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 SEPTEMBER 30, 2004 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)

                     11, JALAN 51A/223, 46100 PETALING JAYA,
                               SELANGOR, MALAYSIA
                    (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 reports),  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 November 16, 2004
  -----                        -------------------------------------------------
Common stock, $.00001
 par value                                        93,751,417





<PAGE>
<TABLE>
<CAPTION>
FORM 10-QSB
3RD QUARTER
                                      INDEX
                                                                                                        Page
PART I  -  FINANCIAL INFORMATION

<S>           <C>                                                                                        <C>
         ITEM 1. FINANCIAL STATEMENTS

         Condensed consolidated balance sheet as at September 30, 2004 (Unaudited)                        3

         Condensed consolidated statements of operations for
         the three-month and nine-month periods ended September 30, 2004 and
         September 30, 2003 (Unaudited)                                                                   5

         Condensed consolidated statements of cash flows for the nine-month
         periods ended September 30, 2004 and September 30, 2003 (Unaudited)                              6

         Notes to condensed consolidated financial statements (Unaudited)                               8 - 23

            ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                          24 - 43

         ITEM 3. CONTROLS AND PROCEDURES                                                                 43

PART II - OTHER INFORMATION

         ITEM 1. LEGAL PROCEEDINGS                                                                       44

         ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                             44

         ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                         44

         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                     45

         ITEM 5. OTHER INFORMATION                                                                       45

         ITEM 6. EXHIBITS                                                                                45

         SIGNATURES                                                                                      46
</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
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,  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  operating  in multiple
countries  with  different  laws and  regulations,  the  inability  to  maintain
profitability in the future and the general economic and business  conditions in
Malaysia, the United States and other countries, primarily in Asia, in which the
Company does or seeks to do business.  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
                      CONDENSED CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2004
                                   (Unaudited)


                                     ASSETS
<TABLE>
<CAPTION>

Current assets:
<S>                                                                                                           <C>
     Cash                                                                                        $          360,643
     Cash, restricted                                                                                     6,280,311
     Accounts receivable, less allowance for doubtful accounts of $375,000                                3,933,168
     Accounts receivable, related parties                                                                   273,684
     Other accounts receivable                                                                               63,670
     Prepaid expenses and other assets                                                                       78,487
     Inventories                                                                                            633,935
     Investment held for sale                                                                                23,158
                                                                                                    ---------------
              Total current assets                                                                       11,647,056
Furniture and equipment, net                                                                              1,372,647
Goodwill                                                                                                    991,920
Investment in associate companies                                                                               108
Long-term receivables, related parties                                                                      329,321
Debt issuance costs                                                                                          26,381
                                                                                                    ---------------
                                                                                                 $       14,367,433
                                                                                                    ===============

</TABLE>
                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Current liabilities:
<S>                                                                                                            <C>
     Bank overdraft and borrowings                                                               $          468,658
     Current portion of capital lease obligations                                                            59,077
     Current portion of convertible term note                                                               135,507
     Current portion of term loan                                                                            50,000
     Accounts payable                                                                                     1,538,215
     Accrued expenses                                                                                       164,421
     Amount due to an affiliated company                                                                    102,732
     Amount due to a director                                                                                18,650
     Income tax provision                                                                                    75,094
     Preferred dividend provision                                                                           205,416
                                                                                                    ---------------
              Total current liabilities                                                                   2,817,770
Capital lease obligations, net of current portion                                                            69,233
Convertible term note, net of current portion                                                               310,831
Term loan, net of current portion                                                                           149,070
Deferred gain                                                                                               329,321
                                                                                                    ---------------
              Total liabilities                                                                           3,676,225
                                                                                                    ---------------
</TABLE>




                                   (continued)



                                       3
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                         SEPTEMBER 30, 2004 (CONTINUED)
                                   (Unaudited)




<TABLE>
<CAPTION>
Minority interest                                                                                           716,685

Commitments and contingencies

<S>                                                                                                           <C>
Shareholders' equity:
     Series A convertible preferred stock, $0.10 par value;
       1,000,000 shares authorized; 100,000 shares issued and outstanding                                    10,000
     Series A convertible preferred stock of subsidiary, $0.01 par value;
       6,500,000 shares authorized; 6,000,000 shares issued and outstanding, net                          5,635,167
     Common stock, $.00001 par value; 350,000,000 shares authorized;
       102,371,129 shares issued                                                                                943
     Additional paid-in capital                                                                           3,803,907
     Treasury stock, 9,030,000 shares at cost                                                               (43,875)
     Options                                                                                                 77,094
     Deferred compensation                                                                                  (20,539)
     Warrants                                                                                               492,313
     Preferred stock dividends declared                                                                    (213,954)
     Retained earnings                                                                                      176,898
     Accumulated other comprehensive income                                                                  56,569
                                                                                                    ---------------
              Total shareholders' equity                                                                  9,974,523
                                                                                                    ---------------
                                                                                                 $       14,367,433
                                                                                                    ===============
</TABLE>

      See accompanying notes to condensed consolidated financial statements



                                       4
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)
<TABLE>
<CAPTION>


                                                                   Three months ended              Nine months ended
                                                                      September 30,                  September 30,
                                                                   2004           2003           2004            2003
                                                                  ------         -------        ------          -------
<S>                                                                 <C>            <C>            <C>                <C>
Revenues:
     Related parties                                            $   379,210    $   542,500     $ 1,193,685    $   932,526
     Others                                                       5,127,319      3,740,899      13,946,291     10,818,268
                                                                -----------    -----------     -----------    -----------
                                                                  5,506,529      4,283,399      15,139,976     11,750,794

Cost of revenues                                                  4,856,148      3,615,842      13,484,342     10,354,533
                                                                -----------    -----------     -----------    -----------
Gross profit                                                        650,381        667,557       1,655,634      1,396,261
                                                                -----------    -----------     -----------    -----------
Operating expenses:
     Sales and marketing                                             17,266          3,835          25,284         19,287
     General and administrative:
       Related parties                                               21,315         15,000          63,947         45,000
       Others                                                       474,015        190,894       1,157,889        562,097
                                                                -----------    -----------       -----------  -----------
Total operating expenses                                            512,596        209,729       1,247,120        626,384
                                                                -----------    -----------     -----------    -----------
Income from operations                                              137,785        457,828         408,514        769,877
                                                                -----------    -----------     -----------    -----------
Other income (expense):
     Interest expense                                               (15,897)        (2,919)        (26,051)        (9,414)
     Interest income                                                  8,469             --           8,469             --
     Gain on disposal of assets, related party                       18,421         28,420         225,679         48,157
     Other income                                                       475             --           5,781             --
     Share of associate companies' losses                           (13,553)            --         (20,132)            --
                                                                -----------    -----------     -----------    -----------
                                                                     (2,085)        25,501         193,746         38,743
                                                                -----------    -----------     -----------    -----------

Income before income tax and minority interest                      135,700        483,329         602,260        808,620
Income tax                                                          (16,579)       --              (49,474)       --
                                                                -----------    -----------     -----------    -----------
Income before minority interest                                     119,121        483,329         552,786        808,620
Minority interest                                                   (23,409)       (70,767)        (57,659)      (115,828)
                                                                -----------    -----------     -----------    -----------
Net income                                                           95,712        412,562         495,127        692,792
Preferred stock dividend                                           (158,788)            --        (213,954)            --
                                                                -----------    -----------     -----------    -----------
Net (loss) income applicable to common shareholders             $   (63,076)   $   412,562     $   281,173    $   692,792
                                                                ===========    ===========     ===========    ===========

Net (loss) income per common share:
     Basic and diluted                                          $         *    $         *     $         *    $         *
                                                                ===========    ===========     ===========    ===========
Weighted average shares outstanding:
     Basic                                                       91,147,968     97,749,551      94,581,079     98,104,372
                                                                ===========    ===========     ===========    ===========
     Diluted                                                     91,147,968     97,845,122      95,189,163     98,108,613
                                                                ===========    ===========     ===========    ===========
</TABLE>

* Less than $.01 per share


      See accompanying notes to condensed consolidated financial statements




                                       5
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                             Nine Months Ended
                                                                                              September 30,
                                                                                           2004                 2003
                                                                                         --------             --------

<S>                                                                                        <C>                    <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net cash (used in) provided by operating activities                            $        (434,568)    $       463,353
                                                                                    -----------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from disposal of equipment                                                       25,991                 495
     Purchase of equipment                                                                    (20,173)             (1,127)
     Net cash received on acquisition of business                                                  83                  --

                                                                                    -----------------     ---------------
       Net cash provided by (used in) investing activities                                      5,901                (632)
                                                                                    -----------------     ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of convertible term note, net                                     470,323                  --
     Repayment of convertible term note                                                        (5,762)                 --
     Payment of expenses in connection with
       subsidiary preferred stock issuance                                                   (296,323)                 --
     Proceeds from exercise of stock options                                                   12,000               2,805
     Proceeds from issuance of shares of common stock                                         500,000              50,000
     Payment for reacquisition of shares of common stock                                           --             (52,298)
     Net repayment of advances from affiliated company                                        (45,593)            (76,246)
     Net repayment of advances to a director                                                  (37,906)           (198,488)
     Payment of obligation under capital leases                                               (52,348)            (17,424)
                                                                                    -----------------     ---------------
           Net cash provided by (used in) financing activities                                544,391            (291,651)
                                                                                    -----------------     ---------------

Net increase in cash                                                                          115,724             171,070
Cash, beginning of period                                                                     244,919              10,077
                                                                                    -----------------     ---------------
Cash, end of period                                                                 $         360,643     $       181,147
                                                                                    =================     ===============

Supplemental disclosure of non-cash financing activities:

Preferred stock (Note 9)
   Restricted cash received in exchange for preferred stock
   of subsidiary                                                                    $       6,500,000     $            --
                                                                                    =================     ===============
Issuance of common stock for services rendered by consultant
   with regard to equity transaction                                                $         133,500     $            --
                                                                                    =================     ===============
Payments on accounts receivable made directly by customers to an
   affiliated company for amounts the Company owed it.                              $              --     $        35,263
                                                                                    =================     ===============
</TABLE>

                                  (continued)

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


BUSINESS ACQUISITION (Note 3):

Acquisition of subsidiary in February 2004:

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


Acquisition of subsidiary in September 2004:

Net assets acquired:
   Property, furniture and equipment                                                  $       115,300
   Inventories                                                                                553,586
   Accounts receivable                                                                        220,239
   Cash, restricted                                                                           271,866
   Cash                                                                                        26,397
   Bank overdraft and borrowings                                                             (468,658)
   Accounts payable                                                                          (854,132)
   Term loan                                                                                 (199,070)
   Goodwill                                                                                   520,770
                                                                                      ---------------
                                                                                              186,298
Less: Minority interests                                                                     (159,984)
      Cash acquired                                                                           (26,397)
                                                                                      ---------------
Net cash received on acquisition of subsidiary                                        $           (83)
                                                                                      ===============

</TABLE>

      See accompanying notes to condensed consolidated financial statements


                                       7
<PAGE>
                       SECURED DIGITAL APPLICATIONS, INC.
          NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)

1.       BASIS OF PRESENTATION

The accompanying  unaudited interim consolidated financial statements of Secured
Digital  Applications,  Inc.  (the  "Company")  include the  accounts of Secured
Digital Applications, Inc. and its following subsidiaries:

1.   EyStar  Media Inc.  ("EMI"),  a Delaware  corporation  wholly-owned  by the
     Company;
2.   SDA America,  Inc.  ("SDAA"),  a Delaware  corporation  wholly-owned by the
     Company;
3.   Secured  Digital   Applications   (M)  Sdn  Bhd  ("SDAM")  (f/k/a  Animated
     Electronic  Industries Sdn Bhd), Amour Multi Systems Sdn Bhd ("AMS") (f/k/a
     Asiaco Multi Corporation Sdn Bhd) and Secured Shipping Sdn Bhd ("SS"),  all
     Malaysian corporations wholly-owned by the Company;
4.   Perwimas  Telecommunications  Sdn Bhd ("PTSB"),  SDAM's 86% owned Malaysian
     subsidiary;
5.   Temasya Wira Sdn Bhd ("TW"), SDAM's 60% owned Malaysian subsidiary;
6.   Asiaco  Material  Handling  (East Coast) Sdn Bhd  ("AEC"),  AMS's 80% owned
     Malaysian subsidiary;
7.   Asiaco Logistic Sdn Bhd ("ALG"), AMS's 67% owned Malaysian subsidiary;
8.   Asiaco Services Sdn Bhd ("ASS"), AMS's 60% owned Malaysian subsidiary;
9.   Asiaco Taiping Sdn Bhd ("ATG"), AMS's 62% owned Malaysian subsidiary,  from
     the date of acquisition on February 9, 2004;
10.  Digital  Image ID Sdn Bhd ("DID")  (f/k/a Vista  Positive Sdn Bhd),  SDAM's
     wholly-owned  subsidiary,  from the date of  incorporation  on February 17,
     2004;
11.  Gallant Service Centre (M) Sdn Bhd ("GSC"), SDAM's wholly-owned subsidiary,
     from the date of acquisition on September 29, 2004;
12.  Gallant IT Holdings Sdn Bhd ("GIH"),  GSC's 55% owned subsidiary,  from the
     date of acquisition on September 29, 2004; and
13.  Gallant  Zone  (M) Sdn Bhd  ("GZ"),  Gallant  IT  Distribution  (M) Sdn Bhd
     ("GID") and Gallant Focus (M) Sdn Bhd ("GF"), all wholly-owned subsidiaries
     of GIH from the date of  acquisition  on September 29, 2004 and,  including
     GIH, such  subsidiaries  may sometimes  collectively  be referred to as the
     "Gallant group" of companies.

