to efficiently access FBI

                                28

<PAGE>


databases without compromising security.  EncrypTAC is already approved by New
Mexico-based police departments and is ready for nationwide launch.
While these are the key elements of our current strategy, there can be no
guarantees that our strategy will not change, or that we will succeed in
achieving these goals individually or collectively.

VoIP.  We provide low-cost, high-quality VoIP solutions that are marketed to
businesses and consumers worldwide.  We offer complete solutions including:
Turn key communication servers with accounting and billing systems, other
required software and hardware licenses, phone sets, private labeling,
hosting, co-locating, and residual international long distance airtime.

We target underserved telecommunications markets and are currently working
with various telecommunications companies, ISP, system integrators and
distributors in Asia, the Middle East, South America, Australia, Africa and
Europe to deploy our solutions to the respective local markets.

Consulting Services

We plan to capitalize on the growth trends in IT outsourcing by large
corporations and public entities that look to economize their operations, move
fixed costs to variable costs, and focus on core competencies.  IT outsourcing
is now a prevalent practice due to the proliferation and increased
sophistication of technology in the workplace.  In addition, thousands of IT
service providers have entered the market, which has created acquisition
opportunities for the Company.

The February 24, 2005 acquisition of the assets of New Mexico-based IS
Solutions, LLC (ISS) brings the Company increased ability to provide new IT
services for public safety and homeland security customers.

Clients

Our client base for consulting services is predominantly located in North
America. It includes small to large commercial businesses as well as all
levels of governmental agencies. Among the industries that the Company serves
includes Communications, Energy, Financial, Government, Education, Public
Safety, Homeland Security, Healthcare, Manufacturing, Retail and
Transportation.

Our current client base for VoIP products and services is predominantly
located Asia. The Company also has clients in the North America, South America
and Eastern Europe. The majority of VoIP clients are distributors, resellers,
system integrators, telecommunication companies, ISP's, call center operators,
and long distance wholesalers. We also sell our VoIP equipment directly to
general consumers.

Our current client base for the mobile asset tracking products is
predominantly located in North America. The Company also has clients in South
America and Europe. The majority of the GPS clients are distributors,
resellers, or system integrators.

Our client base for the Secured Mobile Communications product is primarily
public safety and homeland security agencies.

Sales and Marketing

We use a direct sales force, online marketing, strategic partnerships and
distributor programs to market our products and services. The direct sales
force consists of in-house business development personnel and account managers
who market the products and services to senior business executives,
information officers, information systems managers and others who make
purchasing decisions. Our strategic partnerships provide us with additional
potential businesses via a split-fee, revenue sharing or commission-based
arrangement.


                                29

<PAGE>


Our direct sales force typically responds to proposals and makes presentations
to potential clients.  Our sales employees identify prospective clients
through a variety of means, including sourcing of proposals, referrals from
existing clients, industry consultants, and trade shows and seminars.  Our
sales cycle can vary significantly and typically ranges from three to twelve
months from initial contact to contract execution.

We engage in advertising and other traditional marketing techniques such as
client referrals, trade shows, and personal sales calls to targeted clients.
Relationships with our larger clients and key governmental personnel are
maintained and fostered by at least one of our executive officers. We derive a
large part of our business from repeat sales to our clients and look to
continually expand product and service offerings with existing clients.

The Company's principal products and services do not require any special
government approval that is unique to the Company.  The Company is subject to
the same array of federal, state and local laws and regulations that affect
other business in the information technology and service industry.

During the six months ended June 30, 2005 and 2004, the Company spent a
limited amount on research and development activities.

Intellectual Property

We have registered our key Internet URLs, www.dlgi.com,
www.datalogicconsulting.com, www.ipncom.com, www.iphonecenter.net, and review
these registrations on a regular basis to ensure that they remain current and
in good standing.  We currently do not hold any patents but plan to apply for
some in the near future to protect our Communications technologies.

While the Company has applied for registration of trademarks, service marks
and registered domain names in an effort to protect them, it cannot be sure of
the nature or extent of the protection afforded, since trademark registration
does not assure any enforceable rights under many circumstances and there
exists significant uncertainty surrounding legal protections of domain names.

Costs and Effects of Compliance with Environmental Laws

The Company has not incurred any separately identifiable costs to comply with
environmental laws.

Competition

The markets for the Company's products and services are intensely competitive.
The industry is highly fragmented and includes numerous competitors, none of
which we believe dominates these markets. The markets the Company services are
subject to rapid changes in technology, and we expect that competition in
these market segments will increase as new competitors enter the market. We
believe our principal competitive advantages are the features and capabilities
of our products and services, our high level of customer support, and our
extensive experience in the industry.

