UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



Form 10-QSB





XQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2005



___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____





DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

(Name of small business in its charter)



|Delaware                                       | 0-50002                  | 52-2175896                       
|---------------------------------------------- | ------------------------ | ---------------------------------
|(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.)

|15/F East Wing
Sincere Insurance Building
6 Hennessy Road, Wanchai
Hong Kong
|----------------------------------------------------------------------------
|(Address of Principal Executive Office)                                     

Issuer's telephone number:  (239) 598-2300



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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....



Applicable only to issuers involved in bankruptcy proceedings during the past five years.



Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.  Yes...  No.....



Applicable only to corporate issuers



State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date. At March 31, 2005, the following shares were outstanding: 2,200,000.



Transitional Small Business Disclosure Format (Check one):  Yes...     No X



PART 1 - FINANCIAL INFORMATION





ITEM 1.  FINANCIAL STATEMENTS AND EXHIBITS



(a)

The unaudited financial statements of registrant for the three months ended March 31, 2005, follow.  The financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented.







1



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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.









UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS









FOR THE THREE MONTHS ENDED MARCH 31, 2005

2



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CONTENTS













|                                                     | PAGES
|---------------------------------------------------- | -----
|Consolidated balance sheets                          | 4    
|Consolidated statements of operations                | 5    
|Consolidated statements of cash flows                | 6    
|Notes to unaudited consolidated financial statements | 7-10 









3



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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

| |  | 31-Mar-05   |  | 31-Dec-04
| |  | ----------- |  | ---------
| |  | (Unaudited) |  | Audited  
| |  | USD         |  | USD      

|ASSETS         |  |  | 
|-------------- |  |  | 
|Current assets |  |  | 

| | Cash and cash equivalents         | 24,780  |  | 71,343 
| | --------------------------------- | ------- |  | -------
| | Trade accounts receivable         | 927,918 |  | 154,234
| | Stock subscription receivable     |         |  | 100,000
| | Related party receivable          | 36,346  |  | 36,346 
| | Prepaid expenses and other assets | 39,149  |  | 105,666

|Total current assets | 1,028,193 |  | 467,589
|-------------------- | --------- |  | -------

| | Plant and equipment, net | 31,603 |  | 34,094
| | ------------------------ | ------ |  | ------

|Total assets | 1,059,796 |  | 501,683
|------------ | --------- |  | -------

| |  |  |  | 
| |  |  |  | 

|LIABILITIES AND STOCKHOLDERS' EQUITY |  | 
|------------------------------------ |  | 

|Current liabilities |  |  | 
|------------------- |  |  | 

| | Trade accounts payable            | 758,527 |  | 236,292
| | --------------------------------- | ------- |  | -------
| | Accrued expenses                  | 5,378   |  | 44,141 
| | Deposits                          | 90,549  |  | 81,994 
| | Shareholders' loans               | 6,515   |  | 6,515  
| | Current portion of long-term debt | 4,573   |  | 4,573  

|Total current liabilities | 865,542 |  | 373,515
|------------------------- | ------- |  | -------

| |  |  |  | 
| |  |  |  | 

|Long-term debt, less current portion | 1,966 |  | 3,109
|------------------------------------ | ----- |  | -----

| |  |  |  | 
| |  |  |  | 

|Stockholders' Equity |  |  | 
|-------------------- |  |  | 

| | Common stock - Par value $.001;        |          |  |          
| | -------------------------------------- | -------- |  | ---------
| | shares authorized, 22,200,000 shares   |          |  |          
| | issued and outstanding                 | 22,200   |  | 22,200   
| | Additional paid in capital             | 268,974  |  | 268,974  
| | Accumulate deficit                     | (99,524) |  | (166,753)
| | Accumulated other comprehensive income | 638      |  | 638      
| |                                        |          |  |          

|Total Stockholders' Equity | 192,288 |  | 125,059
|-------------------------- | ------- |  | -------

| |  |  |  | 
| |  |  |  | 

|Total Liabilities and Stockholders' Equity | 1,059,796 |  | 501,683
|------------------------------------------ | --------- |  | -------