All significant  intercompany  accounts and transactions have been eliminated on
consolidation.

The unaudited condensed  consolidated financial statements presented herein have
been  prepared in  accordance  with the  instructions  to Form 10-QSB and do not
include all the  information  and note  disclosures  required  by United  States
generally accepted accounting principles for complete financial  statements.  In
the opinion of management,  all adjustments (consisting only of normal recurring
adjustments)  which are  necessary to provide a fair  presentation  of financial
position,  operating  results and cash flows for the interim  periods  presented
have been made. It is the Company's  opinion  that,  when the interim  financial
statements are read in  conjunction  with the December 31, 2003 Annual Report on
Form 10-KSB,  the  Company's  disclosures  are adequate to make the  information
presented  not  misleading.  The results of operations  for the interim  periods
presented are not  necessarily  indicative of the results to be expected for the
entire year.


                                       8
<PAGE>
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; and
o    fees earned  from rental and  servicing  of  material  handling  equipment,
     provision  of  land  transportation,   engineering  and  industrial  moving
     services.

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

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-month  and nine-month  periods ended September 30, 2004 and 2003.
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                  Nine Months Ended
                                                      September 30,     September 30,    September 30,     September 30,
                                                          2004              2003              2004             2003

<S>                                                            <C>              <C>            <C>                    <C>
Net income                                                     $   96           $   413        $     495         $     693

Preferred stock dividends                                        (159)               --             (214)               --

                                                    ------------------ ---------------- ----------------- ----------------
Net (loss) income available to common shareholders             $  (63)          $   413        $     281         $     693
                                                    ================== ================ ================= ================

Weighted average shares outstanding - basic                    91,148            97,750           94,581            98,104
                                                    ================== ================ ================= ================

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


*  less than $.01 per share

</TABLE>


                                       9
<PAGE>
2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

NET INCOME PER COMMON SHARE (continued)
<TABLE>
<CAPTION>

                                                            Three Months Ended                  Nine Months Ended
                                                        September 30,    September 30,    September 30,     September 30,
                                                           2004              2003              2004             2003


<S>                                                            <C>              <C>               <C>              <C>
Weighted average shares outstanding - basic                    91,148           97,750            94,581           98,104
Common stock issuable to consultant                                --               95               436                5
Dilutive stock options and warrants                                --               --               172               --

                                                    ------------------ ---------------- ----------------- ----------------
Weighted average shares outstanding - diluted                  91,148           97,845            95,189           98,109
                                                    ================== ================ ================= ================

Net (loss) income per share -diluted                               $*               $*                $*               $*
                                                    ================== ================ ================= ================
</TABLE>

* Less than $.01 per share

GOODWILL

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 fair
market  value of tangible  assets  acquired.  The  Company  performed a goodwill
impairment  test in the fourth  quarter  of 2003 on  goodwill  arising  from the
purchase of PTSB and determined that there was no goodwill impairment as of that
test date. A goodwill  impairment test will be performed  annually in the fourth
quarter or upon significant changes in the Company's business environment.

INVENTORIES

Inventories,  which are comprised of peripherals for  surveillance  and wireless
communication,   material  handling   equipment  and  related  spare  parts  and
accessories,  and 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 excess of cost over
par value is allocated to additional paid-in capital. The Company reissues stock
from the treasury on a first-in, first-out basis.



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

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-month and nine-month periods ended September 30, 2004, the Company
made a provision of $16,579 and $49,474, respectively, net of the benefit of any
available  net  operating  losses,  for income tax payable on its  operations in
Malaysia.  There was no  provision  for  income  taxes for the  three-month  and
nine-month  periods ended  September 30, 2003, as net income was offset by a net
operating   loss  carry   forward.   At  December  31,  2003,  the  Company  had
approximately  $2.6 million of net operating loss carry forwards,  of which $1.1
million relates to the Company's activities in Malaysia and $1.5 million relates
to the Company's  activities in the United  States.  The Malaysian net operating
loss carry forward,  which cannot be transferred  between  subsidiaries,  can be
carried  forward  indefinitely  while the Untied States net operating loss carry
forward  expires  through the year 2023.  The United States net  operating  loss
carry forward may be subject to annual limitations based on ownership changes in
the Company's common stock as provided by in Section 382 of the Internal Revenue
Code.

ASSOCIATE COMPANIES - EQUITY ACCOUNTING METHOD

The Company accounts for its investment in common stock of companies in which it
has a  long-term  equity  interest  and  where it has the  ability  to  exercise
significant  influence,  but not control,  over operating and financial policies
based on the equity  method.  The equity method is a method of accounting  under
which the Company  initially  records an investment in the stock of an associate
company at cost and adjusts the carrying  amount of the  investment to recognize
the  Company's  share of the earnings and losses after the date of  acquisition.
The amount of the adjustment is included in the  determination  of the Company's
net  income  and such  amount  reflects  adjustments  similar  to those  made in
preparing  consolidated  financial statements including adjustments to eliminate
intercompany gains and losses, and to amortize,  if appropriate,  any difference
between  the cost and the  underlying  equity  in net  assets  of the  associate
companies at the date of investment.  The carrying amount of the investment will
also be reduced by dividends received from the associate companies.

STOCK-BASED COMPENSATION

The Company has adopted SFAS No. 123,  Accounting for Stock-Based  Compensation.
As  permitted  by SFAS  No.  123,  the  Company  measures  compensation  cost in
accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees  and related  interpretations.  In December  2002,  the FASB
issued SFAS No. 148,  Accounting  for  Stock-Based  Compensation  Transition and
Disclosure.  This  statement  amends SFAS No. 123,  Accounting  for  Stock-Based
Compensation,  and establishes  two  alternative  methods of transition from the
intrinsic  value method to the fair value method of accounting  for  stock-based
employee compensation.  In addition,  SFAS No. 148 requires prominent disclosure
about the effects on reported  net income  (loss) and  requires  disclosure  for
these  effects  in  interim  financial  information.   The  provisions  for  the
alternative  transition  methods are  effective  for fiscal  years  ending after
December 15, 2002,  and the amended  disclosure  requirements  are effective for
interim  periods  beginning  after  December 15, 2002.  The Company  adopted the
disclosure  only  provisions  of SFAS  No.  148 in 2003 and  plans  to  continue
accounting for stock-based compensation under APB 25.



                                       11
<PAGE>
2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK-BASED COMPENSATION (continued)

On September 16, 2002, the Company granted options to purchase 300,000 shares of
the Company's common stock at $0.12 per share to a consultant for services to be
provided to the Company.  These options are exercisable  through September 2007,
contingent upon continuous  service by the consultant  through  specified dates.
100,000 of the options,  which vested March 15, 2003,  were valued at $0.044 per
share, 100,000 of the options,  which vested May 15, 2003, were valued at $0.048
per share,  and 100,000 of the options,  which vested  September 15, 2003,  were
valued at $0.056 per share, based upon the Black-Scholes  option-pricing  model,
resulting in recognition of compensation expense of $8,500 during the nine-month
period ended  September 30, 2003.  100,000 of the options were exercised on July
2, 2004 for a cash consideration of $12,000.

On August 1, 2004,  the Company  granted  options to purchase  an  aggregate  of
300,000 shares of the Company's  common stock at $0.30 per share to a consultant
for  services to be  provided  to the  Company.  These  options are  exercisable
through July 2009,  contingent upon continuous service by the consultant through
specified  dates.  100,000  options  that vest on January 31, 2005 are valued at
$0.064 per share,  100,000 options that vest on April 30, 2005 and the remaining
100,000  options that vest on July 31, 2005 are valued at $0.101 per share based
upon  the  Black-Scholes  option-pricing  model,  resulting  in  recognition  of
compensation  expense of $6,000 during the nine-month period ended September 30,
2004.

On August 3, 2004, the Company granted certain officers, directors and employees
of the Company options to purchase up to an aggregate of 2,000,000 shares of the
Company's common stock at $0.20 per share.  The options are exercisable  through
August     2009,     contingent     upon     continuous     service    by    the
officers/directors/employees   through  specified  dates.  500,000  options  are
exercisable on October 3, 2004,  200,000  options are exercisable on February 3,
2005,  500,000  options are  exercisable  on August 3, 2005,  and the  remaining
800,000  options are  exercisable  in equal numbers on each of February 3, 2006,
2007, 2008 and 2009,  respectively.  In addition,  on August 3, 2004 the Company
granted  options to purchase  100,000  shares of the  Company's  common stock at
$0.12 per share to an independent  director as  compensation  for serving on the
Company's  Board of Directors.  These  options are  exercisable  with  immediate
effect through  August 2009.  For the nine months ended  September 30, 2004, the
Company valued the foregoing 2,100,000 options at $40,094 based on the intrinsic
value method as permitted  under APB25 and  recognized  compensation  expense of
$40,094.

If the Company had  accounted  for the  foregoing  2,100,000  options  issued to
employees and officers in accordance  with FASB statement No. 148, the Company's
net (loss)  income and net (loss)  income per share  would be  approximately  as
follows:
<TABLE>
<CAPTION>


                                                                THREE MONTHS ENDED         NINE MONTHS ENDED
                                                              September 30 September 30 September 30 September 30
                                                                 2004          2003        2004          2003
                                                              ------------ ------------ ------------ ------------
<S>                                                           <C>           <C>          <C>         <C>
Net (loss) income                                             $   ( 63,076)$    412,562 $    281,173 $    692,792
Add:  Stock-based employee compensation expense                     40,094           --       40,094           --
      included in reported net income, net of related tax
Less: Total stock-based employee compensation expense              (76,1OO)          --      (76,100)          --
      determined under fair value based method for all
      awards, net of related tax effects
                                                              ------------ ------------ ------------ ------------
Pro forma net (loss) income                                   $    (99,082)$    412,562 $    245,167 $    692,792
                                                              ============ ============ ============ ============
Income (loss) per share:
 Basic and diluted - as reported                              $          * $          * $          * $          *
 Basic and diluted - pro forma                                $          * $          * $          * $          *
                                                              ============ ============ ============ ============
* Less than $.01 per share
</TABLE>


                                       12
<PAGE>
2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK-BASED COMPENSATION (continued)

The value of the options issued during the three and nine months ended September
30, 2004 is calculated using the Black-Scholes methodology as prescribed by SFAS
No. 148. The Company  utilized an expected  dividend  yield of 0, expected stock
price volatility ranging from 115% to 163%, risk free interest rate ranging from
2% to 4%, and expected life of the option ranging from 3 months to 4.5 years.

The Company did not issue any options to employees and officers during the three
and nine months ended September 30, 2003.

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.

RECLASSIFICATIONS

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


3.   BUSINESS ACQUISITION

On November  17,  2003,  SDAM  signed an asset  purchase  agreement  with Asiaco
Material Handling Sdn Bhd ("AMH"),  a Malaysian  company,  to purchase,  through
AMS, the business assets and selected  liabilities of AMH and seven companies in
the Asiaco group.  The definitive  agreement also provides for AMS to purchase a
majority equity interest in the remaining  sixteen companies in the Asiaco group
from  AMH's  majority  shareholder.  Pursuant  to this  agreement,  the  Company
acquired a majority equity interest in three Malaysian  companies on December 9,
2003:  80% in Asiaco  Material  Handling  (East  Coast)  ("AEC"),  67% in Asiaco
Logistic ("ALG") and 60% in Asiaco Services ("ASS") for a total consideration of
$193,911.  On February 9, 2004,  the Company  acquired a 62% equity  interest in
Asiaco  Taiping  ("ATG")  for a  provisional  consideration  of  $74,135.  These
acquisitions have been accounted for as purchases. The total consideration is to
be satisfied by issuance of AMS's common stock to the owner upon full completion
of the asset purchase  agreements between the Company and AMH. Through September
30,  2004,  the Company had paid a total of $263,158 to AMH as advances  for the
incorporation of AMS and for the purchase of equity in four subsidiaries as well
as  two  associate  companies:  46%  in  Asiaco  Transport  and  33%  in  Asiaco
Engineering. These advances will be deducted from the final purchase price to be
determined by SDAM when it has completed its verification of the net asset value
of AMH and its  subsidiaries.  The purchase price for the entire  acquisition is
expected  to be  approximately  $1.8  million  and  shall  be  determined  after
completion of the financial due diligence. As a result of these acquisitions the
Company entered into the equipment material handling business.





