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 June 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:
                             Jay M. Kaplowitz, 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 August 16,
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                                            1-21
                  Unaudited Balance Sheet as of June 30, 2004
                  Unaudited Statements of Operations for the Three Months
                    Ended and Six Months Ended June 30, 2004 and 2003
                  Unaudited Statements of Cash Flows for the Six Months
                    Ended June 30, 2004 and 2003
                  Notes to Unaudited Financial Statements
Item 2.     Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                      21-24
Item 3.     Controls and Procedures                                           25

PART II
OTHER INFORMATION

Item 1      Legal Proceedings                                                 25
Item 2      Changes in Securities and Small Business                          25
            Issuer Purchases of Equity Securities                             25
Item 3      Defaults upon Senior Securities                                   25
Item 4      Submission of Matters to a Vote of Security Holders               25
Item 5      Other Information                                                 25
Item 6      Exhibits and Reports on Form 8-K                               26-35



<PAGE>


PART I
FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

                                  M-WISE, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                      PERIODS ENDED JUNE 30, 2004 AND 2003




                                    CONTENTS

Consolidated Balance Sheet                                                  1

Consolidated Statements of Operations                                     2-3

Consolidated Statement of Changes in Stockholders' Equity                   4

Schedules of Expenses                                                     5-6

Consolidated Statement of Cash Flows                                        7

Notes to Consolidated Financial Statements                               8-21


<PAGE>


<TABLE>
<CAPTION>




M-WISE, INC.
Balance Sheets
June 30, 2004 and 2003

                                                                        2004          2003
                                     ASSETS
CURRENT
<S>                                                               <C>            <C>
    Cash and cash equivalents                                     $    44,099    $    38,162
    Accounts receivable - trade (net of allowance
       for doubtful accounts of
       $17,629, 2003, nil)                                             70,933         63,253
    Other receivables                                                   4,725        105,274
    Prepaid and sundry assets                                          14,693         26,962
                                                                  -----------    -----------


                                                                      134,450        233,651
LONG-TERM PREPAID EXPENSES                                             12,426          3,540
EQUIPMENT                                                             235,932        392,594
DEFERRED FINANCING FEES                                                44,208         63,152
                                                                  -----------    -----------


                                                                  $   427,016    $   692,937
                                                                  -----------    -----------

                                   LIABILITIES
CURRENT
    Bank indebtedness                                             $    17,936    $    19,827
    Trade accounts payable                                            137,884      1,217,224
    Other payables and accrued liabilities                            686,121        551,671
    Deferred revenue                                                  700,560           --
    Notes payable - current portion                                    33,680           --
                                                                  -----------    -----------

                                                                    1,576,181      1,788,722
ACCRUED SEVERANCE PAY (note 3)                                         18,246         23,767
NOTES PAYABLE                                                       1,817,233      1,807,988
REDEEMABLE PREFERRED SHARES (note 4)                                     --        5,000,304
                                                                  -----------    -----------

                                                                    3,411,660      8,620,781
                                                                  -----------    -----------
                            STOCKHOLDERS' DEFICIENCY
CAPITAL STOCK (note 5)                                            $   118,162    $    84,980
PAID IN CAPITAL                                                     6,883,667      1,717,303
ACCUMULATED OTHER COMPREHENSIVE LOSS                                     --         (118,008)
ACCUMULATED DEFICIT                                                (9,986,473)    (9,612,119)
                                                                  -----------    -----------

                                                                   (2,984,644)    (7,927,844)
                                                                  -----------    -----------

                                                                  $   427,016    $   692,937
                                                                  -----------    -----------
</TABLE>



APPROVED ON BEHALF OF THE BOARD
     "SHAY BEN ASULIN"                               "MORDECHAI BROUDO"
-------------------------------                      ------------------
         DIRECTOR                                         DIRECTOR



                                      -1-
<PAGE>



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


<TABLE>
<CAPTION>

                                                                  2004             2003

<S>                                                           <C>             <C>
SALES                                                         $    233,678    $    237,871

COST OF SALES                                                       47,374          83,255
                                                              ------------    ------------


GROSS PROFIT                                                       186,304         154,616
                                                              ------------    ------------


EXPENSES
    General and administrative (page 5)                            541,373         852,544
    Research and development (page 5)                              138,975         228,729
    Financial                                                       10,665          24,829
    Redemption premium on Class B preferred shares (note 4)           --           200,000
                                                              ------------    ------------


