UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB


[X]  QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005


[ ]  TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 FOR THE  TRANSITION PERIOD FROM               TO
                                             -------------    --------------

Commission file number  000-25663
                        ------------

                            ULTRASTRIP SYSTEMS, INC.
        (Exact name of small business issuer as specified in its charter)

            Florida                                            65-0841549
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)

                            3515 S.E. Lionel Terrace
                              Stuart, Florida 34997
                    (Address of principal executive offices)

                                 (772) 287-4846
                           (Issuer's telephone number)

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 49,038,779 shares of common stock
were outstanding as of July 29, 2005.

Transitional Small Business Disclosure Format (check one):  Yes  [ ]    No  [X]


<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                           Page
PART I.             FINANCIAL INFORMATION

      Item 1.       Consolidated Financial Statements (unaudited)
                         Consolidated Balance Sheet........................  1
                         Consolidated Statements of Operations.............  2
                         Consolidated Statements of Cash Flows.............  3
                         Notes to Consolidated Financial Statements........  4
      Item 2.       Management's Discussion and Analysis or Plan of
                    Operation.............................................. 10
      Item 3.       Controls and Procedures................................ 15

PART II.            OTHER INFORMATION

      Item 1.       Legal Proceedings...................................... 16
      Item 2.       Unregistered Sales of Equity Securities and
                         Use of Proceeds................................... 16
      Item 3.       Defaults Upon Senior Securities........................ 16
      Item 4.       Submission of Matters to a Vote of Security Holders.... 16
      Item 5.       Other Information...................................... 16
      Item 6.       Exhibits and Reports on Form 8-K....................... 16



<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS.


                     ULTRASTRIP SYSTEMS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
=========================================================================================================
                                                                                          March 31, 2005
---------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>
CURRENT ASSETS
   Cash
                                                                                          $      143,576
   Accounts receivable                                                                             8,293
   Inventories                                                                                   845,976
   Prepaid expenses and other                                                                     53,942
---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                           1,051,787

PROPERTY AND EQUIPMENT, NET                                                                      221,889

PATENTS, NET                                                                                      81,332

OTHER ASSETS                                                                                      58,065
---------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                              $    1,413,073
=========================================================================================================

LIABILITIES, REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK AND CAPITAL DEFICIT

CURRENT LIABILITIES
   Accounts payable                                                                       $      481,150
   Accounts payable - related parties                                                            381,089
   Accrued expenses                                                                              736,563
   Notes payable - current portion                                                             1,917,052
   Notes payable - current portion                                                               540,351
---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                                      4,056,205

NOTES PAYABLE TO RELATED PARTIES, LESS CURRENT PORTION                                           101,335

TOTAL LIABILITIES                                                                              4,157,540

Minority interest of consolidated affiliates                                                     445,178

REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK SERIES A
   250 shares authorized; 28 shares issued and outstanding, $25,000 per share
   redemption amount plus dividends in arrears                                                 1,440,098

REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK SERIES B
   4,000 shares authorized; 1,054 shares issued and outstanding, $2,500 per share
   redemption amount plus dividends in arrears                                                 3,838,650

COMMITMENTS AND CONTINGENCIES (Note 10)

CAPITAL DEFICIT

   COMMON STOCK, $0.01 par value; 100,000,000 shares authorized; 47,841,113 shares
   issued and outstanding                                                                        478,411
   ADDITIONAL PAID-IN CAPITAL                                                                 25,879,665
   ACCUMULATED DEFICIT                                                                       (34,826,469)
---------------------------------------------------------------------------------------------------------
TOTAL CAPITAL DEFICIT                                                                         (8,468,393)

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK,  AND CAPITAL        $    1,413,073
DEFICIT
=========================================================================================================
</TABLE>

See accompanying notes to the consolidated financial statements.

                                        1
<PAGE>

                    ULTRASTRIP SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              For three months ended
                                                                                    March 31,
===================================================================================================
                                                                             2005              2004
---------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>
REVENUES                                                             $     16,852      $  1,763,443

COST OF REVENUES                                                           13,049           948,750
---------------------------------------------------------------------------------------------------

GROSS PROFIT                                                                3,803           814,693

OPERATING EXPENSES:
     Selling, general and administrative                                1,137,290           865,312
     Non-cash compensation expense                                             --             5,284
---------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES                                                1,137,290           870,596
---------------------------------------------------------------------------------------------------

LOSS FROM OPERATIONS                                                   (1,133,487)          (55,903)

OTHER (INCOME) EXPENSE:
     Other income                                                          (1,590)             (389)
     Interest expense                                                     330,283           196,418
     Minority interest in net loss of consolidated affiliates              (3,338)               --
----------------------------------------------------------------------------------------------------
TOTAL OTHER EXPENSE                                                       325,355           196,029
----------------------------------------------------------------------------------------------------

NET LOSS                                                               (1,458,842)         (251,932)

PREFERRED STOCK DIVIDENDS                                                 (92,125)          (92,125)
----------------------------------------------------------------------------------------------------

