UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   Form 10-QSB


(Mark one)
[X]  Quarterly  Report Under Section 13 or 15(d) of The Securities  Exchange Act
     of 1934

For the quarterly period ended September 30, 2004

[_]  Transition Report Under Section 13 or 15(d) of The Securities  Exchange Act
     of 1934

For the transition period from ______________ to ____________


Commission File Number: 333-46424

                          CYBER DEFENSE SYSTEMS, INC.
                ------------------------------------------------
             (Exact name of registrant as specified in its charter)


              FLORIDA                                    55-0876130
-------------------------------------           --------------------------------
(State or other jurisdiction of                        (I.R.S. Employer
  incorporation or organization)                      Identification No.)

      10901 ROOSEVELT BOULEVARD
       ST. PETERSBERG, FLORIDA                               33716
-------------------------------------           --------------------------------
 (Address of principal executive offices)                  (Zip code)

                   Registrant's telephone number: 727-577-0878



Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding  twelve 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 [_]


Indicate  by check mark  whether  the  registrant  is an  accelerated  Filer (as
defined in Rule 12-b-2 of the Exchange Act). YES [_] NO [X]


Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the close of the latest practical date.

          Title of Class                            Number of Shares Outstanding
Class A
Common Stock (par value $0.001 per share)     25,921,333 as of November 19, 2004

Class B
Common Stock (Par Value $0.001 per share)        150,000 as of November 19, 2004

Class C
vCommon Stock (Par value $0.001 per share)             2 as of November 19, 2004


<PAGE>



                          CYBER DEFENSE SYSTEMS, INC.

                                      INDEX

                                                                            Page
                                                                          Number

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets
September 30, 2004 (Unaudited) and December 31, 2003 (unaudited)......     1

Consolidated Statements of Operations
Three Months Ended September 30, 2004
and September 30, 2003 (Unaudited)....................................     2

Consolidated Statements of Operations
Nine Months Ended September 30, 2004
and September 30, 2003 (Unaudited)....................................     3

Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2004
and September 30, 2003 (Unaudited)....................................     4

Notes to the Consolidated Financial
Statements (Unaudited)................................................     5

Item 2. Management's Discussion and Analysis of
Financial Condition and Plan of Operations............................     10

Item 3. Controls and procedures.......................................     13


PART II. OTHER INFORMATION

Item 1. Legal Proceedings ............................................     14

Item 2. Changes in Securities.........................................     14

Item 3. Defaults Upon Senior Securities...............................     14

Item 4. Submission of Matters to a Vote of Security
        Security Holders..............................................     14

Item 5. Other Information ............................................     14

Item 6. Exhibits and Reports on Form 8-K..............................     14

                 Signatures...........................................     15





<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

<TABLE>
<CAPTION>
                  CYBER DEFENSE SYSTEMS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                                        September 30,       December 31,
                                                                           2004                 2003
                                                                        -------------       -------------
                                                                         (unaudited)         (unaudited)
<S>                                                                     <C>                 <C>
                                   ASSETS
CURRENT ASSETS:
 Cash and cash equivalents............................................  $     137,763       $         175
 Work in Progress.....................................................      1,175,000                   -
 Plans and designs....................................................        100,000                   -
Notes receivable from E-City Software, Inc............................              -             111,614
Restricted Cash.......................................................        193,354                   -
                                                                        -------------       -------------
 TOTAL CURRENT ASSETS.................................................      1,606,117             111,789
                                                                        -------------       -------------
OTHER ASSETS
Note Receivable - E-City Software, Inc................................              -             111,614
Investment in E-City Software, Inc....................................              -              40,000
Distribution Licenses, net of accumulated amortization of
         $ 34,708 and $14,494 respectively............................         19,162              39,406
Techsphere marketing rights, net of accumulated amortization
          of $37,500..................................................        462,500                   -
                                                                        -------------       -------------
TOTAL ASSETS..........................................................  $   2,087,779       $     191,040
                                                                        =============       =============

                 LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:

