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, 2005

     [ ] 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:

                                               Number of shares outstanding
        Class                                     at November 11, 2005
       -------                                 ----------------------------
Common stock, $.00001 par value                        128,384,430



<PAGE>
FORM 10-QSB
3RD QUARTER
<TABLE>
<CAPTION>
                                      INDEX
                                                                                                        Page
PART I  -  FINANCIAL INFORMATION
<S>                                                           <C>                                        <C>
         ITEM 1. FINANCIAL STATEMENTS

         Condensed consolidated balance sheet as of September 30, 2005 (Unaudited)                        3

         Condensed consolidated statements of operations for the three-month and
         nine-month periods ended September 30, 2005 and September 30, 2004 (Unaudited)                   5

         Condensed consolidated statements of cash flows for the nine-month
         periods ended September 30, 2005 and September 30, 2004 (Unaudited)                              7

         Notes to condensed consolidated financial statements (Unaudited)                                 9

         ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS                                                    27

         ITEM 3. CONTROLS AND PROCEDURES                                                                 42

PART II - OTHER INFORMATION

         ITEM 1. LEGAL PROCEEDINGS                                                                       43

         ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                             43

         ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                         43

         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                     43

         ITEM 5. OTHER INFORMATION                                                                       43

         ITEM 6. EXHIBITS                                                                                43

         SIGNATURES                                                                                      44
</TABLE>
SAFE HARBOR STATEMENT

This Form 10-QSB and other  reports  filed by the Company from time to time with
the Securities and Exchange Commission, as well as the Company's press releases,
contain or may contain forward-looking statements and information that are based
upon  beliefs  of,  and  information   currently  available  to,  the  Company's
management,  as  well  as  estimates  and  assumptions  made  by  the  Company's
management.  The Company is  including  this  cautionary  statement in this Form
10-QSB to make applicable and to take advantage of the safe harbor provisions of
the Private  Securities  Litigation  Reform Act of 1995 for any  forward-looking
statements  made  by or on  behalf  of  us.  Forward-looking  statements  can be
identified by the use of forward-looking terminology such as "believes",  "may",
"should", "anticipates", "estimates", "expects", "future", "intends", "hopes" or
"plans" or the negative thereof.  Such forward-looking  statements involve known
and unknown  risks,  uncertainties  and other  factors  that could cause  actual
results of the Company to vary materially  from  historical  results or from any
future results  expressed or implied in such  forward-looking  statements.  Such
factors include,  among others,  the following:  the revocation of the Company's
broadband network operator's  license,  the inability to successfully  implement
its business  plans,  the  cancellation  or  postponement  of contracts that the
Company has entered  into in  connection  with its  business,  the  inability to
obtain services provided by other communications companies or service providers,
the inability of the Company to raise  capital on a timely  basis,  existing and
future  government  regulations,  the  failure  to retain  qualified  personnel,
competitive  pressures and  potentially  adverse tax and cash flow  consequences
resulting  from  operations  in  multiple  countries  with  different  laws  and
regulations,  and the general economic and business conditions in Malaysia,  the
United  States and the other  countries  in which we do  business,  primarily in
Asia.  The  Company  does  not  undertake  to  update,  revise  or  correct  any
forward-looking statements.

                                       2
<PAGE>
PART I -  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2005
                                   (Unaudited)
<TABLE>
<CAPTION>

                                     ASSETS

Current assets:
<S>                                                                                            <C>
     Cash                                                                                      $        24,831
     Cash, restricted                                                                                  481,880
     Trade receivables,
       less allowance for doubtful accounts of $55,000                                               6,585,840
     Other accounts receivable,
       less allowance for doubtful accounts of $371,000                                                 86,119
     Prepaid expenses                                                                                  118,639
     Inventories                                                                                       490,735
                                                                                               ---------------
              Total current assets                                                                   7,788,044
Property and equipment, net                                                                          1,102,490
Customer lists and relationships                                                                       213,168
License                                                                                                 52,000
Goodwill                                                                                               852,525
Long-term receivables, related parties                                                                 226,952
                                                                                               ---------------
                                                                                               $    10,235,179
                                                                                               ===============


                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
     Bank overdraft and borrowings                                                             $       936,767
     Current portion of capital lease obligations                                                       43,273
     Current portion of term loan                                                                       94,341
     Accounts payable                                                                                1,472,709
     Accrued expenses                                                                                  195,379
     Amount due to an affiliated company                                                                13,770
     Amount due to a director                                                                           13,232
     Income tax payable                                                                                217,125
                                                                                               ---------------
              Total current liabilities                                                              2,986,596
     Capital lease obligations, net of current portion                                                   5,946
     Term loan, net of current portion                                                                 117,452
     Deferred income tax                                                                                85,526
     Deferred gain                                                                                     226,952
                                                                                               ---------------
              Total liabilities                                                                      3,422,472
                                                                                               ---------------

                                   (continued)

                                       3
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                         SEPTEMBER 30, 2005 (CONTINUED)
                                   (Unaudited)


Minority interest                                                                                      544,768
                                                                                               ---------------

Commitments and contingencies

Shareholders' equity:
     Series A convertible preferred stock, $0.10 par value;
       1,000,000 shares authorized; none issued or outstanding                                              --
     Common stock, $.00001 par value;
       350,000,000 shares authorized; 133,736,378 shares issued;
       127,884,430 outstanding                                                                           1,280
     Additional paid-in capital                                                                      5,369,833
     Common treasury stock; 5,851,948 shares at cost                                                        --
     Options                                                                                            60,644
     Warrants                                                                                          779,613
     Retained earnings                                                                                      --
     Accumulated other comprehensive income                                                             56,569
                                                                                               ---------------
              Total shareholders' equity                                                             6,267,939
                                                                                               ---------------
                                                                                               $    10,235,179
                                                                                               ===============
</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,
                                                                   2005           2004           2005            2004
                                                                  ------         -------        ------          -------
<S>                                                            <C>             <C>            <C>               <C>
Revenues:
     Products and equipment                                     $   754,919             --     $ 2,606,785             --
     Services:
      Related parties                                               147,105    $   379,210         323,000    $ 1,193,685
      Others                                                      7,402,952      5,035,288      19,429,714     13,681,277
                                                                -----------    -----------     -----------    -----------
                                                                  8,304,976      5,414,498      22,359,499     14,874,962
                                                                -----------    -----------     -----------    -----------
Cost of revenues:
     Products and equipment                                         690,877             --       2,385,783             --
     Services:
      Related parties                                                43,947        113,816         142,368        441,711
      Others                                                      6,826,828      4,677,482      17,833,369     12,810,729
                                                                -----------    -----------     -----------    -----------
                                                                  7,561,652      4,791,298      20,361,520     13,252,440
                                                                -----------    -----------     -----------    -----------
Gross profit                                                        743,324        623,200       1,997,979      1,622,522
                                                                -----------    -----------     -----------    -----------
Operating expenses:
     Sales and marketing                                             38,343         17,266          67,803         25,284
     General and administrative:
       Related parties                                               21,315         21,315          63,947         63,947
       Others                                                       480,568        404,631       1,319,838        935,913
                                                                -----------    -----------     -----------    -----------
Total operating expenses                                            540,226        443,212       1,451,588      1,025,144
                                                                -----------    -----------     -----------    -----------
Income from operations
                                                                    203,098        179,988         546,391        597,378
                                                                -----------    -----------     -----------    -----------
Other income (expense):
     Interest expense                                               (66,447)       (15,398)       (120,672)       (23,225)
     Interest income                                                 41,408          8,469         120,144          8,469
     Gain on disposal of assets, related party                       36,974         18,421          82,632        225,679
     Other income                                                    22,209             --          58,276             --
     Share of associate companies' losses                                --        (13,553)             --        (20,132)
                                                                -----------    -----------     -----------    -----------
                                                                     34,144         (2,061)        140,380        190,791
                                                                -----------    -----------     -----------    -----------
Income from continuing operations before
     income tax and minority interest                               237,242        177,927         686,771        788,169
Income tax expense                                                  (91,553)       (16,579)       (169,974)       (49,474)
                                                                -----------    -----------     -----------    -----------
Income from continuing operations before
     minority interest                                              145,689        161,348         516,797        738,695
Minority interest                                                    15,982        (37,788)         31,612       (114,347)
                                                                -----------    -----------     -----------    -----------
Income from continuing operations                                   161,671        123,560         548,409        624,348

Discontinued operations (material handling subsidiaries):
   loss from discontinued operations,
       net of $0 income tax                                              --        (27,848)             --       (129,221)
                                                                -----------    -----------     -----------    -----------
Net income                                                      $   161,671    $    95,712     $   548,409    $   495,127
                                                                ===========    ===========     ===========    ===========

                                   (continued)

                                       5
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                                   Three months ended              Nine months ended
                                                                      September 30,                  September 30,
                                                                   2005           2004           2005            2004
                                                                  ------         -------        ------          -------

Net income                                                        $   161,671    $    95,712     $   548,409    $   495,127
Preferred stock dividend                                              (58,208)      (158,788)       (391,870)      (213,954)
Early redemption penalty on preferred stock                        (1,146,827)            --      (1,146,827)            --
                                                                  -----------    -----------     -----------    -----------
Net (loss) income applicable to common shareholders               $(1,043,364)   $   (63,076)    $  (990,288)   $   281,173
                                                                  ===========    ===========     ===========    ===========


Net (loss) income per common share from continuing operations:
     Basic and diluted                                            $         *    $         *     $         *    $         *
                                                                  ===========    ===========     ===========    ===========



Net (loss) income per common share from discontinued operations:
     Basic and diluted                                            $         *    $         *     $         *    $         *
                                                                  ===========    ===========     ===========    ===========

Weighted average shares outstanding:
     Basic                                                        117,854,404     91,147,968     102,997,797     94,581,079
                                                                  ===========    ===========     ===========    ===========
     Diluted                                                      118,933,000     91,147,968     103,532,000     95,189,163
                                                                  ===========    ===========     ===========    ===========

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

      See accompanying notes to condensed consolidated financial statements

                                       6
<PAGE>


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

                                                                                             Nine Months Ended
                                                                                               September 30
                                                                                           2005                 2004
                                                                                         --------             --------
<S>                                                                                 <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net cash used in operating activities                                          $        (533,693)    $      (419,528)
                                                                                    -----------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from disposal of equipment                                                       35,526                  --
     Purchase of equipment                                                                    (85,981)            (19,683)
     Proceeds from sale of investment in associate companies                                   13,158                  --
     Cash acquired on business acquisition                                                      1,381                  83
                                                                                    -----------------     ---------------
           Net cash used in investing activities                                              (35,916)            (19,600)
                                                                                    -----------------     ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Increase in restricted cash                                                             (130,610)                 --
     Net increase in bank borrowings                                                          173,343                  --
     Proceeds from issuance of common stock                                                   976,722             512,000
     Proceeds from issuance of convertible term note, net                                          --             470,323
     Payment of preferred dividend                                                           (256,666)                 --
     Payment of term note and subsidiary preferred stock                                     (238,390)                 --
     Payment of expenses in connection with:
       subsidiary preferred stock issuance                                                         --            (296,323)
     Payment of term note                                                                          --              (5,762)
     Net repayment of advances to affiliated company                                          (81,125)            (45,593)
     Net repayment of advances to a director                                                  (55,670)            (37,906)
     Proceeds from terms loans                                                                 48,131                  --
     Payment of term loan                                                                     (52,046)                 --
     Payment of obligation under capital leases                                               (25,159)            (29,150)
                                                                                    -----------------     ---------------
           Net cash provided by financing activities                                          358,530             567,589
                                                                                    -----------------     ---------------

