U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                            ------------------------



                                   FORM 10-KSB
                                 Amendment No. 2



                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                           THE SECURITIES ACT OF 1934

                                   (Mark One)

[X]  Annual report  pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 for the fiscal year ended December 31, 2004

[ ]  Transition  report  pursuant  to Section  13 or 15(d) of the  Securities
     Exchange Act of 1934

        For the transition period from _______________ to _______________

                          Commission File No. 000-27365


                          MANAKOA SERVICES CORPORATION
               ---------------------------------------------------
             (Exact name of registrant as specified in its charter)


      Nevada                      000-27365                88-0440528
--------------------------------------------------------------------------------
  (State or other              (Commission               (I.R.S. Employer
  Jurisdiction                 File Number)            Identification No.)
 of incorporation)


             7203 W. Deschutes Avenue, Suite B, Kennewick, WA 99336
             ------------------------------------------------------
               (Address of principal executive offices) (Zip Code)


       Registrant's telephone number, including area code: (509) 736-7000
       ------------------------------------------------------------------
             Securities registered pursuant to Section 12(b) of the
                                 Exchange Act:

                                      None
      --------------------------------------------------------------------
      Securities registered pursuant to Section 12(g) of the Exchange Act:
                         Common Stock, $0.001 Par Value
                                (Title of Class)



                                       1
<PAGE>

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during the  preceding  12 months (or for such
shorter period that the Company was required to file such reports),  and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Check if  there is no  disclosure  contained  herein  of  delinquent  filers  in
response to Item 405 of Regulation  S-B, and will not be contained,  to the best
of the  Company's  knowledge,  in  definitive  proxy or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [ ]

The Issuer's revenues for its year ended December 31, 2004 were $nil.

As of April 13, 2005,  the aggregate  market value of the voting and  non-voting
common equity held by  non-affiliates  was  approximately $ 5,903,751 based upon
the closing price per share as reported on the NASDAQ  Bulletin  Board Market of
$0.55 .

There  were  34,263,515  outstanding  shares  of the  issuer's  Common  Stock on
December 31, 2004

DOCUMENTS INCORPORATED BY REFERENCE

None.

FORWARD-LOOKING STATEMENTS

Statements  contained in this report,  which are not  historical in nature,  are
forward-looking   statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act  of  1995.  These  forward-looking   statements  include
statements  in Item 1 - Business,  Item 5 - Market for Common Equity and Related
Stockholder  Matters,  and Item 6 -  Management's  Discussion  and  Analysis  of
Financial  Condition and Results of  Operations,  which can be identified by the
use of forward-looking  terminology such as believes, expects, plans, estimates,
predicts, potential, continue, may, will, should, or anticipates or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy. These statements are only predictions and involve known and unknown
risks,  uncertainties  and other  factors,  including  the risks in the  section
entitled "Risk  Factors",  that may cause our or our industry's  actual results,
levels of activity,  performance or achievements to be materially different from
any future results, levels of activity, performance or achievements expressed or
implied  by these  forward-looking  statements.  Although  we  believe  that the
expectations  reflected in the forward  looking  statements are  reasonable,  we
cannot   guarantee   future   results,   levels  of  activity,   performance  or
achievements.  Except as required by applicable  law,  including the  securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.


Such  forward-looking  statements  involve certain risks and uncertainties  that
could cause actual results to differ materially from anticipated results.  These
risks and  uncertainties  include  regulatory  constraints,  changes  in laws or
regulations  governing  the  Company's  products and  international  trade,  the
ability of the Company to market  successfully  its products in an  increasingly
competitive  worldwide market,  changes in the Company's  operating or expansion
strategy,  failure to  consummate or  successfully  integrate  proposed  product
developments,  the ability of the Company to manage growth,  the general economy
of the  United  States and the  specific  global  markets  in which the  Company
competes,  the  availability of financing from internal and external sources and
other  factors as may be identified  from time to time in the Company's  filings
with the Securities and Exchange Commission or in the Company's press releases.




                                       2
<PAGE>

                          MANAKOA SERVICES CORPORATION

                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004


PAGE

ITEM 1 DESCRIPTION OF BUSINESS ...............................................4

ITEM 2 DESCRIPTIONS OF PROPERTIES ...........................................12

ITEM 3 LEGAL PROCEEDINGS ....................................................12

ITEM 4 SUBMISSIONS  OF  MATTERS  TO A VOTE OF  SECURITY  HOLDERS ............12

ITEM 5 MARKETS FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.............13

ITEM 6 MANAGEMENT'S  DISCUSSION   AND  ANALYSIS  OR  PLAN  OF
          OPERATION..........................................................14

ITEM 7 FINANCIAL STATEMENTS..................................................21

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE .............................42

ITEM 8A CONTROLS AND PROCEDURES .............................................42

ITEM 9  DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT .........42

ITEM 10 EXECUTIVE COMPENSATION ..............................................44

ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS .....................46

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ......................47

ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K ....................................47

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES ..............................48

SIGNATURES ..................................................................48


                                       3
<PAGE>

ITEM 1 DESCRIPTION OF BUSINESS

Background

The  Company  was  incorporated  in  Nevada  on May 14,  1992 and its  principal
business  activities  were  directed  towards the  development  and marketing of
contact-less  smart ID card systems (Smart  Card(s) or Smart ID Card  System(s).
This development effort was unsuccessful. The Company then proceeded to look for
other business opportunities.

The  Company  located a business  opportunity  in the form of  Manakoa  Services
Corporation.  As was disclosed in the  Company's  Form 8-K filed on December 16,
2003,  the Company  entered into a Stock Purchase  Agreement to acquire  Manakoa
Services Corporation,  a Washington  corporation.  As disclosed in the Company's
Form 8-K filed on March 15, 2004,  this  acquisition  closed in March 2004.  The
Company,  which is a Nevada  corporation,  changed its name to Manakoa  Services
Corporation as well. At this time, the Washington Company is a subsidiary of the
Nevada  Corporation.  It is anticipated that the Washington  Corporation will be
merged  into  the  Nevada  Corporation.  Whenever  necessary  to be  clear,  the
Washington Corporation is referred to as "MSC Washington".

The  balance  of this Form  10-KSB  filing  describes  the  business  of Manakoa
Services  Corporation  ("Manakoa",   the  "Company"  or  "we").  Manakoa  was  a
development  stage company  throughout  the 2004 calendar year. The Company made
available  during  the  first  quarter  of 2005  the  Manakoa  KnowledgeBase(TM)
regulatory compliance research engine.

Overview

Manakoa Services Corporation  (www.Manakoa.com) is an enterprise risk management
software and services company focusing on regulatory compliance solutions.

Manakoa ComplianceSuite(TM) is being developed to meet the vertical security and
risk  management   requirements  of  organizations  complying  with  regulations
stemming from the Gramm Leach Bliley Act (GLBA),  Health  Insurance  Portability
Accountability  Act  (HIPAA),  Sarbanes  Oxley Act, USA Patriot Act, and Federal
Informational Security Management Act (FISMA). The Company anticipates expanding
its support to other U.S. regulations plus international regulatory requirements
emerging from the European Union,  Japan,  United Kingdom and Canada. The market
sectors that the Company believes initially will be most significantly  impacted
are public corporations,  health care, insurance, financial services and federal
contractors.  The Company  intends to focus its sales  efforts  through  channel
partners that are  envisioned to include  trade and  professional  associations,
accounting and legal firms, security consultants and system integrators, as well
as non profit associations.

The Company is developing the Manakoa  ComplianceSuite(TM) as both an integrated
solution  set and a series of  standalone  component  products.  The  underlying
architecture  for the Manakoa  ComplianceSuite(TM)  was completed in 2004 but is
subject to  adaptations  and change to meet market,  technology  and  regulatory
shifts over time. The Manakoa  KnowledgeBase(TM) is the first standalone product
component, and was launched on February 28, 2005. It is an Internet subscription
portal for regulatory  compliance  information.  The  Compliance  WorkCenter(TM)
asset and policy engine known as the Manakoa  Compliance  Services(TM)  together
with  related  interfaces  to the  Microsoft  Operations  Manager  are  will  be
announced in April 2005. Other component  products will be released during 2005,
although precise dates are still not publicly defined.



                                       4
<PAGE>

Manakoa  continues its involvement in homeland  security through a licensing and
joint  development  agreement  with  the U.S.  Department  of  Energy  sponsored
Battelle  Pacific  Northwest  National  Laboratory  for the nation's first Cyber
Attack Simulation Trainer (CAST).

Principle Markets

The principal  markets for the Manakoa  platforms  initially center on financial
institutions,  health care,  insurance  industry,  and public companies that are
most directly impacted by current  regulatory  pressures.  This list of industry
sectors is anticipated to grow. The Company also anticipates  targeting homeland
security and other governmental sectors.

The size of the market opportunity appears very large. The regulatory compliance
software market is  experiencing  rapid growth due to the influx in governmental
regulations being instituted by Congress. These new regulations will account for
billions of dollars in IT costs over the coming years.  Nemerts  Research  found
that 80% of  companies  surveyed  have  yet to  purchase  regulatory  compliance
software, with 77% predicted to either begin or increase spending 2005. Industry
growth is projected at over $8.0 Billion and  growing.  AMR  Research,  December
2003 estimated  corporate cost for Sarbanes Oxley alone at $5.5 billion in 2005.
CIO Update,  Oct,  2003 stated  "Compliance  with new federal  regulations  that
address security, privacy, and corporate accountability will have a broad impact
on IT operations at many  organizations"  and goes on to state,  "Compliance  is
reminding  some  people  of  another,  recent  event  that  led to a surge in IT
activity and spending:  Y2K. This time,  however,  there's no "end-time" for the
event;  compliance  is something  that must  continue as long as the laws are in
effect."

Competitive Situation

The Company has not identified a competitor that is approaching  enterprise risk
management and regulatory compliance in the same manner or with the same breadth
as Manakoa.  The company makes no representation  that despite its investigation
that other companies may exist and directly compete in the precisely same market
sectors.  However, many other companies exist in the compliance arena. Companies
that are providing software IT compliance modules include NetIQ,  Bindview,  and
Oracle. Consulting services companies in the field include integrators like CSC,
Protiviti  and IBM and auditors  such as the Big Four  accounting  firms.  Point
product  solutions for everything from document  imaging to document control are
supplied  by  companies  such as Kodak.  Other forms of point  products  include
vendors of firewalls, anti-virus software, and hardware remediation devices. The
opportunities  associated  with  compliance  are well  understood and many large
competitors  are engaged in developing  and marketing  solutions.  Nevertheless,
there are no clear leaders,  nor any tiers of leaders.  The opportunity  thereby
projects itself.

Risk Factors

An investment in our securities is very risky. You should carefully consider the
risk factors described below, together with all other information herein, before
making an  investment  decision.  The  trading  price of our common  stock could
decline  due to any of  these  risks,  and you  could  lose  all or part of your
investment.  The investment is only suitable to qualified  investors who have no
immediate  need for liquidity in their  investment  and who can bear the risk of
potential  total loss. You also should refer to the other  information set forth
herein, including our financial statements and the related notes thereto.



                                       5
<PAGE>

If we do not successfully  address any of the risks described below, there could
be a material adverse effect on our business,  financial condition or results of
operations,  and the trading price of our common stock may decline and investors
may lose all or part of their investment.  We cannot assure any investor that we
will successfully address these risks.

Our products require additional enhancements to achieve commercial viability.

We are  still in the  development  phase for many of our  products.  Substantial
additional  efforts and expenditures to enhance their  capabilities are critical
to our commercial  viability.  There is no assurance  given that we will achieve
such enhancements or such commercial viability.

We are in an early  stage of  organization  without any proven  track  record in
achieving our objectives.

We have no material revenues from operations and no significant tangible assets.
Accordingly,  there is no  assurance  that we will ever  operate at a profitable
level.  Our  business  involves the  development,  production  and  marketing of
software based products. Future development and operating results will depend on
many factors,  including the  completion of developed  products,  demand for our
products,  level of  product  and price  competition,  success in setting up and
expanding  distribution  channels,  and  whether we can  develop  and market new
products and control costs. In addition, our future prospects must be considered
in light of the risks,  expenses  and  difficulties  frequently  encountered  in
establishing a new business in the software industry,  which is characterized by
intense competition and rapid technological  change.  There is no assurance that
our future  financial  forecasts  will be met.  If we are unable to  generate an
operating  profit at some  future  date,  we may  eventually  have  insufficient
working capital to maintain operations.

We may incur substantial  operating losses for several years, may never generate
profits and will need additional capital.

It is very possible that we will incur significant operating losses and generate
negative cash flow from operating activities during the next few years, while we
develop additional technologies and products. There is no assurance that we will
be able to obtain  sufficient  additional debt or equity financing or achieve or
sustain  profitability  or positive cash flow from  operating  activities in the
future  or that we will  generate  sufficient  cash  flow to  service  any  debt
requirements.

We will be dependent on third parties for other matters.

We are a  small  enterprise  and  have  yet to  establish  substantial  internal
management,  personnel and other resources.  We depend  substantially upon third
parties for several  critical  elements of our business  including,  among other
things, promotion and marketing,  technology and infrastructure  development and
distribution  activities.  The loss of or inability to engage  additional  third
party  suppliers,  providers  or personnel  would  impair or interfere  with our
operations  and,  accordingly,  could  have a  material,  adverse  effect on our
revenues and financial results.


                                       6
<PAGE>

We will  need  future  strategic  partnerships  in  order to  achieve  financial
success.

The  successful  execution of our business  strategy is dependent upon enlisting
key strategic partners in order to assist in product development,  the marketing
effort and to provide financial strength.  There is no assurance that we will be
successful in developing  such  strategic  partnerships  on a timely basis or in
developing enough strategic partnerships to successfully market our technologies
and products globally.

If we are not able to maintain our  management  team, it will be more  difficult
for us to manage our operations and our operating performance would suffer.

We are  reliant  on our  management  team.  We do not  have  written  employment
agreements with our management team. Without written employment agreements there
is no  assurance  that we will be able to  retain  the  services  of one or more
members of our management team. In addition,  we may not have adequate resources
to replace any of the management  team who may leave us or to recruit  necessary
additional key members of our management team.

Despite our dependence on certain members of management,  we do not maintain any
key life insurance on them.