Accounts payable......................................................  $     348,823       $      34,199
Assumed debt of affiliated companies                                           41,337              98,972
Accrued liabilities...................................................         27,437               9,252
Notes payable - Cherokee..............................................      1,282,558              21,166
Notes payable - Proxity...............................................        107,011             107,011
Note payable - Alman..................................................        100,000                   -
Note payable - Quebec.................................................        242,216                   -
Due to affiliated companies...........................................         88,000             184,240
                                                                        -------------       -------------
TOTAL CURRENT LIABILITIES.............................................  $   2,237,382       $     454,840
                                                                        -------------       -------------
Commitments and contingencies

SHAREHOLDERS' DEFICIT:
Class A Preferred stock, $0.001 par value; 100,000,000 shares
authorized; none issued and outstanding...............................              -                   -
Common stock:
Class A, $0.001 par value; 200,000,000 shares authorized; 25,921,333
and 18,750,000 shares issued and outstanding ..........................         25,921               18,750
Class B, $0.001 par value; 200,000,000 shares authorized; 150,000
Shares issued and outstanding ........................................            150                  150
Class C, $0.001 par value; 200,000,000 shares authorized; 2
shares issued and outstanding ........................................              -                   -
Additional paid-in capital............................................      1,314,949
Accumulated deficit...................................................     (1,194,083)           (282,700)
                                                                        -------------       -------------
Total shareholder's deficit...........................................       (146,937)           (263,800)
Less subscription receivable..........................................          2,666                   -
                                                                        -------------       -------------
                                                                             (149,603)
                                                                        -------------       -------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                             $   2,087,779       $     191,040
                                                                        =============       =============
</TABLE>


           See accompanying notes to consolidated financial statements

                                                -1-
<PAGE>



<TABLE>
<CAPTION>
                   CYBER DEFENSE SYSTEMS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                               THREE MONTHS ENDED SEPTEMBER 30,

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

<S>                                                         <C>                   <C>
General and administrative expenses....................     $     158,999         $      68,054
                                                             -------------         -------------

Operating loss.........................................          (158,999)              (68,054)

Interest income........................................             3,030                     -
                                                             -------------         -------------

Loss from operations...................................          (155,969)              (68,054)
                                                             -------------         -------------

Net loss ..............................................      $   (155,969)         $   ( 68,054)
                                                             =============         =============


Basic and diluted loss per share.......................      $     (0.006)         $     (0.004)
                                                             =============         =============

Weighted average number of shares......................        25,647,781             18,750,000
                                                             =============         =============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                                      -2-
<PAGE>



<TABLE>
<CAPTION>
                  CYBER DEFENSE SYSTEMS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                                NINE MONTHS ENDED SEPTEMBER 30,

                                                                   2004                  2003
                                                             -------------         -------------
<S>                                                          <C>                   <C>
Sales.................................................       $   3,015,000         $           -

Cost of Sales.........................................           2,200,000                     -
                                                             -------------         -------------

Gross Profit..........................................             815,000                     -

General and administrative expenses....................            957,823               131,555
                                                             -------------         -------------

Operating loss.........................................           (142,823)             (131,555)

Other Income...........................................             28,988                 1,514
                                                             -------------         -------------

Loss from operations...................................           (113,835)             (130,041)
                                                             -------------         -------------

Net loss ..............................................      $    (113,835)        $    (130,041)
                                                             =============         =============


Basic and diluted loss per share.......................      $      (0.005)        $       (0.01)
                                                             =============         =============

Weighted average number of shares......................         25,549,357            18,750,000
                                                             =============         =============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       -3-
<PAGE>



<TABLE>
<CAPTION>
                  CYBER DEFENSE SYSTEMS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                          -
                                   (Unaudited)