Net (decrease) increase in cash                                                              (211,079)            128,461
Net cash provided by (used in) discontinued operations                                        143,417             (12,737)
Cash, beginning of period                                                                      92,493             244,919
                                                                                    -----------------     ---------------
Cash, end of period                                                                 $          24,831     $       360,643
                                                                                    =================     ===============

Supplemental disclosure of non-cash investing and financing activities:


Conversion of accrued term note and related accrued interest into
   common stock                                                                     $         122,581     $            --
                                                                                    =================     ===============

Restricted cash (paid) received in exchange for preferred stock of subsidiary       $      (6,105,138)    $     6,500,000
                                                                                    =================     ===============
Issuance of common stock for services rendered by a consultant                      $              --     $       133,500
                                                                                    =================     ===============
Issuance of common stock for payment of term note and preferred
   stock of subsidiary                                                              $         800,000     $            --
                                                                                    =================     ===============


                                   (Continued)

                                       7
<PAGE>

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

                                                                                              Nine Months Ended
                                                                                                 September 30
                                                                                           2005                 2004
                                                                                         --------             --------
BUSINESS ACQUISITIONS (Note 3):

Acquisition of subsidiary in April 2005/February 2004:

Net assets acquired:
   Property, furniture and equipment                                                 $          2,119     $       10,728
   Inventories                                                                                     --             85,885
   Accounts receivable                                                                         10,365             87,345
   Cash                                                                                        54,033              3,583
   Customer relationships                                                                      59,423                 --
   Accounts payable                                                                           (19,689)           (59,076)
   Capital lease obligation                                                                        --             (8,138)
                                                                                     ----------------     --------------
                                                                                              106,251            120,327
Less: Minority interest                                                                       (21,099)           (46,192)
      Common stock issued                                                                     (32,500)                --
      Cash acquired                                                                           (54,033)            (3,583)
                                                                                     ----------------     --------------
Net cash (received) payable in acquisition of subsidiary                             $         (1,381)    $       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 interest                                                                                         (159,984)
      Cash acquired                                                                                              (26,397)
                                                                                                          --------------
Net cash received in acquisition of subsidiary                                                            $          (83)
                                                                                                          ==============

</TABLE>
      See accompanying notes to condensed consolidated financial statements

                                       8
<PAGE>

                       SECURED DIGITAL APPLICATIONS, INC.
          NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (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), Armor Multi Systems Sdn Bhd ("AMS") (f/k/a
     Asiaco Multi Corporation Sdn Bhd) and Secured Shipping Sdn Bhd ("SS"),  all
     Malaysian corporations wholly-owned by the Company;
4.   Perwimas  Telecommunications  Sdn Bhd ("PTSB"),  SDAM's 86% owned Malaysian
     subsidiary;
5.   Armor Multi Services Sdn Bhd ("AMSS") (f/k/a Asiaco Services Sdn Bhd), AMS'
     60% owned Malaysian subsidiary;
6.   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;
7.   Gallant Service Centre (M) Sdn Bhd ("GSC"), SDAM's wholly-owned subsidiary,
     from the date of acquisition on September 29, 2004;
8.   Gallant IT Holdings Sdn Bhd ("GIH"),  GSC's 55% owned subsidiary,  from the
     date of acquisition on September 29, 2004;
9.   Gallant  Zone (M) Sdn Bhd  ("GZ"),  Eystar  Distribution  Sdn Bhd  ("EDSB")
     (f/k/a Gallant IT  Distribution  (M) Sdn Bhd) and Gallant Focus (M) Sdn Bhd
     ("GF"),  all wholly-owned  subsidiaries of GIH from the date of acquisition
     on September 29, 2004 and,  including GIH, such  subsidiaries may sometimes
     collectively be referred to as the "Gallant group" of companies; and
10.  Innospective  Sdn Bhd ("ISS"),  SDAM's 55% owned Malaysian  subsidiary from
     the date of acquisition on April 30, 2005.

For the  three-month  and  nine-month  periods  ended  September  30, 2004,  the
Company's  unaudited  interim  consolidated  financial  statements  included the
accounts of the following companies,  which were sold on December 27, 2004 to an
unrelated party, and which are presented as discontinued operations:

1.   Temasya Wira Sdn Bhd ("TW"), SDAM's 60% owned Malaysian subsidiary
2.   Asiaco  Material  Handling  (East  Coast) Sdn Bhd  ("AEC"),  AMS' 80% owned
     Malaysian subsidiary;
3.   Asiaco Logistic Sdn Bhd ("ALG"), AMS' 67% owned Malaysian subsidiary; and
4.   Asiaco Taiping Sdn Bhd ("ATG"), AMS' 62% owned Malaysian  subsidiary,  from
     the date of acquisition on February 9, 2004.

All significant  intercompany  accounts and transactions have been eliminated in
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,  except for those described below in Note 9) 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, 2004 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.


                                       9
<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

The Company's sources of revenues are from its  Applications,  Material Handling
and Apple Computer ("Gallant") businesses as follows:

a)   Applications  revenue is derived from  applications  development  services,
     services in connection with the operation of a broadband network,  sales of
     devices  that  utilize  broadband  networks  as well as sales of  biometric
     security  products and services in connection with systems  integration and
     implementation of wireless applications and electronic solutions.

b)   Material Handling revenue is derived from services we provide in connection
     with industrial moving, land transportation and secured logistics, the sale
     of industrial  packing and unpacking  equipment as well as the sale, rental
     and servicing of material handling equipment.

c)   Apple  Computer  revenues  are  derived  primarily  from  the sale of Apple
     Computers and related  accessories in an authorized Apple Center as well as
     the supply and provision of information technology products and services.

The  Company  recognizes  revenues  pursuant  to SEC Staff  Accounting  Bulletin
("SAB") No. 104 and related authoritative literature. Revenues from services are
recognized  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.  Revenues  from the  sales  of  products  and
equipment are  recognized  when the  significant  risks and rewards of ownership
have  passed  to the  customer.  Factors  such  as  customer  acceptance  return
policies, post shipment obligations, warranties, credits and discounts, rebates,
and  price  protection  or  similar  privileges,   have  historically  not  been
considered significant and have had no material impact on revenue recognition.

NET (LOSS) INCOME PER COMMON SHARE

Basic net (loss)  income per share is  calculated  by dividing net (loss) 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,  2005 and  2004.  Diluted  (loss)  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 (loss) 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,
                                                          2005              2004              2005             2004
                                                    -----------------  ----------------  ----------------   ---------------
<S>                                                              <C>               <C>              <C>              <C>
Net income                                          $             162  $             96  $             548   $           495
Preferred stock dividends                                         (58)             (159)              (391)             (214)

Early redemption penalty on preferred stock                    (1,147)               --             (1,147)               --
                                                    -----------------  ----------------  -----------------   ---------------
Net (loss) income applicable to common
shareholders                                        $          (1,043) $            (63) $            (990)  $           281
                                                    =================  ================  =================   ===============

Weighted average shares outstanding - basic                   117,854            91,148            102,998            94,581
                                                    =================  ================  =================   ===============

Net (loss) income per share - basic                 $               *  $              *  $               *   $             *
                                                    =================  ================  =================   ===============
</TABLE>
*  less than $.01 per share

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

NET (LOSS) INCOME PER COMMON SHARE (continued)
<TABLE>
<CAPTION>
                                                            Three Months Ended                  Nine Months Ended
                                                      September 30,     September 30,    September 30,     September 30,
                                                          2005              2004              2005             2004
                                                    ----------------- ----------------  ----------------  ---------------
<S>                                                           <C>               <C>              <C>               <C>
Weighted average shares outstanding - basic                   117,854           91,148           102,998           94,581
Common stock issuable to consultant                             1,079               --               534              436
Dilutive stock options and warrants                                --               --                --              172

                                                    ----------------- ----------------  ---------------- ----------------
Weighted average shares outstanding - diluted                 118,933           91,148           103,532           95,189
                                                    ================= ================ ================= ================

Net (loss) income per share -diluted                $               * $              * $               * $              *
                                                    ================= ================ ================= ================
</TABLE>
* Less than $.01 per share

GOODWILL AND INTANGIBLE ASSETS

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

Intangible assets consist of the following:

a)   A customer list and a Malaysian  government  registered  contractor license
     acquired in September 2004. The customer list has a cost of $189,000 and is
     amortized  using the  straight  line  method over its  estimated  life of 7
     years.  Amortization  expense for the  three-month  and nine-month  periods
     ended  September  30,  2005  was  $6,750  and  $20,250,  respectively,  and
     accumulated  amortization at September 30, 2005 was $27,000. The registered
     contractor  license  has a cost  of  $65,000  and is  amortized  using  the
     straight  line  method  over its  estimated  life of 5 years.  Amortization
     expense for the three-month and nine-month periods ended September 30, 2005
     was  $3,250 and  $9,750,  respectively,  and  accumulated  amortization  at
     September 30, 2005 was $13,000.

b)   Customer  relationships  with a cost of  $59,423  were  acquired  on  April
     30,2005,  and are being  amortized  using the straight line method over its
     estimated life of 3 years.  Amortization  expense for the nine-month period
     ended  September  30,  2005 was $8,255,  and  accumulated  amortization  at
     September 30, 2005 was $8,255.

INVENTORIES

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

TREASURY STOCK

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

INCOME TAXES

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

                                       11
<PAGE>

2.  SIGNIFICANT ACCOUNTING POLICIES (continued)

INCOME TAXES (continued)

A valuation  allowance offsets the net deferred tax assets for which there is no
assurance of recovery. The valuation allowance is evaluated considering positive
and negative evidence about whether the deferred tax assets will be realized. At
the time of evaluation,  the allowance is either increased or reduced; reduction
could result in the complete  elimination of the allowance if positive  evidence
indicates  that the value of the deferred  tax assets is no longer  impaired and
the allowance is no longer required.

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.  As of
September 30, 2005, the Company did not have any investments accounted for under
the equity method of accounting.

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.

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

On August 1, 2004,  the Company  granted  options to purchase  an  aggregate  of
300,000 shares of the Company's  common stock at $0.30 per share to a consultant
for  services to be provided to the  Company.  These  options  were  exercisable
through July 2009,  contingent upon continuous service by the consultant through
specified dates. The option agreement between the Company and the consultant was
terminated in April 2005.  100,000  options vested on January 31, 2005 resulting
in recognition of  compensation  expense of $1,067 during the nine-month  period
ended  September  30,  2005.  100,000  options  vested on April 30, 2005 and the
remaining  100,000  options  scheduled  to vest on July 31, 2005 were  cancelled
following  termination of the  agreement.  As of September 30, 2005, the 100,000
options  vested on January 31, 2005 were also canceled as the consultant did not
exercise the option within the stipulated period.