NET LOSS APPLICABLE TO COMMON STOCK                                  $ (1,550,967)     $   (344,057)
====================================================================================================


NET LOSS PER COMMON SHARE (BASIC AND DILUTED)                        $      (0.03)     $      (0.01)
====================================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                   46,957,853        42,692,518
====================================================================================================
</TABLE>















See accompanying notes to the consolidated financial statements

                                        2

<PAGE>

                    ULTRASTRIP SYSTEMS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                              For the three months ended
                                                                                     March  31,
                                                                              2005              2004
========================================================================================================
<S>                                                                       <C>              <C>
OPERATING ACTIVITIES:
   Net loss                                                               $(1,458,842)     $  (251,932)

   Adjustments to reconcile net loss to net cash used in operating
     activities:
       Depreciation and amortization                                           45,897           65,112
       Accretion of discount on notes payable                                 289,377          151,963
       Amortization of deferred compensation                                       --            5,284
       Common stock issued in settlement of accrued interest and
         commission                                                                --          247,513
       Minority interest in consolidated affiliates                            3,338                --
   Change in operating assets and liabilities:
         Accounts receivable                                                   39,532         (438,019)
         Inventories                                                         (693,299)         (20,170)
         Prepaid expenses                                                      94,962          210,770
         Other assets                                                         (58,065)
         Accounts payable                                                      (1,819)         254,276
         Accounts payable - related parties                                  (246,425)          28,163
         Accrued expenses                                                      (9,546)        (666,065)
-------------------------------------------------------------------------------------------------------

Net cash used in operating activities                                      (1,994,890)        (413,105)
-------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
   Purchase of equipment                                                       (3,123)         (34,164)
-------------------------------------------------------------------------------------------------------

Net cash used in investing activities                                          (3,123)         (34,164)
-------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
   Proceeds from issuance of notes payable and warrants to related
     parties                                                                  136,335          250,000
   Repayments of notes payable                                               (406,492)         (82,149)
   Repayment of notes payable to related parties                             (100,000)              --
   Proceeds from Issuance of Bridge Loans                                   1,836,501               --
   Proceeds from sale of warrants                                                  --          180,000
   Proceeds from sale of equity interests                                     491,840               --
-------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                   1,958,184          347,851
-------------------------------------------------------------------------------------------------------

Net decrease in cash                                                          (39,829)         (99,418)

Cash , beginning of period                                                    183,405          183,417
-------------------------------------------------------------------------------------------------------

Cash , end of period                                                      $   143,576      $    83,999
=======================================================================================================
</TABLE>

See accompanying notes to the consolidated financial statements

                                        3

<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements include
         the accounts of UltraStrip Systems, Inc. and its wholly-owned
         subsidiary, Ecosphere Technologies, Inc. and affiliates Ultrastrip
         Japan, Ltd. and Robotics Investment Group LLC (the "Company").
         Ecosphere Technologies was formed during the first quarter of 2005 and
         will market and produce the Company's water filtration technology.
         Ultrastrip Japan was formed in April 2004 to market and service the
         ship coating removal needs of the Japanese ports.

         The Company is associated with two entities which have been
         consolidated into these financial statements in accordance with the
         provisions of Financial Accounting Standards Board Interpretation No.
         46R Consolidation of Variable Interest Entities. The first entity,
         Ultrastrip Japan, Ltd (USJ) was formed in April 2004 under Japanese law
         as a joint venture between the Company (49.9% ownership) and five
         Japanese companies (50.1% ownership): Kamimura International
         Associates, LLC, Ihara Company, Ltd., Kyokuto Boeki Kaisha, Ltd., Shuwa
         Kaiun Kaisha, Ltd., and Chiba Marine Yokohama Co., Ltd. The Company
         contributed $50,000 to the joint venture in 2004 and provided a two
         year term loan of $32,000 during the first quarter of 2005. The second
         entity, Robotics Investment Group, LLC (RIG), was organized in December
         2004. The purpose of RIG is to purchase a M3500 Robotic Vehicle from
         the Company and lease the M3500 to USJ.

         The accompanying unaudited consolidated financial statements have been
         prepared in accordance with accounting principles generally accepted in
         the United States of America for interim financial information and with
         Item 310 of Regulation S-B. Accordingly, they do not include all of the
         information and footnotes required by accounting principles generally
         accepted in the United States of America for complete financial
         statements. The consolidated financial statements reflect all normal
         recurring adjustments, which, in the opinion of management, are
         considered necessary for a fair presentation of the results for the
         periods shown. The results of operations for the periods presented are
         not necessarily indicative of the results expected for the full fiscal
         year or for any future period. Certain prior period amounts have been
         reclassified to conform to the current period presentation. The
         information included in these unaudited consolidated financial
         statements should be read in conjunction with Management's Discussion
         and Analysis and Plan of Operation contained in this report and the
         audited financial statements and accompanying notes included in the
         Company's Annual Report on Form 10-KSB for the year ended December 31,
         2004.

