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, 2004
                           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.)

                                11, JALAN 51A/223
                               46100 PETALING JAYA
                               SELANGOR, MALAYSIA
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                               011 (603) 7956-7026
                (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: $20,438,030

     The  aggregate  market  value of the voting  stock of the  Company  held by
non-affiliates as of April 13, 2005 was approximately $7,775,490.

     The number of shares outstanding of the Company's common stock, as of April
13, 2005, was 95,035,678.

     Documents incorporated by reference: None


<PAGE>

STATEMENT REGARDING THIS AMENDMENT

The Company is amending its Form 10-KSB for the period  December  31,  2004,  as
previously filed on April 15, 2005

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. The accounting  treatment of
these  embedded  derivatives  are  discussed in detail in notes 12 and 13 to the
Financial Statements.

As a  result  of  this  further  evaluation,  the  Company's  2004  consolidated
financial  statements have been corrected and restated.  The restated  financial
statements contain material changes as a result of non-cash  adjustments made by
the  Company.  In  particular,  the  corrections  resulted in an increase in net
income  of  $696,534  ($.01  per  share)  and net  income  available  to  common
shareholders of $142,278 ($.01 per share).  However,  principally because of the
reclassification  of  certain  preferred  stock  issued  by  a  subsidiary,  the
corrected  financial  statements  show a  decrease  in  shareholders'  equity of
$2,506,702 as of December 31, 2004.

Our shareholders should refer to the financial statements and accompanying notes
for a detailed  explanation of the  adjustments to the financial  results of the
Company that are contained in this Amended 10-KSB.

The  identification of, and accounting for,  derivative  instruments is complex.
Derivative  instrument  liabilities  are re-valued at the end of each  reporting
period,  with changes in the fair value of the derivative  liability recorded as
charges  or credits to income,  in the  period in which the  changes  occur.  We
determined  the fair  value  for  embedded  derivative   instruments  using  the
Black-Scholes  option pricing model. That model requires  assumptions related to
the remaining term of the instruments and risk-free rates of return, our current
common stock price and expected  dividend yield, and the expected  volatility of
our  common  stock  price  over  the  life  of  the  embedded  derivative.   The
identification   of,  and  accounting  for,   derivative   instruments  and  the
assumptions  used  to  value  them  can   significantly   affect  our  financial
statements.

In all other  material  respects, this Amended Annual Report on Form 10-KSB/A is
unchanged from the Annual Report on Form 10-KSB previously filed by  the Company
on April 15, 2005. This  amendment  should also be read in  conjunction with our
amended  Quarterly  Reports on Form 10-QSB/A for the quarters ended March 31 and
June 30, 2005.


<PAGE>
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
<S>              <C>
Item 1     Description of Business.....................................................1
Item 2     Description of Property.....................................................11
Item 3     Legal Proceedings...........................................................11
Item 4     Submission of Matters to a Vote of Security Holders.........................11

PART II
Item 5     Market for Common Equity and Related Stockholder Matters....................12
Item 6     Management's Discussion and Analysis........................................14
Item 7     Financial Statements........................................................F-1
Item 8     Changes In and Disagreements with Accountants on Accounting and
           Financial Disclosure........................................................39
Item 8A    Controls and procedures.....................................................39
Item 8B    Other information...........................................................

PART III
Item 9     Directors, Executive Officers, Promoters and Control Persons; Compliance
           with Section 16(a) of the Exchange Act......................................40
Item 10    Executive Compensation......................................................42
Item 11    Security Ownership of Certain Beneficial Owners and Management and
           Related Stockholder Matters.................................................43
Item 12    Certain Relationships and Related Transactions..............................44
Item 13    Exhibits....................................................................45
Item 14    Principal Accountant Fees and Services......................................46
</TABLE>


RESTATEMENT OF 2004 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  have been
restated,  resulting  in an increase in net income of $696,534  ($.01 per share)
and net income available to common shareholders of $142,278 ($.01 per share). In
addition, shareholders'equity decreased by $2,506,702 as of December 31, 2004.

SAFE HARBOR STATEMENT

     This Form 10-KSB 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" 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 revocation of the
Company's  broadband network operator's  license,  the inability 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 communications 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 its financing  agreements,
existing  and future  government  regulations,  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.


<PAGE>

     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.

<PAGE>
ITEM 1.   DESCRIPTION OF BUSINESS.

Secured  Digital  Applications,  Inc. ("SDA" or the "Company") is an information
technology   systems   integrator   and   value-added   developer  of  practical
applications for digital technology. Through its subsidiary operating companies,
SDA offers  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.  SDA  began
operations  as a business  organized  under the law of Malaysia and  following a
merger  with a  Colorado  corporation  in 1999 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. Our operations are in Asia,  primarily in Malaysia,  where
our home office is located.

     The principal  business address of the Company is 11, Jalan 51A/223,  46100
Petaling Jaya, Selangor,  Malaysia.  The United States address of the Company is
10th floor, 230 Park Avenue, New York, NY 10169.

     As of April 13,  2005,  the  Company  had a total of  95,035,678  shares of
common  stock  issued and  outstanding.  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. The Company also
sold certain assets during 2004,  which were not  significant.  The acquisitions
and sales of assets are discussed below.


BUSINESS

     The  Company  is  a  system  solution  provider,  seeking  to  develop  and
commercialize  practical applications of digital technology.  We are involved in
value-added application  development,  broadband network operation,  the sale of
devices that  utilize  broadband  networks  and the sale of  biometric  security
devices.  Beginning  in 2003,  the Company  has also  sought to develop  secured
shipping and supply chain management services. In October 2004, we expanded into
the business of selling Apple computer products and other information technology
products and services through the acquisition of the Gallant group of companies.
The Company's  principal  operations  during 2004 included the  development  and
operation  of a wireless  broadband  network in  Malaysia,  the  development  of
interactive,  multimedia content for the Internet and the development, licensing
and/or sale of specific products and applications that utilize the capacities of
a broadband  network.  These products  include the EyStar  SmartHome  Management
System,  broadband modems, biometric systems and Internet-based cameras. We also
generate  revenue  from the sale,  rental and  servicing  of  material  handling
equipment  through our  subsidiary,  Armor Multi Systems  ("AMS")  (f/k/a Asiaco
Multi  Corporation).  In  addition,  beginning  in  October  2004,  the  Company
generated  additional  revenue  from  the  sale of Apple  computer  products  in
Malaysia and from the supply and provision of  information  technology  products
and services through the Gallant group of companies.

     The Company  conducts its  principal  operations  in Malaysia,  and has the
     following subsidiaries:

1.   EyStar Media Inc.  ("EMI"),  a wholly  owned  corporation  organized  under
     Delaware law and  presently  based in New York,  through  which the Company
     intends to expand its presently  limited  operations in the United  States.
     EMI seeks to acquire United States  technology  companies and to expand the
     Company's operations into the United States.

                                       1


<PAGE>
2.   SDA America,  Inc.  ("SDAA"),  a wholly owned  corporation  organized under
     Delaware  law that is 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 SDAA.

3.   Secured  Digital   Applications   (M)  Sdn  Bhd  ("SDAM")  (f/k/a  Animated
     Electronic  Industries  Sdn  Bhd),  a wholly  owned  Malaysian  subsidiary,
     designs,  develops and produces  multimedia content and provides consulting
     services  for  website   development,   network   engineering  and  project
     management in IT related projects.

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.

7.   Asiaco Services Sdn Bhd ("ASS"), 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
     2 retail  outlets in Malaysia for the sale of Apple  computer  products and
     accessories.

12.  Gallant IT Distribution (M) Sdn Bhd ("GID"),  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 the Company from
     April  2005,  is a systems  integration  firm  specializing  in the design,
     development  and  implementation  of wireless  applications  and electronic
     solutions.

                                       2

<PAGE>
     At December 31, 2004, the Company,  including its newly acquired subsidiary
companies,  had a total of 50 employees,  all of whom were employed in Malaysia.
EMI and SDAA, both wholly owned U.S. subsidiaries do not have any 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
recruit  additional  employees  in 2005 to  further  strengthen  its  sales  and
marketing division.

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

With the acquisition of a majority interest in the Gallant Group of companies in
October 2004, the Company expanded into the retail  business.  The Gallant Group
of companies is a leading Malaysian provider of information  technology products
and services and one of the country'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. The Company has not withdrawn from the
transaction but has reserved its right to do so.  Management has not determined
whether the Company will proceed with the transaction.


                                        3

<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.

SUPPLY CHAIN MANAGEMENT SERVICES

     The Company'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. The Company's
supply chain management  services are flexible and can be modified  according to
the needs of  companies,  from large  multinationals  to small  businesses.  The
Company's   supply   chain   management   service  is   intended  to  provide  a
cost-effective way to help companies manage their supply chain process. By using
the service,  companies will be able to focus its resources on their  businesses
by outsourcing the management of their supply chain to the Company.

Secured Shipping Services

     By combining its supply chain management systems with technology like Radio
Frequency  Identification  (RFID) and Global  Positioning  System (GPS) tracking
systems and biometric  security  systems and solutions,  the Company has entered
the business of offering  secured  shipping  services to assist exporters to the
United  States to comply  with the  Container  Security  Initiative  (CSI).  The
Company's  secured  shipping  services  provide  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.
Electronic tags also help importers and exporters to track their  shipments,  an
essential  element of the  just-in-time  shipping  system  commonly  employed by
manufacturers,  importers and exporters. The Company's secured shipping services
is suited to identification  applications that provide a high level of security,
non-line-of-sight  reading at long  ranges  and  reliable  performance  in harsh
environments. The underlying value of the Company's secured shipping services is
a drive toward the  end-to-end  visibility  of parts,  materials and products as
they move through the supply chain. The technology offered by the Company can be
applied for interoperability across all transportation modes,  encompassing air,
ocean and land.

                                       4
<PAGE>

THE ASIACO TRANSACTIONS


     The  Company  first  entered  the  secured  shipping  services  through the
announced  acquisition  of a group of affiliated  companies  known as the Asiaco
group.  Although  the  Company  has  continued  to pursue a line of  business in
secured  shipping,  management  has  determined  that it will not use the Asiaco
group  as the  principle  vehicle  to  develop  this  line of  business  and has
concluded  that it would not be in the best  interest  of the  Company  to close
remaining  transactions to acquire certain  entities within the Asiaco group. In
furtherance  of  managements  decision not to proceed with the remaining  Asiaco
transaction, the Company has sold certain assets acquired from Asiaco and deemed
by management to be under performing.


     On November 17, 2003, the Company announced that its subsidiary,  SDAM, had
signed a definitive  agreement with Asiaco Material  Handling Sdn Bhd ("AMH") to
purchase,  through  AMS, 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").  Pursuant to this agreement, the Company
acquired equity  interests in five Malaysian  companies on December 9, 2003: 80%
in Asiaco  Material  Handling  (East  Coast)  ("AEC"),  67% in  Asiaco  Logistic
("ALG"), 60% in Asiaco Services ("ASS"), 46% in Asiaco Transport ("ATP") and 33%
in Asiaco Engineering  ("AEG").  On February 9, 2004, the Company acquired a 62%
equity  interest in Asiaco  Taiping  ("ATG").  Throughout  2004, the Company was
working towards completing the transfer of business,  customers and selected net
assets  (selected assets less selected  liabilities)  from Asiaco Pack Trade Sdn
Bhd ("APT"),  Asiaco Heavylift Sdn Bhd ("AHL"), Asiaco Selangor Sdn Bhd ("ASL"),
Asiaco  Melaka Sdn Bhd  ("AML").  However,  due to the  failure of AMH to obtain
necessary  approvals from relevant  authorities to and comply with certain terms
and conditions in the definitive  agreement,  the Company decided not to proceed
with the purchase of businesses and selected net assets of other Asiaco Group in
December  2004.  In  addition,  in December  2004,  the Company  sold its equity
interests in AEC, ALG, ATG, ATP and AEG.

     In November  2003, the Company  incorporated  a Thai company,  Asiaco Multi
Corporation  (Thailand)  Co.  Ltd  ("AMCT"),  which  was to be used as a special
vehicle to  acquire  the net assets and  business  of Asiaco  Material  Handling
(Thailand) Co. Ltd. ("AMHT"). In December 2004, following the Company's decision
not to proceed  with the  acquisition  of the  businesses  and net assets of the
Asiaco Group,  the Company also  terminated  the  acquisition  of net assets and
business of AMHT.

EYSTAR SMARTHOME CONSOLE

     The multi-protocol  EyStar SmartHome  Management System 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.

     The Company has entered into various  agreements to expand the marketing of
the  SmartHome  Console or to provide  enhanced  features to  purchasers  of the
console.

     The Company has entered into an agreement with PointRed  Technologies  Inc.
("PointRed")  whereby the Company and PointRed agreed to reciprocal marketing of
each  other's  products  and  services.  The Company  agreed to sell  PointRed's
products worldwide,  excluding the United States.  PointRed in return has agreed
to  market  and  sell  the  Company's  EyStar  SmartHome  Consoles,  value-added
applications  and services to its existing and future  clients.  The Company and
PointRed  have further  agreed that PointRed will service and install the EyStar
SmartHome  Console in North and South  America,  while the Company  will service
PointRed's products in Malaysia.

                                       5
<PAGE>
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 plans to utilize in the VISIONET network a
combination  of the Local  Multipoint  Distribution  Service  ("LMDS") and fixed
wireless access  technologies in the 24.0 - 29.0 GHz and 2.4 GHz frequency bands
to  provide  a cost  effective  and  fast  deployment  of  VISIONET.  LMDS  is a
point-to-multipoint  broadband technology utilizing the super-high  "millimeter"
portion of the  airwaves  for  integrated  communications  services.  Due to the
relatively large bandwidth of the LMDS signal, LMDS systems have the capacity to
provide interactive voice, video and data services.  The Company established its
first  VISIONET cell in December 2001.  Feasibility  studies that were conducted
following the rollout of VISIONET  indicated that it would be more profitable to
deploy VISIONET 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.  The Company has therefore  revised its strategy for the  development
and use of VISIONET to serve primarily as a backhaul network.

     In September 2001, the Company entered into a strategic  collaboration with
Aptilo Networks,  Sweden,  to deploy local mobile networks  ("LMNs") in Malaysia
and the Asian  regional  markets.  The Company  anticipates  that the successful
integration  of LMNs with VISIONET  will enable  consumers to receive live video
streams from their handheld devices and laptops,  and to access the Internet and
their corporate  intranets at near T1 speeds  remotely from public  locations in
the "travel ribbon" such as hotels, airports,  restaurants,  conference centers,
shopping malls and  coffeehouses.  The first  integrated  VISIONET-LMN  cell was
deployed  during the fourth quarter of 2001 to connect a number of access points
to Bluetooth  and wireless LAN 802.11b  standard  devices.  This mobile  network
features  Aptilo's  latest  billing  solution  that enables the Company to offer
value-added  applications  and services to users  without the need for any prior
registration  as a  subscriber.  The Company is  optimistic  that this method of
payment  from Aptilo will  ultimately  attract more users to VISIONET and reduce
capital  expenditures and monthly operating costs.  Furthermore,  the integrated
network  provides the Company with the ability to expand its  broadband  network
from fixed wireless into the mobile broadband market.  The Company has committed
to an initial  purchase of software and hardware  from Aptilo valued at $50,000.
The Company  believes that this strategic  relationship  with Aptilo may broaden
VISIONET's user base and generate additional revenue in 2005.

