UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 _______________________ to ________________

                        Commission File Number 333-106160

                                  m-Wise, Inc.
        (Exact name of small business issuer as specified in its charter)

            Delaware                                            11-3536906
-------------------------------                             -------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

                 3 Sapir Street, Herzeliya Pituach, Israel 46852
                    (Address of principal executive offices)

                                 +972-9-9611212
                (Issuer's telephone number, including area code)

                             All Correspondence to:
                             Arthur S. Marcus, Esq.
                 Gersten, Savage, Kaplowitz, Wolf & Marcus, LLP
                           101 E. 52 Street, 9th Floor
                            New York, New York 10022
                                 (212) 752-9700

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 []

The number of shares  outstanding of the issuer's  common stock,  as of November
15, 2004, was 69,506,898.

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

<PAGE>

                                  M-WISE, INC.
                                TABLE OF CONTENTS

                                                                           Page

PART I
FINANCIAL INFORMATION

Item 1.  Financial Statements                                                  1
            Unaudited Balance Sheet as of September 30, 2004                   2
            Unaudited Statements of Operations for the Three Months
              Ended and Nine Months Ended September 30, 2004 and 2003        3-7
            Unaudited Statements of Cash Flows for the Nine Months
              Ended September 30, 2004 and 2003                                8
            Notes to Unaudited Financial Statements                         9-22
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                         23-26
Item 3.  Controls and Procedures                                              27

PART II
OTHER INFORMATION

Item 1   Legal Proceedings                                                    27
Item 2   Changes in Securities and Small Business
         Issuer Purchases of Equity Securities                                27
Item 3   Defaults upon Senior Securities                                      27
Item 4   Submission of Matters to a Vote of Security Holders                  27
Item 5   Other Information                                                    27
Item 6   Exhibits and Reports on Form 8-K                                  25-29

<PAGE>

PART I
FINANCIAL INFORMATION

Item 1.  Financial Statements
                                  M-WISE, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                    PERIODS ENDED SEPTEMBER 30, 2004 AND 2003

<PAGE>

                                    CONTENTS

Report of Independent Registered Public Accounting Firm                  1

Consolidated Balance Sheet                                               2

Consolidated Statements of Operations                                  3-4

Consolidated Statement of Changes in Stockholders' Equity                5

Schedules of Expenses                                                  6-7

Consolidated Statement of Cash Flows                                     8

Notes to Consolidated Financial Statements                            9-23

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of M-WISE, INC.

      We have reviewed the accompanying  consolidated  balance sheets of m-Wise,
Inc. and subsidiaries (the "Company") as of September 30, 2004 and 2003, and the
related consolidated statements of deficit, operations,  change in stockholders'
equity and cash flows for the nine  month  periods  then  ended.  These  interim
financial statements are the responsibility of the Company's management.

      We  conducted  our  reviews in  accordance  with  standards  of the Public
Company  Accounting  Oversight  Board  (United  States).  A  review  of  interim
financial  information consists primarily of applying analytical  procedures and
making inquiries of persons responsible for financial and accounting matters. It
is  substantially  less in scope  than an audit  conducted  in  accordance  with
standards of the Public Company Accounting  Oversight Board (United States), the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

      Based on our reviews, we are not aware of any material  modifications that
should be made to the  consolidated  interim  financial  statements  referred to
above for them to be in conformity with accounting principles generally accepted
in the United States of America.


                                                       "SF PARTNERSHIP, LLP"


TORONTO, CANADA                                        CHARTERED ACCOUNTANTS
November 5, 2004


                                      -1-
<PAGE>

M-WISE, INC.
Balance Sheets
September 30, 2004 and 2003
<TABLE>
<CAPTION>
                                                                     2004           2003
                                                                 -----------    -----------
                                     ASSETS
CURRENT
<S>                                                              <C>            <C>
    Cash and cash equivalents                                    $    52,827    $    16,000
    Accounts receivable - trade (net of allowance for doubtful
       accounts of $17,629; 2003 - $47,937)                          218,344        129,656
    Other receivables                                                  2,974         26,613
    Prepaid and sundry assets                                         11,783         30,037
                                                                 -----------    -----------


                                                                     285,928        202,306
LONG-TERM PREPAID EXPENSES                                            12,467          3,437
EQUIPMENT                                                            242,418        332,754
DEFERRED FINANCING FEES                                               41,051         63,152
                                                                 -----------    -----------


                                                                 $   581,864    $   601,649
                                                                 ===========    ===========

                                   LIABILITIES
CURRENT
    Bank indebtedness                                            $    15,571    $    13,729
    Trade accounts payable                                           215,502      1,225,094
    Other payables and accrued liabilities                           654,820        659,858
    Deferred revenue                                                 396,062         55,786
    Notes payable - current portion                                   71,000             --
                                                                 -----------    -----------


                                                                   1,352,955      1,954,467
ACCRUED SEVERANCE PAY (note 3)                                        16,238         22,311
NOTES PAYABLE (note 4)                                             1,790,997      1,807,988
REDEEMABLE PREFERRED SHARES (note 5)                                      --      5,100,304


                                                                   3,160,190      8,885,070
                                                                 -----------    -----------

                            STOCKHOLDERS' DEFICIENCY
CAPITAL STOCK (note 6)                                           $   118,162    $    84,980
PAID IN CAPITAL                                                    6,889,881      1,729,682
ACCUMULATED OTHER COMPREHENSIVE LOSS                                      --       (127,529)
ACCUMULATED DEFICIT                                               (9,586,369)    (9,970,554)
                                                                 -----------    -----------


                                                                  (2,578,326)    (8,283,421)
                                                                 -----------    -----------


                                                                 $   581,864    $   601,649
                                                                 ===========    ===========
</TABLE>

APPROVED ON BEHALF OF THE BOARD

      "SHAY BEN ASULIN"                               "MORDECHAI BROUDO"

          DIRECTOR                                         DIRECTOR


                                      -2-
<PAGE>

M-WISE, INC.
Consolidated Statement of Operations
Nine Months Ended September 30, 2004 and 2003





<TABLE>
<CAPTION>
                                                                  2004             2003

<S>                                                           <C>             <C>
SALES                                                         $  1,134,179    $    316,352

COST OF SALES                                                      173,002         110,716
                                                              ------------    ------------

GROSS PROFIT                                                       961,177         205,636
                                                              ------------    ------------

EXPENSES
    General and administrative (page 6)                            782,634       1,069,930
    Research and development (page 6)                              268,068         219,124
    Financial                                                       15,080          39,066
    Redemption premium on Class B preferred shares (note 5)             --         300,000
                                                              ------------    ------------

                                                                 1,065,782       1,628,120
                                                              ------------    ------------

LOSS BEFORE DISCONTINUED OPERATIONS                               (104,605)     (1,422,484)

    Loss on discontinued operations                                     --         205,543
                                                              ------------    ------------

NET LOSS                                                      $   (104,605)   $ (1,628,027)
                                                              ============    ============
BASIC LOSS PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $       0.00           (0.13)
                                                              ============    ============
BASIC LOSS PER SHARE                                          $       0.00           (0.14)
                                                              ============    ============
FULLY DILUTED LOSS PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $       0.00           (0.13)
                                                              ============    ============
FULLY DILUTED LOSS PER SHARE (note 6)                         $       0.00           (0.14)
                                                              ============    ============
BASIC WEIGHTED AVERAGE NUMBER OF SHARES                         69,506,898      11,260,428
                                                              ============    ============
</TABLE>


