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

                                   FORM 10-KSB

               |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

     For the Fiscal Year Ended June 30, 2004 Commission File Number 0-24001

                               IQ BIOMETRIX, INC.
                 ----------------------------------------------
                 (Name of small business issuer in its charter)

                                    Delaware
         --------------------------------------------------------------
         (State or other jurisdiction of incorporation or organization)

                                   76-0552098
                      ------------------------------------
                      (I.R.S. Employer Identification No.)

                      39111 Paseo Padre Parkway, Suite 304
                            Fremont, California 94538
                                 (510) 795-2900
               ---------------------------------------------------
               (Address, including zip code, and telephone number,
                      including area code, of registrant's
                          principal executive offices)

               Securities registered pursuant to Section 12(b) of
                 the Act: NONE Securities registered pursuant to
                            Section 12(g) of the Act:

                               Title of Each Class
                          Common Stock, $.01 Par Value

Check whether the issuer (1) has filed all reports to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES |X| NO |_|

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. |_|

The issuer's revenues for the fiscal year ended June 30, 2004 were $269,724.

The aggregate market value of the voting stock held by non-affiliates of the
registrant on September 17, 2004 was approximately $16,651,646, based on the
closing price of such stock on such date. The number of shares outstanding of
the registrant's Common Stock, $.01 par value, as of September 17, 2004 was
25,333,057.

Transitional Small Business Disclosure format (Check one): YES |_|  NO |X|
<PAGE>

                                     PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES.

         In addition to historical information, this Annual Report on Form
10-KSB (Annual Report) contains predictions, estimates and other forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities and Exchange Act of 1934 that relate to future
events or our future financial performance. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by the forward-looking statements. These risks
and other factors include those listed under "Risk Factors" and elsewhere in
this Annual Report, and some of which we may not know. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue" or the negative of these terms or other
comparable terminology. In addition, these forward-looking statements include,
but are not limited to, statements regarding the following:

         * our belief that the FACES technology will help solve the growing need
for effective technology solutions to support law enforcement and homeland
security;

         * our belief that we have ample room to penetrate further the public
security/law enforcement agencies segment of the market;

         * our intention to compete vigorously in terms of price, product
features, product performance, ease of use, quality of support and service, and
company reputation;

         * our expectations regarding the sources from which we will finance our
operations;

         * our expectations regarding the amount of funds we will need in the
future;

         * our expectations regarding the focus of our revenue generation
efforts on our existing customers;

         * our expectations regarding the amount of additional development
expenses needed to pursue our research and development strategy;

         * our expectations regarding the timing of the rollout, release or
public availability of any products of ours now or hereafter under development;

         * our expectations regarding our receipt of revenues from training
users of our products;

         * our intentions and expectations regarding the future availability of
now undeterminable revenue opportunities arising out of our technology;

         * our intentions regarding the protection of our proprietary
information;

         * our expectations and intentions regarding our ability to make
available the finest facial composite technology on the market;

         * our intentions regarding our marketing and sales efforts.

         These statements are only predictions and are subject to risks and
uncertainties, including the following:

         * our ability to obtain additional debt or equity financing at all or
on reasonable terms;

         * our ability to complete the proposed merger with Wherify Wireless,
Inc; * the availability and timely distribution of governmental funding;

         * our ability to introduce and gain customer acceptance of new products
on a timely basis;

         * risks associated with the potential integration of additional
operations, the extent of management time and attention required and related
costs and expenses associated with the proposed merger with Wherify;
<PAGE>

         * the difficulty of forecasting revenues due to weakness and
uncertainties related to general economic conditions and overall demand within
our markets and among our current and prospective customers;

         * the failure to execute on our acquisition and partnering strategies
and our expansion into potential new markets, which may prevent achievement of
profitability in a timely manner;

         * our ability to introduce and gain customer acceptance of new products
on a timely basis;

         * the protection of our proprietary technology;

         * unforeseen development delays for new products that limit our ability
to generate revenues;

Overview

         IQB is a provider of facial composite software to federal, state and
local law enforcement agencies in the U.S. and worldwide. IQB's headquarters are
located at 39111 Paseo Padre Parkway, Suite 304, Fremont, CA 94538. IQB's
telephone number is (510) 795-2900. IQB's web site is
http://www.iqbiometrix.com. Information contained in IQB's web site shall not be
deemed to be a part of this annual report.