Employees

As of June 30, 2005, the Company had 404 employees. There were 187 part-time
and 218 full-time employees including 7 employees consisting of executive,
supervisory, administrative, sales and clerical personnel. The Company
considers its relations with its employees to be good. The Company has no
collective bargaining agreements with any of its employees. The Company has
employment agreements with senior management and with each of its billable
employees.


                                30


<PAGE>



Results of Operations

Comparison of Three Months Ended June 30, 2005 to Three Months Ended June 30,
2004

Net Revenue.  The net revenues for the quarter ended June 30, 2005 increased
$477,022 or 11.9% to $4,484,178 as compared to net revenues of $4,007,156 for
the same period in the prior year.  The year-over-year increase in revenues
was primarily due to increases in communications products and services for
existing and new customer accounts.

Gross Profit. The gross profit for the quarter ended June 30, 2005 decreased
$705,112 or 57.3% to $526,091 as compared to the gross profit of $1,231,203
for the same period in the prior year.  The decrease was primarily due to a
decrease in higher margin VoIP license revenue attributable to one customer in
the quarter ended June 30, 2004.

Operating Expenses.  The operating expenses for the quarter ended June 30,
2005 were $696,917 as compared to the operating expenses of $696,145 for the
same period in the prior year.

Non-Operating Expenses.  Interest expense for the quarter ended June 30, 2005
was $113,942 as compared to $13,286 for the same period in the prior year.
The increase in interest expense was primarily due to the interest expense
associated with the convertible term note issued by the Company to Laurus.
Other than temporary write-down of marketable securities available for sale
was $196,000 for the quarter ended June 30, 2005 as compared to $ 0 for the
same period in the prior year.  The increase in other than temporary
write-down of marketable securities for sale was attributable to the Company's
determination that the decline in the market value of securities available for
sale is "other-than-temporary."  Accordingly, the cost bases of the securities
were adjusted to their market value as of June 30, 2005.  Factoring expenses
for the quarter ended June 30, 2005 were $0 as compared to $32,694 for the
same period in the prior year.  The decrease in factoring expenses was
attributable to termination of the Company's factoring facility in June, 2004.

Net Loss.  As a result of the above, the net loss for the quarter ended June
30, 2005 was $480,768 as compared to the net income of $479,808 for the same
period in the prior year.  The loss was primarily due to the lower gross
profit margins related to a decrease in VoIP license revenue attributable to
one customer in the quarter ended June 30, 2004, and the other than temporary
write-down of marketable securities available for sale in the quarter ended
June 30, 2005.  The basic and diluted loss per share was $0.012 during the
three months ended June 30, 2005 as compared to an income of $0.011 per share
during the same period last year.


Comparison of Six Months Ended June 30, 2005 to Six Months Ended June 30, 2004

Net Revenue.  The net revenues for the six months ended June 30, 2005
decreased $156,297 or 2.0% to $7,852,446 as compared to net revenues of
$8,008,743 for the same period in the prior year.  The decrease was primarily
due to a decrease in VoIP license revenue and VoIP equipment sales
attributable to two customers in the six months ended June 30, 2004.

Gross Profit. The gross profit for the six months ended June 30, 2005
decreased $1,267,607 or 56.9% to $960,859 as compared to the gross profit of
$2,228,466 for the same period in the prior year.  The decrease was primarily
due to a decrease in higher margin VoIP license revenue and VoIP equipment
sales attributable to two customers in the six months ended June 30, 2004.

Operating Expenses.  The operating expenses for the six months ended June 30,
2005 were $1,371,477 as compared to the operating expenses of $968,901 for the
same period in the prior year.  The increase is attributable to financing
fees, general R & D, product development costs, and increase in operational,
administrative and marketing costs.


                                31

<PAGE>



Non-Operating Expenses.  Interest expense for the six months ended June 30,
2005 was $260,855 as compared to $24,249 for the same period in the prior
year.    The increase in interest expense was primarily due to the interest
expense associated with the convertible term note issued by the Company to
Laurus.  Other than temporary write-down of marketable securities available
for sale was $196,000 for the six months ended June 30, 2005 as compared to $
0 for the same period in the prior year.  The increase in other than temporary
write-down of marketable securities for sale was attributable to the Company's
determination that the decline in the market value of securities available for
sale is "other-than-temporary."  Accordingly, the cost bases of the securities
were adjusted to their market value as of June 30, 2005.  Factoring expenses
for the six months ended June 30, 2005 were $0 as compared to $99,926 for the
same period in the prior year.  The decrease in factoring expenses was
attributable to termination of the Company's factoring facility in June, 2004.

