UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  FORM 10-QSB/A

                                   (Mark One)

        |X|  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

                              EXCHANGE ACT OF 1934

                For the quarterly period ended December 31, 2003

       |_| TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT

                        For the transition period from to

                        Commission file number 000-24001

                               IQ BIOMETRIX, INC.

        (Exact name of small business issuer as specified in its charter)

              Delaware                                      76-0552098
---------------------------------------------           -------------------
(State or other jurisdiction of incorporation             (IRS Employer
   or organization)                                     Identification No.)

         39111 Paseo Padre Parkway, Suite 304, Fremont, California 94538
                    (Address of principal executive offices)

                                 (510) 795-2900
                           (Issuer's telephone number)

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of  the  latest  practicable  date:  As of  January,  31,  2004  the
registrant had 22,778,142 shares of its common stock outstanding.

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

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


<PAGE>

                                TABLE OF CONTENTS

                               FORM 10-QSB REPORT

                                December 31, 2003

<TABLE>
<CAPTION>
                                                                                                PAGE
<S>                                                                                             <C>
PART I - FINANCIAL INFORMATION
   Item  1.  Interim  condensed  financial  statements (unaudited)                              3
     Consolidated Balance Sheet  December 31, 2003                                              3
     Consolidated  Statement of Operations for the three and six months
       ended December 31, 2002 and 2003                                                         4
     Consolidated Statement of Cash Flows for the six
        months ended December 31, 2002 and 2003                                                 5
     Notes to Interim Financial Statements                                                      6

   Item 2. Management's Discussion and Analysis or Plan of Operation                            6

PART II - OTHER INFORMATION
   Item 2. Changes in Securities and Use of Proceeds                                           19
   Item 3. Controls and Procedures                                                             19
   Item 6. Exhibits and Reports on Form 8-K                                                    20

SIGNATURES
</TABLE>


                                       2
<PAGE>

PART I. FINANCIAL STATEMENTS

Item 1. Consolidated Financial Statements (unaudited)

                           CONSOLIDATED BALANCE SHEET
                                December 31, 2003

<TABLE>
<CAPTION>
                               ASSETS
<S>                                                                                              <C>
CURRENT ASSETS:
Cash                                                                                              $     374,405
Trade accounts receivable, net of allowance for doubtful accounts of $  0                                45,635
Inventory                                                                                                11,188
Other                                                                                                    19,074
                                                                                                  -------------
                               Total current assets                                                     450,302
INTANGIBLES, net                                                                                        126,126
OFFICE EQUIPMENT, net                                                                                     7,562
                                                                                                  -------------
                               Total assets                                                       $     583,990
                                                                                                  =============
                               LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Convertible debentures, net of discount                                                           $   1,208,442
Accounts payable                                                                                         44,270
Accrued expenses                                                                                        107,505
                                                                                                  -------------
                               Total current liabilities                                              1,360,207
COMMITMENTS

STOCKHOLDERS' DEFICIT:
Preferred stock,  $.01 par value;  10,000,000 shares  authorized,  none issued -
Common stock, $.01 par value;  50,000,000 shares  authorized,  22,778,142 shares
outstanding, $227,782; additional paid-in capital $7,174,376;  Accumulated  deficit
($8,178,385)

                               Total stockholders' deficit                                             (776,227)
                                                                                                  -------------
                               Total liabilities and stockholders' deficit                        $     583,990
                                                                                                  =============
</TABLE>

  The accompanying  notes are an integral part of these  consolidated  financial
statements.


                                       3
<PAGE>

                               IQ BIOMETRIX, INC.
                            STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                  For the three months ended             For the six months ended
                                                         December 31,                          December 31,
                                                    2003                2002              2003              2002
                                              ---------------     ---------------   ----------------  ----------------
<S>                                           <C>                 <C>               <C>               <C>
Revenues                                      $      55,253              28,305            138,348            49,387
Operating expenses

   Cost of sales                                     36,014              13,237             51,082            27,592
   Sales and marketing                               32,120              37,056            180,814            85,884
   General and administrative                       868,684             328,869          2,300,514           611,162
   Research and development                          61,200              55,028            150,168            80,267
   Impairment                                        20,042              52,401             20,042            52,401
   Depreciation                                       1,053                   0              7,668                 0
                                              ---------------     ---------------   ----------------  ----------------
                                                  1,019,113             486,591          2,710,288           857,306
                                              ---------------     ---------------   ----------------  ----------------
     Operating loss                                (963,860)           (458,286)        (2,571,940)         (807,919)
Other Expense:
   Interest Expense, net                            408,381               9,112            734,489            19,112
                                              ---------------     ---------------   ----------------  ----------------
Net Loss                                      $  (1,372,241)           (467,398)        (3,306,429)         (827,031)
                                              ===============     ===============   ================  ================

Basic and Diluted loss per share                     ($0.06)             ($0.03)            ($0.16)           ($0.05)
Weighted average shares

   outstanding                                   21,172,208          16,517,785         20,193,034        16,502,785
</TABLE>


                                       4
<PAGE>

                                IQ BIOMETRIX, INC
                             STATEMENT OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                    For the Six Months Ended
                                                                          December 31,
                                                                      2003               2002
                                                                ---------------     ---------------
<S>                                                             <C>                 <C>
OPERATING ACTIVITIES:
   Net loss                                                     $   (3,306,429)     $     (827,031)
   Adjustments to reconcile net loss to
        net cash used in operating activities
          Depreciation and amortization                                 37,123              13,470
          Stock Warrants issued as interest on loans                        --              19,112
          Common stock issued for services                           2,382,431              64,517
          Common stock issued for debt                                 190,962                  --
          Impairment                                                    20,042              52,401
          Amortization of debt discount                                595,935                  --
             Changes in assets and liabilities:
               Account receivable                                      (39,662)                 --
               Advance to IQ Entertainment                                  --             (26,121)
               Inventory                                                (5,180)             12,000
               Prepaid expenses                                         18,808                  --
               Accounts payable and accrued expenses                  (197,161)             92,426
                                                                ---------------     ---------------
   Net cash used in operating activities                              (303,181)           (599,226)
                                                                ---------------     ---------------

     Investing activities
               Purchase of fixed assets                                 (1,845)                 --
               Purchase of Intellectual Property                       (50,000)                 --
               Collection of note receivable                            50,000                  --
                                                                ---------------     ---------------
   Net cash used in investing activities                                (1,845)                 --
                                                                ---------------     ---------------
   Financing activities

               Proceeds from sale of common stock                           --             200,000
               Proceeds from exercise of warrants                       31,700                  --
               Proceeds from new convertible notes payable             600,000             350,000
               Proceeds from demand notes payable                      (50,000)             50,000
                                                                ---------------     ---------------
   Net cash provided by financing activities                           581,700             600,000
                                                                ---------------     ---------------
   Net increase (decrease) in cash                                     276,724                 774

   Cash, beginning of year                                              97,681              92,213
                                                                ---------------     ---------------
   Cash, end of year                                            $      374,405      $       92,987
                                                                ===============     ===============
   Supplemental cash flow information
    Non-cash investing and financing activities
          Interest expense not paid
          Taxes paid
</TABLE>

  The accompanying  notes are an integral part of these  consolidated  financial
statements.


                                       5
<PAGE>

                               IQ BIOMETRIX, INC.

                      NOTES TO INTERIM FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying  unaudited interim financial  statements of IQ Biometrix,  Inc.
have been prepared in accordance with accounting  principles  generally accepted
in the  United  States of  America,  the rules of the  Securities  and  Exchange
Commission  ("SEC") and with the instructions to Form 10-QSB, and should be read
in conjunction with the audited financial statements and notes thereto contained
in IQ  Biometrix's  2003  Annual  Report on Form  10-KSB  filed  with the SEC on
October 14, 2003 as amended on February 6, 2004.  In the opinion of  management,
all  adjustments,  consisting of normal recurring  adjustments,  necessary for a
fair  presentation  of financial  position and the results of operations for the
interim periods presented have been reflected herein.  The results of operations
for interim periods are not necessarily indicative of the results to be expected
for the full year. Notes to the financial statements,  which would substantially
duplicate the disclosure  contained in the audited financial statements for 2003
as reported in the 10-KSB, have been omitted.