                                      -3-
<PAGE>

M-WISE, INC.
Consolidated Statement of Operations
Three Months Ended September 30, 2004 and 2003





<TABLE>
<CAPTION>
                                                                  2004           2003

<S>                                                           <C>            <C>
SALES                                                         $    900,501   $     78,481

COST OF SALES                                                      125,628         27,461
                                                              ------------   ------------

GROSS PROFIT                                                       774,873         51,020
                                                              ------------   ------------
EXPENSES
    General and administrative (page 7)                            241,261        217,386
    Research and development (page 7)                              129,093         (9,605)
    Financial                                                        4,415         14,237
    Redemption premium on Class B preferred shares (note 5)             --        100,000
                                                              ------------   ------------

                                                                   374,769        322,018
                                                              ------------   ------------

EARNINGS (LOSS) BEFORE DISCONTINUED OPERATIONS                     400,104       (270,998)

    Loss on discontinued operations                                     --         87,437
                                                              ============   ============
NET EARNINGS (LOSS)                                           $    400,104   $   (358,435)
                                                              ============   ============
BASIC EARNINGS (LOSS) PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $       0.01          (0.02)
                                                              ============   ============
BASIC EARNINGS (LOSS) PER SHARE                               $       0.01          (0.03)
                                                              ============   ============
FULLY DILUTED EARNINGS (LOSS) PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $       0.01          (0.02)
                                                              ============   ============
FULLY DILUTED EARNINGS (LOSS) PER SHARE (note 6)              $       0.01          (0.03)
                                                              ============   ============
BASIC WEIGHTED AVERAGE NUMBER OF SHARES                         69,506,898     11,260,428
                                                              ============   ============
</TABLE>


                                      -4-
<PAGE>

M-WISE, INC.
Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 2004 and 2003

<TABLE>
<CAPTION>
                                     COMMON SHARES                     PREFERRED SHARES                 ACCUMULATED
                                                                                                        OTHER
                                     NUMBER OF                         NUMBER OF                        COMPREHENSIVE
                                     SHARES                      $     SHARES            $              LOSS
                                     ------------------------------------------------------------------------------------
<S>                               <C>               <C>                <C>               <C>            <C>
Balance, January 1, 2003               5,260,428             8,943          268,382            2,684         (177,773)

Shares issued for offering
  costs                               25,786,896            42,978               --               --               --

Shares issued for offering
  costs forfeited                    (19,786,896)               --               --               --         (157,222)

7,025,778 warrants issued for
  deferral of debt for legal
  services rendered                           --                --               --               --               --

Class "C" shares issued for
  obtaining line of credit                    --                --        6,315,258           63,153               --

Options vested for employee
  services                                    --                --               --               --               --

Financial statement translation               --                --               --               --           50,244

Net loss                                      --                --               --               --               --
                                  --------------    --------------   --------------   --------------   --------------

Balance, September 30, 2003           11,260,428            19,143        6,583,640           65,837         (127,529)
                                  ==============    ==============   ==============   ==============   ==============

Balance, January 1, 2004              69,506,898           118,162               --               --               --

Options vested for employee
  services                                    --                --               --               --               --

Net Loss                                      --                --               --               --               --
                                  --------------    --------------   --------------   --------------   --------------

Balance, September 30, 2004           69,506,898           118,162               --               --               --
                                  ==============    ==============   ==============   ==============   ==============
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                     ADDITIONAL
                                     PAID IN          ACCUMULATED
                                     CAPITAL          DEFICIT
                                  -----------------------------------
<S>                                  <C>              <C>
Balance, January 1, 2003             $    1,297,374   $   (8,342,527)

Shares issued for offering
  costs                                     207,022               --

Shares issued for offering
  costs forfeited                                --

7,025,778 warrants issued for
  deferral of debt for legal
  services rendered                          10,000               --

Class "C" shares issued for
  obtaining line of credit                       --               --

Options vested for employee
  services                                  372,508               --

Financial statement translation                  --               --

Net loss                                         --       (1,628,027)
                                     --------------   --------------

Balance, September 30, 2003          $    1,729,682   $   (9,970,554)
                                     ==============   ==============

Balance, January 1, 2004             $    6,869,184   $   (9,481,764)

Options vested for employee
  services                                   20,697               --

Net Loss                                         --         (104,605)
                                     --------------   --------------

Balance, September 30, 2004          $    6,889,881   $   (9,586,369)
                                     ==============   ==============
</TABLE>


                                      -5-
<PAGE>

M-WISE, INC.
Schedule of Expenses
Nine Months Ended September 30, 2004 and 2003



                                       2004            2003

GENERAL AND ADMINISTRATIVE
    Consulting                     $   317,855    $   464,078
    Professional services               55,304        271,324
    Other expenses                      82,205         32,870
    Communications                      94,365         52,740
    Marketing                           48,902             --
    Travel                             104,783          4,000
    Payroll and related expenses        53,256        206,253
    Rent                                12,676         18,105
    Bad debts                            2,436         15,193
    Depreciation                        10,852          5,367
                                   -----------    -----------

                                   $   782,634    $ 1,069,930
                                   ===========    ===========

RESEARCH AND DEVELOPMENT
    Payroll and related expenses   $   150,399    $   129,894
    Depreciation                        77,011         67,597
    Travel                              45,459         31,873
    Vehicle maintenance                 36,545         44,158
    Subcontractors                       7,529         40,580
    Materials and components             3,092         16,828
    Shipment and freight                   203             --
     Government grant (note 7)         (52,170)      (111,806)
                                   -----------    -----------

                                   $   268,068    $   219,124
                                   ===========    ===========


                                      -6-
<PAGE>

M-WISE, INC.
Schedule of Expenses
Three Months Ended September 30, 2004 and 2003





                                        2004            2003

GENERAL AND ADMINISTRATIVE
    Consulting                     $    104,754    $     80,491
    Professional services                   659          37,995
    Other expenses                       17,422           9,383
    Communications                       45,177          17,896
    Marketing                            14,231          19,461
    Travel                               32,223              --
    Payroll and related expenses         18,593          29,166
    Rent                                  2,118           6,010
    Bad debts                             2,436              --
    Vehicle maintenance                      --          15,193
    Depreciation                          3,648           1,791
                                   ------------    ------------

                                   $    241,261    $    217,386
                                   ============    ============


RESEARCH AND DEVELOPMENT
    Payroll and related expenses   $     67,750    $     15,291
    Depreciation                         25,895          20,390
    Travel                               16,180           2,711
    Vehicle maintenance                  11,342           2,550
    Subcontractors                        6,637          (3,212)
    Materials and components              1,107           8,568
    Shipment and freight                    182              --
    Government grant (note 7)                --         (55,903)
                                   ------------    ------------

                                   $    129,093    $     (9,605)
                                   ============    ============