We are a growing company  dependent upon the services of certain  management and
technical  personnel,  for  day-to-day  operations  and for  development  of new
products.  The loss of the services of any one of these persons, or an inability
to recruit  and retain  additional  qualified  personnel,  could have a material
adverse  effect on us. We have no plans at present  to obtain  key  person  life
insurance for officers and  directors.  In the event of the death of any of such
persons,  we may experience,  at least for a short period, a delay in the growth
of our  revenues  and any profits  could  decrease  substantially  without  life
insurance benefits to offset at least a portion of such revenues or profits.

The market for our products is new and evolving.

The risk  management  market place is a dynamic and evolving sector and there is
no our  assurance  that our  products  will be marketed  successfully  or become
widely accepted. Additionally, future regulatory compliance may be altered based
upon changes in the political  landscape,  and may have an adverse effect on our
business.  In addition,  there is no assurance that our products will be adopted
widely as an industry  standard,  even if similar  products have been introduced
successfully to the marketplace.

The markets for our products have only recently begun to develop.  As is typical
in the case of a new and rapidly evolving industry, demand and market acceptance
for  recently  introduced  products  and services are subject to a high level of
uncertainty and risk. Because the markets for our products are new and evolving,
it is difficult to  accurately  predict the future growth rate, if any, and size
of this market.  There is no assurance  either that the markets for our products
will emerge or become sustainable.  If the markets fail to develop, develop more
slowly than expected or become saturated with competitors, or if our products do
not achieve or sustain market  acceptance,  our business,  results of operations
and financial condition will be materially and adversely affected.


                                       7
<PAGE>

The risk management marketplace is highly competitive.

We will compete with a substantial number of other companies, many of which have
larger technical  staffs,  established  market shares and greater  financial and
operational resources than we do. These greater resources permit our competitors
to implement extensive advertising and promotional  programs,  which we have not
been, and may never be, able to meet. As these competitors  enter thefield,  our
market  share may fail to  increase  or may  decrease  despite  our  efforts  to
continue  to produce  superior  products.  The risk  management  and  regulatory
compliance   industry  is  characterized  by  rapidly  evolving  technology  and
potentially  intense  competition.  We will be at a disadvantage with respect to
many  other  companies.  There is no  assurance  that we will be able to compete
successfully.  There is no assurance  that our  competitors  will not succeed in
developing  products or competing  technologies  that are more effective or more
effectively marketed than products marketed by us, or that render our technology
obsolete.  Earlier entrants into a market often obtain and maintain  significant
market share relative to later entrants. We believe that an increasing number of
products in the market and the desire of other  companies to obtain market share
will result in increased price  competition.  Price reductions by us in response
to  competitive  pressure  could have a material,  adverse  effect our business,
financial condition, and results of operations.

If our competition  misappropriates our proprietary  know-how and trade secrets,
we will have greater difficulty in competing with them for business.

Our  chances of success  will  depend in part on our  ability  to  preserve  and
protect our trade secrets and any proprietary technology, and to operate without
infringing  upon the patents or proprietary  rights of third parties in both the
United States and other countries.  At this time we have no pending patents.  We
currently  seek to protect our  proprietary  technology  though  copyrights  and
agreements  with employees and others  requiring  that such  information be kept
confidential and that software code not be reverse  engineered.  There can be no
assurance that such protection will be sufficient or that copyright  claims will
not be challenged.  We may have to sue to defend our intellectual  property,  to
prosecute infringers, or to defend ourselves from infringement claims by others.
Intellectual  property  litigation is expensive and  time-consuming,  and can be
used by  well-funded  adversaries as a strategy for depleting the resources of a
small company such as we are. There is no assurance that we will have sufficient
resources  to  successfully   prosecute  our  interests  in  any  patent-related
litigation that may be brought.

If we are found to have infringed on patents or copyrights  held by others,  our
business would suffer.

The  possibility  exists that we could be found to be  infringing  on patents or
copyrights held by others.  We are not aware of any disputes with respect to any
of our intellectual property at this time The possibility exists,  however, that
either the  companyor  its  subsidiaries  could be found to infringe on patents,
service marks,  trade marks or copyrights held by others. The use of trademarks,
service marks, trade names, slogans, phrases and other expressions in the course
of our  business  or the  business  of our  subsidiaries  may be the  subject of
dispute and possible litigation.

If we cannot  keep pace with  technological  developments,  our  products  could
become obsolete.


                                       8
<PAGE>

Technological  obsolescence of our products  remains a possibility.  There is no
assurance that our competitors  will not succeed in developing  related products
using similar processes and marketing strategies before we do, or that they will
not develop  products  that are more  effective  than any which have been or are
being developed by us. Accordingly,  our ability to compete will be dependent on
timely  enhancement and development of our products,  as well as the development
and enhancement of future products.

We need to manage our growth and maintain procedures and controls.

If we are  to  grow,  we  can  expect  to  place  a  significant  strain  on our
management,  operational  and  financial  resources.  Such  growth  may  require
development of and improvements in our  operational,  accounting and information
systems, procedures and controls.

Our management may have conflicts of interest from time to time.

Management,  Board Members,  Board of Advisors and other controlling persons may
have  conflicts  of  interest  with  regard to  potential  business  clients and
partners. These conflicts will be disclosed and appropriately managed.

The market for our common stock is extremely  thin, and you may have  difficulty
selling our common stock.

If you purchase our  securities and later decide to sell shares of common stock,
you may have difficulty  selling the shares, and the price at which you can sell
the shares (if at all) could be less than you might otherwise  obtain if a broad
public market for the common stock existed.

Our common stock is quoted on the OTC electronic  bulletin board (symbol:  MKOS.
There can be no  assurance  that a stable  market for our common stock will ever
develop or, if it should  develop,  be sustained.  It should be assumed that the
market for our common stock will  continue to be highly  illiquid,  sporadic and
volatile. Our stock should not be purchased by anyone who cannot afford the loss
of the entire investment.

We are required to maintain status as a "reporting"  issuer under the Securities
Exchange Act of 1934 in order to be traded by  broker-dealers  regulated by NASD
("NASD").  If we fail to  continue  to be a  reporting  issuer,  management  may
encounter  difficulty in  maintaining  or expanding a trading market in the near
term,  if at all, and  shareholders  may not be able to sell their shares in the
public  market.  While  management  currently  intends to  maintain  status as a
reporting  issuer under the Exchange Act,  there can be no assurance that we can
or will maintain such status.

We will need additional funding in order to succeed.

We recognize that substantial  additional  funding will be needed to achieve our
objectives.  No assurance  is given that such  funding  will be obtained.  If we
cannot  obtain  such  financing,  it is  possible  that  we will  be  unable  to
successfully commercialize and market our products,  ultimately resulting in our
failure.

Future  financings could adversely affect your ownership  interest and rights in
comparison with those of other shareholders.

If  additional  funds are raised  through the issuance of equity or  convertible
debt securities,  the percentage  ownership of our shareholders will be reduced,
and these  newly-issued  securities  may have rights,  preferences or privileges
senior to those of existing shareholders.



                                       9
<PAGE>

Our  common  stock is  subject  to penny  stock  regulation  that may affect the
liquidity for our common stock.

Shares of our common  stock are subject to the rules  adopted by the  Securities
and Exchange Commission has adopted rules that regulate broker-dealer  practices
in connection with  transactions  in "penny stocks." Penny stocks  generally are
equity  securities  with a price  of less  than  $5.00  per  share  (other  than
securities  registered on certain national securities exchanges or quoted on the
NASDAQ  system,  if  current  price  and  volume  information  with  respect  to
transactions  in such  securities  is provided by the  exchange or system).  The
penny stock rules require a broker-dealer,  before consummation of a transaction
in a penny stock not otherwise  exempt from the rules, to deliver a standardized
risk disclosure document prepared by the SEC that contains the following:

o    a  description  of the  nature  and level of risk in the  market  for penny
     stocks in both public offerings and secondary trading;
o    a description of the broker's or dealer's duties to the customer and of the
     rights and remedies  available to the customer with respect to violation to
     such duties or other requirements of securities' laws;
o    a brief, clear,  narrative description of a dealer market,  including "bid"
     and "ask" prices for penny stocks and  significance  of the spread  between
     the "bid" and "ask" price;
o    a  toll-free  telephone  number  for  inquiries  on  disciplinary  actions;
     definitions  of  significant  terms in the  disclosure  document  or in the
     conduct of trading in penny stocks; and
o    such other information and is in such form (including language,  type, size
     and format), as the Commission shall require by rule or regulation.


                                       10
<PAGE>

Prior to effecting any transaction in penny stock, the  broker-dealer  also must
provide the customer the following:

o    the bid and offer quotations for the penny stock;
o    the  compensation  of  the   broker-dealer   and  its  salesperson  in  the
     transaction;
o    the  number of  shares to which  such bid and ask  prices  apply,  or other
     comparable  information  relating to the depth and  liquidity of the market
     for such stock; and
o    to the depth and liquidity of the market for such stock; and
o    monthly  account  statements  showing the market  value of each penny stock
     held in the customer's account.

In  addition,  the penny stock rules  require that prior to a  transaction  in a
penny stock not otherwise exempt from those rules, the broker-dealer must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written  acknowledgment of the receipt
of a risk disclosure  statement,  a written agreement to transactions  involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure  requirements may have the effect of reducing the trading activity in
the secondary market for a stock such as our common stock that is subject to the
penny stock  rules.  Our board of  directors  has the power to issue  additional
shares of common stock and shares of preferred stock.

Our Certificate of Incorporation  authorizes the issuance of 200,000,000  shares
of common stock and 25,000,000 shares of preferred stock. Our Board of Directors
may issue all such shares that are not yet issued, without stockholder approval,
and has the right to determine  the rights,  preferences  and  privileges of any
preferred  stock issued.  Our Board of Directors may choose to issue some or all
of such shares to acquire one or more businesses or other types of property,  or
to provide  additional  financing in the future. The issuance of any such shares
may result in a reduction of the book value or market  price of the  outstanding
shares of our common  stock.  If we do issue any such  additional  shares,  such
issuance also will cause a reduction in the  proportionate  ownership and voting
power of all other  shareholders.  Further,  any such issuance may result in our
being subject to a change of control.

We do not intend to declare any cash dividends in the foreseeable future.

We have never paid cash  dividends  on our  common  stock and do not  anticipate
paying any dividends on common stock in the foreseeable  future. The declaration
and  payment  of  dividends  are  subject  to the  discretion  of our  Board  of
Directors.  Any  determination as to the payment of dividends in the future will
depend upon results of operations,  capital  requirements,  and  restrictions in
loan  agreements,  if any, and such other  factors as the Board of Directors may
deem relevant.

Our stock option plan could result in the dilution of existing shareholders.

We have adopted a stock option plan  authorizing the issuance of up to 3,000,000
shares of common stock. Such options may be granted under certain  circumstances
at exercise prices below market at the time of grant. In any event, if the price
of our common stock should increase,  the difference  between the current market
stock price the exercise prices of outstanding options will increase.

The existence of below-market options could adversely affect the market price of
our common stock and impair our ability to raise additional  capital through the
sale of our equity securities or debt financing.


                                       11
<PAGE>

Exercise  of any such  options  will  result  in  dilution  of the  proportional
interests of shareholders  at the time of exercise,  and, to the extent that the
exercise  price is less than the book value of the common stock at that time, to
the book value per share of the common stock.

Patents, Trademarks, etc.

The Company has engaged counsel for the purpose of securing patents, copyrights,
and trademarks. The Company is engaged in the process of supporting this effort.

Number of Employees - part and full time.

The Company had 11 full-time  employees,  8  consultants,  and 2 contractors  at
year-end  2004.  Our employees are not  represented by a labor union and we have
never suffered an  interruption  of business as a result of a labor dispute.  We
consider our relations with our employees to be good.

ITEM 2 DESCRIPTION OF PROPERTY

Our Company's  headquarters  are located in Kennewick,  WA. The following  table
sets forth  certain  information  regarding  the  principal  properties  used by
Manakoa Services, all of which are leased:

<TABLE>
<CAPTION>
                                               LEASE TERM BEGINNING   SQUARE      COST
LOCATION         FUNCTION                       AND END (MM/DD/YR)    FOOTAGE    PER MO.
-------------- ------------------------------- --------------------  --------   ---------
<S>                                  <C>                                <C>        <C>
Kennewick, WA   Company Headquarters (1)          month-to-month        2,500      $5,000
Boulder, CO     Engineering/Mktg./Bus.Dev. (2)   6/1/05 - 5/31/06       4,775      $6,500


</TABLE>

(1)  The Company's  headquarters is shared with one of its shareholders,  Apogee
     Biometrics, Inc., in Kennewick, Washington.
(2)  The lease  began at $1,500 for the first 6 months and is now $6,500 per for
     one-year with two one-year extensions

We believe the  facilities we occupy are well  maintained  and in good operating
condition.

ITEM 3 LEGAL PROCEEDINGS

     A dispute  has  arisen  between  the  Company  and  three of its  principal
shareholders,  Apogee Biometrics,  Inc., Mr. Katzaroff, and Mr. Williams, on the
one hand, and on the other, another principal shareholder,  Founders Group, Inc.
The dispute pertains to services to be provided by Founders Group,  Inc. and its
principal  Michael  Sandoval,  and the Company's  issuance of shares to Founders
Group,  Inc.  Settlement  discussions  have  been  proceeding.  There  can be no
assurance  that a  settlement  can be  reached,  or as to  the  terms  as to any
proposed settlement.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None during the quarter ended December 31, 2004.



                                       12
<PAGE>

ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

REPORTS TO SECURITY HOLDERS.  We are a reporting company with the Securities and
Exchange  Commission,  or SEC. The public may read and copy any materials  filed
with the SEC at the  SEC's  Public  Reference  Room at 450  Fifth  Street  N.W.,
Washington,  D.C. 20549. The public may also obtain information on the operation
of the Public  Reference  Room by  calling  the SEC at  1-800-SEC-0330.  The SEC
maintains  an  Internet  site  that  contains  reports,  proxy  and  information
statements,  and other information  regarding  issuers that file  electronically
with the SEC. The address of that site is http://www.sec.gov.

PRICES OF COMMON STOCK.  We participate in the OTC Bulletin Board, an electronic
quotation medium for securities  traded outside of the Nasdaq Stock Market,  and
prices for our common stock are  published  on the OTC Bulletin  Board under the
trading  symbol "MKOS".  This market is extremely  limited and the prices quoted
are not a reliable indication of the value of our common stock.

Following  is  information  about the range of high and low bid  prices  for our
common stock for each fiscal quarter since our stock  commenced  trading.  These
quotations reflect  inter-dealer  prices,  without retail mark-up,  mark-down or
commission, and may not necessarily represent actual transactions.

