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 September 30, 2004

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

                         For the transition period from

                        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              (IRS Employer
         incorporation 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 November 10, 2004 the
registrant had 26,741,097 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

                               September 30, 2004

                                                                           PAGE
PART I - FINANCIAL INFORMATION
   Item  1.  Interim  condensed  financial  statements (unaudited)           3
     Consolidated Balance Sheet  September 30, 2004                          3
     Consolidated  Statement of Operations for the three months
       ended September 30, 2004 and 2003                                     4
     Consolidated Statement of Cash Flows for the three
        months ended September 30, 2004 and 2003                             5
     Notes to Interim Financial Statements                                   6

   Item 2. Management's Discussion and Analysis or Plan of Operation         7
   Item 3. Controls and Procedures                                          21

PART II - OTHER INFORMATION
   Item 1 Legal Proceedings                                                 22
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds      22
   Item 6. Exhibits                                                         22

SIGNATURES

                                       2
<PAGE>

                          PART I. FINANCIAL STATEMENTS

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                               IQ BIOMETRIX, INC.
                           CONSOLIDATED BALANCE SHEET
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)

                                     ASSETS
  Current assets
    Cash                                                           $     53,907
    Accounts receivable, net of
     allowance for doubtful accounts of $6,000                           21,587
    Inventory                                                               615
    Prepaid expenses                                                     14,185
    Note receivable                                                          --
                                                                   ------------
       Total current assets                                              90,294

  Equipment, net of $10,357 of accumulated depreciation                   4,110

  Intellectual property, net of
   $125,401 accumulated amortization                                     73,415
                                                                   ------------

    Total assets                                                   $    167,819
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities
    Convertible notes payable to investors, net                    $  1,341,666
    Short term note payable                                             150,982
    Accounts payable                                                    424,006
    Committed stock                                                     102,000
    Accrued expenses                                                    202,263
    Deferred Revenue                                                     50,000
                                                                   ------------
         Total current liabilities                                    2,270,917
                                                                   ------------

  Commitments and contingencies

Stockholders' Deficit:
  Preferred stock, $.01 par value; 10,000,000
   shares authorized, none issued Common stock,
   $.01 par value; 50,000,000 shares authorized;
   26,286,182 shares issued and oustanding                              262,862
  Additional paid-in capital                                         11,912,598
  Accumulated deficit                                               (14,278,558)
                                                                   ------------
    Stockholders' deficit                                            (2,103,098)
                                                                   ------------

    Total liabilities and stockholders' equity                     $    167,819
                                                                   ============


                                       3
<PAGE>

                               IQ BIOMETRIX, INC.
                            STATEMENTS OF OPERATIONS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (Unaudited)

                                                     2004              2003
                                                 ------------      ------------

Revenue - software sales                         $     52,160      $     83,095

Operating expenses
     Cost of sales                                      5,273             8,334
     Selling expense                                   86,274           148,694
     General and administrative                       673,215         1,503,352
     Research and development                           7,100            88,968
     Interest, net                                    280,443           260,267
     Depreciation and amortization                     15,314             7,668
                                                 ------------      ------------
        Total operating expenses                    1,067,619         2,017,283

                                                 ------------      ------------
Net Loss                                         $ (1,015,459)     $ (1,934,188)
                                                 ============      ============

Basic and Diluted loss per share                 $      (0.04)     $      (0.10)
Weighted average shares
     outstanding                                   25,246,699        19,691,930


                                       4
<PAGE>

<TABLE>
<CAPTION>

                                IQ BIOMETRIX, INC
                             STATEMENT OF CASH FLOWS
             FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
                                   (Unaudited)

                                                            2004            2003
                                                         -----------    -----------
<S>                                                      <C>            <C>
OPERATING ACTIVITIES:

Net loss                                                 $(1,015,459)   $(1,934,188)

Adjustments to reconcile net loss to
  net cash used in operating activities
    Depreciation and amortization                             15,314          7,668
    Option and expense                                        50,806             --
    Common stock issued for services                         373,227      1,636,514
    Amortization of debt discount                            220,049        244,426
     Changes in assets and liabilities:
        Accounts receivable                                   (1,332)       (39,831)
        Prepaid expenses                                      50,851        (13,027)
        Inventory                                                413         (6,680)
        Accrued liabilities                                    2,990        (27,815)
        Deferred revenue                                      50,000             --
        Accounts payable                                      95,188        (10,852)
                                                         -----------    -----------
Net cash used by operating activities                       (157,953)      (143,785)
                                                         -----------    -----------