NOTE 2 - CONVERTIBLE NOTES PAYABLE

In  October  2003,  IQ  Biometrix  issued to two  investors  its 6%  convertible
debentures  in the  aggregate  principal  amount of  $200,000.  The  convertible
debentures are due in one year, and convertible at anytime by the holder into IQ
Biometrix  common stock at a conversion  price of $0.64 per share. In connection
with this issuance,  IQ Biometrix  issued to the investors  warrants to purchase
160,000  shares of IQ Biometrix  common stock at an exercise  price of $1.25 per
share.

Under  generally  accepted  accounting  principles,  IQ Biometrix is required to
record  the value of the  beneficial  conversion  feature  of these  convertible
debentures as a debt discount. In addition,  the value of the warrants using the
Black  Scholes  method is also  recorded  as a debt  discount.  The  total  debt
discount  recorded  with  respect  to these  convertible  debentures  during the
quarter  ended  December  31,  2003 was  $180,262.  This debt  discount  will be
amortized  and  charged  to  interest  expense  over the term of the  respective
debentures.  In the event the investors  convert the  debentures  prior to their
maturity,  then generally accepted accounting principles require IQ Biometrix to
expense the  unamortized  balance of the debt discount in full during the period
in which the debentures were converted.

NOTE 3 - STOCK ISSUANCES

During the six and three month  periods  ended  December 31, 2003,  IQ Biometrix
issued:

o    272,840  shares for $31,700 in cash as part of an option  exercise of which
     122,840  shares were  exercised for $1,700 in the three month period ending
     December 31. 2003.
o    2,638,669  shares for services to consultants and service  providers valued
     at  $2,382,431 of which  741,846  shares worth  $821,072 were issued in the
     three month period ending December 31, 2003.
o    189,637  shares in payment of debt  valued at  $110,962  were issued in the
     three month period ended December 31, 2003.
o    71,111 shares in payment of intellectual property valued at $80,000.
o    60,000 shares in payment of accrued but unpaid  interest  valued at $55,800
     were issued in the three month period ended December 31, 2003.
o    700,000 shares issued related to accrued stock issuance  totaling  $168,000
     at June 30, 2003.

NOTE 4 - SUBSEQUENT EVENTS: NONE

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

Forward-Looking Statements

In  addition  to  historical  information,  this  report  contains  predictions,
estimates and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act
of 1934 that relate to future events or our future financial performance.  These
statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements  expressed or implied by the forward-looking  statements.  These
risks and other factors  include those listed under "Risk Factors" and elsewhere
in this  Registration  Statement,  and some of which  we may not  know.  In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans,"  "anticipates,"  "believes,"  "estimates,"
"predicts,"  "potential,"  "continue"  or the  negative  of these terms or other
comparable terminology.  In addition, these forward-looking  statements include,
but are not limited to, statements regarding the following:

* our belief that our FACES(TM)  technology will help solve the growing need for
effective  tools to fight  crime and  terrorism  as well as  offering  potential
applications relating to other industries;

* our belief that our InterCode(TM) coding system is a breakthrough feature that
can  serve as the  first  international  standard  in the  generation  of unique
alphanumeric codes for facial recognition data;

* our belief that  international  markets represent a significant market for our
products and services;

*  our  belief  that  we  have  ample  room  to  penetrate  further  the  public
security/law enforcement agencies segment of the market;

* our  intention  to compete  vigorously  in terms of price,  product  features,
product  performance,  ease of use, quality of support and service,  and company
reputation;

* our  expectations  regarding  the  sources  from  which  we will  finance  our
operations;

* our expectations regarding the amount of funds we will need in the future;

* our  expectations  regarding  the focus of our sales  efforts on our  existing
customers;

* our  expectations  regarding  the amount of  additional  development  expenses
needed to pursue our research and development strategy;

* our  expectations  regarding  the  timing of the  rollout,  release  or public
availability of any products of ours now or hereafter under development;

* our expectations regarding our receipt of revenues from training users of our
products;

* our intentions and expectations regarding the future availability of now
undeterminable revenue opportunities arising out of our technology;

* our expectations regarding the abilities and use in certain locations of our
FACES(TM) technology;

* our intentions regarding the protection of our proprietary information;

* our expectations and intentions regarding our ability to make available the
finest facial composite technology on the market;

* our  intentions  regarding the  continued  development  and  refinement of our
existing products, and the development and commercialization of various computer
programs and products using the InterCode(TM) technology;

* our intentions regarding the continuation of our direct selling efforts; and

* our intentions regarding our marketing and sales efforts.

These   statements   are  only   predictions   and  are  subject  to  risks  and
uncertainties, including the following:

* the  difficulty  of  forecasting  revenues due to weakness  and  uncertainties
related to general economic conditions and overall demand within our markets and
among our current and prospective customers;

* our ability to introduce and gain customer acceptance of new products on a
timely basis;


                                       6
<PAGE>

* the availability and timely distribution of governmental funding;

* our ability to obtain additional debt or equity financing at all or on
reasonable terms;

* the failure to execute on our  acquisition  and partnering  strategies and our
expansion  into  potential  new  markets,   which  may  prevent  achievement  of
profitability in a timely manner;

* our ability to introduce  and gain  customer  acceptance  of new products on a
timely  basis;

* the protection of our proprietary  technology

*  unforeseen  development  delays for new  products  that limit our  ability to
generate revenues;

OVERVIEW

IQ Biometrix, Inc. is a provider of biometric software and services primarily to
law  enforcement  agencies and the security  industry  and is  headquartered  in
Fremont,  California.  IQ  Biometrix  markets,  distributes  and  sells a facial
composite  software  tool  called  FACES(TM)  to  federal,  state  and local law
enforcement agencies and the security industry in the United States and abroad.

During fiscal year 2003 we derived  substantially all of our revenues from sales
of our FACES(TM) 3.0 product. In July 2003, we launched FACES(TM) 4.0. FACES(TM)
4.0 contains  significant  enhancements  and new features  over  FACES(TM)  3.0,
including the ability to use the TRAK service offered by SocialTech, Inc., which
allows any police officer to create  high-resolution  photo  bulletins and share
them electronically with other law enforcement jurisdictions, the media, and the
community where appropriate.  Revenues in fiscal year 2002 and 2003 were derived
from a diverse  customer  base sold mainly in units of 1 to 50. No customer  was
responsible for more than 2% of revenues.

We market and sell our  products  both  directly  through our own sales force as
well as indirectly  through  resellers and distributors in the United States. To
date, most of our sales have been in North America;  however,  we recently began
to seek relationships with international  distributors and resellers to sell our
products   internationally.   We  are   continually   reviewing  our  sales  and
distribution  strategy  to seek  ways  to  increase  sales  of our  product  and
revenues.

Cost of revenues  currently consists of inventory and packaging costs.

Sales and marketing  expenses  consist  primarily of salaries,  commissions  and
related expenses for personnel engaged in marketing, sales and customer support,
as well as costs associated with promotional  activities and travel expenses. We
intend to expand our sales and marketing  operations  and efforts  substantially
for our products,  both domestically and  internationally,  in order to increase
market awareness and to generate increased sales of our products.  Although,  we
cannot  be  certain  that any  increased  expenditures  will  result  in  higher
revenues,  we  believe  that  continued  investment  in sales and  marketing  is
critical  to our  success  and expect  these  expenses  to  increase in absolute
dollars in the future and as a % of revenues.