The Company's  Common Stock is currently  quoted on the OTC Bulletin Board under
the symbol  MKOS.OB.  The Company's  Common Stock was previously  quoted on NASD
Pink Sheet  market under the symbol EIDT,  until March 19, 2004.  The  following
table sets forth,  for the periods  indicated  the range of high and low closing
sales  prices per share of the  Company's  Common  Stock,  as  reported  on NASD
Over-The-Counter Bulletin Board

           FISCAL PERIOD                FISCAL 2003            FISCAL 2004
           -------------           --------------------    --------------------
                                     HIGH        LOW         HIGH         LOW
                                   --------    --------    --------    --------
        First Fiscal Quarter         $0.24       $0.01       $1.28      $0.50
        Second Fiscal Quarter        $0.51       $0.05       $0.90      $0.45
        Third Fiscal Quarter         $1.00       $0.06       $0.95      $0.50
        Fourth Fiscal Quarter        $0.90       $0.30       $1.25      $0.25

(Note) The source of this  information is Yahoo Finance  quotation  services and
broker-dealers  making a market in the  Company's  common  stock.  These  prices
reflect inter-dealer prices,  without retail markup,  markdown or commission and
may not represent actual transactions.

As of December 31, 2005 there were 272 shareholders of record held the Company's
common  stock  and the  Company  believes  that  there are  approximately  7,000
additional shareholders through nominee or street name accounts with brokers.

The Company has not  declared or paid  dividends  on its Common  Stock since its
formation,  and  the  Company  does  not  anticipate  paying  dividends  in  the
foreseeable  future.  Although  the  Company  does not  currently  have a credit
facility,  future credit facilities,  if any, are likely to prohibit the payment
of dividends.  Declaration or payment of dividends,  if any, in the future, will
be at the  discretion of the Board of Directors and will depend on the Company's
then current financial  condition,  results of operations,  capital requirements
and other factors deemed relevant by the Board of Directors.

The Transfer  Agent and Registrar for our common stock are American  Registrar &
Transfer Co., 342 East 900 South, and Salt Lake City, Utah 84111.



                                       13
<PAGE>

OUR STOCK PRICE MAY BE VOLATILE  AND AN  INVESTMENT  IN SUCH COMMON  STOCK COULD
SUFFER A DECLINE IN VALUE:

The market price of our common stock may fluctuate  significantly  and violently
in response to a number of factors, some of which are beyond our control.  These
factors include:

     o    government  regulatory  action  affecting  the  Companies  services or
          competitors' services;
     o    actual or anticipated fluctuations in operating results;
     o    the loss of key management or other personnel;
     o    the loss of major customers;
     o    the outcome of any future litigation;
     o    broad  market  fluctuations;  and  economic  conditions  in the United
          States or abroad.

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion should be read in conjunction with, and is qualified in
its  entirety  by,  our  consolidated  financial  statements  and notes  thereto
included elsewhere in the annual report.  Historical results are not necessarily
indicative of trends in operating results for any future period.

The statements  contained in the annual report that are not historical facts are
forward-looking statements that evolve a number of risks and uncertainties.  The
actual results of the future events described in such forward-looking statements
in this  annual  report  could  differ  materially  from  those  stated  in such
forward-looking statements.

The Company has embarked upon an entirely new business enterprise apart from the
original  Electronic  Identification,  Inc.  "EIDT"  contact  less smart ID card
systems.  Prior to the  merger,  EIDT had  abandoned  the  smart ID card  system
business.  The technology  being  developed by the old EIDT, on information  and
belief, was not well received by a market place where  technologically  superior
solutions emerged. There are no plans to utilize the smart ID card system.

Manakoa Services  Corporation was a privately held Washington state  corporation
prior to any merger  activity.  It was a  consulting  services  start up without
sales  but  with  a  focus  on  the  financial   sector.   The  merger   between
Manakoa-Washington  and SLX  occurred as a result of the value  perceived by the
principles of the two private  companies.  No financial  impact analysis entered
into the decision to merge.  It was based solely on the belief of private owners
that a merger was  appropriate  based on mutual  interest  and  strategies.  The
reverse merger with EIDT occurred as the method to become a public company.  The
Board of Directors of EIDT did conduct an independent analysis and determined it
was to the benefit of its  stockholders  to approve the  action.  The  financial
impact  of that  merger  is  documented  in the pre and  post  merger  financial
statements on file with the SEC. (please refer to: www.sec.gov)

Manakoa Corporation acquired Secure Logistix Corporation (SLX) in November 2003.
SLX was organized in October 2001 as a Colorado corporation in specific response
to terrorist attacks. SLX developed  contingency plans and models in conjunction
with a number of governmental  and private sector  organizations.  The Company's
first  task was to  identify  third  party  solutions  that  could be applied to
specific risk  management and security  issues facing  clients.  It became clear
that this market place was disjointed and point product  oriented.  There was no
way to "connect  the dots"  without an  integrated  solution.  The second  major
activity was to define what might be driving the adoption of risk management and
security best practices in the near term.



                                       14
<PAGE>

ITEM 6 Management's Discussion and Analysis or Plan of Operation - continued.

The team recognized that a number of government  regulations and laws would soon
be driving  organizations to take these issues  seriously.  Based upon these two
findings,  the Company  made a  strategic  decision to shift from an emphasis on
consulting  services  to  a  product  driven   organization   dedicated  to  the
development of an integrated  solution that addresses basic risk management best
practices and the resolution of related regulatory compliance. The next step was
to  validate  the  conceptual  underpinning  of a new  product as an  integrated
software platform.  This effort included (1) review of the precise impact of the
regulations,  (2) assessment of available  software  platforms that would permit
rapid, repeatable,  and scalable solutions, (3) potential customer assessment of
interest  in  the   conceptual   product,   and  (4)   exploration   of  channel
relationships.

Manakoa Services Corporation  (www.Manakoa.com) is an enterprise risk management
software and services company focusing on regulatory compliance solutions.

Manakoa ComplianceSuite(TM) is being developed to meet the vertical security and
risk  management   requirements  of  organizations  complying  with  regulations
stemming from the Gramm Leach Bliley Act (GLBA),  Health  Insurance  Portability
Accountability  Act  (HIPAA),  Sarbanes  Oxley Act, USA Patriot Act, and Federal
Informational Security Management Act (FISMA). The Company anticipates expanding
its support to other U.S. regulations plus international regulatory requirements
emerging from the European Union,  Japan,  United Kingdom and Canada. The market
sectors that the Company believes initially will be most significantly  impacted
are public corporations,  health care, insurance, financial services and federal
contractors.  The Company  intends to focus its sales  efforts  through  channel
partners that are  envisioned to include  trade and  professional  associations,
accounting and legal firms, security consultants and system integrators, as well
as non profit associations.

The Company is developing the Manakoa  ComplianceSuite(TM) as both an integrated
solution  set  aas  well as a  series  of  standalone  component  products.  The
underlying  architecture  for the Manakoa  ComplianceSuite(TM)  was completed in
2004 but is subject to  adaptations  and change to meet market,  technology  and
regulatory  shifts  over  time.  The  Manakoa  KnowledgeBase(TM)  is  the  first
standalone  product  component,  and was launched on February 28, 2005. It is an
Internet  subscription  portal  for  regulatory  compliance   information.   The
Compliance   WorkCenter(TM)  asset  and  policy  engine  known  as  the  Manakoa
Compliance  Services(TM)  together  with  related  interfaces  to the  Microsoft
Operations  Manager are  scheduled  for release in April 2005.  Other  component
products  will be released  during 2005,  although  precise  dates are still not
defined.

The Company was involved in research,  design and product prototyping throughout
the 2004 calendar year. As a result of this effort, in the first quarter of 2005
the company made commercial available the Manakoa  KnowledgeBase(TM)  regulatory
compliance research engine.

On August 4, 2004, the Company entered into an Agreement and Plan of Acquisition
to acquire Advanced Cyber Security,  Inc. ("ACSI"), a wholly owned subsidiary of
UTEK  Corporation  (amex:  UTK)  ("UTEK").  The  Company  acquired  all  of  the
outstanding  common shares of ACSI from UTEK in exchange for 1,900,000 shares of
the  Company's  common  stock  (all  issued to  UTEK).  The  exchange  of equity
interests  occurred on September 20, 2004,  which  resulted in ACSI becoming the
Company's  wholly-owned  subsidiary.  The results of ACSI's operations have been
included in the accompanying  consolidated financial statements since that date.
The Company conducted the acquisition in order to obtain the license rights held
by ACSI.

                                       15
<PAGE>

ITEM 6 Management's Discussion and Analysis or Plan of Operation - continued.

ACSI acquired  license rights to a prototype  program for systems  administrator
simulation  training (SAST) from Battelle Memorial Institute (the "Licensor") in
August 2004.  The program  rapidly  evaluates the cyber  security  experience of
system  administrators to identify,  circumvent or recover from hacker activity.
The  program  consists of a network of training  tools that  simulate  the cyber
environment and are launched through an automated  system.  The license entitles
ACSI to use certain  software  owned by the  Licensor  and certain  intellectual
property  relating to part of the software for which  Licensor has applied for a
patent. ACSI may use the software, intellectual property and derivatives thereof
to train and certify  personnel to enable such personnel to perform  testing and
assessment of enterprise vulnerabilities.

The Software  consists of three parts:  a  Coordinated  Attack Tool  ("CAT"),  a
Systems  Administrator  Simulation  Trainer  ("SAST")  and a Synthetic  Computer
Network Traffic Generator ("TrafficBot").  The license is exclusive with respect
to the SAST Software and is nonexclusive  with respect to the CAT and TrafficBot
software  and  the  intellectual  property  (which  relates  to  the  TrafficBot
Software).

In consideration for the License, ACSI agreed to the following payments:

o    An initial, nonrefundable payment of $150,000 (paid on August 4, 2004);

o    A royalty of six and one-half  percent (6.5%) of its net sales revenue from
     all products using the licensed software or intellectual property.

o    Commencing  in 2007,  certain  minimum  royalty  payments to  maintain  the
     license,  starting at $75,000 in 2007 and  increasing  up to  $2,000,000 in
     2012 and years thereafter.

o    An annual  "enablement  fee",  the  greater  of  $50,000 or one half of one
     percent (0.05%) of ACSI's total annual revenues from all products using the
     licensed  software or  intellectual  property.  This payment may be made in
     cash or in the Company's  common stock (based on its average closing prices
     for the 20 trading days ending each December 15).

ACSI also  entered into a  consulting  agreement  with the Licensor for which it
paid $50,000 toward  services to be rendered by the Licensor  through the end of
2004. Under this agreement,  the Licensor will help define further  requirements
and a development plan with respect to the software  covering calendar year 2005
in detail,  with a rougher plan for calendar years 2006 and 2007. As of December
31, 2004,  $10,873 of the initial $50,000 remained unused and is included in the
accompanying consolidated financial statements as "Prepaid consulting services -
ACSI".

ACSI is also required to enter into a technical services agreement with Licensor
of at least $500,000 per year for three years (2005 through 2007) related to the
software.  It is  anticipated  that  the  services  to be  provided  under  this
agreement  will reflect the plan being  developed  under the current  consulting
agreement. ACSI shall receive a royalty-free license to use any new intellectual
property that is developed by Licensor in the  performance of its services under
the technical services agreement.

If the minimum  royalties are not paid, or the other amounts described above are
not paid,  the  Licensor  may convert the entire  license  into a  non-exclusive
license or terminate the license, at Licensor's sole discretion.

                                       16
<PAGE>

ITEM 6 Management's Discussion and Analysis or Plan of Operation - continued.

Supplemental  Note:  As of this  amendment  filing dated July 17, 2005,  Manakoa
Services  Corporation and Batelle  Corporation have bi-laterally  terminated the
agreement disclosed in the 8K filing dated September 7, 2004.

Product Overview

The company made a strategic decision to make available its products in the form
of both integrated suites and standalone  products. A well-known example of this
type of strategy is the release by Microsoft of its entire Office suite together
with  independent  standalone  applications  like  Word or Excel.  By  launching
"slices" of the integrated suites, Manakoa is able to go to market earlier while
development continues for the more complex enterprise risk management suite.

There are two primary pillars in to this product roll-out strategy: Manakoa Risk
and Regulatory ComplianceSuite(TM) and Standalone Applications

o    Compliance  WorkCenter(TM)  will access the state of  compliance,  performs
     appropriate shortfall analyses,  and provides Board of Director level plans
     for achieving compliance.  This product is divided into several independent
     applications  that will also be released  separately.  The first  announced
     stand alone product is the Manakoa  Compliance Service that aligns critical
     IT assets with regulatory and best practices policies with mid 2005 release
     date.
o    Compliance  Command and Control  Center(TM)  or C4(TM) will  transform  the
     Board  approved  plan  into a mapped  enterprise  control  environment  via
     Preventative,  Detective and Recovery.  Technical  controls are designed to
     alert,  minimize,  or recover from  non-compliant  and  vulnerable  states;
     displayed  with  progress  monitored  on current,  user-specific  dashboard
     views. The first announced stand alone products  associated with C4(TM) are
     the Manakoa Compliance Microsoft  Operations  Management packs that provide
     event reports and alert management with a mid 2005 release date.

Manakoa Knowledge Transfer and Certification Products

o    Manakoa Risk  KnowledgeBase(TM)  is an Internet based  research  engine for
     corporate risk management and compliance  issues,  resources and questions.
     It provides  subscribers  a common  site that unites the various  facets of
     Manakoa's  Risk  Management  Information  System.  The portal site contains
     access  to  specific  legislation,  cross  referenced  internal  standards,
     security bulletins,  legal opinions, policy templates and guidelines,  live
     linked reports and  publications.  The Manakoa  KnowledgeBase(TM)  was made
     commercially available the first quarter of 2005.
o    Cyber  Attack  Simulation  Trainer  (CAST)  will be  designed  to  teach IT
     professionals  to  identify,  circumvent,  and  recover  from cyber  hacker
     activities through the introduction of attacker scripts and techniques in a
     simulated,  risk-free manner.  Just as flight simulators provide real world
     experience to pilots without  jeopardizing  lives, the Manakoa Cyber Attack
     Simulator Trainer tests, and trains and certifies system administrators and
     other IT professionals. CAST currently has no established release date.


