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 QUARTERLY PERIOD ENDED JUNE 30, 2004

     [ ] 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)

                     SUITE 11.02, 11TH FLOOR MENARA MERAIS,
           NO. 1, JALAN 19/3, 46300 PETALING JAYA, SELANGOR, MALAYSIA
              (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
                          IF CHANGED SINCE LAST REPORT)

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

Yes  X    No

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

    Class                       Number of shares outstanding at August 19, 2004
   -------                      -----------------------------------------------
Common stock, $.00001 par value                     90,841,129

<PAGE>
FORM 10-QSB
2ND QUARTER
<TABLE>
<CAPTION>
                                      INDEX

                                                                                                        Page
PART I - FINANCIAL INFORMATION

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

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

         Condensed consolidated statements of operations for
         the three-month and six-month periods ended June 30, 2004 and
         June 30, 2003 (Unaudited)                                                                        4

         Condensed consolidated statements of cash flows for the six-month
         periods ended June 30, 2004 and June 30, 2003 (Unaudited)                                        5

         Notes to condensed consolidated financial statements (Unaudited)                              6 - 17

         ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS                                                 18 - 35

         ITEM 3. CONTROLS AND PROCEDURES                                                                 35

PART II - OTHER INFORMATION

         ITEM 1. LEGAL PROCEEDINGS                                                                       36

         ITEM 2. CHANGES IN SECURITIES AND PURCHASES OF EQUITY SECURITIES                                36

         ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                         37

         ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                     37

         ITEM 5. OTHER INFORMATION                                                                       37

         ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                        37

         SIGNATURES                                                                                      39
</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.   Forward-looking  statements  can  be  identified  by  the  use  of
forward-looking terminology such as "believes", "may", "should",  "anticipates",
"estimates",  "expects", "future", "intends", "hopes" or "plans" or the negative
thereof.  Such  forward-looking  statements  involve  known and  unknown  risks,
uncertainties  and other factors that could cause actual  results of the Company
to vary materially from historical  results or from any future results expressed
or implied in such  forward-looking  statements.  Such  factors  include,  among
others, the following: the revocation of the Company's license, the inability to
successfully  implement its business plans,  the cancellation or postponement of
contracts that the Company has entered into in connection with its business, the
inability to obtain services  provided by other  communications  companies,  the
inability of the Company to raise capital on a timely basis, existing and future
government regulations,  the failure to retain qualified personnel,  competitive
pressures and potentially adverse tax and cash flow consequences  resulting from
operating  in  multiple  countries  with  different  laws and  regulations,  the
inability to maintain  profitability  in the future and the general economic and
business  conditions  in  Malaysia,  the  United  States  and  other  countries,
primarily  in Asia,  in which  the  Company  does or seeks to do  business.  The
Company  does not  undertake  to update,  revise or correct any  forward-looking
statements.

                                       2
<PAGE>
PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2004
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                ASSETS
Current assets:
<S>                                                                                                  <C>
     Cash                                                                                            $       72,301
     Cash, restricted                                                                                     6,500,000
     Accounts receivable, less allowance for doubtful accounts of $156,000                                3,591,150
     Other accounts receivable                                                                               24,157
     Prepaid expenses and other assets                                                                       31,058
     Inventories                                                                                             97,193
                                                                                                     ---------------
              Total current assets                                                                       10,315,859
Furniture and equipment, net                                                                              1,330,878
Goodwill                                                                                                    471,150
Investment in associate companies                                                                            36,092
Long-term receivables, related parties                                                                      347,742
Debt issuance costs                                                                                          28,853
                                                                                                     ---------------
                                                                                                     $   12,530,574
                                                                                                     ===============
                                                 LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Current portion of capital lease obligations                                                    $       63,092
     Current portion of convertible term note                                                               106,596
     Accounts payable                                                                                       912,816
     Accrued expenses                                                                                        56,689
     Amount due to an affiliated company                                                                     43,213
     Amount due to a director                                                                                 9,361
     Income tax provision                                                                                    62,018
     Preferred dividend provision                                                                            55,166
                                                                                                     ---------------
              Total current liabilities                                                                   1,308,951
Capital lease obligations, net of current portion                                                            81,108
Convertible term note, net of current portion                                                               345,504
Deferred gain                                                                                               347,742
                                                                                                     ---------------
              Total liabilities                                                                           2,083,305
                                                                                                     ---------------
Minority interest                                                                                           533,292

Commitments and contingencies

Shareholders' equity:
     Series A convertible preferred stock, $0.10 par value;
       1,000,000 shares authorized; 100,000 shares issued and outstanding                                    10,000
     Series A convertible preferred stock of subsidiary, $0.01 par value;
       6,500,000 shares authorized; 6,500,000 shares issued and outstanding, net                          6,104,764
     Common stock, $.00001 par value; 350,000,000 shares authorized;
       99,165,531 shares issued                                                                                 911
     Additional paid-in capital                                                                           3,253,876
     Treasury stock, 9,055,000 shares at cost                                                               (44,550)
     Options                                                                                                 14,800
     Warrants                                                                                               492,313
     Preferred stock dividends declared                                                                     (55,166)
     Retained earnings                                                                                       80,460
     Accumulated other comprehensive income                                                                  56,569
                                                                                                     ---------------
              Total shareholders' equity                                                                  9,913,977
                                                                                                     ---------------
                                                                                                     $   12,530,574
                                                                                                     ===============
</TABLE>
      See accompanying notes to condensed consolidated financial statements

                                       3
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three months ended              Six months ended
                                                                         June 30                        June 30
                                                                   2004           2003           2004            2003
                                                              -------------- --------------  -------------- --------------
Revenues:
<S>                                                           <C>            <C>             <C>            <C>
     Related parties                                          $     400,000  $     264,552   $     814,475  $     390,026
     Others                                                       4,756,325      3,620,790       8,818,972      7,077,369
                                                              -------------- --------------  -------------- --------------
                                                                  5,156,325      3,885,342       9,633,447      7,467,395

Cost of revenues                                                  4,567,494      3,444,053       8,628,194      6,738,691
                                                              -------------- --------------  -------------- --------------
Gross profit                                                        588,831        441,289       1,005,253        728,704
                                                              -------------- --------------  -------------- --------------
Operating expenses:
     Sales and marketing                                              3,321          3,050           8,018         15,452
     General and administrative:
       Related parties                                               21,316         15,000          42,632         30,000
       Others                                                       368,576        178,952         683,874        371,203
                                                              -------------- --------------  -------------- --------------
Total operating expenses                                            393,213        197,002         734,524        416,655
                                                              -------------- --------------  -------------- --------------
Income from operations                                              195,618        244,287         270,729        312,049
                                                              -------------- --------------  -------------- --------------
Other income (expense):
     Interest expense                                                (6,475)        (3,138)        (10,154)        (6,495)
     Gain on disposal of assets, related party                      100,000         14,474         207,258         19,737
     Other income                                                       542             --           5,306             --
     Share of associate companies' losses                            (3,947)            --          (6,579)            --
                                                              -------------- --------------  -------------- --------------
                                                                     90,120         11,336         195,831         13,242
                                                              -------------- --------------  -------------- --------------

Income before income tax and minority interest                      285,738        255,623         466,560        325,291
Income tax                                                          (31,053)            --         (32,895)            --
                                                              -------------- --------------  -------------- --------------
Income before minority interest                                     254,685        255,623         433,665        325,291
Minority interest                                                   (18,570)       (32,613)        (34,250)       (45,061)
                                                              -------------- --------------  -------------- --------------
Net income                                                          236,115        223,010         399,415        280,230
Preferred stock dividend                                            (55,166)            --         (55,166)            --
                                                              -------------- --------------  -------------- --------------
Net income applicable to common shareholders                  $     180,949  $     223,010   $     344,249  $     280,230
                                                              ============== ==============  ============== ==============

Net income per common share:
     Basic and diluted                                        $           *  $           *   $           *  $           *
                                                              ============== ==============  ============== ==============
Weighted average shares outstanding:
     Basic                                                       94,730,043     97,820,921      96,329,471     98,284,722
                                                              ============== ==============  ============== ==============
     Diluted                                                    108,197,779     97,820,921     103,175,012     98,284,722
                                                              ============== ==============  ============== ==============
</TABLE>

* Less than $.01 per share

      See accompanying notes to condensed consolidated financial statements

                                       4
<PAGE>
               SECURED DIGITAL APPLICATIONS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                             Six Months Ended
                                                                                                 June 30
                                                                                           2004                 2003
                                                                                         --------             --------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                                 <C>                   <C>
     Net cash (used in) provided by operating activities                            $        (157,283)    $       384,446
                                                                                    ------------------    ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
     Proceeds from disposal of equipment                                                       11,517                  --
     Purchase of equipment                                                                    (12,088)                 --
                                                                                    ------------------    ----------------
       Net cash used in investing activities                                                     (571)                 --
                                                                                    ------------------    ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from issuance of convertible term note, net                                     470,323                  --
     Payment of expenses in connection with
       subsidiary preferred stock issuance                                                   (296,323)                 --
     Proceeds from exercise of stock options                                                       --               2,805
     Payment for reacquisition of shares of common stock                                           --             (52,298)
     Net (payment to) advances from affiliated company                                       (105,111)              6,396
     Net repayment of advances to a director                                                  (47,195)           (177,347)
     Payment of obligation under capital leases                                               (36,458)             (8,922)
                                                                                    ------------------    ----------------
           Net cash used in financing activities                                              (14,764)           (229,366)
                                                                                    ------------------    ----------------
Net (decrease) increase in cash                                                              (172,618)            155,080
Cash, beginning of period                                                                     244,919              10,077
                                                                                    ------------------    ----------------
Cash, end of period                                                                 $          72,301     $       165,157
                                                                                    ==================    ================
Supplemental disclosure of non-cash financing activities:

