United States Securities and Exchange Commission
                             Washington, D.C. 20549
                                   Form 10-QSB

                                   (Mark One)
              |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2005

                                       OR
             |_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
                              EXCHANGE ACT OF 1934
                        For the transition period from to

                        Commission file number 000-31779

                    SECURITY INTELLIGENCE TECHNOLOGIES, INC.
        (Exact name of small business issuer as specified in its charter)

                   Florida                              65-0928369
       (State or other jurisdiction of                 (IRS Employer
        incorporation or organization)              Identification No.)

                145 Huguenot Street, New Rochelle, New York 10801
                    (Address of principal executive offices)

                                 (914) 654-8700
                           (Issuer's telephone number)

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 of common stock $.0001 par value, of the Registrant issued
and outstanding as of February 14, 2006 was 89,459,861.

<PAGE>

            SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES
                                   FORM 10QSB

                         PERIOD ENDED DECEMBER 31, 2005

                                TABLE OF CONTENTS

PART I -  FINANCIAL INFORMATION

ITEM 1.   Consolidated Financial Statements:

          Consolidated Balance Sheets as of December 31, 2005 (unaudited)
             and June 30, 2005                                                 3

          Consolidated Statements of Operations (unaudited) for the three
             and six months ended December 31, 2005 and December 31, 2004      4

          Consolidated Statements of Cash Flow (unaudited) for the six
             months ended December 31, 2005 and December 31, 2004              5

          Notes to Consolidated Financial Statements                           6

Item 2.   Management's Discussion and Analysis of Financial Condition
             and Results of Operations                                        15

PART II - OTHER INFORMATION

Item 2.   Unregistered Sale of Equity Securities and Use of Proceeds          19

Item 3.   Controls and Procedures                                             20

Item 6.   Exhibits and Reports on Form 8-K                                    20


                                       2
<PAGE>

            SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                                            2005            June 30,
                                                                                        (Unaudited)           2005
                                                                                        ------------      ------------
<S>                                                                                     <C>               <C>
ASSETS
Current Assets:
      Cash                                                                              $     47,201      $      1,243
     Inventory                                                                               499,336           566,133
     Other current assets                                                                    157,187           103,285
                                                                                        ------------      ------------
        Total current assets                                                                 703,724           670,661

Property and Equipment, at cost less accumulated depreciation and amortization
   of $8,000 and $4,000 at December 31, 2005 and June 30, 2005 respectively                   17,000            21,000
Receivable from CCS International, Ltd. less allowance for uncollectible amounts
   of $2,942,135 and $2,917,216 at December 31, 2005 and June 30, 2005 respectively               --                --
Other assets                                                                                  18,199            18,199
                                                                                        ------------      ------------

 Total assets                                                                           $    738,923      $    709,860
                                                                                        ============      ============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
     Accounts payable and accrued expenses                                              $  1,606,061      $  1,465,635
     Note payable - CEO/stockholder                                                        1,755,845         1,897,664
     Convertible notes payable                                                               494,000           494,000
     Notes payable affiliate - revolving credit agreement                                    424,179                --
     Note payable - other                                                                    187,000           246,325
     Customer deposits                                                                       643,105           578,801
     Deferred revenue                                                                        464,129           850,390
                                                                                        ------------      ------------
         Total current liabilities                                                         5,574,319         5,532,815
                                                                                        ------------      ------------

Commitments and contingencies - See Notes

Stockholders' deficit:
     Preferred stock, $.0001 par value, 10,000,000 shares authorized:
         Series A Convertible-$1.00 per share liquidation preference,
            3,500,000 shares authorized, issued and outstanding                                  350               350
         Series B Convertible-$1.00 per share liquidation preference,
            1,500,000 shares authorized, issued and outstanding                                  150               150
         Series C Convertible-$.01 per share liquidation preference,
            5,000,000 shares authorized, issued and outstanding                                   --                --
     Common stock, $.0001 par value, 300,000,000 shares authorized,
         88,039,861 and 71,855,499 issued and outstanding at December 31,                      8,804             2,395
            2005 and June 30, 2005 respectively (Note 8)
     Additional paid in capital                                                            8,620,430         7,775,448
     Accumulated deficit                                                                 (13,446,903)      (12,590,941)
     Accumulated other comprehensive loss                                                    (18,227)          (10,357)
                                                                                        ------------      ------------
       Total stockholders' deficit                                                        (4,835,396)       (4,822,955)
                                                                                        ------------      ------------

Total liabilities and stockholders' deficit                                             $    738,923      $    709,860
                                                                                        ============      ============
</TABLE>

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


                                       3
<PAGE>

            SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                           Three Months Ended                    Six Months Ended
                                                      ------------------------------      ------------------------------
                                                               December 31,                        December 31,
                                                      ------------------------------      ------------------------------
                                                          2005              2004              2005              2004
                                                      ------------      ------------      ------------      ------------
<S>                                                   <C>               <C>               <C>               <C>
Revenues                                              $    952,259      $  1,642,759      $  1,729,800      $  2,070,077
                                                      ------------      ------------      ------------      ------------

Costs and expenses:
    Cost of sales                                          284,832           520,953           501,344           681,249
    Compensation and benefits                              497,198           540,917         1,020,780         1,038,948
    Professional fees                                       72,700            48,637           130,372           110,305
    Stock based compensation                                    --            15,000                --           134,957
    Selling, general and administrative expenses           424,556           328,122           788,464           675,637
    Depreciation and amortization                            2,000                --             4,000                --
                                                      ------------      ------------      ------------      ------------
                                                         1,281,286         1,453,629         2,444,960         2,641,096
                                                      ------------      ------------      ------------      ------------
Operating (loss) income  from continuing
    operations before other items                         (329,027)          189,130          (715,160)         (571,019)
                                                      ------------      ------------      ------------      ------------

Debt issuance and interest expense:
    Debt issuance expense                                       --                --                --         2,304,455
    Interest expense                                        48,245            33,097           140,802            54,122
                                                      ------------      ------------      ------------      ------------
                                                            48,245            33,097           140,802         2,358,577
                                                      ------------      ------------      ------------      ------------

(Loss) income from continuing operations                  (377,272)          156,033          (855,962)       (2,929,596)
Loss from operations of discontinued subsidiary -
    CCS International, Ltd.                                     --          (238,790)               --          (563,970)
                                                      ------------      ------------      ------------      ------------

