---

**UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION**
  Washington, D.C. 20549

FORM 10-QSB

x  QUARTERLY
  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED **March 31, 2005**

Commission file Number: **0-32355**

CYOP SYSTEMS INTERNATIONAL INCORPORATED
  (Exact name of small business issuer as specified in its charter)

**Nevada**
  (State or other jurisdiction of incorporation or organization)

**98-0222927**
  (I.R.S. Employer Identification Number)

**Unit A 
  149 South Reeves Drive
  Beverly Hills, California90212**
  (Address of principal executive offices)

**(310) 248-4860**
  (Issuer's telephone number)

State the number of shares outstanding of each of the issuer's
  classes of common equity, as of the latest 
  practicable date: **333,498,160 common shares as at March 31, 2005**

Transitional Small Business Disclosure Format (check one):
  Yes  ̈  No x

---

CYOP SYSTEMS INTERNATIONAL INCORORATED

INDEX

|PART 1.  | FINANCIAL INFORMATION | 2                                                                                                       
|-------- | --------------------- | --------------------------------------------------------------------------------------------------------
|         |                       |                                                                                                         
|         | Item 1.               | Financial Statements                                                                                    
|         |                       |                                                                                                         
|         |                       | Consolidated Balance Sheet as of March 31,
      2005 and December 31, 2004                             
|         |                       |                                                                                                         
|         |                       | Consolidated Statements of Changes in Stockholders'
      Deficiency for the period ended March 31, 2005
|         |                       |                                                                                                         
|         |                       | Consolidated Statement of Operations for
      the period ended March 31, 2005                          
|         |                       |                                                                                                         
|         |                       | Consolidated Statements of Cash Flows for
      the period ended March 31, 2005                         
|         |                       |                                                                                                         
|         |                       | Notes to Consolidated Financial Statements                                                              
|         |                       |                                                                                                         
|         | Item 2.               | Management Discussion and Analysis                                                                      
|         |                       |                                                                                                         
|         | Item 3.               | Controls and Procedures                                                                                 
|         |                       |                                                                                                         
|PART II. | OTHER INFORMATION     | 27                                                                                                      
|         |                       |                                                                                                         
|         | Item 1.               | Legal Proceedings                                                                                       
|         |                       |                                                                                                         
|         | Item 2.               | Changes in Securities                                                                                   
|         |                       |                                                                                                         
|         | Item 3.               | Defaults Upon Senior Securities                                                                         
|         |                       |                                                                                                         
|         | Item 4.               | Submission of Matters to a Vote of Security
      Holders                                               
|         |                       |                                                                                                         
|         | Item 5.               | Other Information                                                                                       
|         |                       |                                                                                                         
|         | Item 6.               | Exhibits and Reports on Form 8K                                                                         
|         |                       |                                                                                                         
|         | SIGNATURES            | 28                                                                                                      

1

---

PART I
  FINANCIAL INFORMATION

Item 1.        Financial Statements



2

---

CYOP SYSTEMS INTERNATIONAL 
  INCORPORATED

Consolidated Financial Statements (Expressed in U.S. Dollars)

March 31, 2005

Index

Consolidated Balance Sheets

Consolidated Statements of Stockholders’
  Deficiency

Consolidated Statements of Operations

Consolidated Statements of Cash Flows

Notes to Consolidated Financial
  Statements



3

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Consolidated Balance Sheets
        Unaudited (Expressed in U.S. Dollars)
|-------------------------------------------------------------------------------------------------------------------------------

|                                                              |   | March 31,2005 |   |   | December, 31, 2004 |  
|------------------------------------------------------------- | - | ------------- | - | - | ------------------ | -
|                                                              |   |               |   |   |                    |  
|ASSETS                                                        |   |               |   |   |                    |  
|                                                              |   |               |   |   |                    |  
|Current                                                       |   |               |   |   |                    |  
|Cash and cash
      equivalents                               | $ | 143,465       |   | $ | 7,337              |  
|Accounts receivable                                           |   | 238           |   |   | 50,058             |  
|Prepaid expenses and deposit                                  |   | 2,440         |   |   | 2,440              |  
|                                                              |   |               |   |   |                    |  
|Total current assets                                          |   | 146,143       |   |   | 59,835             |  
|                                                              |   |               |   |   |                    |  
|Fixed assets                                                  |   | 50.741        |   |   | 54,568             |  
|                                                              |   |               |   |   |                    |  
|Investment in equity – method investee                        |   | 1,653,327     |   |   | 1,668,285          |  
|                                                              |   |               |   |   |                    |  
|Intangible assets                                             |   | 50,604        |   |   | 57,833             |  
|                                                              |   |               |   |   |                    |  
|Total assets                                                  | $ | 1,900,815     |   | $ | 1,840,521          |  
|                                                              |   |               |   |   |                    |  
|LIABILITIES                                                   |   |               |   |   |                    |  
|                                                              |   |               |   |   |                    |  
|Current                                                       |   |               |   |   |                    |  
|Demand loans
      related party                              | $ | 1,289,742     |   | $ | 1,289,620          |  
|Accounts payable
      and accrued liabilities                |   | 260,829       |   |   | 288,785            |  
|Convertible
      debenture                                   |   | -             |   |   | 70,000             |  
|Player funds
      on deposit                                 |   | 44,339        |   |   | 44,158             |  
|Short-term
      loan                                         |   | 212,725       |   |   | 212,725            |  
|Promissory note                                               |   | 160,000       |   |   | 100,000            |  
|                                                              |   |               |   |   |                    |  
|Total current liabilities                                     |   | 1,967,635     |   |   | 2,005,288          |  
|                                                              |   |               |   |   |                    |  
|Deferred revenue                                              |   | 2,173,687     |   |   | 2,173,822          |  
|                                                              |   |               |   |   |                    |  
|Total Liabilities                                             |   | 4,141,322     |   |   | 4,179,110          |  
|                                                              |   |               |   |   |                    |  
|Nature and continuance of operations                          |   |               |   |   |                    |  
|                                                              |   |               |   |   |                    |  
|STOCKHOLDERS' DEFICIENCY                                      |   |               |   |   |                    |  
|                                                              |   |               |   |   |                    |  
|Share capital                                                 |   |               |   |   |                    |  
|Authorized:                                                   |   |               |   |   |                    |  
|500,000,000
      shares of common stock with a par value     |   |               |   |   |                    |  
|of
      $0.00002 per share                                   |   |               |   |   |                    |  
|                                                              |   |               |   |   |                    |  
|Issued, allotted
      and outstanding:                       |   |               |   |   |                    |  
|306,612,485
      shares of common stock (2004 - 181,103,355) |   | 6,135         |   |   | 3,623              |  
|                                                              |   |               |   |   |                    |  
|Additional paid-in capital                                    |   | 2,357,148     |   |   | 1,062,970          |  
|                                                              |   |               |   |   |                    |  
|Deficit accumulated                                           |   | (4,603,790    | ) |   | (3,405,182         | )
|                                                              |   |               |   |   |                    |  
|Total stockholders' deficiency                                |   | (2,240,507    | ) |   | (2,338,589         | )
|                                                              |   |               |   |   |                    |  
|Total liabilities and stockholders' deficiency                | $ | 1,900,815     |   | $ | 1,840,521          |  