     In December 2002, the Company's subsidiary, SDAM executed an Agreement with
Telekom  Sales and Services Sdn Bhd ("TMSS"),  a subsidiary of Telekom  Malaysia
Berhad,  to sell,  distribute and promote  broadband access over standard copper
telephone lines using Digital  Subscriber Line  technology.  The service,  brand
named TMnet  Streamyx,  was first  launched in August 2002.  TMnet Streamyx is a
high speed access service providing "always-on" connection to the Internet. This
service currently covers 100 urban locations in Malaysia.  The agreement with TM
was for an initial period of one year and maybe extended for a further period to
be agreed by both parties.  This  agreement  was renewed for a further  one-year
term commencing July 1, 2004.

     At  year-end  2002,  VISIONET  was rolled out as a backhaul  network in the
Klang  Valley  linking WiFi  hotspots  established  by third  parties to provide
wireless  Internet access  services.  The Company is in discussions with TMSS on
using  VISIONET  to  extend  TMNet's  Streamyx  service  coverage  to  locations
currently not served by TMSS.


                                        6

<PAGE>
BIOMETRICS SECURITY PRODUCTS

     During 2002, the Company  entered into  agreements in which it obtained the
rights to sell and service certain products that utilize broadband  technologies
in the areas of  identification  and security.  In December  2002, the Company's
subsidiary, SDAM executed an Agreement with Sintec Corp, South Korea ("Sintec"),
to sell, distribute and promote their SmileCAM remote video surveillance cameras
in Malaysia,  Thailand,  Singapore,  Vietnam and Brunei. The agreement is for an
initial period of two years and will thereafter be  automatically  renewable for
one-year terms on each  anniversary.  Under the terms of the  agreement,  Sintec
will  grant the  Company  exclusive  distribution  rights  for its  products  in
Malaysia if the  Company  purchases  an agreed  minimum  value of products  from
Sintec during 2003 and 2004.  The agreement with Sintec expired in December 2004
and was  automatically  renewed for a further one year period.  SmileCAM cameras
are used for Internet based security and  entertainment  applications and can be
integrated with the EyStar  SmartHome  Console to provide a value added security
solution for corporate and residential users.  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.

     In January  2003,  the Company  signed a Reseller  Agreement  with  FaceKey
Corporation  ("FaceKey")  to  sell  FaceKey's   biometric-based   products.  The
agreement is for one year and will  thereafter  be  automatically  renewable for
two-year terms on each  anniversary.  Under the terms of the agreement,  FaceKey
will  grant the  Company  exclusive  distribution  rights  for its  products  in
Malaysia if the  Company  purchases  an agreed  minimum  value of products  from
FaceKey during 2003.  Although the Company  achieved  minimum sales in 2003, the
agreement  with  Facekey  was  automatically   renewed  for  another  two  years
commencing  January 2004.  FaceKey develops  products to control access,  record
time and  attendance  and  restrict  use of  personal  computers  by  using  two
biometric  technologies,  face recognition and fingerprint  matching in a manner
that will be highly  competitive with magnetic cards, PIN numbers and passwords.
The  combination  of both  face  and  fingerprint  recognition  technologies  is
believed by the Company to be  extremely  reliable,  providing a security  level
equivalent to a DNA test.  The Company  expects to commence  generating  revenue
from FaceKey's products in the second half of 2005.

     In  December   2003,  the  Company  was  also  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.  The  Company  expects to  commence
generating revenue from Testech's products in the second half of 2005.

                                        7

<PAGE>
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.

                                        8
<PAGE>
COMPETITION

     The Company  operates  in a highly  competitive  marketplace,  in which 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.

                                        9
<PAGE>
SUMMARY OF SIGNIFICANT RISKS

     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, FaceKey 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's  ability to develop the  business of  providing  supply
          chain  management  and secure  shipping  services by  integrating  the
          business  of  its  newly  acquired   subsidiaries  with  the  relevant
          technologies is unproven.

     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  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.

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.

                                       10

<PAGE>
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 two 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  terminated the lease agreement for office space in Flemington,
NJ on March 31, 2004. In April 2004,  the Company  entered into a one-year lease
agreement with an  unaffiliated  party for office space at 10th Floor,  230 Park
Avenue,  New  York,  N.Y.  This  lease  expired  in  March  2005  and  has  been
automatically renewed for an additional one year.

     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  December  22,  2003,  the Company  commenced a lawsuit in the  Chancery
Division, Hunterdon County, New Jersey against seven anonymous Internet posters,
alleging that the posters had made false  statements on certain  message  boards
sponsored by Terra Lycos, Inc.  (Ragingbull.com)  and Yahoo! The Company reached
agreements with the principal  defendants by obtaining  certain  representations
that the defendants were not former  employees or engaged in the manipulation of
the Company's  common stock and, in one  instance,  settled with a defendant who
made a nominal  payment and published a retraction.  The Company has elected not
to continue the litigation against one remaining defendant.

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.

                                       11
<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
2004 and 2003 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 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

Year 2003                High          Low
                        ------        -----

First Quarter           $0.06         $0.02
Second Quarter          $0.28         $0.03
Third Quarter           $0.25         $0.12
Fourth Quarter          $0.69         $0.16


     As of April 13, 2005,  95,035,678 shares of the Company's common stock were
outstanding,  8,530,000 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 13,
2005,  the closing  trade  price for the  Company's  common  stock was $0.17 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.

                                       12

<PAGE>
SALES OF UNREGISTERED SECURITIES

     On November 12, 2004,  $26,594 principal of the Company's  Convertible Term
Note and $4,646 of accrued  interest  was  converted by a Master Fund to 170,288
shares of the Company's common stock.

     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 December 24, 2004,  the Company issued 169,735 shares of common stock at
$0.20 per share for a total  consideration of $33,268 to a consultant as payment
for legal services rendered.

     On December 24, 2004,  the Company  issued  200,000  shares of common stock
were issued to a  consultant  when he  exercised  options  granted to him for an
aggregate cash consideration of $24,000.

     There  were no other  sales of  unregistered  securities  during the fourth
quarter of 2004.  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
2004.

                                       13

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

OVERVIEW

     During 2004, the Company achieved  substantial  growth in its revenues from
continuing  operations,  to  $20,438,030  compared to  $15,858,153  in 2003, and
achieved  positive  earnings for the third 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, 2004 and 2003 was $1,231,894 and
$815,373 respectively.  The Company's net income in 2004 included recognition of
a deferred gain of $245,416 and income from  discontinued operations of  $1,425.
The  Company's  net income in 2003  included  recognition  of a deferred gain of
$73,157,  receipt of $50,000 as compensation  for rescission of a share purchase
agreement and loss from discontinued operations of $10,951. Excluding these, the
Company would have earned a net income of  $985,053 and  $703,167  for 2004  and
2003, respectively.  The earnings per share of common stock, was less than $0.01
and   more  than  $0.01  for  the  years  ended  December  31,  2004  and  2003,
respectively.

     At year end 2004, the Company had total current assets of $11,775,141,  net
property and equipment of $1,256,861 and net tangible assets of  $9,211,038. The
Company's shareholders' equity at year end 2004 was  $7,630,252.

     In 2004, 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.

     The Company  anticipates that these activities will continue to provide the
principal sources of the Company's revenue in 2005. During 2005, 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  2005  and 2006 is  projected  at 5.7% and  5.3%,
respectively.  In view of the expected growth and positive economic outlook, the
Company will continue to focus its business  activities in Malaysia for 2005 and
beyond.


                                       14
<PAGE>
     For 2005,  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 following factors:

1.   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).

2.   Likely  increase  in  demand  for  secured  shipping   services   following
     implementation of Container Security Initiative ("CSI") by the U.S. Customs
     and Border Protection  ("CBP") in January 2002, which consists of four core
     elements:

     o    using  intelligence  and automated  information to identify and target
          containers that pose a risk for terrorism;
     o    pre-screening of containers before they reach U.S. ports;
     o    using detection technology to pre-screen containers; and
     o    using smarter, tamper-evident containers.

3.   The  implementation  of the CSI program in two Malaysian ports,  Port Klang
     and Port  Tanjung  Pelepas,  would make it easier for the Company to market
     its  new  services  to  ocean  carriers,  exporters  and  manufacturers  in
     Malaysia.

Significant Business Developments and Plan of Operation

     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 will be used as the vehicle for
     SDAM's investment in GIH.

                                       15

<PAGE>
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  Gallant  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,  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 in 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.

GIH has the following wholly-owned subsidiaries:

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

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

iii) Gallant IT Distribution (M) Sdn Bhd ("GID"), is currently dormant.

With  the  acquisition  of the  Gallant  group of  companies,  the  Company  has
strengthened its team for 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 September  29,  2004,  the date of the  acquisition.  The  allocation  of the
purchase price is subject to refinement.

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

                                       16
<PAGE>
     Following the  acquisition  of the Gallant Group of companies,  the Company
expanded into the trading of Information and Communication  Technology  products
(ICT) business in 2004 with the following operations:

a)   Operating as a retailer of Apple  products  and a Tier-1 Apple  Reseller in
     Malaysia,
b)   Trading and retailing of ICT products, and
c)   Provision  of  installation,   repair  and  maintenance  services  for  ICT
     products.

     During 2005, the Company  anticipates  that it will continue to provide its
existing multimedia development,  consulting and broadband services,  market the
EyStar SmartHome Management System,  introduce and actively market a new line of
biometrics  security  products  capable of integration with the EyStar SmartHome
Management  System and utilizing the Company's  ability to provide  applications
support.  These  products are the  SmileCAM,  FaceKey and Testech  devices.  The
Company believes that these devices,  when linked with the broadband  technology
that the Company seeks to exploit,  will provide  customers  with  comprehensive
security  and  identification  systems for which it is believed  there will be a
significant  market. The Company will also continue its presence in the material
handling  business through AMS and its subsidiary.  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 center will also have a training facility.

     The Company will also seek to expand its business to include the  provision
of  biometric  security  identification  systems;  supply chain  management  and
secured shipping  services.  In line with this strategy,  the Company has signed
several  agreements  since the third  quarter of 2003 to  acquire  the equity or
business and assets of companies that it believes will assist its expansion into
the development,  integration and provision of secured shipping and supply chain
management services. These agreements are described in more detail below.

     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.

     For its existing  operation,  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.  As described in more detail
below,  the Company  anticipates that its primary markets will continue to be in
Malaysia  and other Asian  countries.  However,  the Company  continues  to seek
additional  markets in North and South  America  and has  entered  into  various
strategic agreements to improve the acceptance of its products there.

                                       17
<PAGE>
     The  Company  has  secured  several  new  contracts  to  provide  hardware,
applications or consulting  services.  The Company believes that it will be able
to begin  performance  of some of these  contracts  during 2004 and that it will
recognize  revenue  from  these  activities  in 2004.  Due to  uncertainties  in
scheduling,  however, the Company cannot forecast the specific dates on which it
will begin performance of these contracts. These contracts are described in more
detail below.

     As a result of the Company's  experience in rolling out the first  VISIONET
cell in December 2001,  management has decided that it will be most advantageous
to the Company to revise its  strategy  for  exploiting  its  broadband  license
granted by the  Government  of  Malaysia.  The  Company  believes  that the most
effective use of the VISIONET  infrastructure  is as a  point-to-point  backhaul
service  provider to other  broadband  and  telecommunications  providers.  This
decision was based on feasibility studies that were conducted after the VISIONET
cell was activated. During 2004, the Company intends to actively market VISIONET
as a backhaul service provider, rather than as a telecommunications company that
provides the "last mile" service. In particular,  the Company has decided to use
VISIONET as a backhaul  link for local mobile  networks that it plans to attempt
to deploy in  partnership  with  Aptilo  Networks,  Sweden.  With this change in
business strategy,  VISIONET will no longer provide the last mile link between a
cell based radio station and retail users. The Company will instead  construct a
wireless highway or backhaul  linking the cell based radio stations  established
by existing telecommunication companies and ISPs. The Company is hopeful that it
will conclude  contracts with a number of telcos and ISPs on the use of VISIONET
as a backhaul link during 2005.

     In  addition,  the  Company  plans to  continue  its efforts to exploit the
Application  Service  Provider (ASP) license  granted to its subsidiary  PTSB in
September 2001, by the Malaysian  Communications and Multimedia Commission.  The
ASP license  will  complement  the  wireless  broadband  license  granted to the
Company in June 1997.  As an ASP, PTSB is permitted to offer  enterprise  access
over the Internet to applications and related services that would otherwise have
to be located in their computers.  The Company  anticipates that the ASP service
may become an  attractive  alternative  to locally based  applications  both for
small and medium enterprises with lower budgets for information technology,  and
also for larger companies as a form of outsourcing.

Significant Contracts

     For the year 2005, the Company hopes to generate additional revenue arising
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 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. Up to December
     31, 2004, the Company has generated $1,038,000 of revenue on this contract,
     of which $467,000 and $571,000 was generated during the year ended December
     31, 2004 and 2003, respectively.

                                       18
<PAGE>
b)   In December  2001,  the Company  entered  into a marketing  agreement  with
     Worldlink  Dotcom Sdn. Bhd.  (Worldlink) to distribute its service  gateway
     for home/office automation in Malaysia,  Singapore and Australia.  In 2002,
     Worldlink promoted the Company's service gateway to potential resellers and
     channel  partners in the  targeted  markets.  The  Worldlink  contract  was
     projected  by the  Company to generate  revenues  of $4.0  million in 2003.
     Worldlink  has not been able to secure any new sales to date.  The  Company
     will  continue  to work with  Worldlink  in the  marketing  of its  service
     gateway.

c)   In January 2002, the Company  appointed  Mutual Base Equity Sdn. Bhd. (MBE)
     as one of its distributors in Malaysia and Singapore for sale of the EyStar
     SmartHome Console.  Under the terms of the Distributor  Agreement,  MBE has
     been  appointed for an initial  duration of 3 years  commencing  January 4,
     2002.  For fiscal years 2002,  2003 and 2004,  MBE has been  attempting  to
     secure contracts for the supply of the EyStar SmartHome Console to property
     developers  in Malaysia and Singapore but was not able to achieve the sales
     target of $17.5  million over the term of the  agreement.  The Company will
     continue to work with MBE to promote the EyStar SmartHome Console.

d)   The Company will attempt to secure  contracts from local mobile networks to
     be jointly deployed with Aptilo Networks in 2005.

e)   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, is expected
     to be completed by December 2004. As a total solution  provider,  PTSB will
     also be responsible for the supply of its EyStar SmartHome  Console as well
     as providing value-added broadband applications such as high speed Internet
     access, security surveillance, multimedia conferencing, home automation and
     video-on-demand.  Up to  December  31,  2004,  the  Company  has  generated
     $527,000 of revenue,  of which  $216,000 and $274,000 was generated in 2004
     and 2003, respectively,  and expects to receive the balance of the contract
     sum through the first quarter of 2005.

f)   In September  2002,  the Company  signed a Channel  Partner  Agreement with
     PointRed  Technologies,  Inc., a wireless broadband equipment  manufacturer
     and distributor to distribute the EyStar SmartHome  Console.  Starting with
     its existing  client base and  expanding  into new markets,  PointRed  will
     sell,  install and service the EyStar SmartHome  Console,  and in doing so,
     may help to accelerate the  distribution  of the Console in North and South
     America.

g)   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  expects to receive  $550,000  in
     consulting fees over 18 months beginning December 1, 2002. The contract was
     completed in 2004 and the Company had received the  contracted sum in full.
     The contract generated revenue of $279,000 and $253,000 for the years ended
     December  31,  2004  and  2003,  respectively.  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 fourth quarter of
     2005 in the two commercial and housing developments.