Preferred stock (Note 6)
   Restricted cash received in exchange for preferred stock
   of subsidiary                                                                    $       6,500,000     $            --
                                                                                    ==================    ================
Issuance of common stock for services rendered by a consultant                      $         133,500     $            --
                                                                                    ==================    ================
Payments on accounts receivable made directly by customers to an
   affiliated company for amounts the Company owed it.                              $              --     $        35,263
                                                                                    ==================    ================
BUSINESS ACQUISITION (Note 3):

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

      See accompanying notes to condensed consolidated financial statements

                                       5
<PAGE>
                       SECURED DIGITAL APPLICATIONS, INC.
          NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

The accompanying  unaudited interim consolidated financial statements of Secured
Digital  Applications,  Inc.  (the  "Company")  include the  accounts of Secured
Digital Applications, Inc. and its following subsidiaries:
a)   EyStar  Media Inc.  ("EMI"),  a Delaware  corporation  wholly-owned  by the
     Company;
b)   SDA America,  Inc.  ("SDAA"),  a Delaware  corporation  wholly-owned by the
     Company;
c)   Secured  Digital   Applications   (M)  Sdn  Bhd  ("SDAM")  (f/k/a  Animated
     Electronic  Industries Sdn Bhd),  Asiaco Multi  Corporation Sdn Bhd ("AMC")
     and  Secured   Shipping  Sdn  Bhd  ("SS"),   all   Malaysian   corporations
     wholly-owned by the Company;
d)   Perwimas  Telecommunications  Sdn Bhd ("PTSB"),  SDAM's 86% owned Malaysian
     subsidiary;
e)   Temasya Wira Sdn Bhd ("TW"), SDAM's 60% owned Malaysian subsidiary;
f)   Asiaco  Material  Handling  (East Coast) Sdn Bhd  ("AEC"),  AMC's 80% owned
     Malaysian subsidiary;
g)   Asiaco Logistic Sdn Bhd ("ALG"), AMC's 67% owned Malaysian subsidiary;
h)   Asiaco Services Sdn Bhd ("ASS"), AMC's 60% owned Malaysian subsidiary;
i)   Asiaco Taiping Sdn Bhd ("ATG"), AMC's 62% owned Malaysian subsidiary,  from
     the date of acquisition on February 9, 2004; and
j)   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.

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

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

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.

                                       6
<PAGE>
2.   SIGNIFICANT ACCOUNTING POLICIES

REVENUE RECOGNITION

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

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

NET INCOME PER COMMON SHARE

Basic net income per share is  calculated  by dividing net income  applicable to
common  shareholders by the weighted average number of common shares outstanding
for the three-month and six-month periods ended June 30, 2004 and 2003.  Diluted
income  per  share is  computed  using  the  weighted  average  number of shares
determined for the basic  computations plus the number of shares of common stock
that would be issued assuming all contingently issuable shares having a dilutive
effect on earnings per share were outstanding for the period. The calculation of
basic and diluted income per share is as follows (in thousands, except per-share
amounts):
<TABLE>
<CAPTION>
                                                                    Three Months Ended             Six Months Ended

                                                               June 30, 2004  June 30, 2003  June 30, 2004  June 30, 2003
<S>                                                            <C>            <C>            <C>            <C>
Net income                                                     $         236  $         223  $         399   $        280
Preferred stock dividends                                                (55)            --            (55)            --
                                                               -------------- -------------- -------------- --------------
Net income available to common shareholders                    $         181  $         223  $         344  $         280
                                                               ============== ============== ============== ==============
Weighted average shares outstanding - basic                           94,730         97,821         96,329         98,285
                                                               ============== ============== ============== ==============
Net income per share - basic                                   $           *  $           *  $           *  $           *
                                                               ============== ============== ============== ==============



Weighted average shares outstanding - basic                           94,730         97,821         96,329         98,285
Common stock issuable to consultant                                      124             --             63             --
Dilutive stock options and warrants                                      190             --            206             --
Convertible preferred stock                                           12,220             --          6,110             --
Convertible term note                                                    934             --            467             --
                                                               -------------- -------------- -------------- --------------
Weighted average shares outstanding - diluted                        108,198         97,821        103,175         98,285
                                                               ============== ============== ============== ==============
Net income per share -diluted                                  $           *  $           *  $           *  $           *
                                                               ============== ============== ============== ==============
</TABLE>

* Less than $.01 per share

                                       7
<PAGE>
2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

NET INCOME PER COMMON SHARE (continued)

The effect of the Company's obligation to issue common stock to a consultant for
the three and six month  periods  ended June 30,  2004 was  124,000  and 63,000,
respectively,  using the if issued  method.  Options  and  warrants  to purchase
3,600,000  shares of common  stock were  included in the  dilutive  stock option
calculation  for the three and  six-month  periods ended June 30, 2004 using the
treasury stock method,  which resulted in a net share increase of 190,000 shares
and 206,000  shares,  respectively.  The effect of conversions for the three and
six month  periods  ended June 30, 2004 of  preferred  stock to common stock was
12,220,000 and 6,110,000, respectivly, using the if converted method. The effect
of  conversions  for the three  and six month  periods  ended  June 30,  2004 of
convertible  term note to common  stock was 934,000 and  467,000,  respectively,
using the if converted  method.  Dividends  applicable to convertible  preferred
stock of  $55,166  for the three and six months  ended June 30,  2004 were added
back to net income to determine diluted net income per share.

GOODWILL

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

INCOME TAXES

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

For the three-month and six-month  periods ended June 30, 2004, the Company made
a provision of $31,053 and $32,895,  respectively, for income tax payable on its
operations  in  Malaysia.  There  was no  provision  for  income  taxes  for the
three-month and six-month periods ended March 31, 2003, as net income was offset
by a net operating  loss carry  forward.  At December 31, 2003,  the Company had
approximately  $2.6 million of net operating loss carry forwards,  of which $1.1
million relates to the Company's activities in Malaysia and $1.5 million relates
to the Company's  activities in the United  States.  The Malaysian net operating
loss carry forward can be carried forward  indefinitely  while the Untied States
net  operating  loss carry  forward  expires  through the year 2023.  The United
States net  operating  loss carry  forward may be subject to annual  limitations
based on  ownership  changes in the  Company's  common  stock as  provided by in
Section 382 of the Internal Revenue Code.

INVENTORIES

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

                                        8
<PAGE>
2.   SIGNIFICANT ACCOUNTING POLICIES (continued)

TREASURY STOCK

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

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.

ESTIMATES

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

BUSINESS RISK

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

RECLASSIFICATIONS

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

                                       9
<PAGE>
3.   BUSINESS ACQUISITION

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

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

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

The following  unaudited  proforma  financial  information  presents  results of
operations as if the acquisition of the above four  subsidiaries had occurred at
the beginning of the respective three and six-month  periods ended June 30, 2004
and 2003:
<TABLE>
<CAPTION>
                                         Three Months Ended                  Six Months Ended
                                               June 30                            June 30
                                       2004             2003              2004              2003

<S>                              <C>               <C>              <C>               <C>
Revenue                          $      5,156,326  $     3,947,699  $      9,660,417  $     7,592,110
                                 ================= ================ ================= ================
Net income                       $        237,575  $       221,208  $        397,074  $       282,030
                                 ================= ================ ================= ================
Basic and diluted
  net income per common share    $              *  $             *  $              *  $             *
                                 ================= ================ ================= ================
</TABLE>

* Less than $0.01 per share

                                       10
<PAGE>
4.   RELATED PARTY ACTIVITY

During  the  six-month  periods  ended  June 30,  2004  and  2003,  the  Company
recognized  revenue  of  $814,475  and  $390,026,   respectively,   for  project
consulting fees from a related party, pursuant to four consulting contracts.

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

At December 31,  2003,  long-term  receivables,  related  parties,  consisted of
$555,000 due from Synervest Sdn Bhd ("SSB").  This amount primarily arose in the
year ended  December  31, 1998 when the  Company  sold to SSB assets used in the
operations of a subsidiary.  Due to the uncertainty of collection of the related
receivable,  a related  gain on the sale of the assets was deferred and is to be
recognized  only  after  all costs  have  been  recovered  and as  payments  are
received.  During the year ended  December  31, 2002,  payments  received by the
Company exceeded all remaining costs. The Company received  $207,258 and $19,737
of the outstanding  receivable  during the six-month periods ended June 30, 2004
and 2003,  respectively,  resulting in a realization  of gain on sale of assets,
related party for those periods. The deferred gain included in the balance sheet
has been reduced  accordingly.  During  2003,  in lieu of actual cash payment of
this Company receivable, management directed the related party to pay the $5,263
to an affiliated company to whom the Company had outstanding accounts payable.