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

4

---

|CYOP SYSTEMS INTERNATIONAL INCORPORATED             |           
|--------------------------------------------------- | ----------
|Consolidated Statements of Stockholders' Deficiency |           
|Three Months ended March 2005                       | Page 1of 3
|(Unaudited)                                         |           
|(Expressed in U.S. Dollars)                         |           

|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   | Accumulated |  |   |              |  
|----------------------------------------------------- | ------------ |  | - | ------- |  | - | ---------- |  |  | ------- |  | - | ----------- | - | - | ----------- |  | - | ------------ | -
|                                                      |              |  |   |         |  |   |            |  |  | Compre- |  |   |             |   |   | other       |  |   | Total        |  
|                                                      |              |  |   |         |  |   | Additional |  |  | hensive |  |   |             |   |   | compre-     |  |   | Stock-       |  
|                                                      | Common stock |  |   | paid-in |  |   | income     |  |  | Deficit |  |   | hensive     |   |   | Holders'    | 
|                                                      | Shares       |  |   | Amount  |  |   | Capital    |  |  | (loss)  |  |   | accumulated |   |   | income      |  |   | (deficiency) |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Balance, December 31, 2004                            | 181,103,355  |  |   | 3,623   |  |   | 1,062,970  |  |  |         |  |   | (3,405,182  | ) |   | -           |  |   | (2,338,589   | )
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0033 per       |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|share on January 12, 2005                             | 6,896,552    |  |   | 138     |  |   | 22,621     |  |  |         |  |   |             |   |   |             |  |   | 22,759       |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0022 per       | 5,681,818    |  |   | 114     |  |   | 12,386     |  |  |         |  |   |             |   |   |             |  |   | 12,500       |  
|share on January 14 2005 from escrow                  |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.003 per        | 6,896,552    |  |   | 138     |  |   | 20,552     |  |  |         |  |   |             |   |   |             |  |   | 20,690       |  
|share on January 18, 2005                             |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.002 per        | 5,882,353    |  |   | 118     |  |   | 11,647     |  |  |         |  |   |             |   |   |             |  |   | 11,765       |  
|share on January 21, 2005                             |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0024 per       | 5,000,000    |  |   | 100     |  |   | 11,900     |  |  |         |  |   |             |   |   |             |  |   | 12,000       |  
|share on January 24, 2005 from escrow                 |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0029 per share | 5,882,353    |  |   | 118     |  |   | 16,941     |  |  |         |  |   |             |   |   |             |  |   | 17,059       |  
|on January 26, 2005                                   |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0031 per share | 8,691,795    |  |   | 174     |  |   | 26,771     |  |  |         |  |   |             |   |   |             |  |   | 26,945       |  
|on January 31, 2005                                   |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Balance                                               | 226,034,778  |  | $ | 4,523   |  | $ | 1,185,788  |  |  |         |  | $ | (3,405,182  | ) | $ | -           |  | $ | (2,214,871   | )

Theaccompanyingnotes are anintegralpart
  of thesefinancialstatements.

5

---

|CYOP SYSTEMS INTERNATIONAL INCORPORATED             |            
|--------------------------------------------------- | -----------
|Consolidated Statements of Stockholders' Deficiency |            
|Three Months ended March 2005                       | Page 2 of 3
|(Unaudited)                                         |            
|(Expressed in U.S. Dollars)                         |            

|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   | Accumulated |  |   |              |  
|----------------------------------------------------- | ------------ |  | - | ------- |  | - | ---------- |  |  | ------- |  | - | ----------- | - | - | ----------- |  | - | ------------ | -
|                                                      |              |  |   |         |  |   |            |  |  | Compre- |  |   |             |   |   | other       |  |   | Total        |  
|                                                      |              |  |   |         |  |   | Additional |  |  | hensive |  |   |             |   |   | compre-     |  |   | Stock-       |  
|                                                      | Common stock |  |   | paid-in |  |   | income     |  |  | Deficit |  |   | hensive     |   |   | Holders'    | 
|                                                      | Shares       |  |   | Amount  |  |   | Capital    |  |  | (loss)  |  |   | accumulated |   |   | income      |  |   | (deficiency) |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Balance, forward                                      | 226,034,778  |  |   | 4,523   |  |   | 1,185,788  |  |  |         |  |   | (3,405,182  | ) |   | -           |  |   | (2,214,871   | )
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0031 per       | 4,081,633    |  |   | 82      |  |   | 12,571     |  |  |         |  |   |             |   |   |             |  |   | 12,653       |  
|share on January 31, 2005 from escrow                 |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0036 per       | 3,194,888    |  |   | 64      |  |   | 11,438     |  |  |         |  |   |             |   |   |             |  |   | 11,502       |  
|share on February 7, 2005 from escrow                 |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0072 per       | 3,494,125    |  |   | 70      |  |   | 24,930     |  |  |         |  |   |             |   |   |             |  |   | 25,000       |  
|share on February 11, 2005                            |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0058 per       | 3,135,907    |  |   | 63      |  |   | 18,125     |  |  |         |  |   |             |   |   |             |  |   | 18,188       |  
|share on February 14, 2005                            |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0058 per       | 1,757,469    |  |   | 35      |  |   | 10,157     |  |  |         |  |   |             |   |   |             |  |   | 10,192       |  
|share on February 14, 2005 from escrow                |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0158 per share | 4,081,633    |  |   | 82      |  |   | 64,407     |  |  |         |  |   |             |   |   |             |  |   | 64,489       |  
|on February 25, 2005                                  |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0169 per share | 671,592      |  |   | 13      |  |   | 11,336     |  |  |         |  |   |             |   |   |             |  |   | 11,349       |  
|on February 28, 2005 from escrow                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued for services at $0.0187 per share       | 30,000,000   |  |   | 600     |  |   | 560,400    |  |  |         |  |   |             |   |   |             |  |   | 561,000      |  
|On February 28, 2005                                  |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Balance,                                              | 276,452,025  |  | $ | 5,532   |  | $ | 1,899,152  |  |  |         |  | $ | (3,405,182  | ) | $ | -           |  | $ | (1,500,498   | )

Theaccompanyingnotes are anintegralpart
  of thesefinancialstatements.

