**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-KSB**
 (Mark
        One)
 [ **X** ]  ANNUAL
        REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF
        THE
        SECURITIES EXCHANGE ACT OF 1934 FOR
        THE
        FISCAL YEAR ENDED JANUARY 31, 2005
 OR
 [
        ]  TRANSITION
        REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF
        THE
        SECURITIES EXCHANGE ACT OF 1934
 
 
 Commission
        File number: 000-26952
 
 **ENTRADA
        NETWORKS, INC.**
 (Exact
        name of Registrant as specified in charter)
 
 
 **Delaware**
              **33-0676350**(State
                  or other jurisdiction of incorporation or organization)
              (IRS
                  Employer Identification Number)**5755
                  Oberlin Dr., Suite 204****San
                  Diego, California**
              **92121**(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 **(858)
        597-1102**
 (Registrant's  telephone
        number, including area code)
 **12
        Morgan, Irvine, California 92618**
 (Former
        address, if changed since last report)
 
 Securities
        registered pursuant to Section 12(b) of the Act: None
 
 Securities
        registered pursuant to Section 12(g) of the Act:
 
 **Common
                  Stock, Par Value $0.001**
              **OTCBB**Title
                  of each class
              Name
                  of exchange on which registered
 
 Check
        whether the Issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Securities Exchange Act of 1934 during the preceding 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
 
 Indicate
        by check mark if disclosure of delinquent filers pursuant to Item 405 of
        Regulation S is not contained herein, and will not be contained, to the best
        of
        Registrant's knowledge, in a definitive proxy or information statements
        incorporated by reference in Part III of this Form 10-K or any amendment
        to this
        Form 10-K.
  The
        issuer's revenues for the latest fiscal year were $4,124,419.
 
 The
        aggregate market value of voting stock based upon the closing sale price
        held by
        non-affiliates of the Registrant on June 2, 2005 was $715,586.
 
 Number
        of
        shares outstanding of the Registrant's only class of common stock as of June
        2,
        2005 (the latest practicable date): 16,805,076
 
 **DOCUMENTS
        INCORPORATED BY REFERENCE** :
 None.
 
   
   **TABLE
        OF CONTENTS**
 **ITEM
                  1DESCRIPTION
                  OF BUSINESS**
              **5****GENERAL**
              **5****OUR STRATEGIC PLAN**
              **6****MARKETS FOR OUR PRODUCTS**
              **6****STORAGE AREA NETWORKING MARKET**
              **6****SALES AND MARKETING**
              **7****CUSTOMERS AND MARKETS**
              **7****CUSTOMER SERVICE AND SUPPORT**
              **7****MANUFACTURING AND QUALITY**
              **8****GENERAL AND ADMINISTRATION**
              **8****WORKING CAPITAL PRACTICES**
              **9****RISK FACTORS**
              **10****ITEM
                  2.PROPERTIES**
              **18****ITEM
                  3.LEGAL
                  PROCEEDINGS**
              **18****ITEM
                  4.SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS**
              **18****ELECTION OF DIRECTORS**
              **18****RATIFICATION OF APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT
                  AUDITOR FOR
                  2005 FISCAL YEAR**
              **18****NON APPROVAL OF AMENDDED AND RESTATED 2000 STOCK INCENTIV
                PLAN**
              **19****APPROVAL OF AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF
                INCORPORATION**
              **19****ITEM
                  5.MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**
              **20****ITEM
                  6.MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS**
              **23****OVERVIEW**
              **23****RESULTS OF OPERATIONS: COMPARISON OF THE YEARS ENDED JANUARY 31,
                  2005 AND
                  JANUARY 31, 2004**
              **24****RESULTS
                OF OPERATIONS: COMPARISON OF THE YEARS ENDED JANUARY 31,
                2004 AND JANUARY 31, 2003**
              **26****LIQUIDITY AND CAPITAL RESOURCES**
              **28****EFFECTS OF INFLATION AND CURRENCY EXCHANGE RATES**
              **32****NEW ACCOUNTING STANDARDS**
              **33****CRITICAL ACCOUNTING POLICIES AND ESTIMATES**
              **33****ITEM
                  7.FINANCIAL
                  STATEMENTS**
              **34****INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**
              **34****REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
                  FIRM**
              **F-1****CONSOLIDATED BALANCE SHEETS AS OF JANUARY 31, 2005 AND
                  2004**
              **F-2****CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JANUARY
                  31, 2005
                  AND 2004**
              **F-3****CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
                  JANUARY 31, 2005 AND 2004**
              **F-4****CONSOLIDATED STATEMENTS OF CASH FLOWS FOR YEARS ENDED JANUARY 31,
                  2005 AND
                  2004**
              **F-5****NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**
              **F- 6
                  TO F-20****ITEM
                  8.CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE**
              **56****ITEM
                  8A.CONTROLS
                  AND PROCEDURES**
              **56****ITEM
                  9.DIRECTORS
                  AND EXECUTIVE OFFICERS OF THE REGISTRANT**
              **58****ITEM
                  10.EXECUTIVE
                  COMPENSATION**
              **61****ITEM
                  11.SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT**
              **65****ITEM
                  12.CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS**
              **66****ITEM
                  13.EXHIBITS**
              **69****ITEM
                  14PRINCIPAL
                  ACCOUNT FEES AND SERVICES**
              **73****SIGNATURES**
              75
 
  
   2
   **PART
        I**
 
 This
        Annual
        Report on Form 10-KSB may contain forward-looking statements that involve
        risks
        and uncertainties. Such statements include, but are not limited to, statements
        containing the words "believes, "anticipates," "expects," "estimates" and
        words
        of similar import. The Company's actual results could differ materially from
        any
        forward-looking statements, which reflect management's opinions only as of
        the
        date of this report, as a result of such risks and uncertainties. The Company
        undertakes no obligation to revise or publicly release the results of any
        revisions to these forward-looking statements. Readers should carefully review
        the risk factors set forth below in "Risk Factors" and in other documents
        the
        Company files from time to time with the Securities and Exchange Commission,
        including its quarterly reports on Form 10-QSB.
 
 **Item
        1**  **Description
        of Business**
 
  **General**
 
 Entrada
        Networks, Inc., with 30 employees and consultants through its three wholly
        owned
        subsidiaries, is in the business of developing, marketing and selling products
        for the network connectivity industry. The business was formed in California
        in
        1989 and reincorporated in Delaware in 1995 when it went public. At no time
        has
        the Company had any bankruptcy, receivership or similar
        proceedings.
 
 Torrey
        Pines Networks, our wholly owned subsidiary, acquired all of the outstanding
        stock of Microtek Systems, Inc. on May 14, 2004. Microtek Systems is a provider
        of security, digital imaging, information infrastructures and storage solutions.
        Microtek Systems extends our core competencies in network and storage
        connectivity into solutions and applications specific to verticals, notably
        insurance, healthcare and financial sectors.
 
 During
        the last three years we have been increasingly focused on our Torrey Pines
        Networks product development in the Storage Area Network (hereafter to be
        called
        SAN) and Metropolitan Area Network (hereafter called MAN) transport products
        marketplace.
 
 Our
        transport product line, named SilverlineTM, is designed to interconnect
        geographically separate data centers, post production facilities of film
        studios, or aggregate different types of data or video traffic of university
        campuses or fiber to home of cable operators or companies with significant
        price/feature advantage. Over just one strand of dark fiber in a metropolitan
        area and up to over 100 km, our products provide 4:1 bi-directional capacity
        increase at wire speed and at a significantly lower price. This product line
        has
        been certified and evaluated by a number of major original equipment vendors
        and
        potential customers. We have also received regulatory & industry
        certifications for our first SilverlineTM coarse wave division multiplexing
        product line, and are in the process of introducing it into the market.
 
 Coarse
        Wave Division Multiplexing, or CWDM, is a sophisticated optoelectronics
        technology that uses multiple wavelengths of light very efficiently to greatly
        increase the number of video, data or voice channels of information that
        can be
        sent on a single optical fiber in a transmission system. SilverlineTM CWDM is our
        first fully optical Linux based 8-channel/4-port CWDM product line that is
        based
        on our patent-pending technology. It is a multi-protocol aggregation device
        that
        supports Fibre Channel, Gigabit Ethernet, fibre connectivity or enterprise
        system connection to a mainframe and Synchronous
        Optical Network ( SONET),
        on one fully customized system. SONET is a transmission protocol for high-speed
        transmission over fiber optic cable, which was introduced by Bell Communications
        in 1984 and quickly accepted by American National Standards Institute. The
        parts
        for these products are readily available and our technology is protected
        by a
        pending patent and our trademarks. While in an overall competitive market,
        we
        are unique with our specific products that include customized features and
        price
        point.
 
 Our
        Rixon
        Networks ("Rixon") subsidiary designs,
        manufactures, markets and sells a line of fast and gigabit Ethernet products
        that are incorporated into the remote access and other server products of
        Original Equipment Manufacturers ("OEM"). In addition, some of its products
        are
        deployed by telecommunications network operators, applications service
        providers, internet service providers, and the operators of corporate local
        area
        and wide area networks for the purpose of providing access to and transport
        within their networks.
 
 3
 Our
        Sync
        Research ("Sync") subsidiary designs,
        manufactures, markets, sells and services frame relay products for some of
        the
        major financial institutions in the U.S. and abroad. Emphasis on this profitable
        operation has been on servicing our legacy frame relay product. While the
        revenue is slowly declining, we anticipate profitability in Sync for the
        foreseeable future.
  Sync
        sells to resellers, distributors, original equipment manufacturers partners
        and
        a number of regional Bell Operating Companies and Inter-exchange Carriers.
        Current customers include AT&T, IntegraSys and Geico among others. Sync
        believes that its relationships provide sufficient alternative channels of
        fulfillment to serve the needs of middle and upper market customers. Also,
        Sync
        utilizes a distribution and value-added reseller channel as a primary
        distribution channels for its digital transmission products.
 
  **Our
        Strategic Plan**
  During
        the
        last three years, we have increasingly focused on the efforts of Torrey Pines
        to
        develop transport products for the storage area network and metropolitan
        network
        marketplace. During fiscal 2005 we reevaluated and refocused our strategy
        as
        follows:
 
 Exploring
                      acquisition opportunities that fit into our existing technologies
                      with
                      emphasis on the storage area network and metropolitan area
                      network
                      markets.Commercializing
                      Torrey Pines' optical Silverline transport product line for
                      the storage
                      area network and metropolitan area network
                      markets.Bringing
                      our Rixon operation back to profitability through increased
                      sales
                      efforts and reduced overhead.Maintaining
                      superior service and support for Sync legacy products to sustain
                      our
                      continuing Sync
                      profitability.
 
  **Markets
        for Our Products**
 
 Our
        products address the growing connectivity needs for networked high bandwidth
        data communications. The networking industry has experienced dramatic growth
        since the early 1990's as corporations discovered increasing value in connecting
        desktop devices through local area networks. The emergence of the Internet
        as a
        cost-efficient data transport medium accelerated this movement and moved
        the
        revenue opportunity beyond the Local Area Network (LAN) to Metropolitan Area
        Network (MAN) and Wide Area Network (WAN) environments. Our products address
        the
        demand for connectivity solutions in the traditional data networking markets
        plus the emerging markets for storage area networking. There can be no assurance
        that the prospects for growth for the traditional data networking markets
        or of
        the storage area networking market will be realized.
 
  **Storage
        Area Networking Market**
 
 The
        technology behind storage area networks is similar to that of LANs and WANs.
        Storage area networks are essentially separate local area networks that consist
        of servers, storage devices (such as disc drives) and the networking equipment
        used to connect and route traffic among them. These devices include adapters,
        hubs, switches and routers supporting the Fibre Channel standard. Storage
        area
        networks create a shared storage resource that is readily available, highly
        scalable and designed to be easily protected and managed.
 
 4
 While
        storage area networks are not new, we believe that trends already under way
        will
        move them into the mainstream of distributed networking and that they may
        likely
        become the standard way of accessing stored information.
 
  **Sales
        and Marketing**
 
 Our
        sales
        and marketing organization for our three subsidiaries at January 31, 2005
        consisted of nine (9) individuals, including managers, sales representatives,
        and support personnel. We support our customers by providing product training,
        regular mailing of promotional and technical material, telephone and other
        technical support.
 
 Rixon's
        current sales and marketing activities are concentrated on increasing market
        and
        account penetration for the existing fast and gigabit Ethernet network
        connectivity product lines whose customers are primarily OEM server, computer
        and peripheral vendors. The current channel mix for Rixon is approximately
        6.7%
        OEM, 20.3% indirect and 73.0% other
 
 Torrey
        Pines is concentrating on gaining customer acceptance of the Silverline-CWDM
        product line by large OEMs and signing up resellers.
 
 Sync's
        sales and marketing strategy focuses on maintaining relationships with end-user
        middle market enterprises through its existing customer base and promote
        Sync's
        products and drive demand for its products and services. The primary roles
        of
        Sync's sales efforts are (i) to assist end user customers in addressing complex
        network problems; (ii) to differentiate the features and capabilities of
        Sync's
        products from competitive offerings; and (iii) support its partners.
 
  **Customers
        and Markets**
 
 Rixon's
        customer and market strategy is focused on communicating key benefits of
        our
        server class fast & gigabit Ethernet adapter cards to our OEM customer base
        and the end-user market that the OEMs service.
 
 Torrey
        Pines' customer and market strategy is focused on communicating key benefits
        of
        SAN transport to both our OEM customer base and the end-user market that
        the
        OEM's service. Additionally, Torrey Pines is focused on security, digital
        imaging, storage and disaster recovery solutions to address the needs of
        customers primarily in the mid-west.
  Sync
        follows a customer and market strategy relying primarily on leveraging
        resellers, distributors, and a number of service providers as delivery channels
        for its products, including several partners serving the international market.
        Sync utilizes a distribution and value-added reseller channel as its primary
        distribution channel for the digital transmission products. Sync has from
        time
        to time entered into OEM relationships with selected internetworking companies
        and will continue to develop such relationships as appropriate.
  For
        fiscal 2005, no
        one customer accounted for more than 10% of our net revenues.  For
        fiscal 2004, Cisco accounted for 56.7% of our net revenues and Cisco accounted
        for 56.9% of our net revenue for the year ended January 31, 2003
   5
 **Customer
        Service and Support**
 
 Our
        customer service organization is structured to assist OEM and system integrator
        accounts. Post-sales support for all of our customers include, product warranty
        against defects in material and workmanship. The length of product warranties
        varies by product, from 12 months in some instances, to 60 months for a broad
        range of products, and previously, lifetime warranties for certain legacy
        products. Telephone technical support programs for hardware and software
        generally cover the first 12 months from purchase. On-site support and shared
        support agreements are designed to provide a high level of service to fulfill
        a
        broad spectrum of customer needs. As of January 31, 2005, there were seven
        (7)
        employees working in customer service and support.
 
 **Engineering,
        Research and Development**
 
 As
        of
        January 31, 2005, there were five (5) employees working in our engineering,
        research and development area. Our research and development expenditures
        were
        $0.9 million for the fiscal year ended January 31, 2005.
  Our
        efforts are targeted to achieve technological advances that will allow us
        to
        introduce innovative products to market. Product introduction is driven by
        a
        combination of rapidly evolving technology and standards, as well as changing
        customer requirements. Our team works closely with our systems engineering
        staff
        performing continuous evaluations of customer needs, emerging trends and
        technical challenges in order to identify new market opportunities while
        simultaneously focusing on our customers' strategic requirements.
 
  **Manufacturing
        and Quality**
 
 Our
        products are manufactured on an outsourced basis from various contract
        manufacturers. Final assembly, test and quality assurance are performed by
        us at
        our Lake Forest, California facility. These manufacturers provide us with
        access
        to enhanced supply chain agreements, volume purchasing power, a lower cost
        labor
        base, and improved quality and process control. We concurrently undertake
        manufacturing engineering with development engineering to ensure that reliable,
        high yield and low cost manufacturing processes that meet our customers'
        manufacturing standards are designed into our products from inception. We
        perform final integration and testing at our Lake Forest, California
        facility.
 
 We
        actively manage our components supply chain. Network connectivity and frame
        relay product assemblies consist of approximately 500 individual part types,
        and
        all of these parts have been qualified to current, purchasing customers'
        standards. For approximately 90% of these parts we have qualified second
        or
        third sources in place.
 
 We
        believe that our strategy of outsourcing the majority of our manufacturing
        activities to third party contract manufacturers enables us to react quickly
        to
        market demand and avoid the significant capital investment that would be
        required to establish and maintain full manufacturing facilities. We are
        therefore able to focus our manufacturing resources on final assembly, burn-in
        and final testing to ensure reliability and quality assurance for our products.
        We have a quality assurance program in place and continually evaluate this
        process to ensure quality practices throughout the organization and to monitor
        the performance of our third party vendors.
 
 As
        of
        January 31, 2005, there were three (3) employees working in our manufacturing,
        repair, test, shipping, receiving, purchasing, inventory control.
 
  **General
        and Administration** ****
 
 As
        of
        January 31, 2005, there were six (6) employees and contractors performing
        general and administration functions, including one (1) executive.
 
 6
  **Working
        Capital Practices**
 
 We
        have
        historically maintained high levels of inventories to meet the output
        requirements of our customers and to ensure an uninterrupted flow of inputs
        from
        our suppliers. As of January 31, 2005, we had $2.2 million of net inventory
        on
        hand.
 
 The
        inventory we carry allows us to have resources available to anticipate a
        market
        upswing. Many of our products require custom parts with longer than average
        lead
        times and our inventory levels support our ability to provide fast response
        to
        increased customer needs at the same time recognizing the need for conservative
        inventory valuations. During fiscal year 2004, $1.495 million in inventory
        was
        disposed of and written off against the valuation reserve. During fiscal
        year
        2005, $1.1 million in inventory was disposed of and written off against the
        valuation reserve.
 
 Inventory
        balances consist of the following (in thousands):
 
 ****
              ****
              **January
                  31****2005**
              
              
              **2004**Raw
                  material
              
              $
              1,994
              
              $
              3,002Work
                  in process
              
              
              45
              
              
              61Finished
                  goods
              
              
              2,483
              
              
              2,642Total Inventory
              
              
              4,522
              
              
              5,705Less:
                  Valuation reserve
              
              
              (2,368
              )
              
              (3,411
              )Net Inventory
              
              $
              2,154
              
              $
              2,294
 
 We
        perform ongoing credit evaluations of each of our customers' financial condition
        and we extend unsecured credit related on the sales of various products.
        Rorke
        Data accounted for 12.1% of our net receivables at January 31, 2005. For
        fiscal
        2004, IntegraSys accounted for 62.0% and Ingram Micro accounted for 14.0%
        of our
        net receivables at January 31, 2004. Our day's sales outstanding ("DSO")
        was at
        53 days at January 31, 2005 and 33 days at January 31, 2004.
 
 **Forward-Looking
        Statements'Cautionary Statement**
 
 *Certain
        statements in this document, including statements in the "Risk Factors,"
        "Our
        Business," and Management's "Discussion and Analysis of Financial Condition
        and
        Results of Operations" sections, are forward-looking statements within the
        meaning of Section 27A of the Securities Act of 1933, as amended, Section
        21E of
        the Securities Exchange Act of 1934, as amended, and the Private Securities
        Litigation Reform Act of 1995. These statements are not historical facts
        but
        rather reflect current expectations concerning future results and events.
        Words
        such as "believes," "expects," "intends," "plans," "anticipates," "likely,"
        "will" and similar expressions identify such forward-looking statements.
        These
        forward-looking statements are subject to risks, uncertainties and other
        factors, including those set forth in the "Risk Factors" section of this
        document, some of which are beyond our control that could cause actual results
        to differ materially from those forecast or anticipated in such forward-looking
        statements. These factors include, but are not limited to, the technical
        and
        commercial success of our current and future products, reliance on vendors
        and
        product lines, competition, performance of new products, performance of
        affiliates and their future operating results, our ability to establish
        successful strategic alliances, quarterly and seasonal fluctuations, dependence
        on senior management and possible volatility of stock price. These factors
        are
        discussed generally in greater detail under the caption "Risk Factors" in
        this
        document.*
 
 7
 *We
        wish to caution readers not to place undue reliance on any such forward-looking
        statements, which speak only as of the date made. Such statements are subject
        to
        certain risks and uncertainties that could cause actual results to differ
        materially from historical earnings and those presently anticipated or
        projected. These risks and uncertainties are described in the following section.
        We specifically decline any obligation to publicly release the result of
        any
        revisions that may be made to any forward-looking statements to reflect
        anticipated or unanticipated events or circumstances occurring after the
        date of
        such statements, or to update the reasons why actual results could differ
        from
        those projected in the forward-looking statements.*
 
  **Risk
        Factors**
 
 In
        connection with the safe harbor contained in the Private Securities Litigation
        Reform Act of 1995 we are hereby identifying important factors that could
        cause
        actual results to differ materially from those contained in any forward-looking
        statements made by us or on our behalf. Any such statement is qualified by
        reference to the following cautionary statements:
 
 **We
        may not be able to obtain additional funding on satisfactory terms.** We
        may be
        unable to obtain additional funding on satisfactory terms, which could interfere
        with our existing and planned operations, dilute our stockholders or impose
        burdensome financial restrictions on our business. Historically, we have
        relied
        upon cash from financing activities to fund most of the cash requirements
        of our
        operating and investing activities. Although we have been able to generate
        some
        but not sufficient cash from our operating activities in the recent past,
        there
        is no assurance we will be able to do so in the future.
 
 General
        economic conditions may cause declines in investor confidence in and
        accessibility to capital markets. Further, because our common stock is not
        listed on a national exchange, the ability of any potential or future investors
        to achieve liquidity from our common stock is limited, which could inhibit,
        if
        not preclude, our ability to raise additional working capital on a timely
        basis,
        in sufficient amounts or on terms acceptable to us.
 
 Any
        future financing may cause significant dilution to existing stockholders.
        Any
        debt financing or other financing of securities senior to our common stock
        would
        likely include financial and other covenants that will restrict our flexibility
        in the operation and management of our business. At a minimum, we expect
        these
        covenants to include restrictions on our ability to pay dividends on our
        common
        stock. Any failure to comply with these covenants would have a material adverse
        effect on our business, prospects, financial condition, results of operations
        and cash flows. In addition, we have paid, and will continue to be required
        to
        pay, interest on all amounts borrowed in debt financings, and the obligation
        to
        repay such interest could have a material adverse effect on our business,
        prospects, financial condition, results of operations and cash
        flow.
 
 If
        adequate funds are not available, we may also be required to delay, scale
        back
        or eliminate portions of our operations and product development efforts or
        to
        obtain funds through arrangements with strategic partners or others that
        may
        require us to relinquish rights to certain of our technologies or potential
        products or other assets. Accordingly, the inability to obtain this financing
        could result in a significant loss of ownership and/or control of our
        proprietary technology and other important assets and could also adversely
        affect our ability to fund our continued operations and our product development
        efforts that historically have contributed significantly to our competitiveness.
 
 **We
        have limited working capital.** Our
        working capital is limited and we are constantly challenged in executing
        our
        business plan. Additionally, our working capital does not allow us to fund
        significant organic growth opportunities or to cope with unforeseen
        contingencies. Unless we are able to secure additional external financing,
        for
        which there can be no assurance, we could be constrained in pursuing our
        business strategy and new opportunities aggressively.
 
 **Our
        ability to continue as a going concern.** We
        have
        reevaluated and refocused our strategy in light of our current difficult
        financial condition. We believe that our strategy is viable and can be achieved.
        Nevertheless, unless we are able to improve revenue levels, cut further costs
        and raise additional capital to fund future operations, there can be no
        assurance that we will have sufficient liquidity and resources to successfully
        execute our plan and our plan may have to be severely curtailed.
  8
  We
        anticipate that our available cash resources will be sufficient to meet our
        presently anticipated capital requirements for the next twelve months. However,
        we have suffered recurring losses from operations. As of January 31, 2005
        we had
        a negative working capital of $136 thousand. We recognize that in order to
        meet
        our capital requirements, and continue to operate, additional funding is
        necessary. We are exploring additional sources of liquidity, through debt
        and
        equity financing alternatives. If we are (i) unable to grow our business
        or
        improve our operating cash flows as expected, (ii) unsuccessful in restructuring
        all or the necessary and required portion of the debt repayments due in July
        2005
        in the aggregate principal amounts of $1.9 million, or (iii) unable to raise
        additional funds through offerings of our common stock or exercise of
        outstanding warrants, then we may be unable to continue as a going concern.
        There can be no assurance that additional financing will be available when
        needed or, if available, that it will be on terms favorable to us and our
        stockholders.
   If
        we are
        not successful in generating sufficient cash flows from operations, or in
        raising additional capital when required in sufficient amounts and on terms
        acceptable to us, these failures would have a material adverse effect on
        our
        business, results of operations and financial condition. If additional funds
        are
        raised through the issuance of equity securities, the percentage ownership
        of
        our current stockholders would be diluted.
 
 **Our
        strategy to increasingly focus on the operations of Torrey Pines and restore
        the
        operations of Rixon to profitability involves risk and may not be successful.** We
        have
        increasingly focused on the operations of Torrey Pines and its efforts to
        develop transport products for the storage area network and metropolitan
        network
        marketplace. We have also focused on restoring the operations of Rixon to
        profitability. We may be unsuccessful with this strategy. We may be unsuccessful
        in commercializing our optical SilverlineTM storage area network and metropolitan
        area network transport product line and we may not be able to bring the
        operations of Rixon back to profitability through increased sales efforts
        and
        reduced overhead.
 
 **We
        rely on a relatively limited number of customers, and the loss of any
        significant customer could materially and adversely affect our business and
        financial condition.** Historically,
        we have derived a significant portion of our revenues and accounts receivable
        from a relatively limited number of customers. The loss of one or more of
        these
        customers, or their inability to pay for our products and services, could
        have a
        material and adverse effect on our operating and financial results. In fact,
        Cisco Systems, our single largest customer during the fiscal year ended January
        31, 2004, discontinued purchasing an adapter card from us starting from the
        third quarter of our fiscal year ended January 31, 2004. During the twelve
        months ended January 31, 2004, Cisco Systems accounted for approximately
        56.7%
        of our consolidated net revenues, whereas during the twelve months ended
        January
        31, 2005, it accounted for 0% of our net revenues.
 
 **Our
        industry is highly competitive, and we may not have the resources required
        to
        compete successfully. The market for network connectivity products and services
        and storage area network transport equipment is extremely competitive and
        we
        expect competition to continue to intensify in the future** .
        Our
        primary competitors include Adaptec, Intel Corporation, Interphase, CNT,
        Vixel,
        ADVA, Ciena, TransMode, Pandatel, Finisar, and MRV Communications. We may
        also
        face competition from a number of other companies that have announced plans
        for
        new products to address the same problems that our products address. Many
        of our
        current and potential competitors have significantly greater resources, name
        recognition and customer relationships than us. In particular, established
        companies in the telecommunications equipment or computing industries may
        seek
        to expand their product offerings by designing and selling products using
        competitive technology that could render our products obsolete or have a
        material adverse effect on our revenues.
 