                                                                   NINE MONTHS ENDED SEPTEMBER 30,

                                                                      2004             2003
                                                                -------------        -------------
<S>                                                             <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss..............................................       $    (113,835)     $      (130,041)
   Adjustments to reconcile net loss to net
   cash used by operating activities:
     Depreciation and amortization.......................              57,714                8,335
     Changes in assets and liabilities:
       Inventory.........................................          (1,175,000)                   -
       Accounts payable..................................             248,395                    -
       Accrued expenses..................................              15,651                6,341
                                                                -------------        -------------
NET CASH USED BY OPERATING ACTIVITIES....................            (967,075)            (115,365)
                                                                -------------        -------------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of licenses.................................                   -              (40,000)
    Change in related party receivables/payables.........             493,427                9,638
    Purchase of intangible assets........................            (600,000)                   -
                                                                -------------        -------------
NET CASH USED BY INVESTING ACTIVITIES....................            (106,573)             (30,362)
                                                                -------------        -------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from notes payable........................            1,842,985              146,972
     Principal payments on notes payable................             (446,777)             (20,000)
     Issuance of common stock...........................                6,988               18,750
                                                                -------------        -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES...............            1,403,196              145,722
                                                                -------------        -------------
Net increase in cash....................................              330,941                   (5)
Cash and cash equivalents, beginning....................                  176                    -
                                                                -------------        -------------
Cash and cash equivalents, ending.......................        $     331,117        $          (5)
                                                                =============        =============
NON-CASH INVESTING AND FINANCING ACTIVITIES:

  Increase in investment in subsidiary by incurring
    related payable.....................................        $      53,800        $      40,000
  Additional paid-in capital purchased with related party note        398,655                    -
  Issuance of common stock for subscription receivable...               2,666                    -
</TABLE>




          See accompanying notes to consolidated financial statements.



                                       -4-
<PAGE>



                   CYBER DEFENSE SYSTEMS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization, acquisitions and mergers and controlling shareholder

     Cyber Defense  Systems,  Inc.  ("the  Registrant"  or "Cyber  Defense") was
incorporated on August 19, 2004 in Florida. On Alert Systems,  Inc. ("On Alert")
was  incorporated on March 17, 2003 in Nevada and acquired a control position in
Cyber  Aerospace  Corp.  ("Cyber  Aerospace") in March 2004. On Alert was merged
with and into  Cyber  Defense  on  September  1,  2004.  E-City  Software,  Inc.
("E-City") was organized in Nevada and on September 1, 2004 was also merged with
and into  Cyber  Defense  following  the On  Alert  merger.  As a result  of the
aforementioned, Cyber Defense is the successor to E-City and its shares of class
A common stock began trading on the Over the Counter  Bulletin Board  ("OTC:BB")
under the symbol CYDF on  September  7, 2004.  Due to the nature of the mergers,
the historical  financial statements of the Registrant are now those of On Alert
and will include  results of  operations  for Cyber  Aerospace  from its date of
inception in March 2004, as it was previously a subsidiary of On Alert, and will
also  include  the  results of  operations  of E-City  from it's date of merger,
September 1, 2004.

     The  majority  and  controlling  shareholders  of the  company  are Proxity
Digital Networks, Inc., a publicly traded company ("PDNW") and Cherokee Raiders,
Inc.  ("Cherokee")  owning 72.6 % and 26.1 % of the Class A common shares of the
Registrant  respectively.  In  addition,  Cherokee  also owns all 150,000 of the
issued and  outstanding  shares of Class B common  stock  which  allow for 1,000
votes per share.  The Chief  Executive  Officer of both PDNW and Cherokee is Mr.
Robinson, the Chief Executive Officer of the Registrant.

Basis of Presentation

     The unaudited  financial  statements  included in the Form 10-QSB have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310(b)
of  Regulation  SB of the  Securities  and Exchange Act of 1934.  The  financial
information furnished herein reflects all adjustments,  which, in the opinion of
management,  are necessary for a fair  presentation  of the Company's  financial
position, the results of operations and cash flows for the periods presented.

     Certain  information  and  footnote   disclosures   normally  contained  in
financial  statements  prepared in accordance with generally accepted accounting
principles have been omitted, pursuant to such rules and regulations.

     The  preparation  of financial  statements  in  conformity  with  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 reported
period. Actual results could differ from those estimates.






                                       -5-
<PAGE>



                   CYBER DEFENSE SYSTEMS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


GOING CONCERN

     The Company had a working  capital  deficiency  of $ 343,051 for the fiscal
year ended  December 31, 2003 and $ 631,265 for the nine months ended  September
30, 2004.  At  September  30, 2004,  the Company had an  accumulated  deficit of
$1,194,083,  and had  incurred a loss of $113,835 for the nine months then ended
and a loss of $282,700 for the year ended  December 31, 2003.  In addition,  the
Company's  available  unrestricted cash of $137,763 at September 30, 2004 is not
sufficient to fund operations for the next twelve months.  Such recurring losses
and  working  capital  deficiency  raise doubt  about the  Company's  ability to
continue as a going concern.  The Company's financial  statements do not include
any adjustments  relating to the recoverability and reclassification of recorded
asset  amounts or to  amounts  and  classification  of  liabilities  that may be
necessary should the Company be unable to continue as a going concern.