6

---

|CYOP SYSTEMS INTERNATIONAL INCORPORATED             |           
|--------------------------------------------------- | ----------
|Consolidated Statements of Stockholders' Deficiency |           
|Three Months ended March 2005                       | Page 3of 3
|(Unaudited)                                         |           
|(Expressed in U.S. Dollars)                         |           

|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   | Accumulated |  |   |              |  
|----------------------------------------------------- | ------------ |  | - | ------- |  | - | ---------- |  |  | ------- |  | - | ----------- | - | - | ----------- |  | - | ------------ | -
|                                                      |              |  |   |         |  |   |            |  |  | Compre- |  |   |             |   |   | other       |  |   | Total        |  
|                                                      |              |  |   |         |  |   | Additional |  |  | hensive |  |   |             |   |   | compre-     |  |   | Stock-       |  
|                                                      | Common stock |  |   | paid-in |  |   | income     |  |  | Deficit |  |   | hensive     |   |   | Holders'    | 
|                                                      | Shares       |  |   | Amount  |  |   | Capital    |  |  | (loss)  |  |   | accumulated |   |   | income      |  |   | (deficiency) |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Balance, forward                                      | 276,452,025  |  |   | 5,532   |  |   | 1,899,152  |  |  |         |  |   | (3,405,182  | ) |   | -           |  |   | (1,500,498   | )
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0165 per share | 606,061      |  |   | 12      |  |   | 9,988      |  |  |         |  |   |             |   |   |             |  |   | 10,000       |  
|on March 7, 2005 from escrow                          |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0184 per share | 4,958,677    |  |   | 99      |  |   | 91,139     |  |  |         |  |   |             |   |   |             |  |   | 91,238       |  
|on March 14, 2005 from escrow                         |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.014 per        | 4,477,612    |  |   | 90      |  |   | 62,595     |  |  |         |  |   |             |   |   |             |  |   | 62,685       |  
|share on March 21, 2005                               |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0142 per       | 5,118,110    |  |   | 102     |  |   | 72,574     |  |  |         |  |   |             |   |   |             |  |   | 72,676       |  
|share on March 28, 2005                               |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Shares issued to Cornell Capital at $0.0148 per       | 15,000,000   |  |   | 300     |  |   | 221,700    |  |  |         |  |   |             |   |   |             |  |   | 222,000      |  
|share on February 14, 2005 from escrow                |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Net loss for the period                               |              |  |   |         |  |   |            |  |  |         |  |   | (1,198,608  | ) |   |             |  |   | (1,198,608   | )
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|                                                      |              |  |   |         |  |   |            |  |  |         |  |   |             |   |   |             |  |   |              |  
|Balance, March 31, 2005                               | 306,612,485  |  | $ | 6,135   |  | $ | 2,357,148  |  |  |         |  | $ | (4,603,790  | ) | $ | -           |  | $ | (2,240,507   | )

Theaccompanyingnotes are anintegralpart
  of thesefinancialstatements.

7

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Consolidated Statements of Operations 
        Three months ended March 31, 2005 and 2004 (Expressed in U.S. Dollars)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 |   | 2005        |   |   | 2004        |  
|------------------------------------------------ | - | ----------- | - | - | ----------- | -
|Revenue                                          |   |             |   |   |             |  
|Sales –
      Crediplay                          | $ | 135         |   | $ | 4,060       |  
|Service fees                                     |   | 2,433       |   |   | 7,338       |  
|Banking fees                                     |   | 102         |   |   | 192         |  
|Ad sales                                         |   | -           |   |   | -           |  
|                                                 |   | 2,670       |   |   | 11,590      |  
|Cost of sales                                    |   | 8,075       |   |   | 13,115      |  
|                                                 |   | (5,405      | ) |   | (1,525      | )
|                                                 |   |             |   |   |             |  
|Sales and
      marketing expenses               |   | (56,460     | ) |   | 5,050       |  
|Consultants
      fees                           |   | (876,732    | ) |   | (88,000     | )
|Corporate
      Finance fees                     |   | (141,307    | ) |   | (262,500    | )
|General and
      Admin fees                     |   | (70,404     | ) |   | (96,521     | )
|Salaries and benefits                            |   | -           |   |   | (8,043      | )
|                                                 |   |             |   |   |             |  
|Operating loss                                   |   | (1,150,308  | ) |   | (451,539    | )
|                                                 |   |             |   |   |             |  
|Other income (loss)                              |   |             |   |   |             |  
|                                                 |   |             |   |   |             |  
|Interest income
      related party              |   | -           |   |   | 27,951      |  
|Interest Expense                                 |   | (33,342     | ) |   | (2,838      | )
|Equity in losses of equity-method
      investee |   | (14,958     | ) |   | -           |  
|                                                 |   |             |   |   |             |  
|Net loss for the year                            | $ | (1,198,608  | ) | $ | (426,426    | )
|                                                 |   |             |   |   |             |  
|Loss per share –basic and diluted                |   |             |   |   |             |  
|                                                 |   |             |   |   |             |  
|Loss from operations                             | $ | (0.005      | ) | $ | (0.000      | )
|                                                 |   |             |   |   |             |  
|Net loss                                         | $ | (0.005      | ) | $ | (0.000      | )
|                                                 |   |             |   |   |             |  
|Weighted average number of common                |   |             |   |   |             |  
|shares outstanding -basic and diluted            |   | 237,385,334 |   |   | 148,617,366 |  