General and  administrative  expense consists  primarily of salaries and related
expenses for executive, finance, accounting, information technology, facilities,
and human  resources  personnel.  We expect  these  expenses  to  increase as we
continue to add personnel and incur  additional costs related to the anticipated
growth of our business and to support our  operations  as a public  company.  We
expect that these expenses will stabilize in the next six to twelve months as we
meet our  immediate  staffing  needs.  We expect  these  expenses to increase in
absolute dollars but be less in the future as a % of revenue.

Research  and  development  expense  consists  primarily of salaries and related
personnel expense,  fees paid to consultants and outside service providers,  and
other expenses  related to the design,  development,  testing and enhancement of
our products. Currently we are focusing our attention on is on FACES 5.0. We are
also continually seeking other products and intellectual  property that could be
used to enhance our current product and/or product line. We expense our research
and development costs as they are incurred.  We believe that a significant level
of  investment  for  product  research  and  development  is  required to remain
competitive.  Accordingly, we expect to continue to devote substantial resources
to product research and development,  and we expect our research and development
expense to continue to increase in the future both in absolute  dollars and as a
% of revenue.


                                       7
<PAGE>

RESULTS OF OPERATIONS

Revenues  increased  181% to $138,000 for the six months ended December 31, 2003
from  $49,000 for the six months ended  December  31, 2002.  In the three months
ended December 31, 2003 revenues increased 95% to $55,000 as compared to $28,000
for the three months ended December 30, 2002. Revenues increased in the relevant
periods  primarily  because we released our new FACES(TM) version 4.0 in July of
2003.  2002  revenues  were  from  the  sale of our  FACES(TM)  version  3.1 and
FACES(TM) version LE products.  Revenues are expected to accelerate  through the
end of fiscal 2004, as funds for technology  investment from government agencies
including  the  Homeland   Security  Agency  begin  to  be  distributed  to  law
enforcement agencies throughout the country.

Sales and marketing  expense increased 113% to $181,000 for the six months ended
December 31, 2003 from $86,000 for the six months ended  December 31, 2002.  The
increase was due to increased  promotions  and  marketing  expenses  incurred in
conjunction with the release of FACES 4.0. Of these expenses, $181,000 were paid
with  common  stock.  In the three  months  ended  December  31,  2003 sales and
marketing  expense  decreased to $32,000 a slight  decrease from $37,000 for the
three months ended December 31, 2002. Spending was down due to the dollars spent
in the prior quarter. We expect spending to increase over the next few months as
we build our sales and marketing strategy.

General and  administrative  and consulting expense increased 276% to $2,300,514
for the six months  ended  December  31, 2003 from  $611,000  for the six months
ended  December 31, 2002. In the three months ended  December 31, 2003,  general
and  administrative  and  consulting  expense  increased  164% to $869,000  from
$329,000.  The increased spending was mainly for investor relations of $291,000,
investment  banking  fees of $726,000,  legal fees of  $563,000,  and payroll of
$190,000.  The use of  these  funds  is  related  to the  company's  search  for
additional  sources of capital,  partnering  or  acquisition  opportunities  and
creating  the  corporate  infrastructure  needed in a public  company.  Of these
expenses,  approximately $1,996,000 were paid with common stock. The increase in
general and administrative  expenses, was mainly for investor relations expenses
of $80,000,  investment  banking fees of $429,000,  legal fees of $120,000,  and
payroll of $40,000.  Of these  expenses,  approximately  $600,000 were paid with
common  stock.  The use of these  funds is related to the  company's  search for
additional sources of capital, partnering or acquisition opportunities.

Research and  development  expense  increased 87% to $150,000 for the six months
ended December 31, 2003 from $80,000 for the six months ended December 31, 2002.
In the three months ended December 31, 2003,  research and  development  expense
increased  11% to $62,000 from  $55,000 for the three months ended  December 31,
2002. The increase in research and  development  costs are primarily as a result
of costs incurred in the planning and development of our next generation product
as well as developing our systems integration package, and researching potential
partner products and  intellectual  property.  Of these expenses,  approximately
$150,000 were paid with common stock.

Interest expense  increased 8,766% to $734,489 for the six months ended December
31, 2003 from $19,000 for the six months ended  December 31, 2002.  In the three
months ended  December 31, 2003 interest  expense  increased  1,437% to $408,381
from $9,000 for the three months ended  December 31,  2002.  All  increases  are
related to the amount of issued  debt of  $1,800,000  compared  to  $200,000  at
December  31,  2003 and  2002,  respectively  and the  amortization  of the debt
discounts in 2004.

LIQUIDITY AND CAPITAL RESOURCES

As of December  31,  2003,  we had cash and cash  equivalents  of  approximately
$374,000. Net cash used in operations decreased to ($303,131) for the six months
ended December 31, 2003 compared with $599,000 for the six months ended December
31, 2002.  Net cash used in  operations  was $210,000 for the three months ended
December  31,  2003 as  compared to  $349,000  used for the three  months  ended
December 31, 2002. The $346,000  improvement was primarily the result  2,888,000
of stock issue in lieu of cash for  services and debt  repayment of  $2,574,000,
amortization  of debt discount of $540,000 offset by the paydown of payables and
accrued liabilities of $320,000.

Net cash provided by financing activities was about the same at $582,000 for the
six months ended  December 31, 2003  compared  with  $600,000 for the six months
ended December 31, 2003. Net cash provided by financing  activities decreased to
$52,000 for the three months ended December 31, 2003 from $400,000 for the three
months ended  December 31, 2002.  The $121,000  decrease is primarily due to the
reduction of convertible  debentures issued of $350,000 plus a reduction in debt
repayment of $100,000.

From our inception in 2002 we have  financed our  operations  primarily  through
private  sales of common  stock and  convertible  debentures.  We have  negative
working  capital  totaling  $910,000  which  consists of  $1,208,442  of
convertible investor notes, which is net of debt discounts totaling $591,558.

There is a "Going  Concern"  reservation  in our auditor's  opinion for the year
ended June 30, 2003. We are currently  seeking  sources of capital as we believe
we may have  trouble  meeting  and  servicing  our current  operating  cash flow
requirements in the near term. At December 31, 2003 we had cash of $374,000;
accounts payable of $44,000, and accrued liabilities of $107,505.


                                       8
<PAGE>

$1,150,000  of the  convertible  notes  become due and  payable  over the next 6
months.  We have no  assurances  that these notes will be converted  into common
stock per the terms of the debentures. We currently have no borrowings available
to us under any credit  arrangement,  and we will look for  additional  debt and
equity  financings  should cash provided  from  operations  be  insufficient  to
support  our  debt  obligations  and our  ongoing  operations  of the  business.
Adequate  funds may not be available on terms  acceptable  to us. If  additional
funds are raised through the issuance of equity securities, dilution to existing
stockholders  may result.  If funding is insufficient at any time in the future,
we may be unable to develop or enhance our products or services,  take advantage
of business  opportunities  or respond to  competitive  pressures,  any of which
could have a  material  adverse  effect on our  financial  position,  results of
operations and cash flows.

Even  with   financing,   there  can  be  no  assurance  that  we  will  achieve
profitability.   Due  to  these  factors,   we  believe  that   period-to-period
comparisons of our results of operations are not  necessarily a good  indication
of future  performance.  The results of operations in some future periods may be
below the expectations of analysts and investors.

