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 September 30, 2004

                                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                              330755473
          --------                              ---------
(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 November 12, 2004, there were 37,759,320 shares of the issuer's Common
Stock outstanding.

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

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

<PAGE>


                              INDEX


PART I.  FINANCIAL INFORMATION

  Item 1. Consolidated Financial Statements

          Unaudited Condensed Consolidated Balance Sheet
          as of September 30, 2004

          Unaudited Condensed Consolidated Statement of Operations -
          Three and Nine Months Ended September 30, 2004 and 2003

          Unaudited Condensed Consolidated Statement of Cash Flows -
          Nine Months Ended September 30, 2004 and 2003

          Notes to Unaudited Condensed Consolidated Financial Statements

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

  Item 3. Quantitative and Qualitative Disclosures About Market Risk

  Item 4. Controls and Procedures

PART II.  OTHER INFORMATION

  Item 1. Legal Proceedings

  Item 2. Changes in Securities

  Item 3. Defaults upon Senior Securities

  Item 4. Submission of Matters to a Vote of Security Holders

  Item 5. Other Information

  Item 6. Exhibits and Reports Filed on Form 8-K


SIGNATURES

<PAGE> 2


                  PART I. FINANCIAL INFORMATION


ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
               CONDENSED CONSOLIDATED BALANCE SHEET
                        SEPTEMBER 30, 2004
                            Unaudited)


                              ASSETS

CURRENT ASSETS
     Cash & cash equivalents                                   $    773,332
     Accounts receivable, net of allowance
        for bad debts of $ 120,331                                3,118,633
     Marketable securities                                           14,000
     Inventory                                                       37,896
     Prepaid expenses                                                79,324
                                                               -------------
           Total current assets                                   4,023,185

RESTRICTED CASH                                                   1,253,780

PROPERTY AND EQUIPMENT, net                                          66,440

INTANGIBLE ASSETS
     Licenses, net                                                   21,901
     Loan origination costs, net                                    285,083

DEPOSITS                                                              9,111
                                                               -------------
                                                               $  5,659,500
                                                               =============

               LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable & accrued expenses                       $  1,284,683
     Notes payable - officers                                       164,000
     Notes payable                                                  283,200
     Convertible debt - current portion                             477,270
                                                               -------------
           Total current liabilities                              2,209,153

CONVERTIBLE DEBT - LONG TERM PORTION                              2,522,730
                                                               -------------
           Total Liabilities                                      4,731,883

MINORITY INTEREST                                                   209,117

STOCKHOLDERS' EQUITY
     Common stock, $0.001 par value; Authorized shares
       100,000,000 Issued and outstanding shares 37,759,320          37,759
     Additional paid in capital                                   3,162,369
     Shares to be issued                                             42,457
     Prepaid consulting expense                                    (244,102)
     Beneficial conversion feature                                 (807,291)
     Comprehensive income                                          (189,500)
     Accumulated deficit                                         (1,283,192)
                                                               -------------
           Total stockholders' equity                               718,500
                                                               -------------

                                                               $  5,659,500
                                                               =============




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

<PAGE> 3
<TABLE>
<CAPTION>

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


                                            For the three month periods  For the nine month periods
                                                 ended September 30,         ended September 30,
                                                 2004          2003           2004         2003
                                           -------------- -------------- ------------- -------------
<S>                                        <C>            <C>            <C>           <C>
Net revenue                                $   3,050,110  $   2,780,609  $ 11,058,853  $  7,763,639

Cost of revenue                                2,634,388      2,446,165     8,414,665     7,034,904
                                           -------------- -------------- ------------- -------------

Gross profit                                     415,722        334,444     2,644,188       728,735

Operating expenses                               631,292        128,351     1,600,193     1,029,739
                                           -------------- -------------- ------------- -------------

Profit (loss) from Operations                   (215,570)       206,093     1,043,995      (301,004)

Non-operating income (expense):
    Factoring expense                                  -        (72,095)      (99,926)     (102,077)
    Interest expense                            (106,306)       (20,116)     (130,555)      (50,614)
                                           -------------- -------------- ------------- -------------
      Total non-operating income (expense)      (106,306)       (92,211)     (230,481)     (152,691)
                                           -------------- -------------- ------------- -------------
Income (loss) before income tax and
  minority interest allocation                  (321,876)       113,882       813,514      (453,695)
                                           -------------- -------------- ------------- -------------

Provision for income tax                               -              -         1,600         1,600

Minority interest allocation                     (16,516)       (13,722)     (190,966)      (17,039)
                                           -------------- -------------- ------------- -------------

Net income (loss)                          $    (338,392) $     100,160  $    620,948  $   (472,334)
                                           ============== ============== ============= =============

Basic earnings (loss) per share            $      (0.009) $       0.003  $      0.017  $     (0.015)
                                           ============== ============== ============= =============

Basic weighted average shares outstanding     37,237,391     36,929,887    36,970,059    32,078,736
                                           ============== ============== ============= =============

Diluted earnings (loss) per share *        $      (0.009) $       0.003  $      0.015  $     (0.015)
                                           ============== ============== ============= =============

Diluted weighted average shares outstanding   37,237,391     36,929,887    42,802,872    32,078,736
                                           ============== ============== ============= =============

*    Weighted average number of shares used to compute basic and diluted loss per share in 2003 is
     the same since  the effect of dilutive securities is anti-dilutive for the three and nine months
     ended September 30, 2004.



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

</TABLE>
<PAGE> 4

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



                                                   For the nine month periods
                                                        ended September 30,
                                                         2004       2003
                                                   ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net income (loss)                                $    620,948  $   (472,334)
  Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
     Depreciation and amortization                      122,233        27,535
     Issuance of shares for service                     215,451       756,090
     Issuance of shares for compensation                 45,196        90,334
     Options granted for consulting services              1,205             -
     Minority interest                                  170,417        35,189
     (Increase) decrease in current assets:
        Receivables                                  (1,585,089)   (1,951,032)
        Prepaid expenses                                (78,349)        4,573
        Inventory                                        28,329       (68,974)
        Deposits                                         (2,499)      (37,636)
     Increase (decrease) in current liabilities:
        Accounts payable and accrued expense            446,276      (139,368)
                                                   ------------- -------------
  Total Adjustments                                    (636,830)   (1,283,289)
                                                   ------------- -------------
     Net cash used in operating activities              (15,882)   (1,755,623)
                                                   ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Increase in restricted cash                        (1,253,780)            -
  Sale (purchase) of treasury stock                     150,904       (10,000)
  Acquisition of property & equipment                   (14,351)      (43,986)
                                                   ------------- -------------
     Net cash used in investing activities           (1,117,227)      (53,986)
                                                   ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from convertible debt                      3,000,000             -
  Payment of debt issuance costs                       (311,000)            -
  Payments to factor                                   (854,301)            -
  Proceeds from factor                                        -     1,587,100
  Proceeds from loan                                    225,000       246,803
  Payment of loans                                     (160,000)            -
  Payment on line of credit                            (429,406)            -
  Proceeds from line of credit                          182,631           571
                                                   ------------- -------------
     Net cash provided by  financing activities       1,652,924     1,834,474
                                                   ------------- -------------

NET INCREASE IN CASH & CASH EQUIVALENTS                 519,815        24,865

CASH & CASH EQUIVALENTS, BEGINNING BALANCE              253,517             -
                                                   ------------- -------------
CASH & CASH EQUIVALENTS, ENDING BALANCE            $    773,332  $     24,865
                                                   ============= =============


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


<PAGE> 5

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________

NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

DataLogic International, Inc. (formerly, Topclick International, Inc.) (the
"Company") was incorporated on October 3, 1996 in the state of Delaware. The
Company changed its name from Galveston Oil & Gas, Inc. to Topclick
International, Inc. on February 5, 1999. The Company was developing an
Internet website for providing users with a one-stop information index to the
top Internet guides. On July 23, 2001, the board of directors approved the
amendment of the Company's certificate of incorporation to change its name to
DataLogic International, Inc.