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

8

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Consolidated Statements of Cash Flows 
        Three months ended March 31, 2005 and 2004 (Expressed in U.S. Dollars)
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    |   | 2005       |   |   | 2004     |  
|--------------------------------------------------- | - | ---------- | - | - | -------- | -
|                                                    |   |            |   |   |          |  
|Cash flows from (used in) operating activities      |   |            |   |   |          |  
|Net loss for
      the year                         | $ | (1,198,608 | ) | $ | (426,426 | )
|Adjustments
      to reconcile net loss to net cash |   |            |   |   |          |  
|Used
      in operating activities:                 |   |            |   |   |          |  
|-
      amortization of intangible assets           |   | 7,229      |   |   | 7,229    |  
|-
      depreciation of fixed assets                |   | 3,827      |   |   | 5,186    |  
|-
      imputed interest on related party loan      |   | -          |   |   | 24,439   |  
|-
      shares issuance for services                |   | 899,307    |   |   | 258,490  |  
|-
      investment in equity interest               |   | 14,958     |   |   |          |  
|-
      accredited to convertible debenture         |   | -          |   |   | 1,284    |  
|Changes in
      assets and liabilities:            |   |            |   |   |          |  
|-
      accounts receivable                         |   | 49,821     |   |   | -        |  
|-
      interest receivable                         |   | -          |   |   | (15,039  | )
|-
      note receivable related party               |   | -          |   |   | (5,574   | )
|-
      prepaid expenses and deposit                |   | -          |   |   | 2,500    |  
|-
      accounts payable and accrued liabilities    |   | (27,956    | ) |   | (31,649  | )
|-
      player funds on deposit                     |   | 180        |   |   | (8,250   | )
|-
      deferred revenue                            |   | 135        |   |   | (4,060   | )
|                                                    |   | (251,107   | ) |   | (191,871 | )
|                                                    |   |            |   |   |          |  
|Cash flows from (used in) investing activities      |   |            |   |   |          |  
|Proceeds from
      disposal of fixed assets        |   | -          |   |   | -        |  
|Increase in
      software development costs        |   | -          |   |   | -        |  
|Purchase of
      investments                       |   | -          |   |   | -        |  
|Purchase of fixed assets                            |   | -          |   |   | -        |  
|                                                    |   | -          |   |   | -        |  
|                                                    |   |            |   |   |          |  
|Cash flows from (used in) financing activities      |   |            |   |   |          |  
|Shares issued                                       |   | 385,000    |   |   | -        |  
|Increase in
      due from director                 |   | 122        |   |   | 66,340   |  
|Proceeds from
      promissory note                 |   | 60,000     |   |   | -        |  
|Proceeds from convertible
      debenture           |   | (70,000    | ) |   | 125,000  |  
|                                                    |   | 375,122    |   |   | 191,340  |  
|                                                    |   |            |   |   |          |  
|Increase in cash and cash equivalents               |   | 124,015    |   |   | (531     | )
|                                                    |   |            |   |   |          |  
|Effect of exchange rate on cash                     |   | 12,113     |   |   | -        |  
|                                                    |   |            |   |   |          |  
|Cash and cash equivalents,beginning of year         |   | 7,337      |   |   | 9,057    |  
|                                                    |   |            |   |   |          |  
|Cash and cash equivalents, end of year              | $ | 143,465    |   | $ | 8,526    |  
|                                                    |   |            |   |   |          |  
|Cash and cash equivalents represented by:           |   |            |   |   |          |  
|Cash                                                | $ | 139,718    |   | $ |          |  
|Cash with processors                                |   | 3,747      |   |   |          |  
|                                                    | $ | 143,465    |   | $ | 8,526    |  

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

SUPPLEMENTAL CASH FLOW INFORMATION

On December 1, 2004 the Company assigned a discounted promissory
  note valued at $1,605,986 to a related party company in consideration of
  25 million common shares of that company. The common shares acquired are held
  as an equity interest investment.

9

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|1. | Nature and Continuance of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The Company was incorporated on October
        29, 1999 in as Triple 8 Development Corporation under the laws of the
        State of Nevada to engage in any lawful business or activity for which
        corporations may be organized under the laws of the State of Nevada. The
        Company changed its name to CYOP Systems International Incorporated on
        October 30, 2000. On November 3, 2000, the Company acquired 100% of the
        issued and outstanding shares of CYOP Systems Inc., Barbados (“CYOP
        Barbados”). This transaction was accounted for as a reverse acquisition
        and a recapitalization.                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   | CYOP Barbados was incorporated under the
        laws of Barbados on June 20, 2000. On August 31, 2000, CYOP Barbados acquired
        100% of the issued and outstanding shares of Moshpit Entertainment Inc.,
        Canada (“Moshpit”), a company incorporated under the laws
        British Columbia, Canada. CYOP Barbados sold 100% of the issued and outstanding
        shares of Moshpit by an agreement dated April 1, 2002 to a former stockholder
        and the sole director                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | The Company, and its subsidiary, is a
        provider of multimedia transactional technology solutions and services
        for the entertainment industry. The Company’s range of products
        and services include financial transaction platforms for on-line video
        games and integrated e-commerce transaction technology for on-line merchants.
        These services are considered as one segment only based on internal organizational
        structure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | These consolidated financial statements
        have been prepared using the generally accepted accounting principles
        applicable to a going concern which contemplates the realization of assets
        and the satisfaction of liabilities and commitments in the normal course
        of business. The Company has suffered recurring losses from operations
        and has a net capital deficiency. The ability of the Company to continue
        as a going concern is dependent upon many factors, including the ability
        of the Company to obtain financing to fund working capital requirements,
        the degree of competition encountered by the Company, technology risks,
        government regulation and general economic conditions. The Management’s
        plan in this regard is to raise equity financing as required and keep
        abreast with the multimedia technology. These consolidated financial statements
        do not include any adjustments that might result from this uncertainty.
|  
|   | In fiscal year 2003, the company completed
        a stock split, which five (5) new shares were exchanged for every one
        (1) old share. The consolidated financial statements have been restated
        to reflect the stock split.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|2. | Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

10

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|  
|   | (b)                                       
|  
|   |                                           
|  
|   | (c)                                       
|  
|   |                                           
|  
|   | (d)                                       
|  
|   |                                           
|  
|   | (e)                                       
|  
|   |                                           

|Audio and visual equipment     | 20% declining-balance basis
|------------------------------ | ---------------------------
|Computer hardware              | 30% declining-balance basis
|Computer software              | 50% declining-balance basis
|Office furniture and equipment | 20% declining-balance basis
|Leasehold improvements         | 20% straight-line basis    

11

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|  
|   | (f)                                       
|  
|   |                                           
|  
|   | (g)                                       
|  
|   |                                           
|  
|   | (h)                                       
|  
|   |                                           
|  
|   | (i)                                       
|  
|   |                                           
|  
|   | (j)                                       
|  
|   |                                           

