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

                                   FORM 10-QSB

         (Mark One)
|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 EXCHANGE ACT

                  For the transition period from _____ to _____



                         COMMISSION FILE NUMBER 0-25675

                              PATRON SYSTEMS, INC.
        (EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)

                DELAWARE                                   74-3055158
    (STATE OR OTHER JURISDICTION OF            (IRS EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)

     500 N. MICHIGAN AVE, SUITE 300                          60611
              CHICAGO, IL
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                   (ZIP CODE)

                                 (312) 396-4031
                           (ISSUER'S TELEPHONE NUMBER)

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 |_| No |X|

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  59,698,360 shares of common stock
outstanding as of July 29, 2005.

Transitional Small Business Disclosure Format (Check one):  Yes |_|   No |X|


<PAGE>


                              PATRON SYSTEMS, INC.

                          FORM 10-QSB QUARTERLY REPORT
                       ----------------------------------

                                TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION                                              PAGE

ITEM 1. FINANCIAL STATEMENTS...............................................   3

Condensed Consolidated Balance Sheet at March 31, 2005  (unaudited)........   3
Condensed Consolidated Statements of Operations for the
         Three Months Ended March 31, 2005 and 2004 (unaudited)............   4
Condensed Consolidated Statement of Stockholders' (Deficiency)
         Equity for the Three Months Ended March 31, 2005 (unaudited)......   5
Condensed Consolidated Statements of Cash Flows for the
         Three Months Ended March 31, 2005 and 2004 (unaudited)............   6
Notes to Condensed Consolidated Financial Statements (unaudited)...........   7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS...............................  26

ITEM 3. CONTROLS AND PROCEDURES............................................  37


PART II - OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS........  39

ITEM 6. EXHIBITS...........................................................  40

SIGNATURES.................................................................  42

                           FORWARD LOOKING STATEMENTS
The following discussion and explanations should be read in conjunction with the
financial  statements and related notes contained elsewhere in this Form 10-QSB.
Certain  statements  made in this  discussion are  "forward-looking  statements"
within the  meaning of the  Private  Securities  Litigation  Reform Act of 1995.
Forward-looking  statements  can be  identified  by  terminology  such as "may",
"will", "should", "expects", "intends", "anticipates",  "believes", "estimates",
"predicts",  or  "continue"  or the negative of these terms or other  comparable
terminology. Because forward-looking statements involve risks and uncertainties,
there are important factors that could cause actual results to differ materially
from those expressed or implied by these  forward-looking  statements.  Although
Patron  Systems  believes  that  expectations  reflected in the  forward-looking
statements are reasonable,  it cannot guarantee  future results,  performance or
achievements.  Moreover,  neither  Patron  Systems nor any other person  assumes
responsibility  for the  accuracy  and  completeness  of  these  forward-looking
statements.  Patron  Systems  is under  no duty to  update  any  forward-looking
statements  after the date of this report to conform such  statements  to actual
results.


                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      PATRON SYSTEMS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                   (unaudited)

ASSETS                                                            MARCH 31, 2005
                                                                   ------------
Current Assets:
  Cash and cash equivalents ...................................    $    366,721
  Restricted cash .............................................       1,388,000
  Accounts receivable, net ....................................         284,597
  Other current assets ........................................          76,260
                                                                   ------------
     Total current assets .....................................       2,115,578

Property and equipment, net ...................................         166,760
Deferred financing costs ......................................         460,559
Intangible assets, net ........................................       3,081,770
Goodwill ......................................................      22,544,415
                                                                   ------------
     Total assets .............................................    $ 28,369,082
                                                                   ============

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
  Accounts payable ............................................    $  2,120,132
  Accrued payroll and related expenses ........................       3,203,699
  Notes payable (to creditors of acquired business) ...........       2,640,000
  Accrued interest ............................................       1,139,219
  Advances from stockholders ..................................         885,342
  Demand notes payable ........................................         695,000
  Expense reimbursements due to officers and stockholders .....         476,174
  Consulting agreement payable ................................         300,000
  Deferred revenue ............................................         235,034
  Notes payable to officers and stockholders ..................         430,212
  Other current liabilities ...................................         142,969
  Bridge notes payable ........................................       2,717,105
  Acquisition notes payable ...................................       4,500,000
                                                                   ------------
     Total current liabilities ................................      19,484,886

Note payable - stock repurchase obligation ....................       1,738,667
                                                                   ------------
     Total liabilities ........................................      21,223,553
                                                                   ------------

Common stock subject to put right (2,000,000 shares) ..........       1,000,000
                                                                   ------------

Stockholders' Equity
  Preferred stock, par value $0.01 per share,
    75,000,000 shares authorized, none issued
    and outstanding ...........................................            --
  Common stock, par value $0.01 per share,
    150,000,000 shares authorized, 37,006,212
    shares issued and outstanding as of March
    31, 2005 (net of 2,000,000 shares subject
    to put right) .............................................         370,062
  Additional paid-in capital ..................................      44,998,571
  Common stock to be issued ...................................       5,189,400
  Common stock repurchase obligation ..........................      (1,300,000)
  Deferred compensation .......................................        (966,833)
  Accumulated deficit .........................................     (42,145,671)
                                                                   ------------
     Total stockholders' equity ...............................       6,145,529
                                                                   ------------
     Total liabilities and stockholders' equity ...............    $ 28,369,082
                                                                   ============


See notes to condensed consolidated financial statements.


                                       3
<PAGE>


                      PATRON SYSTEMS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)

                                                        THREE MONTHS ENDED
                                                   ----------------------------
                                                     MARCH 31,       MARCH 31,
                                                       2005            2004
                                                   ------------    ------------
                                                                   (DEVELOPMENT
                                                                      STAGE)

Revenue ........................................   $     48,860    $       --
                                                   ------------    ------------

Cost of Sales
  Cost of products/services ....................         31,004            --
  Amortization of technology ...................         11,167            --
                                                   ------------    ------------
    Total cost of sales ........................         42,171            --
                                                   ------------    ------------
  Gross profit .................................          6,689            --
                                                   ------------    ------------

Operating Expenses
  Salaries and related expenses ................        458,686         110,489
  Consulting expense (non-employee stock based
     compensation) .............................        508,500          77,500
  Professional fees ............................        144,401          28,924
  General and administrative ...................        244,244         270,994
  Amortization of intangibles ..................          8,063            --
  Stock based penalty under accomodation
     agreement .................................        369,000         255,000
  Loss associated with settlement agreement ....           --           438,667
                                                   ------------    ------------
     Total operating expenses ..................      1,732,894       1,181,574

Operating loss .................................     (1,726,205)     (1,181,574)

Interest income ................................         19,250          19,250
Interest expense ...............................       (496,840)        (33,088)

                                                   ------------    ------------
Loss before income taxes .......................     (2,203,795)     (1,195,412)

  Income taxes .................................           --              --
                                                   ------------    ------------
Net loss .......................................   $ (2,203,795)     (1,195,412)
                                                   ============    ============

Net Loss Per Share - Basic and Diluted .........   $      (0.04)   $      (0.03)
                                                   ============    ============

Weighted Average Number of Shares Outstanding
   - Basic and diluted .........................     50,686,749      38,814,999
                                                   ============    ============


See notes to condensed consolidated financial statements.


                                       4
<PAGE>


<TABLE>
PATRON SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIENCY) EQUITY (unaudited)
For the three months ended March 31, 2005
<CAPTION>
                                                                              Additional    Shares of      Value of
                                                 Shares of     Par Value       Paid in     Common Stock  Common Stock
                                                Common Stock  Common Stock     Capital     to be Issued   to be Issued
                                                 -----------   -----------   -----------   -----------   -----------
<S>                                               <C>          <C>           <C>             <C>         <C>
Balance, December 31, 2004 (development stage)    37,006,212   $   370,062   $28,973,711     5,951,648   $ 4,671,400

Common stock issued in purchase business
   combinations
Complete Security Solutions, Inc. ............          --            --       6,300,000     7,500,000        75,000
LucidLine, Inc. ..............................          --            --       3,696,000     4,400,000        44,000
Entelagent Software Corporation ..............          --            --       2,520,000     3,000,000        30,000
Common stock to be issued under accommodation
   agreement as a penalty ....................          --            --            --         450,000       369,000
Amortization of deferred stock-based
   compensation ..............................          --            --            --            --            --
Issuance of warrants and bridge notes to
   investors .................................          --            --       1,043,860          --            --
Issuance of warrants issued as purchase
   consideration .............................          --            --       1,912,500          --            --
Issuance of warrants to transaction advisors .          --            --         255,000          --            --
Issuance of warrants to placement agent ......          --            --         297,500          --            --
Net Loss .....................................          --            --            --            --            --
                                                 -----------   -----------   -----------   -----------   -----------
Balance, March 31, 2005 ......................    37,006,212   $   370,062   $44,998,571    21,301,648   $ 5,189,400
                                                 ===========   ===========   ===========   ===========   ===========


<CAPTION>
                                                 COMMON STOCK
                                                  REPURCHASE       DEFERRED      ACCUMULATED
                                                  OBLIGATION     COMPENSATION      DEFICIT           TOTAL
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
Balance, December 31, 2004 (development stage)   $ (1,300,000)   $ (1,475,333)   $(39,941,876)   $ (8,702,036)

Common stock issued in purchase business
   combinations
Complete Security Solutions, Inc. ............           --              --              --         6,375,000
LucidLine, Inc. ..............................           --              --              --         3,740,000
Entelagent Software Corporation ..............           --              --              --         2,550,000
Common stock to be issued under accommodation
   agreement as a penalty ....................           --              --              --           369,000
Amortization of deferred stock-based
   compensation ..............................           --           508,500            --           508,500
Issuance of warrants and bridge notes to
   investors .................................           --              --              --         1,043,860
Issuance of warrants issued as purchase
   consideration .............................           --              --              --         1,912,500
Issuance of warrants to transaction advisors .           --              --              --           255,000
Issuance of warrants to placement agent ......           --              --              --           297,500
Net Loss .....................................           --              --        (2,203,795)     (2,203,795)
                                                 ------------    ------------    ------------    ------------
BALANCE, MARCH 31, 2005 ......................   $ (1,300,000)   $   (966,833)   $(42,145,671)   $  6,145,529
                                                 ============    ============    ============    ============
</TABLE>


                                       5
<PAGE>


<TABLE>
                      PATRON SYSTEMS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)

<CAPTION>
                                                                    THREE MONTHS ENDED
                                                               ----------------------------
                                                                 MARCH 31,       MARCH 31,
                                                                   2005            2004
                                                               ------------    ------------
                                                                               (DEVELOPMENT
                                                                                  STAGE)
<S>                                                            <C>             <C>
Cash Flows from Operating Activities
  Net loss .................................................   $ (2,203,795)   $ (1,195,412)
                                                               ============    ============
  Adjustments to reconcile net loss to net cash used
    in operating activities:
    Depreciation and amortization ..........................         19,525            --
    Amortization of deferred compensation ..................        508,500            --
    Accretion related to warrants issued for notes payable .        260,965            --
    Amortization of deferred financing costs ...............        153,520            --
    Common stock issued in lieu of cash for services .......           --            77,500
    Stock based penalty on accomodation agreement ..........        369,000         255,000
    Costs of acquisitions not consummated ..................           --           438,667
    Non-cash interest income ...............................        (19,250)        (19,250)
    Changes in assets and liabilities:
      Restriced cash escrowed to settle liabilities assumed      (1,388,000)           --
      Prepaid expenses .....................................         10,637            --
      Accounts receivable ..................................        (58,518)           --
      Other current assets .................................        110,533            --
      Accounts payable .....................................       (325,017)         20,181
      Accrued interest .....................................         94,827          33,088
      Deferred revenue .....................................         35,283            --
      Expense reimbursements due to officers and
         shareholders ......................................        (94,500)           --
      Accrued payroll and payroll related expenses .........        (72,250)         86,944
      Other current liabilities ............................         31,439            --
      Other accrued expenses ...............................         (3,413)           --
                                                               ------------    ------------
  Total adjustments ........................................       (366,719)        892,130
                                                               ============    ============
NET CASH USED IN OPERATING ACTIVITIES ......................     (2,570,514)       (303,282)
                                                               ============    ============

CASH FLOWS USED IN INVESTING ACTIVITIES
  Cash payments in purchase business combinations ..........       (847,633)           --
  Cash acquired in purchase business combinations ..........        416,397            --
  Purchase of fixed assets .................................        (32,055)           --
                                                               ------------    ------------
NET CASH USED IN INVESTING ACTIVITIES ......................       (473,291)           --
                                                               ============    ============

CASH FLOWS FROM FINANCING ACTIVITIES
  Expenses financed by (repaid to) officers and stockholders       (225,000)        200,236
  Advances from stockholders ...............................        500,000            --
  Deferred financing costs .................................       (316,579)           --
  Proceed from issuance of common stock ....................           --           200,000
  Proceeds from issuance of bridge notes ...................      3,500,000            --
  Repayments of advances from shareholders .................        (93,796)       (119,903)
                                                               ------------    ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ..................      3,364,625         280,333
                                                               ============    ============

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......   $    320,820    $    (22,949)

CASH AND CASH EQUIVALENTS, beginning of period .............   $     45,901    $     22,957
                                                               ------------    ------------
CASH AND CASH EQUIVALENTS, end of period ...................   $    366,721    $          8
                                                               ------------    ------------

Supplemental Disclosures of Cash Flow Information:
  Issuance of note under stock repurchase obligation .......   $       --      $  1,300,000
  Obligation to repurchase 2,000,000 shares of common
     stock subject to put right ............................           --         1,000,000
Cash paid during the period for:
  Interest .................................................        214,428
Supplemental non-cash investing and financial activity
  Current tangible assets acquired .........................        417,525
  Non-current tangible assets acquired .....................      2,756,470
  Current liabilities assumed with acquisitions ............     (8,606,548)
  Non-current liabilities assumed with acquisitions ........       (439,126)
  Intangible assets acquired ...............................      3,101,000
  Goodwill recognized on purchase business combinations ....     22,544,415
  Non-cash considerations ..................................    (19,342,500)
  Cash acquired in purchase business combinations ..........        416,397
                                                               ------------
  Cash paid to acquire businesses ..........................        847,633
                                                               ============

See notes to condensed consolidated financial statements.
</TABLE>


See notes to condensed consolidated financial statements.


                                       6
<PAGE>


                      PATRON SYSTEMS, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 MARCH 31, 2005

NOTE A - BASIS OF INTERIM FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements of Patron
Systems,  Inc. (the  "Company,"  "Patron,"  "us," or "we") have been prepared in
accordance with accounting  principles  generally  accepted in the United States
for  interim  financial   information  and  the  instructions  to  Form  10-QSB.
Accordingly,  they do not include all the information and footnotes  required by
accounting  principles  generally  accepted  in the United  States for  complete
financial  statements.  In the  opinion of  management  all  adjustments  (which
include  only normal  recurring  adjustments)  necessary  to present  fairly the
financial  position,  results  of  operations  and cash  flows  for all  periods
presented have been made. The results of operations for the  three-month  period
ended March 31, 2005 is not necessarily indicative of the operating results that
may be expected for the entire year ending December 31, 2005.

NOTE B - THE COMPANY

ORGANIZATION AND DESCRIPTION OF BUSINESS

Patron Systems, Inc., ("Systems") is a Delaware corporation formed in April 2002
to provide  comprehensive,  end-to-end  information security solutions to global
corporations and government  institutions.  Systems'  founders intended to raise
capital  on a private  equity  basis,  but  determined  that it had a need for a
public company currency to achieve their growth plan.

Pursuant to an Amended and Restated Share Exchange  Agreement  dated October 11,
2002, Combined  Professional  Services ("CPS"),  Systems and the stockholders of
Systems  consummated a share  exchange  ("Share  Exchange"),  As a result of the
Share  Exchange,   the  former  stockholders  of  Systems  became  the  majority
stockholders of CPS. Accordingly,  Systems became the accounting acquirer of CPS
and the exchange was accounted for as a reverse merger and  recapitalization  of
Systems.  CPS  subsequently  changed  its  name to  Patron  Systems,  Inc.  (the
"Company" or "Patron").

DEVELOPMENT STAGE OPERATIONS

In accordance with Statement of Financial Accounting Standard ("SFAS") No.7, the
Company was considered to be a development  stage enterprise  during the quarter
ended March 31, 2004, as its activities principally consisted of raising capital
and screening potential  acquisition  candidates in the information and homeland
security segments, As described in Note E, the Company consummated  acquisitions
of three  businesses  that have developed  technologies,  customer bases and are
generating  revenue.  Accordingly,  the Company is no longer  considered to be a
development stage enterprise effective for the quarter ended March 31, 2005.

NOTE C - LIQUIDITY AND FINANCIAL CONDITION

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will  continue as a going  concern.  The Company  incurred a net loss of
$2,203,795 for the three months ended March 31, 2005, which includes $877,500 of
non-cash  charges  for the fair  value of  common  stock the  Company  issued as
penalties  under certain  registration  rights  agreements and  amortization  of
deferred compensation under a stock based compensation arrangement. In addition,
the Company used net cash flows in its operating activities of $2,570,514 during
the quarter ended March 31, 2005. The Company's  working  capital  deficiency at
March  31,  2005  amounts  to  $17,369,308  and the  Company  is  continuing  to
experience  shortages  in  working  capital.  The  Company is also  involved  in
substantial  litigation and is being investigated by the Securities and Exchange
Commission with respect to certain of its press releases and its use of form S-8
to register shares of common stock issued to certain  consultants  (Note N). The
Company  cannot provide any assurance that the outcome of these matters will not
have a material  adverse  affect on its ability to sustain the  business.  These
matters raise  substantial  doubt about the  Company's  ability to continue as a
going  concern.  The  accompanying  financial  statements  do  not  include  any
adjustments that may result from the outcome of this uncertainty.