See the accompanying notes to the unaudited consolidated financial statements

4



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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS



| |  | Three months ended March 31,
| |  | ----------------------------

| |  | 2005        |  | 2004       
| |  | ----------- |  | -----------
| |  | (Unaudited) |  | (Unaudited)
| |  | USD         |  | USD        
| |  |             |  |            

|Sales revenues | 1,104,454 |  | 322,408
|-------------- | --------- |  | -------

| |  |  |  | 
| |  |  |  | 

|Cost of goods sold | 896,546 |  | 302,688
|------------------ | ------- |  | -------

| |  |  |  | 
| |  |  |  | 

|Gross profit | 207,908 |  | 19,720
|------------ | ------- |  | ------

| |  |  |  | 
| |  |  |  | 

|Operating expenses |  |  | 
|------------------ |  |  | 

| | Depreciation, depletion and amortization | 4,110   |  | 107   
| | ---------------------------------------- | ------- |  | ------
| | General and administrative               | 141,291 |  | 77,443
| |                                          | 145,401 |  | 77,550
| |                                          |         |  |       

|Operating income (loss) | 62,507 |  | (57,830)
|----------------------- | ------ |  | --------

| |  |  |  | 
| |  |  |  | 

|Other income |  |  | 
|------------ |  |  | 

| | Other | 4,722 |  | 1,641
| | ----- | ----- |  | -----
| |       | 4,722 |  | 1,641
| |       |       |  |      

|Income (loss) before income tax | 67,229 |  | (56,189)
|------------------------------- | ------ |  | --------

| |  |  |  | 
| |  |  |  | 

|Provision for income taxes | - |  | -
|-------------------------- | - |  | -

| |  |  |  | 
| |  |  |  | 

|Net income (loss) | 67,229 |  | (56,189)
|----------------- | ------ |  | --------

| |  |  |  | 
| |  |  |  | 

|Net income (loss) per common share | 0.00303 |  | (0.00832)
|---------------------------------- | ------- |  | ---------

| |  |  |  | 
| |  |  |  | 

|Weighted average common stock outstanding | 22,200,000 |  | 6,751,240
|----------------------------------------- | ---------- |  | ---------





See the accompanying notes to the unaudited consolidated financial statements

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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

| |  |  | Three months ended March 31,
| |  |  | ----------------------------

| |  |  | 2005        |  | 2004       
| |  |  | ----------- |  | -----------
| |  |  | (Unaudited) |  | (Unaudited)
| |  |  | USD         |  | USD        

|Operating activities:                                                                    |        |  |         
|---------------------------------------------------------------------------------------- | ------ |  | --------
|Net income (loss)                                                                        | 67,229 |  | (56,189)
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |        |  |         

| | Depreciation, depletion and amortization         | 4,110 |  | 107
| | ------------------------------------------------ | ----- |  | ---
| | Accumulated other comprehensive income (deficit) | 0     |  | 0  
| | Change in operating assets and liabilities       |       |  |    

| |  | Increase in trade accounts receivable         | (773,684) |  | (39,875)
| |  | --------------------------------------------- | --------- |  | --------
| |  | Decrease in prepaid expenses and other assets | 66,517    |  | 83,466  
| |  | Decrease in stock subscription receivables    | 100,000   |  | 0       
| |  | Decrease in related party receivable          | 0         |  | 0       
| |  | Increase (decrease) in trade accounts payable | 522,235   |  | (8,069) 
| |  | Decrease in accrued expenses                  | (38,763)  |  | (11,010)
| |  | Increase in deposits                          | 8,555     |  | 3,950   
| |  | Increase in shareholder loan payable          | 0         |  | 1,980   

|Total adjustments | (111,030) |  | 30,549
|----------------- | --------- |  | ------

| |  |  |  |  | 
| |  |  |  |  | 

|Net cash used in operating activities | (43,801) |  | (25,640)
|------------------------------------- | -------- |  | --------

| |  |  |  |  | 
| |  |  |  |  | 

|Investing activities: |  |  | 
|--------------------- |  |  | 

| |  |  |  |  | 
| |  |  |  |  | 

|Capital expenditures, including: |  |  | 
|-------------------------------- |  |  | 

| | Purchase of plant and equipment, net | (1,619) |  | (2,789)
| | ------------------------------------ | ------- |  | -------

| |  |  |  |  | 
| |  |  |  |  | 

|Net cash used in investing activities | (1,619) |  | (2,789)
|------------------------------------- | ------- |  | -------

| |  |  |  |  | 
| |  |  |  |  | 

|Financing activities: |  |  | 
|--------------------- |  |  | 

| |  |  |  |  | 
| |  |  |  |  | 

|Proceeds from capital injection       | 0       |  | 0    
|------------------------------------- | ------- |  | -----
|Repayment from long-term debt         | (1,143) |  | (338)
|Net cash used in financing activities | (1,143) |  | (338)

| |  |  |  |  | 
| |  |  |  |  | 

|Net change in cash and cash equivalents | (46,563) |  | (28,767)
|--------------------------------------- | -------- |  | --------

| |  |  |  |  | 
| |  |  |  |  | 

|Cash and cash equivalents, beginning of period | 71,343 |  | 64,523
|---------------------------------------------- | ------ |  | ------
|Cash and cash equivalent, end of period        | 24,780 |  | 35,756

See the accompanying notes to the unaudited consolidated financial statements

6



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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





NATURE OF OPERATIONS



1.