5.   CONVERTIBLE TERM NOTES

On May 28, 2004, the Company entered into a Securities  Purchase  Agreement with
an  unrelated  investors`  group (The "Master  Fund")  under  which the  Company
obtained  $500,000  funding  through  the sale of a  Convertible  Term Note (the
"Note") in the principal amount of $500,000, which is convertible into shares of
the Company's  common stock at a fixed  conversion  price of $0.35 per share and
warrants to purchase up to 300,000  shares of the Company's  common  stock.  The
Note has a three-year  term and a coupon at a rate per annum  equivalent  to the
"prime  rate"  published  in The Wall Street  Journal from time to time plus 2%,
subject  to a floor of 6% per  annum.  The  monthly  interest  will be  adjusted
downward  based on a minimum  increase  of 25 percent of the price of the common
stock above the  conversion  price.  The warrants have a seven-year  term and an
exercise price of $0.40 per share for the first 100,000 shares,  $0.43 per share
for the second 100,000 shares and $0.47 per share for the third 100,000  shares.
Black-Scholes  valuations were performed on the 300,000 warrants  resulting in a
gross debt  discount  of $47,900  which will be  amortized  over the term of the
debt,  or 36 months,  using the interest  rate method.  $326,000 of the proceeds
were  used  for  payment  of  expenses  relating  to  issuance  of the  Note and
convertible  preferred stock to secure an additional $6.5 million financing from
the Master  Fund (See Note 6).  The  balance  of the Note  proceeds  was used as
working capital.  The Company has granted a security  interest in all of its net
assets and the net assets of one of its wholly  owned  subsidiaries,  until such
time that the Note is  satisfied.  The principal and the interest can be paid in
cash or in common stock at a fixed  conversion  price of $0.35 per share, at the
Master Fund's option,  provided that the volume weighted average price (VWAP) of
the common stock for the ten trading days immediately  preceding the due date is
110% above the exercise price. The fixed conversion price was reset to $0.20 per
share  pursuant to an agreement  entered into by the Master Fund and the Company
on August  11,2004  (see  Note 6),  and the  reset  may  result in a  beneficial
conversion feature.

                                       11
<PAGE>
6.   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,  which is convertible  into shares of common stocks at a fixed
ratio of 80 shares of common stock for 1 share of preferred stock. The 8,000,000
shares were returned to treasury and are available for  re-issuance  at a future
date.  The  preferred  stock is entitled to  cumulative  dividends  at $2.20 per
annum,  payable in common  stock at $.28 per  share.  Each share of the Series A
preferred is entitled to voting rights  equivalent to 80 shares of common stock.
The Series A preferred  is subject to  mandatory  conversion  10 years after its
issuance.

On May 28, 2004, the Company entered into a Securities Purchase Agreement with a
Master  Fund  under  which  the  Company  issued  6,500,000  shares  of Series A
Convertible  Preferred  Stock (the "Series A Preferred") of one of the Company's
wholly owned  subsidiaries,  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  preferred
stock  dividends  can be paid in cash or in common  stock at a fixed  conversion
price of $0.35 per share, at the Master Fund's option,  provided that the volume
weighted  average  price  (VWAP) of the common  stock for the ten  trading  days
immediately  preceding  the due  date is 110%  above  the  exercise  price.  The
warrants have a seven-year term and an exercise price of $0.40 per share for the
first  1,000,000  shares,  $0.43 per share for the second  1,000,000  shares and
$0.47 per share for the third  1,000,000  shares.  The Series A Preferred  has a
liquidation  value of $1 per share.  On August 11,  2004,  the  Company  and the
Master Fund  executed an amendment  to certain  agreements  governing  the terms
under  which the Note and Series A  Preferred  issued to the Master  Fund may be
converted  into  the  common  stock  of the  Company.  Under  the  terms  of the
amendment,  the  Master  Fund may  convert  a portion  of the Note and  Series A
Preferred as follows:  the first  $2,000,000 of conversions have been reset to a
price of $0.20 (whether as principal repayment or accrued and unpaid interest or
dividends);  the next  $1,000,000 of  conversions  have been reset to a price of
$0.25 per share.  The  remaining  conversions  permitted  under the terms of the
original  securities  issuance  will  remain  unchanged  at $0.35 per share.  In
addition to resetting the  conversion  prices for a portion of the  transaction,
the amendment  provides for all dividend and interest payments payable under the
investment  would  accrue,  rather  than be  payable  in  cash,  until  the next
conversion into common stock occurs. The amendment provides for a waiver of cash
payments of interest or dividends due prior to the  execution of the  amendment,
with any such  amounts to be accrued to the amounts  payable  under the terms of
the Note or Series A preferred. The amendment stipulates that at such time as an
amended  registration  statement  is  declared  effective,  the Master Fund will
convert $500,000 of principal and/or accrued an unpaid dividends of the Series A
Preferred  into the common stock of the Company  provided  that the price of the
Company's stock is at least $0.20 per share at the time.

                                       12
<PAGE>
6.   PREFERRED STOCK (continued)

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

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

7.   STOCK OPTION

On September 16, 2002, the Company granted options to purchase 300,000 shares of
the Company's common stock at $0.12 per share to a consultant for services to be
provided to the Company.  These options are exercisable  through September 2007,
contingent upon continuous  service by the consultant  through  specified dates.
100,000 of the options,  which vested March 15, 2003,  were valued at $0.044 per
share,  and 100,000 of the options,  which  vested May 15, 2003,  were valued at
$0.048 per share, based upon the Black-Scholes  option-pricing model,  resulting
in recognition  of  compensation  expense of $7,333 during the six-month  period
ended June 30, 2003. The remaining  100,000 options,  which vested September 15,
2003, were valued at $0.056 per share.  100,000 of the options were exercised on
July 2, 2004 for a cash consideration of $12,000.

8.   COMMON STOCK

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

On May 25, 2004,  the Company  reacquired  8,000,000  shares of its common stock
pursuant to a share  exchange  agreement  with its Chairman and Chief  Executive
Officer,  Mr. Patrick Lim,  whereby Mr. Lim surrendered  8,000,000 shares of the
Company's  common stock in exchange for 100,000  shares of the  Company's  newly
created Series A Voting Convertible  Preferred Stock. These shares were returned
to treasury and are available for  re-issuance  at a future date. As of June 30,
2004, the Company had a balance of 9,055,000  repurchased shares in its treasury
stock valued at $44,550.

                                       13
<PAGE>
8.   COMMON STOCK (continued)

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

9.   PROPOSED BUSINESS TRANSACTIONS

In December 2003,  the Company  entered into two Joint Venture  Agreements  with
Amove Resources Sdn Bhd ("AR") to jointly  implement a secured  shipping service
and a Central  Monitoring  Service  ("CMS") in the northern  region of Malaysia,
where AR is  currently  providing  armed guard  services to clients that include
factories,  offices and homes.  Pursuant to the Agreement,  the Company was also
granted an option to  purchase  a 51% equity  interest  in AR for  $550,000.  On
January 30, 2004,  the  Company's  subsidiary,  SDAM,  entered into a definitive
agreement  to  acquire  51%  equity in AR from AR's  principal  shareholder  for
$526,315 in cash.  SDAM made an initial cash payment of $26,315.  The balance of
the  purchase  price is to be paid at closing,  which is to occur by October 31,
2004.  The  purchase  agreement  is subject  to  customary  closing  conditions,
including the  completion  of a financial  and legal due diligence  audit to the
Company's  satisfaction and the renewal of certain  contracts with AR's existing
customers. At the date of this report, the Company had yet to close the purchase
agreement  as AR's  principal  shareholder  had  yet to  fulfill  the  condition
precedent as stated in the definitive agreement.

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

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

                                       14
<PAGE>
9.   PROPOSED BUSINESS TRANSACTIONS (continued)

On July 21, 2004, the Company announced that it has signed a letter of intent to
buy a 56% equity stake in Gallant IT Holdings (M) Sdn Bhd  (Gallant),  a leading
Malaysian provider of information  technology products and services for $658,000
(RM2.5 million). The closing date for the transaction is scheduled for September
20, 2004,  subject to completion of due diligence to the Company's  satisfaction
and signing of a  definitive  agreement.  The  purchase  will be funded  through
advances by the principal  shareholder,  internally generated funds and/or funds
raised through the sale of securities to a Master Fund.

10.  SIGNIFICANT CONCENTRATIONS OF CREDIT RISK

The Company grants credit,  generally without collateral,  to its customers. Two
customers  accounted for  substantially  all revenue earned during the six-month
periods  ended June 30, 2004 and 2003.  For the six months  ended June 30, 2004
and 2003,  one  customer  accounted  for  approximately  43% and 54% of revenue,
respectively,  and another customer  accounted for  approximately 44% and 41% of
revenue, respectively.