                                      -7-
<PAGE>

M-WISE, INC.
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 2004 and 2003





<TABLE>
<CAPTION>
                                                                                       2004           2003
<S>                                                                                <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                                       $  (104,605)   $(1,628,027)
    Adjustments  required to  reconcile  net loss to net cash used in  operating
activities:
      Depreciation                                                                      87,863         72,964
      Increase in redemption premium on Class B preferred shares                            --        300,000
      Common shares issued for offering costs                                               --         60,000
      Warrants issued for deferral of debt for legal services rendered                      --         10,000
      Wages and salaries paid by options                                                20,697        372,508
      Accounts receivable - trade                                                     (168,378)        (4,837)
      Other receivables                                                                 12,702         66,796
      Prepaid and sundry assets                                                            459        (13,562)
      Deferred revenue                                                                 340,276         55,786
      Trade accounts payable                                                            17,284        176,303
      Other payables and accrued liabilities                                          (130,011)       256,394
      Long-term prepaid expenses                                                        (5,168)        13,581
      Deferred financing fees                                                            9,471        (63,152)
      Accrued severance pay                                                             (4,435)           734
                                                                                   -----------    -----------

                                                                                        76,155       (324,512)
                                                                                   -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisition of equipment                                                         (73,907)            --
      Proceeds from disposition of equipment                                                --        116,643
                                                                                   -----------    -----------

                                                                                       (73,907)       116,643
                                                                                   -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Increase in notes payable                                                         22,438             --
      Bank indebtedness - gross                                                         (4,397)         7,890
                                                                                   -----------    -----------

                                                                                        18,041          7,890
                                                                                   -----------    -----------

FOREIGN EXCHANGE LOSS ON CASH AND CASH EQUIVALENTS                                          --            404
                                                                                   -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                    20,289       (199,575)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                         32,538        215,575
                                                                                   -----------    -----------

CASH AND CASH EQUIVALENTS - END OF PERIOD                                          $    52,827    $    16,000
                                                                                   ===========    ===========
</TABLE>


                                      -8-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003



1.    DESCRIPTION OF BUSINESS AND GOING CONCERN

      a)    Description of Business

      m-Wise  Inc.  (the  "Company")  is  a  U.S.   corporation  which  develops
      interactive   messaging   platforms  for  mobile  phone-based   commercial
      applications,  transactions and information services with internet billing
      capabilities.

      The  Company  has  a   wholly-owned   subsidiary  in  Israel,   which  was
      incorporated in 2000 under the laws of Israel.

      b)    Going Concern

      The Company's financial statements are presented on a going concern basis,
      which   contemplates   the  realization  of  assets  and  satisfaction  of
      liabilities in the normal course of business.  The Company has experienced
      recurring  losses  since  inception  and  has  negative  cash  flows  from
      operations that raise substantial doubt as to its ability to continue as a
      going  concern.  For the periods ended  September  30, 2004 and 2003,  the
      Company experienced net losses of $104,605 and $1,628,027 respectively.

      The Company is in an industry  where  operational  fluctuation  is usually
      higher  than  other  ordinary  industries.   The  accompanying   financial
      statements reflect  management's  current assessment of the impact to date
      of the economic situation on the financial position of the Company. Actual
      results may differ materially from management's current assessment.

      The Company's  ability to continue as a going  concern is also  contingent
      upon its ability to secure  additional  financing,  continuing sale of its
      products and attaining profitable operations.

      Management is pursuing various sources of equity  financing.  Although the
      Company plans to pursue  additional  financing,  there can be no assurance
      that the Company  will be able to secure  financing  when needed or obtain
      such on terms satisfactory to the Company, if at all.

      The  financial  statements do not include any  adjustments  to reflect the
      possible future effects on the recoverability and classification of assets
      or the amounts and  classification of liabilities that may result from the
      possible inability of the Company to continue as a going concern.


                                      -9-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      The  accounting  policies  of the  Company  are in  accordance  with  U.S.
      generally accepted accounting  principles,  and their basis of application
      is consistent with that of the previous  period.  Outlined below are those
      policies considered particularly significant:

      a)    Basis of Presentation

            These unaudited interim financial statements reflect all adjustments
            that  are,  in  the  opinion  of  management,  necessary  to a  fair
            statement of the results for the interim periods presented.

      b)    Reporting Currency

            A majority of the Company's  revenues are generated in U.S. dollars.
            In  addition,  a  substantial  portion  of the  Company's  costs are
            incurred in U.S.  dollars.  Management has determined  that the U.S.
            dollar  will be  used  as the  Company's  functional  and  reporting
            currency.

            Accordingly,  financial  statements  of  subsidiaries  maintained in
            currencies  other than the reporting  currency are being  translated
            into  U.S.   dollars  in  accordance  with  Statement  of  Financial
            Accounting   Standard   No.   52  (SFAS   52),   "Foreign   Currency
            Translation".   All  translation   gains  and  losses  are  directly
            reflected  separately in stockholders'  equity as Accumulated  Other
            Comprehensive Income or Loss.

            Foreign currency  transactions of subsidiaries  have been translated
            to their functional currencies at the rate prevailing at the time of
            the  transaction.  Realized  foreign  exchange gains and losses have
            been charged to income in the year.

            During  the 2003  fiscal  year,  the  subsidiaries  whose  reporting
            currency  was other than US dollars were  disposed and as such,  the
            accumulated other comprehensive loss was adjusted to nil.

      c)    Cash and Cash Equivalents

            Cash includes  currency,  cheques  issued by others,  other currency
            equivalents,   current   deposits   and  passbook   deposits.   Cash
            equivalents   include   securities  and   short-term   money  market
            instruments  that can be easily converted into cash. The investments
            that mature  within three months from the  investment  date are also
            included as cash equivalents.

      d)    Allowance for Doubtful Accounts

            The  allowance  for doubtful  accounts  reflects  managements'  best
            estimate of probable  losses  inherent  in the  accounts  receivable
            balance.  The  Company  determines  the  allowance  based  on  known
            troubled  accounts,   historical  experience,  and  other  currently
            available evidence.


                                      -10-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

      e)    Deferred Financing Fees

            Deferred financing fees relate to a non-interest bearing credit line
            facility of $300,000  provided by a shareholder as disclosed in note
            6. The  overdraft  from the  credit  facility  will be  non-interest
            bearing and there will be no  covenants  with which the Company will
            need to comply.  The credit line facility has no expiration date and
            management  expects to retain the  facility for a period of at least
            five  years.  Accordingly,  the fees are being  amortized  using the
            straight-line method over five years.

      f)    Equipment and Depreciation

            Equipment  are  stated  at  cost  less   accumulated   depreciation.
            Depreciation  is based on the  estimated  useful lives of the assets
            and is provided using the undernoted annual rates and methods:

                   Furniture and equipment      6-15%          Straight-line
                   Computer equipment             33%          Straight-line

      g)    Accrued Severance

            The Company  accounts for its potential  severance  liability of its
            Israel  subsidiary in accordance with EITF 88-1,  "Determination  of
            Vested Benefit  Obligation for a Defined Benefit Pension Plan".  The
            Company's  liability for  severance  pay is  calculated  pursuant to
            applicable  labour laws in Israel on the most  recent  salary of the
            employees  multiplied by the number of years of employment as of the
            balance sheet date for all  employees.  The  Company's  liability is
            fully  accrued and reduced by monthly  deposits  with  severance pay
            funds and insurance policies.

      h)    Revenue Recognition

            The  Company  generates  revenues  from  product  sales,  licensing,
            customer services and technical support.