         FINANCIAL ACCOUNTING STANDARDS BOARD INTERPRETATION (FIN) NO. 46R

         Effective January 1, 2005, the Company has adopted FIN 46R for the
         purpose of consolidating financial statements for entities that meet
         the requirements listed in FIN 46R. The two entities which qualify for
         consolidation are Ultrastrip Japan, Ltd. (USJ) and Robotics Investment
         Group, LLC (RIG). The Company owns 49.9% of USJ which is not a
         controlling amount, but in accordance with the provisions of FIN 46R,
         the entity is a variable interest entity which should be consolidated.
         Regarding RIG, the Company currently has 0% direct interest in the
         entity. However, RIG's design is to finance the leasing of one of the
         Company's M3500 Robotic vehicles to USJ. Additionally, the Company will
         acquire an interest in the lease equal to the percentage of the
         purchase price of the M3500 which RIG cannot pay. Thus, RIG qualifies
         for treatment as a special purpose entity to be consolidated in
         accordance with the provisions of FIN 46R. The effect of consolidating
         these two entities added $78,000 to Ultrastrip's assets and reduced
         Ultrastrip's liabilities by $364,000, due to the elimination of a
         deposit on equipment from RIG. As of March 31, 2005, USJ and RIG have
         had little operating activies so the effect on the income statement is
         to increase the loss by $3,338.


2.       GOING CONCERN

         The accompanying consolidated financial statements were prepared
         assuming that the Company will continue as a going concern. This basis
         of accounting contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of operations. During
         the three months ended March 31, 2005, the Company incurred losses of
         approximately $1.5 million, had a working capital deficiency of
         approximately $3.0 million, and had outstanding redeemable convertible
         preferred stock that is eligible for redemption at the holder's option
         for approximately $5.3 million (including accrued dividends). The
         Company has not attained a level of revenues sufficient to support
         recurring expenses, and the Company does not presently have the
         resources to settle previously incurred obligations. These factors,
         among others, raise substantial doubt about the Company's ability to
         continue as a going concern.

         The Company's continued existence is dependent upon its ability to
         resolve its liquidity problems, principally by obtaining additional
         debt financing and equity capital, and ultimately achieving profitable

                                        4

<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         operations. While pursuing additional debt and equity funding, the
         Company must continue to operate on limited cash flow generated
         internally.

         The unaudited consolidated financial statements do not include any
         adjustments to reflect the possible future effects on the
         recoverability and classification of assets or the amounts and
         classification of liabilities that may result from the inability of the
         Company to continue as a going concern. There are no assurances that
         the Company will be successful in achieving the above plans, or that
         such plans, if consummated, will enable the Company to obtain
         profitable operations or continue as a going concern.

3.       ACCRUED EXPENSES

         The major components of accrued expenses are summarized as follows:

         March 31, 2005
         ----------------------------------------------------------------------
         Accrued payroll and related benefits                       $   516,234
         Accrued Interest                                               149,442
         Other accrued expenses                                          70,887
         ----------------------------------------------------------------------
         Total accrued expenses                                     $   736,563
         ======================================================================

4.       NOTES PAYABLE

   (A.)  RELATED PARTIES
         Notes payable to related parties consist of the following:

                                                                 MARCH 31, 2005
         -----------------------------------------------------------------------

         Notes payable to shareholder: $1,000,000 note
         payable, net of discount, due on September 14, 2004,
         collateralized by all existing equipment and
         machinery utilized to manufacture the Company's
         product; $125,000 note payable, net of discount,
         due on September 14, 2004, collateralized by all
         existing equipment and machinery utilized to
         manufacture the Company's product; and $20,000 note
         payable, interest at prime plus 2% (7.75% at March
         31, 2005), due upon demand. Since September 14, 2004,
         the due date for the majority of these notes, the
         Company has been negotiating with the note holder
         about renewal terms.                                        $ 1,145,000

         Unsecured notes payable to shareholder, interest at
         prime plus 2% (7.75% at March 31, 2005), due on
         demand.                                                         398,000


                                        5

<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         Unsecured notes payable to Director, interest at
         prime plus 2% (7.75% at March 31, 2005), due March
         31, 2005. The note has been extended through
         September 30, 2005.                                             240,000

         Note payable to shareholder, collaterized by certain
         machinery and equipment of the Company, interest at
         18%, due on demand.                                              50,000

         Unsecured note payable to a company owned by
         shareholders of UltraStrip, interest at prime plus 2%
         (7.75% at March 31, 2005), due on demand.                        40,000

         Unsecured note payable to owners of Ultrastrip
         Japan, Ltd., interest at 9% per annum, payable March
         31, 2007.                                                        24,835

         Unsecured note payable to employee, interest at 5%,
         payments annually beginning on February 21, 2006, with
         principal payments of $35,000 principal plus interest.          111,500

         Unsecured bridge finance notes payable of $10,000 to
         shareholders, net of discount, convertible into
         common stock at the rate of $1.00 per share of common
         stock, contains two detachable warrants for every
         dollar of principal to acquire shares of common stock
         at an exercise price of $1.00 and $1.25 per share.
         Interest at 5%, due twelve months from respective
         issue dates.                                                      9,052
         -----------------------------------------------------------------------
         Total                                                       $ 2,018,387
         =======================================================================