Net loss                                              $   (377,272)     $    (82,757)     $   (855,962)     $ (3,493,566)
                                                      ============      ============      ============      ============

Loss per share, basic and diluted:
    From continuing operations                        $      (0.00)     $       0.00      $      (0.01)     $      (0.04)
                                                      ============      ============      ============      ============
    From discontinued operations                      $      (0.00)     $      (0.00)     $      (0.00)     $      (0.01)
                                                      ============      ============      ============      ============
    Total                                             $      (0.00)     $      (0.00)     $      (0.01)     $      (0.05)
                                                      ============      ============      ============      ============

Weighted average number of shares (Note 8)              83,153,654        67,526,199        80,018,677        67,294,107
                                                      ============      ============      ============      ============
</TABLE>

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


                                       4
<PAGE>

            SECURITY INTELLIGENCE TECHNOLOGIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                          Six Months Ended
                                                                                    ----------------------------
                                                                                            December 31,
                                                                                    ----------------------------
                                                                                        2005             2004
                                                                                    -----------      -----------
<S>                                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Loss from continuing operations                                                 $  (855,962)     $(2,929,596)
    Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization                                                       4,000               --
      Debt issuance expense                                                                  --        2,304,455
      Amortization of deferred compensation                                                  --          107,957
      Stock issued to consultant and employee for services                              468,899           37,000
      Discount on common stock issued for services                                           --           27,000
      (Increase) decrease in other comphrensive loss                                     (7,870)           6,446
      Noncash compensation - CEO/stockholder                                                 --           71,400
      Noncash interest expense - CEO/stockholder                                         33,089           18,522
      CHANGES IN OPERATING ASSETS AND LIABILITIES:
        (Increase) in accounts receivable                                                    --         (422,039)
        Decrease in inventory                                                            66,797          100,000
        (Increase) decrease in other current assets                                     (53,902)          41,135
        Increase in accounts payable and accrued expenses                               179,918          492,351
        Increase (decrease) increase in customer deposits                                64,304         (636,403)
        (Decrease) increase in deferred revenue                                        (386,261)          46,558
      Discontinued operations                                                                --          (46,651)
                                                                                    -----------      -----------
Net cash used in operating activities                                                  (486,988)        (781,865)
                                                                                    -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Borrowings under revolving credit agreement - affiliate                             424,179               --
    Borrowings under notes payable - others                                                  --          145,000
    (Repayments) of notes payable - other                                               (59,325)              --
    (Repayments) under note payable - CEO/stockholder                                  (174,908)              --
    Borrowings under note payable - CEO/stockholder                                          --          203,554
    Borrowings under convertible credit facility                                             --          294,000
    Proceeds from issuance of common stock                                              343,000               --
                                                                                    -----------      -----------
Net cash provided by financing activities                                               532,946          642,554
                                                                                    -----------      -----------

Net increase (decrease) in cash                                                          45,958         (139,311)

Cash, beginning of period                                                                 1,243          172,395
                                                                                    -----------      -----------
Cash, end of period                                                                 $    47,201      $    33,084
                                                                                    ===========      ===========
</TABLE>


                                       5
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

1 - Interim Financial Statements

      The accompanying unaudited financial statements of Security Intelligence
Technologies, Inc. and subsidiaries (the "Company") have been prepared pursuant
to generally accepted accounting principles for interim financial statements and
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules and
regulations. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
audited financial statements for the year ended June 30, 2005 filed on Form
10-KSB. On November 17, 2005, the board of directors approved a three-for-one
stock distribution pursuant to which the Company issued two shares for each
share of common stock outstanding on the record date, November 28, 2005. All
share and per share information in this form 10-QSB retroactively reflects the
stock distribution. See Note 8.

      In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the Company's
financial condition, results of operations and cash flows for the periods
presented have been included. The Company's quarterly results presented herein
are not necessarily indicative of results for a full year.

Organization and Nature of Business

      The Company is engaged in the design, assembly and sale of security and
surveillance products and systems. The Company purchases finished items for
resale from independent manufacturers, and also assembles off-the-shelf
electronic devices and other components into proprietary products and systems at
its own facilities. The Company generally sells to businesses, distributors,
government agencies and consumers through its sales office in Miami, Florida and
its executive offices located in New Rochelle, New York and through its retail
store/service center in London, England.

Principles of Consolidation

      The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, Homeland Security Strategies, Inc., a New
York corporation, that commenced operations on August 20, 2003; Homeland
Security Strategies of California, Inc., a California corporation, that operated
a sales office that commenced operations on December 26, 2003 and closed in
September 2004; Homeland Security Strategies Inc of Florida, Inc., a Florida
corporation, that operates a sales office that commenced operations on January
30, 2004 and Homeland Security Strategies (UK), Ltd. (formerly Counter Spy Shop
of Mayfair Limited), a United Kingdom corporation that operates a retail
store/service center. All significant intercompany balances and transactions
have been eliminated in consolidation.

Discontinued Operations

Prior to 2004, a significant portion of the Company's revenue was derived from
sales by retail stores which were operated by the Company's wholly-owned
subsidiary, CCS International, Inc. ("CCS"). Commencing in mid 2003 and
continuing through March 2004, the Company closed all of its retail stores,
although the Company continues to make modest retail sales from its headquarters
and its London branch. On March 22, 2005, the Company sold the stock of CCS to
Menahem Cohen, who was then a vice president and a director of the Company, for
$100 and contingent consideration consisting of 5% of CCS's and its
subsidiaries' net sales through March 31, 2015. Since the Company no longer
operates any retail stores, the operations of CCS and its subsidiaries are
treated as a discontinued operation in our financial statements. The
subsidiaries disposed of were, in addition to CCS, Spy Shop, Ltd. d/b/a Counter
Spy Shop of Delaware (formerly a retail store closed on January 31, 2004);
Security Design Group, Inc. (formerly a manufacturing operation, currently
inactive); Counter Spy Shop of Mayfair London, Ltd. (formerly a retail store
closed on July 1, 2003); CCS Counter Spy Shop of


                                       6
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

1. Nature of Business and Summary of Significant Accounting Policies - continued

Discontinued Operations - continued:

Mayfair London, Ltd. (formerly a retail store closed on January 1, 2004); and
Counter Spy Shop of Mayfair, Ltd. (formerly a sales office/retail store that
ceased operations on March 31, 2004). The operations of CCS International, Ltd.
and its subsidiaries have been included in loss from discontinued operations for
the three and six months ended December 31, 2004.

