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

                                   FORM 10-QSB

                                   (MARK ONE)

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


                 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006 OR


[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

         FOR THE TRANSITION PERIOD FROM ______________ TO ______________

                         COMMISSION FILE NUMBER: 0-25658


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

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

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

                               011 (603) 7956 7026
                (ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                       N/A
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)


Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such rep orts), and (2) has been
subject to such filing requirements for the past 90 days.


Yes  X    No

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:


           Class                 Number of shares outstanding at August 11, 2006
------------------------------   ----------------------------------------------
Common stock, $.00001 par value                        138,568,546

<PAGE>
<TABLE>
<CAPTION>

FORM 10-QSB
2ND QUARTER

                                      INDEX

                                                                                                           Page
<S>                                                                                                        <C>
PART I  -  FINANCIAL INFORMATION

         ITEM 1. FINANCIAL STATEMENTS

         Consolidated balance sheet as at June 30, 2006 (Unaudited)                                       3 - 4

         Consolidated statements of operations for the three-month and six-month periods
         ended June 30, 2006 and 2005 (Unaudited)                                                         5 - 6


         Condensed consolidated statements of cash flows for the six-month
         periods ended June 30, 2006 and 2005 (Unaudited)                                                 7 - 8


         Notes to consolidated financial statements (Unaudited)                                           9 - 22

         ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS                                                    23 - 31

         ITEM 3. CONTROLS AND PROCEDURES                                                                    31

PART II - OTHER INFORMATION

         ITEM 1. LEGAL PROCEEDINGS                                                                          32

         ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                32

         ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                            32

         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                        32

         ITEM 5. OTHER INFORMATION                                                                          32

         ITEM 6. EXHIBITS                                                                                   32

         SIGNATURES                                                                                         33

</TABLE>
SAFE HARBOR STATEMENT

This Form 10-QSB 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 and information that are 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-QSB 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.  Forward-looking  statements  can be
identified by the use of forward-looking terminology such as "believes",  "may",
"should", "anticipates", "estimates", "expects", "future", "intends", "hopes" or
"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.  Such
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.

                                       2
<PAGE>

PART I -  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2006
                                   (Unaudited)


<TABLE>
<CAPTION>

                                     ASSETS

<S>                                                                                    <C>
Current assets:
     Cash                                                                       $       116,226
     Trade receivables (including related party of $789,997),
       less allowance for doubtful accounts of $455,822                               8,039,284
     Prepaid expenses                                                                    79,622
     Inventories                                                                        435,072
                                                                                ---------------
      Total current assets                                                            8,670,204
Cash, restricted                                                                        581,803
Property and equipment, net                                                           1,002,258
Customer list                                                                           178,059
License                                                                                  42,250
Goodwill                                                                                851,740
Long-term receivables, related party                                                    144,840
                                                                                ---------------
                                                                                $    11,471,154
                                                                                ===============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Bank overdraft and borrowings                                              $     1,233,657
     Current portion of capital lease obligations                                        35,804
     Current portion of term loans                                                      112,733
     Accounts payable                                                                 1,632,685
     Accrued expenses                                                                   229,865
     Amount due to an affiliated company                                                138,616
     Amount due to a director                                                            64,356
     Income tax payable                                                                 284,406
                                                                                ---------------
              Total current liabilities                                               3,732,122
     Term loans, net of current portion                                                  63,375
     Deferred income tax                                                                168,079
     Deferred gain                                                                      144,840
                                                                                ---------------
              Total liabilities                                                       4,108,416
                                                                                ---------------


                                   (continued)



                                       3
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                            JUNE 30, 2006 (CONTINUED)
                                   (Unaudited)





Minority interest                                                                       467,145
                                                                                ---------------
Commitments and contingencies

Shareholders' equity:
     Common stock, $.00001 par value; 350,000,000 shares authorized;
        136,342,742 shares issued                                                         1,363
     Additional paid-in capital                                                       5,902,816
     Common treasury stock, 424,890 shares at cost                                           --
     Options                                                                             94,624
     Warrants                                                                           749,715
     Accumulated loss                                                                   (23,464)
     Accumulated other comprehensive income                                             170,539
                                                                                ---------------
              Total shareholders' equity                                              6,895,593
                                                                                ---------------
                                                                                $    11,471,154
                                                                                ===============
 </TABLE>

           See accompanying notes to consolidated financial statements


                                       4
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      Three months ended               Six months ended
                                                           June 30,                         June 30,
                                                ----------------------------    -------------------------------
                                                     2006             2005          2006                2005
                                                ------------    ------------    ------------       ------------
                                                                  (Restated)                         (Restated)
<S>                                                  <C>                <C>           <C>                <C>
Revenues:
Products and equipment                          $    442,067    $    890,913    $  1,012,350       $  1,851,866
Services:
  Related parties                                     85,872         130,106         946,153            175,895
  Others                                           8,003,898       6,513,150      16,348,050         12,026,762
                                                ------------    ------------    ------------       ------------
                                                   8,531,837       7,534,169      18,306,553         14,054,523
                                                ------------    ------------    ------------       ------------
Cost of revenues:
Products and equipment                               354,334         846,066         838,446          1,694,906
Services:
  Related parties                                     82,731          13,158         107,365             48,947
  Others                                           7,855,275       6,010,825      15,792,390         11,056,015
                                                ------------    ------------    ------------       ------------
                                                   8,292,340       6,870,049      16,738,201         12,799,868
                                                ------------    ------------    ------------       ------------
Gross profit                                         239,497         664,120       1,568,352          1,254,655
                                                ------------    ------------    ------------       ------------

Operating expenses:
     Sales and marketing                              11,959          12,172          18,833             29,460
     General and administrative:
       Related parties                                36,563          21,316          72,982             42,632
       Others                                        618,074         419,239       1,302,061            825,876
                                                ------------    ------------    ------------       ------------
Total operating expenses                             666,596         452,727       1,393,876            897,968
                                                ------------    ------------    ------------       ------------
Income (loss) from operations                       (427,099)        211,393         174,476            356,687
                                                ------------    ------------    ------------       ------------
Other income (expense):
     Interest expense                                (29,218)        (71,883)        (49,438)          (114,907)
     Amortization of debt issuance costs                  --         (17,454)             --            (24,231)
     Interest income                                   9,127          35,685           9,127             78,736
     Loss on sale of property and equipment           (6,403)             --         (53,812)                --
     Reversal of provision for investment             58,260              --          58,260                 --
     Previously deferred gain on sale of
       technology - related party                     20,549          31,974          44,354             45,658
     Other income                                      3,069          20,330           3,677             36,067
                                                ------------    ------------    ------------       ------------
                                                      55,384          (1,348)         12,168             21,323
                                                ------------    ------------    ------------       ------------
Income (loss) before items listed below             (371,715)        210,045         186,644            378,010
     Income tax                                      (44,466)        (56,053)       (302,304)           (78,421)
     Minority interest                                 3,117          13,495          33,439             15,630
     Gain on foreign currency transactions             5,029              --          58,757                 --
                                                ------------    ------------    ------------       ------------
Net income (loss)                                   (408,035)        167,487         (23,464)           315,219

Preferred stock dividend                                  --        (174,999)             --           (333,662)

Accretion to preferred stock redemption value             --        (275,668)             --           (551,334)
                                                ------------    ------------    ------------       ------------
Net loss applicable to common
 shareholders                                   $   (408,035)   $   (283,180)   $    (23,464)      $   (569,777)
                                                ============    ============    ============       ============

</TABLE>
                                   (continued)

                                        5




<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      Three months ended               Six months ended
                                                           June 30,                         June 30,
                                               -----------------------------   --------------------------------
                                                     2006            2005          2006                2005
                                               -------------   -------------   -------------       ------------
                                                                 (Restated)                         (Restated)
<S>                                                 <C>          <C>                <C>                <C>
Net income (loss)                                   (408,035)    $   167,487    $    (23,464)      $    315,219

Other comprehensive income:

Foreign currency translation adjustments              14,750              --         152,462                 --
                                                ------------    ------------    ------------       ------------
Comprehensive income (loss)                     $   (393,285)   $    167,487    $    128,998       $    315,219
                                                ============    ============    ============       ============
Net income (loss) per common share:
     Basic and diluted                          $          *    $          *    $          *       $          *
                                                ============    ============    ============       ============
Weighted average shares outstanding:
     Basic                                       133,859,992      95,963,906     132,226,594         95,446,373
                                                ============    ============    ============       ============
     Diluted                                     134,631,200      96,220,053     132,238,494         96,823,812
                                                ============    ============    ============       ============
</TABLE>
* Less than $.01 per share