Net Loss.  As a result of the above, the net loss for the six months ended
June 30, 2005 was $870,674 as compared to the net income of $959,340 for the
same period in the prior year.  The loss was primarily due to a decrease in
VoIP license revenue and VoIP equipment sales attributable to two customers in
the six months ended June 30, 2004, and the other than temporary write-down of
marketable securities available for sale in the six months ended June 30,
2005.  The basic and diluted loss per share was $0.0022 during the six months
ended June 30, 2005 as compared to the basic income per share of $0.026 per
share and the diluted income per share of $0.023 per share during the same
period last year.


Liquidity and Capital Resources

On June 29, 2004, we issued $3 million of convertible secured debt (the "$3
Million Financing"), including the issuance of warrants to purchase a total of
705,000 shares of our common stock. The proceeds from the $3 Million Financing
improved our working capital position.  As of June 30, 2005 we have $424,625
in cash and $972,095 in restricted cash. Given our June 30, 2005 cash balance
and the projected operating cash requirements, we anticipate that existing
capital resources will be adequate to satisfy our cash flow requirements
through December 31, 2005. Our cash flow estimates are based upon achieving
certain levels of sales, gross profit and operating expenses.

Our liquidity primarily consists of $424,625 in cash, restricted cash of
$972,095 and $1,645,958 in accounts receivable.  The Company's current
liabilities consist of $3,553,596 in accounts payable, accrued expenses, and
short-term debts.

The Company's consolidated financial statements are prepared using the accrual
method of accounting in accordance with GAAP, and have been prepared on a
going concern basis, which contemplates the realization of assets and the
settlement of liabilities in the normal course of business.  The Company has
an accumulated deficit of $4,199,652 at June 30, 2005.  Management has taken
various steps to revise its operating and financial requirements, which it
believes will be sufficient to provide the Company with the ability to
continue its operations for the next twelve months.  Management has also
devoted considerable effort during the six months ended June 30, 2005 towards
management of liabilities and improvement of the Company's operations.
Further, the Company has secured a material contract to provide its
PantherTrak product.  This contract can provide the Company with an increased
level of revenues that should support the Company's current overhead expenses
and provide for increasing cash flows to allow the Company to continue its
operations through the next twelve months.

In view of the matters described above, recoverability of a major portion of
the recorded asset amounts shown in the accompanying consolidated balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations.  The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded asset amounts and classification of liabilities
that might be necessary should the Company be unable to continue as a going
concern.


                                32

<PAGE>

We may elect to raise additional capital in the future, from time to time,
through equity or debt financings in order to capitalize on business
opportunities and market conditions and to insure the continued marketing of
current product and service offerings together with development of new
technology, products and services. There can be no assurance that we can raise
additional financing with favorable terms.

We believe that our current cash position is sufficient to meet our capital
expenditures and working capital requirements for the near term; however, the
growth and technological change of the market make it difficult for us to
predict future liquidity requirements with certainty and our forecast is based
upon certain assumptions, which may differ from actual future outcomes.  Over
the longer term, we must successfully execute our plans to increase revenue
and income streams that will generate significant positive cash flow if we are
to sustain adequate liquidity without impairing growth or requiring the
infusion of additional funds from external sources.  Additionally, a major
expansion, such as would occur with the acquisition of a major new subsidiary,
might also require external financing that could include additional debt or
capital.  There can be no assurance that additional financing, if required,
will be available on acceptable terms, if at all.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.


ITEM 4. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of the filing of this Form 10-QSB, we
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14(c)
and 5d-14(c). Based upon our review, we concluded that our disclosure controls
and procedures for IPN Communications during our quarter ended March 31, 2005
had not been effective in timely alerting us to material information relating
to the company required to be included in our reports required to be filed
under the Securities Exchange Act. The deficiencies which we experienced
during that period resulted from three primary problems: (1) a general lack of
corporate governance due to our extreme lack of resources and manpower, and an
inability to create an effective segregation of duties, due to the requirement
of the Chief Financial Officer performing too many corporate and business
functions simultaneously; (2) a lack of general oversight through a systematic
and formal approach to the conduct of our corporate, financial and business
affairs, resulting in a lack of effective communication between management and
our Board of Directors; and (3) the lack of a full-time and experienced Chief
Financial Officer.

Since March 31, 2005, we have worked diligently with other professional
advisors and our auditors to address these deficiencies, which we have taken
very seriously. In January 2005, Mr. Moore joined the Company as Chief
Executive Officer.  We have also obtained new professional assistance, both
independent and in-house, designed to help us improve our corporate
governance, public company reporting and other activities generally. Finally,
our Board has determined, subject to our receipt of adequate financing to
support its efforts, to undertake an executive search to recruit a full-time
Chief Financial Officer with public company experience.