Going Concern and Liquidity

The financial statements of the Company have been prepared assuming the Company
will continue as a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company incurred net losses of $855,962 and $9,781,186 for the six months ended
December 31, 2005 and the fiscal year ended June 30, 2005, respectively. In
addition, at December 31, 2005, the Company had a working capital deficit of
$4,870,595 and a deficiency in stockholders' equity of $4,835,396. The Company's
bank facility has terminated, and the only source of funds other than operations
has been loans from the Company's chief executive officer and GCOM Consultants,
Inc. a company owned by the wife of the chief executive officer, deposits from
customers and distributors, proceeds from notes and the sale of common stock.
(See Notes 3, 4, 5, and 6). These factors raise substantial doubt about the
Company's ability to continue as a going concern. To address the Company's
immediate cash requirements which are necessary for the Company to continue in
business, management discontinued substantially all of its retail operations
during the fiscal year ended June 30, 2004 and re-focused its marketing efforts
to focus on its sophisticated bomb jamming and cellular monitoring systems to
the United States Government and contractors of the United States Government.
Sales to these groups of these systems were $973,000 during the fiscal year
ended June 30, 2005. The Company had no sales to the United States Government or
government contractors during the three or six months ended December 31, 2005.
As part of this effort, the Company has re-focused its staff, and is actively
pursuing additional equity and debt financing to supplement cash flow from
operations. However, the Company's low stock price and its continuing losses
make it difficult to obtain equity and debt funding, and, there can be no
assurances that additional financing will be available to the Company on
acceptable terms, or at all, or that the Company will generate the necessary
cash flow from operations. The Company and its management believe that its bomb
jamming and cellular monitoring systems and the United States Government
marketplace are viable products and markets in which to compete, and ultimately
achieve profitability. The Company's ability to continue its operations is
dependent upon its ability to generate sufficient cash flow either from
operations or from financing, to meet its obligations on a timely basis and to
further develop and market its products. However, the Company's financial
condition and continuing losses may inhibit potential customers from purchasing
the Company's products. The accompanying financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

Revenue recognition

      The Company recognizes revenue from sales upon the delivery of merchandise
to a customer. The Company recognizes revenue from its sophisticated monitoring
systems and bomb jamming systems after installation, testing and customer
acceptance. Non-refundable advance payments received under marketing and
distribution arrangements are deferred and either applied as payments towards
customer purchases made pursuant to the terms of the respective agreements, or
recognized as income at the termination of the agreement if specified purchase
quotas have not been met by the customer. Customer deposits are initially
recorded as liabilities and recognized as revenue when the related goods are
shipped.


                                       7
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

1. Nature of Business and Summary of Significant Accounting Policies - continued

Contingent Liabilities of CCS

      The Company's balance sheet at December 31, 2005 does not reflect any
liabilities of CCS, since the Company was not an obligor or guarantor with
respect to any of the liabilities except as set forth in Note 3. The Company
issued shares of common stock to settle debt obligations of CCS or its
subsidiaries. These agreements contain a price guarantee that requires CCS to
settle in cash any difference between the original face amounts of the debt and
proceeds from the creditor's subsequent sale of the shares. Since the obligation
to make the payment is an obligation of CCS, and not the Company, the amount by
which the target prices exceeded the value of the stock on December 31, 2005,
which was $615,271, is not reflected as a liability of the Company at December
31, 2005. In addition at December 31, 2005, CCS's creditors had initiated
lawsuits against CCS for nonpayment of accrued liabilities and its distributors
has initiated litigation for breeches of their agreements in the total amount of
approximately $1,312,000. Judgments of approximately $770,000 have been entered
against CCS in these matters. Although the Company has no contractual obligation
with respect to any of the obligations of CCS, and the Company believes that it
has a valid defense to any claim that it has any liability with respect to any
liabilities or obligations of CCS, it is possible that a creditor of CCS or its
subsidiaries may make a claim against the Company and that they may prevail.

Financial Guarantees

      The Company has issued shares of common stock to settle its debt
obligations pursuant to an agreement that requires the Company to settle in cash
any difference between the original face amounts of the debt and proceeds from
the creditor's subsequent sale of the shares. The Company accounts for these
transactions by recording the debt at fair value with periodic mark-to-market
adjustments until the guarantee is settled. Unrealized gains or losses resulting
from changes in fair value are included in earnings and accrued expenses.

Stock-based Compensation

      The Company periodically grants stock options to employees in accordance
with the provisions of its stock option plans, with the exercise price of the
stock options being set at the closing market price of the common stock on the
date of grant. The Company also granted shares of preferred stock and stock
options to its senior executive officers pursuant to their employment
agreements. The Company accounts for stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and accordingly accounts for employee stock-based compensation
utilizing the intrinsic value method. FAS No. 123, "Accounting for Stock-Based
Compensation", establishes a fair value based method of accounting for
stock-based compensation plans. The Company has adopted the disclosure only
alternative under FAS No. 123, which requires disclosure of the pro forma
effects on earnings and earnings per share as if FAS No. 123 had been adopted as
well as certain other information.

      In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment."
This statement replaces SFAS No. 123, "Accounting for Stock-Based Compensation"
and supersedes APB No. 25, "Accounting for Stock Issued to Employees." SFAS
123(R) requires all stock-based compensation to be recognized as an expense in
the financial statements and that such cost be measured according to the fair
value of stock options. In April 2005 the SEC announced that the effective date
of SFAS no. 123R for small business issuers will be suspended until the first
interim or annual reporting period of the company's first fiscal year beginning
on or after December 15, 2005, which, for the Company, is the first quarter of
the fiscal year ended June 30, 2007. The Company currently provides the pro
forma disclosures required by SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," on a quarterly basis.


                                       8
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

1. Nature of Business and Summary of Significant Accounting Policies - continued

Stock-based Compensation - continued:

Stock options granted to non-employees are recorded at their fair value, as
determined in accordance with SFAS No. 123 and Emerging Issues Task Force
Consensus No. 96-18, and recognized over the related service period. Deferred
charges for options granted to non-employees are periodically re-measured until
the options vest.