                                       13
<PAGE>
3.   BUSINESS ACQUISITION (continued)

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets  acquired and the  liabilities  assumed from ATG at February 9, 2004, the
date of the  acquisition.  The  allocation of the purchase  prices is subject to
refinement.

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

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

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

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

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

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

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



                                       14
<PAGE>
3.   BUSINESS ACQUISITION (continued)

GIH has the following wholly-owned subsidiaries:

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

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

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

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

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets acquired and the liabilities  assumed from the Gallant group of companies
at September  29,  2004,  the date of the  acquisition.  The  allocation  of the
purchase price is subject to refinement.

Property, furniture and equipment             $       115,300
Inventories                                           553,586
Accounts receivable                                   220,239
Cash, restricted                                      271,866
Cash                                                   26,397
Bank overdraft and borrowings                        (468,658)
Accounts payable                                     (854,132)
Term loan                                            (199,070)
Minority interests                                   (159,984)
Goodwill                                              520,770
                                              ---------------
                                              $        26,314
                                              ===============

The following  unaudited  proforma  financial  information  presents  results of
operations  as if the above  acquisitions  had occurred at the  beginning of the
respective three and nine-month periods ended September 30, 2004 and 2003:
<TABLE>
<CAPTION>

                                                             Three Months Ended                  Nine Months Ended
                                                                September 30                       September 30
                                                            2004             2003              2004              2003

<S>                                                  <C>                <C>                <C>              <C>
Revenue                                              $      6,312,917   $     5,234,525    $   17,586,112   $    14,604,174
                                                     ================   ===============    ==============   ===============
Net income                                           $         26,873   $       453,338    $      276,463   $       800,541
                                                     ================   ===============    ==============   ===============
Basic and diluted
  net income per common share                        $              *  $             *     $            *   $             *
                                                     ================   ===============    ==============   ===============
</TABLE>

* Less than $0.01 per share

                                       15
<PAGE>
4.   RESTRICTED CASH

As of  September  30,  2004,  the  Company  has the  following  restricted  cash
balances:

Cash deposited with a financial institution in US             $        6,008,445
Cash deposited with financial institutions in Malaysia                   271,866
                                                              ------------------
                                                              $        6,280,311
                                                              ==================

Restricted  cash  of  $6,008,445  deposited  in a US  financial  institution  is
security for the performance of the Company and its subsidiaries' obligations to
the Master Fund (see note 9 below).

Restricted cash of $271,866 (RM1,003,090)  deposited with financial institutions
in Malaysia is time deposit  accounts used as collateral for trade financing and
bank overdraft  facilities granted to GIH and GZ. The time deposit accounts have
a maturity period of one year and are automatically  renewed on an annual basis.
The time deposit  accounts earn interest at an aggregate rate of 3.7% per annum.
Interest  earned on the time deposits is to be added on and rolled over with the
principal sum.

5. BANK OVERDRAFT AND BORROWINGS

As of September  30, 2004,  the Company  assumed the following  bank  facilities
arising from its acquisition of GIH and its subsidiaries:

                                               Limit               Utilized
                                               -----               --------
Bank overdraft                        $        132,000     $        127,658
Trade financing facilities                     368,000              341,000
                                      ----------------     ----------------
                                      $        500,000     $        468,658
                                      ================     ================

The above bank facilities bear interest at rates ranging from 1.75% to 8.40% per
annum and are secured by:

a) a pledge on the time deposit accounts; and
b) personal guarantees provided by third parties and two directors of GIH.



                                       16
<PAGE>
6.   RELATED PARTY ACTIVITY

During the  nine-month  periods ended  September 30, 2004 and 2003,  the Company
recognized  revenue  of  $1,193,685  and  $932,526,  respectively,  for  project
consulting fees from a related party, pursuant to four consulting contracts.  As
of September 30, 2004, $273,684 of the $1,193,685 was in accounts receivable.

During the  nine-month  period ended  September 30, 2003, in lieu of actual cash
payment of project consulting fee receivables,  management  directed the related
party to pay a total of $30,000 to an affiliated company to whom the Company had
outstanding accounts payable. The net effect to the Company was that revenue was
recognized and recorded payables were reduced by equal amounts.

At December 31,  2003,  long-term  receivables,  related  parties,  consisted of
$555,000 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  $225,679 and $48,157
of the outstanding  receivable during the nine-month periods ended September 30,
2004 and  2003,  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.  During 2003, in lieu of actual cash
payment of this Company receivable, management directed the related party to pay
the $5,263 to an affiliated company to whom the Company had outstanding accounts
payable.


7.   TERM LOAN

As of September 30, 2004, the Company  assumed a term loan liability of $199,070
(RM756,465)  arising from its acquisition of GIH and its subsidiaries.  The term
loan,  which was granted by a financial  institution in Malaysia,  is secured by
personal guarantees provided by third parties and two directors of GIH and bears
interest at 8.4% per annum.



                                       17
<PAGE>
8.   CONVERTIBLE TERM NOTES

On May 28, 2004, the Company entered into a Securities  Purchase  Agreement 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, which is convertible into shares of
the Company's  common stock at a fixed  conversion  price of $0.35 per share and
warrants to purchase up to 300,000  shares of the Company's  common  stock.  The
Note has a three-year  term and a coupon at a rate per annum  equivalent  to the
"prime  rate"  published  in The Wall Street  Journal from time to time plus 2%,
subject  to a floor of 6% per  annum.  The  monthly  interest  will be  adjusted
downward  based on a minimum  increase  of 25 percent of the price of the common
stock above the  conversion  price.  The warrants have a seven-year  term and an
exercise price of $0.40 per share for the first 100,000 shares,  $0.43 per share
for the second 100,000 shares and $0.47 per share for the third 100,000  shares.
Black-Scholes  valuations were performed on the 300,000 warrants  resulting in a
gross debt  discount  of $47,900  which will be  amortized  over the term of the
debt,  or 36 months,  using the interest  rate method.  $326,000 of the proceeds
were  used  for  payment  of  expenses  relating  to  issuance  of the  Note and
convertible  preferred stock to secure an additional $6.5 million financing from
the Master  Fund (see Note 9).  The  balance  of the Note  proceeds  was used as
working capital.  The Company has granted a security  interest in all of its net
assets and the net assets of one of its wholly  owned  subsidiaries,  until such
time that the Note is  satisfied.  The principal and the interest can be paid in
cash or in common stock at a fixed  conversion  price of $0.35 per share, at the
Master Fund's option,  provided that the volume weighted average price (VWAP) of
the common stock for the ten trading days immediately  preceding the due date is
110% above the exercise price. The fixed conversion price was reset to $0.20 per
share  pursuant to an agreement  entered into by the Master Fund and the Company
on August  11,2004  (see  Note 9),  and the  reset  may  result in a  beneficial
conversion  feature.  During the three months  ended  September  30,  2004,  the
Company  redeemed  $5,762  principal of the Note with cash.  As of September 30,
2004,  outstanding principal of the Note was $446,338. On November 12, 2004, the
Master  Fund  submitted  a notice to  convert  $29,412 of the Note and $4,646 of
accurred  interest  to  170,288  shares  of  the  Company`s  common  stock  at a
conversion price of $0.20 per share.


9.   PREFERRED STOCK

On May 25,  2004,  the  Company  executed a share  exchange  agreement  with its
Chairman  and  Chief  Executive  Officer,  Mr.  Patrick  Lim,  whereby  Mr.  Lim
surrendered  8,000,000  shares of the  Company's  common  stock in exchange  for
100,000  shares  of the  Company's  newly  created  Series A Voting  Convertible
Preferred Stock (the "Voting  Preferred"),  which is convertible  into shares of
common stock at a fixed ratio of 80 shares of common stock for 1 share of Voting
Preferred  stock.  The  8,000,000  shares  were  returned  to  treasury  and are
available  for  re-issuance  at a future  date.  The Voting  Preferred  stock is
entitled to cumulative  dividends at $2.20 per annum, payable in common stock at
$.28 per share.  Each share of the Voting Preferred is entitled to voting rights
equivalent  to 80 shares of common  stock.  The Series A preferred is subject to
mandatory conversion 10 years after its issuance.

On May 28, 2004, the Company and one of the Company's wholly owned subsidiaries,
SDA America, Inc. ("SDAA") entered into a Securities Purchase Agreement with the
Master Fund under which the SDAA issued 6,500,000 shares of Series A Convertible
Preferred Stock (the "Series A Preferred") at a price of $1.00 per share,  which
is  convertible  into shares of the  Company's  common  stock,  and  warrants to
purchase up to 3,000,000  shares of the  Company's  common  stock.  The Series A
Preferred is entitled to cumulative  preferential  dividends at a rate per annum
equivalent to the "prime rate" published in The Wall Street Journal from time to
time plus 2%, subject to a floor of 6% per annum.  The preferred stock dividends
can be paid in  cash or in  shares  of the  Company's  common  stock  at a fixed
conversion price of $0.35 per share, at the Master Fund's option,  provided that
the volume weighted  average price (VWAP) of the Company's  common stock for the
ten trading days  immediately  preceding the due date is 110% above the exercise
price.  The warrants have a seven-year  term and an exercise  price of $0.40 per
share for the first 1,000,000  shares,  $0.43 per share for the second 1,000,000
shares  and  $0.47  per  share for the  third  1,000,000  shares.  The  Series A
Preferred has a liquidation  value of $1.00 per share.

                                       18
<PAGE>
9.   PREFERRED STOCK (continued)

On August 11,  2004,  the Company and the Master Fund  executed an  amendment to
certain  agreements  governing  the  terms  under  which  the Note and  Series A
Preferred  issued to the Master Fund may be  converted  into the common stock of
the  Company.  Under the terms of the  amendment,  the Master Fund may convert a
portion of the Note and Series A Preferred as follows:  the first  $2,000,000 of
conversions  have been reset to a price of $0.20 per share (whether as principal
repayment or accrued and unpaid  interest or dividends);  the next $1,000,000 of
conversions  have  been  reset to a price  of $0.25  per  share.  The  remaining
conversions  permitted under the terms of the original  securities issuance will
remain  unchanged at $0.35 per share.  In addition to resetting  the  conversion
prices for a portion of the transaction, the amendment provides for all dividend
and interest payments payable under the investment would accrue,  rather than be
payable  in cash,  until the next  conversion  into  common  stock  occurs.  The
amendment  provides for a waiver of cash  payments of interest or dividends  due
prior to the execution of the amendment,  with any such amounts to be accrued to
the  amounts  payable  under the terms of the Note or  Series A  preferred.  The
amendment stipulates that at such time as an amended  registration  statement is
declared  effective,  the Master Fund will convert  $500,000 of principal and/or
accrued and unpaid  dividends of the Series A Preferred into the common stock of
the Company provided that the price of the Company's stock is at least $0.20 per
share at the time. The Master Fund converted  $500,000 of the Series A Preferred
in September 2004,  resulting in a decrease in preferred stock of $469,957,  and
the issuance of 2,500,000 shares of common stock.

On November  15,  2004,  the Company and the Master Fund  executed an  amendment
("Amendment No. 2") to the Securities Purchase Agreement, dated May 28, 2004 and
as amended to date ("SPA").  Under the terms of Amendment No. 2, the Master Fund
agreed to remove the  condition  from the SPA that required the Company to cause
its common stock to be listed on the Nasdaq  SmallCap  Market,  Nasdaq  National
Market System,  the American Stock Exchange or the New York Stock Exchange on or
prior to November 15, 2004 (the "Listing  Condition").  As consideration for the
removal of the Listing  Condition,  the Company has agreed to issue  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.

Pursuant to the Securities  Purchase  Agreement  between the Master Fund and the
Company and a restricted  account  agreement  entered  into by the Company,  the
Master  Fund and a US bank,  the  $6,500,000  investment  was  deposited  into a
restricted  account as  security  for the  performance  of the  Company  and its
subsidiaries'  obligations to the Master Fund. The proceeds are restricted until
the receipt of confirmation from the Securities and Exchange  Commission ("SEC")
that an effective  registration  statement under the Securities Act of 1933 with
respect  to such  investment  has  been  declared  effective.  At that  time the
preferred stock is convertible, subject to certain conditions, into common stock
of the Company at the option of the Master Fund. Additionally, at that date, the
Company  and the  Master  Fund  can  agree  to use the  restricted  cash to make
acquisitions   of   companies   that  meet   agreed-upon   criteria  for  sales,
profitability and accounting standards.