 **We
        operate in a market where emerging companies enter the markets in which we
        are
        competing and new products and technologies are**  **introduced.** Increased
        competition may result in further price reductions, reduced gross margins
        and
        loss of market share, any of which could materially and adversely affect
        our
        business operations or financial results. There are many competitors and
        potential competitors that are well funded and which may be able to "leap
        frog"
        beyond the technologies upon which we currently rely.
 
 9
 **Our
        business will be seriously harmed if we are not able to develop and
        commercialize new or enhanced products.** Our
        growth depends on our ability to successfully develop new or enhanced products.
        Our next generation of network management products and coarse wavelength
        division multiplexing products are under development. We cannot be sure whether
        these or other new products will be successfully developed and introduced
        to the
        market on a timely basis or at all. We will need to complete each of the
        following steps to successfully commercialize new products: complete product
        development, qualify and establish component suppliers, validate manufacturing
        methods, conduct extensive quality assurance and reliability testing, complete
        any software validation, and demonstrate systems interoperability.
 
 If
        we do
        not develop these products in a timely manner, our competitive position and
        financial condition could be adversely affected.
 
 In
        addition, as we introduce new or enhanced products, we must also manage the
        transition from older products to newer products. If we fail to do so, we
        may
        disrupt customer ordering patterns or may not be able to ensure that adequate
        supplies of new products can be delivered to meet anticipated customer demand.
        Any failure to effectively manage this transition may cause us to lose current
        and prospective customers.
   **We
        maintain high levels of inventory with low turnover.** We
        have
        historically maintained high levels of inventory to meet the output requirements
        of our customers over which we have little influence and to support our older,
        or legacy, products already in service. Many of our products require custom
        parts with long lead times, and our inventory levels allow us to provide
        fast
        response to our customer needs. While we continually review our reserves
        for
        conservative valuations, significant changes in customer demand for our products
        could adversely and materially affect our business operations or financial
        results.
   **Except
        for the fiscal year ending January 31, 2003, we incurred net operating losses
        over the recent past and may experience future losses.** We
        have
        incurred losses from operations during the twelve months ended January 31,
        2005
        of $2.5 million and during the twelve months ended January 31, 2004 of
        approximately $2.0 million. We have financed these losses through a combination
        of debt issuances, bank lines of credit and security placements. However,
        there
        can be no assurance that our working capital requirements will not exceed
        our
        ability to generate sufficient cash to support our requirements and the needed
        capital will have to be obtained from additional external sources.
  **Our
        future growth depends on our ability to attract new customers, and on our
        customers' ability to sell additional services to their own customers.** Most
        of
        our potential customers evaluate our network connectivity and storage area
        products for integrated deployment in larger systems. There are a limited
        number
        of potential customers for our products. If we are not selected by a potential
        customer for a particular system project, our business may be seriously harmed.
        Similarly, our growth depends on our customers' success in selling integrated
        solutions based on our products and complementary products from others. We
        believe that our success will depend on our ability to effectively anticipate
        and adapt to customer requirements and offer products and services that meet
        customer demands. Any failure of our current or prospective customers to
        purchase products from us for any reason, including a downturn in their
        business, would seriously harm our ability to grow our business.
  10
  **The
        time that our customers and potential customers require for testing and
        qualification before purchasing our networking products and solutions can
        be
        long and variable, which may cause our results of operations to be
        unpredictable.** Before
        purchasing our products and solutions, potential customers must undertake
        a
        lengthy evaluation, testing and product qualification process. In addition,
        potential customers require time-consuming field trials of our products and
        solutions. Our sales effort requires the effective demonstration of the benefits
        of our products to, and significant training of, potential customers. In
        addition, the timing of deployment depends on many factors, including the
        sophistication of a customer and the complexity and size of a customer's
        networks. Our sales cycle, which is the period from the time a sales lead
        is
        generated until the recognition of revenue, often exceeds one year. The length
        and variability of our sales cycle is beyond our control and is affected
        by,
        among other things, our customers' build out and deployment schedules, our
        customers' access to product purchase financing, our customers' needs for
        functional demonstration and field trials, and the manufacturing lead time
        for
        our products. Because our sales cycles are long and variable, our results
        of
        operations may be unpredictable.
   **Our
        products may have errors or defects that we find only after deployment, which
        could seriously harm our business.** Our
        products can only be fully tested after deployment. Our customers may discover
        errors or defects in our products, and our products may not operate as expected.
        If we are unable to fix errors or other problems that may be identified,
        we
        could experience loss of or delay in revenues and loss of market share, loss
        of
        customers, failure to attract new customers or achieve market acceptance,
        diversion of engineering resources, increased service and warranty costs,
        and
        legal actions by our customers. Any failure of our current or planned products
        to operate as expected could delay or prevent their adoption and seriously
        harm
        our business.
 
 **If
        our products do not fully work with, or interoperate with, our customers'
        systems, installations will be delayed or canceled or our products could
        be
        returned.** Many
        of
        our customers require that our products be designed to work or interoperate
        with
        their existing networks, each of which may have different specifications
        and
        utilize a variety of protocols. Our customers' networks contain multiple
        generations of products that have been added over time as these networks
        have
        grown and evolved. Our products must work or interoperate with all of the
        products within these networks as well as future products in order to meet
        our
        customers' requirements. If we are required to modify our product design
        to be
        compatible with our customers' systems to achieve a sale, it may result in
        a
        longer sales cycle, increased research and development expense and reduced
        margins on our products. If our products do not fully work or interoperate
        with
        those of our customers' networks, installations could be delayed, orders
        for our
        products could be canceled or our products could be returned, any of which
        could
        seriously harm our business.
   **If
        we fail to establish and successfully maintain strategic alliances, our business
        may be harmed.** Strategic
        alliances are an important part of our effort to expand our revenue
        opportunities and technological capabilities given our limited resources
        to
        commercialize our products and reach the market. We cannot be certain that
        we
        will be able to enter strategic alliances on terms that are favorable to
        us. Our
        business may be harmed if we fail to establish and maintain strategic alliances
        that extend our reach.
   **Our
        business may be seriously harmed if we are unable to establish successful
        relationships with distributors and systems integrators.** We
        believe that our future success is dependent upon our ability to establish
        successful relationships with a variety of distributors and systems integrators.
        As we expand domestically and internationally, we will increasingly depend
        on
        distributors and systems integrators. If we are unable to establish and expand
        these relationships, we may not be able to increase market awareness or sales
        of
        our products, which may prevent us from achieving and maintaining
        profitability.
   **Our
        business for storage area networking products may be seriously harmed if
        the
        market for storage area networking products does not develop as we expect.** Our
        planned product offerings are focused on the needs of customers that service
        storage area networks. The market for storage area networking products is
        new,
        and we cannot be certain that a viable market for our products will develop
        or
        be sustainable. If this market does not develop, or develops more slowly
        than we
        expect, our business may be seriously harmed. Furthermore, the storage area
        networking industry is subject to rapid technological change and newer
        technology or products developed by others could render our products
        uncompetitive or obsolete. If the standards adopted are different from those
        that we have chosen to support, market acceptance of our products would be
        significantly reduced and our business would be seriously harmed.
  11
  **We
        depend upon contract manufacturers, and any disruption in these relationships
        may cause us to fail to meet the demands of our customers and damage our
        customer relationships.** We
        use
        contract manufacturers to manufacture and assemble our products in accordance
        with our specifications. We do not have long-term contracts with any of them,
        and none of them are obligated to perform services for us for any specific
        period or at any specified price, except as may be provided in a particular
        purchase order. We may not be able to effectively manage our relationships
        with
        these manufacturers and they may not meet our future requirements for timely
        delivery or provide us with the quality of products that we and our customers
        require.
   Each
        of
        our contract manufacturers also builds products for other companies. We cannot
        be certain that they will always have sufficient quantities of inventory
        available to fill our orders on a timely basis. Qualifying a new contract
        manufacturer and commencing volume production is expensive and time consuming
        and could result in a significant interruption in the supply of our products.
        If
        we are required to change contract manufacturers, we may suffer delays that
        could lead to the loss of revenue and damage our customer
        relationships.
   **We
        rely on a limited number of suppliers for some of our components, and our
        business may be seriously harmed if our supply of any of these components
        is
        disrupted.** The
        major
        components of our products include circuit boards, microprocessors, chipsets,
        and memory components among other components. Most of these components are
        available from multiple sources. However, some components used in our products
        are obtained from single or limited sources and may from time to time be
        in
        short supply. We have from time to time experienced, and are experiencing,
        difficulty in obtaining some components. We do not have guaranteed supply
        arrangements with any of our suppliers, and we cannot assure you that our
        suppliers will continue to meet our requirements. Shortages of components
        could
        not only limit our production capacity but also could result in higher costs
        due
        to the higher costs of components in short supply or the need to use higher-cost
        substitute components. Significant increases in the prices of components
        could
        have a material adverse effect on our results of operations because we may
        not
        be able to adjust product pricing to reflect the increases in component costs.
        Also, an extended interruption in the supply of components or a reduction
        in
        their quality or reliability would have a material adverse effect on our
        financial condition and results of operations by impairing our ability to
        timely
        deliver quality products to our customers. Delays in deliveries due to shortages
        of components or other factors may result in cancellation by our customers
        of
        all or part of their orders. Although customers who purchase from us products
        that are not readily available from other sources would be less likely than
        other customers of ours to cancel their orders due to production delays,
        we
        cannot assure you that cancellations will not occur.
   The
        availability of many of these components to us is dependent in part by our
        ability to provide suppliers with accurate forecasts of our future requirements.
        In the event of a disruption in supply or if we receive an unexpectedly high
        level of purchase orders, we may not be able to develop an alternate source
        in a
        timely manner or at favorable prices. Any of these events could hurt our
        ability
        to deliver our products to our customers and negatively affect our operating
        margins. In addition, our reliance on our suppliers exposes us to potential
        supplier production difficulties or quality variations. Any such disruption
        in
        supply would seriously impact our present and future sales.
   In
        addition, we have from time to time received from manufacturers "last buy"
        notices that indicate that one or more components that we incorporate into
        our
        products will be discontinued.
   If
        we are
        unable to participate in a last buy or are unable to purchase an adequate
        quantity of last buy components to cover our needs until the time, if any,
        that
        we are able to find an appropriate substitute component that works with the
        current design of our product or to redesign our product to allow for use
        of a
        substitute component, we may have to eliminate the product from our product
        line. We believe that with respect to many of our single source components,
        we
        could obtain similar components from other sources. However, in response
        to past
        last buy notices, we have been working to alter product designs on some of
        our
        products to allow us to use alternative components. We cannot assure you
        that we
        will be successful in our redesign of these products or that we will not
        experience difficulties associated with future last buys. Further, we cannot
        assure you that future severe shortages of components that could increase
        the
        cost or delay the shipment of our products will not occur.
  12
  **We
        may be unable to protect our intellectual property, which could limit our
        ability to compete** .
        We hold
        nine patents and have one patent pending for our SilverlineTM product design.
        Although we attempt to protect our intellectual property rights through patents,
        trademarks, and copyrights, by maintaining certain technology as trade secrets
        and by other measures, we cannot assure you that any patent, trademark,
        copyright or other intellectual property rights owned by us will not be
        invalidated, circumvented or challenged; that such intellectual property
        rights
        will provide competitive advantages to us; or that any of our future patent
        applications, if any, will be issued with the scope of the claims sought
        by us,
        if at all. We cannot assure you that others will not develop technologies
        that
        are similar or superior to our technology, or that our competitors will not
        duplicate our technology or "design around" the patents that we own. In
        addition, effective patent, copyright and trade secret protection may be
        unavailable or limited in certain foreign countries in which we do business
        or
        intend to do business in the future.
   We
        believe that the future success of our business will depend on our ability
        to
        translate the technological expertise and innovation of our personnel into
        new
        and enhanced products. We cannot assure you that the steps taken by us will
        prevent misappropriation of our technology. In the future, we may take legal
        action to enforce our patents and other intellectual property rights, to
        protect
        our trade secrets, to determine the validity and scope of the proprietary
        rights
        of others, or to defend against claims of infringement or invalidity. Such
        litigation could result in substantial costs and diversion of resources and
        could harm our business and operating results.
   **We
        could become subject to litigation regarding intellectual property rights,
        which
        could seriously harm our business and require us to incur significant costs.** In
        recent
        years, there has been significant litigation in the United States involving
        patents and other intellectual property rights. We may be a party to litigation
        in the future to protect our intellectual property or as a result of an
        allegation that we infringe others' intellectual property. Any parties asserting
        that our products infringe upon their proprietary rights would force us to
        defend ourselves, and possibly our customers or manufacturers against the
        alleged infringement. These claims and any resulting lawsuits, if successful,
        could subject us to significant liability for damages and invalidation of
        our
        proprietary rights. Additionally, any claims and lawsuits, regardless of
        their
        merits, would likely be time-consuming and expensive to resolve and would
        divert
        management time and attention.
   Any
        claims of infringement of the intellectual property of others could also
        force
        us to do one or more of the following: stop selling, incorporating or using
        our
        products that use the challenged intellectual property; obtain from the owner
        of
        the infringed intellectual property right a license to sell or use the relevant
        technology, which may not be available to us on reasonable terms, or at all;
        or
        redesign the infringing products that use such technology. If we are forced
        to
        take any of the foregoing actions, our business may be seriously
        harmed.
   **The
        markets that our products address are governed by regulations and evolving
        industry standards.** The
        market for our products is highly regulated and industry standards are
        intensive, with many standards evolving as new technologies are deployed.
        In the
        United States, our products must comply with various regulations defined
        by the
        Federal Communications Commission and standards established by Underwriters
        Laboratories. In addition, there are industry standards established by various
        organizations such as Fibre Channel Industry Association, American National
        Standards Institute, and Internet Engineering Task Force. We design our products
        in an effort to comply with those industry standards so that each particular
        product can be accepted by its intended customer. To the extent non-compliance
        with such standards has a detrimental effect on customer acceptance, we must
        address such non-compliance in the design of our products. Standards for
        new
        services and network management are still evolving. However, as the standards
        evolve, we will be required to modify our products or develop and support
        new
        versions of our products. The failure of our products to comply or delays
        in
        compliance could materially and adversely affect our business, operating
        results
        and financial condition.
   **Our
        future revenues are unpredictable and our financial results may fluctuate.** Our
        revenue and operating results could fluctuate substantially from quarter
        to
        quarter and from year to year. This could result from any one or a combination
        of factors such as our development and the sale of new technologies and the
        cancellation or postponement of orders, the timing and amount of significant
        orders from our largest customers, our success in developing, introducing
        and
        shipping product enhancements and new products, the mix of products we sell,
        new
        product introductions by competitors, pricing actions taken by us or our
        competitors, the timing of delivery and availability of components from
        suppliers, changes in material costs and general economic
        conditions.
  13
  **Our
        business may be adversely affected by competitive pressures, which we must
        react
        to.** The
        industry we compete in is characterized by declining prices of existing
        products. Therefore continual improvements of manufacturing efficiencies
        and
        introduction of new products and enhancements to existing products are required
        to maintain gross margins. In response to customer demands or competitive
        pressures, or to pursue new product or market opportunities, we may take
        certain
        pricing or marketing actions, such as price reductions, volume discounts,
        or
        provisions of services at below market rates. These actions could materially
        and
        adversely affect our business, operating results and financial
        condition.
   **If
        we are unsuccessful in our efforts to take advantage of distribution channels
        for our products, sales of our products may decline or fail to increase.** We
        channel many of our products through a network of distribution outlets. We
        are
        continuing to develop and solidify our relationships with certified resellers,
        distributors and system integrators, many of which are part of a worldwide
        distribution network. To the extent we are unsuccessful in our efforts to
        create
        or maintain an adequate quality and quantity of these relationships, sales
        of
        our products may decline or fail to increase as we work to establish effective
        channels to market.
   **We
        rely heavily on our management and board of directors, and the loss of any
        of
        their services could materially and adversely affect our business.** Our
        success is highly dependent upon the continued services of key members of
        our
        management and board of directors, including our Chairman of the Board, Chief
        Executive Officer and President, Dr. Kanwar J.S. Chadha, Vice Chairman and
        Chief
        Financial Officer, Dr. Davinder Sethi, and Mr. James Dziak, President of
        Microtek Systems, Inc., a wholly-owned subsidiary of our Torrey Pines
        subsidiary. The loss of Dr. Chadha, Dr. Sethi or Mr. Dziak or one or more
        other
        key members of our management or board of directors could have a material
        adverse effect on us because each of these individuals has experience and
        skills
        upon which we draw heavily in our day-to-day operations and/or strategic
        planning activities. We do not maintain key-man life insurance policies on
        any
        member of management. Our ability to pay cash compensation to retain key
        members
        of our management and board of directors is limited by our cash flows.
   **Our
        common stock price is subject to significant volatility, which could result
        in
        substantial losses for investors.** The
        stock
        market as a whole, and individual stocks in particular historically have
        experienced extreme price and volume fluctuations, which often have been
        unrelated to the performance of the related corporations. During the fiscal
        year
        ended January 31, 2005 the high and low closing sale prices of our common
        stock
        were $0.38 and $0.08, **** respectively
        and for the fiscal year ended January 31, 2004, the high and low closing
        sale
        prices of our common stock were $0.42 and $0.10, respectively. The market
        price
        of our common stock may exhibit significant fluctuations in the future in
        response to various factors, many of which are beyond our control, and which
        include:
 
 Variations
                      in our quarterly operating results, which variations could
                      result from,
                      among other things, changes in the needs of one or more of
                      our
                      customers;Changes
                      in market valuations of similar companies and stock market
                      price and
                      volume fluctuations generally;Economic
                      conditions specific to the industries in which we
                      operate;Announcements
                      by us or our competitors of new or enhanced products, technologies
                      or
                      services or significant contracts, acquisitions, strategic
                      relationships, joint ventures or capital
                      commitments;Regulatory
                      developments;Additions
                      or departures of key personnel; andFuture
                      sales of our common stock or other debt or equity
                      securities.
 
 14
 If
        our
        operating results in future quarters fall below the expectations of market
        makers and investors, the price of our common stock likely will decline,
        perhaps
        substantially. In the past, securities class action lawsuits have often been
        brought against companies following periods of volatility in the market price
        of
        their securities. We may in the future be the target of similar lawsuits.
        Securities lawsuits could result in substantial costs and liabilities and
        could
        divert management's attention and resources. Consequently, the price at which
        you purchase shares of our common stock may not be indicative of the price
        that
        will prevail in the trading market. You may be unable to sell your shares
        of
        common stock at or above your purchase price, which may result in substantial
        losses to you.
  Shares
        of
        our common stock eligible or to become eligible for public sale could adversely
        affect our stock price and make it difficult for us to raise additional capital
        through sales of equity securities. As of January 31, 2005, we had outstanding
        15,430,076 shares of common stock, a substantial portion of which were
        unrestricted, were eligible for resale under Rule 144 of the Securities Act
        of
        1933, or were registered for resale or issued with registration rights.
        Disregarding beneficial ownership limitations that apply to some holders
        of our
        derivative securities, as of January 31, 2005, we also had outstanding options
        and warrants that were exercisable for or convertible into approximately
        33,764,112 shares of common stock, nearly all of which were issued with
        registration rights. Sales of a substantial number of shares of our common
        stock
        in the public market, or the perception that sales could occur, could adversely
        affect the market price for our common stock. Any adverse effect on the market
        price for our common stock could make it difficult for us to sell equity
        securities at a time and at a price that we deem appropriate.
   **We
        may authorize a significant number of additional shares of common
        stock.** On
        January 27, 2005, our stockholders voted at our
        annual meeting of stockholders in favor
        of a
        proposal to amend our Amended and Restated Certificate of Incorporation,
        as
        amended to date, to increase the number of our authorized shares of common
        stock
        from 50,000,000 to 150,000,000 .
        As of
        January 31, 2005, we had issued and outstanding 15,430,076 shares of common
        stock, as well as stock options and warrants to acquire an aggregate of 33,764,112 additional shares of common stock. Increasing the number of authorized shares
        of
        our common stock enables our
        Board of Directors to issue additional shares of our common stock up to
        the number of authorized shares ,
        the
        effect of which will be to dilute the share holdings of our
        stockholders, which may adversely affect the market price of our
        stock.
  **Because
        our stock is not listed on a national securities exchange, you may find it
        difficult to dispose of, or obtain quotations for our common
        stock.** Our
        common stock trades under the symbol "ESAN" on the OTC Bulletin Board. Because
        our stock trades on the OTC Bulletin Board rather than on a national securities
        exchange or on NASDAQ, you may find it difficult to either dispose of, or
        to
        obtain quotations as to the price of, our common stock.
   **Because
        we are subject to the "Penny Stock" rules, the level of trading activity
        in our
        stock may be reduced.** Broker-dealer
        practices in connection with transactions in "penny stocks" are regulated
        by
        penny stock rules adopted by the Securities and Exchange Commission. Penny
        stocks, like shares of our common stock, generally are equity securities
        with a
        price of less than $5.00 (other than securities registered on some national
        securities exchanges or quoted on NASDAQ). The penny stock rules require
        a
        broker-dealer, prior to a transaction in a penny stock not otherwise exempt
        from
        the rules, to deliver a standardized risk disclosure document that provides
        information about penny stocks and the nature and level of risks in the penny
        stock market. The broker-dealer also must provide the customer with current
        bid
        and offer quotations for the penny stock, the compensation of the broker-dealer
        and its salesperson in the transaction, and, if the broker-dealer is the
        sole
        market maker, the broker-dealer must disclose this fact and the broker-dealer's
        presumed control over the market, and monthly account statements showing
        the
        market value of each penny stock held in the customer's account. In addition,
        broker-dealers who sell these securities to persons other than established
        customers and "accredited investors" must make a special written determination
        that the penny stock is a suitable investment for the purchaser and receive
        the
        purchaser's written agreement to the transaction. Consequently, these
        requirements may have the effect of reducing the level of trading activity,
        if
        any, in the secondary market for a security subject to the penny stock rules,
        and investors in our common stock may find it difficult to sell their shares.
 
 15
 **Item
        2.** **Properties**
 
 We
        do not
        currently own any real property. Our leased real estate consists of a 2,677
        square foot suite in San Diego, California, which we use for corporate and
        research and development use, and a 7,344 square foot office, manufacturing
        and
        distribution facility in Lake Forest, California, the leases for each of
        which
        expire on July 31, 2007. We also lease a 5,290 square foot office, engineering
        and distribution facility in Milwaukee, Wisconsin, which expires on April
        30,
        2006. We believe that the properties we currently lease will be sufficient
        for
        our needs in the near future.
 
 **Item
        3.** **Legal
        Proceedings**
 
 From
        time
        to time, we may be involved in legal proceedings and claims incidental to
        the
        conduct of our business. Although it is impossible to predict the outcome
        of
        these, we believe that such proceedings or claims, individually or in the
        aggregate, are not likely to have a material effect on our financial position
        or
        results of operations or cash flows.
 
 **Item
        4.** **Submission
        of Matters to a Vote of Security Holders**
 
 Entrada
        held its annual stockholders meeting (the "Annual Meeting") on January 27,
        2005
        at 10:00 a.m. PST at Entrada's principal executive offices, 5755 Oberlin
        Drive,
        Suite 204, San Diego, California 92121. A total of 14,825,100 shares, or
        96%, of
        Entrada's issued and outstanding Common Stock entitled to vote at the Annual
        Meeting was present in person or by proxy at the Annual Meeting. Matters
        submitted to stockholders at the Annual Meeting and the voting results thereof
        were as follows:
 
 
 **Election
        of Directors**
 
 Each
        of
        Dr. Kanwar J.S. Chadha, Mr. Leonard N. Hecht, Mr. Rohit Phansalkar and Dr.
        Davinder Sethi, having received a plurality of the votes cast at the Annual
        Meeting, was re-elected to serve on Entrada's Board of Directors until the
        2006
        annual stockholders meeting or until his successor is duly elected and
        qualified. The following is a breakdown of the voting results:
 
 Director
              Votes
                  For
              Votes
                  Withheld or AgainstDr.
                  Kanwar J.S. Chadha
              14,401,484
              423,616Mr.
                  Leonard N. Hecht
              14,621,350
              203,750Mr.
                  Rohit Phansalkar
              14,621,417
              203,683Dr.
                  Davinder Sethi
              14,617,337
              207,763
 
 
 **Ratification
        of Appointment of BDO Seidman, LLP as Independent Auditor for 2005 Fiscal
        Year**
 
 The
        stockholders ratified the appointment of BDO Seidman, LLP as Entrada's
        independent auditor for the fiscal year ended January 31, 2005, by a majority
        of
        votes present at the meeting, in person or by proxy, and entitled to vote
        on the
        proposal. The following is a breakdown of the voting results:
 
 Votes
                  For
              Votes
                  Against
              Abstentions
              Broker
                  Non-Votes14,685,949
              79,896
              59,255
              0
 
 16
 **Approval
        of Amended and Restated 2000 Stock Incentive Plan**
 
 The
        stockholders did not approve the proposal to adopt the Entrada Networks,
        Inc. Amended and Restated 2000 Stock Incentive Plan. The following is a
        breakdown of the voting results:
 
 Votes
                  For
              Votes
                  Against
              Abstentions
              Broker
                  Non-Votes4,242,134
              1,078,628
              54,607
              9,449,731
 
 **Approval
        of Amendment to Amended and Restated Certificate of
        Incorporation**
 
 The
        stockholders approved an amendment to Entrada's Amended and Restated Certificate
        of Incorporation, increasing the number of Entrada's authorized shares of
        Common
        Stock, $.001 par value, from 50,000,000 to 150,000,000, by a majority of
        shares
        of Entrada's Common Stock outstanding and entitled to vote at the
        Annual  Meeting.
        The following is a breakdown of the voting results:
 
 Votes
                  For
              Votes
                  Against
              Abstentions
              Broker
                  Non-Votes13,591,321
              1,178,247
              55,532
              0
 
 On
        January 31, 2005, we filed a Certificate of Amendment with the Secretary
        of
        State of the State of Delaware, pursuant to which the amendment became effective
        as of such date.
 
 17
  PART
        II
 **Item
        5.**  **Market for Common Equity and Related Stockholder Matters**
 
 Our
        common stock is currently listed on the Over-the-Counter Bulletin Board under
        the symbol "ESAN." Our common stock traded on the NASDAQ National Market
        from
        the date it began to be publicly traded in November 1995 under the symbol
        "SYNX"
        until September 1, 2000, when our trading symbol changed to "ESAN." On February
        1, 2002, our common stock began trading on the NASDAQ Small Cap Market under
        the
        symbol "ESAN." On October 31, 2002, our common stock was delisted from the
        NASDAQ Small Cap Market and began trading on the Over-the-Counter Bulletin
        Board
        (the "OTCBB") under the same symbol.
 