                                                                   691,013       1,306,102
                                                              ------------    ------------


LOSS BEFORE DISCONTINUED OPERATIONS                               (504,709)     (1,151,486)

    Loss on discontinued operations                                   --           118,106
                                                              ------------    ------------


NET LOSS                                                      $   (504,709)   $ (1,269,592)
                                                              ------------    ------------


BASIC LOSS PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $     (0.007)         (0.102)
                                                              ------------    ------------


BASIC LOSS PER SHARE                                          $     (0.007)         (0.113)
                                                              ------------    ------------


FULLY DILUTED LOSS PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $     (0.007)         (0.102)
                                                              ------------    ------------


FULLY DILUTED LOSS PER SHARE (note 5)                         $     (0.007)         (0.113)
                                                              ------------    ------------


BASIC WEIGHTED AVERAGE NUMBER OF SHARES                         69,506,898      11,260,428
                                                              ------------    ------------

</TABLE>



                                      -2-
<PAGE>


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


<TABLE>
<CAPTION>


                                                                   2004            2003

<S>                                                           <C>             <C>
SALES                                                         $    109,709    $     82,176

COST OF SALES                                                       39,107          54,605
                                                              ------------    ------------

GROSS PROFIT                                                        70,602          27,571
                                                              ------------    ------------

EXPENSES
    General and administrative (page 6)                            262,458         370,006
    Research and development (page 6)                               83,986          67,261
    Financial                                                        9,764          21,515
    Redemption premium on Class B preferred shares (note 4)           --           100,000
                                                              ------------    ------------

                                                                   356,208         558,782
                                                              ------------    ------------

LOSS BEFORE DISCONTINUED OPERATIONS                               (285,606)       (531,211)

    Loss on discontinued operations                                   --            46,304
                                                              ------------    ------------

NET LOSS                                                      $   (285,606)   $   (577,515)
                                                              ------------    ------------

BASIC LOSS PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $     (0.004)         (0.047)
                                                              ------------    ------------

BASIC LOSS PER SHARE                                          $     (0.004)         (0.051)
                                                              ------------    ------------

FULLY DILUTED LOSS PER SHARE
   BEFORE DISCONTINUED OPERATIONS                             $     (0.004)         (0.047)
                                                              ------------    ------------

FULLY DILUTED LOSS PER SHARE (note 5)                         $     (0.004)         (0.051)
                                                              ------------    ------------

BASIC WEIGHTED AVERAGE NUMBER OF SHARES                         69,506,898      11,260,428
                                                              ------------    ------------
</TABLE>



                                      -3-
<PAGE>


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


<TABLE>
<CAPTION>
                                                COMMON SHARES      PREFERRED SHARES       ACCUMULATED
                                                                                          OTHER           ADDITIONAL
                                                NUMBER OF            NUMBER OF            COMPREHENSIVE   PAID IN       ACCUMULATED
                                                SHARES               $  SHARES            $   LOSS        CAPITAL        DEFICIT
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>         <C>       <C>           <C>    <C>            <C>            <C>
Balance, January 1, 2003                        5,260,428     8,943      268,382    2,684    (177,773)   $ 1,297,374    $(8,342,527)

Shares issued for offering costs               25,786,896    42,978         --       --          --          207,022           --

Shares issued for offering costs forfeited    (19,786,896)  (32,778)        --       --          --         (157,222)          --
  7,025,778 warrants issued for deferral of
  debt for legal services rendered                   --        --           --       --          --           10,000           --

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

Options vested for employee services                 --        --           --       --          --          360,129           --

Financial statement translation                      --        --           --       --        59,765           --             --

Net loss                                             --        --           --       --          --             --       (1,269,592)
                                             --------------------------------------------------------------------------------------
Balance, June 30, 2003                         11,260,428    19,143    6,583,640   65,837    (118,008)   $ 1,717,303    $(9,612,119)
                                             ======================================================================================

Balance, January 1, 2004                       69,506,898   118,162         --       --          --      $ 6,869,184    $(9,481,764)

Options vested for employee services-                --        --           --       --        14,483           --

Net Loss                                             --        --           --       --          --             --         (504,709)
                                             --------------------------------------------------------------------------------------
Balance, June 30, 2004                         69,506,898   118,162         --       --          --      $ 6,883,667    $(9,986,473)
                                             ======================================================================================
</TABLE>