         Less:    current portion                                    $ 1,917,052
                                                                     -----------

         Long-term debt                                              $   101,335
                                                                     ===========


   (B.)  OTHER
         Notes payable consist of the following:

                                                                      MARCH 31,
                                                                        2005
         -----------------------------------------------------------------------


         Unsecured bridge finance notes payable of $620,000, net of discount,
         convertible into common stock at the rate of $1.00 per share of common
         stock, contains two detachable warrants for every dollar of principal
         to acquire shares of common stock at an exercise price of $1.00 and
         $1.25 per share. Interest at 5%, due 12 months from respective issue
         dates. $ 540,351

-------------------------------------------------------------------------------
Total                                                                   540,351

Less current portion                                                $   540,351
-------------------------------------------------------------------------------

Long-term debt                                                      $        --
===============================================================================


5.        COMMON STOCK
          Shares issued
         -------------

         During the three month period ended March 31, 2005, the Company issued
         1,766,500 shares of common stock in connection with the conversion of
         the bridge finance notes payable to equity.

                                        6

<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         Shares reserved for issuance
         ----------------------------
         As of March 31, 2005, 29,349,849 shares of Common Stock were reserved
         for issuance under the Company's two stock option plans, outstanding
         non-plan options, and warrants and upon conversion of the outstanding
         Series A and Series B Redeemable Convertible Cumulative Preferred
         Stock.



6.       REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK
         Series A
         --------
         As of March 31, 2005 there were 28 shares of Series A Redeemable
         Convertible Cumulative Preferred Stock outstanding. The shares are
         redeemable at the option of the Company at $27,500 per share plus
         accrued dividends, and the shares became redeemable at the option of
         the holder in June 2002 at $25,000 per share plus accrued dividends.
         Accrued dividends totaled $740,098 on March 31, 2005.

         Series B
         --------
         As of March 31, 2005 there were 1,054 shares of Series B Redeemable
         Convertible Cumulative Preferred Stock outstanding. The shares are
         redeemable at the option of the Company at $3,000 per share plus
         accrued dividends, and the shares became redeemable at the option of
         the holder in June 2002 at $2,500 per share plus accrued dividends.
         Accrued dividends totaled $1,203,630 on March 31, 2005.

7.       LOSS PER SHARE

         Basic loss per common share is computed on the basis of the weighted
         average number of common shares outstanding during each period
         presented. Diluted loss per common share is computed on the basis of
         the weighted average number of common shares and dilutive securities
         outstanding. Dilutive securities having an anti-dilutive effect on
         diluted loss per common share are excluded from the calculation.

         The Company's outstanding options and warrants to acquire common stock
         and shares of common stock which may be issued upon conversion of
         outstanding redeemable convertible cumulative preferred stock (all
         aggregating 24,072,012 shares of common stock at March 31, 2005) are
         not included in the computation of loss per common share because the
         effects of inclusion would be anti-dilutive.


8.       STOCK-BASED COMPENSATION - PRO FORMA NET LOSS

         The Company accounts for stock options issued to non-employees, under
         Statement of Financial Accounting Standards No. 123, "Accounting for
         Stock-Based Compensation ("SFAS No. 123"). The Company's issuance of


                                       7


<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         employee stock options is accounted for using the intrinsic value
         method under APB Opinion No. 25, "Accounting for Stock issued to
         Employees" ("APB 25"). SFAS No. 123 as amended by Statement of
         Financial Accounting Standards No. 148 "Accounting for Stock-Based
         Compensation -- Transition and Disclosure" requires the Company to
         provide pro forma information regarding net earnings and earnings per
         common share as if compensation cost for the Company's stock options
         had been determined in accordance with the fair value based method
         prescribed in SFAS No. 123.

         We have granted stock options to our employees at exercise prices equal
         to or greater than the fair value of the shares at the date of grant
         and accounted for these stock option grants in accordance with APB 25.
         Under APB 25, when stock options are issued with an exercise price
         equal to or greater than the market price of the underlying stock on
         the date of grant, no compensation expense is recognized in the
         statement of operations.

         In December 2004, APB 25 was replaced by Statement of Financial
         Accounting Standards No. 123 (Revised) ("Statement 123(R)") which is
         effective for all accounting periods beginning after December 15, 2005.
         We will adopt Statement 123(R) effective on January 1, 2006 and will be
         required to recognize an expense for the fair value of our unvested
         outstanding stock options. Under Statement 123(R), we must determine
         the transition method to be used at the date of adoption, the
         appropriate fair value model to be used for valuing share-based
         payments and the amortization method for compensation cost. The
         transition methods include prospective and retroactive adoption
         options. Under the retroactive option, prior periods may be restated
         either as of the beginning of the year of adoption or for all periods
         presented. The prospective option requires that compensation expense be
         recorded for all unvested stock options and restricted stock at the
         beginning of the first quarter of adoption of Statement 123(R), while
         the retroactive option would record compensation expense for all
         unvested stock options and restricted stock beginning with the first
         period restated. Both transition methods would require management to
         make accounting estimates. We have not yet concluded which method we
         will utilize, nor have we determined what the impact will be on
         earnings per share.