 The
        following table sets forth, for the fiscal quarters indicated, the high/ask
        and
        low/bid information as reported on the National Association of Securities
        Dealers OTC Electronic Bulletin Board.
  **Fiscal
                  2004**Quarter
                  from February 1, 2003 to April 30, 2003
              
              $
              0.42
              
              $
              0.18Quarter
                  from May 1, 2003 to July 31, 2003
              
              
              0.38
              
              
              0.18Quarter
                  from August 1, 2003 to October 31 , 2003
              
              
              0.24
              
              
              0.10Quarter
                  from November 1, 2003 to January 31, 2004
              
              
              0.27
              
              
              0.10**Fiscal
                  2005**Quarter
                  from February 1,2004 to April 30, 2004
              
              
              0.38
              
              
              0.15Quarter
                  from May 1, 2004 to July 31, 2004
              
              
              0.25
              
              
              0.13Quarter
                  from August 1, 2004 to October 31, 2004
              
              
              0.19
              
              
              0.08Quarter
                  from November 1, 2004 to January 31, 2005
              
              $
              0.25
              
              $
              0.08
  We have outstanding 15,430,076 shares of our common stock as of January
        31, 2005. Our shares of common stock are held by approximately 8,600
        stockholders.
  We
        have never
        paid any cash dividends on our common stock. Our present credit facility
        contains covenants, which preclude the payment of dividends. The present
        policy
        of the Board of Directors is to retain all available funds to finance the
        planned level of operations. In light of the anticipated cash needs of our
        business, it is not anticipated that any cash dividends will be paid to the
        holders of our common stock in the foreseeable future. In addition, any future
        debt financing or other financing of securities senior to our common stock
        would
        likely include financial and other covenants that will restrict our ability
        to
        pay dividends on our common stock.
 
 18
 Our
        equity
        compensation plan and outstanding warrant information as of January 31, 2005
        is
        as follows:
   **Number
                of Securities to be Issued Upon
                Exercise of Outstanding Options, Warrants and
                Rights**
              ****
              ****
              **Weighted-Average
                  Exercise price of Outstanding Options, Warrants and
                  Rights**
              ****
              ****
              **Number
                  of Securities Remaining Available for Future Issuance under Equity
                  Compensation Plans (Excluding Securities Reflected in Column
                  (a**
              **)**Plan
                  categoryEquity Compensation Plans Approved by Security Holders
              
              
              3,188,355
              
              $
              0.49
              
              
              1,557,386Equity Compensation Plans Not Approved by Security Holders
              
              
              30,575,757*
              
              $
              0.13
              
              
              -Total
              
              
              33,764,112
              
              $
              0.16
              
              
              1,557,386
 
 *
        Represents: (1) a fully-vested warrant to purchase up to 75,757 shares of
        our
        common stock at a per share exercise price of $3.30, issued to Silicon Valley
        Bank on February 20, 2001, which warrant expires on February 20, 2006; (2)
        fully-vested warrants to purchase up to an aggregate of 500,000 shares of
        our
        common stock at a per share exercise price of $0.35, issued on February 5,
        2004
        to the following individuals for the share amounts indicated, which warrants
        expire on February 5, 2007:
 
 **Warrant
                  Holder**
              **Shares**SBI
                  Advisors, LLC
              400,000Shelly
                  Singhal
              50,000Jon
                  Buttles
              25,000Matt
                  McGovern
              25,000
 
 (3)
        fully-vested warrants to purchase up to an aggregate of 5,000,000 shares
        of our
        common stock at a per share exercise price of $0.16, issued on May 14, 2004
        to
        the following individuals for the share amounts indicated, which warrants
        expire
        on May 13, 2007:
 
 **Warrant
                  Holder**
              **Shares**SBI
                  Brightline IV, LLC
              3,450,000John
                  Wang
              125,000J.
                  Michael Higginbotham
              125,000Suraj
                  Gohill
              125,000Robert
                  Gilman
              250,000Charles
                  Dominick
              250,000Franklin
                  C. Fisher, Jr.
              175,000Joseph
                  A. Schick
              25,000Phoenix
                  Capital Opportunity Fund
              225,000Jon
                  Buttles
              250,000
 
 19
 (4)
        fully
        vested warrants to purchase up to an aggregate of 15,000,000 shares of our
        common stock at a per share exercise price of $0.10, issued on October 21,
        2004
        to the following individuals for the share amounts indicated, which warrants
        expire on October 20, 2007:
 
 **Warrant
                  Holder**
              **Shares**David
                  F. Evans
              3,750,000Crestwood
                  Children's Trust
              3,750,000McGovern
                  Living Trust (Dated September 28, 2004)
              3,750,000Jon
                  Buttles
              3,750,000
 
 (5)
        a
        warrant to purchase up to an aggregate of 10,000,000 shares of our common
        stock
        at a per share exercise price of $0.12, issued to Trilogy on November 10,
        2004.
        This warrant is exercisable on the earlier of January 1, 2005 or the date
        on
        which the registration statement of which this prospectus is a part is effective
        and expires on November 10, 2006. As long as we have a class of securities
        registered under Section 12 of the Securities Exchange Act of 1934, Trilogy
        will
        not be entitled to exercise this warrant in an amount that, immediately
        following such purchase, would result in Trilogy beneficially owning 5% or
        more
        of our outstanding shares of common stock.
 
 
 See
        Note 9 to
        the Consolidated Financial Statements for information regarding the material
        features of the above plans approved by security holders.
  20
 
 **Item
        6. Management's Discussion and Analysis** **or
        Plan of Operations**
 
 Certain
        statements contained in this Annual Report on Form 10-KSB, including, without
        limitation, statements containing the words "believes", "anticipates",
        "estimates", "expects", and words of similar import constitute "forward-looking
        statements" within the meaning of the Private Securities Litigation Reform
        Act
        of 1995. Readers are referred to the "Risk Factors" section of this Annual
        Report on Form 10-KSB contained herein, which identifies important risk factors
        that could cause actual results to differ from those contained in the
        forward-looking statements.
 
 The
        results of operations reflect our activities and our wholly owned subsidiaries;
        this consolidated group is referred to individually and collectively as "We"
        and
        "Our".
 
 Management's
        Discussion and Analysis of Financial Condition and Results of Operations
        should
        be read in conjunction with the consolidated audited financial statements
        and
        related notes thereto.
 
 
 **Overview**
 
 **Our
        Ability to Continue as a Going Concern**
  We
        have
        suffered recurring losses from operations and as of January 31, 2005 we had
        a
        negative working capital of $136 thousand. We recognize that in order to
        meet
        our capital requirements, and continue to operate, additional funding is
        necessary. We are exploring additional sources of liquidity, through debt
        and
        equity financing alternatives. If we are (i) unable to grow our business
        or
        improve our operating cash flows as expected, (ii) unsuccessful in retiring
        or
        restructuring the debt repayments due by July 31, 2005 in the aggregate
        principal amount of $1.9 million, or (iii) unable to raise additional funds
        through offerings of our common stock, then we may be unable to continue
        as a
        going concern. There can be no assurance that additional financing will be
        available when needed or, if available, that it will be on terms favorable
        to us
        and our stockholders.
 
 If
        we are
        not successful in generating sufficient cash flows from operations, or in
        raising additional capital when required in sufficient amounts and on terms
        acceptable to us, these failures would have a material adverse effect on
        our
        business, results of operations and financial condition. If additional funds
        are
        raised through the issuance of equity securities, the percentage ownership
        of
        our current stockholders would be diluted.
 
 **Our
        change in strategies**
 
 During
        the last three years, we have increasingly focused on our Torrey Pines Networks'
        product development efforts in the Storage Area Network and metropolitan
        network
        transport products marketplace. During fiscal 2004 we reevaluated this strategy.
        Our new strategies are provided below in order of priority:
 
 Explore
                      acquisition opportunities that fit into our existing technologies
                      with
                      emphasis on our SAN markets. This calls for acceleration of
                      organic
                      growth opportunities, especially in the storage area network
                      transport
                      product line where we are developing and marketing the SilverlineTM-CWDM
                      product line, and to actively pursue acquisition opportunities
                      to
                      complement the current lines of business.Commercialize
                      Torrey Pines' optical SilverlineTM SAN and metropolitan area networks
                      transport product lineBring
                      our Rixon operation back to profitability through increased
                      sales
                      efforts and reduced overhead.And,
                      maintain superior service and support for our Sync legacy products
                      to
                      sustain our recent profitable track
                      record.
   21
 **Our
        change in profitability**
 
 Cisco
        Systems, Inc., our single largest customer, discontinued purchasing from
        us an
        adapter card starting from the third quarter of the fiscal year ended January
        2004. During the twelve months ended January 31, 2004, Cisco Systems, accounted
        for approximately 56.7% of our consolidated net revenues. The loss of Cisco
        as a
        customer of our wholly-owned subsidiary, Rixon Networks, Inc., has had a
        material negative impact on our revenues and operating results.
  Since
        May
        2004, with the acquisition of Microtek Systems, Inc., we have added $2.5
        million
        in revenues to the current fiscal year, but still trail behind the revenues
        of
        the prior fiscal year.
  
 **Fiscal
                  Years Ended January 31,****2005**
              
              
              **Pct
                  of**
                **Revenue**
              
              
              **2004**
              
              
              **Pct
                  of**
                **Revenue**
              
              
              **Increase**
                **(Decrease)**
                **$**
              
              
              **Increase**
                **(Decrease)**
              **%****NET
                  REVENUES****PRODUCT**
              
              $
              2,623
              
              
              63.6
              %
              $
              5,224
              
              
              84.0
              %
              $
              (2,601
              )
              
              (49.8
              )%**SERVICES**
              
              
              1,501
              
              
              36.4
              %
              
              997
              
              
              16.0
              %
              
              504
              
              
              50.6
              %**TOTAL
                  NET REVENUES**
              
              $
              4,124
              
              
              100.0
              %
              $
              6,221
              
              
              100.0
              %
              $
              (2,097
              )
              
              (33.7
              )%
 
 
 **Results
        of Operations: Comparison of the Years Ended January 31, 2005 and January
        31,
        2004**
 
 ***Net
        revenue.*** Our
        consolidated net revenue from continuing operations for fiscal 2005 was $4.1
        million compared to $6.2 million for fiscal 2004. Product revenues decreased
        to
        $2.6 million for fiscal 2005 from $5.2 million for fiscal 2004. The decrease
        in
        product revenue for fiscal 2004 resulted primarily from the loss of our major
        customer, Cisco. Service revenue increased to $1.5 million in fiscal 2005
        from
        $1.0 million in fiscal 2004. The increase was due primarily to our Torrey
        Pines
        subsidiary's purchase of Microtek Systems in May 2004
 
 Our
        Sync
        Research net revenues from the frame relay and service business declined
        32.4%
        to $1.0 million for the fiscal year ended January 31, 2005 compared to $1.5
        million net revenues for the fiscal year ended January 31, 2004.
 
 Our
        Sync
        Research service revenue declined $0.3 million or 25.5% compared to $1.0
        million
        for fiscal year 2004 primarily due to the loss of several service customers.
 
 Our
        Rixon
        Networks net revenues were primarily from adapter card product revenues.
        These
        product revenues decreased $4.1 million or 88.2% to $0.6 million for the
        fiscal
        year ended January 31, 2005 from $4.7 million for the fiscal year ended January
        31, 2004. This was primarily due to the loss of Cisco as previously described.
 
 Our
        Torrey Pines Network subsidiary revenues includes the acquisition of Microtek
        Systems in May 2004. Revenues for the fiscal year ended January 31, 2005,
        were
        $2.5 million. We had no revenue from Torrey Pines Networks for the fiscal
        year
        ended January 31, 2004.
 
 22
 ***Gross
        profit.*** Cost of
        revenues consists principally of the costs of components, subcontract assembly
        from outside contract manufacturers, and in-house system integration, quality
        control, final testing, configuration costs and outside service costs. Gross
        profit increased to $1.7 million for the fiscal 2005 from $1.4 million for
        fiscal 2004. Our gross margin increased to 40.5% for the fiscal year ended
        January 31, 2005 from 21.9% for fiscal 2004. The increase in gross margins
        resulted primarily from the inclusion in fiscal 2004 of a provision for
        additional inventory reserves of $1.1 million.
 
 Our
        Sync
        Research gross profit of $0.5 million for the fiscal year ended January 31,
        2005
        dropped by $0.2 million or 27.9% compared to $0.7 million for the fiscal
        year
        ended January 31, 2004. This was primarily due to the decline in legacy
        revenues.
 
 Our
        Rixon
        Networks gross profit of $0.0 million decreased by $0.7 million or 99.8%
        for the
        fiscal year ended January 31, 2005 over the gross profit of the prior fiscal
        year of $0.7 million. Decreased net revenues and facility costs were the
        major
        elements of the decrease. In July 2004, we moved our Rixon and Sync operations
        to smaller facilities.
 
 ***Other
        operating expenses.*** There
        were no other operating expenses in fiscal 2005, a decrease of $0.3 million
        over
        fiscal 2004.
 
 ***Selling
        and marketing.*** Selling
        and marketing expenses consist primarily of employee compensation and related
        costs, commissions to sales representatives, tradeshow expenses and travel
        expenses. Selling and marketing expenses decreased in our Rixon and Sync
        subsidiaries, but increased in Torrey Pines Networks due to its acquisition
        of
        Microtek Systems, and increased in total to $0.7 million for the fiscal year
        ended January 31, 2005 compared to $0.5 million for the prior fiscal year.
 
 ***General
        and administrative.*** General
        and administrative expenses consist primarily of employee compensation and
        related costs, legal and accounting fees, public company costs, and occupancy
        costs. General and administrative expenses increased 78.5% or $1.1 million
        over
        the prior year primarily due to the legal, audit and administrative costs
        associated with Torrey Pines acquisition of Microtek Systems and the associated
        preparation and filings of appropriate disclosures with the SEC. Such expenses
        were partially offset by the consolidation of facilities in Lake Forest and
        San
        Diego, California.
 
 ***Engineering,
        research and development.*** Engineering, research and development expenses consist primarily of compensation
        related costs for engineering personnel, facilities costs, and materials
        used in
        the design, development and support of our technologies. All research and
        development costs are expensed as incurred. Expenses decreased $0.3 million
        or
        25.8% over the prior fiscal year, however, engineering, research and development
        expenses remained on track for the development of our Torrey Pines'
        products.
 
 ***Income
        taxes.*** The
        Company's effective income tax reconciles to the statutory rate for the years
        ended January 31, 2005 and 2004 as follows: (in thousands)
 
 **January
                  31, 2005**
              
              
              **January
                  31, 2004**Federal
                  statutory rate
              
              
              34.00
              %
              
              34.00
              %State
                  taxes
              
              
              0.00
              %
              
              0.00
              %Nondeductible
                  expenses
              
              
              0.00
              %
              
              (1.00
              )%Expiration
                  of NOLs
              
              
              (18.00
              )%
              
              0.00
              %CA
                  NOL limitation
              
              
              (19.00
              )%
              
              0.00
              %Change
                  in valuation allowance
              
              
              2.00
              %
              
              (29.00
              )%Other
              
              
              1.00
              %
              
              (4.00
              )%Effective
                  tax rate
              
              
              0.00
              %
              
              0.00
              %
 
 23
 A
        detail
        of the Company's deferred tax assets and liabilities as of January 31, 2005
        and
        2004 are as follows:
 
 **January
                  31, 2005**
              
              
              **January
                  31, 2004**Current:Allowance for bad debts
              
              $
              23
              
              $
              16Accrued vacation
              
              
              9
              
              
              20Inventory Reserve
              
              
              973
              
              
              1,388Deferred Revenue
              
              
              452
              
              
              157Other
              
              
              24
              
              
              64Valuation allowance
              
              
              (1,481
              )
              
              (1,645
              )Total current
              
              
              -
              
              
              -Non-current:Net operating loss carry forwards
              
              
              33,624
              
              
              33,501Fixed Assets
              
              
              123
              
              
              154Valuation allowance
              
              
              (33,747
              )
              
              (33,655
              )Net deferred tax asset
              
              $
              -
              
              $
              -
 
 At
        January 31, 2005, our deferred income tax assets consist primarily of net
        operating loss carry forwards. The deferred tax asset was fully reserved
        as of
        January 31, 2005.
 
 In
        assessing the reliability of deferred tax assets, management considers whether
        it is more likely than not that some portion or all of the deferred tax assets
        will not be realized. The ultimate realization of deferred tax assets is
        dependent upon the generation of future taxable income during the periods
        in
        which those temporary differences become deductible. Based upon the level
        of
        historical taxable income and projections for future taxable income over
        the
        periods which the deferred tax assets are deductible, management believes
        that
        insufficient evidence exists to conclude that it is more likely than not
        that
        the Company will realize the benefits of these deductible
        differences.
 
 At
        January 31, 2005 the Company had available federal and state net operating
        loss
        carry forwards of approximately $95 million and $15 million, respectively,
        for
        income tax purposes. The federal and state losses will begin expiring in
        the
        2006 and 2005 tax years, respectively. As of January 31, 2005 and 2004 our
        effective income tax rate differs from the federal statutory income tax rate
        due
        to state taxes net of federal benefit and state net operating loss limitations.
 
 The
        utilization of the loss carry forwards as an offset to future taxable income
        is
        subject to limitations under U.S. federal income tax laws. One such limitation
        is imposed when there is a greater than 50% ownership change. An ownership
        change may have occurred during the tax year ended January 31, 2001. As such,
        the above loss may be subject to the limitation of Section 382. At January
        31,
        2005 and 2004, a valuation allowance was recorded to reduce the deferred
        tax
        asset to zero since the recognition of the tax benefit could not be assured.
  24
  
 **Results
        of Operations: Comparison of the Years Ended January 31, 2004 and January
        31,
        2003**
 
 ***Net
        revenue.*** Our
        consolidated net revenue from continuing operations was $6.2 million for
        fiscal
        2004, compared to $13.6 million for fiscal 2003. Product revenues decreased
        to
        $5.2 million for fiscal 2004 from $12.2 million for fiscal 2003. The decrease
        in
        product revenue for fiscal 2004 resulted primarily from the loss of our major
        customer, Cisco. Service revenue decreased from $1.4 million in fiscal 2003
        to
        $1.0 million in fiscal 2004. The decrease was due primarily to the decline
        in
        frame relay service customer renewals.
 
 Our
        Sync
        Research net revenues from the frame relay and service business declined
        21.1%
        to $1.5 million for the fiscal year ended January 31, 2004 compared to $1.9
        million net revenues for the fiscal year ended January 31, 2003.
 
 Our
        Sync
        Research service revenue declined $0.4 million or 28.2% compared to fiscal
        year
        2003 primarily due to the loss of several service customers.
 
 Our
        Rixon
        Networks net revenues were primarily from adapter card product revenues.
        These
        product revenues decreased $7.0 million or 59.8% to $4.7 million for the
        fiscal
        year ended January 31, 2004 from $11.7 million for the fiscal year ended
        January
        31, 2003. This was primarily due to the loss of Cisco as previously described.
 
 We
        had no
        revenues in our Torrey Pines Network subsidiary.
 
 ***Gross
        profit.*** Cost of
        revenues consists principally of the costs of components, subcontract assembly
        from outside contract manufacturers, and in-house system integration, quality
        control, final testing, configuration costs and outside service costs. Gross
        profit decreased to $1.4 million for the fiscal 2004 from $6.5 million for
        fiscal 2003. Our gross margin decreased to 22.6% for the fiscal year ended
        January 31, 2004 from 47.8% for fiscal 2003. The decrease in gross margins
        resulted primarily from the increased provision for inventory reserves and
        the
        loss of our major customer, Cisco.
 
 Our
        Sync
        Research gross profit of $0.7 million for the fiscal year ended January 31,
        2004
        dropped by $0.4 million or 36.4% compared to $1.1 million for the fiscal
        year
        ended January 31, 2003. This was primarily due to a 51.6% increase in service
        cost of sales to $0.3 million due to a prior year credit cost adjustment
        for
        over accrued services.
 
 Our
        Rixon
        Networks gross profit of $0.7 million decreased by $4.7 million or 87.8%
        for the
        fiscal year ended January 31, 2004 over the gross profit of the prior fiscal
        year of $5.4 million. Decreased net revenues and the increased provision
        for
        inventory reserves during the fiscal year were the major elements of the
        increase.
 
 ***Other
        operating expenses.*** In both
        fiscal years the other operating expense was rent expense for our under utilized
        facility in Annapolis Junction, MD. The decreased expense for the fiscal
        year
        ended January 31, 2004 was due to a lease termination agreement for this
        facility effective July 31, 2003. This lease was to have otherwise expired
        in
        October 2004.
 
 ***Selling
        and marketing.*** Selling
        and marketing expenses consist primarily of employee compensation and related
        costs, commissions to sales representatives, tradeshow expenses and travel
        expenses. Selling and marketing expenses decreased due to reductions in selling
        and marketing costs reflects primarily personnel reductions that were the
        end
        result of facility and organizational consolidations begun in fiscal 2002.
 
 ***General
        and administrative.*** General
        and administrative expenses consist primarily of employee compensation and
        related costs, legal and accounting fees, public company costs, and occupancy
        costs. General and administrative expenses decreased primarily due to the
        consolidation of all of our operations in our Irvine, CA facility and
        organizational restructuring finalized during fiscal year 2004.
 
 25
 ***Engineering,
        research and development.*** Engineering, research and development expenses consist primarily of compensation
        related costs for engineering personnel, facilities costs, and materials
        used in
        the design, development and support of our technologies. All research and
        development costs are expensed as incurred. Engineering, research and
        development expenses remained on track for the development of our Torrey
        Pines'
        products.
 
 ***Income
        taxes.*** There
        was no provision for income taxes for fiscal years 2004 and 2003. We have
        carry
        forwards of domestic federal net operating losses, which may be available,
        in
        part, to reduce future taxable income in the United States. However, the
        Internal Revenue Code limits the application of net operating loss carry
        forwards in the event of ownership changes of greater than 50%. We had a
        change
        of ownership in fiscal year 2001 that will limit the amount of any net operating
        loss carry forward we may use in a particular year.
  **Liquidity
        and Capital Resources**
 