 Investing activities
        Receipt from NSS                                          --         50,000
                                                         -----------    -----------
Net cash provided by investing activities                         --         50,000
                                                         -----------    -----------

Financing activities
        Proceeds from exercise of options                     30,000         30,000
        Proceeds from new convertible notes payable               --        500,000
        Proceeds from short term notes payable               175,000             --
                                                         -----------    -----------
Net cash provided by financing activities                    205,000        530,000
                                                         -----------    -----------

Net increase (decrease) in cash                               47,047        436,215

Cash, beginning of period                                      6,860         97,681
                                                         -----------    -----------

Cash, end of period                                      $    53,907    $   533,896
                                                         ===========    ===========

Non-cash:
    Stock for convertible debenture and interest         $   530,000    $        --
    Warrant exercise for retirement of short term note   $    50,000    $        --
    Stock issued for commited stock                      $   144,854

</TABLE>


                                       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 and the rules of the Securities and Exchange
Commission ("SEC"), and should be read in conjunction with the audited financial
statements and notes thereto contained in IQ Biometrix's 2004 Annual Report
filed with the SEC on Form 10-KSB. 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 2004
as reported in the 10-KSB have been omitted.

STOCK BASED COMPENSATION:

The Company accounts for its employee stock-based compensation plans under
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees. The Company did not grant any options to purchase common stock to
employees in the three months ending September 30, 2004, and therefore no
expense was recorded under the intrinsic value method for the three months
ending September 30, 2004.

Third party consultants were issued options to purchase 60,000 shares of stock
with a five year life and exercise price of $0.92 per share. Total non-cash
expense of $50,806 based on fair value using the Black Scholes method was
recorded as of September 30, 2004.

NOTE 2 - CONVERTIBLE NOTES PAYABLE


In the quarter ending September 30, 2004, IQ Biometrix received $175,000 for an
unsecured convertible promissory note bearing interest of 10% per annum, and due
on December 31, 2004. The note had 450,000 warrants attached resulting in a
discount of $119,067. The discount will be amortized over the life of the note.
As of September 30, 2004, $45,049 was charged to interest expense. The note is
convertible into common stock if IQ Biometrix raises $1,500,000 from an offering
of common stock. The conversion rate will be equivalent to the average per share
price of the offering.

NOTE 3 - STOCK ISSUANCES

During the three month period ended September 30, 2004, IQ Biometrix issued
160,000 shares of common stock in connection with a warrant exercise with a
value of $80,000. Payment was for $30,000 in cash and retirement of a $50,000
short term note.

During the three month period ended September 30, 2004, IQ Biometrix issued
596,867 shares to consultants for corporate development, marketing, investment
banking, legal services, investor relations and sales support services valued at
approximately $518,072.

During the three month period ended September 30, 2004, IQ Biometrix issued
828,125 shares in connection with the conversion of two convertible debentures
which included the principal and accrued interest valued at $530,000.

NOTE 4 - SUBSEQUENT EVENTS:

In October, the Company borrowed an additional $30,000 from Forte Capital
Partners, LLC, on the debenture initiated in July 2004, which carries a 10%
annual interest rate and is convertible on the same terms as the next round of
financing. Warrants were issued in conjunction with this debenture. This loan
will be used to help with short term cash needs and matures on March 31, 2005.

                                       6
<PAGE>

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 the FACES technology will help solve the growing need for
      effective technology solutions to support law enforcement and homeland
      security;

*     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 revenue generation 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 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 our marketing and sales efforts.

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

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


                                       7
<PAGE>

*     our ability to complete the proposed merger with Wherify Wireless, Inc;

*     the availability and timely distribution of governmental funding;

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

*     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 proposed merger with Wherify;

*     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;

*     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

IQB is a provider of facial composite software to federal, state and local law
enforcement agencies in the U.S. and worldwide. IQB's headquarters are located
at 39111 Paseo Padre Parkway, Suite 304, Fremont, CA 94538. IQB's telephone
number is (510) 795-2900. IQB's web site is http://www.iqbiometrix.com.
Information contained in IQB's web site shall not be deemed to be a part of this
quarterly report.