On July 20, 2001, the Company acquired 100% shares outstanding of DataLogic
Consulting, Inc. (DCI), a Texas Corporation, and became a parent Company. DCI
provides SAS consulting services, Telecommunication and Wireless consulting
services, Web design and E-commerce development, and IT staffing and offshore
development services to various industries throughout the country. DCI was
formed on August 20, 1993.

On June 2, 2003, the Company closed a transaction, whereby it acquired 51% of
the issued and outstanding shares of capital stock of i-PhoneHome, Inc., a
California corporation which was 100% owned by several individuals. In
exchange for 51% of the shares common stock of i-PhoneHome, Inc., the Company
issued i-PhoneHome, Inc., fifty-seven thousand ($57,000) dollars in restricted
common stock.  On December 2, 2003, the Company issued i-PhoneHome, Inc. an
additional forty thousand ($40,000) dollars in restricted common stock
provided that this agreement remained valid and that i-PhoneHome, Inc. is
profitable on or about this date.

On July 24, 2003, i-PhoneHome, Inc. changed its name to IPN Communications,
Inc.

On January 5, 2004, the Management agreement with IPN Communications, Inc. was
amended.  The term of the Agreement shall remain in effect until December 31,
2004 unless terminated prior to that time in accordance with the terms in the
Agreement. The amendment provided for DataLogic to pay IPN in the amount of
$100,000 payable in DataLogic restricted common stock in full consideration of
IPN's performance of services. In addition, DataLogic shall pay IPN eleven
percent of net profits. DataLogic shall no longer be obligated to pay IPN
monthly service fees or any other payout based on the net profit milestones as
outlined in the original Management Agreement. In lieu of the agreement, the
company issued 370,370 shares of common stock valued at $ 100,000 on January
5, 2004.

Basis of presentation

The accompanying unaudited condensed consolidated interim financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for the presentation of interim financial
information, but do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements.
The audited consolidated financial statements for the year ended December 31,
2003 were filed on April 9, 2004 with the Securities and Exchange Commission
and are hereby referenced.  In the opinion of management, all adjustments
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 2004 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2004.

<PAGE> 6

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________


Use of Estimates

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

Issuance of shares for service

The Company accounts for the issuance of equity instruments to acquire goods
and 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 measurable.

Marketable Securities

The Company's securities are classified as available-for-sale and, as such,
are carried at fair value. All of the securities comprised of shares of common
stock of investee. Securities classified as available-for-sale may be sold in
response to changes in interest rates, liquidity needs, and for other
purposes.

Unrealized holding gains and losses for available-for-sale securities are
excluded from earnings and reported as comprehensive income as a separate
component of stockholder's equity.

Following is a summary of investment securities classified as available for
sale as on September 30, 2004:


                                     Cost Basis  Fair Value  Unrealized loss

Marketable securities-Common stock   $  203,500    $   14,000  $  189,500

Unrealized holding gains and losses for the nine month period ending September
30, 2004 amounted to $47,000.

Intangible Assets

Net intangible assets at September 30, 2004 were as follows:

                Website Development             $     4,900
                Loan Origination Costs              311,000
                Licensing Rights                     39,000
                                                ------------
                                                    354,900
                Less Accumulated amortization       (47,916)
                                                ------------

                                                $   306,984
                                                ============

                Client lists                    $    33,086
                Less Accumulated amortization       (33,086)
                                                ------------
                                                $         -
                                                ============

<PAGE> 7

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________


    Amortization for years 2004 through 2007 will be as follows:

              2004                 $        29,526
              2005                         118,300
              2006                         107,324
              2007                          51,834
                                   ----------------
              Total                $       306,984
                                   ================

Segment Reporting

The Company has two reportable segments consisting of the consulting services
and the sale of phones. The Company evaluates performance based on sales,
gross profit margins and operating profit before income taxes.  The following
is information for the Company reportable segments for the Three month and
nine months period ended September 30, 2004 (in thousands):

For the three month period ended September 30, 2004 (in thousands):


                                          Voice Over
                             Consulting   IP (VoIP)
                             Segment      Segment      Unallocated    Total
                             ------------ ------------ ----------- ----------
Revenue                      $     2,793  $       258  $        -  $   3,051

Gross Margin                         360           56           -        416

Depreciation & amortization          (81)          (8)          -        (89)

Interest expense                    (101)          (5)          -       (106)

Income from continuing
 operations before Income taxes     (380)          17          25       (338)

Identifiable assets                4,730          926           -      5,656

Capital expenditures                   -            -           -

<PAGE> 8


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________



For the nine month period ended September 30, 2004 (in thousands):


                                          Voice Over
                             Consulting   IP (VoIP)
                             Segment      Segment      Unallocated    Total
                             ------------ ------------ ----------- ----------
Revenue                      $     8,990  $     2,069  $        -  $  11,059

Gross Margin                       1,757          887           -      2,644

Depreciation & amortization          (96)         (20)         (8)      (124)

Interest expense                    (121)         (10)       (131)

Income from continuing
 operations before Income taxes      436          199         (14)       621

Identifiable assets                4,730          926           -      5,656

Capital expenditures                   3           11           -         14


The Company operated in one segment for the three month and nine month period
ending September 30, 2003.

Reclassifications

Certain comparative amounts have been reclassified to conform with the current
year's presentation.

NOTE 2 - PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
DataLogic International, Inc, its 100% wholly owned subsidiary, and DataLogic
Consulting, Inc. (DCI) and 51% owned subsidiary, IPN Communications, Inc.
(formerly i-PhoneHome, Inc.) from the acquisition date.  All significant
inter-company accounts and transactions have been eliminated in consolidation.

NOTE 3 - RECENT PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure".  SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation.  In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used, on
reported results.  The Statement is effective for the Companies' interim
reporting period ending January 31, 2003.

In compliance with FAS No. 148, the Company has elected to continue to follow
the intrinsic value method in accounting for its stock-based employee
compensation plan as defined by APB No. 25 and has made the applicable
disclosures below.