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

STOCK-BASED COMPENSATION (continued)

On August 3, 2004, the Company granted certain officers, directors and employees
of the Company options to purchase up to an aggregate of 2,000,000 shares of the
Company's common stock at $0.20 per share.  The options are exercisable  through
August     2009,     contingent     upon     continuous     service    by    the
officers/directors/employees  through  specified  dates.  500,000  options  were
exercisable on October 3, 2004,  200,000 options were exercisable on February 3,
2005,  500,000  options were  exercisable  on August 3, 2005,  and the remaining
800,000  options are  exercisable  in equal numbers on each of February 3, 2006,
2007, 2008 and 2009,  respectively.  In addition,  on August 3, 2004 the Company
granted  options to purchase  100,000  shares of the  Company's  common stock at
$0.12 per share to an independent  director as  compensation  for serving on the
Company's  Board of Directors.  These  options are  exercisable  with  immediate
effect through  August 2009.  For the three and nine months ended  September 30,
2005, the Company,  based on the intrinsic  value method as permitted  under APB
No.25, recognized compensation expense of $4,790 and $22,409,  respectively. The
Company recognized compensation expense of $40,094 for the three and nine months
ended  September  30,  2004,  respectively.  On May 3, 2005,  two  officers  and
directors  exercised 290,000 options, an officer exercised 30,000 options and an
employee  exercised  30,000  options  at $0.20  per  share  for  aggregate  cash
consideration of $70,000.

In December 2004, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 123(R) Share Based Payment,  which  addresses the accounting for share-based
payment  transactions.  SFAS No.  123(R)  eliminates  the ability to account for
share-based  compensation  transactions using APB No. 25, and generally requires
instead that such  transactions  be accounted and recognized in the statement of
income based on their fair values.  SFAS No. 123(R) will be effective for public
companies  that file as small  business  issuers as of the first interim  period
that begins after December 15, 2005. The Company is evaluating the provisions of
SFAS No.  123(R).  Depending  upon the numbers and terms of options  that may be
granted in future  periods,  the  implementation  of this standard  could have a
material impact on the Company's  financial  position and results of operations.
The Company  estimates that it may need to recognize  approximately  $60,000 in
additional  compensation expense under SFAS No.123(R) on options that may not be
fully vested by the effective date.

Had compensation cost for options been determined based on the fair value at the
grant  date  consistent  with the method  prescribed  under  SFAS No.  123,  the
Company's  pro forma net  income  and net  income  per share  would have been as
follows:
<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED               NINE MONTHS ENDED
                                                              September 30    September 30    September 30    September 30
                                                                   2005           2004            2005            2004
                                                              -------------   ------------   -------------  -------------
<S>                                                           <C>             <C>            <C>            <C>
Net income                                                    $     161,671   $     95,712   $     548,409  $     495,127
Add: Stock-based employee compensation expense
        included in reported net income, net of related tax           4,790         40,094          22,409         40,094
Less: Total stock-based employee compensation expense
         determined under fair value based method for all
         awards, net of related tax effects                         (29,000)       (76,100)        (93,000)       (76,100)
                                                              -------------   ------------   -------------  -------------
Pro forma net income                                          $     137,461   $     59,706   $     477,818  $     459,121
                                                              =============   ============   =============  =============
Income (loss) per share:
 Basic and diluted - as reported                              $           *   $          *   $           *  $           *
 Basic and diluted - pro forma                                $           *   $          *   $           *  $           *
                                                              =============   ============   =============  =============
* Less than $.01 per share
</TABLE>
The value of the options issued during the nine months ended  September 30, 2005
is  calculated  using the  Black-Scholes  methodology.  The Company  utilized an
expected dividend yield of 0, expected stock price volatility  ranging from 115%
to 163%,  risk free  interest  rates ranging from 2% to 4%, and expected life of
the options ranging from 3 months to 3.9 years.


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

ESTIMATES

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

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

3.  BUSINESS ACQUISITION AND DISPOSAL

On November  17,  2003,  SDAM  signed an asset  purchase  agreement  with Asiaco
Material Handling Sdn Bhd ("AMH"),  a Malaysian  company,  to purchase,  through
AMS, the business assets and selected  liabilities of AMH and seven companies in
the Asiaco group.  The definitive  agreement also provided for AMS to purchase a
majority equity interest in the remaining  sixteen companies in the Asiaco group
from  AMH's  majority  shareholder.  Pursuant  to this  agreement,  the  Company
acquired a majority equity interest in three Malaysian  companies on December 9,
2003:  80% in Asiaco  Material  Handling  (East  Coast)  ("AEC"),  67% in Asiaco
Logistic ("ALG") and 60% in Armor Multi Services ("AMSS").  On February 9, 2004,
the Company also acquired a 62% equity interest in Asiaco Taiping  ("ATG").  The
Company  acquired its majority  equity  interests in AEC, ALG, AMSS and ATG (the
"Subsidiaries") from AMH for total consideration of $268,046,  of which $119,047
was  allocated to AMSS,  and $148,999 was  allocated to AEC, ALG and ATG.  These
acquisitions  were  accounted  for as  purchases.  The Company also acquired its
equity investments of 46% in Asiaco Transport and 33% in Asiaco Engineering from
AMH for total consideration of $45,222.  The total consideration of $313,268 was
to be  satisfied  by the  issuance of AMS'  common  stock to the owner upon full
completion of the asset purchase agreements between the Company and AMH. Through
December 31,  2004,  the Company had paid a total of $263,158 to AMH as advances
for the  incorporation of AMS and for the purchase of equity in the Subsidiaries
as well as the two associate companies. As of December 31, 2004, the Company had
a liability  of $50,110 to AMH,  which was  recorded in "other  payables".  As a
result of these  acquisitions  the Company  entered into the equipment  material
handling business.

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

Revenues from  discontinued  operations  were $92,031 and $265,014 for the three
and nine months ended September 30, 2004, respectively. Losses from discontinued
operations  were  $27,848  and  $129,221  for the  three and nine  months  ended
September  30,  2004,  respectively.   Discontinued  operations  relate  to  the
Company's material handling business.

                                       14
<PAGE>
3.   BUSINESS ACQUISITION AND DISPOSAL (continued)

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

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

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

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.

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


                                       15
<PAGE>
3.  BUSINESS ACQUISITION AND DISPOSAL (continued)

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 was subjected 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, 2005 and 2004:
<TABLE>
<CAPTION>

                                                             Three Months Ended                  Nine Months Ended
                                                                September 30                       September 30
                                                           2005             2004              2005              2004
                                                     ----------------  ---------------  ----------------  ---------------
<S>                                                  <C>               <C>              <C>               <C>
Revenues                                             $      8,304,976  $     6,536,493  $     22,388,272  $    17,710,919
                                                     ================  ===============  ================  ===============
Net income                                           $        155,224  $        14,802  $        539,145  $       258,475
                                                     ================  ===============  ================  ===============
Basic and diluted
  net income per common share                        $              *  $             *  $              *  $             *
                                                     ================  ===============  ================  ===============
* Less than $0.01 per share
</TABLE>

4.  RESTRICTED CASH

Restricted  cash  of  $481,880  as  of  September  30,  2005  included  $464,837
(RM1,766,000) deposited with financial institutions in Malaysia. This restricted
cash represents 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.


                                       16
<PAGE>
5.  BANK OVERDRAFT AND BORROWINGS

As of September 30, 2005,  the Company's  subsidiaries  have the following  bank
facilities:
<TABLE>
<CAPTION>
                                                                    GIH              GZ               Total
                                                                  -------        -----------       ----------
<S>                                                           <C>               <C>              <C>
Bank overdraft                                                $     132,000     $      79,000    $     211,000
Trade financing facilities                                          211,000           631,000          842,000
                                                              -------------     -------------    -------------
Total bank facilities available                               $     343,000     $     710,000    $   1,053,000
                                                              =============     =============    =============
Balance utilized as of September 30, 2005                     $     228,479     $     708,288    $     936,767
                                                              =============     =============    =============
</TABLE>
The above bank  facilities  are  repayable on demand and bear  interest at rates
ranging from 1.5% to 8.40% per annum and are secured by:

a)   a pledge on the time deposit accounts;
b)   sinking fund accounts included in restricted cash;
c)   a corporate guarantee for RM2.5 million provided by GIH; and
d)   personal guarantees provided by third parties and two directors of GIH.

6.  RELATED PARTY ACTIVITY

During the  nine-month  periods ended  September 30, 2005 and 2004,  the Company
recognized  revenue  of  $323,000  and  $1,193,685,  respectively,  for  project
consulting fees from a related party, pursuant to four consulting contracts.

At December 31,  2004,  long-term  receivables,  related  parties,  consisted of
$309,584 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 $82,632 and $225,679
of the outstanding  receivable during the nine-month periods ended September 30,
2005 and  2004,  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.

7.  TERM LOANS

As of September  30,  2005,  the Company has term loan  liabilities  of $211,793
(RM804,812).  These term loans, which were granted by financial  institutions in
Malaysia,  are secured by personal  guarantees provided by third parties and two
directors of GIH and bear interest at 8% - 8.4% per annum.


                                       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,  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 had 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  could be  adjusted
downward  based on a minimum  increase  of 25% 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 was being  amortized over the term of the
debt,  or 36 months,  using the  effective  interest  rate  method.  Proceeds of
$326,000 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  granted a security  interest  in all of its net
assets and the net assets of one of its wholly  owned  subsidiaries,  until such
time that the Note was  satisfied.  The principal and interest  could be paid in
cash or in common stock at the  conversion  price,  at the Master Fund's option,
provided that the volume  weighted  average price (VWAP) of the common stock for
the ten  trading  days  immediately  preceding  the due date was 110%  above the
conversion price. The conversion price was reset on August 11, 2004 to $0.20 per
share  pursuant to an agreement  entered into by the Master Fund and the Company
and the reset  resulted  in a  beneficial  conversion  feature of  approximately
$152,000.

On April 25, 2005,  pursuant to an agreement entered into by the Master Fund and
the Company, the conversion price was subsequently reset to a price equal to 85%
of the  average of the five lowest  closing  prices  during the 22 trading  days
prior to the date of conversion,  subject to a minimum conversion price of $0.07
per share.  The reset  resulted in a revised  beneficial  conversion  feature of
approximately  $112,000.  The beneficial  conversion  feature is contingent upon
certain  future  events and is recorded as  conversions  are made.  On August 1,
2005,  the  Company  repaid  the  entire  outstanding  balance  of the  Note and
recognized an early payment penalty of $46,830 (see Note 9).