 At
        January 31, 2005, we had a working capital deficit of $136 thousand, a decrease
        of $2.3 million from the working capital of $2.2 million at January 31, 2004.
        Cash flow used by operations was $1.4 million during the twelve months ended
        January 31, 2005 compared with $0.2 million for the twelve months ended January
        31, 2004. The increase in cash flows used by operations reflects primarily
        an
        increase in net loss from operations after adjustment for non-cash expenses
        including depreciation, amortization, reserves, non-cash interest expense
        as
        well as a decrease in accounts receivable and an increase in our interest
        costs
        due to short term financing for working capital and our Torrey Pines
        subsidiary's acquisition of Microtek. During the twelve months ended January
        31,
        2005, operating cash flow also reflect cash provided from increases in accounts
        payable, declines in prepaid and other current assets and inventories, offset
        by
        a increase in accrued expenses.. During the twelve months ended January 31,
        2004, operating cash flow reflects cash used for accounts payables, accrued
        expenses and in other current liabilities offset by a decrease in inventories,
        accounts receivables and other current assets.
  Our
        net
        investing activities consist primarily of purchases of property, plant and
        equipment and our purchase in May 2004 of Microtek Systems, Inc. Cash
        investments activities in the twelve months ended January 31, 2005 were $84
        thousand for the purchase of property, plant and equipment and $511 thousand
        for
        the acquisition of Microtek Systems.
  Our
        financing activities during the twelve months ended January 31, 2005 provided
        net cash flows of $2.1 million, primarily in connection with short-term bank
        debt and debt raised through the issuance of promissory notes totaling net
        of
        payments $1.875 million with maturities of $1.125 million and
        $0.750 million on July 31, 2005 for our Torrey Pines subsidiary's acquisition
        of
        Microtek Systems and working capital.
  At
        January 31, 2005, our working capital was $(136) thousand and cash and cash
        equivalents and short-term investments were $148 thousand. At January 31,
        2004,
        our working capital was $2.2 million and cash and cash equivalents and
        short-term investments were $72 thousand. ****
  We
        have
        in place a line of credit that allows us to bridge the gap between our daily
        cash requirements and the cash we have on hand. We and our subsidiaries,
        Rixon
        Networks, Inc., Sync Research, Inc., and Torrey Pines Networks, Inc., including
        its subsidiary, Microtek Systems, Inc., are parties to that certain Amendment
        to
        Loan Documents and that certain Loan and Security Agreement (together, the
        "Amended and Restated Loan Agreement") with Silicon Valley Bank, a California
        chartered bank ("Silicon Valley Bank") dated December 14, 2004, which Amended
        and Restated Loan Agreement amends and restates that certain Loan and Security
        Agreement between the same parties and dated February 20, 2001, as amended
        through December 13, 2004 (the "Prior Loan Agreement"). We require access
        to
        this line of credit in order to operate. The credit facility is due to expire
        on
        July 31, 2005.
  26
 Under
        the
        Amended and Restated Loan Agreement, Silicon Valley Bank may, in its sole
        discretion, make advances to us against Eligible Accounts (as defined in
        the
        Amended and Restated Loan Agreement) of Rixon Networks, Sync Research, Torrey
        Pines and Microtek Systems. The principal amount of such advances will not
        exceed 75% of the face amount of Eligible Accounts of each of Rixon Networks
        and
        Sync Research and 80% of the face amount of Eligible Accounts of each of
        Torrey
        Pines and Microtek Systems, subject to certain adjustments. Silicon Valley
        Bank
        may change these percentages at any time in its sole discretion. The aggregate
        face amount of all Financed Receivables (defined as those Eligible Accounts
        against which Silicon Valley Bank makes advances to us) outstanding at any
        time
        may not exceed $1.0 million. In addition, Silicon Valley Bank has no obligation
        to make advances to us in excess of $800,000 in the aggregate at any time
        outstanding.
  Amounts
        borrowed under the Amended and Restated Loan Agreement accrue interest at
        an
        annual rate equal to Silicon Valley Bank's prime rate plus 5% (10.25% at
        January
        31, 2005). The minimum monthly interest payment during the term of the Amended
        and Restated Loan Agreement is $750. We are also subject to a monthly
        "collateral handling fee" of 0.75% of the Financed Receivable Balance (as
        defined in the Amended and Restated Loan Agreement) for each Financed Receivable
        outstanding, based upon a 360 day year (9.0% at January 31, 2005). Upon an
        Event
        of Default (as defined in the Amended and Restated Loan Agreement), the annual
        interest rate will increase by an additional 5% and the collateral handling
        fee
        will increase by an additional 0.50%.
  Under
        the
        Amended and Restated Loan Agreement, we are obligated to repay amounts advanced
        against each Financed Receivable, including all related and accrued interest,
        other finance charges and the collateral handling fee, upon the earlier of
        (i)
        the date on which payment of the Financed Receivable is received; (ii) the
        date
        on which the Financed Receivable no longer qualifies as an Eligible Account;
        (iii) the date on which any Adjustment (as defined in the Amended and Restated
        Loan Agreement) is asserted against the Financed Receivable (to the extent
        of
        such Adjustment); (iv) the date on which we breach certain representations
        and
        warranties or any covenant under the Amended and Restated Loan Agreement;
        or (v)
        expiration of the Amended and Restated Loan Agreement.
  To
        secure
        our repayment of amounts borrowed under the Amended and Restated Loan Agreement,
        we granted to Silicon Valley Bank a security interest in substantially all
        of
        our assets, including our intellectual property rights, now owned or hereafter
        acquired. Pursuant to the Amended and Restated Loan Agreement, we are precluded
        from incurring any additional indebtedness other than certain permitted
        indebtedness as specifically set forth in the Amended and Restated Loan
        Agreement, which may include debt which is subordinated to our indebtedness
        to
        Silicon Valley Bank and incurred on terms acceptable to Silicon Valley
        Bank.
  Upon
        an
        Event of Default, Silicon Valley Bank may pursue a variety of remedies
        including, but not limited to, ceasing to make advances to us, declaring
        all our
        indebtedness to Silicon Valley Bank immediately due and payable, and taking
        possession and disposing of the collateral securing our performance obligations
        under the Amended and Restated Loan Agreement. Pursuant to the Amended and
        Restated Loan Agreement, an Event of Default includes, but is not limited
        to,
        our failure to timely repay our indebtedness to Silicon Valley Bank, our
        failure
        to perform any material term, provision or covenant included in the Amended
        and
        Restated Loan Agreement, the occurrence of a Material Adverse Change (as
        defined
        in the Amended and Restated Loan Agreement), our insolvency, and certain
        defaults by us under agreements with third parties.
  Outstanding
        borrowings were $295,000 under the Amended and Restated Loan Agreement, as
        of
        January 31, 2005. The Amended and Restated Loan Agreement was to expire on
        December 17, 2004. However, each of the parties to the Amended and Restated
        Loan
        Agreement entered that certain Amendment to Loan Documents dated December
        22,
        2004, pursuant to which the parties extended the expiration date of the Amended
        and Restated Loan Agreement to January 30, 2005.  The
        expiration date of the Amended and Restated Loan Agreement has been further
        extended to July 31, 2005.
  27
 On
        February 8, 2005, Entrada and Silicon Valley Bank executed that certain
        Amendment to Loan Documents, effective as of February 8, 2004 (the "Loan
        Agreement Amendment"), pursuant to which the parties extended the expiration
        date of the Amended and Restated Loan Agreement (the "Maturity Date") to
        March
        1, 2005. And, on March 4, 2005 the parties executed another Amendment to
        Documents, pursuant to which the Maturity Date was extended to March 31,
        2005.
  On
        April
        5, 2005, Entrada and Silicon Valley Bank executed that certain Amendment
        to Loan
        Documents, effective as of March 31, 2004 (the "Loan Agreement Amendment"),
        pursuant to which the parties extended the expiration date of the Amended
        and
        Restated Loan Agreement to April 30, 2005. As per this Loan Agreement Amendment,
        the aggregate face amount of all financed receivables outstanding at any
        time
        may not exceed $625 thousand, and Silicon Valley Bank has no obligation to
        make
        advances to Entrada in excess of $500 thousand in the aggregate at any time
        outstanding. In addition, interest accrues at an annual rate equal to Silicon
        Valley Bank's prime rate plus 8.0% (13.25%).
  On
        February 6, 2004, to raise interim financing, we issued Term Notes in the
        aggregate principal amount of $500,000, pursuant to that certain Term Credit
        Agreement (the "Original Credit Agreement") dated January 30, 2004, by and
        among
        us, Hong Kong League Central Credit Union ("HKL"), HIT Credit Union ("HIT")
        (hereinafter, the "Lenders") and SBI Advisors, LLC ("SBI"). The Term Notes
        are
        secured by our assets and mature on March
        31 , 2005. We
        are required to make monthly payments of interest accrued on the Term Notes.
        Interest accrues at the annual rate of 24%. We have the right to prepay the
        Term
        Notes without penalty. In connection with this transaction, we issued warrants
        to purchase an aggregate of 500,000 of our shares of common stock at a per
        share
        exercise price of $0.35. The warrants have a three-year term and are entitled
        to
        piggy-back registration rights.
  On
        May
        14, 2004, to raise interim financing, we issued additional Term Notes in
        the
        aggregate principal amount of $1,000,000, pursuant to that certain First
        Amendment to Term Credit Agreement dated May 14, 2004, by and among us, HKL,
        HIT, Brightline Bridge Partners I, LLC ("Brightline") and SBI (the "First
        Amendment") which amended the Original Credit Agreement. The Term Notes are
        secured by our assets and mature on March
        31 , 2005. We
        are required to make monthly payments of interest accrued on the Term Notes.
        Interest accrues at the annual rate of 24%. We have the right to prepay the
        Term
        Notes without penalty. In connection with this transaction, we issued warrants
        to purchase an aggregate of 5,000,000 of our shares of common stock at a
        per
        share exercise price of $0.16. The warrants have three-year terms and are
        entitled to piggy-back registration rights. In addition, we paid $75,000
        in fees
        and issued 125,000 shares of common stock in connection with this
        transaction.
  On
        May
        14, 2004, Torrey Pines acquired Microtek Systems, Inc. Under the terms of
        this
        acquisition, Torrey Pines acquired all of the issued capital stock of Microtek
        in exchange for $750,000 in cash, $150,000 in promissory notes, 1,302,083
        shares
        of our common stock, and other consideration. Of the $1,000,000 we concurrently
        raised in the interim financing, we used $750,000 as cash consideration to
        buy
        Microtek.
  On
        October 4, 2004, to raise interim financing, we issued an additional Term
        Note
        in the principal amount of $750,000, pursuant to that certain Second Amendment
        to Term Credit Agreement (the "Second Amendment") dated October 4, 2004 by
        and
        among us, HKL, HIT, Brightline, Matthew McGovern, Jon Buttles and SBI, which
        further amends the Original Credit Agreement. The Term Note is secured by
        our
        assets and matures on March 31, 2005. We are required to make monthly payments
        of interest accrued on the Term Notes. Interest accrues at the annual rate
        of
        24%. We have the right to prepay the Term Note without penalty. In connection
        with this transaction, we issued warrants to purchase an aggregate of 15,000,000
        of our shares of common stock at a per share exercise price of $0.10. The
        warrants have three-year terms and are entitled to piggy-back registration
        rights. In addition, we paid $75,000 in fees in connection with this
        transaction.
  Our
        obligations under the Original Credit Agreement, the First Amendment and
        the
        Second Amendment and the third amendment are secured by all of our assets
        pursuant to the terms of that certain Security Agreement dated January 30,
        2004,
        by and among us and SBI (the "Security Agreement").
  28
 At
        the
        option of the Lenders or SBI, the Company will be obligated to immediately
        repay
        all unpaid principal and interest under the Term Notes issued by the Company
        under the Original Credit Agreement, the First Amendment, and the Second
        Amendment upon any Event of Default, which term includes our failure to pay
        any
        principal or interest under the Term Notes when due and payable, our breach
        of
        any covenant, representation or warranty under the Original Credit Agreement
        or
        the Security Agreement, our default under certain agreements identified in
        the
        Original Credit Agreement, the creation of certain liens against our assets
        or
        properties, and our insolvency or dissolution, as more specifically described
        in
        the Original Credit Agreement. In addition, upon an Event of Default, interest
        which accrues on the outstanding principal under the Term Notes will increase
        by
        2% per annum.
  Effective
        January 29, 2005, Entrada Networks, Inc. ("Entrada") entered into the Third
        Amendment to Term Credit Agreement (the "Third Amendment") between Entrada,
        Hong
        Kong League Central Credit Union ("HKL"), HIT Credit Union ("HIT"), Brightline
        Bridge Partners I, LLC ("Brightline"), Matthew McGovern ("Mr. McGovern"),
        and
        Jon Buttles ("Mr. Buttles") (collectively, the "Lenders") and SBI Advisors,
        LLC
        ("SBI").
  Pursuant
        to the Third Amendment, effective January 29, 2005, the Lenders agreed to
        extend
        from January 29, 2005 to March 31, 2005 the date on which Entrada must repay
        all
        unpaid principal owed by Entrada pursuant to the Original Credit Agreement.
        In
        addition, any cash proceeds Entrada receives upon the issuance and sale of
        its
        equity securities shall be first used to pay any accrued interest, ant then
        Entrada will use 70% of the remaining cash proceeds to prepay the outstanding
        principal amount owed under the Original Credit agreement, as
        amended.
  Effective
        March 30, 2005, Entrada entered into the Fourth Amendment between
        Entrada
        and the Lenders that amends the Term Credit Agreement dated March 30, 2004,
        as
        amended by the First Amendment, dated May 14, 2004, as amended by the Second
        Amendment, dated October 1, 2004, and as further amended by the Third Amendment,
        dated January 29, 2005.
  Pursuant
        to the Fourth Amendment, effective March 30, 2005, the Lenders agreed to
        extend
        from March 31, 2005 to July 31, 2005 the date on which Entrada must repay
        all
        unpaid principal and interest owed by Entrada pursuant to the Original Credit
        Agreement, as amended.
  Pursuant
        to the Fourth Amendment, effective March 30, 2005, the Lenders agreed to
        reduce
        the interest rate to 10% per annum and the balance of 14% to be Paid In Kind
        which shall be computed and compounded monthly.
  In
        addition, upon repayment of all amounts payable under the terms of the Term
        Notes, Lenders will retain 5,000,000 of the 20,500,000 original
        Warrants issued to SBI Advisors, LLC or its designees, and the balance
        of
        unexercised Warrants held by such parties at the time of repayment of the
        Term
        Notes will be returned to Borrower. These parties and their warrants holdings
        are as follows: (1) 3,500,000 with McGovern Living Trust; (2) 3,650,000 with
        Jon
        Buttles; (3) 3,250,000 with David F. Evans; and (4) 3,500,000 with Crestwood
        Children's Trust. The warrants retained by SBI or its designees shall be
        the
        then lowest priced warrants owned by SBI Advisors, LLC or its
        designees. .
  29
  We
        have
        suffered recurring losses from operations through January 31, 2005 and as
        of
        January 31, 2005,  we had a negative working capital of $136 thousand.
        We
        recognize that in order to meet our capital requirements, and continue to
        operate, additional funding is necessary. We are exploring additional sources
        of
        liquidity, through debt and equity financing alternatives. If we are (i)
        unable
        to grow our business or improve our operating cash flows as expected, (ii)
        unsuccessful in retiring or restructuring the debt repayments due by July
        30,
        2005 in the
        aggregate principal amount of $1.9 million pursuant to the Original Credit
        Agreement, as amended, or (iii) unable to raise additional funds through
        offerings of our common stock, then we may be unable to continue as a going
        concern. There can be no assurance that additional financing will be available
        when needed or, if available, that it will be on terms favorable to us and
        our
        stockholders.
  If
        we are
        not successful in generating sufficient cash flows from operations, or in
        raising additional capital when required in sufficient amounts and on terms
        acceptable to us, these failures would have a material adverse effect on
        our
        business, results of operations and financial condition. If additional funds
        are
        raised through the issuance of equity securities, the percentage ownership
        of
        our current stockholders would be diluted.
  We
        continue to pursue external equity financing arrangements that could enhance
        our
        liquidity position in the coming years. Nonetheless, our future capital
        requirements may vary materially from those now planned including the need
        for
        additional working capital to accommodate infrastructure needs. There can
        be no
        assurances that our working capital requirements will not exceed our ability
        to
        generate sufficient cash internally to support our requirements and that
        external financing will be available or that, if available, such financing
        can
        be obtained on terms favorable to us and our stockholders.
  While
        we
        experienced an operating loss for the 2005 fiscal year due to the loss of
        revenues from Cisco and our declining legacy service contracts, we are working
        toward a positive cash flow with our personnel reductions and cost cutting
        measures. However, there can be no assurance that future revenue gains from
        our
        additional sales personnel or anticipated cost reductions will occur or be
        sufficient to maintain operations if there are further reductions in revenue
        resulting from changes in the economy or our product marketing
        areas.
  The
        following table presents, at January 31, 2005, our obligations and commitments
        to make future payments under contracts and contingent commitments.
 
 **Payment
                  Due by Period as of January 31, 2005**Less
                than
              
              
              **1-3**
              
              
              **4-5**
              
              
              **After
                  5****Contractual
                    Obligations (In thousands)**
              
              
              Total
              
              
              **1
                  Year**
              
              
              **Years**
              
              
              **Years**
              
              
              **Years**Short Term Debt
              
              $
              2,114
              
              $
              2,087
              
              $
              27
              
              
              -
              
              
              -Operating Leases
              
              
              372
              
              
              184
              
              
              188
              
              
              -
              
              
              -**Total Contractual Cash Obligations**
              
              $
              2,486
              
              $
              2,271
              
              $
              215
              
              $
              -
              
              $
              -
 
  **Effects
        of Inflation and Currency Exchange Rates**
 
 We
        believe that the relatively moderate rate of inflation in the United States
        over
        the past few years has not had a significant impact on our revenue or operating
        results or on the prices of raw materials. There can be no assurance, however,
        that inflation will not have a material adverse effect on our operating results
        in the future.
 
 All
        of
        our revenue and expenses are currently denominated in U.S. dollars and to
        date
        our business has not been affected by currency fluctuations. In the future,
        however, we could conduct business in several different countries and thus
        fluctuations in currency exchange rates could cause our products to become
        relatively more expensive in particular countries, leading to a reduction
        in
        revenue in that country. In addition, inflation in such countries could increase
        our expenses. In the future, we may engage in foreign currency denominated
        revenue or pay material amounts of expenses in foreign currencies and, in
        such
        event, may experience gains and losses due to currency fluctuations. Our
        operating results could be adversely affected by such
        fluctuations.
 30
 **New
        Accounting Standards**
 
  In
        January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
        Interpretation No. 46, "Consolidation of Variable Interest Entities," an
        interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial
        Statements." This pronouncement requires the consolidation of variable interest
        entities, as defined, and is effective immediately for variable interest
        entities created after January 31, 2002, and for variable interest entities
        in
        which an enterprise obtains an interest after that date. We have no variable
        interest entities and thus this interpretation is not expected to have a
        material impact our financial statements.
 
 In
        December 2004, the FASB issued statement No. 123R, , "Share-Based Payment",
        a
        revision to statement No. 123 "Accounting for Stock Based Compensation,"
        This
        statement replaces statement no. 123 and supersedes APB No. 25. This statement
        sets accounting requirements for "share-based" compensation to employees,
        including employee-stock-purchase-plans (ESPPs) and provides guidance on
        accounting for awards to non-employees. This Statement will require the Company
        to recognize in the income statement the grant-date fair value of stock options
        and other equity-based compensation issued to employees, but expresses no
        preference for a type of valuation model. For public entities, this Statement
        is
        effective for the first interim period beginning after December 15, 2005.
        The
        Company will adopt this Statement in our fiscal year beginning February 1,
        2006
        and is evaluating this pronouncement's effect on the Company's financial
        position and net income.
   In
        November 2004, the FASB issued statement No. 151, "Inventory Costs." This
        statement eliminates the "so abnormal" criterion in ARB 43 "Inventory Pricing"
        and no longer permits a company to capitalize inventory costs on their balances
        sheets when the production defect rate varies significantly from the expected
        rate. The Statement reduces the differences between U.S. and international
        accounting standards. This Statement is effective for inventory cost incurred
        during annual periods beginning after June 15, 2005. We will adopt this
        Statement in our fiscal year beginning February 1, 2006. We do not believe
        that
        this pronouncement will have a material effect on the Company's financial
        position and net income.
 
 In
        December 2004, the FASB issued  Staff Position No. 109-1 ("FAS 109-1"),
        "Application of FASB Statement No. 109, Accounting for Income Taxes, for
        the Tax
        Deduction on Qualified Production Activities Provided by the American Jobs
        Creation Act of 2004." FAS 109-1 clarifies that the deduction will be treated
        as
        a "special deduction" as described in Statement of Financial Accounting
        Standards No. 109, "Accounting for Income Taxes." As such, the special deduction
        has no effect on deferred tax assets and liabilities existing at the date
        of
        enactment. The impact of the deduction will be reported in the period in
        which
        the deduction is claimed. We are currently assessing the financial impact
        of FAS
        109-1 on our consolidated financial statements
  **Critical
        Accounting Policies and Estimate** s
 
 Our
        discussion and analysis of our financial condition and results of operations
        are
        based upon our consolidated financial statements, which have been prepared
        in
        accordance with accounting principles generally accepted in the United States.
        The preparation of these financial statements requires us to make estimates
        and
        judgments that affect the reported amounts of assets, liabilities, revenues
        and
        expenses, and related disclosures of contingent assets and liabilities. On
        an
        on-going basis, we evaluate our estimates, including those related to our
        valuation of inventory and our allowance for uncollectable accounts receivable.
        We base our estimates on historical experience and on various other assumptions
        that are believed to be reasonable under the circumstances, the results of
        which
        form the basis for making judgments about the carrying values of assets and
        liabilities that are not readily apparent from other sources. Actual results
        may
        materially differ from these estimates under different assumptions or
        conditions.
 
 31
 We
        believe the following critical accounting policies affect our more significant
        judgments and estimates used in the preparation of our consolidated financial
        statements:
 
 Since
              we account for and report our physical inventory at the "lower of cost
              or
              market", and such net inventory comprises 50.1% of our current assets
              and
              36.2% of total assets at January 31, 2005, we carefully evaluate the
              market
              value of that inventory on a continual basis. In a business such as
              ours,
              wherein we are stocking replacement parts to satisfy a customer's unknown
              needs, determining obsolescence is an inherently subjective process.
              Adjustments to obsolescence reserves are made based on judgments of
              market
              value that are supported by our best estimates of the future salability
              of
              specific items in that inventory*.*
          Accounts
              receivable balances are evaluated on a continual basis and allowances
              are
              provided for potentially uncollectable accounts based on management's
              estimate
              of the collectability of customer accounts. If the financial condition
              of a
              customer were to deteriorate, resulting in an impairment of their ability
              to
              make payments, an additional allowance may be required. Allowance adjustments
              are charged to operations in the period in which the facts that give
              rise to
              the adjustments become known.
 **** **Item
        7.**  **Financial
        Statements**
  **INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **Page**Report of Independent Registered Public Accounting Firm
                F-1Consolidated Balance Sheets as of January 31, 2005 and
                    2004
                F-2Consolidated Statements of Operations for the years endedJanuary
                      31, 2005 and 2004
                F-3Consolidated Statements of Stockholders' Equity for the
                    years ended
                    January 31, 2005 and 2004
                F-4Consolidated Statements of Cash Flows for the
                    years ended
                    January 31, 2005 and 2004
                F-5Notes to Consolidated Financial Statements
                F- 6
                    to F-20
 32
 
 ***Report
        of Independent Registered Public Accounting Firm***
 
 
 
 Board
        of
        Directors and Stockholders
 Entrada
        Networks, Inc.
 
 We
        have
        audited the balance sheet of Entrada Networks, Inc. (the Company)
        as of
        January 31, 2005, and the related statements of operations, stockholders'
        equity, and cash flows for the year then ended. These financial statements
        are
        the responsibility of the Company's management. Our responsibility is to
        express
        an opinion on these financial statements based on our audit. The financial
        statements of Entrada Networks, Inc. as of January 31, 2004 and for the year
        then ended, were audited by other auditors whose report dated March 25, 2004,
        expressed an unqualified opinion on those statements.
 
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States).  Those standards require
        that
        we plan and perform the audit to obtain reasonable assurance about whether
        the
        financial statements are free of material misstatement *.*  The
        Company is not required to have, nor were we engaged to perform, an audit
        of its
        internal control over financial reporting. Our audit included consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company's internal control
        over financial reporting. Accordingly, we express no such opinion. An
        audit also includes examining, on a test basis, evidence supporting the amounts
        and disclosures in the financial statements, assessing the accounting principles
        used and significant estimates made by management, as well as evaluating
        the
        overall financial statement presentation.  We believe that our audit
        provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Entrada Networks, Inc. as of
        January 31, 2005, and the results of its operations and its cash flows for
        the
        year then ended  in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the financial
        statements, the Company has reported accumulated losses as of January 31,
        2005
        and is dependent on additional financing to fund operations through the fiscal
        year ending January 31, 2006 and beyond. These factors raise substantial
        doubt
        about the Company's ability to continue as a going concern. Management's
        plans
        as to these matters are described in Note 2. The financial statements do
        not
        include any adjustments to reflect the possible future effects on the
        recoverability and classification of assets or the amounts and classification
        of
        liabilities that may result from the outcome of this uncertainty.
 
 /s/
                  Pererson & Co., LLPPeterson
                  & Co.,LLPSan
                  Diego, CaliforniaMay
                  13, 2005
 
 
 F-1
   **ENTRADA
                  NETWORKS, INC.*****AND
                  SUBSIDIARIES******CONSOLIDATED
                  BALANCE SHEETS JANUARY 31, 2005 AND 2004******(In
                  Thousands)*****January
                  31, 2005**
              
              
              **January
                  31, 2004****ASSETS****CURRENT ASSETS****Cash and equivalents**
              
              **$**
              **148**
              
              **$**
              **72****Accounts receivable, net of allowance for doubtful accounts of
                  $59 and
                  $39, respectively**
              
              
              **596**
              
              
              **561****Inventory, net**
              
              
              **2,154**
              
              
              **2,294****Deferred costs**
              
              
              **960**
              
              
              **-****Prepaid expenses and other current assets**
              
              
              **444**
              
              
              **350****TOTAL CURRENT ASSETS**
              
              
              **4,302**
              
              
              **3,277****PROPERTY
                  AND EQUIPMENT, NET**
              
              
              **496**
              
              
              **590****GOODWILL**
              
              
              **1,135**
              
              
              **-****OTHER
                  ASSETS****Deposits**
              
              
              **23**
              
              
              **39****TOTAL OTHER ASSETS**
              
              
              **23**
              
              
              **39****TOTAL
                  ASSETS**
              
              **$**
              **5,956**
              
              **$**
              **3,906****LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES****Accounts payable**
              
              **$**
              **691**
              
              **$**
              **383****Other current and accrued liabilities**
              
              
              **498**
              
              
              **265****Short-term debt****Bank**
              
              
              **295**
              
              
              **65****Other**
              
              
              **1,819**
              
              
              **-****Total Short-Term Debt**
              
              
              **2,114**
              
              
              **65****Deferred Revenue**
              
              
              **1,135**
              
              
              **394****TOTAL
                  LIABILITIES**
              
              
              **4,438**
              
              
              **1,107****COMMITMENTS
                  AND CONTINGENCIES (Notes 7 and 8)****STOCKHOLDERS'
                  EQUITY****Preferred
                  stock, $.001 par value; 2,000 shares authorized; -0- shares
                  issued.****Common
                  stock, $.001 par value; 150,000 shares authorized; 15,430
                  shares****issued and outstanding at January 31, 2005; 13,901 shares
                  issued****and outstanding at January 31, 2004**
              
              
              **15**
              
              
              **13****Treasury Stock, 86,026 and 402,616 shares at cost , at January
                  31, 2005
                  and January 31, 2004, respectively**
              
              
              **(26**
              **)**
              
              **(127**
              **)****Additional paid-in capital**
              
              
              **54,523**
              
              
              **52,001****Accumulated deficit**
              
              
              **(52,994**
              **)**
              
              **(49,088**
              **)****TOTAL
                  STOCKHOLDERS' EQUITY**
              
              
              **1,518**
              
              
              **2,799****TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY**
              
              **$**
              **5,956**
              
              **$**
              **3,906**
 ***See accompanying notes to consolidated financial
        statements.***
  F-2
  **ENTRADA
                  NETWORKS, INC.*****AND
                  SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JANUARY 31, 2005 and,
                  2004************(In
                  Thousands, except per share amounts)*****2005**
              
              
              **2004****NET
                  REVENUES****PRODUCT**
              
              **$**
              **2,623**
              
              **$**
              **5,224****SERVICES**
              
              
              **1,501**
              
              
              **997****TOTAL NET REVENUES**
              
              
              **4,124**
              
              
              **6,221****COST
                  OF REVENUE****PRODUCT**
              
              
              **1,769**
              
              
              **4,532****SERVICES**
              
              
              **685**
              
              
              **326****TOTAL COST OF REVENUE**
              
              
              **2,454**
              
              
              **4,858****GROSS
                  PROFIT**
              
              
              **1,670**
              
              
              **1,363****OPERATING
                  EXPENSES****Selling and marketing**
              
              
              **696**
              
              
              **456****Engineering, research and development**
              
              
              **853**
              
              
              **1,150****General and administrative**
              
              
              **2,601**
              
              
              **1,457****Other operating expenses**
              
              
              **-**
              
              
              **341****TOTAL OPERATING EXPENSES**
              
              
              **4,150**
              
              
              **3,404****INCOME
                  (LOSS) FROM OPERATIONS**
              
              
              **(2,480**
              **)**
              
              **(2,041**
              **)****OTHER
                  INCOME (EXPENSE)****Interest expense, net**
              
              
              **(1,399**
              **)**
              
              **(14**
              **)****Other income (expense)**
              
              
              **27**
              
              
              **71****TOTAL OTHER INCOME (EXPENSE)**
              
              
              **(1,372**
              **)**
              
              **57****NET
                  INCOME (LOSS)**
              
              **$**
              **(3,852**
              **)**
              **$**
              **(1,984**
              **)****INCOME
                  (LOSS) PER COMMON SHARE):****BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
                  OUTSTANDING**
              
              
              **14,982**
              
              
              **13,528****NET INCOME (LOSS) PER COMMON SHARE:****BASIC**
              
              **$**
              **(0.26**
              **)**
              **$**
              **(0.15**
              **)****DILUTED**
              
              **$**
              **(0.26**
              **)**
              **$**
              **(0.15**
              **)**
 ***See accompanying notes to consolidated financial
        statements.***
  F-3
 **ENTRADA
                  NETWORKS, INC.*****AND
                  SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED JANUARY,
                  2005 and
                  2004******(In
                  Thousands)*****ADDITIONAL**
              
              
              
              
              
              **TOTAL****COMMON** 
                  **STOCK**
              
              
              **TREASURY**
              
              
              **PAID
                  IN**
              
              
              **ACCUMULATED**
              
              
              **STOCKHOLDERS'****Shares**
              
              
              **Amount**
              
              
              **STOCK**
              
              
              **CAPITAL**
              
              
              **DEFICIT**
              
              
              **EQUITY****BALANCE
                  AT JANUARY 31, 2003**
              
              
              **12,937**
              
              **$**
              **13**
              
              
              **-**
              
              **$**
              **52,001**
              
              **$**
              **(47,104**
              **)**
              **$**
              **4,910****Treasury Stock**
              
              
              
              
              
              
              
              
              **(127**
              **)**
              
              
              
              
              
              
              
              (127
              )**Warrants Exercised**
              
              
              **964**
              
              
              **-**
              
              
              
              
              
              **-**
              
              
              **-**
              
              
              **-****Net Loss**
              
              
              **-**
              
              
              **-**
              
              
              
              
              
              **-**
              
              
              **(1,984**
              **)**
              
              **(1,984**
              **)****BALANCE
                  AT JANUARY 31, 2004**
              
              
              **13,901**
              
              
              **13**
              
              
              **(127**
              **)**
              
              **52,001**
              
              
              **(49,088**
              **)**
              
              **2,799****Warrants
                  issued in connection with Notes Payable and Marketing
                  Agreement**
              
              
              
              
              
              
              
              
              
              
              
              **2,224**
              
              
              
              
              
              **2,224****Treasury Stock issued**
              
              
              
              
              
              
              
              
              **101**
              
              
              
              
              
              **(54**
              **)**
              ****
              **47****Common stock issued in connection with Compensation Agreement and
                  Acquisition**
              
              
              **1,529**
              
              
              **2**
              
              
              
              
              
              **298**
              
              
              
              
              