           See accompanying notes to consolidated financial statements


                                       6
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                     Six Months Ended
                                                                                 June 30,        June 30,
                                                                                   2006            2005
                                                                             ---------------   --------------
                                                                                                 (Restated)
<S>                                                                                   <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net cash used in operating activities                                   $      (25,968)  $     (219,577)
                                                                             --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from disposal of equipment                                             27,978           35,526
     Purchase of equipment                                                           (2,328)         (74,859)
     Proceeds from sale of investment in associate companies                             --           13,158
     Cash acquired on business acquisition                                               --            1,381
                                                                             --------------   --------------
         Net cash provided by (used in) investing activities                         25,650          (24,794)
                                                                             --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of common stock                                          80,000           70,000
     Increase in restricted cash                                                    (14,866)         (86,104)
     Net increase in bank borrowings                                                 82,447          183,224
     Net repayment of advances to affiliated company                                 11,392          (19,649)
     Net payment (repayment) of advances from/to a director                         (23,332)            (492)
     Payment of term loan                                                            (8,499)         (37,525)
     Payment of obligation under capital leases                                      (8,836)         (16,250)
                                                                             --------------   --------------
           Net cash provided by financing activities                                118,306           93,204
                                                                             --------------   --------------

FOREIGN CURRENCY TRANSLATION ADJUSTMENT                                             (48,348)              --
                                                                             --------------   --------------
Net increase (decrease) in cash                                                      69,640         (151,167)
Net cash provided by discontinued operations                                             --          143,417
Cash, beginning of period                                                            46,586           92,493
                                                                             --------------   --------------
Cash, end of period                                                          $      116,226   $       84,743
                                                                             ==============   ==============

Supplemental disclosure of cash flow information:

Cash paid for interest                                                       $       47,030   $       45,668
                                                                             ==============   ==============
Cash paid for income taxes                                                   $        7,581   $        3,017
                                                                             ==============   ==============

Supplemental disclosure of non-cash financing activities:

Accretion to preferred stock redemption value                                $           --   $      551,334
                                                                             ==============   ==============
Preferred stock dividend declared                                            $           --   $      333,662
                                                                             ==============   ==============
Conversion of accrued term note and related accrued interest                 $           --   $      102,136
                                                                             ==============   ==============
Issuance of common stock for acquisition of new business                     $           --   $       32,500
                                                                             ==============   ==============

</TABLE>
           See accompanying notes to consolidated financial statements

                                       7
<PAGE>

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



BUSINESS ACQUISITION:

Acquisition of subsidiary in April 2005

Net assets acquired:
   Property, furniture and equipment                            $     2,119
   Accounts receivable                                               10,365
   Cash                                                              54,033
   Customer relationships                                            59,423
   Accounts payable                                                 (19,689)
                                                                -----------
                                                                    106,251

Less: Minority interest                                             (21,099)
      Common stock issued                                           (32,500)
      Cash acquired                                                 (54,033)
                                                                -----------
Net cash paid in acquisition of subsidiary                      $    (1,381)
                                                                ===========

           See accompanying notes to consolidated financial statements


                                        8

<PAGE>

                       SECURED DIGITAL APPLICATIONS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2006
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with generally  accepted  accounting  principles for
interim   financial   information  and  with  Item  310(b)  of  Regulation  S-B.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)considered  necessary  for a  fair  presentation  have  been  included.
Operating  results for the six months ended June 30, 2006,  are not  necessarily
indicative of the results that may be expected for the year ending  December 31,
2006.  These  unaudited  consolidated  financial  statements  should  be read in
conjunction  with the audited  consolidated  financial  statements and footnotes
thereto  included in the Company's  Form 10-KSB for the year ended  December 31,
2005, as filed with the Securities and Exchange Commission.


RESTATEMENT OF 2005 CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the issuance of the Company's June 30, 2005 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 (See notes 7 and 8).  Accordingly,  the Company's 2005  consolidated
financial statements have been restated, resulting in the following:


1.   A  decrease  in net  income of $71,519  and  $52,837  for the six and three
     months  ended June 30,  2005  (less than $.01 per share for both  periods),
     respectively.

2.   A decrease in net income available to common shareholders of $622,853 ($.01
     per  share) and  $328,505  (less than $.01 per share) for the six and three
     months ended June 30, 2005, respectively.

3.   There was a decrease  in  shareholders'  equity of  $3,129,555  at June 30,
     2005.


2. SIGNIFICANT ACCOUNTING POLICIES

TRANSLATION OF CURRENCIES

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 period-end rates of exchange for assets and liabilities, and
average  rates of  exchange  for the period 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.

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;
o    fees earned from provision of information technology related services and
o    fees earned from rental and servicing of material handling equipment.

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.


                                        9


<PAGE>

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

NET INCOME PER COMMON SHARE

Basic net income per share is  calculated  by dividing net income  applicable to
common  shareholders by the weighted average number of common shares outstanding
for the three and six months  ended June 30, 2006 and 2005.  Diluted  income per
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 period. The calculation of basic and
diluted income per share is as follows (in thousands, except per-share amounts):


<TABLE>
<CAPTION>
                                                               Three Months Ended                      Six Months Ended
                                                         June 30, 2006       June 30, 2005     June 30, 2006       June 30, 2005
                                                       ------------------  -----------------  ----------------   ----------------
                                                                               (Restated)                          (Restated)
                                                             <S>               <C>                <C>                    <C>
Net income (loss)                                      $             (408) $             167  $            (23)  $            315

Preferred stock dividends                                              --               (175)               --               (334)

Accretion to preferred stock redemption value                          --               (276)               --               (551)
                                                       ------------------  -----------------  ----------------   ----------------
Net income (loss) available to common
shareholders                                           $             (408) $            (284) $            (23)  $           (570)
                                                       ==================  =================  ================   ================

Weighted average shares outstanding - basic                       133,860             95,964           132,227             95,446
                                                       ==================  =================  ================   ================

Net income per share - basic                           $                *  $               *  $              *   $          (0.01)
                                                       ==================  =================  ================   ================

*  less than $.01 per share

                                                               Three Months Ended                      Six Months Ended
                                                         June 30, 2006        June 30,2005     June 30, 2006       June 30,2005
                                                       ------------------  -----------------  ----------------   ----------------
                                                                                (Restated)                         (Restated)
Weighted average shares outstanding - basic                       133,860             95,964           132,227             95,446
Common stock issuable to consultant                                   771                244                11                352
Dilutive stock options and warrants                                    --                 12                --                 26
                                                       ------------------  -----------------  ----------------   ----------------

Weighted average shares outstanding - diluted                     134,631             96,220           132,238             95,824
                                                       ==================  =================  ================   ================

Net income per share - diluted                         $                *  $              **  $              *   $             **
                                                       ==================  =================  ================   ================

* Less than $.01 per share
** Would be antidilutive
</TABLE>

For the six and  three  months  ended  June  30,  2006,  1,080,000  options  and
4,600,000  warrants were excluded from the calculation of earnings per share, as
their issuance prices were in excess of the average market price for the period.

                                       10
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

GOODWILL AND INTANGIBLE ASSETS

Goodwill,  arising from the purchase of PTSB and the Gallant group of companies,
represents  the  purchase  price paid and  liabilities  assumed in excess of the
estimated fair value of tangible assets acquired.

Intangible  assets  consist  of a  customer  list  and  a  Malaysian  government
registered  contractor license acquired in September 2004. The customer list has
a gross  carrying  value of $189,000  and is amortized  using the straight  line
method over its expected life of seven years.  Amortization  expense for each of
the three and six  months  ended June 30,  2006 and 2005 was $6,750 and  13,500,
respectively.  The accumulated  amortization  at June 30, 2006 was $47,250.  The
registered  contractor  license has a carrying value of $65,000 and is amortized
using  the  straight   line  method  over  its  expected  life  of  five  years.
Amortization  expense  for each of the three and six months  ended June 30, 2006
and 2005 was $3,250 and $6,500,  respectively.  The accumulated  amortization at
June 30, 2006 was $22,750.

Customer  relationships  with a cost of $59,423 were acquired on April 30, 2005,
and are being  amortized using the straight line method over an expected life of
three  years.  Amortization  expense for the three and six months ended June 30,
2006 was $4,953 and $9,906,  respectively,  and $3,301 for each of the three and
six months ended June 30, 2005.  Accumulated  amortization  at June 30, 2006 was
$23,114.

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.

TREASURY STOCK

The Company records treasury stock purchases at cost. The Company reissues stock
from the treasury on a first-in, first-out basis.

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.

For the three and six months  ended June 30,  2006,  provision  for income taxes
amounted  to $44,466  and  $302,304  respectively.  For the three and six months
ended June 30, 2005, provision for income taxes amounted to $56,053 and $78,421,
respectively.  The  provisions  are  net of the  benefit  of any  available  net
operating losses, for income tax payable on its operations in Malaysia.