12

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|  
|   | (k)                                       
|  
|   |                                           
|  
|   | (l)                                       
|  
|   |                                           
|  
|   |                                           
|  
|   |                                           
|  
|   | (m)                                       
|  
|   |                                           

13

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|  
|   |                                           
|  
|   | (n)                                       
|  
|   |                                           
|  
|   | (o)                                       
|  
|   |                                           
|  
|   | (p)                                       
|  
|   |                                           

14

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Significant Accounting Policies(continued)
|-- | ------------------------------------------
|  
|   | (q)                                       
|  
|   |                                           
|  
|   |                                           
|  
|   |                                           
|  
|   |                                           

15

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Significant Accounting
        Policies(continued)
|-- | --------------------------------------------------
|  
|   |                                                   
|  
|   |                                                   
|  
|3. | Investment in equity
        method investee      
|  
|   |                                                   
|  
|   |                                                   

16

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | Fixed assets
|-- | ------------

| |                                |   | March 31, 2005   
| | ------------------------------ | - | -----------------
| |                                |   |                  
| |                                |   | Cost             
| |                                |   |                  
| | Audio and visual equipment     | $ | 21,558           
| | Computer hardware              |   | 96,864           
| | Computer software              |   | 3,088            
| | Office furniture and equipment |   | 9,227            
| |                                |   |                  
| | Total                          | $ | 130,737          
| |                                |   |                  
| |                                |   |                  
| |                                |   | December 31, 2004
| |                                |   |                  
| |                                |   | Cost             
| |                                |   |                  
| | Audio and visual equipment     | $ | 21,558           
| | Computer hardware              |   | 96,864           
| | Computer software              |   | 3,088            
| | Office furniture and equipment |   | 9,227            
| |                                |   |                  
| | Total                          | $ | 130,737          

|   | For the three months ended March 31, 2005, depreciation
        expenses charged to cost of service, software development costs and general
        and administrative expenses were $3,827 (2004 - $5,186).                                                                                                                                                                                      
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|5. | Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   | On May 21, 2002, the Company terminated the software
        development agreement and a software licensing, technical support and
        operation of customer service and data centre agreement with a related
        company (related by a common director) was terminated. As at that date
        $240,000 license fees were billed with $200,000 remaining unpaid
        at May 21, 2002.
|  
|   | In satisfaction of this unpaid amount and in consideration
        of terminating the agreement the related company assigned all right, title
        and interest in:                                                                                                                                                                                                                            
|  
|   | the Skill-Bingo Patents and the Skill-Bingo Inventions
        purchased from FYRC Inc.                                                                                                                                                                                                                                                                                                           
|  
|   | The above has been collectively recorded as intellectual
        property with an expected useful life of 5 years.                                                                                                                                                                                                                                                                                

17

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | Intangible Assets (continued)
      the Skill-Bingo game software 
        the website located at http://www.bigrbingo.com
        the trademark “BiG’rBingo” 
        the BiG’rBingo customer deposits
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | The changes in the carrying amount of intellectual property as follows:                                                                                                                                

| |                            |   | 2005    |   |   | 2004    |  
| | -------------------------- | - | ------- | - | - | ------- | -
| |                            |   |         |   |   |         |  
| | Balance, beginning of year | $ | 57,833  |   | $ | 86,749  |  
| |                            |   |         |   |   |         |  
| | Accumulated amortization   |   | ( 7,229 | ) |   | (28,916 | )
| |                            |   |         |   |   |         |  
| | Balance, end of year       | $ | 50,604  |   | $ | 57,833  |  

|6. | Loans
|-- | -----
|   |      
|   | (a)  

| |       |                                                       |           | March 31  |   |           | December 31
| | ----- | ----------------------------------------------------- | --------- | --------- | - | --------- | -----------
| |       |                                                       |           | 2005      |   |           | 2004       
| | i.    | Interest bearing and unsecured at 5% per
      annum: |           |           |   |           |            
| | -     | Andrea Carley – an officer                            | $         | 35,030    |   | $         | 25,156     
| | -     | Mitch White – a director and stockholder              |           | 1,056,757 |   |           | 1,054,726  
| | -     | Gordon Samson – a director                            |           | 76,822    |   |           | 104,457    
| | -     | Patrick Smyth – a director                            |           | 76,508    |   |           | 60,656     
| |       |                                                       |           |           |   |           |            
| | Total | $                                                     | 1,245,117 |           | $ | 1,244,995

| | (b) | Short term Loan
| | --- | ---------------

| |       |                                                     |        | March 31 |   |        | December 31
| | ----- | --------------------------------------------------- | ------ | -------- | - | ------ | -----------
| | i.    | Non-Interest bearing and unsecured                  |        | 2005     |   |        | 2004       
| |       |                                                     |        |          |   |        |            
| | -     | Jack Carley – related to a director and stockholder | $      | 44,625   |   | $      | 44,625     
| |       |                                                     |        |          |   |       
| | Total | $                                                   | 44,625 |          | $ | 44,625

| | (c) | Short-term Loan Related Party
| | --- | -----------------------------

| |       |                            |         | December 31 |   |         | December 31
| | ----- | -------------------------- | ------- | ----------- | - | ------- | -----------
| |       |                            |         | 2004        |   |         | 2003       
| |       |                            |         |             |   |         |            
| | i.    | Interest at 10% per annum: |         |             |   |         |            
| | -     | RedRuth Ventures           |         | 212,725     |   |         | 212,725    
| |       |                            |         |             |   |         |            
| | Total | $                          | 212,725 |             | $ | 212,725

