SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB/A

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2005
                           COMMISSION FILE NO. 0-25658

                       SECURED DIGITAL APPLICATIONS, INC.
                 (NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)

             DELAWARE                                   84-1357927
  (STATE OR OTHER JURISDICTION                        (IRS EMPLOYER
        OF INCORPORATION)                          IDENTIFICATION NO.)

                             PARK 80 WEST, PLAZA ONE
                             SADDLE BROOK, NJ  07663
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (201) 843 0222
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                       N/A
          (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

              SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:
                   COMMON STOCK, $0.00001 PER SHARE PAR VALUE

Indicate by check mark whether the Company (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  Company  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

Yes:  X      No:

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form  and no  disclosure  will  be
contained,   to  the  best  of  Company's  knowledge,  in  definitive  proxy  or
information  statements  incorporated  by  reference  in Part  III of this  Form
10-KSB. [ X]

     Issuer's revenues for its most recent fiscal year: $28,307,362

     The  aggregate  market  value of the voting  stock of the  Company  held by
non-affiliates as of April 12, 2006 was approximately $5,112,293.

     The number of shares outstanding of the Company's common stock, as of April
12, 2006, was 133,736,378.

     Documents incorporated by reference: None

<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS


PART I
<S>                                   <C>
Item 1     Description of Business................................................... 3
Item 2     Description of Property...................................................14
Item 3     Legal Proceedings.........................................................14
Item 4     Submission of Matters to a Vote of Security Holders.......................14

PART II
Item 5     Market for Common Equity and Related Stockholder Matters..................15
Item 6     Management's Discussion and Analysis......................................17
Item 7     Financial Statements......................................................38
Item 8     Changes In and Disagreements with Accountants on Accounting
           and Financial Disclosure..................................................39
Item 8A    Controls and procedures...................................................39


PART III
Item 9     Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16(a) of the Exchange Act.........................41
Item 10    Executive Compensation....................................................43
Item 11    Security Ownership of Certain Beneficial Owners and Management............44
Item 12    Certain Relationships and Related Transactions............................45
Item 13    Exhibits..................................................................46
Item 14    Principal Accountant Fees and Services....................................47
</TABLE>

SAFE HARBOR STATEMENT

     This Form 10-KSB/A and other reports filed by the Company from time to time
with the  Securities  and Exchange  Commission,  as well as the Company's  press
releases, contain or may contain forward-looking statements,  within the meaning
of Section 27A of the  Securities  Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Information is provided that is based upon beliefs of, and
information  currently  available  to,  the  Company's  management,  as  well as
estimates  and  assumptions  made by the  Company's  management.  The Company is
including this  cautionary  statement in this Form 10-KSB to make applicable and
to take  advantage  of the safe  harbor  provisions  of the  Private  Securities
Litigation Reform Act of 1995 for any  forward-looking  statements made by or on
behalf of us.  Statements  that are not  statements  of  historical  fact may be
deemed  to be  forward-looking  statements.  Forward-looking  statements  can be
identified by the use of forward-looking terminology such as "believes",  "may",
"should", "anticipates",  "estimates",  "expects", "future", "intends", "hopes",
"plans",  "projects" or the negative thereof.  Such  forward-looking  statements
involve  known and unknown  risks,  uncertainties  and other  factors that could
cause actual results of the Company to vary materially  from historical  results
or from  any  future  results  expressed  or  implied  in  such  forward-looking
statements.

     These factors include,  among others,  the following:  the inability of the
Company to  successfully  implement  its business  plans,  the  cancellation  or
postponement  of contracts that the Company has entered into in connection  with
its business,  the inability to obtain  services  provided by other companies or
service  providers,  the  inability of the Company to raise  capital on a timely
basis, the inability of the Company to meet certain covenants contained in trade
financing agreements,  existing and future government  regulations,  changes and
fluctuation in foreign currency  exchange rates, the failure to retain qualified
personnel,  competitive  pressures  and  potentially  adverse  tax and cash flow
consequences resulting from operations in multiple countries with different laws
and regulations,  and the general economic and business  conditions in Malaysia,
the United States and the other countries in which we do business,  primarily in
Asia.  The  Company  does  not  undertake  to  update,  revise  or  correct  any
forward-looking statements.

     The Company will provide  copies of its annual  report,  including  audited
financial statements to its security holders. We also file periodic reports with
the Securities and Exchange  Commission as well as reports on Form 8-K, proxy or
information  statements  and other reports  required of publicly held  reporting
companies. The public may read and copy any materials the Company files with the
SEC at the SEC's Public  Reference Room at 450 Fifth Street,  N.W.,  Washington,
D.C.  20549.  The public may obtain  information  on the operation of the Public
Reference Room by calling the SEC at  1-800-SEC-0330.  The SEC also maintains an
Internet site that contains the reports, proxy and information  statements,  and
other information that the Company files  electronically  with the SEC, which is
available on the Internet at www.sec.gov.  Further information about the Company
and its subsidiaries  may be found at  www.digitalapps.net,  www.eystar.com  and
www.gallant-it.com.my.


STATEMENT REGARDING THIS AMENDMENT

This Amendment to the Company's  Form 10-KSB is filed to correct  certain errors
in the financial statements contained in the Form 10-KSB filed on April 17, 2006
as a result of a consultant's  error while compiling and transmitting the report
for filing on EDGAR. The Company's independent registered public accounting firm
had not  approved  the  release  of their  report in the  previously  filed Form
10-KSB.  Management  has examined the  corrections,  which were omitted from the
previously  filed report.  The corrections do not affect the reported results of
the company's operations and the Company does not believe that they are material
to the consolidated financial statements.

                                       2
<PAGE>
ITEM 1.   DESCRIPTION OF BUSINESS.

     OVERVIEW

     Secured  Digital  Applications,   Inc.  ("SDA"  or  the  "Company")  is  an
integrator of related business  enterprises and business processes.  We generate
revenue through our 14 majority or wholly owned subsidiary  companies located in
the United States and Malaysia,  and  operating in the  information  technology,
communications,   multimedia,   retail,   international   trade  and   logistics
industries.

     Since SDA became a publicly held company  through a reverse  acquisition in
1999,  the  Company  has  expanded  its  lines  of  business  from  a  broadband
communications  operator and  internet  content  provider by acquiring  majority
interests in regional companies that are believed to have superior potential for
growth and profitability as a member of the SDA Group of Companies. Acquisitions
are pursued  based on  management's  criteria  for  acquisition,  which  include
acquisition   costs,   growth  potential,   compatibility  with  SDA's  existing
subsidiaries and the likelihood, in management's view, that the acquired company
will benefit from the centralized  managerial and support  services  provided by
SDA's home office in Petaling Jaya, Malaysia.

     SDA's  operating  subsidiaries  offer products in diverse lines of business
including the development of internet  content,  digital  security and biometric
products, broadband telecommunications,  secured shipping,  value-added sales of
hardware  and  software,  and  retail  sales  of  Apple  computer  products  and
accessories.

BUSINESS DEVELOPMENT

SDA  began  operations  as a  business  organized  under  the  law of  Malaysia.
Following a merger with a Colorado  corporation in 1999, we began to do business
as Digital Broadband  Networks,  Inc. On June 5, 2002, we  reincorporated  under
Delaware law by merging the existing Digital Broadband  Networks,  Inc. with and
into a wholly owned  subsidiary  organized  under  Delaware  law. On January 28,
2004,  we changed  our name to Secured  Digital  Applications,  Inc. in order to
reflect the changed focus of the Company.

SDA's corporate  office is located at Park 80 West,  Plaza One, Saddle Brook, NJ
07663.  We also maintain  offices at 11, Jalan  51A/223,  46100  Petaling  Jaya,
Selangor,  Malaysia  and No. 17,  Lorong Saga Jaya 4, Taman  Perindustrian  Saga
Jaya,  13600 Prai,  Penang,  Malaysia  and operate  three  retail  computer  and
peripherals stores in the Kuala Lumpur area.

As of April 12, 2006,  the Company had a total of  133,736,378  shares of common
stock issued.  The Company has not been subject to any bankruptcy,  receivership
or similar  proceeding.  We have not engaged in any  material  reclassification,
merger, consolidation or sale of a material amount of assets not in the ordinary
course of business. The Company has, however,  acquired several new subsidiaries
during  the  prior  three  years  and  engaged  in  reorganizations  of  certain
subsidiaries  that were not  actively  operating.  The Company also sold certain
assets   during   2004,   which   were  not   significant.   The   acquisitions,
reorganizations and sales of assets are discussed below.


                                       3
<PAGE>
BUSINESS OF ISSUER

Operations of the SDA Group of Companies

     The Company is an  integrator  of business  enterprises  and  processes and
generates revenue through its majority or wholly owned subsidiaries, referred to
in this  annual  report as the "SDA  Group of  Companies."  Our  strategy  is to
develop  synergistic  lines of businesses  in which  management  functions,  are
integrated into a centralized management system that is operated for the benefit
of all of the SDA companies.  Daily operations of the  subsidiaries,  meanwhile,
generally  remain  under the auspices of line  management  that holds a minority
equity stake in the enterprise.  These minority equity holders typically are the
founders of the regional businesses that we have acquired.

Primarily  through our  subsidiary,  Secured  Digital  Applications  (M) Sdn Bhd
("SDAM"),  we  provide  managerial,  sales and  administrative  services  to our
operating subsidiaries in Malaysia and the United States. These services include
back-office support, such as accounting,  sales, logistics and purchasing.  SDAM
also provides strategic management for the portfolio of SDA subsidiary companies
by through long-term planning,  coordinates cross-selling efforts, and organizes
projects undertaken in cooperation by multiple subsidiaries.

     SDA  continues to seek to add to its holdings with  acquisitions  that meet
management's  criteria for inclusion in the group of SDA Companies.  In general,
we seek  regional  businesses  with  strong  management  willing  to  remain  in
considerable  positions of  responsibility  as minority equity holders.  We also
seek  businesses  that are  operating at a profit or near  break-even  and which
provide a superior  opportunity for high rates of growth after  integration into
the SDA group of companies. In considering potential acquisitions, SDA evaluates
such factors as

     o    the  "fit"  of  the  potential   acquisition   among  SDA's   existing
          subsidiaries,  in particular  whether the acquisition is complementary
          to SDA's existing operating subsidiaries;

     o    the  capabilities  of  existing  management  and  the  willingness  of
          existing  management to continue with the  enterprise as employees and
          minority equity holders;

     o    whether the  enterprise  provides,  in  management's  view, a superior
          potential for growth and profitability after acquisition;

     o    whether the enterprise,  in management's view, can be successfully and
          beneficially integrated with SDA's existing business processes;

     o    the terms  under  which  existing  management  is prepared to convey a
          majority interest to SDA; and

     o    the  demonstrated  ability  of  existing  management  to  operate  the
          enterprise profitably.

SDA's  acquisitions  and the growth of its  operating  subsidiaries  have been a
significant  factor in the rapid growth of the  company's  revenues  since 2000,
from  approximately  $4.2  million  for the  year  ended  December  31,  2000 to
approximately  $28.3 million for the year ended December 31, 2005.  There can be
no  assurance,  however,  of  SDA's  continuing  success  with its  strategy  of
acquiring and integrating regional business enterprises.

Since 2000,  we have  succeeded in financing  our  acquisitions  primarily  with
internally  generated  funds and with the  issuance  of our common  stock.  This
strategy has permitted  the Company to maintain a low debt to equity ratio,  and
at present the company's debt is primarily limited to trade financing secured by
restricted cash accounts.  There can be no assurance,  however,  that we will be
able to continue to pay for acquisitions with internally  generated funds and it
is likely  that we will  require  additional  funding,  which may  result in the
issuance of additional equity or debt.

During  2004 we  secured  $7  million  in  financing  through  the  issuance  of
convertible  debt and  convertible  preferred  stock. In the view of management,
however,  the terms of the financing  ceased to be in the best  interests of the


                                       4
<PAGE>
Company  and  had  an  unacceptable  impact  on  earnings  available  to  common
shareholders.  We  announced  a plan  to  retire  the  company's  debt  and  two
outstanding  issues of convertible  preferred  stock.  The convertible  debt and
preferred  stock were  retired in August 2005 and the company  recorded  certain
charges for  extraordinary  costs  associated with this action.  See Note 12 and
Note 13 to the  financial  statements.  While we believe that decision to reduce
payments  for  interest  and  preferred  dividends  will  improve  the  earnings
available to common  shareholders  during 2006 and  thereafter,  there can be no
assurance that our strategy will be  successful,  nor can there be any assurance
that we will not seek future  financing  in the form of debt,  common  equity or
preferred  equity  that has a negative  impact on earnings  available  to common
shareholders.

Areas of Operation - Overview

SDA's principal  operations are largely in the information  technology industry,
in which its companies,  either independently or through joint projects, seek to
develop and commercialize practical applications of digital technology.

SDA's   subsidiaries   are  involved  in   value-added   software   applications
development,  broadband  network  operation,  the sale of devices  that  utilize
broadband  networks,   the  development  and  sale  of  devices  using  wireless
communications technologies,  the sale of biometric security devices and devices
incorporating  biometric  technology and the development of multi-media Internet
content.  The Company is also a leading  reseller of Apple computer  products in
Malaysia and operates three retail "digital  lifestyle" stores at which it sells
Apple computers and other information technology products.

In  addition,  SDA has  sought  to enter the  logistics  and  supply  management
business  and,  through a subsidiary  corporation,  provides  sales,  rental and
servicing of material  handling  equipment.  SDA has sought to acquire companies
with  logistics  capabilities  and executed  non-binding  letters of intent with
companies   doing   business   as   logistics    operators   or   transportation
intermediaries.  Management has  determined,  however,  in the course of its due
diligence that these  acquisitions  did not meet the Company's  expectations for
growth and profitability and elected to not complete certain  acquisitions.  The
status of these acquisition efforts are discussed in more detail below.

In the third  quarter  of 2005,  concluded  that  international  trade  provides
opportunities for growth and profitability  that, in management's  opinion,  are
superior  to those  that have been  available  solely as a  logistics  operator.
Management  determined to reorganize two of its subsidiaries,  SDA America, Inc.
and Eystar Media,  Inc., to pursue  opportunities in trade between North America
and Asia.  The  reorganization  was  completed in early 2006.  We are  presently
developing the businesses of SDA Worldwide,  Inc. (f/k/a SDA America, Inc.) as a
customs consultant for Asian exporters and China Sea Trade Company (f/k/a Eystar
Media, Inc.), a wholly owned subsidiary of SDA Worldwide, as a sales consulting,
import/export management and proprietary trading and logistics firm.

Operations During 2005

The  Company's  principal  operations  during 2005 included the  development  of
interactive,  multimedia  content for the Internet;  the development,  licensing
and/or sale of specific products and applications that utilize the capacities of
a broadband network;  information  technology  consulting and the operation of a
wireless  broadband  network in Malaysia.  We marketed  hardware and software as
well  consulting  services  to a number of  companies  in the public and private
sectors.  Our hardware products included the EyStar SmartHome Management System,
broadband modems,  biometric systems and Internet-based  cameras.  SDA sells its
products in connection with consulting contracts that are awarded to the Company
as well as through its retail computer stores.

                                       5
<PAGE>
In April 2005, we acquired our newest subsidiary,  Innospective Sdn. Bhd., which
develops  applications for use with  communications and information  technology.
Our  operations  expanded with  Innospective  into the design,  development  and
implementation of wireless applications and electronic solutions. Innospective's
business   activities   include   providing   turnkey   solutions  for  wireless
communications,  controls and security, home and office automation,  development
of personal digital  assistants,  automatic vehicle locating systems and vehicle
immobilizer systems;  and supply,  installation and commissioning of testing and
measurement  equipment.  In addition,  Innospective  provides  technical  design
consulting services and technical training services.

During 2005 Innospective developed applications incorporated into products using
wireless communications, satellite and biometric information technologies. These
included the  Smart-Tracker  vehicle  management  system,  currently in use by a
Malaysian  Fortune  500  oil  and  gas  company.  Other  products  developed  by
Innospective include radio terminal unit and a customized OEM GSM/GPRS modem.

Innospective has also supplied  significant research and development services to
other  operating  subsidiaries.  During 2005,  Innospective  completed a product
update of the Eystar SmartHome system and has provided  consulting  services for
turnkey sales. ISS has also provided product development  services in such areas
as  inventory  control  and  security  for  other  members  of the SDA  Group of
Companies.

During  2005  we  significantly   expanded  our  retail  information  technology
business,  operated by a group of  subsidiaries  known as the  Gallant  Group of
Companies.  Gallant is a Tier One Apple  computer  reseller and  operated  three
retail stores during 2005 offering "digital lifestyle" products, including Apple
Computers. During the year we devoted substantial resources to the operations of
Gallant, developing proprietary inventory processing systems in conjunction with
new purchasing  procedures.  These efforts were undertaken to improve efficiency
and profit margins.

We also  generated  revenue  from the sale,  rental and  servicing  of  material
handling  equipment  by our  subsidiary  Armor  Multi  Services.  Since 2003 the
Company  has sought to develop  secured  shipping  and supply  chain  management
services.  Our strategy was to seek out strong regional logistics operations for
potential acquisition.  Although we have executed non-binding letters of intent,
we have elected not to close these transactions. We continue to pursue expansion
into the logistics and secured shipping business.

The businesses of our operating subsidiaries are described in more detail below.

     The Company has the following subsidiaries:

1.   China Sea Trade Company,  Inc.  ("CST")(f/k/a Eystar Media, Inc.), a wholly
     owned subsidiary of SDA Worldwide,  Inc.,  organized under Delaware law and
     based in Saddle Brook, NJ. CST offers consulting and management services to
     regional  firms in Asia  seeking to develop  markets in the United  States.
     These include  contract sales  representation,  the contract  management of
     joint venture  companies  and advice and  consulting on funding and mergers
     and acquisitions  within the United States. In addition,  CST is seeking to
     establish a  proprietary  importing  and  logistics  operation for selected
     products.  CST began  operations  in early  2006 and did not  generate  any
     revenue in 2005.

2.   SDA  Worldwide,  Inc.  ("SDAW")(f/k/a  SDA  America,  Inc.) an wholly owned
     subsidiary,  organized  under  Delaware law and based in Saddle Brook,  NJ,
     offers  consulting  services to Asian exporters seeking to enter the United
     States markets,  principally on compliance with US customs regulations. The
     company  was  originally  formed as a wholly  owned  corporation  used as a
     special  vehicle to secure a $6.5 million  funding from Laurus  Master Fund
     Ltd. (the "Master Fund") through private placement of securities consisting
     of  convertible  preferred  stock of SDA America.  As a result of the early


                                       6
<PAGE>
     retirement  of the  Laurus  investment,  management  determined  to use the
     corporation  as the vehicle to develop the  company's  international  trade
     consulting business in the United States. SDAW began operations in 2006 and
     did not generate any revenue in 2005.

3.   Secured  Digital   Applications   (M)  Sdn  Bhd  ("SDAM")  (f/k/a  Animated
     Electronic Industries Sdn Bhd), is a wholly owned Malaysian subsidiary that
     designs,  develops and produces  multimedia content and provides consulting
     services  for  website   development,   network   engineering  and  project
     management  in IT related  projects.  In  addition to its  activities  as a
     multimedia   developer  and  IT  consultant,   SDAM  provides   centralized
     management and  back-office  support to SDA's other  subsidiaries  from its
     office in Petaling Jaya, Malaysia.

4.   Perwimas  Telecommunications  Sdn  Bhd  ("PTSB"),  an  86%-owned  Malaysian
     subsidiary of SDAM,  provides  broadband  and  application  services  under
     licenses granted by the government of Malaysia.

5.   Armor Multi  Systems Sdn Bhd ("AMS")  (f/k/a Asiaco Multi  Corporation  Sdn
     Bhd),   presently  a  wholly  owned  Malaysian   subsidiary  of  SDAM,  was
     incorporated  as a special  vehicle to acquire the  businesses and selected
     net assets of Asiaco Material  Handling Sdn Bhd ("AMH") and its subsidiary,
     associate and related companies ("the Asiaco Group"), based in Malaysia.

6.   Secured  Shipping Sdn Bhd ("SS"),  a wholly owned  Malaysian  subsidiary of
     SDAM,  presently  provides  consulting  services on the  implementation  of
     secured shipping services and supply chain  management.  SS is presently in
     the development stage and has not generated any revenue.

7.   Armor Multi Services Sdn Bhd ("AMSSB"), a 60%-owned Malaysian subsidiary of
     AMS, is primarily involved in providing maintenance, repair and restoration
     services for all material handling equipment.

8.   Digital Image ID Sdn Bhd ("DID") (f/k/a Vista Positive Sdn Bhd),  presently
     a  wholly-owned  Malaysian  subsidiary  of  SDAM,  will  be used as a joint
     venture  vehicle to undertake a project with the  Company's  partners and a
     leading Malaysian IT company to enable the search and match of DNA data for
     newborns and registered  criminals,  for use primarily by the Government of
     Malaysia.

9.   Gallant Service Centre (M) Sdn Bhd ("GSC"),  SDAM's wholly-owned subsidiary
     from the date of acquisition on September 29, 2004 is primarily involved in
     the provision of scheduled  maintenance and repair services for information
     technology  products.  The Company is using GSC as the special  vehicle for
     its investment in the Gallant group of companies.

10.  Gallant IT Holdings Sdn Bhd ("GIH"),  GSC's 55% owned subsidiary,  from the
     date of  acquisition  on September  29, 2004 is  primarily  involved in the
     supply and provision of information technology products and services.

11.  Gallant Zone (M) Sdn Bhd ("GZ"), a wholly-owned subsidiary of GIH, operates
     three retail  outlets in Malaysia for the sale of Apple  computer  products
     and accessories.

12.  Eystar  Distribution  Sdn Bhd ("ED") (f/k/a Gallant IT Distribution (M) Sdn
     Bhd), a wholly-owned subsidiary of GIH, is currently dormant.

13.  Gallant  Focus (M) Sdn Bhd ("GF"),  a  wholly-owned  subsidiary  of GIH, is
     currently dormant.

14.  Innospective  Sdn Bhd ("ISS"),  a 55%-owned  subsidiary  of SDAM from April
     2005, is a systems integration firm specializing in the design, development
     and implementation of wireless applications and electronic solutions.


                                       7
<PAGE>
     At December 31, 2005,  the Company and its  subsidiaries  had a total of 50
employees,  all of whom were  employed in  Malaysia.  SDAW and CST are  operated
through  a  consulting  agreement  with  the  minority  equity  holder  in SDAW,
Intellego  LLC, a New Jersey  Limited  Liability  Company,  which supplies three
employees.  In an  effort  to  reduce  its  operating  costs,  the  Company  has
outsourced its  labor-intensive  content  production work to third parties.  The
Company  plans to continue  recruiting  additional  employees in 2006 to further
strengthen its administrative, sales and marketing divisions.


The SDA Group of Companies Business Activities

Interactive Media Development

     The  Company is  involved  in the design,  development  and  production  of
interactive  multimedia  content,  websites,  programs  and  applications  which
includes the following activities:

     o    Designing,   producing,   hosting  and   distribution  of  interactive
          multimedia content, websites, programs and applications.

     o    Developing  and  producing   e-commerce  programs  and  Internet-based
          security applications and solutions.

     o    Providing project consulting  services on broadband  communication and
          networking systems for property development projects.

Apple, Digital Lifestyle and Information Technology Products

The Gallant Group of companies is a leading  Malaysian  provider of  information
technology  products and services and one of  Malaysia's  top resellers of Apple
computer  products.  The Company,  through its interest in the Gallant group, is
licensed by Apple  Computer  South Asia Pte Ltd ("Apple") to operate as a Tier-1
Apple  reseller in  Malaysia.  In addition to Apple  products,  the Company also
sells other digital lifestyle  products that are compatible with Apple products,
for  example  Mac  accessories,   I-Pod  accessories,  smart  phones  and  other
information and communication technology products. The Company also attained the
status of preferred  partner for  education  institutions  in Malaysia  from two
leading  multimedia  software  houses,  Macromedia and Adobe.  In addition,  the
Company  undertakes  projects  to  supply  computer  hardware  and  software  to
educational institutions,  corporations and government agencies in Malaysia. The
Company is a registered government contractor licensed by Malaysia's Ministry of
Finance to provide or supply the  following  products and services to government
departments and agencies: computer and related IT services,  networking products
and services,  teaching aids, software products and services, personal computers
and related peripherals and services, digital cameras and related equipment, and
multi-user  systems  and  services.  In  Malaysia,  only  registered  government
contractors  licensed by the  Ministry of Finance are  authorized  to provide or
supply products and services to the Government.

In late November  2004,  the Company  announced that it had executed a letter of
intent to acquire a 51 percent interest in MacAsia Sdn Bhd, a Apple professional
video  reseller  in  Malaysia  that  specialized  in retail  sales of video post
production  hardware  based on  Apple's  Final Cut Pro  software  and BMD's high
quality Decklink I/O cards. The transaction was initially  scheduled to close in
December 2004, but has been delayed as a result of activities  undertaken by the
parties during the due diligence process,  primarily the task of reconciling the
accounts of MacAsia with Generally Accepted Accounting  Principles applicable to
United States companies.  The Company has not withdrawn from the transaction but
has  reserved  its  right  to  do  so.  Management   continues  to  pursue  this
acquisition,  but  there  can be no  assurance  that  it  will  be  successfully
completed.


                                       8
<PAGE>
System Integration, Product Development Services and Design Consulting

     Following the  acquisition of  Innospective  Sdn Bhd ("ISS") in April 2005,
the Company expanded into the systems integration  business  specializing in the
design,  development and implementation of wireless  applications and electronic
solutions.  ISS  provides  its  clients  a total  product  development  solution
covering the following  areas from  conceptualization  to final product:  design
selection,  application  development,  printed circuit board design,  production
support,  testing and measurement service,  regulatory approval consulting,  and
technical  support  for  final  products.   ISS's  business  activities  include
providing turnkey solutions for wireless communications,  controls and security,
home  and  office  automation,   development  of  personal  digital  assistants,
automatic vehicle locating systems and vehicle immobilizer  systems; and supply,
installation  and  commissioning  of  testing  and  measurement  equipment.   In
addition,   Innospective  provides  technical  design  consulting  services  and
technical training services.

During 2005 ISS developed applications incorporated into products using wireless
communications, satellite and biometric information technologies. These included
the Smart-Tracker  vehicle  management  system,  currently in use by a Malaysian
Fortune  500 oil and gas  company.  Other  products  developed  by  Innospective
include  radio  terminal  unit and  customized  OEM  GSM/GPRS  modem.  The radio
terminal unit using GSM/GPRS control is used for automation  control  solutions.
The GSM/GPRS modem is embedded with a GSM/GPRS  wireless  module and is used for
wireless transmission of data.

ISS has also supplied  significant  research and  development  services to other
operating  subsidiaries.  During  2005,  ISS  completed a product  update of the
Eystar SmartHome system and has provided  consulting services for turnkey sales.
ISS has also provided  product  development  services in such areas as inventory
control and security for other members of the SDA Group of Companies.

Supply Chain Management Services

SDA's supply chain management is a service encompassing  hardware,  software and
personnel to integrate the flow of goods and information  from initial  sourcing
to delivery of raw materials and/or finished goods to the end user. Key services
offered to clients within this end-to-end process include purchasing, production
planning,    order   processing   and   fulfillment,    inventory    management,
transportation,  distribution, and customer service. Our supply chain management
services are flexible and can be modified  according to the needs of  companies.
We are  actively  seeking  to  develop  competitive  technologies  that  will be
available to a variety of companies  to provide a  cost-effective  way to manage
the supply chain  process.  The SDA Group of Companies have  incorporated  these
supply chain products in their  operations.  Our supply chain services are still
in the  development  stage,  however,  and we have yet to  generate  significant
third-party revenue from this service.

Secured Shipping and Logistics Services

     By combining its supply chain management systems with wireless technologies
like Radio Frequency  Identification  (RFID),  Global  Positioning  System (GPS)
tracking Systems, Short Message Systems (SMS) and biometric security systems and
solutions, the Company has entered the business of offering secured shipping and
logistics  services to assist  exporters to comply with  international  security
demands,  including  the United  States' to comply with the  Container  Security
Initiative  (CSI). The Company is seeking to commercialize  applications for the
electronic  tagging  of  containers  using a GPS  tracking  device  that  allows
consignees  to know  where the  containers  are in  real-time  and  whether  the
container has been tampered with. We are also seeking to develop electronic tags
and other  wireless  applications  to track  shipments and delivery  fleets,  an
essential  element of the  just-in-time  shipping  system  commonly  employed by
manufacturers,  importers  and  exporters.  Our secured  shipping and  logistics
services  have been  introduced in the areas of fleet  management  and inventory
control,  but the introduction of products  targeting  containerized  traffic is
still in the development stage.


                                       9
<PAGE>
Eystar SmartHome System

     During 2005, we introduced a second generation of the multi-protocol EyStar
SmartHome  Management  System.  The  Eystar is a  gateway  device  that  bridges
external  data  networks  such as the Internet to internal  home  networks  like
Ethernet,  telephone line, power line and the 802.11b wireless LAN,  eliminating
the need for any additional  wiring in the home. The Console has the capacity to
enable value-added services to be offered to subscribers. These services include
home   healthcare  in   conjunction   with   hospitals   and  health   advisors;
interconnection and control of appliances  produced by different  manufacturers;
and  security  applications  that  allow  subscribers  to check  on their  homes
remotely.  This Console is designed to operate on both the narrow and  broadband
fixed line/wireless networks and can be linked to the SmileCAM,  another product
marketed by the Company.

     SDA has entered  into  various  agreements  to expand the  marketing of the
SmartHome System or to provide  enhanced  features to purchasers of the console.
In addition, we market the Smarthome system directly.


Broadband Networks

     The Company, through its subsidiary PTSB, has been granted a license by the
government of Malaysia to develop and operate a countrywide  wireless  broadband
network,  known as  VISIONET,  with the capacity to provide  interactive  voice,
video and data  services.  The Company  established  its first  VISIONET cell in
December  2001.  As the  result  of  feasibility  studies  that  were  conducted
following  the  rollout  of  VISIONET,  our  broadband  service  is offered as a
backhaul service for other  telecommunication and broadband service providers. A
backhaul service provides network  infrastructure to other service providers who
provide the direct link or "last mile" service to consumers. We are engaged in a
number of  cooperative  efforts  with  last-mile  service  providers  seeking to
develop  broadband  services.  These include Aptilo Networks,  Sweden,  which is
seeking to deploy  local  mobile  networks  ("LMNs") in  Malaysia  and the Asian
regional  markets and Telekom Sales and Services Sdn Bhd ("TMSS"),  a subsidiary
of Telekom  Malaysia  Berhad,  which is seeking to sell,  distribute and promote
broadband access over standard copper  telephone lines using Digital  Subscriber
Line (DSL) technology.


Biometric Security Products

     SDA is actively  engaged in the  commercialization  of security  technology
incorporating  biometric  identification  technologies.  We sell  such  products
directly  and also develop  value-added  applications  incorporating  biometrics
technology as part of our IT and wireless technology consulting  activities.  We
have entered into a number of agreements  through which we obtained the right to
sell and service.  During 2002, the Company  entered into agreements in which it
obtained these technologies.