STOCK-BASED COMPENSATION

The Company adopted FAS No. 123R, "Share-Based Payments", effective from January
1,  2006,  utilizing  the  "modified  prospective"  method as  described  in the
standard.  Under  the  "modified  prospective"  method,   compensation  cost  is
recognized for all Share-based payments granted after the effective date and for
all unvested awards granted prior to the effective date. Prior to adoption,  the
Company accounted for Share-based payments under the recognition and measurement
principles of Accounting  Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", and Related interpretations. The Company recognized $3,640
and $8,587 in total stock-based compensation expense during the three months and
six months ended June 30, 2006. Total unvested stock-based  compensation expense
was $22,425 at June 30, 2006 and had a total weighted average  remaining term of
3.17 years.


                                       11

<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK-BASED COMPENSATION (continued)

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  were  exercisable
through July 2009,  contingent upon continuous service by the consultant through
specified  dates. On March 9, 2005 these options were forfeited when the Company
terminated the service agreement with the consultant.

On August 3, 2004, the Company granted certain officers, directors and employees
of the Company options to purchase up to an aggregate of 2,000,000 shares of the
Company's common stock at $0.20 per share.  The options are exercisable  through
August  2009,  contingent  upon  continuous  service by the  officers/directors/
employees through  specified dates.  500,000 options were exercisable on October
3, 2004,  200,000 options were exercisable on February 3, 2005,  500,000 options
are  exercisable  on August 3, 2005,  and the  remaining  800,000  options  were
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.  250,000  of the  options  were  exercised  on April  28,  2005 for a cash
consideration of $50,000, 40,000 of the options were exercised on April 29, 2005
for a cash consideration of $8,000,  60,000 of the options were exercised on May
3, 2005 for a cash  consideration of $12,000.  On January 31, 2006,  100,000 and
300,000 options which were granted to an independent  director with an option to
purchase the Company's common stock at $0.12 and $0.20 per share,  respectively,
were forfeited when he resigned from the Company.  On February 19, 2006, 270,000
options  which were granted to an officer were  forfeited  when he resigned from
the Company.

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 during the three months
and six months ended June 30, 2005 would have been as follows:

<TABLE>
<CAPTION>
                                                                     Three Months Ended          Six Months Ended
                                                                          June 30,                    June 30,
                                                                            2005                       2005
                                                                     ------------------          ----------------
                                                                        (Restated)                  (Restated)
<S>                                                                        <C>                         <C>
Net loss applicable to common stockholders                           $         (283,180)         $       (569,777)
Add: Stock-based employee compensation expense
         included in reported net income, net of related tax                      8,142                    17,619
Less: Total stock-based employee compensation expense
         determined under fair value based method for all
         awards, net of related tax effects                                     (29,000)                  (64,000)
                                                                     ------------------          ----------------
Pro forma net loss                                                   $         (304,038)         $       (616,158)
                                                                     ==================          ================
Loss per share:
 Basic and diluted - as reported                                     $                *          $          (0.01)
                                                                     ==================          ================
 Basic and diluted - pro forma                                       $                *          $          (0.01)
                                                                     ==================          ================

* Less than $.01 per share
</TABLE>

The  value  of  the  options  issued  is  calculated  using  the   Black-Scholes
methodology  as prescribed  by SFAS No. 148 with the following  weighted-average
assumption for all options granted during the quarter:

                                                 FAS No.123R     FAS No.123
                                                   Expense       Pro forma
                                                   June 30,       June 30,
                                                    2006            2005
                                                  ------------- -------------
Risk free interest rate                               2%            2%-4%
Dividend yield                                        0%               0%


                                       12

<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (continued)


STOCK-BASED COMPENSATION (continued)


Expected life of option in years                     3.2 years      4.2 years
Expected volatility                                  139% - 163%    115% - 163%


The Company did not issue any options to employees  and officers  during the six
months ended June 30, 2006.


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.

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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


                                       13
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES (continued)

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

In June 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued FASB
Interpretation  No. 48,  Accounting for  Uncertainty in Income Taxes (FIN 48) an
interpretation  of FASB Statement No. 109,  Accounting  for Income Taxes,  which
clarifies the  accounting for  uncertainty in income taxes.  FIN 48 prescribes a
recognition  threshold and  measurement  attribute  for the financial  statement
recognition and measurement of a tax position taken or expected to be taken in a
tax  return.  The  Interpretation  requires  that the Company  recognize  in the
financial  statements,  the impact of a tax  position,  if that position is more
likely than not of being  sustained on audit,  based on the technical  merits of
the position.  FIN 48 also provides  guidance on  de-recognition of a previously
recognized tax position,  classification,  interest and penalties, accounting in
interim  periods  and  disclosures.  The  provisions  of FIN  48  are  effective
beginning January 1, 2007 with the cumulative effect of the change in accounting
principle recorded as an adjustment to the opening balance of retained earnings.
The Company will assess the potential impact the adoption of this Interpretation
may have on its financial position or results of operations.

RECLASSIFICATIONS

Certain  2005  balances  have  been  reclassified  to  conform  to  the  current
presentation.

3. RESTRICTED CASH

As of June 30, 2006, the Company has the following restricted cash balances:

Cash deposited with financial institutions in Malaysia        $    581,803
                                                              ============


Restricted cash of $581,803 (RM 2,142,664) deposited with financial institutions
in  Malaysia  represent  time  deposit  accounts  used as  collateral  for trade
financing and bank overdraft  facilities  granted to Gallant IT Holdings Sdn Bhd
("GIH")and  Gallant Zone (M) Sdn Bhd ("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.

4. BANK OVERDRAFT AND BORROWINGS

As of June  30,  2006,  the  Company's  subsidiaries  have  the  following  bank
facilities:

<TABLE>
<CAPTION>
                                                                             GIH              GZ              Total
                                                                         -------------     -------------    -------------
<S>                                                                            <C>              <C>           <C>
Bank overdraft                                                           $     135,767     $     108,612    $     244,379
Trade financing facilities                                                     217,226           868,904        1,086,130
                                                                         -------------     -------------    -------------
Total bank facilities available                                          $     352,993     $     977,516    $   1,330,509
                                                                         =============     =============    =============
Balance utilized as of June 30, 2006                                     $     245,900     $     987,757    $   1,233,657
                                                                         =============     =============    =============
</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.

                                       14
<PAGE>
5. RELATED PARTY ACTIVITY

During  the three and six  months  ended  June 30,  2006 and 2005,  the  Company
recognized revenue of $85,872,  $946,153,  $130,106 and $175,895,  respectively,
for project  consulting  fees from a related party,  pursuant to four consulting
contracts. In association with these contracts,  during the three and six months
ended June 30, 2006 and 2005, the Company  recognized costs of revenue amounting
to $82,731, $107,365, $13,158 and $48,947, respectively. Included in these costs
are fees paid to a company in which Mr.  Patrick  Lim,  the  Chairman  and Chief
Executive Officer of the Company, has a financial interest. The related company,
LSH Assets Holdings Sdn Bhd ("LSH") billed fees of $59,500 for the three and six
months ended June 30, 2006.


As of June 30,  2006,  accounts  receivable  from  the  related  entity  totaled
$789,997.

At December 31,  2005,  long-term  receivables,  related  parties,  consisted of
$183,098 due from Synervest Sdn Bhd ("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.  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  $20,549 $44,354,
$31,974  and  $45,658  of the  outstanding  receivable  during the three and six
months ended June 30, 2006 and 2005, respectively, resulting in a realization of
gain on sale of assets,  related  party for those  periods.  The  deferred  gain
included in the balance sheet has been reduced accordingly.

General  and  administrative  expenses - related  parties  for the three and six
months  ended June 30,  2006 and 2005  totaled  $36,563,  $72,982,  $21,316  and
$42,632,   respectively.   These   expenses   included   management   fees   and
administrative  expenses  payable by the  Company to LSH.  For the three and six
months  ended June 30,  2006 and 2005,  LSH billed  the  Company  administrative
expenses of $6,491, $12,982, $6,316 and $12,632,  respectively. The Company also
incurred management fees of $30,000,  $60,000, $15,000 and $30,000 for the three
and six months ended June 30, 2006 and 2005,  respectively.  The management fees
were charged on the basis of time spent for the  administration  and  management
services provided to the Company.

6. TERM LOANS

As of June 30,  2006,  the Company  has term loan  liabilities  of $176,108  (RM
648,571).  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% - 8.4% per annum.

7. 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.

On August 1, 2005, the Company repaid the term note in full.

Some of the significant terms of the Note included the following:

1.   The Note had a three-year term with a maturity date of May 28, 2007.
2.   Interest  rate of 2% above the "prime rate" as published by the Wall Street
     Journal  from time to time  subject to a floor of 6%. The monthly  interest
     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  could be paid in cash or in common stock at
     the Master Fund's option, as defined.


