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 December 31, 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 January 31, 2005 the registrant
had 6,863,211 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, 2004

                                                                            PAGE
PART I - FINANCIAL INFORMATION
   Item  1.  Interim  condensed financial  statements (unaudited)             3
     Balance Sheet December 31, 2004                                          3
     Statement of Operations for the three and six
       months ended December 31, 2004 and 2003                                4
     Statement of Cash Flows for the six
        months ended December 31, 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                                           22

PART II - OTHER INFORMATION
   Item 1 Legal Proceedings                                                  23
   Item 2. Unregistered Sales of Equity Securities and Use of Proceeds       23
   Item 6. Exhibits                                                          23

SIGNATURES


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. INTERIM FINANCIAL STATEMENTS (UNAUDITED)

                               IQ BIOMETRIX, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 2004
                                   (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                                                            <C>
  Current assets
     Cash                                                                      $  1,146,566
     Accounts receivable, net of allowance for doubtful accounts of $6,000           36,142
     Inventory                                                                       10,253
     Prepaid expenses                                                                 5,352
                                                                               ------------
         Total current assets                                                     1,198,313

  Equipment, net of $11,408 of accumulated depreciation                               3,059

  Intellectual property, net of $136,068 accumulated amortization                    64,750
                                                                               ------------

     Total assets                                                              $  1,266,122
                                                                               ============

                   LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities
     Convertible notes payable to investors, net                               $  2,550,000
     Short term note payable                                                        349,204
     Accounts payable                                                               252,773
     Stock payable                                                                  150,000
     Accrued expenses                                                               287,820
                                                                               ------------
          Total current liabilities                                               3,589,797
                                                                               ------------

  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;
     6,823,029 shares issued and oustanding                                          68,231
  Additional paid-in capital                                                     12,832,463
  Accumulated deficit                                                           (15,224,369)
                                                                               ------------
     Stockholders' deficit                                                       (2,323,675)
                                                                               ------------

     Total liabilities and stockholders' equity                                $  1,266,122
                                                                               ============
</TABLE>


                                       3
<PAGE>

                               IQ BIOMETRIX, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                            For the three                 For the six
                                            months ended                  months ended
                                            December 31,                  December 31,
                                         2004           2003           2004          2003
                                     -----------    -----------    -----------    -----------
<S>                                  <C>            <C>            <C>            <C>
Revenue - software sales             $   161,353    $    55,253    $   213,513    $   138,348

Operating expenses
     Cost of sales                        (1,426)        36,014          3,846         51,082
     Selling expense                      87,288         32,120        173,563        180,814
     General and administrative          869,092        868,684      1,542,307      2,300,514
     Research and development              7,100         61,200         14,200        150,168
     Interest, net                       123,391        408,381        403,834        734,489
     Impairment                               --         20,042             --         20,042
     Depreciation and amortization        11,719          1,053         27,033          7,668
                                     -----------    -----------    -----------    -----------
        Total operating expenses       1,097,164      1,427,494      2,164,783      3,444,777
                                     -----------    -----------    -----------    -----------
Net Loss                             $  (935,811)   $(1,372,241)   $(1,951,270)   $(3,306,429)
                                     ===========    ===========    ===========    ===========

Basic and Diluted loss per share     $     (0.14)   $     (0.26)   $     (0.30)   $     (0.65)
Weighted average
 shares outstanding                     6,675,079      5,293,052      6,493,374      5,048,258
</TABLE>


                                       4
<PAGE>

                                IQ BIOMETRIX, INC
                             STATEMENT OF CASH FLOWS
               FOR THE SIX MONTHS ENDED DECEMBER 31, 2004 AND 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            2004           2003
                                                         -----------    -----------
OPERATING ACTIVITIES:
<S>                                                      <C>            <C>
Net loss                                                 $(1,951,270)   $(3,306,429)