Digital Network Alliance International, Inc. (the Company) was incorporated on August 20, 1997 in the State of Delaware as Sheffield Products, Inc. On August 13, 2004 the Company acquired all of the outstanding stock of Digital Network Alliance Holdings (BVI) Inc., a British Virgin Islands Corporation (Digital BVI) in exchange for stock of the Company. On November 30, 2004 the Company changed its name to Digital Network Alliance International, Inc. The consolidated results of operations are primarily those of Digital BVI and its consolidated subsidiaries.



The principal activities of the consolidated company are that of provision of voice termination, satellite and broadband internet services throughout the Asia Pacific region, including Hong Kong, Singapore, Indonesia, Bangladesh, Pakistan and Mongolia.



2.

BASIS OF PRESENTATION



The accompanying consolidated financial statements include those of the Company and its wholly owned subsidiaries; Digital BVI, Digital Network Alliance (S) Pte Ltd (Digital S), and Digital Network Alliance (HK) Limited (Digital HK). Digital BVI incorporated in British Virgin Islands on June 4, 2004, Digital S incorporated in the Republic of Singapore on October 19, 2001, and Digital HK incorporated in Hong Kong on November 12, 2001. The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) and have been retroactively restated to give effect to the recapitalization due to a reverse merger consummated on August 13, 2004. This basis differs from that used in the statutory accounts of the Company, which were prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in Singapore and Hong Kong. All necessary intercompany transactions and balances have been eliminated in consolidation, and all necessary adjustments have been made to present the consolidated financial statements in accordance with US GAAP.



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Quarterly Financial Statements



The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-QSB but do not include all of the information and footnotes required by generally accepted accounting principles and should, therefore, be read in conjunction with the Company’s 2004 financial statements in Form 10-KSB.  These statements do include all normal recurring adjustments which the Company believes necessary for a fair presentation of the statements.  The interim operating results are not necessarily indicative of the results for a full year.

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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Economic and Political Risks



The Company faces a number of risks and challenges as a result of having primary operations and markets in the PRC. Changing political climates in the PRC could have a significant effect on the Company’s business.



The Company faces a number of risks and challenges as a result of having operations within several markets in the Asia Pacific region, e.g., Indonesia, Bangladesh and Pakistan.  The changing political climates in these markets could have a significant effect on the Company’s business.

Cash and Cash Equivalents



For purposes of the statements of cash flows, cash and cash equivalents includes cash on hand and demand deposits held by banks. None of the Company’s deposits are insured by the Federal Deposit Insurance Corporation or any other entity of the U.S. government.

Trade Accounts Receivable



Trade accounts receivable are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful accounts is made when

collection of the full amount becomes questionable. No receivables have been deemed to be uncollectible as of March 31, 2005.



Prepaid Expenses



Prepaid expenses consist primarily of prepayments made to contractors for circuits and services not yet received by the Company.

Plant and Equipment



Property, plant and equipment is carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the useful lives of the assets. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred.  Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.  Depreciation related to property and equipment used in production is reported in cost of sales.  Property and equipment are depreciated over their estimated useful lives as follows:



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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Computer equipment

2 years

Office equipment

4 years

Network equipment

3 years



Long-term assets of the Company are reviewed annually to assess whether the carrying value has become impaired, according to the guidelines established in Statement of Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The Company also evaluates the periods of depreciation to determine whether subsequent events and circumstances warrant revised estimates of useful lives. No impairment of assets was recorded in the periods reported.



Deposits



The Company commonly receives payments of deposit in advance for circuits and voice termination services to be provided to customers. Those deposits are recognized into income in accordance with the Company’s revenue recognition policy, as stated below.

Revenue Recognition



Revenue from provision of voice termination, satellite and broadband internet services is recognized as earned when the following four criteria are met: (1) pervasive evidence of an arrangement exists; (2) delivery has occurred or the services have been rendered; (3) the seller's price to the buyer is fixed or determinable; and (4) collectibility is reasonably assured.