                                      -11-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

            Revenues from products sales are recognized on a  completed-contract
            basis, in accordance with Staff Accounting Bulletin No. 101 "Revenue
            Recognition in Financial  Statements" ("SAB No. 101"),  Statement of
            Position  97-2  "Software  Revenue  Recognition"  and  Statement  of
            Position 81-1 "Accounting for Performance of  Construction-Type  and
            Certain  Production-Type   Contracts".  The  Company  has  primarily
            short-term contracts whereby revenues and costs in the aggregate for
            all  contracts  is expected to result in a matching of gross  profit
            with period  overhead or fixed costs similar to that achieved by use
            of  the  percentage-of-completion  method.  Accordingly,   financial
            position and results of operations  would not vary  materially  from
            those resulting from the use of the percentage-of-completion method.
            Revenue is  recognized  only after all three stages of  deliverables
            are complete;  installation,  approval of acceptance test results by
            the customer and when the product is successfully put into real-life
            application.   Customers   are  billed,   according  to   individual
            agreements,  a percentage of the total contract fee upon  completion
            of work in each stage; approximately 40% for installation,  40% upon
            approval of acceptance  tests by the customer and the balance of the
            total  contract  price when the  software is  successfully  put into
            real-life application. The revenues, less its' associated costs, are
            deferred and  recognized  on completion of the contract and customer
            acceptance.  Amounts  received for work  performed in each stage are
            not refundable.

            On-going  service and technical  support  contracts  are  negotiated
            separately at an additional  fee. The technical  support is separate
            from the  functionality of the products,  which can function without
            on-going support.

            Technology  license  revenues are recognized in accordance  with SAB
            No. 101 at the time the  technology  and license is delivered to the
            customer, collection is probable, the fee is fixed and determinable,
            a  persuasive  evidence  of  an  agreement  exists,  no  significant
            obligation  remains  under the sale or  licensing  agreement  and no
            significant customer acceptance requirements exist after delivery of
            the technology.

            Revenues  relating to customer  services and  technical  support are
            recognized  as the services are rendered  ratably over the period of
            the related contract.

            The Company does not sell products with multiple deliverables. It is
            management's  opinion that EITF 00-21,  "Revenue  Arrangements  With
            Multiple Deliverables" is not applicable.

      i)    Research and Development Costs

            Research and development costs are expensed as incurred.


                                      -12-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

      j)    Government Grants

            Government   grants  are  recognized  as  income  over  the  periods
            necessary  to  match  them  with the  related  costs  that  they are
            intended to compensate.

      k)    Use of Estimates

            Preparation of financial  statements in accordance  with  accounting
            principles  generally  accepted  in the  United  States  of  America
            requires  management to make estimates and  assumptions  that affect
            the amounts  reported in the financial  statements and related notes
            to financial  statements.  These estimates are based on management's
            best  knowledge  of  current  events and  actions  the  Company  may
            undertake in the future.  Actual results may ultimately  differ from
            estimates,  although  management  does not believe such changes will
            materially affect the financial statements in any individual year.

      l)    Concentration of Credit Risk

            SFAS No. 105, "Disclosure of Information About Financial Instruments
            with   Off-Balance   Sheet  Risk  and  Financial   Instruments  with
            Concentration   of  Credit   Risk",   requires   disclosure  of  any
            significant  off-balance  sheet risk and credit risk  concentration.
            The  Company  does not have  significant  off-balance  sheet risk or
            credit   concentration.   The  Company   maintains   cash  and  cash
            equivalents with major Israel financial institutions.

            The Company's provides credit to its clients in the normal course of
            its  operations.  Depending  on their size,  financial  strength and
            reputation,  customers are given credit terms of up to 60 days.  The
            Company  carries out, on a continuing  basis,  credit  checks on its
            clients and maintains provisions for contingent credit losses which,
            once they materialize, are consistent with management's forecasts.

            For other debts, the Company determines,  on a continuing basis, the
            probable  losses and sets up a  provision  for  losses  based on the
            estimated realizable value. For the periods ended September 30, 2004
            and 2003, all uncollectible  amounts have been written off and there
            was no further provision for doubtful accounts.

            Concentration of credit risk arises when a group of clients having a
            similar  characteristic  such  that  their  ability  to  meet  their
            obligations  is  expected  to be  affected  similarly  by changes in
            economic  or  other  conditions.  The  Company  does  not  have  any
            significant risk with respect to a single client.


                                      -13-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

      m)    Fair Value of Financial Instruments

            The  estimated  fair  value  of  financial   instruments   has  been
            determined by the Company using  available  market  information  and
            valuation  methodologies.   Considerable  judgment  is  required  in
            estimating  fair  value.  Accordingly,  the  estimates  may  not  be
            indicative  of the amounts the  Company  could  realize in a current
            market  exchange.  At  September  30,  2004 and 2003,  the  carrying
            amounts  of  cash  equivalents,   short-term  bank  deposits,  trade
            receivables and trade payables  approximate their fair values due to
            the short-term maturities of these instruments.


3.    ACCRUED SEVERANCE PAY

      The Company accounts for its potential  severance  liability of its Israel
      subsidiary in accordance with EITF 88-1,  "Determination of Vested Benefit
      Obligation for a Defined  Benefit Pension Plan".  The Company's  liability
      for  severance pay is  calculated  pursuant to  applicable  labour laws in
      Israel on the most recent salary of the employees multiplied by the number
      of years of employment as of the balance sheet date for all employees. The
      Company's  liability is fully accrued and reduced by monthly deposits with
      severance pay funds and insurance  policies.  As at September 30, 2004 and
      2003,  the amount of the  liabilities  accrued  were  $54,046  and $53,197
      respectively.  Severance pay expenses for the periods ended  September 30,
      2004 and 2003 were $874 and $2,517 respectively.

      The deposit funds include profits accumulated up to the balance sheet date
      from the Israeli  company.  The deposited funds may be withdrawn only upon
      the fulfillment of the obligation  pursuant to Israeli  severance pay laws
      or labour  agreements.  Cash  surrender  values of the deposit funds as at
      September 30, 2004 and 2003 were $37,808 and $30,886 respectively.  Income
      earned from the deposit funds for 2004 and 2003 was immaterial.


4.    NOTES PAYABLE

<TABLE>
<CAPTION>
                                                                             2004           2003


<S>                                                                    <C>              <C>
Syntek Capital AG - a significant shareholder until July 2002          $      900,000   $      900,000
DEP Technology Holdings Ltd. - a significant shareholder
                                                     until July 2002          900,000          900,000
           Accrued interest                                                    61,997            7,988
                                                                       --------------   --------------




                                                                            1,861,997        1,807,988
           Less: Current portion                                               71,000               --
                                                                       --------------   --------------

                                                                       $    1,790,997   $    1,807,988
                                                                       ==============   ==============
</TABLE>


                                      -14-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


4.    NOTES PAYABLE (cont'd)

      The promissory  notes are unsecured,  bear interest at the per annum LIBOR
      rate offered by Citibank  North  America and are repayable on December 31,
      2007.  Commencing  January 1, 2004,  the annual  principal  repayments are
      calculated as a total of 5% of annual prior year's revenues.