                                       7
<PAGE>


The Company expects to continue  incurring losses for the foreseeable future due
to the  inherent  uncertainty  that is related to  establishing  the  commercial
feasibility of technological  products and developing a presence in new markets.
The  Company's  ability  to  successfully   integrate  the  acquired  businesses
described in Note E is critical to the  realization  of its business  plan.  The
Company raised  $4,000,000 of gross proceeds  ($3,683,421 net proceeds after the
payment  of  certain  transaction  expenses)  in  two  financing   transactions,
including  $500,000  that the Company  received as an advance from a stockholder
during the three  months ended March 31, 2005.  The Company used  $2,570,514  of
these  proceeds  to fund its  operations  (which  includes a  $1,388,000  escrow
deposit for the payment of liabilities  assumed in business  combinations),  and
$473,291 in investing activities,  which principally includes the cash component
of  purchase  business  combinations  that the  Company  consummated  during the
quarter.  In  addition,  the Company  repaid an aggregate of $318,796 of certain
obligations  due to certain  officer/stockholders.  Subsequent to March 31, 2005
the Company raised  approximately  $3,893,000 in additional  gross funds in five
capital financing transactions.  Net proceeds from these transaction amounted to
$3,587,840 which were used principally to fund operations.

The  Company is  currently  in the  process of  attempting  to raise  additional
capital and has taken certain steps to conserve its liquidity while it continues
to integrate  the acquired  businesses.  Although  management  believes that the
Company  has  access to capital  resources,  the  Company  has not  secured  any
commitments  for additional  financing at this time nor can the Company  provide
any  assurance  that it will be  successful  in its efforts to raise  additional
capital and/or successfully execute its business plan.

NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned  subsidiaries.  All significant inter-company transactions have
been eliminated.

CASH AND CASH EQUIVALENTS

The Company  considers  all highly  liquid  securities  purchased  with original
maturities of three months or less to be cash equivalents.

REVENUE RECOGNITION

The Company derives revenues from the following  sources:  (1) sales of computer
software,  which includes new software licenses and software updates and product
support  revenues and (2) services,  which  include  internet  access,  back-up,
retrieval and restoration services and professional consulting services.

The Company  applies the revenue  recognition  principles  set forth under AICPA
Statement of Position ("SOP") 97-2 "Software Revenue Recognition" and Securities
and  Exchange   Commission  Staff  Accounting   Bulletin  ("SAB")  104  "Revenue
Recognition"  with  respect  to all of its  revenue.  Accordingly,  the  Company
records  revenue when (i)  persuasive  evidence of an arrangement  exists,  (ii)
delivery has occurred, (iii) the vendor's fee is fixed or determinable, and (iv)
collectability is probable.

The Company  generates  revenues  through sales of software  licenses and annual
support subscription  agreements,  which include access to technical support and
software  updates  (if  and  when  available).  Software  license  revenues  are
generated  from  licensing the rights to use products  directly to end-users and
through third party service providers.

Revenues from software license agreements are generally recognized upon delivery
of software to the customer.  All of the Company's  software sales are supported
by a written  contract or other evidence of sale  transaction such as a customer
purchase order.  These forms of evidence  clearly  indicate the selling price to
the  customer,  shipping  terms,  payment  terms  (generally 30 days) and refund
policy,  if any. The selling  prices of these products are fixed at the time the
sale is consummated.


                                       8
<PAGE>


Revenue from post contract customer support arrangements or undelivered elements
are deferred and  recognized at the time of delivery or over the period in which
the services are performed based on vendor specific  objective  evidence of fair
value for such  undelivered  elements.  Vendor  specific  objective  evidence is
typically  based on the price charged when an element is sold  separately or, if
an element is not sold  separately,  on the price  established  by an authorized
level of management,  if it is probable that the price, once  established,  will
not change  before  market  introduction.  The Company uses the residual  method
prescribed  in SOP 98-9 to allocate  revenues to delivered  elements once it has
established vendor-specific evidence for such undelivered elements.

The Company provides its internet access and back-up,  retrieval and restoration
services  under  contractual  arrangements  with terms  ranging from 1 year to 5
years.   These  contracts  are  billed  monthly,   in  advance,   based  on  the
contractually  stated  rates.  At the  inception of a contract,  the Company may
activate the customer's account for a contractual fee that it amortizes over the
term of the  contract  in  accordance  with  Emerging  Issues  Task Force  Issue
("EITF") 00-21 "Revenue Arrangements with Multiple  Deliverables." The Company's
standard contracts are automatically renewable by the customer unless terminated
on 30 days written notice.  Early termination of the contract  generally results
in an early  termination fee equal to the lesser of six months of service or the
remaining term of the contract.

Professional  consulting  services  are  billed  based on the number of hours of
consultant   services  provided  and  the  hourly  billing  rates.  The  Company
recognizes revenue under these arrangements as the service is performed.

Revenue from the resale of third-party  hardware and software is recognized upon
delivery  provided  there are no  further  obligations  to install or modify the
hardware or software. Revenue from the sales of hardware/software is recorded at
the gross amount of the sale when the contract  satisfies  the  requirements  of
Emerging Issues Task Force ("EITF") 99-19.

ACCOUNTS RECEIVABLE

The  Company  adjusts  its  accounts  receivable  balances  that it  deems to be
uncollectible.  The  allowance  for  doubtful  accounts  is the  Company's  best
estimate  of the amount of  probable  credit  losses in the  Company's  existing
accounts receivable.  The Company reviews its allowance for doubtful accounts on
a monthly basis and  determines  the allowance  based on an analysis of its past
due  accounts.  All  past  due  balances  that  are  over 90 days  are  reviewed
individually  for  collectability.  Account balances are charged off against the
allowance  after all means of collection  have been  exhausted and the potential
for recovery is considered remote.

PROPERTY AND EQUIPMENT

Property and  equipment is stated at cost.  Depreciation  is computed  using the
straight-line method over the estimated useful lives of the assets.  Maintenance
and repairs  are charged to expense as  incurred;  cost of major  additions  and
betterments  are  capitalized.  When property and equipment is sold or otherwise
disposed of, the cost and related  accumulated  depreciation are eliminated from
the accounts and any resulting gains or losses are reflected in the statement of
operations in the period of disposal

GOODWILL

SFAS 142, Goodwill and Other Intangible Assets, requires that goodwill be tested
for impairment at the reporting unit level (operating segment or one level below
an operating segment) on an annual basis (June 30th for the Company) and between
annual tests in certain  circumstances.  Application of the goodwill  impairment
test  requires  judgment,  including  the  identification  of  reporting  units,
assigning  assets and  liabilities  to reporting  units,  assigning  goodwill to
reporting units, and determining the fair value.  Significant judgments required
to estimate the fair value of reporting  units  include  estimating  future cash
flows, determining appropriate discount rates and other assumptions.  Changes in
these estimates and assumptions  could  materially  affect the  determination of
fair value and/or goodwill  impairment for each reporting unit. We have recorded
goodwill in  connection  with the  Company's  acquisitions  described  in Note E
amounting to $22,544,415.  The Company has determined that no impairment charges
are necessary during the quarter ended March 31, 2005.


                                       9
<PAGE>


LONG LIVED ASSETS

The Company periodically reviews the carrying values of its long lived assets in
accordance  with  SFAS 144  "Long  Lived  Assets"  when  events  or  changes  in
circumstances would indicate that it is more likely than not that their carrying
values may exceed  their  realizable  value and record  impairment  charges when
necessary.  The Company has determined that no impairment  charges are necessary
during the quarter ended March 31, 2005.

STOCK OPTION PLANS

As permitted  under SFAS No. 148  "Accounting  for  Stock-Based  Compensation  -
Transition  and  Disclosure,"   which  amended  SFAS  No.  123  "Accounting  for
Stock-Based  Compensation,"  the  Company  has elected to continue to follow the
intrinsic   value  method  in  accounting  for  its   stock-based   compensation
arrangements  as defined by Accounting  Principles  Board ("APB") Opinion No. 25
"Accounting  for  Stock  Issued  to  Employees,"  and  related   interpretations
including Financial  Accounting  Standards Board ("FASB")  Interpretation No. 44
"Accounting  for  Certain   Transactions   Involving  Stock   Compensation,"  an
interpretation of APB No. 25.

The following table  summarizes the pro forma  operating  results of the Company
had compensation  expense for stock options granted to employees been determined
in  accordance  with the fair market value based method  prescribed  by SFAS No.
123. The Company has presented the following disclosures in accordance with SFAS
No. 148.

                                                    Three Months ended March 31,
                                                    ----------------------------
                                                        2005            2004
                                                    -----------     -----------

Net Loss, as reported ..........................    $(2,203,795)    $(1,195,412)
(+)Stock-based compensation cost reflected
   in the financial statements .................           --              --
(-)Stock-based employee compensation expense
    under the fair value method ................        185,278         204,444
                                                    -----------     -----------
Pro-Forma Net Loss .............................    $(2,389,073)    $(1,399,856)
                                                    ===========     ===========
Pro-Forma Net Loss per Share-
Basic and Diluted, as reported .................    $     (0.04)    $     (0.03)
                                                    ===========     ===========
Basic and Diluted, pro-forma ...................    $     (0.05)    $     (0.04)
                                                    ===========     ===========

Number of Shares, Basic and Diluted ............     50,686,749      38,251,388
                                                    ===========     ===========

NON-EMPLOYEE STOCK BASED COMPENSATION

The cost of stock based compensation awards issued to non-employees for services
are  recorded  at  either  the  fair  value  of  the  services  rendered  or the
instruments  issued in exchange  for such  services,  whichever  is more readily
determinable,  using the  measurement  date  guidelines  enumerated  in Emerging
Issues Task Force Issue ("EITF") 96-18,  "Accounting for Equity Instruments That
Are  Issued to Other  Than  Employees  for  Acquiring,  or in  Conjunction  with
Selling, Goods or Services."

COMMON STOCK PURCHASE WARRANTS

The Company  accounts for the issuance of common stock purchase  warrants issued
with  registration  rights  in  accordance  with the  provisions  of EITF  00-19
"Accounting  for Derivative  Financial  Instruments  Indexed to, and Potentially
Settled in, a Company's Own Stock."

Based on the  provisions  of EITF 00-19,  the Company  classifies  as equity any
contracts that (i) require physical  settlement or net-share  settlement or (ii)
gives the  company a choice of  net-cash  settlement  or  settlement  in its own
shares (physical settlement or net-share settlement).  The Company classifies as
assets  or  liabilities  any  contracts  that (i)  require  net-cash  settlement
(including a requirement  to net cash settle the contract if an event occurs and
if that


                                       10
<PAGE>


event is outside the control of the company) (ii) give the counterparty a choice
of net-cash settlement or settlement in shares (physical settlement or net-share
settlement).

INCOME TAXES

The Company  accounts for income taxes pursuant to SFAS No. 109,  Accounting for
Income  Taxes.  Deferred  taxes  arise  from  temporary  differences,  primarily
attributable  to the use of the cash method for tax purposes and accrual  method
for book purposes and net operating  loss  carry-forwards.  The Company  records
valuation  allowances for deferred tax assets when circumstances  indicate it is
more  likely  than not that the  Company  will not  realize  the  benefit of its
deferred tax assets.

NET LOSS PER SHARE

Basic  net loss  per  common  share  is  computed  by  dividing  net loss by the
weighted-average  number of common shares outstanding during the period. Diluted
net loss per common share also  includes  common stock  equivalents  outstanding
during  the  period if  dilutive.  Diluted  net loss per  common  share has been
computed by dividing net loss by the  weighted-average  number of common  shares
outstanding  without an assumed increase in common shares outstanding for common
stock equivalents; as such common stock equivalents are anti-dilutive.

As a result of the  consummation of the Share Exchange  described in Note B, the
Company  included  1,200,000  stock  options with an exercise  price of $.01 per
share that it issued to certain  employees  during  2002 in its  calculation  of
weighted-average number of common shares outstanding for all periods presented.

Net loss per common share excludes the following  outstanding options,  warrants
and convertible notes as their effect would be anti-dilutive:

                                                             MARCH 31,
                                                  ------------------------------
                                                     2005                2004
                                                  ----------          ----------
Options ................................           7,125,000           5,200,000
Warrants ...............................           4,665,000              15,000
Convertible notes ......................                --               120,462
                                                  ----------          ----------
                                                  11,790,000           5,335,462
                                                  ==========          ==========


USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

In preparing  financial  statements in  conformity  with  accounting  principles
generally  accepted in the United  States of America,  management is required to
make estimates and  assumptions  that affect the reported  amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and revenue  and  expenses  during the  reporting
period. Actual results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The  carrying  amounts  reported  in  the  balance  sheet  for  cash,   accounts
receivable,  accounts payable accrued  expenses,  advances from stockholders and
all note obligations  classified as current  liabilities  approximate their fair
values  based on the  short-term  maturity of these  instruments.  The  carrying
amounts of the Company's  convertible and subordinated note  obligations,  stock
repurchase  obligation  and common stock subject to put right  approximate  fair
value as such instruments feature contractual interest rates that are consistent
with  current  market  rates  of  interest  or have  effective  yields  that are
consistent with instruments of similar risk, when taken together with any equity
instruments concurrently issued to holders.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In January 2003,  Financial  Accounting  Standards  Board  ("FASB")  issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
This  interpretation  of  Accounting  Research  Bulletin  No. 51,  "Consolidated
Financial  Statements," provides guidance for identifying a controlling interest
in a variable  interest  entity  ("VIE")  established by means other than voting
interest. FIN 46 also required consolidation of a VIE


                                       11
<PAGE>


by an enterprise  that holds such  controlling  interest.  In December 2003, the
FASB completed its  deliberations  regarding the proposed  modifications  to FIN
No.,  46 and  issued  Interpretation  Number  46R,  "Consolidation  of  Variable
Interest Entities - an Interpretation of ARB 51" ("FIN No. 46 R"). The decisions
reached  included a deferral of the effective date and provisions for additional
scope exceptions for certain types of variable interests. Application of FIN No.
46R is required in financial  statements of public  entities that have interests
in VIEs or potential VIEs commonly referred to as  special-purpose  entities for
periods ending after December 15, 2003.  Application by public issuers' entities
is required in all interim and annual  financial  statements  for periods ending
after  December  15,  2004.  The  adoption  of this  pronouncement  did not have
material effect on the Company's financial statements.

In December  2004,  the FASB issued SFAS No. 123R "Share  Based  Payment".  This
statement is a revision of SFAS Statement No. 123,  "Accounting  for Stock-Based
Compensation"  and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees,  and its related  implementation  guidance.  SFAS 123R  addresses all
forms of share based  payment  ("SBP")  awards  including  shares  issued  under
employee  stock  purchase  plans,  stock  options,  restricted  stock  and stock
appreciation  rights.  Under SFAS 123R, SBP awards result in a cost that will be
measured at fair value on the awards' grant date,  based on the estimated number
of awards that are  expected  to vest and will result in a charge to  operations
for  stock-based  compensation  expense.  The charge  will be  reflected  in the
Company's  Statements  of  Operations  during  periods in which such charges are
recorded,  but will not affect its Balance  Sheets or  Statements or Cash Flows.
SFAS  123R  is  effective  for  public  entities  that  file as  small  business
issuers--as of the beginning of the first interim or annual  reporting period of
the fiscal year that begins after December 15, 2005.

The  Company is  currently  in the  process of  evaluating  the effect  that the
adoption of this pronouncement will have on its financial statements.

In December  2004,  the FASB issued SFAS No.  153,  "Exchanges  of  Non-monetary
Assets".  SFAS 153 amends APB  Opinion No. 29 to  eliminate  the  exception  for
non-monetary  exchanges  of similar  productive  assets and  replaces  it with a
general  exception  for  exchanges  of  non-monetary  assets  that  do not  have
commercial  substance.  A non-monetary  exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. The provisions of SFAS 153 are effective for non-monetary asset
exchanges  occurring in fiscal periods  beginning  after June 15, 2005.  Earlier
application is permitted for  non-monetary  asset exchanges  occurring in fiscal
periods  beginning after December 16, 2004. The provisions of this statement are
intended be applied  prospectively.  The adoption of this  pronouncement  is not
expected to have a material effect on the Company's financial statements.

EITF Issue No. 04-8,  "The Effect of  Contingently  Convertible  Instruments  on
Diluted  Earnings  per Share." The EITF  reached a consensus  that  contingently
convertible  instruments,  such as contingently  convertible debt,  contingently
convertible  preferred  stock,  and other such securities  should be included in
diluted earnings per share (if dilutive)  regardless of whether the market price
trigger has been met. The  consensus  became  effective  for  reporting  periods
ending  after  December  15, 2004.  The  adoption of this  pronouncement  is not
expected to have material effect on the Company's financial statements.

NOTE E - BUSINESS COMBINATIONS

MERGER WITH COMPLETE SECURITY SOLUTIONS, INC.

On February 25, 2005, pursuant to the filing of an Agreement and Plan of Merger,
the Company's  merger with Complete  Security  Solutions,  Inc.  ("CSSI") became
effective.  The merger was  consummated  pursuant to a  definitive  Supplemental
Agreement and the Agreement and Plan of Merger,  entered into as of February 24,
2005,  each among the Company,  CSSI  Acquisition  Co. I, Inc.,  a  wholly-owned
subsidiary  of the Company and CSSI.  Pursuant to the terms of the  Supplemental
Agreement and Agreement and Plan of Merger with CSSI,  CSSI  Acquisition  Co. I,
Inc. merged with and into CSSI, with CSSI surviving the merger as a wholly-owned
subsidiary of the Company.

CSSI sells computer software that supports real-time secure collection, delivery
and sharing of field-based  report  information for public safety agencies.  The
Company  believes  that  CSSI's   electronic   forms  technology   provides  law
enforcement and other justice  agencies with secure,  real-time  access to field
reporting data for use inside a


                                       12
<PAGE>


department or in a multi-jurisdictional  information sharing system. The Company
acquired  CSSI  because  it  believes  that such  technologies  fit  within  its
strategic plan of building a business that addresses the urgency of homeland and
information security initiatives.

In  connection  with the CSSI merger,  the Company  issued  7,500,000  shares of
common stock in exchange for the outstanding shares of the common stock of CSSI,
and  subordinated   promissory  notes  in  the  aggregate  principal  amount  of
$4,500,000 (the "Subordinated  Notes") and warrants to purchase 2,250,000 shares
of common stock ("Purchase  Warrants") in exchange for the outstanding shares of
the preferred stock of CSSI. The Purchase Warrants have a term of 5 years and an
exercise price of $0.70 per share. The Subordinated  Notes and Purchase Warrants
were  issued to Apex  Investment  Fund V, L.P.,  The  Northwestern  Mutual  Life
Insurance Company, and Advanced Equities Venture Partners I, L.P.