                                       -4-

<PAGE>


M-WISE, INC.
Schedule of Expenses
Six Months Ended June 30, 2004 and 2003

<TABLE>
<CAPTION>
                                                     2004              2003

<S>                                              <C>                 <C>
GENERAL AND ADMINISTRATIVE
    Consulting                                   $ 213,101           $ 383,587
    Professional services                           54,645             233,329
    Other expenses                                  64,783              23,487
    Communications                                  49,188              34,844
    Marketing                                       34,671             (19,461)
    Travel                                          72,560               4,000
    Payroll and related expenses                    34,663             177,087
    Rent                                            10,558              12,095
    Depreciation                                     7,204               3,576
                                                 -----------------------------
                                                 $ 541,373           $ 852,544
                                                 =============================
RESEARCH AND DEVELOPMENT
    Payroll and related expenses                 $  82,649           $ 114,603
    Depreciation                                    51,116              47,207
    Travel                                          29,279              29,162
    Vehicle maintenance                             25,203              41,608
    Subcontractors                                     892              43,792
    Materials and components                         1,985               8,260
    Shipment and freight                                21                --
    Government grant (note 6)                      (52,170)            (55,903)
                                                 -----------------------------
                                                 $ 138,975           $ 228,729
                                                 =============================
</TABLE>


                                       -5-

<PAGE>


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

<TABLE>
<CAPTION>
                                                  2004              2003

GENERAL AND ADMINISTRATIVE
<S>                                            <C>               <C>
    Consulting                                 $  91,749         $  65,141
    Professional services                         10,003           205,668
    Other expenses                                33,631            11,362
    Communications                                26,247            17,907
    Marketing                                     15,035               200
    Travel                                        55,011             4,000
    Payroll and related expenses                  21,577            57,860
    Rent                                           5,310             6,081
    Depreciation                                   3,895             1,787
                                               ---------------------------
                                               $ 262,458         $ 370,006
                                               ===========================

RESEARCH AND DEVELOPMENT
    Payroll and related expenses               $  38,262         $  27,829
    Depreciation                                  24,954            23,054
    Travel                                        10,228             2,756
    Vehicle maintenance                            9,258            20,194
    Subcontractors                                  --              43,792
    Materials and components                       1,284             5,539
    Government grant (note 6)                       --             (55,903)
                                               ---------------------------
                                               $  83,986         $  67,261
                                               ===========================

</TABLE>


                                       -6-
<PAGE>


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


<TABLE>
<CAPTION>

                                                                                     2004                2003

<S>                                                                             <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                                    $  (504,709)          $(1,269,592)
    Adjustments required to reconcile net loss to net cash
    used in operating activities:
      Depreciation                                                                   58,320                50,783
      Increase in redemption premium on Class B preferred shares                       --                 200,000
      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                                             14,483               360,129
      Accounts receivable - trade                                                   (20,968)               67,694
      Other receivables                                                              10,951                 6,160
      Prepaid and sundry assets                                                      (2,451)              (11,209)
      Deferred revenue                                                              644,774                  --
      Trade accounts payable                                                        (60,335)              149,908
      Other payables and accrued liabilities                                        (98,709)              154,781
      Long-term prepaid expenses                                                     (5,127)               13,478
      Deferred financing fees                                                         6,314               (63,153)
      Accrued severance pay                                                          (2,427)                2,190
                                                                                ---------------------------------
                                                                                     40,116              (268,831)
                                                                                ---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisition of equipment                                                      (37,877)                 --
      Proceeds from disposition of equipment                                           --                  77,041
                                                                                ---------------------------------
                                                                                    (37,877)               77,041
                                                                                ---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
      Increase in notes payable                                                      11,354                  --
      Bank indebtedness - gross                                                      (2,032)               13,988
                                                                                ---------------------------------
                                                                                      9,322                13,988
FOREIGN EXCHANGE LOSS ON CASH AND CASH EQUIVALENTS                                     --                     389
                                                                                ---------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 11,561              (177,413)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                      32,538               215,575
                                                                                ---------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD                                       $    44,099           $    38,162
                                                                                =================================
</TABLE>


                                       -7-
<PAGE>



M-WISE, INC.
Notes to Financial Statements
June 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 June 30, 2004
            and 2003, the Company experienced net losses of $504,709 and
            $1,269,592 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.