A summary of the status of the discounted  principal and interest  amount of the
Note from January 1, 2005 through September 30, 2005 is presented below:
<TABLE>
<CAPTION>
                                              Total         Interest         Principal        Discount            Net
                                        ---------------   -------------  ---------------  ----------------  -------------
<S>                                      <C>               <C>            <C>              <C>               <C>
Balance as of January 1, 2005           $       426,470   $          --  $       426,470  $         40,855  $     385,615
Interest through September 30, 2005              18,381          18,381               --                --             --
Conversion in April 2005 (a)                    (52,770)         (8,653)         (44,117)           (4,226)       (39,891)
Conversion in May 2005 (b)                      (17,412)         (2,707)         (14,705)           (1,408)       (13,297)
Conversion June 1, 2005 (c)                     (17,249)         (2,544)         (14,705)           (1,408)       (13,297)
Conversion June 16, 2005 (d)                    (14,705)             --          (14,705)           (1,407)       (13,298)
Conversion July 12, 2005 (e)                    (20,445)         (2,304)         (18,141)           (1,740)       (16,401)
Allocation of discount                          (30,666)             --          (30,666)          (30,666)            --
Early payment penalty                            46,830          46,830               --                --             --
Repaid on August 1, 2005                       (338,434)        (49,003)        (289,431)               --       (289,431)
                                        ---------------   -------------  ---------------  ----------------  -------------
Balance as of September 30, 2005        $            --   $          --  $            --  $             --  $          --
                                        ===============   =============  ===============  ================  =============
</TABLE>
a)   On April 25, 2005, the Master Fund converted $39,891  discounted  principal
     of the note and  $8,653  of  accrued  interest  to  383,701  shares  of the
     Company's common stock.
b)   On May 5, 2005, the Master Fund converted $13,297  discounted  principal of
     the note and $2,707 of accrued  interest to 140,311 shares of the Company's
     common stock.
c)   On June 1, 2005, the Master Fund converted $13,297 discounted  principal of
     the note and $2,544 of accrued  interest to 163,132 shares of the Company's
     common stock.
d)   On June 16, 2005, the Master Fund converted $13,298 discounted principal of
     the note to 147,649 shares of the Company's common stock.
e)   On July 12, 2005, the Master Fund converted $16,401 discounted principal of
     the note and $2,304 of accrued  interest to 250,000 shares of the Company's
     common stock.

                                       18
<PAGE>
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 was convertible into shares of
common stock at a fixed ratio of 80 shares of common stock for 1 share of Voting
Preferred  stock.  The  8,000,000  shares  were  returned  to  treasury  and are
available  for  re-issuance  at a future date.  The Voting  Preferred  stock was
entitled to cumulative  dividends at $2.20 per annum, payable in common stock at
$.28 per share. On May 3, 2005, Mr. Lim and the Company executed an amendment to
the  Certificate of Designation of Series A Voting  Convertible  Preferred Stock
governing  payment of dividend on the Voting  Preferred.  Under the terms of the
amendment, Mr. Lim would have the option of receiving the dividend on the Voting
Preferred either in cash or shares of the Company's common stock.  Each share of
the Voting  Preferred was entitled to voting  rights  equivalent to 80 shares of
common  stock.  The Series A preferred  was subject to mandatory  conversion  10
years after its issuance.  On August 3, 2005,  the Company's  Chairman and Chief
Executive  Officer converted the entire 100,000 shares of the Company's Series A
Voting Convertible  Preferred Stock into 8,000,000 shares of common stock, which
resulted in the  reclassification  of $10,000  from the stated  amount to $80 of
common stock (par) and $9,920  additional  paid-in  capital.  In  addition,  the
Company paid the $256,666 dividend due to Mr. Lim in cash in August 2005.

A summary of the status of the  Voting  Preferred  and  dividend  accrued  since
January 1, 2005 and changes through September 30, 2005 is presented below:
<TABLE>
<CAPTION>
                                                              Total          Dividend          Stated
                                                                                               Amount
                                                          -------------- ---------------  ----------------
<S>                                                      <C>            <C>              <C>
Balance as of January 1, 2005                             $     138,333  $       128,333  $         10,000
Dividend through September 30, 2005                             128,333          128,333                --
Conversion to common stock in August 2005                       (10,000)              --           (10,000)
Payment in August 2005                                         (256,666)        (256,666)               --
                                                          -------------- ---------------  ----------------
Balance September 30, 2005                                $          --  $            --  $             --
                                                          ============== ===============  ================
</TABLE>
On May 28, 2004, the Company and one of the Company's wholly owned subsidiaries,
SDAA,  entered into a Securities  Purchase Agreement (the "SPA") with the Master
Fund under which SDAA issued 6,500,000 shares of Series A Convertible  Preferred
Stock  (the  "Series  A  Preferred")  at a price of $1.00 per  share,  which was
convertible  into shares of the Company's common stock, and warrants to purchase
up to 3,000,000 shares of the Company's common stock. The Series A Preferred was
convertible,  subject to certain conditions, into common stock of the Company at
the  option of the  Master  Fund and was  entitled  to  cumulative  preferential
dividends at a rate per annum  equivalent  to the "prime rate"  published in The
Wall  Street  Journal  from time to time plus 2%,  subject  to a floor of 6% per
annum.  The preferred  stock dividends could be paid in cash or in shares of the
Company's common stock at the applicable  conversion price, at the Master Fund's
option.  The conversion price was initially set at $0.35 per share. The warrants
have a  seven-year  term and an exercise  price of $0.40 per share for the first
1,000,000 shares,  $0.43 per share for the second 1,000,000 shares and $0.47 per
share for the third 1,000,000  shares.  The Series A Preferred had a liquidation
value of $1.00 per share.

On August 11,  2004,  the Company and the Master Fund  executed an  amendment to
certain  agreements  governing  the  terms  under  which  the Note and  Series A
Preferred  issued to the Master Fund could be converted into the common stock of
the Company.  Under the terms of the amendment,  the Master Fund could convert a
portion of the Note and Series A Preferred as follows:  the first  $2,000,000 of
conversions  were  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 were reset to a price of $0.25 per share. The remaining  conversions
permitted under the terms of the original securities issuance remained unchanged
at $0.35 per share. In addition to resetting the conversion prices for a portion
of the  transaction,  the  amendment  provided  that all  dividend  and interest
payments  payable under the investment  would accrue,  rather than be payable in
cash,  until the next  conversion  into common  stock  occurred.  The  amendment
provided 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.

                                       19
<PAGE>
9.  PREFERRED STOCK (continued)

On November 15, 2004,  the Company and the Master Fund  executed an amendment to
the 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 issued  warrants to the Master Fund to purchase
1,300,000  shares of the Company's  common stock. The warrants have a seven-year
term and an exercise price of $0.35 per share.

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

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 original $6,500,000 investment was deposited into
a  restricted  account as security  for the  performance  of the Company and its
subsidiaries' obligations to the Master Fund. The proceeds were restricted until
the preferred stock was converted into common stock of the Company.

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

A summary of the status of the Series A  Preferred  and  dividend  thereon  from
January 1, 2005 through September 30, 2005 is presented below:
<TABLE>
<CAPTION>
                                         Total         Dividend/     Series A      Amount       Issue          Net
                                                      Redemption      Stated     Allocated to   Costs        Carrying
                                                        Penalty       Amount       Warrants                    Value
                                     -------------   -----------   -------------  -----------  -----------   ------------
<S>                                  <C>            <C>           <C>             <C>          <C>          <C>
Balance as of January 1, 2005        $   6,238,563  $    238,563  $    6,000,000  $   479,000  $   364,833  $   5,156,167
Dividend through
 September 30, 2005                        263,537       263,537              --           --           --             --
Allocation of warrants and
 issue costs                              (843,833)           --        (843,833)    (479,000)    (364,833)            --
Early redemption penalty                 1,146,827     1,146,827              --           --           --             --
Redeemed on August 1, 2005              (6,805,094)   (1,648,927)     (5,156,167)          --           --     (5,156,167)
                                     -------------   -----------   -------------  -----------  -----------   ------------
Balance September 30, 2005           $          --   $        --   $          --  $        --  $        --   $         --
                                     =============   ===========   =============  ===========  ===========   ============
</TABLE>
                                       20
<PAGE>
9.  PREFERRED STOCK (continued)

The following table  summarizes the August 1, 2005  transaction  with the Master
Fund:
<TABLE>
<CAPTION>
                                                       Total             Interest/            Discounted
                                                                         Dividend             Principal/
                                                                                               Series A
                                                                                               Carrying
                                                                                                Amount
                                                 ----------------    ---------------     -----------------
<S>                                              <C>                 <C>                 <C>
Balance as of August 1, 2005
 Term note                                       $        291,604    $         2,173     $         289,431
 Series A Preferred                                     5,658,267            502,100             5,156,167
                                                 ----------------    ---------------     -----------------
 Total                                                  5,949,871    $       504,273     $       5,445,598
Paid from restricted cash                              (6,105,138)   ===============     =================
Cash payment                                             (238,390)
Common stock issued (a)                                  (800,000)
                                                 ----------------
Early payment/redemption penalty (b)             $     (1,193,657)
                                                 ================
</TABLE>
a)   9,756,098 shares of common stock issued at a price of $0.082 per share.
b)   The  August 1, 2005  transaction  resulted  in an early  payment/redemption
     penalty of $1,193,657,  of which  approximately  $46,830 is attributable to
     interest  expense  and  $1,146,827  represents  a  reduction  to net income
     available  to common  shareholders,  and which is recorded in the three and
     nine months ended September 30, 2005.

10.  COMMON STOCK

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

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

                                       21
<PAGE>
10.  COMMON STOCK (continued)

The Company  reissued from its treasury  stock 199,218 shares of common stock on
June 2, 2005 at $0.103 per share for total  consideration  of  $20,466,  843,446
shares  of  common  stock on  August  9,  2005 at  $0.108  per  share  for total
consideration  of $91,092 and 295,632  shares of common stock on  September  23,
2005 at $0.085 per share for total  consideration of $25,129, to a consultant as
payment  for  services  rendered to the  company  during the nine  months  ended
September 30, 2005. In August 2005, the Company  reissued  609,756 shares of its
common  stock from  treasury  to an  investor  for cash of  $50,000,  in private
placement  exercises.  These  shares  were issued at a price equal to 85% of the
average  of the five  lowest  closing  prices of the  common  stock  during  the
twenty-two trading days prior to the date of issuance,  as reported by Bloomberg
News Services.  On August 9, 2005, the Company  reissued from its treasury stock
240,000 shares of common stock at $0.139 per share for a total  consideration of
$33,360 and on September 27, 2005,  the Company  issued 240,000 shares of common
stock at $0.098 per share for a total  consideration of $23,520, to a consultant
pursuant  to a  compensation  agreement  dated July 15,  2005,  under  which the
Company is to issue an aggregate of 960,000  shares of its common stock,  to the
consultant  as payment  for  services  to be  rendered  to the  Company  for the
twelve-month period ending July 14, 2006. The 480,000 shares were valued,  based
on the  respective  market  price  on the  date of  issuance,  and  the  Company
recognized  compensation  expense of $27,800 for the three and nine months ended
September 30, 2005,  respectively.  As of September 30, 2005,  the Company had a
balance of 5,851,948 repurchased shares in its treasury stock.

On February 8, 2005, the Company issued 240,000 shares of common stock at $0.175
per share for a total  consideration of $42,000 and on May 18, 2005, the Company
issued  240,000  shares  of  common  stock  at  $0.125  per  share  for a  total
consideration of $30,000, to a consultant  pursuant to a compensation  agreement
dated July 15, 2004, under which the Company is to issue an aggregate of 960,000
shares of its common  stock to the  consultant  as payment  for  services  to be
rendered to the Company for the  twelve-month  period ended July 14,  2005.  The
480,000 shares were valued,  based on the respective market price on the date of
issuance, and the Company recognized compensation expense of $5,000 and $82,000,
respectively, for the three and nine months ended September 30, 2005.

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

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

In October 2005,  the Company issued 500,000 shares of common stock at $0.10 per
share  for  total  consideration  of  $50,000  to  a  consultant  pursuant  to a
compensation  agreement dated September 12, 2005,  under which the Company is to
issue an aggregate of 2,000,000  shares of its common stock to the consultant at
$0.10 per share as payment  for  services  to be rendered to the Company for the
twelve-month  period ending  September  12, 2006.  For the three and nine months
ended September 30, 2005, the Company recognized compensation expense of $8,333.

