================================================================================

                                  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 JUNE 30, 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: 49,367,779 shares of common stock
were outstanding as of August 19,2005.

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

================================================================================
<PAGE>


                            ULTRASTRIP SYSTEMS, INC.

                                   FORM 10-QSB


                                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 and Plan
                  of Operation ............................................. 13
   Item 3.   Controls and Procedures ....................................... 19

PART II.        OTHER INFORMATION

   Item 1.   Legal Proceedings ............................................. 20
   Item 2.   Unregistered Sales of Equity Securities and Use of
             Proceeds ...................................................... 20
   Item 3.   Defaults Upon Senior Securities ............................... 20
   Item 4.   Submission of Matters to a Vote of Security Holders ........... 20
   Item 5.   Other Information ............................................. 20
   Item 6.   Exhibits and Reports on Form 8-K .............................. 20





<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.    CONSOLIDATED FINANCIAL STATEMENTS.

                            ULTRASTRIP SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>
==================================================================================================
                                                                                        June 30,
                                                                                          2005
-------------------------------------------------------------------------------------------------
<S>                                                                                  <C>
CURRENT ASSETS
   Cash                                                                              $    341,262
   Accounts receivable                                                                      5,504
   Inventories                                                                          1,108,676
   Prepaid expenses and other                                                              65,970
-------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS                                                                    1,521,412

PROPERTY AND EQUIPMENT, NET                                                               179,884

PATENTS, NET                                                                               79,891

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

TOTAL ASSETS                                                                         $  1,839,252
=================================================================================================

LIABILITIES, REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK AND CAPITAL DEFICIT

CURRENT LIABILITIES
   Accounts payable                                                                  $    514,804
   Accounts payable - related parties                                                     359,345
   Accrued expenses                                                                       898,192
   Notes payable to related parties - current portion                                   2,702,384
   Notes payable - current portion                                                        555,641
-------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES                                                               5,030,366

NOTES PAYABLE TO RELATED PARTIES, LESS CURRENT PORTION                                    111,335

TOTAL LIABILITIES                                                                       5,141,701

Minority interest in consolidated affiliates                                              572,690

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                                          1,466,348

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                                          3,904,525

COMMITMENTS AND CONTINGENCIES (Note 9)

CAPITAL DEFICIT
   COMMON STOCK, $0.01 par value; 100,000,000 shares authorized; 48,397,779 shares
   issued and outstanding                                                                 483,978
   ADDITIONAL PAID-IN CAPITAL                                                          26,627,820
   ACCUMULATED DEFICIT                                                                (36,357,810)
-------------------------------------------------------------------------------------------------
TOTAL CAPITAL DEFICIT                                                                  (9,246,012)

TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK, AND CAPITAL
DEFICIT                                                                              $  1,839,252
=================================================================================================
</TABLE>
         See accompanying notes to the consolidated financial statements

                                        1

<PAGE>

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

<TABLE>
<CAPTION>
                                                                    For three months ended       For the six months ended
                                                                           June 30,                     June 30,
--------------------------------------------------------------------------------------------------------------------------
                                                                   2005           2004            2005            2004
--------------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>             <C>             <C>             <C>
REVENUES                                                      $      5,853    $     93,144    $     22,705    $  1,856,588

COST OF REVENUES                                                     3,248          44,382          16,297         993,132
--------------------------------------------------------------------------------------------------------------------------

GROSS PROFIT                                                         2,605          48,762           6,408         863,456

OPERATING EXPENSES:
     Selling, general and administrative                         1,090,301         555,905       2,227,591       1,421,217
     Non-cash compensation expense                                  85,173           5,284          85,173          10,569
--------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES                                         1,175,474         561,189       2,312,764       1,431,786
--------------------------------------------------------------------------------------------------------------------------

LOSS FROM OPERATIONS                                            (1,172,869)       (512,427)     (2,306,356)       (568,330)