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 per share would have been adjusted to the pro forma
amounts for the nine month ended September 30, 2004 as follows ($ in
thousands, except per share amounts). :


<PAGE> 9

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________




            Net Income - as reported                   $       621
            Stock-Based employee compensation
              expense included in reported net
              income, net of tax
                                                                 -
            Total stock-based employee
              compensation expense determined
              under fair-value-based method for all
              rewards, net of tax                             (228)
                                                        -------------
            Pro forma net loss                          $      393
                                                        =============
            Earnings per share:
            Basic, as reported                                0.02
            Diluted, as reported                              0.02
            Basic, pro forma                                  0.01
            Diluted, pro forma                                0.01

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


                       Risk-free interest rate                4.35%
                       Expected life of the options           2 years
                       Expected volatility                    272%
                       Expected dividend yield                  -


Following is a summary of the stock option activity:


                      Outstanding at December 31, 2003         1,750,000
                      Granted                                  1,105,000
                      Forfeited                                 (600,000)
                      Exercised                                        -
                                                             ------------

                      Outstanding at September 30, 2004        2,255,000
                                                             ============

On May 15, 2003, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 150 (FAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150 changes the accounting
for certain financial instruments that, under previous guidance, could be
classified as equity or "mezzanine" equity, by now requiring those instruments
to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, FAS 150 requires disclosure
regarding the terms of those instruments and settlement alternatives. FAS 150
affects an entity's classification of the following freestanding instruments:
a) Mandatorily redeemable instruments b) Financial instruments to repurchase
an entity's own equity instruments c) Financial instruments embodying
obligations that the issuer must or could choose to settle by issuing a
variable number of its shares or other equity instruments based solely on (i)
a fixed monetary amount known at inception or (ii) something other than
changes in its own equity instruments d) FAS 150 does not apply to features
embedded in a financial instrument that is not a derivative in its entirety.
The guidance in FAS 150 is generally effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at the
beginning of the first interim period beginning after June 15, 2003. For
private companies, mandatorily redeemable financial instruments are subject to
the provisions of FAS 150 for the fiscal period beginning after December 15,
2003. The adoption of SFAS No. 150 does not have a material impact on the
Company's financial position or results of operations or cash flows.

<PAGE> 10


           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________



In December 2003, the Financial Accounting Standards Board (FASB) issued a
revised Interpretation No. 46, "Consolidation of Variable Interest Entities"
(FIN 46R). FIN 46R addresses consolidation by business enterprises of variable
interest entities and significantly changes the consolidation application of
consolidation policies to variable interest entities and, thus improves
comparability between enterprises engaged in similar activities when those
activities are conducted through variable interest entities. The Company does
not hold any variable interest entities.

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments." The EITF reached a consensus about the
criteria that should be used to determine when an investment is considered
impaired, whether that impairment is other-than-temporary, and the measurement
of an impairment loss and how that criteria should be applied to investments
accounted for under SFAS No. 115, "ACCOUNTING IN CERTAIN INVESTMENTS IN DEBT
AND EQUITY SECURITIES." EITF 03-01 also included accounting considerations
subsequent to the recognition of an other-than-temporary impairment and
requires certain disclosures about unrealized losses that have not been
recognized as other-than-temporary impairments.  Additionally, EITF 03-01
includes new disclosure requirements for investments that are deemed to be
temporarily impaired.  In September 2004, the Financial Accounting Standards
Board (FASB) delayed the accounting provisions of EITF 03-01; however the
disclosure requirements remain effective for annual reports ending after June
15, 2004.  The Company will evaluate the impact of EITF 03-01 once final
guidance is issued.

In April of 2004, the EITF reached consensus on the guidance provided in EITF
Issue No. 03-6, "Participating Securities and the Two-Class Method under SFAS
No. 128 Earnings Per Share" ("EITF 03-6").  EITF 03-6 clarifies whether a
security should be considered a "participating security" for purposes of
computing earnings per share ("EPS") and how earnings should be allocated to a
"participating security" when using the two-class method for computing basic
EPS.  The adoption of EITF 03-6 does not have a significant impact on the
Company's financial position or results of operations.

In May of 2004, the FASB revised FASB Staff Position ("FSP") No. 106-1,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003" and issued FSP No. 106-2,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act of 2003" ("FSP No. 106-2"). FSP 106-2
provides accounting guidance to the employers who sponsor post retirement
health care plans that provide prescription drug benefits; and the
prescription drug benefit provided by the employer is "actuarially equivalent"
to Medicare Part D and hence qualifies for the subsidy under the Medicare
amendment act. The adoption of FSP 106-2 does not have a significant impact on
the Company's financial position or results of operations.

SEC Staff Accounting Bulletin (SAB) No. 105, "APPLICATION OF ACCOUNTING
PRINCIPLES TO LOAN COMMITMENTS," summarizes the views of the staff of the SEC
regarding the application of generally accepted accounting principles to loan
commitments accounted for as derivative instruments. SAB No.105 provides that
the fair value of recorded loan commitments that are accounted for as
derivatives under SFAS No. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES," should not incorporate the expected future cash flows
related to the associated servicing of the future loan. In addition, SAB No.
105 requires registrants to disclose their accounting policy for loan
commitments. The provisions of SAB No. 105 must be applied to loan commitments
accounted for as derivatives that are entered into after March 31, 2004. The
adoption of this accounting standard does not have a material impact on the
Company's financial statements.

<PAGE> 11

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________



NOTE 4 - DUE TO FACTOR

On August 23, 2002, the Company entered into a factoring and security
agreement to sell certain accounts receivable to Allied Capital Partners, L.P.
The purchase price for each account sold is the face amount of the account
less a discount of 1.75%.  All accounts sold are with recourse on seller.
Allied may defer making payment to the Company of a portion of the purchase
price payable for all accounts purchased which have not been paid up to 13.25%
of such accounts (reserve).  All of the Company's accounts receivable,
inventories and computer hardware are pledged as collateral under this
agreement. The initial term is for three month and will automatically renew
for additional three month at the end of the term. The Company discontinued
the services of factor as of June 30, 2004.  All the outstanding balances due
to the factor have been paid in full. In connection with the factoring
agreement, the Company incurred fees of $99,926 during the period ended
September 30, 2004.

NOTE 5 - NOTES PAYABLE- OFFICER

The company repaid $ 10,000 of the loan from officer during the three month
period ended September 30, 2004.  The notes payable to the officers amounted
to $ 164,000 at September 30, 2004.  The notes are unsecured and bear the
annual interest rates of 6% and 12% on the unpaid principal balance. Interest
on these notes for the period ended September 30, 2004 and 2003 amounted to
$11,900 and $14,445.

NOTE 6 - NOTES PAYABLE & LINE OF CREDIT

Notes payable comprised of the following:

Unsecured note, interest rate 10%, interest payable on last day of
 each month, due January 15, 2004                                   $  50,000
Unsecured note, interest rate 6%, interest payable at the
 end of the term or on demand, due June 30, 2004                       50,000
Unsecured note, interest rate 6%, interest payable at the
 end of the term or on demand, due December 31, 2004                  150,000
Unsecured note, Interest rate 12%, interest payable at the
 end of the term, due June 30, 2004                                    33,200
                                                                   -----------
                                                                   $  283,200
                                                                   ===========

Interest on these notes for the period ended September 30, 2004 and September
30, 2003 was $11,805 and $9,043 respectively.