              **300****Net Loss**
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              **(3,852**
              **)**
              
              **(3,852**
              **)****BALANCE
                  AT JANUARY 31, 2005**
              
              
              **15,430**
              
              **$**
              **15**
              
              **$**
              **(26**
              **)**
              **$**
              **54,523**
              
              **$**
              **(52,994**
              **)**
              **$**
              **1,518**
  ***See accompanying notes to consolidated financial
        statements.***
  F-4
 **ENTRADA
                  NETWORKS, INC.*****AND
                  SUBSIDIARIES******CONSOLIDATED
                  STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JANUARY 31, 2005 AND
                  2004******(In
                  Thousands)*****2005**
              
              
              **2004****CASH
                  FLOWS FROM OPERATING ACTIVITIES**Net income (loss)
              
              $
              (3,852
              )
              $
              (1,984
              )**Adjustments
                  to reconcile net income (loss) to net cash provided by (used in)
                  operating
                  activities**Depreciation
                  and amortization
              
              
              369
              
              
              486Loss on the disposal of equipment
              
              
              5
              
              
              1Non
                  cash interest associated with debt discount amortization
              
              
              893
              
              
              -Non
                  cash marketing expense
              
              
              198
              
              
              -Provision
                  for doubtful accounts receivable
              
              
              36
              
              
              (95
              )Provision
                  for inventory reserve
              
              
              -
              
              
              1,097Issuance
                  of common stock in exchange for services
              
              
              50
              
              
              -Issuance
                  of treasury stock in exchange for services
              
              
              47
              
              
              -**Changes
                  in assets and liabilities, net of effects of business entity
                  acquisition:**Accounts
                  receivable
              
              
              518
              
              
              807Inventories
              
              
              177
              
              
              175Prepaid
                  and other current assets
              
              
              245
              
              
              517Accounts
                  payable
              
              
              127
              
              
              (428
              )Accrued
                  expenses
              
              
              (256
              )
              
              (584
              )Deferred revenue
              
              
              45
              
              
              -Other
                  current liabilities
              
              
              -
              
              
              (164
              )**NET CASH USED IN OPERATING ACTIVITIES**
              
              
              (1,398
              )
              
              (172
              )**CASH
                  FLOWS FROM INVESTING ACTIVITIES:**Purchase
                  of property and equipment
              
              
              (84
              )
              
              (4
              )Cash paid for acquisition, net of cash acquired
              
              
              (511
              )
              
              -Short-term
                  investments
              
              
              -
              
              
              (82
              )**NET CASH USED IN INVESTING ACTIVITIES**
              
              
              (595
              )
              
              (86
              )**CASH
                  FLOWS FROM FINANCING ACTIVITIES:**Borrowing onshort-term
                  line of credit
              
              
              3,275
              
              
              4,990Payments on short-term line of credit
              
              
              (3,046
              )
              
              (5,400
              )Proceeds from issuances of notes payable
              
              
              2,250
              
              
              -Repayments on notes payable
              
              
              (410
              )
              
              -Repayment
                  of capital lease obligations
              
              
              -
              
              
              (68
              )**NET CASH PROVIDED BY (USED IN) FINANCING
                  ACTIVITIES**
              
              
              2,069
              
              
              (478
              )INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              76
              
              
              (736
              )CASH
                  AND CASH EQUIVALENTS - BEGINNING OF YEAR
              
              
              72
              
              
              808CASH
                  AND CASH EQUIVALENTS - END OF YEAR
              
              $
              148
              
              $
              72
 
 **Supplemental
                  Cash Flow Information**
              
              
              **Fiscal
                  2005**
              
              
              **Fiscal
                  2004**Interest paid
              
              $
              308
              
              $
              22Taxes paid
              
              $
              -
              
              $
              -
 
 **See
        accompanying notes to consolidated financial
        statements.**
  F-5
 
 **ENTRADA
                NETWORKS, INC.**
 ***AND
                SUBSIDIARIES***
 
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
                Thousands, except share and per share amounts)**
 **1.**  **THE
        COMPANY AND BASIS OF PRESENTATION**
 
 Entrada
        Networks, Inc., through its wholly owned subsidiaries, (the "Company", "we",
        "our" or "us"), is in the business of developing, marketing and selling products
        for the network connectivity segments. Our Torrey Pines Networks ("Torrey
        Pines") subsidiary designs, manufactures, markets and sells storage area
        network
        ("SAN") transport switching products. Torrey
        Pines Networks acquired all of the outstanding stock of Microtek Systems,
        Inc.
        on May 14, 2004. Microtek Systems is a provider of security, digital imaging,
        information infrastructures and storage solutions. Microtek Systems extends
        our
        core competencies in network and storage connectivity into solutions and
        applications specific to verticals, notably insurance, healthcare and financial
        sectors.
 
 Our
        Rixon
        Networks ("Rixon") subsidiary designs, manufactures, markets and sells a
        line of
        fast and gigabit Ethernet products that are incorporated into the remote
        access
        and other server products of Original Equipment Manufacturers ("OEM"). In
        addition, some of its products are deployed by telecommunications network
        operators, applications service providers, internet service providers, and
        the
        operators of corporate local area and wide area networks for the purpose
        of
        providing access to and transport within their networks. And, our Sync Research
        ("Sync") subsidiary designs, manufactures, markets, sells and services frame
        relay products for some of the major financial institutions in the U.S. and
        abroad.
 
 We
        manufacture and ship from our facility in Lake Forest, California with corporate
        offices in San Diego, California.
 
 The
        Company, incorporated in Delaware as Sync Research, Inc., is the product
        of a
        reverse merger completed on August 31, 2000 with a wholly owned subsidiary
        of
        Sorrento Networks Corporation. This subsidiary was doing business as Entrada
        Networks-AJ. At the merger, we changed our name to Entrada Networks, Inc. 
        Subsequent to the merger, the former parent of Entrada Networks disposed
        of
        5,517,500 of its shares of our common stock to its shareholders and holds
        approximately 458,286 or 3.3% of our common shares outstanding as of January
        31,
        2005.
 
 
 **2.**  **LIQUIDITY
        AND** **GOING
        CONCERN:**
  The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern, which contemplates the realization of assets
        and the satisfaction of liabilities in the normal course of business. The
        Company incurred a net loss for the year ended January 31, 2005 of $3,852,000,
        has incurred losses since inception totaling $52,994,000 through January
        31,
        2005, and is dependent of raising additional financing fund operations through
        the fiscal year ending January 31, 2006 and beyond. These factors raise
        substantial doubt about the Company's ability to continue as a going
        concern.
  In
        order to
        continue as a going concern and to increase its revenues to a level necessary
        to
        achieve a profitable level of operations, the Company will need, among other
        things, additional capital resources. Management's plans to obtain such
        resources for the Company includes external financing to meet its working
        capital requirements and execute its management strategies of internal
        development and growth through acquisition. The financial statements do not
        include any adjustments that might be necessary if the Company is unable
        to
        continue as a going concern.
  **3.**  **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
  All
        references to a fiscal year refer to the fiscal year ending on January 31
        of
        that year. For example, references to fiscal 2005 refer to the fiscal year
        beginning on February 1, 2004 and ending on January 31, 2005.
 
 ***Principles
        of Consolidation***  - The
        balance sheets as of January 31, 2005 and 2004 and the consolidated statements
        of operations for the years ended January 31, 2005 and 2004 reflect our accounts
        and all subsidiaries controlled by us after the elimination of significant
        inter-company transactions and balances.
 
 ***Use
        of Estimates*** ** - The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates that affect the reported amounts of assets, liabilities, revenues
        and
        expenses, and the disclosure of contingent assets and liabilities. Actual
        results could differ materially from these estimates.
 
 F-6
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  ***Cash
        and Cash Equivalents***  - All cash
        on hand and in banks, certificates of deposit and other highly liquid
        investments with original maturities of three months or less, when purchased
        are
        considered to be cash equivalents.
  ***Accounts
        Receivable***  - In the
        normal course of business, we extend unsecured credit to our customers related
        to the sales of various products. Typically, credit terms require payment
        within
        thirty days from the date of shipment. We evaluate and monitor the
        creditworthiness of each customer on a case-by-case basis. We provide an
        allowance for doubtful accounts based on our continuing evaluation of our
        customers' credit risk. We generally do not require collateral from our
        customers.
 
 ***Inventory***  - Inventories, comprised of raw materials, work in process, finished goods
        and
        spare parts, are stated at the lower of cost (standard cost method which
        approximates, first-in, first-out) or market. Inventories at January 31,
        2005
        and 2004 consist of:
 
 **2005**
                ****
                ****
                **2004**Raw
                    material
                
                $
                1,994
                
                $
                3,002Work
                    in process
                
                
                45
                
                
                61Finished
                    goods
                
                
                2,483
                
                
                2,642Total Inventory
                
                
                4,522
                
                
                5,705Less:
                    Valuation reserve
                
                
                (2,368
                )
                
                (3,411
                )Total Net Inventory
                
                $
                2,154
                
                $
                2,294
 
 ***Fair
          Value of
          Financial Instruments*** - The
          fair value of financial instruments, consisting of cash and cash equivalents
          and
          short term debt, are determined by reference to various market data and
          other
          valuation techniques as appropriate. We believe that there are no material
          differences between the recorded book values of our financial instruments
          and
          their estimated fair values.
  ***Property
          and
          Equipment*** -
          Property and equipment are recorded at historical cost. Repair  and
          maintenance costs are expensed when incurred. Depreciation and amortization
          are
          provided over the estimated useful lives of the individual assets or the
          terms
          of the leases, if shorter, using straight-line methods. Useful lives for
          property and equipment range from 3 to 10 years.
 ***Deferred
            Costs** -* Deferred
            costs represent the unamortized portion of amounts recorded in connection
            with
            the valuation of warrants issued in connection with a marketing agreement.
            Amounts deferred are amortized to expense over the term of the
            agreement.
 ***Goodwill*** -
        Goodwill represents the excess of costs over fair value of assets of businesses
        acquired. The Company adopted the provisions of FASB Statement No. 142,
        "Goodwill and Other Intangible Assets", as of January 1, 2002. Pursuant to
        Statement 142, goodwill and intangible assets acquired in a purchase business
        combination and determined to have an indefinite useful life are not amortized,
        but instead tested for impairment at least annually.  Statement 142
        also
        requires that intangible assets with estimable useful lives be amortized
        over
        their respective estimated useful lives to their estimated residual values,
        and
        reviewed for impairment in accordance with FASB Statement No. 144, "Accounting
        for Impairment or Disposal of Long-Lived Assets."
 
 ***Impairment
        of Long-Lived Assets -*** The
        Company adopted Statement 144 on January 1, 2002. The adoption of Statement
        144
        did not affect the Company's consolidated financial statements.
  In
        accordance with Statement 144, long-lived assets, such as property, and
        equipment, and purchased intangibles subject to amortization, are reviewed
        for
        impairment whenever events or changes in circumstances indicate that the
        carrying amount of an asset may not be recoverable.  If the carrying
        amount
        of an asset exceeds its estimated future cash flows, an impairment charge
        is
        recognized by the amount by which the carrying amount of the asset exceeds
        the
        fair value of the asset. Assets to be disposed of would be separately presented
        in the balance sheet and reported at the lower of the carrying amount or
        fair
        value less costs to sell, and are no longer depreciated. The assets and
        liabilities of a disposed group classified as held for sale would be presented
        separately in the appropriate asset and liability sections of the balance
        sheet.
 
 F-7
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  Goodwill
        is tested annually for impairment, and is tested for impairment more frequently
        if events and circumstances indicate that the asset might be impaired. An
        impairment loss is recognized to the extent that the carrying amount exceeds
        the
        asset's fair value. This determination is made at the reporting unit level
        and
        consists of two steps. First, the Company determines the fair value of a
        reporting unit and compares it to its carrying amount. Second, if the carrying
        amount of a reporting unit exceeds its fair value, an impairment loss is
        recognized for any excess of the carrying amount of the reporting unit's
        goodwill over the implied fair value of that goodwill. The implied fair value
        of
        goodwill is determined by allocating the fair value of the reporting unit
        in a
        manner similar to a purchase price allocation, in accordance with FASB Statement
        No. 141, "Business Combinations." The residual fair value after this allocation
        is the implied fair value of the reporting unit goodwill.
  ***Research
        and Development*** - We
        expense research and development costs as incurred in accordance with Statement
        of Financial Accounting Standards ("SFAS") No. 2, "Accounting for Research
        and
        Development Costs". Research and development costs are costs associated with
        products or processes, including software development costs,  for
        which
        technological feasibility has not been proven and future benefits are uncertain.
        During fiscal year 2005 and 2004 research and development expenses were $0.9
        million and $1.2 million, respectively.
 
 ***Revenue
        Recognition*** - We
        generally recognize product revenue when the products are shipped, all
        substantial contractual obligations, if any, have been satisfied, and the
        collection of the resulting receivable is reasonably assured. Revenue from
        installation is recognized as the services are performed to the extent of
        the
        direct costs incurred. Revenue from service obligations is deferred and
        recognized over the life of the contract. Inventory or demonstration equipment
        shipped to potential customers for field trials is not recorded as revenue.
        We
        accrue for estimated sales returns and other allowances at the time of shipment.
        Although some of our products contain a software component, the software
        is not
        sold separately and we are not contractually obligated to provide software
        upgrades to our customers.
 
 ***Warranty
        and Customer Support***  - We
        typically warrant our products against defects in materials and workmanship
        for
        a period of one to five years from the date of sale and a provision for
        estimated future warranty and customer support costs is recorded when revenue
        is
        recognized. To date, warranty and customer support costs have not been
        material.
 
 ***Income
        Taxes*** - Income
        taxes are accounted for in accordance with Statement of Financial Accounting
        Standards No. 109 "Accounting for Income Taxes. "The statement employs an
        asset
        and liability approach for financial accounting and reporting of deferred
        income
        taxes generally allowing for recognition of deferred tax assets in the current
        period for future benefit of net operating loss and research credit carry
        forwards as well as items for which expenses have been recognized for financial
        statement purposes but will be deductible in future periods. A valuation
        allowance is recognized if, on the weight of available evidence, it is more
        likely than not that some portion or all of the deferred tax assets will
        not be
        realized. .
 
 ***Advertising*** -
        We
        expense advertising expenditures as incurred. Advertising expenses consist
        of
        direct expenditures. There was no advertising expenses incurred during fiscal
        2005 and 2004.
 
 ***Income
        and Loss Per Common Share*** - Basic
        income and loss per common share is computed by dividing net income or loss
        available to common shareholders by the weighted average number of common
        shares
        outstanding during each period presented. Diluted earnings per
        share is based on the weighted average number of common shares outstanding
        as well as dilutive potential common shares, which in our case consist of
        shares
        issuable under stock option plans and warrants. Potential common shares would
        not be included in the diluted loss per share computation for fiscal 2005
        and
        2004, as they would be anti-dilutive..
 
 F-8
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  ***Stock-Based
        Compensation***  All
        stock
        options issued to employees have an exercise price not less than the fair
        market
        value of our common stock on the date of grant, and in accordance with the
        accounting for such options utilizing the intrinsic value method there is
        no
        related compensation expense recorded in our financial statements. Options
        which
        were granted prior to our August 31, 2000 merger were valued as part of the
        consideration for the merger. Had compensation cost for stock-based compensation
        been determined based on the fair value at the grant dates in accordance
        with
        Statement of Financial Accounting Standards No. 123, our net loss and loss
        per
        share for the years ended January 31, 2005 and 2004 would have been as
        follows:
 
 **Fiscal
                  Year****2005**
              
              **2004**Net
                  income (loss) as reported:
              
              $
              (3,852
              )
              $
              (1,984
              )Add: Stock based employee compensation expense
              
              
              -
              
              
              117Deduct: Total stock based employee compensation expense determined
                  under
                  fair value method for all awards, net of related tax
                  effects
              
              
              (192
              )
              
              (250
              )Pro
                  forma income (loss)
              
              $
              (4,044
              )
              $
              (2,117
              )Pro
                  forma income (loss) per share:Basic and diluted EPS as reported
              
              $
              (0.26
              )
              $
              (0.15
              )Pro forma basic and diluted EPS
              
              $
              (0.27
              )
              $
              (0.15
              )
 
 The
        fair
        value of option grants is estimated on the date of grant utilizing the
        Black-Scholes option-pricing model with the following weighted average
        assumptions:
 
 **2005**
              **2004**Risk
                  free interest rate
              4.2%
              4.2%Stock
                  volatility factor
              183%
              183%Weighted
                  average expected option life
              7.78
                  years
              8.09
                  yearsExpected
                  dividend yield
              0.0%
              0.0%Fair
                  value of options granted
              $0.11
                  to $0.26
              $0.01
                  to $0.23Weighted
                  average fair value of options granted
              $0.19
              $0.23
 
 ***New
        Accounting Pronouncements***
 
 In
        January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
        Interpretation No. 46, "Consolidation of Variable Interest Entities," an
        interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial
        Statements." This pronouncement requires the consolidation of variable interest
        entities, as defined, and is effective immediately for variable interest
        entities created after January 31, 2002, and for variable interest entities
        in
        which an enterprise obtains an interest after that date. We have no variable
        interest entities and thus this interpretation is not expected to have a
        material impact on our financial statements.
 
 In
        December 2004, the FASB issued statement No. 123R, , "Share-Based Payment",
        a
        revision to statement No. 123 "Accounting for Stock Based Compensation."
        This
        statement replaces statement no. 123 and supersedes APB No. 25. This statement
        sets accounting requirements for "share-based" compensation to employees,
        including employee-stock-purchase-plans (ESPPs) and provides guidance on
        accounting for awards to non-employees. This Statement will require the Company
        to recognize in the income statement the grant-date fair value of stock options
        and other equity-based compensation issued to employees, but expresses no
        preference for a type of valuation model. For public entities, this Statement
        is
        effective for the first interim period beginning after December 15, 2005.
        The
        Company will adopt this Statement in our fiscal year beginning February 1,
        2006
        and is evaluating this pronouncement's effect on the Company's financial
        position and net income.
 
 In
        November 2004, the FASB issued statement No. 151, "Inventory Costs." This
        statement eliminates the "so abnormal" criterion in ARB 43 "Inventory Pricing"
        and no longer permits a company to capitalize inventory costs on their balances
        sheets when the production defect rate varies significantly from the expected
        rate. The Statement reduces the differences between U.S. and international
        accounting standards. This Statement is effective for inventory cost incurred
        during annual periods beginning after June 15, 2005. We will adopt this
        Statement in our fiscal year beginning February 1, 2006. We do not believe
        that
        this pronouncement will have a material effect on the Company's financial
        position and net income.
 
 F-9
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  In
          December 2004, the FASB issued  Staff Position No. 109-1 ("FAS 109-1"),
          "Application of FASB Statement No. 109, Accounting for Income Taxes, for
          the Tax
          Deduction on Qualified Production Activities Provided by the American Jobs
          Creation Act of 2004." FAS 109-1 clarifies that the deduction will be treated
          as
          a "special deduction" as described in Statement of Financial Accounting
          Standards No. 109, "Accounting for Income Taxes." As such, the special
          deduction
          has no effect on deferred tax assets and liabilities existing at the date
          of
          enactment. The impact of the deduction will be reported in the period in
          which
          the deduction is claimed. We are currently assessing the financial impact
          of FAS
          109-1 on our consolidated financial statements.
 
 **4.**  **PROPERTY
        AND EQUIPMENT**
 
 Property
        and equipment consisted of the following components as of January 31, 2005
        and
        2004:
 
 **2005**
              ****
              ****
              **2004**Manufacturing, engineering and plant equipment and
                  software
              
              $
              2,422
              
              $
              8,469Office furniture and fixtures
              
              
              113
              
              
              275Leasehold and building improvements
              
              
              -
              
              
              249Total property and equipment
              
              
              2,535
              
              
              8,993Less: Accumulated depreciation and amortization
              
              
              (2,039
              )
              
              (8,403
              )Net book value
              
              $
              496
              
              $
              590
 
 Depreciation
        expense for fiscal 2005 and 2004 was $369 and $486, respectively.
  During
        2005,
        we disposed of, or wrote off equipment, furniture and fixtures and leasehold
        improvements totaling $7.043 million and related accumulated depreciation
        of
        $7.03 million in connection with our asset review in December
        2004.
  **5.** **SHORT
        TERM DEBT**
 
 Short
        term debt at January 31, 2005 and 2004 consisted of the following:
 2005
                
                
                2004Bank:Floating interest rate loan based on 2.5%
                    over lender's
                
                $
                -
                
                $
                65prime rate secured by all
                    of our tangible assetsFloating interest rate loan based on 5% over
                    lender's
                
                
                295
                
                
                -prime rate secured
                    by all of our tangible assetsOther:Term Notes at fixed interest rate of 18% to
                    24%Principal balance
                    outstanding
                
                
                1,875
                
                
                -Less: unamortized
                    discount
                
                
                (171
                )
                
                -Net balance
                
                
                1,704
                
                
                -Promissory Note at a fixed interest rate of
                    6%
                
                
                115
                
                
                -Total other
                
                
                1,819
                
                
                -Total
                
                $
                2,114
                
                $
                65
 
 Under
          the
          Amended and Restated Loan Agreement, Silicon Valley Bank may, in its sole
          discretion, make advances to us against Eligible Accounts (as defined in
          the
          Amended and Restated Loan Agreement) of Rixon Networks, Sync Research,
          Torrey
          Pines and Microtek Systems. The principal amount of such advances will
          not
          exceed 75% of the face amount of Eligible Accounts of each of Rixon Networks
          and
          Sync Research and 80% of the face amount of Eligible Accounts of each of
          Torrey
          Pines and Microtek Systems, subject to certain adjustments. Silicon Valley
          Bank
          may change these percentages at any time in its sole discretion. The aggregate
          face amount of all Financed Receivables (defined as those Eligible Accounts
          against which Silicon Valley Bank makes advances to us) outstanding at
          any time
          may not exceed $1.0 million. In addition, Silicon Valley Bank has no obligation
          to make advances to us when the outstanding advances in the aggregate exceed
          $800 thousand.
  Amounts
          borrowed under the Amended and Restated Loan Agreement accrue interest
          at an
          annual rate equal to Silicon Valley Bank's prime rate plus 5% (10.25% at
          January
          31, 2005). The minimum monthly interest payment during the term of the
          Amended
          and Restated Loan Agreement is $750 dollars. We are also subject to a monthly
          "collateral handling fee" of 0.75% of the Financed Receivable Balance (as
          defined in the Amended and Restated Loan Agreement) for each Financed Receivable
          outstanding, based upon a 360 day year (9.0% at January 31, 2005). Upon
          an Event
          of Default (as defined in the Amended and Restated Loan Agreement), the
          annual
          interest rate will increase by an additional 5% and the collateral handling
          fee
          will increase by an additional 0.50%.
  F-10
 On
            February
            6, 2004 we issued Term Notes in the aggregate principal amount of $500
            thousand,
            pursuant to that certain Term Credit Agreement (the “Original Credit Agreement”)
            dated January 30, 2004 by and among us, Hong Kong League Central Credit
            Union
            (“HKL”), HIT Credit Union (“HIT”) (hereinafter, the “Lenders”) and SBI Advisors,
            LLC (“SBI”). The original maturity date of the Term Notes was January 29, 2005,
            which was subsequently extended to July 31, 2005 (see Note 16). The Term
            Notes
            are secured by our assets, and accrue interest at an annual rate of 18%
            - 24%.
            Interest on the Term Notes is payable monthly, and we have the right
            to prepay
            the Term Notes without penalty. In connection with this transaction,
            we issued
            warrants to purchase an aggregate of 500,000 of our shares of common
            stock at a
            per share price of $0.35. The warrants have a three-year term, and the
            warrant
            holders are entitled to piggy-back registration rights.
 
 The
            Company
            determined the fair value of the warrants issued in connection with the
            convertible notes using a Black-Scholes valuation model, and allocated
            the
            proceeds from the issuance of the notes between the warrants and convertible
            debt, based on the determination of their relative fair values. As a
            result of
            the fair value allocation of the warrants, the Company record debt discount
            and
            additional paid in capital in the amount of $56 thousand. The recorded
            debt
            discount will be amortized as non-cash interest expense over the original
            one
            year maturity of the Term Notes.
 
 On
            May 14,
            2004 we issued additional Term Notes in the aggregate principal amount
            of $1.0
            million, pursuant to that certain First Amendment to Term Credit Agreement
            dated
            May 14, 2004 by and among us, HKL, HIT, Brightline bridge Partners, LLC
            (“Brightline”) and SBI (the “First Amendment”) which amended the Original Credit
            Agreement. The original maturity date of the Term Notes was January 29,
            2005,
            which was subsequently extended to July 31, 2005 (see Note 16). The Term
            Notes
            are secured by our assets, and accrue interest at an annual rate of 24%.
            Interest on the Term Notes is payable monthly, and we have the right
            to prepay
            the Term Notes without penalty. In connection with the First Amendment,
            we
            issued warrants to purchase an aggregate of 5,000,000 of our shares of
            common
            stock at a per share price of $0.16. The warrants have a three-year term,
            and
            the warrant holders are entitled to piggy-back registration rights.
 