         IQB is the result of a merger of JVWeb, Inc., a Delaware corporation,
and IQ Biometrix California, Inc., a California corporation. JVWeb was
incorporated on October 28, 1997 in Delaware to pursue electronic commerce
opportunities. When JVWeb was unsuccessful in pursuing its business plan, JVWeb
discontinued its operations and began the active search for an appropriate
merger candidate in a transaction that would likely result in a change in the
control and management of JVWeb. JVWeb and IQ Biometrix were introduced by Eric
McAfee, who was a stockholder of CI Systems, a company whose assets were
acquired by IQ Biometrix California prior to the merger. Greg J. Micek was the
President and Chief Executive Officer of JVWeb and Greg J. Micek and Lewis Ball
were members of the Board of Directors of JVWeb.

         The FACES(TM) technology was initially developed in the mid-1990's by
Montreal-based entrepreneur Pierre Cote, the founder of InterQuest Inc., which
launched FACES(TM) version 1.0 in 1998. InterQuest subsequently filed for
bankruptcy in October 2000. In August 2001, another Canadian company acquired
the FACES(TM) technology out of the bankruptcy proceedings on a deferred payment
basis. When this acquirer was unable to raise funds to make the deferred
payments, it defaulted and filed for bankruptcy in September 2001. Pierre Cote
and other former InterQuest management and stockholders founded IQ Biometrix
California, Inc. and on March 22, 2002, IQ Biometrix California merged with and
into IQB Acquisition Corporation, a newly formed, wholly-owned Delaware
subsidiary of JVWeb and JVWeb changed its name to "IQ Biometrix, Inc."

         In a transaction valued at $22,109,277, IQB acquired ownership of all
of the right, title and interest in and to the FACES(TM) business and
intellectual property, including software, patents and trademarks, the FACES(TM)
library, inventory and other items. Because JVWeb had no significant assets or
operations at the time of the merger, the merger was treated for accounting
purposes as a "reverse merger." Although JVWeb was at the time a public company
that acquired all of the assets of IQB, for accounting purposes IQB was treated
as the acquirer and the public company henceforth.

      In connection with the merger, IQB:

      o     issued 12,854,231 shares of common stock of IQB to the IQ Biometrix
            California stockholders in exchange for all the issued shares of IQ
            Biometrix California; and

      o     assumed outstanding options obligating IQB to issue up to 1,738,160
            shares of IQB's common stock. Immediately after the merger, the
            former stockholders of IQ Biometrix California held approximately
            85.51% of IQB's outstanding common stock. No placement or other fees
            were paid in connection with the merger.

Industry Background

         The management of IQB believes that crime and homeland security remain
a major concern. Product-oriented solutions should therefore command a market
priority. There has been a surge of interest in technology that can help
identify suspects and provide front line support to fight crime and terrorism.
Among these technologies, facial composite and facial recognition technologies
are expected to be one of the fastest-growing segments of the biometric market
over the next two to three years.
<PAGE>

The IQ Biometrix Solution

         IQB's product FACES (TM) allows the user to create and re-create
billions of human faces. Facial features selected from a database are
automatically blended together to produce a photo-quality composite facial
image. The technology helps law enforcement agencies identify, track and
apprehend suspects.

         FACES automatically generates a unique alphanumeric "InterCode"TM, for
each image. IQB's InterCode(TM) algorithm is the digital imprint of the face, as
represented by the unique combination of facial features from IQB's proprietary
library. Every InterCode(TM) is unique with respect to a particular face, just
as fingerprints or DNA are to a particular person. The digital character of the
InterCode(TM) coding system and the small size of the code itself (less than 250
characters in length) allows the InterCode to be transmitted via any
telecommunications network (phone, fax, internet). It also gives law enforcement
agencies a more secure way to exchange facial composites relating to sensitive
investigations.

         The photo quality of FACES composites means that they can be used
effectively with facial recognition technology as a query to search image
databases and deliver possible matches for positive identification.

          FACES(TM) first gained public recognition through its use in the
capture of criminals by the highly-rated television series "America's Most
Wanted," and its subsequent endorsement by host John Walsh. The first time
FACES(TM) was used on the show it helped law enforcement capture a serial rapist
of young girls within 48 hours of the show's airing.