                                       19
<PAGE>
h)   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, 2004, the Company has generated $409,000 of revenue from
     this  contract,  of which  $354,000  and $55,000 was  generated in 2004 and
     2003, respectively.

i)   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  the
     uncertainty,  revenue that will be realized from this contract  during 2005
     cannot be accurately forecast.

j)   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.  To date,  the  technical  specifications  for the
     project have yet to be finalized by the relevant regulatory authorities and
     the  Company has not  received  any  indication  on when the  contract  may
     commence.  Due to the uncertainty,  revenue that will be realized from this
     contract during 2005 may not be accurately forecast.

k)   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.
     The developer of the project is unable to provide a definitive date for the
     completion of construction work. Due to the uncertainty,  revenue that will
     be realized from this contract during 2005 cannot be accurately forecast.

l)   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.

m)   In November 2003, the Company's subsidiary, AMS, was awarded a $4.6 million
     contract to provide  electronically  secured  cargo  shipping  services for
     goods bound for the United  States to a shipping  agency  operating in Port
     Klang, Malaysia. The contract, which was expected to commence in the second
     quarter  of 2004,  was for an initial  duration  of  fifteen  months.  This
     contract  was  rescinded  by AMS as the client  had  failed to fulfill  its
     obligation to complete the necessary  facilities for  implementation of the
     contract.

                                       20
<PAGE>
n)   In December  2003,  the Company  announced  that its  subsidiary,  AMS, was
     awarded a $4.92 million contract to provide a secured shipping service. The
     fifteen  month  contract was  expected to commence in the first  quarter of
     2004. The contract calls for AMS to provide warehousing, transportation and
     monitoring of cargo from the time the goods leave the client's warehouse to
     the port of destination in the United States.  The contract was canceled in
     December  2004 when the client  informed  AMS that it was facing  financial
     difficulties and funding for the project was not forthcoming.

o)   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 fourth quarter of 2005 and to be
     completed by the fourth quarter of 2006.  Under the three  contracts,  SDAM
     will provide a  comprehensive  biometric  security system that will include
     biometric technology for apartment door locks, elevator access control, and
     will control  vehicle  access into and out of the  development  and visitor
     registration.

p)   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 had now been postponed to the second half of 2005.

q)   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 is to be delivered and installed in the fourth
     quarter  of 2004.  A  three-year  maintenance  contract  will  begin  after
     installation.  Commencement  of delivery  had been  postponed to the second
     half of 2005.

r)   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 had 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 2005  cannot be
     accurately  forecasted.  The e-commerce  portal will allow only  registered
     members to use the portal for online  purchases and payments.  Members will
     register by providing details of the identity,  credit card information and
     biometric information.  After registration when a member desires to make an
     online   purchase,   their  identity  will  be  verified  and  credit  card
     information  validated.  This system will significantly  reduce the risk of
     fraud and identity theft in online e-commerce transactions.  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.

                                       21
<PAGE>
s)   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 trial of the
     pilot system is now expected to commence in the second half of 2005.

Strategic Contractual Relationships

     In its efforts to exploit broadband technology,  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.

     Beginning  in  September   2001,  the  Company  entered  into  a  strategic
collaboration  with Aptilo  Networks,  Sweden,  to deploy local mobile  networks
("LMNs") in Malaysia and the Asian  regional  markets.  The Company  anticipates
that the successful  integration of LMNs with VISIONET will enable  consumers to
receive live video  streams  from their  handheld  devices and  laptops,  and to
access the Internet  and their  corporate  intranets at near T1 speeds  remotely
from  public  locations  in  the  "travel  ribbon"  such  as  hotels,  airports,
restaurants,  conference  centers,  shopping malls and  coffeehouses.  The first
integrated  VISIONET-LMN  cell was deployed during the fourth quarter of 2001 to
connect a number of access points to Bluetooth and wireless LAN 802.11b standard
devices.  This mobile network  features  Aptilo's  latest billing  solution that
enables  the Company to offer  value-added  applications  and  services to users
without the need for any prior  registration  as a subscriber.  Any user can now
pay for instant  network  access to surf the  Internet  or purchase  value-added
applications  on the spot by using their credit card.  The Company is optimistic
that this method of payment  from Aptilo will attract more users to VISIONET and
reduce  capital  expenditures  and monthly  operating  costs.  Furthermore,  the
integrated network provides the Company with the ability to expand its broadband
network from fixed wireless into the mobile  broadband  market.  The Company has
committed to an initial  purchase of software and hardware from Aptilo valued at
$50,000.  The Company believes that this strategic  relationship with Aptilo may
broaden  VISIONET's  user base and generate  additional  revenue in 2005 that is
expected to contribute positively to the Company's cash flow.

     In July 2002,  the Company  entered into a letter  agreement  with PointRed
Technologies Inc. ("PointRed") whereby the Company has agreed to market and sell
PointRed's products worldwide. In return, PointRed has agreed to market and sell
the Company's EyStar SmartHome  Consoles,  value added applications and services
to its  existing  and  future  clients.  On August 16,  2002,  the  Company  and
PointRed,  pursuant to the original letter agreement dated July 2002,  signed an
agreement whereby the Company will utilize existing  personnel and facilities to
promote  PointRed's  products  and to service  existing  PointRed  customers  in
Malaysia.  Also pursuant to the original letter agreement,  the Company signed a
channel partner  agreement with PointRed,  whereby  PointRed will distribute the
EyStar SmartHome Console.  Under the agreement,  PointRed will sell, install and
service the EyStar SmartHome Console in North and South America.

                                       22

<PAGE>

     In December 2002, the Company's subsidiary, SDAM executed an Agreement with
Sintec Corp,  South Korea  ("Sintec"),  to sell,  distribute  and promote  their
SmileCAM remote video  surveillance  cameras in Malaysia,  Thailand,  Singapore,
Vietnam and Brunei. The agreement is for an initial period of two years and will
thereafter be  automatically  renewable for one-year terms on each  anniversary.
Under the terms of the  agreement,  Sintec  will  grant  the  Company  exclusive
distribution  rights for its  products in Malaysia if the Company  purchases  an
agreed minimum value of products from Sintec during 2003 and 2004. The agreement
with Sintec expired in December 2004 and was automatically renewed for a further
one  year.   SmileCAM   cameras  are  used  for  Internet   based  security  and
entertainment  applications  and can be  integrated  with the  EyStar  SmartHome
Console to provide a value added security solution for corporate and residential
users.  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.

     In December 2002, the Company's subsidiary, SDAM executed an Agreement with
Telekom  Sales and Services Sdn Bhd ("TM"),  a  subsidiary  of Telekom  Malaysia
Berhad,  to sell,  distribute and promote  broadband access over standard copper
telephone lines using Digital  Subscriber Line  technology.  The service,  brand
named TMnet  Streamyx,  was first  launched in August 2002.  TMnet Streamyx is a
high speed access service providing "always-on" connection to the Internet. This
service currently covers 100 urban locations in Malaysia.  The agreement with TM
was for an initial period of one year and maybe extended for a further period to
be agreed by both parties.  This  agreement  was renewed for a further  one-year
term commencing July 1, 2004.

     In January  2003,  the Company  signed a Reseller  Agreement  with  FaceKey
Corporation  ("FaceKey")  to  sell  FaceKey's   biometric-based   products.  The
agreement is for one year and will  thereafter  be  automatically  renewable for
two-year terms on each  anniversary.  Under the terms of the agreement,  FaceKey
will  grant the  Company  exclusive  distribution  rights  for its  products  in
Malaysia if the  Company  purchases  an agreed  minimum  value of products  from
FaceKey during 2003.  Although the Company  achieved  minimum sales in 2003, the
agreement  with  Facekey  was  automatically   renewed  for  another  two  years
commencing  January 2004.  FaceKey develops  products to control access,  record
time and  attendance  and  restrict  use of  personal  computers  by  using  two
biometric  technologies,  face recognition and fingerprint  matching in a manner
that will be highly  competitive with magnetic cards, PIN numbers and passwords.
The  combination  of both  face  and  fingerprint  recognition  technologies  is
believed by the Company to be  extremely  reliable,  providing a security  level
equivalent to a DNA test.

     On September 10, 2003,  the Company's  Malaysian  subsidiary,  SDAM entered
into a letter agreement to establish a joint venture  company,  Temasya Wira Sdn
Bhd ("TWSB"),  to undertake the research and  development of biometric  security
applications.  SDAM will initially hold 60% of TWSB's equity while two Malaysian
individuals  will hold the  remaining  40%.  SDAM`s  holding will  eventually be
diluted  to 30%  when  EMI  acquires  30%  equity  interest  in TWSB  after  the
completion of the joint venture agreement to be executed between the Company and
FaceKey Corporation as described below. However, due to disagreement with TWSB's
minority shareholders on the business and financial matters of the joint venture
company,  SDAM  sold its 60%  equity  interest  in TWSB in  December  2004 to an
unrelated  party.  SDAM is presently in the process of identifying  new business
partners for the intended joint venture company.


                                       23
<PAGE>
     On September 24, 2003, the Company  announced that it had executed a Letter
of  Intent to form a joint  venture  with  FaceKey  Corporation  ("FaceKey")  to
develop  biometric  applications for the MyKad "smart"  national  identification
card ("MyKad") held by more than 7 million people in Malaysia.  EMI will be used
as the joint  venture  company to develop a system  and  applications  utilizing
FaceKey's face and  fingerprint  technologies  to verify a live  fingerprint and
face with data stored in a smartcard,  which  permits  retrieval of  information
about   the   cardholder   electronically.   Due  to  some   disagreement   over
implementation  and  operational  issues,  the  Company  and  Facekey  are still
negotiating  the terms of the definitive  agreement.  The definitive  agreement,
which requires  FaceKey to acquire a 49% equity  interest in EMI, will be signed
only  after  both  parties  have  agreed  on the  terms  of the  development  of
applications for MyKad. EMI will subsequently acquire a 30% equity interest in a
joint venture company to be established  between Facekey,  the Company and other
Malaysian  companies.  The Company and FaceKey will be jointly  responsible  for
marketing the products globally.

     In December 2003, the Company was appointed by Testech Inc.  ("Testech") of
South Korea to distribute its biometrics  security  products.  Testech's product
range  includes   fingerprint  access  control  system,   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  biometrics  security  products  that could be customized to meet
clients' requirements.

     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. Due to delays in the development  work, the field trial is not expected to
commence  until the third  quarter of 2005.  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 is scheduled for
early 2006. The initial  deployment of the portal would be for the Malaysian and
Singapore  markets with subsequent  deployment  across the Asia-Pacific  region.
After successfully  implementing the payment portal for the Asia-Pacific region,
the Company intends to introduce a similar portal for the North American market.
The  payment  portal will be partly  funded by  internally  generated  funds and
proceeds from the private  placement of the  Company's  securities to the Master
Fund.

     In connection  with the development of the Company's  businesses,  products
and services,  the Company has from time to time entered into various agreements
to  acquire  or  license  new   products  and   technologies,   to  improve  the
effectiveness  of its  existing  products,  to expand the scope of the goods and
services  that it offers  and to  acquire  companies  with  operations  that are
synergistic  to its  business  plan.  In some cases  during 2004 the Company has
experienced   difficulties  with  such  arrangements  as  a  result  of  product
performance or because such an agreement was determined to be inconsistent  with
the Company's present business plan, and as appropriate, the Company has decided
not to pursue the arrangement further.

                                       24
<PAGE>
     On October 14,  2003,  the Company  announced  that its  subsidiary,  SDAM,
executed a letter  agreement with Asiaco Material  Handling Sdn Bhd ("AMH"),  to
acquire  a 51%  equity  interest  in  each of  three  AMH  Malaysian  subsidiary
companies.  AMH and its  subsidiaries  are  primarily  engaged  in supply  chain
management,  land transportation,  secured logistics as well as sale, rental and
servicing of material  handling  equipment.  On November  17, 2003,  the Company
announced that its subsidiary,  SDAM had signed a definitive  agreement with AMH
to purchase,  through AMS, the business  assets and selected  liabilities of AMH
and seven companies in the Asiaco group. The definitive  agreement also provides
for AMS,  to  purchase a  majority  equity  interest  in the  remaining  sixteen
companies in the Asiaco group from AMH's major  shareholder.  The purchase price
for the above  acquisition  is  approximately  $1.8 million.  The final purchase
price shall be determined  after  completion  of the  financial  due  diligence.
Through  December 31, 2003,  the Company had completed the purchase of equity in
five Asiaco companies: 80% in AEC, 67% in ALG, 60% in ASS, 46% in ATP and 33% in
AEG. On February 9, 2004, the Company  completed the acquisition of a 62% equity
interest  in ATG.  However,  due to the  failure of AMH to obtain the  necessary
approval from relevant  authorities and comply with certain terms and conditions
in the  definitive  agreement,  the  Company  decided  not to  proceed  with the
purchase of  businesses  and selected net assets of the Asaico Group in December
2004. Through year ended December 31, 2004, the Company sold its equity interest
in AEC, ALG, ATG, ATP and AEG.

     Through  December 31, 2004, the Company had paid a total of $263,158 to AMH
as advances  for the  incorporation  of AMC and purchase of equity in the Asiaco
group of companies. In October 2004, the Company sold its 46% equity interest in
ATP for a cash  consideration  of $23,158 to an unrelated party. On December 27,
2004 the  Company  sold its  equity  interest  in AEC,  ALG,  ATG and AEG for an
aggregated  consideration  of $152,628 in accounts  receivable  to an  unrelated
party.  As  of  the  date  of  this  report,   the  Company  received  the  full
consideration in cash and does not expect to incur additional expenses resulting
from its decision not to proceed with the definitive agreement with AMH.