SDA has secured the right from Sintec  Corp,  South Korea  ("Sintec"),  to sell,
distribute  and  promote  its  SmileCAM  remote  video  surveillance  cameras in
Malaysia,   Thailand,   Singapore,   Vietnam  and  Brunei.   This  agreement  is
automatically  renewable for one-year terms.  SmileCAM  cameras include features
such as automatic  motion  detection  and tracking,  and sending live  streaming
video to an Internet browser. Combined with applications and solutions developed
by the Company,  the Company  believes that SmileCAM cameras offer to purchasers
useful features such as the ability to record intrusion,  owner  notification by
ordinary telephone, live video, remote security options and forwarding of images
by use of the Internet.


                                       10
<PAGE>
SDA also has been  appointed  by  Testech  Inc.  ("Testech")  of South  Korea to
distribute its biometrics  security  products.  Testech's product range includes
fingerprint access control systems, fingerprint time and attendance, fingerprint
door lock and fingerprint  authentication  module.  These products  support both
TCP/IP protocol and RS422 serial communication.  Four different  combinations of
authentication methods are utilized:  fingerprint,  pin number with fingerprint,
pin number with smart card,  and  fingerprint  with smart card.  Testech holds a
U.S. patent for contact light emitting fingerprint  authentication  sensor which
is used in the above products.  Testech's products are competitively  priced for
the mass  market  and  enable the  Company  to have a wider  range of  biometric
security products that could be customized to meet clients' requirements.


Licenses/Government Regulation

     The Company  operates its wireless  broadband  network  under a license the
Company has obtained from the Government of Malaysia.  The Company believes that
it has the only such license granted by the Government of Malaysia, however, the
Government may issue additional licenses to the Company's competitors.

     Although  the  Company is unaware  of any reason why its  license  might be
terminated or limited,  the Government of Malaysia has the  unilateral  right to
revoke the Company's license upon thirty days notice. The license granted by the
Government  of Malaysia is  material  to the  operations  of the Company and any
alteration,  limitation  or  revocation  of the  license  would  have a material
adverse effect on the Company.

     The  business  operations  of PTSB  are  regulated  by both  the  Malaysian
Ministry of Energy  Communications  & Multimedia  (MECM)  (formerly known as the
Ministry of Energy  Telecommunications & Post) and the Malaysian  Communications
and  Multimedia  Commission  ("CMC").  PTSB's  WVCN  license is  governed by the
Malaysian  Communications  &  Multimedia  Act  1998  ("Act  588")  which  became
effective   on  April  1,   1999.   This   Act,   which   has   superseded   the
Telecommunications  Act of 1950 and the  Broadcasting Act of 1988, is to provide
for and to regulate the converging  communications and multimedia  industries in
Malaysia.  Under  Malaysian law, PTSB had the option of registering its existing
wireless broadband license under Act 588 or maintaining the terms of the license
under the repealed Act. The Company believed that it would be more  advantageous
to register its license under the new Act, and on March 3, 2000  registered with
the CMC its  intention to migrate to the new Act. The license was granted for an
initial period of 10 years commencing May 28, 1997.

     While  the  Company   believes  that  Act  588  is  the  most   significant
industry-specific governmental regulations that apply to the Company's business,
the Company is subject to a large  number of other laws in  different  countries
and localities.

     In September 2001, PTSB was awarded an Application Service Provider ("ASP")
license by the CMC. The ASP license will complement  PTSB's  wireless  broadband
license.  As an ASP,  PTSB could offer  enterprises  access over the Internet to
applications  and related  services that would  otherwise  have to be located in
their computers.

     The  Company's  subsidiary,  GIH  is  a  registered  government  contractor
licensed  by  Malaysia's  Ministry  of  Finance  to  provide  or supply  certain
information  and  communication  technology  products and services to government
departments  and agencies.  The license is due for renewal in December 2006, and
its  approval is granted  solely at the  discretion  of  Malaysia's  Ministry of
Finance.

     The  Company's  subsidiary,  GIH  operates  as a Tier 1 Apple  Reseller  in
Malaysia under an annual license  granted by Apple that will expire in September
2005.


                                       11
<PAGE>
Competition

     The Company operates in a highly competitive marketplace,  in which many of
its competitors are longer  established and financially  sound.  The markets for
security  products and applications and broadband  network facility services are
particularly competitive.

     The  Company's  broadband  services  encounter  competition  from  domestic
Internet  Service  Providers,  often referred to as ISPs.  Many of the competing
ISPs have,  or can be expected to have greater  financial,  marketing  and other
resources  than the Company.  In addition,  in marketing or reselling  broadband
services  provided by  third-parties,  the Company  competes  with other similar
providers.

     The devices  developed and marketed by the Company that seek to utilize the
capacity  of  broadband  networks  typically  compete  with  similar  well-known
products.  In addition,  for security  products  and  applications,  the Company
expects competition from companies that offer conventional security products and
solutions like card access system.

     The Company's  subsidiaries also operate in highly competitive  markets for
sales,  rental  and  service  of  material  handling   equipment,   where  price
competition  is intense and customer  loyalty is low. The Company will also face
competition  from more  established  third party logistic  providers and freight
forwarders  that have  similar  plans to the  Company  to provide  supply  chain
management and secured shipping services in Malaysia.

     The  Company's  subsidiaries  that  operate  retail  business for Apple and
Information  Technology  products  are in a market  highly  sensitive to general
economic  conditions and cyclical changes in consumer demands and new technology
developments.

     Although  the  Company  remains  optimistic  that its  products  will  find
acceptance in a competitive marketplace,  there can be no assurance that it will
be able to compete  successfully  with such  entities.  To date, the Company has
found a limited market for its products and there can be no assurance that sales
will improve or will not weaken.

SIGNIFICANT RISK FACTORS

     The  Company  faces  a  significant   number  of  risks  and  uncertainties
associated  with executing its business plan, only some of which the Company can
currently anticipate.

     These  risks and  uncertainties  may  impair  the  Company's  progress  and
profitability and must be given careful consideration.

     The risks described below are intended to highlight risks that are specific
to the  implementation of its business plan, but are not the only risks that the
Company  faces.  They are not discussed in a particular  order and no assumption
should be made that the most significant or likely risks are discussed first. In
addition, other risks and uncertainties, including those generally affecting the
global economy,  the political and economic  climate in Malaysia and the rest of
Asia, the United States, the relevant  industries in which the Company operates,
the public securities  market, and risks that the Company currently believes are
immaterial may ultimately impair its business and results of operations.

     These risks are  discussed in more detail in  Management's  Discussion  and
Analysis, below.

                                       12
<PAGE>
SUMMARY OF SIGNIFICANT RISKS

   o  The  Company's  business  strategy,  to  acquire  new  businesses  and  to
      aggressively  grow  its  existing  businesses,   requires  investments  of
      substantial resources and entails substantial risk.

   o  The  Company  may  acquire  businesses  that it is unable to  successfully
      integrate into its centralized management structure.

   o  The Company may be unable to continue to grow its  operations  in a manner
      consistent with its historical  performance.  The Company may be unable to
      make  additional  acquisitions  of the same caliber and/or such companies,
      once acquired, may not experience growth or profitability.

   o  The Company has aggressively  pursued strategic  acquisitions of companies
      that it considers to have superior prospects in related lines of business,
      and these acquisitions may be unsuccessful and cause financial losses.

   o  The Company's ability to introduce its products to the anticipated markets
      is unproven.

   o  The market for the Company's  broadband  products and services,  including
      the EyStar  SmartHome  Console,  SmileCAM,  and Testech are unproven,  and
      demand may be inadequate.

   o  The market for the  Company's  new  business  line which  includes  sales,
      rental and servicing of material handling  equipment is highly competitive
      with a large number of competitors.

   o  The Company  obtains  supplies and services  from third parties who may be
      unwilling to continue providing these services in the future.

   o  The Company is subject to license  requirements  and extensive  government
      regulation that can be changed at any time.

   o  The  Company  is  subject  to  particular  risks due to its  international
      operations.

   o  The Company's retail business is sensitive to changes in cyclical consumer
      demand, general economic conditions and technology development.

   o  The Company has entered into  significant  contracts with a limited number
      of  businesses,  the loss of which would be materially  detrimental to the
      Company's operations.

   o  The Company's attempt to enter the business of international trade, either
      as a consultant or as a proprietary  trader,  may be unsuccessful and lead
      to losses. International trade is heavily regulated, is highly competitive
      and is subject to the  detrimental  effects of  fluctuations  in  currency
      exchange rates.

   o  Substantially  all of the Company's  sales occur in Malaysian  Ringgit and
      the Company's  sales and earnings will be affected by the recent  decision
      of the Malaysian  government to allow the currency  exchange rate with the
      United States dollar to fluctuate.  The exchange rate had been  previously
      fixed at 3.8 Ringgit to the dollar.  Since the exchange rate was permitted
      to float,  the exchange rate has dropped to 3.72 Ringgit to the US dollar,
      which has been  favorable  to the  company's  revenue  as  reported  in US
      dollars.

                                       13
<PAGE>
ENVIRONMENTAL LAWS

     To date,  the Company has not incurred any  material  costs for  compliance
with any prevailing environmental laws of Malaysia or the United States.

PATENTS AND TRADEMARKS

     The Company has no patents. The Company's subsidiary,  PTSB, has registered
the name  "VISIONET" as its service  tradename and trademark  with the Malaysian
Registry of Trade Marks and  Patents.  In June 2002,  SDAM  registered  the name
"EyStar" as its service  tradename and trademark with the Malaysian  Registry of
Trade Marks and Patents. No other intellectual property registration is pending.

ITEM 2. DESCRIPTION OF PROPERTIES.

     The  Company's  principal  executive  offices are located at No. 11,  Jalan
51A/223,  46100 Petaling Jaya, Selangor,  Malaysia.  This office space is leased
from an  unaffiliated  party.  This lease expires on March 14, 2007 and provides
for a two-year renewal option thereafter.  A subsidiary of the Company leases an
office from an unaffiliated  party in Malaysia under a two-year operating lease,
which expires in May 2006 and provides for a one-year renewal option thereafter.
Another  subsidiary of the Company leases three retail outlets in Malaysia.  One
lease  expires in December  2006 and the other  lease  expires in March 2008 and
provides for a three-year renewal option thereafter.

     The  company and two of its  subsidiaries  utilize  office  space in Saddle
Brook, New Jersey,  provided under the terms of a consulting  agreement with the
minority  equity holder in SDA Worldwide.  The consulting  agreement  expires in
September 2007 and is not subject to automatic renewal.

     The Company believes that its existing and planned  facilities are adequate
for  its  current  requirements  and  that  suitable  additional  space  will be
available as needed to accommodate future expansion of its operations.


ITEM 3. LEGAL PROCEEDINGS.

     On May 31, 2005,  the Company  commenced an action in the Superior Court of
New Jersey,  Chancery Division,  Union County, seeking to enjoin the exchange of
shares  of Kalan  Gold  Corp.,  held by  Michael  Gillies,  into  shares  of the
Company's  common  stock.  The Company  alleges that the shares were  improperly
issued  by  Kalan,  predecessor  to the  Company,  to  Gillies,  who  acted as a
consultant in connection with the 1999 merger of Animated Electronics Industries
Sdn Bhd and Kalan Gold. The Company obtained, with the consent of the parties, a
temporary  restraining order prohibiting the exchange of the shares. Mr. Gillies
has answered the complaint.  The Company filed a motion for summary judgment and
to stay  certain  claims  raised by Mr.  Gillies as subject to an  agreement  to
arbitrate contained in a consulting agreement. In October 2005, the Court denied
the motion for  summary  judgment  but granted  the  Company's  motion to compel
arbitration. The Company has elected not to pursue its rights in arbitration and
in November 2005, the disputed share certificate was exchanged for a certificate
representing a like amount of shares of SDA common stock.


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

     The Company did not submit any matter to a vote of the  Company's  security
holders during the fourth quarter of the fiscal year covered by this report.


                                       14
<PAGE>
                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The Company's  common stock trades in the  Over-the-Counter  ("OTC") market
under the symbol  "SDGL"  and  published  quotations  are  available  on the OTC
Bulletin Board. Prior to February 3, 2004 and June 6, 2002, the Company's common
stock traded under the symbol "DBBD" and "DBBN", respectively.

     The table below sets forth the range of high and low bid  quotations of the
Company's common stock as publicly reported by Marketguide  during the Company's
2005 and 2004 fiscal years. The following bid price market quotations  represent
prices  between  dealers  and  do  not  include  retail  markup,   markdown,  or
commissions; hence, they may not represent actual transactions.

Year 2005                High          Low
                        ------        -----

First Quarter           $0.23         $0.16
Second Quarter          $0.18         $0.08
Third Quarter           $0.15         $0.09
Fourth Quarter          $0.12         $0.08

Year 2004                High          Low
                        -----         -----

First Quarter           $0.54         $0.32
Second Quarter          $0.41         $0.23
Third Quarter           $0.27         $0.18
Fourth Quarter          $0.33         $0.19


     As of April 12, 2006, 133,071,488 shares of the Company's common stock were
outstanding,  664,890  shares of the common  stock were held in the treasury and
the  number  of  holders  of  record  of the  common  stock  at  that  date  was
approximately  80.  However,  the Company  estimates that it has a significantly
greater  number of  shareholders  because a substantial  number of the Company's
shares are held in "street names" by the Company's  market makers.  On April 12,
2006,  the closing  trade price for the  Company's  common  stock was $0.066 per
share.

     Under the Company's Articles of Incorporation,  holders of common stock are
entitled to receive such dividends as may be declared by the Company's  Board of
Directors.  No dividends on the common stock were paid by the Company during the
periods  reported herein.  The Company has entered into certain  agreements with
regard to the sale of a convertible note and convertible  preferred stock to the
Laurus Master Fund that restrict the Company from paying additional dividends on
its  common  stock  until  such  time as the  convertible  note and  convertible
preferred have been converted into common stock, repaid or redeemed.


                                       15
<PAGE>
SALES OF UNREGISTERED SECURITIES


     There were no sales of unregistered securities during the fourth quarter of
2005.  All  securities  that have been issued or sold by the Company  during the
past three years,  but were not registered  under the Securities Act of 1933, as
amended, have been reported in the Company's previous Forms 10-QSB.

PURCHASE OF EQUITY SECURITIES

     There were no repurchases of equity securities during the fourth quarter of
2005.


                                       16
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

     During 2005, the Company achieved  substantial  growth in its revenues from
continuing  operations,  to  $28,307,362,  compared to  $20,438,030 in 2004, and
achieved positive earnings from continuing operations for the fourth consecutive
year.  These  revenues  were mainly  derived  from the design,  development  and
production of interactive multimedia websites and content and from the provision
of project consulting services.

     Net income for the year ended  December  31, 2005 and 2004 was $126,916 and
$1,231,894  respectively.  The Company's net income in 2005 included recognition
of a deferred  gain of  $126,282.  The  Company's  net  income in 2004  included
recognition  of a  deferred  gain of  $245,416,  and  income  from  discontinued
operations  of $1,425.  Excluding  these,  the  Company  would have earned a net
income of $634 and  $985,053 for 2005 and 2004,  respectively.  The earnings per
share of common  stock,  was less than $0.01 for both years ended  December  31,
2005 and 2004, respectively.

     At year end 2005, the Company had total current  assets of $7,419,307,  net
property and equipment of $1,187,786 and net tangible assets of $4,997,766.  The
Company's shareholders' equity at year end 2005 was $6,099,721.

In early 2005,  the Company  announced  it would seek to retire its  outstanding
debt and convertible stock issues as part of a strategy to reduce costs for debt
service and preferred stock dividends and thereby improve net earnings available
to common shareholders.  In August 2005, we reached an agreement to retire early
approximately  $6.34 million in convertible  debt and preferred stock held by an
institutional  investor.  In  addition,  the  chairman of company  converted  an
outstanding  class of preferred  stock into 8 million shares of common stock. We
incurred  non-operating  charges during the third quarter of approximately  $3.3
million related to this action.  These charges  resulted in a net loss available
to common  shareholders for 2005. The strategy to retire the outstanding  shares
of dividend bearing preferred stock and the  interest-bearing  note reduced debt
service and dividend payments by about $550,000 per year.

We have changed the accounting  utilized in connection with our treatment of the
convertible stock and convertible  debt,  specifically to treat certain features
of these securities as embedded  derivatives that required  bifurcation from the
host securities and separate accounting treatment. We corrected and restated our
results for the year ended December 31, 2004 and are in the process of restating
our quarterly  financial  statements  for 2005.  Our discussion of the Company's
financial results  incorporate the restated 2004 results.  See Item 7, Financial
Statements,  below,  for a more detailed  discussion of the  restatement of 2004
results and the financial statements beginning at page F-1.

     In 2005, the Company's revenue was generated from the following activities:

1.   Designing,  producing,  hosting and distribution of interactive  multimedia
     content, websites, programs and applications.
2.   Developing and producing  e-commerce  programs and Internet-based  security
     applications and solutions.
3.   Providing  project  consulting  services on  broadband  communications  and
     networking systems for property development projects.
4.   Sale, rental and servicing of material handling equipment.
5.   Sale of Apple  products,  computer  hardware,  software  and  provision  of
     installation,  repair and maintenance  services for information  technology
     products.

                                       17
<PAGE>
     The Company  anticipates that these activities will continue to provide the
principal sources of the Company's revenue in 2006. During 2006, revenue is also
expected  to be  generated  from  application  development,  network  operation,
delivery of value-added  applications and services;  sales of biometric security
products and solutions and sales of the EyStar SmartHome  Management System. The
Company expects revenue from the sale, rental and servicing of material handling
equipment, sale of Apple products, sale of other information technology hardware
and software and provision of information  technology services. The Company also
expects  revenue to be generated  from  provision of product  design  consulting
services,  and sale of products and applications developed by its newly acquired
subsidiary, Innospective Sdn Bhd.

     The Company conducts its principal operations in Malaysia. According to the
Malaysian Institute of Economic Research,  Malaysia's  projected growth in Gross
Domestic  Products  (GDP)  for  2006  and 2007 is  projected  at 5.5% and  5.8%,
respectively.  In view of the expected growth and positive economic outlook, the
Company will continue to focus its business  activities in Malaysia for 2006 and
beyond.

     For 2006,  the  Company is seeking to expand its  business  to include  the
development,  integration  and  provision  of secured  shipping and supply chain
management services. The Company believes it is able to combine its expertise in
application  development  with biometric  security  solutions,  Radio  Frequency
Identification  and Global Positioning System tracking system to provide a total
solution for supply chain management,  secured shipping and third party logistic
services.  The Company's  planned secured  shipping and supply chain  management
services would include the following offerings:

1.   Technology to identify planned and actual container contents.
2.   Technology to identify planned and actual container routing.
3.   Physical security of the container seal.
4.   Physical  security of cargo  loading and handling  areas,  including  video
     monitoring, employee screening, access control, and perimeter security.
5.   Technology to scan container contents for weapons of mass destruction
     ("WMD").
6.   Technology to reconcile  container  contents to manifests  without breaking
     the container seal.

The  Company's  decision to enter into the  secured  shipping  and supply  chain
management  industries  was prompted by the large  potential  market for secured
shipping  services as indicated by burgeoning  exports from Malaysia to the USA,
which  increased  from $24  billion in 2002 to $28 billion in 2004  (source:  US
Census Bureau) and the increasing levels of security imposed by the U.S. Customs
and Border Protection.

The company intends to aggressively pursue  opportunities in international trade
in 2006.  We have  reorganized  two of our existing  subsidiaries  which will be
operated as SDA  Worldwide  ("SDAW") and China Sea Trade  Company  ("CST").  SDA
Worldwide  will seek to provide  logistics and  consulting  services to overseas
companies  seeking to develop markets in the United States for their products or
materials.  These services will include advice and consulting on compliance with
US customs regulations,  assistance in developing and implementing secure supply
chains and developing and  maintaining  policies and procedures that comply with
the informed compliance standards applicable to trade with the United States.

SDAW's wholly owned subsidiary, CST will provide management and sales consulting
to overseas  producers of goods and services  seeking to enter the United States
markets. These services include contract management of US subsidiaries, contract
sales   representation  and  back-office   services,   consulting  on  corporate
transactions  including mergers,  acquisitions and fundraising,  contract market
research and product development.


                                       18
<PAGE>
SDAW and CST are based in Saddle Brook,  New Jersey,  a suburb of New York City.
SDA also has  established  an office in Saddle  Brook,  which  will serve as its
United  States  headquarters.  Although  the  company is expected to continue to
conduct  its  principal  operations  in  Malaysia,   it  has  relocated  certain
operations  including  shareholder services and investor relations to the United
States to improve its ability to provide service to its investors.


Significant Business Developments and Plan of Operation

     On April 30, 2005,  the Company  completed the  acquisition of a 55% equity
interest in Innospective  Sdn Bhd ("ISS"),  for total  consideration of $85,152.
The Company paid $52,652  (RM200,080) in cash to acquire  122,000 shares of ISS'
common stock and issued 250,000 shares of the Company's common stock,  valued at
$32,500,  being the market  price of the  Company's  common stock at the date of
issuance,  to a  consultant  as payment for  professional  fees on advising  the
Company in this acquisition.  ISS is a systems  integration firm specializing in
the  design,   development  and  implementation  of  wireless  applications  and
electronic  solutions,  and  its  acquisition  is  believed  to  complement  the
Company's existing revenue sources.


     The following table summarizes the estimated  aggregated fair values of the
assets acquired and the liabilities assumed from ISS at April 30, 2005, the date
of the  acquisition.  The allocation of the purchase  price is  preliminary  and
subject to change.  However, the final purchase price allocation is not expected
to be materially different than that presented herein.



Property, furniture and equipment                    $         2,119
Accounts receivable                                           10,365
Cash                                                          54,033
Customer relationships                                        59,423
Accounts payable                                             (19,689)
Minority interest                                            (21,099)
                                                     ---------------
                                                     $        85,152
                                                     ===============

     During 2006, the Company anticipates that it will continue to implement its
strategy  and to  operate  its  existing  lines  of  businesses,  including  its
multi-media content operations, the retail computer outlets and the provision of
IT and wireless  technology  consulting.  In  addition,  we plan to continue our
efforts to commercialize our logistics and supply chain services and technology.

     We plan to operate in the United States during 2006 primarily  through SDAW
and CST and to provide  consulting  services to Asian companies that are seeking
to  establish  a  presence  in the US  markets.  We will  focus our  efforts  on
developing contracts with Malaysian  manufacturers.  During 2005, our subsidiary
Gallant opened its second and third Apple retail centers located in the Hartamas
Shopping Centre in Sri Hartamas and Bangsar Village Shopping Center,  suburbs of
Kuala Lumpur. The new outlets focus on the "digital lifestyle" concept developed
by the Company and offer a one-stop  showroom for retailing of Apple products as
well as products  developed  by the Company and its newly  acquired  subsidiary,
ISS.  Gallant  began  to  implement  new  purchasing  and  inventory  management
techniques  during  2005,  including  increased  sales  on  consignment  and the
development of proprietary  inventory  systems that management  anticipates will
reduce costs and improve profit margins.


                                       19
<PAGE>
     We plan to  continue  to focus our core  operations  in Asia,  particularly
Malaysia,  as management  believes  that the growth of Asian  economies has been
favorable and is likely to continue.  The company  continues to review potential
acquisitions in Asia, primarily of regional companies in Malaysia, Thailand, and
the  People's  Republic of China in an effort to add  operations  that will meet
management's  standards  and provide  superior  opportunities  for growth  after
acquisition. We plan to attempt to benefit from the high levels of trade between
the United States and Asia through the  establishment  of consulting  businesses
serving Asian manufacturers seeking to develop markets in the United States.

     The  Company  anticipates  that it will  continue to seek the rights to new
products and services through  contractual  arrangements and potentially through
the acquisition of other business entities that provide  compatible  products or
services.  The Company  expects to continue to market its  products and services
through  a  sales   force  and  through  its   Internet   websites   located  at
www.digitalapps.net and www.eystar.com.

     The Company has secured various contracts to provide hardware, applications
or  consulting  services.  The Company  believes that it will be able to perform
some of these  contracts  during 2006 and that it will  recognize  revenue  from
these activities in 2006. The Company has experienced significant  uncertainties
in scheduling,  however, and we cannot forecast the dates on which we will begin
performance  of these  contracts.  These  contracts are described in more detail
below, along with their current status.


Significant Contracts

     For  2005,  the  Company  hopes to  generate  additional  revenue  from the
contracts  described  below.  This description is intended to provide the reader
with  a  description  of  the  principal  activities  of the  Company  that  are
anticipated in 2005.  Although the Company provides its current estimates of the
time in which the contracts  will be  performed,  revenues that may be generated
and/or sales that are  projected,  there can be no assurance  that the contracts
will be performed as anticipated or that the revenues or sales projected will be
realized by the Company. The contracts may be terminated,  limited,  breached or
delayed,  may be subject to force majeure  clauses or the obligations to pay for
services  rendered or products  received may not be fulfilled.  The Company does
not undertake to  continually  update its  shareholders  about the status of its
contracts in the absence of a legal obligation to do so.

a)   In August 2001, the Company was awarded a consulting contract, estimated to
     generate revenue of $2.85 million over a three year period,  through August
     2005,  to carry out the  planning,  design,  project  execution  (including
     contract  and  project  management)  of all  broadband  communications  and
     networking   systems/services  for  Pulau  Indah-Marina  Village,  a  water
     oriented luxury resort, residential hotel and spa project. Through December
     31, 2005, the Company has generated $1,300,000 of revenue on this contract,
     of which $137,000 and $467,000 was generated during the year ended December
     31, 2005 and 2004, respectively.

b)   In January 2002, the Company's subsidiary,  PTSB, was awarded a contract to
     carry out the  planning,  design,  and project  execution of all  broadband
     communications  and networking  systems/services  for a  commercial/housing
     project in  Selangor,  Malaysia.  Under the  contract,  PTSB will receive a
     total contract sum of $550,000 over 36 months  beginning  January 2003. The
     project,   featuring   312   serviced   apartments,   62  units  of  retail
     shops/offices  and  120  units  of  housing  for a  government  agency  was
     completed in March 2005. Up to December 31, 2005, the Company has generated
     $550,000 of revenue, of which $23,000 and $216,000 was generated during the
     year ended December 31, 2005 and 2004 respectively.


                                       20
<PAGE>
c)   In November  2002, the Company was  contracted by MY Architect  ("MYA"),  a
     related party, to provide consulting  services relating to home automation,
     home networking,  energy cost saving,  security surveillance and monitoring
     for MYA's  current  projects  involving  two major  commercial  and housing
     developments  in  Malaysia.  The Company  expected  to receive  $550,000 in
     consulting fees over the 18 months beginning December 1, 2002. The contract
     was  completed in 2004 and the Company had received the  contracted  sum in
     full in 2004.  The Company  recognized  $279,000 of revenue during the year
     ended  December 31, 2004.  The Company is  presently  negotiating  with the
     project  developer  to  secure  additional  contracts,  estimated  at  $4.0
     million,  for the supply and installation of the EyStar  SmartHome  Console
     and its security  system  sometime in the second quarter of 2006 in the two
     commercial and housing developments.

d)   In April  2003,  the Company  contracted  with MYA to carry out the design,
     supply and installation of all broadband communications, access control and
     network  security  equipment for a mixed  property  development  project in
     Selangor,  Malaysia, which features a total of 10 blocks of residential and
     commercial  high-rise  properties.  The  30-month  contract,   expected  to
     generate  revenue of $3.2 million,  commenced in the third quarter of 2003.
     Up to December 31, 2005, the Company has generated $550,000 of revenue from
     this  contract,  of which  $158,000 and $354,000 was  generated in 2005 and
     2004, respectively.

e)   In April 2003, the Company was awarded a $9 million contract by MBE for the
     supply of biometric  security products and EyStar SmartHome consoles over a
     three-year period with the first delivery  originally  expected to commence
     in the fourth  quarter of 2003. In December  2003, the Company was informed
     by MBE to postpone the delivery until further  notice.  Due to uncertainty,
     revenue  that will be  realized  from this  contract  during 2005 cannot be
     accurately forecast.  MBE has revived the project in first quarter 2006 and
     the Company is negotiating  to outsource the contract  jointly with a third
     party.

f)   In June 2003,  the  Company  signed a contract  to  implement  a  biometric
     security   recognition  and  identification   system  comprising  hardware,
     software and issuance of security  identity  cards over a ten-year  period.
     The contract, which was expected to commence in the fourth quarter of 2003,
     after the finalizing of technical  specifications  with relevant regulatory
     authorities,  was estimated to generate  revenue of $15 million through the
     first quarter of 2005.  Technical  specifications for the project have been
     finalized;  the Company is currently negotiating on a new project time line
     with the relevant regulatory authorities.

g)   In June 2003, the Company was awarded a $2.0 million contract to supply and
     install a biometric  security system for access control and time attendance
     in  Malaysia.  The project  was  estimated  to  commence  during the fourth
     quarter of 2003 and be  completed  within  six  months of the  commencement
     date.  The  Company was also  awarded a  maintenance  contract  for 5 years
     thereafter.  This  maintenance  contract begins following the completion of
     the  project  and is  expected  to  generate  annual  recurring  revenue of
     approximately  $250,000. The commencement of this contract has been delayed
     as the construction work on the project's property has yet to be completed.
     In April 2005,  the Company  and the client  agreed to amend the  Company's
     scope  of  work  to  include   only  design,   installation,   testing  and
     commissioning of the biometric  security  system.  The client will purchase
     the required hardware directly from third-party  vendors.  The contract sum
     has been revised to $600,000. For the three and nine months ended September
     30, 2005, revenue of $13,158 was generated from this project.


                                       21
<PAGE>
h)   In August  2003,  the Company  was awarded an $850,000  contract to supply,
     install and  commission a biometric  based Building  Access  Management and
     Monitoring System for a 40-story office complex in Kuala Lumpur,  Malaysia.
     The system is  designed to enhance  security  through  the  management  and
     monitoring of visitors  within a building  complex or restricted  area. The
     office  complex  is  currently  tenanted  by  government   departments  and
     agencies,  embassies,  corporations and trade missions.  Implementation  of
     this  contract was expected to commence in the first quarter of 2004 and be
     completed by the second  quarter of 2004.  This project has been delayed as
     the Company was informed by the client to postpone  installation work until
     further  notice.  The client has requested for changes to the contract.  If
     the Company accepts the project  changes,  it is anticipated that work will
     commence on second quarter of 2006.

i)   In March 2004, the Company's subsidiary,  SDAM, was awarded three contracts
     by a related  party,  with an  aggregate  value of $3.81  million,  for the
     supply  and   installation   of  a  biometric   security  system  in  three
     developments  in  Malaysia.   The  first  is  a  multiple-use  real  estate
     development project,  consisting of 312 apartments and 65 office and retail
     units, located in Shah Alam, Malaysia.  Due to delays in construction work,
     installation  is now anticipated to begin in the second half of 2005 and to
     be completed by the first half of 2006.  The second  development is located
     in  Templar  Park,  Malaysia  consisting  of 208  apartments  and the third
     development  is located in Cheras,  Malaysia  with 240  apartments.  Due to
     delays  in  construction  work,  installation  for  the  second  and  third
     development  is anticipated to begin in the first quarter of 2006 and to be
     completed by the first quarter of 2007. In April 2005,  the Company and the
     client agreed to amend the Company's  scope of work to include only design,
     installation,  testing and commissioning of the biometric  security system.
     The client will purchase the required  hardware  directly from  third-party
     vendors. Total contract sum has been revised to $1,150,000.

j)   In April  2004,  the  Company's  subsidiary,  SDAM,  was awarded a contract
     valued  at  $1.9  million  to  deliver  a  biometric   identification   and
     verification  system by the end of the fourth quarter of 2004. The contract
     calls for SDAM to provide a comprehensive  biometric  security system using
     face and fingerprint  recognition  technology for an office complex located
     in Brunei that has 1,200 staff employees.  The system will include controls
     for building access control and employee time  attendance.  Commencement of
     delivery was expected to occur on the second half of 2005.  The customer is
     desirous  re-negotiate the terms of delivery and the contract has been held
     in abeyance until further notice.

k)   In May 2004, the Company's subsidiary, Secured Digital Applications (M) Sdn
     Bhd ("SDAM"), was awarded a contract valued at $2.2 million by Master Index
     Sdn  Bhd   ("MISB")   to  deliver,   install   and   maintain  a  biometric
     identification  and  verification  system  for an office  complex  in Kuala
     Lumpur,  Malaysia.  The system was to be  delivered  and  installed  in the
     fourth quarter of 2004. A three-year  maintenance contract will begin after
     installation.  Commencement  of  delivery  has  been  postponed  due to the
     customers request for a change in the design and technical specification of
     the system.  The client has  encountered  funding  problem and is currently
     negotiating with the Company to revise certain terms of the contract.

l)   In June 2004, the Company announced that it was awarded a contract,  valued
     at   $921,000,    to   develop,    implement    and   maintain   a   secure
     business-to-consumer   e-commerce  portal  using  the  Company's  biometric
     security  technology.  Completion  and  implementation  of the  portal  was
     scheduled for December 2004 but has been postponed  until further notice as
     the client  informed the Company that it needed more time to negotiate with
     its intended  business  partners on the features  and  requirements  of the
     portal.  Revenue  to be  generated  from this  contract  in 2006  cannot be
     accurately  forecasted.  In addition to the contract  fee of $921,000,  the
     Company also expects to generate  annual  recurring  revenue by receiving a
     transaction fee for each completed online  transaction and from a five-year
     contract to provide software and hardware upgrades plus system maintenance.