The Subordinated Notes issued to the holders of the outstanding  preferred stock
of CSSI  have an  initial  term of 120  days  (due on June 25,  2005),  with the
Company's  option to extend  the term for an  additional  60 days to August  24,
2005. The Subordinated  Notes are interest free and  automatically  convert into
the  securities  offered  by the  Company at the first  closing of a  subsequent
financing  for the Company,  for such number of offered  securities  as could be
purchased for the principal  amount being converted.  If the Subordinated  Notes
are not paid in full on or before the extended  maturity date,  each  noteholder
will be  issued a  warrant  (the  "Penalty  Warrant")  entitling  the  holder to
purchase  3.84 shares of common  stock for each $1.00 of  principal  amount then
outstanding. The Penalty Warrants issuable in connection with the non-payment of
the  Subordinated  Notes may only be  exercised  by a holder's  delivery  of its
subordinated  promissory note in payment of the exercise price,  the delivery of
which will  result in the full  satisfaction  of all  amounts of  principal  and
interest due and payable under such  Subordinated  Note. As described in Note P,
the Company did not repay the Subordinated Notes on their original maturity date
of June 25, 2005.

The Company has agreed to register the resale of the 7,500,000  shares of common
stock  issued to the  holders of the  outstanding  common  stock of CSSI and the
2,250,000  shares of common  stock  issuable  upon the  exercise of the warrants
issued to the holders of the outstanding preferred stock of CSSI at such time as
the Company next files a registration statement with the Securities and Exchange
Commission ("SEC") on a best efforts basis.

MERGER WITH LUCIDLINE, INC.

On February 25, 2005, pursuant to the filing of an Agreement and Plan of Merger,
the Company's merger with LucidLine,  Inc.  ("LucidLine") became effective.  The
merger was consummated pursuant to a definitive  Supplemental  Agreement and the
Agreement  and Plan of Merger  entered into as of February 24, 2005,  each among
the Company,  LL Acquisition I Corp.,  a wholly-owned  subsidiary of the Company
and LucidLine. Pursuant to the terms of the Supplemental Agreement and Agreement
and Plan of Merger with LucidLine,  LL Acquisition I Corp.  merged with and into
LucidLine,  with LucidLine surviving the merger as a wholly-owned  subsidiary of
the Company.

LucidLine  provides  high-speed  Internet access,  synchronized  remote back-up,
retrieval,  and  restoration  services  to small and  mid-size  businesses.  The
Company  acquired  LucidLine  because it believes that  LucidLine's  information
protection  technologies  fit within its  strategic  plan of building a business
that addresses the urgency of homeland and information security initiatives.

In connection with the LucidLine merger,  the Company issued 4,400,000 shares of
common stock and $200,000 of cash, in exchange for all of the outstanding shares
of  LucidLine's  common stock.  The Company has agreed to register the resale of
the shares of common stock issued to the holders of the outstanding common stock
of  LucidLine at such time as the Company  next files a  registration  statement
with the SEC on a best efforts basis.

MERGER WITH ENTELAGENT SOFTWARE CORP.

On November 24, 2002,  Patron, ESC Acquisition,  Inc., a California  corporation
and wholly-owned  subsidiary of Patron ("Entelagent  Mergerco"),  and Entelagent
Software  Corp.,  a  California  corporation  ("Entelagent"),  entered  into  an
Agreement  and Plan of  Merger,  (the  "Entelagent  Merger  Agreement")  whereby
Entelagent  Mergerco would be merged with and into  Entelagent  with  Entelagent
surviving as a wholly owned subsidiary of Patron (the


                                       13
<PAGE>


"Entelagent   Merger").   Patron,   Entelagent   Mergerco  and  Entelagent  also
concurrently entered into a Supplemental Agreement (the "Entelagent Supplemental
Agreement").

On February 24,  2005,  Patron  entered  into a definitive  Amended and Restated
Supplemental  Agreement  pursuant to which Entelagent  Mergerco would merge with
and into  Entelagent,  with  Entelagent  surviving the merger as a  wholly-owned
subsidiary of Patron.  The Amended and Restated  Supplemental  Agreement amended
and restated the Entelagent Supplemental Agreement.

On March 30, 2005,  pursuant to the filing of an Amended and Restated  Agreement
and Plan of Merger,  Patron's  merger  with  Entelagent  became  effective.  The
Amended and  Restated  Agreement  and Plan of Merger  amended and  restated  the
Entelagent Merger Agreement.

Entelagent   provides  flexible  and  scalable  real-time   content-aware  email
monitoring and  post-event  review of e-mail  messages and their  attachments as
well as infrastructure for knowledge  management of archived e-mail messages and
attachments  in all media.  Entelagent's  e-mail content  monitoring  technology
addresses the need for  comprehensive  internal  security  measures to safeguard
company  intellectual  capital.  The  Company  acquired  Entelagent  because  it
believes that Entelagent's  information surveillance and protection technologies
fit within its strategic  plan of building a business that addresses the urgency
of homeland and information security initiatives.

In connection  with the Entelagent  Merger,  Patron issued  3,000,000  shares of
Patron's  common  stock in  exchange  for all of the  outstanding  shares of the
capital  stock of  Entelagent.  Patron has agreed to register  the resale of the
3,000,000  shares  of common  stock  issued to the  holders  of the  outstanding
capital  stock of  Entelagent  at such time as Patron next files a  registration
statement  with the SEC on a best efforts  basis.  In addition,  pursuant to the
terms of the Amended and Restated Supplemental Agreement,  Patron also agreed to
(i)  issue  to  certain  officers,  directors,  stockholders  and  creditors  of
Entelagent,  in  consideration  of amounts owed by  Entelagent  to such parties,
promissory notes in the aggregate principal amount of $2,640,000,  with interest
payable  thereon  at a rate of 8% per  annum  and  maturing  one year  after the
completion of the merger and (ii) pay $1,388,000 in  outstanding  liabilities of
Entelagent from the net proceeds of the Interim Bridge  Financing I completed on
February 28, 2005. Accordingly, the Company placed $1,388,000 of the proceeds it
received from the Interim Bridge Financing I financing  transaction in an escrow
account to be specifically used for the payment of such liabilities.  Such funds
are presented as restricted cash in the accompanying  balance sheet at March 31,
2005.

Prior to the completion of the business combinations,  CSSI made an aggregate of
$2,600,000 in loans and advances to Patron,  Entelagent and LucidLine. The loans
and advances,  which  remained  outstanding  subsequent to the completion of the
transactions,  have been  eliminated  in the  Company's  consolidated  financial
statements.

BUSINESS COMBINATION ACCOUNTING

The Company  accounted for its  acquisitions  of CSSI,  LucidLine and Entelagent
using the purchase  method of  accounting  prescribed  under SFAS 141  "Business
Combinations."  Under the purchase method, the acquiring  enterprise records any
purchase  consideration  issued to the sellers of the acquired business at their
fair values. The aggregate of the fair value of the purchase  consideration plus
any  direct  transaction  expenses  incurred  by  the  acquiring  enterprise  is
allocated  to  the  assets  acquired  (including  any  separately   identifiable
intangibles)  and liabilities  assumed based on their fair values at the date of
acquisition. The excess of cost of the acquired entities over the fair values of
assets acquired and liabilities assumed was recorded as goodwill. The results of
operations  for  each of the  acquired  companies  following  the  dates of each
business  combination  is  included  in  the  Company  consolidated  results  of
operations for the quarter ended March 31, 2005.

The Company  evaluated each of the  aforementioned  transactions to identify the
acquiring entity as required under SFAS 141 for business  combinations  effected
through an exchange of equity  interests.  Based on such  evaluation the Company
determined  that  it  was  the  acquiring   entity  in  each   transaction  (and
cumulatively  for all  transactions)  as (1) the larger  portion of the relative
voting  rights  in the  Company  after  each  combination  was  retained  by its
previously  existing  stockholders,  (2) the previously  existing  stockholders,
through their retention of a majority of voting rights,  retained the ability to
elect or appoint a voting majority of the governing body of the combined entity,
and (3) under the terms of the exchange of equity securities, the Company paid a
premium over the market value of the equity  securities  of the other  combining
entities.


                                       14
<PAGE>


The following  table  provides a breakdown of the purchase  price  including the
fair value of  purchase  consideration  issued to the  sellers  of the  acquired
business and direct  transaction  expenses incurred by the Company in connection
with consummating these transactions:

<TABLE>
<CAPTION>
                                 COMPLETE
                                 SECURITY                   ENTELAGENT
                                 SOLUTIONS    LUCIDLINE,     SOFTWARE
                                    INC.          INC.      CORPORATION      TOTAL
                                -----------   -----------   -----------   -----------
<S>                             <C>           <C>           <C>           <C>
Cash ........................   $      --     $   200,000   $      --     $   200,000
Common Stock ................     6,375,000     3,740,000     2,550,000    12,665,000
Subordinated promissory notes     4,500,000          --            --       4,500,000
Common stock warrants .......     1,912,500          --            --       1,912,500
Transaction expenses ........       398,128       154,611       359,894       912,633
                                -----------   -----------   -----------   -----------
   Total Purchase Price .....   $13,185,628   $ 4,094,611   $ 2,909,894   $20,190,133
                                ===========   ===========   ===========   ===========
</TABLE>

The fair value of common stock  issued to the sellers as purchase  consideration
was determined in accordance with the provisions of EITF 99-12 "Determination of
the  Measurement  Date for the Market Price of Acquirer  Securities  Issued in a
Purchase Business  Combination." The fair value of subordinated  notes issued to
the  sellers  as  purchase  consideration  is  considered  to be  equal to their
principal  amounts  due to the  short-term  maturity of those  instruments.  The
Company  calculated the fair value of common stock purchase  warrants  issued to
the sellers as purchase  consideration  using the  Black-Scholes  option-pricing
model.

Transaction expenses, which include legal fees and transaction advisory services
directly  related to the  acquisitions  amount to  $912,633.  Such fees  include
$657,633  paid in cash and $255,000  for the fair value of 300,000  common stock
purchase  warrants  issued to Laidlaw & Company in its capacity as a transaction
advisor.

PRELIMINARY PURCHASE PRICE ALLOCATION

Under business combination accounting,  the total preliminary purchase price was
allocated to CSSI's and  LucidLine's  net tangible and  identifiable  intangible
assets based on their  estimated  fair values as of February 25, 2005. The total
preliminary   purchase  price  allocation  for  Entelagent's  net  tangible  and
identifiable  intangible  assets was based on their  estimated fair values as of
March 30, 2005. The preliminary allocation of the purchase price for these three
acquisitions  is set forth below.  The excess of the purchase price over the net
tangible  and  identifiable  intangible  assets was  recorded as  goodwill.


                                       15
<PAGE>


<TABLE>
<CAPTION>
                                       COMPLETE
                                       SECURITY                       ENTELAGENT
                                       SOLUTIONS       LUCIDLINE,      SOFTWARE
                                          INC.            INC.        CORPORATION        TOTAL
                                      ------------    ------------    ------------    ------------
<S>                                   <C>             <C>             <C>             <C>
Fair value of tangible assets:
Cash ..............................   $    399,636    $      9,563    $      7,198    $    416,397
Accounts receivable ...............        118,225          22,936          84,918         226,079
Employee receivables ..............        111,773           2,000          27,500         141,273
Other current assets ..............         43,857             326           5,990          50,173
                                      ------------    ------------    ------------    ------------
Total current assets ..............        673,491          34,825         125,606         833,922
Property and Equipment ............         62,000          61,000          12,000         135,000
Advances to prospective affiliates       2,621,470            --              --         2,621,470
                                      ------------    ------------    ------------    ------------
Total  tangible assets ............      3,356,961          95,825         137,606       3,590,392

Liabilities assumed: ..............           --
Accounts payable ..................       (128,854)        (32,473)       (355,416)       (516,743)
Advances from prospective affiliate           --          (829,032)     (2,363,359)     (3,192,391)
Accrued expenses
   and other current liabilities ..       (357,391)           --        (4,540,023)     (4,897,414)
                                      ------------    ------------    ------------    ------------
Total current liabilities .........       (486,245)       (861,505)     (7,258,798)     (8,606,548)
Long term liabilities .............           --           (93,796)       (345,330)       (439,126)
                                      ------------    ------------    ------------    ------------
Total liabilities assumed .........       (486,245)       (955,301)     (7,604,128)     (9,045,674)
                                      ------------    ------------    ------------    ------------
Net tangible assets acquired
  (liabilities assumed) ...........      2,870,716        (859,476)     (7,466,522)     (5,455,282)

Value of excess allocated to:
Developed technology ..............        670,000            --         1,900,000       2,570,000
Customer relationships ............        180,000            --              --           180,000
Trademarks and tradenames .........         55,000            --           106,000         161,000
In-process research and
    development ...................        190,000            --              --           190,000
Goodwill ..........................      9,219,912       4,954,087       8,370,416      22,544,415
                                      ------------    ------------    ------------    ------------
                                      $ 13,185,628    $  4,094,611    $  2,909,894    $ 20,190,133
                                      ============    ============    ============    ============
</TABLE>

The purchase price  allocation is preliminary,  based on management's  estimates
and a valuation  study performed by an independent  outside  appraisal firm that
has not yet been finalized.  The Company considered its intention for future use
of the acquired assets, analyses of the historical financial performance of each
of the acquired  businesses and estimates of future performance of each acquired
businesses'  products and services.  The Company's  final  determination  of the
purchase price  allocation  could result in changes to the amounts  reflected in
its  preliminary  estimate.  The  Company is in the  process of  finalizing  the
information  required  to file its Form 8-K  with the  Securities  and  Exchange
Commission and will do so as soon as practicable.

PROFORMA FINANCIAL INFORMATION

The unaudited  financial  information in the table below summarizes the combined
results of operations of the Company and CSSI,  LucidLine and  Entelagent,  on a
proforma  basis,  as if the  companies  had been combined as of the beginning of
each of the periods presented.

The unaudited  proforma  financial  information for the three months ended March
31, 2005 combines the  historical  results for Patron for the three months ended
March 31, 2005and the  historical  results for CSSI and LucidLine for the period
from  January  1, 2005 to  February  24,  2005 and the  historical  results  for
Entelagent  for the period from January 1, 2005 to March 20, 2005. The unaudited
proforma  financial  results for the three months ended March 31, 2004  combines
the historical  results for Patron for this period with the  historical  results
for CSSI, Entelagent and LucidLine for the three months ended March 31, 2004.


                                       16
<PAGE>


                                                    THREE MONTHS ENDED MARCH 31,
                                                        2005            2004
                                                     -----------    -----------
Total revenues ...................................   $   207,829    $   215,038
Net loss .........................................    (4,635,653)    (2,010,132)
Pro forma net loss per share, basic and diluted ..   $     (0.08)   $     (0.04)


The proforma financial information is presented for informational  purposes only
and is not indicative of the results of operations that would have been achieved
if the acquisitions of these three companies had taken place at the beginning of
each of the periods presented

NOTE F - OTHER CURRENT ASSETS

Other current assets consist of the following:

                                                              MARCH 31,
                                                                2005
                                                             ---------
         Prepaid expenses ............................       $  39,530
         Employee advances ...........................          30,740
         Deposits ....................................           5,990
                                                             ---------
                                                             $  76,260
                                                             =========

NOTE G - PROPERTY AND EQUIPMENT

                                                              MARCH 31,
                                                                2005
                                                             ---------
         Computers ...................................       $ 142,155
         Furniture and Fixtures ......................          24,900
                                                             ---------
             sub-total ...............................         167,055
         less: accumulated depreciation ..............            (295)
                                                             ---------
             Property and equipment, net .............       $ 166,760
                                                             =========

Depreciation expense for the three months ended March 31, 2005 was $295.

NOTE H - DEFERRED FINANCING COSTS

Deferred  financing  costs,  which  amount  to  $614,079,  include  cash fees of
$316,579  and  $297,500  representing  the fair  value of 350,000  common  stock
purchase warrants issued to Laidlaw & Company (UK) Ltd. in their capacity as the
placement  agent  in the  $3,500,000  Interim  Bridge  Financing  I (Note  J) in
February  2005.  The  fair  value  of the  warrants  was  determined  using  the
Black-Scholes option-pricing model.

The deferred  financing  costs are being  amortized over the minimum term of the
debt  instrument  issued through the financing  which is 120 days.  Amortization
expense  amounted to $153,520  for the three  months ended March 31, 2005 and is
included as a component  of interest  expense in the  accompanying  statement of
operations.

NOTE I - INTANGIBLE ASSETS

The  components of  intangible  assets as of March 31, 2005 are set forth in the
following table:


                                       17
<PAGE>


<TABLE>
<CAPTION>
                                                                 NET BOOK     ESTIMATED
                                      PRELIMINARY  ACCUMULATED   VALUE AT      USEFUL
                                      FAIR VALUE   AMORTIZATION  3/31/2005      LIFE
                                      ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>             <C>
Trademarks and tradenames .........   $  161,000   $    1,146   $  159,854      4 years
Developed technology ..............    2,570,000       11,167    2,558,833      5 years
Customer relationships ............      180,000        3,750      176,250      4 years
In-process research and development      190,000        3,167      186,833      5 years
                                      ----------   ----------   ----------
                                      $3,101,000   $   19,230   $3,081,770
                                      ==========   ==========   ==========
</TABLE>

The Company  classifies  amortization of developed  technology as a component of
cost of sales.

AMORTIZATION OF INTANGIBLE ASSETS

The  amortization of intangible  assets will result in the following  expense by
year:

                                                     INTANGIBLE
          YEARS ENDED DECEMBER 31,                  AMORTIZATION
          -----------------------                  -------------
                    2005                           $     497,167
                    2006                                 637,250
                    2007                                 637,250
                    2008                                 637,250
                    2009                                 568,417
                    2010                                 123,667

NOTE J - NOTES PAYABLE

BRIDGE NOTES

On February  28,  2005,  the Company  completed a $3.5  million  financing  (the
"Interim  Bridge  Financing  I") through the issuance of 10% Senior  Convertible
Promissory  Notes (the "Bridge  Notes") and warrants to purchase up to 1,750,000
shares of the Company's common stock. The warrants have a term of 5 years and an
exercise price of $0.70 per share. On February 28, 2005, the warrants had a fair
value of  $1,837,500  based on a  closing  price of $1.05  per  share.  Prior to
maturity,  the Bridge Notes may be converted into the securities issuable at the
first  closing of a  subsequent  financing  by the  Company,  for such number of
offered  securities  as  could  be  purchased  for the  principal  amount  being
converted.  The Bridge  Notes have an initial  term of 120 days (due on June 28,
2005),  bear  interest  at a  contractual  rate of 10% per annum and  feature an
option to extend  the term for an  additional  60 days to August  27,  2005.  As
described  in Note P, the Company did not repay the Bridge Notes on the original
maturity date of June 28, 2005.