     On December 6, 2003, the Company executed a definitive agreement with AMH's
principal  shareholder and Asiaco Material Handling (Thailand) Co. Ltd. ("AMHT")
to purchase  the assets and business of AMHT.  On December 8, 2003,  the Company
announced  the  incorporation  of Asiaco Multi  Corporation  (Thailand)  Co. Ltd
("AMCT"),  to be used as a special  vehicle  to  acquire  AMHT's  net assets and
business,  including  taking over AMHT's  headquarters in Bangkok,  Thailand and
branch office in the industrial city of Rayong, Thailand. Upon completion of the
acquisition,  the Company will own 60% of AMCT's equity.  The remaining 40% will
be jointly owned by the existing  shareholders of AMHT.  Following the Company's
decision not to proceed with the asset purchase  agreement with AMH, the Company
will also not continue with the purchase of assets and business of AMHT.

     The Company  sold its 60% equity  interest  in TWSB in December  2004 to an
unrelated party for  consideration of $3,947 in accounts  receivable.  As of the
date of this  report,  the  Company  received  the full  $3,947 in cash from the
unrelated party.


                                       25
<PAGE>
     On December 3, 2003,  the Company  entered into a Joint  Venture  Agreement
with Amove  Resources  Sdn Bhd ("AR") to jointly  implement  a secured  shipping
service. The Company has incorporated Secured Shipping Sdn Bhd ("SS") to be used
as the joint venture  company.  Pursuant to the Agreement,  the Company was also
granted an option to  purchase a 51% equity  interest in AR for  $550,000.  This
option to purchase was exercisable on or before January 31, 2004. On January 30,
2004, the Company's  subsidiary,  SDAM,  entered into a definitive  agreement to
acquire 51% equity in AR for $526,315 in cash from AR's  principal  shareholder.
SDAM made an initial cash payment of $26,315.  The balance of the purchase price
is to be paid at closing,  which was to occur by October 31,  2004.  In November
2004,  both parties had agreed not to proceed with the Joint Venture  Agreements
and the  acquisition  as AR's  principal  shareholder  was not  able to  fulfill
certain condition precedent as stated in the definitive  agreement.  As a result
of the termination of the purchase agreement, the Company and AR also agreed not
to  proceed  with the  intended  joint  implementation  of a Central  Monitoring
Service  ("CMS"),  through SS, in the northern  region of Malaysia.  The initial
$26,315 cash was refunded to the Company in November 2004.

     On February 17, 2004, the Company announced that its subsidiary,  SDAM, had
executed a  definitive  agreement  to acquire the business and assets of Izfahan
Enterprise (M) Sdn Bhd ("IE"), a Malaysian freight  forwarding  company licensed
by the Malaysian Customs Department to provide freight forwarding service in the
northern and central region of Peninsular Malaysia.  The Company did not proceed
with closing the acquisition as there was disagreement with IE's shareholders on
business and financial matters.


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 likely need to raise  additional  funds to
satisfy the Company's cash requirements during 2004.

     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.

                                       26
<PAGE>
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
business of providing  supply chain  management and secure shipping  services by
integrating  the business of its newly acquired  subsidiaries  with the relevant
technologies is also unproven. Thus, 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
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.

THE  ABILITY  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 the
Company's  business plan. If the Company is unable to generate  sufficient  cash
from its  operations or raise  capital as needed,  the Company will be unable to
pursue or execute its current business plan and fund its operations.

                                       27
<PAGE>

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.

     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 Company will also 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.

                                       28
<PAGE>
THE  INTERNATIONAL  NATURE OF THE  COMPANY'S  OPERATIONS  SUBJECT 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.

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 2003 and 2004, 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.

                                       29
<PAGE>
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.  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.
Accordingly,  the Company's 2004  consolidated  financial  statements  have been
restated, 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.


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


<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                   --------------------------------
                                                                       2004                2003
                                                                   -------------      -------------
                                                                    (As Restated)
<S>                                                                        <C>                 <C>
Revenues                                                           $  20,438,030      $  15,858,153
Gross profit                                                           2,159,219          1,822,491
Sales and marketing                                                       43,677             38,623
General and administrative                                             1,575,395            879,921
Gain on disposal of assets - related parties                             245,416             73,157
Income from continuing operations                                      1,230,469            826,324
Net income                                                             1,231,894            815,373
</TABLE>


Year ended December 31, 2004 compared to year ended December 31, 2003

     Total revenue increased by $4,579,877,  or 29%, to $20,438,030 for the year
ended December 31, 2004, as compared to $15,858,153  for the year ended December
31, 2003. Increase in revenue for 2004 can be further analyzed as follows:
<TABLE>
<CAPTION>

                                                          2004            2003           Increase
                                                    ---------------  --------------- ------------------
<S>                                                       <C>              <C>             <C>
Application division                                $   19,036,894   $   15,807,763  $   3,229,131  20%
Material handling division
         (From December 2003)                              535,195           50,390        484,805  N/A
Apple division (From October 2004)                         865,941               --        865,941  N/A
                                                    ---------------  --------------- --------------
Total revenue                                       $   20,438,030   $   15,858,153  $   4,579,877  29%
                                                    ===============  =============== ==============
</TABLE>

The  increase  in total  revenue  for 2004 was mainly due to an increase in fees
earned from the  production  of  multimedia  programs  and revenue  received for
project  consulting  services.  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, 2004, two customers, respectively, accounted for 43% and
44% of total  revenue.  In the year ended  December  31,  2003,  two  customers,
respectively, accounted for 50% and 42% of total revenue.

                                       30

<PAGE>

Gross Profit

     Gross profit  increased to $2,159,219 for the year ended December 31, 2004,
compared to  $1,822,491  for the year ended  December 31,  2003,  an increase of
$336,728 or 18%.  Increase in gross  profit for 2004 can be further  analyzed as
follows:
<TABLE>
<CAPTION>

                                                   2004            2003           Increase
                                             ---------------  --------------- ------------------
<S>                                                <C>              <C>             <C>
Application division                         $    1,967,938   $    1,802,818  $     165,120  9%
Material handling division
         (From December 2003)                        61,752           19,673         42,079  N/A
Apple division (From October 2004)                  129,529               --        129,529  N/A
                                             ---------------  --------------- --------------
Total gross profit                           $    2,159,219   $    1,822,491  $     336,728  18%
                                             ===============  =============== ==============
</TABLE>

The  increase in gross  profit in 2004 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 $4,243,149 or 30%, to $18,278,811 in 2004
from  $14,035,662  in 2003. 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.

Sales and marketing expenses

     Sales and marketing  expenses increased by $5,054 or 13% to $43,677 for the
year ended  December 31, 2004 from $38,623 for the year ended December 31, 2003.
Higher sales and marketing expenses in 2004 was primarily due to advertising and
promotional expenses incurred by the Apple division,  which accounted for 22% of
total sales and marketing  expenses,  and higher travelling expenses incurred to
introduce  the  Company's  biometric  products to  customers  and  resellers  in
Malaysia.  Advertising and promotion costs, which were approximately  $9,703 and
$12,793 for the years ended December 31, 2004 and 2003, respectively,  accounted
for 22% and 33% of sales and marketing expenses in 2004 and 2003.

General and administrative expenses


     General and administrative expenses involving non-related parties increased
by  $695,474 or 88% to  $1,490,132  for the year ended  December  31,  2004,  as
compared to $794,658 for the year ended  December 31, 2003.  Increase in general
and administrative expenses for 2004 could be further analyzed as follows:

<TABLE>
<CAPTION>


                                                          2004            2003           Increase
                                                    ---------------  --------------- -------------------
<S>                                                        <C>              <C>             <C>
Application division                                $    1,207,406   $      756,700  $     450,706  60%
Material handling division
         (From December 2003)                              147,603           37,958        109,645  N/A
Apple division (From October 2004)                         135,123               --        135,123  N/A
                                                    ---------------  --------------- --------------
Total general and administrative expenses           $    1,490,132   $      794,658  $     695,474  88%
                                                    ===============  =============== ==============
</TABLE>

                                       31


<PAGE>
     Increase  in general  and  administrative  expenses  involving  non-related
parties  was  mainly due to  increase  in general  and  administrative  expenses
incurred by the Application  division,  which accounted for 81% and 95% of total
non-related  parties'  general and  administrative  expenses  for the year ended
December  31,  2004 and  2003,  respectively.  The  Material  Handling  division
accounted for 10% and 5% of total general and administrative  expenses involving
non-related parties in 2004 and 2003, respectively. The Apple division accounted
for 9% of  total  non-related  parties'  general  and  administrative  expenses.
General and  administrative  expenses for the Application  division increased by
$450,706 or 60% to $1,207,406 for the year ended December 31, 2004 from $756,700
for the year ended December 31, 2003. The increase was mainly attributable to an
increase in compensation  expenses,  consulting fees, public relation  services,
maintenance expenses,  rental expenses and professional fees. For the year ended
December  31,  2004,  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.  For the year
ended December 31, 2003, out of the total general and administrative expenses of
$794,658,  30% was for  depreciation of tangible assets and 16% was for employee
payroll.  Another 11% was for legal expenses,  8% was for fees for  professional
and auditing  services,  7% was for investor relation expenses and approximately
28% was  for  rent,  utilities,  general  office  supplies,  communications  and
corporate insurance expenses.

     General and  administrative  expenses - related  parties for the year ended
December  31,  2004 and 2003 was  $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, 2004 and 2003,  the related
company,  LSH Assets  Holdings Sdn Bhd ("LSH"),  billed the Company's  Malaysian
subsidiary, SDAM, administrative expenses of $25,263 per year for administration
and clerical fees  incurred by LSH on behalf of SDAM.  The Company also incurred
management  fees of $60,000 per year for the years ended  December  31, 2004 and
2003,  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  $96,571,  or  797%, to  $108,686  for the
year  ended December 31, 2004 as compared to $12,115 for the year ended December
31, 2003. Interest expense for the year ended December 31, 2004 included $18,678
related  to  a  $500,000  convertible  term  note  issued  on  May 28, 2004  and
$66,819  for  the  amortization of the derivative  liability associated with the
term  note (see note 9 to the Financial Statements).  In  addition,  the   Apple
division  incurred  interest  expense of $14,578 for the year ended December 31,
2004.

Amortization of debt issuance costs

     Amortization  of debt  issuance  costs of  $29,835  in 2005  relate  to the
issuance  of the term  note on May 28,  2004.  See a further  discussion  in the
Liquidity and Capital Resources section.

Gain on value of derivative liabilities

     Gain on value of  derivative  liabilities  of  $980,423  in 2005  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.  See a further
discussion in notes 12 and 13 to the Financial Statements.

Gain on disposal of assets - related parties

     For the years  ended  December  31,  2004 and 2003,  the  Company  included
recognition of a previously deferred gain of $245,416 and $73,157,  respectively
related to a similar amount the Company received from its long-term  receivable,
related  party.  The  receivable  balance and total  deferred gain was $555,000,
respectively,  as of December 31, 2003.  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
$309,584 respectively, as of December 31, 2004.

                                       32
<PAGE>
Other income

     During 2003,  other income included  $50,000 the Company  received from the
shareholders  of Convergent  Technologies,  Inc.  ("CTI") as  cancellation  fee,
pursuant to a Rescission  Agreement  signed between CTI's  shareholders  and the
Company in November 2003.


Liquidity and Capital Resources


     As of  December  31,  2004,  the  Company  had  net  cash of  $92,493,  and
restricted  cash of $6,456,408 of which  approximately  $6,000,000  was from the
sale of securities to a Master Fund.


     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 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 America,  Inc. ("SDAA"),  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.


                                       33

<PAGE>

     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.

     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.

     As of April 13, 2005,  the balance of cash held in the  restricted  account
was $ 6,057,000.  There was a balance due and owing for  interest and  principal
repayments on the convertible debentures of $47,852,  representing payments owed
for a three-month period. Payments of interest and repayment of principal on the
convertible  note are due monthly in cash,  unless the market for the  company's
common stock was a minimum of $0.22 per share,  in which case the Master Fund is
required to accept payment in common stock.  The Company's  failure to make such
payments  in cash as they  come  due on a  monthly  basis  could  result  in the
declaration of a default and  acceleration of the principal  amounts owed to the
Master Fund.

     For the year ended December 31, 2004, 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, 2004,  the Company  owed Mr. Lim,  the Chief  Executive
Officer  ("CEO"),  Chairman and Director of the Company,  $68,902 for short-term
cash advances made to subsidiaries  of the Company for working capital  purposes
from time to time.  Additionally,  at December  31,  2004,  the amount owed to a
company in which Mr. Lim has a financial  interest was $94,895.  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.


     For the year ended December 31, 2004, net cash used in operating activities
was $795,427.  For the year ended December 31, 2003,  the Company  generated net
cash of  $680,258  from its  operating  activities.  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 higher net cash used
in operating  activities in 2004, as compared to 2003,  was mainly due to higher
operating and interest expense,  which increased by 90% and 797%,  respectively.
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.  For the year ended  December 31, 2003,  the primary reason for the
difference  between income from  continuing  operations of $826,324 and net cash
provided by  operations of $680,258 was an increase in accounts  receivable,  of
$429,189 during 2003.


     Cash  used  in  investing   activities   of  $49,613  in  2004  was  mainly
attributable to net cash used in acquiring new equipment and subsidiaries.  Cash
used in investing  activities of $94,877 in 2003 was mainly  attributable to net
cash used in acquiring new subsidiaries and associates.


                                       34

<PAGE>
     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. Cash used in financing activities of $186,489 in 2003 was primarily due to
repayment of advances from a director of $169,383.

     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, 2004, 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.

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


                                       35
<PAGE>

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.

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.

                                       36

<PAGE>
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.

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,
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 liability instruments
under the provision of SFAS No. 133, "Accounting for Derivative  Instruments and
Hedging  Activities".  In May 2004,  the Company  issued a  convertible  note of
$500,000,  preferred stock of a subsidiary with a stated value of $6,500,000 and
warrants to purchase common stock at various exercise prices.  Subsequent to the
issuance of the Company's December 31, 2004 consolidated  financial  statements,
the Company  determined  that both the preferred stock of the subsidiary and the
convertible  term note contained  embedded  derivatives  that must be bifurcated
from their host instruments (See Notes 12 and 13).

The  identification of, and accounting for,  derivative  instruments is complex.
Derivative  instrument  liabilities  are re-valued at the end of each  reporting
period,  with changes in the fair value of the derivative  liability recorded as
charges  or credits to income,  in the  period in which the  changes  occur.  We
determined  the  fair  value  for  embedded  derivative  instruments  using  the
Black-Scholes  option pricing model. That model requires  assumptions related to
the remaining term of the instruments and risk-free rates of return, our current
common stock price and expected  dividend yield, and the expected  volatility of
our  common  stock  price  over  the  life  of  the  embedded  derivative.   The
identification   of,  and  accounting  for,   derivative   instruments  and  the
assumptions  used  to  value  them  can   significantly   affect  our  financial
statements.

                                       37
<PAGE>
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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.

                                       38

<PAGE>
ITEM 7. FINANCIAL STATEMENTS

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


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.  As of the
Evaluation  Date,  the Company's  Chairman and Chief  Executive  Officer and its
Chief Financial 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
Financial Officer, as appropriate,  to allow timely decisions regarding required
disclosure.  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.  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.