                                       22
<PAGE>

m)   In July 2004, the Company  announced it was awarded a $6.7 million contract
     to develop face and fingerprint  authentication for credit card payments to
     be  implemented  in  four  countries  in  Asia.  The  contract  is for  the
     development   and  operation  of  a  Biometrics   (Face  and   Fingerprint)
     Authentication  Center  for  credit  card  payments  in  Thailand,  Brunei,
     Indonesia and Hong Kong.  The objective is to achieve  Zero-Fraud in credit
     card  transactions.  Customers targeted for the project include credit card
     issuers  such as banks and other  financial  institutions,  plus  merchants
     accepting  credit card  payments.  Revenues  will be  generated  from sales
     and/or rental of  Point-of-Sales  terminals  equipped with a USB camera and
     fingerprint reader and from transaction  charges.  The Company is currently
     developing a pilot system for evaluation by the customer.  The  development
     of the pilot system has been  suspended as the customer  requested for more
     time to revise  their  requirements  on the  technical  specifications  and
     features of the system.


n)   On  July  7,  2004  the  Company  announced  teaming  agreements  with  two
     unaffiliated  entities to collectively pursue projects to enable the search
     and  match  of DNA data  for  newborns  and  registered  criminals  for use
     primarily by the Government of Malaysia.  The project may be developed by a
     joint  venture  company led by the Company.  The project may be financed by
     internally generated funds. Additional financing in the form of a grant may
     be  sought  from  the  Multimedia  Development  Corporation,   a  Malaysian
     Corporation  charged with the responsibility of implementing the Multimedia
     Super Corridor (MSC), a Malaysian initiative for the global information and
     communication  technology  (ICT) industry.  The targeted  completion of the
     beta  version is expected to be 9 months from the  commencement  date.  The
     commencement  of field  trials is expected to be the  beginning of the 10th
     month, with full commercial implementation targeted for the 21st month.

o)   In June 2004,  the Company  announced  plans to conduct a field trial of an
     online  biometric  payment portal for  electronic  commerce and credit card
     transactions  using biometric products and systems developed by its current
     partner  companies for  identification  and verification  during the second
     half of 2004.  Merchants who sign up as clients of the payment  portal will
     enroll  their  customers  into  the  Company's  system.   Thereafter,   the
     merchant's  clients when making purchases will have their identity verified
     by using face and fingerprint biometric technology. After authentication of
     their  identity,  the  transaction  will be processed and payment  approval
     sought from banks and credit card issuers.  The Company intends to generate
     revenue by charging a fee based on a percentage  of the  transaction  value
     executed through the portal. Implementation of the portal was scheduled for
     early 2006 with initial  deployment in the Malaysian and Singapore markets.
     The project has been delayed,  however,  and no start date has been set for
     the field trials.  Management  cannot forecast  whether the project will be
     implemented during 2006.


Strategic Contractual Relationships


     The Company seeks to enter strategic agreements,  both formal and informal,
with other providers of goods or services that are compatible with the Company's
existing businesses. Such arrangements include license agreements,  requirements
contracts and service agreements.  The Company may also seek to acquire business
enterprises that offer goods and services that are of benefit to the Company and
its shareholders.  The Company's success with these strategic  relationships has
been  uneven,  however,  and with the  exception  of  products  that the company
utilizes  in  performing  its  consulting  contracts,  they  have not  generated
material  amounts  of  revenue.  We  cannot  forecast  whether  these  strategic
relationships will generate significant revenue in 2006.


                                       23
<PAGE>
CASH REQUIREMENTS AND RISK FACTORS

     The  Company  faces  a  significant   number  of  risks  and  uncertainties
associated  with executing its business plan, only some of which the Company can
currently  anticipate.  Chief  among  these  risk  factors  are the needs of the
Company for working capital and the potential need to raise  additional funds to
satisfy the Company's cash requirements during 2006.

     These risks and  uncertainties,  discussed in more detail below, may impair
the Company's progress and profitability. The risks described below are intended
to highlight risks that are specific to the implementation of its business plan,
but are not the  only  risks  that  the  Company  faces.  Additional  risks  and
uncertainties,  including  those  generally  affecting the global  economy,  the
political and economic climate in Malaysia and the rest of Asia, the industry in
which the Company  operates,  the public securities  market,  and risks that the
Company  currently  deems  immaterial  may  ultimately  impair its  business and
results of operations.

IF THE COMPANY'S  LICENSE IS ALTERED OR REVOKED,  THE COMPANY WOULD BE UNABLE TO
IMPLEMENT ITS BUSINESS PLAN.

     The Company  believes that the wireless  broadband  license the Company has
obtained from the  Government of Malaysia is material to the Company's  business
as a facilities-based  and network service provider.  Any material alteration or
revocation  of the license would have a material  adverse  effect on the Company
and would prevent the Company from  implementing its business plan. As described
earlier,  the  Government  of Malaysia  has the  unilateral  right to revoke the
Company's  license upon thirty  days'  notice.  In  addition,  while the Company
currently  believes  that it has the only license  granted by the  Government of
Malaysia,  the  Government  may  issue  additional  licenses  to  the  Company's
competitors, which could also have a material adverse effect on the Company.

IF THE  COMPANY IS UNABLE TO  SUCCESSFULLY  IMPLEMENT  ITS  BUSINESS  PLAN,  THE
COMPANY'S FINANCIAL CONDITION WOULD BE IMPAIRED.

     If the Company is unable to  successfully  implement its business plan, the
Company's financial  condition and performance would be impaired.  The Company's
business plan and strategy  include  numerous  elements that may be difficult or
costly to execute,  and the Company may not be successful in implementing  these
elements and can provide no assurance  that it will do so. The Company  seeks to
exploit  technology  that often does not have  well-established  markets  and in
which  there is great  competition.  The  Company's  ability to develop  its new
businesses, including supply chain management, secure shipping and international
trade  services is unproven.  Even if the Company  successfully  implements  its
business plans, there may be insufficient  demand for the Company's products and
services,  in which event the Company will not generate  sufficient  revenues to
offset the Company's planned  expenditures,  thereby having an adverse effect on
the Company's business operations and financial condition.

THE FAILURE OF THIRD  PARTIES  WITH WHOM THE COMPANY  DOES  BUSINESS TO MEET THE
COMPANY'S REQUIREMENTS COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS.

     The Company's business plan and operations rely on the Company's ability to
obtain  products  and  services  provided by other third  party  providers.  For
example,  the Company relies on a third party  provider for Internet  connection
and  international  gateway and procures its products  through  agreements  with
other providers, a number of which are also actual or potential competitors. The
agreements  that the  Company  has  entered  into may not be  exclusive  and are
generally  terminable  according to their terms. The third-party  providers also
may not be able to provide products or services in sufficient  amounts or of the
necessary  quality to meet the needs of the Company.  The failure of one or more
of these  companies  to meet the  Company's  needs  could  adversely  affect the


                                       24
<PAGE>
Company's  business and results of operations.  Some of these companies may also
be the  Company's  competitors  and,  accordingly,  in the  future,  they may be
unwilling  to provide the  Company  with the  products or services it  requires.
These  companies  may also decide to dedicate  their  resources  and networks to
other  communications  companies  or to  facilitate  their own growth  and, as a
result,  elect to scale  back or  terminate  the  services  they  provide to the
Company.  The failure of any of these third  parties to perform could prevent or
delay the  implementation  of the Company's  business  plan,  limit the types of
services the Company can provide to its customers  and  potential  customers and
adversely  impact the Company's  relationship  with its customers.  Any of these
occurrences could have an adverse effect on the Company's  business,  results of
operations and financial condition.

FAILURE TO RAISE  CAPITAL IN THE FUTURE ON A TIMELY BASIS MAY  ADVERSELY  AFFECT
OUR ABILITY TO FUND OUR OPERATIONS.

     The Company will require  substantial  capital to fund its planned  capital
expenditures and operations.  The Company does not expect to be able to generate
sufficient cash from operations to provide the necessary  capital to execute all
aspects of the  Company's  business  plan.  To the extent that the Company  does
require  addition  funding,  it is likely to issue  additional  shares of common
stock, which would dilute interests of existing shareholders.  If the Company is
unable to  generate  sufficient  cash from its  operations  or raise  capital as
needed,  the  Company  will  likely be unable to pursue or  execute  its  entire
current business plan and may have difficulty fund its operations.

THE COMPANY'S  BUSINESS AND INDUSTRY ARE SUBJECT TO EXTENSIVE  REGULATIONS  THAT
COULD CHANGE AT ANY TIME AND RESTRICT THE COMPANY'S  ABILITY TO COMPETE WITH ITS
COMPETITORS.

     The Malaysian  communications  industry  (including spectrum allocation and
usage) is highly regulated by the Malaysian government.  Regulations that govern
the Company's  business in building a wireless network could change at any time,
which could adversely affect the way the Company conducts its VISIONET business.
The Company may incur substantial costs in complying with these regulations, and
failure to comply with  applicable  rules and  regulations  could  result in the
Company having to pay penalties or its license being revoked by the  government.
Except  for the  deployment  of  VISIONET,  this  risk  factor  does  not have a
significant impact on the Company's other businesses.

FAILURE TO HIRE OR RETAIN QUALIFIED PERSONNEL COULD HURT THE COMPANY'S BUSINESS.

     The Company's future success and performance is dependent on its ability to
identify,  hire, train and retain experienced technical and marketing personnel.
The Company faces significant competition for employees with the skills required
for its  business.  There can be no  assurance  that the Company will succeed in
attracting and retaining the services of qualified and experienced technical and
marketing personnel.

THE MARKETS IN WHICH THE COMPANY  OPERATES ARE VOLATILE,  VERY  COMPETITIVE  AND
INCREASED COMPETITION COULD ADVERSELY AFFECT THE COMPANY.

     The markets for security  products and applications  and broadband  network
facility services are highly competitive.  For broadband  services,  the Company
expects to encounter competition from domestic Internet Service Providers, often
referred to as ISPs. Many of the competing ISPs have, or can be expected to have
greater  financial,  marketing and other  resources  than the Company.  However,
following the repositioning of VISIONET as a backhaul service network, this risk
factor no longer has a material  impact on the  Company's  future  business  and
operation.


                                       25
<PAGE>
     For security  products and  applications,  the Company expects  competition
from companies that offer conventional security products and solutions like card
access  system.  No  assurance  can be  given  that we  will be able to  compete
successfully with these entities.

     The markets for sales,  rental and service of material handling  equipment,
are highly  competitive  where price competition is intense and customer loyalty
is low.  The Company will not be able to provide the  assurance  that it's newly
acquired  subsidiaries and associates will be able to remain  competitive in the
respective industries.

     The market for retail of Apple and other  digital  lifestyle  products  and
supply and provision of information  technology  products and services is highly
cyclical,   sensitive  to  changes  in  general  economic  environment  and  new
technology development.

     The logistics,  secured shipping and supply chain management industries are
highly competitive.

     The  Company  will face  competition  from  more  established  third  party
logistic  providers  and freight  forwarders  that have  similar  plans like the
Company to provide  supply chain  management  and secured  shipping  services in
Malaysia.

     The  Company   will  face   competition   from   experienced,   larger  and
well-established   businesses   in  its   attempts  to  enter  the  business  of
international  trade.  The  business  of  international  trade  also  is  highly
dependent   on  overall   economic   conditions   including   such   factors  as
transportation costs,  materials costs, labor costs and currency exchange rates.
While the overall  environment for international  trade is presently believed to
be  favorable,  changes in  conditions  would  negatively  impact the  Company's
attempt to establish this line of business.

THE  INTERNATIONAL  NATURE OF THE  COMPANY'S  OPERATIONS  EXPOSED THE COMPANY TO
SPECIAL RISKS.

     The Company  currently intends to operate primarily in Malaysia and perhaps
elsewhere  in Asia.  The  Company  therefore  faces  special  risks  related  to
operating  in  international  markets,  which  the  Company  may  not be able to
overcome.  The  following  are some of the risks  inherent in doing  business in
Malaysia and other non-U.S. markets:

     -    Unanticipated changes in regulatory  requirements,  tariffs,  customs,
          duties and other trade barriers;
     -    Limitations  on  the  Company's  flexibility  in  structuring  foreign
          investments imposed by regulatory authorities;
     -    Longer payment cycles and problems in collecting accounts receivable;
     -    Political and economic risks;
     -    Translation  and  transaction  exposure from  fluctuations in exchange
          rates of other currencies; and
     -    Potentially  adverse  tax and cash flow  consequences  resulting  from
          operating in multiple countries with different laws and regulations.


                                       26
<PAGE>
REGULATION

     The  business  operations  of PTSB  are  regulated  by both  the  Malaysian
Ministry of Energy  Communications  & Multimedia  (MECM)  (formerly known as the
Ministry of Energy  Telecommunications & Post) and the Malaysian  Communications
and  Multimedia  Commission  ("CMC").  PTSB's  WVCN  license is  governed by the
Malaysian  Communications  &  Multimedia  Act  1998  ("Act  588")  which  became
effective  on  April  1,  1999.   This  new  Act,   which  has   superseded  the
Telecommunications  Act of 1950 and the  Broadcasting Act of 1988, is to provide
for and to regulate the converging  communications and multimedia  industries in
Malaysia.

     Under  Malaysian  law,  PTSB has the  option of  registering  its  existing
wireless broadband license under Act 588 or maintaining the terms of the license
under the repealed Act. The Company believes that it would be more  advantageous
to register its license  under the new Act, and has on March 3, 2000  registered
with the CMC its  intention  to migrate to the new Act.  The license was granted
for an initial period of 10 years commencing May 28, 1997.

     While  the  Company   believes  that  Act  588  is  the  most   significant
industry-specific governmental regulations that apply to the Company's business,
the Company is subject to a large  number of other laws in  different  countries
and localities.

     In September 2001, PTSB was awarded an Application Service Provider ("ASP")
license by the CMC. The ASP license will complement  PTSB's  wireless  broadband
license.  As an ASP,  PTSB could offer  enterprises  access over the Internet to
applications  and related  services that would  otherwise  have to be located in
their computers.

RELATED PARTY TRANSACTIONS

During 2004 and 2005, the Company was awarded contracts by My Architect (MYA) in
an  amount  that is  material  to the  financial  results  of the  Company.  The
principal  partner  of MYA is a  director  of  PTSB,  the  Company's  86%  owned
Malaysian subsidiary.

RESULTS OF OPERATIONS

     The  following  discussion  and  analysis of our  financial  condition  and
results  of  operations  should  be read in  conjunction  with the  consolidated
financial statements and notes.

     The following  table sets forth certain  operating data for Secured Digital
Applications and subsidiaries for the periods as indicated below.

                                                    Year Ended December 31,
                                               ---------------------------------
                                                     2005                2004

Revenues                                       $    28,307,362    $   20,438,030
Gross profit                                         2,262,282         2,159,219
Sales and Marketing                                    142,887            43,677
General and administrative                           1,895,076         1,575,395
Gain on disposal of assets-related parties             126,282           245,416
Income from continuing operations                      126,916         1,230,469
Net income                                             126,916         1,231,894



                                       27
<PAGE>
Year ended December 31, 2005 compared to year ended December 31, 2004

     Total revenue increased by $7,869,332,  or 39%, to $28,307,362 for the year
ended December 31, 2005, as compared to $20,438,030  for the year ended December
31, 2004. Increase in revenue for 2005 can be further analyzed as follows:
<TABLE>
<CAPTION>
                                              2005            2004           Increase
                                        --------------  ---------------  -------------------
<S>                                     <C>                 <C>                  <C>
Application division                    $   24,189,876  $    19,036,894  $   5,152,982   27%
Material handling division                     306,784          535,195       (228,411) -42%
Apple division (From October 2004)           3,810,702          865,941      2,944,761  340%
                                        --------------  ---------------  -------------
Total revenue                           $   28,307,362  $    20,438,030  $   7,869,332   39%
                                        ==============  ===============  =============

The  increase  in total  revenue  for 2005 was mainly due to an increase in fees
earned from the production of multimedia programs,  revenue received for project
consulting  services  and the Apple  business.  The increase in revenue from the
production of multimedia  programs was a result of increased  sub-contract  work
from the clients of the  Company's  two major  customers,  Worldlink  Dotcom and
Mutual Base Equity.  Revenue for project consulting  services was generated from
four project  consulting  contracts that the company  secured in 2001,  2002 and
2003.  In the  year  ended  December  31,  2005,  two  customers,  respectively,
accounted for 41% and 42% of total revenue. In the year ended December 31, 2004,
the  same  two  customers,  respectively,  accounted  for 44%  and 43% of  total
revenue.

Gross Profit

     Gross profit  increased to $2,262,282 for the year ended December 31, 2005,
compared to  $2,159,219  for the year ended  December 31,  2004,  an increase of
$103,063  or 5%.  Increase in gross  profit for 2005 can be further  analyzed as
follows:

                                              2005            2004        Increase/(Decrease)
                                        --------------  ---------------  --------------------
Application division                    $    1,794,011  $     1,967,938  $    (173,927)  -9%
Material handling division                      17,851           61,752        (43,901) -71%
Apple division (From October 2004)             450,420          129,529        320,891  248%
                                        --------------  ---------------  -------------
Total gross profit                      $    2,262,282  $     2,159,219  $     103,063    5%
                                        ==============  ===============  =============
</TABLE>

The  increase in gross  profit in 2005 was due to higher  revenue,  particularly
consulting  revenue,  which has a higher  margin  than  production  work and the
consolidation  of the Apple  division  from October  2004. As a result of higher
revenue, cost of revenues increased by $7,766,269 or 42%, to $26,045,080 in 2005
from  $18,278,811  in 2004. The increase in cost of revenue was primarily due to
the Company  requiring  additional  external  resources  in order to fulfill the
higher demand for the Company's services.  The outsourcing of content production
work enabled the Company to develop a team of  contractors  that will assist the
Company in producing multimedia content and applications that are crucial to its
future business operation.


                                       28
<PAGE>
Sales and marketing expenses

     Sales and marketing  expenses  increased by $99,210 or 227% to $142,887 for
the year ended  December 31, 2005 from  $43,677 for the year ended  December 31,
2004.  Higher  sales  and  marketing  expenses  in  2005  was  primarily  due to
advertising and promotional expenses incurred by the Application division, which
accounted for 63% of total sales and marketing  expenses,  and higher travelling
expenses incurred to introduce the Company's  products to customers in Malaysia.
Advertising and promotion costs, which were approximately  $7,031 and $9,703 for
the years ended December 31, 2005 and 2004,  respectively,  accounted for 5% and
22% of sales and marketing expenses in 2005 and 2004.
<TABLE>
<CAPTION>
                                                        2005              2004       Increase/(Decrease)
                                                    --------------  ---------------  -------------------
<S>                                                 <C>             <C>                     <C>
Application division                                $       90,212  $        34,068  $       56,144  165%
Material handling division                                  22,763               --          22,763
Apple division (From October 2004)                          29,912            9,609          20,303  211%
                                                    --------------  ---------------  --------------
Total general and administrative expenses           $      142,887  $        43,677  $       99,210  227%
                                                    ==============  ===============  ==============

General and administrative expenses

     General and administrative expenses involving non-related parties increased
by  $259,635 or 17% to  $1,749,767  for the year ended  December  31,  2005,  as
compared to $1,490,132 for the year ended December 31, 2004. Increase in general
and administrative expenses for 2005 could be further analyzed as follows:

                                                          2005            2004      Increase/(Decrease)
                                                    --------------  --------------  ------------------
Application division                                $    1,047,734  $    1,207,406  $    (159,672) -13%
Material handling division                                 118,043         147,603        (29,560) -20%
Apple division (From October 2004)                         583,990         135,123        448,867  332%
                                                    --------------  --------------  -------------
Total general and administrative expenses           $    1,749,767  $    1,490,132  $     259,635   17%
                                                    ==============  ==============  =============
</TABLE>

     Increase  in general  and  administrative  expenses  involving  non-related
parties  was  mainly due to  increase  in general  and  administrative  expenses
incurred  by the  Apple  division,  which  accounted  for  33%  and 9% of  total
non-related  parties'  general and  administrative  expenses  for the year ended
December  31,  2005 and  2004,  respectively.  The  Material  Handling  division
accounted  for  7%  of  total  general  and  administrative  expenses  involving
non-related  parties.  General  and  administrative  expenses  for the  Material
Handling  division  decreased  by $29,560 or 20% to $118,043  for the year ended
December  31, 2005 from  $147,603  for the year ended  December  31,  2004.  The
Application division accounted for 60% of total non-related parties' general and
administrative expenses. General and administrative expenses for the Application
division  decreased by $159,672 or 13% to $1,047,734 for the year ended December
31, 2005 from  $1,207,406 for the year ended December 31, 2004. The decrease was
mainly attributable to a decrease in, consulting fees, public relation services,
maintenance  expenses,  and  professional  fees. For the year ended December 31,
2005, of the total general and  administrative  expenses of $1,749,767,  16% was
for depreciation of tangible assets, 10% was for consulting fees and 22% was for
employee  payroll.  Another  15% was for  fees  for  professional  and  auditing
services,  2% was  for  investor  relation  expenses,  9% was  for  compensation
expenses and approximately 26% was for rent, utilities, general office supplies,
communications and corporate insurance expenses. For the year ended December 31,
2004, out of the total general and  administrative  expenses of $1,490,132,  18%
was for depreciation of tangible assets, 10% was for consulting fees and 14% was
for employee  payroll.  Another 18% was for fees for  professional  and auditing
services,  8% was  for  investor  relation  expenses,  5% was  for  compensation
expenses and approximately 27% was for rent, utilities, general office supplies,
communications and corporate insurance expenses.


                                       29
<PAGE>
     General and  administrative  expenses - related  parties for the year ended
December  31, 2005 and 2004 was  $145,309  and  $85,263 per year,  respectively.
General and administrative  expenses - related parties included  management fees
and  administrative  expenses  payable by the  Company to a company in which Mr.
Patrick Lim, the President  and Chief  Executive  Officer of the Company,  has a
financial  interest.  For each of the year ended December 31, 2005 and 2004, the
related  company,  LSH Assets  Holdings  Sdn Bhd ("LSH"),  billed the  Company's
Malaysian  subsidiary,  SDAM,  administrative  expenses  of $25,309 per year for
administration  and clerical fees incurred by LSH on behalf of SDAM. The Company
also  incurred  management  fees of $120,000  and $60,000 per year for the years
ended December 31, 2005 and 2004,  respectively.  The management fee was charged
on the  basis of time  spent  for the  administration  and  management  services
provided to the Company.


Interest expense

     Interest expense  increased by $226,803,  or 209%, to $335,489 for the year
ended  December 31, 2005 as compared to $108,686 for the year ended December 31,
2004.  Interest  expense for the year ended  December 31, 2005 included  $65,125
related to a $500,000  convertible term note issued on June 4, 2004 and $179,862
related to the amortization of the derivative liability associated with the term
note. These accounted for  approximately 19% and 54% of interest expense for the
year ended December 31, 2005. In addition,  the Apple division incurred interest
expense of $84,655 or 25% of interest  expense for the year ended  December  31,
2005.


Amortization and accretion of debt issuance costs

     Amortization  and accretion  costs  increased by $35,676 or 120% to $65,511
for the year ended  December  31, 2005 as compared to $29,835 for the year ended
December 31, 2004. The  amortization  and accretion cost relates to the issuance
of  preferred  stock of a  subsidiary  and a term  note on May 28,  2004.  See a
further discussion in the Liquidity and Capital Resources section.

Gain on value of derivative liabilities

     Gains on value of  derivative  liabilities  of  $980,423  in 2004 relate to
derivative  liabilities  of the preferred  stock of the  subsidiary and the term
note.  Issued on May 28, 2004.  Such  derivative  liabilities are required to be
marked-to-market under generally accepted accounting principles.


Gain on disposal of assets - related parties

     For the years  ended  December  31,  2005 and 2004,  the  Company  included
recognition of a previously deferred gain of $126,282 and $245,416, respectively
related to a similar amount the Company received from its long-term  receivable,
related  party.  The  receivable  balance and total  deferred gain was $309,584,
respectively,  as of December 31, 2004.  These  amounts  arose in the year ended
December  31, 1998 when the Company  sold  assets  used in the  operations  of a
subsidiary to a related  company.  Due to the  uncertainty  of collection of the
related receivable, a related gain on the sale of the assets was deferred and is
to be recognized  only after all costs have been recovered and to the extent the
receivable  is  collected.  During the year ended  December 31,  2002,  payments
received by the Company  exceeded all remaining costs. As a result the Company's
long-term  receivable,  related party and deferred gain balances were reduced to
$183,098 respectively, as of December 31, 2005.


                                       30
<PAGE>
Liquidity and Capital Resources

     As of  December  31,  2005,  the  Company  had  net  cash of  $46,586,  and
restricted cash of $548,154.

     On May 28, 2004, the Company  entered into agreements with a Master Fund to
secure a $7.0 million funding through private placement of securities consisting
of a convertible term note,  convertible  preferred stock issued by a subsidiary
corporation,  SDA Worldwide,  Inc.  (f/k/a SDA America,  Inc.),  and warrants to
purchase common stock of the Company. The Company secured from the Master Fund:

a)   $500,000  funding through the sale of a Convertible  Term Note (the "Note")
     in the principal  amount of $500,000,  which is convertible  into shares of
     the Company's  common stock at a fixed  conversion price of $0.20 per share
     and  warrants  to  purchase up to 300,000  shares of the  Company's  common
     stock. The term note has a three-year term and a coupon at a rate per annum
     equivalent  to the "prime rate"  published in The Wall Street  Journal from
     time to time  plus 2%,  subject  to a floor of 6% per  annum.  The  monthly
     interest  will be  adjusted  downward  based on a  minimum  increase  of 25
     percent of the price of the common stock above the  conversion  price.  The
     warrants  have a seven-year  term and an exercise  price of $0.40 per share
     for the first 100,000 shares, $0.43 per share for the second 100,000 shares
     and $0.47 per share for the third 100,000 shares.

b)   $6,500,000  funding  through  the  sale of  6,500,000  shares  of  Series A
     Convertible  Preferred  Stock (the "Series A  Preferred")  of the Company's
     wholly owned subsidiary,  SDA Worldwide,  Inc. ("SDAW") (f/k/a SDA America,
     Inc.), at a price of $1.00 per share,  which is convertible  into shares of
     the Company's  common stock and warrants to purchase up to 3,000,000 shares
     of the  Company's  common  stock.  The Series A  Preferred  is  entitled to
     cumulative  preferential  dividends at a rate per annum  equivalent  to the
     "prime rate"  published  in The Wall Street  Journal from time to time plus
     2%, subject to a floor of 6% per annum. The warrants have a seven-year term
     and an exercise  price of $0.40 per share for the first  1,000,000  shares,
     $0.43 per share for the second 1,000,000 shares and $0.47 per share for the
     third 1,000,000 shares.

     Pursuant  to an  amendment  to the  agreements  governing  the terms of the
Series A Preferred in August 2004,  the Master Fund may convert a portion of the
Note and Series A Preferred as follows: the first $2,000,000 of conversions have
been reset to a price of $0.20 per share  (whether  as  principal  repayment  or
accrued and unpaid  interest or dividends);  the next  $1,000,000 of conversions
have  been  reset to a price of  $0.25  per  share.  The  remaining  conversions
permitted  under the  terms of the  original  securities  issuance  will  remain
unchanged at $0.35 per share. In addition to resetting the conversion prices for
a portion of the  transaction,  the  amendment  provides  for all  dividend  and
interest  payments  payable under the  investment  would accrue,  rather than be
payable  in cash,  until the next  conversion  into  common  stock  occurs.  The
amendment  provides for a waiver of cash  payments of interest or dividends  due
prior to the execution of the amendment,  with any such amounts to be accrued to
the amounts payable under the terms of the Note or Series A preferred.

     Pursuant to the Securities  Purchase  Agreement between the Master Fund and
the Company and a restricted account agreement entered into by the Company,  the
Master  Fund and a US bank,  the  $6,500,000  investment  was  deposited  into a
restricted  account as  security  for the  performance  of the  Company  and its
subsidiaries' obligations to the Master Fund. The proceeds, which are restricted
to making  acquisitions  of other  companies  that meet agreed to  criteria  for
sales,  profitability  and  accounting  standards,  may  be  released  from  the
restricted account at such time the preferred stock is converted into the common
stock of the Company pursuant to the relevant transaction documents.


                                       31
<PAGE>
     Pursuant to Amendment  No. 2 to the SPA executed on November 15, 2004,  the
Master  Fund  agreed  to  remove  the  Listing   Condition   from  the  SPA.  As
consideration  for the removal of the Listing  Condition,  the Company agreed to
issue to the Master Fund warrants to purchase  1,300,000 shares of the Company's
common stock. The warrants have a seven-year term and an exercise price of $0.35
per share.

     On April 25, 2005, the Company and the Master Fund executed an amendment to
certain  agreements  governing  the  terms  under  which  the Note and  Series A
Preferred  issued to the Master Fund could be converted into the common stock of
the Company. Under the terms of the amendment, the Master Fund could convert the
remaining Note and the first  $2,000,000  Series A Preferred at a price equal to
85  percent of the  average  of the five  lowest  closing  prices  during the 22
trading days prior to the date of conversion  (whether as principal repayment or
accrued and unpaid interest or dividends), subject to a minimum conversion price
of $0.07 per share and subject to certain contingent conversion terms.