NOTE 2 - INFORMATION ON THE MERGED ENTITIES AND BUSINESS PLAN

     The  Registrant  will  continue  to execute the On Alert  business  plan of
seeking  to  acquire  marketing  rights  to  offensive  and  defensive  security
technologies supporting a full line of interoperable protection disciplines.  By
acquiring   security  products  through  teaming  and  licensed   marketing  and
distribution  agreements,  the Company  plans to introduce  new product lines to
multiple markets.  Through exclusive global licenses, On Alert had also licensed
a  developing  system that uses  acoustical  and  ultrasonic  means to sense and
evaluate  activity  pertinent  to the  law  enforcement,  security  and  defense
industries.  On Alert also owned a majority  and  controlling  position in Cyber
Aerospace Corp.

     Through the Cyber  Aerospace  merger,  the  company is now  involved in the
sales and marketing of spherical  airships through a global marketing  agreement
with Techsphere Systems International,  LLC. In addition, the Company intends to
continue  assembling  a  team  of  military  experts,  aerospace  and  composite
engineers  to design and build a new  generation  of  Unmanned  Aerial  Vehicles
("UAV'S") known as Individual  Unmanned  Airscouts  ("IUAS").  Such vehicles are
being  designed so that they will be able to integrate  advanced  communications
with  airships  that will provide a mobile  stable  platform and will be able to
remain airborne in a set location longer than previously possible.

     Prior to the merger,  E-City Software had developed its core  3DCityMap(TM)
technology for 3D artistic  rendering of streets,  specific buildings and points
of interest in major  metropolitan  down-town  corridors and surrounding  areas,
including stadiums,  airports and landmarks. These maps have been used primarily
by clients to  visually  orient  their  customers  to easily  identify  business
locations, relevant landmarks, restaurants, hotels or other places of importance
to tourists and travelers. E-City has produced fully geo referenced, web-enabled
versions of these 3DCityMaps(TM) for our  cartoGRAPHICS(TM)  map engines as well
as  printed  versions  of  these  maps  for its  clients.  These  systems  where
applicable  will be incorporated  into the operating  systems of the UAV's under
development as well as the airships.


NOTE 3 - TECHSPHERE MARKETING RIGHTS

     Techsphere Systems International, LLC ("TSI") manufactures, constructs, and
assembles Low, Medium and High altitude  airships  ("Airships")  and TSI has the
exclusive world wide right and license to manufacture the Airships  according to
the U.S and Canadian  patents owned by 21st Century  Airships,  Inc., a Canadian
corporation. Cyber Aerospace Corp.,("CYBER"),  the operating subsidiary of Cyber
Defense Systems,  Inc., is engaged in marketing and sales to federal,  state and
local  government  agencies  and the  various  Military  branches  (collectively
referred to hereinafter as "Government  Units") On March 13, 2004, CYBER entered
into an agreement for $500,000 to on a global basis exclusively  market and sell
Airships  manufactured  by  TSI  to  Government  Units  and  non-exclusively  to
telecommunications entities. CYBER must, beginning one year from the anniversary
date,  provide  $15,000,000 in annual sales to TSI. CYBERS' agreement will renew
automatically for 3 year periods and terminates in 2019.








                                       -6-
<PAGE>



                   CYBER DEFENSE SYSTEMS INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4 - Note Payable - Quebec

     On August 23,  2004,  the Company and Quebec,  Inc.,  ("Quebec") a Canadian
corporation, executed a Secured Commercial Promissory Note pursuant to the terms
of which the Company borrowed  $242,216 from Quebec.  Prepaid interest of $9,316
for 61 days was  withheld  from the  initial  funding  and  thereafter  interest
accrues at an annual rate of 24%.  The Note is secured by certain  equipment  of
the Company and securities owned by Mr. Robinson,  the company's Chief Executive
Officer.  Prepayment  is  required  from any equity or loan funds  raised by the
Company and full payment of all remaining  principle and accrued interest is due
no later than  February 5, 2005.  Quebec  also  acquired  88,000  shares of CYDF
common stock at a price of $0.0593 per share.


