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, 2007  ___ 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)  Delaware0-5000252-2175896(State or other jurisdiction of incorporation)(Commission File Number)(IRS Employer Identification No.)1301, Jubilee Centre,
18 Fenwick Street, 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....  Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No .X  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, 2007, the following shares were outstanding: 11,100,000.  Transitional Small Business Disclosure Format (Check one):  Yes...     No X    - 1 -    PART 1 - FINANCIAL INFORMATION  ITEM 1.  FINANCIAL STATEMENTS AND EXHIBITS  (a) The unaudited financial statements of registrant for the three months ended March 31, 2007, 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.         DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.     UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS     FOR THE THREE MONTHS ENDED MARCH 31, 2007                 - 2 -        CONTENTS       PAGESConsolidated balance sheets4Consolidated statements of operations5Consolidated statements of cash flows6Notes to unaudited consolidated financial statements7                - 3 -      DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.CONSOLIDATED BALANCE SHEETS31-Mar-0731-Dec-06(Unaudited)AuditedUSDUSDASSETSCurrent assetsCash and cash equivalents$                55,858$                90,264Trade accounts receivable46,03964,148Prepaid expenses and other assets36,02339,566Total current assets137,920193,978Plant and equipment, net52,81164,412Total assets$              190,731$              258,390LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilitiesTrade accounts payable$              436,810$             461,273Accrued expenses13,91451,791Payable to a stockholder285,100285,100Deposits41,87350,704Total current liabilities777,697848,868Stockholders' deficitCommon stock - Par value $.001; authorized 200,000,000shares authorized, 11,100,000 sharesissued and outstanding11,10011,100Additional paid in capital2,282,1402,282,140Retained deficit(2,888,451)(2,889,578)Accumulated other comprehensive income8,2455,860Total stockholders' deficit(586,966)(590,478)Total liabilities and stockholders' deficit$              190,731$              258,390   See the accompanying notes to the unaudited consolidated financial statements        - 4 -    DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC.CONSOLIDATED STATEMENTS OF OPERATIONSThree months ended March 31,20072006(Unaudited)(Unaudited)USDUSDSales revenues$                       175,053$                 284,808Cost of goods sold93,379236,394Gross profit81,67448,414General and administrative expenses141,37785,996Net operating loss(59,703)(37,582)Other incomeInterest expense-(121)Other8721,308Total other income8721,187Net loss before income tax and discontinued operation(58,831)(36,395)Taxes--Net loss before discontinued operation(58,831)(36,395)Income (loss) from discontinued operation2,086(3,615)Gain on sale of discontinued subsidiary57,872-Net profit (loss)$                        1,127$                        (40,010)Foreign currency translation adjustment2,385(79)Comprehensive income (loss)$                       3,512$                       (40,089)Net profit (loss) per common share$                    0.00010$                     (0.00360)Weighted average common shares outstanding11,100,00011,100,000  See the accompanying notes to the unaudited consolidated financial statements    - 5 -      DIGITAL NETWORK ALLIANCE INTERNATIONAL. INC.CONSOLIDATED STATEMENTS OF CASH FLOWSThree months ended March 31,20062005(Unaudited)(Unaudited)USDUSDOperating activities:Net profit(loss)$                   1,127$                   (40,010)Adjustments to reconcile net profit (loss) to net cash usedin operating activities:Depreciation, depletion and amortization7,5656,514Gain on disposal of interest in subsidiaries(57,872)-Impairment loss on bad and doubtful debts46,601-Change in operating assets and liabilitiesTrade accounts receivable16,40126,336Prepaid expenses and other assets33817,111Trade accounts payable(11,825)(2,148)Accrued expenses(36,595)(17,305)Deposits(2,774)(9,061)Deferred revenue0(6,250)Net cash used in operating activities(37,034)(24,813)Investing activities:Disposal of subsidiaries2430Net cash provided by investing activities2430Financing activities:Repayment from long-term debt0(1,143)Net cash used in financing activities0(1,143)Effect of rate changes on cash2,385(79)Net change in cash and cash equivalents(34,406)(26,035)Cash and cash equivalents, beginning of period90,26450,738Cash and cash equivalent, end of period$                      55,858$                      24,703Cash paid for interest$                               0$                           121Cash paid for income taxes$                               0$                               0  See the accompanying notes to the unaudited consolidated financial statements    - 6 -    DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  1. NATURE OF OPERATIONS  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 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), as well as its 70% owned subsidiary DNA Financial Systems Inc. BVI (Financial BVI). The accounts of Financial BVI include its 100% owned subsidiary DNA Financial Systems (HK), Limited (Financial HK). Digital BVI incorporated in British Virgin Islands on June 4, 2005, Digital S incorporated in the Republic of Singapore on October 19, 2001, and Digital HK incorporated in Hong Kong on November 12, 2001. Financial BVI incorporated in British Virgin Islands on March 15, 2005 for the purpose of holding Financial HK, which incorporated in Hong Kong on April 1, 2005.  