      Under the loan agreements, the Company is not allowed to declare dividends
      except for the purpose of  redemption  of common  stock owned by Ogen LLC,
      one of the stockholders of the Company.

      The Company may not create a pledge,  charge or other encumbrance over any
      or all of its assets for financing  without the lenders'  consent and must
      provide notice to the lender at least 10 days prior to any such action.


5.    REDEEMABLE PREFERRED SHARES

      The Company has issued  Series "B"  preferred  shares,  redeemable  at the
      option  of the  holder at a price  equal to $8.17  per share  plus 10% per
      annum from the date of purchase through the redemption date.

      The  Company  recorded  the  transaction  in  accordance  with EITF  D-98,
      "Classification  and Measurement of Redeemable  securities".  As such, the
      preference  shares have been presented  outside of permanent equity at its
      redemption  value.  The  premium  on  redemption  is being  charged to the
      statement of operations as incurred.

      On November 19, 2003, the Company, in accordance with the holders,  agreed
      to convert  489,456  Series "B"  preferred  shares into  3,124,105  common
      shares at a ratio of 1 to 6.3828125.  Following the conversion, the common
      shares  were  split  on a 1 to 6 basis  to  18,744,630  common  shares  as
      described in note 6.


                                      -15-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


<TABLE>
<CAPTION>
<S>   <C>                  <C>                                                       <C>                  <C>
6.    CAPITAL STOCK

        Authorized
          210,000,000      Common shares
          170,000,000      Preferred shares
                           Series "A": convertible, voting, par value of $0.0017 per share
                           Series "B": 10% non-cumulative dividend, redeemable, convertible, voting, par
                                        value of $0.0017 per share
                           Series "C": 10% non-cumulative dividend, convertible, voting, par value of
                                        $0.0017 per share

                                                                                            2004              2003

        Issued
             69,506,898    Common shares (2003 - 11,260,428)                          $    118,162         $     19,143
                    nil    Series "A" Preferred shares (2003 - 268,382)                         --                2,684
                    nil    Series "C" Preferred shares (2003 - 6,315,258)                       --               63,153
                                                                                      ------------         ------------



                                                                                      $    118,162         $     84,980
                                                                                      ============         ============
</TABLE>

On November 19, 2003,  the Company,  in accordance  with the holders,  agreed to
convert all the 268,382 Class "A" and 489,456 Class "B" and 6,315,258  Class "C"
preferred  shares into common  shares.  Following  the  conversion,  the Company
granted a 1 to 6 forward stock split of its common  shares.  The  conversion has
been recorded prospectively in the consolidated financial statements,  while the
forward stock split has been recorded retroactively.


Stock warrants and options:

The Company accounted for its stock options and warrants in accordance with SFAS
123  "Accounting  for Stock - Based  Compensation"  and SFAS 148 "Accounting for
Stock - Based  compensation  -  Transition  and  Disclosure."  Value of  options
granted has been  estimated  by the Black  Scholes  option  pricing  model.  The
assumptions  are evaluated  annually and revised as necessary to reflect  market
conditions and additional experience. The following assumptions were used:


                                     2004                       2003

                           Israel    International     Israel     International

Interest rate                  5%               5%         5%                5%
Expected volatility           50%              50%        50%               50%
Expected life in years          8               10          8                10


                                      -16-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003





6.    CAPITAL STOCK (cont'd)


      Warrants:

      In April 2000,  56,180  warrants,  equivalent  to 337,080 after the 1 to 6
      forward  stock  split,  were  issued to one of the  shareholders  with his
      preferred  Class "A" shares for a total  investment of $750,000.  Warrants
      will expire in the event of an initial  public  offering of the  Company's
      securities. Warrants have an exercise price for preferred Class "A" shares
      of the  Company at $4.45 per share,  equivalent  to $0.74 after the 1 to 6
      forward  stock split.  No value has been  assigned to the warrants and the
      total  investment net of par value of preferred  Class "A" shares has been
      presented as additional paid in capital.  The warrants for preferred Class
      "A" shares were  converted  into  warrants  for common  shares on a 1 to 1
      basis during the year.

      In January 2003,  the Company  issued  180,441  warrants for the Class "B"
      preferred  shares of the Company for  deferral of debt for legal  services
      rendered, which was valued at $10,000. The Warrants will expire in 2010.

      The  warrants  for  preferred  Class "B" shares have been  converted  into
      warrants for common  shares  during the year at a ratio of 1 to 6.3828125.
      After the conversion, the warrants were further split at the ratio of 1 to
      6 in accordance  with the forward stock split of the common shares.  After
      the  conversion  and the  forward  split,  there were  7,025,778  warrants
      outstanding each convertible to 1 common share at par value.

      Capital Stock:

      In January 2003, the Company issued 4,297,816 common shares, equivalent to
      25,786,896  after the 1 to 6 forward stock split, for $250,000 of offering
      costs  with  regard  to  the  registration  of  its  securities  with  the
      Securities Exchange Commission. In November 2003 it was agreed upon by the
      parties  that the fair value of the  offering  costs was only  $60,000 and
      therefore 19,786,896 of the post-split shares were forfeited. The offering
      costs have been charged to professional  services expense in the year. The
      cancellation  has been reflected  retroactively  in the interim  financial
      statements.

      In January 2003, the Company issued  6,315,258 Class "C" preferred  shares
      to a shareholder for providing a non-interest bearing credit line facility
      of $300,000. These shares were issues at par value, which approximates the
      fair  market  value of the  financing  fees  relating  to the credit  line
      facility.  At September 30, 2004 the line of credit has not been utilized.
      The 6,315,258 Class "C" preferred shares were subsequently  converted into
      37,891,548 common shares post forward stock split.


                                      -17-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003



6.    CAPITAL STOCK (cont'd)

      Stock Options:

      In February 2001 the Board of Directors of the Company  adopted two option
      plans to allow  employees and  consultants to purchase  ordinary shares of
      the Company.

      Under the Israel  2001  share  option  plan  management  authorized  stock
      options  for  2,403,672  common  shares  of the  Company  having a $0.0017
      nominal  par value each and an exercise  price of  $0.0017,  and under the
      International  2001 share option plan,  stock  options for 300,000  common
      shares  having a $0.0017  nominal par value each and an exercise  price of
      $0.0017.  As of September  30, 2004,  3,672  options under the Israel 2001
      share option plan for common stock were not yet granted.

      Under the Israel  2003  share  option  plan  management  authorized  stock
      options (on a post conversion,  post split basis) for 16,094,106 preferred
      Class "B" shares, which were converted to options for common shares of the
      Company  having a $0.0017  nominal par value each and an exercise price of
      $0.0017,  and under the International 2003 share option plan stock options
      (on a post  conversion,  post split basis) for 25,061,094  preferred Class
      "B"  shares  which were  converted  to  options  for common  shares of the
      Company  having a $0.0017  nominal par value each and an exercise price of
      $0.0017.  As of September 30, 2004,  38,256  options under the Israel 2003
      share option plan were not yet granted.