         The following pro forma disclosures may not be representative of the
         effects on reported net earnings for future years as options vest over
         several years and the Company may continue to grant options to
         employees:


                                       8

<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


         For the three months ended March 31,                2005         2004
         -----------------------------------------------------------------------

         Net loss applicable to common stock,
           as reported                                 $ (1,550,967) $ (344,057)

         Add: Stock-based employee compensation included
           in reported net loss                                  --          --

         Deduct: Total stock-based employee compensation
           expense determined under fair value based
           method for all awards, net of related tax
           effects                                         (269,429)    (64,493)
         ----------------------------------------------------------------------
         Pro forma net loss applicable to common stock $ (1,820,396) $ (408,550)

         Basic loss per common share as reported
                                                       $      (0.03) $    (0.01)
         Basic loss per common share pro forma
                                                       $      (0.04) $    (0.01)


         The Company estimates the fair value of each stock option at the grant
         date using the Black-Scholes option pricing model based on the
         following assumptions:

         For the three months ended March 31,           2005           2004
         -----------------------------------------------------------------------

         Risk free interest rate                      4.22-4.50%    3.92 - 4.25%
                                                     10-20 years    10-20 years
         Expected volatility                                   0%             0%
         Dividend yield
                                                             0.0            0.0


9.       COMMITMENT AND CONTINGENCIES

         The Company has multiple employment agreements with key officers as
         follows:

         o        The Company entered into an employment agreement, effective
                  March 7, 2005, with its Chief Financial Officer calling for
                  annual base compensation of $185,000 in Year 1; $205,000 in
                  Year 2; and $225,000 in Year 3, plus stock options. The
                  employment agreement also includes incentive bonuses of cash
                  and additional stock options. Additionally, the agreement
                  provides for a relocation allowance.

         o        The Company entered into an employment agreement, effective
                  January 1, 2005, with its Vice President of Administration
                  calling for annual base compensation of $115,000 in Year 1;
                  $125,000 in Year 2; and $135,000 in Year 3, plus stock
                  options. The employment agreement also includes incentive
                  bonuses of cash and additional stock options.

         o        The Company entered into an employment agreement, effective
                  January 1, 2005, with its Chief Operating Officer calling for


                                       9

<PAGE>

                             ULTRASTRIP SYSTEMS, INC
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


                  annual base compensation of $150,000 in Year 1; $165,000 in
                  Year 2; and $180,000 in Year 3, plus stock options. The
                  employment agreement also includes incentive bonuses of cash
                  and additional stock options.

         o        The Company entered into an employment agreement, effective
                  January 1, 2005, with its Vice President of Operations calling
                  for annual base compensation of $125,000 in Year 1; $137,000
                  in Year 2; and $149,000 in Year 3, plus stock options. The
                  employment agreement also includes incentive bonuses of cash
                  and additional stock options.

10.      SUPPLEMENTAL CASH FLOW INFORMATION

         Supplemental disclosure is as follows:


         For the three months ended March 31,              2005           2004
         =======================================================================

         Cash paid for interest                          $    4,068   $   30,304

         Non-cash investing and financing activities:

         Accrued preferred stock dividends               $   92,125   $   92,125

         Warrants issued in connection with financing    $       --   $  135,596

         Common stock issued to settle debt obligations  $1,766,500   $1,417,893


11.      SUBSEQUENT EVENTS

         During the period of April 1, 2005 through July 30, 2005, the Company
         raised a total of $1,931,000 in convertible bridge finance notes
         payable with interest at 5%, due 12 months from the respective issue
         dates that contain two detachable warrants for every dollar of
         principal to acquire shares of common stock at an exercise price of
         $1.00 and $1.25. All of the notes were immediately converted to equity.

         In April 2005, the Company contributed one water filtration system,
         with a book value of approximately $100,000 to the Jean
         Michel-Cousteau's Water Culture Network and agreed to supply the
         personnel to operate the equipment for six months at no cost the Water
         Culture Network.

         On April 29, 2005, we purchased a total of 733,334 shares of our common
         stock at $1.00 per share from Mr. Jean-Michel Cousteau and two other
         shareholders affiliated with Mr. Cousteau. The Company issued notes
         payable due December 31, 2005.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.

Certain statements in "Management's Discussion and Analysis and Plan of
Operation" are forward-looking statements that involve risks and uncertainties.
Words such as may, will, should, would, anticipates, expects, intends, plans,
believes, seeks, estimates and similar expressions identify such forward-looking
statements. Readers are cautioned not to place undue reliance on these

                                       10


<PAGE>

forward-looking statements, which reflect management's analysis only as of the
date hereof. The Company assumes no obligation to update these forward-looking
statements to reflect actual results or changes in factors or assumptions
affecting forward-looking statements.