                                       39

<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, 2005 are as follows:-

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

   Patrick Soon-Hock Lim                 55         Chairman, Chief Executive
                                                    Officer and Director

   Valerie Hoi-Fah Looi                  46         Secretary and Director

   Wan Abdul Razak bin Muda              68         Director

   Mark Deschaine                        41         Director

   Chee-Hong Leong                       39         Chief Financial Officer/
                                                    Treasurer


(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, 55, 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,  68, 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.

     MS.  VALERIE  HOI-FAH LOOI,  46, 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.

                                       40

<PAGE>
     MR. MARK DESCHAINE,  41, has served as the Company's  independent  director
and  Chairman of the Audit  Committee  since June 27, 2002.  Mr.  Deschaine is a
principal  member with  Educational & Technological  Consultants LLC, a Michigan
company,  specializing  in learning,  training,  educational  and  technological
issues.  Mr.  Deschaine  holds  teaching  credentials,  as well  as two  Masters
Degrees,  one from  Oakland  University  and the other from Grand  Valley  State
University in the area of education.

     MR.  CHEE-HONG  LEONG,  39, has served as the Chief  Financial  Officer and
Treasurer of the Company since February 2000. He is a Fellow of the  Association
of Chartered Certified Accountants, United Kingdom. Mr. Leong is responsible for
the  financial  and  administrative  functions of the Company.  Prior to joining
SDAM,  Mr.  Leong was the  Assistant  Accounts  Manager at  Industrial  Concrete
Products from April 1994 to December 1999. Mr. Leong earned his Bachelor of Arts
in Accounting at Ulster  University in Northern Ireland in 1989 and qualified as
a Chartered  Certified  Accountant with the  Association of Chartered  Certified
Accountants, UK in 1994.

     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 and Mr.
Deschaine are the only Outside Directors 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, 2004.

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),  Mark Deschaine
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. Mark  Deschaine 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.

                                       41

<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.  Mr.
Deschaine, a Director, was granted an option for 400,000 common shares, of which
option  for  100,000  common  shares  was  granted  at $0.12 and  option for the
remaining  300,000  common shares was granted at $0.20,  all  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.
Leong, the current Chief Financial Officer and Treasurer,  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                2004              -              -
Chairman, Chief Executive            2003              -              -
Officer and Director                 2002              -              -

EMPLOYMENT AGREEMENTS

     The Company has no employment  agreements with its Chief Executive  Officer
and other executive officers.  However, its wholly-owned  subsidiary,  SDAM, and
Chee Hong Leong entered into a letter  agreement,  dated December 8, 1999,  with
respect to Mr. Leong's  appointment as Corporate  Finance Manager of SDAM. Under
the letter agreement,  Mr. Leong will receive a basic salary of $18,947 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. Leong
is presently drawing a basic salary of $31,579 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 $32,126 per
year.

                                       42

<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 13,
2005, there were 95,035,678 common shares issued and outstanding.


NAME AND ADDRESS                     NUMBER OF SHARES OF           PERCENT OF
OF BENEFICIAL OWNER(1)               BENEFICIAL OWNER (2)            CLASS

Patrick Soon-Hock Lim                    50,995,000 (3)               52.09

Valerie Hoi-Fah Looi                      4,820,000                    4.92

Mark Deschaine (4)                        1,004,500                    1.03

Wan Abdul Razak bin Muda                    400,000                       *

Chee-Hong Leong                              78,000                       *
                                        -----------                  ------
All Officers and Directors as
a Group (5 persons)                      57,297,500                   58.04
                                        ===========                  ======
*    Less than 1%.


(1)  Except for Mark  Deschaine,  the address for each  beneficial  owner is c/o
     Secured Digital  Applications,  Inc., No. 11 Jalan 51A/223,  46100 Petaling
     Jaya, Selangor, Malaysia.

(2)  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.

(3)  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.

(4)  The address for Mark Deschaine is PO Box 72 Frankenmuth, MI 48734.


                                       43

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

During the year ended  December 31, 2004,  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.  During each of the years ended December 31, 2004 and 2003, LSH billed the
Company  $60,000 per year for  management  fees.  LSH also billed the  Company's
Malaysian subsidiary, SDAM, $25,263 per year for each of the year ended December
31, 2004 and 2003 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  $59,876 and  $140,966 in 2004 and 2003,  respectively.
Advances of $198,568 and $248,636 were repaid in 2004 and 2003, respectively. As
of  December  31,  2004,  the  amount  due to LSH was  $94,895.  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". During the
year  ended  December  31,  2003,  in lieu of actual  cash  payment  of  project
consulting fee receivables from two consulting  contracts,  management  directed
two customers to pay a total of $30,000 to LSH.

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, 2004,  $73,665 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, 2004, long-term receivables, related parties, consisted of an
overdue  amount of $309,584  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  $245,416 and $73,157 of the outstanding
receivable  during the years ended  December  31,  2004 and 2003,  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.  During 2003, in lieu
of actual cash  payment of this  Company  receivable,  management  directed  the
related party to pay the $5,263 to an affiliated company to whom the Company had
outstanding accounts payable.

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,  2004,  $40,790  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.


                                       44
<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,  2004 and  2003,  the  Company  received  fees of  $1,316,052  and
$1,153,578,  respectively,  from consulting  contracts that it entered into with
MYA. As of December 31, 2004,  $131,579 and $94,210 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, 2004,  the Company  owed the Chief  Executive  Officer of the
Company  $68,902 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.


3.2       Amended and Restated  Certificate of  Incorporation of Secured Digital
          Applications, Inc.


3.3       Certificate  of  Ownership  of Digital  Broadband  Networks,  Inc.  (a
          Delaware   Corporation)  and  Secured  Digital  Applications  Inc.  (a
          Delaware Corporation)

3.4       Certificate  of  Amendment  to the  Certificate  of  Incorporation  of
          Secured Digital Applications, Inc.

3.5       Bylaws of Digital Broadband Networks, Inc., presently known as Secured
          Digital Applications, Inc.


                                       45

<PAGE>
10.1      Employment  Letter Agreement,  dated January 1, 1999,  between Valerie
          Looi and Animated  Electronic  Industries Sdn. Bhd.  (Incorporated  by
          reference to Exhibit 10.3 to the Company's  Form 10-KSB filed with the
          SEC on April 14, 2000.)

10.2      Employment  Letter  Agreement,  dated December 8, 1999,  between Leong
          Chee Hong and Animated Electronic  Industries Sdn. Bhd.  (Incorporated
          by reference to Exhibit 10.4 to the  Company's  Form 10-KSB filed with
          the SEC on April 14, 2000.)

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


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  2003  and  2004 is GHP  Horwath,  P. C.
Aggregate fees were billed or expected to be billed in the following  categories
and amounts:

                                          Years Ended December 31,
                                        -----------------------------
                                          2004                 2003
                                        ---------           ---------
          Audit Fees                    $  96,700           $  50,500
          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.

                                       46

<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 10, 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 10, 2006
----------------------------   Officer and Director
Patrick Soon-Hock Lim          (Principal Executive Officer)



   Resigned                    Chief Financial Officer          April 10, 2006
----------------------------   (Financial Officer and
Chee Hong Leong                Principal Accounting Officer
                               - resigned on 11.19.05)




/s/ Voon Fui Yong              Chief Accounting Officer         April 10, 2006
----------------------------   (Financial Officer and
Voon Fui Yong                  Principal Accounting Officer
                               - appointed on 11/19/05)


/s/ Valerie Hoi-Fah Looi       Secretary and Director           April 10, 2006
----------------------------
Valerie Hoi-Fah Looi



/s/ Wan Abdul Razak bin Muda   Director                         April 10, 2006
----------------------------
Wan Abdul Razak bin Muda



   Resigned                    Director                         April 10, 2006
----------------------------
Mark Deschaine

                                       47

<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
                   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-8
         Notes to consolidated financial statements                   F-11


<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING 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, 2004,  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, 2004. 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, 2004, and the results of
their  operations  and their  cash  flows for each of the years in the  two-year
period  ended  December 31,  2004,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

As discussed in Note 1, the Company  restated  its 2004  consolidated  financial
statements to reflect the  correction  of an error in accounting  for a May 2004
issuance of preferred stock of a subsidiary, a convertible term note and related
warrants.


GHP HORWATH, P.C.

Denver, Colorado
April 14, 2005,  except for the effects of the restatement  discussed in Note 1,
as to which the date is April 7, 2006

                                      F-1
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2004
                                 (As restated)


<TABLE>
<CAPTION>
                                     ASSETS

Current assets:
<S>                                                                           <C>

     Cash                                                                    $     92,493
     Cash, restricted (Note 7)                                                  6,456,408
     Trade receivables,
       less allowance for doubtful accounts of $55,000 (Notes 6 and 14)         4,381,419
     Other accounts receivable,
       less allowance for doubtful accounts of $371,000                           268,893
     Prepaid expenses                                                              68,345
     Inventories                                                                  507,583
                                                                             ------------
              Total current assets                                             11,775,141
Property and equipment, net (Note 5)                                            1,256,861
Customer list (Note 2 and 3)                                                      189,000
License (Note 2 and 3)                                                             65,000
Goodwill (Note 2 and 3)                                                           852,525
Long-term receivables, related parties (Note 6)                                   309,584

                                                                             ------------
                                                                             $ 14,448,111
                                                                             ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Bank overdraft and borrowings (Note 8)                                  $    763,424
     Current portion of capital lease obligations (Note 9)                         42,752
     Current portion of convertible term note - net of issuance
       costs and derivative liability of $112,829 (Note 12)                        63,641
     Current portion of term loan (Note 10)                                        65,637
     Accounts payable                                                           1,112,708
     Accrued expenses                                                             223,931
     Amount due to an affiliated company (Note 6)                                  94,895
     Amount due to a director (Note 6)                                             68,902
     Income tax provision (Note 11)                                                32,428
     Preferred stock dividend provision                                           366,896
                                                                             ------------
              Total current liabilities                                         2,835,214


     Capital lease obligations, net of current portion (Note 9)                    31,626
     Convertible term note, net of current portion - net of issuance
       costs and derivative liability of $132,544 (Note 12)                       117,456
     Term loan, net of current portion (Note 10)                                  150,071
     Deferred income tax (Note 11)                                                131,316
     Deferred gain (Note 6)                                                       309,584
                                                                             ------------
              Total liabilities                                                 3,575,267
                                                                             ------------
                                   (continued)

                                      F-2

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (CONTINUED)
                                DECEMBER 31, 2004
                                    (As restated)


Series A convertible preferred stock of subsidiary - net of
  issuance costs and derivative liability                                       2,687,311
  of $3,312,689 (Liquidation preference of $6,000,000)                       ------------


Minority interest                                                                 555,281
                                                                             ------------
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; 100,000 shares issued and outstanding,
       liquidation preference $3,678,000                                           10,000
     Common stock, $.00001 par value; 350,000,000 shares authorized;
        103,151,152 shares issued                                                     955
     Additional paid-in capital                                                 6,776,000
     Common treasury stock, 8,530,000 shares at cost                              (30,375)
     Options                                                                       78,835
     Deferred compensation                                                        (11,447)
     Warrants                                                                     749,715
     Retained earnings                                                                 --
     Accumulated other comprehensive income                                        56,569
                                                                             ------------
              Total shareholders' equity                                        7,630,252
                                                                             ------------
                                                                             $ 14,448,111
                                                                             ============
</TABLE>
                 See notes to consolidated financial statements

                                      F-3


<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>

                                                                                   2004              2003
                                                                                ------------    ------------
                                                                               (As restated)
 <S>                                                                              <C>                 <C>
Revenues:

     Related parties (Note 6)                                                   $  1,316,052    $  1,153,578
     Others                                                                       19,121,978      14,704,575
                                                                                ------------    ------------
                                                                                  20,438,030      15,858,153
Cost of revenues                                                                  18,278,811      14,035,662
                                                                                ------------    ------------
Gross profit                                                                       2,159,219       1,822,491
                                                                                ------------    ------------
Operating expenses:
     Sales and marketing                                                              43,677          38,623
     General and administrative:
       Related parties (Note 6)                                                       85,263          85,263
       Others                                                                      1,490,132         794,658
                                                                                ------------    ------------
Total operating expenses                                                           1,619,072         918,544
                                                                                ------------    ------------
Income from operations                                                               540,147         903,947
                                                                                ------------    ------------
Other income (expense):
     Interest expense                                                               (108,686)        (12,115)
     Amortization of debt issuance costs                                             (29,835)           --
     Other issuance costs                                                           (210,311)           --
     Gain on value of derivative liabilities                                         980,423            --
     Interest income                                                                  16,408            --
     Gain on disposal of assets, related parties (Note 6)                            245,416          73,157
     Other income                                                                     14,933          50,000
     Share of associate companies' losses                                             (6,355)         (2,551)
                                                                                ------------    ------------
                                                                                     901,993         108,491
                                                                                ------------    ------------
Income from continuing operations before income tax and minority interest          1,442,140       1,012,438
Income tax                                                                          (180,083)        (24,736)
                                                                                ------------    ------------
Income from continuing operations before minority interest                         1,262,057         987,702
Minority interest                                                                    (31,588)       (161,378)
                                                                                ------------    ------------
Income from continuing operations                                                  1,230,469         826,324
                                                                                ------------    ------------
Discontinued operations:

     Income (loss) from operations of discontinued material handling
      subsidiaries before income tax (including gain on disposal of
      $131,115 in 2004)                                                                1,425          (2,968)
       Income tax                                                                       --            (7,983)
                                                                                ------------    ------------

     Income(loss) from discontinued operations                                         1,425         (10,951)
                                                                                ------------    ------------
Net income                                                                      $  1,231,894    $    815,373
                                                                                ============    ============

                                   (continued)

                                      F-4
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

                                                                                                 2004               2003
                                                                                           ----------------   ----------------
                                                                                            (As restated)

Net income                                                                                 $      1,231,894   $        815,373

Preferred stock dividend                                                                           (375,434)             --

Accretion to preferred stock redemption value                                                      (714,182)             --

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

Net income applicable to common shareholders                                               $        142,278   $        815,373
                                                                                           ================   ================





Net income per common share from continuing operations:

       Basic and diluted                                                                   $           0.01   $           0.01
                                                                                           ================   ================

Net income per common share from discontinued operations:

       Basic and diluted                                                                   $              *   $              *
                                                                                           ================   ================
Weighted average shares outstanding

     Basic                                                                                       94,349,704         98,060,143
                                                                                           ================   ================
     Diluted                                                                                     95,181,672         98,160,611
                                                                                           ================   ================


* less than $0.01 per share
</TABLE>

                 See notes to consolidated financial statements

                                      F-5

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
               YEARS ENDED DECEMBER 31, 2004 (AS RESTATED) AND 2003