Advertising Expenses



Advertising costs will be expensed when and if incurred. The Company has incurred no advertising expenses to date.



Retirement Benefits



The Company has a defined contribution benefit plan. The Company’s contributions are discretionary. For the period ended March 31, 2005, the contribution made by Digital Network Alliance amounted to$692.

Foreign Currency and Comprehensive Income



The accompanying consolidated financial statements are presented in United States (US) dollars. The functional currency is the Singapore dollar (S$) and Hong Kong dollar (HK$).

9



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DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





3.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The consolidated financial statements are translated into US dollars from S$ and HK$ at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

Taxes



Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

Estimates



The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.



Loss Per Share



Basic loss per common share ("LPS") is calculated by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted earnings per common share are calculated by adjusting the weighted average outstanding shares, assuming conversion of all potentially dilutive securities, such as stock options and warrants.



The Company had no potentially dilutive securities outstanding at March 31, 2005.



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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS



Certain statements in this report, including statements in the following discussion, which are not statements of historical fact, are what are known as forward-looking statements, which are basically statements about the future.  For that reason, these statements involve risk and uncertainty since no one can accurately predict the future.  Words such as plans, intends, will, hopes, seeks, anticipates, expects, and the like, often identify such forward-looking statements, but are not the only indication that a statement is a forward-looking statement.  Such forward-looking statements include statements concerning our plans and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present and future operations will or may produce revenues, income or profits.  Numerous factors and future events could cause the Company to change such plans and objectives, or fail to successfully implement such plans or achieve such objectives, or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the reader is advised that the following discussion should be considered in light of the discussion of risks and other factors contained in this report on Form 10-QSB and in the Company’s other filings with the Securities and Exchange Commission.  No statements contained in the following discussion should be construed as a guarantee or assurance of future performance or future results.



OVERVIEW



Our overall objective is to build a comprehensive telecommunications network which delivers cost-effective services to our customers within the Asia Pacific region, and beyond.  This is a long-term objective, involving many elements, and there is no assurance that it can be achieved.  Our ability to do so will be dependent upon a number of factors including, but not limited to, our ability to achieve and maintain strategic partnerships and alliances with various local partners and suppliers, our ability to achieve and maintain consistently profitable operations and the availability of necessary working capital.



Our plan of operations for 2005 includes maintenance of our existing operations, and to the extent possible, expansion and improvement of our existing operations as well as commencement of new operations.  The extent to which we will be able to expand and improve existing operations and commence new operations will be dependent to a large extent on the availability of working capital either from our pending stock offering, or from other sources.  Since there is no assurance that the offering will be successful, or that working capital will be available to us from other sources, there is also no assurance regarding the extent to which we will be able to expand our current operations or commence new operations.



The Company does not directly carry on any business activities.  Instead, all operations are carried on through its operating subsidiaries Digital Network Alliance (S) Pte., Ltd. (Digital Singapore) and Digital Network Alliance (HK) Ltd. (Digital Hong Kong), which are incorporated in Singapore and Hong Kong respectively.  These operating subsidiaries were incorporated on November 12, 2001 and October 19, 2001, respectively, and each of them commenced operations in January 2002.



Through its operating subsidiaries, the Company is engaged in the business of providing satellite internet connections to customers in the Asia Pacific region, including Hong Kong, Singapore, Indonesia, Bangladesh, Pakistan and Mongolia, and the business of providing managed broadband services to commercial office buildings and apartment buildings in Singapore and Hong Kong.



The following discussion concerning the results of operation, liquidity and capital resources of Digital Network Alliance International, Inc. (the Company), is based solely upon the business operations that are carried on by the Company’s operating subsidiaries for the three-month interim periods ended March 31, 2005 and 2004.



RESULTS OF OPERATIONS



Net sales for the three months ended March 31, 2005 were $1,104,454, as compared to $322,408 for the three months ended March 31, 2004.   The increase of $782,046, or approximately 243%, was primarily attributable to the fact that we received substantial revenues in 2005 from new services which were not offered in 2004. One of the new services is voice termination services in Hong Kong, from which we received revenues of approximately $35,095 during the three months ended March 31, 2005.  We first began providing voice termination services during the fourth quarter of 2004, and we added a substantial number of new customers during the first quarter of 2005.   The other new service from which substantial revenues were generated during the first quarter of 2005 is new managed network services in Indonesia.  These managed network services include managed broadband services and network build out and system integration which were provided to new customers in Jakarta, Indonesia. The new customers in Indonesia are a result of the increase in demand for managed network and cellular services within Jakarta and the neighboring cities.  With the general improvement of the economy and the influx of foreign investment and multi-nationals, the demand for such services is growing significantly.