As a result of issuing to the Master Fund an  aggregate  of  3,000,000  warrants
with the $6.5 million convertible  preferred stock, the Company recorded a total
of $479,000  discount on the $6.5 million  convertible  preferred stock based on
applying a Black-Scholes  valuation which resulted in a net  reclassification of
$479,000  reducing  additional  paid-in  capital and  increasing  warrants.  All
Black-Scholes   valuations   referenced   and  related   entries  are   non-cash
transactions.

The  conversion of $500,000 of the Series A Preferred in September 2004 resulted
in the release of $500,000 from the restricted account.


                                       19
<PAGE>
10.   COMMON STOCK

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

On May 25, 2004,  the Company  reacquired  8,000,000  shares of its common stock
pursuant to a share  exchange  agreement  with its Chairman and Chief  Executive
Officer,  Mr. Patrick Lim,  whereby Mr. Lim surrendered  8,000,000 shares of the
Company's  common stock in exchange for 100,000  shares of the  Company's  newly
created Series A Voting Convertible  Preferred Stock. These shares were returned
to treasury and are  available  for  re-issuance  at a future date. On August 9,
2004, the Company reissued 25,000 shares of common stock from its treasury stock
to a consultant as payment for services rendered to the Company in July 2004 and
recognized  $5,750 as  compensation  expenses based on the market value of $0.23
per share on the date of issuance.  As of September 30, 2004,  the Company had a
balance of 9,030,000 repurchased shares in its treasury stock valued at $43,875.

On June 4, 2004, the Company issued 181,632 shares of common stock at $0.245 per
share for a total  consideration of $44,500; on July 2, 2004, the Company issued
176,237 shares of common stock at $0.253 per share for a total  consideration of
$44,500;  and on August 2, 2004,  the Company  issued  189,361  shares of common
stock at $0.235 per share for a total  consideration of $44,500, to a consultant
as payment for fees of $133,500 for  services  rendered in  connection  with the
Company's  financing  transactions  with the Master  Fund.  The number of shares
issued was  determined by dividing the amount payable by the mean average of the
prior day's closing bid and asked prices as published on the OTC Bulletin Board.

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

On July 30,  2004,  the  Company  issued  240,000  shares of  common  stock to a
consultant,  pursuant to a  compensation  agreement  dated July 15, 2004,  under
which the Company is to issue an aggregate of 960,000 shares of its common stock
to the  consultant as payment for services to be rendered to the Company for the
twelve-month  period  ending July 14,  2005.  The 240,000  shares were valued at
$0.27 per share,  based on the  market  price on the date of  issuance,  and the
Company  recognized  compensation  expenses  of  $54,000  for the three and nine
months ended  September 30, 2004. In November  2004,  the Company issued another
240,000 shares of common stock to the consultant. These were valued at $0.25 per
share.

In August 2004,  pursuant to a compensation  agreement between the Company and a
consultant,  the Company authorized the issuance of 120,000 shares of its common
stock to the  consultant  as payment for  services to be rendered to the Company
for the twelve-month period ending in July 2005. The common stock will be issued
to the consultant on a quarterly basis commencing in August 2004.



                                       20
<PAGE>
11.   PROPOSED BUSINESS TRANSACTIONS

In December 2003,  the Company  entered into two Joint Venture  Agreements  with
Amove Resources Sdn Bhd ("AR") to jointly  implement a secured  shipping service
and a Central  Monitoring  Service  ("CMS") in the northern  region of Malaysia,
where AR is  currently  providing  armed guard  services to clients that include
factories,  offices and homes.  Pursuant to the Agreement,  the Company was also
granted an option to  purchase  a 51% equity  interest  in AR for  $550,000.  On
January 30, 2004,  the  Company's  subsidiary,  SDAM,  entered into a definitive
agreement  to  acquire  51%  equity in AR from AR's  principal  shareholder  for
$526,315 in cash.  SDAM made an initial cash payment of $26,315.  The balance of
the purchase  price is to be paid at closing,  which was to occur by October 31,
2004.  In  November  2004,  both  parties  agreed not to proceed  with the Joint
Venture  Agreements and the acquisition  because AR's principal  shareholder was
not able to fulfill  certain  conditions  precedent as stated in the  definitive
agreement. The initial $26,315 cash is to be refunded by November 30, 2004.

On December 6, 2003,  the Company  executed a  definitive  agreement  with AMH's
principal  shareholder and Asiaco Material Handling (Thailand) Co. Ltd. ("AMHT")
to purchase  the assets and business of AMHT.  On December 8, 2003,  the Company
announced  the  incorporation  of Asiaco Multi  Corporation  (Thailand)  Co. Ltd
("AMCT"),  to be used as a special  vehicle  to  acquire  AMHT's  net assets and
business, including taking over AMHT's headquarters in Bangkok and branch office
in the  industrial  city of Rayong.  Upon  completion  of the  acquisition,  the
Company will own 60% of AMCT's  equity.  The remaining 40% will be jointly owned
by the existing  shareholders of AMHT. The Company and the existing shareholders
of AMHT are still  negotiating  the terms and  conditions  for the  transfer  of
AMHT's net assets and business to AMCT.

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


12.   SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

The Company grants credit,  generally without collateral,  to its customers. Two
customers  accounted for  substantially all revenue earned during the nine-month
periods ended  September 30, 2004 and 2003. For the nine months ended  September
30, 2004 and 2003,  one  customer  accounted  for  approximately  44% and 50% of
revenue,  respectively, and another customer accounted for approximately 45% and
42% of revenue, respectively.

One  supplier  accounted  for  substantially  all  cost of  revenue  during  the
nine-month  periods  ended  September  30,  2004 and 2003.  The  Company  is not
dependent upon one supplier to provide the services that it requires.  Since the
fourth quarter of 2001, the Company has made a strategic  decision to engage the
services of one sole  supplier  after taking into  consideration  the quality of
service and  competitive  pricing  being  offered.  Should the need  arise,  the
Company could utilize alternative suppliers for the services that it requires.



                                       21
<PAGE>
13.   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 (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 division (Gallant group of companies)

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

The accounting  policies of the segments are the same as those  described  under
note 2: Significant  Accounting Policies.  The Company's reportable segments are
strategic  business units that offer different  products and services.  They are
managed  separately  because each division requires  different product knowledge
and marketing  strategies.  The new  businesses  were acquired as a unit and the
management  at the time of  acquisition  was retained.  Inter-segment  sales and
transfers between reportable segments are not material to the periods presented.
The Company did not include  segment  reporting in the report for the nine-month
period ended September 30, 2003 as the Company  functioned as a single operating
unit. The Company's revenue is derived primarily from operations in Malaysia and
substantially all of the Company's assets are located in Malaysia.
<TABLE>
<CAPTION>

                                                               Applications       Material            Total
                                                                                Handling
                                                              --------------    -------------    --------------

<S>                                                               <C>               <C>               <C>
Three-month period ended September 30, 2004:

Revenue:
   Related parties                                          $       379,210  $             --  $       379,210
   Others                                                         4,893,212           234,107        5,127,319
                                                            ---------------  ----------------  ---------------
                                                            $     5,272,422  $        234,107  $     5,506,529
                                                            ===============  ================  ===============
Net income (loss) from operating segments                   $       138,586  $        (42,874) $        95,712
                                                            ===============  ================  ===============
Depreciation expense                                        $        59,071  $          8,072
                                                            ===============  ================
Interest expense                                            $        15,398  $            499
                                                            ===============  ================
Income tax expense                                          $        16,579  $             --
                                                            ===============  ================
Share of associate companies' results                       $            --  $        (13,553)
                                                            ===============  ================
Expenditures for additions to long lived assets             $         3,752  $          4,340
                                                            ===============  ================
</TABLE>

                                       22
<PAGE>
13.   SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>

Nine-month period ended September 30, 2004:

<S>                                                              <C>                <C>                 <C>
Revenue:
   Related parties                                          $     1,193,685  $             --  $     1,193,685
   Others                                                        13,243,211           703,080       13,946,291
                                                            ---------------     -------------   --------------
                                                            $    14,436,896  $        703,080  $    15,139,976
                                                            ===============     =============  ===============
Net income (loss) from operating segments                   $       687,720  $       (192,593) $       495,127
                                                            ===============     =============  ===============
Depreciation expense                                        $       176,066  $         29,213
                                                            ===============     =============
Interest expense                                            $        23,225  $          2,826
                                                            ===============     =============
Income tax expense                                          $        49,474  $             --
                                                            ===============     =============
Share of associate companies' results                       $            --  $        (20,132)
                                                            ===============     =============
Expenditures for additions to long lived assets             $         6,452  $         13,721
                                                            ===============     =============
</TABLE>

The above  segment  information  does not include the  operating  results of the
Apple  division  as the  Company  acquired  the Gallant  group of  companies  on
September 29, 2004. The results of the Apple division will be consolidated  into
the Company's group results commencing October 2004.


Consolidated total assets as of September 30, 2004 are as follows:
   Applications                                      $      12,592,998
   Apple                                                     1,187,388
   Material handling                                           586,939
   Investments in associate companies                              108
                                                     -----------------
   Total consolidated assets                         $      14,367,433
                                                     =================


14.   POST BALANCE SHEET EVENTS

In  October  2004,  the  Company  sold  its 46%  equity  interest  in one of its
associate  companies,  Asiaco  Transport,  for cash of $23,158  to an  unrelated
party.  The Company has written  down the value of its  investment  to the sales
price, less anticipated closing cost of $1,726,  resulting in a loss of $11,132,
which is included in the share of associate  company's  losses for the three and
nine months  ended  September  30,  2004.  The sale of Asiaco  Transport  is not
expected to have a material  impact on the  Company's  proposed  acquisition  of
selected business assets and liabilities from AMH and its subsidiaries.

In October 2004, the Company's newly acquired 55%-owned subsidiary,  GZ, secured
the following  $658,000  (RM2,500,000)  financing  arrangement  with a financial
institution in Malaysia:  bank overdraft facility of $79,000  (RM300,000),  term
loan  of  $53,000  (RM200,000)  and  trade  financing   facilities  of  $526,000
(RM2,000,000).  The bank overdraft and trade financing  facilities are repayable
on demand and bear  interest at rates  ranging from 1.5% to 7.5% per annum.  The
term loan,  intended for financing the establishment of a new retail outlet, has
a maturity  of 4 years from the date of  drawdown  and bears  interest at 8% per
annum. The financing agreement is secured by the following:

a) A time deposit  account for  $164,000  (RM625,000)  pledged to the  financial
institution;
b) A sinking  fund  account for  $34,000  (RM130,000)  pledged to the  financial
institution;
c) A corporate guarantee for $658,000 (RM2,500,000) provided by GIH; and
d) Personal guarantees provided by two directors of GIH.




                                       23
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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. and subsidiaries (the "Company") is a system
solution  provider  involved  in  application  development,   broadband  network
operation,  delivery of value added  applications and services;  sale of devices
that utilize  broadband  networks and the sale of  biometric  security  devices.
During  2003,  the Company  expanded  its  business to include the  development,
integration  and  provision  of secured  shipping  and supply  chain  management
services.  From October 2004, the Company  expanded into the business of selling
Apple products and other  information  technology  products and services through
the  acquisition  of the Gallant group of companies on September  29, 2004.  The
Company's  principal  operations  include the  development  and  operation  of a
wireless  broadband  network  in  Malaysia,   the  development  of  interactive,
multimedia  content for the Internet and the development,  licensing and/or sale
of specific products and applications that utilize the capacities of a broadband
network. These include the EyStar SmartHome Console, broadband modems, biometric
systems and Internet-based  cameras. The Company also generates revenue from the
sale, rental and servicing of material  handling  equipment and the provision of
land  transportation,  industrial  moving and engineering  services  through its
subsidiary,  Amour Multi Systems ("AMS") (f/k/a Asiaco Multi Corporation).  From
October 2004, the Company will generate  additional  revenue from the selling of
Apple  products in Malaysia  and from the supply and  provision  of  information
technology products and services through the Gallant group of companies.

The Company conducts its principal operations in Malaysia, and has the following
subsidiaries as of September 30, 2004:

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

2.   SDA America,  Inc.  ("SDAA"),  a wholly owned  corporation  organized under
     Delaware  law that is used as a special  vehicle  to secure a $6.5  million
     funding from Laurus Master Fund Ltd. (the "Master  Fund")  through  private
     placement of securities consisting of convertible preferred stock of SDAA.