     On August 1, 2005, the Company entered into an agreement  whereby it waived
a  limitation  on the number of shares that could be  converted  and held by the
Master Fund in order to permit conversions by the Master Fund under the Note and
Series A Preferred  into  9,756,098  shares of common stock.  The conversion was
made in  connection  with an agreement,  also dated August 1, 2005,  whereby the
Master Fund agreed to accept  $800,000,  payable in shares of common stock,  and
$6,343,000  in cash  (of  which  $6,105,000  represented  restricted  cash),  in
consideration for the early repayment of the Note and redemption of the Series A
Preferred.  Following the  repayment of the Note and  redemption of the Series A
Preferred  on August 1,  2005,  the  Company  refunded  the  entire  balance  of
approximately  $6.1  million in the  restricted  account to the Master  Fund and
recognized an early  redemption  penalty of $1,146,827 and early payment penalty
of $46,830 on the Note.

A summary of the status of the discounted  principal and interest  amount of the
Note from January 1, 2005 through December 31, 2005 is presented below:
<TABLE>
<CAPTION>

                                              Total         Interest       Principal        Discount           Net
                                        ---------------   -------------  -------------   ---------------  -------------
<S>                                            <C>               <C>            <C>             <C>              <C>
Balance as of January 1, 2005           $       426,470   $          --  $     426,470   $        40,855  $     385,615
Interest through September 30, 2005              18,381          18,381             --                --             --
Conversion in April 2005 (a)                    (52,770)         (8,653)       (44,117)           (4,226)       (39,891)
Conversion in May 2005 (b)                      (17,412)         (2,707)       (14,705)           (1,408)       (13,297)
Conversion June 1, 2005 (c)                     (17,249)         (2,544)       (14,705)           (1,408)       (13,297)
Conversion June 16, 2005 (d)                    (14,705)             --        (14,705)           (1,407)       (13,298)
Conversion July 12, 2005 (e)                    (20,445)         (2,304)       (18,141)           (1,740)       (16,401)
Allocation of discount                          (30,666)             --        (30,666)          (30,666)            --
Early payment penalty                            46,830          46,830             --                --             --
Repaid on August 1, 2005(f)                    (338,434)        (49,003)      (289,431)               --       (289,431)
                                        ---------------   -------------  -------------   ---------------  -------------
Balance as of December 31, 2005         $            --   $          --  $          --   $            --  $          --
                                        ===============   =============  =============   ===============  =============
</TABLE>

a)   On April 25, 2005, the Master Fund converted $39,891  discounted  principal
     of the note and  $8,653  of  accrued  interest  to  383,701  shares  of the
     Company's common stock.
b)   On May 5, 2005, the Master Fund converted $13,297  discounted  principal of
     the note and $2,707 of accrued  interest to 140,311 shares of the Company's
     common stock.
c)   On June 1, 2005, the Master Fund converted $13,297 discounted  principal of
     the note and $2,544 of accrued  interest to 163,132 shares of the Company's
     common stock.
d)   On June 16, 2005, the Master Fund converted $13,298 discounted principal of
     the note to 147,649 shares of the Company's common stock.
e)   On July 12, 2005, the Master Fund converted $16,401 discounted principal of
     the note and $2,304 of accrued  interest to 250,000 shares of the Company's
     common stock.
f)   On August 1, 2005, the Company repaid the entire outstanding balance of the
     Note and  redeemed the  convertible  preferred  stock of a subsidiary  (see
     Note 13).

                                       32
<PAGE>
A summary of the status of the Series A  Preferred  and  dividend  thereon  from
January 1, 2005 through December 31, 2005 is presented below:
<TABLE>
<CAPTION>

                                                                    Stated       Embedded       Issue        Carrying
                                          Total       Dividend      Amount       Liability      Costs         Value
                                      -----------    -----------  -----------   -----------  -----------   ------------
<S>                                      <C>              <C>           <C>            <C>         <C>         <C>
Balance as of January 1, 2004         $        --    $        --  $        --   $        --  $         --  $        --
Issuance on May 28, 2004              $ 6,500,000    $        --  $ 6,500,000   $ 3,206,857  $  1,051,927  $ 2,241,216
Conversion in September 2004             (500,000)            --     (500,000)     (231,913)      (74,174)    (193,913)
Dividend through
  December 31, 2004                       238,563        238,563           --            --            --           --
Amortization of issue costs                    --             --           --            --      (195,551)     195,551
Amortization of embedded liability             --             --           --      (444,457)           --      444,457
                                      -----------    -----------  -----------   ------------ ------------  -----------
Balance as of December 31, 2004       $ 6,238,563    $   238,563  $ 6,000,000   $ 2,530,487  $    782,202  $ 2,687,311
                                      ===========    ===========  ===========   ============ ============  ===========


                                                      Dividend/       Series A                                     Net
                                                     Redemption        Stated        Embedded      Issue          Carrying
                                          Total        Penalty         Amount       Liability      Costs          Value
                                     -------------  ------------   -------------   ------------  -----------   -------------
Balance as of January 1, 2005        $   6,238,563  $    238,563   $   6,000,000   $  2,530,487  $   782,202   $   2,687,311
Dividend through
 September 30, 2005                        263,537       263,537              --             --           --              --
Amortization                                    --            --              --     (2,530,487)    (782,202)      3,312,689
Early redemption penalty                   302,994       302,994              --             --           --              --
Redeemed on August 1, 2005              (6,805,094)     (805,094)     (6,000,000)            --           --      (6,000,000)
                                     -------------  ------------   -------------   ------------  -----------   -------------
Balance December 31, 2005            $          --  $         --   $           --  $         --  $        --   $          --
                                     =============  ============   ==============  ============  ===========   =============
</TABLE>

The following table  summarizes the August 1, 2005  transaction  with the Master
Fund:
                                                                     Discounted
                                                                     Principal/
                                                                     Series A
                                                   Interest/         Carrying
                                       Total        Dividend          Amount
Amount                             -------------   ------------   -------------
Balance as of August 1, 2005
Term note                          $     322,270   $      2,173   $     320,097
Series A Preferred                     6,502,100        502,100       6,000,000
                                   -------------   ------------   -------------
Total                                  6,824,370   $    504,273   $   6,320,097
Paid from restricted cash             (6,105,138)  ============   =============
Cash payment                            (238,390)
Common stock issued (a)                 (800,000)
                                   -------------
Early payment/redemption
 penalty (b)                       $    (319,158)
                                   =============

a)   9,756,098 shares of common stock issued at a price of $0.082 per share.
b)   The  August 1, 2005  transaction  resulted  in an early  payment/redemption
     penalty of $1,193,657,  of which  approximately  $46,830 is attributable to
     interest  expense  and  $1,146,827  represents  a  reduction  to net income
     available to common  shareholders,  and which is recorded in the year ended
     December 31, 2005.

     For the year ended December 31, 2005, operations were primarily funded from
internally generated funds and working capital advanced from time to time by the
principal shareholder,  director and officer of the Company. These advances bear
no interest and have no fixed terms of repayment.

     As of December  31, 2005,  the Company  owed Mr. Lim,  the Chief  Executive
Officer  ("CEO"),  Chairman and Director of the Company,  $86,192 for short-term
cash advances made to subsidiaries  of the Company for working capital  purposes
from time to time.  Additionally,  at December  31,  2005,  the amount owed to a
company in which Mr. Lim has a financial interest was $125,518.  This amount was
for  short-term  cash  advances  made to the  Company and its  subsidiaries  for
working capital purposes from time to time and for management and administrative
fees.  These amounts are unsecured,  bear no interest and have no fixed terms of
repayment.

                                       33
<PAGE>
     On May 25, 2004, the Company  executed a share exchange  agreement with Mr.
Lim, whereby Mr. Lim surrendered  8,000,000 shares of the Company's common stock
in exchange for 100,000  shares of the Company's  newly created  Series A Voting
Convertible Preferred Stock (the "Voting Preferred"), which was convertible into
shares of common stock at a fixed ratio of 80 shares of common stock for 1 share
of Voting  Preferred  stock.  The 8,000,000 shares were returned to treasury and
are available for  re-issuance at a future date. The Voting  Preferred stock was
entitled to cumulative  dividends at $2.20 per annum, payable in common stock at
$.28 per share. On May 3, 2005, Mr. Lim and the Company executed an amendment to
the  Certificate of Designation of Series A Voting  Convertible  Preferred Stock
governing  payment of dividend on the Voting  Preferred.  Under the terms of the
amendment, Mr. Lim would have the option of receiving the dividend on the Voting
Preferred either in cash or shares of the Company's common stock.  Each share of
the Voting  Preferred was entitled to voting  rights  equivalent to 80 shares of
common  stock.  The Series A preferred  was subject to mandatory  conversion  10
years after its issuance.

     On August 3, 2005,  Mr. Lim  converted  the  entire  100,000  shares of the
Company's Series A Voting  Convertible  Preferred Stock into 8,000,000 shares of
common  stock,  which  resulted in a  reclassification  of the $10,000  from the
stated amount to $80 of common stock and $9,920  additional-paid-in  capital. In
addition,  the  Company  paid the  $256,666  dividend  due to Mr. Lim in cash in
August 2005.

A summary of the status of the  Voting  Preferred  and  dividend  accrued  since
January 1, 2005 and changes through December 31, 2005 is presented below:
<TABLE>
<CAPTION>
                                                                                             Stated
                                                              Total          Dividend        Amount
                                                          -------------  --------------  --------------
<S>                                                            <C>            <C>             <C>
Balance as of January 1, 2004                             $          --  $           --  $           --
Convertible Preferred Stock, May 25 2004                         10,000              --          10,000
Dividend through December 31, 2004                              128,333         128,333              --
                                                          -------------  --------------  --------------
Balance December 31, 2004                                 $     138,333  $      128,333  $       10,000
                                                          =============  ==============  ==============


                                                                                             Stated
                                                              Total          Dividend        Amount
                                                          -------------  --------------  --------------
Balance as of January 1, 2005                             $     138,333  $      128,333  $       10,000
Dividend through September 30, 2005                             128,333         128,333              --
Conversion to common stock in August 2005                       (10,000)             --         (10,000)
Payment in August 2005                                         (256,666)       (256,666)             --
                                                          -------------  --------------  --------------
Balance December 31, 2005                                 $          --  $           --  $           --
                                                          =============  ==============  ==============
</TABLE>

     The net cash used in  operating  activities  was  $601,133 and $795,427 for
year ended December 31, 2005 and December 31, 2004  respectively.  Net cash used
in  operating  activities  consists  of cost of  revenues,  sales and  marketing
expenses and general and administrative expenses. Net cash provided by operating
activities  mainly  consists  of  receipt  of  income  generated  by  multimedia
production work, project  consultation,  sale of computer hardware and provision
of repair and maintenance  services for material handling  equipment.  The lower
net cash used in operating  activities in 2005, as compared to 2004,  was mainly
due to increase in credit  granted  from trade  payables  and lower  inventories
holding  period.  . For the year ended December 31, 2005, the primary reason for
the  difference  between income from  continuing  operations of $126,916 and net
cash used in operations of $601,133 was an increase in accounts  receivable,  of
$1,863,451 during 2005. For the year ended December 31, 2004, the primary reason
for the difference  between income from continuing  operations of $1,230,469 and
net cash used in operations of $795,427 was an increase in accounts  receivable,
of $1,711,036 during 2004.

     Cash  used  in  investing   activities   of  $62,287  in  2005  was  mainly
attributable  to net cash used in  acquiring  new  subsidiaries  and purchase of
equipment.  Cash used in  investing  activities  of  $49,613  in 2004 was mainly
attributable to net cash used in acquiring new equipment and subsidiaries.


                                       34
<PAGE>
     Cash generated from financing  activities of $632,056 in 2005 was primarily
due to higher bank borrowings, proceeds from private placement exercises in July
2005,  proceeds from issuance of common stocks in exercising of employees  stock
options and less payment to a Master on early repayment on the Note and Series A
Preferred  Cash  provided  by  financing  activities  of  $712,487  in 2004  was
primarily from  conversion of preferred  stocks of a subsidiary to the Company's
common stock by the Master Fund and from issuance of convertible  term note, net
of costs  incurred  in  connection  with the debt and  securities  issued to the
Master Fund.

     In addition to  internally  generated  funds and  financial  support from a
director and major  shareholder,  the Company may seek to raise additional funds
from equity or debt financing for its future working capital requirements. As of
December 31, 2005, the Company has furniture and equipment of approximately $1.3
million for the roll out of its portal, build-out of VISIONET and implementation
of its business  plan. The Company  estimates  that it would require  additional
capital  expenditures  of up to $2.0 million to implement  its business  plan to
become a total system  solution  provider  involved in application  development,
network operation,  delivery of value added applications and services;  and sale
of its EyStar  SmartHome  Console.  The Company has also committed to an initial
purchase of software  and  hardware  valued at $50,000 in  conjunction  with its
announced strategic collaboration with Aptilo Networks, Sweden.

     The  Company  will  also be  expanding  into new  businesses  that  include
provision of secured shipping and supply chain management services.  The Company
expects to incur further expenses to acquire companies and technologies that are
synergistic  to the new  businesses and will help the Company to rollout the new
businesses  in the shortest time  possible.  During 2003,  the Company  incurred
$263,000 in the establishment and acquisition of new subsidiaries and associates
relating to its new businesses.  Some of these acquisitions did not workout well
and the  Company  had  sold  some  of  these  companies,  whose  operations  and
management were not compatible to the Company's business plan in 2004. For 2005,
the Company estimates that it will incur an additional $2.1 million to identify,
negotiate and acquire the businesses and/or net assets in companies  synergistic
to its planned new businesses.  In addition,  the Company estimates that it will
require a further $2.0 million to finance the set-up cost of its new businesses.
The Company  also expects that it will require a further $2.0 million to finance
the  working  capital  of its new  businesses  and the  operation  of its  newly
acquired and/or established subsidiaries and associates.

     On  July  7,  2004  the  Company  announced  teaming  agreements  with  two
unaffiliated  entities to collectively  pursue projects to enable the search and
match of DNA data for newborns and registered criminals for use primarily by the
Government of Malaysia.  The project may be developed by a joint venture company
led by the Company.  The project may be financed by internally  generated funds.
Additional  financing  in the form of a grant may be sought from the  Multimedia
Development Corporation, a Malaysian Corporation charged with the responsibility
of implementing the Multimedia Super Corridor (MSC), a Malaysian  initiative for
the global information and communication technology (ICT) industry.

     The  Company  will also  expand its  business  in ICT  trading  through the
Gallant Group of companies. On March 28, 2005, the Company announced the opening
of a second Apple retail center in the Hartamas Shopping Centre in Sri Hartamas,
a suburb of Kuala Lumpur,  Malaysia.  The new outlet will expand on the "digital
lifestyle"  concept  developed by the Company and offers a one-stop showroom for
retailing of Apple products as well as products developed by the Company and its
subsidiary  Innospective  Sdn Bhd  ("ISS").  The  expansion  of the ICT  trading
business is expected to be finances by internal fund and bank borrowings.

     The Company will continuously  evaluate its financing  requirements and may
decide to consider alternative modes of financing.


                                       35
<PAGE>
     No  dividends  on common  stock were paid by the  Company for the two years
reported herein.

Critical Accounting Policies

Financial  Reporting  Release No. 60, which was released by the  Securities  and
Exchange Commission,  requires all companies to include a discussion of critical
accounting policies or methods used in the preparation of financial  statements.
Note 2 to the  Consolidated  Financial  Statements  includes  a  summary  of the
significant  accounting  policies  and methods  used in the  preparation  of the
Company's Consolidated Financial Statements. The following is a brief discussion
of the more significant accounting policies and methods used by the Company.

Revenue Recognition

Revenue represents the net invoiced value of:

o    goods sold;
o    fees earned from the  production  of  multimedia  programs and Intranet and
     management and consulting services; and
o    fees earned  from rental and  servicing  of  material  handling  equipment,
     provision  of  land  transportation,   engineering  and  industrial  moving
     services.

The  Company  recognizes  revenue  from the  sales of goods in the  period  when
significant  risks and rewards of ownership  have  transferred to its customers.
The Company recognizes revenue from the services provided in the period in which
the  services  are  performed  and  when  there  is no  significant  uncertainty
regarding  the  consideration  to be  received  and the  associated  costs to be
incurred.

Accounts Receivable

The Company grants credit,  generally without collateral,  to its customers. The
Company  continuously  monitors  collections and payments from its customers and
maintains  an  allowance  for  estimated   uncollectible   accounts  based  upon
historical  experience and specific customer  collections  issues that have been
identified. Such allowances have been within managements expectations.

Stock-Based Compensation

SFAS   No.   123,   Accounting   for   Stock-Based   Compensation,   defines   a
fair-value-based  method of accounting  for  stock-based  employee  compensation
plans and  transactions  in which an  entity  issue its  equity  instruments  to
acquire  goods or  services  from  non-employees,  and  encourages  but does not
require  companies  to  record   compensation  cost  for  stock-based   employee
compensation plans at fair value.

The Company has chosen to account for employee  stock-based  compensation  using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25 (APB  No.  25),  Accounting  for  Stock  Issued  to  Employees,  and  related
interpretations.  Accordingly,  employee  compensation cost for stock options is
measured as the excess,  if any, of the  estimated  fair value of the  Company's
stock at the date of the grant over the amount an  employee  must pay to acquire
the stock.


                                       36
<PAGE>
Transactions in which the Company issues  stock-based  compensation for goods or
services  received from  non-employees are accounted for based on the fair value
of the  consideration  received  or the  fair  value of the  equity  instruments
issued,  whichever  is more  reliably  measurable.  The Company  often  utilizes
pricing models in determining  the fair values of options and warrants issued as
stock-based  compensation  to  non-employees.  These pricing  models utilize the
market prize of the Company's  common stock and the exercise price of the option
or  warrant,  as  well as time  value  and  volatility  factors  underlying  the
positions. These pricing models utilize the market price of the Company's common
stock and the exercise price of the option or warrant, as well as time value and
volatility factors underlying the positions.

In December  2004,  the FASB issued SFAS No.  123(R) Share Based  Payment  which
addresses the accounting for share-based payment  transactions.  SFAS No. 123(R)
eliminates  the ability to account  for  share-based  compensation  transactions
using APB No.  25,  Accounting  for Stock  Issued to  Employees,  and  generally
requires  instead that such  transactions  be accounted  and  recognized  in the
statement of income based on their fair value. SFAS No. 123(R) will be effective
for public companies that file as small business issuers as of the first interim
or  annual  reporting  period  that  begins  after  December  15,  2005.  We are
evaluating the  provisions of this standard,  but depending upon the numbers and
terms of options that may be granted in future periods,  the  implementation  of
this standard could have a material impact on the Company's  financial  position
and results of operations.

Impairment of Long-lived Assets

The  Company   evaluates   long-lived  assets  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable. In performing the review of recoverability, we estimate future cash
flows expected to result from the use of the asset and its eventual disposition.
The  estimates  of  future  cash  flows,  based on  reasonable  and  supportable
assumptions and projections, require management's subjective judgments. The time
periods for estimating  future cash flows is often lengthy,  which increases the
sensitivity  to assumptions  made.  Depending on the  assumptions  and estimates
used, the estimated  future cash flows projected in the evaluation of long-lived
assets can vary  within a wide range of  outcomes.  The  Company  considers  the
likelihood of possible  outcomes in determining the best estimate of future cash
flows.

Accounting for Goodwill

Since the  adoption  of SFAS 142 on  January  1,  2002,  the  Company  no longer
amortizes goodwill but instead tests annually for impairment.  SFAS 142 requires
that goodwill be tested annually.  If the carrying value of goodwill exceeds its
fair value, an impairment loss must be recognized.  A present value technique is
often the best  available  technique  with which to estimate the fair value of a
group of  assets.  The use of a  present  value  technique  requires  the use of
estimates  of  future  cash  flows.   These  cash  flow  estimates   incorporate
assumptions that marketplace  participants  would use in their estimates of fair
value as well as the Company's own  assumptions.  These cash flow  estimates are
based on  reasonable  and  supportable  assumptions  and consider all  available
evidence.  However,  there is inherent  uncertainty  in estimates of future cash
flow. As such, different assumptions were used in the Company's calculations and
the likelihood of possible outcomes was considered.


RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2005, the FASB issued FASB Statement No. 154 Accounting Changes and Error
Corrections,  a replacement of APB Opinion No. 20,  Accounting  Changes and FASB
Statement No. 3, Reporting  Accounting Changes in Interim Financial  Statements.
SFAS 154 provides  guidance on the  accounting  for and  reporting of accounting
changes  and  error   corrections.   It   establishes,   unless   impracticable,
retrospective  application  as the  required  method for  reporting  a change in
accounting principle in the absence of explicit transition requirements specific
to the newly adopted accounting  principle.  SFAS 154 also provides guidance for
determining  whether  retrospective   application  of  a  change  in  accounting
principle  is  impracticable  and for  reporting  a  change  when  retrospective


                                       37
<PAGE>
application  is  impracticable.  The  provisions  of SFAS 154 are  effective for
accounting  changes and  corrections of errors made in fiscal periods  beginning
after  December 15,  2005.  The  adoption of the  provisions  of SFAS 154 is not
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial Instruments, which amends SFAS No. 133 and SFAS No. 140 Accounting for
Transfers and Servicing of Financial Assets and  Extinguishment  of Liabilities.
SFAS 155 amends SFAS 133 to narrow the scope  exception  for  interest-only  and
principal-only   strips  on  debt   instruments  to  include  only  such  strips
representing  rights to receive a specified portion of the contractual  interest
or  principle  cash flows.  SFAS 155 also  amends  SFAS 140 to allow  qualifying
special-purpose  entities  to hold a  passive  derivative  financial  instrument
pertaining to beneficial interests that itself is a derivative instruments.  The
adoption of the provisions of SFAS 155 is not expected to have a material impact
on the Company's financial position or results of operations.

In December 2004, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 123(R) Share Based Payment,  which  addresses the accounting for share-based
payment  transactions.  SFAS No.  123(R)  eliminates  the ability to account for
share-based  compensation  transactions using APB No. 25, and generally requires
instead that such  transactions  be accounted and recognized in the statement of
income based on their fair values.  SFAS No. 123(R) will be effective for public
companies  that file as small  business  issuers as of the first interim  period
that begins after December 15, 2005. The Company is evaluating the provisions of
SFAS No.  123(R).  Depending  upon the numbers and terms of options  that may be
granted in future  periods,  the  implementation  of this standard  could have a
material impact on the Company's  financial  position and results of operations.
The Company  estimates  that it may need to recognize  approximately  $31,000 in
additional  compensation expense under SFAS No.123(R) on options that may not be
fully vested by the effective date.


ITEM 7. FINANCIAL STATEMENTS

The audited  financial  statements  of the Company as of December 31, 2005 being
furnished in response to this Item are  contained in a separate  section of this
Report following the signature page.

In connection  with its filing of  notification of inability to timely file this
annual report on March 30, 2006, the Company  reported that it had determined to
amend and restate its financial  statements for the periods ending  December 31,
2004 and for the  quarters  ended  March 31, June 30 and  September  30, 2006 in
order to account for embedded  derivatives  contained in  convertible  stock and
convertible  debt issued by the Company.  The Company  reported that it expected
the  restatements  would  have a  material  effect  on net  income  and net loss
applicable  to  shareholders.  On April 10, 2006,  the Company filed its amended
Form 10-KSB for the year ended  December 31, 2004 and  anticipates  that it will
shortly file amended reports on Form 10-QSB for the periods ended March 31, June
30 and  September  30,  2005.  The Company  determined  to amend and restate its
financial  statements  after it evaluated the  application  of SFAS 133 and EITF
00-19 in response to an inquiry from the SEC. In light of the  restatement,  the
financial  statement as contained in our original Form 10-KSB for the year ended
December 31, 2004 and in our original  Forms 10-QSB for the periods  ended March
31,  June 30 and  September  20,  2005  should  not be  relied.  In light of the
restatement,  the  financial  statement as contained in our original Form 10-KSB
for the year ended  December 31, 2004 and in our  original  Forms 10-QSB for the
periods ended March 31, June 30 and September 30, 2005 should not be relied on.


The decision to restate the  financials  was approved by the Company's  Board of
Directors  in  order  to  account  for  embedded  derivatives   incorporated  in
convertible  preferred stock and convertible debt issued in 2004. Members of the
Audit  Committee and the Board of Directors have discussed  there statement with
the Company's  independent  registered  public  accounting firm.  Members of the
Audit Committee and the Board of Directors have discussed the statement with the
Company's independent registered public accounting firm.


Summary of Transaction

On May 28,  2004,  the Company  entered  into a  Securities  Purchase  Agreement
("SPA") with an investor  group,  Laurus  Master Fund Ltd. The Company  issued a
$500,000  Convertible  Term Note (the "Note").  The Note bears interest at prime
plus two percent with a floor of six percent and was due on May 28, 2007.  Other
terms  included the granting of a security  interest in all of the net assets of
the Company and a condition  that required the Company to cause its common stock
to be listed on a registered  exchange or one of the NASDAQ national markets. In
addition, the Company issued to Laurus warrants to purchase up to 300,000 shares
of common  stock.  Also on May 28, 2004, as part of the SPA, the Company and one
of its subsidiaries issued 6.5 million shares of Series A Convertible  Preferred
Stock  (the  "Series A  Preferred")  at a price of $1 per  share.  The  Series A
Preferred  was  convertible,  subject to certain  conversion  limitations,  into
common stock of the Company at the option of the investor group and was entitled
to  cumulative  preferential  dividends  at a rate per  annum of prime  plus two


                                       38
<PAGE>
percent  with a floor of six  percent.  Other terms  included a  condition  that
required  the  Company to cause its common  stock to be listed on an exchange or
one of the NASDAQ national  markets.  In addition,  the Company issued to Laurus
warrants to purchase up to 3,000,000 shares of common stock.

On November 15, 2004, the listing condition was removed.  As consideration,  the
Company issued to Laurus warrants to purchase up to 1.3 million shares of common
stock. A more complete  discussion of the terms of the preferred  stock and term
note  are  contained  in  Notes  12 and 13 of the  restated  December  31,  2004
financial statements.

The  restatement for the year ended December 31, 2004 resulted in an increase to
net income of $696,534, from $535,360 to $1,231,894,  primarily as a result of a
non-cash gain on the value of derivative  liabilities in the amount of $980,423,
offset by costs of issuance and other  expenses  associated  with the financing.
Net income available to common  shareholders  decreased by $17,648 from $159,926
to $142,278,  due to the  accretion to preferred  stock  redemption  value.  The
Company  reclassified  the preferred stock of its subsidiary to mezzanine rather
than permanent equity. The additional paid-in capital of the Company was reduced
by $2,476,804,  primarily because of the reclassification of the preferred stock
of its subsidiary out of permanent equity.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

     There were no  disagreements  on accounting and financial  disclosures with
the Company's present  independent  accountants,  GHP Horwath,  P.C., during the
reporting period.


ITEM 8A. CONTROLS AND PROCEDURES

     Within  the 90  days  prior  to the  date  of this  report,  the  Company's
management  concluded  its  evaluation  of the  effectiveness  of the design and
operation of the Company's  disclosure controls and procedures.  Our evaluation,
under the control of the Chief Executive  Officer and Chief  Financial  Officer,
considered  whether we accurately  record  transactions  in  reasonable  detail,
necessary  to permit  the  preparation  of  financial  statements  according  to
Generally  Accepted  Accounting  Principles.  The evaluation  further considered
whether our system of internal  controls  adequately  insures that  receipts and
expenditures  are made in accordance with the  authorizations  of management and
are  such  as  to  prevent  or  permit  the  timely  detection  of  unauthorized
acquisition,  use or disposition of assets that could have a material  effect on
our financial  statements.  We also evaluated whether our internal controls over
financial  reporting,  specifically  whether our controls and procedures  ensure
that  information  required to be disclosed in our periodic reports is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Commission's  rules and forms of the  Evaluation  Date,  and  incorporating  the
qualification  noted below, the Company's  Chairman and Chief Executive  Officer
and its Chief Accounting Officer concluded that the Company maintains disclosure
controls and  procedures  that are effective in providing  reasonable  assurance
that  information  required to be disclosed in the  Company's  reports under the
Securities  Act of 1934 (Exchange  Act) is recorded,  processed,  summarized and
reported  within the time periods  specified  in the SEC's rules and forms,  and
that  such   information  is  accumulated  and  communicated  to  the  Company's
management,  including  its Chairman and Chief  Executive  Officer and its Chief
Accounting Officer, as appropriate, to allow timely decisions regarding required
disclosure.

     During  December  2005 and January  2006,  we made  certain  changes to our
internal controls concerning  financial reporting as a result of an inquiry from
the  Securities  and  Exchange  Commission  and  our  subsequent  review  of the
accounting  treatment  applied to a convertible  preferred note and  convertible
preferred  stock and warrants  related to the note and preferred stock that were
issued in May 2004.  Specifically  we  concluded  that the  Company had issued a
note,  preferred stock and warrants,  each of which was convertible  into common
stock, that contained embedded derivatives requiring bifurcation from their host
instruments under Statement of Financial Accounting Standards 133 (SFAS 133) and

                                       39
<PAGE>
Emerging Issues Task Force No. 00-19 (EITF 00-19). We subsequently  restated our
2004  financial  statements  and shortly  will restate our  quarterly  financial
statements for 2005.

We thereafter  evaluated the circumstances under which the applicability of SFAS
133 and EITF 00-19 failed to come to the  attention of  management  prior to and
during the preparation  and audit of the December 31, 2004 financial  statements
and the  preparation  and review of the March 31, June 30 and September 30, 2005
financial statements. We concluded that additional steps should be undertaken in
connection  with the issuance of new  securities  to assure the  application  of
appropriate accounting standards. We have since adopted a policy of retaining as
special  consultant  an outside  public  accountant or public  accounting  firm,
registered  with Public  Company  Accounting  Oversight  Board (PCAOB) or having
specific expertise in the preparation of financial  statements for publicly held
companies to advise and assist us in the preparation of our disclosure documents
generally and in the accounting treatment to be applied to the securities of the
Company prior.

In the opinion of management, the failure to apply SFAS 133 and EITF 00-19 arose
from  particular  circumstances  that have been  addressed by the policy changes
discussed  above in a manner  reasonably  to avoid a similar  deficiency  in the
future.

The Company's management necessarily applied its judgment in assessing the costs
and benefits of such  controls  and  procedures,  which,  by their  nature,  can
provide only reasonable  assurance  regarding  management's  control objectives.
Except as  discussed  above,  there  have  been no  significant  changes  in the
Company's internal controls or in other factors that could significantly  affect
these controls subsequent to the Evaluation Date.


                                       40
<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

     The Directors and Executive  Officers of the Company,  and their respective
ages and positions held in the Company, as of April 12, 2006 are as follows:-

NAME                        AGE    POSITION HELD
---------                   ----   -----------------------

Patrick Soon-Hock Lim       56    Chairman, Chief Executive Officer and Director

Valerie Hoi-Fah Looi        47    Secretary and Director

Wan Abdul Razak bin Muda    69    Director

Mark Deschaine              42    Director
                                  (Resigned with effect from October 31, 2005)

Chee-Hong Leong             40    Chief Financial Officer/Treasurer
                                  (Resigned with effect from November 19, 2005)

Voon-Fui Yong               37    Chief Accounting Officer


(1) The  directors  of the Company  will serve in such  capacity  until the next
annual meeting of the Company's shareholders or until their successors have been
elected and  qualified.  The officers  serve at the  discretion of the Company's
Directors.  There are no family  relationships  among the Company's officers and
directors,  nor are there any arrangements or understandings  between any of the
directors or officers of the Company or any other  person  pursuant to which any
officer or director was or is to be selected as an officer or director.