OTHER (INCOME) EXPENSE:
     Other income                                                     (779)           (171)         (2,370)           (560)
     Interest expense                                              359,239         191,531         689,522         387,949
--------------------------------------------------------------------------------------------------------------------------
     Minority Interest in net income (loss) of consolidated
        affiliates                                                      13              --          (3,325)             --
--------------------------------------------------------------------------------------------------------------------------

TOTAL OTHER EXPENSE                                                358,473         191,360         683,827         387,389
?--------------------------------------------------------------------------------------------------------------------------

NET LOSS                                                        (1,531,342)       (703,787)     (2,990,183)       (955,719)

PREFERRED STOCK DIVIDENDS                                          (92,125)        (92,125)       (184,250)       (184,250)
--------------------------------------------------------------------------------------------------------------------------

NET LOSS APPLICABLE TO COMMON STOCK                           $ (1,623,467)   $   (795,912)   $ (3,174,433)   $ (1,139,969)
==========================================================================================================================


NET LOSS PER COMMON SHARE (BASIC AND DILUTED)                 $      (0.03)   $      (0.02)   $      (0.07)   $      (0.03)
==========================================================================================================================

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING            47,952,055      44,007,041      47,730,385      43,349,504
==========================================================================================================================
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                        2
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                    For the six months ended
                                                                                            June 30,
                                                                                       2005           2004
-------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>            <C>
OPERATING ACTIVITIES:
   Net loss                                                                        $(2,990,183)   $  (955,719)

   Adjustments to reconcile net loss to net cash used in operating
activities:
       Depreciation and amortization                                                    90,897        130,604
       Accretion of discount on notes payable                                          519,623        300,808
       Amortization of deferred compensation                                                --         10,569
       Common stock issued in settlement of accrued interest and commission                 --        252,013
       Warrants issued for services                                                     85,173             --
       Minority Interests in consolidated affiliates                                     3,325             --
       Note payable issued for employee compensation                                    86,500             --
   Change in operating assets and liabilities:
         Accounts receivable                                                            42,321        210,077
         Inventories                                                                  (955,999)       (73,296)
         Prepaid expenses                                                               82,934        208,803
         Other Assets                                                                  (58,065)            --
         Accounts payable                                                               31,835       (121,013)
         Accounts payable - related parties                                           (268,169)      (252,064)
         Accrued expenses                                                              152,083       (650,413)
-------------------------------------------------------------------------------------------------------------

Net cash used in operating activities                                               (3,177,725)      (939,631)
-------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
    Purchase of equipment                                                               (4,677)       (41,800)
    Investment in affiliate                                                                 --        (50,000)
-------------------------------------------------------------------------------------------------------------

Net cash used in investing activities                                                   (4,677)       (91,800)
-------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
    Proceeds from issuance of notes payable and warrants                                    --        400,000
    Proceeds from issuance of notes payable and warrants to related parties            140,885        200,000
    Repayments of notes payable                                                       (406,493)      (202,152)
    Repayment of notes payable to related parties                                     (120,000)            --
    Proceeds from issuance of bridge loans                                           3,106,500             --
    Proceeds from sale of equity interests                                             619,367             --
    Proceeds from issuance of common stock                                                  --         25,000
    Proceeds from sale of warrants                                                          --        471,500
-------------------------------------------------------------------------------------------------------------

Net cash provided by financing activities                                            3,340,259        894,348
-------------------------------------------------------------------------------------------------------------

Net increase (decrease) in cash                                                        157,857       (137,083)

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

Cash , end of period                                                               $   341,262    $    46,334
=============================================================================================================
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                        3

<PAGE>


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

        FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 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. (the "Company"), its
         wholly-owned subsidiary, Ecosphere Technologies, Inc. ("Ecosphere") and
         two entities that the Company has an interest in, Ultrastrip Japan,
         Ltd. ("USJ") and Robotics Investment Group, LLC ("RIG"). Ecosphere was
         formed during the first quarter of 2005 to market and produce the
         Company's water filtration technology. USJ was formed in April 2004 to
         market and service the ship coating removal needs of the Japanese ports
         and RIG was formed to purchase equipment leased to USJ.