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

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



                                       24
<PAGE>
5.   Amour Multi  Systems Sdn Bhd ("AMS")  (f/k/a Asiaco Multi  Corporation  Sdn
     Bhd),   presently  a  wholly  owned  Malaysian   subsidiary  of  SDAM,  was
     incorporated  as a special  vehicle to acquire the  businesses and selected
     net assets of Asiaco Material  Handling Sdn Bhd ("AMH") and its subsidiary,
     associate and related companies ("the Asiaco Group"), based in Malaysia.

6.   Secured  Shipping Sdn Bhd ("SS"),  a wholly owned  Malaysian  subsidiary of
     SDAM,  presently  provides  consulting  services on the  implementation  of
     secured shipping services and supply chain  management.  SS will be used as
     the vehicle for the company to implement  secured shipping  services once a
     suitable joint-venture partner has been identified.

7.   Temasya Wira Sdn Bhd ("TW"), a 60%-owned  Malaysian  subsidiary of SDAM was
     established to undertake the research and development of biometric security
     applications in Malaysia.

8.   Asiaco  Material  Handling  (East  Coast)  Sdn Bhd  ("AEC"),  an  80%-owned
     Malaysian  subsidiary of AMS, is primarily involved in the sale,  servicing
     and  rental  of  material  handling  equipment  in the  eastern  region  of
     Malaysia.

9.   Asiaco Logistic Sdn Bhd ("ALG"), a 67%-owned  Malaysian  subsidiary of AMS,
     is  primarily  involved in  industrial  moving,  packing and  unpacking  of
     industrial equipment and secured logistics.

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

11.  Asiaco Taiping Sdn Bhd ("ATG"), a 62%-owned Malaysian subsidiary of AMS, is
     primarily  involved in the sale,  servicing and rental of material handling
     equipment in the northern region of Malaysia.

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

13.  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.

14.  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.

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

16.  Gallant IT Distribution (M) Sdn Bhd ("GID"),  a wholly-owned  subsidiary of
     GIH,  is  currently  dormant.

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

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

For the three and nine months ended  September 30, 2004,  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.


                                       25
<PAGE>
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 and the provision
     of land transportation, industrial moving and engineering services.


Significant Business Developments and Plan of Operation

During  2004,  the  Company  anticipates  that it will  continue  to provide its
existing multimedia development,  consulting and broadband services,  market the
EyStar  SmartHome  Console,  and  introduce  and  actively  market a new line of
biometrics  security  products  capable of integration with the EyStar SmartHome
Console and  utilizing the Company's  ability to provide  applications  support.
These  products  are the  SmileCAM,  FaceKey  and Testech  devices.  The Company
believes that these devices,  when linked with the broadband technology that the
Company seeks to exploit, will provide customers with comprehensive security and
identification  systems  for which it is  believed  there will be a  significant
market.

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

On November 17, 2003,  the Company  announced  that its  subsidiary,  SDAM,  had
signed a definitive  agreement with Asiaco Material  Handling Sdn Bhd ("AMH") to
purchase,  through AMS, the business assets and selected  liabilities of AMH and
seven companies in the Asiaco group. The definitive  agreement also provides for
AMS, to purchase a majority equity interest in the remaining  sixteen  companies
in the Asiaco group from AMH's major  shareholder.  AMH and its subsidiaries are
primarily  engaged in supply  chain  management,  land  transportation,  secured
logistics as well as sale, rental and servicing of material handling  equipment.
Pursuant to this agreement,  the Company  acquired a majority equity interest in
three Malaysian  companies on December 9, 2003: 80% in Asiaco Material  Handling
(East Coast) ("AEC"),  67% in Asiaco Logistic ("ALG") and 60% in Asiaco Services
("ASS") for a total consideration of $193,911.  On February 9, 2004, the Company
acquired a 62% equity  interest  in Asiaco  Taiping  ("ATG")  for a  provisional
consideration  of  $74,135.  These  acquisitions  have  been  accounted  for  as
purchases.  The total  consideration  is to be  satisfied  by  issuance of AMS's
common stock to the owner upon full completion of the asset purchase  agreements
between the  Company and AMH.  Through  March 31,  2004,  the Company had paid a
total of $263,158 to AMH as advances  for the  incorporation  of AMS and for the
purchase of equity in four subsidiaries as well as two associate companies:  46%
in  Asiaco  Transport  and 33% in Asiaco  Engineering.  These  advances  will be
deducted  from the final  purchase  price to be  determined  by SDAM when it has
completed its  verification of the net asset value of AMH and its  subsidiaries.
The purchase price for the entire  acquisition  is expected to be  approximately
$1.8 million and shall be  determined  after  completion  of the  financial  due
diligence.  As a result of these  acquisitions  the Company has entered into the
equipment material handling business.

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets  acquired and the  liabilities  assumed from ATG at February 9, 2004, the
date of the  acquisition.  The  allocation  of the purchase  price is subject to
refinement.




                                       26
<PAGE>
Property, furniture and equipment                  $        10,728
Inventories                                                 85,885
Accounts receivable                                         87,345
Cash                                                         3,583
Accounts payable                                           (59,076)
Capital lease obligation                                    (8,138)
Minority interests                                         (46,192)
                                                   ---------------
                                                   $        74,135
                                                   ===============

As of the date of this report,  the Company is working  towards  completing  the
transfer of business,  customers and selected net assets  (selected  assets less
selected  liabilities)  from four Asiaco  Companies:  Asiaco Pack Trade,  Asiaco
Heavylift,  Asiaco Selangor and Asiaco Melaka.  The transfer of business and net
assets from these four companies will take time as the transfer of title on some
assets requires  approval from the relevant  authorities.  The Company currently
expects to  complete  purchase  of only some  business  assets  from AMH and its
subsidiaries by December 31, 2004, as AMH has not yet obtained approval from the
relevant  authorities  for the transfer of a majority of its business  assets to
AMS.  The  purchase  will be  funded by cash from  internally  generated  funds,
advances  from the  Company's  principal  shareholder,  as well as funds  raised
through the sale of securities to a Master Fund.

In  October  2004,  the  Company  sold  its 46%  equity  interest  in one of its
associate  companies,  Asiaco  Transport,  for cash of $23,158  to an  unrelated
party.  The Company has written  down the value of its  investment  to the sales
price, less anticipated closing cost of $1,726,  resulting in a loss of $11,132,
which is included in the share of associate  company's  losses for the three and
nine months  ended  September  30,  2004.  The sale of Asiaco  Transport  is not
expected to have a material  impact on the  Company's  proposed  acquisition  of
selected business assets and liabilities from AMH and its subsidiaries.

On December 6, 2003,  the Company  executed a  definitive  agreement  with AMH's
principal  shareholder and Asiaco Material Handling (Thailand) Co. Ltd. ("AMHT")
to purchase  all of the assets and  business of AMHT.  On December 8, 2003,  the
Company announced the  incorporation of Asiaco Multi Corporation  (Thailand) Co.
Ltd ("AMCT"),  to be used as a special  vehicle to acquire AMHT's net assets and
business including taking over AMHT's  headquarters in Bangkok and branch office
in the  industrial  city of Rayong.  Upon  completion  of the  acquisition,  the
Company will own 60% of AMCT's  equity.  The remaining 40% will be jointly owned
by the existing  shareholders of AMHT. The Company and the existing shareholders
of AMHT are still  negotiating  the terms and  conditions  for the  transfer  of
AMHT's net assets and business to AMCT.

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




                                       27
<PAGE>
In April 2004,  the Company  announced  it had signed a Teaming  Agreement  with
ImageWare   Systems,   Inc.  ("IW")  to  market   biometric   verification   and
identification  systems.  Under the terms of the Teaming Agreement,  the Company
will act as prime  contractor  for the  marketing and  development  of biometric
verification and identification systems based on thumbprint and photo extraction
technology.  IW will provide to the Company products and/or services,  including
their Omni Biometric Engine TM ("Omni"),  to extract data from the web-based ASP
programs  developed  by the Company.  Initially,  the Company and IW will market
products and services on an exclusive basis to private and public sector clients
in Malaysia,  Thailand  and Brunei and on a  non-exclusive  basis in  Indonesia.
Revenues generated from Team projects will be shared equally.  Each company will
bear its own costs of developing  products,  programs and systems  necessary for
each  project.  One of the initial  projects to be pursued by the Company and IW
Systems is the development of a biometric verification and identification system
to be used with the Malaysian Government's "MyKad" national identification card.
It is  anticipated  the project will be available for field trials by the second
quarter of 2005.  The total  project  cost to develop the systems  necessary  to
conduct the field  trials is  estimated to be under $1 million with each company
responsible  for its own  development  costs.  Revenues  will be  generated on a
fee-per-transaction basis with the amount of the fee to be determined.

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

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

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

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

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

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




                                       28
<PAGE>
GIH is involved in the  implementation  of information  technology (IT) projects
for businesses and educational institutions. GIH is also a registered government
contractor  licensed by Malaysia's  Ministry of Finance to provide or supply the
following products and services to government departments and agencies: computer
and related IT  services,  networking  products  and  services,  teaching  aids,
software products and services,  personal computers and related  peripherals and
services,  digital  cameras and related  equipment,  and multi-user  systems and
services.

GIH has the following wholly-owned subsidiaries:

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

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

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

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

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets acquired and the liabilities  assumed from the Gallant group of companies
at September 29, 2004, the date of the acquisition:

Property, furniture and equipment                  $       115,300
Inventories                                                553,586
Accounts receivable                                        220,239
Cash, restricted                                           271,866
Cash                                                        26,397
Bank overdraft and borrowings                             (468,658)
Accounts payable                                          (854,132)
Term loan                                                 (199,070)
Minority interests                                        (159,984)
Goodwill                                                   520,770
                                                   ---------------
                                                   $        26,314
                                                   ===============

For its existing  operations,  the Company  anticipates that it will continue to
seek the rights to new products and services  through  contractual  arrangements
and potentially  through the acquisition of other business entities that provide
compatible  products or services.  The Company expects to continue to market its
products  and services  through a sales force and through its Internet  websites
located at www.digitalapps.net  and www.eystar.com.  As described in more detail
below,  the Company  anticipates that its primary markets will continue to be in
Malaysia  and other Asian  countries.  However,  the Company  continues  to seek
additional  markets in North and South  America  and has  entered  into  various
strategic agreements to improve the acceptance of its products there.

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



                                       29
<PAGE>
As a result of the Company's  experience in rolling out the first  VISIONET cell
in December 2001,  management has decided that it will be most  advantageous  to
the Company to revise its strategy for exploiting its broadband  license granted
by the Government of Malaysia.  The Company believes that the most effective use
of the VISIONET  infrastructure is as a point-to-point backhaul service provider
to other broadband and telecommunications  providers. This decision was based on
feasibility  studies that were conducted  after the VISIONET cell was activated.
During  2004,  the  Company  intends to actively  market  VISIONET as a backhaul
service provider, rather than as a telecommunications  company that provides the
"last mile" service. In particular, the Company has decided to use VISIONET as a
backhaul  link for local mobile  networks  that it plans to attempt to deploy in
partnership with Aptilo Networks, Sweden. With this change in business strategy,
VISIONET  will no longer  provide the last mile link  between a cell based radio
station and retail users. The Company will instead  construct a wireless highway
or  backhaul  linking  the cell based  radio  stations  established  by existing
telecommunication  companies  and ISPs.  The  Company  is  hopeful  that it will
conclude  contracts with a number of telcos and ISPs on the use of VISIONET as a
backhaul link during the next twelve months.

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


Significant Contracts

The Company hopes to generate  additional revenue in the next twelve months from
the  contracts  described  below.  This  description  is intended to provide the
reader with a description  of the  principal  activities of the Company that are
anticipated  in 2004.  Although  the Company  provides  estimates of the time in
which the  contracts  will be performed,  revenues that may be generated  and/or
sales that are  projected,  there can be no assurance that the contracts will be
performed  as  anticipated  or that  the  revenues  or sales  projected  will be
realized by the Company. The contracts may be terminated,  limited,  breached or
delayed,  may be subject to force majeure  clauses or the obligations to pay for
services rendered or products received may not be fulfilled.

a)   In August 2001, the Company was awarded a consulting contract, estimated to
     generate revenue of $2.17 million from January 2004 through August 2005, to
     carry out the planning,  design,  project execution (including contract and
     project   management)  of  all  broadband   communications  and  networking
     systems/services  for Pulau  Indah-Marina  Village, a water oriented luxury
     resort, residential,  hotel and spa project. Through December 31, 2003, the
     Company  generated  $680,000 of revenue on this contract.  During the three
     and nine months ended September 30, 2004, the Company recognized additional
     revenue of  $159,000  and  $428,000,  respectively  on this  contract.  The
     Company   recognized   additional   revenue  of  $333,000   and   $500,000,
     respectively,  on this  contract  during  the three and nine  months  ended
     September  30,  2003.  During  2003,  in lieu of cash  payment,  management
     directed the customer to pay $20,000 to an  affiliated  company to whom the
     Company had outstanding accounts payable. The net effect to the Company was
     that revenue was  recognized  and recorded  payables  were reduced by equal
     amounts.