 The
            Company
            determined the fair value of the warrants issued in connection with the
            convertible notes using a Black-Scholes valuation model, and allocated
            the
            proceeds from the issuance of the notes between the warrants and convertible
            debt, based on the determination of their relative fair values. As a
            result of
            the fair value allocation of the warrants, the Company record debt discount
            and
            additional paid in capital in the amount of $496 thousand.  The
            recorded
            debt discount will be amortized as non-cash interest expense over the
            remaining 6 month term of the maturity of the amended Term
            Notes.
 On
          May 14,
          2004, Torrey Pines acquired Microtek Systems, Inc. Under the terms of this
          acquisition, Torrey Pines acquired all of the issued capital stock of Microtek
          in exchange for $750 thousand in cash, a promissory note for
          $150
          thousand ("Promissory Note"),  1,302,083 shares of our common stock,
          and
          other consideration. Of the $1.0 million,  we concurrently raised
          in the
          interim financing, we used $750 thousand as cash consideration to
          buy
          Microtek. The Promissory Note is payable in four equal semi-annual installments,
          including interest on the unpaid principal balance accrued at a rate of
          6% per
          annum, commencing November 14, 2004 and ending May 14, 2006.
  On
          October 4,
          2004 we issued additional Term Notes in the aggregate principal amount
          of $750
          thousand, pursuant to that certain Second Amendment to Term Credit Agreement
          (the “Second Amendment”) dated October 4, 2004 by and among us, HKL, HIT,
          Brightline Matthew McGovern, Jon Buttles and SBI which further amended
          the
          Original Credit Agreement, and extended original maturity date of the Term
          Notes
          was January 29, 2005 to March 31, 2005. The maturity date was subsequently
          extended to July 31, 2005 (see Note 16). The Term Notes are secured by
          our
          assets, and accrue interest at an annual rate of 24%. Interest on the Term
          Notes
          is payable monthly, and we have the right to prepay the Term Notes without
          penalty. In connection with the First Amendment, we issued warrants to
          purchase
          an aggregate of 15,000,000 of our shares of common stock at a per share
          price of
          $0.10. The warrants have a three-year term, and the warrant holders are
          entitled
          to piggy-back registration rights.
  The
          Company
          determined the fair value of the warrants issued in connection with the
          convertible notes using a Black-Scholes valuation model, and allocated
          the
          proceeds from the issuance of the notes between the warrants and convertible
          debt, based on the determination of their relative fair values. As a result
          of
          the fair value allocation of the warrants, the Company record debt discount
          and
          additional paid in capital in the amount of $513 thousand. The recorded
          debt
          discount will be amortized as non-cash interest expense over the remaining
          8.5
          month term of the original maturity of the Term Notes.
  Our
          obligations under the Original Credit Agreement, the First Amendment, the
          Second
          Amendment and the third Amendment are secured by all of our assets pursuant
          to
          the terms of that certain Security Agreement dated January 30, 2004, by
          and
          among us and SBI (the "Security Agreement").
  **6.**  **OTHER
        CURRENT AND ACCRUED LIABILITIES**
 
 **Other
        current and accrued liabilities consisted of the following as of January
        31,
        2005 and 2004.**
 
 ****
              
              
              **2005**
              
              
              **2004**Payroll
                  and employee benefits
              
              $
              186
              
              $
              102Accrued
                  expenses
              
              
              164
              
              
              55Sales
                  tax payable
              
              
              8
              
              
              29Accrued
                  audit fees
              
              
              65
              
              
              60Office
                  lease
              
              
              15
              
              
              -Other
              
              
              60
              
              
              19Total
              
              $
              498
              
              $
              265
 
 F-11
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  **7.**  **LEASES
        AND OTHER COMMITMENTS**
 
 Rental
        expense under operating leases was $279 and $686 for the years ended January
        31,
        2005 and 2004, respectively. There were future operating lease commitments
        in
        excess of one year as of January 31, 2005 as follows:
   **Contractual
                    Obligations (In
                    thousands)****Payment
                    Due by Period as of January 31,
                    2005****Total**
                
                
                **Less
                    than 1Year**
                
                
                **1-3
                    Years**
                
                
                **4-5
                    Years**
                
                
                **After
                    5 Years****Short
                    Term Debt**
                
                $
                2,114
                
                $
                2,087
                
                $
                27
                
                $
                -
                
                $
                -**Operating
                    Leases**
                
                $
                372
                
                $
                184
                
                
                188
                
                
                -
                
                
                -**Total Contractual Cash Obligations**
                
                $
                2,486
                
                $
                2,271
                
                $
                215
                
                $
                -
                
                $
                -
 
 In
        the
        merger agreement between Sync Research and our former parent, Sorrento Networks
        Corporation, Sorrento agreed to indemnify and hold us harmless against any
        liability arising after the merger in connection with the termination of
        a
        certain frozen defined pension plan maintained by Rixon. In July 2004, Sorrento
        was acquired by Zhone Technologies, Inc. A consultant retained by Sorrento
        and
        by the successor corporation to the entity from whom Sorrento originally
        purchased the company that became Rixon, had advised Sorrento and the successor
        corporation that the cost of termination of the pension plan in question
        could
        be in excess of $3 million. We do not believe that we are responsible for
        this
        termination cost or for the failure by Sorrento and Zhone to make required
        contributions to the plan, and have made no adjustments in our financial
        statements to record the contingent liability. However, to date we have
        voluntarily administered the plan. Sorrento and Anite, the original plan
        sponsor, have
        failed to make required contributions to the Plan since July 15, 2004. 
        As
        part of its administrative duties with respect to the Plan, the Company has
        filed the required Post-Event Notice of Reportable Events (Form 10) with
        the
        Pension Benefit Guarantee Corporation for the failure by Sorrento and Anite
        to
        make required contributions to the Plan.
 
 **8.**  **LITIGATION**
 
 From
        time
        to time we are involved in various litigation and proceedings incidental
        to the
        normal conduct of our business. Although it is impossible to predict the
        outcome
        of any outstanding legal proceedings, we believe that such legal proceedings
        and
        claims, individually and in the aggregate, are not likely to have a material
        effect on our financial position, the results of operations or cash
        flows.
  **9.**  **STOCKHOLDERS'
        EQUITY**
 
 We
        are
        authorized to issue the following shares of stock:
 
 150,000,000
                  shares of Common Stock ($.001 par value)2,000,000
                  shares of Preferred Stock ($.001 par
                  value)
 
 None
        of
        our preferred stock was outstanding during the years ended January 31, 2005
        and
        2004.
 
 On
        January 27, 2005, the stockholders approved an amendment to Entrada's Amended
        and Restated Certificate of Incorporation, increasing the number of Entrada's
        authorized shares of Common Stock, $.001 par value, from 50,000,000 to
        150,000,000, On January 31, 2005, we filed a Certificate of Amendment with
        the
        Secretary of State of the State of Delaware, pursuant to which the amendment
        became effective as of such date.
 
 On
        February 6, 2004, the Company issued 500,000 warrants in connection with
        the
        Term Notes dated January 30, 2004.  The warrants were valued using
        a Black
        -Scholes valuation model and, based on the relative fair value allocation
        of
        proceeds between the Term Notes and warrants, additional paid in capital
        in the
        amount of $56 thousand was recorded related to the warrants.
    F-12
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
 On
          May
          14, 2004, the Company issued 5,000,000 warrants in connection with the
          placement
          of $1.0 million debt.  The warrants were valued using a Black Scholes
          valuation model and, based on the relative fair value allocation of proceeds
          between the Term Notes and warrants, additional paid in capital in the
          amount of
          $496 thousand was recorded related to the warrants.
  In
          November 2004, the Company issued 15,000,000 warrants in connection with
          the
          placement of $750 thousand in debt and 10,000,000 warrants in connection
          with a
          marketing agreement with Trilogy.  The warrants were valued using
          a
          Black-Scholes valuation model.    Based on
          the relative fair
          value allocation of proceeds between the debt and warrants, and based on
          the
          valuation of warrants issued to Trilogy, paid in capital in the amounts
          of $513
          thousand and  $1,159, respectively, was recorded related to the
          warrants.
 
 **10.**  **STOCK
        OPTION PLANS AND STOCK AWARD PLAN**
 
 We
        have
        four stock options plans with outstanding options: The 1991 Stock Option
        Plan,
        the 1996 Stock Option Plan, the 1999 Stock Option Plan and the 2000 Stock
        Option
        Plan. Only the 2000 Stock Option Plan is active. This plan provides for the
        granting of incentive or non-statutory stock options to certain key employees,
        non-employee members of the Board of Directors, consultants and independent
        contractors. Options are granted at a price equal to 100% of the fair market
        value of our common stock at the date of grant. Options typically vest at
        a rate
        of 25% of the shares on the first anniversary of the vesting commencement
        date
        and 1/36th of the remaining shares at the end of each month and expire not
        later
        than 10 years from the date of grant. The purpose of this plan is to attract,
        retain, motivate and reward our officers, directors, employees and consultants
        to maximize their contribution toward our success.
 
 The
        following table summarizes the activity in our plans:
  **Weighted
                  Average****Number
                  of Shares**
              
              
              **Exercise
                  Price**Shares
                  under option at January 31, 2002
              
              
              3,005,766
              
              $
              2.89Granted
              
              
              85,500
              
              $
              0.14Cancelled
              
              
              (1,584,524
              )
              $
              3.59Shares
                  under option at January 31, 2003
              
              
              1,506,742
              
              $
              2.65Granted
              
              
              1,521,583
              
              $
              0.23Cancelled
              
              
              (53,519
              )
              $
              0.54Shares
                  under option at January 31, 2004
              
              
              2,974,806
              
              $
              1.11Granted
              
              
              763,500
              
              $
              0.20Cancelled
              
              
              (549,951
              )
              $
              0.22Shares
                  under option at January 31, 2005
              
              
              3,188,355
              
              $
              0.95
 
 F-13
 
 **ENTRADA
                  NETWORKS, INC.**
 ***AND
                  SUBSIDIARIES***
 
 **NOTES
                  TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
                  Thousands, except share and per share amounts)**
 Additional
            information relating to stock options outstanding and exercisable at
            January 31,
            2005 summarized by exercise price is as follows:
  **Outstanding**
                **Exercisable****Exercise
                    Price**
                ****
                **Weighted
                    Average**
                **Weighted
                    Average****Per
                      Share**
                
                
                Shares
                
                
                Life
                    (Years
                )
                
                Exercise
                    Price
                
                
                Shares
                
                
                Exercise
                    Price$0.10
                    - $0.15
                
                
                923,250
                
                
                7.33
                
                $
                0.13
                
                
                826,329
                
                $
                0.13$0.17
                    - $0.21
                
                
                549,958
                
                
                9.07
                
                $
                0.19
                
                
                133,750
                
                $
                0.18$0.22
                    - $0.22
                
                
                1,039,983
                
                
                8.02
                
                $
                0.22
                
                
                1,036,838
                
                $
                0.22$0.26-
                    $5.63
                
                
                667,104
                
                
                7.00
                
                $
                1.52
                
                
                405,979
                
                $
                2.32$11.09
                    - $16.56
                
                
                8,060
                
                
                3.29
                
                $
                13.84
                
                
                8,060
                
                $
                13.84$0.10
                    - $16.56
                
                
                3,188,355
                
                
                7.78
                
                $
                0.49
                
                
                2,410,956
                
                $
                0.59
 
 **11.**
              **INCOME
                  TAXES**
 
 The
        Company's effective income tax reconciles to the statutory rate for the years
        ended January 31, 2005 and 2004 as follows:
 ***Income
            taxes.*** The
            Company's effective income tax reconciles to the statutory rate for the
            years
            ended January 31, 2005 and 2004 as follows: (in thousands)
 
 **January
                      31, 2005**
                  
                  
                  **January
                      31, 2004**Federal
                      statutory rate
                  
                  
                  34.00
                  %
                  
                  34.00
                  %State
                      taxes
                  
                  
                  0.00
                  %
                  
                  0.00
                  %Nondeductible
                      expenses
                  
                  
                  0.00
                  %
                  
                  (1.00
                  )%Expiration
                      of NOLs
                  
                  
                  (18.00
                  )%
                  
                  0.00
                  %CA
                      NOL limitation
                  
                  
                  (19.00
                  )%
                  
                  0.00
                  %Change
                      in valuation allowance
                  
                  
                  2.00
                  %
                  
                  (29.00
                  )%Other
                  
                  
                  1.00
                  %
                  
                  (4.00
                  )%Effective
                      tax rate
                  
                  
                  0.00
                  %
                  
                  0.00
                  %
 
 A
          detail
          of the Company's deferred tax assets and liabilities as of January 31,
          2005 and
          2004 are as follows:
 
 **January
                      31, 2005**
                  
                  
                  **January
                      31, 2004**Current:Allowance for bad debts
                  
                  $
                  23
                  
                  $
                  16Accrued vacation
                  
                  
                  9
                  
                  
                  20Inventory Reserve
                  
                  
                  973
                  
                  
                  1,388Deferred Revenue
                  
                  
                  452
                  
                  
                  157Other
                  
                  
                  24
                  
                  
                  64Valuation allowance
                  
                  
                  (1,481
                  )
                  
                  (1,645
                  )Total current
                  
                  
                  -
                  
                  
                  -Non-current:Net operating loss carry forwards
                  
                  
                  33,624
                  
                  
                  33,501Fixed Assets
                  
                  
                  123
                  
                  
                  154Valuation allowance
                  
                  
                  (33,747
                  )
                  
                  (33,655
                  )Net deferred tax asset
                  
                  $
                  -
                  
                  $
                  -
 F-14
 
 **ENTRADA
                NETWORKS, INC.**
 ***AND
                SUBSIDIARIES***
 
 **NOTES
                TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
                Thousands, except share and per share
                amounts)**
  At
        January 31, 2005, our deferred income tax assets consist primarily of net
        operating loss carry forwards. The deferred tax asset was fully reserved
        as of
        January 31, 2005.
 
 In
        assessing the reliability of deferred tax assets, management considers whether
        it is more likely than not that some portion or all of the deferred tax assets
        will not be realized. The ultimate realization of deferred tax assets is
        dependent upon the generation of future taxable income during the periods
        in
        which those temporary differences become deductible. Based upon the level
        of
        historical taxable income and projections for future taxable income over
        the
        periods which the deferred tax assets are deductible, management believes
        that
        insufficient evidence exists to conclude that it is more likely than not
        that
        the Company will realize the benefits of these deductible
        differences.
 
 At
        January 31, 2005 the Company had available federal and state net operating
        loss
        carry forwards of approximately $95 million and $15 million, respectively,
        for
        income tax purposes. The federal and state losses will begin expiring in
        the
        2006 and 2005 tax years, respectively. As of January 31, 2005 and 2004, our
        effective income tax rate differs from the federal statutory income tax rate
        due
        to state taxes net of federal benefit and state net operating loss limitations.
 
 The
        utilization of the loss carry forwards as an offset to future taxable income
        is
        subject to limitations under U.S. federal income tax laws. One such limitation
        is imposed when there is a greater than 50% ownership change. An ownership
        change may have occurred during the tax year ended January 31, 2001. As such,
        the above loss may be subject to the limitation of Section 382. At January
        31,
        2005 and 2004, a valuation allowance was recorded to reduce the deferred
        tax
        asset to zero since the recognition of the tax benefit could not be assured.
 **12** **.**  **SUPPLEMENTAL
        CASH FLOW DISCLOSURES**
 
 **Non-Cash
                  Financing and Investing Activities**
              
              
              **Fiscal
                  Year 2005**
              
              
              **Fiscal
                  Year 2004**Value of warrants issued in connection with Term Notes
              
              $
              1,065
              
              $
              -Value of common stock issued in connection with
                  acquisition
              
              $
              250
              
              $
              -
 
 F-15
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  **13.**  **CONCENTRATIONS
        OF CREDIT RISK**
 
 Financial
        instruments that potentially subject us to concentrations of credit risk
        consist
        primarily of temporary cash investments and trade receivables. We place our
        temporary cash investments with high credit financial institutions. At times
        such amounts may exceed F.D.I.C. limits.
 
 Customers
        greater than 10% of our net revenues and net receivables in a given fiscal
        year
        are as follows:
 **Percent
                      net revenues (>10%**
                  **Percent
                      net receivables (>10%)****Description**
                  ****
                  **Fiscal
                      years ended January 31,**
                  **Fiscal
                      years ended January 31,**2005
                  
                  
                  2004
                  
                  
                  2005
                  
                  
                  2004Cisco
                  
                  
                  -
                  %
                  
                  56.7
                  %
                  
                  -
                  %
                  
                  -
                  %Ingram
                      Micro
                  
                  
                  -
                  %
                  
                  -
                  %
                  
                  -
                  %
                  
                  14.0
                  %IntegraSys
                  
                  
                  -
                  %
                  
                  -
                  %
                  
                  -
                  %
                  
                  62.0
                  %Rorke
                      Data
                  
                  
                  -
                  %
                  
                  -
                  %
                  
                  12.1
                  %
                  
                  -
                  %
 
 **14.**  **Acquisition
        of Microtek Systems, Inc by subsidiary Torrey Pines Networks,
        Inc**
 
 On
        May
        14, 2004, Torrey Pines Networks, the Company's subsidiary, acquired Microtek
        Systems, Inc. (Microtek), a leading provider of security, digital imaging,
        information infrastructures and storage solutions. Microtek was a privately
        held
        Milwaukee, Wisconsin based corporation. Microtek offers highly specialized
        services in consulting, assessment, and solutions to challenges in security,
        digital imaging, storage, and information infrastructures. It has an installed
        customer base across financial, healthcare and insurance sectors.
 
 Under
        the
        terms of this acquisition, we acquired all of the issued capital stock of
        Microtek. The purchase price of $1,219 was determined as
        follows:
 Cash
                      paid
                  
                  $
                  750Note
                      payable
                  
                  
                  150Common
                      stock
                  
                  
                  250Direct
                      transaction costs
                  
                  
                  69Total
                      purchase price
                  
                  $
                  1,219
  
 The
        allocation of the purchase price to the assets acquired and the liabilities
        assumed based on their fair values are as follows:
 
 **Assets
                  Acquired**Cash acquired
              
              $
              308Accounts receivable, net
              
              
              591Inventory, net
              
              
              37Prepaid expenses and other current assets
              
              
              321Property and equipment, net
              
              
              207Goodwill
              
              
              1,135Total Assets Acquired
              
              $
              2,599**Liabilities
                  Assumed**Accounts payable
              
              
              (366
              )Short term debt
              
              
              (12
              )Accrued liabilities
              
              
              (306
              )Deferred revenue
              
              
              (696
              )Total Liabilities Assumed
              
              $
              (1,380
              )**Total
                  Purchase Price**
              
              $
              1,219
 
 F-16
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  An
        allocation of $1,135 to Goodwill has been made. Goodwill represents the excess
        of the purchase price over the fair market value of the net tangible and
        intangible assets acquired. Goodwill will not be amortized and will be tested
        for impairment at least annually.
 
 Microtek's
        operations have been included in the company's financial results from the
        date
        of acquisition through the balance of the fiscal year ended January 31,
        2005.
  15.
        EMPLOYEE BENEFIT PLANS
 
 Effective
        August 31, 2000, the Company adopted the Entrada 401K Plan (the "Plan") for
        employees of the Company. This defined contribution plan allows employees
        to
        contribute up to 15% of pre-tax wages, limited to the maximum amount permitted
        by federal law. Entrada makes no matching contribution, but does pay for
        the
        administration of the plan, which amounted to $26 thousand for each of the
        fiscal years ended 2005 and 2004.
 
 **16.**  **SUBSEQUENT
        EVENTS**
  On
        January 31, 2005, the Audit Committee of our Board of Directors ended the
        engagement with BDO Seidman, LLP ("BDO"), our independent accountants, and
        thereafter approved the selection of new independent accountants, as described
        below.
  The
        reports of BDO on our financial statements for the fiscal years ended January
        31, 2003 and 2004 did not contain any adverse opinion or a disclaimer of
        opinion, and were not qualified or modified as to uncertainty, audit scope
        or
        accounting principles. In connection with the audits of the our two most
        recent
        fiscal years ended January 31, 2003 and 2004, and for the subsequent interim
        periods preceding this dismissal, there were no disagreements with BDO on
        any
        matter of accounting principles or practices, financial statement disclosure,
        or
        auditing scope or procedures, which disagreements, if not resolved to the
        satisfaction of BDO, would have caused BDO to make reference to the subject
        matter of the disagreement in connection with its reports on our financial
        statements for such years or interim periods.
  On
        February 22, 2005, the Audit Committee of our Board of Directors
        engaged Peterson and Co., LLP ("PCO") as our new independent
        certified
        public accountants.
 
 Prior
        to
        February 22, 2005, there were no consultations between Entrada and PCO
        regarding the application of accounting principles to a specific completed
        or
        contemplated transaction, or the type of audit opinion that might be rendered
        on
        Entrada's financial statements.
 
 F-17
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  On
        February 8, 2005, Entrada and Silicon Valley Bank executed that certain
        Amendment to Loan Documents, effective as of February 8, 2004 (the "Loan
        Agreement Amendment"), pursuant to which the parties extended the expiration
        date of the Amended and Restated Loan Agreement (the "Maturity Date") to
        March
        1, 2005.  On March 4, 2005 the parties executed another Amendment
        to
        Documents, pursuant to which the Maturity Date was extended to March 31,
        2005.
        This was further extended to July 31, 2005. On April 5, 2005, Entrada and
        Silicon Valley Bank executed that certain Amendment to Loan Documents, effective
        as of March 31, 2004 (the "Loan Agreement Amendment"), pursuant to which
        the
        parties extended the expiration date of the Amended and Restated Loan Agreement
        to April 30, 2005. As per this Loan Agreement Amendment, the aggregate face
        amount of all financed receivables outstanding at any time may not exceed
        $625
        thousand, and Silicon Valley Bank has no obligation to make advances to Entrada
        in excess of $500 thousand in the aggregate at any time outstanding. In
        addition, interest accrues at an annual rate equal to Silicon Valley Bank's
        prime rate plus 8.0% (13.75%).
 
 On
        May 3,
        2005, Entrada and Silicon Valley Bank executed that certain Amendment to
        Loan
        Documents, effective as of April 30, 2005 (the "Loan Agreement Amendment"),
        pursuant to which the parties extended the expiration date of the Amended
        and
        Restated Loan Agreement to July 31, 2005.
 
 Effective
        January 29, 2005, Entrada Networks, Inc. ("Entrada") entered into the Third
        Amendment to Term Credit Agreement (the "Third Amendment") between Entrada,
        Hong
        Kong League Central Credit Union ("HKL"), HIT Credit Union ("HIT"), Brightline
        Bridge Partners I, LLC ("Brightline"), Matthew McGovern ("Mr. McGovern"),
        and
        Jon Buttles ("Mr. Buttles") (collectively, the "Lenders") and SBI Advisors,
        LLC
        ("SBI").
 
 Pursuant
        to the Third Amendment, effective January 29, 2005, the Lenders agreed to
        extend
        from January 29, 2005 to March 31, 2005 the date on which Entrada must repay
        all
        unpaid principal owed by Entrada pursuant to the Original Credit Agreement,
        In
        addition, Any cash proceeds Entrada receives upon the issuance and sale of
        its
        equity securities shall be first used to pay any accrued interest, ant then
        Entrada will use 70% of the remaining cash proceeds to prepay the outstanding
        principal amount owed under the Original Credit agreement, as
        amended.
 
 Effective
        March 30, 2005, Entrada entered into the Fourth Amendment between
        Entrada
        and the Lenders that amends the Term Credit Agreement dated January
        30,
        2004, between Entrada, HKL, HIT, Shelly Singhal ("Mr. Singhal") and SBI (the
        "Original Credit Agreement"), as amended by the First Amendment to Term Credit
        Agreement (the "First Amendment"), dated May 14, 2004, between Entrada, SBI
        and
        the Lenders identified therein, and as further amended by the Second Amendment
        to Term Credit Agreement (the "Second Amendment"), dated October 1, 2004,
        between Entrada, SBI and the Lenders identified therein and as further amended
        by the Third Amendment Term Credit Agreement (the "Third Amendment"), dated
        January 29, 2005, between Entrada, SBI and the Lenders identified
        therein.
 
 Pursuant
        to the Fourth Amendment, effective March 30, 2005, the Lenders agreed to
        extend
        from March 31, 2005 to July 31, 2005 the date on which Entrada must repay
        all
        unpaid principal and interest owed by Entrada pursuant to the Original Credit
        Agreement, as amended.
 
 Pursuant
        to the Fourth Amendment, effective March 30, 2005, the Lenders agreed to
        reduce
        the interest rate to 10% per annum and the balance of 14% to be Paid In Kind
        which shall be computed and compounded monthly.
  In
        addition, Upon repayment of all amounts payable under the terms of the Term
        Notes, Lenders will retain 5,000,000 of the 20,500,000 original
        Warrants issued to SBI Advisors, LLC or its designees, and the balance
        of
        unexercised Warrants held by such parties at the time of repayment of the
        Term
        Notes will be returned to Borrower. The warrants retained by SBI or its
        designees shall be the then lowest priced warrants owned by SBI Advisors,
        LLC or
        its designees.
 
 On
        May
        31, 2005, Entrada terminated its engagement with Trilogy Capital Partners
        ("Trilogy") and Trilogy agreed to return to Entrada 8,500,000 of the
        original 10,000,000 Warrants issued to Trilogy.
 
 F-18
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
  **17.**  **OPERATING
        SEGMENT INFORMATION**
 
 ***Geographical
        Information***
 
 The
        table
        below presents external revenues based on the locations of the customer:
  ****
              **Fiscal
                  year ended January 31******
              ****
              ****
              **2005**
              ****
              ****
              **2004**Net
                  Revenues:United States
              
              $
              4,075
              
              $
              5,550Europe
              
              
              49
              
              
              671Total net revenues
              
              $
              4,124
              
              $
              6,221
 
 
 ***Products
        and Service Revenue***
 
 The
        table
        below presents external revenues for groups of similar products and services:
  **Fiscal
                  year ended January 31******
              ****
              ****
              **2005**
              ****
              ****
              **2004****Net
                  Revenues:**Network adapter cards
              
              $
              555
              
              $
              4,701Frame relay network products
              
              
              294
              
              
              523Torrey Pines-Optical Transport
              
              
              72
              
              
              -Torrey Pines-Solution Sales
              
              
              1,702
              
              
              -Service and support
              
              
              1,501
              
              
              997**Total net revenue**
              
              $
              4,124
              
              $
              6,221
 
 ***Supplemental
        Financial Information***
 
 There
        were no inter-segment revenues.
 
 F-19
 
 **ENTRADA
              NETWORKS, INC.**
 ***AND
              SUBSIDIARIES***
 
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(In
              Thousands, except share and per share
              amounts)**
 We
          have
          three operating segments, Rixon Networks, Inc., Sync Research, Inc. and
          Torrey
          Pines Networks, Inc.
  **Segment
        Financial Information for the year ended January 31, 2005:**
 **Rixon
                    Networks**
              ****
              ****
              **Sync
                  Research**
              ****
              ****
              **Torrey
                  Pines Networks**
              ****
              ****
              **Total****Fiscal
                  year ended January 31, 2005**Total
                  Revenues
              
              $
              555
              
              $
              1,027
              
              $
              2,542
              
              $
              4,124Net
                  Income (loss)
              
              
              (3,820
              )
              
              403
              
              
              (435
              )
              
              (3,852
              )Depreciation
                  and amortization expense
              
              
              148
              
              
              30
              
              
              191
              
              
              369Inventory
                  reserve additions
              
              
              -
              
              
              -
              
              
              -
              
              
              -Capital
                  asset additions
              
              
              61
              
              
              -
              
              
              23
              
              
              84Total
                  Assets
              
              
              3,045
              
              
              299
              
              
              2,612
              
              
              5,956
   Segment
        Financial Information fiscal year ended January 31, 2004:
 
 ****
                ****
                **Rixon
                    Networks**
                ****
                ****
                **Sync
                    Research**
                ****
                ****
                **Torrey
                    Pines Networks**
                ****
                ****
                **Total**
                ********
                **Fiscal
                    year ended January 31, 2004**Total
                    Revenues
                
                $
                4,702
                
                $
                1,519
                
                $
                -
                
                $
                6,221Net
                    Income (loss)
                
                
                (2,328
                )
                
                706
                
                
                (362
                )
                
                (1,984
                )Depreciation
                    and amortization expense
                
                
                269
                
                
                52
                
                
                165
                
                
                486Inventory
                    reserve additions
                
                
                1,097
                
                
                -
                
                
                -
                
                
                1,097Capital
                    asset additions
                
                
                4
                
                
                -
                
                
                -
                
                
                4Total
                    Assets
                
                
                2,544
                
                
                744
                
                
                618
                
                
                3,906
 F-20
 **Item
        8.**  **Changes
        in and Disagreements with Accountants on Accounting and**  **Financial
        Disclosure**
 
 Effective
        January 31, 2005, BDO Seidman, LLP ("BDO"), our independent accountants,
        were
        dismissed by the Audit Committee of our Board of Directors. The reports of
        BDO
        on our financial statements for the fiscal years ended January 31, 2003 and
        2004
        did not contain any adverse opinion or a disclaimer of opinion, and were
        not
        qualified or modified as to uncertainty, audit scope or accounting principles.
        In connection with the audits of the our two most recent fiscal years ended
        January 31, 2003 and 2004, and for the subsequent interim periods preceding
        this
        dismissal, there were no disagreements with BDO on any matter of accounting
        principles or practices, financial statement disclosure, or auditing scope
        or
        procedures, which disagreements, if not resolved to the satisfaction of BDO,
        would have caused BDO to make reference to the subject matter of the
        disagreement in connection with its reports on our financial statements for
        such
        years or interim periods.
 