The Cyber Attack Simulation Trainer (CAST) is an acquired  worldwide  technology
license,  as reported in the company's 8K filing of September 7, 2004, for three
technology  components  from Batelle  Memorial  Institute,  thru Advanced  Cyber
Security,  Inc. (ACSI).  Manakoa's role is to work jointly with Batelle Memorial
Institute to augment  development  and to  commercialize  the  technologies on a
world wide basis. The first year of joint  development has been much slower than
both parties  anticipated and  discussions  regarding a revision to the original
terms and conditions of the Agreement and Plan of Acquistion have commenced.


                                       17
<PAGE>

ITEM 6 Management's Discussion and Analysis or Plan of Operation - continued.

The primary risk  associated  with not  completing  development  in a reasonable
period of time is that  market  expectations  will have  been  established  with
potential  channel  partners and end user customers.  A failure to deliver would
damage the  reputation  of an  emerging  company and limit its ability to retain
market relationships.  The technological uncertainties are mitigated by the fact
that the  underlying  solutions  are being  built  upon  commercially  available
products and based around  standards like ISO 17799, the NIST-800 series and the
COSO framework.  There are tremendous  content  development and workflow process
pressures requiring the company to retain and expand its high end professionals.
The company  will need to  continue  its fund  raising  efforts to pay for these
professionals in order to meet development deadlines.

The risks  associated with failure to complete  projects in a timely fashion are
fairly  typical of software  development.  We are focusing  initial  releases on
regulations (GLBA,  HIPAA,  FISMA) that have specific  associated  deadlines and
reasonably clear governmental  audit guidelines.  While the company believes the
scheduled release of its  ComplianceSuite(tm)  will map well to potential client
requirements,  development  slippage could adversely impact market  penetration.
Beyond the risk associated with internal schedule delays, changes in the timing,
tone and specific  requirements set forth by regulators may also have an impact.
Finally, competition is also a real risk component. By failing to come to market
in a timely fashion, others could enter and capture market share.

Market Opportunity

The regulatory  compliance  market is rapidly  growing and a number of reputable
research  firms like AMR Research  and The Garner  Group state that  billions of
dollars in projected corporate spending will occur.  Manakoa believes that there
exist underlying  similarities between the targeted  regulations.  The following
summarizes initial U.S. regulations targeted by Manakoa's compliance platforms:

Gramm Leach Bliley Act - GBLA  compliance  involves  over  238,000  firms in the
financial  services  industry and any organization  using  non-public  financial
information and their technical service providers

Sarbanes  Oxley  Act  -Impacts  all  public   companies,   estimated  at  14,000
organizations involving corporate governance

HIPAA -Health care and insurance  providers impacted with an emphasis on privacy
matters

FISMA - Federal  Information  Security  Management  Act impacts both  government
agencies and government contractors

The company also  envisions  expanding  the number of supported  regulations  to
other federal and regional laws as well as certain international regulations..

Need for Additional Financing.


The Company  will need to raise  additional  funds in the next twelve  months to
satisfy  its cash  requirements.  The Company is  currently  seeking to raise $2
million in a private  placement of securities  and intends to seek an additional
$8 million in public offering of securities.  The Company anticipates,  based on
currently proposed plans and assumptions relating to its operations,  that these
financings,  or other sources of additional  funding,  will be essential for the
Company to satisfy its cash  requirements for more than  approximately  eighteen
months.  In the event that the Company's plans change,  its assumptions prove to
be inaccurate or its cash flow proves to be insufficient  (due to  unanticipated


                                       18
<PAGE>

ITEM 6 Management's Discussion and Analysis or Plan of Operation - continued.

expenses, inadequate revenues, difficulties, problems or otherwise), the Company
may be  required  to obtain  financing  sooner than  anticipated,  seek  further
additional  financing  or  curtail  its  activities.   Any  issuance  of  equity
securities   would  result  in  dilution  to  the  interests  of  the  Company's
stockholders  and any issuance of debt  securities  would subject the Company to
risks that interest rates may increase or cash flow may be insufficient to repay
such indebtedness.

The Company envisions a requirement for two rounds of funding.  Initially, it is
expected  that the Company  will raise $2.0  million in a private  placement  in
order  to  accelerate  the  development  and  market  entry  for its  compliance
solutions and provide general administrative  expenses. A second round of public
financing  will be sought  for $8  million to  advance  market  penetration  and
support  second-generation  product  development.  The Company  currently has no
commitments or understandings  for these or any other additional  financings and
there can be no assurance that any additional financing will be available to the
Company.

--------------------------------------------------------------------------------
MANAKOA Use of Proceeds               Initial Round    Second Round-$8.0 million
--------------------------------------------------------------------------------
Administrative/Funding Costs              $250,000           $1,000,000
--------------------------------------------------------------------------------
Product Development                       $800,000           $2.500,000
--------------------------------------------------------------------------------
Market Validation and Use Cases           $225,000           $  500,000
--------------------------------------------------------------------------------
Expand Facilities and Infrastructure      $250,000           $1,500,000
--------------------------------------------------------------------------------
Market Development and Demand Creation    $275,000           $1,000,000
--------------------------------------------------------------------------------
Working Capital                           $200,000           $1,500,000
--------------------------------------------------------------------------------



Plant & Equipment

The Company foresees no expected purchase or sale of plant or related facilities
at this time.

Dependence Upon Qualified Personnel and Executive Officers.

The  Company's  operations  depend in part upon its  ability  to retain and hire
qualified  personnel,  of  which  there  can  be  no  assurance.  The  Company's
operations  are also  dependent  upon the  continued  services of its  executive
management team and certain other consultants. The loss of services of the Chief
Executive  Officer,  its executive  management  team or any of its  consultants,
whether as a result of death,  disability  or  otherwise,  could have a material
adverse  effect  upon  the  Company's  operations.  The  Company  does  not have
employment agreements with its executive officers.

Revenue Model

As a new  product  in an  emerging  market,  MANAKOA  Services  Corporation  has
conducted early validation for pricing and client acquisition  estimates.  These
figures  are based upon  feedback  from our  strategic  partners  together  with
potential customers.  The pricing has been estimated using a combination of cost
up and market value considerations.  Review by MANAKOA and our partners is still


                                       19
<PAGE>

ITEM 6 Management's Discussion and Analysis or Plan of Operation - continued.

underway  and  significant  changes in the  pricing  model may  evolve  prior to
product releases.

The  level  of  market  penetration  required  to  achieve  our  plan,  requires
significantly  less  than 1% of all  financial  institutions  to  recognize  the
compliance issues and take a responsible approach to risk mitigation.


                                       20
<PAGE>

ITEM 7 FINANCIAL STATEMENTS

See Exhibit 1, Financial  Statements  and Financial  Statement  Schedules.  Such
Financial Statements and Schedules are incorporated herein by reference.


Report of Independent Registered Public Accounting Firm.................... 22

Consolidated Balance Sheet at December 31, ................................ 23

Consolidated Statements of Operations for the years ended December 31,
     2004 and 2003, and from November 21, 2001 (inception) through
     December 31, 2004..................................................... 24

Consolidated Statement of Changes in Shareholders' Deficit for the period
     from November 21, 2001 (inception) through December 31, 2004.......... 25

Consolidated Statements of Cash Flows for the years ended December 31,
     2004 and 2003, and from November 21, 2001 (inception) through
     December 31, 2004.................................................. 26-27

Notes to Consolidated Financial Statements................................. 28



                                       21
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders
Manakoa Services Corporation:


We have audited the consolidated  balance sheet of Manakoa Services  Corporation
(a  development  stage  enterprise)  as of December  31,  2004,  and the related
consolidated  statements of operations,  changes in shareholder's  deficit,  and
cash flows,  for the years ended  December 31, 2004 and 2003,  and from November
21, 2001 (inception)  through December 31, 2004.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
consolidated  financial statements are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements.  An audit also includes  assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Manakoa Services
Corporation  as of December 31, 2004,  and the results of their  operations  and
their  cash  flows for the years  ended  December  31,  2004 and 2003,  and from
November  21, 2001  (inception)  through  December 31, 2004 in  conformity  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
the Company  will  continue as a going  concern.  As  discussed in Note 1 to the
consolidated  financial  statements,  the Company has suffered  operating losses
since inception,  which raises a substantial doubt about its ability to continue
as a  going  concern.  Management's  plans  in  regard  to this  matter  is also
described in Note 1. The  consolidated  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.




Cordovano and Honeck LLP
Denver, Colorado
April 11, 2005





                                       22
<PAGE>



                          MANAKOA SERVICES CORPORATION
                         (A Development Stage Company)
                           Consolidated Balance Sheet

                               December 31, 2004

                                     Assets
Cash                                                                $   285,095
Prepaid expenses:
   Prepaid consulting services (Note 6)                                 442,958
   Prepaid consulting services - ACSI (Note 9)                           10,873
   Prepaid expenses (Note 2)                                             41,046
   Prepaid insurance                                                     14,428
Property and equipment, net of accumulated depreciation
   of $84,759 (Note 3)                                                   22,726
Debt issue costs, net of accumulated amortization
   of $517,500 (Note 5)                                                 517,500
License rights, net of accumulated amortization
   of $12,500 (Note 9)                                                  137,500
                                                                    -----------
                                                                    $ 1,472,126
                                                                    ===========
                     Liabilities and Shareholders' Deficit
Current liabilities:
   Accounts payable                                                 $   319,911
   Notes payable:
   Related party, current maturities (Note 2)                           160,000
   Convertible notes (Note 5)                                           997,500
   Other (Note 5)                                                       725,000
Accrued interest payable:
   Related party (Note 2)                                                15,334
   Convertible notes (Note 5)                                            75,641
   Other (Note 5)                                                        14,568
Indebtedness to related parties (Note 2)                                109,729
Accrued employee compensation (Note 1)                                  500,000
   Other accrued liabilities                                             58,170
                                                                    -----------
                  Total current liabilities                           2,975,853

Long-term debt:
   Note payable to related party, less current
      maturities (Note 2)                                                25,000
                                                                    -----------
                  Total liabilities                                   3,000,853
                                                                    -----------
Shareholders' deficit (Notes 2, 5 and 6):
   Preferred stock, $001 par value; 25,000,000 shares
     authorized, -0- shares issued and outstanding                         --
   Common stock, $001 par value; 200,000,000 shares
     authorized, 34,511,513 shares issued and outstanding                34,512
   Additional paid-in capital                                         4,350,734
   Deficit accumulated during the development stage                  (5,913,973)
                                                                    -----------
                  Total shareholders' deficit                        (1,528,727)
                                                                    -----------
                                                                    $ 1,472,126
                                                                    ===========

          See accompanying notes to consolidated financial statements

                                       23
<PAGE>

                          MANAKOA SERVICES CORPORATION
                         (A Development Stage Company)
                      Consolidated Statements of Operations
<TABLE>
<CAPTION>
                                                                                November 21,
                                                                                   2001
                                                       For the Years Ended     (Inception)
                                                         December 31,             Through
                                               ----------------------------     December 31,
                                                     2004            2003           2004
                                               ------------    ------------    ------------
Service revenue                                $       --      $     34,000    $     89,625
                                               ------------    ------------    ------------
<S>                                                    <C>            <C>            <C>
Operating expenses:
   Cost of services                                    --            30,600          83,775
   Stock-based compensation (Notes 2 and 6):
       Software research and development             67,500         480,000         547,500
       Consulting, related parties                  700,000            --           700,000
       Consulting, other                            515,542            --           515,542
       Investor relations                           289,000            --           289,000
       Common stock options                         526,050            --           526,050
   Research and development                         696,256         575,000       1,346,256
   General and administrative costs:
       Salaries and payroll taxes                   239,766          75,000         389,766
       Professional fees                            279,265          36,065         318,080
       Consulting                                   290,798          48,050         338,848
       Rent                                          89,397           3,100          95,497
       Insurance                                     80,987            --            80,987
       Other                                        129,025           5,928         149,524
                                               ------------    ------------    ------------

           Total operating expenses               3,903,586       1,253,743       5,380,825
                                               ------------    ------------    ------------

           Loss from operations                  (3,903,586)     (1,219,743)     (5,291,200)

Interest expense:
   Debt issue costs (Note 5)                       (517,500)           --          (517,500)
   Related party (Note 2)                           (14,500)           --           (14,500)
   Other                                            (89,939)           (834)        (90,773)
                                               ------------    ------------    ------------

           Total interest expense                  (621,939)           (834)       (622,773)
                                               ------------    ------------    ------------

           Loss before income taxes              (4,525,525)     (1,220,577)     (5,913,973)

Income tax provision (Note 4)                          --              --              --
                                               ------------    ------------    ------------

           Net loss                            $ (4,525,525)   $ (1,220,577)   $ (5,913,973)
                                               ============    ============    ============


Basic and diluted loss per share               $      (0.15)   $      (0.16)
                                               ============    ============

Weighted average common shares outstanding       29,228,641       7,514,741
                                               ============    ============
</TABLE>
          See accompanying notes to consolidated financial statements

                                       24
<PAGE>

                          MANAKOA SERVICES CORPORATION
                         (A Development Stage Company)
           Consolidated Statement of Changes in Shareholders' Deficit
<TABLE>
<CAPTION>
                                                                                                             Deficit
                                                                                                          Accumulated
                                                         Common Stock           Common       Additional    During the
                                                 ------------------------       Stock         Paid-In      Development
                                                     Shares     Par Value   Subscriptions     Capital         Stage        Total
                                                 -----------  -----------    -----------    -----------    -----------  -----------
<S>                                                   <C>           <C>            <C>            <C>            <C>          <C>
Balance, November 21, 2001 (inception)                  --    $      --      $      --      $      --      $      --    $      --

Net loss                                                --           --             --             --             --           --
                                                 -----------  -----------    -----------    -----------    -----------  -----------
Balance, December 31, 2001                              --           --             --             --             --           --

January 1, 2002, stock sold to an
     officer (Note 2)                              6,100,000        6,100           --           (6,000)          --            100
Management and administrative services
     contributed by an officer (Note 2)                 --           --             --           75,000           --         75,000
Net loss                                                --           --             --             --         (167,871)    (167,871)
                                                 -----------  -----------    -----------    -----------    -----------  -----------

Balance, December 31, 2002                         6,100,000        6,100           --           69,000       (167,871)     (92,771)

November 24, 2003, stock issued to
     acquire net liabilities of Manakoa Services
     Corporation (Note 1)                         12,200,000       12,200           (610)       (13,626)          --         (2,036)
                                                 -----------  -----------    -----------    -----------    -----------  -----------
November 25, 2003, following recapitalization     18,300,000       18,300           (610)        55,374       (167,871)     (94,807)