<TABLE>
<CAPTION>

                              Preferred stock            Common Stock        Additional
                                          Par                      Par         paid-in     Treasury
                              Shares     Value       Shares        Value       capital       stock
                             ---------  --------    -----------  ---------  ------------   ----------
<S>                             <C>        <C>         <C>         <C>          <C>          <C>
Balances, January 1, 2003           --  $     --     98,950,899  $     989  $  3,564,241   $       --
Purchase of common shares           --        --     (1,305,000)        --            --      (52,298)
Issuance of common shares           --        --        250,000         --        42,252        7,748
Issuance of common shares           --        --         33,000         --         2,805           --
Cancellation of stock options
 issued to a consultant             --        --             --         --            --           --
Amortization of deferred
 compensation for the year
  ended December 31, 2003           --        --             --         --            --           --
Comprehensive income:
 Net income for the year
  ended December 31, 2003           --        --             --         --            --           --
 Comprehensive income               --        --             --         --            --           --
                             ---------  --------    -----------  ---------  ------------   ----------

Balances, December 31, 2003         --        --     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)          --
Common Stock issued for
 services                           --        --        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:
  fund raising expenses             --        --        547,230          6       133,494           --
  professional fees                 --        --        649,735          6       158,062           --
Conversion of preferred shares      --        --      2,500,000         25       776,384           --
Reclassification of embedded
 derivatives                        --        --             --         --     2,113,162           --
Conversion of term note             --        --        170,288          1        31,239           --
Redemption of term note             --        --             --         --        (1,409)          --
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 (CONTINUED)
              YEARS ENDED DECEMBER 31, 2004 (AS RESTATED) AND 2003

                                                                             Accumulated
                                         Deferred               Retained       other
                                       Compensation             earnings/   comprehensive
                               Options    Cost       Warrants   (deficit)      Income         Total
                             ---------  ---------   ---------  -----------  -----------   -----------
Balances, January 1, 2003    $  17,620  $  (8,500)  $      --  $(1,134,328) $    56,569   $ 2,496,591
Purchase of common shares           --         --          --           --           --       (52,298)
Issuance of common shares           --         --          --           --           --        50,000
Issuance of common shares           --         --          --           --           --         2,805
Cancellation of stock options
 issued to a consultant         (2,820)        --          --           --           --        (2,820)
Amortization of deferred
  compensation for the year
  ended December 31, 2003           --      8,500          --           --           --         8,500
Comprehensive income:
  Net income for the year
  ended December 31, 2003           --         --          --      815,373           --       815,373
 Comprehensive income               --         --          --           --           --       815,373
                             ---------  ---------   ---------  -----------  -----------   -----------

Balances, December 31, 2003     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)        --          --           --           --       (14,800)
Common stock issued for             --         --          --           --           --        50,800
 services
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:
  fund raising expenses             --         --          --           --           --       133,500
 professional fees                  --         --          --           --           --       158,068
Conversion of preferred shares      --         --          --           --           --       776,409
Reclassification of embedded
 derivatives                        --         --          --           --           --     2,113,162
Conversion of term note             --         --          --           --           --        31,240
Redemption of term note             --         --          --           --           --        (1,409)
Amortization of deferred
 compensation for the year
  ended December 31, 2004           --     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
                             =========  =========   =========  ===========  ===========   ===========
</TABLE>

                 See notes to consolidated financial statements

                                      F-7

<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003
<TABLE>
<CAPTION>

                                                                                      2004           2003
                                                                                  -----------    -----------
                                                                                 (As restated)
<S>                                                                                   <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Income from continuing operations                                            $ 1,230,469    $   826,324
     Adjustments to reconcile net income to net cash (used in)
      provided by operating activities:

     Minority interest                                                                 31,588        161,378
     Depreciation and amortization                                                    262,285        244,578
     Amortization of debt issuance costs                                               29,835           --
     Amortization of embedded liability of term note                                   66,819           --
     Gain on value of derivative liabilities                                         (980,423)          --
     Deferred compensation expense                                                     15,153          8,500
     Other compensation expense                                                       306,053           --
     Compensation expense reversed for canceled options                                  --           (2,820)
     Reserve for bad debts                                                             12,369           --
     Gain on disposal of assets, related party                                       (245,416)       (73,157)
     Share of associate companies' losses                                               6,355          2,551
     Warrants issued for other issuance costs                                         210,311           --
     Changes in operating assets and liabilities, net of effects from purchase
       of Gallant Group of companies and ATG in 2004 and AEC, ASS and
       ALG in 2003
       Increase in receivables                                                     (1,711,036)      (429,189)
       Increase in prepaid expenses                                                   (26,711)        (3,537)
       (Decrease) Increase in inventories                                             (46,327)        (4,693)
       Decrease in payables and accrued expenses                                     (110,836)       (79,633)
       Increase in income tax liability                                               154,085         29,956
                                                                                  -----------    -----------
           Net cash (used in) provided by operating activities                       (795,427)       680,258
                                                                                  -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from sale of property and equipment                                        --              731
     Purchase of property and equipment                                               (66,275)       (28,550)
     Payment for purchase of businesses, net of cash acquired                         (19,654)       (21,836)
     Proceeds from sale of investment in associate companies                           36,316        (45,222)
                                                                                  -----------    -----------
           Net cash used in investing activities                                      (49,613)       (94,877)
                                                                                  -----------    -----------
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)          --
     Proceeds from exercise of stock options                                           12,000          2,805
     Proceeds from restricted cash on conversion of preferred stock                   500,000           --
     Proceeds from issuance of shares of common stock                                    --           50,000
     Proceeds from minority investors in subsidiaries                                    --            2,632
     Payment for purchase of common shares for treasury                                  --          (52,298)
     Net (payment to) proceeds from affiliated company                                (53,430)         7,593
     Net proceeds from (payment to) a director                                         19,714       (169,383)
     Payment of obligations under capital leases                                       (9,645)       (27,838)
     Payment of term loan                                                             (17,343)          --
     Payment of subsidiary's preferred stock dividend                                  (8,538)          --
     Increase in restricted cash                                                     (184,542)          --
     Net increase in bank borrowings                                                  294,977           --
                                                                                  -----------    -----------
           Net cash provided by (used in) financing activities                        712,487       (186,489)
                                                                                  -----------    -----------
Net (decrease) increase in cash                                                      (132,553)       398,892
Net cash used in discontinued operations                                              (19,873)      (164,050)
Cash, beginning of year                                                               244,919         10,077
                                                                                  -----------    -----------
Cash, end of year                                                                 $    92,493    $   244,919
                                                                                  ===========    ===========
                                   (continued)

                                      F-8
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


                                                                                2004            2003
                                                                             -----------    -----------
                                                                            (As restated)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

     Cash paid for interest during the year                                  $    31,728    $    12,673
                                                                             ===========    ===========
     Cash paid for income taxes during the year                              $    25,998    $     2,763
                                                                             ===========    ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
        FINANCING ACTIVITIES:

Preferred stock (Note 13)
   Restricted cash received in exchange for preferred stock of subsidiary    $ 6,500,000    $      --
                                                                             ===========    ===========
Accretion to preferred stock redemption value                                $   714,182    $      --
                                                                             ===========    ===========

Preferred stock dividends declared                                           $   375,434    $      --
                                                                             ===========    ===========
Warrants issued in exchange for 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             $    34,058    $      --
                                                                             ===========    ===========

Issuance of common stock for services rendered by consultant
  with regard to equity transaction                                          $   133,500    $      --
                                                                             ===========    ===========
Payments on accounts receivable made directly by customers to an
     affiliated company for amounts the Company owed it. (Note 6)            $      --      $    30,000
                                                                             ===========    ===========

BUSINESS ACQUISITIONS (NOTE 3):

Material Handling Business:

Net assets acquired:
   Cash                                                                      $     3,583    $    23,077
   Accounts receivable                                                            87,345        364,117
   Inventories                                                                    85,885         71,044
   Property, furniture and equipment                                              10,728        227,919
   Capital lease obligation                                                       (8,138)       (55,648)
   Accounts payable                                                              (59,076)      (323,108)
                                                                             -----------    -----------
                                                                                 120,327        307,401
Less: Minority interests                                                         (46,192)      (113,490)
         Cash acquired                                                            (3,583)       (23,077)
                                                                             -----------    -----------

Cash used in acquisition of subsidiaries                                          70,552        170,834

Cash used in acquisition on discounted operations                                (70,552)      (148,998)
                                                                             -----------    -----------
Net cash effect of acquisitions                                              $        --    $    21,836
                                                                             ===========    ===========

                                   (continued)

                                       F-9

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




                                                2004
                                             ----------
                                           (As restated)


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-10

<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

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.  The Company's revenues for 2004
and 2003 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, 2004:

-    EyStar  Media Inc.  ("EMI"),  a Delaware  corporation  wholly-owned  by the
     Company;

-    SDA America,  Inc.  ("SDAA"),  a Delaware  corporation  wholly-owned by the
     Company from the date of incorporation on May 28, 2004;

-    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;  - Asiaco  Services Sdn Bhd ("ASS"),  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"),  Gallant  IT  Distribution  (M) Sdn Bhd
     ("GID") 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."

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.

                                      F-11

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

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., EMI, SDAM and PTSB for 2004 and 2003;

2.   AMS, SS, SDAA and DID from the effective date of incorporation;

3.   ASS, GSC, GIH, GZ, GID and GF  from the effective date of acquisition; and

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


RESTATEMENT OF 2004 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  have been
restated,  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.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

FINANCIAL STATEMENTS

The  consolidated  financial  statements  have been prepared in accordance  with
accounting principles generally accepted in the United States of America.

The  Company's   consolidated   financial  statements  include  the  results  of
operations  of the  subsidiaries'  business  from the date of  acquisition.  Net
assets of the  subsidiaries  are  recorded  at their  fair  value at the date of
acquisition.  All significant  inter-company accounts and transactions have been
eliminated in consolidation.

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.

                                      F-12

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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:
<TABLE>
<CAPTION>
                                                                      Business Segments
                                                   Broadband, Multimedia &
                                                    Biometric Security /            Material Handling
Asset Classification                            Computer Sales and Services         Equipment & Others
---------------------------                  ---------------------------------- --------------------------
<S>                                                          <C>                         <C>   <C>
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%
</TABLE>

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, 2004, 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.  Effective  with the  adoption  of  Statement  of
Financial  Accounting  Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets ("SFAS No. 142"),  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
31,2004 and 2003.

Intangible  assets  consist  of a  customer  list  and  a  Malaysian  government
registered  contractor license acquired in September 2004 (Note 3). The customer
list has a gross carrying value of $189,000 and is amortized  using the straight
line method over its expected life of 7 years. Amortization expense for 2004 and
accumulated  amortization at December 31, 2004 was $6,750.  Amortization expense
for each of the next five years is  expected  to be  approximately  $27,000  per
year. The registered  contractor  license has a carrying value of $65,000 and is
amortized  using the  straight  line method over its  expected  life of 5 years.
Amortization expense for 2004 and accumulated  amortization at December 31, 2004
was $3,250.  Amortization expense for each of the next five years is expected to
be approximately $13,000 per year.

                                      F-13
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ASSETS UNDER CAPITAL LEASES

The Company records assets acquired under capital leases as fixed assets and the
corresponding  obligation  under  capital  leases as a  liability.  The  initial
recording  value of assets under a capital lease is the lesser of the fair value
of the  leased  assets  or the  present  value of the  minimum  lease  payments,
excluding  any portion  representing  executory  costs and profit  thereon.  The
assets  recorded  under capital leases are  depreciated  over the shorter of the
lease term or estimated useful life of the assets.

ASSOCIATE COMPANIES - 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 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.

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  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-14

<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



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 liability instruments
under the provision 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
$9,703 and $12,793 in 2004 and 2003, respectively.

NET INCOME PER COMMON SHARE

Income per common share is determined in accordance with SFAS No. 128, "Earnings
Per Share"  (EPS).  SFAS No. 128 requires the  presentation  of two EPS amounts,
basic and diluted.  Basic net income per common share is  calculated by dividing
net income by the weighted  average number of common shares  outstanding for the
year ended  December  31,  2004 and 2003.  Diluted  income  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 shares having a dilutive effect on earnings
per share were  outstanding  for the year. The  calculation of basic and diluted
income per share is as follows (in thousands, except per-share amounts):

                                      F-15
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NET INCOME PER COMMON SHARE (CONTINUED)

<TABLE>
<CAPTION>
                                                                                Year ended December 31
                                                                              2004                  2003
                                                                       ------------------    ------------------
                                                                         (As Restated)
<S>                                                                            <C>                   <C>
Net income                                                             $           1,232     $             815
Preferred stock dividend                                                            (375)                   --
Accretion to preferred stock redemption value                                       (714)                   --
                                                                       ------------------    ------------------
Net income available to common shareholders                            $             143     $             815
                                                                       ==================    ==================
Weighted average shares outstanding - basic                                       94,350                98,060
                                                                       ==================    ==================
Net income per share - basic                                           $               *     $            0.01
                                                                       ==================    ==================

Weighted average shares outstanding - basic                                       94,350                98,060
Common stock issuable to consultant                                                  354                   101
Dilutive stock options and warrants                                                  478                    --
                                                                       ------------------    ------------------
Weighted average shares outstanding - diluted                                     95,182                98,161
                                                                       ==================    ==================
Net income per share - diluted                                         $               *     $            0.01
                                                                       ==================    ==================

*  Less than $.01 per share
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial  instruments consist of cash, accounts receivable,  bank
overdraft and borrowings,  term loans,  accounts  payable,  preferred stock of a
subsidiary, warrant and derivative liabilities. 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.

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 and net income per share would have been as follows:


                                      F-16
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


STOCK-BASED COMPENSATION (CONTINUED)
<TABLE>
<CAPTION>
                                                                                      Year Ended December 31,
                                                                                      2004              2003
                                                                                   --------------  -------------
                                                                                   (As Restated)
<S>                                                                                     <C>              <C>
Net income applicable to common shareholders                                       $    142,278    $    815,373
Add: Stock-based employee compensation expense
        included in reported net income, net of related tax                              52,235              --
Less: Total stock-based employee compensation expense
         determined under fair value based method for all
         awards, net of related tax effects                                             (88,100)             --
                                                                                  --------------   -------------
Pro forma net income (loss) applicable to common shareholders                     $     106,413    $    815,373
                                                                                  ==============   =============
Income per share:
 Basic and diluted - as reported                                                  $           *    $       0.01
                                                                                  ==============   =============
 Basic and diluted - pro forma                                                    $           *    $       0.01
                                                                                  ==============   =============


*  Less than $.01 per share
</TABLE>
The fair value was estimated at the date of grant using the  following  weighted
average assumptions:

                                                                       2004
                                                                     --------
Risk free interest rate                                                2.3%
Dividend yield                                                          0%
Expected life of option in years                                    4.7 years
Expected volatility                                                    129

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  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, 2004 was $88,100.

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-17
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


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 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.

RECLASSIFICATIONS

Certain  2003  balances  have  been  reclassified  to  conform  to  the  current
presentation.

                                      F-18
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


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 Asiaco Services ("ASS") for a 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 an 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-19

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



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 $265,000 and $55,000 for the years
ended December 31, 2004 and 2003, respectively.  Losses before income taxes from
discontinued  operations  were $130,000 and $11,000 for the years ended December
31, 2004 and 2003, respectively. Discontinued operations relate to the Company's
material handling segment.