NOTE 5- NOTES PAYABLE - CHEROKEE

     Cherokee  Raiders  Inc. is  controlled  by Mr.  Robinson and is therefore a
related  company.  Since  the  inception  of On Alert in  March  2003 and  Cyber
Aerospace in March 2004,  they have  received  advances from  Cherokee;  certain
expenses  have been paid by Cherokee on behalf of On Alert and Mr.  Robinson has
also  advanced  certain  funds to On Alert on behalf of Cherokee.  Such advances
totaled  $1,282,558  and $ 21,166 at  September  30, 2004 and  December 31, 2003
respectively.  Interest  accrues  at 12%  annually  and all  notes  and  accrued
interest are due on November 30, 2005. The  convertible  portion of $400,000 was
converted  to CYDF  common  shares at  $.0593  per  share on  September  1, 2004
resulting in the issuance of 6,750,000 shares to Cherokee.


NOTE 6 - NOTES PAYABLE - ALMAN

     Jim Alman is President of Cyber Aerospace Corp. and Cyber Defense  Systems,
Inc. and has been nominated for the board of directors of Cyber Defense Systems,
Inc.  and  therefore is an affiliate  of the  company.  The UAV  technology  and
development  rights  were  purchased  from Mr.  Alman  on  March  5th 2004 for a
$100,000 note, the right to purchase 1,000,000 shares of Cyber Aerospace Corp at
par value of $.0001 a share and 5% of the gross revenues of revenue  produced by
his UAV designs.  The terms of his note are on or before  December 05, 2005 (the
"Maturity  Date"),  Cyber Aerospace Corp. (the "Maker"),  promises to pay to the
order of James 8 % per annum on the then outstanding unpaid principal balance.


NOTE 7 - THE MERGERS AND ISSUANCE OF COMMON SHARES

     Proxity owned  18,750,000 and Cherokee Raiders owned 6,750,000 shares of On
Alert before the merger,  then, as a result of the merger,  Proxity and Cherokee
surrendered  those  25,500,000  shares of On Alert,  those shares were canceled,
and, in exchange,  Proxity and Cherokee received  25,500,000 newly issued shares
of Class A Common Stock of Cyber Defense Systems, Inc.; (b) since Cherokee owned
150,000  shares of Class B Common Stock of On Alert (with the right to vote 1000
shares for each one share  owned)  before the merger,  then,  as a result of the
merger, Cherokee surrendered those 150,000 shares of On Alert, those shares were


                                       -7-
<PAGE>



canceled,  and, in exchange,  Cherokee  received  150,000 newly issued shares of
Class B Common  Stock of Cyber  Defense  (which  now also have the same right to
vote 1000 shares for each one share owned);  and (c) since On Alert itself owned
40,000,001 shares of E-City before the merger,  this block of E-City stock, as a
result of the merger,  now belonged to Cyber Defense Systems,  Inc., thus making
E-City an 80% subsidiary of Cyber Defense. Basically, then, Proxity and Cherokee
(as the holder of stock with "super voting" rights) would control Cyber Defense.

     The next step in the  process  entailed  the  merger of E-City  into  Cyber
Defense pursuant to the "short-form" merger laws. A "short-form" merger allows a
parent  (such as Cyber  Defense)  to merge a  subsidiary  (such as E-City)  into
itself without having to obtain shareholder  consent.  As explained above, since
Cyber Defense owned 40,000,001,  or in excess of 80% of the number of Issued and
Outstanding  shares of E-City after the first merger,  Cyber Defense was able to
avail itself of the  "short-form"  merger  statutes and merge E-City into itself
without having to incur substantial legal fees by soliciting proxies.