December 2003, stock issued in exchange
     for software development services (Note 6)    1,000,000        1,000           --          479,000           --        480,000
December 18, 2003, stock issued to
     acquire net liabilities of Electronic
     Identification, Inc (Note 1)                  8,553,783        8,554           --         (409,769)          --       (401,215)
                                                 -----------  -----------    -----------    -----------    -----------  -----------
December 19, 2003, following recapitalization     27,853,783       27,854           (610)       124,605       (167,871)     (16,022)
Net loss                                                --           --             --             --       (1,220,577)  (1,220,577)
                                                 -----------  -----------    -----------    -----------    -----------  -----------
Balance, December 31, 2003                        27,853,783       27,854           (610)       124,605     (1,388,448)  (1,236,599)

Receipt of stock subscription                           --           --              610           --             --            610
Common stock issued in exchange for
     services (Note 6)                             2,433,000        2,433           --        1,312,567           --      1,315,000
July 2004, warrants granted as debt issue costs
     (Note 5)                                           --           --             --        1,035,000           --      1,035,000
September 2004, sale of common stock ($50/share)
     (Note 6)                                        500,000          500           --          249,500           --        250,000
September 2004, common stock issued
     to acquire Advanced Cyber Security, Inc
     (Note 9)                                      1,900,000        1,900           --          179,837           --        181,737
September to December 2004, granted common stock
     options (Note 6)                                   --           --             --          526,050           --        526,050
October 2004, common stock issued to repay
     convertible debt (Note 5)                       125,000          125           --           49,875           --         50,000
December 2004, common stock issued to pay for
     shareholder obligations and services
     rendered (Note 2)                             1,750,000        1,750           --          873,250           --        875,000
Cancellation of common shares                        (50,270)         (50)          --               50           --           --
Net loss                                                --           --             --             --       (4,525,525)  (4,525,525)
                                                 -----------  -----------    -----------    -----------    -----------  -----------
Balance, December 31, 2004                        34,511,513  $    34,512    $      --      $ 4,350,734    $(5,913,973) $(1,528,727)
                                                 ===========  ===========    ===========    ===========    ===========  ===========
</TABLE>
          See accompanying notes to consolidated financial statements

                                       25
<PAGE>

                          MANAKOA SERVICES CORPORATION
                         (A Development Stage Company)
                     Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
                                                                                                               November 21,
                                                                                                                   2001
                                                                                      For the Years Ended      (Inception)
                                                                                        December 31,              Through
                                                                                --------------------------      December 31,
                                                                                       2004           2003           2004
                                                                                -----------    -----------    -----------
<S>                                                                                  <C>             <C>            <C>
Cash flows from operating activities:
     Net loss                                                                   $(4,525,525)   $(1,220,577)   $(5,913,973)
     Adjustments to reconcile net loss to net cash
        used in operating activities:
           Depreciation and amortization                                             23,779           --           23,779
           Stock-based compensation - services (Notes 2 and 6)                    1,572,042        480,000      2,052,042
           Stock-based compensation - options (Note 6)                              526,050           --          526,050
           Debt issue costs, net (Note 5)                                           517,500           --          517,500
           Loss on debt extinguishment                                                 --             --             --
           Services contributed by an officer                                          --             --           75,000
           Changes in operating assets and liabilities:
              Perpaid expenses                                                      (55,474)          --          (55,474)
              Accounts payable                                                      289,982         39,644        420,631
              Accrued employee compensation                                          35,170        500,000        535,170
              Other accrued liabilities                                             103,141        200,594        306,485
                                                                                -----------    -----------    -----------
                       Net cash used in
                           operating activities                                  (1,513,335)          (339)    (1,512,790)
                                                                                -----------    -----------    -----------
Cash flows from investing activities:
     Property and equipment purchases                                               (25,122)          --          (25,122)
     Cash acquired in EIDT merger                                                      --            4,797          4,797
                                                                                -----------    -----------    -----------
                       Net cash (used in) provided by
                           investing activities                                     (25,122)         4,797        (20,325)
                                                                                -----------    -----------    -----------

Cash flows from financing activities:
     Proceeds from issuance of convertible debt (Note 5)                            857,500           --          857,500
     Principal payments on promissory note
        owed to an officer (Note 2)                                                 (15,000)          --          (15,000)
     Proceeds from issuance of promissory notes (Note 5)                            725,000           --          725,000
     Proceeds from sale of common stock (Note 6)                                    250,610           --          250,710
                                                                                -----------    -----------    -----------
                       Net cash provided by
                           financing activities                                   1,818,110           --        1,818,210
                                                                                -----------    -----------    -----------

                           Net change in cash                                       279,653          4,458        285,095

Cash, beginning of period                                                             5,442            984           --
                                                                                -----------    -----------    -----------

Cash, end of period                                                             $   285,095    $     5,442    $   285,095
                                                                                ===========    ===========    ===========


                                       26
<PAGE>

Consolidated Statements of Cash Flows - continued

Supplemental disclosure of cash flow information: Cash paid during the period
     for:
        Income taxes                                                            $      --      $      --      $      --
                                                                                ===========    ===========    ===========
        Interest                                                                $      --      $      --      $      --
                                                                                ===========    ===========    ===========
     Non-cash investing and financing activities:
        Common stock issued to acquire Advanced
           Cyber Security, Inc (Note 9)                                         $   181,737    $      --      $   181,737
                                                                                ===========    ===========    ===========
        Common stock issued to extinguish a
           convertible promissory note (Note 5)                                 $    50,000    $      --      $    50,000
                                                                                ===========    ===========    ===========
        Common stock issued for prepaid
           consulting services (Note 6)                                         $  (442,958)   $      --      $  (442,958)
                                                                                ===========    ===========    ===========
        Common stock issued in Manakoa/SLX
           Stock Purchase Agreement (Note 1)                                    $      --      $    (2,036)   $    (2,036)
                                                                                ===========    ===========    ===========
        Common stock issued in Manakoa/EIDT
           Stock Purchase Agreement (Note 1)                                    $      --      $  (401,215)   $  (401,215)
                                                                                ===========    ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements


                                       27
<PAGE>


                          MANAKOA SERVICES CORPORATION
                          (A Development Stage Company)
                   Notes to Consolidated Financial Statements

NOTE 1:  NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

Manakoa Services Corporation (the "Company" or "Manakoa") was incorporated under
the laws of  Colorado  on  November  21,  2001 as  Secure  Logistix  Corporation
("SLX").  On November  25,  2003,  the  Company  entered  into a Stock  Purchase
Agreement with Manakoa Services Corporation-Private Company ("MSC"). On December
19, 2003, the Company  entered into a Stock Purchase  Agreement with  Electronic
Identification, Inc. ("EIDT"), a public company registered with the Security and
Exchange  Commission  ("SEC").  The Company is a development stage enterprise in
accordance with Statement of Financial  Accounting  Standard ("SFAS") No. 7. The
Company plans to develop its regulatory compliance software operations.

The Company operates as a consultant, developer and publisher of risk management
and  regulatory  software-based  solutions  for  corporate  security and Federal
regulatory compliance.  The Company has worked with Federal agencies and private
companies  to  define  enhanced  risk  management  and the  effective  corporate
response  to Federal  regulations  such as the Gramm Leach  Bliley  Act,  Health
Insurance  Portability and  Accountability  Act, Sarbanes Oxley Act, and the USA
Patriot Act.

MSC Recapitalization

On November 25, 2003, MSC, a private shell company incorporated on May 20, 2003,
entered into a Stock Purchase  Agreement with SLX (now known as Manakoa,  or the
Company).  Under the terms of the  agreement,  MSC agreed to acquire  all of the
issued and outstanding  common stock of SLX in exchange for 6,100,000  shares of
MSC common  stock and  $300,000  cash.  The  parties  subsequently  amended  the
agreement  to replace  the  $300,000  cash with the  assumption  of  $300,000 in
liabilities.  Following the acquisition, SLX became a wholly-owned subsidiary of
MSC.  However,  for accounting  purposes,  the acquisition has been treated as a
recapitalization  of SLX,  with MSC the legal  surviving  entity.  Since MSC had
minimal assets and no operations, the recapitalization has been accounted for as
the sale of  12,200,000  shares of SLX common stock for the net  liabilities  of
MSC. Therefore,  the historical  financial  information prior to the date of the
recapitalization, is the financial information of SLX.

In  addition  to the above terms of the Stock  Purchase  Agreement,  the Company
granted 1,000,000  compensatory  common stock options (see Note 6) and agreed to
pay $500,000 to its employees and contractors as payment for 2003 services.  The
$500,000,  which is currently  due and payable,  has been accrued as of December
31, 2003 and is included in the accompanying  consolidated  financial statements
as "Accrued employee compensation" and "Research and development".

EIDT Recapitalization

On December 18, 2003, the Company  entered into a Stock Purchase  Agreement with
EIDT, a Nevada  corporation.  Under the terms of the  Agreement,  EIDT agreed to
acquire  all of the  issued  and  outstanding  common  stock of the  Company  in
exchange for 19,300,000 shares of EIDT's common stock. This acquisition has been
treated as a recapitalization of Manakoa,  with EIDT the legal surviving entity.
Since EIDT had minimal assets and no operations,  the  recapitalization has been
accounted  for as the sale of 8,553,783  shares of Manakoa  common stock for the
net liabilities of EIDT.  Therefore,  the historical financial information prior
to the date of the  recapitalization,  is the financial  information of Manakoa.


                                       28
<PAGE>

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT  ACCOUNTING POLICIES -
        continued

Costs of the transaction have been charged to the period.  The  recapitalization
took place on December 18, 2003; however, the consolidated  financial statements
have been prepared as if the recapitalization took place on December 31, 2003.

Going Concern

The accompanying consolidated financial statements have been prepared on a going
concern basis,  which contemplates the realization of assets and satisfaction of
liabilities  in the  normal  course of  business.  As shown in the  accompanying
consolidated  financial statements,  the Company has suffered significant losses
since inception.  This factor,  among others, may indicate that the Company will
be unable to continue as a going concern for a reasonable time.

The consolidated financial statements do not include any adjustments relating to
the  recoverability  and  classification  of liabilities that might be necessary
should the  Company be unable to  continue  as a going  concern.  The  Company's
continuation  as a going  concern is  dependent  upon its  ability  to  generate
sufficient cash flow to meet its obligations on a timely basis and ultimately to
attain  profitability.  The Company plans to seek additional funding to maintain
its operations through debt and equity financing. There is no assurance that the
Company will be successful in its efforts to raise additional working capital or
achieve  profitable  operations.  The consolidated  financial  statements do not
include any adjustments that might result from the outcome of this uncertainty.

Summary of Significant Accounting Policies

Use of estimates

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

Cash equivalents

For the  purposes of the  statement  of cash flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash  equivalents.  The Company had no cash  equivalents at
December 31, 2004.

Property, equipment and depreciation

Property  and  equipment  are  stated  at cost and are  depreciated  over  their
estimated  useful  lives,  ranging from 5 to 10 years,  using the  straight-line
method.

Upon   retirement  or  disposition  of  equipment,   the  cost  and  accumulated
depreciation  are removed from the accounts  and any  resulting  gain or loss is
reflected  in  operations.  Repairs  and  maintenance  are charged to expense as
incurred and expenditures for additions and improvements are capitalized.

                                       29
<PAGE>

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT  ACCOUNTING POLICIES -
        continued

Software Development Costs

Software  development  costs  are  recorded  in  accordance  with  Statement  on
Financial  Accounting  Standards  ("SFAS") Statement No. 86, "Accounting for the
Costs of Computer  Software to be Sold,  Leased or  Otherwise  Marketed".  Costs
incurred to establish the  technological  feasibility of computer software to be
sold,  leased,  or  otherwise  marketed are expensed as incurred to research and
development  costs. Once technological  feasibility is established,  the cost of
producing product masters for the software is capitalized. Capitalization of the
software  development  costs ceases and  amortization of the  capitalized  costs
commences  when the  product is  available  for  general  release to  customers.
Capitalized costs are amortized based on the greater of (a) the ratio of current
gross revenues to the total current and anticipated  future gross  revenues,  or
(b) the straight-line  method over the remaining  estimated economic life of the
product.

Research and development costs totaled $696,256 and $575,000 for the years ended
December 31, 2004 and 2003,  respectively.  The Company has not  capitalized any
software development costs as of December 31, 2004.

Impairment of Software Development Costs

The Company  will review  software  development  costs for  impairment  whenever
events or changes in  circumstances  indicate that the carrying  amount of these
assets may not be recoverable. These assets are assessed for impairment based on
estimated  undiscounted  future cash flows from these  assets.  If the  carrying
value of the assets exceeds the estimated future undiscounted cash flows, a loss
is recorded  for the excess of the asset's  carrying  value over the fair value.
The Company did not have any capitalized  software development costs at December
31, 2004.

Impairment of Long-Lived Assets

The Company  evaluates  the carrying  value of its  long-lived  assets under the
provisions  of SFAS No.  144,  "Accounting  for the  Impairment  or  Disposal of
Long-Lived Assets".  Statement No. 144 requires impairment losses to be recorded
on long-lived  assets used in  operations  when  indicators  of  impairment  are
present and the  undiscounted  future cash flows  estimated  to be  generated by
those  assets are less than the  assets'  carrying  amount.  If such  assets are
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying value or fair value,  less
costs to sell.

Net loss per share

Basic earnings/loss per share is computed by dividing income available to common
shareholders  (the  numerator) by the  weighted-average  number of common shares
(the denominator) for the period.  The computation of diluted earnings per share
is similar to basic earnings per share, except that the denominator is increased
to  include  the  number  of  additional  common  shares  that  would  have been
outstanding if potentially dilutive common shares had been issued.

At December 31, 2004,  there was no variance  between basic and diluted loss per
share as all potentially dilutive common shares outstanding (including 3,685,000
common stock options,  2,373,000  common stock warrants and convertible debt and
accrued interest convertible to 2,291,671 common shares) were anti-dilutive.

                                       30
<PAGE>

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT  ACCOUNTING POLICIES -
        continued

Income taxes

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

Revenue recognition

Service  revenue is  recognized  after  services are provided and  collection is
probable.  Expenses are recognized  when incurred.  The Company did not make any
sales of software  products  during the periods  presented  in the  accompanying
consolidated financial statements.

Fair value of financial instruments

The carrying  amounts of cash,  accounts  payable and other accrued  liabilities
approximate fair value due to the short-term maturity of the instruments.