The Company has a line of credit from a financial institution for $450,000.
The line expired on May 31, 2004. The line is secured by the Company's assets,
is personally guaranteed by CEO of the Company and bears an interest rate of
4.38%.

NOTE 7 - CONVERTIBLE DEBT

On June 25, 2004, the Company entered into a Securities Purchase Agreement
with Laurus Master Fund, Ltd. (Purchaser) 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 and a common stock purchase warrant.
The note is convertible into shares of common stock, $.001 par value at a
fixed conversion rate of $0.66, and bears an interest rate at prime plus 2%.
The warrant provides 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. The
warrants have



<PAGE> 13

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________


cashless exercise features. $1,250,000 of the principal amount of the Note
will be held in a restricted account by the company but under the sole
dominion and control of the Purchaser as security for the company's and its
subsidiaries' obligations under the Securities Purchase Agreement and related
agreements. 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 ($1,750,000) to zero or upon the satisfaction of
other specified conditions. The notes are secured by all the Company's assets
and the assets of the subsidiaries.

The Company incurred $311,000 as the loan origination cost for the debt. The
Company will amortize the cost over the period of the loan. The Company
amortized $285,083 for the period ending September 30, 2004.  The Company
recorded the beneficial conversion feature associated with the debt for
$431,818. These costs have been reduced from the long term portion of the
convertible debt on the balance sheet and will be amortized over their lives.
The Company recorded the beneficial conversion feature associated with the
warrants for $430,050. The Company has recorded amortization expense for
$54,577 for the period ending September 30, 2004 on these costs.

NOTE 8 - SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.

The Company paid $2,157 and $0 for income tax during the period ended
September 30, 2004 and 2003. The Company paid $38,611 and $35,817 interest
during the period ended September 30, 2004 and 2003, respectively.

NOTE 9 - RELATED PARTY TRANSACTIONS

The Company issued 370,370 shares of common stock for management fees
amounting $100,000. These shares have been issued to shareholders of IPN as
part of the management agreement between the company and IPN for the
management services to be provided by IPN from January 01, 2004 to December
31, 2004. This management fees will be amortized over the period of service.
$75,000 has been expensed for the nine months period ending September 30,
2004.

NOTE 10 - STOCKHOLDERS' EQUITY

Common stock

During the period ended September 30, 2004, the Company issued common stocks
in exchange of various services to following parties:

The Company issued 370,370 shares of common stock for management fees
amounting $100,000. These shares have been issued to shareholders of IPN as
part of the management agreement between the company and IPN for the
management services to be provided by IPN from January 01, 2004 to December
31, 2004. This management fees will be amortized over the period of service.
$75,000 has been expensed for the period ending September 30, 2004.

<PAGE> 14

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________



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 has issued 137,099
shares as of September 30, 2004. The company has recorded the cost of services
based on 20 day average of stock price at the date of agreement amounting to
$160,200.  The cost will be amortized over the period of service. $93,450 has
been expensed for the period ending September 30, 2004.

The company issued 30,000 shares of common stock for consulting services
amounting $22,200.

The company issued 75,000 shares of common stock for salary expenses amounting
to $ 43,500.

The company issued 497,500 shares of common stock for prepaid consulting
expenses amounting $188,413.  The cost will be amortized over the period of
service. $ 24,026 has been expensed for the period ending September 30, 2004.

The company issued 150,000 shares of common stock for prepaid legal fees
amounting $ 62,700.  The cost will be amortized over the period of service.
$0- has been expensed for the period ending September 30, 2004.

The company issued 25,000 shares of common stock for prepaid directors
compensation amounting $10,175.  The cost will be amortized over the period of
service. $ 1,696 has been expensed for the period ending September 30, 2004.

During the period ended September 30, 2003, the Company issued common stocks
in exchange of various services to following parties:

The company issued 8,812,500 shares of common stock for consulting services
amounting $756,090.  The company issued 1,050,403 shares of common stock for
salaries amounting $90,334.

Per purchase agreement with I-Phonehome, Inc dated on June 2, 2003, the
Company has common stock to be issued for $57,000.


Stock Option

In 1999 the board of directors approved the creation of the 1999 Stock Option
Plan.  This plan provides for the grant of incentive stock options to
employees, directors and consultants.  Options issued under this plan will
expire over a maximum term of ten years from the date of grant.

Pursuant to the Corporate Stock Option Plan, the Company granted 600,000
options to two key employees (300,000 options each) during the year ended
December 31, 2002. 150,000 options vested immediately and remaining 450,000
options will vest quarterly, over 3 years beginning three months after the
vesting commencement date. The Option has an expiry that is 2 years from the
vesting schedule date.

The option exercise prices were $0.04 for the first 200,000 options and $0.03
for 400,000 options which were the same as fair value of the shares at the
time of granting of the options.

Pursuant to the Corporate Stock Option Plan, the Company granted 1,150,000
options to two key employees during the year ended December 31, 2003. 440,000
options vested immediately and remaining options will vest quarterly, over 3
years beginning three months after the vesting commencement date. The Option
has an expiry that is 2 years from the vesting schedule date.


<PAGE> 15
           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________


Pursuant to the Corporate Stock Option Plan, the Company granted 130,000
options to two key employees during the three months period ended March 31,
2004. 52,000 options vested immediately and remaining options will vest
quarterly, over 2 years beginning three months after the vesting commencement
date. The Option has an expiry that is 2 years from the vesting schedule date.

Pursuant to the Corporate Stock Option Plan, the Company granted 200,000
options to two key employees during the three months period ended June 30,
2004. 80,000 options vested immediately and remaining options will vest
quarterly, over 2 years beginning three months after the vesting commencement
date. The Option has an expiry that is 2 years from the vesting schedule date.

Pursuant to the Corporate Stock Option Plan, the Company granted 775,000
options to five key employees during the three months period ended September
30, 2004. 265,000 options vested immediately and remaining options will vest
quarterly, over 2 years beginning three months after the vesting commencement
date. The Option has an expiry that is 2 years from the vesting schedule date.

NOTE 11 - BASIC AND DILUTED NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share for the nine-month period ended
September 30, 2004 and 2003 determined by dividing net income (loss) for the
periods by the weighted average number of basic and diluted shares of common
stock outstanding.

NOTE 12- MAJOR CUSTOMERS

Two major customers provided 80% of the net revenue for the period ended
September 30, 2004. Total receivable from these major customers amounted to
approximately $1,906,871.

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

NOTE 13- COMMITMENTS

The company headquarter consists of approximately 2,900 square feet of office
space and is leased by the company until August 31, 2006.  The company also
leases six office facilities under month-to-month basis.

NOTE 14 - GOING CONCERN

The Company's consolidated financial statements are prepared using the
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company has accumulated deficit of
$1,283,192 at September 30, 2004. In view of the matters described above,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheets 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 or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

<PAGE> 16

           DATALOGIC INTERNATIONAL, INC. & SUBSIDIARIES
     NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
______________________________________________________________________________



Management has taken various steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue on in next twelve months. Management devoted considerable
effort during the period ended September 30, 2004, towards management of
liabilities and improving the operations. The Company has a revolving line of
credit through their bank to be used as working capital.  The management
believes that the above actions will allow the Company to continue its
operations through the next twelve months.