Adjustments to reconcile net loss to
  net cash used in operating activities
    Depreciation and amortization                             27,033         37,123
    Option and warrant expense                                50,806             --
    Common stock issued for services                       1,026,610      2,382,431
    Common stock issued for debt                             190,962
    Amortization of debt discount                            309,643        595,935
     Changes in assets and liabilities:
        Accounts receivable                                  (15,887)       (39,662)
        Prepaid expenses                                      59,684         18,808
        Inventory                                             (9,226)        (5,180)
        Committed stock                                      (96,851)            --
        Accounts payable and Accrued liabilities              27,164       (227,119)
                                                         -----------    -----------
Net cash used by operating activities                       (572,294)      (353,131)
                                                         -----------    -----------

 Investing activities
        Purchase of fixed assets                                  --         (1,845)
        Receipt from NSS                                          --         50,000
                                                         -----------    -----------
Net cash provided by investing activities                         --         48,155
                                                         -----------    -----------

Financing activities
        Proceeds from exercise of warrants                    30,000             --
        Proceeds from exercise of options                     77,000         31,700
        Proceeds from new convertible notes payable               --        600,000
        Conversion of notes payable                               --        (50,000)
        Proceeds from short term notes payable             1,605,000             --
                                                         -----------    -----------
Net cash provided by financing activities                  1,712,000        581,700
                                                         -----------    -----------

Net increase in cash                                       1,139,706        276,724

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

Cash, end of period                                      $ 1,146,566    $   374,405
                                                         ===========    ===========

Non-cash:
    Stock for convertible debenture and interest         $   637,000    $        --
    Warrant exercise for retirement of short term note   $    50,000    $        --
    Stock issued for conversion of account payable       $     7,600    $        --
</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.
(IQ Biometrix) 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:

IQ Biometrix accounts for its employee stock-based compensation plans under
Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued
to Employees. IQ Biometrix did not grant any options to purchase common stock to
employees in the six months ending December 31, 2004, and therefore no expense
was recorded under the intrinsic value method for the three months ending
December 31, 2004.

NOTE 2 - CONVERTIBLE NOTES PAYABLE

In the quarter ending December 31, 2004, IQ Biometrix raised $30,000 pursuant to
the issuance of a secured convertible promissory note. The note bears interest
of 10% per annum and is due on March 31, 2005. In connection with this
financing, IQ Biometrix also issued a warrant to purchase 60,000 shares of IQ
Biometrix's common stock at an exercise price of $2.00 per share, resulting in a
discount of $13,039. The discount will be amortized over the life of the note.
As of December 31, 2004, $7,243 was charged to interest expense. The note is
convertible into IQ Biometrix's common stock if IQ Biometrix raises $1,500,000
in an equity or equity equivalent offering at a conversion rate equal to the
price of the equity sold in such subsequent offering. On January 11, 2005, IQ
Biometrix issues $3.3 million in convertible debentures and warrants. As a
result, the note has been converted into the new debenture, carrying the same
terms as the January 11, 2005 offering.

NOTE 3 - STOCK ISSUANCES

In the six months ending December 31, 2004, IQ Biometrix issued 84,000 shares of
its common stock in connection with warrant and option exercises valued at
$164,600. IQ Biometrix received $107,000 in cash, $50,000 in retirement of short
term debt and $7,600 in retirement of accounts payable. During the three month
period ended December 31, 2004, IQ Biometrix issued 44,000 shares of its common
stock in connection with option exercises valued at $84,600. IQ Biometrix
received $77,000 in cash and $7,600 in retirement of accounts payable.

During the six month period ended December 31, 2004, IQ Biometrix issued 314,931
shares of its common stock to consultants for services related to corporate
development, marketing, investment banking, legal, investor relations and sales
support valued at approximately $1,026,500. During the three month period ended
December 31, 2004, IQ Biometrix issued 165,719 shares of its common stock to
consultants for services related to corporate development, marketing, investment
banking, legal, investor relations and sales support valued at approximately
$508,400.

During the six month period ended December 31, 2004, IQ Biometrix issued 248,852
shares of its common stock in connection with the conversion of approximately
$637,100 in outstanding principal and interest pursuant to three convertible
debentures. During the three month period ended December 31, 2004, IQ Biometrix
issued 41,822 shares of its common stock in connection with the conversion of
approximately $107,100 in outstanding principal and interest pursuant to a
convertible debenture.