During the quarter ended September 30, 2004 we derived nearly two thirds of our
revenues from sales of our FACES(TM) 4.0 product. In July, 2004, we launched
FACES(TM) EDU, a classroom version of our composite image software. FACES (TM)
EDU is intended primarily to support middle and high school science subjects and
give students hands-on experience in interviewing witnesses and developing
electronic composites. FACES (TM) EDU has lower pricing and more limited
features than our foundation product, FACES (TM) product for law enforcement. In
September 2004, IQB entered into a contract with Wards Natural Science, a
division of VWR International, a worldwide provider of integrated law
enforcement and security solutions. The contract launches a joint initiative to
develop forensic kits based on FACES EDU technology, designed for the education
industry. The products will be marketed and sold through Ward's sales channels
including an existing client base of more than 1,400,000 teachers. Revenues to
date have been derived from a diverse customer base sold mainly in units of 1 to
25. During the quarter no customer was responsible for more than 6% of
recognized 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, product shipping 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 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 percent of revenue.

General and administrative expense consists primarily of salaries and related
expenses for executive, finance, accounting, information technology, facilities,
and human resources personnel. We expect that these expenses will stabilize in
the next six to twelve months as we meet our immediate staffing needs.


                                       8
<PAGE>

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. We are beginning the planning and development process for the next
generation of our FACES (TM) product. We also continue to seek 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.

On April 15, 2004, IQB and Wherify Wireless, Inc. jointly announced the signing
of a definitive agreement under which IQB and Wherify would merge. Under the
proposed transaction, IQB is currently expected to issue to Wherify shareholders
approximately 34.6 million newly issued shares of IQB common stock and the
shareholders of Wherify are currently expected to hold approximately 80% of the
combined company. The proposed transaction has been unanimously approved by our
board of directors and is subject to certain terms and conditions, including
approval by both the stockholders of IQB and the shareholders of Wherify.
Assuming completion of the transaction, for every share of Wherify capital stock
held as of the record date, each Wherify stockholder is currently expected to
receive approximately 5.1 shares of IQB common stock. If either party terminates
the proposed merger under circumstances specified in the merger agreement the
terminating party will be required to pay the other party a termination fee of
$500,000.

RESULTS OF OPERATIONS

Revenues decreased 37% to $52,160 for the three months ended September 30, 2004
from $83,095 for the three months ended September 30, 2003. Revenues decreased
in the relevant period primarily because of reduced marketing efforts in the
three months ended September 30, 2004 as compared to the same period of 2003
when the product was initially released. Approximately 59% of the revenue for
the three months ended September 30, 2004 was from the sales of FACES 4.0 LE,
38% from the sales of FACES 4.0 EDU and 3% coming from the sales of FACES 3.0.
As of September 30, 2004 approximately 52% of our revenues were derived from
sales to new customers, 35% to resellers and 13% were sales to current
customers. During the quarter IQB entered into a contract with Wards Natural
Science in which Wards purchased $100,000 of FACES EDU licenses. None of the
revenue was recognized in this quarter, IQB began shipping product to Wards in
early October and expects to recognize most if not all of this revenue in the
second fiscal quarter ended December 31, 2004.

Gross margin remained the same at 90% for the three months ended September 30,
2004 and 2003.

Sales and marketing expense decreased 42% to $86,274 for the three months ended
September 30, 2004 from $148,694 for the three months ended September 30, 2003.
The decrease was primarily due to reduced promotions and marketing spending
compared to the first quarter of 2004, which were incurred in conjunction with
the release of FACES 4.0, and the reduction of one in the sales staff. Of the
expenses incurred in the three months ended September 30, 2004, approximately
$31,000 was paid with common stock.

General and administrative expense decreased 55% to $673,215 for the three
months ended September 30, 2004 from $1,503,352 for the three months ended
September 30, 2003. The decreased spending for the three month period ending
September 30, 2004 came mainly from decreasing investment banking and business
consulting fees by $434,000 to $84,000 due to cutbacks in services required and
the lower stock price for shares issued as payment, reduced legal and audit fees
by $147,000 to $297,000 mainly due to the reduction in services required for
intellectual property protection and filing services, and personnel and
consulting expenses by $180,000 to $119,000 due to reductions in consultants and
the lower stock price for shares issued as payment. These expenses relate to the
Company's search for additional sources of capital, partnering or acquisition
opportunities and maintaining the corporate infrastructure needed in a public
company. Approximately $447,000 of general and administrative expenses was paid
in the form of shares of our common stock.