         IQB has entered into a nonbinding strategic alliance agreement with
SocialTech, Inc., a privately-held company and the developer of the TRAK
notification software system to integrate IQB's FACES(TM) technology with
SocialTech's TRAK system. "TRAK - Technology to Recover Abducted Kids," is a
computer software system that was originally designed to help law enforcement
agencies locate and recover abducted children. This system allows any police
officer to quickly and efficiently create high-resolution photo bulletins,
annotate them and share them electronically with other law enforcement
jurisdictions, the media, and the community, around the world in seconds. The
TRAK system is used by more than 1,400 police departments and is currently
implemented at all 600 police departments in the State of New Jersey. TRAK has
been used in a variety of cases, assisting law enforcement to communicate
important visual information. However, without FACES(TM) or a photo image from a
video camera or other source, the TRAK solution often is restricted to a general
description of the suspect, e.g. white male, 6' tall, brown hair. This
description is believed to be much less effective in identifying suspects than
the FACES(TM)composite image. Using TRAK with IQB's FACES(TM)product creates a
powerful tool for law enforcement agencies. To date, IQB has received no
revenues from its agreement with SocialTech.

         In July 2003, IQB launched FACES(TM) 4.0. IQB began an aggressive sales
and marketing campaign to extend the penetration of FACES(TM) in law
enforcement.

         On April 15, 2004, IQB and Wherify Wireless, Inc. jointly announced the
signing of a definitive agreement under which IQB and Wherify would merge. Under
the proposed transaction, IQB is currently expected to issue to Wherify
shareholders approximately 32 million newly issued shares of IQB common stock
and the shareholders of Wherify are currently expected to hold approximately 80%
of the combined company. The proposed transaction has been unanimously approved
by our board of directors and is subject to certain terms and conditions,
including approval by both the stockholders of IQB and the shareholders of
Wherify. Assuming completion of the transaction, for every share of Wherify
capital stock held as of the record date, each Wherify stockholder is currently
expected to receive approximately 4.5 shares of IQB common stock. If either
party terminates the proposed merger under circumstances specified in the merger
agreement the terminating party will be required to pay the other party a
termination fee of $500,000.

Strategy

         Our goal is to become a leader in the field of facial composite
software. We plan to achieve this goal through the implementation of the
following key strategies:

         * Maintain FACES(TM) as the leading facial composite software. One of
our strategies is to position FACES(TM) as a state-of-the-art, easy to use,
efficient product. Management believes that FACES(TM) represents a significant
leap forward in simplicity of design and usability, revolutionizing the process
of suspect identification. FACES(TM) can assist anti-terrorism, law enforcement,
security and public safety personnel to identify suspects and solve crimes, by
(i) developing accurate, photo-like composite images of suspects, (ii) giving
law enforcement and other personnel in multiple agencies the ability to exchange
composite images quickly and efficiently, and (iii) allowing the user to use
FACES(TM) with facial recognition technology to search photo databases and
retrieve possible matches.
<PAGE>

         * Build strong brand recognition: Our strategy is to develop, promote,
advertise and increase the brand equity and visibility of FACES(TM) through a
variety of marketing and promotional techniques using a variety of media and
conducting an ongoing public relations campaign. To help build strong brand
recognition and lay the foundation for sales of enhanced products developed in
the future, 150,000 copies of FACES(TM) 1.0 were donated to police departments
across North America in 1998 and 1999. This undertaking resulted in endorsements
from a number of major law enforcement organizations.

         * Develop new products: We intend to continue to develop and refine our
existing products, and to develop and commercialize additional products using
our technology and our facial image library. We also intend to expand our
product line through strategic acquisitions. For example, our proposed merger
with Wherify Wireless, Inc. will expand the combined company's product line and
allow the combined company to leverage its existing sales and distribution
channels to increase sales of all of its products.

         * Continue to seek valuable endorsements and recognition. FACES(TM) has
been endorsed by John Walsh, host of the Fox Network television series
"America's Most Wanted," which is viewed by 15 million people every week, and
"Americas Most Wanted" has adopted FACES(TM) as a crime-solving tool. We will
continue to seek endorsements from groups such as these.