OVERVIEW

Incorporated in 1998, UltraStrip Systems, Inc. is a socially responsible water
engineering and industrial automation company specializing in water filtration
and coatings removal using ultra-high pressure water. The company's vision is to
develop innovative, patented technologies that work in harmony with the
environment, to demonstrate the economic value of the technologies in the
marketplace, and ultimately transform industries through strategic partnerships.
As a result of this vision, UltraStrip has developed products to protect
community water systems throughout the United States, and virtually eliminate
millions of tons of contaminated grit generated from the coating removal
processes in the automotive, above ground storage tank and marine industries.

The Company is associated with two entities which have been consolidated into
these financial statements per FIN 46 (revised). The first entity, Ultrastrip
Japan, Ltd (USJ) was formed in April 2004 under Japanese law as a joint venture
between the Company (49.9% ownership) and five Japanese companies (50.1%
ownership): Kamimura International Associates, LLC, Ihara Company, Ltd., Kyokuto
Boeki Kaisha, Ltd., Shuwa Kaiun Kaisha, Ltd., and Chiba Marine Yokohama Co.,
Ltd. The Company contributed $50,000 to the joint venture in 2004 and provided a
two year term loan of $32,000 during the first quarter of 2005. The second
entity, Robotics Investment Group, LLC (RIG), was organized in December 2004.
The purpose of RIG is to purchase a M3500 Robotic Vehicle from the Company and
lease the M3500 to USJ.

To date, all of the Company's revenues have been generated from the sale of its
M3500 coating removal systems, related spare parts and related contract services
of the M3500 systems which are used in the removal of paint from large
commercial marine vessels. During 2004, 99.6% of revenues came from sales of the
M3500 and spare parts to one customer which had an exclusive agreement with the
Company, which agreement has expired. The Company does not anticipate receiving
material revenue from this customer in 2005. In 2005, the Company expects to
continue to generate revenue from the M3500 and commercialize its water
filtration system in conjunction with the Water Culture Network by providing its
system to third world countries which badly need pure water in order to save
lives.

The Company launched Ecosphere, a wholly-owned subsidiary, in the first quarter
of 2005. Ecosphere will produce and market the filtration technology developed,
originally, in the water-jet surface stripping robotics technology. The
"high-volume" filtration of water is anticipated to attract a significant demand
into the homeland security as well as global water restoration and filtration
crisis areas. The launch event in New York on April 25, 2005 included a
reception and demonstrations to several press representatives as well as parties
interested in the applications of the filtration technology.

CRITICAL ACCOUNTING ESTIMATES

In response to the SEC's financial reporting release, FR-60, Cautionary Advice
Regarding Disclosure About Critical Accounting Policies, the Company has
selected its more subjective accounting estimation processes for purposes of
explaining the methodology used in calculating the estimate, in addition to the
inherent uncertainties pertaining to the estimate and the possible effects on
the Company's financial condition. The three accounting estimates are discussed
below. These estimates involve certain assumptions that if incorrect could
create a material adverse impact on the Company's results of operations and
financial condition.

                                       11

<PAGE>

Revenue Recognition
-------------------

Revenue from sales of equipment is generally recognized when products are
delivered to and accepted by the customer, economic risk of loss has passed to
the customer, the price is fixed or determinable, collection is probable and any
future obligations of the Company are insignificant. Revenue from water jetting
service contracts is recognized ratably over the service period or as the
services are rendered. Payments received in advance of the performance of
services are deferred until the services are performed. The Company uses its
judgment in assessing when revenue is realizable and earned, and records revenue
based on the specific provisions of its contracts with third parties and its
assessment of when collection is probable.

Determination of the Estimated Market Value of the Company's Common Stock
-------------------------------------------------------------------------

The Company's Common Stock is not listed on any national securities exchange or
established trading market, and therefore there is no easily determined market
value for the shares. As a result, our management makes an estimate as to fair
market value. The Company calculates the weighted average price per share using
primary sales of Common Stock during each reporting period. This average is then
used in assigning values to stock issued for services, as the market price of
the underlying stock for options granted to employees and service providers and
for purposes of computing stock appreciation for variable options. As a result,
estimates are made as to the market value of the Company's Common Stock as of
any given date for use in various non-cash equity transactions throughout a
given reporting period. The Company believes this approach provides the most
objective basis for assessing the market value of its Common Stock and provides
for consistency among reporting periods.

Useful Lives and Impairment of Machinery and Equipment and Patents
------------------------------------------------------------------

The Company capitalizes as machinery and equipment its automated water-jetting
systems upon completion of all manufacturing and testing and when such systems
are placed into service by performance of a contract. The Company determines the
useful lives of machinery and equipment based on the forecasted durability of
the raw materials used in the manufacture of its robotic vehicle (i.e., titanium
and aluminum) and the technology utilized in the system. While some of the
individual components (i.e., the ultra-high pressure pump, the containers, the
vacuum system, etc.) of the Company's systems may individually have longer
useful lives than the Company's estimate for the useful life of the entire
system (i.e., 10 years or longer), the Company believes that the technological
advancement in both the robotic vehicle and the configuration of the entire
system would be obsolete after five years. Accordingly, the Company has used
five years to depreciate its M3500 and the MEFS.