                                       6
<PAGE>

NOTE 4 - SUBSEQUENT EVENTS:

On January 11, 2005, IQ Biometrix received $3,300,000 for the issuance of
convertible debentures and warrants to qualified institutional buyers, and a
limited number of accredited individual and institutional investors. The
convertible debentures bear interest at an annual rate of 5% and mature on June
30, 2005. The debentures are convertible at any time at the election of the
holder into shares of IQ Biometrix's common stock at a conversion price of $2.00
per share (the "Conversion Price"). IQ Biometrix has agreed to file with the SEC
a resale registration statement relating to the common stock issuable upon
conversion of the notes and warrants (the "Resale Registration Statement"). The
debentures will automatically convert into shares of IQ Biometrix's common stock
at the Conversion Price upon the effectiveness of the Resale Registration
Statement. In connection with the sale of the convertible debentures, IQ
Biometrix issued warrants to purchase an aggregate of 825,000 shares of IQ
Biometrix's common stock for an exercise price of $2.70 per share. The
conversion price of the debentures and the exercise price of the warrants are
subject to adjustment at any time as the result of any subdivision, stock split
and combination of shares or recapitalization or if IQ Biometrix sells any
common stock or rights to acquire common stock at purchase price less than the
conversion price of the debentures or the exercise price of the warrants. As
part of this financing, the convertible notes payable held by Forte Capital
Partners, LLC and John Micek, Jr, were converted to debentures containing the
same terms as the financing closed January 11, 2005. There was no adjustment to
the warrants previously issued, nor any additional warrants granted based on
this conversion. Cash fees were paid to Apline Capital Partners ($327,500) and
Daniel McKelvey ($100,00) as part of consulting agreements with IQB.

On January 12, 2005, IQ Biometrix issued bonuses to Greg Micek, a member of its
board of directors and to Mike Walsh, its Chief Financial Officer. Mr. Micek's
bonus consisted of $50,000 in cash and 10,416 shares of IQ Biometrix common
stock and Mr. Walsh's bonus consisted of 20,833 shares of IQ Biometrix common
stock.

On January 13, 2005, the board of directors approved an amendment to option
agreements between IQ Biometrix and 4 of its employees representing the right to
purchase an aggregate of 419,650 shares of IQ Biometrix common stock. The
amendments extend the period during which the employees may exercise their stock
options after termination of their employment relationship, from 45 days to 180
days after termination.

On January 13, 2005, the board of directors approved an amendment to option
agreements between IQ Biometrix and 5 of its consultants representing the right
to purchase an aggregate of 166,350 shares of IQ Biometrix common stock. The
amendments extend the period during which the consultants may exercise their
stock options after termination of their consulting relationship, from 45 days
to 180 days after termination. This is considered a modification of an existing
award. The fair value of the modified award was no different than the fair value
of the original award on the modification date, therefore, there was no
accounting consequence.

On January 24, 2005, IQ Biometrix extended the due date on a convertible
debenture with Forte Capital Partners, LLC, to June 30, 2005. The face value of
the debenture is $300,000. Daniel McKelvey, a member of IQ Biometrix's board of
directors is a managing partner of Forte Capital Partners, LLC.

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:


                                       7
<PAGE>

*     our belief that our FACESTM 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 TM 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 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 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;


                                       8
<PAGE>

OVERVIEW

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

During the quarter ended December 31, 2004 we derived nearly two thirds of our
revenues from sales of our FACES (TM) EDU 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, the Company 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 TM 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. In the three and six months ending December 31, 2004, Wards accounted
for 62% and 47% of our revenues, respectively. Other than Wards, no customer was
responsible for more than 6% of our recognized revenues for the three or six
month periods ending December 31, 2004.

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, legal, 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.

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.