                                       15
<PAGE>
7.   CONVERTIBLE TERM NOTES (CONTINUED)

5.   The Note was convertible into shares of the Company's common stock.

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  granted a security  interest in all of its net assets and the
     net assets of one of its  wholly-owned  subsidiaries,  until such time that
     the Note was satisfied.

8.   The SPA also  included a condition  that  required the Company to cause its
     common  stock  to  be  listed  on  the  NASDAQ  Smallcap   Market,   NASDAQ
     NationalMarket  System,  the American  Stock Exchange or the New York Stock
     Exchange on or prior to November 15, 2004 ("the Listing Condition").

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

In 2004, the Company recorded an initial  liability of $246,681 for the value of
the  embedded  liability.  The  initial  value  of the  embedded  liability  was
amortized over the term of the Note. For the three and six months ended June 30,
2006 and 2005, the Company  recognized  amortization  expense of $0, $0, $46,305
and $60,682 respectively, and is included in interest expense.

In 2004, the Company recorded debt discount and  amortization  costs of $95,346,
which  included the initial  value of the warrants of $62,525.  These costs were
amortized  over the term of the Note.  Amortization  in the  amount  of $0,  $0,
$17,454 and  $24,231 for the three and six months  ended June 30, 2006 and 2005,
respectively,  is  included  in  amortization  of  debt  issuance  costs  in the
statement of operations.


8. PREFERRED STOCK

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

On August 1, 2005,  the Company  redeemed the  outstanding  Series A Convertible
Preferred Stock in full.

The  Series  A  Preferred  was  convertible,   subject  to  certain   conversion
limitations,  into common  stock of the Company at the option of the Master Fund
and was  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.


                                       16
<PAGE>
8. PREFERRED STOCK (CONTINUED)

In 2004,  the Company  determined  that the nature of the  cumulative  preferred
dividends  on and  the  economic  characteristics  of the  Series  A  Preferred,
required the Series A Preferred to be  classified  outside of permanent  equity.
Similar  to the Note,  the  Company  also  evaluated  the  Series A  Preferred's
conversion  feature to determine if it gave rise to an embedded  derivative that
would need to be accounted for separately under SFAS No. 133 and EITF 00-19. The
Company  concluded that certain  provisions  common to both it and the Note also
resulted  in the  Series  A  Preferred  conversion  feature  being  an  embedded
derivative that must be bifurcated and recorded as a derivative liability.

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

In September 2004, the Master Fund converted  $500,000 of the Series A Preferred
resulting  in the  issuance of 2,500,000  shares of common  stock.  On August 1,
2005, the balance of the Series A Preferred was redeemed in full.

Black-Scholes  valuations were performed on the derivative  liability associated
with the Series A  Preferred  and the  related  warrants.  In 2004,  the Company
recorded an initial derivative liability of $3,206,857. The initial value of the
derivative  liability was being accreted over three years based on  management's
estimate of the expected  term. For the three and six months ended June 30, 2006
and 2005, accretion amounted to $0, $0, $194,750 and $389,499, respectively, and
is included in accretion to preferred stock redemption value.

In 2004, the Company recorded  issuance costs of $1,051,927,  which included the
initial value of the warrants of $625,248. These costs were amortized over three
years.  Amortization  of issuance costs totaled $0, $0, $80,918 and $161,835 for
the three and six months  ended  June 30,  2006 and 2005,  respectively,  and is
included in accretion to preferred stock redemption value.

9. COMMON STOCK

On June 2, 2005,  the Company  reissued  250,000 shares of common stock from its
treasury  stock to a consultant as payment for services  rendered to the Company
in connection with an acquisition.

On June 2, 2005, the Company  reissued from its treasury stock 199,218 shares of
common  stock at $0.103 per share for total  consideration  of $20,466;  843,446
shares  of  common  stock on  August  9,  2005 at  $0.108  per  share  for total
consideration  of $91,092;  and 295,632  shares of common stock on September 23,
2005 at $0.085 per share for total  consideration of $25,129, to a consultant as
payment for services rendered to the Company during fiscal 2005. In August 2005,
the Company  reissued  609,756  shares of its common  stock from  treasury to an
investor for cash of $50,000 in private placement  exercises.  These shares were
issued at a price equal to 85% of the average of the five lowest  closing prices
of the common  stock  during the  twenty-two  trading  days prior to the date of
issuance, as reported by Bloomberg News Services. On August 9, 2005, the Company
reissued from its treasury  stock  240,000  shares of common stock at $0.139 per
share for a total  consideration of $33,360.  On September 27, 2005, the Company
issued  240,000  shares  of  common  stock  at  $0.098  per  share  for a  total
consideration  of $23,520.  On February  8, 2006 the Company  reissued  from its
treasury  stock  240,000  shares of common  stock at $0.09 per share for a total
consideration  of  $21,600  and on May 3,  2006 the  Company  reissued  from its
treasury  stock  240,000  shares of common  stock at $0.09 per share for a total
consideration  of $21,600  during  the three  months  ended  June 30,  2006 to a
consultant pursuant to a compensation agreement dated July 15, 2005, under which
the Company is to issue an aggregate of 960,000  shares of its common stock,  to
the  consultant  as payment  for  services to be rendered to the Company for the
twelve-month period ending July 14, 2006. The 480,000 shares were valued,  based
on the  respective  market  price  on the  date of  issuance,  and  the  Company
recognized  compensation expense of $21,600 and $43,520,  respectively,  for the
three and six months ended June 30, 2006.

In January 2006, the Company  reissued from its treasury stock 800,000 shares of
common  stock to an  investor  at $0.10 per share for a total  consideration  of
$80,000 in a private placement exercise.


                                       17
<PAGE>
9. COMMON STOCK (CONTINUED)

On February 8, 2006, the Company reissued  2,000,000 shares of common stock from
its  treasury  stock to a  consultant  as payment for  services  rendered to the
Company to develop a shopping  portal and  recognized  $180,000 as  compensation
expense based on the market value of $0.10 per share on the date of issuance.

On February 21, 2006,  the Company  reissued  from its  treasury  stock  500,000
shares of common stock at $0.10 per share for total consideration of $50,000. On
June 12, 2006,  the Company  issued  500,000 shares Of common stock at $0.10 per
share  for  total  consideration  of  $50,000  to  a  consultant  pursuant  to a
compensation  agreement dated September 12, 2005,  under which the Company is to
issue an aggregate of 2,000,000  shares of its common stock to the consultant at
$0.10 per share as payment  for  services  to be rendered to the Company for the
twelve-month  period  ending  September  12, 2006.  For the three months and six
months  ended June 30,  2006,  the Company  recognized  compensation  expense of
$50,000 and $100,000 respectively.

On February 22, 2006, the Company  reissued  200,000 shares of common stock from
its  treasury  stock to a  consultant  as payment for  services  rendered to the
Company over a two year period.  The Company  recognized $18,000 as compensation
expense based on the market value of $0.09 per share on the date of issuance.

On March 8, 2006, the Company  reissued  447,058 shares of common stock from its
treasury  stock to a consultant as payment for services  rendered to the Company
for total  consideration of $40,235 based on the market value of $0.09 per share
on the date of issuance. On June 12, 2006, the Company issued 568,994 shares and
776,501 shares of common stock to a consultant as payment for services  rendered
to the Company for total  consideration  of $48,364  and  $67,944,  respectively
based  on  the  market  value  of  $0.085  per  share  and  $0.0875  per  share,
respectively  on the date of  issuance.  As of June  30,2006,  the Company had a
balance of 424,890 repurchased shares in its treasury.

On June 12,  2006,  the Company  issued  1,000,000  shares of common  stock to a
consultant  as payment for services  rendered to the Company over a year period.
The Company recognized $90,000 as compensation expense based on the market value
of $0.09 per share on the date of issuance.

On June 12,  2006,  the  Company  issued  185,759  shares of  common  stock to a
consultant  as payment for  advance of working  capital to a  subsidiary  of the
Company for total consideration of $15,000 based on the market value of $0.08075
per share on the date of issuance.

On July 27, 2006, the Company issued 650,457  restricted  shares of common stock
to a  consultant  as payment  for  services  rendered to the Company for a total
consideration  of $45,532  based on the  market  value of $0.07 per share on the
date of issuance.

On July 27,  2006,  the  Company  issued  650,457  shares of  common  stock to a
consultant  as  payment  for  services  rendered  to  the  Company  for a  total
consideration  of $45,532  based on the  market  value of $0.07 per share on the
date of issuance.