     MR. PATRICK SOON-HOCK LIM, 56, has served as the President, Chief Executive
Officer and director of the Company,  positions he has held since April 1999. In
June 2002,  Mr. Lim was  appointed  as  Chairman,  Chief  Executive  Officer and
director of the Company.  Mr. Lim has been the  Managing  Director at SDAM since
1988 and has been involved in the multimedia industry for over 12 years. Mr. Lim
earned his Masters of Science from Reading University, United Kingdom in 1973.

     MR. WAN ABDUL  RAZAK BIN MUDA,  69, has served as a director of the Company
since April 1999.  Mr.  Muda  previously  served as Chairman of the Board of the
Company  from  April  1999 to June  2002.  In  addition,  Mr.  Muda has been the
Chairman of the Board of SDAM and PTSB since February  1993.  Since 1992, he has
been the Chairman and Director of Tiong Nam Transport  Holdings Bhd, a Malaysian
public land cargo transportation and warehousing company. Prior to joining Tiong
Nam Transport Holding Bhd, Mr. Muda had served in the Malaysian Police Force for
34  years.  He  joined  the  Malaysian  Police  Force  as a police  cadet  after
completing  senior high school.  As part of his training,  he attended  numerous
courses  conducted by the Royal Malaysian  Police Training College and rose from
the rank and file to his last position as the Chief Police  Officer of the state
of Terengganu, Malaysia.


                                       41
<PAGE>
     MS.  VALERIE  HOI-FAH LOOI,  47, has served as the Corporate  Secretary and
director  of the  Company  since  April  1999  and,  in  such  position,  she is
responsible for corporate  affairs and human resources of the Company.  Ms. Looi
has also  served as the Senior  Vice  President,  Corporate  Affairs at SDAM,  a
position  she has held  since  joining  SDAM in  1990.  She has over 10 years of
experience  in corporate  affairs.  Ms. Looi  received her Diploma in Management
from the Malaysian Institute of Management.

     MR.  VOON-FUI  YONG, 37 has served as the Chief  Accounting  Officer of the
Company Since November 2005, prior to this position he served as the Finance and
Administration  Manager.  Mr. Yong is an Associate of the Chartered Institute of
Management Accountant, United Kingdom. Prior to joining SDAM in October 1999, he
served as an Accounts Executive at SembCorp  Malaysia,  a subsidiary of Sembcorp
Industries  that is  listed  on the  Singapore  Stock  Exchange.  Mr.  Yong  has
extensive experience in financial and management accounting.

     The  Company  does not pay fees to  members of the board of  directors  and
presently has no plans to pay directors' fees.  Presently,  Mr. Muda is the only
outside Director of the Company.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  (the "34
Act"),  requires  the  Company's  officers  and  directors  and  persons who own
beneficially more than ten percent of the Company's Common Stock to file initial
reports of ownership and changes in ownership  with the  Securities and Exchange
Commission  ("SEC").  Based  solely on a review of copies of the  Section  16(a)
reports  furnished  to  the  Company  and  written  representations  by  certain
reporting  persons,  the Company believes that all of the Company's officers and
directors,  and all persons owning more than ten percent of the Company's Common
Stock have filed the subject reports, if required,  on a timely basis during and
with respect to the fiscal year ended December 31, 2005.

Audit Committee Composition

The Company has a separately  designated standing audit committee established in
accordance with Section  3(a)(58)(A) of the Securities  Exchange Act of 1934, as
amended (the "Exchange Act").  Patrick  Soon-Hock Lim (Chairman),  and Wan Abdul
Razak bin Muda are members of the audit committee. The Board has determined that
at least one person on the Audit Committee,  Patrick Soon-Hock Lim, qualifies as
a  "financial  expert" as defined by SEC rules  implementing  Section 406 of the
Sarbanes-Oxley  Act. and Wan Abdul Razak bin Muda meet the SEC  definition of an
"independent" director.

Code of Ethics

The Company has adopted a Code of Ethics (as defined in Item 406) of  Regulation
S-K that  applies to its  directors  and  executive  officers.  Secured  Digital
Applications, Inc. will provide a copy of its code of ethics, without charge, to
any investor  that requests it.  Requests  should be addressed in writing to Ms.
Valerie Looi, No.11 Jalan 51A/223, 46100 Petaling Jaya, Selangor, Malaysia.

Code of Conduct for Purchases and Sales of Company Securities

The Company has  adopted a Code of Conduct  for  Purchases  and Sales of Company
Securities that applies to its directors and executive officers. Secured Digital
Applications,  Inc. will provide a copy of its Code of Conduct for Purchases and
Sales of Company  Securities,  without charge, to any investor that requests it.
Requests  should be  addressed  in writing to Ms.  Valerie  Looi,  No. 11, Jalan
51A/223, 46100 Petaling Jaya, Selangor, Malaysia.


                                       42
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION

     The  following  table  sets  forth  certain   information   concerning  the
compensation earned by the Company's Chief Executive Officer and other executive
officers who were serving as executive officers at the end of the last completed
fiscal year and whose salary and bonus aggregated were in excess of $100,000. No
other compensation not covered in the following table was paid or distributed by
the  Company  to such  persons  during the period  covered.  Employee  Directors
receive no additional  compensation for service on the Board of Directors of the
Company.  Outside  Directors  received no compensation  from the Company as such
during this period, except as indicated below.

     On August 3, 2004,  the Company  granted  stock  options to  directors  and
officers of the Company. Mr. Lim, the current Chief Executive Officer,  Chairman
and  Director  was  granted  an  option  for  500,000  common  shares  at  $0.20
exercisable  until August 2, 2009.  Mr. Muda, a Director,  was granted an option
for 100,000 common shares at $0.20  exercisable until August 2, 2009. Miss Looi,
the current  Secretary  and Director,  was granted an option for 500,000  common
shares at $0.20  exercisable  until August 2, 2009.  Mr. Yong, the current Chief
Accounting  Officer,  was granted an option for 300,000  common  shares at $0.20
exercisable  until  August 2, 2009.  The  closing  price of the common  stock on
August 3, 2004 was $0.24.

     The Company has no other retirement, pension, profit sharing, stock option,
insurance or other similar programs. There were no long-term compensation plans,
awards, options or any other compensation offered by the Company.

                           SUMMARY COMPENSATION TABLE

                                                                ANNUAL
                                                             COMPENSATION
                                                       ------------------------
NAME AND PRINCIPAL POSITION                YEAR          SALARY        BONUS
---------------------------------------  ---------     ---------    -----------
Patrick Soon-Hock Lim                      2005            -              -
Chairman, Chief Executive                  2004            -              -
Officer and Director                       2003            -              -

EMPLOYMENT AGREEMENTS

     The Company has no employment  agreements with its Chief Executive  Officer
and other executive officers.  However, its wholly-owned  subsidiary,  SDAM, and
Voon Fui Yong entered into a letter  agreement,  dated  November 19, 2005,  with
respect to Mr. Yong's  redesignation as Chief Accounting  Officer of SDAM. Under
the letter  agreement,  Mr. Yong will receive a basic salary of $24,000 per year
and be  entitled to  unspecified  stock  option  grants to be awarded by Secured
Digital Applications,  Inc. in the future. Either party may terminate the letter
agreement by giving the other party one month's prior written  notice.  Mr. Yong
is presently drawing a basic salary of $24,000 per year.

     SDAM and Ms.  Valerie  Hoi-Fah Looi entered into a letter  agreement  dated
January  1,  1999 with  respect  to Ms.  Looi's  redesignation  as  Senior  Vice
President of Corporate  Affairs at SDAM.  Under the letter  agreement,  Ms. Looi
will receive a basic salary of $13,578 per year subject to review by the Company
from time to time.  Ms. Looi is presently  drawing a basic salary of $38,636 per
year.

                                       43
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following sets forth the number of shares of the Company's common stock
beneficially owned by (i) each person who, as of April 8, 2004, was known by the
Company to own  beneficially  more than five percent  (5%) of its common  stock;
(ii) each of the Directors  and Executive  Officers of the Company and (iii) the
Directors  and  Executive  Officers of the  Company as a group.  As of April 12,
2006, there were 133,736,378 common shares issued.


NAME AND ADDRESS                   NUMBER OF SHARES OF          PERCENT OF
OF BENEFICIAL OWNER                BENEFICIAL OWNER (1)            CLASS

Patrick Soon-Hock Lim                 51,245,000 (2)               38.31

Valerie Hoi-Fah Looi                   4,860,000                    3.63

Wan Abdul Razak bin Muda                 400,000                       *

Voon-Fui Yong                             62,400                       *
                                   --------------            ------------
All Officers and Directors as
a Group (4 persons)                   56,567,400                   41.94
                                   ==============            ============
* Less than 1%.


(1)  The inclusion  herein of any shares of common stock as  beneficially  owned
     does not  constitute an admission of beneficial  ownership of those shares.
     Unless  otherwise  indicated,  each person listed above has sole investment
     and voting power with respect to the shares listed.

(2)  Includes  (a)  8,000,000  shares  directly  owned by Mr.  Lim's  wife,  (b)
     8,000,000 shares directly owned by Mr. Lim's son and (c) 25,245,000  shares
     owned by LSH Asset  Holdings Sdn Bhd, a  corporation  controlled by Mr. Lim
     and his wife.


                                       44
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the year ended  December 31, 2005,  the Company had related  transactions
with the following parties:

LSH ASSET HOLDINGS SDN BHD ("LSH"):

LSH is a company  wholly-owned by the Company's Chief Executive  Officer and his
wife. LSH billed the Company  management fees totaling  $120,000 and $60,000 for
the  respective  years ended  December  31,  2005 and 2004.  LSH also billed the
Company's  Malaysian  subsidiary,  SDAM,  $25,309  per year for each of the year
ended December 31, 2005 and 2004 for  administrative  and clerical charges.  LSH
also made short  term  advances  to the  Company  from time to time for  working
capital  purposes.  These advances totaled 110,881 and $59,876 in 2005 and 2004,
respectively.  Advances  of 225,462 and  $198,568  were repaid in 2005 and 2004,
respectively.  As of December 31, 2005, the amount due to LSH was $125,518. This
amount is unsecured,  bears no interest, has no fixed terms of repayment, and is
recorded in the financial statements as "Amount due to an affiliated company".

VISIONEWS ASIA SDN BHD ("VASB"):

The  Company's  Chief  Executive  Officer is a  director  of VASB and owns a 40%
equity  interest in VASB. A director of PTSB is also a director of VASB and owns
a 20% equity  interest in VASB. As of December 31, 2005,  $73,491 of receivables
from 1999 was not  recognized as revenue due to the  uncertainty  of collection.
The terms of repayment for the amount due from VASB is similar to terms accorded
to the Company's other existing customers.

SYNERVEST SDN BHD ("SSB")

A director of PTSB is a director of SSB and holds a 60% equity  interest in SSB.
As of December 31, 2005, long-term receivables, related parties, consisted of an
overdue  amount of $183,098  from SSB. This amount  primarily  arose in the year
ended  December  31,  1998,  when the  Company  sold to SSB  assets  used in the
operations of a subsidiary.  These assets,  comprising analog video hardware and
peripherals and a patent for image display,  were sold to SSB for a total sum of
$1,661,175.  Due to the uncertainty of collection of the related  receivable,  a
related gain on the sale of the assets was deferred and is to be recognized only
after all costs have been  recovered  and as payments are  received.  During the
year ended  December 31,  2002,  payments  received by the Company  exceeded all
remaining costs.  The Company received  $126,282 and $245,416 of the outstanding
receivable  during the years ended  December  31,  2005 and 2004,  respectively,
resulting in a  realization  of gain on sale of assets,  related  party for both
years.  The  deferred  gain  included  in the  balance  sheet  has been  reduced
accordingly. The deferred gain on sale of assets will be recognized as a gain as
payments on the long-term receivable balance are received.

KHIDMAT MAKMUR SDN BHD ("KMSB")

A director  of PTSB is a director  of KMSB and holds a 30%  equity  interest  in
KMSB.  As of  December  31,  2005,  $40,693  of  receivables  from  1999 was not
recognized  as  revenue  due to the  uncertainty  of  collection.  The  terms of
repayment  for the amount due from KMSB are  similar  to terms  accorded  to the
Company's other existing customers.


                                       45
<PAGE>
MY ARCHITECT ("MYA") AND MY DRAUGHTING SERVICES ("MDS")

A director of PTSB is a principal partner of MYA and MDS. During the years ended
December  31,  2005  and  2004,  the  Company  received  fees  of  $333,342  and
$1,316,052,  respectively,  from consulting  contracts that it entered into with
MYA. As of December 31, 2005,  $131,268 and $93,988 of 1999 receivables from MYA
and MDS, respectively,  were not recognized as revenue due to the uncertainty of
collection.  The  terms of  repayment  for the  amount  due from MYA and MDS are
similar to terms accorded to the Company's other existing customers.

CHIEF EXECUTIVE OFFICER

As of December 31, 2005,  the Company  owed the Chief  Executive  Officer of the
Company  $86,192 for  short-term  cash  advances made to the Company for working
capital  purpose  from time to time.  The  amount  owing to the Chief  Executive
Officer is unsecured,  bears no interest, has no fixed terms of repayment and is
recorded in the financial statements as "Amount due to a director".


ITEM 13. EXHIBITS.

3.1     Certificate  of  Incorporation  of Secured  Digital  Applications,  Inc.
        (incorporated  by reference to Exhibit 3.1 to the Company's  Form 10-KSB
        filed with the SEC on April 15, 2005)

3.2     Amended and Restated  Certificate of  Incorporation  of Secured  Digital
        Applications,  Inc.  (incorporated  by  reference  to Exhibit 3.2 to the
        Company's Form 10-KSB filed with the SEC on April 15, 2005.)

3.3     Certificate of Ownership of Digital Broadband Networks, Inc. (a Delaware
        Corporation)   and  Secured  Digital   Applications   Inc.  (a  Delaware
        Corporation)  (incorporated by reference to Exhibit 3.3 to the Company's
        Form 10-KSB filed with the SEC on April 15, 2005)

3.4     Certificate of Amendment to the Certificate of  Incorporation of Secured
        Digital Applications,  Inc. (incorporated by reference to Exhibit 3.3 to
        the Company's Form 10-KSB filed with the SEC on April 15, 2005)

3.5     Bylaws of Digital Broadband Networks,  Inc.,  presently known as Secured
        Digital Applications,  Inc. (incorporated by reference to Exhibit 3.3 to
        the Company's Form 10-KSB filed with the SEC on April 15, 2005)

10.1    Amended Settlement Memorandum,  dated December 14, 1999, as confirmed by
        Judge  Jim  R.  Carrigan  of  the  Judicial  Arbiter  Group  in  Denver.
        (Incorporated  by reference to Exhibit 10.1 to the Company's Form 10-KSB
        filed with the SEC on April 14, 2000.)

10.2    Agreement  and Plan of  Reorganization,  dated April 20,  1999,  between
        Kalan Gold  Corporation  and Animated  Electronic  Industries  Sdn. Bhd.
        (Incorporated  by  reference  to Exhibit  2.1 to the  Company's  Current
        Report on Form 8-K/A dated April 20, 1999, as filed with the SEC on July
        2, 1999.)

21.1    List of Subsidiaries

31.1    Certification  by Chief  Executive  Officer  pursuant  to Rule 13A-14 or
        15D-14 of the Securities Exchange Act of 1934


                                       46
<PAGE>
31.2    Certification  by Chief  Accounting  Officer  pursuant to Rule 13A-14 or
        15D-14 of the Securities Exchange Act of 1934

32.1    Certification by Chief Executive Officer pursuant to 18 U.S.C. 1350

32.2    Certification by Chief Accounting Officer pursuant to 18 U.S.C. 1350


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Our  principal  auditor  during  fiscal  2004  and  2005 is GHP  Horwath,  P. C.
Aggregate fees were billed or expected to be billed in the following  categories
and amounts:

                                                Years Ended December 31,
                                          ---------------------------------
                                              2005                2004
                                          -------------       -------------
 Audit Fees                               $      97,400   $          96,700
 Audit Related                                       --                  --
 Tax Related                                         --                  --
 Other Fees                                          --                  --


Audit  fees  include  fees  billed for  professional  services  rendered  by our
principal  auditor  for the audit of annual  financial  statements,  reviews  of
quarterly  financial  statements  and  services  that are  normally  provided in
connection with statutory and regulatory filings.

Audit related fees included due diligence assistance provided in connection with
potential acquisitions. All of the services described above were approved by the
Company's  audit  committee and prior to  performance.  The audit  committee has
determined  that the  payments  made to its  independent  accountants  for these
services are compatible with maintaining such auditors' independence.


                                       47
<PAGE>
                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                      Secured Digital Applications, Inc.

Dated:  April 20, 2006                By:  /s/ Patrick Soon-Hock Lim
                                           --------------------------
                                           Patrick Soon-Hock Lim
                                           Chairman and Chief Executive Officer


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the  following  persons on behalf of the Company
and in the capacities and on the dates indicated.

      SIGNATURE                            TITLE                      DATE
      ---------                            -----                      ----


/s/ Patrick Soon-Hock Lim         Chairman, Chief Executive      April 20, 2006
-------------------------         Officer and Director
Patrick Soon-Hock Lim             (Principal Executive Officer)



/s/ Voon-Fui Yong                 Chief Accounting Officer       April 20, 2006
-----------------                 (Financial Officer and
Voon Fui Yong                     Principal Accounting Officer


/s/ Valerie Hoi-Fah Looi          Secretary and Director         April 20, 2006
------------------------
Valerie Hoi-Fah Looi



/s/ Wan Abdul Razak bin Muda      Director                       April 20, 2006
----------------------------
Wan Abdul Razak bin Muda



                                       48
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



Report of independent registered public accounting firm                    F-1
Consolidated financial statements:
         Balance sheet                                                     F-2
         Statements of operations                                          F-4
         Statements of changes in shareholders'
           equity and comprehensive income                                 F-6
         Statements of cash flows                                          F-10
         Notes to consolidated financial statements                        F-14


<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM


Board of Directors
Secured Digital Applications, Inc.

We have audited the accompanying  consolidated  balance sheet of Secured Digital
Applications,  Inc. and  subsidiaries  as of December 31, 2005,  and the related
consolidated  statements  of  operations,  changes in  shareholders'  equity and
comprehensive income and cash flows for each of the years in the two-year period
ended December 31, 2005. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Secured  Digital
Applications,  Inc. and subsidiaries as of December 31, 2005, and the results of
their  operations  and their  cash  flows for each of the years in the  two-year
period  ended  December 31,  2005,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

As discussed in Note 1 to the consolidated  financial statements,  subsequent to
December 31, 2005, the Company  corrected its accounting for preferred  stock of
of a  subsidiary,  a  convertible  term note and related  warrants in the first,
second and third quarters of 2005.




GHP HORWATH, P.C.

Denver, Colorado
April 7, 2006



                                      F-1
<PAGE>
<TABLE>
<CAPTION>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2005


                                     ASSETS

Current assets:
<S>                                                                                    <C>
          Cash                                                                $          46,586
     Cash, restricted (Note 7)                                                          548,154
     Trade receivables,
       less allowance for doubtful accounts of $440,720 (Notes 6 and 14)              6,468,036
     Prepaid expenses                                                                    85,584
     Inventories                                                                        270,947
                                                                              -----------------
              Total current assets                                                    7,419,307
Property and equipment, net (Note 5)                                                  1,187,786
Customer list and customer relationships (Notes 2 and 3)                                201,465
License (Notes 2 and 3)                                                                  48,750
Goodwill (Notes 2 and 3)                                                                851,740
Long-term receivables, related parties (Note 6)                                         183,098
                                                                              -----------------
                                                                              $       9,892,146
                                                                              =================



                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Bank overdraft and borrowings (Note 8)                                   $       1,113,069
     Capital lease obligations (Note 9)                                                  44,640
     Current portion of term loan (Note 10)                                              76,582
     Accounts payable                                                                 1,136,071
     Accrued expenses                                                                   270,290
     Amount due to an affiliated company (Note 6)                                       125,518
     Amount due to a director (Note 6)                                                   86,192
     Income tax payable (Note 11)                                                        13,598
                                                                              -----------------
              Total current liabilities                                               2,865,960
     Term loan, net of current portion (Note 10)                                        101,908
     Deferred income tax (Note 11)                                                      156,209
     Deferred gain (Note 6)                                                             183,098
                                                                              -----------------
              Total liabilities                                                       3,307,175
                                                                              -----------------


                                   (continued)

                                      F-2
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (CONTINUED)
                                DECEMBER 31, 2005




Minority interest                                                                       485,250
                                                                              -----------------
Commitments and contingencies (Notes 17, 18, 19 and 20)

Shareholders' equity (Note 13):
     Series A convertible preferred stock, $0.10 par value;
       1,000,000 shares authorized;  none issued or outstanding                              --
     Common stock, $.00001 par value;
       350,000,000 shares authorized; 133,736,378 shares issued,
           128,884,430 shares outstanding                                                 1,289

     Additional paid-in capital                                                       5,253,842
     Common treasury stock, 4,851,948 shares at cost                                         --
     Options                                                                             62,372
     Warrants                                                                           749,715
     Retained earnings                                                                        -
     Accumulated other comprehensive income                                              32,503
                                                                              -----------------
              Total shareholders' equity                                              6,099,721
                                                                              -----------------
                                                                              $       9,892,146
                                                                              =================
</TABLE>
                 See notes to consolidated financial statements

                                      F-3
<PAGE>
<TABLE>
<CAPTION>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                                               2005                  2004
                                                                         -----------------      --------------
<S>                                                                             <C>                    <C>
Revenues:
Products and equipment                                                   $       3,549,766      $      788,291
Services:
  Related parties (Note 6)                                                         333,342           1,316,052
  Others                                                                        24,424,254          18,333,687
                                                                         -----------------      --------------
                                                                                28,307,362          20,438,030
                                                                         -----------------      --------------
Cost of revenues:
Products and equipment                                                           3,274,413             715,172
Services:
  Related parties                                                                  145,527             478,553
  Others                                                                        22,625,140          17,085,086
                                                                         -----------------      --------------
                                                                                26,045,080          18,278,811
                                                                         -----------------      --------------
Gross profit                                                                     2,262,282           2,159,219
                                                                         -----------------      --------------
Operating expenses:
     Sales and marketing                                                           142,887              43,677
     General and administrative:
       Related parties (Note 6)                                                    145,309              85,263
       Others                                                                    1,749,767           1,490,132
                                                                         -----------------      --------------
Total operating expenses                                                         2,037,963           1,619,072
                                                                         -----------------      --------------
Income from operations                                                             224,319             540,147
                                                                         -----------------      --------------
Other income (expense):
     Interest expense                                                             (335,489)           (108,686)
     Amortization of debt issuance costs                                           (65,511)            (29,835)
     Other issuance costs                                                               --            (210,311)
     Gain on value of derivative liabilities                                            --             980,423
     Interest income                                                               120,894              16,408
     Previously deferred gain on sale of technology,
         related parties (Note 6)                                                  126,282             245,416
     Other                                                                          43,529              14,933
     Equity in losses of unconsolidated subsidiaries                                   --               (6,355)
                                                                         -----------------      --------------
                                                                                  (110,295)            901,993
                                                                         -----------------      --------------
Income from continuing operations before income tax and minority interest          114,024           1,442,140
Income tax                                                                         (77,484)           (180,083)
                                                                         ------------------     --------------
Income from continuing operations before minority interest                          36,540           1,262,057
Minority interest                                                                   90,376             (31,588)
                                                                         -----------------      --------------
Income from continuing operations                                                  126,916           1,230,469
                                                                         -----------------      --------------
Discontinued operations:
     Income  from operations of discontinued material handling
     subsidiaries  (including gain on disposal of $131,115)                             --              1,425

                                                                         -----------------      -------------
Net income                                                               $         126,916      $   1,231,894
                                                                         =================      =============
                                   (continued)

                                      F-4
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                                               2005                  2004
                                                                         ----------------       ------------


Net income                                                               $         126,916      $   1,231,894

Preferred stock dividend                                                          (391,870)          (375,434)
Early redemption penalty on preferred stock                                       (302,994)                --
Accretion to preferred stock redemption value                                   (3,312,689)          (714,182)
                                                                         -----------------      -------------

Net (loss) income applicable to common shareholders                      $      (3,880,637)     $     142,278
                                                                         =================      =============


Net income                                                               $         126,916      $   1,231,894

Other comprehensive income:

     Foreign currency translation adjustments                                      (24,066)                --

                                                                         -----------------      -------------
Comprehensive income                                                     $         102,850      $   1,231,894
                                                                         =================      =============



Basic and diluted net (loss) income per common share:

     Continuing operations                                               $           (0.04)     $           *

     Discontinued operations                                                             *                  *
                                                                         -----------------      -------------

Net (loss) income per common share                                       $           (0.04)     $           *
                                                                         =================      =============
Weighted average shares outstanding

     Basic                                                                     109,447,305         94,349,704
                                                                         =================      =============
     Diluted                                                                   110,255,798         95,181,672
                                                                         =================      =============
</TABLE>
* Less than $0.01 per share


                 See notes to consolidated financial statements

                                       F-5
<PAGE>
<TABLE>
<CAPTION>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


                               Preferred stock                                   Additional   Common Stock
                                          Par                        Par          paid-in       Treasury
                               Shares     Value       Shares        Value         capital        stock
                             ---------  ---------   -----------    ---------    -------------  -----------
<S>                             <C>       <C>          <C>           <C>             <C>            <C>
Balances, January 1, 2004           --  $      --    97,928,899    $     989    $   3,609,298  $   (44,550)
Issuance of warrants                --         --            --           --               --           --
Return of common shares        100,000     10,000    (8,000,000)         (80)          (9,920)          --
Exercise of stock options           --         --       300,000            3           50,797           --
Common stock issued for services    --         --       525,000            5           91,570       14,175
Issuance of stock options           --         --            --           --               --           --
Issuance of stock options           --         --            --           --               --           --
Issuance of common shares as
 compensation for:
raising capital                     --         --       547,230            6          133,494           --
  professional fees                 --         --       649,735            6          158,062           --
Conversion of preferred shares      --         --     2,500,000           25          776,384           --
Conversion of term note             --         --       170,288            1           31,239           --
Redemption of term note             --         --            --           --           (1,409)          --
Reclassification of embedded
   derivatives                      --         --            --           --        2,113,162           --
Amortization of deferred
   compensation for the year
   ended December 31, 2004          --         --            --           --               --           --
Comprehensive income:
 Net income for the year            --         --            --           --               --           --
  ended December 31, 2004
 Comprehensive income               --         --            --           --               --           --
Dividend declared for the year
  ended December 31, 2004           --         --            --           --         (176,677)          --
Accretion to preferred stock
    redemption value                --         --            --           --               --           --
                             ---------  ---------  ------------    ---------    -------------  -----------
Balances, December 31, 2004    100,000  $  10,000    94,621,152    $     955    $   6,776,000  $   (30,375)

                                   (continued)

                                      F-6
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


                             Preferred stock             Common Stock            Additional
                                          Par                         Par         paid-in       Treasury
                              Shares     Value        Shares         Value         capital       stock
                             ---------  ---------   -----------    ---------    -------------  -----------
Balances, December 31, 2004    100,000  $  10,000    94,621,152    $     955    $   6,776,000  $   (30,375)

Conversion of term note             --         --     1,259,319           14          155,974           --
Settlement of convertible
 securities                         --         --     9,756,098           86          799,914           --
Conversion of preferred
  shares                      (100,000)   (10,000)    8,000,000           80            9,920           --
Common stock issued for
 private placement                  --         --    11,349,565          113          945,717        7,270
Cost of raising capital             --         --            --           --          (46,379)          --
Issuance of common shares as
 compensation for professional
 fees                               --         --     3,298,296           34          344,178       16,355
Issuance of common shares for
 business acquisition               --         --       250,000            3           25,747        6,750
Employee stock options exercised    --         --       350,000            4           83,996           --
Issuance of stock options           --         --            --           --               --           --
Cancellation of stock option        --         --            --           --           39,412           --
Early redemption penalty on
   preferred stock                  --         --            --           --         (302,994)          --
Accretion to preferred stock
   redemption value                 --         --            --           --       (3,312,689)          --
Amortization of deferred
 compensation for the year
  ended December 31, 2005           --         --            --           --               --           --
Comprehensive income:
 Net income for the year
  ended December 31, 2005           --         --            --           --               --           --
Foreign currency translation
  adjustment                        --         --            --           --               --           --
 Comprehensive income
Dividend declared for the year
  ended December 31, 2005           --         --            --           --         (264,954)          --
                             ---------- ---------  -------------   ---------    -------------  -----------
Balances, December 31, 2005         --  $      --   128,884,430    $   1,289    $   5,253,842  $        --
                             =========  =========  ============    =========    =============  ===========

                                   (continued)

                                      F-7
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                      AND COMPREHENSIVE INCOME (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                                                 Accumulated
                                        Deferred                Accumulated         Other
                                      Compensation                 earnings     Comprehensive
                              Options      Cost      Warrants        (deficit)     Income         Total
                             --------- ----------   ----------- -------------   -------------  -----------
Balances, January 1, 2004    $  14,800 $       --  $         --  $  (318,955)   $      56,569  $ 3,318,151
Issuance of warrants                --         --       749,715           --               --      749,715
Return of common shares             --         --            --           --               --           --
Exercise of stock options      (14,800)        --            --           --               --       36,000
Common stock issued for services    --         --            --           --               --      105,750
Issuance of stock options       26,600    (26,600)           --           --               --           --
Issuance of stock options       52,235         --            --           --               --       52,235
Issuance of common shares as
 compensation for:
 raising capital                    --         --            --           --               --      133,500
  professional fees                 --         --            --           --               --      158,068
Conversion of preferred shares      --         --            --           --               --      776,409
Conversion of term note             --         --            --           --               --       31,240
Redemption of term note             --         --            --           --               --       (1,409)
Reclassification of embedded
   derivatives                      --         --            --           --               --    2,113,162
Amortization of deferred
 compensation for the year
  ended December 31, 2 004          --     15,153            --           --               --       15,153
Comprehensive income:
 Net income for the year
  ended December 31, 2004           --         --            --    1,231,894               --    1,231,894
Comprehensive income                --         --            --           --               --    1,231,894
Dividend declared for the year
  ended December 31, 2004           --         --            --     (198,757)              --     (375,434)
Accretion to preferred stock
        redemption value            --         --            --     (714,182)              --     (714,182)
                             --------- ----------  ------------  -----------    -------------  -----------
Balances, December 31, 2004  $  78,835 $  (11,447) $    749,715  $        --    $      56,569  $ 7,630,252


                                   (continued)

                                      F-8
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                      AND COMPREHENSIVE INCOME (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


                                                                                Accumulated
                                        Deferred                 Accumulated       Other
                                      Compensation                earnings      Comprehensive
                              Options    Cost        Warrants     (deficit)        Income        Total
                             --------- ----------  ------------  -----------    ------------- ------------
Balances, December 31, 2004  $  78,835 $  (11,447) $    749,715  $        --    $      56,569 $  7,630,252