                                       30
<PAGE>
b)   In December  2001,  the Company  entered  into a marketing  agreement  with
     Worldlink  Dotcom Sdn. Bhd.  (Worldlink) to distribute its service  gateway
     for home/office automation in Malaysia,  Singapore and Australia.  In 2002,
     Worldlink promoted the Company's service gateway to potential resellers and
     channel  partners in the  targeted  markets.  The  Worldlink  contract  was
     projected  by the  Company to generate  revenues  of $4.0  million in 2003.
     Worldlink  has not been able to secure any sales during 2003 and  indicated
     that additional  time is required to promote the Company's  service gateway
     and secure  orders  from its  resellers  and channel  partners.  Therefore,
     revenue  cannot be accurately  forecast.  The gateway  bridges the Internet
     with internal home and office networks while  facilitating  the delivery of
     home and  office  applications  including,  but not  limited  to,  security
     surveillance and video conferencing.

c)   In January 2002, the Company  appointed  Mutual Base Equity Sdn. Bhd. (MBE)
     as one of its distributors in Malaysia and Singapore for sale of the EyStar
     SmartHome Console.  Under the terms of the Distributor  Agreement,  MBE has
     been  appointed for an initial  duration of 3 years  commencing  January 4,
     2002.  For fiscal years 2002 and 2003,  MBE has been  attempting  to secure
     contracts  for the  supply of the  EyStar  SmartHome  Console  to  property
     developers  in Malaysia  and  Singapore.  The sales target for MBE is $17.5
     million  over  the  remaining  term  of  the  agreement.  There  can  be no
     assurance, however, that MBE will meet its sales target.

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

e)   In January 2002, the Company's subsidiary,  PTSB, was awarded a contract to
     carry out the  planning,  design,  and project  execution of all  broadband
     communications  and networking  systems/services  for a  commercial/housing
     project in  Selangor,  Malaysia.  Under the  contract,  PTSB will receive a
     total contract sum of $550,000 over 36 months  beginning  January 2003. The
     project,   featuring   312   serviced   apartments,   62  units  of  retail
     shops/offices and 120 units of housing for a government agency, is expected
     to be completed by December 2004. As a total solution  provider,  PTSB will
     also be responsible for the supply of its EyStar SmartHome  Console as well
     as providing value-added broadband applications such as high speed Internet
     access, security surveillance, multimedia conferencing, home automation and
     video-on-demand. The Company generated $311,000 of revenue on this contract
     through December 31, 2003. The Company  recognized  $26,000 and $109,000 of
     revenue, respectively, during the three months ended September 30, 2004 and
     2003. Total revenue  generated for the nine months ended September 30, 2004
     and 2003 were $176,000 and $205,000, respectively.  During 2003, in lieu of
     cash  payment,  management  directed  the  customer  to pay  $10,000 of the
     $42,000  recognized  to an  affiliated  company  to whom  the  Company  had
     outstanding  accounts  payable.  The net  effect  to the  Company  was that
     revenue was recognized and recorded payables were reduced by equal amounts.

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




                                       31
<PAGE>
g)   In November  2002, the Company was  contracted by MY Architect  ("MYA"),  a
     related party, to provide consulting  services relating to home automation,
     home networking,  energy cost saving,  security surveillance and monitoring
     for MYA's  current  projects  involving  two major  commercial  and housing
     developments  in  Malaysia.  The Company  expected  to receive  $550,000 in
     consulting fees over the 18 months beginning  December 1, 2002. The Company
     generated  $273,000 of revenue on this contract  through December 31, 2003.
     The Company  recognized  $25,000  and  $86,000 of revenue  during the three
     months ended  September 30, 2004 and 2003,  respectively.  Total revenue of
     $279,000 and $214,000,  respectively, was recognized during the nine months
     ended  September  30,  2004 and 2003.  The Company  also  expects to secure
     additional  contracts  sometime in 2005,  estimated at $4.0  million,  from
     MYA's  clients  for the supply  and  installation  of the EyStar  SmartHome
     Console  and  its  security  system  in  the  two  commercial  and  housing
     developments.

h)   In April  2003,  the Company  contracted  with MYA to carry out the design,
     supply and installation of all broadband communications, access control and
     network  security  equipment for a mixed  property  development  project in
     Selangor,  Malaysia, which features a total of 10 blocks of residential and
     commercial  high-rise  properties.  The  30-month  contract,   expected  to
     generate  revenue of $3.2 million,  commenced in the third quarter of 2003.
     Through  December 31, 2003, the Company  generated  $55,000 of revenue from
     this contract and recognized  additional  revenue of $168,000 and $310,000,
     respectively during the three and nine months ended September 30, 2004.

i)   In April 2003, the Company was awarded a $9 million contract by MBE for the
     supply of biometric  security products and EyStar SmartHome consoles over a
     three-year period with the first delivery  originally  expected to commence
     in the fourth  quarter of 2003. In December  2003, the Company was informed
     by  MBE  to  postpone  the  delivery  until  further  notice.  Due  to  the
     uncertainty,  revenue that will be realized from this contract  during 2004
     cannot be accurately forecast.

j)   In June 2003,  the  Company  signed a contract  to  implement  a  biometric
     security   recognition  and  identification   system  comprising  hardware,
     software and issuance of security  identity  cards over a ten-year  period.
     The contract, which was expected to commence in the fourth quarter of 2003,
     after the finalizing of technical  specifications  with relevant regulatory
     authorities,  is estimated to generate  revenue of $15 million  through the
     first  quarter  of 2005.  To date,  the  technical  specifications  for the
     project have yet to be finalized by the relevant regulatory authorities and
     the  Company has not  received  any  indication  on when the  contract  may
     commence.  Due to the uncertainty,  revenue that will be realized from this
     contract during 2004 may not be accurately forecast.

k)   In June 2003, the Company was awarded a $2.0 million contract to supply and
     install a biometric  security system for access control and time attendance
     in  Malaysia.  The project  was  estimated  to  commence  during the fourth
     quarter of 2003 and be  completed  within  six  months of the  commencement
     date.  The  Company was also  awarded a  maintenance  contract  for 5 years
     thereafter.  This  maintenance  contract begins following the completion of
     the  project  and is  expected  to  generate  annual  recurring  revenue of
     approximately  $250,000. The commencement of this contract has been delayed
     as the construction work on the project's property has yet to be completed.
     The developer of the project is unable to provide a definitive date for the
     completion of construction work. Due to the uncertainty,  revenue that will
     be realized from this contract during 2004 cannot be accurately forecast.




                                       32
<PAGE>
l)   In August  2003,  the Company  was awarded an $850,000  contract to supply,
     install and  commission a biometric  based Building  Access  Management and
     Monitoring System for a 40-story office complex in Kuala Lumpur,  Malaysia.
     The system is  designed to enhance  security  through  the  management  and
     monitoring of visitors  within a building  complex or restricted  area. The
     office  complex  is  currently  tenanted  by  government   departments  and
     agencies,  embassies,  corporations and trade missions.  Implementation  of
     this  contract was expected to commence in the first quarter of 2004 and to
     be completed by the second  quarter of 2004.  This project has been delayed
     as the Company was  informed  by the client to postpone  installation  work
     until further notice.

m)   In November 2003, the Company's subsidiary, AMS, was awarded a $4.6 million
     contract to provide  electronically  secured  cargo  shipping  services for
     goods bound for the United  States to a shipping  agency  operating in Port
     Klang, Malaysia. The contract, which was expected to commence in the second
     quarter of 2004, is for an initial duration of fifteen months. Through AMS,
     the Company will  provide  technical  expertise in the areas of  electronic
     tagging and real-time  tracking of maritime  shipments bound for the United
     States and supply chain management services to its clients.  The containers
     will be tracked from the time they leave the client's  facility to the time
     they arrive in a United  States port.  Consignees  in the U.S. will also be
     able to monitor the location of the  containers  in  real-time,  detect any
     tampering to the  container  and insure that the cargo is not  substituted.
     This  contract  has been delayed as AMS was informed by the client that the
     facilities   for   implementation   of  the  contract  are  not  ready  and
     implementation of the contract has been postponed until further notice.

n)   In December  2003,  the Company  announced  that its  subsidiary,  AMS, was
     awarded a $4.92 million contract to provide a secured shipping service. The
     fifteen  month  contract was  expected to commence in the first  quarter of
     2004. The contract calls for AMS to provide warehousing, transportation and
     monitoring of cargo from the time the goods leave the client's warehouse to
     the  port  of  destination  in the  United  States.  The  Company  will  be
     responsible  for  providing the  technology to identify  planned and actual
     container contents;  and identify planned and actual container routing. Any
     discrepancies  in the  contents  and/or  routing  will be  reported  to the
     shipper.  The Company will also provide physical  security of the container
     seal and cargo loading  area. To date,  the contract has yet to commence as
     the client and AMS failed to agree on certain implementation issues. AMS is
     trying to resolve the differences  with the client but is unable to provide
     any  assurance  that AMS will be able to  proceed  with  the  contract  and
     generate revenue from this contract in 2004.

o)   In March 2004, the Company's subsidiary,  SDAM, was awarded three contracts
     by a related  party,  with an  aggregate  value of $3.81  million,  for the
     supply  and   installation   of  a  biometric   security  system  in  three
     developments  in  Malaysia.   The  first  is  a  multiple-use  real  estate
     development project,  consisting of 312 apartments and 65 office and retail
     units, located in Shah Alam, Malaysia.  Due to delays in construction work,
     installation  is now anticipated to begin in the second quarter of 2005 and
     to be completed by the first  quarter of 2006.  The second  development  is
     located in Templar  Park,  Malaysia  consisting of 208  apartments  and the
     third development is located in Cheras,  Malaysia with 240 apartments.  Due
     to delays in  construction  work,  installation  for the  second  and third
     development is anticipated to begin in the second quarter of 2005 and to be
     completed by the second quarter of 2006.  Under the three  contracts,  SDAM
     will provide a  comprehensive  biometric  security system that will include
     biometric technology for apartment door locks, elevator access control, and
     will control  vehicle  access into and out of the  development  and visitor
     registration.




                                       33
<PAGE>
p)   In April  2004,  the  Company's  subsidiary,  SDAM,  was awarded a contract
     valued  at  $1.9  million  to  deliver  a  biometric   identification   and
     verification  system by the end of the fourth quarter of 2004. The contract
     calls for SDAM to provide a comprehensive  biometric  security system using
     face and fingerprint  recognition  technology for an office complex located
     in Brunei that has 1,200 staff employees.  The system will include controls
     for building access control and employee time  attendance.  Commencement of
     delivery had been postponed to the first quarter of 2005.

q)   In May 2004, the Company's subsidiary, Secured Digital Applications (M) Sdn
     Bhd ("SDAM"), was awarded a contract valued at $2.2 million by Master Index
     Sdn  Bhd   ("MISB")   to  deliver,   install   and   maintain  a  biometric
     identification  and  verification  system  for an office  complex  in Kuala
     Lumpur, Malaysia. The system is to be delivered and installed in the fourth
     quarter  of 2004.  A  three-year  maintenance  contract  will  begin  after
     installation.  Commencement  of delivery  had been  postponed to the second
     quarter of 2005.

r)   In June 2004, the Company announced that it was awarded a contract,  valued
     at   $921,000,    to   develop,    implement    and   maintain   a   secure
     business-to-consumer   e-commerce  portal  using  the  Company's  biometric
     security  technology.  Completion  and  implementation  of  the  portal  is
     scheduled  for  December  2004.  The  e-commerce  portal  will  allow  only
     registered  members to use the portal for online  purchases  and  payments.
     Members will  register by providing  details of the  identity,  credit card
     information and biometric  information.  After  registration  when a member
     desires to make an online  purchase,  their  identity  will be verified and
     credit card information  validated.  This system will significantly  reduce
     the risk of fraud and identity theft in online e-commerce transactions.  In
     addition to the contract fee of $921,000,  the Company will generate annual
     recurring  revenue by receiving a transaction fee for each completed online
     transaction and from a five-year  contract to provide software and hardware
     upgrades plus system maintenance.

s)   In July 2004, the Company  announced it was awarded a $6.7 million contract
     to develop face and fingerprint  authentication for credit card payments to
     be  implemented  in  four  countries  in  Asia.  The  contract  is for  the
     development   and  operation  of  a  Biometrics   (Face  and   Fingerprint)
     Authentication  Center  for  credit  card  payments  in  Thailand,  Brunei,
     Indonesia and Hong Kong.  The objective is to achieve  Zero-Fraud in credit
     card  transactions.  Customers targeted for the project include credit card
     issuers  such as banks and other  financial  institutions,  plus  merchants
     accepting  credit card  payments.  Revenues  will be  generated  from sales
     and/or rental of  Point-of-Sales  terminals  equipped with a USB camera and
     fingerprint reader and from transaction  charges.  The Company is currently
     developing a pilot system for evaluation by the customer.  The trial of the
     pilot system is expected to commence in the second quarter of 2005.