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

12.  SEGMENT INFORMATION

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

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

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

2.   Material handling equipment division (Material Handling)

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

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

                                       15
<PAGE>
12.  SEGMENT INFORMATION (continued)
<TABLE>
<CAPTION>
                                                                                  Material
                                                               Applications       Handling            Total
                                                            ---------------- ----------------- ----------------
Three-month period ended June 30, 2004:
Revenue:
<S>                                                         <C>              <C>               <C>
   Related parties                                          $       400,000  $             --  $       400,000
   Others                                                         4,558,158           198,167        4,756,325
                                                            ---------------- ----------------- ----------------
                                                            $     4,958,158  $        198,167  $     5,156,325
                                                            ================ ================= ================
Net income (loss) from operating segments                   $       343,574  $       (107,459) $       236,115
                                                            ================ ================= ================
Depreciation expense                                        $        58,819  $         13,148
                                                            ================ =================
Interest expense                                            $         4,567  $          1,908
                                                            ================ =================
Income tax expense                                          $        31,053  $             --
                                                            ================ =================
Share of associate companies' results                       $            --  $         (3,947)
                                                            ================ =================
Expenditures for additions to long lived assets             $         2,700  $          6,522
                                                            ================ =================

Six-month period ended June 30, 2004:

Revenue:
   Related parties                                          $       814,475  $             --  $       814,475
   Others                                                         8,349,999           468,973        8,818,972
                                                            ---------------- ----------------- ----------------
                                                            $     9,164,474  $        468,973  $     9,633,447
                                                            ================ ================= ================
Net income (loss) from operating segments                   $       549,134  $       (149,719) $       399,415
                                                            ================ ================= ================
Depreciation expense                                        $       117,535  $         21,141
                                                            ================ =================
Interest expense                                            $         7,827  $          2,327
                                                            ================ =================
Income tax expense                                          $        32,895  $             --
                                                            ================ =================
Share of associate companies' results                       $            --  $         (6,579)
                                                            ================ =================
Expenditures for additions to long lived assets             $         2,700  $          9,381
                                                            ================ =================

Consolidated total assets as of June 30, 2004 are as follows:
   Applications                                                                                 $   11,811,911
   Material handling                                                                                   682,571
   Investments in associate companies                                                                   36,092
                                                                                                ----------------
   Total consolidated assets                                                                    $   12,530,574
                                                                                                ================
</TABLE>
                                       16
<PAGE>
13.  POST BALANCE SHEET EVENTS

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

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

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

On August 3, 2004, the Company granted certain officers, directors and employees
of the  Company  options to  purchase up to  2,000,000  shares of the  Company's
common  stock at $0.20 per share.  The options are  exercisable  through  August
2009,  contingent  upon continuous  service by the  officers/directors/employees
through  specified  dates.  500,000  options are exercisable on October 3, 2004;
200,000  options  are  exercisable  on  February  3, 2005;  500,000  options are
exercisable on August 3, 2005, and the remaining 800,000 options are exercisable
in equal number on February 3, 2006, 2007, 2008 and 2009, respectively.

On August 3, 2004, the Company granted options to purchase 100,000 shares of the
Company's  common  stock  at  $0.12  per  share to an  independent  director  as
compensation  for serving on the Company's  Board of Directors.  The options are
exercisable with immediate effect through August 2009.

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

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
restricted common stock to the consultant as payment for services to be rendered
to the Company for the twelve-month period ending in July 2005. The common stock
will be issued to the consultant on a quarterly basis commencing in August 2004.

                                       17
<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") is a system
solution  provider  involved  in  application  development,   broadband  network
operation,  delivery of value added  applications and services;  sale of devices
that utilize  broadband  networks and the sale of  biometric  security  devices.
During  2003,  the Company  expanded  its  business to include the  development,
integration  and  provision  of secured  shipping  and supply  chain  management
services.  The  Company's  principal  operations  include  the  development  and
operation  of a wireless  broadband  network in  Malaysia,  the  development  of
interactive,  multimedia content for the Internet and the development, licensing
and/or sale of specific products and applications that utilize the capacities of
a broadband  network.  These  include the EyStar  SmartHome  Console,  broadband
modems, biometric systems and Internet-based cameras. The Company also generates
revenue from the sale, rental and servicing of material  handling  equipment and
the provision of land transportation, industrial moving and engineering services
through its subsidiary,  Asiaco Multi Corporation  ("AMC"). In 2004, the Company
hopes to generate  additional  income from its new business in the  development,
integration  and  provision  of secured  shipping  and supply  chain  management
services.

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

1.   EyStar Media Inc.  ("EMI"),  a wholly  owned  corporation  organized  under
     Delaware law and  presently  based in New York,  through  which the Company
     intends to expand its presently  limited  operations in the United  States.
     EMI seeks to acquire United States  technology  companies and to expand the
     Company's operations into the United States.
2.   SDA America,  Inc.  ("SDAA"),  a wholly owned  corporation  organized under
     Delaware  law that is used as a special  vehicle  to secure a $6.5  million
     funding from Laurus Master Funds, Ltd. ("Laurus") through private placement
     of securities consisting of convertible preferred stock of SDAA.
3.   Secured  Digital  Applications,  Inc ("SDAM")  (f/k/a  Animated  Electronic
     Industries Sdn Bhd), a wholly owned  Malaysian  subsidiary  involved in the
     design,  development  and  production of multimedia  content;  provision of
     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.   Asiaco  Multi  Corporation  Sdn  Bhd  ("AMC"),  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"),  presently  a  wholly  owned  Malaysian
     subsidiary of SDAM,  will be the joint venture  vehicle between the Company
     and Amove  Resources Sdn Bhd ("AR") to provide secured  shipping  services.
     SDAM's equity holding in SS will be reduced to 51% upon  fulfillment of all
     closing  conditions  stipulated  in the joint  venture  agreement  executed
     between the Company and AR.

                                       18
<PAGE>
7.   Temasya Wira Sdn Bhd ("TW"), a 60%-owned  Malaysian  subsidiary of SDAM was
     established to undertake the research and development of biometric security
     applications in Malaysia.
8.   Asiaco  Material  Handling  (East  Coast)  Sdn Bhd  ("AEC"),  an  80%-owned
     Malaysian  subsidiary of AMC, is primarily involved in the sale,  servicing
     and  rental  of  material  handling  equipment  in the  eastern  region  of
     Malaysia.
9.   Asiaco Logistic Sdn Bhd ("ALG"), a 67%-owned  Malaysian  subsidiary of AMC,
     is  primarily  involved in  industrial  moving,  packing and  unpacking  of
     industrial equipment and secured logistics.
10.  Asiaco Services Sdn Bhd ("ASS"), a 60%-owned  Malaysian  subsidiary of AMC,
     is primarily  involved in  providing  maintenance,  repair and  restoration
     services for all material handling equipment.
11.  Asiaco Taiping Sdn Bhd ("ATG"), a 62%-owned Malaysian subsidiary of AMC, is
     primarily  involved in the sale,  servicing and rental of material handling
     equipment in the northern region of Malaysia.
12.  Digital Image ID Sdn Bhd ("DID") (f/k/a Vista Positive Sdn Bhd),  presently
     a  wholly-owned  Malaysian  subsidiary  of  SDAM,  will  be used as a joint
     venture  vehicle to undertake a project with the  Company's  partners and a
     leading Malaysian IT company to enable the search and match of DNA data for
     newborns and registered  criminals,  for use primarily by the Government of
     Malaysia

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

For the three and six months  ended June 30,  2004,  the  Company's  revenue was
generated primarily from the following activities:

1.   Designing,  producing,  hosting and distribution of interactive  multimedia
     content, websites, programs and applications.
2.   Developing and producing  e-commerce  programs and Internet-based  security
     applications and solutions.
3.   Providing  project  consulting  services on  broadband  communications  and
     networking systems for property development projects.
4.   Sale, rental and servicing of material handling equipment and the provision
     of land transportation, industrial moving and engineering services

Significant Business Developments and Plan of Operation

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

                                       19
<PAGE>
The Company  will also seek to expand its  business to include the  provision of
biometric  security  identification  systems  and supply  chain  management  and
secured shipping  services.  In line with this strategy,  the Company has signed
several  agreements  since the third  quarter of 2003 to  acquire  the equity or
business and assets of companies that it believes will assist its expansion into
the development,  integration and provision of secured shipping and supply chain
management services. These agreements are described in more detail below.

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

The  following  table  summarizes  the estimated  aggregated  fair values of the
assets  acquired and the  liabilities  assumed from ATG at February 9, 2004, the
date of the  acquisition.  The  allocation  of the purchase  price is subject to
refinement.
<TABLE>
<CAPTION>
<S>                                                                      <C>
Property, furniture and equipment                                        $      10,728
Inventories                                                                     85,885
Accounts receivable                                                             87,345
Cash                                                                             3,583
Accounts payable                                                               (59,076)
Capital lease obligation                                                        (8,138)
Minority interests                                                             (46,192)
                                                                         --------------
                                                                                74,135
                                                                         ==============
</TABLE>
As of the date of this report,  the Company is working  towards  completing  the
transfer of business,  customers and selected net assets  (selected  assets less
selected  liabilities)  from four Asiaco  Companies:  Asiaco Pack Trade,  Asiaco
Heavylift,  Asiaco Selangor and Asiaco Melaka.  The transfer of business and net
assets from these four companies will take time as the transfer of title on some
assets requires  approval from the relevant  authorities.  The Company presently
expects the transfer to be completed by the third quarter of 2004.  The purchase
will be  funded by cash  from  internally  generated  funds,  advances  from the
Company's  principal  shareholder,  as well as funds raised  through the sale of
securities to a Master Fund.