18

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|   | (d)                                        | Convertible debenture                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |                                            | In connection with the standby equity distribution
        agreement as filed on March 1, 2004, the Company issued in January 2004
        to the Investor $125,000 of convertible debentures that are convertible
        into shares of common stock at a discounted market price. The convertible
        debentures are secured by all of Company’s assets, interest bearing
        at 5% per annum and matured two years from the date of issuance. The Company
        has the right to redeem the debenture upon 30 days notice for 120% of
        the amount plus accrued interest. Upon such redemption, the Company will
        issue the investor a warrant to purchase 50,000 shares of common stock
        at an exercise price of $0.036 per share for every $100,000 of
        debentures that were redeemed.
|  
|   |                                            | Upon the issuance of the notes, the net proceeds
        ($125,000) received were allocated between the liability and equity
        components of the notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |                                            | The outstanding amount as at March 31, 2005 is $0.00                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | (e)                                        | Promissory Notes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |                                            | On April 8, 2004 the Company executed a Promissory
        Note (the “Note”) with the Holder, Cornell Capital Partners,
        LP for $50,000.00. The Note is secured pursuant to the prior Security
        Agreement dated January 28, 2004 between the Holder and the Company. The
        Holder is entitled to interest at the rate of twenty four percent (24%)
        per annum or the highest permitted by applicable law, if lower.                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |                                            | On December 13, 2004 the Company executed a Promissory
        Note (2) (the “Note 2”) with the Holder, Cornell Capital Partners,
        LP for $50,000. An issuance of 50,000,000 common shares was also completed
        at that time in security. The Holder is entitled to interest at the rate
        of twelve per cent (12%) per annum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |                                            | Both notes (the “Note”) and (the “Note
        2”) were retired as at March 31, 2005. During the period new notes
        (the “Note 3”) for $125,000 and (the “Note 4”)
        for $250,000 were executed and funds advanced from Cornell Capital,
        LP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |                                            | As at March 31, 2005 outstanding amounts on (the
        “Note 3”) and (the “Note 4”) was $160,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|7. | Sale and License-back of Computer Software
|  
|   |                                            | On December 14, 2001, the Company sold computer software
        identified as Crediplay System to the sole director and a major stockholder
        and creditor of the Company for $3,000,000. The purchase price was
        settled by retiring $1,200,000 of debt owed to the purchaser and a
        promissory note for $1,800,000. The promissory note bears interest
        at 5% per annum with maturity on December 14, 2010. The promissory note
        is secured through a first priority lien and security interest in the
        Crediplay System and amount                                                                                                                                                                                                                                                  

19

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | due to Mr. Mitch White (the “Purchaser”)
        totalling $517,613 (2001 – nil). As at December 31, 2002 the
        present value of the promissory note is $1,585,034 after calculating
        at the discount of 7% and accruing interest at 5%. Interest receivable
        was calculated at 1,800,000 X 5% or $90,000. As at December 31, 2003,
        the present value of the promissory note is $1,605,986 after calculating
        at the discount of 7% and accruing interest at 5%. Interest receivable
        was calculated at $1,800,000 X 5% or $90,000.
      Pursuant to a Marketing, Development and Distribution
        Agreement entered into on the same date, the Crediplay System was licensed
        back to the Company for a term of 15 years. A licensing fee payable will
        be calculated on Gross Earnings derived from the Crediplay System as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2002         | Gross Earnings x 20%
|------------ | --------------------
|2003         | Gross Earnings x 17%
|2004         | Gross Earnings x 15%
|2005 to 2017 | Gross Earnings x 10%

| |  | As there have been only minor revenues since inception
        due to the lack of capitalization of the Company, the Promissory Note
        for $1.8 million (“the note”) was assigned to an affiliated
        company, Gaming Transactions Inc., after releasing the guarantee provided
        by the shareholder loan of Mitch White in consideration of twenty five
        (25) million shares of restricted stock of Gaming Transactions Inc., (“GGTS)
        a pink sheet issuer. As at December (Form 8-K filed December 13, 2004)
        this company was thinly traded and a deemed price of $0.075 per share
        was used. As no reductions have been made as contemplated in the agreements
        executed December 31, 2001 and filed on Edgar by Form 8-K on April 15,
        2002 a market asset was exchanged to ensure value to the Company.
      The development costs of the Crediplay System expended
        by the Company amounted to approximately $1,273,406 of which $778,348
        was expensed previously. Management of the Company has estimated the $3,000,000
        value based on the discounted future cash flow projection and the estimate
        provided by knowledgeable parties of the software.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20

---

|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | Sale and License-back of Computer Software(continued)                 
|-- | ----------------------------------------------------------------------
|   |                                                                       
|   | The gain on the sale of the Crediplay System is calculated as follows:

| |  |                                                   |   |           |  
| |  | ------------------------------------------------- | - | --------- | -
| |  | Sales price                                       |   |           |  
| |  |                                                   |   |           |  
| |  | Retirement
      of loan due to the purchaser     | $ | 1,200,000 |  
| |  | Present value of $1,800,000
      promissory note |   |           |  
| |  | discounted at 7% per annum                        |   | 1,565,452 |  
| |  |                                                   |   |           |  
| |  |                                                   |   | 2,765,452 |  
| |  |                                                   |   |           |  
| |  | Software development costs incurred in 2001       |   | (495,058  | )
| |  |                                                   |   |           |  
| |  | Deferred gain 2001                                | $ | 2,270,394 |  
| |  |                                                   |   |           |  
| |  | Recognized gain                                   |   | (71,842   | )
| |  |                                                   |   |           |  
| |  | Deferred gain 2002                                | $ | 2,198,552 |  
| |  |                                                   |   |           |  
| |  | Recognized gain in 2003                           |   | (16,040   | )
| |  |                                                   |   |           |  
| |  | Deferred gain in 2003                             | $ | 2,182,512 |  
| |  |                                                   |   |           |  
| |  | Recognized gain in 2004                           |   | (8,690    | )
| |  |                                                   |   |           |  
| |  | Deferred gain 2004                                |   | 2,173,822 |  
| |  |                                                   |   |           |  
| |  | Recognized gain in 2005                           |   | (135      | )
| |  |                                                   |   |           |  
| |  | Deferred gain 2005                                |   | 2,173,687 |  

|   | The deferred gain will continue to be
        amortized in proportion to the licensing fees payable over the term of
        the agreement.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------
|  
|8. | Stockholders’ Equity (Deficit)                                                                                                             
|  
|   | (a)                                                                                                                                        
|  
|   |                                                                                                                                            