Stock-based compensation

The Company  accounts  for  compensation  expense for its  stock-based  employee
compensation  plans using the  intrinsic  value method  prescribed in Accounting
Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to  Employees"
("APB  25"),  and  complies  with the  disclosure  provisions  of SFAS No.  123,
"Accounting  for  Stock-Based  Compensation"  ("SFAS  123"),  and SFAS No.  148,
"Accounting for Stock-Based  Compensation-Transition and Disclosure".  Under APB
25, compensation  expense of fixed stock options is based on the difference,  if
any, on the date of the grant  between  the deemed  fair value of the  Company's
stock and the exercise price of the option.  Compensation  expense is recognized
on the date of  grant  or on the  straight-line  basis  over the  option-vesting
period. The Company accounts for stock issued to nonemployees in accordance with
the  provisions  of SFAS 123 and EITF Issue No.  96-18,  "Accounting  for Equity
Instruments  That Are  Issued  to Other  Than  Employees  for  Acquiring,  or in
Conjunction with Selling, Goods or Services".

Pro forma  information  regarding  the results of operations is determined as if
the Company had  accounted for its employee  stock options using the  fair-value
method.  The fair value of each option  grant is  estimated on the date of grant
using the Black-Scholes method. Pro forma disclosures have been included in Note
6.

Recent accounting pronouncements

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets
- an amendment of APB Opinion No. 29." This  Statement  eliminates the exception
for nonmonetary  exchanges of similar  productive  assets and replaces it with a
general  exception  for  exchanges  of  nonmonetary  assets  that  do  not  have
commercial  substance.  A nonmonetary  exchange has commercial  substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange.  This Statement is effective for  nonmonetary  asset  exchanges


                                       31
<PAGE>

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT  ACCOUNTING POLICIES -
        continued

occurring in fiscal periods  beginning after June 15, 2005. The Company does not
expect application of SFAS No. 153 to have a material affect on its consolidated
financial statements.

In December  2004,  the FASB  issued a revision  to SFAS No.  123,  "Share-Based
Payment." This Statement  supercedes APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees"  and its related  implementation  guidance.  It establishes
standards for the accounting for  transactions in which an entity  exchanges its
equity  instruments  for goods or services.  It also addresses  transactions  in
which an entity  incurs  liabilities  in exchange for goods or services that are
based  on the fair  value  of the  entity's  equity  instruments  or that may be
settled by the issuance of those equity  instruments.  This  Statement  does not
change the accounting guidance for share-based payment transactions with parties
other than employees provided in Statement No. 123 as originally issued and EITF
Issue No. 96-18.  This  Statement is effective for public  entities that file as
small  business  issuers as of the  beginning  of the first  fiscal  period that
begins after December 15, 2005. The Company has not yet determined the impact of
SFAS No. 123 (revised) on its consolidated financial statements.

NOTE 2:  RELATED PARTY TRANSACTIONS

Indebtedness to related parties

As of  December  31,  2004,  the Company  owed its  officers,  employees  and an
affiliate a total of $109,729 for accrued  salaries,  accrued rent, and expenses
paid on behalf of the Company.  These  liabilities are non-interest  bearing and
are due on demand.  Management  plans to settle these  liabilities  with cash or
stock.  The  $109,729  is included in the  accompanying  consolidated  financial
statements as "Indebtedness to related parties".

As part of its merger with EIDT, the Company  assumed  $206,275 in advances owed
to two shareholders of the Company.  These advances are non-interest bearing and
are due on demand.  During the year ended  December 31, 2004, the Company repaid
$31,275 in cash and extinguished the remaining  $175,000 through the issuance of
1,750,000  shares of the Company's  common stock. The common stock was valued at
$875,000 based on the quoted market price of the stock on the transaction  date,
or $.50 per share. The excess valuation of the common stock,  totaling $700,000,
has been charged to consulting for services  performed on behalf of the Company.
The $700,000 is included in the accompanying  consolidated  financial statements
as "Stock-based compensation - consulting, related parties".

Commencing  January 1, 2002, the Company began accruing its officer's salary due
to a lack of working  capital.  During the year ended  December  31,  2002,  the
officer contributed half of the $150,000 salary, which is recorded as additional
paid-in capital in the accompanying  consolidated  financial  statements.  As of
November 23, 2003,  the Company owed the officer  $209,375 for accrued  salaries
and issued a  promissory  note to the  president  as payment for $200,000 of the
accrued  salaries.  The note carries a four percent interest rate and matures on
March 31, 2006.  During the year ended  December 31,  2004,  the Company  repaid
$15,000 against the note reducing the balance to $185,000.  Accrued  interest on
the note totaled $15,334 at December 31, 2004. Future maturities of the note are
as follows:

                                       32
<PAGE>

NOTE 2:  RELATED PARTY TRANSACTIONS - continued

            Year ended December 31,
             -------------------------------------------

             2005...........................   $ 160,000

             2006...........................      25,000
                                          --------------
                                               $ 185,000
                                          ==============


Common stock sale

On January 1, 2002,  the Company  sold  6,100,000  shares of its $.001 par value
common stock to the officer for $100.

Rent and other administrative expenses

The Company began renting  office space  located in Kennewick,  Washington  from
Apogee Biometrics,  Inc. ("ABI"), an affiliate under common control, in December
2003.  Commencing  January 1, 2004, the parties verbally agreed that the Company
would  make  monthly  rent  payments  of $5,000 on a  month-to-month  basis.  In
addition,  the Company pays 50% of certain  administrative  expenses utilized by
both  parties.  During the years ended  December 31, 2004 and 2003,  the Company
incurred  rent  and   administrative   expenses  totaling  $71,857  and  $4,670,
respectively. The Company made payments to ABI totaling $112,903 during the year
ended December 31, 2004, resulting in prepaid expenses of $41,046.

NOTE 3:  PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2004:

             Computer equipment........................... $   98,855
             Furniture and office equipment...............      8,630
                                                          -----------
                                                              107,485
             Less accumulated depreciation................    (84,759)
                                                          -----------
                                                           $   22,726
                                                          ===========

Depreciation  expense totaled $11,279 and $-0-, for the years ended December 31,
2004 and 2003, respectively.

NOTE 4:  INCOME TAXES

A reconciliation of the U.S.  statutory federal income tax rate to the effective
rate is as follows:
                                                                   December 31,
                                                               2004       2003
                                                           ---------- ----------
      U.S. federal statutory graduated rate..................  34.00%     34.00%
      State income tax rate, net of federal benefit..........   3.06%      3.06%
      Net operating loss for which no tax benefit
       is currently available................................ -37.06%    -37.06%
                                                           ---------- ----------
                               Effective rate...............    0.00%      0.00%
                                                           ========== ==========

                                       33
<PAGE>

NOTE 4:  INCOME TAXES - continued

At December 31, 2004, deferred taxes consisted of a net tax asset of $2,151,928,
due to operating loss carryforwards of approximately $5,746,102, which was fully
allowed for in the valuation  allowance of $2,151,928.  The valuation  allowance
offsets the net  deferred tax asset for which there is no assurance of recovery.
The  deferred  tax assets for the years  ended  December  31, 2004 and 2003 were
$1,676,969 and $452,295, respectively. The change in the valuation allowance for
the years ended  December 31, 2004 and 2003 were also  $1,676,969  and $452,295,
respectively. Net operating loss carryforwards will expire through 2024.

The valuation  allowance will be evaluated at the end of each year,  considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced;  reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer  impaired and the  allowance is
no longer required.

Should the Company undergo an ownership  change as defined in Section 382 of the
Internal  Revenue  Code,  the Company's  tax net  operating  loss  carryforwards
generated prior to the ownership change will be subject to an annual limitation,
which could reduce or defer the utilization of these losses.

NOTE 5:  NOTES PAYABLE AND CONVERTIBLE DEBT

Convertible promissory notes

As part of its merger with EIDT (see Note 7), the Company  acquired  $140,000 in
convertible  promissory  notes that were  originally  issued during  October and
November  2003.  During the year ended  December 31, 2004, the Company issued an
additional $907,500 in convertible  promissory notes and repaid one $50,000 note
through the issuance of 125,000 shares of its common stock ($.40 per share).  As
of December 31, 2004, the balance of convertible  promissory  notes  outstanding
totaled $997,500.

The notes carry a 10 percent  interest rate and mature one year from the date of
the note. The first  $310,000 in notes issued  between  October 2003 and January
2004 may be converted  into the Company's  common  stock,  at a rate of $.40 per
share. The remaining  $687,500 of notes issued in 2004 may be converted into the
Company's  common stock, at a rate of $.50 per share. The notes may be converted
at the option of the holder.  On the maturity date of the respective  notes, the
Company has the right and option to  automatically  convert the unpaid principal
balance and accrued  interest then  outstanding into the number of common shares
resulting from dividing all of the unpaid  principal and accrued  interest by an
amount equal to the established exercise price ($.40 or $.50 per share). Accrued
interest payable on the notes totaled $75,641 at December 31, 2004.

                                       34
<PAGE>

NOTE 5:  NOTES PAYABLE AND CONVERTIBLE DEBT - continued

Other notes payable

The Company's  remaining  promissory  notes payable  consist of the following at
December 31, 2004:

  Note payable to an individual issued on June 30, 2004,
     matures June 30, 2005, convertible to the Company's
     common stock at a rate of $.50 per share, 10%
     annual interest rate.......................................  $    250,000
  Note payable to an individual issued on November 15, 2004,
     payable on demand after February 15, 2005, 10% annual
     interest rate, unsecured...................................       150,000
  Note payable to an individual issued on December 3, 2004,
     payable on demand after June 30, 2005, 10% annual
     interest rate, unsecured...................................       300,000
  Note payable to an individual issued on December 30, 2004,
     payable on demand after June 30, 2005, 10% annual
     interest rate, unsecured...................................        25,000
                                                                --------------
                                                                  $    725,000
                                                                ==============



Accrued interest payable on the above notes totaled $14,568 at December 31,
2004.

The  Company  issued the  $250,000  note holder  warrants to purchase  1,500,000
shares of common stock as a loan  origination  fee.  The  exercise  price on the
warrants is $.01 per share and the warrants expire on July 1, 2005. The warrants
were issued  below the quoted  market price ($.70 per share) of the common stock
on the grant date.  Accordingly,  the Company  determined  the fair value of the
warrants  in  accordance  with  SFAS 123 and  capitalized  debt  issue  costs of
$1,035,000  at July 1, 2004.  The debt issue  costs are  amortized  to  interest
expense over the term of the loan (one year). As of December 31, 2004,  $517,500
was amortized to interest  expense and the remaining  $517,500 is capitalized in
the  accompanying  condensed  consolidated  financial  statements  as debt issue
costs.  The  remaining  debt issue  costs will be fully  amortized  to  interest
expense by June 30, 2005.

The fair value for the warrants  granted with the loan was estimated at the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions:


   Risk-free interest rate.....................            1.01%
   Dividend yield..............................            0.00%
   Volatility factor...........................          115.15%
   Weighted average expected life..............           1 year



                                       35
<PAGE>

NOTE 6:  STOCKHOLDERS' DEFICIT

Common stock

During the year ended December 31, 2004, the Company issued  2,185,000 shares of
its common stock in exchange for research and  development,  investor  relations
and business  consulting service contracts.  The transactions were valued at the
quoted  market  price of the common  stock on the  transaction  date and totaled
$1,191,000.  Stock-based  compensation expense of $748,042 was recognized in the
accompanying  consolidated  financial statements for the year ended December 31,
2004. The remaining $442,958 was recorded as prepaid consulting services.

On September 30, 2004, the Company issued 248,000 shares of its common stock and
248,000 stock purchase warrants in exchange for investor relations services. The
transaction  was valued at the quoted  market  price of the common  stock on the
transaction date. Stock-based compensation expense of $124,000 was recognized in
the accompanying  consolidated  financial statements for the year ended December
31, 2004. The warrants are  exercisable at a price of $1.10 per share and expire
on September 30, 2005.

During September 2004, the Company sold 500,000 units to UTEK Corporation (amex:
UTK)  through  a  private  offering.  Each  unit  consisted  of one share of the
Company's common stock and one warrant to purchase an additional share of common
stock at a price of $1.10 per share. The unit price was $.50 per unit, resulting
in total proceeds of $250,000. The offering was made pursuant to exemptions from
registration provided by Section 4(2) of the Securities Act of 1933, as amended,
and Rule 506 of Regulation D promulgated thereunder. The units were sold through
the Company's officers and directors.

During  September 2004, the Company issued  1,900,000 shares of its common stock
to acquire Advanced Cyber Security, Inc. ("ACSI"), see Note 9.

Common stock options

Options granted to non-employees, accounted for under the fair value method

Between September and December 2004, the Company granted its consultants options
to  purchase an  aggregate  of 850,000  shares of the  Company's  common  stock.
500,000  options  carry an  exercise  price of $.66 per share and the  remaining
350,000 options carry an exercise price of $.01 per share.  100,000 options vest
on November 4, 2005, the remaining  options vested on the date of grant.  All of
the options  expire three years from the grant date.  The quoted market price of
the common stock ranged between $.40 and $.70 per share.  The Company valued the
options  in  accordance  with SFAS 123.  The fair  value of the  options  ranged
between  $.243 and $691 per share and totaled  $281,050,  which was  recorded as
stock-based  compensation in the accompanying  consolidated financial statements
for the year ended December 31, 2004.

The fair  value of the  options  was  estimated  at the date of grant  using the
Black-Scholes option-pricing model with the following assumptions:

        Risk-free interest rate                   2.00%
        Dividend yield                            0.00%
        Volatility factor                       115.15%
        Weighted average expected life          3 years


                                       36
<PAGE>

NOTE 5:  NOTES PAYABLE AND CONVERTIBLE DEBT - continued

Options and warrants assumed in recapitalization

During the year ended December 31, 2003, EIDT granted  non-employees  options to
purchase  50,000 shares of the  Company's  common stock and warrants to purchase
125,000  shares.  The stock  awards were  granted  for  services  provided.  The
exercise prices range from $.06 (125,000  shares) to $.10 (50,000  shares).  The
options and warrants expire between January 27, 2005 and September 10, 2005. The
fair  value of the  awards  were  determined  in  accordance  with  SFAS 123 and
resulted in stock-based compensation expense of $25,400.