     In the (second) change of domicile merger between E-City and Cyber Defense,
(a) the 40,000,001  shares of E-City owned by Cyber Defense were  canceled,  and
(b) for each 30 shares of the Common  Stock of the "old" Nevada  company  (i.e.,
E-City) owned by them before the merger,  the remaining  shareholders  of E-City
received  1 share of the  Class A Common  Stock of the "new"  Florida  company (
i.e., Cyber Defense) after the merger.  Thus,  pursuant to and after the merger,
those persons received a total of 333,333 shares of the "new" Florida Company. (
i.e., Cyber Defense).  At September 30, 2004, there are 25,921,333 shares of the
Class A Common  Stock of Cyber  Defense  Issued and  Outstanding.  As  mentioned
above, 333,333 are held by E-City's prior public  shareholders,  88,000 are held
by  Quebec,  a  lender  to the  company,  18,750,000  are held by  Proxity,  and
6,750,000  are held by  Cherokee  Raiders,  L.P.  and all  Quebec,  Proxity  and
Cherokee  shares are restricted.  In addition,  150,000 shares of Class B Common
Stock of Cyber  Defense,  with  multiple  voting  rights,  are owned by Cherokee
Raiders, L.P. However, these shares are also Restricted.

     Finally,  since Cyber Aerospace has shareholders other than On Alert, those
persons continue to own shares in Cyber Defense, Cyber Aerospace continues to be
an operating subsidiary of Cyber Defense.



                                       -8-
<PAGE>



                   CYBER DEFENSE SYSTEMS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 8 - SUBSEQUENT EVENTS

     The  company  has  entered  into  agreements  with PSC  Equipment,  Inc. of
Margate, Florida, and Equipment Depot, Inc. of Pompano Beach, Florida to acquire
approximately  $8,150,000 of aerospace R & D and production equipment to further
the  fulfillment of the companies  contracts and purchase  orders.  The separate
transactions  are  expected  to close upon the  completion  of  inspections  and
appraisals. The company is paying approximately $5.4 million in a combination of
cash and the exchange of newly issued  common stock of On Alert  Systems,  Inc.,
valued at $2.50 a share for the  purposes of the  transactions  to complete  the
purchase.

     The company has recently entered into  negotiations  with two institutional
lending  institutions  for funding for the purpose of  providing  expansion  and
working capital for the company.  The amount  currently under  negotiation is in
the $3 million to $5 million dollar range. The company anticipates the terms and
conditions  to be tied to the  proposed  equipment  closing that will be used as
collateral in the aforementioned transactions.

     The company  entered  into  employment  agreements  in  November  2004 with
William Robinson,  as Chief Executive Officer at a salary of $250,000 a year and
an annual  award of 250,000  shares for each  completed  year of service;  James
Alman,  as President of Cyber  Aerospace  and Cyber  Defense for $120,000 a year
with an award of 50,000 shares for each completed year of service,  Bill Strobel
as V.P.  of  Business  Development  for  $30,000  a year with an award of 40,000
shares for each year of completed  service;  Barry Nelsen as V.P. of  Government
Sales for $120,000 a year with 40,000  sharesfor each completed year of service,
Andrea Facchinetti as Senior Systems Engineer at an annual salary of $78,000 and
an award of 25,000 shares for each completed year of service,  Jaffray  Stephens
as Director of Research  and  Development  for $78,000  annually and an award of
25,000 shares for each year of completed  service.  These employment  agreements
are effective on January 1, 2005.













                                       -9-
<PAGE>



ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF RESULTS OF  OPERATIONS  AND
         LIQUIDITY AND CAPITAL RESOURCES

GENERAL

     The following  discussion and analysis  should be read in conjunction  with
the Consolidated  Financial  Statements and Notes thereto appearing elsewhere in
this Form 10-Q.

     This  management's  discussion  and  analysis of financial  conditions  and
results of operations contains certain  "forward-looking  statements" as defined
in the  Private  Securities  Litigation  Reform  Act of  1995.  Such  statements
relating  to  future  events  and  financial   performance  are  forward-looking
statements that involve risks and  uncertainties,  detailed from time to time in
the  Company's  various SEC  filings.  No  assurance  can be given that any such
matters will be realized.

                              RESULTS OF OPERATIONS

The Three Months  Ended  September  30, 2004  Compared to the Three Months Ended
September 30, 2003

     General and  administrative  expenses totaled $158,999 for the three months
ended  September  30, 2004 as compared  to $68,054  for the three  months  ended
September 30, 2003, a net increase of $90,945. The net increase is primarily due
to an increase in specialized consulting and legal fees as well as the inclusion
of the general and  administrative  expenses of Cyber  Aerospace,  Corp.  in the
amount of $ 22,666.