In  accordance  with  Accounting  Principles  Board  Opinion No. 14, the Company
allocated  $2,456,140  of the  proceeds to the Bridge  Notes and  $1,043,860  of
proceeds to the  warrants.  The  difference  between the carrying  amount of the
Bridge  Notes and their  contractual  redemption  amount  is being  accreted  as
interest expense to June 28, 2005, their earliest date of redemption.  Accretion
of the  aforementioned  discount amounted to $260,965 for the three months ended
March 31,  2005 and is  included  as a  component  of  interest  expense  in the
accompanying statement of operations. Contractual interest expense on the Bridge
Notes,  which  amounted to $29,167 for the three  months ended March 31, 2005 is
also included as a component of interest expense in the  accompanying  statement
of operations

In the event that the Company chooses to extend the contractual maturity date of
the Bridge Notes for an additional 60 days to August 28, 2005,  the  contractual
interest rate will  increase to 12% per annum,  and the Company will be required
to issue warrants (the "Bridge  Extension  Warrants") to purchase such number of
shares  of common  stock  equal to 1/2 of a share  for each  $1.00 of  principal
amount outstanding.  The Bridge Extension Warrants have a term of 5 years and an
exercise price of $0.70 per share.

If the  Bridge  Notes are not paid in full on or before  the  extended  maturity
date,  each  noteholder  will be issued a  warrant  ("Bridge  Penalty  Warrant")
entitling  the holder to purchase  3.84 shares of common stock for each $1.00 of
principal  amount then  outstanding.  The Bridge  Penalty  Warrants  may only be
exercised  by a holder's  delivery of its Bridge Note in payment of the exercise
price, the delivery of which will result in the full satisfaction of all amounts
of principal  and interest due and payable  under such Bridge Note.  The Company
has agreed to file with the SEC a  registration  statement for the resale of the
restricted shares of the Company's common stock issuable upon exercise of all of
the warrants issued in this transaction, on a best efforts basis.

The  Company  sold  these  securities  to  thirty-three   accredited   investors
introduced  by Laidlaw & Company (UK) Ltd.  ("Laidlaw"),  which is the placement
agent in the Interim  Bridge  Financing  I. As  described in Note H, the Company
incurred $614,070 of fees in connection with this transaction including $297,500
for the fair value of warrants to purchase up to 350,000 shares of the Company's
common stock (the "Placement  Agent Warrants") at an exercise price of $0.70 per
share.


                                       18
<PAGE>


The issuance and sale of the  securities  issued in connection  with the Interim
Bridge  Financing I were exempt from the  registration  and prospectus  delivery
requirements of the Securities  Act,  pursuant to Section 4(2) of the Securities
Act as transactions not involving any public offering.

DEMAND NOTES PAYABLE

Through  December 31, 2004, the Company borrowed an aggregate amount of $695,000
from four unrelated parties. These notes are payable on demand and bear interest
at the rate of 10% per  annum.  Interest  expense  on these  notes  amounted  to
$17,375  and  $17,375  for the  three  months  ended  March  31,  2005 and 2004,
respectively.

NOTE K - RELATED PARTY TRANSACTIONS

ADVANCES FROM STOCKHOLDERS

Certain  stockholders  have made working  capital  advances to the Company,  the
unpaid  balance of which amounts to $430,212 at March 31, 2005.  These  amounts,
which are non-interest bearing, are payable on demand.

On March  31,  2005,  the  Company  received  $500,000  in  financing  from Apex
Investment  Fund V, LP ("Apex"),  one of the selling  shareholders of CSSI and a
current  stockholder  of the Company.  In  consideration  of this financing from
Apex,  the  parties  have  mutually  agreed  that the terms of this loan will be
identical  to the terms that are being  offered to the  investors in the Interim
Bridge Financing II, described in Note P. The Company has finalized terms and is
currently  in the process of  finalizing  definitive  agreements  and notes with
respect to the terms the additional bridge financing.  Accordingly,  the Company
has  classified the advance from Apex as a demand loan pending the completion of
the agreements and notes.

EXPENSE REIMBURSEMENTS DUE TO OFFICERS AND STOCKHOLDERS

Certain  stockholders  and  officers  of the Company  have paid  expenses on the
Company's behalf since its inception,  of which $476,174 remains  outstanding at
March 31, 2005. The amounts payable to such officers and stockholders are due on
demand.

NOTES PAYABLE TO OFFICERS AND STOCKHOLDERS

Notes payable to officers and  stockholders  bear interest at 10% and are due on
demand.  Interest expense on these notes amounted to $6,438 for the three months
ended March 31, 2005.

NOTE L - COMMON STOCK REPURCHASE OBLIGATION AND PUT RIGHT

On June 6, 2005, the Company entered into a settlement of certain claims brought
by Patrick J. Allin, the Company's  former Chief Executive  Officer and a former
member of the Company's Board of Directors, against the Company. This settlement
is described more fully in Note P below.

Pursuant to the  Settlement  Agreement and Mutual  Release,  the Company,  among
other things, agreed to purchase from Mr. Allin and The Allin Dynastic Trust two
million  (2,000,000) shares (the "Remainder Shares") through a cash payment from
the proceeds of a follow-on-financing by the Company, at a price per share equal
to the lesser of (a) $.50 per share or (b) 90% of the issue price or  conversion
price,  as the case may be, of the  security  issued  in a  follow-on-financing,
provided  however  that in the event that 90% of the issue  price or  conversion
price, as the case may be, of the security issued in the  follow-on-financing is
less than $.50 per share,  Mr.  Allin  and/or The Allin  Dynastic  Trust may, at
their option, refuse to sell any or all of the Remainder Shares to the Company.

For the Remainder  Shares,  the Company  recorded  $1,000,000  for the intrinsic
value of the 2 million  shares of common stock subject to Mr. Allin's put right.
The  Company  also  reduced  the number of shares  issued and  outstanding  by 2
million  shares as of February  21,  2004.  However,  the Company did not remove
these shares from the number of shares issued and  outstanding  for the purposes
of computing Net Loss per Share on the  Statements of  Operations.  In the event
the stock issued in the Company's proposed follow-on financing is issued at less
than $0.50


                                       19
<PAGE>


per share and Mr.  Allin  refuses to sell the  Remainder  Shares to the Company,
this amount will be eliminated on the books of the Company.

NOTE M - ACCOMMODATION AGREEMENT

In November 2002, the Company entered into a financing  arrangement with a third
party financial institution (the "Lender"),  pursuant to which the Company would
borrow  $950,000  under a note to be  collateralized  by the  pledge of  950,000
shares of registered stock from five different stockholders.  In connection with
this arrangement, the Company executed a series of Accommodation Agreements with
these stockholders  wherein each stockholder  pledged their shares in return for
the right to receive on or before  November  17,  2003 the return of the pledged
shares,  or replacement  shares in the event of foreclosure,  and one additional
share of common stock for every four shares pledged as compensation. The Company
also  agreed  to use  "best  efforts"  to  register  these  shares  with  the US
Securities and Exchange Commission 12 months from the date of issue.

In December 2002, the Company received  approximately $450,000 of proceeds under
the note and  provided  the  Lender the  pledged  shares.  Since  that date,  no
additional  proceeds were provided by the Lender and repeated attempts were made
by the Company to secure the additional  proceeds.  The Company has  effectively
accounted  for the Lender's  failure to fund the facility and return the pledged
shares  as a  foreclosure  on the  loan  collateral.  Accordingly,  the  Company
recorded a $1,047,728 loss during the year ended December 31, 2002.

On March 13,  2003,  the Company  issued  1,200,000  replacement  shares with an
aggregate fair value of $3,708,000 to the  stockholders who pledged their shares
under  the  Accommodation  Agreements.  Accordingly,  the  Company  recorded  an
additional  loss of $2,210,272  during the year ended  December 31, 2003 for the
difference  between the loss the Company recorded upon the Lender's  foreclosure
of the collateral and the aggregate fair value of the replacement shares.

In  addition,  the  Accommodation  Agreements  provided for the Company to pay a
penalty  in the  event of its  failure  to cause  the  replacement  shares to be
registered on or before March 31, 2003.  As a result,  the Company has accrued a
penalty of 450,000  shares per quarter,  which penalty  amounted to $369,000 and
$255,000 in the quarters ended March 31, 2005 and 2004, respectively.

NOTE N - COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

Sherleigh  Associates Inc. Profit Sharing Plan  ("Sherleigh")  filed a complaint
against the  Company,  Patrick  Allin,  former  Chief  Executive  Officer of the
Company, and Robert E. Yaw, the Company's non-executive Chairman, on February 3,
2004, in the United States District Court for the Southern  District of New York
(the "Court")  alleging common law fraud.  The complaint  alleged that Sherleigh
was  fraudulently  induced into  purchasing  1,000,000  shares of Company common
stock in reliance  upon certain of the  Company's  press  releases and allegedly
false  statements by Mr. Allin and Mr. Yaw,  concerning  the Company's  plans to
acquire  two target  companies,  TrustWave  Corporation  (currently  a strategic
partner of the Company) and  Entelagent  (a current  subsidiary of the Company),
and its financing  arrangements  regarding those  acquisitions.  Sherleigh seeks
rescission of its purchase agreement and return of its $2,000,000 purchase price
or compensatory damages to be proven at trial. Mr. Allin recently entered into a
settlement  agreement with Sherleigh and is requesting that the Court include in
its  dismissal  order  a  finding  that  the  settlement  is  reasonable  and  a
prohibition  against any claims by the Company or Mr. Yaw against Mr.  Allin for
contribution or indemnification  with respect to Sherleigh's claims. The Company
has opposed Mr. Allin's request.  The issue has been fully briefed but the Court
has not yet  issued  any  ruling  on Mr.  Allin's  request.  Discovery  has been
completed, but no trial date has been set by the Court. The Company believes the
Plaintiff's  claims are without merit and intends to continue to defend  against
them through  trial,  if necessary.  The amount of loss, if any, with respect to
the claim cannot be  predicted or  quantified  at this time and,  therefore,  no
amounts have been recorded on the books of the Company.

Cook Associates,  Inc. ("Cook  Associates")  filed a complaint against us in the
Circuit Court of Cook County,  Illinois,  on October 7, 2004, alleging breach of
contract.  Cook  Associates  alleges  that  the  Company  contracted  with  Cook


                                       20
<PAGE>


Associates to provide certain  executive  search  services and advice  regarding
potential  mergers and acquisitions  pursuant to Cook Associates'  standard fees
policy to which the Company allegedly agreed. Cook Associates  maintains that it
provided those services to the Company and is seeking approximately  $528,081 in
damages. The Company believes it has valid defenses to the claims.  Nonetheless,
the  Company  believes  it is in  its  best  interests  to  reach  a  reasonable
resolution  to this  matter and to avoid  costly  litigation.  Accordingly,  the
Company is  currently  in  negotiations  with Cook and  believes it will reach a
reasonable  settlement of all claims and potential  claims  without any material
adverse effects.

In December of 2004, Patrick Allin,  former Chief Executive Officer informed the
Company of his intent to assert  several claims against the Company for (1) sums
allegedly owed under his employment agreement with the Company, in the aggregate
amount of approximately $2,173,234,  (2) indemnification from the Company in the
amount of $850,000  for the value of the shares  tendered by him to Sherleigh in
connection with his settlement of that action, (3) the Company's alleged failure
to remove restrictive  legends from a total of 6,500,000 shares of the Company's
common stock owned by him and the Allin Dynastic  Trust,  an affiliated  entity,
and (4) amounts  payable to him under the terms of demand notes in the amount of
$146,000  plus accrued  interest.  On June 6, 2005,  the Company  settled  these
claims as  described  below in Note P -  Subsequent  Events.  As a result of the
settlement,  the  Company  accrued  for certain  liabilities  and an  additional
reserve for the stock the Company agreed to repurchase from him.

In April of 2005,  Richard  L.  Linting,  a former  President  of the  Company's
Professional Services Group, filed a complaint against the Company and Robert E.
Yaw, II, the  Company's  non-executive  Chairman,  in the Circuit  Court of Cook
County,  Illinois  alleging  breach of his  purported  employment  contract  and
seeking  sums  allegedly  owed under the  employment  contract  in the amount of
$1,321,809,  plus  court  costs  and fees.  The  Company  believes  it has valid
defenses to the claims. Nonetheless, the Company has been working to settle this
claim with Mr. Linting and believes,  based on  discussions  with legal counsel,
Mr. Linting will settle this matter for amounts of cash and stock  approximately
equal to amounts  already  accrued on the Company's  books as of the date of his
termination.

In December of 2004, Marie Graul,  former Chief Financial Officer,  informed the
Company  of her  intention  to  assert  a claim  against  the  Company  for sums
allegedly  owed under her  employment  agreement  with the Company.  The Company
believes  it has valid  defenses to the  claims.  Although  the Company has been
working to settle this claim with Ms.  Graul,  the Company  believes  this claim
will enter  arbitration  proceedings.  For Ms.  Graul,  the Company has recorded
accrued, but unpaid,  salary of $95,139 from the start of her employment through
the date of termination,  or July 17, 2003. In addition,  Ms. Graul's employment
agreement  specifies  that if her agreement was terminated for any reason before
January 1, 2004, she would be entitled to a bonus of 25% of her base salary,  or
$62,500.  Therefore,  the Company believes the total accrued, but unpaid payroll
due to Ms. Graul under the terms of her  employment  agreement is $157,639.  Any
additional  amounts the Company may owe Ms. Graul as a result of the arbitration
proceedings are not estimable at this time.

While  the  Company  believes  its  has  defenses  to the  claims  noted  above,
notwithstanding  the fact that the Company  intends to  vigorously  defend these
actions, there can be no assurance the Company will be successful in its defense
of any of these  claims.  In the event the Company is required to pay damages in
connection  with any one or more of the claims  asserted in these actions,  such
payment  could have a material  adverse  effect on the  Company's  business  and
operations.

SEC INVESTIGATION

Pursuant  to  Section  20(a)  of the  Securities  Act and  Section  21(a) of the
Securities Exchange Act, the staff of the SEC (the "Staff"), issued an order (In
the Matter of Patron Systems, Inc. - Order Directing a Private Investigation and
Designating  Officers to Take  Testimony  (C-03739-A,  February 12,  2004)) (the
"Order")  that a  private  investigation  (the "SEC  Investigation")  be made to
determine whether certain actions of, among others, the Company,  certain of its
officers  and  directors  and  others  violated  Section  5(a)  and  5(c) of the
Securities Act and/or Section 10 and Rule 10b-5  promulgated  under the Exchange
Act.  Generally,  the Order  provides,  among  other  things,  that the Staff is
investigating (i) the legality of two (2) separate Registration Statements filed
by the Company on Form S-8,  filed on December 20, 2002 and on April 2, 2003, as
amended on April 9, 2003 (collectively, the "Registration Statements"), covering
the resale of, in the  aggregate,  4,375,000  shares of common  stock  issued to
various  consultants  of the Company,  and (ii) whether in  connection  with the
purchase or sale of shares of common


                                       21
<PAGE>


stock,  certain officers and directors of the Company and others (a) sold common
stock  in  violation  of  Section  5 of the  Securities  Act  and/or,  (b)  made
misrepresentations and/or omissions of material facts and/or employed fraudulent
devices in connection  with such  purchases  and/or sales relating to certain of
the Company's press releases regarding,  among other items, proposed mergers and
acquisitions  that were never  consummated.  If the SEC brings an action against
the Company,  it could result in, among other items, a civil injunctive order or
an administrative  cease-and-desist  order being entered against the Company, in
addition to the  imposition of a significant  civil penalty.  Moreover,  the SEC
Investigation  and/or  a  subsequent  SEC  action  could  affect  adversely  the
Company's  ability to have its common  stock become  listed on a stock  exchange
and/or  quoted on the NASD Bulletin  Board or NASDAQ,  the Company being able to
sell its securities and/or have its securities registered with the SEC and/or in
various  states and/or the Company's  ability to implement its business plan. To
date, the Company's legal counsel  representing  the Company in such matters has
indicated that the SEC  Investigation is ongoing and the Staff has not indicated
whether it will or will not recommend that the SEC bring an  enforcement  action
against the Company, its officers, directors and/or others.

NOTE O - STOCKHOLDERS' EQUITY

ISSUANCE OF COMMON STOCK AS PURCHASE CONSIDERATION

On February 25, 2005 the Company  committed to issue an aggregate of  11,900,000
shares of its  common  stock with an  aggregate  fair  value of  $10,115,000  as
purchase  consideration  to the  sellers  of CSSI and  LucidLine  (Note  E).  On
February 28, 2005, the Company committed to issue an additional 3,000,000 shares
of its common  stock with an  aggregate  fair value of  $2,550,000  as  purchase
consideration  to  the  sellers  of  Entelagent  (Note  E).  The  aforementioned
transactions  are  presented  as common  stock to be issued in the  accompanying
balance sheet and statements of stockholders'  (deficiency)  equity at March 31,
2005.
ISSUANCE OF COMMON STOCK PURCHASE WARRANTS

On February  25,  2005,  the Company  issued  2,250,000  common  stock  purchase
warrants  with a term of 5 years and an  exercise  price of $0.70 per share as a
portion  of  purchase  consideration  associated  with  the  acquisition  of the
preferred  stock of CSSI (Note E). The  aggregate  fair value of these  warrants
amounted to $1,912,500.

On February 28, the Company issued  warrants to purchase up to 1,750,000  shares
of its  common  stock  to the  Bridge  Notes  investors  described  in  Note  I.
Additionally,  the Company issued 350,000 common stock purchase warrants with an
aggregate  fair value of $297,500 to the Placement  Agent in the Interim  Bridge
Financing I transaction.

Finally,  the Company  also issued  warrants  for 300,000  shares at a $0.70 per
share  exercise  price to Laidlaw & Company  and/or its  designees in connection
with the receipt of acquisition  related services for the Entelagent,  LucidLine
and CSSI mergers (Note E). The aggregate fair value of these  warrants  amounted
to $255,000.