The Company determines the useful lives of its patents based on the remaining
life of the patent issued by the U.S. Patent Office. Management believes the
legal life of the patent is a reasonable period of time over which the Company
expects to realize the benefits of its intellectual property rights because of
the broad nature of the Company's patents and the Company's intent to protect
its intellectual property rights over the lives of its patents.

                                       12

<PAGE>

The Company reviews for impairment its machinery and equipment used in its hydro
jetting services, whenever events or changes in circumstances indicate that the
carrying amount of its assets may not be recoverable. Such events or changes in
circumstances might occur when a new version of a product is launched or when a
major technological advancement in robotic operations or ultra high water
pressure becomes available. During the quarter ended March 31, 2005, the Company
did not have any impairment write offs. During the year ended December 31, 2004
the Company did not have any impairment write offs.


RESULTS OF OPERATIONS

REVENUES
--------
Revenues were $16,852 for the three months ended March 31, 2005, as compared to
$1,763,443 for the three months ended March 31, 2004, caused by the lack of a
major equipment sale during the first quarter of 2005. The Company had spare
part sales of $14,958 and royalties of $1,894 for the three months ended March
31, 2005, as compared with equipment sales of $1,750,000, royalties of $4,002
and other revenue of $9,441 for the three months ended March 31, 2004.

COST OF REVENUES
----------------
Cost of revenues was $13,049 for the three months ended March 31, 2005, as
compared to $948,750 for the three months ended March 31, 2004. Gross profits
declined primarily due to a decline in equipment sales in the first quarter of
2005.

OPERATING EXPENSES
------------------
Operating expenses for the three months ended March 31, 2005 were $1,137,290
compared to $870,596 for the three months ended March 31, 2004. This increase
was primarily attributed to $383,099 of 2005 expenses associated with
the launch and promotion of Ecosphere which was partially offset by a reduction
of commissions.

LOSS FROM OPERATIONS
--------------------
Loss from operations for the three months ended March 31, 2005 was $1,133,487
compared to $55,903 loss for the three months ended March 31, 2004. The increase
in loss from operations in 2004 was due to a decline in sales and the launch of
Ecosphere.

INTEREST EXPENSE
----------------
Interest expense was $330,283 and $196,418 for the three months ended March 31,
2005 and 2004, respectively. This increase was primarily attributable to
increases in 2005 convertible debt associated with the Bridge Loans authorized
in November 2004.

PREFERRED STOCK DIVIDENDS
-------------------------
Preferred Stock dividends were $92,125 for the three months ended March 31, 2005
and March 31, 2004. These dividends reflect Company obligations to preferred
shareholders that have not been paid.

                                       13

<PAGE>

NET LOSS APPLICABLE TO COMMON STOCK
-----------------------------------
Net loss applicable to Common Stock was $1,550,967 for the three months ended
March 31, 2005, compared to a net loss of $344,057 for the three months ended
March 31, 2004. Net loss per common share was $0.03 for the three months ended
March 31, 2005 and $0.01 for the three months ended March 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $1,994,890 for the three months ended
March 31, 2005, compared to $413,105 for the three months ended March 31, 2004.
This increase is primarily due to the Company's decreased equipment sales in
2005 and resulting decrease in gross profit, plus the launch activities for
Ecosphere.

The Company's net cash used in investing activities was $3,123 for the three
months ended March 31, 2005 compared to $34,164 for the three months ended March
31, 2004. The change in cash is due to the decrease in equipment purchases.

The Company's net cash provided by financing activities was $1,958,184 for the
three months ended March 31, 2005 compared to $347,851 for the three months
ended March 31, 2004. The increase is primarily due to increased subscriptions
to the Company's Bridge Loan offering of $1,836,510 and sale of equity interests
in USJ and RIG, partially offset by a net reduction in short-term debt.

The Company continues to experience losses from operations and with no revenues
it is dependent on outside sources of funding to continue its operations. As of
the filing of this Report, the Company has only $225,626 and lacks financial
resources to meet its March 31, 2005 working capital deficit of $2,993,418 and
future operating costs. Management recognizes that until sufficient product
sales are achieved, the Company has a continuing need to raise capital to fund
its daily operations and research and development activities. The Company raised
$1,836,500 in bridge loans authorized in November 2004 from various parties
during the first quarter of 2005 including $1,366,500 which was immediately
converted to common stock. Additionally, subsequent to March 31, 2005 the
Company raised $1,931,000 in bridge loans all of which was immediately converted
to common stock.

Obligations are being met on a month-to-month basis as cash becomes available.
There can be no assurances that the Company's present flow of cash will be
sufficient to meet current and future obligations. The Company has incurred
losses since its inception, and continues to require additional capital to fund
operations and development. As such, the Company's ability to pay its already
incurred obligations is mostly dependent on the Company achieving its sales goal
or raising additional capital in the form of equity or debt. The Company is
currently expanding sales efforts into the Asian and European markets and is
concentrating on marketing Ecosphere's water filtration system. The Company has
donated one water filtration system to Jean-Michel Costeau's Water Culture
Network and agreed to supply the personnel to operate the system for six months
at no cost to the Water Culture Network, which further reduces our liquidity.