Research and development expense decreased 92% to $7,100 for the three months
ended September 30, 2004 from $88,968 for the three months ended September 30,
2003. The decrease in research and development costs was primarily a result of
the Company's decision to delay the planning and development of our next
generation software and as well as delayed researching products and intellectual
property for potential partnering opportunities, pending the consummation of the
merger with Wherify Wireless, Inc. We anticipate research and development
expenses for the development of our next generation product to start increasing
as the Company initiates the planning and development process in the next few
months.


                                       9
<PAGE>

Interest expense increased 8% to $280,443 for the three months ended September
30, 2004 from $260,267 for the three months ended September 30, 2004. The
increase is related to the interest accrued on the debt of $1,342,000 compared
to $794,000 at September 30, 2004 and 2003, respectively and the amortization of
the debt discounts related to this debt in the three months ended September 30,
2004.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, we had cash and cash equivalents of approximately $54,000.
Net cash used in operations was approximately $158,000 for the three months
ended September 30, 2004 compared with approximately $144,000 for the three
months ended September 30, 2003. The cash used by operations was made up of the
net loss of approximately $1,015,459 primarily offset by non cash expenses of
approximately $804,000 consisting of option and warrant expenses of
approximately $51,000, stock issued for services of approximately $518,000,
amortization of debt discount of approximately $220,000 and depreciation and
amortization expense of approximately $15,000. The remaining offset was
primarily related to deferred revenue of $50,000 from the sales to Wards.

Net cash provided by financing activities was $205,000 and $530,000 for the
three months ended September 30, 2004 and 2003 respectively. Both periods
contained option/warrant exercises of $30,000, the balance was made up of short
term convertible debentures in 2004 and long term convertible debentures in
2003.

From our inception, we have financed our operations primarily through private
sales of common stock and convertible debentures. We have negative working
capital totaling $2,180,623 which consists primarily of $1,492,648 of
convertible investor notes, both long term $1,341,666 and short term $150,982,
which is net of debt discounts (for price discounts and warrant issuances)
totaling approximately $82,400 and is exclusive of accrued interest of
approximately $176,000.

There is a "Going Concern" reservation in our auditor's opinion for the year
ended June 30, 2004. In the future, in order to address our liquidity issues, we
will seek additional debt or equity financing. At September 30, 2004 we had cash
of $53,907, accounts payable of $424,000, and accrued liabilities, excluding
interest of $27,000.

All of the convertible notes will become due and payable the earlier of the
completion of the merger or by March 31, 2005. 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. The Company has no
material commitments for capital expenditures and there are no anticipated
material capital expenditures that are reasonably expected to have a material
impact on the Company.

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.


                                       10
<PAGE>

RECENT EVENTS

In October, the Company borrowed an additional $30,000 from Forte Capital
Partners, LLC, pursuant to a convertible debenture that carries a 10% annual
interest rate and is convertible on the same terms as the next round of
financing. Warrants were issued in conjunction with this debenture. This loan
will be used to help with short term cash needs and matures on March 31, 2005.

The Company has extended the due dates on all of its convertible debentures to
the earlier of completion of the proposed merger with Wherify Wireless or March
31, 2005.

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 September 30, 2004 we had a net carrying value for our intangible
assets of $73,415.

REVENUE RECOGNITION

We adopted revenue recognition policies to comply fully with the guidance in
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." Revenue consists of shipped customer orders and completed services.
We have an increasing sale order backlog, however those orders are not
considered revenue until the order is shipped and services are rendered.

We account for the licensing of software in accordance with American Institute
of Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2,
Software Revenue Recognition. The application of SOP 97-2 requires judgment,
including whether a software arrangement includes multiple elements, and if so,
whether vendor-specific objective evidence (VSOE) of fair value exists for those
elements. Changes to the elements in a software arrangement, the ability to
identify VSOE for those elements, the fair value of the respective elements, and
changes to a product's estimated life cycle could materially impact the amount
of earned and unearned revenue. Judgment is also required to assess whether
future releases of certain software represent new products or upgrades and
enhancements to existing products.