                                      -18-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


6.    CAPITAL STOCK (cont'd)

      The options vest gradually over a period of 4 years from the date of grant
      for  Israel  and 10 years  (no less  than 20% per year for five  years for
      options granted to employees) for the International plan. The term of each
      option shall not be more than 8 years from the date of grant in Israel and
      10 years from the date of grant in the International plan. The outstanding
      options  that  have  vested  have  been  expensed  in  the  statements  of
      operations as follows:

              Year ended December 31, 2001              $          9,000
              Year ended December 31, 2002                            --
              Year ended December 31, 2003                       384,889
              Quarter ended March 31, 2004                         8,269
              Quarter ended June 30, 2004                          6,214
              Quarter ended September 30, 2004                     6,214
                                                        ----------------

                                                        $        414,586
                                                        ================

      The following table summarizes the activity of common stock options during
2004 and 2003:


<TABLE>
<CAPTION>
                                                         2004                    2003

                                            Israel      International     Israel     International
                                         ------------   ------------   ------------   ------------
<S>                                        <C>            <C>               <C>            <C>
Outstanding, beginning of period           18,455,850     25,361,094        600,000        300,000
   Granted                                         --             --      1,800,000             --
   Exercised                                       --             --             --             --
   Cancelled                                       --             --             --             --
                                         ------------   ------------   ------------   ------------
Outstanding, end of period                 18,455,850     25,361,094      2,400,000        300,000
                                         ------------   ------------   ------------   ------------
Weighted average fair value of common
stock options granted during the
period                                   $         --   $         --   $     18,000   $         --
                                         ============   ============   ============   ============
Weighted average exercise price of
common stock options, beginning of
period                                   $     0.0017   $     0.0017   $     0.0017   $     0.0017
                                         ============   ============   ============   ============
Weighted average exercise price of
common stock options granted in the
period                                   $         --   $         --   $     0.0017   $         --
                                         ============   ============   ============   ============
Weighted average exercise price of
common stock options, end of per         $     0.0017   $     0.0017   $     0.0017   $     0.0017
                                         ============   ============   ============   ============
Weighted average remaining contractual
life of common stock options                  7 years        9 years        8 years       10 years
                                         ============   ============   ============   ============
</TABLE>


                                      -19-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


6. CAPITAL STOCK (cont'd)

      The following  table  summarizes  the activity of preferred  stock options
during 2004 and 2003:


<TABLE>
<CAPTION>
                                                         2004                                 2003

                                                     Israel        International      Israel        International
<S>                                               <C>             <C>              <C>              <C>
      Outstanding, beginning of period                       --               --               --               --
         Granted                                             --               --       16,055,850       25,061,094
         Exercised                                           --               --               --               --
         Preferred stock options converted
            to common                                        --               --               --               --
         Cancelled                                           --               --               --               --
                                                 --------------   --------------   --------------   --------------

      Outstanding, end of period                             --               --       16,055,850       25,061,094
                                                 ==============   ==============   ==============   ==============

      Weighted average fair value of preferred
      stock options granted during the period    $           --   $           --   $       27,360   $       42,604
                                                 ==============   ==============   ==============   ==============

      Weighted average exercise price of
      preferred stock options, beginning of
      period                                     $           --   $           --   $           --   $           --
                                                 ==============   ==============   ==============   ==============

      Weighted average exercise price of
      preferred stock options granted in the
      period                                     $           --   $           --   $       0.0017   $       0.0017
                                                 ==============   ==============   ==============   ==============

      Weighted average exercise price of
      preferred stock options, end of period     $           --   $           --   $       0.0017   $       0.0017
                                                 ==============   ==============   ==============   ==============

      Weighted average remaining contractual
      life of preferred stock options                                                    8 years          10 years
                                                 ==============   ==============   ==============   ==============
</TABLE>


      All  outstanding  preferred stock options have been cancelled and replaced
      with common stock options during the 2003 fiscal year at the ratio of 1 to
      6.3828125.

      The stock options and the  preferred  shares have not been included in the
      calculation of the diluted  earnings per share as their inclusion would be
      antidilutive.


                                      -20-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003

7.    GOVERNMENT GRANTS

      During the period ended September 30, 2004 the Israeli subsidiary received
      approximately  $52,000  from a joint  Israeli-Singapore  government  grant
      program.  The amount is being  recorded as a reduction of the research and
      development  expense incurred in the period. The total amount approved for
      the grant was $186,330, which the Company is recording on a cash basis.

      The  Israeli  subsidiary  is  required  to  repay  the  government  agency
      royalties  in the  amount of 2.5% of gross  sales  from the  products  and
      services being developed  relating to the grant,  limited to the amount of
      the grant. If the product is not marketable, the grant will not be repaid.
      As at September  30, 2004 the products  have been  developed  but no sales
      have been made. As such, no amount has been paid as royalties.


8.    INCOME TAXES

      The Company  accounts  for income taxes in  accordance  with SFAS No. 109,
      "Accounting  for Income  Taxes".  This Standard  prescribes the use of the
      liability method whereby deferred tax asset and liability account balances
      are determined based on differences  between  financial  reporting and tax
      bases of assets and  liabilities  and are  measured  using the enacted tax
      rates.  The  effects  of  future  changes  in tax  laws or  rates  are not
      anticipated.

      Under SFAS No. 109  income  taxes are  recognized  for the  following:  a)
      amount  of  tax  payable  for  the  current  year,  and  b)  deferred  tax
      liabilities  and assets for future tax  consequences  of events  that have
      been  recognized  differently  in the  financial  statements  than for tax
      purposes.  Management  determined that accounting values of its assets and
      liabilities  recorded are not  materially  different from their tax values
      and  therefore  no  deferred  tax  assets/liabilities  have been  setup to
      account for the temporary differences.


                                      -21-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


8.    INCOME TAXES (cont'd)

      The Israeli  subsidiary  maintains an  investment  program in hardware and
      software  in the  amount of  $75,000  and has been  granted  the status of
      "Approved  Enterprise"  under  the Law for the  Encouragement  of  Capital
      Investments,  1959 in  Israel.  This  status  entitles  the  Company to an
      exemption  from tax on income  derived there from for a period of 10 years
      starting in the year in which the Company first generates  taxable income,
      but not later than 14 years from the date of approval  which was  received
      on  December  2002  or 12  years  from  commencement  of  operations.  The
      tax-exempt  profits  that  will  be  earned  by  the  Company's  "Approved
      Enterprises"  can be distributed  to  shareholders,  without  imposing tax
      liability  on the Company  only upon its  complete  liquidation.  If these
      retained  tax-exempt profits are distributed in a manner other than in the
      complete  liquidation  of the Company they would be taxed at the corporate
      tax rate  applicable to such profits as if the Company had not elected the
      alternative  system  of  benefits  (depending  on  the  level  of  foreign
      investment in the Company)  currently  between 10% to 25% for an "Approved
      Enterprise".  Under SFAS 109, a deferred tax liability  normally  would be
      recorded  relating  to taxes  that  would be owed on the  distribution  of
      profits even if management does not intend currently to declare dividends.
      As at  September  30,  2004 the Israel  subsidiary  has not  reported  any
      taxable  income  and there was an  accumulated  deficit  of  approximately
      $250,000.  There was no  deferred  tax  liability  to be  recorded  in the
      period.