FASB Statement 123, "Accounting for Stock-Based Compensation," requires the
Company to provide pro forma information regarding net income (loss) and income
(loss) per share as if compensation cost for the Company's stock option
issuances had been determined in accordance with the fair value based method
prescribed in FASB Statement 123. The Company estimates the fair value of each
stock option at the grant date by using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in fiscal 2005,
2004, 2003 and 2002: dividend yield of 0%, risk-free interest rates ranging from
3.38% to 4.32%, expected lives of eight years, and expected volatility ranging
from 120% to 178%. Under the accounting provisions of SFAS Statement 123, the
Company's net loss and loss per share for the three and six months ended
December 31, 2005 and 2004, would have been the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
                                                            Three Months Ended                Six Months Ended
                                                        ---------------------------     ---------------------------
                                                                December 31,                    December 31,
                                                        ---------------------------     ---------------------------
Net loss:                                                   2005            2004            2005            2004
                                                        -----------     -----------     -----------     -----------
<S>                                                     <C>             <C>             <C>             <C>
    As reported                                         $  (377,272)    $   (82,757)    $  (855,962)    $(3,493,566)
    Add: Stock based employee compensation expense
       included in reported net loss                             --              --              --              --
    Deduct: Total stock based employee compensation
       expense determined under the fair value based
         method for all awards                             (295,396)        (20,163)       (590,785)        (53,449)
                                                        -----------     -----------     -----------     -----------
                                                        $  (672,668)    $  (102,920)    $(1,446,747)    $(3,547,015)
                                                        ===========     ===========     ===========     ===========

Loss per share, basic and diluted:
    As reported                                         $     (0.00)    $     (0.00)    $     (0.01)    $     (0.05)
    Proforma                                            $     (0.01)    $     (0.00)    $     (0.02)    $     (0.05)
</TABLE>

Foreign Currency Translation

      The functional currency of the Company's United Kingdom subsidiary is
pound sterling. Accordingly, the Company translates all assets and liabilities
into U.S. dollars at current rates. Revenues, costs, and expenses are translated
at average rates during each reporting period. Gains and losses resulting from
the translation of the consolidated financial statements are excluded from
results of operations and are reflected as a translation adjustment and a
separate component of stockholders' deficit. Gains and losses resulting from
foreign currency transactions are recognized in the consolidated statement of
operations in the period they occur.

Warranties

      The Company warrants the products and systems it sells to be free from
defects in materials and workmanship under normal use. Parts and labor costs to
repair defective products or systems are covered during the first ninety days
after delivery of the product or system. Thereafter the cost is billed to the
customer. A tabular reconciliation of the Company's aggregate product warranty
liability for the six months ended December 31, 2005 and 2004 is as follows:


                                       9
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

1. Nature of Business and Summary of Significant Accounting Policies - continued

Warranties - continued:

                                                             Six Months Ended
                                                          ----------------------
                                                               December 31,
                                                          ----------------------
                                                            2005           2004
                                                          -------        -------
Balance July 1,                                           $35,000        $15,000

Charges for warranty work                                      --             --

Accrual for product warranties issued
   during the period                                           --             --
                                                          -------        -------
Balance at December 31,                                   $35,000        $15,000
                                                          =======        =======

Use of estimates

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 combined financial statements, and the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from those
estimates.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market.

Property and equipment

      Assets are stated at cost. Depreciation is computed over the estimated
useful life of the assets generally using the straight-line method over periods
ranging from five to seven years. Additions and major renewals and betterments
are capitalized and depreciated over their estimated useful lives. Repairs and
maintenance are charged to operating expenses as incurred.

Income taxes

      The Company uses the liability method to determine its income tax expense.
Under this method, deferred tax assets and liabilities are computed based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted rates and laws that will be in effect when
the differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of the available evidence, it is
more likely than not that all or some portion of the deferred tax assets will
not be realized. The ultimate realization of the deferred tax asset depends on
the Company's ability to generate sufficient taxable income in the future.

Loss Per Share

The Company calculates earnings per share in accordance with SFAS No. 128,
Earnings Per Share, and SEC Staff Accounting Bulletin No. 98. Accordingly, basic
and diluted loss per share is computed using the weighted average number of
shares of common stock outstanding and excludes all common stock equivalents
outstanding during the period.


                                       10
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

1. Nature of Business and Summary of Significant Accounting Policies - continued

Loss Per Share - continued:

Common stock equivalents consist of shares issuable upon the exercise of stock
options and warrants using the treasury stock method. Stock options and
preferred stock that are convertible into common stock based on the Company's
attainment of performance goals are not includible in the calculation of
earnings per share until the specified targets are met. The following securities
have been excluded from the diluted computation for the six months ended
December 31, 2005 and 2004 because they are contingently issuable and/or
antidilutive:

                                                          Six Months Ended
                                                     ---------------------------
                                                            December 31,
                                                     ---------------------------
                                                        2005             2004
                                                     ----------       ----------

Series A Convertible Preferred Stock                 10,500,000       10,500,000
Series B Convertible Preferred Stock                  4,500,000        4,500,000
Series C Convertible Preferred Stock                 15,000,000               --
Stock options                                        43,828,500       10,828,500
Warrants                                              1,500,000        1,500,000

Reclassifications

Certain reclassifications have been made to the prior year financial statements
in order to conform to the current year presentation

2. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at December 31, 2005 consisted of the
following:

Accounts payable - trade                                              $  360,943
Professional fees                                                         96,647
Payroll liabilities (includes delinquent payroll taxes and
   associated interest and penalties of $726,089)                        990,710
Accrued Interest                                                          61,999
Deferred rent payable                                                     50,762
Other                                                                     45,000
                                                                      ----------
                                                                      $1,606,061
                                                                      ==========

3. Note Payable - CEO/stockholder

This amount represents a note payable to the Company's chief executive officer
and includes deferred salary of $233,938 and accrued interest of $118,478 based
on an interest rate of 5% per annum. The Note is due on demand and is secured by
substantially all of the assets of the Company and is subordinated to
outstanding borrowings under the Notes Payable Affiliate - revolving credit
agreement (See Note 6). Prior to the sale of CCS (See Note 7), the Company's
chief executive officer had advanced to CCS the sum of $750,741. Pursuant to his
employment agreement with the Company, the


                                       11
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

3. Note Payable - CEO/stockholder - continued:

Company guaranteed CCS' obligations to him to the maximum amount of $738,000.
The Company's obligations under this guaranty are payable only from cash flow
from operations not required for the Company's business. Because of CCS'
financial condition, the guaranteed obligations have been reflected as a
liability on the Company's balance sheet.