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  ended  in  July  2005.  In  September  2005,  the
consultant   agreed  with  the  Company  to  waive  his  entitlement  under  the
compensation agreement and the Company was relieved from the obligation to issue
120,000 shares of its common stock to the consultant.  During the three and nine
months ended  September  30, 2005,  the Company  reversed  accrued  compensation
expense of $16,800.

                                       22
<PAGE>
11.  SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

The Company grants credit,  generally without collateral,  to its customers. Two
customers in the Company's  applications segment accounted for approximately 82%
of revenues  earned  during the three and nine months ended  September 30, 2005,
respectively.  These two  customers  accounted  for  approximately  89% and 87%,
respectively,  of  revenues  earned  during  the  three  and nine  months  ended
September  30, 2004.  In the three months and nine months  ended  September  30,
2005, the two customers,  each accounted for 41% of total revenue.  In the three
months ended September 30, 2004, the two customers, accounted for 44% and 45% of
total revenue.  In the nine months ended  September 30, 2004, the two customers,
accounted for 43% and 44% of total revenue.  The allowance for doubtful accounts
receivable  was  approximately  $426,000 at September 30, 2005. The Company will
continue to pursue  vigorously  the collection of all its  outstanding  accounts
receivable.

Three  suppliers  accounted  for 85% cost of revenues  during the three and nine
months ended  September 30, 2005, and one supplier  accounted for  substantially
all cost of revenues  during the three and nine months ended September 30, 2004.
The Company is not  dependent  upon one supplier to provide the services that it
requires  but made a strategic  decision to engage the  services of only a small
number of suppliers after taking into  consideration  the quality of service and
competitive  pricing  being  offered.  Should the need arise,  the Company could
utilize alternative suppliers for the services that it requires.

12.   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,  the sale of biometric security
     devices,  systems  integration and implementation of wireless  applications
     and electronic solutions.

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

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

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

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

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

                                       23
<PAGE>
12.   SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
                                                                      Material
                                                    Applications      Handling        Gallant         Total
                                                   ---------------   ------------  -------------- --------------
<S>                                                <C>               <C>           <C>            <C>
Three-month period ended September 30, 2005:

Revenue:
   Related parties                                 $      147,105    $         --  $          --  $      147,105
   Others                                               7,210,740          83,048        864,083       8,157,871
                                                   ---------------   ------------  -------------- --------------

                                                        7,357,845          83,048        864,083       8,304,976
Cost of revenue                                         6,744,868          76,614        740,170       7,561,652
                                                   ---------------   ------------  -------------- --------------
Gross profit                                       $      612,977    $      6,434  $     123,913  $      743,324
                                                   ==============    ============  =============  ==============
Income (loss) from operating segments              $      140,460    $      9,029  $      12,182  $      161,671
                                                   ==============    ============  =============  ==============
Depreciation expense                               $       55,645    $      3,678  $       7,380
                                                   ==============    ============  =============
Interest expense                                   $       51,171    $         --  $      15,276
                                                   ==============    ============  =============
Interest income                                    $       29,526    $         --  $      11,882
                                                   ==============    ============  =============
Income tax expense                                 $       54,274    $         --  $      37,279
                                                   ==============    ============  =============
Expenditures for additions to long lived assets    $        1,254    $      1,181  $       8,686
                                                   ==============    ============  =============

Three-month period ended September 30, 2004:

Revenue:
   Related parties                                 $      379,210  $           --  $          --  $      379,210
   Others                                               4,903,211         132,077             --       5,035,288
                                                   --------------  --------------  -------------  --------------
                                                        5,282,421         132,077             --       5,414,498
Cost of revenue                                         4,677,447         113,851             --       4,791,298
                                                   --------------  --------------  -------------  --------------

Gross profit                                       $      604,974  $       18,226  $              $      623,200

Income (loss):
   from operating segments                         $      126,997  $       (3,437) $          --  $      123,560
   from discontinued operations                            11,589         (39,437)            --         (27,848)
                                                   --------------  --------------  -------------  --------------

                                                   $      138,586  $      (42,874) $          --  $       95,712
                                                   ==============  ==============  =============  ==============
Depreciation expense                               $       59,071  $        4,222  $          --
                                                   ==============  ==============  =============
Interest expense                                   $       15,398  $           --  $          --
                                                   ==============  ==============  =============
Interest income                                    $        8,469  $           --  $          --
                                                   ==============  ==============  =============
Share of associate companies losses                $           --  $      (13,553) $          --
                                                   ==============  ==============  =============
Income tax expense                                 $       16,579  $           --  $          --
                                                   ==============  ==============  =============
Expenditures for additions to long lived assets    $        3,752  $        5,012  $          --
                                                   ==============  ==============  =============
</TABLE>
                                       24
<PAGE>

12. SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
                                                    Applications      Material                          Total
                                                                      Handling        Gallant
                                                   --------------    --------------  -------------  --------------
<S>                                                <C>               <C>             <C>            <C>
Nine-month period ended September 30, 2005:

Revenue:
   Related parties                                 $      323,000    $           --  $          --  $      323,000
   Others                                              18,913,976           277,137      2,845,386      22,036,499
                                                   --------------    --------------  -------------  --------------
                                                       19,236,976           277,137      2,845,386      22,359,499
Cost of revenue                                        17,656,756           261,332      2,443,432      20,361,520
                                                   --------------    --------------  -------------  --------------

Gross profit                                       $    1,580,220    $       15,805  $     401,954  $    1,997,979
                                                   ==============    ==============  =============  ==============
Income (loss) from operating segments              $      514,504    $         (966) $      34,871  $      548,409
                                                   ==============    ==============  =============  ==============
Depreciation expense                               $      177,041    $       11,611  $      22,287
                                                   ==============    ==============  =============
Interest expense                                   $       70,285    $           --  $      50,387
                                                   ==============    ==============  =============
Interest income                                    $      108,262    $           --  $      11,882
                                                   ==============    ==============  =============
Income tax expense                                 $      132,695    $           --  $      37,279
                                                   ==============    ==============  =============
Expenditures for additions to long lived assets    $        3,218    $        1,181  $      81,581
                                                   ==============    ==============  =============
Nine-month period ended September 30, 2004:

Revenue:
   Related parties                                 $    1,193,685    $           --  $          --  $    1,193,685
   Others                                              13,266,368           414,909             --      13,681,277
                                                   --------------    --------------  -------------  --------------
                                                       14,460,053           414,909             --      14,874,962
Cost of revenue                                        12,885,210           367,230             --      13,252,440
                                                   --------------    --------------  -------------  --------------
Gross profit                                       $    1,574,843    $       47,679  $          --  $    1,622,522
                                                   ==============    ==============  =============  ==============
Income (loss):
   from operating segments                         $      691,947    $      (67,599) $          --  $      624,348
   from discontinued operations                            (4,225)         (124,996)            --        (129,221)
                                                   --------------    --------------  -------------  --------------
                                                   $      687,722    $     (192,595) $          --  $      495,127
                                                   ==============    ==============  =============  ==============
Depreciation expense                               $      176,606    $       11,937  $          --
                                                   ==============    ==============  =============
Interest expense                                   $       23,225    $           --  $          --
                                                   ==============    ==============  =============
Interest income                                    $        8,469    $           --  $          --
                                                   ==============    ==============  =============
Share of associate companies losses                $           --    $      (20,132) $          --
                                                   ==============    ==============  =============
Income tax expense                                 $       49,474    $           --  $          --
                                                   ==============    ==============  =============
Expenditures for additions to long lived assets    $        6,452    $       13,231  $          --
                                                   ==============    ==============  =============
</TABLE>
Segment  information  for the three and nine months ended September 30, 2004, do
not include the operating  results of the Apple division as the Company acquired
the Gallant group of companies on September 29, 2004.

Consolidated total assets as of September 30, 2005 are as follows:

   Applications                                $       8,455,960
   Apple                                               1,577,001
   Material handling                                     202,218
                                               -----------------
   Total consolidated assets                   $      10,235,179
                                               =================

                                       25
<PAGE>
13.  PROPOSED BUSINESS TRANSACTION

On August 24, 2005, the Company announced the signing of agreements to acquire a
company that holds a 60% interest in a Malaysian ocean freight  intermediary and
100% of an ocean transportation logistics company. The planned acquisitions form
part of the  Company's  continuing  initiative  to  establish  a viable  secured
shipping business.  The aggregate purchase price for these entities is estimated
at $220,000 and is to be paid in cash at closing.  These  acquisitions  have not
closed pending the completion of due diligence.



                                       26
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

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

OVERVIEW

     Secured Digital  Applications,  Inc. and subsidiaries (the "Company") seeks
to develop and commercialize  practical  applications of digital technology in a
variety of  industries.  We are involved in three  principal  lines of business:
broadband,  multimedia and biometric security operations;  retail sales of Apple
computers and related equipment; and material handling,  shipping and logistics.
The  activities of our  subsidiary  companies  include  value-added  application
development,  broadband  network  operation,  the sale of devices  that  utilize
broadband  networks  and the sale of  biometric  security  devices.  We  operate
principally  in Malaysia.  The  Company's  principal  operations  in the area of
broadband,   multimedia  and  biometric   security   during  2005  included  the
development  and  operation of a wireless  broadband  network in  Malaysia,  the
development  of  interactive,  multimedia  content  for  the  Internet  and  the
development,  licensing and/or sale of specific  products and applications  that
utilize the capacities of a broadband network. These products include the EyStar
SmartHome   Management   System,   broadband   modems,   biometric  systems  and
Internet-based  cameras.  Through its majority  interest in the Gallant group of
companies,  the Company sells Apple  computer  products in Malaysia and supplies
information technology products to customers in private industry and government.
The Company is seeking to further  develop  secured  shipping  and supply  chain
management  services.  We also  generate  revenue  from  the  sale,  rental  and
servicing of material  handling  equipment  through our subsidiary,  Armor Multi
Systems ("AMS") (f/k/a Asiaco Multi  Corporation)  and have executed a letter of
intent to purchase an Ocean  Transportation  Intermediary and logistics  company
operating in Malaysia.  The Company is also  planning to develop a United States
operation to act as consultant to companies in Southeast  Asia seeking to export
goods into the United States.

The Company conducts its principal operations in Malaysia, and has the following
subsidiaries as of September 30, 2005:

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 was used as a special  vehicle to secure a $6.5  million
     funding  from a Master  Fund,  is  currently  dormant  following  the early
     retirement  of securities  issued to the Master Fund.  The Company plans to
     utilize  SDAA for the purpose of its  consulting  operations  in the United
     States.

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

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

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

6.   Secured  Shipping Sdn Bhd ("SS"),  a wholly owned  Malaysian  subsidiary of
     SDAM,  presently  provides  consulting  services on the  implementation  of
     secured shipping services and supply chain management.

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

                                       27
<PAGE>
8.   Digital Image ID Sdn Bhd ("DID") (f/k/a Vista Positive Sdn Bhd),  presently
     a  wholly-owned  Malaysian  subsidiary  of  SDAM,  will  be used as a joint
     venture  vehicle to undertake a project with the  Company's  partners and a
     leading Malaysian IT company to enable the search and match of DNA data for
     newborns and registered  criminals,  for use primarily by the Government of
     Malaysia.