The Nine  Months  Ended  September  30, 2004  Compared to the Nine Months  Ended
September 30, 2003

     General and administrative  expenses totaled $957,823 for nine months ended
September  30, 2004 as compared to $131,555 for the nine months ended  September
30,  2003, a net  increase of  $826,268.  The  increase is  primarily  due to an
increase in specialized  consulting cost and legal fees as well as the inclusion
of the  general  and  administrative  expenses  of  Cyber  Aerospace,  Corp.  of
$533,605.

     Other  income of $28,988 in the 2004  nine-month  period is  comprised of a
gain on settlement  of  indebtedness  of $20,407 and interest  income of $8,581.
Other income in the 2003 nine-month consisted of $1,514 of interest income.





                                      -10-
<PAGE>



Liquidity and Capital Resources

     The Company's  primary  needs for  liquidity and capital  resources are the
funding of salaries and other administrative  expenses related to the management
of the Company.

     The  Company's  cash and cash  equivalents  of $137,763 as of September 30,
2004 are not  sufficient to support  current  levels of operations  for the next
twelve  months  and it will be  necessary  for the  Company  to seek  additional
financing.

     The  company  has  entered  into  agreements  with PSC  Equipment,  Inc. of
Margate, Florida, and Equipment Depot, Inc. of Pompano Beach, Florida to acquire
approximately  $8,150,000 of aerospace R & D and production equipment to further
the fulfillment of the companies'  contracts and purchase  orders.  The separate
transactions  are  expected  to close upon the  completion  of  inspections  and
appraisals. The company is paying approximately $5.4 million in a combination of
cash and the exchange of newly issued  common stock of On Alert  Systems,  Inc.,
valued at $2.50 a share for the  purposes of the  transactions  to complete  the
purchase.

     The company has recently entered into  negotiations  with two institutional
lending  institutions  for funding for the purpose of  providing  expansion  and
working capital for the company.  The amount  currently under  negotiation is in
the $3 million to $5 million dollar range. The company anticipates the terms and
conditions  to be tied to the  proposed  equipment  closing that will be used as
collateral in the aforementioned transactions.

Critical Accounting Policies

     The  Company's  discussion  and  analysis of its  financial  condition  and
results of operations are based upon Cyber Defense's financial statements, which
have been prepared in accordance with accounting  principles  generally accepted
in the United States. The preparation of these financial statements requires the
use of estimates  that affect the reported  amounts of assets,  liabilities  and
expenses.  The Company  evaluates its estimates on an ongoing  basis,  including
estimates for income tax assets and  liabilities and the impairment of the value
of investments.  The Company bases its estimates on historical experience and on
actual  information and assumptions that are believed to be reasonable under the
circumstances at that time. Actual results may differ from these estimates under
different  assumptions  or conditions.  The Company  believes that the following
critical accounting  policies affect its more significant  estimates used in the
preparation of its financial statements.

Accounting for Income Taxes.

     The  Company  currently  records a full  valuation  allowance  against  the
deferred tax benefit for net operating losses  generated,  since in management's
opinion the net  operating  losses do not meet the more likely than not criteria
for future realization.





                                      -11-
<PAGE>



Impairment of Investments.

     Cyber  Defense  Systems,  Inc.  reviews  estimates  of  the  value  of  its
investments  each reporting  period and records an impairment loss to the extent
that  management  believes  that there has been an  impairment  to the  carrying
value.

Recent Accounting Pronouncements

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  Instruments  and  Hedging  Activities."  The  Statement  amends  and
clarifies  accounting for derivative  instruments,  including certain derivative
instruments  embedded in other contracts entered into or modified after June 30,
2003.  The guidance  should be applied  prospectively.  The  provisions  of this
Statement that relate to SFAS 133 Implementation Issues that have been effective
for fiscal  quarters  that began prior to June 15, 2003,  should  continue to be
applied in accordance with  respective  effective  dates.  In addition,  certain
provisions  relating to forward purchases or sales of when-issued  securities or
other securities that do not yet exist,  should be applied to existing contracts
as well as new contracts  entered into after June 30, 2003. The adoption of SFAS
No. 149 is not expected to have an impact on the Company's financial statements.