                                      -8-
<PAGE>


M-WISE, INC.
Notes to Financial Statements
June 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 equivalents include cash and highly liquid investments with
            initial maturities of three months or less.



                                      -9-
<PAGE>



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


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

      d)    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
            5. 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.

      e)    Equipment and Depreciation

            Equipment is 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

      f)    Revenue Recognition

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

            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.



                                      -10-
<PAGE>


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



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

            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.

      g)    Research and Development Costs

            Research and development costs are expensed as incurred.

      h)    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.

      i)    Use of Estimates

            The preparation of financial statements, in conformity with U.S.
            generally accepted accounting principles, requires management to
            make estimates and assumptions that affect the reported amounts of
            assets and liabilities and disclosure of contingent assets and
            liabilities at the date of the financial statements and the reported
            amounts of revenues and expenses during the reporting period. Actual
            results could differ from those estimates.



                                      -11-
<PAGE>



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


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

      j)    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 June 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.

      k)    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 June 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.



                                      -12-
<PAGE>


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



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

      l)    Impact of Recently Issued Accounting Standards

            The FASB recently issued SFAS No. 144, "Accounting for the
            Impairment or Disposal of Long-Lived Assets," that is applicable to
            financial statements issued for fiscal years beginning after
            December 15, 2001. The FASB's new rules on asset impairment
            supercede FASB Statement 121, "Accounting for the Impairment of
            Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and
            portions of APB Opinion 30, "Reporting the Results of Operations."
            SFAS No. 144 provides a single accounting model for long-lived
            assets to be disposed of and significantly changes the criteria that
            must be met to classify an asset as "held-for-sale." Classification
            as "held-for-sale" is an important distinction since such assets are
            not depreciated and are stated at the lower of fair value and
            carrying amount. SFAS No. 144 also requires expected future
            operating losses from discontinued operations to be displayed in the
            period(s) in which the losses are incurred, rather than as of the
            measurement date as currently required. The provisions of SFAS No.
            144 were implemented for the year ending December 31, 2002 and did
            not have a material effect on the Company's financial position or
            operating results.


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 June 30, 2004 and 2003,
      the amount of the liabilities accrued were $57,141 and $56,398
      respectively. Severance pay expenses for the periods ended June 30, 2004
      and 2003 were $550 and $5,988 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
      June 30, 2004 and 2003 were $38,895 and $32,631 respectively. Income
      earned from the deposit funds for 2004 and 2003 was immaterial.



                                      -13-
<PAGE>


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


4.    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 5.


5.    CAPITAL STOCK

<TABLE>
<CAPTION>
        Authorized
       <S>                 <C>                                                  <C>
          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>





                                      -14-
<PAGE>




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



5. CAPITAL STOCK (cont'd)

      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:

<TABLE>
<CAPTION>
                                                 2004                    2003

                                     ISRAEL    INTERNATIONAL     ISRAEL     INTERNATIONAL
         <S>                         <C>       <C>               <C>        <C>
         Interest rate                      5%            5%            5%            5%
         Expected volatility               50%           50%           50%           50%
         Expected life in years              8            10             8            10
</TABLE>

      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.



                                      -15-
<PAGE>


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



5. CAPITAL STOCK (cont'd)

      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.

      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 June 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.

      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 June 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 June 30, 2004, 38,256 options under the Israel 2003 share
      option plan were not yet granted.


                                      -16-
<PAGE>


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



5. 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
                                               -----------
                                               $   408,372
                                               -----------

      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
         period                                  $   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>



                                      -17-
<PAGE>


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

5. 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.



                                      -18-
<PAGE>


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



6.   GOVERNMENT GRANTS

      During the period ended June 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 June 30, 2004 the products have been developed but no sales have
      been made. As such, no amount has been paid as royalties.


7.    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.












                                      -19-
<PAGE>



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


7. 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 June 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                    $     2,500,000        2,395,500
          Valuation allowance for deferred income tax assets         (2,500,000)      (2,395,500)
                                                                --------------------------------
                                                                $           --               --
                                                                ================================
</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 June 30, 2004, the Company has approximately $9,800,000 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.