Strategic Contractual Relationships

In its  efforts to exploit  broadband  technology,  the  Company  seeks to enter
strategic agreements, both formal and informal, with other providers of goods or
services  that are  compatible  with the  Company's  existing  businesses.  Such
arrangements  include  license  agreements,  requirements  contracts and service
agreements. The Company may also seek to acquire business enterprises that offer
goods and services that are of benefit to the Company and its shareholders.




                                       34
<PAGE>
In June 2004, the Company  announced plans to conduct a field trial of an online
biometric  payment portal for electronic  commerce and credit card  transactions
using biometric  products and systems developed by its current partner companies
for  identification  and  verification  during the second  half of 2004.  Due to
delays in the  development  work,  the field  trial is not  expected to commence
until the third quarter of 2005. Merchants who sign up as clients of the payment
portal will enroll their customers into the Company's  system.  Thereafter,  the
merchant's  clients when making  purchases will have their identity  verified by
using face and fingerprint biometric  technology.  After authentication of their
identity,  the  transaction  will be processed and payment  approval sought from
banks and credit  card  issuers.  The  Company  intends to  generate  revenue by
charging a fee based on a percentage of the transaction  value executed  through
the portal.  The Company  estimates  that gross revenue during the first year of
commercial  operation will be approximately  $30 million.  Implementation of the
portal is scheduled for early 2005.  The initial  deployment of the portal would
be for the Malaysian and Singapore markets with subsequent deployment across the
Asia-Pacific region. After successfully  implementing the payment portal for the
Asia-Pacific  region,  the Company intends to introduce a similar portal for the
North  American  market.  The payment portal will be partly funded by internally
generated  funds  and  proceeds  from the  private  placement  of the  Company's
securities to the Master Fund.

In December 2003, the Company was appointed by Testech Inc. ("Testech") of South
Korea to distribute its biometrics  security  products.  Testech's product range
includes  fingerprint  access control systems,  fingerprint time and attendance,
fingerprint  door lock and  fingerprint  authentication  module.  These products
support  both TCP/IP  protocol and RS422 serial  communication.  Four  different
combinations of  authentication  methods are utilized:  fingerprint,  pin number
with  fingerprint,  pin number with smart card, and fingerprint with smart card.
Testech  holds  a  U.S.   patent  for  a  contact  light  emitting   fingerprint
authentication  sensor which is used in the above products.  Testech's  products
are  competitively  priced for the mass  market and enable the Company to have a
wider range of biometric  security  products  that could be  customized  to meet
clients' requirements.

On September 10, 2003, the Company's Malaysian  subsidiary,  SDAM entered into a
letter  agreement to  establish a joint  venture  company,  Temasya Wira Sdn Bhd
("TWSB"),  to  undertake  the  research and  development  of biometric  security
applications.  SDAM will initially hold 60% of TWSB's equity while two Malaysian
individuals  will hold the  remaining  40%.  SDAM's  holding will  eventually be
diluted  to 30%  when  EMI  acquires  30%  equity  interest  in TWSB  after  the
completion of the joint venture agreement to be executed between the Company and
FaceKey  Corporation  as  described  below.  TWSB is now  expected  to  commence
operations in the third quarter of 2005 as the Company is still negotiating with
Facekey on management and operational matters of TWSB.

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




                                       35
<PAGE>
In  January  2003,  the  Company  signed  a  Reseller   Agreement  with  FaceKey
Corporation  ("FaceKey")  to  sell  FaceKey's   biometric-based   products.  The
agreement is for one year and will  thereafter  be  automatically  renewable for
two-year terms on each  anniversary.  Under the terms of the agreement,  FaceKey
will  grant the  Company  exclusive  distribution  rights  for its  products  in
Malaysia if the  Company  purchases  an agreed  minimum  value of products  from
FaceKey during 2003.  Although the Company  achieved  minimum sales in 2003, the
agreement  with  Facekey  was  automatically   renewed  for  another  two  years
commencing  January 2004.  FaceKey develops  products to control access,  record
time and  attendance  and  restrict  use of  personal  computers  by  using  two
biometric  technologies,  face recognition and fingerprint  matching in a manner
that will be highly  competitive with magnetic cards, PIN numbers and passwords.
The  combination  of both  face  and  fingerprint  recognition  technologies  is
believed by the Company to be  extremely  reliable,  providing a security  level
equivalent to a DNA test.

In December  2002,  the Company's  subsidiary,  SDAM executed an Agreement  with
Sintec Corp,  South Korea  ("Sintec"),  to sell,  distribute  and promote  their
SmileCAM remote video  surveillance  cameras in Malaysia,  Thailand,  Singapore,
Vietnam and Brunei. The agreement is for an initial period of two years and will
thereafter be  automatically  renewable for one-year terms on each  anniversary.
Under the terms of the  agreement,  Sintec  will  grant  the  Company  exclusive
distribution  rights for its  products in Malaysia if the Company  purchases  an
agreed  minimum value of products from Sintec during 2003 and 2004.  The Company
hopes that the agreement  with Sintec,  which is due to expire in December 2004,
will be renewed for a further one year.  SmileCAM  cameras are used for Internet
based security and  entertainment  applications  and can be integrated  with the
EyStar  SmartHome  Console  to  provide  a value  added  security  solution  for
corporate and  residential  users.  SmileCAM  cameras  include  features such as
automatic motion detection and tracking,  and sending live streaming video to an
Internet  browser.  Combined with  applications  and solutions  developed by the
Company,  the Company believes that SmileCAM cameras offer to purchasers  useful
features such as the ability to record intrusion, owner notification by ordinary
telephone,  live video,  remote security options and forwarding of images by use
of the Internet.

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

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




                                       36
<PAGE>
Beginning in September 2001, the Company entered into a strategic  collaboration
with Aptilo  Networks,  Sweden,  to deploy  local  mobile  networks  ("LMNs") in
Malaysia  and the Asian  regional  markets.  The  Company  anticipates  that the
successful  integration  of LMNs with VISIONET will enable  consumers to receive
live video streams from their  handheld  devices and laptops,  and to access the
Internet and their  corporate  intranets at near T1 speeds  remotely from public
locations  in  the  "travel  ribbon"  such  as  hotels,  airports,  restaurants,
conference  centers,  shopping  malls and  coffeehouses.  The  first  integrated
VISIONET-LMN  cell was deployed  during the fourth  quarter of 2001 to connect a
number of access points to Bluetooth and wireless LAN 802.11b standard  devices.
This mobile network  features  Aptilo's latest billing solution that enables the
Company to offer value-added applications and services to users without the need
for any prior registration as a subscriber.  The Company is optimistic that this
method of payment  from Aptilo will  attract  more users to VISIONET  and reduce
capital  expenditures and monthly operating costs.  Furthermore,  the integrated
network  provides the Company with the ability to expand its  broadband  network
from fixed wireless into the mobile broadband market.  The Company has committed
to an initial  purchase of software and hardware  from Aptilo valued at $50,000.
The Company  believes that this strategic  relationship  with Aptilo may broaden
VISIONET's user base and generate additional revenue in the next twelve months.



COMPARISON  OF THE THREE  MONTHS  ENDED  SEPTEMBER  30, 2004 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2003

REVENUES

Revenues  for the three  months  ended  September  30, 2004  totaled  $5,506,529
compared to  $4,283,399  for the three  months  ended  September  30,  2003,  an
increase of  $1,223,130  or 29%.  The  increase in net sales in the three months
ended  September  30, 2004 as compared to the same period in 2003 was mainly due
to an increase in fees earned from the  production  of  multimedia  programs and
revenue received for project  consulting  services.  Included in revenue for the
three  months  ended  September  30,  2004 and 2003 was income of  $379,210  and
$542,500,  respectively,  received from a related  party for project  consulting
fees.  Revenues  for the three  months ended  September  30, 2004 also  included
income of $224,107 or 4% of total revenue, generated by the Asiaco subsidiaries.
For the three months ended  September  30, 2004,  two  customers,  respectively,
accounted for 44% and 45% of total revenue. For the three months ended September
30,  2003,  two  customers,  respectively,  accounted  for 44% and 43% of  total
revenue.

GROSS PROFIT

Gross profit  decreased to $650,381  for the three  months ended  September  30,
2004,  compared to $667,557  for the three months  ended  September  30, 2003, a
decrease of $17,176 or 3%. The  decrease in gross  profit was  primarily  due to
higher cost of revenue. As a result of higher revenue, cost of revenue increased
by $1,240,306,  or 34%, to $4,856,148 in the third quarter 2004 from  $3,615,842
in the third  quarter 2003.  The high cost of revenue  percentage is a result of
the Company  requiring  additional  external  resources  in order to fulfill the
demand for the Company's  services.  The outsourcing of content  production work
enabled  the  Company  to  develop a team of  contractors  that will  assist the
Company in producing multimedia content and applications that are crucial to its
future business operation.

Sales and marketing expenses

Sales and  marketing  expenses  increased by $13,431 or 350%, to $17,266 for the
three months ended  September  30, 2004  compared to $3,835 for the three months
ended  September  30,  2003.  Higher  sales and  marketing  expenses in 2004 was
primarily due to higher travelling  expenses incurred to introduce the Company's
biometric products to customers and resellers in Malaysia.




                                       37
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  were  $495,330 for the three months ended
September  30, 2004,  compared to $205,894 for the three months ended  September
30,   2003,   an  increase  of  $289,436  or  141%.   Included  in  general  and
administrative expenses for 2004 are expenses of $111,166 incurred by the Asiaco
subsidiaries.  Excluding expenses incurred by the Asiaco  subsidiaries,  general
and  administrative  expenses  for 2004 would have been  $384,164.  General  and
administrative  expenses,  excluding  the  Asiaco  subsidiaries,   increased  by
$178,270 or 87% for the three months ended  September 30, 2004.  The increase in
general and administrative  expenses was mainly  attributable to higher expenses
incurred for consulting fees, compensation expenses,  public relations services,
maintenance expenses and higher rental expenses.

INTEREST EXPENSE

Interest expense increased by $12,978 or 445%, to $15,897 for three months ended
September  30, 2004 as compared to $2,919 for the three months  ended  September
30,  2003.  Interest  expense for the three  months  ended  September  30, 2004,
included  $10,400 related to a $500,000  convertible term note issued on June 4,
2004,  and accounted for  approximately  65% of total  interest  expense for the
three months ended September 30, 2004.

GAIN ON DISPOSAL OF ASSETS, RELATED PARTY

Gain on disposal of assets,  related party, for the three months ended September
30, 2004 and 2003 included  recognition of a previously deferred gain of $18,421
and $28,420, respectively, related to a similar amount the Company received from
its  long-term  receivable,  related  party.  The  receivable  balance and total
deferred gain was $555,000,  respectively,  as of December 31, 2003. 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 $329,321 respectively, as of September 30, 2004.

NET INCOME

The Company  recorded net income of $95,712 for the three months ended September
30,  2004,  as  compared to net income of $412,562  for the three  months  ended
September 30, 2003. Net income for the three months ended September 30, 2004 and
2003  included   recognition   of  a  deferred  gain  of  $18,421  and  $28,420,
respectively.  Excluding  these  non-recurring  transactions,  the  recorded net
income would have been $77,291 and $384,142,  respectively,  for the three-month
periods ended September 30, 2004 and 2003.

                                       38
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED  SEPTEMBER 30, 2004 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2003


REVENUES

Revenues  for the nine  months  ended  September  30, 2004  totaled  $15,139,976
compared to  $11,750,794  for the nine  months  ended  September  30,  2003,  an
increase  of  $3,389,182  or 29%.  The  increase in net sales in the nine months
ended  September  30, 2004 as compared to the same period in 2003 was mainly due
to an increase in fees earned from the  production  of  multimedia  programs and
revenue received for project  consulting  services.  Included in revenue for the
nine  months  ended  September  30, 2004 and 2003 was income of  $1,193,685  and
$932,526,  respectively,  received from a related  party for project  consulting
fees. For the nine months ended September 30, 2004, two customers, respectively,
accounted for 42% and 44% of total revenue.  For the nine months ended September
30,  2003,  two  customers,  respectively,  accounted  for 50% and 42% of  total
revenue.