         USJ and RIG 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
         ("FIN 46R"). USJ is a Japanese 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 $97,500 to the joint venture, $50,000 in
         2004 and an additional $47,500 in 2005. Also, the Company provided a
         two year term loan of $32,000 during the first quarter of 2005. RIG was
         organized in December 2004 for the purpose of purchasing a M3500
         Robotic Vehicle from the Company and leasing the M3500 to USJ. Because
         RIG did not raise sufficient money, the company was not able to
         recognize revenue when it sold 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.

                                        4

<PAGE>

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


         Financial Accounting Standards Board Interpretation 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 USJ and RIG. The Company owns 49.9% of USJ which is
         not a controlling amount, but in accordance with the provisions of the
         guidance provided by FIN 46R, the entity is a variable interest entity
         which should be consolidated. Regarding RIG, the Company currently has
         no direct interest in the entity. However, RIG purchased one M3500 from
         the company and leased it 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 the Company's assets and reduced
         the Company's liabilities by $364,000, due to the elimination of a
         deposit on equipment from RIG. USJ has generated no revenues and it and
         RIG have had little operating activities, so the effect on the
         Company's consolidated statement of operations as of June 30, 2005 is
         to increase the loss by $3,325.


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 six months ended June 30, 2005, the Company incurred losses of
        approximately $3.0 million, had a working capital deficiency of
        approximately $3.5 million, and had outstanding redeemable convertible
        preferred stock that is eligible for redemption at the holder's option
        for approximately $5.4 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
        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 attain profitable operations or
        continue as a going concern.

                                        5

<PAGE>

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


3.      ACCRUED EXPENSES

       The major components of accrued expenses are summarized as follows:

                                                                        June 30,
                                                                         2005
       -------------------------------------------------------------------------
       Accrued payroll and related benefits                         $    514,321
       Accrued Interest                                                  252,131
       Other accrued expenses                                            131,740
       -------------------------------------------------------------------------
       Total accrued expenses                                       $    898,192
       =========================================================================

4.      NOTES PAYABLE

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

                                                                        JUNE 30,
                                                                         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, interest at prime plus
       2%,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.        $  1,125,000


       Unsecured notes payable to shareholder, interest at prime
       plus 2% (8.25% at June 30, 2005), due on demand.                  398,000

       Unsecured notes payable to director, interest at prime
       plus 2% (8.25% at June 30, 2005), due March 31, 2005. The
       note has been extended through September 30, 2005.                240,000

       Note payable to shareholder, collateralized 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% (8.25% at June
       30, 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.             86,500

       Unsecured note payable to shareholder, interest at 5% and
       due upon demand                                                    50,000

       Unsecured note payable to employee, interest at 5% and due
       upon demand.                                                       18,550

       Unsecured note payable to shareholder, interest at 0% per
       annum, due December 31, 2005. Note is prepayable with a
       portion of the proceeds of revenues from the sale of our
       water filtration systems and our current bridge loan
       offering. If note not fully repaid by due date, interest
       begins at 12% per annum until note paid.                          400,000

                                        6

<PAGE>

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


       Unsecured note payable to shareholder and former director,
       interest at 0% per annum, due December 31, 2005. Note is
       prepayable with a portion of the proceeds of revenues from
       the sale of our water filtration systems and our current
       bridge loan offering. If note not fully repaid by due
       date, interest begins at 12% per annum until note paid.           200,000


       Unsecured note payable to shareholder, interest at 0% per
       annum, due December 31, 2005. Note is prepayable with a
       portion of the proceeds of revenues from the sale of our
       water filtration systems and our current bridge loan
       offering. If note not fully repaid by due date, interest
       begins at 12% per annum until note paid.                          133,334