Conversion of term note             --         --            --           --               --      155,988
Settlement of convertible
 securities                         --         --            --           --               --      800,000
Conversion of preferred shares      --         --            --           --               --           --
Common stock issued for
 private placement                  --         --            --           --               --      953,100
Cost of raising capital             --         --            --           --               --      (46,379)
Issuance of common shares as
 compensation for professional
 fees                               --         --            --           --               --      360,567
Issuance of common shares for
 business acquisition               --         --            --           --               --       32,500
Employee stock options
 exercised                     (14,000)        --            --           --               --       70,000
Issuance of stock options       47,329         --            --           --               --       47,329
Cancellation of stock option   (49,792)    10,380            --           --               --           --
Early redemption penalty on
   preferred stock                  --         --            --           --               --     (302,994)
Accretion to preferred stock
   redemption value                 --         --            --           --               --   (3,312,689)
Amortization of deferred
 compensation for the year
  ended December 31, 2005           --      1,067            --           --               --        1,067
Comprehensive income:
 Net income for the year
  ended December 31, 2005           --         --            --      126,916               --      126,916
Foreign currency translation
 adjustment                         --         --            --           --          (24,066)     (24,066)
Comprehensive income                --         --            --           --               --      102,850
Dividend declared for the year
  ended December 31, 2005           --         --            --     (126,916)              --     (391,870)
                             --------- ----------  ------------  -----------    ------------- ------------
Balances, December 31, 2005  $  62,372 $       --  $    749,715  $        --    $      32,503 $  6,099,721
                             ========= ==========  ============  ===========    ============= ============
</TABLE>

                 See notes to consolidated financial statements

                                      F-9
<PAGE>
<TABLE>
<CAPTION>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                                                    2005              2004
                                                                                -------------     ------------
                                                                                               (Revised, Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                 <C>              <C>
      Net income                                                                $     126,916    $   1,230,469
     Adjustments to reconcile net income to net cash
      used in operating activities:

     Minority interest                                                                (90,376)          31,588
     Depreciation and amortization                                                    344,467          262,285
     Amortization of debt issuance costs                                               65,511           29,835
     Amortization of embedded liability of term note                                  179,862           66,819
     Gain on value of derivative liabilities                                               --         (980,423)
     Deferred compensation expenses                                                    48,396           15,153
     Other compensation expense                                                       360,567          306,053
     Reserve for bad debts                                                             24,957           12,369
     Management and clerical fees to affiliated company                               145,204           85,262
     Previously deferred gain on sale of technology, related party                   (126,282)        (245,416)
     Equity in losses of unconsolidated investees                                          --            6,355
     Warrants issued for other issuance costs                                              --          210,311
     Changes in operating assets and liabilities, net of effects from purchase of
      ISS in 2005 and Gallant Group of companies and ATG in 2004:
       Increase in receivables                                                     (1,863,451)      (1,711,036)
       Increase in prepaid expenses                                                   (16,397)         (26,711)
       Decrease (increase) in inventories                                             236,636          (46,327)
       Increase (increase) in payables and accrued expenses                           101,821         (110,836)
       Increase in income tax liability                                                 6,240          154,085
                                                                                -------------    -------------
           Net cash used in operating activities of continuing operations            (455,929)        (710,165)
           Net cash used in operating activities of discontinued operations                --          (19,873)
                                                                                -------------    -------------
           Net cash used in operating activities                                     (455,929)        (730,038)
                                                                                -------------    --------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sale of property and equipment                                      39,151               --
     Purchase of property and equipment                                              (259,394)         (66,275)
     Payment for purchase of businesses, net of cash acquired                           1,381          (19,654)
     Proceeds from sale of subsidiary companies                                       143,417               --
     Proceeds from sale of associate companies                                         13,158           36,316
                                                                                -------------    -------------
           Net cash used in investing activities                                      (62,287)         (49,613)
                                                                                -------------    -------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of convertible term note, net                                  --          470,323
     Repayment of convertible term note                                                    --          (13,297)
     Payment on redemption of term note                                                    --           (1,409)
     Payment of expenses in connection with subsidiary preferred stock issuance            --         (296,323)
     Payment of expenses in connection with private placement                         (46,379)              --
     Proceeds from exercise of stock options                                           70,000           12,000
     Proceeds from restricted cash on conversion of preferred stock                        --          500,000
     Proceeds from issuance of shares of common stock                                 953,100               --
     Proceeds from affiliated company                                                 110,881           59,876
     Repayment to affiliated company                                                 (225,462)        (198,568)
     Proceeds from a director                                                         724,286           89,629
     Repayment to a director                                                         (706,996)         (69,915)
     Payment of obligations under capital leases                                      (29,738)          (9,645)
     Payment of term loan                                                             (84,727)         (17,343)
     Payment of subsidiary's preferred stock dividend                                (256,666)          (8,538)
     Payment for early redemption of subsidiary's preferred stock                    (222,226)              --
     Increase in restricted cash                                                     (196,884)        (184,542)
     Net increase in line of credit                                                   397,663          294,977
                                                                                -------------    -------------
           Net cash provided by financing activities                                  486,852          627,225
                                                                                -------------    -------------
                                   (continued)
</TABLE>


                                      F-10
<PAGE>
<TABLE>
<CAPTION>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

                                                                                    2005               2004
                                                                                -------------     -------------
                                                                                                 (Revised, Note 2)

<S>                                                                                   <C>              <C>
FOREIGN CURRENCY TRANSLATION ADJUSTMENT                                               (14,543)               --
                                                                               --------------     -------------

Net decrease in cash                                                                  (45,907)         (152,426)

Cash, beginning of year                                                                92,493           244,919
                                                                                -------------     -------------
Cash, end of year                                                               $      46,586     $      92,493
                                                                                =============     =============


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     Cash paid for interest during the year                                     $     134,230     $      31,728
                                                                                =============     =============
     Cash paid for income taxes during the year                                 $      72,562     $      25,998
                                                                                =============     =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
        FINANCING ACTIVITIES:

Restricted cash (paid) received in exchange for preferred stock of subsidiary   $  (6,000,000)    $   6,500,000
                                                                                ==============    =============
Restricted cash paid for accrued dividends                                      $    (105,138)    $          --
                                                                                =============     =============
Accretion to preferred stock redemption value                                   $   3,312,689     $     714,182
                                                                                =============     =============

Preferred stock dividends declared                                              $     391,870     $     375,434
                                                                                =============     =============
Warrants issued in exchange of debt                                             $          --     $     749,715
                                                                                =============     =============
Reclassification of embedded liabilities                                        $          --     $   2,113,162
                                                                                =============     =============

Receivable for exercise of stock options, received in January 20, 2005          $          --     $      24,000
                                                                                =============     =============
Conversion of convertible term note and related accrued interest                $     155,988     $      34,058
                                                                                =============     =============
Issuance of common stock for services rendered by consultant
  with regard to equity transaction                                             $      32,500     $     133,500
                                                                                =============     =============
Issuance of common stock for term note , accrued interest
  and accrued dividends of preferred stock of subsidiary                        $     800,000     $          --
                                                                                =============     =============
</TABLE>

                                      F-11
<PAGE>
<TABLE>
<CAPTION>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


                                                                             2005                  2004
                                                                       -----------------    ------------------

<S>                                                                    <C>                      <C>
BUSINESS ACQUISITIONS (NOTE 3):


Applications Business:

Net assets acquired:
   Cash                                                                $         54,033
   Accounts receivable                                                           10,365
   Property, furniture and equipment                                              2,119
   Customer relationships                                                        59,423
   Accounts payable                                                             (19,689)
                                                                       ----------------
                                                                                106,251
Less: Minority interests                                                        (21,099)
      Common stock issued                                                       (32,500)
      Cash acquired                                                             (54,033)
                                                                       ----------------
Net cash received in acquisition of subsidiaries                       $         (1,381)
                                                                       ================


Material Handling Business:

Net assets acquired:
   Cash                                                                                     $           3,583
   Accounts receivable                                                                                 87,345
   Inventories                                                                                         85,885
   Property, furniture and equipment                                                                   10,728
   Capital lease obligation                                                                            (8,138)
   Accounts payable                                                                                   (59,076)
                                                                                            -----------------
                                                                                                      120,327
Less: Minority interests                                                                              (46,192)
   Cash acquired                                                                                       (3,583)
                                                                                            -----------------
Net cash used in acquisition of subsidiaries                                                           70,552
Cash used in acquisition of discontinued operations                                                   (70,552)
                                                                                            -----------------
                                                                                            $              --
                                                                                            =================



                                   (continued)

                                      F-12
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


                                                                             2005                  2004
                                                                       -----------------    ------------------

BUSINESS ACQUISITIONS (Continued):


Apple Business:

Net assets acquired:
   Cash                                                                                     $          26,397
   Cash, restricted                                                                                   271,866
   Accounts receivable                                                                                163,895
   Inventories                                                                                        445,775
   Property, furniture and equipment                                                                  115,300
   Customers list                                                                                     189,000
   Licenses                                                                                            65,000
   Goodwill                                                                                           381,375
   Bank overdraft and borrowings                                                                     (468,447)
   Term loan                                                                                         (199,070)
   Accounts payable                                                                                  (854,342)
   Income tax provision                                                                                12,797
                                                                                            -----------------
                                                                                                      149,546
Less: Minority interests                                                                             (103,495)
      Cash acquired                                                                                   (26,397)
                                                                                            -----------------
Net cash used on acquisition of subsidiary                                                  $          19,654
                                                                                            =================
</TABLE>
                 See notes to consolidated financial statements

                                      F-13
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004

NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION

Secured Digital Applications, Inc. and subsidiaries (the "Company") are involved
in application development, broadband network operation, delivery of value added
applications and services;  sale of devices that utilize broadband  networks and
the sale of biometric  security  devices.  During 2003, the Company expanded its
business  to include  the  development,  integration  and  provision  of secured
shipping and supply chain  management  services.  Beginning in October 2004, the
Company expanded into the business of selling Apple computer  products and other
information  technology  products  and  services.  In April  2005,  the  Company
expanded  into the  business  of  specializing  in the design,  development  and
implementation of wireless applications and electronic solutions.  The Company's
revenues for 2005 and 2004 were primarily  derived from the design,  development
and  production  of  interactive  multimedia  websites and  content,  rental and
service  of  material  handling  equipment  and sale of  information  technology
products and services.

The Company, formerly known as Digital Broadband Networks, Inc, changed its name
to Secured Digital Applications,  Inc., after its board of directors unanimously
approved the change on January 28, 2004.

The Company conducts its principal operations in Malaysia, and has the following
subsidiaries as of December 31, 2005:

-    China Sea Trade Company, Inc. ("CST") (f/k/a Eystar Media Inc.), a Delaware
     corporation wholly-owned by the Company;

-    SDA  Worldwide,  Inc.  ("SDAW")  (f/k/a  SDA  America,  Inc.),  a  Delaware
     corporation wholly-owned by the Company;

-    Secured  Digital   Applications   (M)  Sdn  Bhd  ("SDAM")  (f/k/a  Animated
     Electronic Industries Sdn Bhd), a Malaysian corporation wholly-owned by the
     Company;

-    Armor Multi  Systems Sdn Bhd ("AMS")  (f/k/a Asiaco Multi  Corporation  Sdn
     Bhd) and  Secured  Shipping  Sdn Bhd  ("SS"),  all  Malaysian  corporations
     wholly-owned by the Company from the date of  incorporation on November 10,
     2003 and December 8, 2003, respectively;

-    Perwimas  Telecommunications  Sdn Bhd ("PTSB"),  SDAM's 86% owned Malaysian
     subsidiary;

-    Armor Multi  Services Sdn Bhd ("AMSSB")  (f/k/a  Asiaco  Services Sdn Bhd),
     AMS's 60%  owned  Malaysian  subsidiary;  from the date of  acquisition  on
     December 9, 2003;

-    Digital  Image ID Sdn Bhd ("DID")  (f/k/a Vista  Positive Sdn Bhd),  SDAM's
     wholly-owned  subsidiary,  from the date of  incorporation  on February 17,
     2004;

-    Gallant Service Centre (M) Sdn Bhd ("GSC"), SDAM's wholly-owned subsidiary,
     from the date of acquisition on September 29, 2004;

-    Gallant IT Holdings Sdn Bhd ("GIH"),  GSC's 55% owned subsidiary,  from the
     date of  acquisition  on September 29, 2004; and

-    Gallant Zone (M) Sdn Bhd ("GZ"),  Eystar Distribution Sdn Bhd ("ED") (f/k/a
     Gallant IT Distribution  (M) Sdn Bhd) and Gallant Focus (M) Sdn Bhd ("GF"),
     all  wholly-owned  subsidiaries  of GIH  from the  date of  acquisition  on
     September  29,  2004 and,  including  GSC and GIH,  such  subsidiaries  may
     sometimes collectively be referred to as the "Gallant group of companies."


                                      F-14
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

-    Innospective  Sdn Bhd ("ISS"),  a 55%-owned  subsidiary  of SDAM from April
     2005, is a systems integration firm specializing in the design, development
     and implementation of wireless applications and electronic solutions.

On September 10, 2003,  the Company  formed  Temasya Wira Sdn Bhd ("TW"),  a 60%
owned  Malaysian  corporation.  The Company  sold TW on December  27, 2004 to an
unrelated party.

On December  27,  2004,  the Company  sold the  following  Malaysian  subsidiary
companies to an unrelated party:

1.   Asiaco  Material  Handling  (East Coast) Sdn Bhd  ("AEC"),  AMS's 80% owned
     Malaysian subsidiary from the date of acquisition on
     December 9, 2003;

2.   Asiaco Logistic Sdn Bhd ("ALG"),  AMS's 67% owned Malaysian subsidiary from
     the date of acquisition on December 9, 2003; and

3.   Asiaco Taiping Sdn Bhd ("ATG"), AMS's 62% owned Malaysian subsidiary,  from
     the date of acquisition on February 9, 2004.

The accompanying consolidated financial statements include:

1.   Secured Digital Applications, Inc., CST, SDAM and PTSB for 2005 and 2004;

2.   AMS, SS, SDAW, DID and AMSSB for 2005 and 2004;

3.   GSC, GIH, GZ, ED, GF and ISS from the effective date of acquisition;

4.   TW, AEC, ALG and ATG as discontinued  operations from the effective date of
     acquisition up to the effective date of disposal.

All  significant  inter-company  account  balances  and  transactions  have been
eliminated in consolidation.


RESTATEMENT  OF  2004  YEAR  END  AND  2005  QUARTERLY   CONSOLIDATED  FINANCIAL
STATEMENTS

Subsequent  to the  issuance of the  Company's  December  31, 2004  consolidated
financial  statements,  and  based  upon a  further  evaluation  of the  factors
utilized in determining  the accounting and  presentation of a May 2004 issuance
of  preferred  stock of a  subsidiary,  a  convertible  term  note  and  related
warrants,  the Company  determined that both the preferred stock of a subsidiary
and the  convertible  term  note  contained  embedded  derivatives  that must be
bifurcated from their host instruments. In addition, the Company determined that
the warrants and the  preferred  stock of a subsidiary  should not  initially be
classified  as a  component  of  shareholders'  equity  (See  notes  12 and 13).
Accordingly,  the Company's 2004 consolidated financial statements were restated
and were filed in an amended  Form  10-KSB on April 10,  2006,  resulting  in an
increase in net income of $696,534  ($.01 per share)and a decrease in net income
available  to common  shareholders  of $17,648  (less than $.01 per  share).  In
addition, shareholders' equity decreased by $2,506,702 as of December 31, 2004.


                                      F-15
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

RESTRICTED CASH

For purposes of the statements of cash flows,  changes in restricted cash (Notes
7 and 8) are excluded  from changes in cash and are  accounted  for as investing
activities.

ACCOUNTS RECEIVABLE AND CREDIT POLICIES

The Company grants credit,  generally without collateral,  to its customers. The
Company  continuously  monitors  collections and payments from its customers and
maintains  an  allowance  for  estimated   uncollectible   accounts  based  upon
historical  experience and specific  customer  collection  issues that have been
identified. Such allowances have been within management's expectations.

INVENTORIES

Inventories,  which are comprised of peripherals for  surveillance  and wireless
communication,   material  handling   equipment  and  related  spare  parts  and
accessories,  Apple computer products, information technology hardware, software
and accessories,  are stated at the lower of cost or net realizable  value. Cost
is determined on a first-in-first-out basis.

PROPERTY AND EQUIPMENT AND DEPRECIATION

Property and equipment  are stated at cost less  depreciation.  Depreciation  is
calculated  on the  straight-line  method over the expected  useful lives of the
assets. The principal annual rates of depreciation are:

                                                   Business Segments
                                       Broadband, Multimedia
                                         and Biometric       Material Handling
                                        Security/ Computer   Equipment and Apple
Asset Classification                    Sales and Services   Computer division
---------------------------            -------------------  --------------------

Office equipment, furniture and
  fixtures,
  computer software                            20%                10% - 25%
Video communication hardware
  and peripherals, office renovation           10%                    -
Tools and equipment                            10%                10% - 12%
Material handling equipment                     -                    10%
Motor vehicles                                  -                 10% - 20%



                                      F-16
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT AND DEPRECIATION (CONTINUED)

Routine   expenses  for   maintenance  and  repair  are  expensed  as  incurred.
Expenditures  that result in  enhancement  of the value or in  extension  of the
useful life of fixed assets are capitalized.

Management  assesses the carrying values of its long-lived assets for impairment
when  circumstances  warrant  such a review.  Generally,  long-lived  assets are
considered  impaired  if the  estimated  fair  value is less  than  the  assets'
carrying  values.  If an impairment is indicated,  the loss is measured based on
the amounts by which the carrying values of the assets exceed their fair values.
At December 31, 2005, management believes that no impairment has occurred.

GOODWILL AND INTANGIBLE ASSETS

Goodwill consists of the excess of cost over net assets acquired of PTSB and the
Gallant  group of companies.  Management  of the Company  evaluates the carrying
value of goodwill annually or whenever a possible  impairment is indicated.  The
Company  performs its impairment  test annually during the fourth quarter of the
fiscal year and determined  that there was no impairment  during the years ended
December 31, 2005 and 2004.

Intangible assets include a customer list and a Malaysian government  registered
contractor  license acquired in September 2004 (Note 3). The customer list has a
cost of  $189,000  and is  amortized  using the  straight  line  method over its
expected  life of 7 years.  Amortization  expense for 2005 and 2004  amounted to
$27,000 and $6,750, respectively.  Accumulated amortization at December 31, 2005
was $33,750. Amortization expense for each of the next five years is expected to
be $27,000 per year. The registered contractor license has a cost of $65,000 and
is amortized  using the straight  line method over its expected life of 5 years.
Amortization  expense  for  2005  and  2004  amounted  to  $13,000  and  $3,750,
respectively.  Accumulated  amortization  at  December  31,  2005  was  $16,750.
Amortization  expense  for fiscal  years 2006  through  2008 is  expected  to be
$13,000 per year and $9,750 for fiscal 2009. Customer  relationships with a cost
of $59,423 were acquired on April 30, 2005,  and are being  amortized  using the
straight line method over its estimated  life of 3 years.  Amortization  expense
for 2005  and  accumulated  amortization  at  December  31,  2005  was  $13,208.
Amortization  expense  for  fiscal  years  2006  and  2007  is  expected  to  be
approximately $19,800 per year and $6,600 in fiscal year 2008.


                                      F-17
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

UNCONSOLIDATED SUBSIDIARIES - EQUITY ACCOUNTING METHOD

The Company considers  associate  companies as its investment in common stock of
companies  in which it has a  long-term  equity  interest  and  where it has the
ability to exercise significant  influence,  but not control, over operating and
financial  policies.  Such  investments  are  accounted  for  in  the  Company's
consolidated  financial statements based on the equity method. The equity method
is a  method  of  accounting  under  which  the  Company  initially  records  an
investment in the stock of an associate company ("investee") at cost and adjusts
the carrying  amount of the  investment to recognize the Company's  share of the
earnings and losses of the investee after the date of acquisition. The amount of
the  adjustment  is included in the  determination  of the  Company's net income
(loss) and such amount reflects  adjustments  similar to those made in preparing
consolidated   financial   statements   including   adjustments   to   eliminate
intercompany gains and losses, and to amortize,  if appropriate,  any difference
between the cost and the underlying  equity in net assets of the investee at the
date of  investment.  The carrying  amount of the investment is also adjusted to
reflect the  Company's  share of changes in the  investee's  capital and will be
reduced by dividends  received from the investee.  Under the equity  method,  an
investment in common stock of associate  companies is shown in the  consolidated
balance sheet as a single  amount and the Company's  share of earnings or losses
of the associate companies is shown in the consolidated  statement of operations
as a single  amount.  As of  December  31,  2005,  the  Company did not have any
investments accounted for under the equity method.


INCOME TAXES

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to differences  between the recorded book basis and tax basis
of assets and liabilities  for financial and income tax reporting.  The deferred
tax assets and liabilities represent the future tax return consequences of those
differences,  which will  either be taxable  or  deductible  when the assets and
liabilities  are recovered or settled.  Deferred  taxes are also  recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset future federal income taxes.

COMPREHENSIVE INCOME

The Company has adopted Statement of Financial  Accounting Standards (SFAS) 130,
"Reporting  Comprehensive Income", which establishes requirements for disclosure
of comprehensive  income including  certain items previously not included in the
statements of operations,  including minimum pension  liability  adjustments and
foreign  currency  translation  adjustments,  among others.  The Company's  only
components of comprehensive income are foreign currency translation adjustments.



                                      F-18
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

COMPREHENSIVE INCOME (CONTINUED)

The functional currency of the Company's  subsidiaries is the Malaysian Ringgit.
The financial statements of these subsidiaries are translated into United States
dollars ("USD") using year-end rates of exchange for assets and liabilities, and
average  rates of  exchange  for the year for  revenues,  costs,  and  expenses.
Translation gains and losses are treated as a component of shareholders' equity.
The reporting currency used in the financial  statements is USD unless otherwise
stated.

DERIVATIVE INSTRUMENTS

In connection with the issuances of equity  instruments or debt, the Company may
issue options or warrants to purchase  common stock.  In certain  circumstances,
these  options or warrants  may be  classified  as  liabilities,  rather than as
equity.  In  addition,  the  equity  instrument  or debt  may  contain  embedded
derivative  instruments,  such as  conversion  options or listing  requirements,
which  in  certain  circumstances  may be  required  to be  bifurcated  from the
associated  host  instrument  and  accounted  for  separately  as  a  derivative
liability instrument.  The Company accounts for derivative instruments under the
provisions of SFAS No. 133,  "Accounting for Derivative  Instruments and Hedging
Activities".

TREASURY STOCK

The Company  records  treasury stock  purchases at cost. The excess of cost over
par value is allocated to additional paid-in capital. The Company reissues stock
from the treasury on a first-in, first-out basis.

REVENUE RECOGNITION

Revenue represents the net invoiced value of:

o    goods sold;

o    fees earned from the  production  of  multimedia  programs and Intranet and
     management and consulting services; and

o    fees earned  from rental and  servicing  of  material  handling  equipment,
     provision  of  land  transportation,   engineering  and  industrial  moving
     services.

The  Company  recognizes  revenue  from the  sales of goods in the  period  when
significant  risks and rewards of ownership  have  transferred to its customers.
The Company recognizes revenue from the services provided in the period in which
the  services  are  performed  and  when  there  is no  significant  uncertainty
regarding  the  consideration  to be  received  and the  associated  costs to be
incurred.

ADVERTISING

Costs related to advertising  and promotion of products and services are charged
to sales and marketing expense as incurred. Advertising and promotion costs were
$7,031 and $9,703 in 2005 and 2004, respectively.

                                      F-19
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET INCOME (LOSS) PER COMMON SHARE

Income  (loss) per common share  requires the  presentation  of two EPS amounts,
basic and diluted.  Basic net income  (loss) per common share is  calculated  by
dividing  net income  (loss) by the  weighted  average  number of common  shares
outstanding  for the years  ended  December  31, 2005 and 2004.  Diluted  income
(loss) per common share is computed using the weighted  average number of shares
determined for the basic  computations plus the number of shares of common stock
that would be issued assuming all contingently  issuable common stock equivalent
shares having a dilutive  effect on earnings per share were  outstanding for the
year. However,  there is no dilution from common stock equivalents in years with
net losses  attributable  to common share holders  because their effect would be
anti-dilutive.  The  calculation of basic and diluted income (loss) per share is
as follows (in thousands, except per-share amounts):


                                                      Year ended December 31,
                                                    --------------------------
                                                        2005           2004
                                                    ------------    ----------

Net income                                          $        127    $     1,231
Preferred stock dividend                                    (392)          (375)
Early redemption penalty on preferred stock                 (303)            --
Accretion to preferred stock redemption value             (3,313)          (714)
                                                    ------------    -----------
Net (loss) income available to common shareholders  $     (3,881)   $       142
                                                    ============    ===========
Weighted average shares outstanding - basic              109,447         94,350
                                                    ============    ===========
Net (loss) income per share - basic                 $      (0.04)   $         *
                                                    ============    ===========

Weighted average shares outstanding - basic              109,447         94,350
Common stock issuable to consultant                          809            354
Dilutive stock options and warrants                           --            478
                                                    ------------    -----------
Weighted average shares outstanding - diluted            110,256         95,182
                                                    ============    ===========
Net (loss) income per share - diluted               $      (0.04)   $         *
                                                    ============    ===========
*  less than $.01 per share


FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial  instruments consist of cash, accounts receivable,  bank
overdraft and borrowings, term loans and accounts payable. The carrying value of
term loans  approximate  fair value because the loans bear interest  rates at or
near current market rates. The carrying amounts of all other,  non-related party
financial instruments approximate fair value due to their short maturities.  The
fair values of amounts due to and from related  parties are not  practicable  to
estimate,  due to the related party nature of the underlying  transactions.  The
Company has no material off-balance sheet financial instruments.

                                      F-20
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

The Company has adopted SFAS No. 123,  Accounting for Stock-Based  Compensation.
As  permitted  by SFAS  No.  123,  the  Company  measures  compensation  cost in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to  Employees  and related  interpretations.  Had  compensation  cost for
options  been  determined  based on the fair value at the grant date  consistent
with the method  prescribed  under SFAS No.  123,  the  Company's  pro forma net
income (loss) and net income (loss) per share would have been as follows:
<TABLE>
<CAPTION>
                                                                   Year Ended December 31,
                                                               -----------------------------
                                                                   2005            2004
                                                               ----------      -------------
<S>                                                               <C>              <C>
Net (loss) income applicable to common shareholders            $ (3,880,637)   $     142,278
Add: Stock-based employee compensation expense
        included in reported net income, net of related tax          47,329           52,235
Add/(Less): Total stock-based employee compensation expense
         determined under fair value based method for all
         awards, net of related tax effects                         (57,665)         (88,100)
                                                               ------------    -------------
Pro forma net income (loss) applicable to common shareholders  $ (3,890,973)   $     106,413
                                                               ============    =============
Net Income (loss) per share:
 Basic and diluted - as reported                               $      (0.04)   $           *
                                                               ============    =============
 Basic and diluted - pro forma                                 $      (0.04)   $           *
                                                               ============    =============
* Less than $.01 per share
</TABLE>

The fair value in 2004 was  estimated  at the date of grant using the  following
weighted average assumptions:


Risk free interest rate                                               2.3%
Dividend yield                                                         0%
Expected life of option in years                                   4.7 years
Expected volatility                                                   129%


                                      F-21
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION (CONTINUED)


Option  valuation  models  require  the input of highly  subjective  assumptions
including  the  expected  life of the  options  and their  expected  volatility.
Because the Company's employee stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

The pro forma net income (loss) per share above is calculated using the weighted
average number of shares of common stock outstanding as described in Note 2. The
weighted  average fair value of options  granted  during the year ended December
31, 2005 and 2004 was $46,625 and $88,100, respectively.

In December 2004, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 123(R) Share Based Payment,  which  addresses the accounting for share-based
payment  transactions.  SFAS No.  123(R)  eliminates  the ability to account for
share-based  compensation  transactions using APB No. 25, and generally requires
instead that such  transactions  be accounted and recognized in the statement of
income based on their fair values.  SFAS No. 123(R) will be effective for public
companies  that file as small  business  issuers as of the first interim  period
that begins after December 15, 2005. The Company is evaluating the provisions of
SFAS No.  123(R).  Depending  upon the numbers and terms of options  that may be
granted in future  periods,  the  implementation  of this standard  could have a
material impact on the Company's  financial  position and results of operations.
The Company  estimates  that it may need to recognize  approximately  $31,000 in
additional  compensation expense under SFAS No.123(R) on options that may not be
fully vested by the effective date.

BUSINESS RISK

The  Company is subject to risks and  uncertainties  common to  technology-based
companies,   including  rapid  technological  change,  dependence  on  principal
products  and  third-party  technology,  new  product  introductions  and  other
activities of competitors,  dependence on key personnel,  and limited  operating
history.

                                      F-22
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ESTIMATES

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May  2005,  the FASB  issued  SFAS  No.  154  Accounting  Changes  and  Error
Corrections,  a replacement of APB Opinion No. 20,  Accounting  Changes and FASB
Statement No. 3, Reporting  Accounting Changes in Interim Financial  Statements.
SFAS 154 provides  guidance on the  accounting  for and  reporting of accounting
changes  and  error   corrections.   It   establishes,   unless   impracticable,
retrospective  application  as the  required  method for  reporting  a change in
accounting principle in the absence of explicit transition requirements specific
to the newly adopted accounting  principle.  SFAS 154 also provides guidance for
determining  whether  retrospective   application  of  a  change  in  accounting
principle  is  impracticable.  The  provisions  of SFAS  154 are  effective  for
accounting  changes and  corrections of errors made in fiscal periods  beginning
after  December 15,  2005.  The  adoption of the  provisions  of SFAS 154 is not
expected  to have a  material  impact on the  Company's  financial  position  or
results of operations.

In February  2006,  the FASB issued SFAS No. 155,  Accounting for Certain Hybrid
Financial Instruments, which amends SFAS No. 133 and SFAS No. 140 Accounting for
Transfers and Servicing of Financial Assets and  Extinguishment  of Liabilities.
SFAS 155 amends SFAS 133 to narrow the scope  exception  for  interest-only  and
principal-only   strips  on  debt   instruments  to  include  only  such  strips
representing  rights to receive a specified portion of the contractual  interest
or  principle  cash flows.  SFAS 155 also  amends  SFAS 140 to allow  qualifying
special-purpose  entities  to hold a  passive  derivative  financial  instrument
pertaining to beneficial interests that itself is a derivative instruments.  The
adoption of the provisions of SFAS 155 is not expected to have a material impact
on the Company's financial position or results of operations.

RECLASSIFICATIONS

In 2005,  the Company has  separately  disclosed  the  operating,  investing and
financing   portions  of  the  cash  flows   attributable  to  its  discontinued
operations,  which in the prior  period were  reported on a combined  basis as a
single amount.

Certain  other 2004 balances  have been  reclassified  to conform to the current
presentation.