      The Company has deferred income tax assets as follows:

<TABLE>
<CAPTION>
                                                                2004            2003
<S>                                                          <C>              <C>
      Deferred income tax assets
        Non-capital losses carried forward                   $ 2,400,000      2,500,000
        Valuation allowance for deferred income tax assets    (2,400,000)    (2,500,000)
                                                             -----------    -----------


                                                             $        --             --
                                                             ===========    ===========
</TABLE>


      The Company  provided a valuation  allowance  equal to the deferred income
      tax assets because it is not presently more likely than not that they will
      be realized.

      The Company has accumulated tax losses in all of its  subsidiaries.  It is
      not likely that the Company will be able to generate income to utilize the
      tax loss. Therefore, no deferred tax assets have been set up to record the
      tax benefits.

      As at September 30, 2004,  the Company has  approximately  $9,350,000  and
      $250,000  tax losses  carried  forward in its  United  States and  Israeli
      subsidiaries.  Losses in the United  States  subsidiary,  if not utilized,
      will expire in twenty years from the year of origin,  December 31, 2020 to
      December 31, 2024.  For the Israel  subsidiary,  the losses can be carried
      forward indefinitely to reduce income taxes on future taxable income.


                                      -22-
<PAGE>

M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003


9.    RELATED PARTY TRANSACTIONS

      During the period  the  Company  incurred  directors  consulting  fees and
      salaries in the amount of $180,000 (2003, $180,000). At September 30, 2004
      and 2003,  the amounts  were unpaid and  included  in other  payables  and
      accrued expenses.

These  transactions  were in the normal  course of business  and  recorded at an
exchange value established and agreed upon by the above mentioned parties.

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operation

The following  discussion  should be read in conjunction  with our  consolidated
financial statements and related notes included elsewhere in this Report.

This  filing  contains  forward-looking   statements.  The  words  "anticipate,"
"believe,"  "expect,  "plan," "intend," "seek,"  "estimate,"  "project," "will,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. These statements include, among others, information regarding future
operations,  future  capital  expenditures,  and  future  net  cash  flow.  Such
statements reflect our management's  current views with respect to future events
and  financial  performance  and  involve  risks and  uncertainties,  including,
without  limitation:  (a) the timing of our sales  could  fluctuate  and lead to
performance  delays;  (b) without  additional equity or debt financing we cannot
carry out our business plan; (c) our  stockholders  have  pre-emptive  rights to
purchase securities of m-Wise , Which could impair our ability to raise capital;
(d) we operate  internationally and are subject to currency fluctuations , which
could cause us to incur losses even if our operations are profitable; (e) we are
dependent  upon  certain  major  customers , and the loss of one or more of such
customers  could  adversely  affect  our  revenues  and  profitability;  (f) our
research and development  facilities are located in Israel and we have important
facilities  and resources  located in Israel which could be negatively  affected
due to military or political tensions; (g) certain of our officers and employees
are requires to serve in the Israel  defense forces and this could force them to
be absent from our business for extended  periods;  (h) the rate of inflation in
Israel may negatively  impact our costs if it exceeds the rate of devaluation of
the NIS against the Dollar.  Should one or more of these risks or  uncertainties
occur, or should underlying  assumptions  prove to be incorrect,  actual results
may vary materially and adversely from those anticipated, believed, estimated or
otherwise indicated.  These forward-looking statements speak only as of the date
of  this  prospectus.  Subject  at all  times  to  relevant  federal  and  state


                                      -23-
<PAGE>

M-WISE, INC.


securities law disclosure requirements,  we expressly disclaim any obligation or
undertaking  to  disseminate  any  update or  revisions  to any  forward-looking
statement contained herein to reflect any change in our expectations with regard
thereto or any changes in events,  conditions or circumstances on which any such
statement is based. Consequently,  all of the forward-looking statements made in
this Report are  qualified by these  cautionary  statements  and there can be no
assurance of the actual results or developments.

RESULTS OF OPERATIONS


NINE MONTHS  ENDED  SEPTEMBER  30,  2004  COMPARED  WITH THE NINE  MONTHS  ENDED
SEPTEMBER 30, 2003.

REVENUES

License fees and  products.  Revenues  from license fees and products  increased
372% to $695,787 for the nine months ended  September 30, 2004 from $147,450 for
the same
period in 2003. the increase  primarily  consisted of $605,000  revenues derived
from our contract with Unefon S.A.

Revenue share. Revenues from revenue share decreased 20% to $15,143 for the nine
months ended September 30, 2004 from $18,876 for the same period in 2003.

Customer  services and technical  support.  Revenues from customer  services and
technical support increased 182% to $423,249 for the nine months ended September
30, 2004 from  $150,026  for the same  period in 2003.  The  increase  primarily
consisted of revenues from ongoing  customers who were not our customers  during
the first nine months of 2003.



Cost of revenues

Customer services and technical support. Cost of customer services and technical
support  increased 56% to $173,002 for the nine months ended  September 30, 2004
from
$110,716 for the same period in 2003.  This increase was primarily due to higher
revenues from customer services and technical support.

Operating expenses

Research and  development.  Research and development  expenses  increased 22% to
$268,068 for the nine months ended September 30, 2004 from $219,124 for the same
period in 2003. This increase was primarily due to a $20,505 increase in payroll
and related  expenses,  partially offset by a $33,051 decrease in subcontractors
expenses,  This increase was also partially due to a $52,170 grant received from
a joint  Israeli  Singapore  government  program  during the nine  months  ended


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M-WISE, INC.


September  30, 2004  compared  with a $111,806  grant  received  during the same
period in 2003. We believe that we have assembled a small core of highly skilled
and efficient technical  personnel  sufficient to conduct our current and future
research and development activities.  Research and development expenses,  stated
as a  percentage  of  revenues,  decreased  to 24% for  the  nine  months  ended
September 30, 2004 from 69% for the same period in 2003.


General and administrative. General and administrative expenses decreased 27% to
$782,634 for the nine months ended  September 30, 2004 from  $1,069,930  for the
same
period in 2003.  This  decrease  was  primarily  due to a $216,020  decrease  in
professional  services  expenses,  a $ 152,997  decrease  in payroll and related
expenses mainly due to options granted for employee  services in the nine months
ended  September  30,  2003 and a  $146,223  decrease  in  consulting  expenses,
partially  offset  by a  $100,783  increase  in  travel  expenses  and a $48,902
increase in marketing expenses. General and administrative expenses, stated as a
percentage of revenues, decreased to 69% for the nine months ended September 30,
2004 from 338% for the same period in 2003.

Financing expenses

Financing expenses. Our financing expenses decreased 61% to $15,080 for the Nine
months ended September 30, 2004 from $39,066 for the same period in 2003.



LIQUIDITY AND CAPITAL RESOURCES

Our principal  sources of liquidity  since our inception have been private sales
of equity securities,  stockholder loans,  borrowings from banks and to a lesser
extent, cash from operations. We had cash and cash equivalents of $ 52,827 as of
September 30, 2004 and $32,538 as of December 31, 2003. Our initial capital came
from an aggregate  investment of $1.3 million from Cap Ventures Ltd. To date, we
have raised an aggregate of $5,300,000 from placements of our equity  securities
(including the investment by Cap Ventures and a $4,000,000  investment by Syntek
Capital AG and DEP Technology Holdings Ltd.). We have also borrowed an aggregate
of  $1,800,000  from Syntek  Capital AG and DEP  Technology  Holdings  Ltd. (See
"Certain  Transactions")  and as of the date of this prospectus we have no funds
available to us under bank lines of credit. We have a credit line agreement with
Miretzky  Holdings Limited.  There is no amount currently  outstanding under the
line. The credit line is for  $300,000.The  credit line has no termination  date
and does not provide for interest payments.