         * Maintain a strong commitment to customer satisfaction: We understand
that, in order for IQB to be successful, our customers must be satisfied with
our products. We are committed to customer satisfaction throughout our
organization. In order to accomplish this, we intend to invest substantial time
and effort in testing our products and working closely with our customers to
quickly address any issues that arise. We will focus on providing our customers
with the technical assistance and capabilities required to ensure a satisfactory
experience with our products. Customers are currently able to access support,
via e-mail and telephone during normal business hours and we supplement our
telephone support with Web-based support services. IQB has also negotiated a
strategic relationship with a national law enforcement training organization to
provide training and certification to law enforcement personnel throughout the
U.S. and Canada. This program is designed to train FACES(TM) users in witness
interviewing techniques and advanced uses of the FACES(TM) technology, such as
age progression, creating virtual lineups and integrating composites with video
and photo enhancement technology, to produce more accurate composites and
maximize the potential of the FACES(TM) technology.

         * Continue to develop a strong network of strategic partners: We have
developed a number of formal and informal strategic relationships with persons
whose services are necessary to develop and implement our business strategy.

         * Expand sales and distribution channels: We intend to address a
broader market for our products by seeking to increase the number of
distributors of our products as well continuing our direct selling efforts.
Distributors will be chosen carefully, with regard to vertical and geographic
focus, as we diligently work with each distributor to generate sales. In
addition, we believe that international markets represent a significant
opportunity to increase the sales of our products and services, and we have
established an early marketing, sales and support presence in selected
international markets. When appropriate, we will implement localized versions of
our software. We expect that if our proposed merger with Wherify Wireless, Inc.
is consummated, it will allow the combined company to leverage its existing
sales and distribution channels to increase sales of all of its products.

         * Pursue incremental revenue opportunities: We intend to leverage
FACES(TM) to broaden our presence and develop additional revenue opportunities.
Future revenue opportunities are expected to grow out of our technology,
although the exact nature of these can not now be determined.

         * Attract and retain exceptional employees: We believe that versatile
and experienced employees provide significant advantages in the rapidly evolving
market in which we will compete. We are committed to building a talented
employee base and to attracting an experienced management team.
<PAGE>

Products

         FACES(TM) is a software technology that allows operators to develop
accurate, photo-like facial composite images. Its interface is designed as a
series of easy-to-use menus: no previous forensic art training or experience is
required. The FACES(TM) database includes thousands of facial features that can
be selected with the click of a mouse. The features are automatically blended
together to provide facial images of either gender and any race, from juvenile
to elderly. A unique alphanumeric ID code is generated for each facial image
which can be transmitted over any telecommunications channel (telephone, email,
radio and fax). When the code is entered into the receiver's FACES(TM) system it
recreates the composite, exact in every detail. At less than 1KB in size, the
code is ideal for wireless transmission; it also provides police agencies with
additional security when exchanging suspect images relating to sensitive
investigations. FACES(TM) is both PC and Mac-compatible and can be run on any
standard desktop or portable computer. About 700 MB of space is needed on a
system's hard drive to install FACES(TM), or the software can be run directly
from the CD-ROM drive.

FACES 4.0 Version

         FACES(TM) 4.0, launched in July 2003, provided several important
advancements from prior versions. The FACES(TM) database was expanded to 4,400
features, including new African American, Latino and Asian features. Facial
markings such as scars and tattoos have been added as well as ability to choose
between light, medium and dark hair components. Positioning and sizing tools
were enhanced to allow the facial composite images to be fine tuned. Composites
can be exported in JPEG format to provide further refinement through standard
graphics programs, and to incorporate into police bulletins and notifications.
FACES(TM) 4.0 is available in single, multi license and network license
versions, and can be operated in English, Spanish and French.

FACES 4.0 Support, Maintenance and Training

         Purchasers of FACES(TM) 4.0 are entitled to free technical assistance
for 90 days by trained personnel either by phone or email. Detailed product FAQs
and composite tips and techniques are available through the IQB website. In
February 2003, IQB introduced an annual maintenance program that extends the
initial technical assistance period to 12 months, and provides free software
upgrades during the maintenance period.