                                      F-23
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 3: ACQUISITION AND DISPOSAL OF SUBSIDIARIES

On November  17,  2003,  SDAM  signed an asset  purchase  agreement  with Asiaco
Material Handling Sdn Bhd ("AMH"),  a Malaysian  company,  to purchase,  through
AMS, the business assets and selected  liabilities of AMH and seven companies in
the Asiaco group.  The definitive  agreement also provided for AMS to purchase a
majority equity interest in the remaining  sixteen companies in the Asiaco group
from  AMH's  majority  shareholder.  Pursuant  to this  agreement,  the  Company
acquired a majority equity interest in three Malaysian  companies on December 9,
2003:  80% in Asiaco  Material  Handling  (East  Coast)  ("AEC"),  67% in Asiaco
Logistic  ("ALG")  and 60% in  Armor  Multi  Services  ("AMSSB")  (f/k/a  Asiaco
Services)  for  total  consideration  of  $193,911.  On  February  9, 2004,  the
Company  acquired  a  62%  equity  interest  in  Asiaco  Taiping  ("ATG")  for a
provisional  consideration of $74,135.  These acquisitions were accounted for as
purchases.  The total consideration was to be satisfied by the issuance of AMS's
common stock to the owner upon full completion of the asset purchase  agreements
between the Company and AMH.  Through  December 31, 2004, the Company had paid a
total of $263,158 to AMH as advances  for the  incorporation  of AMS and for the
purchase of equity in four subsidiaries as well as two associate companies:  46%
in Asiaco  Transport and 33% in Asiaco  Engineering.  These  advances would have
been deducted from the final purchase price to be determined by SDAM when it has
completed its  verification of the net asset value of AMH and its  subsidiaries.
As a  result  of these  acquisitions  the  Company  entered  into the  equipment
material handling business.

The following table  summarizes the estimated fair values of the assets acquired
and the liabilities assumed in the ATG acquisition at February 9, 2004.

Cash                                      $         3,583
Accounts receivable                                87,345
Inventories                                        85,885
Property, furniture and equipment                  10,728
Capital lease obligation                           (8,138)
Accounts payable                                  (59,076)
Minority interests                                (46,192)
                                          ---------------
                                          $        74,135
                                          ===============

In December  2004,  the Company  decided not to proceed with the asset  purchase
agreement with AMH. On December 27, 2004 the Company sold its equity interest in
AEC,  ALG and ATG together  with its 60% equity  interest in  TW  for  aggregate
consideration of $143,417 to an unrelated party.

The  following  table  summarizes  the carrying  values of the major  classes of
assets sold and  liabilities  surrendered  for the four companies at the date of
disposal.

                                      F-24
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 3: ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONTINUED)

Cash                                      $         7,136
Accounts receivable                               127,626
Inventories                                        50,042
Property, furniture and equipment                  81,593
Capital lease obligation                          (42,781)
Accounts payable                                 (185,079)
Income tax                                         (3,598)
Minority interests                                (22,637)
Gain on disposal                                  131,115
                                          ---------------
                                          $       143,417
                                          ===============

Revenues from  discontinued  operations were $0 and $265,000 for the years ended
December  31,  2005 and 2004,  respectively.  Losses  before  income  taxes from
discontinued  operations  were $0 and $130,000 for the years ended  December 31,
2005 and 2004,  respectively.  Discontinued  operations  relate to the Company's
material handling segment.

On April 30,  2005,  the  Company  completed  the  acquisition  of a 55%  equity
interest in Innospective  Sdn Bhd ("ISS"),  for total  consideration of $85,152.
The Company paid $52,652  (RM200,080) in cash to acquire  122,000 shares of ISS'
common stock and issued 250,000 shares of the Company's common stock,  valued at
$32,500,  being the market  price of the  Company's  common stock at the date of
issuance,  to a  consultant  as payment for  professional  fees on advising  the
Company in this acquisition.  ISS is a systems  integration firm specializing in
the  design,   development  and  implementation  of  wireless  applications  and
electronic  solutions,  and  its  acquisition  is  believed  to  complement  the
Company's existing revenue sources.

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets acquired and the liabilities assumed from ISS at April 30, 2005, the date
of the  acquisition.  The allocation of the purchase  price is  preliminary  and
subject to change.  However, the final purchase price allocation is not expected
to be materially different than that presented herein.

Property, furniture and equipment         $         2,119
Accounts receivable                                10,365
Cash                                               54,033
Customer relationships                             59,423
Accounts payable                                  (19,689)
Minority interest                                 (21,099)
                                          ---------------
                                          $        85,152
                                          ===============

                                      F-25
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 3: ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONTINUED)

On September 29, 2004, the Company  announced that its wholly-owned  subsidiary,
SDAM,  completed the acquisition of the entire  outstanding voting securities of
Gallant  Service  Centre (M) Sdn Bhd  ("GSC")  and  securities  representing  an
aggregate  of 55% of the total  outstanding  voting  securities  of  Gallant  IT
Holdings Sdn Bhd ("GIH"), a leading Malaysian provider of information technology
products and services as follows:

a)   Pursuant  to a  share  sale  agreement,  dated  September  17,  2004,  SDAM
     purchased  all of the capital stock of Gallant  Service  Centre (M) Sdn Bhd
     ("GSC")  from  the  existing   shareholders   for   approximately   $26,000
     (RM100,000).  Following  this  purchase,  GSC was used as the  vehicle  for
     SDAM's investment in GIH.

b)   Pursuant to a  subscription  agreement,  dated  September  17, 2004,  SDAM,
     through  GSC,  purchased  500,000  ordinary  shares and 100,000  redeemable
     convertible  preference shares ("RCPS") of GIH for  approximately  $158,000
     (RM600,000).  Each preference  share of GIH is convertible into 18 ordinary
     shares of GIH and entitles its holder to 18 votes.  An additional  $474,000
     (RM1,800,000)  is payable  upon  conversion  of the RCPS,  for an aggregate
     purchase price of $632,000 (RM2,400,000).

c)   Pursuant to the same subscription  agreement,  the existing shareholders of
     GIH, who were retained as managers of GIH, have provided a 12-month  profit
     guarantee for the current business of GIH and its  subsidiaries  commencing
     from the date of closing,  and such guaranteed profit shall be at least 20%
     above the profit achieved per the 2003 audited accounts of GIH.

d)   In  connection  with  the  acquisition,  GIH  engaged  SDAM to  manage  its
     businesses through a management agreement, dated September 17, 2004.

GIH is involved in the  implementation  of information  technology (IT) projects
for businesses and educational institutions. GIH is also a registered government
contractor  licensed by Malaysia's  Ministry of Finance to provide or supply the
following products and services to government departments and agencies: computer
and related IT  services,  networking  products  and  services,  teaching  aids,
software products and services,  personal computers and related  peripherals and
services,  digital  cameras and related  equipment,  and multi-user  systems and
services.

                                      F-26
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 3: ACQUISITION AND DISPOSAL OF SUBSIDIARIES (CONTINUED)

GIH has the following wholly-owned subsidiaries:

i)   Gallant Zone (M) Sdn Bhd ("GZ"),  is a retailer of Apple computer  products
     and a Tier 1 Apple reseller.

ii)  Gallant Focus (M) Sdn Bhd ("GF"), is currently dormant.

iii) Eystar  Distribution  Sdn Bhd ("ED") (f/k/a Gallant IT Distribution (M) Sdn
     Bhd), is currently dormant.

With the acquisition of the Gallant group of companies,  management believes the
Company has  strengthened  its position in implementing  information  technology
projects and has entered into the business of retailing Apple products.

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets acquired and the liabilities  assumed from the Gallant group of companies
at the date of the acquisition.

Cash                                                      $        26,397
Cash, restricted                                                  271,866
Accounts receivable                                               163,895
Inventories                                                       445,775
Property, furniture and equipment                                 115,300
Customer list                                                     189,000
Licenses                                                           65,000
Goodwill (none of which is expected to be tax deductible)         381,375
Bank overdraft and borrowings                                    (468,447)
Term loan                                                        (199,070)
Accounts payable                                                 (854,342)
Income tax provision                                               12,797
Minority interests                                               (103,495)
                                                          ---------------
                                                          $        46,051
                                                          ===============

The following  unaudited  proforma  financial  information  presents  results of
operations  as if the  acquisition  of ISS had occurred at the  beginning of the
respective years ended December 31, 2005 and 2004:

                                                      2005             2004

Revenue                                           $  28,336,187   $   20,640,398
                                                  =============   ==============
Net income                                        $     124,094   $    1,219,736
                                                  =============   ==============
Basic and diluted net income (loss)
  per common share                                $       (0.04)  $            *
                                                  =============   ==============

* Less than $0.01 per share

                                      F-27
<PAGE>
NOTE 4: INVESTMENT IN ASSOCIATE COMPANIES

In October 2004, the Company sold its 46% equity  interest in Asiaco  Transport,
for cash of $23,158 to an unrelated party. In December 2004, the Company decided
not to  proceed  with the  asset  purchase  agreement  with AMH and sold its 33%
equity  interest in Asiaco  Engineering for $13,158 to an unrelated  party.  The
sale of both companies resulted in a loss from associate companies of $6,355 for
the year ended December 31, 2004.


NOTE 5: PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 2005:

     Office equipment                                     $          246,111
     Furniture and fixtures                                          149,315
     Tools and equipment                                             160,504
     Video communication hardware and peripherals                  2,192,327
     Computer software                                               328,023
     Office renovation                                               174,748
     Motor vehicles                                                   14,839
     Material handling equipment                                      98,451
                                                          ------------------
                                                                   3,364,318
      Less accumulated depreciation                               (2,176,532)
                                                          ------------------
                                                          $        1,187,786
                                                          ==================

Depreciation expense for the years ended December 31, 2005 and 2004 was $281,000
and $269,330, respectively.


                                      F-28
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 6: RELATED PARTY TRANSACTIONS

During the years ended December 31, 2005 and 2004, the Company had related party
transactions with the following entities:

LSH ASSET HOLDINGS SDN BHD ("LSH"):

LSH is a company  wholly-owned by the Company's Chief Executive  Officer and his
wife. LSH billed the Company  management fees totaling  $120,000 and $60,000 for
the  respective  years ended  December  31,  2005 and 2004.  LSH also billed the
Company's Malaysian subsidiary, SDAM, approximately $25,000 per year for each of
the years ended  December  31,  2005 and 2004 for  administrative  and  clerical
charges.  LSH also made short term advances to the Company from time to time for
working capital  purposes.  These advances  totaled $110,881 and $59,876 in 2005
and 2004,  respectively.  Advances of $225,462 and $198,568  were repaid in 2005
and 2004,  respectively.  As of  December  31,  2005,  the amount due to LSH was
$125,518.  This amount is  unsecured,  bears no interest,  has no fixed terms of
repayment,  and is recorded  in the  financial  statements  as "Amount due to an
affiliated company".

VISIONEWS ASIA SDN BHD ("VASB"):

The  Company's  Chief  Executive  Officer is a  director  of VASB and owns a 40%
equity  interest in VASB. A director of PTSB is also a director of VASB and owns
a 20% equity  interest in VASB. As of December 31, 2005,  $73,491 of receivables
from 1999 was not  recognized as revenue due to the  uncertainty  of collection.
The terms of repayment for the amount due from VASB is similar to terms accorded
to the Company's other existing customers.

SYNERVEST SDN BHD ("SSB")

A director of PTSB is a director of SSB and holds a 60% equity  interest in SSB.
As of December 31, 2005, long-term receivables, related parties, consisted of an
overdue  amount of $183,098  from SSB. This amount  primarily  arose in the year
ended  December  31,  1998,  when the  Company  sold to SSB  assets  used in the
operations of a subsidiary. These assets, comprised of analog video hardware and
peripherals and a patent for image display,  were sold to SSB for a total sum of
$1,661,175.  Due to the uncertainty of collection of the related  receivable,  a
related gain on the sale of the assets was deferred and is to be recognized only
after all costs have been  recovered  and as payments are  received.  During the
year ended  December 31,  2002,  payments  received by the Company  exceeded all
remaining costs.  The Company received  $126,282 and $245,416 of the outstanding
receivable  during the years ended  December  31,  2005 and 2004,  respectively,
resulting in a  realization  of gain on sale of assets,  related  party for both
years.  The  deferred  gain  included  in the  balance  sheet  has been  reduced
accordingly.  The deferred gain on sale of assets  totaled  $183,098 at December
31,  2005,  and  will be  recognized  as a gain  as  payments  on the  long-term
receivable balance are received.


KHIDMAT MAKMUR SDN BHD ("KMSB")

A director  of PTSB is a director  of KMSB and holds a 30%  equity  interest  in
KMSB.  As of  December  31,  2005,  $40,693  of  receivables  from  1999 was not
recognized  as  revenue  due to the  uncertainty  of  collection.  The  terms of
repayment  for the amount due from KMSB are  similar  to terms  accorded  to the
Company's other existing customers.

                                      F-29
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 6: RELATED PARTY TRANSACTIONS (CONTINUED)

MY ARCHITECT ("MYA") AND MY DRAUGHTING SERVICES ("MDS")

A director of PTSB is a principal partner of MYA and MDS. During the years ended
December  31,  2005  and  2004,  the  Company  received  fees  of  $333,342  and
$1,316,052,  respectively,  from consulting  contracts that it entered into with
MYA. As of December 31, 2005,  $131,268 and $93,988 of 1999 receivables from MYA
and MDS, respectively,  were not recognized as revenue due to the uncertainty of
collection.  The  terms of  repayment  for the  amount  due from MYA and MDS are
similar to terms accorded to the Company's other existing customers.

CHIEF EXECUTIVE OFFICER

As of December 31, 2005,  the Company  owed the Chief  Executive  Officer of the
Company  $86,192 for  short-term  cash  advances made to the Company for working
capital  purposes from time to time.  Advances from the Chief Executive  Officer
totaled  $724,286  and $82,260 for the years ended  December  31, 2005 and 2004,
respectively.  Repayment  of advances  to the Chief  Executive  Officer  totaled
$706,996  and  $69,915  for  the  years  ended   December  31,  2005  and  2004,
respectively.  The amount  owing to the Chief  Executive  Officer is  unsecured,
bears no  interest,  has no fixed  terms of  repayment  and is  recorded  in the
financial statements as "Amount due to a director".


NOTE 7: RESTRICTED CASH

As of  December  31,  2005,  the Company has  $548,154  restricted  cash in time
deposit  accounts with a financial  institution in Malaysia  which  represents a
time deposit  account used as collateral for trade  financing and bank overdraft
facilities  granted to GIH and GZ (Note 8).  The time  deposit  accounts  have a
maturity  period of one year and are  automatically  renewed on an annual basis.
The time deposit  accounts earn interest at an aggregate rate of 3.7% per annum.
Interest  earned on the time deposits is to be added on and rolled over with the
principal sum.



                                      F-30
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 8: BANK OVERDRAFT AND BORROWINGS

As of December 31, 2005, the Company's subsidiaries have the following bank
facilities:
<TABLE>
<CAPTION>

                                                                    GIH              GZ               Total
                                                              -------------     -------------    -------------
<S>                                                           <C>                   <C>              <C>
Bank overdraft                                                $     131,268     $     105,014    $     236,282
Trade financing facilities                                          210,029           840,116        1,050,145
                                                              -------------     -------------    -------------
Total bank facilities available                               $     341,297     $     945,130    $   1,286,427
                                                              =============     =============    =============
Balance utilized as of December 31, 2005                      $     206,258     $     906,811    $   1,113,069
                                                              =============     =============    =============
</TABLE>

The above bank  facilities  are  repayable on demand and bear  interest at rates
ranging from 1.5% to 8.40% per annum and are secured by:

a) a pledge on the time deposit accounts;
b) sinking fund accounts included in restricted cash;
c) a corporate guarantee provided by GIH; and
d) personal guarantees provided by third parties and two directors of GIH.


NOTE 9: CAPITAL LEASE OBLIGATIONS

Certain  telecommunications  and other  assets  are leased  from a lessor  under
various  equipment lease financing  facilities.  Such leases have been accounted
for as capital leases. At the Company's request, a lessor agreed to an extension
on the  repayment  period in 1998 to enable  the  Company  to secure  additional
working capital  financing.  The rescheduled  lease terms for all capital leases
commenced  on December  1998 and are  payable on a monthly  basis with the final
payment due November  2006.  The Company will acquire  title to all assets under
capital leases, upon payment of the final lease payment in November 2006.

As of December 31, 2005 the future minimum lease payments on capital leases are
as follows:

   Year ending
   December 31:
   ------------------
   2006                                                 $           46,242
                                                        ------------------
   Total payments                                                   46,242
   Less:  amount representing interest                              (1,602)
                                                        ------------------
   Present value of minimum capital lease payments                  44,640
   Less:  current maturities of capital lease
     obligations                                                   (44,640)
                                                        ------------------
                                                        $               --
                                                        ==================



                                      F-31
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 9: CAPITAL LEASE OBLIGATIONS (CONTINUED)

Assets under these capital leases,  which are included in property and equipment
at December 31, 2005, are as follows:

                                                 Original   Accumulated    Net
                                                   Cost    Depreciation   Value
                                               ---------------------------------
Video communication hardware and peripherals   $  408,896  $ (389,384) $  19,512
                                               ==========  ==========  =========

The Company has not made regular principal and interest payments due under three
capital lease  agreements  since July 2000.  During the year ended  December 31,
2005,  the Company  made  payments  to the lessor  totaling  $36,755.  The total
overdue  amount as of  December  31,  2005 is  $19,832,  which  includes  unpaid
principal of $13,088 and unpaid interest of $6,744. Unpaid principal is included
in current  portion of capital lease  obligations on the balance  sheet.  Unpaid
interest is included in accrued  expenses on the balance  sheet.  The  Company's
Chief  Executive  Officer  (CEO),  who is  also a  shareholder,  has  personally
guaranteed  payment under these capital lease agreements.  Pursuant to the terms
of the guarantee agreement dated December 3, 1998, the CEO has guaranteed to pay
all amounts  which become due under the terms of the capital  lease  agreements.
Subsequent to December 31, 2005 and through the date of this report, the Company
has made payments to the lessor totaling $5,250.


NOTE 10: TERM LOAN

As of December  31,  2005,  the Company  has term loan  liabilities  of $178,490
(RM679,870)  arising  from  its  acquisition  of GIH  and its  subsidiaries  and
including an additional  $53,000 term loan drawn down in March 2005.  These term
loans, which were granted by financial  institutions in Malaysia, are secured by
personal  guarantees provided by third parties and two directors of GIH and bear
interest at 8.4% per annum and are due on various dates through March 2009.

As of December 31, 2005 maturities of the term loans are as follows:

   Year ending
   December 31:
   ------------------
   2006                         $           76,582
   2007                                     77,993
   2008                                     21,287
   2009                                      2,628
                                ------------------
   Total                        $          178,490
                                ==================



                                      F-32
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 11: INCOME TAXES

For 2005 and 2004, all income of the Company was derived from its activities in
Malaysia and the United States. Provision for income tax liability for the year
ended December 31, 2005 and 2004, respectively, is as follows:

                                                         Year ended December 31,
                                                            2005         2004
                                                         ---------     ---------

Current tax expense                                      $  52,591     $  48,767
Deferred tax expense                                        24,893       131,316
                                                         ---------     ---------
Provision for Malaysian income tax expense
     on the Company and its subsidiaries' income         $  77,484     $ 180,083
                                                         =========     =========

The  difference  between  current  income tax  expense and  expected  income tax
expense  computed  applying the United States  Federal income tax rate of 34% to
income from  continuing  operations  before income tax and minority  interest is
explained as follows:

                                                       Year ended December 31,
                                                        2005            2004
                                                    -------------  -------------

     Expected income tax expense                    $      39,000  $    480,100
     Effect of lower Malaysian tax rate of 28%             (7,000)      (84,700)
     Benefit of operating loss carry forwards                  --      (179,900)
     Other                                                 45,484       (35,417)
                                                    -------------  -------------
     Income tax expense                             $      77,484  $    180,083
                                                    =============  =============

Temporary  differences  and carry forwards that give rise to deferred tax assets
and liabilities as of December 31, 2005 are as follows:

Deferred tax assets
       Net operating loss carry forward              $     790,968
       Less: valuation allowance                          (729,535)
                                                     -------------
       Deferred tax asset net of allowance                  61,433

Deferred tax liability
       Depreciation                                       (217,642)
                                                     -------------
Total net deferred tax liability                     $    (156,209)
                                                     =============


                                      F-33
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 11: INCOME TAXES (CONTINUED)

The valuation  allowance  offsets the net deferred tax assets for which recovery
is not  considered  more likely than not. The  valuation  allowance is evaluated
considering positive and negative evidence about whether the deferred tax assets
will be realized. At that time of evaluation,  the allowance is either increased
or reduced;  reduction could result in the complete elimination of the allowance
if positive  evidence  indicates that the value of the deferred tax assets is no
longer impaired and the allowance is no longer required. The Company's total net
operating  loss carry  forward  at  December  31,  2005 is  $2,298,000  of which
$925,000 relates to the Company's  activities in Malaysia and $1,373,000 relates
to the Company's  activities in the United States.  The net operating loss carry
forward  that  relates  to  activities  in  Malaysia  can  be  carried   forward
indefinitely,  on an entity basis,  while the net  operating  loss carry forward
that relates to the Company's  activities in the United States  expires  through
the year 2025. The United States net operating loss carry forward may be subject
to annual  limitations  based on ownership changes in the Company's common stock
as provided by in section 382 of the Internal Revenue Code.


NOTE 12: CONVERTIBLE TERM NOTES

On May 28,  2004,  the Company  entered  into a  Securities  Purchase  Agreement
("SPA") with an unrelated  investors  group (the "Master  Fund") under which the
Company  obtained  $500,000  funding through the sale of a Convertible Term Note
(the "Note") in the principal amount of $500,000.  Some of the significant terms
of the Note included the following:

1.   The Note had a three-year term with a maturity date of May 28, 2007.

2.   Interest  rate of 2% above the "prime rate" as published by the Wall Street
     Journal from time to time subject to a floor of 6%. The monthly interest to
     be adjusted downward based on a minimum increase of 25 percent of the price
     of the common stock above the conversion price.
3.   Monthly principal  payments of $14,706 commencing on September 1, 2004 with
     the unpaid principal balance and any unpaid and/or accrued interest due and
     payable on May 28, 2007.
4.   The principal and the interest  could be paid in cash or in common stock at
     fixed  conversion  price of $0.35 per share,  at the Master Fund's  option,
     provided that the volume weighted  average price (VWAP) of the common stock
     for the ten trading days immediately  preceding the due date was 110% above
     the exercise price.
5.   The Note was  convertible  into shares of the  Company's  common stock at a
     fixed  conversion   price  of  $0.35  per  share,   subject  to  conversion
     limitations as defined in the Note. The fixed conversion price was reset to
     $0.20 per share  pursuant to an  agreement  entered into by the Master Fund
     and the  Company  on August  11,  2004 (see  Note 13).  On April 25,  2005,
     pursuant to an  agreement  entered into by the Master Fund and the Company,
     the conversion price was subsequently  reset to a price equal to 85 percent
     of the average of the five lowest closing prices during the 22 trading days
     prior to the date of conversion,  subject to a minimum  conversion price of
     $0.07 per share.
6.   The  Company  issued  warrants  to  purchase  up to  300,000  shares of the
     Company's common stock, subject to the conversion limitations as defined in
     the Note.  The  warrants  have a seven-year  term and an exercise  price of
     $0.40  per  share for the  first  100,000  shares,  $0.43 per share for the
     second 100,000 shares and $0.47 per share for the third 100,000 shares.
7.   The Company  had  granted a security  interest in all of its net assets and
     the net  assets of one of its  wholly-owned  subsidiaries,  until such time
     that the Note was satisfied.
8.   The SPA also  included a condition  that  required the Company to cause its
     common stock to be listed on the NASDAQ  Smallcap  Market,  NASDAQ National
     Market  System,  the American Stock Exchange or the New York Stock Exchange
     on or prior to November 15, 2004 ("the Listing Condition").


                                      F-34
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 12: CONVERTIBLE TERM NOTES (CONTINUED)

The Company used  $326,000 of the  proceeds for payment of expenses  relating to
the issuance of the Note and convertible preferred stock to secure an additional
$6.5  million  financing  from the Master Fund (see Note 13). The balance of the
Note proceeds was used as working capital.

The Company  evaluated the Note's  conversion terms to determine if it gave rise
to an embedded  derivative that would need to be accounted for separately  under
SFAS No.  133 and  Emerging  Issues  Task Force  (EITF)  00-19  "Accounting  for
Derivative  Financial  Instruments  Indexed  to, and  Potentially  Settled in, a
Company's Own Stock." The Company determined that certain provisions,  including
a conversion price that was not fixed and the Listing Condition, resulted in the
conversion feature being an embedded derivative that must be bifurcated from the
Note and recorded as a derivative  liability.  On November 15, 2004, the Listing
Condition was removed. This resulted in the elimination of the need to bifurcate
the embedded derivative associated with the Note's conversion feature.

In 2004, the Company recorded an initial  liability of $246,681 for the value of
the  embedded  liability.  The  initial  value  of the  embedded  liability  was
amortized  over the term of the Note.  For the years ended December 31, 2005 and
2004,  the Company  recognized  amortization  expense of $179,862  and  $66,819,
respectively, which is included in interest expense.

In 2004, the Company recorded debt discount and  amortization  costs of $95,346,
which  included the initial  value of the warrants of $62,525.  These costs were
amortized over the term of the Note.  Amortization  in the amount of $65,511 and
$29,835  for the  years  ended  December  31,  2005 and 2004,  respectively,  is
included in amortization of debt issuance costs in the statement of operations.

On August 1, 2005, the Company entered into an agreement for the early repayment
of the Note (see note 13) and recognized an early redemption penalty of $16,164.

A summary of the status of the  discounted  principal  and  interest  derivative
liability and issue costs of the Note is presented below:
<TABLE>
<CAPTION>
                                                                                     Derivative
                                        Total       Interest      Principal       Liability    Issue Costs       Net
                                     ------------  -----------   -----------     ------------  ------------ ------------
<S>                                      <C>           <C>            <C>           <C>            <C>          <C>
Balance as of January 1, 2004                   --            --            --               --            --           --
Issuance on May 28, 2004             $    500,000    $        --   $   500,000     $     246,681 $    95,346  $    157,973
Repayment in September 2004               (14,706)            --       (14,706)          (6,821)      (2,571)       (5,314)
Conversion in November 2004               (29,412)            --       (29,412)         (13,035)      (4,830)      (11,547)
Conversion in December 2004               (29,412)            --       (29,412)         (12,723)      (4,674)      (12,015)
Amortization of issue costs                    --             --            --               --      (17,760)       17,760
Amortization of embedded liability             --             --            --          (34,240)         --         34,240
                                     ------------    -----------   -----------     ------------ ------------  ------------
Balance as of December 31, 2004      $    426,470    $        --   $   426,470     $    179,862  $    65,511  $    181,097
                                     ============    ===========   ===========     ============ ============  ============




                                                                                  Derivative     Issue
                                        Total        Interest      Principal      Liability      Costs          Net
                                     ------------  ------------   ----------     ------------ ------------  ------------

Balance as of January 1, 2005        $    426,470  $         --   $  426,470    $     179,862  $    65,511  $    181,097
Interest through July 31, 2005             18,381        18,381           --               --           --            --
Amortization through July 31, 2005             --            --           --         (140,098)     (51,536)      191,634
Conversion in April 2005 (a)              (52,770)       (8,653)     (44,117)         (17,119)      (6,076)      (20,922)
Conversion in May 2005 (b)                (17,412)       (2,707)     (14,705)          (5,534)      (1,947)       (7,224)
Conversion June 1, 2005 (c)               (17,249)       (2,544)     (14,705)          (5,359)      (1,869)       (7,477)
Conversion June 16, 2005 (d)              (14,705)           --      (14,705)          (5,360)      (1,869)       (7,476)
Conversion July 12, 2005 (e)              (20,445)       (2,304)     (18,141)          (6,392)      (2,214)       (9,535)
Early payment penalty                      16,164        16,164           --               --           --            --
Repaid on August 1, 2005 (f)             (338,434)      (18,337)    (320,097)              --           --      (320,097)
                                     ------------  ------------   ----------    -------------  -----------   -----------
Balance as of December 31, 2005      $         --  $         --   $       --    $          --  $        --   $        --
                                     ============  ============   ==========    =============  ===========   ===========
</TABLE>

a)   On April 25, 2005, the Master Fund converted $20,922  discounted  principal
     of the note and  $8,653  of  accrued  interest  to  383,701  shares  of the
     Company's common stock.

b)   On May 5, 2005, the Master Fund converted  $7,224  discounted  principal of
     the note and $2,707 of accrued  interest to 140,311 shares of the Company's
     common stock.

                                      F-35
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 12: CONVERTIBLE TERM NOTES (CONTINUED)

c)   On June 1, 2005, the Master Fund converted $7,477  discounted  principal of
     the note and $2,544 of accrued  interest to 163,132 shares of the Company's
     common stock.

d)   On June 16, 2005, the Master Fund converted $7,476 discounted  principal of
     the note to 147,649 shares of the Company's common stock.

e)   On July 12, 2005, the Master Fund converted $9,535 discounted  principal of
     the note and $2,304 of accrued  interest to 250,000 shares of the Company's
     common stock.

f)   On August 1, 2005, the Company repaid the entire outstanding balance of the
     Note and  redeemed the  convertible  preferred  stock of a subsidiary  (see
     Note13).


NOTE 13: SHAREHOLDERS' EQUITY

PREFERRED STOCK

On May 25,  2004,  the  Company  executed a share  exchange  agreement  with its
Chairman  and  Chief  Executive  Officer,  Mr.  Patrick  Lim,  whereby  Mr.  Lim
surrendered  8,000,000  shares of the  Company's  common  stock in exchange  for
100,000  shares  of the  Company's  newly  created  Series A Voting  Convertible
Preferred Stock (the "Voting  Preferred"),  which is convertible  into shares of
common stock at a fixed ratio of 80 shares of common stock for 1 share of Voting
Preferred  stock.  The  8,000,000  shares  were  returned  to  treasury  and are
available  for  re-issuance  at a future  date.  The Voting  Preferred  stock is
entitled to cumulative  dividends at $2.20 per annum, payable in common stock at
$0.28 per share.  On May 3, 2005, Mr. Lim and the Company  executed an amendment
to the Certificate of Designation of Series A Voting Convertible Preferred Stock
governing  payment of dividend on the Voting  Preferred.  Under the terms of the
amendment, Mr. Lim would have the option of receiving the dividend on the Voting
Preferred either in cash or shares of the Company's common stock.  Each share of
the Voting  Preferred is entitled to voting  rights  equivalent  to 80 shares of
common stock. The Series A preferred is subject to mandatory conversion 10 years
after its issuance.

On August 3, 2005, the Company's  Chairman and Chief Executive Officer converted
the entire 100,000 shares of the Company's Series A Voting Convertible Preferred
Stock  into   8,000,000   shares  of  common  stock,   which   resulted  in  the
reclassification  of $10,000 from the stated amount to $80 of common stock (par)
and $9,920  additional  paid-in  capital.  In  addition,  the  Company  paid the
$256,666 dividend due to Mr. Lim in cash in August 2005.

A summary of the status of the  Voting  Preferred  and  dividend  accrued  since
January 1, 2005 and changes through December 31, 2005 is presented below:

                                                                       Stated
                                               Total      Dividend     Amount
                                           -----------  -----------   ---------
Balance as of January 1, 2004              $        --  $        --   $      --
Convertible preferred stock, May 25, 2004       10,000           --      10,000
Dividend through December 31, 2004             128,333      128,333          --
                                           -----------  -----------   ---------
Balance December 31, 2004                  $   138,333  $   128,333   $  10,000
                                           ===========  ===========   =========




                                                                        Stated
                                              Total      Dividend       Amount
                                           -----------  -----------   ---------
Balance as of January 1, 2005              $   138,333  $   128,333   $  10,000
Dividend through September 30, 2005            128,333      128,333          --
Conversion to common stock in August 2005      (10,000)          --     (10,000)
Payment in August 2005                        (256,666)    (256,666)         --
                                           -----------  -----------   ---------
Balance December 31, 2005                  $        --  $        --   $      --
                                           ===========  ===========   =========


                                      F-36
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK OF A SUBSIDIARY

On May 28, 2004, the Company and one of the Company's wholly owned subsidiaries,
SDA  America,  Inc.  ("SDAA")  entered into the "SPA" with the Master Fund under
which SDAA issued 6,500,000 shares of Series A Convertible  Preferred Stock (the
"Series A Preferred") at a price of $1.00 per share,  which was convertible into
shares of the Company's  common stock,  and warrants to purchase up to 3,000,000
shares of the Company's common stock.