On August 10, 2006,  the Company  issued  500,000 shares of common stock at $.10
per share for total  consideration  of $50,000  to a  consultant  pursuant  to a
compensation agreement dated September 2005, under which the Company is to issue
an aggregate of 2,000,000  shares of its common stock to the  consultant at $.10
per share as payment  for  services to be rendered to the Company for the twelve
month period ending September 12, 2006.

                                       18
<PAGE>
10. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

The Company grants credit,  generally without collateral,  to its customers. Two
customers in the  Company's  applications  segment  accounted  for the following
revenue:

<TABLE>
<CAPTION>
                                                              Three Months Ended                     Six Months Ended
                                                       June 30, 2006       June 30,2005       June 30, 2006     June 30,2005
                                                     ----------------     ---------------   -----------------  ---------------
                                                                            (Restated)                             (Restated)
<S>                                                         <C>                 <C>                 <C>                <C>
Customer 1                                                  49%                 42%                 44%                42%
Customer 2                                                  47%                 41%                 44%                41%

                                                     ----------------     ---------------   -----------------  ---------------
Total                                                       96%                 83%                 88%                83%
                                                     =================    ===============   =================  ===============
</TABLE>

At June  30,  2006,  the two  customers  accounted  for  85% of  trade  accounts
receivable.  The large  concentration  of revenues  with the two  customers is a
result of the Company's  strategy of using the two customers as  contractors  to
service certain accounts with certain long-standing  accounts established by the
Company,  reducing  credit  risk and  carrying  costs.  Allowance  for  doubtful
accounts  receivable was $455,822 at June 30, 2006. The Company will continue to
pursue  vigorously the collection of all its  outstanding  accounts  receivable.
Three  suppliers  accounted for 87% cost of revenues during the six months ended
June 30, 2006, and one supplier accounted for substantially all cost of revenues
during the six months ended June 30, 2005. 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  believes  that it will be able to utilize
alternative suppliers for the services that it requires.

11. SEGMENT INFORMATION

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 Center
     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.


                                       19
<PAGE>

11. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                    Material
                                                  Applications      Handling         Gallant          Corporate        Total
                                                ---------------  ---------------  --------------   --------------    ---------------
<S>                                                 <C>              <C>              <C>             <C>                <C>
Three-month period ended
June 30, 2006 :

Revenue:

Products and equipment                          $            --  $            --  $      442,067   $           --    $      442,067
services:
   Related parties                                       77,185               --           8,687               --            85,872
   Others                                             7,991,390           12,503               5               --         8,003,898
                                                ---------------  ---------------  --------------   --------------    --------------
                                                      8,068,575           12,503         450,759               --         8,531,837
Cost of revenue:

Products and equipment                                       --               --         354,334               --           354,334
services:
   Related parties                                       23,231               --          59,500               --            82,731
   Others                                             7,844,960           10,315              --               --         7,855,275
                                                ---------------  ---------------  --------------   --------------    --------------
Gross profit                                    $       200,384  $         2,188  $       36,925   $           --    $      239,497
                                                ===============  ===============  ==============   ==============    ==============
Net income (loss)
from operating segments                         $      (348,906) $        47,230  $     (106,359)  $           --    $     (408,035)
                                                ===============  ===============  ==============   ==============    ==============
Depreciation expense                            $        62,872  $           706  $        9,466   $           --    $       73,044
                                                ===============  ===============  ==============   ==============    ==============
Interest expense                                $           867  $            --  $       28,351   $           --    $       29,218
                                                ===============  ===============  ==============   ==============    ==============
Interest income                                 $            --  $            --  $        9,127   $           --    $        9,127
                                                ===============  ===============  ==============   ==============    ==============
Income tax expense                              $        45,070  $            --  $         (604)  $           --    $       44,466
                                                ===============  ===============  ==============   ==============    ==============
Expenditures for additions
  to long lived assets                          $         1,166  $           292  $          345   $           --    $        1,803
                                                ===============  ===============  ==============   ==============    ==============


                                       20
<PAGE>
11. SEGMENT INFORMATION (CONTINUED)
                                                                    Material
                                                  Applications      Handling          Gallant        Corporate            Total
                                                ---------------  ---------------   -------------   --------------    ---------------
Three-month period ended
June 30, 2005 (Restated):

Revenue:

Products and equipment                          $            --  $            --   $          --   $           --    $           --
services:
   Related parties                                      130,106               --              --               --           130,106
   Others                                             6,331,658          102,906         969,499               --         7,404,063
                                                ---------------  ---------------   -------------   --------------    --------------
                                                      6,461,764          102,906         969,499               --         7,534,169
Cost of revenue:

Products and equipment                                       --               --         846,066               --           846,066
services:
   Related parties                                       13,159               --              --               --            13,159
   Others                                             5,909,402           97,092           4,330               --         6,010,824
                                                ---------------  ---------------   -------------   --------------    --------------
Gross profit                                    $       539,203  $         5,814   $     119,103   $           --    $      664,120
                                                ===============  ===============   =============   ==============    ==============

Net income (loss)
from operating segments                         $       176,636  $       (31,063)  $      74,751   $      (52,837)   $      167,487
                                                ===============  ===============   =============   ==============    ==============
Depreciation expense                            $        60,533  $         3,616   $       7,373   $           --    $       71,522
                                                ===============  ===============   =============   ==============    ==============
Interest expense                                $         8,940  $            --   $      16,638   $       46,305    $       71,883
                                                ===============  ===============   =============   ==============    ==============
Interest Income                                 $        35,685  $            --   $          --   $           --    $       35,685
                                                ===============  ===============   =============   ==============    ==============
Income tax expense                              $        56,053  $            --   $          --   $           --    $       56,053
                                                ===============  ===============   =============   ==============    ==============
Expenditures for additions
  to long lived assets                          $            --  $            --   $       2,322   $           --    $        2,322
                                                ===============  ===============   =============   ==============    ==============



                                                                      Material
                                                  Applications       Handling         Gallant         Corporate          Total
                                                ---------------  ---------------  --------------   --------------    --------------
Six-month period ended
June 30, 2006 :

Revenue:

Products and equipment                          $            --  $            --  $    1,012,350   $           --    $    1,012,350
services:
   Related parties                                      159,297               --         786,856               --           946,153
   Others                                            16,311,603           35,985             462               --        16,348,050
                                                ---------------  ---------------  --------------   --------------    --------------
                                                     16,470,900           35,985       1,799,668               --        18,306,553
Cost of revenue:

Products and equipment                                       --               --         838,446               --           838,446
services :
   Related parties                                       47,865               --          59,500               --           107,365
   Others                                            15,765,164           27,226              --               --        15,792,390
                                                ---------------  ---------------  --------------   --------------    --------------
Gross profit                                    $       657,871  $         8,759  $      901,722   $           --    $    1,568,352
                                                ===============  ===============  ==============   ==============    ==============
Net income (loss)
from operating segments                         $      (451,461) $        12,359  $      415,638   $           --    $      (23,464)
                                                ===============  ===============  ==============   ==============    ==============
Depreciation expense                            $       124,392  $         2,687  $       18,910   $           --    $      145,989
                                                ===============  ===============  ==============   ==============    ==============


                                       21


<PAGE>

11. SEGMENT INFORMATION (CONTINUED)


                                                                     Material
                                                 Applications        Handling         Gallant         Corporate            Total
                                                ---------------    -------------   -------------   --------------    ---------------


Interest expense                                $         1,609    $          --   $      47,829   $           --   $        49,438
                                                ===============    =============   =============   ==============   ===============
Interest income                                 $            --    $          --   $       9,127   $           --   $         9,127
                                                ===============    =============   =============   ==============   ===============
Income tax expense                              $        84,923    $          --   $     217,381   $           --   $       302,304
                                                ===============    =============   =============   ==============   ===============
Expenditures for additions
  to long lived assets                          $         1,326    $         292   $         710   $           --   $         2,328
                                                ===============    =============   =============   ==============   ===============


                                                   Material
                                                 Applications        Handling         Gallant        Corporate           Total
                                                ---------------    -------------   -------------  ---------------   ---------------
Six-month period ended
June 30, 2005 (Restated):

Revenue:

Products and equipment                          $            --    $          --   $   1,851,867   $           --   $     1,851,867
services:
   Related parties                                      175,895               --              --               --           175,895
   Others                                            11,703,237          194,088         129,436               --        12,026,761
                                                ---------------    -------------   -------------   --------------   ---------------
                                                     11,879,132          194,088       1,981,303               --        14,054,523
Cost of revenue:

Products and equipment                                       --               --       1,694,906               --         1,694,906
services:
   Related parties                                       48,948               --              --               --            48,948
   Others                                            10,862,940          184,718           8,356               --        11,056,014
                                                ---------------    -------------   -------------   --------------    --------------
Gross profit                                    $       967,244    $       9,370   $     278,041   $           --    $    1,254,655
                                                ===============    =============   =============   ==============    ==============