                                       20
<PAGE>
On December 6, 2003,  the Company  executed a  definitive  agreement  with AMH's
principal  shareholder and Asiaco Material Handling (Thailand) Co. Ltd. ("AMHT")
to purchase  all of the assets and  business of AMHT.  On December 8, 2003,  the
Company announced the  incorporation of Asiaco Multi Corporation  (Thailand) Co.
Ltd ("AMCT"),  to be used as a special  vehicle to acquire AMHT's net assets and
business including taking over AMHT's  headquarters in Bangkok and branch office
in the  industrial  city of Rayong.  Upon  completion  of the  acquisition,  the
Company will own 60% of AMCT's  equity.  The remaining 40% will be jointly owned
by the existing  shareholders of AMHT. The Company and the existing shareholders
of AMHT are still  negotiating  the terms and  conditions  for the  transfer  of
AMHT's net assets and business to AMCT.

On December 3, 2003,  the Company  entered into a Joint Venture  Agreement  with
Amove Resources Sdn Bhd ("AR") to jointly  implement a secured shipping service.
The Company has  incorporated  Secured Shipping Sdn Bhd ("SS") to be used as the
joint venture company.  Pursuant to the Agreement,  the Company was also granted
an option to purchase a 51% equity  interest in AR for $550,000.  This option to
purchase was exercisable on or before January 31, 2004. On January 30, 2004, the
Company's  subsidiary,  SDAM, entered into a definitive agreement to acquire 51%
equity in AR for $526,315 in cash from AR's principal shareholder.  SDAM made an
initial cash payment of $26,315. The balance of the purchase price is to be paid
at closing,  which is to occur by October 31, 2004.  The  purchase  agreement is
subject to customary closing conditions, including the completion of a financial
and legal due diligence audit to the Company's  satisfaction  and the renewal of
certain  contracts  with AR's existing  customers,  which include  multinational
companies and Fortune 50 U.S.  companies  operating in Malaysia.  SDAM will fund
the  balance  of the  purchase  price  from  internally  generated  funds.  AR's
principal  shareholder will retain 49% equity in AR and continue to serve as the
Chief Executive Officer of AR. He will also guarantee a minimum profit after tax
of $137,000 for fiscal years ending  December  2004 to 2008. At the date of this
report,  the Company had yet to close the purchase  agreement as AR's  principal
shareholder  had  yet to  fulfill  the  condition  precedent  as  stated  in the
definitive agreement.

In addition to implementing a secured shipping service,  the Company and AR also
agreed to jointly implement a Central Monitoring Service ("CMS"), through SS, in
the  northern  region of Malaysia  where AR is currently  providing  armed guard
services to clients  that  include  factories,  offices  and homes.  The central
monitoring  station will be installed with the latest  state-of-the-art  digital
surveillance and recording systems.  Clients will be provided 24-hour monitoring
of their  premises.  When an intrusion  is  detected,  AR's armed guards will be
dispatched  immediately  to the  premises and law  enforcement  agencies and the
client will be notified.  The system will permit clients access to the Company's
home and business surveillance portal via the Internet.  The Company will hold a
majority  equity  interest  in  SS  after  consummation  of  the  Joint  Venture
Agreement. SS has yet to commence operations as the Company is still negotiating
with  AR on the  operational  and  administrative  arrangements  for  the  Joint
Venture.

                                       21
<PAGE>
In April 2004,  the Company  announced  it had signed a Teaming  Agreement  with
ImageWare   Systems,   Inc.  ("IW")  to  market   biometric   verification   and
identification  systems.  Under the terms of the Teaming Agreement,  the Company
will act as prime  contractor  for the  marketing and  development  of biometric
verification and identification systems based on thumbprint and photo extraction
technology.  IW will provide to the Company products and/or services,  including
their Omni Biometric EngineTM  ("Omni"),  to extract data from the web-based ASP
programs  developed  by the Company.  Initially,  the Company and IW will market
products and services on an exclusive basis to private and public sector clients
in Malaysia,  Thailand  and Brunei and on a  non-exclusive  basis in  Indonesia.
Revenues generated from Team projects will be shared equally.  Each company will
bear its own costs of developing  products,  programs and systems  necessary for
each  project.  One of the initial  projects to be pursued by the Company and IW
Systems is the development of a biometric verification and identification system
to be used with the Malaysian Government's "MyKad" national identification card.
It is  anticipated  the project will be available for field trials by the fourth
quarter of 2004.  The total  project  cost to develop the systems  necessary  to
conduct the field  trials is  estimated to be under $1 million with each company
responsible  for its own  development  costs.  Revenues  will be  generated on a
fee-per-transaction basis with the amount of the fee to be determined.

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

On July 21, 2004, the Company announced that it has signed a letter of intent to
buy a 56% equity stake in Gallant IT Holdings (M) Sdn Bhd  (Gallant),  a leading
Malaysian provider of information  technology products and services for $658,000
(RM2.5 million).  Founded in 1986,  Gallant is involved in the sales of personal
computers  and  peripherals,  systems  integration  and  servicing  of computers
through its subsidiary/related  companies. Gallant is also one of three licensed
Tier-1  AppleCenters in Malaysia that sell products and provide customer support
to Apple's  customers.  The founders of Gallant  will provide a 12-month  profit
guarantee  for the  current  business  of  Gallant  commencing  from the date of
closing.  The guaranteed  profit shall be at least 20% above the profit achieved
in Gallant's  2003 audited  accounts.  The closing date for the  transaction  is
scheduled for September 20, 2004. The purchase will be funded  through  advances
by the principal  shareholder,  internally  generated  funds and/or funds raised
through the sale of securities to a Master Fund. Upon closing, Gallant will have
three operating  entities - Gallant IT Holdings which provides technical support
and customer  support to meet the needs of home users,  corporate or educational
customers;  Gallant Zone which operates an AppleCenter at Mid Valley Megamall in
Kuala  Lumpur;  and Gallant  Focus,  owner of "Digital  Boutique,"  a "one-stop"
showroom that enables the  integration  of all types of IT and related  products
that can be incorporated into an individual's lifestyle.

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

                                       22
<PAGE>
The Company has secured several new contracts to provide hardware,  applications
or consulting  services.  The Company  believes that it will be able to commence
performance  of some  of  these  contracts  and  recognize  revenue  from  these
activities in the fourth  quarter of 2004. Due to  uncertainties  in scheduling,
however,  the Company cannot  forecast the specific dates on which it will begin
performance  of these  contracts.  These  contracts are described in more detail
below.

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

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

Significant Contracts

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

a)   In August 2001, the Company was awarded a consulting contract, estimated to
     generate revenue of $2.17 million from January 2004 through August 2005, to
     carry out the planning,  design,  project execution (including contract and
     project   management)  of  all  broadband   communications  and  networking
     systems/services  for Pulau  Indah-Marina  Village, a water oriented luxury
     resort, residential,  hotel and spa project. Through December 31, 2003, the
     Company  generated  $680,000 of revenue on this contract.  During the three
     and six months  ended June 30,  2004,  the  Company  recognized  additional
     revenue of  $157,000  and  $268,000,  respectively  on this  contract.  The
     Company   recognized   additional   revenue  of  $123,000   and   $167,000,
     respectively,  on this contract  during the three and six months ended June
     30, 2003.  During 2003,  in lieu of cash payment,  management  directed the
     customer  to pay $20,000 to an  affiliated  company to whom the Company had
     outstanding  accounts  payable.  The net  effect  to the  Company  was that
     revenue was recognized and recorded payables were reduced by equal amounts.

                                       23
<PAGE>
b)   In December  2001,  the Company  entered  into a marketing  agreement  with
     Worldlink  Dotcom Sdn. Bhd.  (Worldlink) to distribute its service  gateway
     for home/office automation in Malaysia,  Singapore and Australia.  In 2002,
     Worldlink promoted the Company's service gateway to potential resellers and
     channel  partners in the  targeted  markets.  The  Worldlink  contract  was
     projected  by the  Company to generate  revenues  of $4.0  million in 2003.
     Worldlink  has not been able to secure any sales during 2003 and  indicated
     that additional  time is required to promote the Company's  service gateway
     and secure  orders  from its  resellers  and channel  partners.  Therefore,
     revenue  cannot be accurately  forecast.  The gateway  bridges the Internet
     with internal home and office networks while  facilitating  the delivery of
     home and  office  applications  including,  but not  limited  to,  security
     surveillance and video conferencing.

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

d)   The Company will attempt to secure  contracts from local mobile networks to
     be jointly deployed with Aptilo Networks in the second half of 2004.

e)   In January 2002, the Company's subsidiary,  PTSB, was awarded a contract to
     carry out the  planning,  design,  and project  execution of all  broadband
     communications  and networking  systems/services  for a  commercial/housing
     project in  Selangor,  Malaysia.  Under the  contract,  PTSB will receive a
     total contract sum of $550,000 over 36 months  beginning  January 2003. The
     project,   featuring   312   serviced   apartments,   62  units  of  retail
     shops/offices and 120 units of housing for a government agency, is expected
     to be completed by December 2004. As a total solution  provider,  PTSB will
     also be responsible for the supply of its EyStar SmartHome  Console as well
     as providing value-added broadband applications such as high speed Internet
     access, security surveillance, multimedia conferencing, home automation and
     video-on-demand. The Company generated $311,000 of revenue on this contract
     through  December 31, 2003. The Company  recognized  $89,000 and $54,000 of
     revenue,  respectively,  during the three  months  ended June 30,  2004 and
     2003.  Total  revenue  generated for the six months ended June 30, 2004 and
     2003 were $150,000 and $96,000, respectively.  During 2003, in lieu of cash
     payment,  management  directed  the  customer to pay $10,000 of the $42,000
     recognized  to an  affiliated  company to whom the Company had  outstanding
     accounts  payable.  The net  effect to the  Company  was that  revenue  was
     recognized and recorded payables were reduced by equal amounts.