NOTE 15 - SUBSEQUENT EVENT

On November 5, 2004, the Company entered into an agreement to purchase the
remaining 49% interest in its subsidiary, IPN Communications, Inc. to make it
a wholly owned subsidiary.

<PAGE> 17

ITEM 2. MANAGEMENT  DISCUSSION AND ANALYSIS AND PLAN OF OPERATION


The following discussion and analysis should be read in conjunction with our
condensed consolidated financial statements and notes to 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 our 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.



<PAGE> 18


The information contained in this report is not a complete description of our
business or the risks associated with an investment in our common stock.
Before deciding to buy or maintain a position in our common stock, you should
carefully review and consider the various disclosures we made in this report,
and in our other materials filed with the Securities and Exchange Commission
that discuss our business in greater detail and that disclose various risks,
uncertainties and other factors that may affect our business, results of
operations or financial condition. In particular, you should review our most
recent filing of Form SB-2, our annual report on Form 10-KSB for the year
ended December 31, 2003, and the following risk factors:

RISKS RELATED TO OUR BUSINESS

WE HAVE RECENTLY BEGUN TO OFFER NEW PRODUCTS AND SERVICES AND MAY NOT BE
SUCCESSFUL IN THESE OPERATIONS.

We recently commenced our VoIP telephony products and service business
following our acquisition of IPN Communications on June 2, 2003. Further, we
entered the machine-to-machine (M2M) technologies market in early 2004.
Therefore our business and future prospects in these areas are difficult to
evaluate. There are significant challenges, risks and uncertainties frequently
encountered by early-stage companies using new and unproven business models in
rapidly evolving markets. These risks and uncertainties include significant
start-up expenses, obtaining and performing contracts with clients, hiring and
retaining qualified personnel establishing a reputation in the industry and
acquiring, developing and managing contact centers, managing growth, and
obtaining additional capital if required. Further, there are substantial
expenses associated with the entry into new businesses.

WE ARE DEPENDENT ON A FEW LARGE CUSTOMERS; AND OUR CONTINUING OPERATIONS RELY
ON THE ABILITY OF THE COMPANY TO RENEW THESE CONTRACTS.

The company provides quality consulting services to Fortune 1000 clients and
governmental agents.  During the year ended December 31, 2003, we were awarded
an expansion of several multi-year contracts with several state agencies.  Our
dependence on major customers subjects us to significant financial risks in
the operation of our business if a major customer were to terminate or
materially reduce, for any reason, its business relationship with us. Further,
some of our government agency customers are subject to unique political and
budgetary constraints and have special contracting requirements that may
affect our ability to obtain new government customers.  In addition, future
sales to government agencies will depend on our ability to meet government
contracting requirements, certain of which may be onerous or impossible to
meet, resulting in our inability to obtain a particular contract. Common
requirements in government contracts include bonding; provisions permitting
the purchasing agency to modify or terminate, at will, the contract without
penalty and provisions permitting the agency to perform investigations or
audits of our business practices.

<PAGE> 19

WE RELY ON DISTRIBUTORS AND RESELLERS TO SELL OUR VOIP PRODUCTS TO GENERAL
CONSUMERS; ANY DISRUPTION TO THESE DISTRIBUTION CHANNELS WOULD HARM OUR
BUSINESS.

We sell our VoIP products to independent distributors, resellers, system
integrators, telecommunication companies, internet service providers, call
center operators and long distance wholesalers.  We have not yet actively sell
our VoIP equipment directly to general consumers.  As such, we are subject to
many risks, including risks related to their inventory levels and support for
our products. If distributors attempt to reduce their levels of inventory or
if they do not maintain sufficient levels to meet customer demand, our sales
could be negatively impacted.

Furthermore, distributors may also sell products offered by our competitors.
If our competitors offer our distributors more favorable terms, those
distributors may de-emphasize or decline to carry our products. In the future,
we may not be able to retain or attract a sufficient number of qualified
distributors. If we are unable to maintain successful relationships with
distributors or to expand our distribution channels, our business could
suffer.

WE MAY FACE INCREASED GOVERNMENT REGULATION, TAXATION AND LEGAL UNCERTAINTIES
IN OUR INDUSTRY, WHICH COULD HARM OUR BUSINESS.

There are an increasing number of federal, state, local and foreign laws and
regulations pertaining to the Internet and telecommunications. In addition, a
number of federal, state, local and foreign legislative and regulatory
proposals are under consideration. Laws or regulations may be adopted with
respect to the Internet relating to, among other things, fees and taxation of
VoIP telephony services, liability for information retrieved from or
transmitted over the Internet, online content regulation, user privacy and
quality of products and services.  Changes in tax laws relating to electronic
commerce could materially affect our business, prospects and financial
condition.  Moreover, the applicability to the Internet of existing laws
governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing.  Any new legislation or regulation, or
the application or interpretation of existing laws or regulations, may
decrease the growth in the use of the Internet or VoIP telephony services, may
impose additional burdens on electronic commerce or may alter how we do
business.  This could decrease the demand for our existing or proposed
services, increase our cost of doing business, increase the costs of products
sold through the Internet or otherwise have a material adverse effect on our
business, plans, prospects, results of operations and financial condition.

Our current client base for its VoIP products and services is predominantly
located in Asia. Our ability to offer VoIP services outside the U.S. is
subject to the local regulatory environment, which may be complicated and
often uncertain. Regulatory treatment of Internet telephony outside the United
States varies from country to country.

OUR SUCCESS DEPENDS UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND
PROPRIETARY TECHNOLOGIES, WHICH COULD INVOLVE COSTLY AND LENGTHY LITIGATION
THAT COULD SERIOUSLY HARM OUR BUSINESS AND FINANCIAL CONDITION.

We have registered our key Internet URLs and review these registrations on a
regular basis to ensure that they remain current and in good standing. While
we have applied for registration of trademarks, servicemarks and registered
domain names in an effort to protect them, we 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 protection of domain names.

<PAGE> 20

We do not hold any patents on our technologies nor have we applied for any
patents, which may limit our ability to protect our technologies. In addition,
any particular aspect of our technologies may infringe the claims of other
existing patents, and therefore, subject us to an infringement action.

Legal proceedings could subject us to significant liability for damages or
invalidate our proprietary rights. Any potential intellectual property
litigation also could force us to take specific actions, including:

o   cease selling products that use the challenged intellectual property;

o   obtain from the owner of the infringed intellectual property a right or a
    license to sell or use the relevant technology, which license may not be
    available on reasonable terms, or at all; or

o   redesign those products that use infringing intellectual property.

WE SERVE MARKETS THAT ARE HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE
WITH BUSINESSES THAT HAVE GREATER RESOURCES THAN WE DO.