       Unsecured note payable to venture partner of USJ ,
       interest at 0%, to be repaid from the Company's share of
       proceeds of lease agreement between USJ and RIG.                   47,500

       -------------------------------------------------------------------------
       Total                                                        $  2,813,719
       =========================================================================

       Less:    current portion                                     $  2,702,384

       Long-term debt                                               $    111,335


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

                                                                        JUNE 30,
                                                                         2005
       -------------------------------------------------------------------------

       Unsecured bridge loan notes payable of $610,000, 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.                                                 $    555,641

       -------------------------------------------------------------------------
       Total                                                             555,641

       Less current portion                                         $    555,641
       -------------------------------------------------------------------------

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


5.      COMMON STOCK
        Shares issued
        -------------
        During the six month period ended June 30, 2005, the Company issued
        3,056,500 shares of common stock in connection with the conversion of
        the bridge loan notes payable to equity. In April 2005, the Company
        purchased a total of 733,334 shares of common stock from three related
        parties including a director and two of his affiliates. The director
        immediately resigned from the Company's Board of Directors.

                                        7


<PAGE>

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


        Shares reserved for issuance
        ----------------------------
        As of June 30, 2005, 32,389,849 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.
        As of August 19, 2005, 34,329,849 shares of Common Stock were reserved
        for issuance.


6.      REDEEMABLE CONVERTIBLE CUMULATIVE PREFERRED STOCK
        Series A
        --------
        As of June 30, 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 $766,348 on June 30, 2005.

        Series B
        --------
        As of June 30, 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 $1,269,505 on June 30, 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 27,112,012 shares of common stock at June 30, 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

                                        8

<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.


                                       9
<PAGE>

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


        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:

<TABLE>
<CAPTION>
                                                                                    For the three months ended
                                                                                            June 30,
                                                                                       2005           2004
       ------------------------------------------------------------------------------------------------------
       <S>                                                                         <C>            <C>
       Net loss applicable to common stock, as reported
                                                                                   $(1,623,467)   $  (795,912)

       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                                                        --        (58,943)
       ------------------------------------------------------------------------------------------------------
       Pro forma net loss applicable to common stock                               $(1,623,467)      (854,855)

       Basic loss per common share as reported                                     $     (0.03)   $     (0.02)
       Basic loss per common share pro forma
                                                                                   $     (0.03)   $     (0.02)
</TABLE>
<TABLE>
<CAPTION>
                                                                                     For the six months ended
                                                                                             June 30,
                                                                                       2005           2004
       ------------------------------------------------------------------------------------------------------
       <S>                                                                         <C>            <C>
       Net loss applicable to common stock, as reported                            $(3,174,433)   $(1,139,969)

       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)      (123,436)
       ------------------------------------------------------------------------------------------------------
       Pro forma net loss applicable to common stock                               $(3,443,862)    (1,263,405)

       Basic loss per common share as reported                                     $     (0.07)   $     (0.03)
       Basic loss per common share pro forma
                                                                                   $     (0.07)   $     (0.03)

        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:
</TABLE>

<TABLE>
<CAPTION>
                                                                                     For the six months ended
                                                                                             June 30,
                                                                                       2005           2004
       ------------------------------------------------------------------------------------------------------
       <S>                                                                     <C>               <C>
       Risk free interest rate                                                   4.22-4.50%      3.92 - 4.25%
       Expected life                                                           10-20 years       10-20 years
       Expected volatility                                                               0%                0%
       Dividend yield                                                                  0.0               0.0
</TABLE>

                                       10

<PAGE>

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


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
                 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.

        The Company entered into a one year agreement, effective July 1, 2005,
        with a consulting firm to support the Company's launch of its Ecosphere
        subsidiary. The agreement calls for a monthly retainer of $20,000 for
        the first six months and a monthly retainer of $30,000 for the next six
        months. The agreement and its addendum also provide for the consultant
        to receive stock options and other compensation based upon consultant's
        performance.