All of the  aforementioned  warrants are  reflected as an increase to additional
paid-in   capital  in  the   accompanying   balance  sheet  and   statements  of
stockholders' (deficiency) equity at March 31, 2005.

ISSUANCE OF COMMON STOCK AS PENALTY UNDER AN ACCOMMODATION AGREEMENT

The  Accommodation  Agreements  (Note M) provided for a penalty in the event the
Company failed to register the  replacement  shares on or before March 31, 2003.
The  replacement  shares were not  registered  on or before March 31, 2003. As a
result,  the Company has accrued a penalty of 450,000 shares per quarter for the
five  stockholders,  in the aggregate.  The Company recorded charges of $369,000
and $255,000, for the periods ended March 31, 2005 and 2004,  respectively.  The
Company  intends to include the replacement and penalty shares in a registration
statement  to be filed in 2005,  at which time the penalty will cease to accrue.
The  penalty  shares  are  presented  as  common  stock  to  be  issued  in  the
accompanying  balance sheet and statements of stockholders'  (deficiency) equity
at March 31, 2005.


                                       22
<PAGE>


NOTE P - SUBSEQUENT EVENTS

ADDITIONAL  BRIDGE  FINANCING  RECEIVED FROM APEX  INVESTMENT FUND V, LP AND THE
NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

On April 15, 2005,  Patron received an additional  $200,000 from Apex.  Then, on
May 2, 2005,  Patron  received  $200,000 from Apex.  Finally,  on June 15, 2005,
Patron received $750,000 from Apex.

On July 1, 2005,  Patron received an additional  $200,000 from The  Northwestern
Mutual Life Insurance Company ("Northwestern").

In consideration of this financing from Apex and Northwestern,  the parties have
mutually  agreed  that Apex and  Northwestern  will be offered the same terms as
investors in the Interim  Bridge  Financing  II,  described  above.  This mutual
agreement was entered into on a verbal basis. As of the date of this filing, the
Company  has  finalized  terms and is  currently  in the  process of  finalizing
definitive agreements and notes with respect to the additional bridge financing.

SETTLEMENT WITH PATRICK J. ALLIN, FORMER CHIEF EXECUTIVE OFFICER

On June 6, 2005, the Company entered into a settlement of certain claims brought
by Patrick J. Allin, the Company's  former Chief Executive  Officer and a former
member of the Company's Board of Directors, against the Company. Pursuant to the
Settlement  Agreement and Mutual Release dated June 2, 2005,  among the Company,
Mr. Allin and The Allin Dynastic Trust,  the Company agreed to pay to Mr. Allin,
in settlement of Mr.  Allin's  claims,  an aggregate  payment of One Million One
Hundred Fifty Thousand Dollars  ($1,150,000) payable as follows: (i) Two Hundred
Thousand Dollars ($200,000) paid upon execution of the Settlement  Agreement and
Mutual Release and (ii) Nine Hundred Fifty Thousand Dollars  ($950,000)  payable
in cash and/or a promissory note upon the consummation of a  follow-on-financing
by the Company. The parties also agreed to release all claims existing as of the
date of the Settlement  Agreement and Mutual Release.  The Settlement  Agreement
and Mutual Release  terminates by its terms if the Company does not consummate a
follow-on-financing  by August 15, 2005.  The Company has fully reserved for the
amount at February  21,  2004.  The Company had already  accrued an aggregate of
$927,167 in amounts  repayable to Mr. Allin at February 21, 2004. The difference
between the amounts already  accrued and the cash settlement  amount of $216,507
is included in General and  Administrative  expense in the three  months  ending
March 31, 2004 in the accompanying statement of operations.

Pursuant to the Settlement Agreement and Mutual Release, the Company also agreed
to purchase  from Mr.  Allin and The Allin  Dynastic  Trust an aggregate of four
million  (4,000,000)  shares of the Company's  common stock as follows:  (i) two
million  (2,000,000)  shares (the  "Initial  Shares")  through  the  issuance of
promissory  notes in the aggregate  principal  amount of One Million Six Hundred
Thousand  Dollars  ($1,600,000)  and (ii) two  million  (2,000,000)  shares (the
"Remainder   Shares")   through  a  cash   payment   from  the   proceeds  of  a
follow-on-financing  by the Company, at a price per share equal to the lesser of
(a) $.50 per share or (b) 90% of the issue  price or  conversion  price,  as the
case may be, of the security issued in a  follow-on-financing,  provided however
that in the event that 90% of the issue price or conversion  price,  as the case
may be, of the security issued in the  follow-on-financing is less than $.50 per
share, Mr. Allin and/or The Allin Dynastic Trust may, at their option, refuse to
sell any or all of the Remainder  Shares to the Company.  The Initial Shares are
to be held in escrow pursuant to a mutually  agreed upon Escrow  Agreement to be
subsequently  entered into between the parties.  Each of Mr. Allin and The Allin
Dynastic  Trust have agreed to lock-up their shares until the shorter of (y) the
six month period subsequent to the consummation of a follow-on-financing and (z)
the date on which the next  registration  statement filed by the Company becomes
effective.

The  promissory  notes issued to purchase the Initial Shares bear interest at an
annual rate of 8%,  with  interest  payments  due and payable on the last day of
August, November, February and May during the term of the promissory notes, with
a maturity  date of June 30,  2006.  In  addition,  if the  Company  defaults on
certain terms under the promissory  notes,  and such default remains uncured for
five days, all payments under the  promissory  notes  accelerate and the Company
agrees to confess to a judgment against the Company in a court of the promissory
note holder's choosing in Cook County, Illinois. In the alternative, the holders
of the promissory notes may demand that


                                       23
<PAGE>


the shares  purchased by the promissory  notes be returned in fulfillment of all
obligations remaining under such promissory notes.

As a result of this  agreement  to  repurchase  shares of common  stock from Mr.
Allin and The Allin Dynastic Trust, the Company has applied  hindsight to record
certain  liabilities  and  adjustments to equity.  On February 21, 2004, for the
first 2 million  shares,  the  Company  recorded  a note  payable  to Mr.  Allin
amounting to  $1,738,667,  representing  $1,600,000  in  principal  and $138,667
interest  payable  quarterly from June 6, 2005 to June 6, 2006. On June 6, 2005,
the closing price of our common stock was $0.65,  representing  a stock buy-back
commitment  based on the fair value of the 2 million  shares of common  stock of
$1,300,000. The remaining $438,667 was recorded as a litigation loss.

For the Remainder  Shares,  the Company  recorded  $1,000,000  for the intrinsic
value of the 2 million  shares of common stock subject to Mr. Allin's put right.
The  Company  also  reduced  the number of shares  issued and  outstanding  by 2
million  shares as of February  21,  2004.  However,  the Company did not remove
these shares from the number of shares issued and  outstanding  for the purposes
of computing Net Loss per Share on our Statements of Operations.

In the event the stock issued in the Company's proposed  follow-on  financing is
issued at less than $0.50 per share and Mr. Allin  refuses to sell the Remainder
Shares  to the  Company,  this  amount  will be  eliminated  on the books of the
Company.

INTERIM BRIDGE FINANCING II

On June 6, 2005, the Company completed a new $2,543,000  financing (the "Interim
Bridge  Financing  II")  through  the  issuance  of (i) 10%  Junior  Convertible
Promissory  Notes and (ii) warrants to purchase up to 1,271,500 shares of common
stock.  The warrants  have a term of 5 years and an exercise  price of $0.60 per
share.  On June 6, 2005,  the warrants  had a fair value of $826,475  based on a
closing  price of $0.65 per share.  Prior to  maturity,  the Junior  Convertible
Promissory Notes may be converted into the securities  offered by the Company at
the first closing of a subsequent  financing for the Company, for such number of
offered  securities  as  could  be  purchased  for the  principal  amount  being
converted.  The Junior Convertible  Promissory Notes have an initial term of 120
days,  with an option for the  Company to extend the term for an  additional  60
days,  and pay  interest at a rate of 10% per annum.  Upon the  extension of the
maturity  date  of the  Junior  Convertible  Promissory  Notes,  the  associated
interest  payable will be  increased  to 12% per annum,  and the Company will be
required to issue  warrants to purchase  such number of shares of the  Company's
common  stock equal to one-half  of a share for each $1.00 of  principal  amount
outstanding.  The warrants  issuable upon  extension of the maturity date of the
Junior Convertible  Promissory notes will have a term of 5 years and an exercise
price of $0.60 per share.  In  addition,  if the Junior  Convertible  Promissory
Notes  are not  paid in full on or  before  the  extended  maturity  date,  each
noteholder will be issued a warrant entitling the holder to purchase 3.84 shares
of  the  Company's  common  stock  for  each  $1.00  of  principal  amount  then
outstanding.  The warrants  issuable in connection  with the  non-payment of the
Junior Convertible Promissory Notes may only be exercised by a holder's delivery
of its Junior Convertible  Promissory Note in payment of the exercise price, the
delivery  of which  will  result  in the full  satisfaction  of all  amounts  of
principal and interest due and payable under such Junior Convertible  Promissory
Note. The Company has agreed to file with the Securities and Exchange Commission
a registration  statement for the resale of the restricted  shares of its common
stock issuable upon exercise of the Warrants on a best efforts basis.

The Company sold these  securities to seven accredited  investors  introduced by
Laidlaw  &  Company  (UK)  Ltd.  ("Laidlaw").  Laidlaw  acted as a broker in the
Interim  Bridge  Financing  II. For its  services as a broker,  the Company paid
Laidlaw a cash fee of $305,160, including the reimbursement of costs, and issued
to Laidlaw and/or its designees warrants to purchase up to 152,580 shares of the
Company's common stock at an exercise price of $0.60 per share.

The issuance and sale of the  securities  issued or issuable in connection  with
the Interim Bridge Financing II were exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (the "Securities
Act")  pursuant  to  Section  4(2) of the  Securities  Act as  transactions  not
involving any public offering.


                                       24
<PAGE>


EXTENSION OF ACQUISITION AND BRIDGE NOTE MATURITY DATES

On February  28,  2005,  the Company  completed a $3.5  million  financing  (the
"Interim  Bridge  Financing  I") through the issuance of 10% Senior  Convertible
Promissory  Notes (the "Bridge  Notes") and warrants to purchase up to 1,750,000
shares of the Company's  common stock (Note H). The Bridge Notes have an initial
term of 120 days (due on June 28, 2005),  bear interest at a contractual rate of
10% per annum and feature an option to extend the term for an additional 60 days
to August 27, 2005. The Bridge Notes were not repaid as of June 28, 2005 and the
option to extend the term for an additional 60 days was exercised.

On  February  25,  2005,  Subordinated  Notes were  issued to the holders of the
outstanding  preferred  stock of CSSI (Note E). These notes have an initial term
of 120 days (due on June 25, 2005), with the Company's option to extend the term
for an  additional  60 days to  August  24,  2005.  The  Subordinated  Notes are
interest  free and  automatically  convert  into the  securities  offered by the
Company at the first closing of a subsequent financing for the Company, for such
number of offered  securities  as could be purchased  for the  principal  amount
being converted.  The  Subordinated  Notes were not redeemed as of June 25, 2005
and the option to extend the term for an additional 60 days was exercised.

SETTLEMENT WITH COOK ASSOCIATES, INC.

On June 29, 2005, the Company  entered into a settlement with Cook Associates to
settle all claims and  potential  claims  related to the  lawsuit  that had been
filed by Cook Associates against the Company. Under the terms of the settlement,
Cook Associates  agreed to dismiss its lawsuit and associated claim for $528,081
in damages and the Company agreed to remove any and all  conditions/restrictions
that would  prevent the  600,000  shares of Company  common  stock owned by Cook
Associates from being freely traded.


                                       25
<PAGE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS


                      PATRON SYSTEMS, INC. AND SUBSIDIARIES

           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                                 MARCH 31, 2005

The following  discussion and analysis  should be read in  conjunction  with the
Annual Report on Form 10-KSB,  including the consolidated  financial statements,
and the related notes thereto,  for the years ended December 31, 2004,  2003 and
2002 of Patron  Systems,  Inc.  and  subsidiaries  (collectively  referred to as
"Patron,"  the  "Company,"   "we,"  "us,"  or  "our").   Except  for  historical
information  contained herein,  the matters discussed below are  forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements  involve risks and uncertainties,
including, but not limited to, economic,  governmental,  political,  competitive
and technological factors affecting our operations,  markets,  products,  prices
and other factors discussed  elsewhere in this report and other reports filed by
us with the SEC. These factors may cause results to differ  materially  from the
statements made in this report or otherwise made by or on our behalf.

OVERVIEW

On February 25, 2005,  we  consummated  the  acquisitions  of Complete  Security
Solutions,  Inc. and LucidLine,  Inc.  pursuant to the filings of Agreements and
Plans of Merger  with the  Secretaries  of State of the States of  Delaware  and
Illinois, respectively. On February 28, 2005, Patron Systems, Inc. consummated a
private  placement with accredited  investors in the amount of $3.5 million.  On
March 30, 2005, we  consummated  the  acquisition  of Entelagent  Software Corp.
pursuant to the filing of an Agreement  and Plan of Merger with the Secretary of
State of the State of California. On March 31, 2005, we borrowed $500,000 from a
shareholder,  Apex Investment Fund V, LP. Subsequent to March 31, 2005 we raised
approximately  $3,893,000  in additional  gross funds in five capital  financing
transactions.  Net proceeds from these transaction  amounted to $3,587,840 which
were used  principally  to fund  operations.  We discuss these  transactions  in
further detail in this report.

Our  acquisitions  have  allowed us to develop a platform  for trusted  security
services and next generation  integrated  security products,  which we intend to
deliver to global  corporations and government  institutions.  We intend to work
with  organizations  to ensure that  global  enterprises  implement  information
security policies,  procedures and products that result in "trusted" information
environments.

We currently offer software solutions that fit into overall corporate compliance
and data protection initiatives by automatically finding, archiving and applying
persistent  protection  to sensitive  data - beyond  authentication  - whenever,
wherever and however sensitive data is shared, accessed and stored. Additionally
we offer software solutions that support real-time secure  collection,  delivery
and  sharing  of  field-based  report  information.  This  software  allows  law
enforcement  and  public-safety  agencies  to have  real-time  access  to  field
reporting  data  for  use  inside  a  department  or  in a  multi-jurisdictional
information sharing system.

We also offer a range of services to corporate and government entities utilizing
fiber optics and data replication technologies to provide secure robust off-site
data  backup,  recovery,   restoration,  and  retrieval  services  coupled  with
high-speed  data  communication  turnkey  solutions.  Our  secure  and  scalable
high-speed data communication solutions facilitate seamless instantaneous backup
of  mission  critical  business  data and  enable  immediate  access to data and
real-time  restoration  of  critical  business  functionality  in the event of a
crisis or disaster.  Additionally, we offer our clients a comprehensive Risk and
Vulnerability  Assessment  (RAVA)  evaluation  service.  This  service  provides
security and  business  impact  assessments,  which  evaluate an  organization's
compliance with both Homeland Security and NTSA standards.

Furthermore,  we intend to address the homeland  security  requirements that are
being imposed on state, county and municipal  governments.  The Company believes
that we offer state, county and municipal governments a unique


                                       26
<PAGE>


group of  product  and  service  offerings  focused on their  specific  homeland
security  information  infrastructure  issues. This is accomplished by utilizing
the full range of our  capabilities  for  evaluating  and assessing  information
infrastructure  risks  and  vulnerabilities,  combined  with our  experience  in
designing,  implementing and managing large,  secure information  infrastructure
systems.   Also  contributing  is  our  extensive   experience  in  implementing
real-time,  secure data collection and the  multi-jurisdictional  sharing of law
enforcement  and  public-safety  information  combined  with our  experience  in
developing  and  deploying  software  solutions  which  provide  secure data and
content delivery and management.

CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with  accounting  principles  generally  accepted in the United States  requires
management to make estimates and assumptions that affect the amounts reported in
the  Condensed   Consolidated   Financial  Statements  and  Notes  thereto.  Our
application  of accounting  policies  affects these  estimates and  assumptions.
Actual results could differ from these estimates under different  assumptions or
conditions.

BASIS OF PRESENTATION

In accordance with Statement of Financial  Accounting Standard ("SFAS") No.7, we
considered our business to be a development  stage  enterprise  through December
31,  2004,  as our  activities  principally  consisted  of raising  capital  and
screening  potential  acquisition  candidates  in the  information  and homeland
security segments, During the quarter ended March 31, 2005, we effected business
combinations  with  CSSI,  LucidLine  and  Entelagent.   Each  of  the  acquired
businesses has developed  technologies,  customer  bases and generates  revenue.
Accordingly,  we no longer  consider  our  business  to be a  development  stage
enterprise effective for the quarter ended March 31, 2005.

REVENUE RECOGNITION

We derive revenues from the following  sources:  (1) sales of computer software,
which includes new software  licenses and software  updates and product  support
revenues and (2) services, which include internet access, back-up, retrieval and
restoration services and professional consulting services.

We apply the revenue  recognition  principles set forth under AICPA Statement of
Position ("SOP") 97-2 "Software Revenue Recognition" and Securities and Exchange
Commission Staff  Accounting  Bulletin  ("SAB") 104 "Revenue  Recognition"  with
respect  to all  of  its  revenue.  Accordingly,  we  record  revenue  when  (i)
persuasive evidence of an arrangement exists, (ii) delivery has occurred,  (iii)
the vendor's fee is fixed or determinable, and (iv) collectability is probable.

We generate  revenues  through  sales of software  licenses  and annual  support
subscription  agreements which include access to technical  support and software
updates (if and when  available).  Software  license revenues are generated from
licensing the rights to use our products directly to end-users and through third
party service providers.

Revenues from software license agreements are generally recognized upon delivery
of  software to the  customer.  All of our  software  sales are  supported  by a
written  contract  or other  evidence  of sale  transaction  such as a  customer
purchase order.  These forms of evidence  clearly  indicate the selling price to
the  customer,  shipping  terms,  payment  terms  (generally 30 days) and refund
policy,  if any. The selling  prices of these products are fixed at the time the
sale is consummated.

Revenue from post contract customer support arrangements or undelivered elements
are deferred and  recognized at the time of delivery or over the period in which
the services are performed based on vendor specific  objective  evidence of fair
value for such  undelivered  elements.  Vendor  specific  objective  evidence is
typically  based on the price charged when an element is sold  separately or, if
an element is not sold  separately,  on the price  established  by an authorized
level of management,  if it is probable that the price, once  established,  will
not change before market introduction.  We use the residual method prescribed in
SOP 98-9 to allocate  revenues to  delivered  elements  once it has  established
vendor-specific evidence for such undelivered elements.