 On
        February 22, 2005, the Audit Committee of our Board of Directors engaged
        Peterson and Co., LLP ("PCO") as our new independent certified public
        accountants. Prior to February 22, 2005, there were no consultations between
        Entrada and PCO regarding the application of accounting principles to a specific
        completed or contemplated transaction, or the type of audit opinion that
        might
        be rendered on Entrada's financial statements.
  **Item
        8a.**  **Controls
        and Procedures**
 
 **(a)  
          Disclosure Controls and Procedures.** We
          maintain controls and procedures designed to ensure that we are able to
          collect
          the information required to disclose in the reports we file with the SEC,
          and to
          process, summarize and disclose this information within the time periods
          specified in the rules of the SEC. Our Chief Executive and Chief Financial
          Officers are responsible for establishing and maintaining these procedures
          and,
          as required by the rules of the SEC, evaluate their effectiveness. Based
          on
          their evaluation of our controls and procedures which took place as of
          a date
          within 107 days prior to the filing date of this report, Chief Executive
          and
          Chief Financial Officers believe that these procedures are effective to
          ensure
          that Entrada Networks is able to collect, process and disclose the information
          we are required to disclose in the reports it files with the SEC within
          the
          required time periods.
 
 **(b)**  **Changes
        in Internal Controls.** We
        maintain a system of internal controls designed to provide reasonable assurance
        that: transactions are executed in accordance with our management's general
        or
        specific authorization; transactions are recorded as necessary to (1) to
        permit
        preparation of financial statements in conformity with generally accepted
        accounting principles in the United States of America, and (2) to maintain
        accountability for assets; access to assets is permitted only in accordance
        with
        our management's general or specific authorization; and the recorded
        accountability for assets is compared with the exiting assets at reasonable
        intervals and appropriate action is take with respect to any
        difference.
 
 In
        connection with its audit of the Company's financial statements for the year
        ended January 31, 2005, our independent auditors identified certain items
        that
        it considers to be material weaknesses in the effectiveness of the Company's
        internal controls. A "material weakness" is a reportable condition in which
        the
        design or operation of one or more of the specific control components has
        a
        defect or defects that could have a material adverse effect on our ability
        to
        record, process, summarize and report financial statements in a timely
        manner.
 
 These
        material weaknesses are primarily due to staffing and limited resources in
        the
        accounting function which: a) limit the level of monitoring and oversight
        within
        the accounting function and which restricts the Company's ability to gather,
        analyze, reconcile accounts, and report information relative to the financial
        statement assertions in a timely manner; and b) limit the ability to obtain
        optimum segregation of duties required to meet the increased public reporting
        demands. Additionally, the Company's accounting functions are not centralized
        or
        effectively coordinated.
 
 Management
        is giving serious consideration to the identified material weaknesses and
        reviewing alternatives that would streamline the accounting functions across
        the
        Company's subsidiaries, and allocate additional resources to be able to perform
        the accounting functions effectively and in a timely manner.
 53
 **PART
        III**
 
 **Item
        9.**  **Directors
        and Executive Officers of the Registrant**
 
 On
        April 30,
        2005, our directors and executive officers were:
 
 **Name**
              **Age**
              **Position**Kanwar
                  J.S. Chadha
              59
              Chairman,
                  President, Chief Executive Officer, DirectorDavinder
                  Sethi
              58
              Vice
                  Chairman, Chief Financial Officer, Director (ii)Leonard
                  Hecht
              68
              Director,Chairman
                  of Audit Committee (i)Rohit
                  Phansalkar
              59
              Director,
                  Chairman of Compensation Committee
                  (ii)
 
 (i)
        Member of Compensation Committee, (ii) Member of Audit Committee
 Mr.
        Leonard Hecht and Mr. Rohit Phansalkar are our independent directors of the
        board and they are also financial experts.
 
 ***Dr.
        Kanwar
        J.S. Chadha,*** 59, has
        served as our President and Chief Executive Officer since April 2000. He
        was
        elected as a director on August 31, 2000 and elected Chairman on September
        28,
        2001. He joined AT&T Bell Laboratories in February 1973 as a Member of
        Technical Staff and served as a systems engineer and principal software designer
        for the AMPS trial system. As a Supervisor at AT&T Bell Laboratories from
        August 1977 to August 1980, Dr. Chadha was responsible for the development
        of
        various software systems. As a Department Head at AT&T Bell Laboratories
        from August 1980 to January 1987, he managed the development of cellular
        phone
        technologies, MERLIN phone system, Applications Processor, Videotex system,
        and
        System 25 PBX. Dr. Chadha was a co-founder of WaterBazaar.com e-portal. Dr.
        Chadha was also a founder of ERPL, Inc., a firm that specializes in the
        development of embedded software systems, enterprise and manufacturing resource
        planning software systems, and that provides business-to-business e-marketplace
        systems solutions and development. From 1988 to 1999, Dr. Chadha ran his
        own
        private businesses in the graphic arts arena. Dr. Chadha holds a B.E. (Hons)
        in
        Electrical Engineering from Thapar Institute of Technology, Punjab, India,
        a
        M.A.Sc. in Control Systems from the University of Toronto, Ontario, Canada,
        and
        a Ph.D. in Systems Engineering from Case Western Reserve University, Cleveland,
        Ohio. Dr. Chadha is a first cousin of Dr. Davinder Sethi, one of our
        directors.
 
 ***Dr.
        Davinder
        Sethi,*** 58, was
        appointed as our senior vice president in January 2005. He has served as
        our
        Chief Financial Officer since November 1, 2001. He has been one of our directors
        since September 2000. He was elected our Vice Chairman on November 19, 2001.
        During 1999 and 2000, Dr. Sethi was an independent advisor in the fields
        of
        information technology and finance. He was Chairman and Chief Executive Officer
        of iPing, Inc., and was a Director and Senior Advisor to Barclays de Zoete
        Wedd **.** In
        addition, Dr. Sethi spent seven years at Bell Laboratories in operations
        research and communications network planning and seven years in corporate
        finance at AT&T. Dr. Sethi holds a Ph.D. and M.S. in Operations Research,
        Economics and Statistics from the University of California, Berkeley, and
        is a
        graduate of the Executive Management Program at Penn State University. Dr.
        Sethi
        also serves on the Board of Directors of WorldWater Corporation. Dr. Sethi
        is a
        first cousin of Dr. Chadha, our Chairman, President and Chief Executive Officer
        and one of our directors.
 
 ***Leonard
        N.
        Hecht*** *,* 68, has
        served as one of our directors since August 31, 2000 and as our Chairman
        from
        September 2000 until August 2001. Mr. Hecht is a member of our Audit and
        Compensation Committees and is the Chairman of the Audit Committee. Mr. Hecht
        served as Executive Vice President of Sorrento Networks, Inc. from August
        2000
        until January 2001 and as one of its directors from June 1996 to January
        2001.
        Since 1994, he has been President of Chrysalis Capital Group, an investment
        banking company specializing in mergers, acquisitions and financings that
        he
        founded. From 1987 to 1993, Mr. Hecht was Managing Director of the Investment
        Banking Group and head of the Technology Assessment Group of Houlihan Lokey
        Howard & Zukin, a financial advisory firm. From 1984 to 1987, Mr. Hecht was
        the Vice Chairman of the Board and Chief Executive Officer of Quantech
        Electronics Corp., a diversified publicly held electronics company. Prior
        to
        joining Quantech, Mr. Hecht was a founding principal of Xerox Development
        Corporation, a wholly owned subsidiary of the Xerox Corporation. Xerox
        Development Corporation was active in strategic planning, mergers and
        acquisitions, divestitures, licensing, joint ventures and venture investing
        for
        the Xerox Corporation. Mr. Hecht has served on the board of many public
        companies including DCC Corporation from January 1997 to January 2000,
        Concurrent Computer Corporation from January 1993 to December 1994, Hygrade
        Electronics Corp. from 1980 to Dec 1986 and Micronetics, Inc. from January
        1980
        to December 1986.
 
 54
 ***Rohit
        Phansalkar*** *,* 59, has
        served as one of our directors since August 31, 2000. He is a member of our
        Audit and Compensation Committees and is the Chairman of the Compensation
        Committee. Since January 2001, Mr. Phansalkar has been the Chairman & CEO of
        RKP Capital, Inc. an investment banking boutique specializing in financings,
        mergers and acquisitions. Mr. Phansalkar was the Chairman and Chief Executive
        Officer of Sorrento Networks Corporation from July to September 2000. He
        was a
        partner of Anderson Weinroth & Co. LP from February 1998 to June 2000. Prior
        to that, Mr. Phansalkar was the co-founder, Vice Chairman and Chief Executive
        Officer of Newbridge Capital, a firm dedicated to making private equity
        investments in India. From 1993 to 1996, Mr. Phansalkar was a Managing Director
        of Oppenheimer & Co., where he was the head of the Energy Finance Group. Mr.
        Phansalkar was the founding Chairman of The India Fund, a $510 million
        closed-end fund listed on the NYSE. Prior to joining Oppenheimer, Mr. Phansalkar
        was a Managing Director of Bear Stearns & Co. He is a director of Zip Global
        Networks. Mr. Phansalkar received a BS in engineering from Michigan
        Technological University and a MBA from Harvard Graduate School of Business.
 
 **Other
        Senior Managers**
 
 *Jim
        Dziak* ***,*** *President, Microtek Systems.* Jim
        founded Microtek in 1985 & grew it to $4 million/yr revenue by 2003 with
        seventeen employees before joining Entrada in May 2004. Microtek is located
        in
        Milwaukee, Wisconsin.
 
 *Raj
        Ganti,
        Chief Technology Officer &* Vice
        President. Mr. Ganti joined Entrada in 2001 from Qualcomm where he most recently
        held the position of Lead Architect for designing broadband wireless products.
        He also was Senior Staff Engineer/Manager at Qualcomm, and responsible for
        developing and designing server farms and high speed networks using ATM/Gigabit
        Ethernet. Mr. Ganti is a contributing author to several networking magazines,
        routinely speaks at conferences, and teaches advanced networking courses
        at UC
        San Diego. He holds a BSEE from Bharathiar University (India) as well as
        an MSEE
        from the University of Southern California.
 *Jim
            Loofbourrow* ,
            Vice
            President, Finance. Mr. Loofbourrow joined Sync Research's finance department
            in
            1995. He was founder and President of Divajex Industries from 1970 through
            1986.
            From 1986 until 1989, he operated Nautilus Computers, a service company
            evaluating and installing corporate networks and accounting systems on
            small to
            medium sized business. From 1989 through 1995 he ran TechnOzone, Inc.,
            a
            manufacturing company working with the ozonation of fruit packing-house
            water.
            He holds a BS degree from Yale University and an MBA from Stanford
            University.
 
 55
 **Item
        10.**  **Executive
        Compensation**
 
 The
        following tables set forth the annual compensation for both individuals who
        served as our Chairman and Chief Executive Officer ("CEO") for the fiscal
        years
        ended January 31, 2005 and 2004 and for our Vice Chairman and Chief
        Financial Officer ("CFO"). There were no other executive officers at the
        end of
        the fiscal year who served the company during the year and whose salary and
        bonus exceeded $100,000.
 
 **Summary
        Compensation Table**
 
 **Annual
                  Compensation**
              **Long-Term
                  Compensation****Other**
              ****
              ****
              **Restricted**
              ****
              ****
              **Securities**
              ****
              ****
              **Long-Term**
              ****
              ****
              **All**
              ********
              ****
              
              ****
              ****
              
              ****
              ****
              
              ****
              ****
              **Annual**
              
              
              **Stock**
              
              
              **Underlying**
              
              
              **Incentive**
              
              
              **Other****Fiscal**
              
              
              **Salary**
              
              
              **Bonus**
              
              
              **Compensation**
              
              
              **Award(s**
              **)**
              
              **Options**
              
              
              **Plan**
              
              
              **Compensation****Name
                  and Principal Position**
              
              
              **Year**
              
              
              **($**
              **)**
              
              **($**
              **)**
              
              **($**
              **)**
              
              **($**
              **)**
              
              **(#**
              **)**
              
              **Payouts**
              
              
              **($**
              **)****Kanwar
                  J.S. Chadha, Ph.D.,**
              
              
              2005
              
              
              222,230
              
              
              -
              
              
              -
              
              
              -
              
              
              200,000
              
              
              -
              
              
              50,000(*
              )Chairman,
                  CEO,
              
              
              2004
              
              
              187,986
              
              
              55,000
              
              
              -
              
              
              
              
              
              810,000
              
              
              -
              
              
              -President,
                  Director
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -
              
              
              -
              
              
              -**Davinder
                  Sethi, Ph.D.**
              
              
              2005
              
              
              93,486
              
              
              -
              
              
              -
              
              
              -
              
              
              50,000
              
              
              -
              
              
              -Vice
                  Chairman, CFO,
              
              
              2004
              
              
              141,066
              
              
              30,000
              
              
              -
              
              
              -
              
              
              200,000
              
              
              -
              
              
              -Director
  *
        Dr. Chadha
        received $50,000 in stock on May 14, 2004 as a bonus for making the Microtek
        acquisition per his employment agreement.
 
 During
        fiscal
        year 2003 both Dr. Chadha and Dr. Sethi agreed to take a part of their
        compensation in stock, $100,000 for Dr. Chadha and $50,000 for Dr. Sethi,
        respectively. The 746,384 and 384,615 shares, respectively, were issued at
        market price on the day of the agreements with the shares being held in lockup
        until the shares were earned. The shares were issued under the Stock Issuance
        section of the 2000 Stock plan.
 
 56
 **Long-Term
        Incentive Plans**
 
 We
        have no
        long-term incentive plans other than the 1991, 1996 and 2000 Stock Option
        Plans
        and the 1995 Directors' Stock Option Plan. Only the 2000 Stock Option Plan
        is
        active.
 **Option/SAR
        Grants in Last Fiscal Year**
 **(Individual
        Grants)**
  **Name**
              ****
              ****
              **Number
                  of Securities underlying Options/SARs Granted (#**
              **)**
              ****
              **Percent
                  of Total Options/SARs Granted to Employees in Fiscal
                  Year**
              ****
              ****
              **Exercise
                  or Base Price ($/sh**
              **)**
              ****
              **Expiration
                  Date**Kanwar
                  J.S. Chadha, Ph.D.
              
              
              200,000
                  (1
              )
              
              35.5
              %
              $
              0.17
              
              
              04/30/2014Davinder
                  Sethi, Ph.D.
              
              
              50,000
                  (2
              )
              
              4.5
              %
              $
              0.26
              
              
              03/29/2014
 
 (1)  On
        April
        30, 2004, Mr. Chadha was granted an option to purchase 200,000 shares with
        an
        exercise price equal to the fair market value of our common stock on the
        date of
        grant. Twenty five percent of these option shares will vest on the first
        anniversary of the date of grant. The remaining option shares will vest in
        equal
        amounts on a monthly basis over the next 36 months.
  (2)  On
        March
        29, 2004, Mr. Sethi was granted an option to purchase 50,000 shares with
        an
        exercise price equal to the fair market value of our common stock on the
        date of
        grant. Twenty five percent of these option shares will vest on the first
        anniversary of the date of grant. The remaining option shares will vest in
        equal
        amounts on a monthly basis over the next 36 months.
  (A)In
          accordance with Securities
          and Exchange Commission rules, these columns show gains that might exist
          for the
          respective options, assuming that the market price of our common stock
          appreciates from the date of the grant over the term of the option at rates
          of
          5% and 10%, respectively.
 **Aggregated
                      Option Exercises in Fiscal Year 2005 and January 31, 2005 Option
                      Values****Name**
                  **Shares
                      Acquired on Exercise**
                    **(#)**
                  **Value
                      Realized**
                    **($)**
                  **Number
                      of Securities Underlying Unexercised Options at Fiscal Year-End**
                    **(#)**
                  **Value
                      of Unexercised In-the-Money Options at Fiscal
                      Year-End**
                    **($)
                      (A)****Exercisable**
                  **Unexercisable**
                  **Exercisable**
                  **Unexercisable**Kanwar
                      J. S. Chadha
                  -
                  -
                  725,625
                  284,375
                  -
                  -Davinder
                      Sethi
                  -
                  -
                  568,750
                  181,250
                  $1,500
                  -
   (A)
          Options
          are "in-the-money" if, on January 31, 2005, the market price of the Common
          Stock
          ($0.14) exceeded the exercise price of such options. The value of such
          options
          is calculated by determining the difference between the aggregate market
          price
          of the Common Stock covered by such options on January 31, 2005, and the
          aggregate exercise price of such options.
   
 
 57
 **Employment
        Agreements**
   We
        have
        entered into employment agreements with Kanwar J.S. Chadha, Ph.D., our
        President, Chief Executive Officer and Chairman dated May 10, 2001, and Davinder
        Sethi, Ph.D., our Chief Financial Officer and Vice Chairman dated June 15,
        2002.
        Dr. Chadha's agreement was later amended pursuant to the Amendment to Employment
        Agreement dated April 30, 2004.
   Pursuant
        to his employment agreement as amended, Dr. Chadha will continue to serve
        in his
        positions until April 30, 2008 unless Dr. Chadha resigns earlier or his
        employment is terminated earlier by us. If, prior to April 30, 2008, we
        terminate Dr. Chadha without cause (as defined in Dr. Chadha's agreement),
        if
        Dr. Chadha resigns for good reason (as defined in Dr. Chadha's agreement)
        or if
        the agreement terminates as a result Dr. Chadha's death or permanent disability
        (as defined in Dr. Chadha's agreement), Dr. Chadha will be entitled to receive
        all salary and bonuses earned through, as well as the payment of his base
        salary
        for the two-year period following, the last day of his employment, all
        outstanding options held by Dr. Chadha will immediately vest, and our rights
        to
        repurchase shares and cancel unexercised options will terminate. However,
        if Dr.
        Chadha resigns at any time without good reason, we terminate his employment
        for
        cause prior to the end of the term of his employment or we terminate Dr.
        Chadha's employment with cause after the end of the term of his employment,
        Dr.
        Chadha will only be entitled to receive salary earned by him through the
        last
        day of his employment. If Dr. Chadha dies or is permanently disabled, he
        will be
        entitled to receive all salary earned by him through the last day of his
        employment and all of his outstanding options will immediately
        vest.
   In
        addition to his base salary, Dr. Chadha is entitled to participate in our
        Executive Cash Incentive Plan, receive a quarterly performance bonus (in
        an
        amount not to exceed fifty percent of his base salary) if we achieve performance
        targets set by our Board of Directors, and receive shares of our common stock
        and options to purchase shares of our common stock. Dr. Chadha is also entitled
        to  receive
        a
        long-term disability insurance policy and to participate in other employee
        benefit programs available to our senior executives.
   Pursuant
        to his employment agreement, Dr. Sethi will continue to serve in his positions
        until November 1, 2005 unless Dr. Sethi resigns earlier or his employment
        is
        terminated earlier by us. If, prior to November 1, 2005, we terminate Dr.
        Sethi
        without cause (as defined in Dr. Sethi's agreement), if Dr. Sethi resigns
        for
        good reason (as defined in Dr Sethi's agreement) or if the agreement terminates
        as a result Dr. Sethi's death or permanent disability (as defined in Dr.
        Sethi's
        agreement), Dr. Sethi will be entitled to receive all salary and bonuses
        earned
        through, as well as the payment of his base salary for the two-year period
        following, the last day of his employment, all outstanding options held by
        Dr.
        Sethi will immediately vest, and our rights to repurchase shares and cancel
        unexercised options will terminate. However, if  Dr. Sethi resigns
        at any
        time without good reason, we terminate his employment for cause prior to
        the end
        of the term of his employment or we terminate Dr. Sethi's employment with
        cause
        after the end of the term of his employment, Dr. Sethi will only be entitled
        to
        receive salary earned by him through the last day of his employment. If Dr.
        Sethi dies or is permanently disabled, he will be entitled to receive all
        salary
        earned by him through the last day of his employment and all of his outstanding
        options will immediately vest.
   In
        addition to his base salary, Dr. Sethi is entitled to participate in our
        Executive Cash Incentive Plan and to receive options to purchase shares of
        our
        common stock. Dr. Sethi is also entitled to participate in other employee
        benefit programs available to our senior executives.
  Dr.
        Chadha also has an agreement dated December 1, 2000, that provides for the
        immediate vesting of options, and for our loan of funds to Dr. Chadha for
        the
        purposes of exercising such options, in the event of a change in control
        of the
        Company.
  **Director Compensation**
   Each director who is not an employee of the Company or one of its
        subsidiaries receives $1,000 for each Board of Directors or committee meeting
        attended. Directors who serve as the chairman of a committee receive an
        additional $500 for each committee meeting attended. Each member of the Audit
        Committee receives $2,000, rather than $1,000, for each Audit Committee meeting
        attended. In addition, pursuant to our 2000 Stock Option Plan, our outside
        directors are granted an option to purchase 100,000 shares of our common
        stock
        when they first join the board and then an option to purchase 50,000 shares
        of
        our common stock annually thereafter.
  **Compliance with Section 16(a) of the Exchange Act**
 
 The
        Securities Exchange Act of 1934 requires our directors and executive officers
        and persons who own more than ten percent of a registered class of our equity
        securities to file reports of beneficial ownership and changes in beneficial
        ownership with the Securities and Exchange Commission. To our knowledge,
        all
        filing requirements by our officers and directors were complied with during
        the
        year ended January 31, 2005
  58
 **Item
        11.**  **Security
        Ownership of Certain Beneficial Owners and Management**
 
 The
        following table sets forth certain information as of April 30, 2005, regarding
        the ownership of the Common Stock by (i) each Director of the Company; (ii)
        each
        of the executive officers named in the Summary Compensation Table, above;
        (iii)
        each person known by us to beneficially own 5% or more of Common Stock; and
        (iv)
        all Directors and executive officers of Entrada as a group. Except as indicated,
        all persons named as beneficial owners of Common Stock have sole voting and
        investment power with respect to the shares indicated as beneficially owned
        by
        them.
 **Common
                    Stock******
                ****
                ****
                ****
                ****
                **Number
                  of**
                
                
                **Percentage
                    of****Title
                    of Class**
                
                
                **Name
                    of Beneficial Owner (A)**
                
                
                **Shares**
                
                
                **Outstanding
                    (F**
                **)**Common
                
                
                Kanwar J.S. Chadha, 5755 Oberlin Dr., Suite 204, San Diego, CA
                    92121
                
                
                1,599,042(B
                )
                
                9.7
                %Common
                
                
                Leonard N. Hecht, 5755 Oberlin Dr., Suite 204, San Diego, CA
                    92121
                
                
                411,621
                    (C
                )
                
                2.6
                %Common
                
                
                Rohit Phansalkar, 5755 Oberlin Dr., Suite 204, San Diego, CA
                    92121
                
                
                521,833
                    (D
                )
                
                3.3
                %Common
                
                
                Davinder Sethi, 5755 Oberlin Dr., Suite 204, San Diego, CA 92121
                
                
                1,287,823
                    (E
                )
                
                8.0
                %**All
                    Directors and Executive Officers as a group**
                
                
                3,820,319
                
                
                21.4
                %Springboard Harper
                
                
                741,249
                
                
                4.8
                %Jim
                    Dziak
                
                
                1,302,083
                
                
                8.4
                %**Total
                    all affiliates**
                
                
                5,863,651
                
                
                33.0
                %
  (A)
              All
                  information with respect to beneficial ownership of the shares
                  is based
                  upon filings made by the respective beneficial owners with the
                  Securities
                  and Exchange Commission or information provided by such beneficial
                  owners
                  to us. Except as noted the addresses for each beneficial owner
                  is 5755
                  Oberlin Drive, Suite 204, San Diego, California
                  92121.
 
 (B)
              Includes
                  exercisable options held by Dr. Chadha to acquire 1,010,000 shares
                  of
                  common stock and shares directly owned by Dr. Chadha of 361,769
                  shares. On
                  February 5, 2002, the board of directors approved payment of $50,000
                  of
                  Dr. Chadha's salary for fiscal year 2003 in stock at the price
                  of the
                  stock on January 29, 2002. On May 20, 2002, the board of directors
                  approved payment of $57,883 of his salary for fiscal year 2004
                  in stock as
                  reported by NASDAQ at the close of business on May 20, 2002. On
                  February
                  3, 2003, Dr. Chadha was issued options at a price of $0.22 per
                  share for
                  660,000 shares replacing the like amount of options cancelled July
                  31,
                  2002 as part of our employee Tender Offer filed with the Securities
                  and
                  Exchange Commission in June 2002. On April 30, 2003, the board
                  of
                  directors granted Dr. Chadha 150,000 options at the closing market
                  price
                  of $0.28 per share. On April 30, 2004, the board of directors granted
                  Dr.
                  Chadha 200,000 options at the closing market price of $0.17 per
                  share on
                  April 30, 2004.  On May 14, 2004, 227,273 shares or $50,000
                  at market
                  close were awarded to Dr Chada per his employment agreement
                  for the
                  acquisition of Microtek Systems,
                  Inc..
 
 (C)
              Includes
                  exercisable options held by Mr. Hecht to acquire 300,000 shares
                  of common
                  stock and 111,621 shares indirectly owned by him. On September
                  28, 2001,
                  the board of directors approved options for 50,000 shares at a
                  price of
                  $0.11 per share, the closing price on September 28, 2001. On April
                  23,
                  2002, the board of directors approved payment of $3,500 of Mr.
                  Hecht's
                  past board fees in stock at the price of the stock as reported
                  by NASDAQ
                  at the close of business on May 20, 2002. On May 20, 2002, the
                  price was
                  $0.16 per common share with the $3,500 payable by issuing 21,875
                  shares to
                  him. In addition, Mr. Hecht holds options to purchase 90,000 shares
                  of our
                  common stock owned by Sorrento Networks Corporation, which are
                  not
                  considered to be beneficially owned by Mr. Hecht. On February 3,
                  2003, Mr.
                  Hecht was issued options at a price of $0.22 per share for 100,000
                  shares
                  replacing the like amount of options cancelled July 31, 2002 as
                  part of
                  our employee Tender Offer filed with the Securities and Exchange
                  Commission in June, 2002. On November 24, 2003, the board of directors
                  approved options for 50,000 shares at a price of $0.11 per share,
                  the
                  closing price on November 24, 2003. On March 29, 2004, the board
                  of
                  directors approved options for 50,000 shares at a price of $0.18
                  per
                  share, the closing price on February 2, 2004. On January 26, 2005,
                  the
                  board of directors approved options for 50,000 shares at a price
                  of $0.12
                  per share, the closing price on January 26,
                  2005.
 