10.     SUPPLEMENTAL CASH FLOW INFORMATION

        Supplemental disclosure is as follows:

<TABLE>
<CAPTION>
                                                                                     For the six months ended
                                                                                             June 30,
                                                                                       2005           2004
       ------------------------------------------------------------------------------------------------------
       <S>                                                                     <C>               <C>

       Cash paid for interest                                                   $      4,068     $     21,299

       Non-cash investing and financing activities:

       Accrued preferred stock dividends                                        $    184,250     $    184,250

       Notes payable issued to repurchase common stock                          $    733,334     $         --

       Warrants issued in connection with financing                             $         --     $    278,986

       Common stock issued to settle debt obligations                           $  3,056,500     $  1,517,893
</TABLE>

                                       11

<PAGE>

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


11.     SUBSEQUENT EVENTS

        During the period of July 1, 2005 through August 19, 2005, the Company
        raised a total of $970,000 in convertible bridge finance notes payable
        with interest at 5% per annum, due twelve 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 July 2005, Ecosphere entered into a letter of intent with a Seattle
        based broker-dealer. In order to capitalize Ecosphere and take advantage
        of its proprietary technology, the Company decided to sell a minority
        interest in Ecosphere. The broker-dealer is expected to offer 10% of
        Ecosphere's capital stock beginning in September or October. The terms
        of the offering are subject to further negotiation upon completion of
        the Ecosphere business plan. Additionally, the Company is currently
        negotiating with a third party to become chief executive officer of
        Ecosphere and another person to be its Chairman of the Board of
        Directors. If these negotiations are successful, these two persons and
        two of the Company's executive officers would receive options to
        purchase shares of Ecosphere common Stock exercisable at low prices.
        Further, in order to provide a solution to the conflicts of interest
        that will arise with officers and directors of the Company providing
        services to Ecosphere, the Ecosphere certificate of incorporation will
        provide that such services may be provided as long as the Company
        controls Ecosphere. The Company will also cause Ecosphere to enter an
        agreement with the Company whereby the Company will provide management
        and administrative services to Ecosphere for a monthly fee. All of the
        foregoing agreements are subject to Ecosphere obtaining independent
        financing.











                                       12
<PAGE>

                             ULTRASTRIP SYSTEMS, INC


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
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, the Company 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, the Company has developed products to protect community water
systems throughout the United States through the only Environmental Protection
Agency certified portable water filtration system, provide clean water
throughout the third world, solve the clean water problems of the agricultural
industry 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 in accordance with FIN 46 (revised). The first
entity, 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 second entity, RIG, was organized in December 2004. RIG purchased a
M3500 robotic system from the Company and leased 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.

The Company launched Ecosphere, a wholly-owned subsidiary, in April 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.

                                       13

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


As a result of the inquiries made at and subsequent to the New York launch, the
Company decided to finance Ecosphere by selling investors a minority interest in
it and to create an independent management team for it. Thus, in July 2005
Ecosphere signed a letter of intent with a Seattle-based investment banking firm
which plans to raise capital for Ecosphere. Pending that offering, Ecosphere is
currently considering the possibility of raising up to $2.5 million from the
sale of an initial round of capital stock. See Note 11 to the consolidated
financial statements for further information on Ecosphere.

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.


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.

                                       14

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


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.

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 June 30, 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

FOR THE THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THE THREE MONTHS ENDED JUNE
30, 2004

REVENUES
--------
Revenues were $5,853 for the three months ended June 30, 2005, as compared to
$93,144 for the three months ended June 30, 2004. The Company had spare part
sales of $5,853 and royalties of $0 for the three months ended June 30, 2005, as
compared with spare part sales of $86,407, royalties of $4,605 and other revenue
of $2,133 for the three months ended June 30, 2004.