21

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|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | Stockholders’ Equity (Deficit)(continued)                                                                                                                                                                                                                                                                                                             
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | (b)                                                                                                                                                                                                                                                                                                                                                   
|  
|   |                                                                                                                                                                                                                                                                                                                                                       
|  
|   |                                                                                                                                                                                                                                                                                                                                                       
|  
|   | (c)                                                                                                                                                                                                                                                                                                                                                   
|  
|   |                                                                                                                                                                                                                                                                                                                                                       
|  
|9. | Income Taxes                                                                                                                                                                                                                                                                                                                                          
|  
|   | As at March 31, 2005 the Company has non-capital
        losses and undepreciated capital cost of approximately $3,400,000
        and $80,000, respectively, which can be carried forward for tax purposes
        and are available to reduce taxable income of future years. The non-capital
        losses expire commencing in 2006 through 2010.
|  
|   | (a)                                                                                                                                                                                                                                                                                                                                                   

| |                                                                                       |   | 2005       |   |   | 2004     |  
| | ------------------------------------------------------------------------------------- | - | ---------- | - | - | -------- | -
| | Undepreciated capital cost of capital assets                                          |   |            |   |   |          |  
| | over their net book value                                                             | $ | 30,000     |   | $ | 19,000   |  
| | Estimated tax loss carryforward                                                       |   | 1,000,000  |   |   | 715,00   |  
| | Less: valuation allowance                                                             |   | (1,030,000 | ) |   | (734,000 | )
| |                                                                                       |   | -          |   |   | -        |  
| |                                                                                       |   |            |   |   |          |  
| | The valuation allowance reflects the realization
      of the tax assets is unlikely.

22

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|CYOP
        SYSTEMS INTERNATIONAL INCORPORATED
      Notes to Consolidated Financial Statements 
        For the three months ended March 31, 2005 and 2004 (Expressed in U.S. dollars)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | Related Party Transactions                                                                                         
|--- | -------------------------------------------------------------------------------------------------------------------
|   
|    | Related party transactions not disclosed
        elsewhere in the consolidated financial statements are as follows:
|   
|    | (a)                                                                                                                
|   
|    | (b)                                                                                                                
|   
|    |                                                                                                                    
|   
|11. | Geographic Information                                                                                             
|   
|    | All the Company’s operations and
        fixed assets are located in the United States.                            

23

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Item 2. MANAGEMENT'S
  DISCUSSION AND ANALYSIS

The following management's discussion and analysis of the
  Company should be read in conjunction with the financial statements and the
  related notes thereto included elsewhere in this quarterly report for the three
  months ended March 31, 2005. This quarterly report contains certain forward-looking
  statements and the Company's future operation results could differ materially
  from those discussed herein.

We were incorporated on October 29, 1999 under the laws of
  the State of Nevada as Triple 8 Development Corporation to engage in any lawful
  corporate purpose. We changed our name to CYOP Systems International Incorporated
  on October 30, 2000.

We have not been involved in any bankruptcy, receivership
  or similar proceedings.

We have been primarily focused on developing our product for
  market launch. Management has financed most of our operations to date. Management
  will continue to fund our operations through shareholders loans until our equity
  financing is closed. We will satisfy cash requirements solely from funds loaned
  by management or family and friends or private investors until this time. However,
  management is not under any contractual obligation to provide continued funding.
  We will spend approximately $1/2 million in the next 12 months to maintain
  current operations at our current expenditure rate; not including any marketing
  initiatives or expansion plans. Additional funds in the amount of $1.5 million
  will be expended for a complete launch of the Crediplay system including a full
  marketing budget. Executive and key personnel have executed management contracts
  and to ensure retention of executive and key personnel the Company will be paying
  fees and salaries or accruing them as necessary for 2005.

We anticipate contracting additional human resources as required
  during the next 12 months. We not expect to acquire physical assets or significant
  equipment in the next 12 months by leasing or purchasing in order to fulfill
  certain agreements . We will not be performing any significant research and
  development in the next 12 months as our pay for play software is complete and
  tested.

We launched our first pay-for-play online video game, Urban
  Mercenary in February 2001. In March 2001, the Company secured the Canadian
  Imperial Bank of Commerce as the Company's merchant account processor. Merchant
  processors now include Banner Bank.

In September 2002, we launched a suite of free and “pay
  for play” games including card, strategy, arcade, sports and multiplayer
  games, terminating our licensing contract with Bingo.com. These games are licensed
  from third-party’s and the company continues to talk to and discuss arrangements
  with third party game developers to ensure leading edge games are available
  on the proprietary site www.skillarcade.com for our members.

In order for our Company to expand it's operations and realize
  profits from pay for play online video gaming we are actively signing up affiliate
  company’s and pursuing strategic acquisitions and partnerships that bring
  internet traffic and more games to be integrated into our existing suite of
  games. Until we increase our Company's exposure and attract players to our website
  and/or complete strategic acquisitions and partnerships we cannot expect large
  volumes of players for our online pay for play video game. Revenues will be
  derived from licensing fees from third parties that already have an established
  community and significant traffic to their web sites and from ad-serving.

24

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Liquidity and Capital Resources

The Company does not yet have an adequate source of reliable,
  long-term revenue to fund operations. As a result, the Company is reliant on
  outside sources of capital funding. There can be no assurances that the Company
  will in the future achieve a consistent and reliable revenue stream adequate
  to support continued operations. The Company has secured a source of capital
  funding, as an equity funding with regulatory clearance of the SB-2 registration
  statement granted with the August 12, 2004 filing of the SB-2/A.

The Company had cash and cash equivalents of $143,465
  at March 31, 2005 and a working capital deficit of $(1,821,492) with the
  deficiency arising primarily from $1,502,467 in loans from directors and
  accrued compensation for executives, compared to a working capital deficit of
  ($1,370,949) at March 31, 2004 to satisfy requirements for operations for
  the same period ending March 31, 2004. This reflects the continued commitment
  by management with an increase of advancing shareholder loans to cover the cost
  of operations.

During the three month period ended March 31, 2005, the Company
  used cash of $251,107 in operating activities compared to using $191,871
  in the prior period ended March 31, 2004. This is a reflection of primarily
  three things; significant legal expenses and corporate finance fees incurred
  in connection with the equity financing being undertaken and consulting fees
  now being accrued if not paid.

Net cash provided by financing activities for the three month
  period ending March 31, 2005 was $375,122 for the period originating from
  common shares purchased by Cornell Capital, LP, a further promissory note from
  Cornell Capital, LP and settlement of their convertible debenture which compares
  to $191,340 in net cash provided to the Company for the same period in 2004.

Our future capital requirements will depend on a number of
  factors, including costs associated with development of our Web portal, the
  success and acceptance of our new games and the possible partnerships and/or
  acquisition of complementary businesses, products and technologies. We have
  sufficient cash and cash equivalents on hand to conduct our operations through
  the second quarter of 2005.