4. Notes Payable - Convertible Credit Facility; Debt Issuance Expense

On June 10, 2004 the Company entered into a convertible credit agreement with
private investors pursuant to which the Company borrowed $494,000. The notes
bear interest at the rate of 10% per annum, are convertible into the Company's
common stock at $.0333 per share and matured on June 30, 2005, except that in
the event of default the conversion rate is reduced to $.01667 per share. On
June 30, 2005 the Company and the lenders entered into an agreement amending the
terms of the notes which included an extension of the maturity date until June
30, 2010, a lowering of the conversion price to $.01667 per share and the
lowering of the interest rate to 0% or the minimum allowed by law, subsequent to
July 31, 2005. The conversion feature was valued at $3,847,832 using the
Black-Scholes option-pricing model. The Company expensed $2,304,455 of this
amount in the six months ended December 31, 2004 and $1,543,377 during the
remainder of the year ended June 30, 2005 as debt issuance expense. There was no
similar expense during the six months ended December 31, 2005.

5. Note Payable - Others

This amount represents notes payable to two individuals, including Menahem
Cohen, which the Company issued in January and May 2005. The notes are payable
on demand, bears interest at the rate of 5 and 11% per annum, and are unsecured.

6. Notes Payable Affiliate - Revolving Credit Agreement

In August 2005, the Company entered into a revolving credit agreement with GCOM
Consultants, Inc., which is owned by the wife of the Company's chief executive
officer, under which the Company may borrow up to $680,000. The Agreement
terminates on September 1, 2015 and requires monthly payments of $4,410 during
the term. Borrowings under the agreement bear interest at the annual rate of
7.025%, are due on demand, and are secured by a security interest in
substantially all of the Company's assets. In connection with this agreement,
the Company's chief executive officer has subordinated his security interest in
the Company's assets to any borrowings under this agreement (See Note 3). As of
December 31, 2005, the Company had borrowed approximately $424,000 under this
agreement.

7. Disposition of Assets - Sale of CCS International, Ltd.

On March 22, 2005, the Company sold all of the stock of CCS to Menahem Cohen for
$100 and contingent consideration consisting of 5% of CCS's and its
subsidiaries' net sales through March 31, 2015. Because of CCS's financial
condition the Company has established a full reserve for uncollectible amounts
due from them of $2,942,135. Prior to the sale of CCS,, the Company's president
and chief executive office, had advanced to CCS the sum of $750,741. Pursuant to
Mr. Jamil's employment agreement with the Company, the Company guaranteed CCS
obligations to Mr. Jamil to the maximum amount of $738,000 (See Notes 3). The
Company's obligations under this guaranty are payable only from cash flow from
operations not required for the Company's business. Because of CCS' financial
condition, the guaranteed obligations have been reflected as a liability of the
Company's balance sheet under the caption "Notes Payable - CEO/Stockholder".


                                       12
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

7. Disposition of Assets - Sale of CCS International, Ltd. - continued:

In connection with the sale of the stock of CCS Mr. Cohen resigned as vice
president and director of the Company, and the Company entered into a consulting
agreement with Mr. Cohen through December 31, 2007, pursuant to which the
Company will pay Mr. Cohen compensation at the annual rate of $108,000.

8. Common Stock

Stock Issuances

During the six months ended December 31, 2005 the Company issued the following
securities:

The Company sold 6,000,003 shares of common stock to accredited investors for
$343,000.

The Company issued 6,129,214 shares of common stock in payment of consulting
services valued at $293,219.

The Company issued 3,693,000 shares of common stock to employees in payment of
$175,680 of accrued wages.

The Company issued 362,145 shares of common stock to its 401 (K) Savings Plan,
valued at $17,780, as its match to employee's contributions (See Note 9).

Stock Distribution

On November 17, 2005 the Company's board of directors authorized a three-for-one
stock distribution pursuant to which the Company issued two shares of common
stock for each share outstanding on the record date, November 28, 2005. The
shares were distributed to stockholders on or about December 5, 2005. All
references to numbers of common shares and per share data in the accompanying
financial statements have been adjusted to reflect the stock distribution on a
retroactive basis. The par value of the additional shares of common stock issued
in connection with the stock distribution was credited to "Common stock" and a
like amount charged to "Additional paid-in-capital" in the three month period
ended December 31, 2005. The terms of the Company's Series A, Series B and
Series C Convertible Preferred stock provide for a change in the conversion rate
to adjust for the stock distribution. Accordingly, each share of the Company's
Series A, Series B and Series C Convertible Preferred stock has become
convertible into three shares of the Company's common stock.

Amendment to Articles of Incorporation

On November 17, 2005 the Company's board of directors authorized an amendment to
the Company's Articles of Incorporation increasing the authorized shares of the
Company's common stock, par value $.0001 per share from one hundred million to
three hundred million, effective on November 28, 2005.

9. 401(K) Savings Plan

The Company maintains a qualified deferred compensation plan under section
401(k) of the Internal Revenue Code. Under the plan, employees may elect to
defer up to 15% of their salary, subject to the Internal Revenue Service limits.
The Company may make a discretionary match as well as a discretionary
contribution. During the six months ended December 31, 2005 the Company matched
employees contributions of $17,780 by issuing 362,145 shares if its common
stock. The Company did not make a discretionary match or a discretionary
contribution during the six months ended December 31, 2004.


                                       13
<PAGE>

            Security Intelligence Technologies, Inc. and Subsidiaries
                   Notes To Consolidated Financial Statements
                           December 31, 2005 and 2004
                                   (Unaudited)

10. Income taxes

      The Company did not incur any income tax liabilities during the three and
six month periods ended December 31, 2005 and 2004 due to operating losses. As
of December 31, 2005, the Company has increased its tax valuation allowance to
offset the deferred tax benefits of net operating losses and other temporary
differences arising during the three and six months ended December 31, 2005 and
2004 because management is uncertain as to their ultimate realization.

11. Legal Matters

      Although the Company is not the defendant in any litigated matter, CSS and
one or more of its subsidiaries are the defendant in a number of actions, in
which the total amount claimed is approximately $1,312,000. Although the Company
is not a party to any agreement with the plaintiff in any of these actions and
has not taken any action to guarantee these obligations, it is possible that the
plaintiffs may seek to make a claim against the Company. The Company believes
that it has no liability in any of these actions, and will vigorously defend any
action which seeks to impose liability upon the Company.