 59
 (D)
              Includes
                  exercisable options held by Mr. Phansalkar to acquire 300,000 shares
                  of
                  common stock and 221,833 shares owned directly or indirectly by
                  him. In
                  addition, Mr. Phansalkar holds options to purchase 50,000 shares
                  of our
                  common stock owned by Sorrento Networks Corporation, which are
                  not
                  considered to be beneficially owned by Mr. Phansalkar. On September
                  28,
                  2001, the board of directors approved options for 50,000 shares
                  at a price
                  of $0.11 per share, the closing price on September 28, 2001. On
                  May 20,
                  2002, Mr. Phansalkar received 18,750 shares of common stock for
                  his unpaid
                  past board fees in the amount of $3,000 at the market price on
                  May 20,
                  2002, which was at $0.16 per share. Mr. Phansalkar also owns approximately
                  3,500 shares of the common stock of Sorrento Networks Corporation.
                  On
                  February 3, 2003, Mr. Phansalkar was issued options at a price
                  of $0.22
                  per share for 100,000 shares replacing the like amount of options
                  cancelled July 31, 2002 as part of our employee Tender Offer filed
                  with
                  the Securities and Exchange Commission in June 2002. On November
                  24, 2003,
                  the board of directors approved options for 50,000 shares at a
                  price of
                  $0.11 per share, the closing price on November 24, 2003. On March
                  29,
                  2004, the board of directors approved options for 50,000 shares
                  at a price
                  of $0.18 per share, the closing price on February 2, 2004. On January
                  26,
                  2005, the board of directors approved options for 50,000 shares
                  at a price
                  of $0.12 per share, the closing price on January 26,
                  2005.
 
 (E)
              Includes
                  exercisable options held by Dr. Sethi to acquire 750,000 shares
                  of common
                  stock and 537,823 shares owned directly or indirectly by him. On
                  February
                  5, 2002, the board of directors approved payment of $50,000 of
                  Dr. Sethi's
                  salary for fiscal year 2003 into stock at the price of the stock
                  on
                  January 29, 2002 as reported by NASDAQ at the close of business
                  on that
                  day. On January 29, 2002, the price was $0.13 per common share
                  with the
                  $50,000 resulting in 384,615 shares being issued to him. On May
                  20, 2002,
                  Dr. Sethi received 25,000 shares of common stock for his payment
                  of $4,000
                  at the price of $0.16 per share. On February 3, 2003, Dr. Sethi
                  was issued
                  options at a price of $0.22 per share for 100,000 shares replacing
                  the
                  like amount of options cancelled July 31, 2002 as part of our employee
                  Tender Offer filed with the Securities and Exchange Commission
                  in June
                  2002.On
                  September 28, 2001, the board of directors granted Dr. Sethi 50,000
                  options at the closing market price of $0.11 per share.On
                  October 31, 2001, the board of directors granted Dr. Sethi 450,000
                  options
                  at the closing market price of $0.15 per share. On April 30, 2003,
                  the
                  board of directors granted Dr. Sethi 100,000 options at the closing
                  market
                  price of $0.28 per share. On March 29, 2004, the board of directors
                  approved options for 50,000 shares at a price of $0.26 per share,
                  the
                  closing price on March 29, 2004.
 
 (F)
              For
                  each beneficial owner, the "Percentage of Outstanding" equals each
                  owner's
                  actual holdings of shares plus shares represented by unexercised
                  options
                  and warrants held, divided by the total of our outstanding shares
                  at May
                  2, 2005, plus the unexercised options and warrants detailed above
                  for the
                  referenced holder only.Please
                  also note thatthepercentages
                  are based ontheamount
                  of outstanding securities.In
                  other words, individual percentages of the listed holders will
                  not add to
                  the group total because the calculations are made separately for
                  each
                  holder.
 
 **Item
        12.**  **Certain
        Relationships and Related Transactions**
  In
        the merger
        agreement between Sync Research and our former parent, Sorrento Networks
        Corporation, Sorrento agreed to indemnify and hold us harmless against any
        liability arising after the merger in connection with the termination of
        a
        certain frozen defined pension plan maintained by Rixon. In July 2004, Sorrento
        was acquired by Zhone Technologies, Inc. A consultant retained by Sorrento
        and
        by the successor corporation to the entity from whom Sorrento originally
        purchased the company that became Rixon, had advised Sorrento and the successor
        corporation that the cost of termination of the pension plan in question
        could
        be in excess of $3 million. We do not believe that we are responsible for
        this
        termination cost or for the failure by Sorrento and Zhone to make required
        contributions to the plan. However, to date we have voluntarily administered
        the
        plan. Sorrento and Anite, the original plan sponsor,  have failed
        to make
        required contributions to the Plan since July 15, 2004.  As part of
        its
        administrative duties with respect to the Plan, the Company has filed the
        required Post-Event Notice of Reportable Events (Form 10) with the Pension
        Benefit Guarantee Corporation for the failure by Sorrento and Anite to make
        required contributions to the Plan.
  60
 Dr.
        Kanwar
        J.S. Chadha, Chairman, President, Chief Executive Officer and Director, has
        an
        agreement dated December 1, 2000, that provides for the immediate vesting
        of
        options, and for the Company's loan of funds to Dr. Chadha for the purposes
        of
        exercising such options, in the event of a change in control of Entrada.
        We have
        entered into an employment agreement with Dr. Chadha that runs through April
        14,
        2008 and an employment agreement with Dr. Davinder Sethi, our Chief Financial
        Officer, that runs through October 31, 2005.
  On
        January
        30, 2004, we borrowed an aggregate of $500 thousand from Hong Kong
        League
        Central Credit Union ("HKL"), HIT Credit Union ("HIT") and Shelly Singhal.
        In
        connection with this transaction, we issued a warrant to SBI Advisors, LLC
        ("SBI") to purchase 400,000 shares of our common stock and a warrant to purchase
        100,000 shares of our common stock to Shelly Singhal. The warrants have an
        exercise price of $0.35 per share and expire on February 5, 2007. Mr. Singhal
        has assigned his rights with respect to 25,000 of our shares issuable upon
        exercise of the warrant issued to Mr. Singhal to each of Jon Buttles and
        Matt
        McGovern. All of our shares of common stock issuable upon the exercise of
        the
        warrants issued in this debt financing are being registered for resale pursuant
        to the registration statement of which this prospectus is a part. The funds
        from
        this debt financing were used primarily for working capital.
  On
        May 14,
        2004, we borrowed an additional $1.0 million from HKL and Brightline
        Bridge
        Partners I, LLC ("Brightline"). In connection with this transaction, we issued
        a
        warrant to purchase 3,450,000 of our shares of common stock to SBI Brightline
        IV, LLC ("SBI Brightline") and a warrant to purchase 1,550,000 shares of
        our
        common stock to Brightline. The warrants have an exercise price of $0.16
        per
        share and will expire on May 13, 2007 **.** In
        addition, we issued 125,000 shares of our common stock for advisory fees
        in
        connection with the transaction, which shares are held of record by Core
        Capital
        Holdings, LLC. Brightline has assigned its rights under the warrant issued
        to
        Brightline to the following persons and entities (with the number of shares
        for
        which the warrant is exercisable by each such person or entity identified
        in
        parenthesis following such person or entity's name):
 
 John
                  Wang
              (125,000)J.
                  Michael Higginbotham
              (125,000)Suraj
                  Gohill
              (125,000)Robert
                  Gilman
              (250,000)Charles
                  Dominick
              (250,000)Franklin
                  C. Fisher, Jr.
              (175,000)Joseph
                  A. Schick
              (25,000)Phoenix
                  Capital Opportunity Fund
              (225,000)Jon
                  Buttles
              (250,000)**Total**
              **(1,550,000)**
  We
        registered
        the shares issuable upon exercise of the warrants issued in this debt financing
        for resale pursuant to the registration statement of which this prospectus
        is a
        part. The funds from this debt financing were primarily used for the acquisition
        of Microtek Systems, Inc.
  On
        October 4,
        2004, we borrowed an additional $750 thousand from HKL. In connection
        with
        this transaction, we issued a warrant to SBI, or its designees, to purchase
        15,000,000 shares of our common stock at a per share exercise price of $0.10.
        SBI has designated Jon Buttles, David F. Evans, Crestwood Children's Trust
        and
        McGovern Living Trust (dated September 28, 2004) to each receive a warrant
        to
        purchase 3,750,000 shares of our common stock. We are registering the shares
        issuable upon exercise of these warrants for resale pursuant to the registration
        statement of which this prospectus is a part. The funds from this debt financing
        will be used primarily for working capital and the reduction of our outstanding
        debt.
  61
 On
        November
        10, 2004, we entered into a Letter of Engagement (the "Letter of Engagement")
        with Trilogy Capital Partners, Inc. ("Trilogy"). Pursuant to the Letter of
        Engagement, Trilogy agreed to implement a marketing program regarding our
        technology, and, to the extent we request, to assist us in business development
        and capital raising and to provide strategic advisory and investor relations
        services. The Letter of Engagement has an initial term of 6 months and is
        terminable by us or Trilogy at any time thereafter upon 30 days prior written
        notice. In consideration for the services to be provided by Trilogy, we agreed
        to pay Trilogy $10,000 per month and we issued to Trilogy a warrant to purchase
        up to 10,000,000 shares of our Common Stock at a per share exercise price
        of
        $0.12. As long as we have a class of securities registered under Section
        12 of
        the Securities Exchange Act of 1934, as amended, Trilogy will not be entitled
        to
        exercise the warrant to purchase shares of our common stock in an amount
        that,
        immediately following such purchase, would result in Trilogy beneficially
        owning
        5% or more of our outstanding shares of common stock. The warrant expires
        on
        November 30, 2006.
 
 On
          May 31,
          2005, we signed an agreement terminating our Letter of Engagement with
          Trilogy.
          Neither Trilogy or Entrada shall have any further rights or obligations.
          It was
          further agreed that Trilogy will asign to Entrada the Warrant that evidences
          the
          right to purchase 8,500,000 shares of Common Stock. Entrada agrees that
          Trilogy
          shall retain that portion of the Warrant evidencing the right to purchase
          1,500,000 shares. Trilogy shall execute and deliver to Entrada an assignment
          of
          the certificate evidencing the Warrant to purchase 10,000,000 shares against
          the
          delivery of a new certificate evidencing the portion of the Warrant that
          was not
          assigned to Entrada.
  Some
        or all
        of the warrant holders identified in the preceding paragraphs may be affiliated
        or otherwise associated with one or more of Hong Kong League Central Credit
        Union, HIT Credit Union, and Brightline Bridge Partners I, LLC, from whom
        we
        received loans in the aggregate amount of $2.25 million between February
        4,
        2004 and October 4, 2004, with Trilogy Capital Partners, Inc. whom we have
        engaged to provide certain marketing and other services, or with one or more
        of
        SBI Advisors, LLC, SBI Brightline IV, LLC, Brightline Bridge Partners I,
        LLC and
        Trilogy, who were entitled to receive (or designate other parties to receive)
        all of the 30,500,000 warrants as compensation for services provided in
        connection with such loans or services. SBI Brightline IV, LLC is controlled
        by
        SBI USA, LLC, which is in turn controlled by Shelly Singhal. Brightline Bridge
        Partners I, LLC is controlled by Shelly Singhal and Jon Buttles. SBI Advisors,
        LLC is controlled by Shelly Singhal.
  During
        April
        2004, we issued at cost 104,767 and 86,900 of our 384,615 treasury shares
        to SBI
        Brightline IV, LLC and Trilogy Capital Partners, LLC, respectively, for advisory
        fees in connection with the short-term debt issued on February 6, 2004.
  Dr.
        Chadha's
        brother is the managing member of HandsOn Ventures, LLC, which purchased
        in
        February 2002 a $250 thousand senior convertible debenture we issued
        and
        which was due January 2004 along with a warrant to purchase an aggregate
        of
        1,923,709 shares of our common stock, which warrant has been fully exercised.
        The debenture was fully paid and retired in January 2003.
 62
 **Item
        13.**  **Exhibits**
 
 
 **(a)Exhibits
                  and Consolidated Financial Statement Schedules**1.Financial
                  Statements:
                  (see index to financial statements under Item 7)Report of Independent Registered Public Accounting
                  FirmConsolidated Balance Sheets at January 31, 2005
                  and
                  2004Consolidated Statements of Operations for the Years Ended
                  January
                  31, 2005 and 2004Consolidated Statement of Stockholders' Equity for the
                  Years Ended
                  January 31, 2005 and 2004Consolidated Statements of Cash Flows for the Years Ended
                  January
                  31, 2005 and 2004Notes to Consolidated Financial
                  Statements
 
 2.Exhibits:
 
 **Exhibit****Number**
              **Description
                  of Document**2.1
              Stock
                  Purchase Agreement among Torrey Pines Networks, Inc., Entrada Networks,
                  Inc. and James Dziak dated May 14, 2004 - (A)3.1
              Amended
                  and Restated Certificate of Incorporation - (B)3.2
              Certificate
                  of Amendment of Amended and Restated Certificate of Incorporation
                  -
                  (C)3.3
              Certificate
                  of Amendment of Amended and Restated Certificate of Incorporation
                  -
                  (D)3.4
              Certificate
                  of Designation of Rights, Preferences and Privileges of Series
                  A Preferred
                  Stock - (E)3.5
              Bylaws
                  - (C)3.6
              Amendment
                  to Bylaws (W)5.1
              Opinion
                  of Snell & Wilmer L.L.P. (W)10.1
              1996
                  Non-Executive Stock Option Plan (Amended August 21, 1998) - (F)10.2
              Amended
                  and Restated 1991 Stock Incentive Plan - (G**)**10.3
              Amended
                  and Restated 1995 Directors' Stock Option Plan - (G**)**10.4
              Employment
                  Agreement between Entrada Networks, Inc. and Kanwar J.S. Chadha
                  dated May
                  10, 2001 - (H)10.5
              Employment
                  Agreement between Entrada Networks, Inc. and Davinder Sethi dated
                  June 15,
                  2002 - (I)10.6
              Amendment
                  to Silicon Valley Bank Loan Documents dated March 20, 2003 -
                  (I)10.7
              Lease
                  Termination Agreement between Chippewa Limited Partnership and
                  Rixon
                  Networks, Inc. dated July 31, 2003 - (J)10.8
              Stock
                  Purchase Agreement among Entrada Networks, Inc., SBI Brightline
                  IV, LLC
                  and Trilogy Investment Fund I, LLC dated November 25, 2003 -
                  (K)10.9
              Amendment
                  to Silicon Valley Bank Loan Documents dated October 29, 2003 -
                  (L)10.10
              First
                  Amendment to Stock Purchase Agreement among Entrada Networks, Inc.,
                  SBI
                  Brightline IV, LLC and Trilogy Investment Fund I, LLC dated March
                  8, 2004
                  (W)10.11
              Amendment
                  to Employment Agreement between Entrada Networks, Inc. and Kanwar
                  J.S.
                  Chadha dated April 30, 2004 - (M)10.12
              Limited
                  Waiver and Amendment to Silicon Valley Bank Loan Documents dated
                  April 19,
                  2004 - (M)10.13
              Stock
                  Purchase Agreement between Entrada Networks, Inc. and Trilogy Investment
                  Fund I, LLC dated April 26, 2004 - (N)10.14
              Stock
                  Purchase Agreement between Entrada Networks, Inc. and SBI Brightline
                  IV,
                  LLC dated May 14, 2004 - (N)10.15
              Term
                  Credit Agreement among Entrada Networks, Inc., Hong Kong League
                  Central
                  Credit Union, HIT Credit Union and SBI Advisors, LLC dated January
                  30,
                  2004 - (O)10.16
              Term
                  Note issued by Entrada Networks, Inc. to Hong Kong League Central
                  Credit
                  Union dated January 30, 2004 - (O)10.17
              Term
                  Note issued by Entrada Networks, Inc. to HIT Credit Union dated
                  January
                  30, 2004 - (O)10.18
              Term
                  Note issued by Entrada Networks, Inc. to Shelly Singhal dated January
                  30,
                  2004 - (O)10.19
              Security
                  Agreement among Entrada Networks, Inc. and SBI Advisors, LLC dated
                  January
                  30, 2004 - (O)10.20
              Warrant
                  Certificate issued by Entrada Networks, Inc. to SBI Advisors, LLC
                  dated
                  February 5, 2004 - (O)10.21
              Form
                  of Warrant Certificate, issued by Entrada Networks, Inc. dated
                  February 5,
                  including schedule of recipients (W)10.22
              First
                  Amendment to Term Credit Agreement among Entrada Networks, Inc.,
                  Hong Kong
                  League Central Credit Union, HIT Credit Union, Brightline Bridge
                  Partners
                  I, LLC and SBI Advisors, LLC dated May 14, 2004 - (O)10.23
              Term
                  Note issued by Entrada Networks, Inc. to Hong Kong League Central
                  Credit
                  Union dated May 14, 2004 - (O)10.24
              Term
                  Note issued by Entrada Networks, Inc. to Brightline Bridge Partners
                  I, LLC
                  dated May 14, 2004 - (O)10.25
              Form
                  of Warrant Certificate issued by Entrada Networks, Inc. dated May
                  14,
                  2004, including schedule of recipients (W)10.26
              Registration
                  Rights Agreement between Entrada Networks, Inc. and James Dziak
                  dated May
                  14, 2004 (W)10.27
              Termination
                  and Release Agreement between Entrada Networks, Inc. and SBI Brightline
                  IV, LLC dated September 24, 2004 - (P)10.28
              Termination
                  and Release Agreement between Entrada Networks, Inc. and Trilogy
                  Investment Fund I, LLC dated September 24, 2004 - (P)10.29
              Second
                  Amendment to Term Credit Agreement among Entrada Networks, Inc.,
                  Hong Kong
                  League Central Credit Union, HIT Credit Union, Brightline Bridge
                  Partners
                  I, LLC, Matthew McGovern, Jon Buttles and SBI Advisors, LLC dated
                  October
                  1, 2004 - (Q)10.30
              Term
                  Note issued by Entrada Networks, Inc. to Hong Kong League Central
                  Credit
                  Union dated October 1, 2004 - (Q)10.31
              Warrant
                  Certificate issued by Entrada Networks, Inc. to Jon Buttles dated
                  October
                  21, 2004 (W)10.32
              Warrant
                  Certificate issued by Entrada Networks, Inc. to David F. Evans
                  dated
                  October 21, 2004 (W)10.33
              Warrant
                  Certificate issued by Entrada Networks, Inc. to Crestwood Children's
                  Trust
                  dated October 21, 2004 (W)10.34
              Warrant
                  Certificate issued by Entrada Networks, Inc. to McGovern Living
                  Trust
                  (Dated September 28, 2004) dated October 21, 2004 (W)10.35
              401(k)
                  Plan - (R)10.36
              Silicon
                  Valley Bank Subordination Agreement dated January 22, 2002 -
                  (S)10.37
              Trilogy
                  Capital Partners, Inc. Letter of Engagement dated November 10,
                  2004 -(T)10.38
              Warrant
                  Certificate issued by Entrada Networks, Inc. to Trilogy Capital
                  Partners,
                  Inc. dated November 10, 2004 - (T)10.39
              Lease
                  by and between Calwest Industrial Holdings, LLC and Entrada Networks,
                  Inc., dated May 5, 2004 (W)10.40
              Standard
                  Multi-Tenant Office Lease - Gross, by and between Denzo Investment
                  Trust -
                  Denzo I LP and Entrada Networks, Inc., dated April 14, 2004
                  (W)10.41
              Lease
                  by and between Monterey Park Ltd. and Microtek Systems, Inc. dated
                  March
                  12, 2003 (W)10.42
              Form
                  of Options Granted to Executive Officers and schedule of recipients
                  (W)10.43
              Silicon
                  Valley Bank Loan and Security Agreement dated February 20, 2001
                  (W)10.44
              Amendment
                  to Silicon Valley Bank Loan Documents dated October 29, 2002 -
                  (U)10.45
              Entrada
                  2000 Stock Incentive Plan dated October 27, 2000 (W)10.46
              Silicon
                  Valley Bank Loan and Security Agreement dated December 14, 2004
                  (V)10.47
              Silicon
                  Valley Bank Amendment to Loan Documents dated December 14,
                  2004
                  (V)10.48
              Silicon
                  Valley Bank Amendment to Loan Documents dated December 22,
                  2004
                  (V)21.1
              Subsidiaries
                  of Entrada Networks, Inc. (W)23.1
              Consent
                  of BDO Seidman, LLP, filed herewith23.2
              Consent
                  of Peterson & Co., filed
                  herewith
  63
  
 **The
                  foregoing are incorporated by reference from the registrant's filings
                  as
                  indicated:**A
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on May 19, 2004.B
              Filed
                  as an exhibit to Entrada Network, Inc.'s Registration Statement
                  on Form
                  S-4/A, filed with the Securities and Exchange Commission on August
                  3,
                  2000.C
              Filed
                  as an exhibit to Entrada Network, Inc.'s Quarterly Report on Form
                  10-Q for
                  the fiscal quarter ended June 30, 1999, filed with the Securities
                  and
                  Exchange Commission on August 16, 1999.E
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on May 19, 2000.F
              Filed
                  as an exhibit to Entrada Network, Inc.'s Quarterly Report on Form
                  10-Q for
                  the fiscal quarter ended September 30, 1998, filed with the Securities
                  and
                  Exchange Commission on November 16, 1998. (SEC File No. 000-26952)G
              Filed
                  as an exhibit to Entrada Network, Inc.'s Quarterly Report on Form
                  10-Q for
                  the fiscal quarter ended June 30, 1998, filed with the Securities
                  and
                  Exchange Commission on August 14, 1998.(SEC
                  File No. 000-26952)H
              Filed
                  as an exhibit to Entrada Network, Inc.'s Annual Report on Form
                  10-K for
                  the fiscal year ended January 31, 1998, filed with the Securities
                  and
                  Exchange Commission on May 1, 2002.I
              Filed
                  as an exhibit to Entrada Network, Inc.'s Annual Report on
                  Form 10-K
                  for the fiscal year ended January 31, 2003, filed with the
                  Securities
                  and Exchange Commission on April 30, 2003.J
              Filed
                  as an exhibit to Entrada Network, Inc.'s Quarterly Report on Form
                  10-Q for
                  the fiscal quarter ended July 31, 2003, filed with the Securities
                  and
                  Exchange Commission on September 15, 2003.K
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on November 26,
                  2003.L
              Filed
                  as an exhibit to Entrada Network, Inc.'s Quarterly Report on Form
                  10-Q for
                  the fiscal quarter ended October 31, 2003, filed with the Securities
                  and
                  Exchange Commission on December 15, 2003.M
              Filed
                  as an exhibit to Entrada Network, Inc.'s Annual Report on Form
                  10-K for
                  the fiscal year ended January 31, 2004, filed with the Securities
                  and
                  Exchange Commission on May 14, 2004.N
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on May 25, 2004.O
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on May 26, 2004.P
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on September 28,
                  2004.Q
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on October 8,
                  2004.R
              Filed
                  as an exhibit to Entrada Network, Inc.'s Registration Statement
                  on Form
                  S-1, filed with the Securities and Exchange Commission which became
                  effective on November 9, 1995.S
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on January 28,
                  2002.T
              Filed
                  as an exhibit to Entrada Network, Inc.'s Current Report on Form
                  8-K, filed
                  with the Securities and Exchange Commission on November 11,
                  2004.U
              Filed
                  as an exhibit to Entrada Network, Inc.'s Quarterly Report on Form
                  10-Q for
                  the fiscal quarter ended October 31, 2002, filed with the Securities
                  and
                  Exchange Commission on November 29, 2002.V
              Filed
                  as an exhibit to Entrada Networks, Inc.'s current report on Form
                  8-K filed
                  with the Security and Exchange Commission on January 7,
                  2005.W
              Filed
                  as an exhibit to Entrada Networks, Inc.'s Registration Statement
                  on Form
                  SB-2, filed with the Securities and Exchange Commission on November
                  26,
                  2004
 
 64
 **(b)** Certifications
 
 31.1Statement Under Oath for Chief Executive Officer Pursuant to
                    Section 302
                    of the Sarbanes-Oxley Act.31.2Statement
                    Under Oath for Principal Financial Officer Pursuant to Section
                    302 of the
                    Sarbanes-Oxley Act.32.1Statement
                    Under Oath for Chief Executive Officer Pursuant to Section 906
                    of the
                    Sarbanes-Oxley Act.32.2Statement
                    Under Oath for Principal Financial Officer Pursuant to Section
                    906 of the
                    Sarbanes-Oxley Act.
 Item
        14  **Principal
        Account Fees and Services**
 
 Fiscal
                Year 2005
              
              
              **Fiscal
                  Year 2004**Audit
                  Fees (1)
              
              $
              60,000
              
              $
              61,433Audit-related fees (2)
              
              
              107,933
              
              
              20,735Tax
                  fees (3)
              
              
              15,000
              
              
              15,000All
                  other fees (4)
              
              
              7,339
              
              
              4,078Total
              
              $
              190,272
              
              $
              96,246
 
 (1)
              Represents
                  fees for professional services provided in connection with the
                  audit of
                  our annual financial statements and review of our quarterly financial
                  statements.
 
 (2)
              During
                  fiscal year 2004 and 2005, we incurred fees for assurance services
                  in
                  connection with the audit of our 401-K Plan and audit related services
                  in
                  connection with the filing our Form S-3, Form SB-2 and the acquisition
                  of
                  Microtek Systems, Inc..
 
 (3)
              Represents
                  fees in connection with preparation of our federal and state tax
                  returns.
 
 (4)
              During
                  fiscal years 2004 and 2005, fees include review of responses to
                  SEC
                  inquiries, Form 8-K filings.
  Our
        Audit
        Committee has determined that the provision of non-audit services by BDO
        Seidman, LLP is compatible with maintaining BDO Seidman's independence, and
        none
        of such services were pre-approved pursuant to the *de
        minimis* exception
        provided in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934.
  Generally,
        the Audit Committee approves in advance audit and non-audit services to be
        provided by BDO Seidman. In other cases, in accordance with Rule 2-01(c)(7)
        of
        Securities and Exchange Commission Regulation S-X, the Audit Committee has
        delegated pre-approval authority to the Chairman of the Audit Committee for
        matters which arise or otherwise require approval between regularly scheduled
        meetings of the Audit Committee, provided that the Chairman report such
        approvals to the Audit Committee at the next regularly scheduled meeting
        of the
        Audit Committee.
   65
   **SIGNATURES**
 
 Pursuant
        to the requirements of Section 13 or 15(d) of the Securities Exchange Act
        of
        1934, we have duly caused this report to be signed on its behalf by the
        undersigned, thereunto duly authorized.
 
 ENTRADA
        NETWORKS, INC.
 
 
 By:/s/
                  Davinder
                  SethiDate:
                  June 14, 2005Davinder
                  Sethi, Ph.D.Chief
                  Financial OfficerPrincipal
                  Accounting Officer
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, this report has
        been
        signed below by the following persons on our behalf and in the capacities
        and on
        the dates indicated.
 
 By:/s/
                  Kanwar J.S.
                  ChadhaDate:
                  June 14, 2005Kanwar
                  J.S. Chadha, Ph.D.Chairman
                  and DirectorPresident
                  and Chief Executive Officer
 
 By:/s/
                  Leonard
                  HechtDate:
                  June 14, 2005Leonard
                  HechtDirector
 
 By:/s/
                  Rohit
                  PhansalkarDate:
                  June 14, 2005Rohit
                  PhansalkarDirector
 
 By:
                  /s/ Davinder
                  Sethi                                                                                                     
                   Date: June 14, 2005Davinder
                  Sethi, Ph.D.Vice
                  Chairman and Director


66