The fair value for the options  granted  during the period was  estimated at the
date of grant using the  Black-Scholes  option-pricing  model with the following
assumptions:

    Risk-free interest rate                       2.00%
    Dividend yield                                0.00%
    Volatility factor                           286.12%
    Weighted average expected life               1 year


Options granted to employees, accounted for under the intrinsic value method

Between  September and December 2004, the Company granted its employees  options
to purchase an aggregate  of 2,785,000  shares of the  Company's  common  stock.
2,185,000  options  carry an exercise  price of $.66 per share and the remaining
600,000  options carry an exercise price of $.01 per share.  The options vest as
follows:

             Number of
              Options                     Vesting Date
      ----------------               --------------------------
             1,350,000                    Date of grant
               100,000                    January 1, 2005
             1,335,000                    Ratably over 36 months
      ----------------
             2,785,000
      ================

All of the options  expire  three years from the grant date.  The quoted  market
price of the common  stock ranged  between $.40 and $.70 per share.  The 600,000
options  granted at an exercise price of $.01 were below the quoted market price
on the date of grant.  These options resulted in total stock-based  compensation
of $294,000  ($49,000 of which will vest on January 1, 2005).  As a result,  the
Company  recorded  $245,000  as  stock-based  compensation  in the  accompanying
consolidated financial statements for the year ended December 31, 2004.

On November 25, 2003, the Company granted  1,000,000  compensatory  common stock
options to its  employees  and  contractors  as payment for 2003  services.  The
1,000,000  options had an  exercise  price of $.0001 per share and vested on the
grant date.  Due to the nominal  exercise  price the  options  were  immediately
exercised and, for accounting purposes, the transaction has been recorded as the
issuance of  1,000,000  shares of the  Company's  common  stock in exchange  for
services.  The shares  issued in the  transaction  were valued based on the fair
market value of the Company's common stock on the transaction  date, or $.48 per
share  (following the December 19, 2003 merger with  Electronic  Identification,
Inc.).  Stock-based compensation expense totaling $480,000 was recognized in the
accompanying consolidated financial statements.

                                       37
<PAGE>

NOTE 5:  NOTES PAYABLE AND CONVERTIBLE DEBT - continued

As stated in the Summary of Significant Accounting Polices, the Company accounts
for awards of stock-based employee compensation under the intrinsic value method
of Opinion 25. Companies that elect to use the method provided in Opinion 25 are
required  to  disclose  pro forma net  income and pro forma  earnings  per share
information  that  would  have  resulted  from the use of the fair  value  based
method.  Had  compensation  expense been recorded based on the fair value at the
grant date,  and charged to expense over vesting  periods,  consistent  with the
provisions of SFAS 123, the Company's net loss and net loss per share would have
increased to the pro forma amounts indicated below:

                                                         For The Years Ended
                                                            December 31,
                                                 ------------------------------
                                                         2004           2003
                                                 ---------------    -----------
Net loss, as reported                            $    (4,525,525)   $(1,220,577)
                                                 ===============    ===========
Stock-based employee compensation, as reported   $       245,000    $   480,000
                                                 ===============    ===========
Stock-based employee compensation, fair value    $       375,979    $   480,000
                                                 ===============    ===========
Pro forma net loss                               $    (4,656,504)   $(1,220,577)
                                                 ===============    ===========
Basic and diluted net loss per common
   share, as reported                            $         (0.15)   $     (0.16)
                                                 ===============    ===========
Pro forma basic and diluted net loss
   per common share                              $         (0.16)   $     (0.16)
                                                 ===============    ===========


The following schedule summarizes the changes in the Company's stock awards:

<TABLE>
<CAPTION>

                                 Awards Outstanding and Exercisable
                                  ---------------------------------   Weighted Average    Weighted Average
                                     Number of    Exercise Price       Exercise Price        Remaining
                                      Shares         Per Share            Per Share       Contractual Life
                                  ------------  -------------------  ------------------  ------------------
<S>                                       <C>            <C>                  <C>             <C>
Balance at January 1, 2003                   -          $0.00           $          -             N/A
   Options and warrants acquired
     in recapitalization               175,000      $.06 to $.10        $       0.07           1.5 years
   Awards granted                    1,000,000          $0.0001         $     0.0001             None
    Awards exercised                (1,000,000)         $0.0001         $     0.0001             None
   Awards cancelled/expired                  -          $0.00           $          -             N/A
                                  ------------                       ------------------
Balance at December 31, 2003           175,000      $.06 to $.10        $       0.07           1.5 years
   Awards granted                    5,883,000     $.01 to $1.10        $       0.45            3 years
   Awards exercised                          -          $0.00           $          -             N/A
   Awards cancelled/expired                  -          $0.00           $          -             N/A
                                  ------------                       ------------------

Balance at December 31, 2004         6,058,000     $.01 to $1.10        $       0.43          2.75 years
</TABLE>

                                       38
<PAGE>

NOTE 7:    COMMITMENTS

On  February  16,  2004,  the Company  began  leasing  office  space in Boulder,
Colorado for its product  development  team. Lease payments increase from $1,660
per month to $6,500 per month through May 31, 2006, when the lease expires. Rent
expense  under the lease totaled  $11,333 and $-0- for the years ended  December
31, 2004 and 2003, respectively.

Future minimum payments due under the lease agreements are as follows:

   December 31,
   ------------------------
   2005                            $    63,595
   2006                            $    32,500


NOTE 8:  CONCENTRATION OF CREDIT RISK

During the year ended  December 31, 2003, the Company had one customer that made
up 100 percent of the Company's sales.

NOTE 9:  AGREEMENT AND PLAN OF ACQUISITION

On August 4, 2004, the Company entered into an Agreement and Plan of Acquisition
to acquire Advanced Cyber Security,  Inc. ("ACSI"), a wholly owned subsidiary of
UTEK  Corporation  (amex:  UTK)  ("UTEK").  The  Company  acquired  all  of  the
outstanding  common shares of ACSI from UTEK in exchange for 1,900,000 shares of
the  Company's  common  stock  (all  issued to  UTEK).  The  exchange  of equity
interests  occurred on September 20, 2004,  which  resulted in ACSI becoming the
Company's  wholly-owned  subsidiary.  The results of ACSI's operations have been
included in the accompanying  consolidated financial statements since that date.
The Company conducted the acquisition in order to obtain the license rights held
by ACSI.

The  acquisition of ACSI was recorded in accordance  with Statement of Financial
Accounting Standard ("SFAS") No. 141, "Business Combinations". SFAS 141 requires
that  in  exchange  transactions  where  consideration  given  is not  in  cash,
measurement  is based on the fair value of the  consideration  given or the fair
value of the  consideration  acquired,  which ever is more  clearly  evident and
reliably  measurable.   Following  a  review  of  the  transaction,   management
determined that the fair value of the assets acquired from ACSI was more clearly
evident  and  reliable  than the fair value of the common  stock  given up. As a
result,  the  transaction  was  recorded  at a value of  $181,737,  based on the
valuation of license rights ($146,137) and prepaid consulting fees ($35,600).

The following table  summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition:

                September 30, 2004
   -------------------------------------------------
   Prepaid expenses                       $   35,600
   License rights                            146,137
   Total assets acquired                     181,737
                                        ------------
   Total liabilities assumed                       -
   Net assets acquired                    $  181,737
                                        ============


                                       39
<PAGE>

NOTE 9:  AGREEMENT AND PLAN OF ACQUISITION - continued

License rights

ACSI acquired  license rights to a prototype  program for systems  administrator
simulation  training (SAST) from Battelle Memorial Institute (the "Licensor") in
August 2004.  The program  rapidly  evaluates the cyber  security  experience of
system  administrators to identify,  circumvent or recover from hacker activity.
The  program  consists of a network of training  tools that  simulate  the cyber
environment and are launched through an automated  system.  The license entitles
ACSI to use certain  software  owned by the  Licensor  and certain  intellectual
property  relating to part of the software for which  Licensor has applied for a
patent. ACSI may use the software, intellectual property and derivatives thereof
to train and certify  personnel to enable such personnel to perform  testing and
assessment of enterprise vulnerabilities.

The Software  consists of three parts:  a  Coordinated  Attack Tool  ("CAT"),  a
Systems  Administrator  Simulation  Trainer  ("SAST")  and a Synthetic  Computer
Network Traffic Generator ("TrafficBot").  The license is exclusive with respect
to the SAST Software and is nonexclusive  with respect to the CAT and TrafficBot
software  and  the  intellectual  property  (which  relates  to  the  TrafficBot
Software).

In consideration for the License, ACSI agreed to the following payments:

     o    An  initial,  nonrefundable  payment  of  $150,000  (paid on August 4,
          2004);

     o    A royalty of six and one-half  percent (6.5%) of its net sales revenue
          from  all  products  using  the  licensed   software  or  intellectual
          property.

     o    Commencing in 2007,  certain minimum royalty  payments to maintain the
          license,  starting at $75,000 in 2007 and  increasing up to $2,000,000
          in 2012 and years thereafter.

     o    An annual  "enablement fee", the greater of $50,000 or one half of one
          percent  (0.05%) of ACSI's  total  annual  revenues  from all products
          using the licensed software or intellectual property. This payment may
          be made in cash or in the Company's common stock (based on its average
          closing prices for the 20 trading days ending each December 15).

Licensor agreements

ACSI also  entered into a  consulting  agreement  with the Licensor for which it
paid $50,000 toward  services to be rendered by the Licensor  through the end of
2004. Under this agreement,  the Licensor will help define further  requirements
and a development plan with respect to the software  covering calendar year 2005
in detail,  with a rougher plan for calendar years 2006 and 2007. As of December
31, 2004,  $10,873 of the initial $50,000 remained unused and is included in the
accompanying consolidated financial statements as "Prepaid consulting services -
ACSI".

ACSI is also required to enter into a technical services agreement with Licensor
of at least $500,000 per year for three years (2005 through 2007) related to the
software.  It is  anticipated  that  the  services  to be  provided  under  this
agreement  will reflect the plan being  developed  under the current  consulting
agreement. ACSI shall receive a royalty-free license to use any new intellectual
property that is developed by Licensor in the  performance of its services under
the technical services agreement.

                                       40
<PAGE>

NOTE 9:  AGREEMENT AND PLAN OF ACQUISITION - continued

If the minimum  royalties are not paid, or the other amounts described above are
not paid,  the  Licensor  may convert the entire  license  into a  non-exclusive
license or terminate the license, at Licensor's sole discretion.

License rights and amortization

License rights are stated at cost and amortized over an estimated useful life of
five years using the straight-line  method.  Amortization expense for the period
from  September 20, 2004 through  December 31, 2004 totaled  $12,500.  Estimated
aggregate amortization in future years is as follows:

     Year ended December 31,
     -----------------------------------------
     2005                            $  30,000
     2006                               30,000
     2007                               30,000
     2008                               30,000
     2009                               17,500
                                 -------------
                                      $137,500
                                 =============

NOTE 10: SHAREHOLDER DISPUTE

A  dispute  has  arisen   between  the  Company  and  three  of  its   principal
shareholders,  Apogee Biometrics,  Inc., Mr. James Katzaroff,  and Mr. G. Robert
Williams,  on the one hand,  and on the other,  another  principal  shareholder,
Founders Group, Inc. The dispute pertains to services to be provided by Founders
Group, Inc. and its principal Michael  Sandoval,  and the Company's  issuance of
shares to Founders Group, Inc.

Settlement   negotioations  have  been  proceeding   amicably.   The  only  loss
anticipated would involve attorney fees, none have been incurred to date.


NOTE 11: SUBSEQUENT EVENTS

During March 2005, the Company  granted its  consultants  options to purchase an
aggregate of 200,000 shares of the Company's common stock. 130,000 options carry
an exercise  price of $.66 per share and the remaining  70,000  options carry an
exercise price of $.01 per share. All of the options expire three years from the
grant date.

During January and February 2005,  stock awards were exercised  resulting in the
issuance of 275,000  shares of the  Company's  common  stock.  Proceeds from the
stock awards totaled $9,000.

During February 2005, an employee left the Company resulting in the cancellation
of 350,000 common stock options.

                                       41
<PAGE>

ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

NONE.

ITEM 8A CONTROLS AND PROCEDURES

The chief  executive  officer and the  president of the Company  have  concluded
based on  their  evaluation  that as of the end of the  period  covered  by this
report the Company's  disclosure controls and procedures are effective to ensure
that information required to be disclosed by the Company in the reports filed or
submitted  by it under the  Securities  Act of 1934,  as amended,  is  recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Securities and Exchange  Commission's  rules and forms, and include controls and
procedures  designed to ensure that information  required to be disclosed by the
Commission  in such reports is  accumulated  and  communicated  to the Company's
management,  including the president,  as appropriate to allow timely  decisions
regarding required disclosure.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the period covered by this report.

ITEM 9 DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT

The members of the Board of Directors of the Company serve until the next annual
meeting of the  stockholders,  or until their successors have been elected.  The
officers are  appointed  by the Board of  Directors  and hold office until their
earlier death, retirement, resignation or removal.

There are no agreements  for any officer or director to resign at the request of
any other person, and none of the officers or directors named below is acting on
behalf of, or at the direction of, any other person.

                                                                   Year first
Name                    Age   Position                              elected
----------------------- ----- ---------------------------------- ------------
Stuart Platt               71  Chairman of The Board                     2003
G. Robert Williams         57  Chief Executive Officer, Director         2003
James C. Katzaroff         48  President, Director                       2003
James  C. Riviere          63  Director                                  2004
Ken Hatch                  69  Director                                  2004
Robert A. Papke            48  Secretary                                 2004


Executive  Officers of the  Company are elected on an annual  basis and serve at
the  discretion of the Board of Directors.  Directors of the Company are elected
on an  annual  basis.  All  directors  agreed to  remain  until the 2005  annual
meeting.

Rear Admiral (ret) Stuart Platt--MS, MBA, Chairman of the Board

The author of THE ARMAMENT  TIDE - ReARMING  AMERICA,  Stuart Platt was promoted
early ahead of his peers;  he went on to become a Rear  Admiral and  completed a
distinguished 31 year military career as a highly decorated Vietnam veteran.  He
has followed his military success with an equally successful executive career in
business,  principally  in the  technology  and defense  sectors.  Appointed  by
President Reagan as the Navy's first  Competition  Advocate  General,  he led an
historic  reform program to improve the way the Navy buys ships,  aircraft,  and

                                       42
<PAGE>

ITEM 9 DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT - continued

weapon  systems.  He also  served as deputy  commander  of the Naval Sea Systems
Command,  where  he  was  responsible  for  acquiring  Navy  surface  ships  and
submarines  during the build-up of the 600 ship Navy. He was recently honored by
being  named to the  Cold War  Leadership  Hall of Fame by the  Submarine  Force
Library & Museum Association,  and was a presidential  appointee to the Board of
Governors of the United  States  Merchant  Marine  Academy.  Admiral Platt has a
Master of Science from the William E. Simon  Graduate  School of Business at the
University of Rochester, an MBA from the School of Business at the University of
Michigan,  and is a  graduate  of the  Executive  Program,  Graduate  School  of
Business at Stanford University.