Net income (loss)
from operating segments                         $       338,502    $     (37,982)  $      86,218   $      (71,519)   $      315,219
                                                ===============    =============   =============   ==============    ==============
Depreciation expense                            $       121,396    $       7,933   $      14,907   $           --    $      144,236
                                                ===============    =============   =============   ==============    ==============
Interest expense                                $        19,114    $          --   $      35,111   $       60,682    $      114,907
                                                ===============    =============   =============   ==============    ==============
Interest Income                                 $        78,736    $          --   $          --   $           --    $       78,736
                                                ===============    =============   =============   ==============    ==============
Income tax expense                              $        78,421    $          --   $          --   $           --    $       78,421
                                                ===============    =============   =============   ==============    ==============
Expenditures for additions
  to long lived assets                          $            --    $          --   $      74,859   $           --    $       74,859
                                                ===============    =============   =============   ==============    ==============
</TABLE>
11. SEGMENT INFORMATION (CONTINUED)

Consolidated total assets as of June 30, 2006 are as follows:


   Applications                                          $         9,066,332
   Apple                                                           2,334,375
   Material handling                                                  70,447
                                                         -------------------
   Total consolidated assets                             $        11,471,154
                                                         ===================


                                       22

<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

THE FOLLOWING ANALYSIS OF THE OPERATIONS AND FINANCIAL  CONDITION OF THE COMPANY
SHOULD  BE  READ  IN  CONJUNCTION  WITH  THE  CONDENSED  CONSOLIDATED  FINANCIAL
STATEMENTS,  INCLUDING THE NOTES THERETO,  OF THE COMPANY CONTAINED ELSEWHERE IN
THIS FORM 10-QSB.


OVERVIEW

Secured  Digital  Applications,  Inc.  ("SDA"  or  the  "Company")  is  a  media
production  company  providing  content  for  various  technologies,   including
television,  the Internet and free-standing  displays. The Company also provides
information  technology  services  in such  areas as  biometric  technology  and
security  systems.  We generate  revenue  through our  majority or wholly  owned
subsidiary companies located in the United States and Malaysia, and operating in
the   information   technology,   communications,    multimedia,   retail,   and
international trade and logistics industries.

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


SDA's core line of  business  is media  production  and  information  technology
applications,  which  account for the  majority of our  revenue.  Our  operating
subsidiaries   offer  products  in  diverse  lines  of  business  including  the
development of Internet  content,  digital security and biometric  products.  We
also  engage in  value-added  sales of  consumer  media  products.  The  Company
conducts its principal operations in Malaysia.  Its principal subsidiaries as of
June 30, 2006 are the following companies:

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

-    SDA  Worldwide,   Inc.("SDAW")(f/k/a   SDA  America,  Inc.)  an  80%  owned
     subsidiary,  organized  under  Delaware law and based in Saddle Brook,  NJ,
     offers  consulting  services to Asian exporters seeking to enter the United
     States markets,  principally on compliance with US customs regulations. The
     company  was  originally  formed as a wholly  owned  corporation  used as a
     special  vehicle to secure a $6.5 million  funding from Laurus  Master Fund
     Ltd. (the "Master Fund") through private placement of securities consisting
     of  convertible  preferred  stock of SDA America.  As a result of the early
     retirement  of the  Laurus  investment,  management  determined  to use the
     corporation  as the vehicle to develop the  company's  international  trade
     consulting business in the United States. SDAW began operations in 2006 and
     did not generate any revenue in 2005.

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

-    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.

-    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.


                                       23
<PAGE>

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

-    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.

-    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.

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

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

The  accompanying  consolidated  financial  statements  include the  accounts of
Secured Digital Applications, Inc. and its subsidiaries.

For the three months and six months ended June 30, 2006 and 2005,  the Company's
revenue was generated primarily 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.



Significant Business Developments and Plan of Operation

During 2006,  the Company  anticipates  that it will  continue to implement  its
strategy and to operate its existing lines of businesses, including an expansion
of its multi-media production business into the area of free-standing kiosks and
display advertising. The Company is pursuing a joint venture with KioskMedia (M)
Sdn Bhd,  a  designer  and  producer  of  free-standing  interactive  kiosks and
free-standing   advertising  with  equipment   installed  in  Asia  and  Europe.
Management  expects to complete  the  transactions  necessary  to form the joint
venture company in the third quarter of 2006, after which it will own 75 percent
of a new company in which Kiosk Media will own 25 percent.

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


                                       24

<PAGE>

We plan to continue to devote the bulk of our  resources to core  operations  in
Asia,  particularly  Malaysia,  as management  believes that the growth of Asian
economies has been favorable and is likely to continue. The company continues to
review  potential  acquisitions  in Asia,  primarily  of regional  companies  in
Malaysia,  Thailand,  and the  People's  Republic  of China in an  effort to add
operations  that  will  meet   management's   standards  and  provide   superior
opportunities for growth after  acquisition.  We plan to attempt to benefit from
the high  levels  of trade  between  the  United  States  and Asia  through  the
establishment of consulting  businesses serving Asian  manufacturers  seeking to
develop markets in the United States.  In addition,  the Company intends to seek
to develop markets for its media production services in the United States and is
developing  a business  process  outsourcing  product that it intends to seek to
introduce during the third and fourth quarter of 2006.

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


The Company has determined to exit from its limited involvement in the broadband
business in Malaysia as a backhaul provider of telecommunications  services. The
decision to exit the broadband business,  which was forecast to constitute about
2 percent of the  Company's  revenue in the current year, is not material to the
Company's  operations  or assets.  The decision to end the  Company's  broadband
business was approved by the Board of Directors  and intended to permit and exit
from a non-core line of business upon favorable terms.


Strategic Contractual Relationships

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


Results of Operations

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

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

<TABLE>
<CAPTION>
                                                          Six Months Ended June 30,
                                                      ----------------------------------
                                                       2006                    2005
                                                                             (Restated)
<S>                                                       <C>                 <C>
Revenues                                            $ 18,306,553        $   14,054,523
Gross profit                                           1,568,352             1,254,655
Sales and marketing                                       18,833                29,460
General and administrative                             1,375,043               868,508
Loss on disposal of property and equipment               (53,812)                   --
Gain on disposal of assets-related parties                44,354                45,658
Net income (loss)                                        (23,464)              315,219
</TABLE>

                                       25
<PAGE>

COMPARISON  OF THE THREE  MONTHS  ENDED JUNE 30, 2006 TO THE THREE  MONTHS ENDED
JUNE 30, 2005

REVENUES

Revenues for the three months ended June 30, 2006  ("2006")  totaled  $8,531,837
compared  to  $7,534,169  for the three  months  ended June 30,  2005  ("2005").
Revenue by division is as follows:

<TABLE>
<CAPTION>
                                              2006               2005             Increase            %
                                         ---------------    ---------------    --------------        ---
                                                              (Restated)

<S>                                          <C>                <C>                <C>               <C>
Application division                     $     8,068,575    $     6,461,764    $    1,606,811        25%
Material handling division                        12,503            102,906           (90,403)      -88%
Apple division                                   450,759            969,499          (518,740)      -54%
                                         ---------------    ---------------    --------------        ---
Total revenue                            $     8,531,837    $     7,534,169    $      997,668        13%
                                         ===============    ===============    ==============        ===
</TABLE>


The  increase  in net sales in 2006 as  compared  to 2005 was  mainly  due to an
increase in fees earned from the production of multimedia  programs and business
contracts.  The increase in revenue from the  production of multimedia  programs
was the result of  sub-contract  work from the  Company's  two major  customers.
Revenue for project  consulting  services was generated  from contracts that the
Company  secured in 2001 through 2003.  Revenue  decreased in the Apple division
from the same period in 2005.  The  performance  of the division was  negatively
impacted by the  cancellation  of a contract by a customer of the Division which
resulted  in the return of a large  purchase of  software  purchased  in advance
through  Gallant.  The  Application  was also  affected  negatively by increased
competition  for larger  corporate  contracts and overall  weakening in consumer
demand for Apple computers.  In 2006, two customers accounted for 49% and 47% of
total revenue,  respectively. In 2005, two customers,  accounted for 42% and 41%
of total revenue, respectively.