On April 15, 2004, the Company and Wherify Wireless, Inc. jointly announced the
signing of a definitive agreement under which the Company and Wherify would
merge. Under the proposed transaction, the Company is currently expected to
issue to Wherify shareholders approximately 43 million newly issued shares of
the Company common stock and the shareholders of Wherify are currently expected
to hold approximately 78% of the combined company. The proposed transaction has
been unanimously approved by our board of directors and the board of directors
of Wherify and is subject to certain terms and conditions, including approval by
both the stockholders of the Company 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 4.83 shares of the Company's 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.


                                       9
<PAGE>

RESULTS OF OPERATIONS

Revenues increased 54% from $138,348 in the six months ended December 31, 2003
to $213,513 in the six months ended December 31, 2004. Revenues increased 192%
from $55,253 for the three months ended December 31, 2003 to $161,353 for the
three months ended December 30, 2004. Revenues increased in the relevant periods
primarily due to the purchase by Wards of $100,000 of our product. The Company
booked this sale in the quarter ended September 30, 2004, and recognized
revenues from this sale in the quarter ended December 31, 2004. After taking
into account the sale of FACES(TM) EDU product to Wards, sales of FACES(TM)EDU
represented approximately 76% and 66% of revenues for the three and six months
ended December 31, 2004, respectively. Excluding the sale to Wards, sales of
FACES(TM)EDU, represented approximately 37% of revenues for both the three and
six months ended December 31, 2004. Sales of FACES(TM)4.0 represented
approximately 24% and 34% of revenues for the three and six months ended
December 31, 2004, respectively.

Selling expense remained relatively flat with a slight decrease of 4% to
$173,563 for the six months ended December 31, 2004 from $180,814 for the six
months ended December 31, 2003. Of these expenses, $181,000 were paid in shares
of the Company's common stock. In the three months ended December 31, 2004,
selling expense increased 172% to 87,288 from $32,120 for the three months ended
December 31, 2003. The increase in selling expense in the three months ended
December 31, 2004 was primarily due to commissions paid on the sale of FACES(TM)
EDU to Wards , as well as payments to the addition of a third party contractor
hired to assist the Company's sales efforts of approximately $16,000 and
increased marketing costs of approximately $20,000. In the six months ended
December 31, 2004, approximately $116,000 of these expenses were paid in shares
of the Company's common stock.

The Company's general and administrative expenses relate primarily to the
Company's search for additional sources of capital, and costs associated with
being a public company. General and administrative expense decreased 33% to
$1,542,307 for the six months ended December 31, 2004 from $2,300,514 for the
six months ended December 31, 2003. The decrease in spending was primarily due
to reduced investment banking fees of $531,980, legal fees of $242,527, and
business consulting fees of $298,253, offset by an increase in investor
relations fees of $118,471 and bonus payouts of $200,000. Of these expenses,
approximately $896,000 was paid in shares of the Company's common stock. In the
three months ended December 31, 2004, general and administrative expense was
flat with $869,062 incurred, compared to $868,684 for the three months ended
December 31, 2003. The changes in spending in general and administrative
expenses, was primarily a result of lower investment banking fees of $129,641,
legal fees of $24,245, and business consulting fees of $121,560, offset by an
increase in investor relations fees of $95,066 and bonus payout of $200,000.
Approximately $449,000 of these expenses were paid in shares of the Company's
common stock.

Research and development expense decreased 91% to $14,200 for the six months
ended December 31, 2004 from $150,268 for the six months ended December 31,
2003. Research and development expense decreased 88% to $61,200 for the six
months ended December 31, 2004 from $7,100 for the three months ended December
31, 2003. The decrease in development costs are due to the fact that no current
development is taking place, other than normal maintenance and bug fixes. We
currently anticipate research and development expense for the next generation of
FACES(TM) to increase in late fiscal 2005 as the development plan is initiated
and the actual development begins.