Cost of goods sold for the three months ended March 31, 2005 was $896,546 compared to $302,688 for the same period of 2004.  The increase of $593,858 or 196% was the result of initial set up costs for the new voice termination business in Hong Kong and initial set up costs for the managed network services in Indonesia, which included building base stations in Jakarta. Although our cost of goods sold increased substantially during the first quarter of 2005 as compared to the same period of 2004, we believe that our investment in equipment needed to provide new services will continue to result in increased revenues in future periods.   The 243% increase in revenues for the period substantially exceeded the 196% increase in cost of good sold.  As a result, gross margin increased by 19% for the first quarter of 2005 as compared to the first quarter of 2004, and gross profit increased significantly from $19,720 for the three months ended March 31, 2004, to $207,908 for the three months ended March 31, 2005.  The increase in gross margin reflects thewell-controlled costs of the satellite business and the substantial profit margin of the new managed broadband business in the Asia Pacific market.



General and administrative expenses for the period ended March 31, 2005 totaled $141,401 compared to $77,443 for the same period ended 2004. The increase of $63,958 or 83% was primarily attributable to increased expenses in three categories, including professional costs for the reverse takeover and expenses related to compliance with public company reporting obligations, an increase in personnel costs as a result of hiring additional staff, and increased travel expenses for members of management as a result of frequent business trips for the exploration and expansion of our new business.

Net profit before tax for the period ended March 31, 2005 was $67,229 as compared to a net loss of  $(56,189) for the period ended March 31, 2004.  Our ability to generate a profit for the period was primarily the result of the expansion of our business to provide new services in various markets in the Asia Pacific region and of our efforts to control the cost of satellite services.  The first quarter of 2005 was the first profitable period of Company operations, and there is no assurance that we will be able to continue to operate profitably in future periods



LIQUIDITY AND CAPITAL RESOURCES



For the period ended March 31, 2005, the Company’s balance sheet reflects current assets of $1,028,193 and total current liabilities of $865,542, as compared to current assets of $467,589 and current liabilities of $373,515 as of December 31, 2004.  These changes reflect a slight decrease in our liquidity ratio from 1.3 as of December 31, 2004 to 1.2 as of March 31, 2005.



As a result of the rapid expansion of our business during the first quarter of 2005, both our trade accounts receivable and our trade accounts payable increased substantially during the period.   Our trade accounts receivable increased from $154,234 as of December 31, 2004, to $927,918 as of March 31, 2005, an increase of $773,684, or approximately 501%, while our trade accounts payable increased from $236,292 as of December 31, 2004 to $758,527 as of March 31, 2005, an increase of $522,235, or approximately 221%.



We intend to rely on timely collection of our trade accounts receivable and on prepayment deposits and monthly service fees from our customers as our primary source of cash.  Our primary use of cash will be payment of our trade accounts payable and maintenance of our current operations.  However, to the extent our cash flow from operations is sufficient to do so, we intend to use it to continue to gradually expand our current operations.

11



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ITEM 3.

CONTROLS AND PROCEDURES



As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC reports.  It should be noted that design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.



In addition, there has been no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REPORT REFLECT MANAGEMENT’S BEST JUDGMENT BASED UPON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS AND UNCERTAINTIES.  ACTUAL RESULTS MAY VARY MATERIALLY.





PART II - OTHER INFORMATION





ITEM 1.

LEGAL PROCEEDINGS



None.



ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUNREGISTERED SALES OF EQUITY SECURPROCEEDS



None.



ITEM 3.

DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



None.



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ITEM 6.

EXHIBITS



(a)

The following exhibits are filed herewith:



3.1

Articles of Incorporation (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on September 12, 2002).



3.2

Bylaws (herein incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on September 12,2002).



31.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



31.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



32.1

Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.



32.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



13



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SIGNATURES



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



DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.





By: /s/ Terence Yap Wing Khai, President, CEO and a director



May 13, 2005





By: /s/ Edward Chan Chi Fai, COO and a director



May 13, 2005





By: /s/ Eppie Wong Yuk Ping, CFO and a director



May 13, 2005





By: /s/ Michael Yap Chee Keong, a director



May 13, 2005

14