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

                                       24
<PAGE>
g)   In November  2002, the Company was  contracted by MY Architect  ("MYA"),  a
     related party, to provide consulting  services relating to home automation,
     home networking,  energy cost saving,  security surveillance and monitoring
     for MYA's  current  projects  involving  two major  commercial  and housing
     developments  in  Malaysia.  The Company  expected  to receive  $550,000 in
     consulting fees over the 18 months beginning  December 1, 2002. The Company
     generated  $273,000 of revenue on this contract  through December 31, 2003.
     The Company  recognized  $76,000  and  $89,000 of revenue  during the three
     months  ended  June 30,  2004 and  2003,  respectively.  Total  revenue  of
     $254,000 and $128,000,  respectively,  was recognized during the six months
     ended June 30, 2004 and 2003. The Company also expects to secure additional
     contracts sometime in 2005,  estimated at $4.0 million,  from MYA's clients
     for the supply and  installation  of the EyStar  SmartHome  Console and its
     security system in the two commercial and housing developments.

h)   In April  2003,  the Company  contracted  with MYA to carry out the design,
     supply and installation of all broadband communications, access control and
     network  security  equipment for a mixed  property  development  project in
     Selangor,  Malaysia, which features a total of 10 blocks of residential and
     commercial  high-rise  properties.  The  30-month  contract,   expected  to
     generate  revenue of $3.2 million,  commenced in the third quarter of 2003.
     Through  December 31, 2003, the Company  generated  $55,000 of revenue from
     this contract and  recognized  additional  revenue of $76,000 and $142,000,
     respectively during the three and six months ended June 30, 2004.

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

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

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

                                       25
<PAGE>
l)   In August  2003,  the Company  was awarded an $850,000  contract to supply,
     install and  commission a biometric  based Building  Access  Management and
     Monitoring System for a 40-story office complex in Kuala Lumpur,  Malaysia.
     The system is  designed to enhance  security  through  the  management  and
     monitoring of visitors  within a building  complex or restricted  area. The
     office  complex  is  currently  tenanted  by  government   departments  and
     agencies,  embassies,  corporations and trade missions.  Implementation  of
     this  contract was expected to commence in the first quarter of 2004 and to
     be completed by the second  quarter of 2004.  This project has been delayed
     as the Company was  informed  by the client to postpone  installation  work
     until further notice.

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

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

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

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

                                       26
<PAGE>
q)   In May 2004, the Company's subsidiary, Secured Digital Applications (M) Sdn
     Bhd ("SDAM"), was awarded a contract valued at $2.2 million by Master Index
     Sdn  Bhd   ("MISB")   to  deliver,   install   and   maintain  a  biometric
     identification  and  verification  system  for an office  complex  in Kuala
     Lumpur, Malaysia. The system is to be delivered and installed in the fourth
     quarter  of 2004.  A  three-year  maintenance  contract  will  begin  after
     installation.

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

s)   In July 2004,  the Company  announced  it was  awarded a $6.7M  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.

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.

In June 2004, the Company  announced plans to conduct a field trial of an online
biometric  payment portal for electronic  commerce and credit card  transactions
using biometric  products and systems developed by its current partner companies
for  identification and verification  during the second half of 2004.  Merchants
who sign up as clients of the payment  portal will enroll their  customers  into
the Company's system.  Thereafter,  the merchant's clients when making purchases
will have  their  identity  verified  by using  face and  fingerprint  biometric
technology.  After  authentication  of their identity,  the transaction  will be
processed and payment  approval  sought from banks and credit card issuers.  The
Company  intends to generate  revenue by charging a fee based on a percentage of
the transaction  value executed through the portal.  The Company  estimates that
gross  revenue   during  the  first  year  of  commercial   operation   will  be
approximately  $30 million.  Implementation of the portal is scheduled for early
2005.  The  initial  deployment  of the portal  would be for the  Malaysian  and
Singapore  markets with subsequent  deployment  across the Asia-Pacific  region.
After successfully  implementing the payment portal for the Asia-Pacific region,
the Company intends to introduce a similar portal for the North American market.
The  payment  portal will be partly  funded by  internally  generated  funds and
proceeds from the private placement of the Company's securities to Laurus Master
Fund, Ltd ("Laurus").

                                       27
<PAGE>
In December 2003, the Company was appointed by Testech Inc. ("Testech") of South
Korea to distribute its biometrics  security  products.  Testech's product range
includes  fingerprint  access control systems,  fingerprint time and attendance,
fingerprint  door lock and  fingerprint  authentication  module.  These products
support  both TCP/IP  protocol and RS422 serial  communication.  Four  different
combinations of  authentication  methods are utilized:  fingerprint,  pin number
with  fingerprint,  pin number with smart card, and fingerprint with smart card.
Testech  holds  a  U.S.   patent  for  a  contact  light  emitting   fingerprint
authentication  sensor which is used in the above products.  Testech's  products
are  competitively  priced for the mass  market and enable the Company to have a
wider range of biometric  security  products  that could be  customized  to meet
clients' requirements.

On September 10, 2003, the Company's Malaysian  subsidiary,  SDAM entered into a
letter  agreement to  establish a joint  venture  company,  Temasya Wira Sdn Bhd
("TWSB"),  to  undertake  the  research and  development  of biometric  security
applications.  SDAM will initially hold 60% of TWSB's equity while two Malaysian
individuals  will hold the  remaining  40%.  SDAM's  holding will  eventually be
diluted  to 30%  when  EMI  acquires  30%  equity  interest  in TWSB  after  the
completion of the joint venture agreement to be executed between the Company and
FaceKey  Corporation as described below. TWSB is expected to commence operations
in the fourth quarter of 2004.

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

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.

                                       28
<PAGE>
In December  2002,  the Company's  subsidiary,  SDAM executed an Agreement  with
Sintec Corp,  South Korea  ("Sintec"),  to sell,  distribute  and promote  their
SmileCAM remote video  surveillance  cameras in Malaysia,  Thailand,  Singapore,
Vietnam and Brunei. The agreement is for an initial period of two years and will
thereafter be  automatically  renewable for one-year terms on each  anniversary.
Under the terms of the  agreement,  Sintec  will  grant  the  Company  exclusive
distribution  rights for its  products in Malaysia if the Company  purchases  an
agreed  minimum value of products from Sintec during 2003 and 2004.  The Company
hopes that the agreement  with Sintec,  which is due to expire in December 2004,
will be renewed for a further one year.  SmileCAM  cameras are used for Internet
based security and  entertainment  applications  and can be integrated  with the
EyStar  SmartHome  Console  to  provide  a value  added  security  solution  for
corporate and  residential  users.  SmileCAM  cameras  include  features such as
automatic motion detection and tracking,  and sending live streaming video to an
Internet  browser.  Combined with  applications  and solutions  developed by the
Company,  the Company believes that SmileCAM cameras offer to purchasers  useful
features such as the ability to record intrusion, owner notification by ordinary
telephone,  live video,  remote security options and forwarding of images by use
of the Internet.

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

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

Beginning in September 2001, the Company entered into a strategic  collaboration
with Aptilo  Networks,  Sweden,  to deploy  local  mobile  networks  ("LMNs") in
Malaysia  and the Asian  regional  markets.  The  Company  anticipates  that the
successful  integration  of LMNs with VISIONET will enable  consumers to receive
live video streams from their  handheld  devices and laptops,  and to access the
Internet and their  corporate  intranets at near T1 speeds  remotely from public
locations  in  the  "travel  ribbon"  such  as  hotels,  airports,  restaurants,
conference  centers,  shopping  malls and  coffeehouses.  The  first  integrated
VISIONET-LMN  cell was deployed  during the fourth  quarter of 2001 to connect a
number of access points to Bluetooth and wireless LAN 802.11b standard  devices.
This mobile network  features  Aptilo's latest billing solution that enables the
Company to offer value-added applications and services to users without the need
for any prior registration as a subscriber.  The Company is optimistic that this
method of payment  from Aptilo will  attract  more users to VISIONET  and reduce
capital  expenditures and monthly operating costs.  Furthermore,  the integrated
network  provides the Company with the ability to expand its  broadband  network
from fixed wireless into the mobile broadband market.  The Company has committed
to an initial  purchase of software and hardware  from Aptilo valued at $50,000.
The Company  believes that this strategic  relationship  with Aptilo may broaden
VISIONET's  user base and generate  additional  revenue in the fourth quarter of
2004.

                                       29
<PAGE>
COMPARISON  OF THE THREE  MONTHS  ENDED JUNE 30, 2004 TO THE THREE  MONTHS ENDED
JUNE 30, 2003

REVENUES

Revenues for the three months ended June 30, 2004 totaled $5,156,325 compared to
$3,885,342  for the three months ended June 30, 2003,  an increase of $1,270,983
or 33%.  The  increase in net sales in the three  months  ended June 30, 2004 as
compared  to 2003  was  mainly  due to an  increase  in  fees  earned  from  the
production of multimedia  programs and revenue  received for project  consulting
services. Included in revenue for the three months ended June 30, 2004 and 2003,
was income of $400,000 and $264,552, respectively, received from a related party
for project consulting fees.  Revenues for 2004 also included income of $185,009
or 4% of total  revenue,  generated  by the Asiaco  subsidiaries.  For the three
months ended June 30, 2004, two customers,  respectively,  accounted for 43% and
46% of total  revenue.  For the three months ended June 30, 2003, two customers,
respectively, accounted for 43% and 51% of total revenue.