The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). 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.  The consolidated statements of operations have been adjusted to reflect the discontinuation of operations performed by our subsidiary, Financial BVI.  Financial BVI was sold on March 2, 2007.  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 2006 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.   - 7 -     DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC. NOTES TO UNAUDITED 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.  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. At December 31, 2006, and at March 31, 2007 the allowance for doubtful accounts totaled $0.  Prepaid Expenses  Prepaid expenses consist primarily of prepayments made to contractors for circuits and services not yet received by the Company.  Plant and Equipment  Plant and equipment are 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:  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.  - 8 -     DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)  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 customers are invoiced for monthly services they have received in accordance with the service contracts. At that time the Company considers the earnings process to be complete and collectibility to be 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, 2007, the contribution made by Digital Network Alliance amounted to $2,093.  Foreign Currency and Comprehensive Income  The accompanying consolidated financial statements are presented in United States (US) dollars. The functional currency is the Singapore dollar (S$) and Hong Kong dollar (HK$). The consolidated financial statements are translated into US dollars from S$ 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.   - 9 -   DIGITAL NETWORK ALLIANCE INTERNATIONAL, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)  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, 2007.  4. DISPOSAL OF SUBSIDIARY  During the period, the Group disposed of its entire interests in DNA Financial Systems Inc. The net liabilities of the subsidiaries at the date of disposal were as follows:  USDNet assets disposed of:Fixed assets4,029Cash and bank balance12,578Accounts receivable1,708Deposits and prepayment3,205Due to Fellow Subsidiary(46,594)Accounts payable(12,638)Accruals(1,282)Deposit received(6,057)(45,051)Gain on disposal of interest in subsidiaries57,872Consideration12,821Satisfied by:Cash consideration received12,821Net cash inflow arising on disposal:Cash received12,821Cash and bank balance disposed of(12,578)243  The subsidiaries disposed of during the year did not make any significant contribution to the results and cash flows of the Group during the period prior to the disposals.   - 10 -    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,  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. We caution you not to place undue reliance on these forward-looking statements.  Although we base these forward-looking statements on our expectations, assumptions, and projections about future events, actual events and results may differ materially, and our expectations, assumptions, and projections may prove to be inaccurate. The forward-looking statements speak only as of the date hereof, and we expressly disclaim any obligation to publicly release the results of any revisions to these forward-looking statements to reflect events or circumstances after the date of this filing.  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 2007 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 public 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 implement our plan of operations within the foreseeable future.  The Company may pursue acquisitions of other companies or technologies.  However, the Company has not currently entered into any negotiations or agreements to acquire any business.   - 11 -   The Company does not directly carry on any business activities.  All of our business operations are carried on through our operating subsidiaries.  The operating subsidiaries are Digital Network Alliance (S) Pte Ltd., a Singapore corporation (DNA Singapore) and Digital Network Alliance (HK) Ltd., a Hong Kong corporation (DNA Hong Kong), DNA Singapore and DNA Hong Kong perform identical business activities of providing satellite Internet connections to customers in the Asia Pacific Region, and providing managed broadband services to commercial office buildings and apartment buildings in Hong Kong and Singapore. DNA Singapore manages business activities in Singapore and Indonesia.  