      Although the Company has no contractual obligation with respect to any of
the obligations of CCS, and the Company believe that it has a valid defense to
any claim that it has any liability with respect to any potential liabilities or
obligations of CCS, it is possible that a creditor of CCS or its subsidiaries
may make a claim against the Company and that they may prevail. The Company
believes that it has meritorious and valid defenses against all such potential
litigation, and will vigorously defend any actions based on such claims.

12. Supplemental Disclosures of Cash Flow Information

Supplemental disclosures of cash flow information for the six month periods
ended December 31, 2005 and 2004 are as follows:

                                                               Six Months Ended
                                                             -------------------
                                                                 December 31,
                                                             -------------------
                                                               2005        2004
                                                             -------     -------

Interest paid                                                $99,288     $14,586
                                                             =======     =======

Taxes paid                                                   $ 1,677     $ 1,715
                                                             =======     =======

    Accrued interest and deferred salary credited to
    note payable - CEO/stockholder                           $33,089     $89,922
                                                             =======     =======


                                       14
<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

General Overview

      The following discussion should be read in conjunction with our financial
statements, including the notes thereto. Our financial statements and
information have been prepared to reflect our financial position as of December
31, 2005 and December 31, 2004. Historical results and trends should not be
taken as indicative of future operations.

      We are operating under a heavy financial burden as reflected in our
substantial working capital deficiency and our continuing losses and negative
cash flow from operations. We have sought to address these problems during
fiscal 2004 by closing our retail operations, although we continue to generate
modest retail sales from our headquarters and our London branch, and by entering
into credit agreement with certain stockholders pursuant to which we borrowed
$494,000. These notes were initially due in June 2005, and were extended for
five years.

      In August 2005, we entered into a revolving credit agreement with GCOM
Consultants, Inc., which is owned by the wife of our chief executive officer,
under which we may borrow up to $680,000. The Agreement terminates on September
1, 2015 and requires monthly payments of $4,410 during the term. Borrowings
under the agreement bear interest at the annual rate of 7.025%, are due on
demand, and are secured by a security interest in substantially all of our
assets. In connection with this agreement, our chief executive officer has
subordinated his security interest in our assets to any borrowings under this
agreement. As of December 31, 2005, we had borrowed approximately $424,000 under
this agreement.

      Our working capital deficiency has made it difficult for us to attract new
business and maintain relations with our customers and suppliers. Other than our
credit agreement and loans from our chief executive officer, our main source of
funds has been our customer deposits which we use for our operations.

      If we are unable to increase our sales and pay our note holders and other
creditors, it may be necessary for us to cease business and seek protection
under the Bankruptcy Code.

Prior to 2004, a significant portion of our revenue was derived from sales by
our retail stores which were operated by CCS, which was then our wholly-owned
subsidiary. In March 2005, we sold the stock of CCS to Menahem Cohen, who was
then our vice president and a director, for $100 and contingent consideration
consisting of 5% of CCS's and its subsidiaries' net sales through March 31,
2015. Since we no longer operate any retail stores, the operations of CCS are
treated as a discontinued operation in our financial statements.

During the fiscal year ended June 30, 2004 and continuing thereafter, we
changed the direction of our sales effort. We substantially reduced our retail
operations by closing our retail stores or converting to them to sales offices,
followed in March 2005 with the sale of our retail subsidiaries. We expanded our
marketing efforts directed at commercial and governmental users, particularly
with respect to our sales of our bomb-jamming systems and our communications
monitoring systems. We do not anticipate that retail sales will account for a
significant portion of our sales on an ongoing basis.

Although we have marketed a number of products in the past, we believe that our
ability to generate profits in the future will be dependent upon our ability to
develop market and sell our bomb-jamming equipment and market and sell the
communications monitoring equipment that we distribute pursuant to a
distribution agreement with a foreign supplier. If we are not able to generate
sales from these products or from any new products which we may either develop
or for which we may acquire distribution rights, we may be unable to operate
profitably and it may be necessary for us to discontinue our operations and seek
protection under the Bankruptcy Code.

Critical accounting policies

      We prepare our financial statements in accordance with accounting
principles generally accepted in the United States of America. Preparing
financial statements in accordance with generally accepted accounting principles
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The following paragraphs include a
discussion of some of the significant accounting policies and methods applied to
the preparation of our consolidated financial statements. See Note 1 of Notes to
Consolidated Financial Statements for further discussion of significant
accounting policies.


                                       15
<PAGE>

Use of estimates

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 combined financial statements, and the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from those
estimates.

Inventories

      Inventories are valued at the lower of cost (first-in, first-out) or
market.

Revenue recognition

      We recognize revenue from sales upon the delivery of merchandise to a
customer. We recognize revenue from our sophisticated monitoring systems and
bomb jamming systems after installation, testing and customer acceptance.
Non-refundable advance payments received under marketing and distribution
arrangements are deferred and either applied as payments towards customer
purchases made pursuant to the terms of the respective agreements, or recognized
as income at the termination of the agreement if specified purchase quotas have
not been met by the customer. Customer deposits are initially recorded as
liabilities and recognized as revenue when the related goods are shipped.

Stock-based Compensation

      We periodically grant stock options to employees in accordance with the
provisions of our stock option plans, with the exercise price of the stock
options being set at the closing market price of the common stock on the date of
grant. We also granted shares of preferred stock and stock options to our senior
executive officers pursuant to their employment agreements. We account for
stock-based compensation plans under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and accordingly accounts for
employee stock-based compensation utilizing the intrinsic value method. FAS No.
123, "Accounting for Stock-Based Compensation", establishes a fair value based
method of accounting for stock-based compensation plans. We have adopted the
disclosure only alternative under FAS No. 123, which requires disclosure of the
pro forma effects on earnings and earnings per share as if FAS No. 123 had been
adopted as well as certain other information.