                                       27
<PAGE>


We provide internet access and back-up, retrieval and restoration services under
contractual  arrangements  with  terms  ranging  from 1 year to 5  years.  These
contracts are billed  monthly,  in advance,  based on the  contractually  stated
rates.  At the inception of a contract,  we may activate the customer's  account
for a  contractual  fee  that it  amortizes  over the  term of the  contract  in
accordance  with  Emerging  Issues  Task Force  Issue  ("EITF")  00-21  "Revenue
Arrangements   with   Multiple   Deliverables."   Our  standard   contracts  are
automatically  renewable by the customer  unless  terminated  on 30 days written
notice.  Early  termination  of  the  contract  generally  results  in an  early
termination  fee equal to the lesser of six  months of service or the  remaining
term of the contract.

Professional  consulting  services  are  billed  based  the  number  of hours of
consultant  services provided and the hourly billing rates. We recognize revenue
under these arrangements as the service is performed.

Revenue from the resale of third-party  hardware and software is recognized upon
delivery  provided  there are no  further  obligations  to install or modify the
hardware or software. Revenue from the sales of hardware/software is recorded at
the gross amount of the sale when the contract  satisfies  the  requirements  of
Emerging Issues Task Force ("EITF") 99-19.

BUSINESS COMBINATIONS

In accordance  with business  combination  accounting,  we allocate the purchase
price of acquired  companies  to the tangible and  intangible  assets  acquired,
liabilities  assumed,  as well as in-process  research and development  based on
their  estimated  fair values.  We have engaged a third-party  appraisal firm to
assist  management in determining the fair values of certain assets acquired and
liabilities  assumed.  Such a valuation requires  management to make significant
estimates and assumptions, especially with respect to intangible assets.

Management makes estimates of fair value based upon  assumptions  believed to be
reasonable.  These estimates are based on historical  experience and information
obtained from the management of the acquired  companies.  Critical  estimates in
valuing certain of the intangible  assets include but are not limited to: future
expected  cash  flows  from  license  sales,  maintenance  agreements,  customer
contracts and acquired  developed  technologies;  expected  costs to develop the
in-process  research and development  into  commercially  viable  products;  the
acquired  company's brand awareness and market position,  as well as assumptions
about the  period of time the  acquired  brand will  continue  to be used in the
combined  company's product  portfolio;  and discount rates. These estimates are
inherently  uncertain  and  unpredictable.  Assumptions  may  be  incomplete  or
inaccurate,  and  unanticipated  events and  circumstances  may occur  which may
affect  the  accuracy  or  validity  of such  assumptions,  estimates  or actual
results.

GOODWILL AND INTANGIBLE ASSETS

We account for Goodwill and Intangible  Assets in accordance  with SFAS No. 141,
"Business  Combinations"  and SFAS  No.  142,  "Goodwill  and  Other  Intangible
Assets." Under SFAS No. 142,  goodwill and  intangibles  that are deemed to have
indefinite  lives are no longer  amortized but,  instead,  are to be reviewed at
least annually for impairment.  Intangible  assets continue to be amortized over
their estimated useful lives.

INCOME TAXES

We account  for income  taxes  pursuant to  Statement  of  Financial  Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. Deferred taxes arise from
temporary differences,  primarily attributable to the use of the cash method for
tax  purposes  and  accrual  method for book  purposes  and net  operating  loss
carry-forwards.

NET LOSS PER SHARE

Basic  net loss  per  common  share  is  computed  by  dividing  net loss by the
weighted-average  number of common shares outstanding during the period. Diluted
net loss per common share also  includes  common stock  equivalents  outstanding
during  the  period if  dilutive.  Diluted  net loss per  common  share has been
computed by dividing net loss by the  weighted-average  number of common  shares
outstanding  without an assumed increase in common shares outstanding for common
stock equivalents; as such common stock equivalents are anti-dilutive.


                                       28
<PAGE>


STOCK OPTION PLANS

As permitted  under SFAS No. 148  "Accounting  for  Stock-Based  Compensation  -
Transition  and  Disclosure,"   which  amended  SFAS  No.  123  "Accounting  for
Stock-Based  Compensation,"  we have elected to continue to follow the intrinsic
value method in accounting  for our  stock-based  compensation  arrangements  as
defined by Accounting  Principles  Board ("APB")  Opinion No. 25 "Accounting for
Stock Issued to  Employees,"  and related  interpretations  including  Financial
Accounting  Standards  Board  ("FASB")  Interpretation  No. 44  "Accounting  for
Certain Transactions Involving Stock Compensation," an interpretation of APB No.
25.

NON-EMPLOYEE STOCK BASED COMPENSATION

We record the cost of stock  based  compensation  awards  that we have issued to
non-employees  for services at either the fair value of the services rendered or
the instruments issued in exchange for such services,  whichever is more readily
determinable,  using the  measurement  date  guidelines  enumerated  in Emerging
Issues Task Force Issue ("EITF") 96-18,  "Accounting for Equity Instruments That
Are  Issued to Other  Than  Employees  for  Acquiring,  or in  Conjunction  with
Selling, Goods or Services."


                              RESULTS OF OPERATIONS

THREE MONTHS  ENDED MARCH 31, 2005  COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2004.

For the three months ended March 31, 2005, our consolidated revenues amounted to
$48,860  compared to $0 for the three months ended March 31, 2004.  The increase
is the  result  of  business  combinations  that we  consummated  with  CSSI and
LucidLine in February 2005 and Entelagent in March 2005.

Cost of Sales for the three  months  ended  March 31,  2005  amounted to $42,171
compared to $0 for the three months  ended March 31, 2004.  Cost of sales during
the three  months  ended March 31, 2005  includes  $11,167  associated  with the
amortization of developed technology that we acquired from CSSI and Entelagent.

Operating  expenses  amounted to $1,732,894 for the three months ended March 31,
as compared to $1,181,574 for the three months ended March 31, 2004, an increase
of $551,320.  The increase  includes  $348,179 for salaries  associated  with an
increase in the number of employees from acquired  businesses,  $431,000 for the
amortization  of a stock based  compensation  arrangement  that we entered  into
during  the year  ended  December  31,  2004  (for  corporate  finance  advisory
services), $115,477 for legal and professional fees that we incurred principally
in connection  with bringing the Company into compliance with its Securities and
Exchange   Commission   reporting   obligations,   $8,063  for  deprecation  and
amortization  of acquired assets and $114,000 for the fair value of common stock
we are  obligated  to  issued  under a  penalty  provision  of an  Accommodation
Agreement. The increases were partially offset by a $26,750 reduction in general
and  administrative  expenses and $439,000  representing a charge we recorded in
2004  in  connection   with  the   settlement   of  litigation   with  a  former
officer/stockholder.

Our consolidated  loss from operations for the three months ended March 31, 2005
amounted to $1,726,205  compared to a loss of $1,181,574  for the same period in
2004.  Our loss  increased  as a result of the  increase  and  decreases  in our
revenues and operating expenses discussed above.

Interest  expense  during the three  months  ended  March 31,  2005  amounted to
$496,840  for the three  months  ended March 31, 2005 as compared to $33,088 for
the three months ended March 31, 2004. The $463,752 increase is directly related
to our issuances of notes and increased  borrowings  that we made to finance our
acquisitions  of CSSI,  LucidLine and  Entelagent  and fund our working  capital
needs.  Interest  income,  which  amounted  to $19,250  during each of the three
months ended March 31, 2005 and 2004 represents  interest earned from loans that
we made to  Entelagent  prior to our  acquisition  of that business on March 30,
2005.


                                       29
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

We incurred a net loss of $2,203,795  for the three months ended March 31, 2005,
which includes  $877,500 of non-cash  charges for the fair value of common stock
we  issued  as  penalties  under  certain  registration  rights  agreements  and
amortization  of  deferred   compensation   under  a  stock  based  compensation
arrangement.  In addition, we used net cash flows in our operating activities of
$2,570,514  during  the  quarter  ended  March 31,  2005.  Our  working  capital
deficiency  at March 31, 2005 amounts to  $17,369,308  and we are  continuing to
experience  shortages in working  capital.  We are also involved in  substantial
litigation and are being investigated by the Securities and Exchange  Commission
with  respect  to  certain  of our  press  releases  and our use of form  S-8 to
register  shares of common stock that we issued to certain  consultants in prior
periods.  We cannot provide any assurance that the outcome of these matters will
not have a material  adverse affect on our ability to sustain the business.  Our
independent  registered  public  accounting  firm has expressed  doubt about our
ability to continue as a going concern

We expect to continue  incurring  losses for the  foreseeable  future due to the
inherent uncertainty that is related to establishing the commercial  feasibility
of technological  products and developing a presence in new markets. Our ability
to successfully  integrate acquired businesses is critical to the realization of
our business  plan.  We raised  $4,000,000  of gross  proceeds  ($3,683,421  net
proceeds  after the payment of certain  transaction  expenses) in two  financing
transactions,  including  $500,000  that  we  received  as  an  advance  from  a
stockholder  during the three months ended March 31, 2005. We used $2,570,514 of
these  proceeds  to fund our  operations  (which  includes a  $1,388,000  escrow
deposit for the payment of liabilities we assumed in business combinations), and
$473,291 in investing activities,  which principally includes the cash component
of purchase  business  combinations that we consummated  during the quarter.  We
also  repaid an  aggregate  of $318,793  of certain  obligations  due to certain
officer/stockholders.  Subsequent  to March 31,  2005,  we raised  approximately
$3,893,000 in additional gross funds in five capital financing transactions. Net
proceeds  from  these  transaction   amounted  to  $3,587,840  which  were  used
principally to fund operations.

We are currently in the process of attempting  to raise  additional  capital and
have  taken  certain  steps to  conserve  our  liquidity  while we  continue  to
integrate  the acquired  businesses.  Although we believe that we have access to
capital resources,  we have not secured any commitments for additional financing
at this time nor can we provide any assurance  that we will be successful in our
efforts to raise  additional  capital and/or  successfully  execute our business
plan.

OFF-BALANCE SHEET ARRANGEMENTS

At  March  31,  2005,  we did not  have any  relationships  with  unconsolidated
entities  or  financial  partnerships,  such as  entities  often  referred to as
structured finance,  variable interest or special purpose entities,  which would
have  been  established  for  the  purpose  of  facilitating  off-balance  sheet
arrangements or other contractually narrow or limited purposes.  As such, we are
not exposed to any financing,  liquidity, market or credit risk that could arise
if we had engaged in such relationships.

CAUTIONARY STATEMENTS AND RISK FACTORS

The risks noted below and  elsewhere  in this report and in other  documents  we
file  with the SEC are risks  and  uncertainties  that  could  cause our  actual
results   to  differ   materially   from  the   results   contemplated   by  the
forward-looking  statements contained in this report and other public statements
we make.

RISKS RELATED TO OUR COMMON STOCK

THERE IS DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.

We  currently  have a number of  obligations  that we are unable to meet without
generating  additional  revenues  or raising  additional  capital.  If we cannot
generate  additional revenues or raise additional capital in the near future, we
may become insolvent. As of March 31, 2005, our cash balance was $366,721 and we
had a working  capital  deficit of $17,369,308.  This raises  substantial  doubt
about our ability to continue as a going concern.  Historically,  we have funded
our capital  requirements with debt and equity financing.  Our ability to obtain
additional equity or debt


                                       30
<PAGE>


financing depends on a number of factors including our financial performance and
the overall  conditions in our industry.  If we are not able to raise additional
financing or if such  financing is not  available on  acceptable  terms,  we may
liquidate assets, seek or be forced into bankruptcy,  and/or continue operations
but suffer  material  harm to our  operations  and  financial  condition.  These
measures  could have a material  adverse  affect on our ability to continue as a
going concern.

INVESTORS MAY NOT BE ABLE TO ADEQUATELY  EVALUATE OUR BUSINESS AND PROSPECTS DUE
TO OUR  LIMITED  OPERATING  HISTORY,  LACK  OF  REVENUES  AND  LACK  OF  PRODUCT
OFFERINGS.

We are at an early stage of executing  our business  plan and have no history of
offering information security  capabilities.  Combined Professional Services was
incorporated  in Nevada in 1995 and Patron Systems was  incorporated in Delaware
in 2002. We have not had significant  business operations since inception.  As a
result of our limited history, it may be difficult to plan operating expenses or
forecast our revenues  accurately.  Our  assumptions  about  customer or network
requirements may be wrong. The revenue and income potential of these products is
unproven,  and the markets  addressed by these  products are  volatile.  If such
products are not  successful,  our actual  operating  results could be below our
expectations and the expectations of investors and market analysts,  which would
likely cause the price of our common stock to decline.

We have generated no revenue from operations as of December 31, 2004 and rely on
financing   generated   from  our  capital   raising   activities  to  fund  the
implementation  of our business plan. We have incurred  operating and net losses
and negative cash flows from  operations  since our  inception.  As of March 31,
2005,  we had an  accumulated  deficit  of  approximately  $42  million.  We may
continue to incur  operating  and net losses,  due in part to  implementing  our
acquisitions  strategy,  engaging in financing  activities  and expansion of our
personnel and our business  development  capabilities.  We will continue to seek
financing for the acquisition of other acquisition  targets that we may identify
in the future.  We continue to believe that we will secure financing in the near
future, but there can be no assurance of our success. If we are unable to obtain
the  necessary  funding,  it will  materially  adversely  affect our  ability to
execute our business plan and to continue our operations.

In addition, we may not be able to achieve or maintain profitability,  and, even
if we do  achieve  profitability,  the  level  of any  profitability  cannot  be
predicted and may vary significantly from quarter to quarter.

THERE CAN BE NO GUARANTY  THAT A MARKET WILL  DEVELOP FOR THE PRODUCTS WE INTEND
TO OFFER.

We currently have a limited offering of products.  We intend to acquire products
through the acquisition of existing businesses. There is no guarantee,  however,
that a market will develop for Internet security solutions of the type we intend
to  offer.  We cannot  predict  the size of the  market  for  Internet  security
solutions,  the rate at which the  market  will  grow,  or  whether  our  target
customers will accept our acquired products.

OUR  OPERATING  RESULTS  MAY  FLUCTUATE  SIGNIFICANTLY,   WHICH  MAY  RESULT  IN
VOLATILITY OR HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK.

The  market  prices  of the  securities  of  technology-related  companies  have
historically  been  volatile and may continue to be volatile.  Thus,  the market
price of our common stock is likely to be subject to wide  fluctuations.  If our
revenues do not grow or grow more slowly than we  anticipate,  if  operating  or
capital   expenditures   exceed   our   expectations   and   cannot  be  reduced
appropriately,  or if some other event adversely affects us, the market price of
our common stock could decline.  Only a small public market currently exists for
our common stock and the number of shares eligible for sale in the public market
is currently  very limited,  but is expected to increase.  Sales of  substantial
shares in the future would depress the price of our common  stock.  In addition,
we currently do not receive any stock market research coverage by any recognized
stock  market  research  or  trading  firm and our  shares are not traded on any
national  securities  exchange.  A larger and more active  market for our common
stock may not develop.

Because of our limited  operations  history  and lack of assets and  revenues to
date, our common stock is believed to be currently  trading on speculation  that
we will be successful in implementing  our  acquisition  and growth  strategies.
There can be no assurance  that such  success  will be achieved.  The failure to
implement our acquisitions  and growth  strategies would likely adversely affect
the  market  price  of  our  common  stock.  In  addition,  if  the  market  for


                                       31
<PAGE>


technology-related stocks or the stock market in general experiences a continued
or greater loss in investor  confidence or otherwise  fails, the market price of
our common stock could decline for reasons unrelated to our business, results of
operations  and financial  condition.  The market price of our common stock also
might decline in reaction to events that affect other  companies in our industry
even if these events do not directly  affect us.  General  political or economic
conditions, such as an outbreak of war, a recession or interest rate or currency
rate  fluctuations,  could also cause the  market  price of our common  stock to
decline.  Our  common  stock  has  experienced,  and is likely  to  continue  to
experience, these fluctuations in price, regardless of our performance.

WE ARE CURRENTLY SUBJECT TO AN SEC INVESTIGATION.

Pursuant  to  Section  20(a)  of the  Securities  Act and  Section  21(a) of the
Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), the staff of
the SEC (the "Staff"),  issued an order (In the Matter of Patron Systems, Inc. -
Order  Directing  a  Private  Investigation  and  Designating  Officers  to Take
Testimony  (C-03739-A,   February  12,  2004))  (the  "Order")  that  a  private
investigation (the "SEC  Investigation") be made to determine whether certain of
our actions,  among others, certain of its officers and directors and others (as
described  below)  violated  Section 5(a) and 5(c) of the  Securities Act and/or
Section 10 and Rule 10b-5  promulgated  under the Exchange Act.  Generally,  the
Order  provides,  among other things,  that the Staff is  investigating  (i) the
legality of two (2) separate  Registration  Statements  filed by us on Form S-8,
filed on  December  20,  2002 and on April 2, 2003,  as amended on April 9, 2003
(collectively,  the "Registration  Statements"),  covering the resale of, in the
aggregate,   4,375,000   shares  of  common  stock  issued  to  various  of  our
consultants,  and (ii) whether in connection with the purchase or sale of shares
of common stock,  certain of our officers,  directors and others (a) sold common
stock  in  violation  of  Section  5 of the  Securities  Act  and/or,  (b)  made
misrepresentations and/or omissions of material facts and/or employed fraudulent
devices in connection  with such  purchases  and/or sales relating to certain of
our  press  releases  regarding,   among  other  items,   proposed  mergers  and
acquisitions  that were never  consummated.  If the SEC brings an action against
us, it could  result in,  among  other  items,  a civil  injunctive  order or an
administrative  cease-and-desist  order being entered against us, in addition to
the imposition of a significant civil penalty.  Moreover,  the SEC Investigation
and/or a subsequent  SEC action could affect  adversely  our ability to have our
common stock listed on a stock exchange and/or quoted on the NASD Bulletin Board
or  NASDAQ,  our  ability  to sell our  securities  and/or  have our  securities
registered with the SEC and/or in various states and/or our ability to implement
its business  plan. To date, our legal counsel  representing  us in such matters
has  indicated  that the SEC  Investigation  is  ongoing  and the  Staff has not
indicated  whether  it  will  or will  not  recommend  that  the  SEC  bring  an
enforcement action against us, our officers, directors and/or others.