Interest expense decreased 45% to $403,834 for the six months ended December 31,
2004 from $734,489 for the six months ended December 31, 2003. Interest expense
decreased 70% to $123,391 for the three months ended December 31, 2004 from
$408,381 for the three months ended December 31, 2003. The decrease is primarily
attributable to the completion of amortization on beneficial conversion price
and warrant discounts, as well as the conversion of $600,000 of convertible
debentures over the six month period reducing the interest accrual.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2004 we had cash and cash equivalents of approximately
$1,150,000. Net cash used in operations was approximately $572,000 for the six
months ended December 31, 2004 as compared with approximately $353,000 for the
six months ended December 31, 2003. The cash used by operations consisted of a
net loss of approximately $1,951,000 primarily offset by non cash expenses of
approximately $1,169,000, consisting of option and warrant expenses of
approximately $51,000, stock issued for services of approximately $1,027,000,
amortization of debt discount of approximately $310,000 and depreciation and
amortization expense of approximately $27,000. The remaining offset was
primarily related to committed stock issued for approximately $97,000.


                                       10
<PAGE>

Net cash provided by financing activities was $1,712,000 and $581,700 for the
six months ended December 31, 2004 and 2003, respectively. Both periods included
cash received from option and warrant exercises of $107,000 in 2004 and $31,700
in 2003. The balance was made up of cash received from the issuance 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 approximately $2,391,500 which consists primarily of
approximately $2,899,200 of short term convertible debentures, which is net of
debt discounts (for price discounts and warrant issuances) totaling
approximately $5,800 and is exclusive of accrued interest of approximately
$176,000, all offset by current assets of approximately $1,198,000.

There is a "Going Concern" reservation in our auditor's opinion for the year
ended June 30, 2004. In order to address our liquidity issues, we sold an
aggregate of $3,300,000 in convertible debentures on January 11, 2005. At
December 31, 2004, we had cash of approximately $1,147,000, accounts payable of
approximately $253,000, and accrued liabilities, excluding interest of
approximately $238,000.

At 12/31/04, the Company had $3,025,348 in outstanding principal and accrued
interest pursuant to outstanding convertible debentures. Of this amount
$1,075,755 are due and payable upon the earlier of the completion of the merger
with Wherify or March 31, 2005. The remaining convertible debentures issued on
January 11, 2005, # automatically convert into shares of the Company's common
stock at the Conversion Price upon the effectiveness of the Resale Registration
Statement.

We currently have no borrowings available to us under any credit arrangement,
and we will look for additional debt and equity financings should current cash
and 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.

RECENT EVENTS

On January 11, 2005, the Company issued convertible debentures and warrants to
qualified institutional buyers, and a limited number of accredited individual
and institutional investors. The convertible debentures have an aggregate face
value of $3,300,000 and mature on June 30, 2005. The debentures are convertible
at any time at the election of the holder into shares of the Company's common
stock at a conversion price of $2.00 per share (the "Conversion Price"). The
Company has agreed to file with the SEC a resale registration statement relating
to the common stock issuable upon conversion of the notes and warrants (the
"Resale Registration Statement"). The debentures will automatically convert into
shares of the Company's common stock at the Conversion Price upon the
effectiveness of the Resale Registration Statement. In connection with the sale
of the convertible debentures, the Company issued warrants to purchase an
aggregate of 825,000 shares of the Company's common stock for an exercise price
of $2.70 per share. The conversion price of the debentures and the exercise
price of the warrants are subject to adjustment at any time as the result of any
subdivision, stock split and combination of shares or recapitalization or if the


                                       11
<PAGE>

Company sells any common stock or rights to acquire common stock at purchase
price less than the conversion price of the debentures or the exercise price of
the warrants. As part of this financing, the convertible notes payable held by
Forte Capital Partners, LLC and John Micek, Jr, were converted to debentures
containing the same terms as the financing closed January 11, 2005. There was no
adjustment to the warrants previously issued, nor any additional warrants
granted based on this conversion. Cash fees were paid to Alpine Capital Partners
($327,500) and Daniel McKelvey ($100,00) as part of consulting agreements with
IQB.

The Company was involved in litigation in the Superior Court for the County of
Fresno with a former consultant. The complaint in the matter was filed on June
22, 2004. The complaint alleged that the Company prematurely terminated a
written consulting agreement with the consultant. The matter was settled in
early January 2005 and the complaint in the matter has been dismissed.