GROSS PROFIT

Gross  profit  increased  to $588,831  for the three months ended June 30, 2004,
compared to $441,289 for the three  months  ended June 30, 2003,  an increase of
$147,542 or 33%.  The increase in gross  profit was  primarily  due to increased
consulting  revenue  in 2004.  As a result of higher  revenue,  cost of  revenue
increased by $1,123,441,  or 33%, to $4,567,494 in 2004 from $3,444,053 in 2003.
The high  cost of  revenue  percentage  is a  result  of the  Company  requiring
additional  external  resources in order to fulfill the demand for the Company's
services.  The  outsourcing  of content  production  work enabled the Company to
develop  a team of  contractors  that  will  assist  the  Company  in  producing
multimedia  content and  applications  that are  crucial to its future  business
operation.

Sales and marketing expenses

Sales and marketing  expenses  increased by $271, or 9%, to $3,321 for the three
months  ended June 30, 2004  compared to $3,050 for the three  months ended June
30, 2003.

GENERAL AND ADMINISTRATIVE EXPENSES

General and  administrative  expenses  were  $389,892 for the three months ended
June 30, 2004, compared to $193,952 for the three months ended June 30, 2003, an
increase of $195,940 or 101%.  Included in general and  administrative  expenses
for 2004 are expenses of $132,014 incurred by the Asiaco subsidiaries. Excluding
expenses  incurred  by  the  Asiaco  subsidiaries,  general  and  administrative
expenses for 2004 would have been $257,878. General and administrative expenses,
excluding  the Asiaco  subsidiaries,  increased  by $63,926 or 33% for the three
months ended June 30,  2004.  The  increase  was mainly  attributable  to higher
expenses incurred for public relation services,  maintenance expenses and higher
rental expenses.

INTEREST EXPENSE

Interest  expense  increased  by $3,337 or 106% to $6,475 for three months ended
June 30, 2004 as compared to $3,138 for the three  months  ended June 30,  2003.
Interest  expense for the three  months  ended June 30,  2004,  included  $3,100
related  to a  $500,000  convertible  term  note  issued  on June 4,  2004,  and
accounted for  approximately  48% of total interest expense for the three months
ended June 30, 2004.

                                       30
<PAGE>
GAIN ON DISPOSAL OF ASSETS, RELATED PARTY

Gain on disposal of assets,  related party,  for the three months ended June 30,
2004 and 2003 included recognition of a previously deferred gain of $100,000 and
$14,474, respectively, related to a similar amount the Company received from its
long-term  receivable,  related party. The receivable balance and total deferred
gain was $555,000,  respectively,  as of December 31, 2003. This amount arose in
the year ended  December  31,  1998 when the  Company  sold  assets  used in the
operations  of a subsidiary  to a related  company.  Due to the  uncertainty  of
collection of the related receivable, the related gain on the sale of the assets
was deferred and is to be  recognized  only after all costs have been  recovered
and as payments are received.  During the year ended December 31, 2002, payments
received  by the  Company  exceeded  all  remaining  costs.  As a result of cash
payment received, the Company's long-term receivable, related party and deferred
gain balances were reduced to $347,742 respectively, as of June 30, 2004.

NET INCOME

The Company  recorded net income of $236,115 for the three months ended June 30,
2004,  as compared to net income of $223,010 for the three months ended June 30,
2003.  Net income for the three  months  ended June 30,  2004 and 2003  included
recognition of a deferred gain of $100,000 and $14,474, respectively.  Excluding
these  non-recurring  transactions,  the  recorded  net  income  would have been
$136,115 and $208,536,  respectively, for the three-month periods ended June 30,
2004 and 2003.

COMPARISON  OF THE SIX MONTHS  ENDED JUNE 30, 2004 TO THE SIX MONTHS  ENDED JUNE
30, 2003

REVENUES

Revenues for the six months ended June 30, 2004 totaled  $9,633,447  compared to
$7,467,395  for the six months ended June 30, 2003, an increase of $2,166,052 or
29%. The increase in net sales in the six months ended June 30, 2004 as compared
to 2003 was mainly due to an  increase in fees  earned  from the  production  of
multimedia  programs and revenue received for project consulting  services.  The
increase was also due to income of $814,475  received  from a related  party for
project  consulting  fees,  pursuant to a  consulting  contract  entered into on
November  5,  2002.  For the six  months  ended June 30,  2004,  two  customers,
respectively,  accounted  for 43% and 44% of total  revenue.  For the six months
ended June 30, 2003, two customers,  respectively,  accounted for 41% and 54% of
total revenue.

GROSS PROFIT

Gross  profit  increased to  $1,005,253  for the six months ended June 30, 2004,
compared  to $728,704  for the six months  ended June 30,  2003,  an increase of
$276,549 or 38%.  The  increase in gross  profit was due to a higher  consulting
revenue,  which has a higher  margin  than  production  work,  in 2004.  Cost of
revenue increased by $1,889,503 or 28%, to $8,628,194 in 2004 from $6,738,691 in
2003. This increase was a result of the Company  requiring  additional  external
resources in order to fulfill the higher demand for the Company's services.  The
outsourcing of content  production work enabled the Company to develop a team of
contractors  that will assist the Company in  producing  multimedia  content and
applications that are crucial to its future business operation.

                                       31
<PAGE>
Sales and marketing expenses

Sales and marketing  expenses decreased by $7,434, or 48%, to $8,018 for the six
months  ended June 30, 2004 from $15,452 for the six months ended June 30, 2003.
The decrease was primarily due to lower marketing  expenses  incurred to promote
the Company's  business of  developing  and  producing  multimedia  programs and
provision of design and consulting services for interactive website development.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative  expenses were $726,506 for the six months ended June
30, 2004 compared to $401,203 for the six months ended June 30, 2003, a increase
of $325,303 or 81%. Included in general and administrative expenses for 2004 was
expenses of $227,801  incurred by the Asiaco  subsidiaries.  Excluding  expenses
incurred by the Asiaco  subsidiaries,  general and  administrative  expenses for
2004 would have been $498,705.  General and administrative  expenses,  excluding
the Asiaco  subsidiaries,  increased  by $97,502 or 24% for the six months ended
June 30, 2004. The increase was  attributable  to an increase in public relation
services,  maintenance expenses,  rental expenses,  professional fees and higher
management  fees payable to a company in which Mr. Patrick Lim, the Chairman and
Chief Executive Officer of the Company, has a financial interest. The management
fee was charged on the basis of time spent for the administration and management
services  provided to the Company.  Management  fees incurred to a related party
were increased to $7,105 per month for the six months ended June 30, 2004.

INTEREST EXPENSE

Interest expense increased by $3,659 or 56% to $10,154 for six months ended June
30, 2004 as compared to $6,495 for the six months ended June 30, 2003.  Interest
expense for the six months ended June 30,  2004,  included  $3,100  related to a
$500,000  convertible  term  note  issued on June 4,  2004,  and  accounted  for
approximately  31% of total  interest  expense for the six months ended June 30,
2004.

GAIN ON DISPOSAL OF ASSETS, RELATED PARTY

Other income for the six months ended June 30, 2004  included  recognition  of a
previously  deferred  gain of $207,258  related to a similar  amount the Company
received from its long-term  receivable,  related party. The receivable  balance
and total  deferred  gain was $555,000,  respectively,  as of December 31, 2003.
This amount  arose in the year ended  December  31,  1998 when the Company  sold
assets used in the operations of a subsidiary to a related  company.  Due to the
uncertainty  of  collection of the related  receivable,  the related gain on the
sale of the assets was  deferred  and is to be  recognized  only after all costs
have been recovered and as payments are received. During the year ended December
31, 2002,  payments  received by the Company  exceeded all remaining costs. As a
result the  Company's  long-term  receivable,  related  party and deferred  gain
balances were reduced to $347,742 respectively, as of June 30, 2004.

NET INCOME

The Company  recorded  net income of $399,415  for the six months ended June 30,
2004  compared  to a net income of  $280,230  for the six months  ended June 30,
2003. Net income for the six-month  period ended June 30, 2004 and 2003 included
recognition of a deferred gain of $207,258 and $19,737, respectively.  Excluding
these  non-recurring  transactions,  the  recorded  net  income  would have been
$192,157 and $260,493,  respectively,  for the six-month  periods ended June 30,
2004 and 2003.

                                       32
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2004,  the Company had cash of $72,301,  and  restricted  cash of
$6,500,000 from the sale of securities to Laurus Master Fund, Ltd ("Laurus"),  a
Cayman Islands corporation.