                                       14

<PAGE>

The Company's short-term and long-term liquidity requirements are expected to
result from working capital needs to purchase inventory, retire existing trade
liabilities and redeemable preferred stock and to pay other operating expenses.
Additionally, the Company plans to file a registration statement in order to
permit bridge loan investors to be able to sell their common stock, assuming a
public market develops. Although the Company cannot accurately predict the
precise timing of its future capital expenditures, the Company estimates that it
will need to expend over $3 million, primarily for research and development and
working capital requirements within the next 12 months. Its management is
seeking to raise this sum from the balance of its Bridge Loan offering.


RELATED PARTY TRANSACTIONS

Our Chairman of the Board of Directors extended his $240,000 note due March 31,
2005 to September 30, 2005 for no consideration. On April 29, 2005, we purchased
a total of 733,334 shares of our common stock at $1.00 per share from Mr.
Jean-Michel Cousteau and two other shareholders affiliated with Mr. Cousteau. We
issued these three shareholders notes due December 31, 2005, which notes are
payable with a portion of the proceeds from revenues from the sale of our water
filtration systems and our current Bridge Loan offering. Mr. Cousteau resigned
as a member of our Board of Directors effective April 29, 2005 and joined our
Board of Advisors on the same date.

FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to our
commercialization of Ecosphere, our liquidity and our ability to reach
accommodations with our creditors. Additionally, words such as "seek," "intend,"
"believe," "plan," "estimate," "expect," "anticipate" and other similar
expressions are forward-looking statements within the meaning of the Act. Some
or all of the results anticipated by these forward-looking statements may not
occur. Forward-looking statements involve known and unknown risks and
uncertainties, both general and specific to the matters discussed in this press
release. Factors that could cause or contribute to such differences include, but
are not limited to, our ability to generate revenues from the sale of our
products, our ability to resolve contractual issues and the condition of the
public equity markets. See also the risk factors contained in our Form 10-KSB
for the year ended December 31, 2005.


ITEM 3.  CONTROLS AND PROCEDURES

We have established disclosure controls and procedures to ensure that material
information relating to Ultrastrip and its consolidated subsidiaries is made
known to the officers who certify the Company's financial reports, as well as
other members of senior management and the Board of Directors, to allow timely
decisions regarding required disclosures. As of the end of the period covered by
this report, Ultrastrip carried out an evaluation, under the supervision and
with the participation of the Company's management, including the Company's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-15 of the Securities and Exchange Act of 1934. Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information related to the Company that is
required to be included in Ultrastrip's annual and periodic SEC filings.

Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within Ultrastrip have been detected.

                                       15

<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS.

None.


ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

During the three months ended March 31, 2005, we issued convertible notes,
shares of our common stock and warrants to purchase shares of our common stock
to accredited investors which were not covered by an effective registration
statement but were exempt under Section 4(2) of the Securities Act of 1933:

We sold $1,836,500 in convertible notes to accredited investors. Purchasers of
these notes also received two warrants to purchase shares of our common stock
for every dollar invested. The warrants are exercisable at $1.00 and $1.25
respectively. The notes are convertible into shares of our common stock at the
rate of $1.00 dollar per share.

We issued 1,766,500 shares of common stock to accredited investors upon
conversion of our bridge notes. 1,366,500 of the shares were issued upon
conversion of notes sold during the first quarter of 2005, and 400,000 of the
shares were issued upon conversion of notes sold during the fourth quarter of
2004.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

There were no defaults upon senior securities during the three months ended
March 31, 2005.

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

There were no matters submitted to a vote of security
holders Fduring the three months ended March 31, 2005.

ITEM 5.  OTHER INFORMATION.

None.

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

(a) EXHIBITS.

EXHIBIT
NUMBER                         DESCRIPTION

3.1           Articles of Incorporation (1)

3.2           Bylaws (1)

4.1           Certificate of Designation for Series A Preferred (1)

4.2           Certificate of Designation for Series B Preferred (1)

10.1          Employment Agreement with James C. Rushing, III (2)

10.2          Employment Agreement with Jacqueline K. McGuire (2)

10.3          Employment Agreement with John P. Odwazny (2)

10.4          Employment Agreement with Michael R. Donn, Sr. (2)

10.5          Promissory Note (Jackie McGuire)

31.1          Certification of Chief Executive Officer (Section 302)

31.2          Certification of Chief Financial Officer (Section 302)

32.1          Certification of Chief Executive Officer (Section 906)

32.2          Certification of Chief Executive Officer (Section 906)

(1) Contained in Form 10-SB/A filed on May 1, 2001.
(2) Contained in Form 10-KSB filed on April 15, 2005.

                                       16

<PAGE>

                                   SIGNATURES


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


                              UltraStrip Systems, Inc.


August 1, 2005                /s/ Stephen R. Johnson
                              --------------------------------------------------
                              Stephen R. Johnson
                              President and Chief Executive Officer



August 1, 2005                /s/  James C. Rushing III
                              --------------------------------------------------
                              James C. Rushing III
                              Chief Financial Officer / Chief Accounting Officer



















                                       17