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M-WISE, INC.


Other than the said  credit  line  agreement  with  Miretzky  we do not have any
Commitments  from any of our  affiliates or current  stockholders,  or any other
Non-affiliated  parties, to provide additional sources of capital to us. We will
need  approximately  $1.0 million for the next twelve  months for our  operating
costs which mainly include salaries, office rent and network connectivity, which
total  approximately  $60,000 per month, and for working  capital.  We intend to
finance  this amount  from our ongoing  sales and through the sale of either our
debt or equity  securities  or a combination  thereof,  to  affiliates,  current
stockholders  and/or new investors.  Currently we do not believe that our future
capital requirements for equipment and facilities will be material.

      Operating  activities.  For the nine months  ended  September  30, 2004 we
generated  $76,155 of cash in operating  activities  primarily due to a $340,276
increase  in  deferred  revenues,  partially  offset by a $168,378  increase  in
accounts  receivable  and a $130,011  decrease  in other  payables  and  accrued
liabilities.  In the same period in 2003,  we used $324,512 of cash in operating
activities  primarily  due to our net loss of $1,628,027  partially  offset by a
compensation expense of $372,508 related to the issuance of options for employee
services,  a  $300,000  increase  in  redemption  premium  on shares of Series B
preferred stock, a $256,394 increase in other payables and accrued  liabilities,
and a $176,303 increase in accounts payable.


Investing and financing activities.

      Property and  equipment  consist  primarily of  computers,  software,  and
office equipment.


      For the nine months ended  September 30, 2004,  net cash used in investing
activities  was $73,907  consisting of an  investment in equipment.  In the same
period  in  2003  net  cash  generated  in  investing  activities  was  $116,643
consisting of Disposition of equipment.



      For the nine  months  ended  September  30,  2004,  net cash  provided  by
financing  activities was $18,041 due to a $22,438  increase in notes  payables,
partially offset by a $4,397 decrease in bank  indebtedness.  In the same period
in 2003,  net cash provided by financing  activities  was $7,890 due to a $7,890
increase in bank indebtedness.


                                      -26-
<PAGE>

M-WISE, INC.


DIVIDENDS

We have not paid any  dividends  on our common  stock.  We are  prohibited  from
paying  dividends  under certain  promissory  notes in the  aggregate  principal
amount of $1.8 million  held by Syntek  Capital AG and DEP  Technology  Holdings
Ltd. We currently  intend to retain any earnings  for use in our  business,  and
therefore do not anticipate paying cash dividends in the foreseeable future.

OFF BALANCE SHEET ARRANGEMENTS

None.

Item 3.  Controls and Procedures

With the  participation  of management,  our Chief  Executive  Officer and Chief
Financial Officer evaluated our disclosure controls and procedures within the 90
days  preceding  the  filing  date of this  quarterly  report.  Based  upon this
evaluation,  the Chief Executive  Officer and Chief Financial  Officer concluded
that our  disclosure  controls and  procedures  are  effective in ensuring  that
material information required to be disclosed is included in the reports that we
file with the Securities and Exchange Commission.

There  were no  significant  changes  in our  internal  control  over  financial
reporting to the  knowledge  of our  management,  or in other  factors that have
materially affected or are reasonably likely to materially affect these internal
controls over financial reporting subsequent to the evaluation date.


PART II
OTHER INFORMATION

Item 1.  Legal Proceedings

Not applicable.

Item 2.  Changes in Securities and Small Business Issuer Purchases of Equity
         Securities

Not applicable

Item 3.  Default upon Senior Securities

Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders


                                      -27-
<PAGE>

M-WISE, INC.


Not applicable.

Item 5.  Other Information

Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

3.1     Amended and restated Certificate of Incorporation**
3.2     Bylaws**
4.1     Purchase and registration rights agreement and schedule of details**
10.1    Amended and Restated Employment Agreement with Mordechai Broudo**
10.2    Amendment to Amended and Restated Employment Agreement with Mordechai
        Broudo**
10.3    Amended and Restated Employment Agreement with Shay Ben-Asulin**
10.4    Amendment to Amended and Restated Employment Agreement with Shay
        Ben-Asulin**
10.5    Employment Agreement, Gabriel Kabazo**
10.6    Confidentiality rider to Gabriel Kabazo Employment Agreement**
10.7    Employment Agreement Asaf Lewin**
10.8    2003 International Share Option Plan**
10.9    Form of Option Agreement, 2003 International Share Option Plan**
10.10   2001 International Share Option Plan**
10.11   Form of Option Agreement, 2001 International Share Option Plan**
10.12   2003 Israel Stock Option Plan**
10.13   Form of Option Agreement, 2003 Israel Stock Option Plan**
10.14   2001 Israel Share Option Plan**
10.15   Form of Option Agreement, 2001 Israel Share Option Plan**
10.16   Investors' Rights Agreement dated January 11, 2001**
10.17   Stockholders Agreement**
10.18   Agreement for Supply of Software and Related  Services dated October 14,
        2002, by and between i Touch plc and m-Wise, Inc.**
10.19   Purchase agreement between m-Wise, Inc. and Comtrend Corporation dated
        May 22, 2002**
10.20   Amended and Restated Consulting agreement between Hilltek Investments
        Limited and m-Wise dated November 13, 2003**


                                      -28-
<PAGE>

M-WISE, INC.


10.21   Consulting  agreement  between  Hilltek  Investments  Limited and m-Wise
        dated June 24, 2003, subsequently amended see exhibit 10.20 above**

10.22   Amendment to Investors' Rights Agreement dated October 2, 2003**

10.23   Appendices to 2003 Israel Stock Option Plan**

10.24   Appendices to 2001 Israel Share Option Plan**

10.25   Credit Line Agreement between m-Wise, Inc. and Miretzky Holdings,
        Limited dated January 25, 2004**

21.     List of Subsidiaries**


31.1     Rule 13a-14(a)/15d-14(a) Certification.*
31.2     Rule 13a-14(a)/15d-14(a) Certification.*

32.1     Certification by the Chairman Relating to a Periodic Report Containing
         Financial Statements. ***
32.2     Certification by the Chief Financial Officer Relating to a Periodic
         Report Containing Financial Statements. ***

-------------
*        Filed herewith.

**         Incorporated by reference from the registration statement filed with
the Securities and Exchange Commission Registration Statement on Form SB-2 (Reg.
No. 333-106160).


*** The Exhibit  attached to this Form  10-QSB  shall not be deemed  "filed" for
purposes of Section 18 of the  Securities  Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise subject to liability under that section, nor shall
it be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by specific
reference in such filing.

(b)   Reports on Form 8-K

         None


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M-WISE, INC.


                                   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.

                                              m-Wise, INC.
                                              (Registrant)

Date:  November 16, 2004                    /s/ Shay Ben-Asulin
                                            -------------------
                                            Name: Shay Ben-Asulin
                                            Title: Chairman


                                      -30-