January 12, 2005, IQ Biometrix issued bonuses to Greg Micek, a member of its
board of directors and to Mike Walsh, its Chief Financial Officer. Mr. Micek's
bonus consisted of $50,000 in cash and 10,416 shares of IQ Biometrix common
stock and Mr. Walsh's bonus consisted of 20,833 shares of IQ Biometrix common
stock.

On January 13, 2005, the board of directors approved an amendment to option
agreements between IQ Biometrix and 4 of its employees representing the right to
purchase an aggregate of 419,650 shares of IQ Biometrix common stock. The
amendments extend the period during which the employees may exercise their stock
options after termination of their employment relationship, from 45 days to 180
days after termination.

On January 13, 2005, the board of directors approved an amendment to option
agreements between IQ Biometrix and 5 of its consultants representing the right
to purchase an aggregate of 166,350 shares of IQ Biometrix common stock. The
amendments extend the period during which the consultants may exercise their
stock options after termination of their consulting relationship, from 45 days
to 180 days after termination.

On January 24, 2005, the Company extended the due date on a convertible
debenture with Forte Capital Partners, LLC, to June 30, 2005. The face value of
the debenture is $300,000. Daniel McKelvey, a member of the Company's board of
directors is a managing partner of Forte Capital Partners, LLC.

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, 2004 we had a net carrying value for our intangible
assets of $64,750.

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.


                                       12
<PAGE>

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 December 31, 2004, we had cash, cash equivalents and short-term investments
of approximately $1,147,000, our accounts payable were $252,773 and we had
accrued expenses of $287,820. We currently do not have any credit arrangements.
We may not be able to obtain additional debt or equity financing, if the need
for additional financing should arise. 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.

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 FACESTM 4.0
product. 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 FACESTM and FACESTM EDU products and our
            expectation that we will continue to derive substantially all of our
            revenues from these products 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, whether internal or
            external;

      *     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;


                                       13
<PAGE>

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 $15,024,369 since inception. As of December 31,
2004, we had an accumulated stockholder deficit of $2,123,675 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, the Company and Wherify Wireless, Inc. jointly announced the
signing of a definitive agreement under which the Company and Wherify would
merge. Under the proposed transaction, the Company is currently expected to
issue approximately 43 million newly issued common stock of the Company and the
shareholders of Wherify is currently expected to hold approximately 78% 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 the Company 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.


                                       14
<PAGE>

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:

*     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 FACESTM 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.


                                       15
<PAGE>

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.

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.


                                       16
<PAGE>

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.

RISKS RELATED TO DEVELOPING OUR PRODUCTS

SUBSTANTIALLY ALL OF THE SOFTWARE DEVELOPMENT FOR OUR 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 FACESTM 4.0 and FACESTM EDU software to
Entreprise Cogniscience, Inc. an independent software developer. Although,
FACESTM 4.0 was commercially released in 2003 and FACESTM EDU was commercially
released in 2004, we have discovered and we may continue to discover errors and
defects in our products. 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 FACESTM , 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


                                       17
<PAGE>

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 FACESTM 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.

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.


                                       18
<PAGE>

                            RISKS RELATED THE MERGER

WHILE THE COMPANY'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 THE COMPANY'S COMMON STOCK.

The Company'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 the Company's
common stock ranged from $2.43 to $.93. Upon completion of the merger, each
share of Wherify capital stock is currently expected bo be converted into the
right to receive approximately 4.83 shares of the Company's common stock. The
exchange ratio will not change even if the market price of the the Company's
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 the Company's common stock. Any reduction in the Company's share
price will result in Wherify stockholders receiving less current value in the
merger at closing. Conversely, any increase in the Company's share price will
result in Wherify stockholders receiving more current value in the merger at
closing. The specific dollar value of the Company's common stock that Wherify
stockholders will receive upon completion of the merger will depend on the
market value of the Company's common stock at that time.