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-20

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



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) Gallant IT Distribution (M) Sdn Bhd ("GID"), is currently dormant.

With  the  acquisition  of the  Gallant  group of  companies,  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.  The allocation of the purchase price is subject
to refinement.


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 the above  subsidiaries  had occurred at the
beginning of the respective years ended December 31, 2004 and 2003:

                                                        2004           2003


Revenue                                             $ 22,857,197    $ 20,014,012
                                                    ============    ============
Net income (2004, as restated)                      $    887,123    $    844,533
                                                    ============    ============
Basic and diluted net income per common share
 (2004, as restated)                                $       0.01    $       0.01
                                                    ============    ============





                                      F-21
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




NOTE 4: INVESTMENT IN ASSOCIATE COMPANIES

On December 9, 2003,  the  Company,  through its wholly owned  subsidiary,  AMC,
acquired an equity  interest  that allows it to exercise  significant  influence
over  operating  and  financial  policies  of the  following  Malaysian  private
companies for a total consideration of $45,222.  The Company accounted for these
investments using the equity method:

Name of Company                Interest   Principal Activity
-------------------------     ----------- ------------------------

Asiaco Transport Sdn Bhd          46%     Providing transportation and related
                                          services.

Asiaco Engineering Sdn Bhd        33%     Providing steel fabrication and
                                          modification work and servicing/repair
                                          of engines, engine blocks and
                                          hydraulic equipment.

The acquisition  formed part of the asset purchase agreement between the Company
and AMH (See Note 3). The total consideration was to be satisfied by issuance of
AMC's  common  stock to the owner  upon full  completion  of the asset  purchase
agreement between the Company and AMH. 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, 2004:
<TABLE>
<CAPTION>

<S>                                                                     <C>
     Office equipment                                                   $          222,354
     Furniture and fixtures                                                        105,037
     Tools and equipment                                                           160,777
     Video communication hardware and peripherals                                2,202,245
     Computer software                                                             170,639
     Office renovation                                                             175,950
     Motor vehicles                                                                 54,567
     Material handling equipment                                                   133,060
                                                                        -------------------
                                                                                 3,224,629
      Less accumulated depreciation                                             (1,967,768)
                                                                        -------------------
                                                                        $        1,256,861
                                                                        ===================
</TABLE>
Depreciation expense for the years ended December 31, 2004 and 2003 was $269,330
and $244,578, respectively.

                                      F-22
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




NOTE 6: RELATED PARTY TRANSACTIONS

During the years ended December 31, 2004 and 2003, 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.  During each of the years ended December 31, 2004 and 2003, LSH billed the
Company  $60,000 per year for  management  fees.  LSH also billed the  Company's
Malaysian subsidiary, SDAM, $25,263 per year for each of the year ended December
31, 2004 and 2003 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  $59,876 and  $140,966 in 2004 and 2003,  respectively.
Advances of $198,568 and $248,636 were repaid in 2004 and 2003, respectively. As
of  December  31,  2004,  the  amount  due to LSH was  $94,895.  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". During the
year  ended  December  31,  2003,  in lieu of actual  cash  payment  of  project
consulting fee receivables from two consulting  contracts,  management  directed
two customers to pay a total of $30,000 to LSH.

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, 2004,  $73,665 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, 2004, long-term receivables, related parties, consisted of an
overdue  amount of $309,584  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  $245,416 and $73,157 of the outstanding
receivable  during the years ended  December  31,  2004 and 2003,  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  $309,584 at December
31,  2004,  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,  2004,  $40,790  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-23

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




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,  2004 and  2003,  the  Company  received  fees of  $1,316,052  and
$1,153,578,  respectively,  from consulting  contracts that it entered into with
MYA. As of December 31, 2004,  $131,579 and $94,210 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, 2004,  the Company  owed the Chief  Executive  Officer of the
Company  $68,902 for  short-term  cash  advances made to the Company for working
capital  purpose from time to time.  Advances from the Chief  Executive  Officer
totaled  $82,260 and  $118,859  for the years ended  December 31, 2004 and 2003,
respectively.  Repayment  of advances  to the Chief  Executive  Officer  totaled
$69,915  and  $288,241  for  the  years  ended   December  31,  2004  and  2003,
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, 2004, the Company has the following restricted cash balances:

Cash deposited with a financial institution in US                 $   6,014,506
Cash deposited with financial institutions in Malaysia                  441,902
                                                                  --------------
                                                                  $   6,456,408
                                                                  ==============

Restricted  cash  of  $6,014,506  deposited  in a US  financial  institution  is
security for the performance of the Company and its subsidiaries' obligations to
the Master Fund (see Note 13 below).


Restricted cash of $441,902 (RM 1,679,227) deposited with financial institutions
in Malaysia is time deposit  accounts used as collateral for trade financing and
bank overdraft  facilities granted to GIH and GZ. 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-24


<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




NOTE 8: BANK OVERDRAFT AND BORROWINGS

As of December 31, 2004,  the Company's  subsidiaries  have the  following  bank
facilities:
<TABLE>
<CAPTION>
                                                                    GIH              GZ               Total
                                                              --------------    --------------   --------------
<S>                                                                <C>               <C>              <C>
Bank overdraft                                                $     132,000     $      79,000    $     211,000
Trade financing facilities                                          211,000           631,000          842,000
                                                              --------------    --------------   --------------
Total bank facilities available                               $     343,000     $     710,000    $   1,053,000
                                                              ==============    ==============   ==============
Balance utilized as of December 31, 2004                      $     187,700     $     575,724    $     763,424
                                                              ==============    ==============   ==============
</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, 2004 the future  minimum lease payments on capital leases are
as follows:

           Year ending
           December 31:
           ------------
           2005                                                $        47,860
           2006                                                         33,232
                                                               ----------------
           Total payments                                               81,092
           Less:  amount representing interest                          (6,714)
                                                               ----------------
           Present value of minimum capital lease payments              74,378
           Less:  current maturities of capital lease
             obligations                                               (42,752)
                                                               ----------------
                                                               $        31,626
                                                               ================

                                      F-25

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 9: CAPITAL LEASE OBLIGATIONS (CONTINUED)

Assets under these capital leases, which are included in property and equipment
at December 31, 2004, are as follows:
<TABLE>
<CAPTION>
                                                             Original     Accumulated      Net
                                                               Cost       Depreciation    Value
                                                         --------------- -------------  -----------
<S>                                                      <C>             <C>            <C>
   Video communication hardware and peripherals          $      408,896  $   (360,953)  $   47,943
                                                         =============== =============  ===========
</TABLE>
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,
2004,  the Company  made  payments  to the lessor  totaling  $63,158.  The total
overdue  amount as of  December  31,  2004 is  $20,437,  which  includes  unpaid
principal of $11,576 and unpaid interest of $8,861. 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, 2004 and through the date of this report, the Company
has made payments to the lessor totaling $15,789.


NOTE 10: TERM LOAN

As of December  31,  2004,  the Company  has term loan  liabilities  of $215,708
(RM756,465) arising from its acquisition of GIH and its subsidiaries. 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.

As of December 31, 2004 maturities of the term loans are as follows:

           Year ending
           December 31:
           ------------------
           2005                                       $           65,637
           2006                                                   76,905
           2007                                                   61,173
           2008                                                   11,993
                                                      -------------------
           Total                                      $          215,708
                                                      ===================

In October 2004, the Company's newly acquired 55%-owned subsidiary,  GZ, secured
a term loan of $53,000  (RM200,000) from a financial  institution in Malaysia to
finance the establishment of a new retail outlet. The term loan, which was drawn
down in March  2005,  has a  maturity  of 4 years from the date of draw down and
bears interest at 8% per annum.

                                      F-26

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




NOTE 11: INCOME TAXES

For 2004 and 2003,  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, 2004 and 2003, respectively, is as follows:


                                                      Year ended December 31,
                                                      2004            2003
                                                  -------------   -------------
                                                  (As Restated)
Current tax expense                               $      48,767   $      24,736
Deferred tax expense                                    131,316              --
                                                  -------------   -------------
Provision for Malaysian income tax expense
     on the Company and its subsidiaries' income  $     180,083   $      24,736
                                                  =============   =============

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,
                                                      2004            2003
                                                 --------------   -------------
                                                  (As Restated)
     Expected income tax expense                 $     480,100    $    345,000
     Effect of lower Malaysian tax rate of 28%         (84,700)             --
     Benefit of operating loss carry forwards         (179,900)       (284,680)
     Other, including permanent differences           (166,733)        (35,584)
                                                 --------------   -------------
     Current income tax expense                  $      48,767    $     24,736
                                                 ==============   =============

Temporary  differences  and carry forwards that give rise to deferred tax assets
and liabilities as of December 31, 2004 (as restated) are as follows:

Deferred tax assets
       Net operating loss carry forward                           $    897,999
       Less: Valuation allowance                                      (792,736)
                                                                  -------------
       Deferred tax asset net of allowance                             105,263

Deferred tax liabilities
       Depreciation                                               $   (236,579)
                                                                  -------------
Net deferred tax liability                                        $   (131,316)
                                                                  =============
                                      F-27


<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 11: INCOME TAXES (CONTINUED)

The valuation  allowance  offsets the net deferred tax assets for which there is
no assurance  of  recovery.  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, 2004 is  approximately  $2,283,000,
of  which  $1,133,000  relates  to the  Company's  activities  in  Malaysia  and
$1,499,000  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 2024.  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 include the following:

1.   The Note has 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
     will 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 can be paid in cash or in 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 common stock
     for the ten trading days  immediately  preceding the due date is 110% above
     the exercise price.
5.   The Note is  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).
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  has  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 is 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").


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.

During the year ended December 31, 2004, the Company repaid $14,706 of principal
with cash and converted  $29,412 of principal and $4,646 of accrued  interest to
170,288 shares of the Company's  common stock. In December 2004, the Master Fund
submitted  a notice to  convert  $29,412  of  principal  and  $5,493 of  accrued
interest to 174,526 shares of the Company's  common stock.  The common stock was
issued to the Master Fund on January 6, 2005.

                                       F-28
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 12: CONVERTIBLE TERM NOTES (CONTINUED)

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.  The Company also  determined that
the  same  provisions  resulted  in  the  classification  of the  warrants  as a
liability.  Black-Scholes  valuations  were  performed  on the  warrants and the
derivative liability.

The Company  recorded  an initial  liability  of  $246,681  for the value of the
embedded  liability.  The initial  value of the embedded  liability is amortized
over the term of the Note. In 2004, the Company recognized  amortization expense
of $66,819 and is included in interest expense.

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

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.  This also resulted in the  reclassification  of the
warrants from a liability to shareholders' equity.

From the date of  issuance  through  November  15,  2004,  the date the  Listing
Condition  was removed,  the Company  valued the  derivative  liability  and the
warrants at the end of each  reporting  period,  with  changes in the fair value
recorded  as charges or credits to gain on  value of  derivative  liabilities in
the period in which the change occurred.  In 2004, the Company  recognized
income of $69,415.

On November 15, 2004, the fair value of the derivative liability of $190,754 was
credited  to  additional paid  in capital  and the fair value of the warrants of
$49,037 was reclassified to shareholders' equity. The remaining unamortized debt
discount of $65,511 and unamortized embedded liability of $179,862 will continue
to be amortized over the remaining  term of the Note.

As of December 31, 2004,  outstanding principal of the convertible term note net
of issuance costs and the derivative liability was $181,097, of which $74,936 is
due in 2005, $74,936 in 2006 and $31,225 in 2007.

A  summary  of  the status of the discounted principal, derivative liability and
issue costs of the Note from May 28, 2004 through December 31, 2004 is presented
below:
<TABLE>
<CAPTION>
                                                                Derivative
                                               Principal        Liability      Issue Costs          Net
                                           ---------------   -------------  ---------------  ----------------
<S>                                            <C>               <C>                <C>              <C>
Issuance on May 28, 2004                   $       500,000   $     246,681  $        95,346  $        157,973
Repayment in September 2004                        (14,706)         (6,821)          (2,571)           (5,314)
Conversion in November 2004                        (29,412)        (13,035)          (4,830)          (11,547)
Conversion in December 2004                        (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   $     179,862  $        65,511  $        181,097
                                           ===============   =============  ===============  ================

A summary of the status of the fair value of the embedded liability and associated warrants of the
Note from May 28, 2004 through December 31, 2004 is presented below:

                                               Derivative                    Gain on Value of
                                               Liability        Warrants     Embedded Liabilities
                                           ---------------   -------------  --------------------
Issuance on May 28, 2004                   $       246,681   $      62,525  $           --
Changes in fair value                              (55,927)        (13,488)          69,415
Removal of Listing Condition
  in November 2004                                (190,754)        (49,037)             --
                                           ---------------   -------------  ---------------
Balance as of December 31, 2004            $           --    $         --   $        69,415
                                           ===============   =============  ===============
</TABLE>

                                      F-29

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 13: SHAREHOLDERS' EQUITY

PREFERRED STOCK

The Company is authorized to issue one million  shares of preferred  stock,  par
value  $0.10 per share,  which may be issued in series  with such  designations,
preferences,  stated values, rights, qualifications or limitations as determined
by the  Board of  Directors.  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. 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.

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 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   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 has 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.

                                      F-30
<PAGE>
                SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK OF A SUBSIDIARY (CONTINUED)

In addition to resetting the conversion prices for a portion of the transaction,
the amendment provides 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  stipulates  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.

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. The
Company also determined that warrants  issued  in  connection  with the Series A
Preferred  should be classified as a 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.   This  also   resulted  in  the
reclassification   of  the  of  the  3,000,000   warrants   from   liability  to
shareholders' equity. 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.  The  warrants  were valued at $210,311 and charged to
other issuance costs.

Black-Scholes  valuations were performed on the derivative  liability associated
with the Series A Preferred and the related  warrants.  The Company  recorded an
initial  derivative liability of $3,206,857. The initial value of the derivative
liability is being  accreted over three years based on  management's estimate of
the expected  term.  In 2004, accretion  amounted to $444,457 and is included in
accretion to preferred stock redemption value.

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

From the date of  issuance  through  November  15,  2004,  the date the  Listing
Condition  was removed,  the Company  valued the  derivative  liability  and the
warrants at the end of each  reporting  period,  with  changes in the fair value
recorded as charges or credits to gain on value of derivative liabilities in the
period in which the change occurred.  In 2004, the Company  recognized income of
$911,008, which  is  included in  gain on value of derivative liabilities on the
statement of operations. On November 15, 2004, the fair value of the  derivative
liability of $1,922,408 was credited to additional paid in  capital and the fair
value of the warrants  of $490,367 was reclassified to shareholders' equity. The
remaining  unamortized  issuance costs  of  $782,202  and  unamortized  embedded
liability of $2,530,487 will continue to be amortized over the  remaining  term.

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 are restricted until
the preferred stock is converted into common stock of the Company. Additionally,
at that date,  the Company  and the Master Fund can 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.