We have existing competitors for our businesses, and may in the future have
new competitors, with greater financial, personnel and other resources, longer
operating histories, more technological expertise, more recognizable names and
more established relationships in industries that we currently serve or may
serve in the future. Increased competition, our inability to compete
successfully against current or future competitors, pricing pressures or loss
of market share could result in increased costs and reduced operating margins,
which could harm our business, operating results, financial condition and
future prospects.

Many companies offer products and services similar to those offered by us.
Many of these firms are well established, have reputations for success and
have significantly greater financial, marketing, distribution, personnel, and
other resources than us. Further, we may experience price competition, and
this competition may adversely affect our financial position and results of
operations or adversely affect our revenues and profitability.

OUR RECENT ACQUISITIONS, AS WELL AS POTENTIAL FUTURE ACQUISITIONS, JOINT
VENTURES OR STRATEGIC TRANSACTIONS ENTAIL NUMEROUS RISKS AND UNCERTAINTIES.

Following the acquisition of DataLogic Consulting, Inc. and IPN
Communications, Inc., we expanded our operations to include information
technology consulting services and VoIP telephony products and services
worldwide. We may also enter into new or different lines of business, as
determined by management and our Board of Directors. The acquisitions of
DataLogic Consulting and IPN Communications, as well as any future
acquisitions or joint ventures could result, and in some instances have
resulted, in numerous risks and uncertainties, including:

<PAGE> 21

      o     potentially dilutive issuances of equity securities;

      o     diversion of management's attention and resources from our
            existing businesses;

      o     significant write-offs if we determine that the business
            acquisition does not fit or perform up to expectations;

      o     the incurrence of debt and contingent liabilities or impairment
            charges related to goodwill and other intangible assets;

      o     difficulties  in the  assimilation  of operations,  personnel,
            technologies, products and information systems of the acquired
            companies;

      o     the risks of entering a new or different line of business;

      o     regulatory and tax risks relating to the new or acquired business;

      o     the risks of entering geographic and business markets in which we
            have no or limited prior experience; and

      o     the risk that the acquired business will not perform as expected.


WE MAY BE UNABLE TO IDENTIFY SUCCESSFUL ACQUISITION CANDIDATES WHICH MAY
IMPAIR THE COMPANY'S GROWTH STRATEGY.

We plan to initiate an aggressive growth strategy in fiscal 2004 to expand its
consulting services and VoIP and M2M market shares by way of selectively
acquiring established, profitable and complementary companies.  We expect such
targeted companies to 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 this 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 or merged companies and to obtain additional
financing.  In 2003, we unsuccessfully attempted to merge with Kiboga Systems,
a solution provider for the public safety market, and incurred substantial
expenses. As such, we may not be able to successfully implement this strategy
or to obtain additional financing on a timely basis, which may thereby impair
its growth strategy.

WE WILL RELY ON USE OF COMPUTER AND TELECOMMUNICATIONS INFRASTRUCTURE PROVIDED
BY THIRD PARTIES.

Our success will depend on our continued investment in sophisticated
telecommunications and computer systems and computer software. We anticipate
making significant investments in the acquisition, development and maintenance
of such technologies and we believe that such expenditures will be necessary
on an on-going basis. Computer and telecommunication technologies are evolving
rapidly and are characterized by short product lifecycles, which requires us
to anticipate technological developments. We can give no assurance that we
will be successful in anticipating, managing or adopting such technological
changes on a timely basis or that we will have the resources available to
invest in new technologies. Our business is dependent on our computer and

<PAGE> 22

telecommunications equipment and software systems, the temporary or permanent
loss of which, through physical damage or operating malfunction, could have a
material adverse effect on our business. Operating malfunctions in the
software systems of financial institutions, market makers and other parties
might have an adverse affect on our operations. We depend on service provided
by various local and long distance telephone companies. A significant increase
in the cost of telephone services that is not recoverable through an increase
in the price of our services, or any significant interruption in telephone
services, could have a material adverse effect on our business. Additionally,
as we continue to introduce new services that use new technologies, we may be
required to license technology from third parties. There can be no assurance
that these licenses will be available on commercially reasonable terms, if at
all. Our inability to obtain any of these licenses could result in delays or
reductions in the introduction of new services or could adversely affect our
existing business.

OUR SUCCESS WILL DEPEND ON OUR ABILITY TO RETAIN KEY PERSONNEL.

Our success will depend on our ability to retain our key personnel and
identify, hire and retain additional qualified personnel. There is intense
competition for qualified personnel in our industry, and there can be no
assurance that we will be able to continue to attract and retain such
personnel necessary for the development of our business. Because of the
intense competition, we can give no assurance that we will be successful in
adding personnel as needed to satisfy our staffing requirements.

WE MAY EXPERIENCE VOLATILITY IN OUR STOCK PRICE, WHICH COULD NEGATIVELY AFFECT
YOUR INVESTMENT

The market price of our common stock may fluctuate significantly in response
to a number of factors, some of which are beyond our control, including:

   .  quarterly variations in operating results;
   .  changes in financial estimates by securities analysts;
   .  changes in market valuations of other similar companies;
   .  announcements by us or our competitors of new products or of significant
      technical innovations, contracts, acquisitions, strategic partnerships
      or joint ventures;
   .  additions or departures of key personnel;
   .  any deviations in net sales or in losses from levels expected by
      securities analysts; and
   .  future sales of common stock.

In addition, the stock market has recently experienced extreme volatility that
has often been unrelated to the performance of particular companies.  These
market fluctuations may cause our stock price to fall regardless of our
performance.



<PAGE> 23

THE SALE OF OUR COMMON STOCK BY LAURUS MASTER FUND, LTD. MAY CAUSE DILUTION
AND COULD CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.

All shares in this offering are freely tradable once converted. Depending upon
market liquidity at the time, a sale of shares under this offering at any
given time could cause the trading price of our common stock to decline.  Our
agreement does not allow Laurus to engage in short selling.  However, the sale
of a substantial number of shares of our common stock under this offering, or
anticipation of such sales, could make it more difficult for us to sell equity
or equity-related securities in the future at a time and at a price that we
might otherwise wish to effect sales.

OUR ABILITY TO ATTRACT ADDITIONAL FINANCING, IF AT ALL, MAY DILUTE THE
OWNERSHIP INTERESTS OF INVESTORS AND MAY CAUSE THE SELLING STOCKHOLDER, AS
WELL AS OTHER HOLDERS, TO SELL THEIR SHARES, WHICH WOULD CONTRIBUTE TO
DOWNWARD MOVEMENT IN THE PRICE OF SHARES.

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 stockholders. In connection with our transaction
with Laurus, we may issue up to 6,130,455 shares of common stock throughout
the three years 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 your shares.

IF AN EVENT OF DEFAULT OCCURS UNDER THE CONVERTIBLE NOTE ISSUED TO LAURUS, IT
COULD SERIOUSLY HARM BOTH OUR AND OUR SUBSIDIARIES' OPERATIONS.

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

   .  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;
   .  we make 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;
   .  our failure to timely deliver shares of common stock when due upon
      conversions of the note; and
   .  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.