THE  CONCENTRATION  OF OUR CAPITAL  STOCK  OWNERSHIP  WITH INSIDERS IS LIKELY TO
LIMIT THE ABILITY OF OTHER STOCKHOLDERS TO INFLUENCE CORPORATE MATTERS.

As of June 24, 2005, the executive  officers,  directors and entities affiliated
with  any  of  them  together  beneficially  own  approximately  29.56%  of  our
outstanding  common  stock.  As a  result,  these  stockholders  may be  able to
exercise control over matters requiring approval by our stockholders,  including
the election of directors and approval of  significant  corporate  transactions.
This  concentration  of  ownership  might  also have the effect of  delaying  or
preventing a change in our control that might be viewed as  beneficial  by other
stockholders.

FUTURE SALES OF SHARES BY EXISTING  STOCKHOLDERS  COULD CAUSE OUR STOCK PRICE TO
DECLINE.

If our  existing  or  future  stockholders  sell,  or  are  perceived  to  sell,
substantial  amounts of our common stock in the public market,  the market price
of our common stock could  decline.  As of June 24, 2005,  there are  55,796,712
shares of common stock outstanding,  of which all but 39,234,580 shares are held
by directors,  executive  officers and other  affiliates,  the sale of which are
subject to volume limitations under Rule 144, various vesting agreements and our
quarterly  and  other  "blackout"  periods.   Furthermore,   shares  subject  to
outstanding  options and warrants and shares  reserved for future issuance under
our stock option plan will become  eligible for sale in the public market to the
extent  permitted by the provisions of various vesting  agreements,  the lock-up
agreements and Rule 144 under the Securities Act.

THE  UNPREDICTABILITY  OF AN ACQUIRED COMPANY'S  QUARTERLY RESULTS MAY CAUSE THE
TRADING PRICE OF OUR COMMON STOCK TO DECLINE.


                                       32
<PAGE>


The quarterly  revenues and  operating  results of companies we may acquire will
likely continue to vary in the future due to a number of factors,  many of which
are outside of our control.  Any of these  factors  could cause the price of our
common stock to decline. The primary factors that may affect future revenues and
future operating results include the following:

         o        the demand for our subsidiaries' current product offerings and
                  our future products;
         o        the length of sales cycles;
         o        the timing of recognizing revenues;
         o        new product introductions by us or our competitors;
         o        changes in our pricing policies or the pricing policies of our
                  competitors;
         o        variations in sales channels, product costs or mix of products
                  sold;
         o        our ability to develop,  introduce and ship in a timely manner
                  new  products  and  product  enhancements  that meet  customer
                  requirements;
         o        our ability to obtain  sufficient  supplies of sole or limited
                  source components for our products;
         o        variations in the prices of the components we purchase;
         o        our  ability to attain and  maintain  production  volumes  and
                  quality  levels for our products at  reasonable  prices at our
                  third-party manufacturers;
         o        our ability to manage our customer base and credit risk and to
                  collect our accounts receivable; and
         o        the  financial  strength  of  our  value-added  resellers  and
                  distributors.

Our  operating  expenses are largely  based on  anticipated  revenues and a high
percentage  of our  expenses  are,  and will  continue to be, fixed in the short
term. As a result,  lower than  anticipated  revenues for any reason could cause
significant  variations  in our  operating  results from quarter to quarter and,
because of our rapidly growing operating  expenses,  could result in substantial
operating losses.

OUR  COMMON  STOCK  IS  SUBJECT  TO THE  SEC'S  PENNY  STOCK  RULES.  THEREFORE,
BROKER-DEALERS MAY EXPERIENCE DIFFICULTY IN COMPLETING CUSTOMER TRANSACTIONS AND
TRADING ACTIVITY IN OUR SECURITIES MAY BE ADVERSELY AFFECTED.

If at any time a company has net tangible  assets of  $5,000,000 or less and the
common  stock has a market price per share of less than $5.00,  transactions  in
the common stock may be subject to the "penny stock" rules promulgated under the
Exchange Act. Under these rules, broker-dealers who recommend such securities to
persons other than institutional accredited investors must:

         o        make a  special  written  suitability  determination  for  the
                  purchaser;
         o        receive the  purchaser's  written  agreement to a  transaction
                  prior to sale;
         o        provide the purchaser  with risk  disclosure  documents  which
                  identify  certain risks  associated  with  investing in "penny
                  stocks" and which describe the market for these "penny stocks"
                  as well as a purchaser's legal remedies; and
         o        obtain a signed and dated  acknowledgment  from the  purchaser
                  demonstrating  that the  purchaser  has actually  received the
                  required risk  disclosure  document  before a transaction in a
                  "penny stock" can be completed.

If our common stock becomes subject to these rules,  broker-dealers  may find it
difficult  to  effectuate  customer  transactions  and  trading  activity in our
securities  may be  adversely  affected.  As a result,  the market  price of our
securities may be depressed, and stockholders may find it more difficult to sell
their shares of our common stock.

RISKS RELATED TO OUR BUSINESS

WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES.

Our business plan is dependent upon the acquisition and integration of companies
that have previously  operated  independently.  The process of integrating could
cause an interruption of, or loss of momentum in, the activities of our business
and the loss of key personnel.  The diversion of management's  attention and any
delays  or  difficulties  encountered  in  connection  with our  integration  of
acquired  operations  could have an adverse  effect on our business,  results of
operations, financial condition or prospects.


                                       33
<PAGE>


WE CURRENTLY DO NOT HAVE SUFFICIENT  REVENUES TO SUPPORT OUR BUSINESS ACTIVITIES
AND IF OPERATING LOSSES CONTINUE,  WILL BE REQUIRED TO OBTAIN ADDITIONAL CAPITAL
THROUGH FINANCINGS WHICH WE MAY NOT BE ABLE TO SECURE.

To achieve our intended growth, we will require substantial  additional capital.
We have  encountered  difficulty  and delays in raising  capital to date and the
market   environment  for  development  stage  companies,   like  ours,  remains
particularly challenging. There can be no assurance that funds will be available
when  needed or on  acceptable  terms.  Technology  companies  in  general  have
experienced difficulty in recent years in accessing capital. Inability to obtain
additional financing may require us to delay, scale back or eliminate certain of
our growth plans which could have a material and adverse effect on our business,
financial condition or results of operations or to cease operations.  Even if we
are able to obtain additional  financing,  such financing could be structured as
equity  financing that would dilute the ownership  percentage of any investor in
our securities.

DOWNTURNS IN THE INTERNET  INFRASTRUCTURE,  NETWORK SECURITY AND RELATED MARKETS
MAY DECREASE OUR REVENUES AND MARGINS.

The  market  for our  current  products  and other  products  we intend to offer
depends on economic  conditions  affecting the broader Internet  infrastructure,
network  security  and related  markets.  Downturns  in these  markets may cause
enterprises  and  carriers to delay or cancel  security  projects,  reduce their
overall or security-specific  information technology budgets or reduce or cancel
orders for our current  products and other products we intend to offer.  In this
environment, customers such as distributors,  value-added resellers and carriers
may  experience  financial  difficulty,  cease  operations and fail to budget or
reduce  budgets for the  purchase of our current  products or other  products we
intend to offer.  This,  in turn,  may lead to longer  sales  cycles,  delays in
purchase  decisions,  payment  and  collection,  and may  also  result  in price
pressures,  causing us to realize  lower  revenues,  gross margins and operating
margins.  In  addition,   general  economic   uncertainty  caused  by  potential
hostilities involving the United States,  terrorist  activities,  the decline in
specific markets such as the service  provider market in the United States,  and
the general  decline in capital  spending in the information  technology  sector
make it difficult to predict changes in the purchase and network requirements of
our potential  customers and the markets we intend to serve. We believe that, in
light of these events, some businesses may curtail or eliminate capital spending
on  information  technology.  A decline in capital  spending  in the  markets we
intend to serve may  adversely  affect our future  revenues,  gross  margins and
operating margins and make it necessary for us to gain significant  market share
from our future  competitors in order to achieve our financial goals and achieve
profitability.

COMPETITION MAY DECREASE OUR PROJECTED REVENUES, MARKET SHARE AND MARGINS.

The market for network security  products is highly  competitive,  and we expect
competition  to intensify in the future.  Competitors  may gain market share and
introduce new competitive  products for the same markets and customers we intend
to serve with our products.  These products may have better  performance,  lower
prices and broader  acceptance than the products we currently offer or intend to
offer.

Many of our potential competitors have longer operating histories,  greater name
recognition,   large  customer  bases  and  significantly   greater   financial,
technical,  sales, marketing and other resources than we have. In addition, some
of our  potential  competitors  currently  combine  their  products  with  other
companies'  networking and security products.  These potential  competitors also
often combine their sales and marketing  efforts.  Such activities may result in
reduced  prices,  lower gross and operating  margins and longer sales cycles for
the  products  we  currently  offer and  intend to offer.  If any of our  larger
potential  competitors were to commit greater  technical,  sales,  marketing and
other  resources to the markets we intend to serve,  or reduce  prices for their
products over a sustained  period of time, our ability to successfully  sell the
products  we intend to offer,  increase  revenue or meet our or market  analysts
expectations could be adversely affected.

FAILURE TO ADDRESS  EVOLVING  STANDARDS  IN THE NETWORK  SECURITY  INDUSTRY  AND
SUCCESSFULLY  DEVELOP AND INTRODUCE NEW PRODUCTS OR PRODUCT  ENHANCEMENTS  WOULD
CAUSE OUR REVENUES TO DECLINE.

The market for network security products is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving   industry   standards.   We  expect  to  introduce  our  products  and
enhancements  to existing  products to address  current  and  evolving  customer
requirements and broader networking trends and  vulnerabilities.  We also expect
to develop products with strategic partners and incorporate


                                       34
<PAGE>


third-party advanced security  capabilities into our intended product offerings.
Some of these products and  enhancements  may require us to develop new hardware
architectures that involve complex and time-consuming  processes.  In developing
and introducing our intended product offerings,  we have made, and will continue
to make,  assumptions  with respect to which  features,  security  standards and
performance  criteria  will  be  required  by  our  potential  customers.  If we
implement  features,  security  standards  and  performance  criteria  that  are
different from those required by our potential  customers,  market acceptance of
our intended product  offerings may be significantly  reduced or delayed,  which
would harm our ability to penetrate existing or new markets.

Furthermore,  we may not be able to develop new products or product enhancements
in a timely  manner,  or at all. Any failure to develop or  introduce  these new
products and product  enhancements  might cause our existing products to be less
competitive, may adversely affect our ability to sell solutions to address large
customer  deployments  and, as a  consequence,  our  revenues  may be  adversely
affected.  In addition,  the introduction of products embodying new technologies
could render existing  products we intend to offer obsolete,  which would have a
direct,  adverse  effect on our market  share and  revenues.  Any failure of our
future products or product enhancements to achieve market acceptance could cause
our revenues to decline and our operating  results to be below our  expectations
and the expectations of investors and market analysts,  which would likely cause
the price of our common stock to decline.

WE HAVE  MATERIAL  WEAKNESSES IN OUR FINANCIAL  SYSTEMS,  INTERNAL  CONTROLS AND
OPERATIONS  THAT  COULD  HAVE A  MATERIAL  ADVERSE  EFFECT  ON  OUR  OPERATIONS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Our ability to sell our intended  product  offerings  and implement our business
plan successfully in a volatile and growing market requires effective management
and financial  systems and a system of financial  processes  and  controls.  Our
Chief  Executive  Officer  and Acting  Chief  Financial  Officer  evaluated  the
effectiveness  of our  disclosure  controls and  procedures in  accordance  with
Exchange Act Rules 13a-15 or 15d-15 and  identified  material  weaknesses in our
internal  control  relating to, among other things,  our limited  segregation of
duties,  ability to identify and record complex  transactions  including capital
financing  transactions  and  business  combinations  and  timely  file  our tax
returns.  The  identification  of these  material  weaknesses  has led our Chief
Executive  Officer  and Acting  Chief  Financial  Officer to  conclude  that our
disclosure  controls and  procedures  are currently not adequate to enable us to
record, process, summarize and report information required to be included in our
periodic SEC filings within the required time period.

We have  limited  management  resources to date and are still  establishing  our
management and financial systems.  Growth, to the extent it occurs, is likely to
place a considerable strain on our management resources,  systems, processes and
controls.  To address  these  issues,  we will need to  continue  to improve our
financial and managerial  controls,  reporting systems and procedures,  and will
need to continue to expand, train and manage our work force worldwide. If we are
unable to maintain an adequate level of financial processes and controls, we may
not be able to accurately report our financial performance on a timely basis and
our business and stock price would be harmed.

IF OUR FUTURE  PRODUCTS DO NOT  INTEROPERATE  WITH OUR END CUSTOMERS'  NETWORKS,
INSTALLATIONS WOULD BE DELAYED OR CANCELLED,  WHICH COULD  SIGNIFICANTLY  REDUCE
OUR ANTICIPATED REVENUES.

Future  products will be designed to interface with our end customers'  existing
networks,  each of which have  different  specifications  and  utilize  multiple
protocol standards. Many end customers' networks contain multiple generations of
products  that  have  been  added  over time as these  networks  have  grown and
evolved.  Our future products must  interoperate with all of the products within
these  networks  as well as with  future  products  that might be added to these
networks in order to meet end customers' requirements.  If we find errors in the
existing  software used in our end customers'  networks,  we may elect to modify
our  software  to fix or  overcome  these  errors  so  that  our  products  will
interoperate and scale with their existing software and hardware.  If our future
products do not  interoperate  with those  within our end  customers'  networks,
installations  could be delayed or orders for our products  could be  cancelled,
which could significantly reduce our anticipated revenues.

AS A PUBLIC  COMPANY,  WE MAY  INCUR  INCREASED  COSTS AS A RESULT  OF  RECENTLY
ENACTED AND  PROPOSED  CHANGES IN LAWS AND  REGULATIONS  RELATING  TO  CORPORATE
GOVERNANCE MATTERS AND PUBLIC DISCLOSURE.

Recently  enacted and  proposed  changes in the laws and  regulations  affecting
public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and
rules adopted or proposed by the SEC will result in increased


                                       35
<PAGE>


costs for us as we evaluate  the  implications  of these laws,  regulations  and
standards and respond to their  requirements.  These laws and regulations  could
make  it more  difficult  or more  costly  for us to  obtain  certain  types  of
insurance,  including  director and officer liability  insurance,  and we may be
forced to accept  reduced  policy  limits and  coverage  or incur  substantially
higher costs to obtain the same or similar coverage.  The impact of these events
could also make it more difficult for us to attract and retain qualified persons
to serve on our board of directors,  board committees or as executive  officers.
We cannot  estimate the amount or timing of  additional  costs we may incur as a
result of these laws and regulations.

WE WILL DEPEND ON OUR KEY  PERSONNEL  TO MANAGE OUR  BUSINESS  EFFECTIVELY  IN A
RAPIDLY  CHANGING MARKET,  AND IF WE ARE UNABLE TO HIRE ADDITIONAL  PERSONNEL OR
RETAIN EXISTING PERSONNEL, OUR ABILITY TO EXECUTE OUR BUSINESS STRATEGY WOULD BE
IMPAIRED.

Our  future  success  depends  upon  the  continued  services  of our  executive
officers. The loss of the services of any of our key employees, the inability to
attract  or  retain  qualified  personnel  in the  future,  or  delays in hiring
required  personnel,  could  delay the  development  and  introduction  of,  and
negatively impact our ability to sell, our intended product offerings.

WE MIGHT HAVE TO DEFEND  LAWSUITS OR PAY DAMAGES IN CONNECTION  WITH ANY ALLEGED
OR ACTUAL FAILURE OF OUR PRODUCTS AND SERVICES.

Because our intended product  offerings and services provide and monitor network
security and may protect valuable information,  we could face claims for product
liability,  tort or breach of  warranty.  Anyone who  circumvents  our  security
measures could misappropriate the confidential  information or other property of
end  customers  using our  products,  or  interrupt  their  operations.  If that
happens,  affected  end  customers  or others may sue us.  Defending  a lawsuit,
regardless of its merit, could be costly and could divert management  attention.
Our business  liability  insurance coverage may be inadequate or future coverage
may be unavailable on acceptable terms or at all.

WE COULD BECOME SUBJECT TO LITIGATION  REGARDING  INTELLECTUAL  PROPERTY  RIGHTS
THAT COULD BE COSTLY AND RESULT IN THE LOSS OF SIGNIFICANT RIGHTS.

In recent  years,  there has been  significant  litigation  in the United States
involving patents and other intellectual  property rights. We may become a party
to litigation in the future to protect our intellectual  property or as a result
of an alleged infringement of another party's intellectual property.  Claims for
alleged infringement and any resulting lawsuit, if successful,  could subject us
to significant liability for damages and invalidation of our proprietary rights.
These lawsuits,  regardless of their success, would likely be time-consuming and
expensive  to  resolve  and would  divert  management  time and  attention.  Any
potential intellectual property litigation could also force us to do one or more
of the following:

         o        stop or delay  selling,  incorporating  or using products that
                  use the challenged intellectual property; and/or
         o        obtain from the owner of the infringed  intellectual  property
                  right a license to sell or use the relevant technology,  which
                  license might not be available on reasonable  terms or at all;
                  or redesign the products that use that technology.

If we are forced to take any of these  actions,  our business might be seriously
harmed.  Our insurance may not cover potential claims of this type or may not be
adequate to indemnify us for all liability that could be imposed.

THE INABILITY TO OBTAIN ANY THIRD-PARTY LICENSE REQUIRED TO DEVELOP NEW PRODUCTS
AND PRODUCT  ENHANCEMENTS  COULD REQUIRE US TO OBTAIN  SUBSTITUTE  TECHNOLOGY OF
LOWER QUALITY OR PERFORMANCE STANDARDS OR AT GREATER COST, WHICH COULD SERIOUSLY
HARM OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

From time to time, we may be required to license  technology  from third parties
to develop new products or product enhancements. Third-party licenses may not be
available to us on  commercially  reasonable  terms or at all. The  inability to
obtain any  third-party  license  required  to develop  new  products or product
enhancements  could require us to obtain substitute  technology of lower quality
or  performance  standards or at greater cost,  which could  seriously  harm our
business, financial condition and results of operations.