                                        F-31

<PAGE>
                SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

PREFERRED STOCK OF A SUBSIDIARY (CONTINUED)

A summary of the status of the stated  amount,  derivative  liability  and issue
costs of the Series A Preferred  from May 28, 2004 through  December 31, 2004 is
presented below:

<TABLE>
<CAPTION>
                                                Series A          Derivative
                                            Stated Amount       Liability      Issue Costs          Net
                                           ---------------   -------------  ---------------  ----------------
<S>                                            <C>               <C>            <C>              <C>
Issuance on May 28, 2004                   $     6,500,000   $   3,206,857  $     1,051,927  $      2,241,216
Conversion in September 2004                      (500,000)       (231,913)         (74,174)         (193,913)
Amortization of issue costs                            --              --          (195,551)          195,551
Amortization of embedded liability                     --         (444,457)             --            444,457
                                           ---------------   -------------  ---------------  ----------------
Balance as of December 31, 2004            $     6,000,000   $   2,530,487  $       782,202  $      2,687,311
                                           ===============   =============  ===============  ================
</TABLE>
A  summary  of the  status  of the fair  value  of the  embedded  liability  and
associated  warrants of the Note from May 28, 2004 through  December 31, 2004 is
presented below:
<TABLE>
<CAPTION>
                                                Derivative                      Gain on Value of
                                               Liability       Warrants     Embedded Liabilities
                                           ---------------   -------------  --------------------
<S>                                                <C>               <C>            <C>
Issuance on May 28, 2004                   $     3,206,857   $     625,248  $           --
Changes in fair value                             (776,127)       (134,881)         911,008
Conversion in September 2004                      (508,322)            --               --
Removal of Listing Condition
  in November 2004                              (1,922,408)       (490,367)             --
                                           ---------------   -------------  ---------------
Balance as of December 31, 2004            $           --    $         --   $       911,018
                                           ===============   =============  ===============
</TABLE>

COMMON STOCK

On  December 4, 2002,  the Company  announced  that its Board of  Directors  had
approved a stock  repurchase  program for up to 10 million  shares from the then
public float of approximately  42.7 million shares which may be repurchased from
time to time until  December  2003.  The shares  repurchased by the Company were
returned to treasury and are available for re-issuance at a future date.

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.  As of December 31, 2004, the Company had a
balance of 8,530,000  repurchased  shares in its treasury  stock with a carrying
amount of $30,375.

On June 4, 2004, the Company issued 181,632 shares of common stock at $0.245 per
share for a total  consideration of $44,500; on July 2, 2004, the Company issued
176,237 shares of common stock at $0.253 per share for a total  consideration of
$44,500;  and on August 2, 2004,  the Company  issued  189,361  shares of common
stock at $0.235 per share for a total  consideration of $44,500, to a consultant
as payment for fees of $133,500 for  services  rendered in  connection  with the
Company's financing transactions with the Master Fund. On December 24, 2004, the
Company  issued  169,735  shares of common  stock at $0.20 per share for a total

                                        F-32

<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)


COMMON STOCK (CONTINUED)

consideration  of  $33,268  to the  consultant  as  payment  for legal  services
rendered.  The number of shares  issued was  determined  by dividing  the amount
payable by the mean  average of the prior day's  closing bid and asked prices as
published on the OTC Bulletin Board.

In July 2004, the Company amended its Certificate of  Incorporation  to increase
its  authorized  common stock from 100 million  shares to 350 million  shares to
provide  sufficient  common  stock to meet  the  obligations  of the  Securities
Purchase  Agreement  with the  Master  Fund and to provide  adequate  authorized
common  stock for  future  uses such as  acquisitions,  private  placements  and
employee benefits plans.

On July 30, 2004, the Company issued 240,000 shares of common stock at $0.27 per
share for a total  consideration  of  $64,800;  on  November 4, 2004 the Company
issued  240,000  shares  of  common  stock  at  $0.25  per  share  for  a  total
consideration of $60,000, 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 ending July 14, 2005.  The
480,000  shares were valued,  based on the market price on the date of issuance,
and the Company recognized  compensation  expense of $114,800 for the year ended
December 31,  2004.  On February 8, 2005,  the Company  issued  another  240,000
shares of common stock to the consultant.  These shares were valued at $0.18 per
share


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.


According to  the  Company's bylaws,  the Company shall cease doing business and
immediately  dissolve,  wind  up  its affairs and distribute its assets upon the
occurrence  of  certain defined events including if, on any date occurring on or
after  May 28, 2007, the  closing  price  of  the  Company's  common  stock on a
principal market (as defined) shall fail to be at least $.37 for five (5) of the
trailing twenty (20) trading days prior to such date.


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 are exercisable  through September 2007,
contingent upon continuous  service by the consultant  through  specified dates.
100,000 of the options,  which vested March 15, 2003,  were valued at $0.044 per
share, 100,000 of the options,  which vested May 15, 2003, were valued at $0.048
per share, and the remaining  100,000 options,  which vested September 15, 2003,
were  valued at $0.056 per share,  based upon the  Black-Scholes  option-pricing
model,  resulting in  recognition of  compensation  expense of $8,500 during the
years ended December 31, 2003.  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 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 are exercisable on February 3,
2005,  500,000  options are  exercisable  on August 3, 2005,  and the  remaining

                                       F-33
<PAGE>


               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003


NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)


STOCK OPTIONS (CONTINUED)

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 are  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.

A summary of the status of the  Company's  stock options as of December 31, 2004
and 2003, and changes during 2004 and 2003, is presented below:
<TABLE>
<CAPTION>

         Options Outstanding                                    2004                               2003
      ------------------------                  --------------------------------   --------------------------------
                                                   Shares        Exercise Price       Shares       Exercise Price
                                                --------------   ---------------   --------------  ----------------
<S>                                                  <C>               <C>               <C>            <C>
   For officers and employees:
    Beginning of the year                                   -                  -          33,000            $0.085
    Granted
     In August 2004                                   100,000           $  0.120
     In August 2004                                 2,000,000           $  0.200               -                 -
    Exercised                                               -                  -         (33,000)           $0.085
                                               ---------------                     --------------
    End of the year                                 2,100,000           $  0.196               -                 -
                                               ===============                     ==============
    Options exercisable at year end                   500,000                  -               -                 -
   For consultants:
    Beginning of the year                             300,000           $  0.120         360,000            $0.120
    Granted
     In August 2004                                   300,000           $  0.300               -                 -
    Exercised                                        (300,000)          $  0.120               -                 -
    Forfeited                                               -                  -         (60,000)           $0.120
                                                --------------                     --------------
    End of the year                                   300,000           $  0.300         300,000            $0.120
                                                ==============                     ==============
    Options exercisable at year end                         -           $  0.300         300,000            $0.120
</TABLE>

                                      F-34

<PAGE>
              SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 13: SHAREHOLDERS' EQUITY (CONTINUED)

STOCK OPTIONS (CONTINUED)

The following table summarizes information about options outstanding at December
31, 2004 and 2003.
<TABLE>
<CAPTION>

                                                             Options Outstanding
                                         --------------------------------------------------------------
                                             Number       Weighted Average Remaining   Weighted Average
                                           Outstanding         Contractual Life        Exercise Price
                                         ---------------  ---------------------------  ----------------
<S>                                              <C>                 <C>                       <C>
   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
                                         =============                                   =============
   As of December 31, 2003:
    For officers and employees                      --                --                          --
    For consultants                            300,000               3.71                       $0.120
                                         -------------                                   -------------
                                               300,000               3.71                       $0.120
                                         =============                                   =============
</TABLE>

NOTE 14: SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

Two  customers in the  Company's  applications  segment  (note 16) accounted for
approximately 87% and 92% of revenues earned during the years ended December 31,
2004 and 2003, respectively. In the year ended December 31, 2004, two customers,
respectively,  accounted  for 43% and 44% of total  revenue.  In the year  ended
December 31, 2003,  two  customers,  respectively,  accounted for 50% and 43% of
total  revenue.  Allowance  for doubtful  accounts  receivable  was $425,869 and
$155,744 at December 31, 2004 and 2003, respectively.  The Company will continue
to pursue vigorously the collection of all its outstanding accounts receivable.


Three suppliers  accounted for 91% and substantially all cost of revenues during
the year ended  December  31,  2004 and 2003,  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-35
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




NOTE 15: OTHER INCOME

During 2003, the Company  received  $50,000 from the  shareholders of Convergent
Technologies,  Inc.  ("CTI")  as  cancellation  fee,  pursuant  to a  Rescission
Agreement signed between CTI's shareholders and the Company in November 2003. On
September  27,  2002,  the  Company  entered  into a letter  agreement  with the
shareholders of CTI, a privately held company, to acquire a majority interest in
CTI for approximately $5.0 million.  The purchase price was subsequently revised
to $2.6 million  after the Company had  completed  its due diligence and further
negotiation with CTI's shareholders. The closing of the agreement was subject to
specific  performance  by the  Company  and  CTI's  shareholders  and  could  be
terminated any time prior to closing by mutual agreement of both parties. During
2003, the Company had paid $150,000 to CTI's  shareholders as an advance deposit
on the  purchase.  On  November  6, 2003,  the  Company  and CTI's  shareholders
mutually agreed to rescind the purchase  agreement after CTI did not satisfy all
of the  conditions  subsequent  to the  Purchase  Agreement  as a result  of its
inability to deliver title to certain real property in a form  acceptable to the
Company.  Pursuant to the Rescission Agreement, the stockholders of CTI refunded
the $150,000 and paid an additional $50,000 to the Company as cancellation fee.


NOTE 16: 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 period 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-36

<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 16: SEGMENT INFORMATION (CONTINUED)

OPERATING SEGMENT INFORMATION


<TABLE>
<CAPTION>

                                                                  Year ended December 31, 2004 (As Restated)

                                                                        Material
                                                    Applications        Handling          Gallant        Corporate          Total
                                                   ---------------  ---------------   ---------------  ------------    ------------
<S>                                                       <C>            <C>               <C>             <C>             <C>
Revenue:
   Related parties                                 $    1,316,052   $           --    $           --    $       --     $  1,316,052
   Others                                              17,720,842          535,195           865,941            --       19,121,978
                                                   ---------------  ---------------   ---------------   -----------    ------------
                                                   $   19,036,894   $      535,195    $      865,941    $       --     $ 20,438,030
                                                   ===============  ===============   ===============   ===========    ============
Net income (loss):
from operating segments                            $      583,369   $      (46,598)   $        3,519    $   696,534    $  1,236,824
from discontinued operations                                  428           (5,358)               --             --          (4,930)
                                                   ---------------  ---------------   ---------------   -----------    ------------
                                                   $      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
                                                   ===============  ===============   ===============
Share of associate companies losses                $           --   $       (6,355)   $           --
                                                   ===============  ===============   ===============
Income tax expense (benefit)                       $      180,526   $       (2,631)   $        2,188
                                                   ===============  ===============   ===============
Expenditures for additions to long lived assets    $       43,725   $       19,283    $           --
                                                   ===============  ===============   ===============

</TABLE>

                                      F-37
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 16: SEGMENT INFORMATION (CONTINUED)

OPERATING SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>

                                                                        Year ended December 31, 2003
                                                               Applications       Material            Total
                                                                                  Handling
                                                              ----------------- ---------------- -----------------
Revenue:
<S>                                                             <C>                 <C>                <C>
   Related parties                                          $       308,289     $            --    $       308,289
   Others                                                        15,499,474              50,390         15,549,864
                                                            ----------------    ----------------   ----------------
                                                            $    15,807,763     $        50,390    $    15,858,153
                                                            ================    ================   ================
Net income (loss):
   from operating segments                                  $       851,743     $       (22,868)   $       828,875
   from discontinued operations                                                         (13,502)           (13,502)
                                                            ----------------    ----------------   ----------------
                                                            $       851,743     $       (36,370)   $       815,373
                                                            ================    ================   ================
Depreciation expense                                        $       239,830     $         3,012
                                                            ================    ================
Interest expense                                            $        12,115     $            --
                                                            ================    ================
Share of associate companies' losses                        $            --     $         2,551
                                                            ================    ================
Income tax expense                                          $        32,719     $            --
                                                            ================    ================
Expenditures for additions to long lived assets             $         4,866     $        23,684
                                                            ================    ================

Total consolidated assets as of December 31, 2004 are as follows:

   Applications                                                                                    $    12,683,711
   Material handling                                                                                       444,628
   Gallant                                                                                               1,319,772
                                                                                                   ----------------
   Total consolidated assets                                                                       $    14,448,111
                                                                                                   ================
</TABLE>

                                      F-38
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003



NOTE 17: 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 two retail  outlets in Malaysia.  One lease  expires in December
2006 and  another  lease  expires in March 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  expired in March 2005 and was  automatically  renewed  for one year.
These  leases  require  the  Company to pay rent of $10,600 per month in January
through March 2005,  $14,000 per month in April 2005 through March 2006, $13,500
per month for April and May 2006,  $13,000  per month in June  through  December
2006,  $6,300  per month in  January  through  March  2007 and  $3,100 per month
through March 2008, as well as taxes,  maintenance,  insurance and certain other
operating  costs of the leased  properties.  Rent expense under these leases was
$91,838  and  $68,035  for  the  years  ended   December   31,  2004  and  2003,
respectively.


The Company  also leases  three  Internet  lines and a related  Internet  access
gateway. These leases can be terminated at anytime by serving a 30 day notice to
the service  provider.  The lease  rental that the Company is required to pay is
$300 per month.

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

           Year ending December 31:
           ------------------------
           2005                                  $          157,800
           2006                                             160,000
           2007                                              46,800
           2008                                               9,300
                                                 ------------------
                                                 $          373,900
                                                 ==================

                                      F-39



<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2004 AND 2003




NOTE 18:  PROPOSED BUSINESS TRANSACTIONS

In  November  2004,  the Company  announced  it had signed a Letter of Intent to
acquire a 51% ownership interest in MacAsia Sdn Bhd, an Apple Professional Video
Reseller  in  Malaysia.  The  Company  has not  proceeded  with  completing  the
acquisition  due to  disagreement  on  financial  and  business  issues with the
existing shareholders of MacAsia.


NOTE 19: PENDING LITIGATION

No legal  proceedings  of a material  nature to which the Company is a party are
pending as of December 31, 2004,  and the Company knows of no legal  proceedings
of a material  nature  pending or  threatened or judgments  entered  against any
director or officer of the Company in his/her capacity as such.


NOTE 20: SUBSEQUENT EVENTS

In January  2005,  the  Company  announced  that it has  executed  a  definitive
agreement to acquire a 55% equity  interest in Innospective  Sdn Bhd ("ISS"),  a
systems   integration   firm   specializing  in  the  design,   development  and
implementation   of  wireless   applications  and  electronic   solutions.   The
transaction is scheduled to close by April 30, 2005 when the Company paid a cash
consideration  of $52,632  (RM200,000) to acquire 122,000 shares of ISS's common
stock,  representing  55% of the paid-up  capital of ISS.  The Company will also
issue  250,000  shares of the  Company's  common  stock from its  treasury  to a
consultant  as payment for  professional  fees on  advising  the Company in this
acquisition.

                                      F-40