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

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

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

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

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

14.  Innospective  Sdn Bhd ("ISS"),  SDAM's 55% owned Malaysian  subsidiary from
     the date of  acquisition  on April 30, 2005 is a systems  integration  firm
     specializing  in the design,  development  and  implementation  of wireless
     applications and electronic solutions.

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

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

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

3.   Providing  project  consulting  services on  broadband  communications  and
     networking systems for property development projects.

4.   Sale, rental and servicing of material handling equipment.

5.   Sale of Apple  products,  computer  hardware,  software  and  provision  of
     installation,  repair and maintenance  services for information  technology
     products.

6.   Systems integration and design,  development and implementation of wireless
     applications and electronic solutions.

Significant Business Developments and Plan of Operation

During  2005,  the  Company  anticipates  that it will  continue  to provide its
existing multimedia development,  consulting and broadband services,  market the
EyStar SmartHome Management System,  introduce and actively market a new line of
biometric  security  products  capable of integration  with the EyStar SmartHome
Management  System and utilizing the Company's  ability to provide  applications
support.  These  products are the  SmileCAM,  FaceKey and Testech  devices.  The
Company believes that these devices,  when linked with the broadband  technology
that the Company seeks to exploit,  will provide  customers  with  comprehensive
security  and  identification  systems for which it is believed  there will be a
significant  market. The Company will also continue its presence in the material
handling  business through AMS and its subsidiary.  The Company will also expand
its business in ICT trading through the Gallant Group of companies. On March 28,
2005,  the Company  announced the opening of a second Apple retail center in the
Hartamas  Shopping Centre in Sri Hartamas,  a suburb of Kuala Lumpur,  Malaysia.

                                       28
<PAGE>
The new outlet will expand on the "digital  lifestyle"  concept developed by the
Company and will offer a one-stop  showroom for  retailing of Apple  products as
well as products  developed  by the Company and its newly  acquired  subsidiary,
ISS.  The center  also has a training  facility.  In August  2005,  the  Company
announced  the opening of its third retail  outlet at Bangsar  Village  Shopping
Center in a middle class suburb of Kuala Lumpur. The outlet, a one-stop showroom
of IT  products,  offers  a full  line of  Apple  and  Windows-based  computers,
software  peripherals and accessories,  including  Apple's popular iPod and iPod
accessories. The Company also expects revenue to be generated from the provision
of product design consulting services, and the sale of products and applications
developed by ISS.

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

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

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

The Company has secured several new contracts to provide hardware,  applications
or  consulting  services.  The  Company  believes  that it will be able to begin
performance  of some of these  contracts  during 2005 and that it will recognize
revenue from these  activities  in 2005.  Due to  uncertainties  in  scheduling,
however,  the Company cannot  forecast the specific dates on which it will begin
performance  of these  contracts.  These  contracts are described in more detail
below.

As a result of the Company's  experience in rolling out the first  VISIONET cell
in  December  2001,  management  decided  that it would be  advantageous  to the
Company to revise its strategy for exploiting its broadband  license  granted by
the Government of Malaysia. The Company determined that it would principally use
the VISIONET  infrastructure  as a  point-to-point  backhaul service provider to
other  broadband  and  telecommunications  providers.  During 2005,  the Company
intends to continue actively  marketing VISIONET as a backhaul service provider,
rather  than as a  telecommunications  company  that  provides  the "last  mile"
service.  In particular,  the Company 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.  Negotiations  with potential  clients had been slow and 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 2006.

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.


                                       29
<PAGE>
Significant Contracts

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

a)   In August 2001, the Company was awarded a consulting contract, estimated to
     generate revenue of $2.85 million over a three year period,  through August
     2005,  to carry out the  planning,  design,  project  execution  (including
     contract  and  project  management)  of all  broadband  communications  and
     networking   systems/services  for  Pulau  Indah-Marina  Village,  a  water
     oriented luxury resort, residential hotel and spa project. Through December
     31, 2004,  the Company  generated  $1,028,000 of revenue on this  contract.
     During the three and nine months  ended  September  30,  2005,  the Company
     recognized additional revenue of $62,000 and $134,000, respectively on this
     contract.   The  Company  recognized  revenue  of  $159,000  and  $428,000,
     respectively,  during the three and nine months ended  September  30, 2004.
     Due to delay by the main  contractor of the project,  the project cannot be
     completed  by August 2005 and the Company has agreed to an extension of the
     contract period for a year to August 2006.

b)   In January 2002, the Company's subsidiary,  PTSB, was awarded a contract to
     carry out the  planning,  design,  and project  execution of all  broadband
     communications  and networking  systems/services  for a  commercial/housing
     project in  Selangor,  Malaysia.  Under the  contract,  PTSB will receive a
     total contract sum of $550,000 over 36 months  beginning  January 2003. The
     project,   featuring   312   serviced   apartments,   62  units  of  retail
     shops/offices  and  120  units  of  housing  for a  government  agency  was
     completed in March 2005. The Company generated  $527,000 of revenue on this
     contract  through  December 31, 2004.  The Company  completed  the contract
     during the nine months ended  September 30, 2005 and recognized  revenue of
     $23,000.  The Company recognized $26,000 and $176,000 of revenue during the
     three and nine months ended September 30, 2004, respectively.

c)   In November  2002, the Company was  contracted by MY Architect  ("MYA"),  a
     related party, to provide consulting  services relating to home automation,
     home networking,  energy cost saving,  security surveillance and monitoring
     for MYA's  current  projects  involving  two major  commercial  and housing
     developments  in  Malaysia.  The Company  expected  to receive  $550,000 in
     consulting fees over the 18 months beginning December 1, 2002. The contract
     was  completed in 2004 and the Company had received the  contracted  sum in
     full.  The Company  recognized  $279,000 of revenue  during the nine months
     ended  September 30, 2004.  The Company is presently  negotiating  with the
     project  developer  to  secure  additional  contracts,  estimated  at  $4.0
     million,  for the supply and installation of the EyStar  SmartHome  Console
     and its security  system  sometime in the second quarter of 2006 in the two
     commercial and housing developments.

d)   In April  2003,  the Company  contracted  with MYA to carry out the design,
     supply and installation of all broadband communications, access control and
     network  security  equipment for a mixed  property  development  project in
     Selangor,  Malaysia, which features a total of 10 blocks of residential and
     commercial  high-rise  properties.  The  30-month  contract,   expected  to
     generate  revenue of $3.2 million,  commenced in the third quarter of 2003.
     Through December 31, 2004, the Company  generated  $409,000 of revenue from
     this  contract and  recognized  additional  revenue of $72,000 and $153,000
     during the three and nine months ended  September  30, 2005,  respectively.
     During the three and nine  months  ended  September  30,  2004,  revenue of
     $168,000 and $310,000, respectively, was generated from this contract.

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

                                       30
<PAGE>
f)   In June 2003,  the  Company  signed a contract  to  implement  a  biometric
     security   recognition  and  identification   system  comprising  hardware,
     software and issuance of security  identity  cards over a ten-year  period.
     The contract, which was expected to commence in the fourth quarter of 2003,
     after the finalizing of technical  specifications  with relevant regulatory
     authorities,  was estimated to generate  revenue of $15 million through the
     first  quarter  of 2005.  To date,  the  technical  specifications  for the
     project have yet to be finalized by the relevant regulatory authorities and
     the  Company has not  received  any  indication  on when the  contract  may
     commence.  Due to the uncertainty,  revenue that will be realized from this
     contract during 2005 may not be accurately forecast.

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

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

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

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

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

                                       31
<PAGE>
l)   In June 2004, the Company announced that it was awarded a contract,  valued
     at   $921,000,    to   develop,    implement    and   maintain   a   secure
     business-to-consumer   e-commerce  portal  using  the  Company's  biometric
     security  technology.  Completion  and  implementation  of the  portal  was
     scheduled for December 2004 but has been postponed  until further notice as
     the client  informed the Company that it needed more time to negotiate with
     its intended  business  partners on the features  and  requirements  of the
     portal.  Revenue  to be  generated  from this  contract  in 2005  cannot be
     accurately  forecasted.  The e-commerce  portal will allow only  registered
     members to use the portal for online  purchases and payments.  Members will
     register by providing details of the identity,  credit card information and
     biometric information.  After registration when a member desires to make an
     online   purchase,   their  identity  will  be  verified  and  credit  card
     information  validated.  This system will significantly  reduce the risk of
     fraud and identity theft in online e-commerce transactions.  In addition to
     the contract fee of $921,000,  the Company also expects to generate  annual
     recurring  revenue by receiving a transaction fee for each completed online
     transaction and from a five-year  contract to provide software and hardware
     upgrades plus system maintenance.

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


Strategic Contractual Relationships

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

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

                                       32
<PAGE>
In July  2002,  the  Company  entered  into a  letter  agreement  with  PointRed
Technologies Inc. ("PointRed") whereby the Company has agreed to market and sell
PointRed's products worldwide. In return, PointRed has agreed to market and sell
the Company's EyStar SmartHome  Consoles,  value added applications and services
to its  existing  and  future  clients.  On August 16,  2002,  the  Company  and
PointRed,  pursuant to the original letter agreement dated July 2002,  signed an
agreement whereby the Company will utilize existing  personnel and facilities to
promote  PointRed's  products  and to service  existing  PointRed  customers  in
Malaysia.  Also pursuant to the original letter agreement,  the Company signed a
channel partner  agreement with PointRed,  whereby  PointRed will distribute the
EyStar SmartHome Console.  Under the agreement,  PointRed will sell, install and
service the EyStar SmartHome Console in North and South America.

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

In December  2002,  the Company's  subsidiary,  SDAM executed an Agreement  with
Telekom  Sales and Services Sdn Bhd ("TM"),  a  subsidiary  of Telekom  Malaysia
Berhad,  to sell,  distribute and promote  broadband access over standard copper
telephone lines using Digital  Subscriber Line  technology.  The service,  brand
named TMnet  Streamyx,  was first  launched in August 2002.  TMnet Streamyx is a
high speed access service providing "always-on" connection to the Internet. This
service currently covers 100 urban locations in Malaysia.  The agreement with TM
was for an initial period of one year and maybe extended for a further period to
be  agreed  by both  parties.  This  agreement  expired  on July 1, 2005 and the
Company has not renewed the  agreement as the  Company's  55% owned  subsidiary,
GIH, is also a distributor of TMnet Streamyx.

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

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

                                       33
<PAGE>
On September 24, 2003,  the Company  announced  that it had executed a Letter of
Intent to form a joint venture with FaceKey  Corporation  ("FaceKey") to develop
biometric  applications  for the  MyKad  "smart"  national  identification  card
("MyKad")  held by more than 7 million  people in Malaysia.  EMI will be used as
the joint  venture  company  to  develop  a system  and  applications  utilizing
FaceKey's face and  fingerprint  technologies  to verify a live  fingerprint and
face with data stored in a smartcard,  which  permits  retrieval of  information
about   the   cardholder   electronically.   Due  to  some   disagreement   over
implementation  and  operational  issues,  the  Company  and  FaceKey  are still
negotiating  the terms of the definitive  agreement.  The definitive  agreement,
which requires  FaceKey to acquire a 49% equity  interest in EMI, will be signed
only  after  both  parties  have  agreed  on the  terms  of the  development  of
applications for MyKad. EMI will subsequently acquire a 30% equity interest in a
joint venture company to be established  between FaceKey,  the Company and other
Malaysian  companies.  The Company and FaceKey will be jointly  responsible  for
marketing the products globally.