As disclosed herein the Company concluded an underwriting
  in the first quarter of 2004 with Cornell Capital LLP and the associated SB-2
  was filed on March 1, 2004 and as amended on May 6, 2004, June 22, 2004, and
  August 5, 11, 12 and 16, 2004 on Edgar.

The Company’s consolidated financial statements have
  been prepared on a continuing operation basis, which contemplates the realization
  of assets and the settlement of liabilities and commitments in the normal course
  of business.

Results of operations for the quarter ended March 31, 2005
  as compared to the quarter ended March 31, 2004.

Revenue

For the quarter ended March 31, 2005 the Company generated
  revenue of $2,670, from operations. The same quarter period ending March
  31, 2004 generated revenues of $11,590. Current revenues are now from a
  wide variety of affiliates and the company’s proprietary URL.

25

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Cost of Sales

Cost of Sales for the three-month period ended March 31, 2005
  was $8,075 and for the same three-month period ended March 31, 2004 $13,115
  all with various third parties marketing companies. This cost of sales is primarily
  sales and marketing expenses for co-brand advertising and keyword buys for our
  site and participation in trade shows.

We expect to continue to incur sales and marketing expenses
  to further our efforts to increase traffic to our Web portal and develop licensee
  opportunities with gaming portals. These costs will include commissions, salaries,
  advertising, and other promotional expenses intended to increase traffic to
  licensees and improve revenue and translation costs. There can be no assurances
  that these expenditures will result in increased traffic or significant new
  revenue sources.

General and Administrative expenses

General and administrative expenses consist primarily of,
  legal and audit professional fees, insurance and other general corporate and
  office expenses, for the three-month period ending March 31, 2005 of $70,404.
  General and administrative expenses decreased by $26,117 for the three-month
  period ended March 31, 2004 from $96,521 for the same period ended March
  31, 2004. This decrease is primarily due to cost cutting measures related to
  overhead.

We expect to continue to incur general and administrative
  expenses to support the business, and there can be no assurances that the Company
  will be able to generate sufficient revenue to cover these expenses. The Company
  will be relying on the equity financing to support the business.

Consultants Fees

Consultant fees consist of the company’s contract labour
  primarily hi-tech services and management. Of the total $876,732 expense
  in the period $783,000 is attributed to S-8 stock issuances from the 2005
  stock option plan as filed on February 24, 2005 on Form S-8. The balance is
  made of $38,500 accrued compensation and $55,200 in actual cash expenses.

Interest Expenses

Interest expenses of $33,342 is a reflection of accrued
  interest on shareholder and related party loans and compared to 2004 of $2,838
  is a materially higher expense. This is a reflection of interest expense being
  accrued on shareholder loans and related party loans at a market rate.

"CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
  OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical
  matters, the matters discussed in this Form 10-QSB are forward-looking statements
  based on current expectations and involve risks and uncertainties. Forward-looking
  statements include, but are not limited to, statements under the following heading:
  "Managements Discussion and Analysis or Plan of Operations" the timing and expected
  profitable results of sales and the need for additional financing.

26

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Item 3.Controls
  and Procedures

The Company maintains disclosure controls and procedures that
  are designed to ensure that information required to be disclosed in the Company's
  reports required to be filed under the Securities Exchange Act of 1934, as amended,
  is recorded, processed, summarized and reported within the time periods specified
  in the Securities and Exchange Commission's rules and forms, and that such information
  is accumulated and communicated to the Company's management, including its Chief
  Executive Officer and Chief Financial Officer, as appropriate, to allow timely
  decisions regarding required disclosure. In designing and evaluating the disclosure
  controls and procedures, management recognizes that any controls and procedures,
  no matter how well designed and operated, can provide only reasonable assurance
  of achieving the desired control objectives, and management is required to apply
  its judgment in evaluating the cost-benefit relationship of possible controls
  and procedures.

Within 90 days prior to the date of this report, the Company
  carried out an evaluation, under the supervision and with the participation
  of the Company's management, including the Company's Chief Executive Officer
  and the Company's Chief Financial Officer, of the effectiveness of the design
  and operation of the Company's disclosure controls and procedures. Based on
  the foregoing, the Company's Chief Executive Officer and Chief Financial Officer
  concluded that the Company's disclosure controls and procedures were effective.

There have been no significant changes in the Company's internal
  controls or in other factors that could significantly affect the internal controls
  subsequent to the date the Company completed its evaluation.

PART IIOTHER INFORMATION

|Item 1. | LEGAL PROCEEDINGS
      None                                          
|------- | ----------------------------------------------------------------------
|        |                                                                       
|Item 2. | CHANGES IN SECURITIES AND USE OF
        PROCEEDS
      None          
|        |                                                                       
|Item 3. | DEFAULTS UPON SENIOR SECURITIES
      None                            
|        |                                                                       
|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF
        SECURITY HOLDERS
      None
|        |                                                                       
|Item 5. | OTHER INFORMATION
      None                                          
|        |                                                                       
|Item 6. | EXHIBITS AND REPORTS ON FORM 8-K                                      

27

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| | (a) | Exhibits                                                                                                                                                             
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                      
| |     | Exhibit
        31.1 Rule 13(a) – 14(a)/15(d) – 14(a) Certification of Chief
        Executive Officer                                                               
| |     |                                                                                                                                                                      
| |     | Exhibit 31.2 Rule 13(a) –
      14(a)/15(d) – 14(a) Certification of Chief Financial Officer                                                                         
| |     |                                                                                                                                                                      
| |     | Exhibit
        32.1 Section 1350 Certification of Chief Executive Officer                                                                                           
| |     |                                                                                                                                                                      
| |     | Exhibit 32.2 Section 1350
      Certification of Chief Financial Officer                                                                                             
| |     |                                                                                                                                                                      
| | (b) | Reports on Form 8-K 
        On February 18, 2005 The Company filed a report on Form 8-K, Item 4 describing
        the change in auditors.                          
| |     |                                                                                                                                                                      
| | (c) | On March 8, 2005 
        The Company filed a report on Form 8-K, Item 5.02 describing the appointment
        of an independent director and audit committee member.

SIGNATURES

In accordance with the requirements of the Exchange Act, the
  registrant caused this report to be signed on its behalf by the undersigned,
  thereunto duly authorized.

|                      | CYOP SYSTEMS INTERNATIONAL INCORPORATED
|--------------------- | ---------------------------------------
|                      |                                        
|                      |                                        
|Dated: April 29, 2005 | Per:                                   
|                      |                                        

28

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