GROSS PROFIT

Gross  profit  decreased to $239,497 in the second  quarter of 2006  compared to
$664,120  during the comparable  period in 2005.  Gross profit by division is as
follows:

<TABLE>
<CAPTION>

                                      2006                2005              Increase            %
                                -----------------   ----------------    ----------------      ----
                                                       (Restated)

<S>                             <C>                 <C>                  <C>                   <C>
Application division            $         200,384   $        539,203     $      (338,819)     -63%
Material handling division                  2,188              5,814              (3,626)     -62%
Apple division                             36,925            119,103             (82,178)     -69%
                                -----------------   ----------------     ---------------      ----
Total gross profit              $         239,497   $        664,120     $      (424,623)     -64%
                                =================   ================     ===============      ====
</TABLE>

The gross profit  percentage of the  Application  division  decreased to 2.5% in
2006 from 8.3% in 2005.  The lower gross  profit  percentage  is a result of the
Company  incurring  additional  subcontractor  costs in  order to meet  customer
demands. In addition, the Company is facing competitive pressures in the area of
information  technology consulting and reduced margins to secure contracts.  The
Company is  striving to improve its  quality of  services  and  efficiency  with
objective to increase its gross profit  percentage.  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 decreased by $213 or 1.7%, to $11,959 in the second
quarter of 2006 compared to $12,172 in the second quarter of 2005,  primarily as
a result of a decrease in travel expenses.


                                       26
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses relating to non-related parties increased to
$618,074 in 2006 compared to $419,239 in 2005. These expenses by division are as
follows:
<TABLE>
<CAPTION>
                                            2006                2005              Increase            %
                                       ---------------     --------------     --------------       ----
                                                              (Restated)


<S>                                    <C>                 <C>                 <C>                   <C>
Application division                   $       504,067     $      292,109      $      211,958        73%
Material handling division                       4,751             18,446             (13,695)       74%
Apple division                                 109,256            108,684                 572         1%

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

Total general and administrative
expenses                               $       618,074     $      419,239      $      198,835        47%
                                       ===============     ==============      ==============       ====
</TABLE>


The  increase in general and  administrative  expenses  relating to  non-related
parties was primarily  due to increases  incurred by the  Application  division,
which accounted for 81% and 70%,  respectively,  of the total.  The increase was
primarily attributable to an increase in consulting fees, compensation expenses,
maintenance expenses,  and professional fees, in particular legal and accounting
fees incurred in connection  with a restatement of financial  statements  during
the first and second quarters of 2006. The Material Handling division  accounted
for  1%  and  4%  of  expenses,   respectively,   of  the  total.   General  and
administrative  expenses for the Material Handling division decreased by 74% The
Apple  division  accounted  for 18% and 26% of  expenses,  respectively,  of the
total.  General and administrative  expenses for the Apple division increased by
1%.

In 2006, general and administrative expenses consisted of the following: 17% was
for depreciation of tangible assets,  17% was for employee payroll,  19% was for
fees for  professional  and  auditing  services,  1% was for  investor  relation
expenses,  28% was for  compensation  expenses and 18% was for rent,  utilities,
general office supplies,  communications and corporate insurance  expenses.  For
2005, 17% was for depreciation of tangible  assets,  4% was for consulting fees,
15% was for employee  payroll,  16% was for fees for  professional  and auditing
services,  1% was for  investor  relation  expenses,  11%  was for  compensation
expenses   and  36%  was  for  rent,   utilities,   general   office   supplies,
communications and corporate insurance expenses.

General and  administrative  expenses - related parties in the second quarter of
2006 and 2005 were $36,563 and $21,316,  respectively.  These expenses  included
management fees and administrative  expenses payable by the Company to a company
in which Mr.  Patrick  Lim,  the  Chairman  and Chief  Executive  Officer of the
Company,  has a financial interest.  In the second quarter of 2006 and 2005, the
related  company,  LSH Assets  Holdings  Sdn Bhd  ("LSH")  billed the  Company's
Malaysian  subsidiary,  SDAM,  administrative  expenses  of $6,491  and  $6,316,
respectively,  for administration and clerical fees incurred by LSH on behalf of
SDAM.  The Company also incurred  management  fees of $30,000 and $15,000 in the
second quarter of 2006 and 2005, 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  decreased by $42,665 or 59%, to $29,218 in the second quarter
of 2006 as  compared  to  $71,883  in the  comparable  period of 2005.  Interest
expense in 2006 relates to capital lease  obligations  and term loans.  Interest
expense  in  2005  included   approximately   $8,000  related  to  the  $500,000
convertible  term  note  issued  on May 28,  2004  and  $46,305  related  to the
amortization of the derivative liability associated with the term note. In 2005,
interest  expense relating to the term note accounted for 76% of the expense for
the period.

AMORTIZATION OF DEBT ISSUANCE COSTS

Amortization of finance costs of $17,454 in the second quarter of 2005 relate to
the issuance of the term note on May 28, 2004.


                                       27
<PAGE>

PREVIOUSLY DEFERRED GAIN ON SALE OF TECHNOLOGY - RELATED PARTY

The gain represents the recognition of a previously deferred gain of $20,549 and
$31,974, respectively, related to a similar amount the Company received from its
long-term  receivable - related party. The receivable balance and total deferred
gain was each $183,098, respectively, as of December 31, 2005. This amount 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, the 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.  As a result of cash
payment  received,  the  Company's  long-term  receivable  -  related  party and
deferred  gain balances  were reduced to $144,840  respectively,  as of June 30,
2006.


COMPARISON  OF THE SIX MONTHS  ENDED JUNE 30, 2006 TO THE SIX MONTHS  ENDED JUNE
30, 2005

REVENUES

Revenues for the six months  ended June 30, 2006  ("2006")  totaled  $18,306,553
compared to $14,054,523 for the six months ended June 30, 2005 ("2005"). Revenue
by division is as follows:
<TABLE>
<CAPTION>

                                    2006                 2005             Increase            %
                              --------------        ---------------    ---------------      ----
                                                       (Restated)

<S>                           <C>                   <C>                <C>                   <C>
Application division          $    16,470,900       $    11,879,132    $     4,591,768       39%
Material handling division             35,985               194,088           (158,103)     -81%
Apple division                      1,799,668             1,981,303           (181,635)      -9%
                              ---------------       ---------------     --------------      ----
Total revenue                 $    18,306,553       $    14,054,523     $    4,252,030       30%
                              ===============       ===============     ==============      ====
</TABLE>

The  increase  in net sales in 2006 as  compared  to 2005 was  mainly  due to an
increase in fees earned from the production of multimedia  programs and business
contracts.  The increase in revenue from the  production of multimedia  programs
was the result of  sub-contract  work from the  Company's  two major  customers.
Revenue for project  consulting  services was generated  from contracts that the
Company secured in 2001 through 2003. Included in Apple division revenue in 2006
was income of $786,856  received  from a related  party for  project  consulting
fees.  Revenue decreased in the Apple division from the same period in 2005. The
performance of the division was  negatively  impacted by the  cancellation  of a
contract by a customer of the Division  which  resulted in the return of a large
purchase of software  purchased in advance through Gallant.  The Application was
also affected negatively by increased competition for larger corporate contracts
and overall  weakening  in consumer  demand for Apple  computers.  In 2006,  two
customers  each  accounted  for 44% of total  revenue.  In 2005,  two  customers
accounted for 42% and 41% of total revenue, respectively.


GROSS PROFIT

Gross  profit  increased to  $1,568,352  in second  quarter of 2006  compared to
$1,254,655  during the comparable period in 2005. Gross profit by division is as
follows:
<TABLE>
<CAPTION>
                                        2006                   2005              Increase       %
                                   ----------------       ----------------     --------------   ----
                                                              (Restated)


<S>                                <C>                    <C>                  <C>               <C>
Application division               $        657,871       $        967,244     $    (309,373)   -32%
Material handling division                    8,759                  9,370              (611)    -7%
Apple division                              901,722                278,041           623,681    224%
                                   ----------------        ---------------     -------------    ----
Total gross profit                 $      1,568,352        $     1,254,655     $     313,697     25%
                                   ================        ===============     =============    ====
</TABLE>

The increase in gross profit was primarily  due to higher  related party revenue
earned  in the Apple  Division  in 2006  totaling  $786,856.  The  gross  profit
percentage  of the  Application  division  decreased  to 4% in 2006 from 8.1% in
2005.  The lower gross profit  percentage  is a result of the Company  incurring
additional  subcontractor  expenses  and added  competitive  pressures to secure
contracts,  resulting in reduced  margins The Company is striving to improve its
quality of services and  efficiency  with objective to increase its gross profit
percentage.  The  outsourcing of content  production work enabled the Company to
develop  a team of  contractors  that  will  assist  the  Company  in  producing
multimedia  content and  applications  that are  crucial to its future  business
operation.


                                       28
<PAGE>

SALES AND MARKETING EXPENSES

Sales and  marketing  expenses  decreased  by $10,627 or 36%,  to $18,833 in the
second  quarter of 2006  compared  to  $29,460  in the  second  quarter of 2005,
primarily as a result of a decrease in travel expenses.


GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses relating to non-related parties increased to
$1,302,061 in 2006 compared to $825,876 in 2005.  These expenses by division are
as follows:
<TABLE>
<CAPTION>
                                         2006                    2005             Increase            %
                                    ---------------         ---------------    -------------        ----
                                                               (Restated)

<S>                                    <C>                     <C>                <C>               <C>
Application division                $     1,044,350         $       516,333    $      528,017       102%
Material handling division                   19,488                  54,224           (34,736)      -64%
Apple division                              238,223                 255,319           (17,096)       -7%
                                    ---------------         ---------------    --------------       ----
Total general and administrative
expenses                            $     1,302,061         $       825,876    $      476,185        58%
                                    ===============         ===============   ===============       ====

</TABLE>

The  increase in general and  administrative  expenses  relating to  non-related
parties was primarily  due to increases  incurred by the  Application  division,
which accounted for 80% and 63%,  respectively,  of the total.  The increase was
primarily attributable to an increase in consulting fees, compensation expenses,
maintenance  expenses,  and professional  fees. The Material  Handling  division
accounted  for 1% and 7% of expenses,  respectively,  of the total.  General and
administrative  expenses for the Material Handling division decreased by 64% The
Apple  division  accounted  for 18% and 31% of  expenses,  respectively,  of the
total.  General and administrative  expenses for the Apple division decreased by
7%.

In 2006, general and administrative expenses consisted of the following: 14% was
for depreciation of tangible assets,  15% was for employee payroll,  18% was for
fees for  professional  and  auditing  services,  1% was for  investor  relation
expenses,  34% was for  compensation  expenses and 18% was for rent,  utilities,
general office supplies,  communications and corporate insurance  expenses.  For
2005, 17% was for depreciation of tangible  assets,  5% was for consulting fees,
21% was for employee  payroll,  13% was for fees for  professional  and auditing
services,  3% was for  investor  relation  expenses,  12%  was for  compensation
expenses   and  29%  was  for  rent,   utilities,   general   office   supplies,
communications and corporate insurance expenses.

General and  administrative  expenses - related parties for the six months ended
June 30, 2006 and 2005 were $72,982 and $42,632,  respectively.  These  expenses
included  management fees and administrative  expenses payable by the Company to
LSH.  LSH  billed  the  Company's  Malaysian  subsidiary,  SDAM,  administrative
expenses of $12,982 and $12,632,  respectively,  for administration and clerical
fees  incurred by LSH on behalf of SDAM.  The Company also  incurred  management
fees of $60,000 and $30,000 in 2006 and 2005,  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  decreased  by $65,469 or 57%,  to $49,438  for the six months
ended June 30, 2006 as compared  to $114,907 in the  comparable  period of 2005.
Interest  expense in 2006 relates to capital lease  obligations  and term loans.
Interest expense in 2005 included  approximately $16,000 related to the $500,000
convertible  term note and $60,682 related to the amortization of the derivative
liability  associated with the term note. In 2005,  interest expense relating to
the term note accounted for 67% of the expense for the period.


AMORTIZATION OF DEBT ISSUANCE COSTS

Amortization  of finance  costs of $24,231 in 2005 relate to the issuance of the
term note on May 28, 2004.


                                       29
<PAGE>

PREVIOUSLY DEFERRED GAIN ON SALE OF TECHNOLOGY - RELATED PARTY

The gain represents the recognition of a previously deferred gain of $44,354 and
$45,658, respectively, related to a similar amount the Company received from its
long-term  receivable - related party. The receivable balance and total deferred
gain was each $183,098, respectively, as of December 31, 2005. This amount 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, the 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.  As a result of cash
payment  received,  the  Company's  long-term  receivable  -  related  party and
deferred  gain balances  were reduced to $144,840  respectively,  as of June 30,
2006.


LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2006, the Company had net cash of $116,226,  and restricted  cash
of $581,803.

In 2006,  operations  were  funded  primarily  from the  proceeds  of a  private
placement and increased bank borrowings.  In addition,  as of June 30, 2006, the
Company owed Patrick Lim, the Company's principal  shareholder,  Chief Executive
Officer  ("CEO") and Chairman  $64,356.  Additionally,  as of June 30, 2006, the
Company owed an  affiliated  company in which Mr. Lim has a financial  interest,
$138,616 for  short-term  cash  advances made to a subsidiary of the Company for
working  capital  purposes  from  time to time and for  management  fees.  These
amounts are unsecured, bear no interest and have no fixed terms of repayment.

Net cash used in operating  activities  of $25,968 in 2006 was  primarily due to
increases in trade  receivables net of non-cash expenses incurred by the Company
and increases in various payables.

Net cash provided by investing  activities of $25,650 was mainly due to disposal
of equipment.

Net cash provided by financing activities of $118,306 was mainly attributable to
higher bank borrowings and a private placement, net of payments made for various
debt.

In addition to internally  generated  funds and financial  support from Mr. Lim,
the Company may seek to raise additional funds from equity or debt financing for
its future working  capital  requirements.  As of June 30, 2006, the Company has
furniture  and  equipment  of  approximately  $1 million for the roll out of its
portal,  build-out of VISIONET and  implementation  of its  business  plan.  The
Company estimates that it may require additional  capital  expenditures of up to
$2.0  million to  implement  its  business  plan.  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 and 2004, 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 work out well and the
Company has sold some of these  companies,  whose operations and management were
not compatible  with the Company's  business plan in 2004. For 2006, the Company
presently  estimates that it may ultimately  incur an additional $2.1 million to
identify,  negotiate  and  acquire  businesses  and/or net  assets in  companies
synergistic to its planned new businesses.  In addition,  the Company  estimates
that in the event it makes such  acquisitions  it would  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.

                                       30
<PAGE>

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 financed by internal funds and bank borrowings.

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

Because the Company  conducts  substantially  all of its operations in Malaysia,
the results of its operations are subject to the risk of fluctuations in foreign
currency  rates.  An  increase  or decrease  in the  exchange  rate  between the
currency  of  Malaysia,  the  Ringgit,  and the  United  States  dollar  will be
reflected in the results of the Company, as results in the Ringgit are converted
to dollars  during the  preparation  of  financial  statements.  The Ringgit has
strengthened  against the dollar by about five percent since it was permitted by
the Malaysian government to fluctuate.


ITEM 3. CONTROLS AND PROCEDURES

As of  the  end of  the  period  covered  by  this  report,  we  carried  out an
evaluation,  under the supervision and with the participation of our management,
including our Chief Executive Officer and our Chief Accounting  Officer,  of the
effectiveness of the design and operation of the Company's  "disclosure controls
and procedures" (as defined in Rule 13a-15(e) under the Securities  Exchange Act
of 1934, as amended).  Based upon that evaluation,  our Chief Executive  Officer
and our Chief  Accounting  Officer  concluded that our  disclosure  controls and
procedures are effective to ensure that information  required to be disclosed by
us in  reports  that we file or submit  under  the  Exchange  Act are  recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities  and Exchange  Commission  (the "SEC")  rules and forms,  and include
controls  and  procedures  designed  to ensure that  information  required to be
disclosed  by  us in  such  reports  is  accumulated  and  communicated  to  our
management,  including  our Chief  Executive  Officer  and our Chief  Accounting
Officer, as appropriate to allow timely decisions regarding required disclosure.


There has been no change in our internal control over financial reporting during
the quarter ended June 30, 2006 that has materially  affected,  or is reasonably
likely to materially affect, our internal control over financial reporting.



                                       31
<PAGE>

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     None.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.


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

     None.


ITEM 5. OTHER INFORMATION

     None.


ITEM 6. EXHIBITS

     (a) Exhibits

     31.1 Certification by Chief Executive Officer Required Under Section 302 of
     Sarbanes-Oxley Act of 2002

     31.2  Certification by Chief Accounting  Officer Required Under Section 302
     of Sarbanes-Oxley Act of 2002

     32.1 Certification by Chief Executive Officer Required Under Section 906 of
     Sarbanes-Oxley Act of 2002

     32.2  Certification by Chief Accounting  Officer Required Under Section 906
     of Sarbanes-Oxley Act of 2002


                                       32
<PAGE>
                                   SIGNATURES

     In accordance  with the  requirements of the Securities and Exchange Act of
1934,  the  Registrant  has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.





                                             SECURED DIGITAL APPLICATIONS, INC.
                                                      (Registrant)



DATE: AUGUST 11, 2006                        BY: /s/ Patrick Soon-Hock Lim
                                             ------------------------------
                                             Patrick Soon-Hock Lim
                                             Chairman & Chief Executive Officer



DATE: AUGUST 11, 2006                        BY: /s/ Voon Fui Yong
                                             ----------------------
                                             Voon Fui Yong
                                             Chief Accounting Officer





                                       33