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

In June 2004, the Company  announced plans to conduct a field trial of an online
biometric  payment portal for electronic  commerce and credit card  transactions
using biometric  products and systems developed by its current partner companies
for  identification  and  verification  during the second  half of 2004.  Due to
delays in the  development  work,  the field  trial is not  expected to commence
until the third quarter of 2005. Merchants who sign up as clients of the payment
portal will enroll their customers into the Company's  system.  Thereafter,  the
merchant's  clients when making  purchases will have their identity  verified by
using face and fingerprint biometric  technology.  After authentication of their
identity,  the  transaction  will be processed and payment  approval sought from
banks and credit  card  issuers.  The  Company  intends to  generate  revenue by
charging a fee based on a percentage of the transaction  value executed  through
the  portal.  Implementation  of the portal is  scheduled  for early  2006.  The
initial  deployment  of the  portal  would be for the  Malaysian  and  Singapore
markets  with  subsequent  deployment  across  the  Asia-Pacific  region.  After
successfully  implementing the payment portal for the Asia-Pacific  region,  the
Company intends to introduce a similar portal for the North American market. The
payment portal will be partly funded by internally  generated funds and proceeds
from the private placement of the Company's securities.

COMPARISON  OF THE THREE  MONTHS  ENDED  SEPTEMBER  30, 2005 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 2004

REVENUES

Revenues  for the three  months  ended  September  30, 2005  totaled  $8,304,976
compared to  $5,414,498  for the three  months  ended  September  30,  2004,  an
increase of  $2,890,478  or 53%.  The  increase in net sales in the three months
ended  September  30, 2005 as compared to the same period in 2004 was mainly due
to an  increase  in fees  earned from the  production  of  multimedia  programs.
Included in revenue for the three months ended  September  30, 2005 and 2004 was
income of $147,105 and $379,210, respectively, received from a related party for
project consulting fees.  Revenues for the three months ended September 30, 2005
also  included  income of $864,083  or 10% of total  revenue,  generated  by the
Gallant  subsidiaries.  For the three  months  ended  September  30,  2005,  two
customers each  accounted for 41% of total  revenue.  For the three months ended
September 30, 2004, two customers accounted for 44% and 45% of total revenue.

                                       34
<PAGE>
GROSS PROFIT

Gross profit  increased to $743,324  for the three  months ended  September  30,
2005,  compared to $623,200 for the three months ended  September  30, 2004,  an
increase of $120,124 or 19%. The increase in gross profit was  primarily  due to
higher revenue in 2005. As a result of higher revenue, cost of revenue increased
by $2,770,354,  or 58%, to $7,561,652 in 2005 from  $4,791,298 in 2004. 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 operations.

SALES AND MARKETING EXPENSES

Sales and  marketing  expenses  increased by $21,077 or 122%, to $38,343 for the
three months ended  September  30, 2005 compared to $17,266 for the three months
ended  September  30,  2004.  Higher  sales and  marketing  expenses in 2005 was
primarily due to higher promotion expenses incurred by the Gallant  subsidiaries
and 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  $501,883 for the three months ended
September  30, 2005,  compared to $425,946 for the three months ended  September
30,  2004,  an  increase  of  $75,937  or  18%.  The  increase  in  general  and
administrative  expenses was mainly attributable to additional expenses incurred
by the Gallant  subsidiaries  and higher expenses  incurred for consulting fees,
compensation  expenses,  public  relations  services,  maintenance  expenses and
rental expenses.  The Gallant subsidiaries' general and administrative  expenses
contributed  $117,319 or 23% of total  general and  administrative  expenses for
2005.

INTEREST EXPENSE

Interest expense increased by $51,049 or 332%, to $66,447 for three months ended
September  30, 2005 as compared to $15,398 for the three months ended  September
30,  2004.  Interest  expense for the three  months  ended  September  30, 2005,
included  $15,276  incurred by the  Gallant  subsidiaries,  $2,173  related to a
$500,000  convertible  term note issued on June 4, 2004 and $46,830 related to a
penalty on the early payment of the convertible  term note.  These accounted for
approximately 23%, 3% and 70%,  respectively,  of total interest expense for the
three months ended  September  30, 2005.  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, which accounted for approximately 68% 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, 2005 and 2004 included  recognition of a previously deferred gain of $36,974
and $18,421, respectively, related to a similar amount the Company received from
its  long-term  receivable,  related  party.  The  receivable  balance and total
deferred gain were each  $309,584 as of December 31, 2004.  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 each reduced to $226,952 as of September 30, 2005.

INCOME FROM CONTINUING OPERATIONS

The Company recorded income from continuing operations of $161,671 for the three
months ended  September  30, 2005,  as compared to $123,560 for the three months
ended September 30, 2004. Income from continuing operations for the three months
ended  September  30, 2005 and 2004 included  recognition  of a deferred gain of
$36,974 and $18,421,  respectively.  Excluding these non-recurring transactions,
the recorded  income from  continuing  operations  would have been  $124,697 and
$105,139  for the  three-month  periods  ended  September  30,  2005  and  2004,
respectively.

                                       35
<PAGE>
COMPARISON OF THE NINE MONTHS ENDED  SEPTEMBER 30, 2005 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2004

REVENUES

Revenues  for the nine  months  ended  September  30, 2005  totaled  $22,359,499
compared to  $14,874,962  for the nine  months  ended  September  30,  2004,  an
increase  of  $7,484,537  or 50%.  The  increase in net sales in the nine months
ended  September  30, 2005 as compared to the same period in 2004 was mainly due
to an  increase  in fees  earned from the  production  of  multimedia  programs.
Included in revenue for the nine months  ended  September  30, 2005 and 2004 was
income of $323,000 and $1,193,685,  respectively,  received from a related party
for project  consulting  fees.  Revenues for the nine months ended September 30,
2005 also included  income of $2,845,386 or 13% of total  revenue,  generated by
the Gallant  subsidiaries.  For the nine months ended  September  30, 2005,  two
customers,  each accounted for 41% of total  revenue.  For the nine months ended
September 30, 2004, two customers accounted for 43% and 44% of total revenue.

GROSS PROFIT

Gross profit  increased to  $1,997,979  for the nine months ended  September 30,
2005,  compared to $1,622,522  for the nine months ended  September 30, 2004, an
increase of $375,457 or 23%. The increase in gross profit was  primarily  due to
higher revenue in 2005. As a result of higher revenue, cost of revenue increased
by $7,109,080, or 54%, to $20,361,520 in 2005 from $13,252,440 in 2004. 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 operations.

SALES AND MARKETING EXPENSES

Sales and  marketing  expenses  increased by $42,519 or 168%, to $67,803 for the
nine months  ended  September  30, 2005  compared to $25,284 for the nine months
ended  September  30,  2004.  Higher  sales and  marketing  expenses in 2005 was
primarily due to higher promotion expenses incurred by the Gallant  subsidiaries
and 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  $1,383,785 for the nine months ended
September 30, 2005, compared to $999,860 for the nine months ended September 30,
2004, an increase of $383,925 or 38%. The increase in general and administrative
expenses was mainly  attributable to additional expenses incurred by the Gallant
subsidiaries  and higher  expenses  incurred for consulting  fees,  compensation
expenses,  public  relations  services,  maintenance  expenses and higher rental
expenses.   The  Gallant  subsidiaries'  general  and  administrative   expenses
contributed  $412,351 or 30% of total  general and  administrative  expenses for
2005.

INTEREST EXPENSE

Interest expense increased by $97,447 or 420%, to $120,672 for nine months ended
September  30, 2005 as compared to $23,225 for the nine months  ended  September
30,  2004.  Interest  expense  for the nine months  ended  September  30,  2005,
included  $50,387  incurred by the Gallant  subsidiaries,  $18,381  related to a
$500,000  convertible  term note issued on September 4, 2004 and $46,830 related
to a penalty on the early payment of the convertible  term note. These accounted
for approximately 42%, 15% and 39%, respectively,  of total interest expense for
the nine months ended September 30, 2005.  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,  which  accounted  for  approximately  58% of total
interest expense for the nine months ended September 30, 2004.

                                       36
<PAGE>
GAIN ON DISPOSAL OF ASSETS, RELATED PARTY

Gain on disposal of assets,  related party,  for the nine months ended September
30, 2005 and 2004 included  recognition of a previously deferred gain of $82,632
and $225,679,  respectively,  related to a similar  amount the Company  received
from its long-term  receivable,  related party. The receivable balance and total
deferred gain were each $309,584,  respectively,  as of December 31, 2004.  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 each reduced to $226,952 as of September
30, 2005.

INCOME FROM CONTINUING OPERATIONS

The Company recorded income from continuing  operations of $548,409 for the nine
months ended  September  30,  2005,  as compared to $624,348 for the nine months
ended September 30, 2004. Income from continuing  operations for the nine months
ended  September  30, 2005 and 2004 included  recognition  of a deferred gain of
$82,632 and $225,679, respectively.  Excluding these non-recurring transactions,
the recorded  income from  continuing  operations  would have been  $465,777 and
$398,669,  respectively, for the nine-month periods ended September 30, 2005 and
2004.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2005, the Company had net cash of $24,831.

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

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

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


                                       37
<PAGE>
Pursuant to  amendments  to the  agreements  governing the terms of the Series A
Preferred  in August 2004 and April 2005,  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 equal to 85 percent of the average of the
five  lowest  closing  prices  during the 22  trading  days prior to the date of
conversion  (whether as principal  repayment  or accrued and unpaid  interest or
dividends),  subject to a minimum  conversion price of $0.07 per share; 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 amendments provide that
all dividend and interest  payments  payable under the investment  would accrue,
rather than be payable in cash,  until the next  conversion  into  common  stock
occurs.  The  amendments  provide  for a waiver of cash  payments of interest or
dividends due prior to the execution of the amendments, with any such amounts to
be  accrued  to the  amounts  payable  under  the  terms of the Note or Series A
Preferred.