<PAGE> 24

Any of the factors described above or in the "Risk Factors" section of our
latest annual report on Form 10-KSB could cause our financial results,
including our net income (loss) or growth in net income (loss) to differ
materially from prior results, which in turn could, among other things, cause
the price of our common stock to fluctuate substantially.

Critical Accounting Policies

This "Management's Discussion and Analysis or Plan of Operation" section of
this report discusses our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported amounts of
assets and liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities at the date of our financial statements.

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

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe the
following critical accounting policies, among others, affect significant
judgments and estimates used in the preparation of our condensed consolidated
financial statements. For a detailed discussion of the application of these
and other accounting policies, see the notes to our condensed consolidated
financial statements included in this report.

We maintain reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate
the adequacy of these reserves.  Reserves are recorded primarily on a specific
identification basis.

Revenue Recognition - Revenue is recognized when earned. The Company's revenue
recognition policies are in compliance with all applicable accounting
regulations, including 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, the Company's 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 of the Company exist and collectibility is
reasonably assured. Payments received before all of the relevant criteria for
revenue recognition are satisfied are recorded as unearned revenue.

<PAGE> 25

Overview

General

DataLogic International, Inc. core businesses consist of Consulting Services,
VoIP and Machine-to-Machine (M2M).  We offer our products and services through
two subsidiaries: DataLogic Consulting, Inc. and IPN Communications, Inc.

DataLogic Consulting, a wholly-owned subsidiary, is a professional service
company dedicated to solving its clients' business problems with
technology-based solutions. Our services include Information Technology
consultancy, project management, software development, Internet solutions,
telecommunications/wireless integration, value added reselling/training and IT
outsourcing. We also provide short and long term staffing solutions to IT and
various other non-clients.  Our clients consist of commercial enterprises and
local and state government agencies.

IPN Communications, Inc, a majority-owned subsidiary, is a provider of
voice-over Internet protocol (VoIP) telephony products and services.  We offer
alternative communication solutions via low-cost, high-quality telephony
services via the Internet.  Our target markets are consumers and business
users worldwide who seek to reduce communication costs.  IPN's product suite
includes USB and Ethernet based VoIP phones, IP Phone adapter, videophones,
and turnkey servers that support in-network VoIP calling and VoIP to
public-switch telephone networks (PSTN).  On November 5, 2004, we acquired the
remaining outstanding 49% of shares outstanding of IPN Communications, Inc.

Staff Augmentation/Consulting Services. Our goal is to provide quality
consulting services to our existing and prospective Fortune 1000 clients and
governmental agencies. We expect to create value by engaging our qualified
professionals to work with clients in the Telecommunications, Energy,
Financial, Governmental, Healthcare, Manufacturing, Retail, and Transportation
industries.  We believe that the prospect of future contract renewals from
existing clients is good since we have received favorable reviews and has been
extended for multiple terms on most of the projects.  However, there can be no
assurance that the Company will be able to renew all of these contracts, or
any.

Outsourcing Services.  We will continue to market our outsourcing services. We
believe our competitive edge is our access to a vast pool of talented and
inexpensive IT resources. We expect to effectively compete in this highly
competitive industry by utilizing our joint ventured offshore development
facilities located in China, Vietnam, and India. We offer turn-key software
development and testing to our clients at rates which are substantially lower
than most of our competitors.  To ensure the quality of services provided, we
conduct extensive in-house training and utilizes industry standard methodology
and development procedures.

<PAGE> 26

Software Development.  We plan to place heavier emphasis on intellectual
property development.  We expect to achieve this via patenting products,
design, and business processes, as well as software product development.

We expect that most of the software development will be in the VoIP and M2M
market segments.

Business Combinations.  We plan to initiate a more aggressive growth strategy
in fiscal 2004 to expand our Consulting Services, VoIP and M2M market shares
by way of selectively acquiring established, profitable, and complementary
companies.  We have retained experienced business brokers and/or
merger/acquisition specialists to help accomplish our goals.

We expect such targeted companies to 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 this strategy depends
not only upon our ability to identify and acquire businesses on a
cost-effective basis, but also upon our ability to integrate the acquired
operations into its organization effectively, to retain clients of the
acquired companies, to retain the personnel of the acquired or merged
companies, and to obtain additional financing. We anticipate that we may be
able to secure adequate financing to fund this growth strategy.  However,
there can be no assurance that we will be able to obtain additional financing
on a timely basis.

Employees and Consultants.  Our current operation is efficient in that we can
hire and manage the anticipated number of new employees without significant
additional resources.  We are also making sufficient preparations to acquire
additional funding to accommodate an anticipated upsurge in operating
expenses, should we be successful in acquiring new contracts.

We recognize that we are not immune to some of the problems that are affecting
many of our IT competitors. We still experience weaknesses in our commercial
computer consulting businesses, and our growth is still limited by the effects
of the weak computer industry and the U.S. economy, in general.  We expect
that these factors will continue to work against it in the near future.

Our service contract for the state of Rhode Island is going well.  The
contract is for five years with three and a half years remaining.  We have
good reasons to believe that we will maintain this current level of business
with the state of Rhode Island with no major changes in the near future.

VoIP Products.  Our VoIP product suite includes USB and Ethernet based phone
sets, IP Phone adapter, videophones, and communication servers.  Our IP Phones
work similar to conventional phones with the exception that signals are
digitized and sent via the Internet instead of through traditional phone
lines.  Our IP Phones can make and receive calls from other IP Phones as well
as conventional phones.  Our services allow free IP Phone to IP Phone calls
anywhere in the world. Calls to other conventional phones are charged at
discounted rates.

We also offer standard or custom turn-key server solutions that come with all
the necessary billing software and hardware to support the in-network calls as
well as to interface to any long distance carrier of choice for PSTN calls.
The system can be deployed anywhere in the world.  It can also be hosted and
maintained by IPN for fee.

<PAGE> 27

Our IP Phones and servers are also available as OEM solutions.  This can be
done by customizing the circuit boards, existing phone models or manufacturing
new phone sets.

We expect to add to our product suite new and innovative products on a regular
basis to increase the value proposition of VoIP technology.

Our VoIP business is progressing well since its acquisition of IPN
Communications in Q2 of 2003.  The majority of our current business is derived
from the Asia Pacific regions.  We expect the market in Asia to remain strong.
We plan to expand into the retail channels in North America in the near
future, as well as stronger penetration into Europe, the Middle East, and
Latin America.

We believe that there will be increasing demand for VoIP products and services
overall as the technology continues to mature and proliferate.  We will place
significant emphasis on selling our products and services globally.  We expect
the current level of interest in our products and services to continually
increase as we further penetrates the market and new products and services are
rolled out.

Our VoIP revenues are derived from hardware and software licensing, hardware
sales and residual long distance charges.

Our VoIP products have been sold primarily to distributors and resellers.  To
expand our market shares, we will offer the products directly to the general
consumer beginning in Q4.  We plan to do this via direct sales through our
on-line web site as well as strategic alliance with various domestic and
international retail channels.

To gain market shares, we have also reduced our licensing cost.  This has
resulted in lower revenues and margins for our server sales.  As a trade off,
we expect to capture more sales in our turn-key servers which should
eventually result in additional sales in phone equipment.