                                       36
<PAGE>


GOVERNMENTAL  REGULATIONS  AFFECTING  THE  IMPORT OR EXPORT  OF  PRODUCTS  COULD
NEGATIVELY AFFECT OUR REVENUES.

Governmental  regulation  of imports  or  exports or failure to obtain  required
export approval of our encryption  technologies could harm our international and
domestic sales.  The United States and various foreign  governments have imposed
controls,  export license  requirements and restrictions on the import or export
of some technologies,  especially encryption technology.  In addition, from time
to time, governmental agencies have proposed additional regulation of encryption
technology,  such as requiring the escrow and  governmental  recovery of private
encryption keys.

In particular,  in light of recent terrorist  activity,  governments could enact
additional regulation or restrictions on the use, import or export of encryption
technology.  Additional  regulation  of  encryption  technology  could  delay or
prevent the  acceptance and use of encryption  products and public  networks for
secure  communications.  This might  decrease  demand for our  intended  product
offerings and services.  In addition,  some foreign  competitors  are subject to
less stringent controls on exporting their encryption technologies. As a result,
they may be able to compete  more  effectively  than we can in the  domestic and
international network security market.

MANAGEMENT COULD INVEST OR SPEND OUR CASH OR CASH EQUIVALENTS AND INVESTMENTS IN
WAYS THAT MIGHT NOT ENHANCE OUR RESULTS OF OPERATIONS OR MARKET SHARE.

We have  made no  specific  allocations  of our  cash  or cash  equivalents  and
investments.  Consequently,  management  will  retain a  significant  amount  of
discretion over the application of our cash or cash  equivalents and investments
and could spend the proceeds in ways that do not improve our  operating  results
or increase our market share. In addition, these proceeds may not be invested to
yield a favorable rate of return.


ITEM 3.  CONTROLS AND PROCEDURES

Members of our  management,  including  our Chief  Executive  Officer and Acting
Chief  Financial  Officer,  have evaluated the  effectiveness  of our disclosure
controls  and  procedures,  as defined by  paragraph  (e) of Exchange  Act Rules
13(a)-15  or  15(d)-15.  Based  on that  evaluation  and the  material  weakness
described below, our Chief Executive  Officer and Acting Chief Financial Officer
concluded  that our  disclosure  controls  and  procedures  were not adequate to
enable us to record,  process,  summarize and report information  required to be
included in our periodic SEC filings within the required time period.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS

Disclosure  controls  are  procedures  that are designed  with the  objective of
ensuring  that  information  required to be disclosed in our reports filed under
the  Securities  Exchange  Act of 1934,  as  amended,  such as this  Report,  is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's rules and forms.  Disclosure  controls are also  designed  with the
objective of ensuring that such  information is accumulated and  communicated to
our management, including our Chief Executive Officer and Senior Vice President,
Finance and Administration,  as appropriate, to allow timely decisions regarding
required  disclosure.  Internal  controls are procedures which are designed with
the  objective of  providing  reasonable  assurance  that our  transactions  are
properly  authorized,  recorded  and  reported  and our assets  are  safeguarded
against unauthorized or improper use, to permit the preparation of our financial
statements in conformity with generally accepted accounting principles.

Our company is not an "accelerated filer" (as defined in the Securities Exchange
Act) and is not  required  to deliver  management's  report on control  over our
financial reporting until our fiscal year ended December 31, 2006. Nevertheless,
we identified  certain  matters that would  constitute  material  weaknesses (as
defined under the Public Company  Accounting  Oversight Board Auditing  Standard
No. 2) in our internal controls over financial reporting.

We have identified  deficiencies in our system of internal  controls,  which are
considered to be material  weaknesses.  These material weaknesses have led us to
conclude  that we currently  have an  inadequate  structure  with respect to our
financial  reporting  systems.  Until March of 2005, we had no central corporate
accounting  department.  Each of our subsidiaries  separately maintained its own
books and records and independently  controlled its cash  disbursements and cash
receipts.   The  decentralized  nature  of  our  accounting  system  limits  the
effectiveness of our


                                       37
<PAGE>


internal control  procedures and our ability to detect  potential  misstatements
and incorrect  accounting and financial  reporting.  The  subsidiary  accounting
departments do not have the sophistication to critically  evaluate and implement
new  accounting  pronouncements,  and  stock  based  transactions  for  options,
warrants  and  common  stock,  At times  these  transactions  were not  recorded
properly and required  additional  procedures and review and we were required to
record  adjustments  proposed by our independent  registered  public  accounting
firm.

Certain  of  the  material  weaknesses  we  identified  relate  to  our  limited
segregation  of duties.  Segregation of duties within our company is limited due
to the fact that we have not had (until recently) any full-time  employees since
February 10, 2004 and, until the completion of business  combination  during the
quarter  ended Maecg 31, 2005,  our  Company's  affairs have been managed by our
non-executive  Chairman and Sole  Director  Robert E, Yaw, II. In addition,  our
financial  records up until that time were  maintained by a former  employee who
had been providing  these services to us on a consulting  basis.  This condition
constituted a material  weakness in our financial  reporting system and a system
of internal  controls that has affected our ability to timely close our books on
a quarterly and annual basis.

The second  material  weakness we  identified is in our ability to implement the
requirements of complex accounting  pronouncements.  We have had difficulty with
ensuring that the accounting for our  equity-based  transactions is accurate and
complete.  Since April 30, 2002  (Inception),  we have  consummated  a series of
complex equity  transactions  involving the  application  of highly  specialized
accounting principles. The equity based transactions that we have had difficulty
with specifically relate to stock to be issued under consulting agreements,  the
penalty shares to be issued in connection with the Accommodation Agreements, and
the common  stock to be  repurchased  in  connection  with the Allin  Settlement
Agreement. We also experienced difficulty with applying the requirements of SFAS
141  "Business  Combinations"  and  related  pronouncement  as it relates to our
acquisitions of CSSI, LucidLine and Entelagent. Although we believe that certain
of these events are unique and that our equity based  transactions in the future
are likely to be substantially  reduced,  we are evaluating  certain  corrective
measures  to  provide  us with the  structure  we need at such times that we may
engage  in  equity  based  transactions  and  consummate   additional   business
combinations in the future.

The third  material  weakness we identified is in our ability to implement a tax
reporting  structure to file, on a timely basis,  Federal and state tax returns.
This material  weakness is primarily due to our limited  segregation  of duties.
Through  our   acquisitions  of  CSSI,   LucidLine  and   Entelagent,   we  have
significantly  increased  the number of  employees  working for us and intend to
implement a tax reporting structure to address this deficiency.

We believe these material  weaknesses  resulted from continued  working  capital
deficiencies and a failure to generate cash flows from  operations.  Immediately
following our acquisitions,  we appointed a Chief Executive Officer/Acting Chief
Financial  Officer who is principally  responsible  for overseeing our financial
affairs. In addition, we increased our number of employees with our acquisitions
of  Entelagent,  LucidLine  and CSSI and have  begun the  process  of  screening
candidates  for key  positions  in our finance  department.  We believe that the
expansion of our  operations and increase in the number of employees will enable
us  to  take  corrective   measures  once  we  finish  evaluating  our  existing
capabilities  and our  available  resources  to take such  corrective  measures.
Additionally,  we expect to hire a Chief  Financial  Officer with public company
experience within the next twelve months and relieve our Chief Executive Officer
of his current Acting Chief Financial Officer duties.

We believe that any such risks are  partially  mitigated by the fact that we had
minimal  assets  and  activities  during  our  most  recent  reporting  periods,
recordkeeping  and  authorization  function were not being performed by the same
individual  and the  non-executive  Chairman  reviewed  and  approved all of our
transactions.  However,  we acknowledge that additional  control  procedures are
necessary to ensure that our  transactions  are  properly  recorded and that our
assets are appropriately safeguarded.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our  internal  control over  financial  reporting or in
other factors identified in connection with the evaluation required by paragraph
(d) of Exchange Act Rules 13(a)-15 or 15(d)-15 that occurred  during the quarter
ended  March 31, 2005 or the four  quarters  ended  December  31, 2004 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.


                                       38
<PAGE>


PART II - OTHER INFORMATION

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

The following  unregistered  equity securities have been issued by us during the
period from January 1, 2005 to March 31, 2005:

<TABLE>
<CAPTION>
                TITLE AND AMOUNT OF SECURITIES      NAME OF        NAME OR CLASS OF
                  GRANTED/EXERCISE PRICE IF        PRINCIPAL     PERSONS WHO RECEIVED    CONSIDERATION
DATE OF GRANT             APPLICABLE              UNDERWRITER         SECURITIES           RECEIVED
-------------   ------------------------------    -----------    --------------------    -------------
<S>                 <C>                               <C>         <C>                       <C>
  February          4,400,000/COMMON STOCK            NONE          STOCKHOLDERS OF         $0.00(1)
    2005                                                            LUCIDLINE, INC.

  February          7,500,000/COMMON STOCK            NONE          STOCKHOLDERS OF         $0.00(2)
    2005                                                           COMPLETE SECURITY
                                                                    SOLUTIONS, INC.

 March 2005         3,000,000/COMMON STOCK            NONE          STOCKHOLDERS OF         $0.00(3)
                                                                  ENTELAGENT SOFTWARE
                                                                         CORP.
<FN>
1.       On February 25,  2005,  we agreed to issue  4,400,000  shares of common
         stock  to  the  stockholders  of our  subsidiary,  LucidLine,  Inc.  in
         consideration of our merger with LucidLine, Inc.
2.       On February 25,  2005,  we agreed to issue  7,500,000  shares of common
         stock to the  stockholders  of  Complete  Security  Solutions,  Inc. in
         consideration of our merger with Complete Security Solutions, Inc.
3.       On March 30, 2005, we agreed to issue 3,000,000  shares of common stock
         to the  stockholders of Entelagent  Software Corp. in  consideration of
         our merger with Entelagent Software Corp.
</FN>
</TABLE>

The following  unregistered  derivative  securities  (options and warrants) have
been issued by us during the period from January 1, 2005 to March 31, 2005:

<TABLE>
<CAPTION>
                TITLE AND AMOUNT OF SECURITIES      NAME OF        NAME OR CLASS OF
                  GRANTED/EXERCISE PRICE IF        PRINCIPAL     PERSONS WHO RECEIVED    CONSIDERATION
DATE OF GRANT             APPLICABLE              UNDERWRITER         SECURITIES           RECEIVED
-------------   ------------------------------    -----------    --------------------    -------------
<S>             <C>                                   <C>        <C>                       <C>
February 2005   2,250,000/Common Stock Purchase       None        Series A Preferred       $0.00(1)
                            Warrants                                Stockholders of
                                                                   Complete Security
                                                                    Solutions, Inc.

February 2005   1,750,000/Common Stock Purchase       None       33 Accredited Investors   $0.00(2)
                           Warrants                                 in Interim Bridge
                                                                       Financing I

February 2005    650,000/Common Stock Purchase        None       Laidlaw & Company (UK)    $0.00(3)
                           Warrants                                      Ltd.
<FN>
1.       On February  25,  2005,  we agreed to issue  warrants to purchase up to
         2,250,000  shares  of our  common  stock  to  the  Series  A  Preferred
         stockholders of Complete Security  Solutions,  Inc. in consideration of
         our merger with Complete Security  Solutions,  Inc. The warrants have a
         term of 5 years and an exercise price of $0.70 per share.
2.       On February  28, 2005,  we issued  warrants to purchase up to 1,750,000
         shares of our common stock to 33  accredited  investors who invested in
         our Interim Bridge Financing I. The warrants have a term of 5 years and
         an exercise price of $0.70 per share.
3.       On  February  28,  2005,  we issued  warrants to purchase up to 650,000
         shares of our common stock to Laidlaw & Company (UK) Ltd. In connection
         with services  rendered to us as the placement agent for Interim Bridge
         Financing  I and  financial  services  related to the  acquisitions  of
         Entelagent, CSSI and LucidLine. The warrants have a term of 5 years and
         an exercise price of $0.70 per share.
</FN>
</TABLE>

The above unregistered  securities were issued pursuant to an exemption from the
registration  requirements  of the  Securities  Act  under  Section  4(2) of the
Securities Act.


                                       39
<PAGE>


ITEM 6.  EXHIBITS

EXHIBIT
NUMBER                             DESCRIPTION OF EXHIBIT
-------        -----------------------------------------------------------------
2.1            Amended and Restated Supplemental  Agreement dated as of February
               24, 2005, by and among Patron  Systems,  Inc.,  ESC  Acquisition,
               Inc. and Entelagent Software Corp.  (incorporated by reference to
               Exhibit  10.1 to the  Current  Report on Form 8-K filed  March 2,
               2005).

2.2            Supplemental  Agreement  dated  February 24,  2005,  by and among
               Patron Systems, Inc., LL Acquisition I Corp. and LucidLine,  Inc.
               (incorporated  by reference to Exhibit 10.2 to the Current Report
               on Form 8-K filed March 2, 2005).

2.3            Agreement  and Plan of Merger dated  February  24,  2005,  by and
               among Patron Systems, Inc., LL Acquisition I Corp. and LucidLine,
               Inc.  (incorporated  by  reference to Exhibit 10.3 to the Current
               Report on Form 8-K filed March 2, 2005).

2.4            Supplemental  Agreement  dated  February 24,  2005,  among Patron
               Systems, Inc., CSSI Acquisition Co. I, Inc. and Complete Security
               Solutions, Inc. (incorporated by reference to Exhibit 10.5 to the
               Current Report on Form 8-K filed March 2, 2005).

2.5            Agreement  and Plan of Merger  dated  February  24,  2005,  among
               Patron Systems,  Inc., CSSI  Acquisition Co. I, Inc. and Complete
               Security  Solutions,  Inc.  (incorporated by reference to Exhibit
               10.6 to the Current Report on Form 8-K filed March 2, 2005).

2.6            Amended and Restated Agreement and Plan of Merger dated March 30,
               2005, by and among Patron Systems Inc., ESC Acquisition, Inc. and
               Entelagent  Software Corp.  (incorporated by reference to Exhibit
               10.1 to the Current Report on Form 8-K filed April 5, 2005).

10.1           Registration  Rights  Agreement  dated  February 24, 2005,  among
               Patron  Systems,  Inc.  and each of the  former  LucidLine,  Inc.
               shareholders  signatory  thereto  (incorporated  by  reference to
               Exhibit  10.4 to the  Current  Report on Form 8-K filed  March 2,
               2005).

10.2           Registration  Rights  Agreement  dated  February 24, 2005,  among
               Patron  Systems,  Inc. and each of the former  Complete  Security
               Solutions,  Inc. stockholders  signatory thereto (incorporated by
               reference to Exhibit 10.7 to the Current Report on Form 8-K filed
               March 2, 2005).

10.3           Form  of  Subordinated  Promissory  Note  issued  to  the  former
               preferred  stockholders  of  Complete  Security  Solutions,  Inc.
               (incorporated  by reference to Exhibit 10.8 to the Current Report
               on Form 8-K filed March 2, 2005).

10.4           Form of Common Stock Purchase  Warrant issued by Patron  Systems,
               Inc. in favor of the former  preferred  stockholders  of Complete
               Security  Solutions,  Inc.  (incorporated by reference to Exhibit
               10.9 to the Current Report on Form 8-K filed March 2, 2005).

10.5           Subscription  Agreement  dated  February 28,  2005,  among Patron
               Systems,  Inc. and each of the investors  listed on the signature
               pages thereto  (incorporated by reference to Exhibit 10.10 to the
               Current Report on Form 8-K filed March 2, 2005).

10.6           Registration  Rights  Agreement  dated  February 28, 2005,  among
               Patron  Systems,  Inc.  and each of the  investors  in the Bridge
               Financing listed on the signature pages thereto  (incorporated by
               reference  to  Exhibit  10.11 to the  Current  Report on Form 8-K
               filed March 2, 2005).

10.7           Form of 10% Senior  Convertible  Promissory Note (incorporated by
               reference  to  Exhibit  10.12 to the  Current  Report on Form 8-K
               filed March 2, 2005).


                                       40
<PAGE>


EXHIBIT
NUMBER                             DESCRIPTION OF EXHIBIT
-------        -----------------------------------------------------------------
10.8           Form of Common Stock Purchase  Warrant issued by Patron  Systems,
               Inc. in favor of investors in the Bridge Financing  (incorporated
               by reference to Exhibit  10.13 to the Current  Report on Form 8-K
               filed March 2, 2005).

10.9           Registration  Rights  Agreement  dated  February 28, 2005,  among
               Patron   Systems,   Inc.   and   Laidlaw  &  Company   (UK)  Ltd.
               (incorporated by reference to Exhibit 10.14 to the Current Report
               on Form 8-K filed March 2, 2005).

10.10          Form of Common Stock Purchase  Warrant issued by Patron  Systems,
               Inc. in favor of Laidlaw & Company (UK) Ltd. in  connection  with
               placement  agent services  (incorporated  by reference to Exhibit
               10.15 to the Current Report on Form 8-K filed March 2, 2005).

10.11          Form of Common Stock Purchase  Warrant issued by Patron  Systems,
               Inc. in favor of Laidlaw & Company  (UK) Ltd in  connection  with
               advisory services  (incorporated by reference to Exhibit 10.16 to
               the Current Report on Form 8-K filed March 2, 2005).

10.12          Registration  Rights Agreement dated March 30, 2005, among Patron
               Systems,  Inc. and each of the former  Entelagent  Software Corp.
               shareholders  signatory  thereto  (incorporated  by  reference to
               Exhibit  10.2 to the  Current  Report on Form 8-K filed  April 5,
               2005).

10.13          Form of Promissory Note issued to certain creditors of Entelagent
               Software Corp.  (incorporated by reference to Exhibit 10.3 to the
               Current Report on Form 8-K filed April 5, 2005).

31.1           Certification of principal executive officer and acting principal
               financial  officer pursuant to Section 302 of the  Sarbanes-Oxley
               Act of 2002.

32.1           Certification  Pursuant  to 18 U.S.C.  Section  1350.  as Adopted
               Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                       41
<PAGE>


                                   SIGNATURES

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


Date: August 2, 2005                   PATRON SYSTEMS, INC.
                                       --------------------
                                       (Registrant)


                                          /s/ Robert Cross
                                       -----------------------------------------
                                       By:    Robert Cross
                                       Its:   Chief Executive Officer and


                                       42