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, 2004. We have
heretofore financed our business through the procurement of capital investments.
At September 30, 2004, we had cash, cash equivalents and short-term investments
of $53,907; our accounts payable were $424,006 and we had accrued expenses of
$202,263. In the future, in order to address our liquidity issues, we will seek
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:


                                       11
<PAGE>

*     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.

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

To date, we have generated very limited revenues from sales of our FACES(TM 4.0
product. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS" and "BUSINESS." 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;

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.


                                       12
<PAGE>

We have incurred net losses of $14,278,558 since inception. As of September 30,
2004, we had an accumulated stockholder deficit of $2,103,098 and we expect to
continue to incur net losses for the foreseeable future. We also expect to incur
significant sales and marketing and general and administrative expenses. As a
result, we will need to generate increased revenues to achieve profitability
which we may be unable to do. 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. On April 15, 2004,
IQB and Wherify Wireless, Inc. jointly announced the signing of a definitive
agreement under which IQB and Wherify would merge. Under the proposed
transaction, IQB is currently expected to issue approximately 34.6 million
(based on IQB effecting a 1 for 4 reverse stock split) newly issued common stock
of IQB and the shareholders of Wherify is currently expected to hold
approximately 80% of the combined company. The proposed transaction has been
unanimously approved by our board of directors and is subject to certain terms
and conditions, including approval by both the stockholders of IQB and the
shareholders of Wherify. Even if our merger with Wherify is completed or if we
complete an acquisition or enter into a partnering relationship that we believe
would improve our financial results, actual financial results could differ and
we could continue to incur net losses. Even if we achieve profitability, we may
not be able to sustain or increase profitability on a quarterly or annual basis.

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:

*     The budget crisis experienced by local, state and federal law enforcement
      agencies;

*     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.

                                       13
<PAGE>

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:

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

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

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

*     proposed or enacted legislation related to privacy of information;

*     customers' satisfaction with our products and services; and

*     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 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.


                                       14
<PAGE>

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.

OUR FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED BY COMPETITION.

The market for our products is characterized by significant 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.

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.


                                       15
<PAGE>

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.

If we are successful in growing our business as we plan, our operations may
expand rapidly and significantly. If our merger with Wherify is completed our
growth rate could increase rapidly. 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.

RISKS RELATED TO DEVELOPING OUR PRODUCTS

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
acquirer 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.

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.

                                       16
<PAGE>

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.
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 FACES(TM) 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.

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 affects 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.

                                       17
<PAGE>

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.

                            RISKS RELATED THE MERGER

WHILE IQB'S SHARE PRICE HAS BEEN VOLATILE IN RECENT PERIODS, THE MERGER EXCHANGE
RATIO IS FIXED AND NO ADJUSTMENT TO THE EXCHANGE RATIO WILL BE MADE AS A RESULT
OF FLUCTUATIONS IN THE MARKET PRICES OF IQB'S COMMON STOCK.

IQB's share price has been volatile in the past and may continue to be volatile
in the future. In fiscal 2004, the closing price of IQB common stock ranged from
$2.43 to $.93. Upon completion of the merger, each share of Wherify capital
stock will be converted into the right to receive approximately 5.1 shares of
IQB common stock. The exchange ratio will not change even if the market price of
the IQB common stock fluctuates. In addition, neither party may withdraw from
the merger or resolicit the vote of its stockholders solely because of changes
in the market price of IQB common stock. Any reduction in IQB's share price will
result in Wherify stockholders receiving less current value in the merger at
closing. Conversely, any increase in IQB's share price will result in Wherify
stockholders receiving more current value in the merger at closing. The specific
dollar value of IQB common stock that Wherify stockholders will receive upon
completion of the merger will depend on the market value of IQB common stock at
that time.

IQB AND WHERIFY WILL FACE CHALLENGES WITH INTEGRATING THE TWO COMPANIES WHICH
COULD CAUSE THE COMBINED COMPANY TO INCUR SIGNIFICANT EXPENSES

The integration of IQB and Wherify 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 the two
companies will be successful in integrating the two companies in a timely manner
or that the combined companies will generate 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 the two
companies or if expected earnings or synergies do not materialize, the combined
company could be forced to incur significant expenses as well as non-cash
charges to write-off acquired assets, which could seriously harm its financial
condition and operating results.