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

The integration of the Company 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 THE COMPANY 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, current and prospective employees
of the Company and Wherify could experience uncertainty about their future roles
within the combined company. This uncertainty may adversely affect the ability
of the combined company to attract and retain key management, sales, marketing
and technical personnel. The employees of the Company and Wherify 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 THE COMPANY'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 the Company 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 the Company and Wherify to support or approve adoption of the
merger agreement.

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


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<PAGE>

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

      o     If the merger agreement is terminated under specified circumstances,
            the Company 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 the Company a termination fee of
            $500,000;

      o     The trading price of the Company 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     the Company 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 the Company's or
Wherify's board of directors determines to seek another merger or business
combination, there can be no assurance that the Company 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 the Company or Wherify, including adverse
changes, events, circumstances or developments resulting from:

      o     General economic conditions or conditions generally affecting the
            markets for each of the Company's products, except to the extent
            that the Company 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 the Company 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 the Company or Wherify.

If such adverse changes occur and the merger is completed, the Company'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 the Company. All prior financial
history of IQ Biometrix is erased. The approximate 20% of the combined entity
remaining with the the Company shareholders will be valued based upon the
current stock price and all tangible and intangible assets of the Company
revalued to an amount equal to the product of the stock price multiplied by the
shares held by the former the Company stockholders plus the Company's total
liabilities. The excess of the Company's total valuation less identifiable
assets and liabilities will be accounted for as goodwill.


                                       20
<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
the Company'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 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. 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:

      o     the depth and liquidity of the markets for our common stock;

      o     investor perception of us and the industry in which we operate;

      o     general economic and market conditions; and

      o     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:

      o     as of January 31, 2005, approximately 140,923 shares of the
            Company's common stock were available for issuance to outside
            consultants to compensate them for services provided;

      o     options to purchase approximately 690,102 shares of our common stock
            were outstanding as of January 31, 2005;

      o     warrants to purchase approximately 1,803,113 shares of common stock
            were outstanding as of January 31, 2005; and

      o     debentures, convertible into 2,828,555 shares of common stock had
            been issued as of January 31, 2005.


                                       21
<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. 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 has recently been below $5.00 per share.
If it goes below the $5.00 per share level again, trading in our common stock
would be 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

(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed within 90 days of
the filing date of this report, our chief executive officer and the principal
financial officer concluded that our disclosure controls and procedures were
adequate.

(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.


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<PAGE>

PART II- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company was involved in litigation in the Superior Court for the County of
Fresno with a former consultant. The complaint in the matter was filed on June
22, 2004. The complaint alleged that the Company prematurely terminated a
written consulting agreement with the consultant. The matter was settled in
early January 2005 and the complaint in the matter has been dismissed.

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

RECENT SALES OF UNREGISTERED SECURITIES
On January 11, 2005, the Company issued convertible debentures with an aggregate
face value of $3,300,000 and warrants to purchase 825,000 shares of the
Company's common stock. All principal and accrued interest are convertible into
shares of the Company's common stock at a conversion price of $2.00 per share.
The convertible debentures and warrants were issued to qualified institutional
buyers and a very limited number of accredited and institutional investors. The
issuance of the convertible debentures and warrants are claimed to be exempt
from registration, and the issuance of the common stock underlying the
debentures and warrants will be claimed to be exempt from registration, pursuant
to Sections 4(2) and 4(6) of the Securities Act of 1933.

On January 12, 2005, the Company issued 10,416 shares of its common stock to
Greg Micek, a member of its board of directors, and 20,833 shares of its
common stock to Michael Walsh, its Chief Financial Officer. Mr. Micek and Mr.
Walsh are accredited investors and the issuance of the common stock is claimed
to be exempt from registration pursuant to Sections 4(2) and 4(6) of the
Securities Act of 1933.

ITEM 6. EXHIBITS

EXHIBIT NO. DESCRIPTION

10.50 Extension of consulting agreement with Liviakis Finanicial Communications
      dated January 1, 2005.

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 February 9, 2005                      /s/ William Scigliano
                                           ----------------------------
                                           President & CEO


Date February 9, 2005                      /s/ Michael Walsh
                                           ----------------------------
                                           Chief Financial Officer


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