We expect operating losses and negative  operating cash flows to continue for at
least the next twelve months,  because of expected increases in expenses related
to brand development;  marketing and other promotional activities;  increases in
personnel;  the  expansion  of  infrastructure  and customer  support  services;
strategic  relationship  development;  and  potential  acquisitions  of  related
complementary  businesses. We believe the expenses incurred here will help us to
build the  infrastructure  necessary to increase  revenues both through  organic
growth and  through  acquisitions,  which we believe  hold the key to our future
revenue  growth.  We feel it will take  additional  products,  either created in
house  or  acquired  through  acquisitions,  to help us  increase  revenue,  and
ultimately to reach profitability. However, we can make no assurances that these
activities will achieve the desired results of increased revenues,  nor that any
increase in revenues  will be enough to bring the company to  profitability  and
positive cash flow.


                                       9
<PAGE>

RECENT EVENTS

In January 2004 the company  replaced  Seth Horn with Michael Walsh as its Chief
Financial Officer.

CRITICAL ACCOUNTING POLICIES

INTANGIBLE ASSETS

Our  intangible  assets  consist of a customer  list  acquired in the JVWEB / IQ
Biometrix acquisition in March 2002 and purchased software code. We recorded the
cost of the software and amortize the cost over the  estimated  useful life of 3
years. We review the value of our intangible  assets quarterly and determine its
value.  At December  31,  2003 we had a net  carrying  value for our  intangible
assets of $142,543.

REVENUE RECOGNITION

Revenues are generated  principally by sales of packaged software.  We recognize
revenue  when all of the  following  criteria  are met:  1) there is  persuasive
evidence that an arrangement  exists, 2) delivery of goods has occurred,  3) the
sales  price is fixed  or  determinable,  and 4)  collectibility  is  reasonably
assured.  Generally, we recognize revenue from product sales direct to customers
and  distributors  upon shipment.  Sales that are made to distributors are final
and returns are only allowed for  defective  products.  To date IQ Biometrix has
not had any product returns. IQ Biometrix will provide training at an additional
charge to the  customer  and  recognizes  revenue  for  training on the date the
training is performed.  IQ Biometrix  subcontracts the training to a third party
and includes the cost of the  training in cost of goods sold.  IQ Biometrix  has
only  recognized   approximately  $10,000  related  to  training  revenue  since
inception.

INFLATION

In our opinion, inflation has not had a material effect on our operations.

RISK FACTORS

RISKS RELATED TO OUR FINANCIAL RESULTS

WE CURRENTLY LACK LIQUIDITY AND WE WILL NEED TO RAISE ADDITIONAL  EQUITY OR DEBT
FINANCING TO FUND OUR OPERATIONS.

To date,  we have had no  meaningful  revenues  and  there is a "Going  Concern"
reservation  in our auditor's  opinion for the year ended June 30, 2003. We have
heretofore financed our business through the procurement of capital investments.
At December 31, 2003, we had cash, cash  equivalents and short-term  investments
of $374,000; our accounts payable were approximately $44,000, and we had accrued
expenses of $86,000.  In  September  and  October  2003 we raised an  additional
$700,000 through the issuance of convertible  debentures,  which mature in 2004.
In order to address our immediate  liquidity issues,  we are seeking  additional
debt or equity financing.  We currently do not have any credit arrangements.  We
may not be able to obtain additional debt or equity financing.  If successful in
raising additional financing,  we may not be able to do so on terms that are not
excessively  dilative to  existing  stockholders  or less  costly than  existing
sources of financing.  Failure to secure additional financing in a timely manner
and on favorable terms in the future could have a material adverse impact on our
financial  performance and stock price and require us to implement  certain cost
reduction initiatives and curtail our operations.

In addition,  any financing  arrangement may have potentially adverse effects on
us or our stockholders. Debt financing (if available and undertaken) may involve
restrictions  limiting our operating  flexibility.  Moreover, if we issue equity
securities to raise additional funds, the following results may occur:

* The percentage  ownership of our existing  stockholders will be reduced;

* Our stockholders may experience additional dilution in net book value per
share;

* The new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock.

We are seeking to increase  our  revenues by  increasing  sales of our  existing
products through the expansion of our marketing  program and our sales force. We
are also exploring the  development of new products that are  synergistic to our
existing business and actively seeking out acquisition and partnering  prospects
that  would  complement  our  existing  product  offerings,  augment  our market
coverage, or enhance our technological  capabilities.  There can be no assurance
that we  will be  successful  in  increasing  sales  of our  existing  products,
developing  or locating  new  products,  or  consummating  any  acquisitions  or
partnering  transactions.  Even  if we were  able  to  develop  or  acquire  new
products,  there can be no  assurance  that  sales of these new  products  would
result in increased revenues, in which case our business,  results of operations
and financial condition would be materially and adversely affected.


                                       10
<PAGE>

OUR LIMITED OPERATING HISTORY MAKES AN EVALUATION OF US AND OUR FUTURE EXTREMELY
DIFFICULT.

We have only  recently  begun  selling our  FACES(TM)  4.0 product,  and we have
generated  very limited  revenues  from its sale.  Because we have only recently
begun to generate revenues,  we are unable to accurately forecast what the level
of our revenues  will be, and we have limited  meaningful  historical  financial
data upon which to plan future operating  expenses.  Given our extremely limited
revenues to date and our current limited cash resources,  if our revenues in any
period are lower than we  project,  our  business,  results  of  operations  and
financial condition would be materially and adversely affected. In addition, our
ability to forecast accurately our quarterly revenue and expenses is limited due
to a number of factors, including:

* The fact that we currently derive substantially all of our revenues from sales
of our FACES (TM) software  product and our expectation that we will continue to
derive  substantially  all of our revenues from this product for the foreseeable
future;

* The  market's  limited  acceptance  of our  product to date;

* Our ability to develop and increase  our  customer  base;

* Our need to expand our distribution capability;

* Our ability to  implement  and  successfully  execute our sales and  marketing
strategy;

* Our need to introduce  new  products and services to respond to  technological
and  competitive  developments  and customer  needs;

* Our ability to manage the growth we are  seeking to realize;

* Our ability to respond to competitive developments;

* Our  dependence on our current  executive  officers and key  employees;

* Our ability to provide superior customer service and order fulfillment.

There can be no assurance that we can successfully  address some or all of these
risks  but our  failure  to do so could  materially  and  adversely  affect  our
business, prospects, financial condition and results of operations.

WE HAVE A HISTORY OF LOSSES AND DO NOT KNOW WHEN WE MAY BECOME  PROFITABLE OR IF
WE DO BECOME PROFITABLE WHETHER WE CAN SUSTAIN PROFITABILITY.

We have incurred net losses of $7,845,022  since  inception.  As of December 31,
2003,  we had an  accumulated  deficit of  $7,845,022  million  and we expect to
continue to incur net losses for the foreseeable future. We also expect to incur
significant   product   development,   sales  and   marketing  and  general  and
administrative  expenses.  As a  result,  we  will  need to  generate  increased
revenues to achieve  profitability and we may not be able to generate sufficient
revenues to achieve  profitability.  To increase our revenues,  we must increase
sales of our existing  products and  introduce  new products that we have either
developed internally or acquired through other arrangements. While we believe we
can grow our revenues from our existing  product through internal  actions,  the
rate of growth will most likely not allow us to achieve our breakeven  quarterly
revenue level in a timely manner.  Therefore,  we continue to evaluate  business
combinations  and partnering  arrangements in our core business areas that would
improve our market share position, increase our revenue, improve on our net loss
position and accelerate our ability to reach profitability. While we are seeking
acquisitions  that we believe would improve our financial  results,  a completed
acquisition may not provide the anticipated  financial results,  thus leading to
continuing net losses. Even if we achieve  profitability,  we may not be able to
sustain or increase profitability on a quarterly or annual basis. We are seeking
to  increase  our  revenues by  increasing  the sales of our  existing  products
through the expansion of our marketing  program and our sales force. We are also
exploring the  development of new products that are  synergistic to our existing
business and actively  seeking out  acquisition  and  partnering  prospects that
would complement our existing product offerings, augment our market coverage, or
enhance our technological  capabilities.  There can be no assurance that we will
be successful in increasing  sales of our existing  products or in developing or
locating new products.  Even if we were able to develop or acquire new products,
there can be no  assurance  that  sales of these new  products  would  result in
increased  revenues,  in which  case our  business,  results of  operations  and
financial condition would be materially and adversely affected.