         In November 2003, IQB joined with CTS Associates of Patchogue, New York
to develop a one day course for investigators on the use of FACES(TM). The
course covers both basic FACES(TM) operation and the use of advanced features
such as age progression. In addition, the course teaches the participant how to
use FACES(TM) effectively in criminal investigations, how to integrate facial
composites with video and photo enhancement technologies, interviewing
techniques to build facial composites, and legal and evidentiary issues relating
to facial composite evidence. The training is designed to maximize the potential
of FACES(TM). IQB now offers both scheduled and customized on-site training
sessions.

FACES 4.0 EDU

         FACES(TM) 4.0 EDU version, designed specifically for classroom use, was
launched in May 2004. It is designed to respond to the growing interest in using
forensic content to teach basic sciences at the middle and high school level.
The product gives students hands-on experience in how suspect composites - like
DNA, fingerprint and other evidence - are used to solve crimes. FACES(TM) 4.0
EDU can be used to teach observational skills that can be critical in increasing
personal awareness and safety.

         Shortly after the launch of FACES(TM) 4.0 EDU, IQB began collaborating
with Ward's Natural Science to use FACES(TM) as a foundation for forensic kits
for the educational market. Ward's, established in 1862 and based in Rochester,
New York, is a leading manufacturer and distributor of science education
materials for middle, high school and college classes, carrying more than 17,000
products. Ward's is a division of VWR International, a worldwide distributor of
scientific equipment to industrial, government, life science, education,
electronics and pharmaceutical markets.

         A non-binding letter of intent for a proof of concept phase for the
forensic kits was signed in September 2004. The forensic kits will include
FACES(TM) EDU technology, as well as examples of other advanced criminal
investigation technologies and activities, and detailed teacher's resources. As
part of the proof of concept, Ward's will purchase 10,000 copies of FACES(TM)
EDU.
<PAGE>

FACES Integrated Solutions

         Due to its flexible architecture, FACES(TM) has already been
successfully integrated with other key law enforcement and security
technologies. For example, FACES is integrated with the TRAK software solution
from SocialTech -- used by 1400 police departments in the U.S. as part of their
Amber Alert protocols - whereby FACES(TM) composite images can be imported into
template alert bulletins. FACES(TM) is also included in the Video Analyst System
(VAS) provided by Intergraph Solutions Group. VAS is a graphics workstation with
tools to capture, analyze, enhance and edit video surveillance, incorporating
NASA-developed Video Image Stabilization and Registration (VISAR) technology.
Using FACES(TM) with the VAS workstation allows facial composites to be
developed from enhanced video images to further define facial evidence and
assist in identification.

         FACES(TM) has also been integrated with FACE Plus technology from
Dataworks Plus to allow police departments to enroll facial composite evidence
in mugshot database systems, and to use facial composites as a query to search
databases and return possible matches. The matched images can provide a virtual
line up for positive identification by witnesses.

Product Development, Packaging And Fulfillment

         To date, IQB's products have been developed primarily through the use
of outside contractors. On May 31, 2002, IQB entered into an agreement with
Entreprise Cogniscience, Inc., a privately-held software development company, to
develop FACES(TM) 4.0. Product documentation is generally created internally.
IQB believes that a crucial factor in the success of a new product is getting it
to market quickly to respond to new user needs or advances in hardware, without
compromising product quality. IQB strives to maintain its relationship with its
customers so that it can become informed at the earliest possible time about
changing usage patterns and hardware advances that may affect software design.

         Entreprise Cogniscience used a proprietary environment based on LISP to
develop IQB's software. If IQB were to bring the software development in-house
or if its relationship with Entreprise Cogniscience were otherwise to terminate,
IQB would need to port its source code to a new development environment, which
may cause it to experience delays in future product releases, enhancements and
upgrades, as well as higher than expected error and defect rates, all of which
could have an adverse effect on its business, results of operations and
financial condition. IQB is not dependent on any other third party products or
technology. IQB spent approximately $147,000 and $172,000 on research and
product development related expenses for the years ended June 30, 2003 and 2004
respectively.

         IQB out sources the packaging of its product, which consists of
transferring FACES(TM) onto compact discs ("CDs"), quality control testing and
printing the CDs and manuals, to Stephen Gould Corporation in Sacramento, CA.
There are a number of software packaging companies that are available in the
event IQB's current vendor becomes unavailable. IQB has multiple sources for
CD's. Quality control tests are selectively performed on finished products. IQB
also out sources its product fulfillment to OnFulfillment Inc. in Newark, CA,
which stores inventory, packages and ships orders.