On June 7, 2004,  the Company  entered into  agreements  with Laurus to secure a
$7.0 million  funding through  private  placement of securities  consisting of a
convertible  term  note,  convertible  preferred  stock  issued by a  subsidiary
corporation,  SDA America,  Inc.,  and warrants to purchase  common stock of the
Company. The Company has secured from Laurus:

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

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

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

For the six  months  ended  June 30,  2004,  all  operations  were  funded  from
internally  generated  funds  and  working  capital  advanced  by Mr.  Lim,  the
Company's principal shareholder,  Chief Executive Officer ("CEO"),  Chairman and
Director. As of June 30, 2004, the Company owed Mr. Lim $9,361. Additionally, as
of June 30, 2004, the Company owed an affiliated Company, in which Mr. Lim has a
financial interest, $43,213 for short-term cash advances made to a subsidiary of
the Company for working  capital  purposes from time to time and for  management
fees.  These amounts are unsecured,  bear no interest and have no fixed terms of
repayment.

Cash used in operating  activities of $157,283 for the six months ended June 30,
2004 was mainly attributable to higher general and administrative expenses.

Net cash used in  investing  activities  of $571 was mainly due to  purchase  of
equipment.

                                       33
<PAGE>
Net cash used in  financing  activities  of $14,764 was  primarily  due to costs
incurred in connection with the debt and securities issued to Laurus.

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 June
30, 2004, the Company has furniture and equipment of approximately  $1.3 million
for the roll out of its portal,  build-out of VISIONET and implementation of its
business plan. The Company  estimates that it would require  additional  capital
expenditures  of up to $2.0 million to implement  its business  plan to become a
total system  solution  provider  involved in application  development,  network
operation,  delivery of value added  applications and services;  and sale of its
EyStar SmartHome Console.  The Company has also committed to an initial purchase
of software and hardware  valued at $50,000 in  conjunction  with its  announced
strategic collaboration with Aptilo Networks, Sweden.

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

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

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

                                       34
<PAGE>
On July 21, 2004, the Company announced that it has signed a letter of intent to
buy a 56% equity stake in Gallant IT Holdings (M) Sdn Bhd  (Gallant),  a leading
Malaysian provider of information  technology products and services for $658,000
(RM2.5 million).

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                   $      144,200     $        63,092    $           81,108
Convertible term note obligations           $      452,100     $       106,596    $          345,504
Operating lease commitments                 $      113,900     $        44,000    $           69,900

</TABLE>

ITEM 3. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report,  the  Company's  management
concluded its evaluation of the effectiveness of the design and operation of the
Company's  disclosure  controls and procedures.  As of the Evaluation  Date, the
Company's  Chairman and Chief Executive  Officer and its Chief Financial Officer
concluded that the Company maintains disclosure controls and procedures that are
effective in providing  reasonable  assurance  that  information  required to be
disclosed in the Company's  reports under the  Securities  Act of 1934 (Exchange
Act) is recorded,  processed,  summarized  and reported  within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's  management,  including its Chairman and Chief
Executive  Officer and its Chief Financial  Officer,  as  appropriate,  to allow
timely  decisions  regarding  required  disclosure.   The  Company's  management
necessarily  applied its  judgment in  assessing  the costs and benefits of such
controls and  procedures,  which,  by their nature,  can provide only reasonable
assurance  regarding  management's  control  objectives.   There  have  been  no
significant  changes in the Company's internal controls or in other factors that
could significantly affect these controls subsequent to the Evaluation Date.

                                       35
<PAGE>
PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     On  December  22,  2003,  the Company  commenced a lawsuit in the  Chancery
Division, Hunterdon County, New Jersey against seven anonymous Internet posters,
alleging that the posters had made false  statements on certain  message  boards
sponsored by Terra Lycos,  Inc.  (Ragingbull.com)  and Yahoo! The complaint,  in
which president and chairman  Patrick Lim is also a plaintiff,  alleges that the
false  statements were intended to manipulate the price of the Company's  common
stock and to damage the reputation of the Company and Mr. Lim.  Causes of action
are alleged under New Jersey law for stock  manipulation,  civil  conspiracy and
libel.  The Company has been  granted  leave to conduct  discovery to obtain the
identities of the anonymous  posters.  Five of the seven defendants who provided
representations,  directly or through their attorneys,  that they are not former
employees of the Company in breach of any agreement of separation  and they were
neither  purchasers or sellers of the Company's  securities  have been dismissed
from the action.  Damages at law and injunctive relief are sought in the action.
The  Company  does not  anticipate  that it will  recover  damages  in an amount
material to the financial condition of the Company.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

     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,  which is convertible  into shares of common stocks at a fixed
ratio of 80  shares  of  common  stocks  for 1 share  of  preferred  stock.  The
8,000,000  shares were returned to treasury and are available for re-issuance at
a future date. The preferred stock is entitled to cumulative  dividends at $2.20
per annum, payable in common stock at $.28 per share. Each share of the Series A
preferred is entitled to voting rights  equivalent to 80 shares of common stock.
The Series A preferred  is subject to  mandatory  conversion  10 years after its
issuance.

     On June 4,  2004,  the  Company  issued a  Convertible  Term Note to Laurus
Master  Fund  Ltd.  ("Laurus)  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.  $326,000 of the proceeds were used for
payment of  expenses  relating  to  issuance  of the term notes and  convertible
preferred stocks to secure an additional $6.5 million financing from the Laurus.
The balance of the proceeds was used as the Company's  working capital.

     On June 4, 2004, the Company's wholly owned subsidiary,  SDA America,  Inc.
issued 6,500,000  shares of Series A Convertible  Preferred Stock (the "Series A
Preferred") to Laurus at a price of $1.00 per share,  which is convertible  into
shares of the Company's  common stock at a fixed  conversion price and warrants
to purchase up to 3,000,000  shares of the Company's  common stock. The Series A
Preferred is entitled to cumulative  preferential  dividends at a rate per annum
equivalent to the "prime rate" published in The Wall Street Journal from time to
time plus 2%, subject to a floor of 6% per annum. The warrants have a seven-year
term and an exercise  price of $0.40 per share for the first  1,000,000  shares,
$0.43 per  share for the  second  1,000,000  shares  and $0.47 per share for the
third 1,000,000 shares.Pursuant to the Securities Purchase Agreement between the
Master Fund and the Company and a restricted  account  agreement entered into by
the  Company,  the Master  Fund and a US bank,  the  $6,500,000  investment  was
deposited  into a  restricted  account as security  for the  performance  of the
Company and its  subsidiaries'  obligations to the Master Fund. The proceeds are
restricted  until the receipt of  confirmation  from the Securities and Exchange
Commission ("SEC") that an effective registration statement under the Securities
Act of 1933 with respect to such investment has been declared effective. At that
time the preferred stock is  convertible,  subject to certain  conditions,  into
common stock of the Company at the option of the Master Fund.  Additionally,  at
that date, the Company and the Master Fund can agree to use the restricted  cash
to make  acquisitions  of companies  that meet  agreed-upon  criteria for sales,
profitability and accounting standards.


                                       36
<PAGE>
     On June 4, 2004,  the  Company  issued  181,632  shares of common  stock at
$0.245 per share for a total  consideration  of $44,500;  as partial payment for
fees of  $133,500  for  services  rendered  in  connection  with  the  Company's
Securities Purchase Agreement with a Master Fund.

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 AND REPORTS ON FORM 8-K

     (a)  Exhibits

     10.1 Agreement,  dated as of  August  11,  2004,  between  Secured  Digital
          Applications Inc. and Laurus Master Fund, Ltd.

     10.2 Amendment No. 1 to Certificate  of  Designation  of SDA America,  Inc.
          dated as of August 11, 2004

     10.3 Amendment No. 1 to Registration  Rights Agreement,  dated as of August
          11, 2004, by and between Secured Digital  Applications Inc. and Laurus
          Master Fund Ltd.

     10.4 Amendment No. 1 to Secured  Convertible  Term Note, dated as of August
          11, 2004, by and between Secured Digital  Applications Inc. and Laurus
          Master Fund, Ltd.

     10.5 Amendment No. 1 to Securities Purchase  Agreement,  dated as of August
          19, 2004 by and between Secured Digital  Applications  Inc. and Laurus
          Master Fund, Ltd.

     10.6 Amended Restricted Account side letter, dated as of August 19, 2004 by
          and between SDA America Inc. and Laurus Master Fund Ltd.

     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

     (b)  Reports on Form 8-K:

     The Company  filed a Current  Report on Form 8-K for an event  specified in
     Item 12 of such report on April 15, 2004.

                                       37
<PAGE>
     The Company  filed a Current  Report on Form 8-K for an event  specified in
     Items 5 and 7 of such report on April 15, 2004.

     The Company  filed a Current  Report on Form 8-K for an event  specified in
     Item 12 of such report on May 17, 2004.


     The Company  filed a Current  Report on Form 8-K for an event  specified in
     Items 5 and 7 of such report on June 8, 2004.

                                       38
<PAGE>
                                   SIGNATURES

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

                                              SECURED DIGITAL APPLICATIONS, INC.
                                                         (Registrant)



DATE: AUGUST 19, 2004                         BY: /s/ Patrick Soon-Hock Lim
                                                  -------------------------
                                              Patrick Soon-Hock Lim
                                              Chairman & Chief Executive Officer



DATE: AUGUST 19, 2004                         BY: /s/ Chee Hong Leong
                                                  ------------------------------
                                                  Chee Hong Leong
                                                  Chief Financial Officer
                                                  (Principal Financial Officer
                                                  and Principal Accounting
                                                  Officer)

                                       39