FLUCTUATIONS IN OUR BUSINESS AND OPERATING  RESULTS MAY MATERIALLY AND ADVERSELY
AFFECT THE TRADING PRICE OF OUR COMMON STOCK.

We expect  that our  operating  results  will  fluctuate  in the future due to a
number of  factors  many of which are  outside  of our  control.  These  factors
include the following:

* Customer  concentration;  most of our current and  prospective  customers  are
local,  state  and  federal  law  enforcement   agencies,   many  of  which  are
experiencing their worst budget crisis in years;


                                       11
<PAGE>

* Budgetary cycles of governmental  agencies;

* Overall demand for our products;

* Our ability to attract new customers at a steady rate;

* The rate at which we or our  competitors  introduce new products,  the rate at
which these products acquire market acceptance, and the cost required to develop
these products;

* Technical  defects in our  products  that could  delay  product  shipments  or
increase the costs of introducing new products;

* Changes in the pricing of our products or those of our competitors;

* The amount and timing of capital expenditures and other costs relating to the
expansion of our operations;

* Costs relating to our marketing programs and our business in general;

* General economic conditions.

Any  of  the  foregoing   factors  may  cause  our  operating   expenses  to  be
disproportionately  high or cause our revenue and operating results to fluctuate
causing our business,  financial condition and operating results to be adversely
affected. In addition, to respond to changes in our competitive environment,  we
may  occasionally  make certain  decisions from which we may benefit in the long
run.  However,  in the short run, such decisions could  materially and adversely
affect our quarterly results of operations and financial  condition.  Due to all
of the foregoing factors,  in some future quarter our operating results may fall
below our expectations and those of our stockholders. In such event, the trading
price of our common stock could be materially  adversely  affected.  Further, we
believe that  period-to-period  comparisons of our financial  results may not be
very  meaningful.  Accordingly,  you should not conclude  that such  comparisons
indicate future performance.

RISKS RELATED TO OUR BUSINESS

OUR BUSINESS  WILL NOT GROW UNLESS THE MARKET FOR  BIOMETRIC  SOLUTIONS  EXPANDS
BOTH DOMESTICALLY AND INTERNATIONALLY.

Our  revenues  are  derived  from  the  sale of  biometric  products.  Biometric
solutions have not gained widespread commercial acceptance. We cannot accurately
predict the future  growth rate,  if any, or the ultimate  size of the biometric
technology  market.  The  expansion  of the market for our products and services
depends on a number of factors including without limitation:

     o   the cost, performance and reliability of our products and services and
         the products and services of competitors;

     o   customers' perception of the perceived benefit of biometric solutions;

     o   public perceptions of the intrusiveness of these solutions and the
         manner in which firms are using the information collected;

     o   public perceptions regarding the confidentiality of private
         information;

     o   proposed or enacted legislation related to privacy of information;

     o   customers' satisfaction with our products and services; and

     o   marketing efforts and publicity regarding these products and services.

IF WE FAIL TO  GENERATE  REPEAT  OR  EXPANDED  BUSINESS  FROM  OUR  CURRENT  AND
PROSPECTIVE CUSTOMERS, OUR BUSINESS WILL BE SERIOUSLY HARMED.

We believe that our success will depend on the continued  growth of our customer
base as well as the sale of new and enhanced products to our existing customers.
Over 150,000  licenses to pre-4.0  versions of our  FACES(TM)  product have been
distributed  to law  enforcement  agencies in the United States and we expect to
focus a large part of our sales and  marketing  efforts  with respect to our new
products on these existing  customers.  If we are to be successful in generating
sales from our existing  customers,  we will need to convince  them that our new
products  provide them with  additional  benefits.  In addition,  our ability to
attract  new  customers  will  depend on a variety  of  factors,  including  the
reliability  and   cost-effectiveness   of  our  products  and  our  ability  to
effectively market our


                                       12
<PAGE>

products.  If we fail to generate repeat and expanded  business from our current
and prospective customers, our operating results will be seriously harmed.

IF WE FAIL TO PROMOTE  OUR BRAND NAME  SUCCESSFULLY  OR IF WE INCUR  SIGNIFICANT
EXPENSES PROMOTING AND MAINTAINING OUR BRAND NAME, OUR BUSINESS COULD BE HARMED.

Due in part to the  emerging  nature  of the  market  for our  products  and the
substantial  resources  available  to some of our  competitors,  there  may be a
limited time  opportunity  for us to achieve and maintain a  significant  market
share.  Developing  and  maintaining  awareness of our brand name is critical to
achieving widespread  acceptance of our products.  Furthermore,  we believe that
the importance of brand  recognition  will increase as competition in the market
for products such as ours increases.  Successfully promoting and positioning our
brand will depend  largely on the  effectiveness  of our marketing  efforts.  To
attract and retain  customers and to promote and maintain our brands in response
to  competitive  pressures,  we may need to  increase  our  marketing  budget or
otherwise to increase  substantially  our  financial  commitment to creating and
maintaining  brand  loyalty among  vendors and  consumers.  If we are unable for
financial reasons to increase our sales and marketing budget or if we are unable
to successfully promote our brand, our business will suffer.

OUR REVENUES ARE DEPENDENT  UPON THE  AVAILABILITY  AND TIMELY  DISTRIBUTION  OF
GOVERNMENTAL FUNDING.

Many of our prospective  customers are local,  state and federal law enforcement
and other  governmental and  quasi-governmental  agencies.  The ability of these
prospective  customers to purchase  our  products  are heavily  dependent on the
availability  or continued  availability of federal,  state or local  government
funds or grants and  general  tax  funding,  including  funding by the Office of
Homeland Security.  Such funding may not be approved or, if approved, it may not
be available  for the purchase of our  products or  solutions,  and even if such
funding is approved and  available,  such funds may be subject to termination at
any time at the sole  discretion of the  government  body providing or receiving
such funds.

RAPID  TECHNOLOGICAL  CHANGE IN OUR MARKET  COULD  CAUSE OUR  PRODUCTS TO BECOME
OBSOLETE OR REQUIRE US TO REDESIGN OUR PRODUCTS.

We expect that our market will be characterized by rapid  technological  change,
frequent new product  introductions  and  enhancements,  uncertain  product life
cycles, changing customer demands and evolving industry standards,  any of which
can render existing products  obsolete.  We believe that our future success will
depend in large part on our ability to develop new and  effective  products in a
timely manner and on a cost  effective  basis.  As a result of the  complexities
inherent in our product, major new products and product enhancements can require
long development and testing periods,  which may result in significant delays in
the  general  availability  of  new  releases  or  significant  problems  in the
implementation of new releases.  In addition,  if we or our competitors announce
or  introduce  new products our current or  prospective  customers  may defer or
cancel purchases of our products,  which could  materially  adversely affect our
business,  operating  results and  financial  condition.  Our failure to develop
successfully,  on a timely and cost effective basis, new products or new product
enhancements that respond to technological  change,  evolving industry standards
or customer  requirements  would have a material adverse affect on our business,
operating results and financial condition.

IF WE  LOSE  ANY  KEY  PERSONNEL,  OR  FAIL TO  ATTRACT  AND  RETAIN  ADDITIONAL
PERSONNEL,  WE MAY BE UNABLE TO CONTINUE  DEVELOPING  OUR  BUSINESS  AND PRODUCT
LINE.