                                      -20-
<PAGE>

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


8.    RELATED PARTY TRANSACTIONS

      During the period the Company incurred directors consulting fees and
      salaries in the amount of $120,000 (2003, $120,000). At June 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
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.


                                      -21-
<PAGE>

RESULTS OF OPERATIONS


SIX MONTHS ENDED JUNE 30, 2004 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 2003.

REVENUES

License fees and products. Revenues from license fees and products decreased 71%
to $33,708 for the six months ended June 30, 2004 from $114,450 for the same
period in 2003, primarily due to our growing dependency on third parties'
marketing capability and our significantly reduced sales resources which
prevented us from achieving enough sales in this period.

Revenue share. Revenues from revenue share decreased 31% to $7,709 for the six
months ended June 30, 2004 from $11,215 for the same period in 2003.

Customer services and technical support. Revenues from customer services and
technical support increased 71% to $192,261 for the six months ended June 30,
2004 from $112,206 for the same period in 2003. The increase primarily consisted
of revenues from ongoing customers who were not our customers during the first
six months of 2003.



Cost of revenues

Customer services and technical support. Cost of customer services and technical
support decreased 43% to $47,374 for the six months ended June 30, 2004 from
$83,255 for the same period in 2003. This decrease was primarily due to lesser
hours spent on customer services and technical support.

Operating expenses

Research and development. Research and development expenses decreased 39% to
$138,975 for the six months ended June 30, 2004 from $228,729 for the same
period in 2003. This decrease was primarily due to a $42,900 decrease in
subcontractors expenses and a $31,954 decrease in payroll and related expenses



                                      -22-
<PAGE>


due to a reduction in the number of employees involved in research and
development from 7 on June 30, 2003 to 6 on June 30, 2004. Since our products
are now substantially developed, we reduced the number of our employees engaged
in research and development. We do not currently intend to continue to reduce
our research and development activities. 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 59% for
the six months ended June 30, 2004 from 96% for the same period in 2003.


General and administrative. General and administrative expenses decreased 36% to
$541,373 for the six months ended June 30, 2004 from $ 852,544 for the same
period in 2003. This decrease was primarily due to a $178,684 decrease in
professional services expenses,a $170,486 decrease in consulting expenses and a
$ 142,424 decrease in payroll and related expenses mainly due to options granted
for employee services in the six months ended June 30, 2003, partially offset by
a $68,560 increase in travel expenses and a $54,132 increase in marketing
expenses. General and administrative expenses, stated as a percentage of
revenues, decreased to 232% for the six months ended June 30, 2004 from 358% for
the same period in 2003.

Financing income and expenses

Financing income. Our Financing income increased 16,904% to $4,421 for the six
months ended June 30, 2004 from $26 for the same period in 2003.

Financing expenses. Our financing expenses decreased 39% to $15,086 for the six
months ended June 30, 2004 from $24,855 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 $ 44,099 as of
June 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


                                      -23-
<PAGE>


"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.

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 six months ended June 30, 2004 we
generated $40,116 of cash in operating activities primarily due to a $644,774
increase in deferred revenues, partially offset by our net loss of $504,709. In
the same period in 2003, we used $268,831 of cash in operating activities
primarily due to our net loss of $1,269,592 partially offset by a compensation
expense of $360,129 related to the issuance of options for employee services, a
$200,000 increase in redemption premium on shares of Series B preferred stock
and, $154,781 increase in other payables and accrued liabilities.


Investing and financing activities.

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


         For the six months ended June 30, 2004, net cash used in investing
activities was $37,877 consisting of an investment in equipment. In the same
period in 2003 net cash generated in investing activities was $77,041 consisting
of Disposition of equipment.


                                      -24-
<PAGE>


    For the six months ended June 30, 2004, net cash provided by financing
activities was $9,322 due to a $11,354 increase in notes payables, partially
offset by a $2,032 decrease in bank indebtedness. In the same period in 2003,
net cash provided by financing activities was $13,988 due to a $13,988 increase
in bank indebtedness.



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



                                      -25-
<PAGE>



Item 3.  DEFAULT UPON SENIOR SECURITIES

Not applicable.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

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**


                                      -26-
<PAGE>


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**

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. ***




                                      -27-
<PAGE>



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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                                   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:  August 16, 2004                               /S/ SHAY BEN-ASULIN
                                                     ----------------------
                                                     Name:  Shay Ben-Asulin
                                                     Title:  Chairman
















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