THE MERGER COULD CAUSE IQB OR WHERIFY TO LOSE KEY PERSONNEL, WHICH COULD
MATERIALLY AFFECT THE COMBINED COMPANY'S BUSINESS AND REQUIRE THE COMPANIES TO
INCUR SUBSTANTIAL COSTS TO RECRUIT REPLACEMENTS FOR LOST PERSONNEL.

As a result of the announcement of the merger agreement, current and prospective
IQB and Wherify employees could experience uncertainty about their future roles
within IQB. This uncertainty may adversely affect the ability of the combined
company to attract and retain key management, sales, marketing and technical
personnel. IQB and Wherify employees may be concerned about the strategic focus
and direction of the combined company, and seek to find employment elsewhere.
Any failure to attract and retain key personnel prior to and after the
consummation of the merger could have a material adverse effect on the business
of the combined company.

SOME OF IQB'S AND WHERIFY'S OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF
INTEREST THAT MAY INFLUENCE THEM TO SUPPORT OR APPROVE ADOPTION OF THE MERGER
AGREEMENT.

Some officers and directors of IQB and Wherify participate in arrangements that
provide them with interests in the merger that are different from yours,
including, among others, the continued service as an officer or director of the
combined company, acceleration of stock and stock option vesting, retention and
severance benefits, continued indemnification and the potential ability to sell
an increased number of shares of the combined company due to acceleration of the
vesting periods for certain stock and stock options. These potential interests,
among others, may influence the officers and directors of IQB and Wherify to
support or approve adoption of the merger agreement.


                                       18
<PAGE>

FAILURE TO COMPLETE THE MERGER MAY RESULT IN IQB OR WHERIFY PAYING A TERMINATION
FEE TO THE OTHER PARTY AND COULD HARM THE TRADING PRICE OF IQB'S COMMON STOCK
AND IQB'S AND WHERIFY'S RESPECTIVE FUTURE BUSINESS AND OPERATIONS.

If the merger is not completed, IQB and Wherify may be subject to the following
risks:

      o    If the merger agreement is terminated under specified circumstances,
           IQB will be required to pay Wherify a termination fee of $500,000;

      o    If the merger agreement is terminated under specified circumstances,
           Wherify will be required to pay IQB a termination fee of $500,000;

      o    The trading price of IQB common stock may decline;

      o    Costs related to the merger, such as legal, accounting and various
           financial advisory fees, must be paid even if the merger is not
           completed; and

      o    IQB and Wherify may be required to seek alternate sources of capital
           in the near term.

In addition, if the merger agreement is terminated and either IQB's or Wherify's
board of directors determines to seek another merger or business combination,
there can be no assurance that IQB or Wherify will be able to find a partner
willing to pay an equivalent or more attractive price than the price to be paid
in the merger.

THE MERGER MAY BE COMPLETED EVEN THOUGH MATERIAL ADVERSE CHANGES MAY RESULT FROM
INDUSTRY-WIDE CHANGES AND OTHER CAUSES SUBSEQUENT TO THE ANNOUNCEMENT OF THE
MERGER AGREEMENT.

In general, either party can refuse to complete the merger if there is a
material adverse change affecting the other party between April 14, 2004, and
the closing. However, some types of adverse changes, events, circumstances or
developments will not prevent the merger from going forward, even if they would
have a material adverse effect on IQB or Wherify, including adverse changes,
events, circumstances or developments resulting from:

      o     General economic conditions or conditions generally affecting the
            markets for each of IQB's products, except to the extent that IQB or
            Wherify is materially disproportionately affected;

      o     The announcement or pendency of the merger or any other transactions
            contemplated by the merger agreement;

      o     Compliance with the express terms and conditions of the merger
            agreement;

      o     Any change in the stock price or trading volume of IQB or Wherify;

      o     Any change in accounting requirements or principles or any change in
            applicable laws, rules or regulations or the interpretation thereof;
            or

      o     The continued incurrence of losses by IQB or Wherify.

If such adverse changes occur and the merger is completed, IQB's stock price may
suffer. This in turn may reduce the value of the merger to Wherify stockholders.

ACCOUNTING RULES APPLICABLE TO THE COMBINED COMPANY COULD ADVERSELY AFFECT
VALUATION.