With these changes, we have concluded as of the time of the filing of this
Report that our Company does have in place an effective system for timely
meeting our Securities Exchange Act requirements, although further refinements
are contemplated as indicated above. Of course, the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events and there can be no assurance that any design will succeed in
adhering to its stated goals under all potential future conditions. These
include an assumption that we will be able to raise through equity investment,
grants or otherwise the funding necessary to implement and maintain our full
system. There can be no assurance that we will be able to implement or
maintain an effective system of internal controls, and if we are not able to
do so, we risk being in violation of our obligations as a public company in
the future. See: RISKS RELATED TO OUR BUSINESS.



                                33
<PAGE>

                   PART II.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 2.  CHANGES IN SECURITIES

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.  OTHER INFORMATION

None.

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<PAGE>

ITEM 6.  EXHIBITS

Exhibit  Description
-------  -----------
(3.1.1)   Certificate of Incorporation (1)
(3.1.2)   Certificate of Amendment to Certificate of Incorporation (1)
(3.1.3)   Certificate of Amendment to Certificate of Incorporation (4)
(3.1.4)   Certificate of Amendment to Certificate of Incorporation (4)
(3.2)     Amended and Restated By-laws (1)
(4.1)     Instruments Defining Rights of Security Holders *
(10.1)    Securities Purchase Agreement dated June 25, 2004, by and
          between DataLogic International Group, Inc. and Laurus Master
          Fund, Ltd. (2)
(10.2)    Secured Convertible Term Note dated June 25, 2004, by and
          between DataLogic International, Inc. and Laurus Master Fund,
          Ltd. (2)
(10.3)    Registration Rights Agreement dated June 25, 2004, by and
          between DataLogic International, Inc. and Laurus Master Fund,
          Ltd. (2)
(10.4)    Common Stock Purchase Warrant (2)
(10.5)    Master Security Agreement dated June 25, 2004, by DataLogic
          International, Inc. and its subsidiaries. (2)
(10.6)    Stock Pledge Agreement dated June 25, 2004, by and among
          Laurus Master Fund, Ltd., DataLogic International, Inc.
          and its subsidiaries. (2)
(10.7)    Subsidiary Guaranty dated June 25, 2004 by the subsidiaries
          of DataLogic International, Inc. (2)
(10.8)    Funds Escrow Agreement dated June 25, 2004 by and among
          DataLogic International, Inc., Laurus Master Fund, Ltd. and
          Loeb & Loeb LLP (2)
(10.9)    Restricted Account Agreement dated June 25, 2004 by and among
          North Fork Bank, DataLogic International, Inc. and Laurus
          Master Fund, Ltd. (2)
(10.10)   Subordination Agreement dated June 25, 2004 by and between
          Derek K. Nguyen and Khanh D. Nguyen and Laurus Master Fund,
          Ltd. (2)
(10.11)   Restricted Side Letter between Laurus Master Fund, Ltd. and
          DataLogic International, Inc. (2)
(10.12)   Stock Option Plan (3)
(10.13)   Management Agreement with IPN Communications, Inc. (4)
(10.14)   Warrant Agreement with Biscayne Capital Markets, Inc. (4)
(10.15)   Finder's Fee Agreement with Biscayne Capital Markets, Inc. (4)
(10.16)   Agreement to Acquire 49% of IPN (5)
(21)      Subsidiaries of DataLogic International, Inc.
(31.1)    Certification pursuant Section 302
(31.2)    Certification pursuant Section 302
(32.1)    Certification pursuant Section 906
(32.2)    Certification pursuant Section 906

*   incorporated by reference from the provisions of Exhibits 3.1.1 -3.1.4

(1) Filed with Form 10-SB on April 23, 1999 (File No. 000-30382)

(2) Filed with Form 8-K dated June 25, 2004

(3) Filed with Form S-8 on April 9, 2003
(4) Filed with Form SB-2 on July 26, 2004
(5) Filed with Form 8-K dated November 18, 2004

                                35

<PAGE>
 
<PAGE>
                            SIGNATURES

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

                                    DataLogic International, Inc.
                                   (Registrant)

Date: August 11, 2005               /s/ Keith Moore
                                    ------------------------------------
                                    Title: Chief Executive Officer,
                                    Chief Operating Officer and Director


Date: August 11, 2005               /s/ Khanh Nguyen
                                    ------------------------------------
                                    Title: President, Chief Financial
                                    Officer and Director



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