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

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

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

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

A summary of the status of the discounted  principal and interest  amount of the
Note from January 1, 2005 through September 30, 2005 is presented below:
<TABLE>
<CAPTION>
                                              Total         Interest         Principal        Discount            Net
                                        ---------------   -------------  ---------------  ----------------  -------------
<S>                                       <C>               <C>            <C>              <C>               <C>
Balance as of January 1, 2005           $       426,470   $          --  $       426,470  $         40,855  $     385,615
Interest through September 30, 2005              18,381          18,381               --                --             --
Conversion in April 2005 (a)                    (52,770)         (8,653)         (44,117)           (4,226)       (39,891)
Conversion in May 2005 (b)                      (17,412)         (2,707)         (14,705)           (1,408)       (13,297)
Conversion June 1, 2005 (c)                     (17,249)         (2,544)         (14,705)           (1,408)       (13,297)
Conversion June 16, 2005 (d)                    (14,705)             --          (14,705)           (1,407)       (13,298)
Conversion July 12, 2005 (e)                    (20,445)         (2,304)         (18,141)           (1,740)       (16,401)
Allocation of discount                          (30,666)             --          (30,666)          (30,666)            --
Early payment penalty                            46,830          46,830               --                --             --
Repaid on August 1, 2005                       (338,434)        (49,003)        (289,431)               --       (289,431)
                                        ---------------   -------------  ---------------  ----------------  -------------
Balance as of September 30, 2005        $            --   $          --  $            --  $             --  $          --
                                        ===============   =============  ===============  ================  =============
</TABLE>
                                       38
<PAGE>
a)   On April 25, 2005, the Master Fund converted $39,891  discounted  principal
     of the note and  $8,653  of  accrued  interest  to  383,701  shares  of the
     Company's common stock.
b)   On May 5, 2005, the Master Fund converted $13,297  discounted  principal of
     the note and $2,707 of accrued  interest to 140,311 shares of the Company's
     common stock.
c)   On June 1, 2005, the Master Fund converted $13,297 discounted  principal of
     the note and $2,544 of accrued  interest to 163,132 shares of the Company's
     common stock.
d)   On June 16, 2005, the Master Fund converted $13,298 discounted principal of
     the note to 147,649 shares of the Company's common stock.
e)   On July 12, 2005, the Master Fund converted $16,401 discounted principal of
     the note and $2,304 of accrued  interest to 250,000 shares of the Company's
     common stock.

     A summary of the status of the Series A Preferred and dividend thereon from
     January 1, 2005 through September 30, 2005 is presented below:
<TABLE>
<CAPTION>
                                          Total       Dividend/     Series A       Amount       Issue          Net
                                                     Redemption      Stated     Allocated to    Costs        Carrying
                                                       Penalty       Amount       Warrants                     Value
                                     -------------  ------------  --------------  -----------  -----------  -------------
<S>                                  <C>            <C>           <C>             <C>          <C>          <C>
Balance as of January 1, 2005        $   6,238,563  $    238,563  $    6,000,000  $   479,000  $   364,833  $   5,156,167
Dividend through
 September 30, 2005                        263,537       263,537              --           --           --             --
Allocation of warrants and
 issue costs                              (843,833)           --        (843,833)    (479,000)    (364,833)            --
Early redemption penalty                 1,146,827     1,146,827              --           --           --             --
Redeemed on August 1, 2005              (6,805,094)   (1,648,927)     (5,156,167)          --           --     (5,156,167)
                                     -------------  ------------  --------------  -----------  -----------  -------------
Balance September 30, 2005           $          --  $         --  $           --  $        --  $        --  $          --
                                     =============  ============  ==============  ===========  ===========  =============
</TABLE>
The following table  summarizes the August 1, 2005  transaction  with the Master
Fund:
<TABLE>
<CAPTION>
                                                                      Total             Interest/            Discounted
                                                                                        Dividend             Principal/
                                                                                                              Series A
                                                                                                              Carrying
                                                                                                               Amount
                                                                ----------------    ---------------     -----------------
<S>                                                             <C>                 <C>                 <C>
Balance as of August 1, 2005
 Term note                                                      $        291,604    $         2,173     $         289,431
 Series A Preferred                                                    5,658,267            502,100             5,156,167
                                                                ----------------    ---------------     -----------------
 Total                                                                 5,949,871    $       504,273     $       5,445,598
                                                                                    ===============     =================
Paid from restricted cash                                             (6,105,138)
Cash payment                                                            (238,390)
Common stock issued (a)                                                 (800,000)
                                                                ----------------
Early payment/redemption penalty (b)                            $     (1,193,657)
                                                                ================
</TABLE>
c)   9,756,098 shares of common stock issued at a price of $0.082 per share.
d)   The  August 1, 2005  transaction  resulted  in an early  payment/redemption
     penalty of $1,193,657,  of which  approximately  $46,830 is attributable to
     interest  expense  and  $1,146,827  represents  a  reduction  to net income
     available  to common  shareholders,  and which is recorded in the three and
     nine months ended September 30, 2005.

                                       39
<PAGE>
For the nine months ended  September 30, 2005, all  operations  were funded from
internally generated funds and proceeds from private placement exercises in July
2005. The Company's  principal  shareholder,  Chief Executive  Officer  ("CEO"),
Chairman and Director, Mr. Lim, will continue making short term advances to fund
the Company's working capital requirement should the need arise. As of September
30, 2005,  the Company owed Mr. Lim $13,232.  Additionally,  as of September 30,
2005, the Company owed an affiliated  Company,  in which Mr. Lim has a financial
interest,  $13,770 for  short-term  cash  advances  made to a subsidiary  of the
Company for working capital  purposes and for management fees. These amounts are
unsecured, bear no interest and have no fixed terms of repayment.

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

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

A summary of the status of the  Voting  Preferred  and  dividend  accrued  since
January 1, 2005 and changes through September 30, 2005 is presented below:
<TABLE>
<CAPTION>
                                                              Total          Dividend          Stated
                                                                                               Amount
                                                          -------------  ---------------  ----------------
<S>                                                       <C>            <C>              <C>
Balance as of January 1, 2005                             $     138,333  $       128,333  $         10,000
Dividend through September 30, 2005                             128,333          128,333                --
Conversion to common stock in August 2005                       (10,000)              --           (10,000)
Payment in August 2005                                         (256,666)        (256,666)               --
                                                          -------------  ---------------  ----------------
Balance September 30, 2005                                $          --  $            --  $             --
                                                          =============  ===============  ================
</TABLE>
Cash  used in  operating  activities  of  $533,693  for the  nine  months  ended
September 30, 2005 was mainly attributable to higher operating expenses,  higher
general and administrative expenses and higher accounts receivable.

Net cash used in investing  activities of $35,916 was mainly due to the purchase
of equipment.

Net cash  provided by  financing  activities  of $358,530 was  primarily  due to
higher bank borrowings,  proceeds from private placement exercises in July 2005,
proceeds from issuance of common stocks in exercising of employees stock options
and  less  payment  to a  Master  on early  repayment  on the Note and  Series A
Preferred.

In private placement  exercises in July 2005 the Company issued 5,791,463 shares
of its common stock to ten investors at an aggregate purchase price of $474,900.
The Company also issued  4,948,346  shares of its common stock to five investors
at an aggregate  purchase  price of $428,200 and reissued  609,756 shares of its
common  stock  from  treasury  to an  investor  for cash of  $50,000  in private
placement  exercises in August 2005. Total proceeds from the private  placements
of  $953,100  were  utilized  in  connection  with the August  2005  Master Fund
redemption,  as discussed  above.  The stock was priced at 85% of the average of
the five lowest closing prices of the common stock during the twenty-two trading
days prior to the closing date, as reported by Bloomberg News Services, which at
the various times of issuance ranged from $0.082 to $0.087.

                                       40
<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, 2005,  the Company has  furniture  and equipment of  approximately
$1.3  million  for  the  roll  out of its  portal,  build-out  of  VISIONET  and
implementation of its business plan. The Company estimates that it would require
additional capital  expenditures of up to $2.0 million to implement its business
plan  to  become  a total  system  solution  provider  involved  in  application
development,  network  operation,  delivery  of  value  added  applications  and
services;  and  sale of its  EyStar  SmartHome  Console.  The  Company  has also
committed to an initial  purchase of software and hardware  valued at $50,000 in
conjunction  with its announced  strategic  collaboration  with Aptilo Networks,
Sweden.

The Company will also be expanding into new businesses that include provision of
secured  shipping and supply chain management  services.  The Company expects to
incur  further  expenses  to  acquire   companies  and  technologies   that  are
synergistic  to the new  businesses and will help the Company to rollout the new
businesses  in the shortest  time  possible.  During 2003 and 2004,  the Company
incurred  $263,000 in the  establishment and acquisition of new subsidiaries and
associates  relating to its new businesses.  Some of these  acquisitions did not
work out well and the Company has sold some of these companies, whose operations
and management were not compatible with the Company's business plan in 2004. For
2006,  the  Company  estimates  that it will incur an  additional  $1 million to
identify,  negotiate and acquire the  businesses  and/or net assets in companies
synergistic to its planned new businesses.  In addition,  the Company  estimates
that it will  require a further  $2.0  million to finance the set-up cost of its
new  businesses.  The Company  also  expects that it will require a further $2.0
million to finance the working  capital of its new  businesses and the operation
of its newly acquired and/or established subsidiaries and associates.

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

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

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



Contractual Obligations:
<TABLE>
<CAPTION>
                                                                            Payment due by period
                                                                      -----------------------------------
                                                                       Less than
                                                   Total                1 year              1 - 5 years
                                            ------------------    ------------------    ------------------
<S>                                         <C>                   <C>                   <C>
Capital lease obligations                   $           49,219    $           43,273    $            5,946
Bank borrowings                             $        1,148,560    $        1,031,108    $          117,452
Operating lease commitments                 $          362,700    $          186,300    $          176,400
</TABLE>

                                       41
<PAGE>
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,  2005 that has  materially  affected,  or is
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

                                       42
<PAGE>
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On May 31, 2005,  the Company  commenced an action in the Superior Court of
New Jersey,  Chancery Division,  Union County, seeking to enjoin the exchange of
shares  of Kalan  Gold  Corp.,  held by  Michael  Gillies,  into  shares  of the
Company's  common  stock.  The Company  alleges that the shares were  improperly
issued  by  Kalan,  predecessor  to the  Company,  to  Gillies,  who  acted as a
consultant in connection with the 1999 merger of Animated Electronics Industries
Sdn Bhd and Kalan Gold. The Company obtained, with the consent of the parties, a
temporary  restraining order prohibiting the exchange of the shares. Mr. Gillies
has answered the complaint.  The Company has filed a motion for summary judgment
and to stay certain  claims raised by Mr.  Gillies as subject to an agreement to
arbitrate contained in a consulting agreement.  The Company's motion for summary
judgment  is  expected  to be heard in  November.  The Company has also issued a
capital call to Mr.  Gillies for the amount it believes is unpaid on the shares.
The Company  presently  intends to cancel the shares issued to Mr. Gillies if it
is successful in the pending litigation.


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

     In private placements in July and August 2005, the Company issued 4,582,051
shares of its common stock, which were exempted from registration under Rule 506
of Regulation D of the  Securities  Act of 1933, as reported in a Form 8-K filed
on August 3,  2005.  During  July and  August  2005,  the  Company  also  issued
6,157,758  shares of common stock to  non-United  States  persons in  negotiated
transactions exempt from registration under Rule 904 of Regulation S promulgated
under the  Securities  Act of 1933.  The purchase price for the shares issued in
the Regulation D private  placement and to the  non-United  States persons under
Regulation  S was 85 percent  of the five  lowest  closing  prices of the common
stock  during the 22 trading  days prior to the closing and resulted in sales at
prices between $0.82 and $0.087.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None.


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

        None.


ITEM 5. OTHER INFORMATION

        None.


ITEM 6. EXHIBITS

       (a) Exhibits

               31.1 Certification  by Chief Executive  Officer  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

                                       43
<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 11, 2005                   BY: /s/ Patrick Soon-Hock Lim
                                              -------------------------
                                              Patrick Soon-Hock Lim
                                              Chairman & Chief Executive Officer



DATE: NOVEMBER 11, 2005                   BY: /s/ Chee Hong Leong
                                              -------------------
                                              Chee Hong Leong
                                              Chief Financial Officer
                                              (Principal Financial Officer and
                                              Principal Accounting Officer)





                                       44