The loss of the services of one or more of our key  personnel  could  materially
adversely affect our business,  operating  results and financial  condition.  We
cannot  guarantee that we will be able to retain our key  personnel.  Our future
success also depends on our continuing ability to attract, assimilate and retain
highly  qualified  sales,  technical and managerial  personnel.  Competition for
these individuals is intense, and there can be no assurance that we can attract,
assimilate or retain necessary personnel in the future.

FAILURE TO EXPAND OUR SALES AND  DISTRIBUTION  CHANNELS AND MANAGE OUR SALES AND
DISTRIBUTION RELATIONSHIPS COULD SIGNIFICANTLY REDUCE OUR REVENUES.

We sell our  products  through a network  of  distributors  and  resellers.  Our
success  will depend on our ability to manage  relationships  with our  existing
network of distributors and resellers and to expand our network of resellers and
distributors. The sale of our products by our distributors and resellers depends
on the  effectiveness  of their selling  efforts and their ability to meet their
own  responsibilities  under  agreements  with customers in a timely manner.  At
times, our distributors and resellers may also offer products of our competitors
and our agreements  with them have no minimum  purchase  commitments.  We cannot
assure you that we will be able to expand our distribution channels,  manage our
distribution  relationships  successfully or that our distributors and resellers
will  market  and  sell  our  products   effectively.   Our  failure  to  manage
successfully our  distribution  relationships or the failure of our distributors
and resellers to sell our products could reduce our revenues and have a material
adverse effect on business, results of operations and financial conditions.

RISKS RELATED TO DEVELOPING OUR PRODUCTS


                                       13
<PAGE>

SUBSTANTIALLY ALL OF THE SOFTWARE  DEVELOPMENT FOR OUR FACES(TM) 4.0 PRODUCT WAS
OUTSOURCED TO A THIRD PARTY.  IF WE CONTINUE TO USE THIRD PARTY  DEVELOPERS  FOR
FUTURE  PRODUCT  RELEASES  WE MAY IN THE  FUTURE BE SUBJECT TO DELAYS IN PRODUCT
RELEASES, ENHANCEMENTS AND UPGRADES AS WELL AS QUALITY CONTROL ISSUES.

We  outsourced  the  development  of our  FACES(TM)  4.0 software to  Entreprise
Cogniscience,  Inc. an independent software developer.  Although,  FACES(TM) 4.0
was  commercially  released in 2003, we have  discovered  and we may continue to
discover  errors and defects in FACES(TM)  4.0. The fact that we do not directly
control  the  development  of our  product  subjects  us to the risk that we may
experience  delays in issuing  error  corrections  or  enhancements  to our most
recent release. Recently, Entreprise Cogniscience was acquired by a third party.
While, the agreement between us and Entreprise  Cogniscience is binding upon any
successor-in-interest to Entreprise  Cogniscience,  we cannot guarantee that the
acquiror will devote as many resources to fulfilling the agreement as Entreprise
Cogniscience  did before the  acquisition or that the quality of their work will
meet our specifications.  If the  successor-in-interest  fails to devote as many
resources  to our  product  or if the  quality  of their  work does not meet our
specification, it could lead to delays in releasing any error corrections or bug
fixes.  In addition,  if we continue to use Entreprise  Cogniscience  or another
independent  software  developer to develop future releases or products,  we may
experience delays in future product releases, enhancements and upgrades, as well
as  difficulties  in maintaining  quality  control which may lead to higher than
expected  error and defect rates,  all of which could have an adverse  effect on
our business, results of operations and financial condition.

WE DEPEND ON THIRD-PARTY  TECHNOLOGY FOR THE DEVELOPMENT OF OUR SOFTWARE.  IF WE
WERE TO TERMINATE  OUR  RELATIONSHIP  WITH SUCH THIRD PARTY  PROVIDER,  WE COULD
EXPERIENCE DELAYS IN FUTURE PRODUCT RELEASES AND IMPROVEMENTS PRODUCTS.

Entreprise Cogniscience,  the third party software developer that assisted us in
the development of FACES(TM) 4.0, used a proprietary  environment  based on LISP
to develop our software.  If we were to bring our software  development in-house
or if our relationship with Entreprise Cogniscience were otherwise to terminate,
we would need to port our source code to a new  development  environment,  which
may cause us to experience delays in future product  releases,  enhancements and
upgrades,  as well as higher than expected error and defect rates,  all of which
could  have an  adverse  effect  on our  business,  results  of  operations  and
financial condition.

OUR  SOFTWARE  PRODUCTS ARE COMPLEX AND MAY CONTAIN  UNKNOWN  DEFECTS THAT COULD
RESULT IN NUMEROUS ADVERSE CONSEQUENCES.

Complex  software  products such as ours often contain latent errors or defects,
particularly  when first  introduced,  when new  versions  or  enhancements  are
released  and  when  configured  for a  specific  customer.  We  currently  have
experienced errors and defects in our most recent release. However, there can be
no  assurance  that  despite  testing,  defects  and errors will not be found in
current   versions,   new  versions  or   enhancements  of  our  products  after
commencement of commercial shipments, any of which could result in damage to our
reputation, the loss of sales, a diversion of our product development resources,
or a delay in market acceptance,  and thereby materially adversely affecting our
business,  operating  results and  financial  condition.  The computer  hardware
environment is  characterized  by a wide variety of non-standard  configurations
that make  prerelease  testing  for  programming  or  compatibility  errors very
difficult  and  time  consuming.  Despite  our  testing,  errors  may  still  be
discovered  in  some  new  products  or  enhancements   after  the  products  or
enhancements are delivered to customers.  Furthermore, there can be no assurance
that  our  products  will  meet  all  of the  expectations  and  demands  of our
customers. The failure of our products to perform to customer expectations could
give rise to warranty  claims.  Any of these  claims,  even if not  meritorious,
could  result  in  costly  litigation  or  divert  management's   attention  and
resources.  We do not currently  maintain any general liability  insurance.  Any
general  liability  insurance that we may carry could be insufficient to protect
us from all liability  that may be imposed under any asserted  claims.  Although
through our  license  agreements  with  customers  we try to include  provisions
designed to limit our exposure to potential claims, such limitation of liability
provisions  may not be  effective  as a result of  existing  or  future  laws or
unfavorable judicial decisions.

We  outsourced  the packaging of our facestm 4.0 product to a single third party
contractor.  If we  continue  to use  third  parties  for the  packaging  of our
products,  we  may  experience  in  the  future  delays  or  disruptions  in the
distribution of our products or quality control issues.

We  outsource  the  packaging  of our  products  to a  third  party  contractor.
Packaging  consists of  transferring  our software onto compact  discs,  quality
control testing and packaging the CDs and manuals. Although to date, we have not
experienced any packaging  delays or quality  control issues,  if we continue to
use a third party contractor to package our products,  we may experience delays,
disruptions  or  quality  control  problems,  which  could  result  in delays in
shipments of our products to our customers,  which would  negatively  affect our
revenues, competitive position and reputation.

IF THE USE OF OUR  PRODUCTS  IS DEEMED TO BE AN  INVASION  OF  PERSONAL  PRIVACY
RIGHTS OUR BUSINESS MAY SUFFER.

From  time to time,  biometric  products  such as ours  have  been the  focus of
organizations  and individuals  seeking to curtail or eliminate the use of these
technologies  on the  grounds  that these  technologies  may be used to diminish
personal  privacy  rights.  In  the  event  that  such  initiatives   result  in
restrictive  legislation,  the market for products such as ours may be adversely
affected.

IF WE GROW OUR  BUSINESS AS PLANNED,  WE MAY NOT BE ABLE TO MANAGE  PROPERLY OUR
GROWTH, WHICH MAY IMPEDE OUR ABILITY TO ACHIEVE PROFITABILITY.