GROSS PROFIT

Gross profit  increased to  $1,655,634  for the nine months ended  September 30,
2004,  compared to $1,396,261  for the nine months ended  September 30, 2003, an
increase of $259,373 or 19%.  The  increase in gross  profit was due to a higher
consulting  revenue,  which has a higher margin than  production  work, in 2004.
Cost of revenue  increased by  $3,129,809  or 30%, to  $13,484,342  in the third
quarter 2004 from  $10,354,533  in the third quarter  2003.  This increase was a
result  of the  Company  requiring  additional  external  resources  in order to
fulfill the higher demand for the Company's services. The outsourcing of content
production  work enabled the Company to develop a team of contractors  that will
assist the Company in producing  multimedia  content and  applications  that are
crucial to its future business operation.

Sales and marketing expenses

Sales and  marketing  expenses  increased by $5,997,  or 31%, to $25,284 for the
nine months  ended  September  30, 2004 from  $19,287 for the nine months  ended
September 30, 2003. The increase was primarily due to higher travelling expenses
incurred  to  introduce  the  Company's  biometric  products  to  customers  and
resellers in Malaysia.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses were  $1,221,836 for the nine months ended
September 30, 2004 compared to $607,097 for the nine months ended  September 30,
2003,  an increase of $614,739 or 101%.  Included in general and  administrative
expenses for 2004 was expenses of $338,967 incurred by the Asiaco  subsidiaries.
Excluding   expenses   incurred   by  the  Asiaco   subsidiaries,   general  and
administrative  expenses  for  2004  would  have  been  $882,869.   General  and
administrative  expenses,  excluding  the  Asiaco  subsidiaries,   increased  by
$275,772 or 45% for the nine months ended  September  30, 2004.  The increase in
general  and  administrative   expenses  was  attributable  to  an  increase  in
compensation  expenses,  consulting fees, public relation services,  maintenance
expenses, rental expenses,  professional fees and higher management fees payable
to a company in which Mr. Patrick Lim, the Chairman and Chief Executive  Officer
of the Company, has a financial interest.  The management fee was charged on the
basis of time spent for the administration  and management  services provided to
the  Company.  Management  fees  incurred to a related  party were  increased to
$7,105 per month for the nine months ended September 30, 2004.


                                       39
<PAGE>
INTEREST EXPENSE

Interest expense increased by $16,637, or 177%, to $26,051 for nine months ended
September 30, 2004 as compared to $9,414 for the nine months ended September 30,
2003.  Interest  expense for the nine months ended September 30, 2004,  included
$13,500 related to a $500,000  convertible term note issued on June 4, 2004, and
accounted for  approximately  52% of total interest  expense for the nine months
ended September 30, 2004.

GAIN ON DISPOSAL OF ASSETS, RELATED PARTY

Gain on disposal of assets,  related party,  for the nine months ended September
30, 2004 and 2003 included recognition of a previously deferred gain of $225,679
and $48,157, respectively, related to a similar amount the Company received from
its  long-term  receivable,  related  party.  The  receivable  balance and total
deferred gain was $555,000,  respectively,  as of December 31, 2003. 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 the Company's
long-term  receivable,  related party and deferred gain balances were reduced to
$329,321 respectively, as of September 30, 2004.

NET INCOME

The Company  recorded net income of $495,127 for the nine months ended September
30,  2004  compared  to a net  income  of  $692,792  for the nine  months  ended
September 30, 2003.  Net income for the  nine-month  period ended  September 30,
2004 and 2003 included  recognition  of a deferred gain of $225,679 and $48,157,
respectively.  Excluding  these  non-recurring  transactions,  the  recorded net
income would have been $269,448 and $644,635,  respectively,  for the nine-month
periods ended September 30, 2004 and 2003.



LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2004,  the Company had net cash of $232,985,  and restricted
cash of approximately $6,000,000 from the sale of securities to the Master Fund.

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

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




                                       40
<PAGE>
b)   $6,500,000  funding  through  the  sale of  6,500,000  shares  of  Series A
     Convertible  Preferred  Stock (the "Series A  Preferred")  of the Company's
     wholly owned subsidiary,  SDA America,  Inc. ("SDAA"),  at a price of $1.00
     per share,  which is convertible  into shares of the Company's common stock
     and warrants to purchase up to  3,000,000  shares of the  Company's  common
     stock.  The Series A  Preferred  is  entitled  to  cumulative  preferential
     dividends at a rate per annum  equivalent to the "prime rate"  published in
     The Wall Street Journal from time to time plus 2%, subject to a floor of 6%
     per annum.  The warrants  have a seven-year  term and an exercise  price of
     $0.40 per share for the  first  1,000,000  shares,  $0.43 per share for the
     second 1,000,000 shares and $0.47 per share for the third 1,000,000 shares.

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

Pursuant to the Securities  Purchase  Agreement  between the Master Fund and the
Company and a restricted  account  agreement  entered  into by the Company,  the
Master  Fund and a US bank,  the  $6,500,000  investment  was  deposited  into a
restricted  account as  security  for the  performance  of the  Company  and its
subsidiaries' obligations to the Master Fund. The proceeds, which are restricted
to making  acquisitions  of other  companies  that meet agreed to  criteria  for
sales,  profitability  and  accounting  standards,  may  be  released  from  the
restricted account following the receipt of confirmation from the Securities and
Exchange Commission ("SEC") that an effective  registration  statement under the
Securities  Act of 1933  with  respect  to such  investment  has  been  declared
effective  and the  preferred  stock is  converted  into the common stock of the
Company pursuant to the relevant transaction documents.

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

For the nine months ended  September 30, 2004, all  operations  were funded from
internally  generated  funds  and  working  capital  advanced  by Mr.  Lim,  the
Company's principal shareholder,  Chief Executive Officer ("CEO"),  Chairman and
Director.  As  of  September  30,  2004,  the  Company  owed  Mr.  Lim  $18,650.
Additionally,  as of September 30, 2004, the Company owed an affiliated Company,
in which Mr. Lim has a financial interest, $102,732 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.

Cash  used in  operating  activities  of  $434,568  for the  nine  months  ended
September 30, 2004 was mainly  attributable to higher general and administrative
expenses.

Net cash  provided by investing  activities of $5,901 was mainly due to proceeds
from sale of equipment.

Net cash  provided by  financing  activities  of $544,391 was  primarily  due to
conversion of preferred  stocks of a subsidiary to the Company's common stock by
the  Master  Fund,  net of  costs  incurred  in  connection  with  the  debt and
securities issued to the Master Fund.




                                       41
<PAGE>
In addition to internally  generated funds and financial support from a director
and major  shareholder,  the  Company  may seek to raise  additional  funds from
equity or debt  financing for its future  working  capital  requirements.  As of
September 30, 2004,  the Company has  furniture  and equipment of  approximately
$1.3  million  for  the  roll  out of its  portal,  build-out  of  VISIONET  and
implementation of its business plan. The Company estimates that it would require
additional capital  expenditures of up to $2.0 million to implement its business
plan  to  become  a total  system  solution  provider  involved  in  application
development,  network  operation,  delivery  of  value  added  applications  and
services;  and  sale of its  EyStar  SmartHome  Console.  The  Company  has also
committed to an initial  purchase of software and hardware  valued at $50,000 in
conjunction  with its announced  strategic  collaboration  with Aptilo Networks,
Sweden.

The Company will also be expanding into new businesses that include provision of
secured  shipping and supply chain management  services.  The Company expects to
incur  further  expenses  to  acquire   companies  and  technologies   that  are
synergistic  to the new  businesses and will help the Company to rollout the new
businesses  in the shortest time  possible.  During 2003,  the Company  incurred
$263,000 in the establishment and acquisition of new subsidiaries and associates
relating to its new  businesses.  For 2004,  the Company  estimates that it will
incur an additional $2.1 million to acquire the business,  net assets and equity
interest in companies  synergistic to its planned new  businesses.  In addition,
the Company estimates that it will require a further $2.0 million to finance the
set-up cost of its new businesses. The Company also expects that it will require
a further $2.0 million to finance the working  capital of its new businesses and
the  operation  of  its  newly  acquired  and/or  established  subsidiaries  and
associates.

In April 2004,  the Company  announced  it had signed a Teaming  Agreement  with
ImageWare   Systems,   Inc.  ("IW")  to  market   biometric   verification   and
identification  systems.  Under the terms of the Teaming Agreement,  the Company
will act as prime  contractor  for the  marketing and  development  of biometric
verification and identification systems based on thumbprint and photo extraction
technology.  IW will provide to the Company products and/or services,  including
their Omni Biometric EngineTM  ("Omni"),  to extract data from the web-based ASP
programs developed by the Company. Revenues generated from Team projects will be
shared  equally.  Each company will bear its own costs of  developing  products,
programs and systems necessary for each project.  One of the initial projects to
be pursued by the  Company  and IW Systems  is the  development  of a  biometric
verification   and   identification   system  to  be  used  with  the  Malaysian
Government's "MyKad" national identification card. It is anticipated the project
will be  available  for field  trials by the fourth  quarter of 2004.  The total
project  cost to develop the systems  necessary  to conduct the field  trials is
estimated  to be under $1 million with each  company  responsible  for their own
development  costs.  Revenues will be generated on a  fee-per-transaction  basis
with the amount of the fee to be determined.

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



                                       42
<PAGE>

<TABLE>
<CAPTION>
Contractual Obligations:
                                                                            Payment due by period
                                                                      ---------------------------------
                                                                       Less than
                                                   Total                1 year              1 - 5 years
                                                   -----               ---------            -----------
<S>                                                 <C>                   <C>                   <C>
Capital lease obligations                   $          128,310    $           59,077    $           69,233
Convertible term note obligations           $          446,338    $          135,507    $          310,831
Bank borrowings                             $          199,070    $           50,000    $          149,070
Operating lease commitments                 $          113,900    $           44,000    $           69,900

</TABLE>

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 Financial  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  Financial  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  Financial
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  September  30,  2004 that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.



                                       43
<PAGE>
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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


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

     On July 30, 2004,  the Company  issued  240,000 shares of common stock to a
consultant,  pursuant to a  compensation  agreement  dated July 15, 2004,  under
which the Company is to issue an aggregate of 960,000 shares of its common stock
to the  consultant as payment for services to be rendered to the Company for the
twelve-month period ending July 14, 2005.

     On August 1, 2004, the Company  granted options to purchase an aggregate of
300,000 shares of the Company's  common stock at $0.30 per share to a consultant
for  services to be  provided  to the  Company.  These  options are  exercisable
through July 2009,  contingent upon continuous service by the consultant through
specified  dates.  100,000 options are exercisable on January 31, 2005,  100,000
options are exercisable on April 30, 2005 and the remaining  100,000 options are
exercisable on July 31, 2005.

     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  are
exercisable on October 3, 2004,  200,000  options are exercisable on February 3,
2005,  500,000  options are  exercisable  on August 3, 2005,  and the  remaining
800,000  options are  exercisable  in equal numbers on each of February 3, 2006,
2007, 2008 and 2009, respectively.

     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.  The options are
exercisable with immediate effect through August 2009.

     On August 9, 2004, the Company  reissued 25,000 shares of common stock from
its  treasury  stock to a  consultant  as payment for  services  rendered to the
Company in July 2004.

     Each of the foregoing issuances of unregistered  securities was exempt from
the  registration  requirements  of the  Securities  Act of  1933,  as  amended,
pursuant  to Section  4(2)  thereof,  as  transactions  not  involving  a public
offering.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.





                                       44
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


ITEM 5. OTHER INFORMATION

     None.


ITEM 6. EXHIBITS

    (a) Exhibits

          10.1  Consulting  Agreement  dated as of July 15, 2004 between Secured
          Digital Applications,  Inc. and Soong Kwong Choon (superseding exhibit
          4.1 to the  Company's  Form  S-8,  as  filed  with the SEC on July 16,
          2004).

          10.2  General  Facility  Agreement,  dated as of  September  30,  2004
          between Bumiputra-Commerce Bank Berhad and Gallant Zone (M) Sdn Bhd

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

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

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

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



                                       45
<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: NOVEMBER 16, 2004               BY: /s/ Patrick Soon-Hock Lim
                                          -------------------------
                                              Patrick Soon-Hock Lim
                                              Chairman & Chief Executive Officer



DATE: NOVEMBER 16, 2004               BY: /s/ Chee Hong Leong
                                          -------------------
                                              Chee Hong Leong
                                              Chief Financial Officer
                                             (Principal Financial Officer and
                                              Principal Accounting Officer)


                                       46