Robert Williams - PhD, Chief Executive Officer and Director

Dr.  Williams has over 20 years of  senior-level  IT management  experience with
companies ranging from start-ups to large technology firms and consultancies. He
was also  instrumental in recent anthrax  terrorist attack crisis management and
is active in continuing  anti-terrorism  efforts.  Prior positions include being
President of  professional  services  organization  PDS  Advanced  Technologies,
President and founder of pioneering UNIX applications  developer  Decathlon Data
Systems, a senior executive at UNISYS/System  Development Corporation,  and Dean
of Research at the  University of California,  Los Angeles and California  State
Polytechnic University. A recognized technology expert, he was also the featured
speaker in the international road shows sponsored by Microsoft, Hewlett Packard,
Compaq  and  Tech  Data on  UNIX  and  Windows  NT  interoperability.  He is the
co-author of the best selling The Ultimate  Windows Server 2003  Administrator's
Guide (Addison Wesley 2002), and other best selling books. Dr. Williams has a BA
and MA from  Whittier  College,  and a PhD from UCLA.  He was named by Microsoft
Corporation  as the Most  Valuable  Professional  (MVP) in the field of Security
(2003).

James C. Katzaroff, President  and Director

Jim Katzaroff  brings a wealth of business and corporate  finance  experience to
Manakoa.  Since  1998,  Mr.  Katzaroff  has held  senior  positions  at Telemac,
including  Chief  Financial  Officer,  Senior Vice  President-Finance,  Sr. Vice
President,   and  Corporate   Secretary  of  Telemac,   Inc.,  an  international
communications  venture active in the wireless telephony market. At Telemac,  he
was responsible for the venture's corporate  strategy,  investors and investment
banking relationships, and the creation of the original executive team. Prior to
Telemac,  Mr.  Katzaroff was a financial  consultant with Smith Barney,  Bateman
Eichler and E.F. Hutton. Mr. Katzaroff has been a financial advisor for numerous
start-up and development stage companies,  and has assisted  numerous  companies
with their initial public offerings.  Mr. Katzaroff holds a Bachelor's Degree in
Business  Economics from the University of  California,  Santa Barbara,  and has
completed advanced management courses at the University of Washington.

James C.  Riviere,  PhD - Member,  Board of Directors  and Chairman of the Audit
Committee

Dr. Riviere is a business  executive  with  extensive  experience in government,
aerospace  and  commercial  enterprises.  He was  most  recently  interim  Chief
Financial  Officer of publicly  traded Trans  Global  Services  Corporation.  He
chaired the US Navy  modernization  procurement  task force.  Dr.  Riviere  held
various  management  positions  on Boeing  programs for the  Minuteman  Missile,
Apollo,  and the 737.  In  executive  management,  Riviere  was  Corporate  Vice
President of Operations and Administration  for System Development  Corporation,

                                       43
<PAGE>

ITEM 9 DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT - continued

and Corporate Vice  President of Planning & Logistics for Burroughs  Corporation
(Unisys  Corporation).  As an independent  consultant,  Dr.  Riviere  maintained
consultative relationships with Bell Atlantic, Mobil Oil, Digital Equipment, and
Allied-Signal  corporations.  Most  recently,  he was Program  Manager,  Support
Strategies for the U.S. Postal Service.  Dr. Riviere majored in Economics at the
University of Washington,  and obtained an MBA from American Graduate University
and a PhD in Industrial Engineering from Pacific Western University.

Ken Hatch - Member, Board of Directors

Mr.  Hatch  is a  respected  business  executive  who  has  served  on  numerous
corporate,  charity,  civic and higher education Boards of Directors.  Mr. Hatch
currently is CEO of Hatch Enterprises,  Inc. which he founded in 1997 to provide
organizational  and corporate image  communications  consulting for corporations
under development,  in transition,  or in crisis. He previously was President of
The Pacific Institute from 1995-1997.  The Pacific Institute does business in 41
countries  and in 13  languages.  Mr. Hatch was Chairman and  President of KIRO,
Inc. a Seattle CBS television and radio station complex, from 1980-1995. He also
served as the  Senior  Vice  President,  Broadcast  Division  for the A. H. Belo
Corporation, then the 11th largest U.S. communication company.

Conflicts of Interest Related to Other Business Activities

James C. Katzaroff,  President and Interim Principal  Financial Officer, is also
Chairman  and CEO of  Apogee  Biometrics,  a  shareholder  that  currently  owns
approximately  5,086,500  shares or 14.8%of Manakoa  Services  Corporation.  The
company  rents  space from Apogee  Biometrics,  Inc.  for $5,000 per month.  Ken
Hatch,  outside  director is also a director of Apogee  Biometrics,  Inc. Robert
Papke, is President of Apogee Biometrics, Inc.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities  Exchange Act of 1934, as amended (the "Exchange
Act"),  requires that the Company's officers and directors,  and persons who own
more  than ten  percent  (10%) of a  registered  class of the  Company's  equity
securities,  file  reports of ownership  and changes of ownership  with the SEC.
Officers, directors and greater than ten percent (10%) shareholders are required
by SEC  regulation  to furnish the Company  with copies of all such reports they
file.

Based  solely  on its  review  of the  copies of such  reports  received  by the
Company, and on written  representations by the Company's officers and directors
regarding their  compliance  with the applicable  reporting  requirements  under
Section 16(a) of the Exchange Act, the Company  believes  that,  with respect to
its fiscal year ended  December 31, 2004,  the Company's  officers and directors
and all of the persons  known to the Company to own more than ten percent  (10%)
of the Company's Common Stock, either failed to file, on a timely basis, or have
yet to file the required beneficial ownership reports with the SEC.


ITEM 10 EXECUTIVE COMPENSATION

The following table furnishes  compensation  information for the year ending for
the Company  Officers;  the Chief Executive  Officer and President.  The company
does not have any employment  contracts or change of control agreements with the
parties.

                                       44
<PAGE>

ITEM 10 EXECUTIVE COMPENSATION - continued

<TABLE>
<CAPTION>
===============================================================================================================================
                                  ANNUAL COMPENSATION                                  LONG TERM COMPENSATION
-------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>      <C>       <C>          <C>                      <C>              <C>            <C>
NAME AND PRINCIPAL       YEAR    SALARY ($) BONUS ($) OTHER ANNUAL                AWARDS           PAYOUTS      ALL OTHER
POSITION                                              COMPENSATION ($)                                         COMPENSATION
------------------------ ----- ------------ --------- -------------------------------------------------------------------------
                                                                                    RESTRICTED        SECURITIES          LTIP
                                                                                 STOCK AWARDS       UNDERLYING      PAYOUTS ($)
                                                                                      ($)          OPTIONS/SARS (#)*     **
-------------------------------------------------------------------------------------------------------------------------------
G.Robert Williams,        2004  $ 74,758 (1)     None             None                   None         None     None        None
Chief Executive Officer
------------------------ ------------------------------------------------------------------------------------------------------
James C Katzaroff         2004  $ 84,705 (2)     None          $45,000                   None         None     None        None
President
-------------------------------------------------------------------------------------------------------------------------------

</TABLE>

(1)  G.Robert  Williams received $74,758 in salary and deferred $45,242 which is
     carried as an account payable.
(2)  James C. Katzaroff  received $84,705 in salary,  plus $45,000 in consulting
     fees on terms at least as  favorable  as could  have been  obtained  from a
     disinterested third party service provider.

Compensation of Outside Directors.

As approved August 12, 2004 by the Board of Directors and retroactive to July 1,
2004, the following  outside director fee schedule is: Monthly  Stipend:  $5,000
payable  monthly or  quarterly at  Directors'  option;  Attendance  at Meetings:
Directors meeting:  $1,500 per day, Committee meeting: $1,500 per day (Committee
Chair $2,000),  Telephonic Meeting:  $500,  Emergency meetings (called with less
than 30 hours notice):  $1,000,  Shareholders Meeting: $1,500; Stock Options and
Grants:  Base  Service  Options  50,000  shares  at $0.01 per  share,  Audit and
Compensation  Chairman 100,000 shares options at $0.01 per share, One time Board
option plan  250,000  shares at $0.66 per share (same as current  ESOP).  It was
also noted that prior monies owed outside  directors,  Chairman Stuart Platt and
Dr. James Riviere for the period of July 1, 2004 through  August 31, 2004,  will
be waived by Admiral Platt and Dr. Riviere in lieu of stock for amounts due.

On May 27, 2004, Stuart Platt was granted 45,000 shares of stock;  150,000 stock
options at $0.01 and 50,000 stock options at $0.66. James C. Riviere was granted
75,000  shares of stock on May 27,  2004;  150,000  stock  options  at $0.01 and
250,000  stock options at $0.66.  Ken Hatch was granted  50,000 stock options at
$0.01 and 250,000 at $0.66. All stock options vest immediately and are valid for
36 months.

Any compensation received by our officers,  directors, and management personnel,
will be determined  from time to time by our board of  directors.  Our officers,
directors,  and management  personnel  will be reimbursed for any  out-of-pocket
expenses incurred on our behalf.

                                       45
<PAGE>

ITEM 10 EXECUTIVE COMPENSATION - continued

Board of Directors Committees

At the Board  Meeting of May 27, 2004 and based on the Article IV of the company
bylaws,  the creation of the Audit and  Compensation  Committees  took place.  A
three  member  Audit  Committee  was  established  and Dr.  James C. Riviere was
assigned as Chairperson.  A three member Compensation  Committee was established
and Admiral Stuart Platt was assigned as  Chairperson.  Each committee  member's
term on the respective  committees shall run  co-terminously  with their term as
director,  unless  terminated  by the Board of  Directors  prior to said natural
expiration of said term or terminated due to said  Director's  resignation  from
the Board of Directors.

Stock Option Plan

The Board of Directors  adopted and a majority of the shareholders  approved the
Company's  2004  Combined  Incentive  and  Non-Qualified  Stock Option Plan that
authorized  the granting of options for up to 3,000,000  shares of the Company's
common.  A copy of the full text of the plan was filed with the  Company's  Form
8-K filed on March 15, 2004.

ITEM 11 SECURITY  OWNERSHIP  OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT  AND
RELATED STOCKHOLDER MATTERS

The following table sets forth certain  information  concerning the ownership of
the  Company's  common stock as of December 31, 2004,  with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the  Company's  common stock;  (ii) all  directors;  and (iii)  directors and
executive officers of the Company as a group.

<TABLE>
<CAPTION>

Title     Name of Beneficial                    Nature of Beneficial               Percent
Class      Owner of Group                       Ownership                 Amount   of Class
------- --------------------------------------- ----------------------- -------------------
<S>                       <C>                         <C>                  <C>        <C>
Common    Dr. G. Robert Williams                CEO/Director            6,103,000      17.8%
Common    James C. Katzaroff                    President/Director     11,206,423      32.7%*1
Common    Michael Sandoval/Founders Group Inc.  Founder                 6,100,000      17.8%
Common    Apogee Biometrics, Inc.               Shareholder             5,086,500      14.8%*2
Common    Dr. James C. Riviere                  Director                  475,000           *3
Common    Admiral Stuart Platt                  Director                  245,000           *4
Common    Kenneth L. Hatch                      Director                  300,000           *5
Common    Robert A. Papke                       Corporate Secretary       450,000           *6
Common    All Directors and Executive
          Officers As a Group (6 in number)                            23,529,423      68.7%
</TABLE>

                                       46
<PAGE>

ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

James  C.  Katzaroff,   President,  directly  owns  a  12%  interest  in  Apogee
Biometrics, Inc.

*1   James C. Katzaroff, President of Manakoa, directly owns 6,119,923 shares of
     Manakoa
*2   James C.  Katzaroff is Chairman  and CEO of Apogee  Biometrics,  Inc.,  and
     indirectly owns 5,086,500 shares
*3   Dr. James C. Riviere owns 75,000 common shares and 400,000 options
*4   Admiral Stuart Platt owns 45,000 common shares and 200,000 options
*5   Kenneth L. Hatch owns 0 common shares and 300,000 options
*6   Robert A. Papke owns 0 common stock and 450,000 options


ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

3.1 Articles of  Incorporation  (incorporated  by reference to the Company's SEC
Form 10KSB/A filed with the SEC on June 20, 2000)

3.2  Certificate  of Amendment  to Articles of  Incorporation  (incorporated  by
reference to the Company's Form 8-K filed with the SEC on March 15, 2004)

3.3 By Laws  (incorporated  by reference to the Company's SEC Form 10KSB/A filed
with the SEC on June 20, 2000)

10.1 2004 Combined  Incentive and Non-Qualified  Stock Option Plan (incorporated
by reference to the Company's Form 8-K filed with the SEC on March 15, 2004)

31.1*Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of
Brad Partridge, as Principal Executive Officer.

31.2*Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of
James C. Katzaroff, as Principal Financial Officer, EVP and Acting Treasurer.

32.1*Certification  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Brad  Partridge,  as  Principal  Executive  Officer and James C.  Katzaroff,  as
Principal Financial Officer, EVP and Acting Treasurer.

*Filed herewith

                                       47
<PAGE>

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

Cordovano and Honeck,  P.C., Denver,  Colorado served as independent auditors of
the Company for the year ended December 31, 2004.

The  Company's  board of directors  pre-approves  all services  performed by the
Company's principal auditor.

                2004        2003
           ------------ ------------
Audit Fees  $ 21,337.50  $ 22,000.00
Tax Fees    $      0.00  $      0.00
           ------------ ------------
            $ 21,337.50  $ 22,000.00

The  Audit  fees for the  years  ended  December  31,  2004  and  2003  were for
professional  services  rendered  for  the  audit  of  the  annual  consolidated
financial  statements and review of the financial  statements included in the of
the Company's form 10KSB.


SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

Manakoa Services Corporation


By: /s/ G. Robert Williams                                       July 14, 2005
---------------------------------                                  -------------
Name:   G. Robert Williams                                             (Date)
Title:  C.E.O.



                                       48
<PAGE>