                                       14
<PAGE>

If we are  successful  in growing our business as we plan,  our  operations  may
expand  rapidly and  significantly.  Any rapid  growth  could put a  significant
strain on our  management,  operational  and  financial  resources.  In order to
manage the growth of our  operations,  we will be  required  to expand  existing
operations,  to implement new  operational,  financial  and  inventory  systems,
procedures  and  controls,  including  improvement  of our  financial  and other
internal management systems,  and to hire, train, manage and expand our employee
base. If we are unable to manage growth  effectively,  our business,  results of
operations and financial  condition will be materially  adversely  affected.  In
addition,  if we are  successful  in growing our business as we plan,  we expect
operating  expenses  to  increase,  and as a result,  we will  need to  generate
increased revenue to achieve and maintain  profitability.  In particular,  as we
grow our business, we would incur additional costs and expenses related to:

* The expansion of our sales force and distribution channels;

* The expansion of our product and services offerings;

* Development of relationships with strategic business partners;

* The expansion of management and infrastructure;

* Brand development, marketing and other promotional activities.

Costs  associated  with these  activities  could delay our ability to achieve or
maintain profitability.

OUR ACQUISITION STRATEGY MAY BE UNSUCCESSFUL, WHICH MAY HARM OUR ABILITY TO GROW
REVENUES.

We believe  that our future  success  depends on our  ability to  introduce  and
market new products and services  that we have either  developed  internally  or
acquired through strategic combinations or partnering  relationships.  We intend
to actively seek out acquisition and partnering  prospects that would complement
our existing  product  offerings,  augment our market  coverage,  or enhance our
technological   capabilities.   This  strategy  is  subject  to  inherent  risks
associated with the potential integration of additional  operations,  the extent
of  management  time and  attention  required,  and related  costs and  expenses
associated with the execution of this strategy.

WE WILL FACE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT US
FROM SUCCESSFULLY INTEGRATING BUSINESSES WE MAY ACQUIRE IN THE FUTURE.

Execution of our acquisition and partnering strategy could result in a number of
financial consequences, including without limitation:

* Use of cash resources that would reduce our financial reserves;

* Issuance of stock that would dilute our current stockholders' percentage
ownership;

* Incurrence of debt;

* Assumption of liabilities;

* Increased operational and administrative complexity of our business;

* Higher fixed  expenses,  which  require a higher level of revenues to maintain
gross margins; and

* Incurrence of expenses related to in-process  research and development and the
possible impairment of goodwill and other intangible assets,  which could result
in large one-time write-offs.

Furthermore, acquisitions involve numerous operational risks, including:

* Problems  related to the  integration  and management of acquired  technology,
products, operations, information systems and personnel of the acquired company;

* Problems completing product  development  programs of the acquired company and
consolidating research and development efforts;

* Unanticipated costs or liabilities;

* Diversion of management's attention from our core business;

* Diversion of resources from our existing business, products or technologies;


                                       15
<PAGE>

* Adverse effects on existing business relationships with suppliers and
customers;

* Risks associated with entering markets in which we have no or limited prior
experience; and

*  Potential  loss  of  key  employees,   particularly  those  of  the  acquired
organizations.

The  integration  of  businesses  that we may acquire  could be a complex,  time
consuming  and  expensive  process.  We must operate as a combined  organization
utilizing common information and communication  systems,  operating  procedures,
financial  controls and human  resources  practices to be successful.  We cannot
guarantee  that any future  acquisitions  will result in sufficient  revenues or
earnings  to  recover  our  investment   in,  or  expenses   related  to,  these
acquisitions  or that any synergies  will develop.  If we are not  successful in
integrating  acquired  businesses  or if expected  earnings or  synergies do not
materialize,  we could be forced to  attempt  to resell or cease  operations  of
acquired businesses. In either event, we would likely incur significant expenses
as well as non-cash charges to write-off acquired assets,  which could seriously
harm our financial condition and operating results.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.

Our future success  depends upon our proprietary  technology.  We are protecting
our proprietary  information  through the use of patent,  copyright,  trademark,
trade  secret  laws,  confidentiality  procedures  and  contractual  provisions.
Notwithstanding  our efforts to protect  our  proprietary  technology,  policing
unauthorized  use  or  copying  of our  proprietary  information  is  difficult,
unauthorized  use or copying occurs from time to time, and litigation to enforce
intellectual  property rights could result in significant costs and diversion of
resources. Any patents we obtain in the future may be circumvented,  challenged,
invalidated or designed around by other companies.  Despite our efforts,  we may
be unable to prevent third parties from infringing upon or misappropriating  our
intellectual  property.  Moreover, the laws of some foreign jurisdictions do not
afford the same degree of protection to our proprietary rights as do the laws of
the  United  States,  and  effective  trademark,  copyright,  and  trade  secret
protection  may not be  available  in every  country in which our  products  are
distributed.  Furthermore,  our  competitors may  independently  develop similar
technology that substantially limits the value of our intellectual property. Our
inability to protect  adequately  our  intellectual  property for these or other
reasons could materially and adversely affect our business,  financial condition
and operating results.

In  addition,  third  parties  may at some point  claim  certain  aspects of our
business infringe their intellectual property rights. While we are not currently
subject to nor are aware of any such  claim,  any future  claim (with or without
merit) could result in one or more of the following:

* Significant litigation costs;

* Diversion of resources, including the attention of management;

* Our agreement to pay certain royalty and/or licensing fees; and

* Cessation of our rights to use, market, or distribute such technology.

Any of these  developments  could  materially and adversely affect our business,
results of operations and financial  condition.  In the future, we may also need
to file lawsuits to enforce our  intellectual  property  rights,  to protect our
trade secrets,  or to determine the validity and scope of the proprietary rights
of others.  Whether successful or unsuccessful,  such litigation could result in
substantial  costs and  diversion of resources.  Such costs and diversion  could
materially  and  adversely  affect  our  business,  results  of  operations  and
financial condition.

OUR FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED BY COMPETITION.

The market for our  products is  characterized  by  significant  and  increasing
competition. Most of our current and potential competitors have longer operating
histories and significantly greater financial, technical and marketing resources
than we do. We expect  competition  to intensify in the future as new  companies
enter the market on a regular basis.  There can be no assurance that existing or
future  competitors will not develop or offer products that provide  significant
performance,  price or other advantages over those we offer.  Such a development
could result in price  reductions or displacement  of our products,  which could
materially  adversely  affect our business,  results of operations and financial
condition.

RISKS RELATED TO OUR CORPORATE GOVERNANCE

OUR AUTHORIZED PREFERRED STOCK EXPOSES STOCKHOLDERS TO CERTAIN RISKS.


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<PAGE>

Our  Certificate  of  Incorporation  authorizes the issuance of up to 10,000,000
shares of  preferred  stock,  par value $.01 per share.  No shares of  preferred
stock have been issued to date. The authorized  preferred stock constitutes what
is commonly referred to as "blank check" preferred stock. This type of preferred
stock allows the Board of Directors to divide the  preferred  stock into series,
to designate  each series,  to fix and determine  separately for each series any
one or more relative  rights and  preferences  and to issue shares of any series
without  further  stockholder  approval.  Preferred  stock  authorized in series
allows our Board of Directors to hinder or discourage an attempt to gain control
of the  Company by a merger,  tender  offer at a control  premium  price,  proxy
contest or  otherwise.  Consequently,  the  preferred  stock could  entrench our
management.  In  addition,  the  market  price  of our  common  stock  could  be
materially and adversely affected by the existence of the preferred stock.

OUR COMMON STOCK HAS A LIMITED AND VOLATILE TRADING HISTORY.

Our common stock trades in the United States on the Over-the-Counter  Electronic
Bulletin  Board  (OTCBB).  The number of shares traded daily has been  extremely
limited  and the prices at which our common  stock has  traded  have  fluctuated
fairly  widely.  See "PRICE RANGE OF COMMON STOCK." There can be no assurance as
to the prices at which our common stock will trade in the future,  although they
may  continue to  fluctuate  significantly.  Prices for our common stock will be
determined in the marketplace  and may be influenced by many factors,  including
the following:

* The depth and  liquidity  of the  markets  for our  common  stock;

* Investor  perception  of us and the  industry in which we  operate;

* General economic and market conditions; and

* The effect  that of any of the events  highlighted  in these Risk  Factors may
have on our business should they occur.