      In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment."
This statement replaces SFAS No. 123, "Accounting for Stock-Based Compensation"
and supersedes APB No. 25, "Accounting for Stock Issued to Employees." SFAS
123(R) requires all stock-based compensation to be recognized as an expense in
the financial statements and that such cost be measured according to the fair
value of stock options. In April 2005 the SEC announced that the effective date
of SFAS no. 123R for small business issuers will be suspended until the first
interim or annual reporting period of the company's first fiscal year beginning
on or after December 15, 2005, which for the Company is the first quarter of the
fiscal year ended June 30, 2007. The Company currently provides the pro forma
disclosures required by SFAS No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure," on a quarterly basis.

      Stock options granted to non-employees are recorded at their fair value,
as determined in accordance with SFAS No. 123 and Emerging Issues Task Force
Consensus No. 96-18, and recognized over the related service period. Deferred
charges for options granted to non-employees are periodically re-measured until
the options vest.

Income taxes

      We use the liability method to determine income tax expense. Under this
method, deferred tax assets and liabilities are computed based on differences
between financial reporting and tax basis of assets and liabilities and are
measured using the enacted rates and laws that will be in effect when the
differences are expected to reverse. Deferred tax assets are reduced by a
valuation allowance if, based on the weight of the available evidence, it is
more likely than not that all or some portion of the deferred tax assets will
not be realized. The ultimate realization of the deferred tax asset depends on
our ability to generate sufficient taxable income in the future. Because of our
losses we did not incur any income tax expense during the three and six months
ended December 31, 2005 and December 31, 2004.


                                       16
<PAGE>


Financial guarantees

      The agreements pursuant to which we issued certain shares to settle debt
obligations contain a price guarantee that requires us to settle in cash any
difference between the original face amounts of the debt and proceeds from the
creditor's subsequent sale of the shares. We account for these transactions by
recording the debt at fair value with periodic mark-to-market adjustments until
the guarantee is settled. Unrealized gains or losses resulting from changes in
fair value are included in earnings and accrued expenses.

Fair Value of Financial Instruments

      The fair values of financial instruments recorded on the balance sheet are
not significantly different from their carrying amounts due to the short-term
nature of those instruments, or because they are accounted for at fair value.

Foreign Currency Translation

      The functional currency of our United Kingdom subsidiary is pound
sterling. Accordingly, we translate all assets and liabilities into United
States dollars at current rates. Revenues, costs, and expenses are translated at
average rates during each reporting period. Gains and losses resulting from the
translation of the consolidated financial statements are excluded from results
of operations and are reflected as a translation adjustment and a separate
component of stockholders' deficit. Translation adjustments were $18,227 as of
December 31, 2005. Gains and losses resulting from foreign currency transactions
are recognized in the consolidated statement of operations in the period they
occur.

Discontinued Operations

On March 22, 2005, we sold all of the stock of CCS to Menahem Cohen for $100 and
contingent consideration consisting of 5% of CCS's and its subsidiaries' net
sales through March 31, 2015. Our balance sheet at December 31, 2005 does not
reflect any liabilities of CCS, since we were not an obligor or guarantor with
respect to any of the liabilities except as set forth in Note 3 of Notes to
Consolidated Financial Statements. Prior to the disposition of CCS we issued
shares of common stock to settle debt obligations of CCS or its subsidiaries.
These agreements contain a price guarantee that requires CCS to settle in cash
any difference between the original face amounts of the debt and proceeds from
the creditor's subsequent sale of the shares. Since the obligation to make the
payment is an obligation of CCS, and not us, the amount by which the target
prices exceeded the value of the stock on December 31, 2005, which was $615,271,
is not reflected as our liability at December 31, 2005. Although we have no
contractual obligation with respect to any of the obligations of CCS, and we
believe we have a valid defense to any claim that we have any liability with
respect to any liabilities or obligations of CCS, it is possible that a creditor
of CCS or its subsidiaries may make a claim against us and that they may
prevail.

RESULTS OF OPERATIONS - Six Months Ended December 31, 2005 and 2004

Revenues. Revenues for the six months ended December 31, 2005 (the "2005
Period") were $1,729,800, a decrease of $340,277 or 16.4%, from revenues of
$2,070,077 for the six months ended December 31, 2004 (the "2004 Period")
primarily as a consequence of decreased sales from our bombjamming systems
partially offset by an increase of $324,343 in revenues recognized from the
termination of distribution agreements with non refundable deposit balances to
$423,507 in the 2005 Period from $99,164 in the 2004 Period.

Cost of Revenue. Cost of sales decreased by $179,905 or 26.4%, to $501,344 in
the 2005 Period from $681,249 in the 2004 Period as a consequence of decreased
sales. Cost of sales as a percentage of product sales increased to 38.4% in the
2005 Period from 34.6% in the 2004 Period primarily as a consequence of selling
lower margin products in the 2005 Period.


                                       17
<PAGE>

Compensation and benefits. Compensation and benefits decreased by $18,168, or
1.75% to $1,020,780 in the 2005 Period from $1,038,948 in the 2004 Period
primarily due to a decrease of $52,948 in our New Rochelle operation resulting
from outsourcing certain marketing and sales functions to outside consultants,
partially offset by aggregate increases of $34,780 in our Miami and London
operation resulting from building marketing, sales and administrative staffs.

Professional fees and legal matters. Professional fees and legal matters
increased by $20,067, or 18.2% to $130,372 in the 2005 Period from $110,305 in
the 2004 Period. Based on a review of CCS's outstanding legal matters and unpaid
settlements, we have established, in consultation with outside counsel, reserves
for litigation costs that we believe are probable and can be reasonable
estimated. We can provide no assurance, however, that such reserves will be
sufficient to absorb actual losses that may result from unfavorable outcomes.
Moreover, it is possible that the resolution of litigation contingencies will
have a material adverse impact on our consolidated financial condition, results
of operations, and cash flows.

Stock based compensation. Stock based compensation is attributable to the grant
of options and warrants to consultants and common stock which we issued to
employees in payment of accrued wages at a discount from the market price. These
items were valued at $134,957 using the Black-Scholes option-pricing model and
were expensed during the 2004 Period. There was no comparable expense in the
2005 Period.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $112,827, or 16.7% to $788,464 in the 2005
Period from $675,637 in the 2004 Period. The increase was primarily due to an
increase in consulting fees of $59,447 as a consequence of increasing resource
allocation to outside consultants to market and sell the company's products.

Depreciation and amortization. Depreciation and amortization was $4,000 in the
2005 Period and relates to equipment and leaseholds acquired during Fiscal 2005.
There were no depreciable assets during the 2004 Period.