     In May 2003,  the FASB issued  Statement of  Accounting  Standards  No. 150
"Accounting  for Certain  Financial  Instruments  with  Characteristics  of both
Liabilities and Equity" (SFAS No. 150).  SFAS No. 150 establishes  standards for
classification and measurement in the statement of financial position of certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires  classification of a financial instrument that is within its scope as a
liability  (or an asset in some  circumstances).  SFAS No. 150 is effective  for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period  beginning  after June
15, 2003. The Company has not yet determined the impact, if any, of the adoption
of SFAS on its financial position or results of operations.


     In May 2003, the consensus on EITF Issue No. 01-08, "Determining Whether an
Arrangement Contains a Lease," was issued. The guidance in the consensus applies
to the purchase or sale of goods and services  under various types of contracts,
including outsourcing arrangements. Based on the criteria in the consensus, both
parties to an  arrangement  are  required to determine  whether the  arrangement






                                      -12-
<PAGE>


includes a lease within the scope of SFAS No. 13,  "Accounting  for Leases." The
new  requirement  applies  prospectively  to new or  modified  arrangements  for
reporting  periods  beginning after May 28, 2003.  Accordingly,  as of August 1,
2003,  the  company  accounted  for new or modified  arrangements  based on this
guidance.  Adoption  of this  standard  did not have an impact on our  company's
financial statements.

     In December 2003, the Financial Accounting Standards Board (" FASB") issued
Interpretation  No. 46 ("FIN 46"),  "Consolidation of Variable Interest Entities
which was originally issued in January 2003. FIN 46 or revised provides guidance
on the  consolidation  of certain  entities  when control  exists  through other
entities  created after  January 31, 2003.  The Company does not hold a variable
interest  in any  enterprise.  Accordingly,  the  Company  does not  expect  the
provisions  of FIN 46 to have a  material  effect  on future  interim  or annual
financial statements.

     On December  18, 2003 the SEC issued  Staff  Accounting  Bulletin  No. 104,
Revenue  Recognition ("SAB 104"), which supersedes SAB 101, Revenue  Recognition
in Financial  Statements.  SAB 104's  primary  purpose is to rescind  accounting
guidance contained in SAB 101 related to multiple element revenue  arrangements,
which was  superseded as a result of the issuance of EITF 00-21,  Accounting for
Revenue Arrangements with Multiple Deliverables. The adoption of SAB 104 did not
have  a  material  impact  the  Company's   financial  position  or  results  of
operations.


ITEM 3. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

     Our chief executive officer who is also our chief financial officer,  after
evaluating  our  "disclosure   controls  and  procedures"  (as  defined  in  the
Securities  Exchange  Act of 1934  (the  "Exchange  Act")  Rules  13a-14(c)  and
15d-14(c)  have concluded that as of a date within 90 days of the filing date of
this report (the "Evaluation  Date") our disclosure  controls and procedures are
effective to ensure that information we are required to disclose in reports that
we file or submit under the Exchange Act is recorded, processed,  summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.

Changes in internal controls

     Subsequent to the Evaluation Date, there were no significant changes in our
internal  controls  or in other  factors  that  could  significantly  affect our
disclosure controls and procedures,  nor were there any significant deficiencies
or material  weaknesses  in our internal  controls.  As a result,  no corrective
actions were required or undertaken.




                                      -13-
<PAGE>



                           PART II OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

     None


ITEM 2. CHANGES IN SECURITIES

     Mergers and issuances from 8-K


ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

     None


ITEM 5. OTHER INFORMATION

     None


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


     EXHIBITS

31.1      Certification  of the Chief Executive  Officer and the Chief Financial
          Officer  pursuant  to Section  302 of the  Sarbanes-Oxley  Act of 2002
          ("Sarbanes-Oxley").

32.1      Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002.



     REPORTS ON FORM 8-K

     The  Company  filed a Current  Report  on Form 8-K on  September  15,  2004
regarding the mergers with E-City Software, Inc. and On Alert Systems, Inc..





                                      -14-
<PAGE>



                                   SIGNATURES



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


                           CYBER DEFENSE SYSTEMS, INC.


     November 22, 2004


                      By:   /s/ Billy Robinson
                            -------------------
                            Billy Robinson
                             Chief Executive Officer


                      By:   /s/ Billy Robinson
                            -------------------
                            Billy Robinson
                             Chief Financial Officer





                                     -15-