The  Series  A  Preferred  was  convertible,   subject  to  certain   conversion
limitations,  into common  stock of the Company at the option of the Master Fund
and is  entitled  to  cumulative  preferential  dividends  at a rate  per  annum
equivalent to the "prime rate" published in The Wall Street Journal from time to
time plus 2%, subject to a floor of 6% per annum.  The preferred stock dividends
can be paid in  cash or in  shares  of the  Company's  common  stock  at a fixed
conversion price of $0.35 per share, at the Master Fund's option,  provided that
the volume weighted  average price (VWAP) of the Company's  common stock for the
ten trading days  immediately  preceding the due date is 110% above the exercise
price.  The warrants have a seven-year  term and an exercise  price of $0.40 per
share for the first 1,000,000  shares,  $0.43 per share for the second 1,000,000
shares  and  $0.47  per  share for the  third  1,000,000  shares.  The  Series A
Preferred had a liquidation value of $1.00 per share.

On August 11,  2004,  the Company and the Master Fund  executed an  amendment to
certain  agreements  governing  the  terms  under  which  the Note and  Series A
Preferred  issued to the Master Fund may be  converted  into the common stock of
the  Company.  Under the terms of the  amendment,  the Master Fund may convert a
portion of the Note and Series A Preferred as follows:  the first  $2,000,000 of
conversions  have been reset to a price of $0.20 per share (whether as principal
repayments or accrued and unpaid interest or dividends);  the next $1,000,000 of
conversions  have  been  reset to a price  of $0.25  per  share.  The  remaining
conversions  permitted under the terms of the original  securities issuance will
remain unchanged at $0.35 per share.

In addition to resetting the conversion prices for a portion of the transaction,
the amendment provided that all dividend and interest payments payable under the
investment  would  accrue,  rather  than be  payable  in  cash,  until  the next
conversion into common stock occurs. The amendment provides for a waiver of cash
payments of interest or dividends due prior to the  execution of the  amendment,
with any such  amounts to be accrued to the amounts  payable  under the terms of
the  Note or  Series  A  preferred.  The  amendment  stipulated  that  upon  the
registration of the shares required for the conversion features, the Master Fund
will convert  $500,000 of principal  and/or accrued and unpaid  dividends of the
Series A Preferred into the common stock of the Company  provided that the price
of the Company's stock is at least $0.20 per share at the time. Accordingly, the
Master Fund  converted  $500,000 of the Series A Preferred  in  September  2004,
resulting in the issuance of 2,500,000 shares of common stock.

On April 25,  2005,  the Company and the Master Fund  executed an  amendment  to
certain  agreements  governing  the  terms  under  which  the Note and  Series A
Preferred  issued to the Master Fund may be  converted  into the common stock of
the Company.  Under the terms of the amendment,  the Master Fund may convert the
remaining Note and the first  $2,000,000  Series A Preferred at a price equal to
85  percent of the  average  of the five  lowest  closing  prices  during the 22
trading days prior to the date of conversion  (whether as principal repayment or
accrued and unpaid interest or dividends), subject to a minimum conversion price
of $0.07 per share.

                                      F-37
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK OF A SUBSIDIARY (CONTINUED)

The Company determined that the nature of the cumulative  preferred dividends on
and the economic characteristics of the Series A Preferred,  required the Series
A Preferred to be classified  outside of permanent equity.  Similar to the Note,
the  Company  also  evaluated  the Series A  Preferred's  conversion  feature to
determine  if it gave  rise to an  embedded  derivative  that  would  need to be
accounted  for  separately  under  SFAS No.  133 and  EITF  00-19.  The  Company
concluded that certain  provisions  common to both it and the Note also resulted
in the Series A Preferred  conversion feature being an embedded  derivative that
must be bifurcated and recorded as a derivative liability.

On November 15, 2004,  the Listing  Condition was removed.  This resulted in the
elimination of the need to bifurcate the embedded derivative associated with the
Series A Preferred's conversion feature. As consideration for the removal of the
Listing  Condition,  the Company issued  warrants to the Master Fund to purchase
1,300,000  shares of the Company's  common stock. The warrants have a seven-year
term and an exercise price of $0.35 per share.

Black-Scholes  valuations were performed on the derivative  liability associated
with the Series A  Preferred  and the  related  warrants.  In 2004,  the Company
recorded an initial derivative liability of $3,206,857. The initial value of the
derivative  liability was being accreted over three years based on  management's
estimate of the expected  term.  For the years ended December 31, 2005 and 2004,
accretion amounted to $2,530,487 and $676,370,  respectively, and is included in
accretion to preferred stock redemption value.

In 2004, the Company recorded  issuance costs of $1,051,927,  which included the
initial value of the warrants of $625,248. These costs were amortized over three
years.  Amortization  of issuance  costs  totaled  $782,202 and $269,725 for the
years  ended  December  31,  2005 and 2004,  respectively,  and is  included  in
accretion to preferred stock redemption value.

Pursuant to the Securities  Purchase  Agreement  between the Master Fund and the
Company and a restricted  account  agreement  entered  into by the Company,  the
Master  Fund and a US bank,  the  $6,500,000  investment  was  deposited  into a
restricted  account as  security  for the  performance  of the  Company  and its
subsidiaries' obligations to the Master Fund. The proceeds were restricted until
the  preferred   stock  was   converted   into  common  stock  of  the  Company.
Additionally,  at that date,  the Company and the Master Fund could agree to use
the restricted  cash to make  acquisitions  of companies  that meet  agreed-upon
criteria for sales,  profitability and accounting  standards.  The conversion of
$500,000 of the Series A Preferred in September  2004 resulted in the release of
$500,000 from the restricted account.

On August 1, 2005,  the Company  entered into an  agreement  whereby it waived a
limitation  on the  number of shares  that  could be  converted  and held by the
Master Fund in order to permit conversions by the Master Fund under the Note and
Series A Preferred  into  9,756,098  shares of common stock.  The conversion was
made in  connection  with an agreement,  also dated August 1, 2005,  whereby the
Master Fund agreed to accept  $800,000,  payable in shares of common stock,  and
$6,343,000  in cash  (of  which  $6,105,000  represented  restricted  cash),  in
consideration for the early repayment of the Note and redemption of the Series A
Preferred.  Following the  repayment of the Note and  redemption of the Series A
Preferred  on August 1,  2005,  the  Company  refunded  the  entire  balance  of
approximately  $6.1  million in the  restricted  account to the Master  Fund and
recognized an early redemption penalty of $302,994.


                                      F-38
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK OF A SUBSIDIARY (CONTINUED)

A summary of the status of the Series A Preferred and dividend thereon is
presented below:
<TABLE>
<CAPTION>
                                                                     Series A                                   Net
                                                                    Stated       Embedded       Issue         Carrying
                                            Total       Dividend     Amount      Liability      Costs           Value
                                      -----------    -----------  -----------   -----------  -----------   ------------
<S>                                      <C>              <C>           <C>            <C>         <C>
Balance as of January 1, 2004         $        --    $        --   $       --    $        --  $         --  $         --
Issuance on May 28, 2004              $ 6,500,000    $        --   $6,500,000    $ 3,206,857  $  1,051,927  $  2,241,216
Conversion in September 2004             (500,000)            --     (500,000)      (231,913)      (74,174)     (193,913)
Dividend through
  December 31, 2004                       238,563        238,563           --             --            --            --
Amortization of issue costs                    --             --           --             --      (195,551)      195,551
Amortization of embedded liability             --             --           --       (444,457)           --       444,457
                                      -----------    -----------  -----------   ------------   -----------  ------------
Balance as of December 31, 2004      $  6,238,563    $  238,563   $ 6,000,000   $  2,530,487   $   782,202  $  2,687,311
                                      ===========    ===========  ===========   ============   ===========  ============




                                                      Dividend/     Series A                                   Net
                                                     Redemption     Stated     Embedded       Issue         Carrying
                                          Total        Penalty      Amount     Liability      Costs           Value
                                     -----------    -----------  -----------   ------------  -----------  -------------
Balance as of January 1, 2005        $   6,238,563  $   238,563  $ 6,000,000   $ 2, 530,487  $   782,202  $   2,687,311
Dividend through
 September 30, 2005                        263,537      263,537           --             --           --             --
Amortization                                    --           --           --     (2,530,487)    (782,202)     3,312,689
Early redemption penalty                   302,994      302,994           --             --           --             --
Redeemed on August 1, 2005              (6,805,094)    (805,094)  (6,000,000)            --           --     (6,000,000)
                                     -------------  -----------  -----------   ------------  -----------  -------------
Balance December 31, 2005            $          --  $        --  $        --   $         --  $        --  $          --
                                     =============  ===========  ===========   ============  ===========  =============
</TABLE>

The following table  summarizes the August 1, 2005  transaction  with the Master
Fund:

                                                                      Discounted
                                                                      Principal/
                                                                       Series A
                                                        Interest/      Carrying
                                           Total        Dividend        Amount
                                      -------------   -----------    -----------
Balance as of August 1, 2005
Term note                             $     322,270   $      2,173   $   320,097
Series A Preferred                         6,502,100       502,100     6,000,000
                                      --------------  ------------   -----------
Total                                      6,824,370  $    504,273   $ 6,320,097
Paid from restricted cash                 (6,105,138) ============   ===========
Cash payment                                (238,390)
Common stock issued (a)                     (800,000)
                                      --------------
Early payment/redemption penalty (b)  $     (319,158)
                                      ==============

a)   9,756,098 shares of common stock issued at a price of $0.082 per share.

b)   The  August 1, 2005  transaction  resulted  in an early  payment/redemption
     penalty of $319,158,  of which $16,164 is attributable to interest  expense
     and  $302,994  represents  a reduction  to net income  available  to common
     shareholders.

                                      F-39
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

COMMON STOCK

On May 25, 2004,  the Company  reacquired  8,000,000  shares of its common stock
pursuant to a share  exchange  agreement  with its Chairman and Chief  Executive
Officer,  Mr. Patrick Lim,  whereby Mr. Lim surrendered  8,000,000 shares of the
Company's  common stock in exchange for 100,000  shares of the  Company's  newly
created Series A Voting Convertible  Preferred Stock. These shares were returned
to treasury and are available for re-issuance at a future date.

On August 9, 2004, the Company  reissued  25,000 shares of common stock from its
treasury  stock to a consultant as payment for services  rendered to the Company
in July 2004 and recognized  $5,750 as compensation  expense based on the market
value of $0.23 per share on the date of  issuance.  On December  24,  2004,  the
Company  reissued  500,000  shares of common stock from its treasury  stock to a
consultant  at $0.20 per share as payment for  services  rendered to the Company
and recognized $100,000 as compensation  expenses.  On June 2, 2005, the Company
reissued  250,000 shares of common stock from its treasury stock to a consultant
as  payment  for  services  rendered  to the  Company  in  connection  with  the
acquisition of ISS.

The Company  reissued from its treasury  stock 199,218 shares of common stock on
June 2, 2005 at $0.103 per share for total  consideration  of  $20,466,  843,446
shares  of  common  stock on  August  9,  2005 at  $0.108  per  share  for total
consideration  of $91,092 and 295,632  shares of common stock on  September  23,
2005 at $0.085 per share for total  consideration of $25,129, to a consultant as
payment for services rendered to the Company during fiscal 2005. In August 2005,
the Company  reissued  609,756  shares of its common  stock from  treasury to an
investor for cash of $50,000, in private placement exercises.  These shares were
issued at a price equal to 85% of the average of the five lowest  closing prices
of the common  stock  during the  twenty-two  trading  days prior to the date of
issuance, as reported by Bloomberg News Services. On August 9, 2005, the Company
reissued from its treasury  stock  240,000  shares of common stock at $0.139 per
share for a total  consideration  of $33,360  and on  September  27,  2005,  the
Company  issued  240,000  shares of common stock at $0.098 per share for a total
consideration of $23,520, to a consultant  pursuant to a compensation  agreement
dated July 15, 2005, under which the Company is to issue an aggregate of 960,000
shares of its common  stock,  to the  consultant  as payment for  services to be
rendered to the Company for the  twelve-month  period ending July 14, 2006.  The
480,000 shares were valued,  based on the respective market price on the date of
issuance,  and the Company recognized  compensation  expense of $56,880 for year
ended December 31, 2005, respectively.  As of December 31, 2005, the Company had
a balance of 4,851,948 repurchased shares in its treasury stock

On February 8, 2005, the Company issued 240,000 shares of common stock at $0.175
per share for a total  consideration of $42,000 and on May 18, 2005, the Company
issued  240,000  shares  of  common  stock  at  $0.125  per  share  for a  total
consideration of $30,000, to a consultant  pursuant to a compensation  agreement
dated July 15, 2004, under which the Company is to issue an aggregate of 960,000
shares of its common  stock to the  consultant  as payment  for  services  to be
rendered to the Company for the  twelve-month  period ended July 14,  2005.  The
480,000 shares were valued,  based on the respective market price on the date of
issuance,  and the Company  recognized  compensation  expense of $72,000 for the
year ended December 31, 2005.

On May 3, 2005,  the Company  issued  290,000 shares of its common stocks to two
officers  and  directors,  30,000  shares to an officer and 30,000  shares to an
employee,  respectively,  for exercising their stock options, at $0.20 per share
for an aggregate cash consideration of $70,000.


                                      F-40
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

COMMON STOCK (CONTINUED)

In private placement exercises in July 2005, the Company issued 5,791,463 shares
of its common stock to ten  investors at an aggregate  purchase  price of $0.082
per share  for a total  consideration  of  $474,900.  The  Company  also  issued
4,948,346 shares of its common stock to five investors at an aggregate  purchase
price of $0.087 per share for a total  consideration of $428,200.  The stock was
sold at 85% of the average of the five lowest closing prices of the common stock
during the  twenty-two  trading days prior to the closing  date,  as reported by
Bloomberg News  Services.  In January 2006, the Company issued 800,000 shares of
its common  stock to an investor  at an  aggregate  purchase  price of $0.10 per
share for a total consideration of $80,000.

In August 2004,  pursuant to a compensation  agreement between the Company and a
consultant,  the Company authorized the issuance of 120,000 shares of its common
stock to the  consultant  as payment for  services to be rendered to the Company
for the  twelve-month  period ending in July 2005. As of December 31, 2004,  the
Company  has not  issued  any of the  120,000  shares  of  common  stock  to the
consultant,  and has accrued $9,000 of compensation expenses. In September 2005,
the  consultant  agreed  with the  Company  to waive his  entitlement  under the
compensation agreement and the Company was relieved from the obligation to issue
120,000  shares of its  common  stock to the  consultant.  During the year ended
December 31, 2005, the Company reversed compensation expense of $16,800.

In October 2005,  the Company issued 500,000 shares of common stock at $0.10 per
share  for  total  consideration  of  $50,000  to  a  consultant  pursuant  to a
compensation  agreement dated September 12, 2005,  under which the Company is to
issue an aggregate of 2,000,000  shares of its common stock to the consultant at
$0.10 per share as payment  for  services  to be rendered to the Company for the
twelve-month  period ending  September 12, 2006. For the year ended December 31,
2005, the Company recognized compensation expense of $61,111.

In November 2005, the Company issued 500,000 shares of common stock at $0.09 per
share for total consideration of $45,000 to a consultant as payment for services
to be rendered to the Company. For the year ended December 31, 2005, the Company
recognized compensation expense of $45,000.


                                      F-41
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

STOCK OPTIONS

On September 16, 2002, the Company granted options to purchase 300,000 shares of
the Company's common stock at $0.12 per share to a consultant for services to be
provided to the Company.  These options were exercisable through September 2007,
contingent upon continuous  service by the consultant  through  specified dates.
100,000 of the options were  exercised on July 2, 2004 for a cash  consideration
of $12,000 and 200,000 of the options were  exercised on December 24, 2004 for a
cash consideration of $24,000.

On August 1, 2004,  the Company  granted  options to purchase  an  aggregate  of
300,000 shares of the Company's  common stock at $0.30 per share to a consultant
for  services to be  provided  to the  Company.  These  options are  exercisable
through July 2009,  contingent upon continuous service by the consultant through
specified  dates.  100,000  options  that vest on January 31, 2005 are valued at
$0.064 per share,  100,000 options that vest on April 30, 2005 and the remaining
100,000  options that vest on July 31, 2005 are valued at $0.101 per share based
upon  the  Black-Scholes  option-pricing  model,  resulting  in  recognition  of
compensation  expense of $15,153  during the year ended  December 31,  2004.  On
March 9, 2005 these  options  were  forfeited  when the Company  terminated  the
service agreement with the consultant.

On August 3, 2004, the Company granted certain officers, directors and employees
of the Company options to purchase up to an aggregate of 2,000,000 shares of the
Company's common stock at $0.20 per share.  The options are exercisable  through
August     2009,     contingent     upon     continuous     service    by    the
officers/directors/employees  through  specified  dates.  500,000  options  were
exercisable on October 3, 2004,  200,000 options were exercisable on February 3,
2005,  500,000  options were  exercisable  on August 3, 2005,  and the remaining
800,000  options are  exercisable  in equal numbers on each of February 3, 2006,
2007, 2008 and 2009,  respectively.  In addition,  on August 3, 2004 the Company
granted  options to purchase  100,000  shares of the  Company's  common stock at
$0.12 per share to an independent  director as  compensation  for serving on the
Company's  Board of Directors.  These options were  exercisable  with  immediate
effect  through  August 2009.  For the year ended December 31, 2004, the Company
valued the foregoing  2,100,000  options at $92,000 based on the intrinsic value
method as permitted under APB25 and recognized  compensation expense of $52,235.
250,000 of the options were exercised on April 28, 2005 for a cash consideration
of $50,000,  40,000 of the options  were  exercised on April 29, 2005 for a cash
consideration of $8,000, 60,000 of the options were exercised on May 3, 2005 for
a cash  consideration  of  $12,000.  On January  31,  2006,  100,000 and 300,000
options which were granted to an independent director with an option to purchase
the  Company's  common  stock at $0.12 and $0.20 per share,  respectively,  were
forfeited  when he resigned  from the Company.  On February  19,  2006,  270,000
options  which were granted to an officer were  forfeited  when he resigned from
the  Company.  For the year ended  December  31,  2005,  the Company  valued the
foregoing  1,080,000  options at $56,000 based on the intrinsic  value method as
permitted under APB 25. The Company recognized  compensation  expense of $24,137
for the year ended December 31, 2005.



                                      F-42
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

STOCK OPTIONS (CONTINUED)

A summary of the status of the  Company's  stock options as of December 31, 2005
and 2004, and changes during 2005 and 2004, is presented below:

              Options Outstanding                             2005                                 2004
            ------------------------            --------------------------------    --------------------------------
                                                   Shares        Exercise Price        Shares         Exercise Price
                                                --------------   ---------------    -------------    ---------------
<S>                                                    <C>               <C>              <C>                  <C>
   For officers and employees:
    Beginning of the year                            2,100,000           $0.196                 -                -
    Granted
     In August 2004                                          -                            100,000           $0.120
     In August 2004                                          -                          2,000,000           $0.200
    Exercised                                        (350,000)          $ 0.200                 -                -
    Forfeited                                        (100,000)          $ 0.120                 -                -
    Forfeited                                        (570,000)          $ 0.200                 -                -
                                                --------------                      -------------
    End of the year                                  1,080,000          $ 0.200         2,100,000           $0.196
                                                ==============                      =============
    Options exercisable at year end                    760,000          $ 0.200           600,000           $0.187
   For consultants:
    Beginning of the year                              300,000          $ 0.300           300,000           $0.120
    Granted
     In August 2004                                                                       300,000           $0.300
    Exercised                                                                           (300,000)           $0.120
    Forfeited                                         (300,000)          $0.300                 -                -
                                                --------------                      -------------
    End of the year                                          -                -           300,000           $0.300
                                                ==============                      =============
    Options exercisable at year end                          -                -           300,000           $0.300
</TABLE>

                                      F-43
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

STOCK OPTIONS (CONTINUED)

The following table summarizes information about options outstanding at December
31, 2005 and 2004.
<TABLE>
<CAPTION>
                                                               Options Outstanding
                                          ----------------------------------------------------------------
                                             Number         Weighted Average Remaining  Weighted Average
                                           Outstanding           Contractual Life        Exercise Price
                                          --------------  ------------------------------------------------
   As of December 31, 2005:
<S>                                            <C>                     <C>                   <C>
    For officers and employees                 1,080,000               3.67                  $0.200
    For consultants                                    -                 -                     -
                                          -------------                                 -------------
   Total                                       1,080,000               3.67                  $0.200
                                          ==============                                =============
   As of December 31, 2004:
    For officers and employees                 2,100,000               4.67                 $ 0.196
    For consultants                              300,000               4.58                 $ 0.300
                                          --------------                                -------------
   Total                                       2,400,000               4.66                 $ 0.209
                                          ==============                                =============
</TABLE>


NOTE 14: SIGNIFICANT CONCENTRATIONS

Two  customers in the  Company's  applications  segment  (Note 15) accounted for
approximately 83% and 87% of revenues earned during the years ended December 31,
2005 and 2004, respectively. In the year ended December 31, 2005, two customers,
respectively,  accounted  for 42% and 41% of total  revenue.  In the year  ended
December 31, 2004, the same two customers,  respectively,  accounted for 44% and
43% of total revenue.  Allowance for doubtful  accounts  receivable was $440,720
and  $425,869 at  December  31, 2005 and 2004,  respectively.  The Company  will
continue to pursue  vigorously  the collection of all its  outstanding  accounts
receivable.

Three suppliers  accounted for 78% and substantially all cost of revenues during
the year ended  December  31,  2005 and 2004,  respectively.  The Company is not
dependent  upon one supplier to provide the services that it requires but made a
strategic  decision to engage the  services of only a small  number of suppliers
after taking into  consideration the quality of service and competitive  pricing
being  offered.  Should the need arise,  the Company could  utilize  alternative
suppliers for the services that it requires.


                                      F-44
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 15: SEGMENT INFORMATION

SEGMENT REPORTING

The Company has three reportable  segments as a result of the  establishment and
acquisition of new subsidiaries.  The Company classifies its business into three
operating  segments,  which are defined by the products and services  offered as
follows:

1.   Broadband, multimedia and biometric security division (Applications)

     Activities under this segment include  application  development,  broadband
     network operation,  delivery of value added applications and services; sale
     of  devices  that  utilize  broadband  networks  and the sale of  biometric
     security devices.

2.   Material handling  equipment  division beginning in December 2003 (Material
     Handling)

     Activities  under this  segment  include  industrial  moving,  packing  and
     unpacking industrial equipment,  land transportation and secured logistics,
     as well as the sale, rental and servicing of material handling equipment.

3.   Apple  computer  division  beginning  in  October  2004  (Gallant  group of
     companies)

     Activities under this segment include  operating an authorized Apple Centre
     and the  supply  and  provision  of  information  technology  products  and
     services.

The accounting  policies of the segments are the same as those  described  under
Note 2: Significant  Accounting Policies.  The Company's reportable segments are
strategic  business units that offer different  products and services.  They are
managed  separately  because each division requires  different product knowledge
and marketing  strategies.  The new  businesses  were acquired as a unit and the
management  at the time of  acquisition  was retained.  Inter-segment  sales and
transfers between reportable segments are not material to the periods presented.
The  Company's  revenue is derived  primarily  from  operations  in Malaysia and
substantially all of the Company's assets are located in Malaysia.


                                      F-45
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 15: SEGMENT INFORMATION (CONTINUED)

OPERATING SEGMENT INFORMATION
<TABLE>
<CAPTION>
                                                                     Year ended December 31, 2005

                                                              Material
                                         Applications         Handling        Gallant         Corporate           Total
                                         ----------------  --------------  --------------   --------------  ---------------
Revenue:

<S>                                            <C>               <C>             <C>              <C>             <C>
Products and equipment                   $            --   $          --   $   3,549,766    $          --   $    3,549,766
services:
   Related parties                       $       333,342   $          --   $          --    $          --   $      333,342
   Others                                     23,856,534         306,784         260,936               --       24,424,254
                                         ----------------  --------------  --------------   --------------  ---------------
                                              24,189,876         306,784       3,810,702               --       28,307,362
Cost of revenue:

Products and equipment                   $            --   $          --   $   3,274,413    $          --   $    3,274,413
services
   Related parties                       $       145,527   $          --   $          --    $          --   $      145,527
   Others                                $    22,250,338   $     288,933   $      85,869    $          --   $   22,625,140
                                         ----------------  --------------  --------------   --------------  ---------------
Gross profit                             $     1,794,011   $      17,851   $     450,420    $          --   $    2,262,282
                                         ================  ==============  ==============   ==============  ===============
Net income (loss)
   from operating segments               $       177,889   $     (31,689)  $     161,325         (180,609)  $      126,916
                                         ================  ==============  ==============   ==============  ===============
Depreciation expense                     $       235,380   $      14,717   $      30,903    $          --
                                         ================  ==============  ==============   ==============
Non-cash compensation expense            $            --   $          --   $          --    $          --
                                         ================  ==============  ==============   ==============
Interest expense                         $       101,638   $          --   $      84,655    $     149,196
                                         ================  ==============  ==============   ==============
Interest income                          $       108,849   $          --   $      12,045    $          --
                                         ================  ==============  ==============   ==============
Income tax expense                       $        65,974   $       1,318   $      10,192    $          --
                                         ================  ==============  ==============   ==============
Expenditures for additions to
   long lived assets                     $       165,473   $       1,179   $      92,742    $          --
                                         ================  ==============  ==============   ==============
</TABLE>

                                      F-46
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
NOTE 15: SEGMENT INFORMATION (CONTINUED)

OPERATING SEGMENT INFORMATION (CONTINUED)
                                                                  Year ended December 31, 2004

                                                               Material
                                           Applications       Handling        Gallant         Corporate        Total
                                         ---------------   --------------  -------------   -------------  -------------
Revenue:
<S>                                           <C>               <C>             <C>             <C>            <C>
Products and equipment                   $            --   $           --  $     788,291   $          --  $     788,291
services:
   Related parties                       $     1,316,052   $           --  $          --   $          --  $   1,316,052
   Others                                     17,720,842          535,195         77,650              --     18,333,687
                                         ----------------  --------------  -------------   -------------  -------------
                                              19,036,894          535,195        865,941              --     20,438,030
Cost of revenue
Products and equipment                   $            --   $           --  $     715,172   $          --  $     715,172
services:
   Related parties                       $       478,553   $           --  $          --   $          --  $     478,553
   Others                                $    16,590,404   $      473,443  $      21,239   $          --  $  17,085,086
                                         ----------------  --------------  -------------   -------------  -------------
Gross profit                             $     1,967,937   $       61,752  $     129,530   $          --  $   2,159,219
                                         ================  ==============  =============   =============  =============
Net income (loss):
   from continuing operations            $       583,369   $      (52,953) $       3,519   $     696,534  $   1,230,469
   from discontinued operations                      428              997             --              --          1,425
                                         ----------------  --------------  -------------   -------------  -------------
                                         $       583,797   $      (51,956) $       3,519   $     696,534  $   1,231,894
                                         ================  ==============  =============   =============  =============
Depreciation expense                     $       240,894   $       16,474  $       7,616   $          --
                                         ================  ==============  =============   =============
Non-cash compensation expense            $       306,000   $           --  $          --   $          --
                                         ================  ==============  =============   =============
Interest expense                         $        27,289   $           --  $      14,578   $      66,819
                                         ================  ==============  =============   =============
Interest income                          $        14,530   $           --  $       1,878   $          --
                                         ================  ==============  =============   =============
Equity in losses of unconsolidated
  investees                              $            --   $       (6,355) $          --   $          --
                                         ================  ==============  =============   =============
Income tax expense (benefit)             $       180,526   $       (2,631) $       2,188   $          --
                                         ================  ==============  =============   =============
Expenditures for additions to
   long lived assets                     $        43,725   $       19,283  $          --   $          --
                                         ================  ==============  =============   =============

Total consolidated assets as of December 31, 2005 are as follows:

   Applications                                                                            $   8,016,098
   Material handling                                                                             153,490
   Gallant                                                                                     1,722,558
                                                                                           -------------
   Total consolidated assets                                                               $   9,892,146
                                                                                           =============
</TABLE>
                                      F-47
<PAGE>
                SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004


NOTE 16: COMMITMENTS AND CONTINGENCIES

Operating Leases

The  Company  leases  its  principal  executive  offices  in  Malaysia  under  a
three-year  operating lease from an unaffiliated party. The lease, which expires
on March  14,  2007,  provides  for a  two-year  renewal  option  thereafter.  A
subsidiary  of the  Company  leases  an  office  from an  unaffiliated  party in
Malaysia  under a  two-year  operating  lease,  which  expires  in May  2006 and
provides for a one-year  renewal option  thereafter.  Another  subsidiary of the
Company leases three retail  outlets in Malaysia.  One lease expires in December
2006,  one lease  expires in March 2008 and another lease expires in August 2008
and provides for a three-year  renewal  option  thereafter.  In April 2004,  the
Company entered into a one-year lease  agreement with an unaffiliated  party for
office  space in New York,  N.Y.  This lease has been  renewed in March 2005 for
additional  one year and it  expired in March  2006.


These  leases  require  the  Company to pay rent of $16,700 per month in January
through March 2006,  $16,500 per month for April 2006 and May 2006,  $15,900 per
month for June  through Dec 2006,  $8,600 per month in Jan  through  March 2007,
$5,400 per month in April 2007  through  February  2008,  $2,300 per month March
through August 2008 and $300 per month  September 2008 through  December 2009 as
well as taxes,  maintenance,  insurance and certain other operating costs of the
leased properties.  Rent expense under these leases was $159,920 and $91,838 for
the years ended December 31, 2005 and 2004, respectively.

The  following  is the  summary  of  properties  leased to the  Company  and its
subsidiaries:-


 No      Location of Property    Leased by   Lease Commerce On   Lease Expire On
 --      --------------------    ---------   -----------------   ---------------

 1.      New York, USA                  SDA         04/01/2004        03/31/2006
 2.      New Jersey, USA                SDA         11/01/2005        10/31/2006
 3.      Petaling Jaya, Selangor,      SDAM        03/15/2004         03/14/2007
         Malaysia
 4.      Kuala Lumpur, Malaysia         GIH         01/14/2005        01/13/2007
 5.      Kuala Lumpur, Malaysia         GIH         03/01/2005        02/28/2008
 6.      Kuala Lumpur, Malaysia         GIH         09/01/2005        08/31/2008
 7.      Prai, Penang, Malaysia         AMS         06/01/2004        05/31/2006


Future minimum lease payments under the  non-cancelable  lease agreements are as
follows:

           Year ending December 31:
           ----------------------------------
           2006                                       $          194,400
           2007                                                   74,400
           2008                                                   25,800
           2009                                                    3,600
                                                      ------------------
                                                      $          298,200
                                                      ==================


                                      F-48