M2M Products. Panther Trak(tm) is our first M2M product.  This GPS based
vehicle tracking device was designed to initially focus on theft, recovery,
and tracking services markets. The device, available in both GSM and CDMA, can
be installed in a vehicle to allow it to be tracked, via a cellular network,
from a central location the vehicle's velocity, direction, idle time, route
efficiency, destination arrivals and departures, etc.  The device can also
send an alert based on exception conditions such as the activation of a panic
button or alarm, deployment of air bag, or move from a park location.

We also provide OEM or customized M2M solutions for various vertical markets.
Some examples of M2M markets include security, public safety, automatic meter
reading, supply chain management, vending machine management, industrial
equipment monitoring, cargo/vehicle tracking, traffic control, and home
automation.

Our M2M business is making steady progress.  We have tested and are currently
marketing our Panther Trak(tm) products in North America, Latin America, Asia
and Europe.

<PAGE> 28

Our M2M revenues are derived from hardware and software licensing, hardware
sales and custom development.

The sale cycle for our Panther Trak(tm) was found to be longer than expected.
Sales to large accounts often require additional customization to our hardware
and software as well as longer test time.  However, we believe these sales are
potentially material with frequent follow-up orders.

As a result of our system customization efforts, we have expanded our device
capability to include support for microLan and Wi-Fi.  We believe these
technologies will allow us to capture other M2M vertical markets in the
future.

Some of our distributors' purchase commitments have not materialized as
expected.  This has resulted in us booking less than projected sales for the
period ended September 30, 2004.  We continue to work with these distributors
to address any outstanding issues and have reasons to believe that this will
lead to additional sales in the near future.

Results of Operations

Comparison of Three Months Ended September 30, 2004 to Three Months Ended
September 30, 2003

Revenues.  The net revenues for the quarter ended September 30, 2004 increased
$269,501 or 9.7% to $3,050,110 as compared to net revenues of $2,780,609 for
the same period in the prior year.  The year-over-year increase in revenues
were primarily due to the increased VoIP sales and the overall increase in
consulting services.

Gross Profit. The gross profit for the quarter ended September 30, 2004
increased $81,278 or 24.3% to $415,722 as compared to the gross profit of
$334,444 for the same period in the prior year.

Operating Expenses.  The operating expenses for the quarter ended September
30, 2004 were $631,292 as compared to the operating expenses of $128,351 for
the same period in the prior year.  The increase is attributable to financing
fees, financing related legal fees, shareholder meeting expenses, general R &
D, product development costs, and increase in operational, administrative and
marketing costs.

Non-Operating Expenses.  Interest expense for the quarter ended September 30,
2004 was $106,306 as compared to $20,116 for the same period in the prior
year.  Factoring expenses for the quarter ended September 30, 2004 were $0 as
compared to $72,095 for the same period in the prior year.

Net Loss.  As a result of the above, the net loss for the quarter ended
September 30, 2004 was $338,392 as compared to the net income of $100,160 for
the same period in the prior year.  The loss was primarily due to the higher
general and one time operating expenses. The basic loss per share was $0.009
during the three months ended September 30, 2004 as compared to an income of
$0.003 per share during the same period last year. The diluted loss per share
was $0.009 during the three months ended September 30, 2004 as compared to an
income of $0.003 per share during the same period last year.

<PAGE> 29


Comparison of Nine Months Ended September 30, 2004 to Nine Months Ended
September 30, 2003

Revenues.  The net revenues for the nine months ended September 30, 2004
increased $3,295,214 or 42.4% to $11,058,853 as compared $7,763,639 for the
same period in the prior year.  The year-over-year increase in revenues were
primarily due to the increased VoIP sales and the overall increase in
consulting services.

Gross Profit. The gross profit for the nine months ended September 30, 2004
increased $1,915,453 or 262.8% to $2,644,188 as compared to the gross profit
of $728,735 for the same period in the prior year.  The increase was
attributable to the increase in total sales resulting from the increased VoIP
sales and increased consulting services

Operating Expenses.  The operating expenses for the nine months ended
September 30, 2004 were $1,600,193 as compared to the operating expenses of
$1,029,739 for the same period in the prior year.

Non-Operating Expenses.  Interest expense for the nine months ended September
30, 2004 was $130,555 as compared to $50,614 for the same period in the prior
year.  Factoring expenses for the nine months ended September 30, 2004 were
$99,926 as compared to $102,077 for the same period in the prior year.

Net Income.  As a result of the above, the net income for the nine months
ended September 30, 2004 increased to $620,948 as compared to the net loss of
$472,334 for the same period in the prior year.  The increase in net income
was primarily due to the increase in VoIP sales and consulting services.  The
basic earnings per share was $0.017 during the nine months ended September 30,
2004 as compared to a loss of $0.015 per share during the same period last
year.  The dilutive earnings per share was $0.015 during the nine months ended
September 30, 2004 as compared to a loss of $0.015 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 September 30, 2004 we have
$773,332 in cash and $1,253,780 in restricted cash. Given our September 30,
2004 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, 2004. Our cash flow estimates are based upon
achieving certain levels of sales, reductions in operating expenses and
liquidity available under our accounts receivable financing.

Our liquidity primarily consists of $773,332 in cash and restricted cash of
$1,253,780 and $3,118,633 in accounts receivable.  The Company's current
liabilities consist of $2,209,153 in accounts payable, accrued expenses, and
short-term debts.

<PAGE> 30

Our consulting services business segment is cash intensive and often consume
most of our working capital.  Due to a weak market, we were unable to access
additional funding from the restricted cash or convert our loan payments to
stock during the period ended September 30, 2004.  Because of the financial
limitation, we were unable to fully execute our business plan as well as
aggressively market our products and services.  This had resulted in lower
than projected sales and net profits.

Our plans to enter the consumer retail VoIP market will require additional
capital for operation, marketing and inventory.  We will seek to access our
restricted cash to support this growth plan but will not guarantee such access
is possible due to the potential market volatility that is beyond our control.

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 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

Our chief executive officer and chief financial officer (our principal
executive officer and principal financial officer, respectively) have
concluded, based on their evaluation as of September 30, 2004 that the design
and operation of our "disclosure controls and procedures" (as defined in Rule
13a-15(e) under the Exchange Act), are effective to ensure that information
required to be disclosed by us in the reports filed or submitted by us under
the Exchange Act is accumulated, recorded, processed, summarized and reported
to our management, including our principal executive officer and our principal
financial officer, as appropriate to allow timely decisions regarding whether
or not disclosure is required.

<PAGE> 31

During the quarter ended September 30, 2004, there were no changes in our
"internal" controls over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.

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.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

Exhibit   Description
-------  ------------

 31       Certification pursuant Section 302
 32       Certification pursuant Section 906

<PAGE> 32


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: November 19, 2004                 /s/ Derek Nguyen
                                    -------------------------------
                                    Title: Chief Executive Officer


Date: November 19, 2004                 /s/ Khanh Nguyen
                                    -------------------------------
                                    Title: President, Chief Operating
                                    Officer and Chief Financial Officer