COST OF REVENUES
----------------
Cost of revenues was $3,248 for the three months ended June 30, 2005, as
compared to $44,382 for the three months ended June 30, 2004. Gross profits
declined primarily due to a decline in replacement part sales in the second
quarter of 2005.

OPERATING EXPENSES
-----------------
Operating expenses for the three months ended June 30, 2005 were $1,175,474
compared to $561,189 for the three months ended June 30, 2004. This increase was
primarily attributed to an increase of $122,717 of salaries and wages due to
increased staff salaries and the hiring of senior management, non-cash
compensation expense of $85,173 for warrants granted for services to former
employee, and $323,299 of expenses associated with the launch and promotion of
Ecosphere.

                                       15

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


LOSS FROM OPERATIONS
--------------------
Loss from operations for the three months ended June 30, 2005 was $1,172,869
compared to a $512,427 loss for the three months ended June 30, 2004. The
increase in loss from operations in 2005 was due to a decline in sales,
increased salaries and the launch of Ecosphere.

INTEREST EXPENSE
----------------
Interest expense was $359,239 and $191,531 for the three months ended June 30,
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 June 30, 2005
and June 30, 2004. These dividends reflect Company obligations to preferred
shareholders that have not been paid.

NET LOSS APPLICABLE TO COMMON STOCK
-----------------------------------
Net loss applicable to Common Stock was $1,623,467 for the three months ended
June 30,, 2005, compared to a net loss of $795,912 for the three months ended
June 30, 2004. Net loss per common share was $0.03 for the three months ended
June 30, 2005 and $0.02 for the three months ended June 30, 2004.


FOR THE SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO THE SIX MONTHS ENDED JUNE 30,
2004

REVENUES
--------
Revenues were $22,705 for the six months ended June 30, 2005, as compared to
$1,856,588 for the six months ended June 30, 2004, caused by the lack of a any
significant major equipment or replacement part sales during the first six
months of 2005. The Company had major equipment sales of $0, replacement part
sales of $20,811 and royalties of $1,894 for the six months ended June 30, 2005,
as compared with major equipment sales of $1,750,000, spare part sales of
$95,963, royalties of $8,607 and other revenue of $2,018 for the six months
ended June 30, 2004.

COST OF REVENUES
----------------
Cost of revenues was $16,297 for the six months ended June 30, 2005, as compared
to $993,132 for the six months ended June 30, 2004. Gross profits declined
primarily due to a decline in major equipment and replacement part sales in the
second quarter of 2005.

OPERATING EXPENSES
------------------
Operating expenses for the six months ended June 30, 2005 were $2,312,764
compared to $1,431,786 for the six months ended June 30,, 2004. This increase
was primarily attributed to increases of salaries due to increased staff
salaries, the hiring of senior management, non-cash compensation expense and
expenses associated with the launch and promotion of Ecosphere.

LOSS FROM OPERATIONS
--------------------
Loss from operations for the six months ended June 30, 2005 was $2,306,356
compared to a $568,330 loss for the six months ended June 30, 2004. The increase
in loss from operations in 2004 was due to a decline in sales, increased
salaries and the launch of Ecosphere.

                                       16

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


INTEREST EXPENSE
----------------
Interest expense was $689,522 and $387,949 for the six months ended June 30,
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 $184,250 for the six months ended June 30, 2005
and June 30, 2004. These dividends reflect Company obligations to preferred
shareholders that have not been paid.

NET LOSS APPLICABLE TO COMMON STOCK
-----------------------------------
Net loss applicable to Common Stock was $3,174,433 for the six months ended June
30,, 2005, compared to a net loss of $1,139,969 for the six months ended June
30, 2004. Net loss per common share was $0.07 for the six months ended June 30,
2005 and $0.03 for the six months ended June 30, 2004.


LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $3,177,725 for the six months ended
June 30, 2005, compared to $939,631 for the six months ended June 30, 2004. This
increase is primarily due to the Company's decreased major equipment sales in
2005 and the resulting decrease in gross profit, plus the launch activities for
Ecosphere and the addition of senior management staff.

The Company's net cash used in investing activities was $4,677 for the six
months ended June 30, 2005 compared to net cash used by investing activities of
$91,800 for the six months ended June 30, 2004. The change in cash is due to the
decrease in equipment purchases and the start up investment of $50,000 for
Ultrastrip Japan in 2004.

The Company's net cash provided by financing activities was $3,340,259 for the
six months ended June 30, 2005 compared to $894,348 for the six months ended
June 30, 2004. The increase is primarily due to subscriptions to the Company's
Bridge Loan offering of $3,106,500 and the 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 primarily dependent on outside sources of funding to continue its
operations. As of the filing of this Report, the Company has only $250,832 and
lacks financial resources to meet its June 30, 2005 working capital deficit of
$3,508,954 and future operating costs. In July 2005, the Company entered into an
agreement under which the Company is the exclusive provider of water jetting
services to the Lisnave, Portugal shipyard which is one of the largest shipyards
in the world. In order to produce the M3500 systems required to be delivered to
Portugal, the Company is seeking to raise money from investors in off balance
sheet transactions whereby the investors would obtain an ownership interest in
the equipment in exchange for a percentage of the revenues. Once the equipment
is financed and delivered to Portugal, the Company and the shipyard will have to
solicit business from ship owners to use the M3500 robots in connection with
coating removal from ships.

                                       17

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


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 $3,106,500 in bridge
loans (authorized in November 2004) from various parties during the first six
months of 2005 including $2,696,500 which was immediately converted to common
stock. Additionally, subsequent to June 30, 2005, the Company raised $970,000 in
bridge loans financing, all of which was immediately converted to common stock.
As of the date of this Report, $1,419,500 remains to be raised from the $8
million authorized by the Company's Board of Directors. The bridge loan offering
must terminate once the Company files its registration statement with the
Securities and Exchange Commission. Even if Ecosphere is successful in raising
funds, only limited amounts will be paid to the Company, both as a repayment for
the funds advanced by the Company and under the management agreement described
in note 11 to the consolidated financial statements. There can be no assurances
that the Company will have sufficient capital to remain operational or that
Ecosphere will be successful in raising sufficient capital or in recruiting a
new management team.

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 may
donate one water filtration system to a non-profit organization and supply the
personnel to operate the system for six months at no cost to the non-profit
organiztion, which further reduces our liquidity. Currently, the Company has not
been able to find a third world country to accept delivery of the water
filtration system.

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
prepayable 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.

                                       18

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


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 and financing 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
capital 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 the Company 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, the Company 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 the Company'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.


                                       19

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


                           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 June 30, 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 Sections 4(2) and 4(6) of the Securities Act of
1933 and Rule 506 thereunder since they were sold only to accredited investors:

We sold $1,270,000 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 1,290,000 shares of common stock to accredited investors upon
conversion of our bridge notes. 1,270,000 of the shares were issued upon
conversion of notes sold during the second quarter of 2005 and 20,000 of the
shares were issued upon conversion of notes sold prior to April 1, 2005.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

There were no defaults upon senior securities during the three months ended June
30, 2005.

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

There were no matters submitted to a vote of security holders during the three
months ended June 30, 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         Agreement with The Allbaugh Company LLC

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.

                                       20

<PAGE>

                             ULTRASTRIP SYSTEMS, INC


                                   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 22, 2005                            /s/ Stephen R. Johnson
                                           -------------------------------------
                                           Stephen R. Johnson
                                           President and Chief Executive Officer


August 22, 2005                           /s/ James C. Rushing, III
                                          --------------------------------------
                                          James C. Rushing, III
                                          Chief Financial Officer /
                                          Chief Accounting Officer