The name of the surviving entity of this business combination will be Wherify
Wireless, Inc. After the combination, the former stockholders of Wherify are
currently expected to own approximately 80% of the stock of the combined entity.
SEC accounting rules call this a "reverse merger" whereby the financial history
and fiscal year-end of Wherify continue as before except for the capital
structure, which legally becomes that of IQB. All prior financial history of IQ
Biometrix is erased. The approximate 20% of the combined entity remaining with
the IQB shareholders will be valued based upon the current stock price and all
tangible and intangible assets of IQB revalued to an amount equal to the product
of the stock price multiplied by the shares held by the former IQB stockholders
plus IQB's total liabilities. The excess of IQB's total valuation less
identifiable assets and liabilities will be accounted for as goodwill.


                                       19
<PAGE>

The goodwill and any identifiable intangibles recorded in the merger transaction
is reviewed annually and must be written down to its estimated fair value based
on management's view of the present value of future estimated cash flows. Should
IQB's products not prove successful in the marketplace, the value of these
products may be impaired, which will materially and adversely affect the
operating results of the combined company.

                    RISKS RELATED TO OUR CORPORATE GOVERNANCE

OUR AUTHORIZED PREFERRED STOCK EXPOSES STOCKHOLDERS TO CERTAIN RISKS.

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 IQB 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 1,002,000 registered shares of our common stock are
            available as of October 31, 2004 for issuance to outside consultants
            to compensate them for services provided;

      *     Options to purchase approximately 2,936,000 shares of our common
            stock were outstanding as of October 31, 2004;

      *     Warrants to purchase approximately 2,957,450 shares of common stock
            were outstanding as of October 31, 2004; and

      *     Debentures, convertible into 4,663,368 shares of common stock had
            been issued as of October 31, 2004.


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<PAGE>

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. In addition, we have solicited the consent of our
stockholders to a one-for-four reverse stock split (the "Reverse Split"). Upon
effectiveness of the Reverse Split, the number of authorized shares of common
stock that are not issued or outstanding would increase from approximately 14.7
million shares to approximately 41 million shares. We will continue to have
10,000,000 authorized but unissued shares of preferred stock. Authorized but
unissued shares will be available for issuance, and 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.

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.

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 September 30, 2004, 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 months ended September 30,
2004, that has materially affected, or is reasonably likely to materially
affect, our internal controls over financial reporting.


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<PAGE>

PART II

ITEM 1. LEGAL PROCEEDINGS

IQB is involved in pending litigation in the Superior Court for the County of
Fresno. The complaint in the matter was filed on June 22, 2004. The principal
parties are IQB and Nicholas Cornacchia. The complaint alleges that IQB
prematurely terminated a written consulting agreement with Mr. Cornacchia. The
complaint seeks to recover sums which Mr. Cornacchia allegedly would have
received but for the alleged premature termination.

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

RECENT SALES OF UNREGISTERED SECURITIES

In July, August and October 2004, IQB entered into a private placement offering
pursuant to which it issued 10% convertible debentures in the aggregate face
amount of $205,000 that matures on March 31, 2005 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 price to be determined by the next round of financing. In connection with this
offering we issued warrants to purchase 510,000 shares of our common stock, at a
per share exercise price of $0.50. The warrants are exercisable from the date of
issuance and expire in July, August and October 2009. These debentures and
warrants were issued pursuant to the exemptions under sections 4(2) and 4(6) of
the Securities Act of 1933.

ITEM 6. EXHIBITS

EXHIBIT NO. DESCRIPTION

10.43 10% Secured Convertible Debenture, updated October 2004, between IQB and
John Micek, Jr. and Forte Capital Partners, LLC.

10.44 Warrant to Purchase Common Stock Issued to Forte Capital Partners, LLC
dated July 2004.

10.45 Warrant to Purchase Common Stock Issued to John Micek, Jr. dated July
2004.

10.47 Warrant to Purchase Common Stock Issued to Forte Capital Partners, LLC
dated August 2004.

10.48 Warrant to Purchase Common Stock Issued to John Micek, Jr. dated August
2004.

10.49 Warrant to Purchase Common Stock Issued to Forte Capital Partners, LLC
dated October 2004.

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.

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<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 November 15, 2004                     /s/ William Scigliano
                                           ----------------------------
                                           President & CEO

Date November 15, 2004                     /s/ Michael Walsh
                                           ----------------------------
                                           Chief Financial Officer


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