Debt issuance expense. Debt issuance expense is attributable to debt we incurred
during June, August and September of 2004 that is convertible into shares of
common stock at prices below the market price of our common stock on the date we
incurred the debt. The conversion feature was valued at $2,304,455 using the
Black-Scholes option-pricing model and was expensed during the 2004 Period.
There were no similar transactions in the 2005 Period.

Interest expense. Interest expense increased by $86,680, or 160.2% to $140,802
in the 2005 Period from $54,122 in the 2004 Period primarily as a result of (i)
closing costs of $37,921 associated with the revolving line of credit we entered
into in August 2005 and (ii) a continued increase in the Company's other
interest bearing outstanding debt obligations.

Loss from discontinued operations. Loss from discontinued operations includes
CCS's operating loss of $563,970 in the 2004 Period. There was no comparable
expense in the 2005 Period.

As a result of the factors described above, our net loss decreased by
$2,637,604, or 75.5% to $855,962, $.01 per share, in the 2005 Period from
$3,493,566, $.05 per share, in the 2004 Period.

Liquidity and Capital Resources

We incurred net losses of $855,962 and $9,781,186, for the 2005 Period and the
fiscal year June 30, 2005 respectively. At December 31, 2005 we had cash of
$47,201, no accounts receivable and a working capital deficit of $4,870,595.
During the 2005 Period, we had a negative cash flow from operations of $486,988.
Our accounts payable and accrued expenses at December 31, 2005 were $1,606,061.
As a result of our continuing losses, our working capital deficiency has
increased. We funded our losses through the sale of our common stock, loans from
our chief executive officer and a company owned by his wife and the issuance of
notes to private investors. We also utilized vendor credit and customer
deposits.

Our accounts payable and accrued expenses increased from $1,465,635 at June 30,
2005 to $1,606,061 at December 31, 2005 an increase of $140,426 reflecting our
inability to pay creditors currently. We also had customer deposits and deferred
revenue of $1,107,234 which relate to payments on orders which had not been
filled at that date. We have used our advance payments to fund our operations.
If our vendors do not extend us necessary credit we may not be able to fill
current or new orders, which may affect the willingness of our clients to
continue to place orders with us.


                                       18
<PAGE>

During the past three years we have sought, and been unsuccessful, in our
efforts to obtain adequate funding for our business. Because of our losses, we
are not able to increase our borrowing. Our bank facility terminated on November
1, 2002 and since that date we have not been able to arrange financing with a
replacement bank or institutional lender. In June 2004, we entered into a
convertible credit agreement with certain stockholders pursuant to which we
borrowed $494,000. Our obligations to these lenders matured on June 30, 2005,
and were extended until June 30, 2010. In August, 2005, we entered into a
revolving credit agreement with GCOM Consultants, Inc., a company owned by the
wife of our chief executive officer, under which we may borrow up to $680,000.
We borrowed approximately $424,000 under this agreement. These borrowings are
due on demand. If demand is made, we do not presently have the resources to pay
the lender. If the lender seeks to demand payment or otherwise enforce the
notes, it may be necessary for us to seek protection under the Bankruptcy Code.
We continue to require funds for our operations, and our failure either to
obtain financing or generate cash flow from operations would materially impair
our ability to continue in business, and we cannot assure you that we will be
able to obtain the necessary financing. If we do not obtain necessary funding,
either from operations or from investors, we may be unable to continue our
operations and it may be necessary for us to seek protection under the
Bankruptcy Code.

      Our main source of funds other than the private investors has been from
loans from our chief executive officer, a company owned by the chief executive
officer's wife, customer deposits and vendor credit. During the 2005 Period we
received $343,000, during fiscal 2005, we received $110,000 and during fiscal
2004 we received $813,000 from the exercise of options to purchase our common
stock and the sale of our common stock. We cannot provide any assurance that we
will be able to raise any more money through the sale of our equity securities.
We may not be able to obtain any additional funding, and, if we are not able to
raise funding, we may be unable to continue in business. Furthermore, if we are
able to raise funding in the equity markets, our stockholders might suffer
significant dilution and the issuance of securities may result in a change of
control. These factors raise substantial doubt about our ability to continue as
a going concern. Our financial statements do not include any adjustments that
might result from the outcome of these uncertainties.

In March 2005, we sold the stock of CCS. Prior to the sale CCS had incurred
liabilities, which continue as liabilities of CCS. Although we did not guaranty
payment of the obligations of CCS, it is possible that creditors of CCS may seek
payment from us. Although we believe that we have no liability to creditors of
CCS, and we would vigorously contest any claim to the contrary, we cannot assure
you that a court would not reach a contrary conclusion. Regardless of whether we
ultimately prevail, we would incur significant legal and other costs in
defending any such action.

                            PART II OTHER INFORMATION

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.

      During the six months ended December 31, 2005 we issued the following in
transactions which were not registered pursuant to the Securities Act of 1933:

o     We sold 6,000,003 shares of common stock to accredited investors for
      $343,000.

o     We issued 2,299,597 shares of common stock in payment of consulting
      services valued at $113,500.

o     We issued 435,000 shares of common stock to employees in payment of
      $17,350 of accrued wages.

o     We issued 362,145 shares of common stock to our 401 (K) Savings Plan,
      valued at $17,780, as our match to contributions by employees. (See Note
      9).


                                       19
<PAGE>

None of these shares were issued in transactions involving a public offering
pursuant to Section 4(2) of the Securities Act of 1933, as amended. No
underwriting or broker was involved in the stock issuances and the Company did
not pay any compensation to any person in connection with the stock issuances.

Item 3. Controls and Procedures

      Our chief executive officer and chief financial officer evaluated our
disclosure controls and procedures as of the end of the period covered by this
quarterly report. Based upon the evaluation, our 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.

      During the quarterly period covered by this report, there were no changes
in our internal controls over financial reporting that materially affected, or
are reasonable likely to materially affect, our internal controls over financial
reporting.

Item 6. EXHIBITS AND REPORTS ON FORM 8K

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

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

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

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                SECURITY INTELLIGENCE TECHNOLOGIES, INC.


                                By: /s/ Ben Jamil
                                ----------------------------------------
                                Ben Jamil, chief executive officer


                                By: /s/ Chris R. Decker
                                ----------------------------------------
                                Chris R. Decker, chief financial officer

Date: February 21, 2006


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