WE HAVE THE  ABILITY AND THE  OBLIGATION  TO ISSUE  ADDITIONAL  SHARES OF COMMON
STOCK IN THE FUTURE,  AND SUCH FUTURE ISSUANCE MAY MATERIALLY  ADVERSELY  AFFECT
STOCKHOLDERS.

We have various  abilities and obligations to issue additional  shares of common
stock in the future. These abilities and obligations include the following:

* Approximately  300,000 registered shares of our common stock are available for
issuance to outside consultants to compensate them for services provided;

* Options to  purchase  approximately  250,000  shares of our common  stock were
outstanding as of January 31, 2004;

*  Warrants  to  purchase  approximately  450,000  shares of common  stock  were
outstanding as of January 31, 2004;

* Debentures,  convertible into 4,600,000 shares of common stock had been issued
as of January 31, 2004 and the shares of common stock into which such debentures
are convertible are being registered as part of this registration statement

The options and warrants  described  above permit the holders to purchase shares
of common stock at specified prices.  These purchase prices may be less than the
then current market price of our common stock. Any shares of common stock issued
pursuant to these options or warrants (or the convertible  debentures  described
above) would further dilute the percentage  ownership of existing  stockholders.
The terms on which we could obtain  additional  capital during the life of these
options, warrants or convertible debentures may be adversely affected because of
such potential  dilution.  Finally, we may issue additional shares in the future
other than as listed above.  There are no preemptive  rights in connection  with
our common stock. Thus, the percentage ownership of existing stockholders may be
diluted if we issue additional shares in the future. For issuances of shares and
grants of options to  consultants,  our Board of Directors  will  determine  the
timing and size of the issuances and grants,  and the  consideration or services
required thereof.  Our Board of Directors intends to use its reasonable business
judgment to fulfill its fiduciary  obligations to our then existing stockholders
in connection with any such issuance or grant. Nonetheless,  future issuances of
additional  shares could cause  immediate  and  substantial  dilution to the net
tangible book value of shares of common stock issued and outstanding immediately
before such  transaction.  Any future decrease in the net tangible book value of
such issued and  outstanding  shares could  materially and adversely  affect the
market value of the shares.

SALES OF OUR COMMON STOCK,  INCLUDING  THOSE SHARES  COVERED BY THIS  PROSPECTUS
(WHICH UPON  EFFECTIVENESS  OF THIS  REGISTRATION  STATEMENT  MAY BE SOLD AT ANY
PRICE AND AT ANY TIME), COULD REDUCE THE PRICE OF OUR COMMON STOCK.

After the registration statement has become effective, the holders of the shares
covered by this  prospectus  may sell the  shares  registered  pursuant  to this
registration  statement at any price and at any time  determined by them without
limitation.  The price of our common  stock may be adversely  affected  upon the
sale of the shares registered hereby.


                                       17
<PAGE>

THE  TRADING   PRICE  OF  OUR  COMMON  STOCK   ENTAILS   ADDITIONAL   REGULATORY
REQUIREMENTS, WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE.

The trading price of our common stock is currently  below $5.00 per share.  As a
result of this  price  level,  trading  in our  common  stock is  subject to the
requirements of certain rules promulgated  under the Securities  Exchange Act of
1934. These rules require additional  disclosure by broker dealers in connection
with any trades  generally  involving any non-NASDAQ  equity security that has a
market price of less than $5.00 per share,  subject to certain exceptions.  Such
rules  require  the  delivery,  before  any  "penny  stock"  transaction,  of  a
disclosure  schedule  explaining the penny stock market and the risks associated
therewith,  and impose various sales practice requirements on broker dealers who
sell penny stocks to persons other than  established  customers  and  accredited
investors  (generally  institutions).  For  these  types  of  transactions,  the
broker-dealer  must  determine  the  suitability  of the  penny  stock  for  the
purchaser and receive the purchaser's  written consent to the transaction before
sale. The additional  burdens  imposed upon broker dealers by such  requirements
may discourage  broker-dealers  from effecting  transactions in our common stock
affected.  As a consequence,  the market  liquidity of our common stock could be
severely limited by these regulatory requirements.

STOCKHOLDERS HAVE NO GUARANTEE OF DIVIDENDS.

The holders of our common stock are entitled to receive  dividends  when, as and
if declared by the Board of Directors out of funds legally available  therefore.
To  date,  we have not  declared  nor paid  any  cash  dividends.  The  Board of
Directors  does not intend to declare any dividends in the  foreseeable  future,
but instead  intends to retain all  earnings,  if any,  for use in our  business
operations.


                                       18
<PAGE>

                                     PART II

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

RECENT SALES OF UNREGISTERED SECURITIES

IQ Biometrix  established  a vendor  payment  policy  whereby it may  compensate
vendors in shares of its common stock in lieu of cash. In the three month period
ended December 31, 2003,  260,748 shares were issued to vendors relying upon the
exemption  under  sections 4(2) and 4(6) of the Securities Act of 1933 and which
represented  compensation for the period of $190,962. The vendors have taken the
shares for investment.

In addition,  in the three month period  ended  December 31, 2003,  IQ Biometrix
issued 741,846 shares of common stock to consultants  for services  rendered and
which  represented  compensation  for the period of  $821,072.  These shares are
registered pursuant to the Company's Registration Statement on Form S-8.

On October 4, 2003,  we entered into a private  placement  offering  pursuant to
which we  issued 6%  convertible  debentures  in the  aggregate  face  amount of
$200,000 that mature in October 2004 to two accredited investors.  Principal and
interest  under  the  debentures  are  convertible  at any  time on or  prior to
maturity  at the  option of the  holder  into  shares of our  common  stock at a
conversion  price of $0.64 per share. In connection with this offering we issued
warrants to purchase 160,000 shares of our common stock, at a per share exercise
price of $1.25.  The  warrants  are  exercisable  from the date of issuance  and
expire on October 4, 2005.  These  debentures  and warrants were pursuant to the
exemptions under sections 4(2) and 4(6) of the Securities Act of 1933.

ITEM 3. CONTROLS AND PROCEDURES

      In accordance with the Securities and Exchange Act of 1934, as amended, we
carried out an evaluation,  under the supervision and with the  participation of
management,  including our Chief Executive Officer and Chief Financial  Officer,
of the effectiveness of our disclosure  controls and procedures as of the end of
the period covered by this report. Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer  concluded that our disclosure  controls and
procedures  were  effective  as of  December  31,  2003,  to provide  reasonable
assurance  that  information  required to be disclosed  in our reports  filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods  specified in the Securities  and Exchange  Commission's
rules  and  forms.  There  has been no  change  in our  internal  controls  over
financial reporting that occurred during the three and six months ended December
31, 2003, that has materially  affected,  or is reasonably  likely to materially
affect, our internal controls over financial reporting.


                                       19
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits:

Exhibit No. Description
-----------------------

31.1  Certification  of Chief Executive  Officer  pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2  Certification  of Chief Financial  Officer  pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1  Certification  of Chief Executive  Officer  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

32.2  Certification  of Chief Financial  Officer  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

b.      Reports on Form 8-K: None.


                                       20
<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.

                               IQ BIOMETRIX, INC.
                               ------------------
                                  (Registrant)


       Date February 17, 2004                     /s/ William Scigliano
                                                  ----------------------------
                                                  President & CEO

       Date February 17, 2004                     /s/ Michael Walsh
                                                  ----------------------------
                                                  Chief Financial Officer


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