DNA Hong Kong conducts and manages the business activities in Hong Kong and Mongolia.  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, 2007 and 2006.  On April 1, 2005, the Company formed DNA Financial Systems (HK) Ltd., a Hong Kong corporation (DNA Financial), as a third operating subsidiary.  On March 2, 2007, DNA Financial was sold to Mr. Choi Ying Ming, the CEO of DNA Financial, for a price of HKD100,000, or approximately $12,820.51.  The reason for the disposal is that this subsidiary is not generating a profit and the profit margin is low.  It is not a profitable endeavor for the Company.  RESULTS OF OPERATIONS  Net sales for the three months ended March 31, 2007 and March 31, 2006 were $175,053 and $284,808 respectively.  This decrease of $109,755 or approximately 39% was because we have scaled down our satellite service income as there was severe pricing competition and customers are looking for alternate solution, such as fibre network. Satellite service income and voice termination income have dropped by $91,506 and $19,937 respectively.  The decrease was offset by the increase in sales of network equipment by $1,688.  Cost of goods sold for the three months ended March 31, 2007 was $93,379 compared to $236,394 in the same period of 2006. The decrease of $143,015 or 60% was due to the well controlled costs of broadband and bandwidth.  Broadband and bandwidth costs have dropped by $6,567 and $114,346 respectively, and voice termination cost and network equipment have also dropped by $12,105 and $9,997 respectively.  Gross profit increased by $33,260 to $81,674 from $48,414 for the three months ended March 31, 2007 and March 31, 2006 respectively.   The gross margin percentage has shown an increase of 69% from March 31, 2006 to March 31, 2007.  The increase in gross margin reflects the well-controlled cost in satellite business and the increased profit margin in the broadband business in Hong Kong.  General and administration expenses for the period ended March 31, 2007 totaled $141,377 compared to $85,996 in the same period ended 2006.  The increase of $55,381, or 64%, was primarily due to the increase in bad debts by $30,086, professional fee by $10,014, rental by $5,926, depreciation by $1,051 and salaries by $8,304.   - 12 -   Net profit (loss) before tax for the periods ended March 31, 2007 and March 31, 2006 were 1,127 and  $(40,010) respectively.  The increase of $41,137 or 103% was mainly due to the gain from disposal of our subsidiary, DNA Financial.  LIQUIDITY AND CAPITAL RESOURCES  For the three months ended March 31, 2007, the Company balance sheet reflects current assets of $137,920, total assets of $190,731, total current liabilities of $777,697 and shareholders deficit of $(586,966).  As of December 31, 2006, the Companys balance sheet reflects current assets of $193,978, total assets of $258,390, total current liabilities of $848,868 and shareholders deficit of $(590,478).  The slightly decrease in liquidity from 0.23 to 0.18 was the result of the decrease in both cash and trade accounts receivables.  We will continue to rely upon prepayment deposits and monthly service fees from our customers as the primary source of cash.  Although there is no guarantee, we anticipate that our current cash and cash equivalents will be sufficient to fund our operations for at least 12 months.  However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary.  ITEM 3. CONTROLS AND PROCEDURES  The Securities and Exchange Commission defines the term disclosure controls and procedures to mean a company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SECs rules and forms.  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 principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and principal accounting officer concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving the objective of timely alerting them to material information required to be included in our periodic SEC reports.  Our chief executive office and principal accounting officer also concluded that our disclosure controls and procedures were effective as of March 31, 2007 to provide reasonable assurance of the achievement of these objectives.  There was no change in the Company's internal control over financial reporting during the quarter ended March 31, 2007, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.    - 13 -    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.  ITEM  5. OTHER INFORMATION  None.  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 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.  32.1 Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 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.   - 14 -    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.  /s/ Chan Chi Fai, President and Chief Operations Officer  Date: May 21, 2007  s/ Eppie Wong, Chief Financial Officer and Director  Date: May 21, 2007   /s/ Terence Yap, Director  Date: May 21, 2007   /s/ Michael Yap, Director  Date: May 21, 2007   /s/ Leslie Ter Chiew Kim  Date: May 21, 2007       - 15 -