         IQB presently manages its product fulfillment, information processing,
vendor management, logistics services, licensing, and related supporting
functions from its Fremont, California office.

New Product Development

         IQB is actively involved in the development of new products. However,
any new products that IQB develops may not be released on the anticipated
schedule, and they may not achieve market acceptance or adequately address the
changing needs of the marketplace on a timely basis, despite the dedication of
significant resources to the development of the products. Any such failure could
result in IQB's having little or no return on its investment of significant
resources, which could adversely affect IQB's business. The following is a
discussion of some of the products currently under development.

         IQB is developing FACES(TM) 5.0. It is currently contemplated that
FACES(TM) 5.0 will include improvements to the features database content and
schema, new tools to refine facial composites, additional export functions to
facilitate transmission of composite evidence and enhance integration of
FACES(TM) with database technologies, witness interview support, and new
delivery models.

         IQB has discontinued the development of FACES SEARCH, which was being
designed to be used with facial recognition technology as users are now able to
use FACES(TM) 4.0 with existing facial image databases and recognition
technologies. IQB is now focused on developing FACES(TM) SDK that is designed to
include a configurable interface to facilitate seamless integration of FACES(TM)
with such technologies, as well as extend the integration of FACES(TM) into
other applications such as computerized games.
<PAGE>

Marketing, Sales And Markets

Marketing

Our marketing strategy aims to penetrate strongly two target markets:

      o     Public security/law enforcement agencies; and
      o     Middle and high school and post secondary education

As a result of IQB's pending merger with Wherify Wireless, Inc., IQB's entry
into other markets, such as the private securities/businesses at risk, has been
de-emphasized. No significant resources are being applied to these activities
pending a re-evaluation of the opportunities.

Sales and Markets

Law Enforcement Market

         Investigators in federal, state and local law enforcement agencies in
the United States are currently the primary market for FACES(TM). According to
US Department of Justice statistics there were more than 17,000 such agencies in
the U.S. as of June 2000. To date, FACES technology has been sold to about 2,500
law enforcement agencies, including the FBI, CIA, Department of Defense,
Department of Homeland Security, US Navy, Royal Canadian Mounted Police, Los
Angeles Police Department, New York Police Department, Chicago Police
Department, Seattle Police Department, Miami Police Department, Orange County
(FL) Sheriff's Department, Atlanta Police Department, Baltimore Police
Department, Boston Police Department, California Highway Patrol, Cleveland
Police Department, Houston Police Department, Philadelphia Police Department and
San Diego Police Department. Thousands of other agencies received licenses for
earlier versions of FACES(TM) to establish product awareness.

         IQB believes that to date only a small portion of the law enforcement
market has been penetrated and substantial additional opportunity exists to
penetrate this market further. IQB believes that it is well positioned to
increase market share given the increasing reliance on and adoption of computer
technologies by law enforcement agencies, the superiority of FACES(TM) as a
facial composite technology, the fact that FACES(TM) can be integrated with
facial image databases, facial image recognition and other law enforcement
technology solutions, and competitive pricing, which provides both a competitive
entry price for small agencies and scaleable multi-license and network options
for larger organizations.

         IQB has identified several sales and marketing channels, which IQB has
used successfully to communicate the value of its technology in supporting
criminal investigations.

         IQB's website remains a key marketing tool, supported by search engine
advertising. IQB also uses paid content placement on other law enforcement
internet sites. IQB established an online store for FACES(TM) in February 2004
and provides a downloadable demonstration version of FACES(TM) 4.0.

         IQB uses a variety of media and public relations strategies to create
awareness of its products, including press releases articles in trade magazines
and other media, broadcast of FACES(TM) success stories and appearances by and
interviews with IQB personnel (including stockholder John Walsh) on television
and radio.

         Although advertising is an important component of IQB's marketing
strategy, IQB has primarily used other media and public relations strategies to
build brand awareness both because of its limited financial resources and
because of the additional credibility that editorial content has in its target
markets. IQB, however, intends to undertake selective advertising activities,
including direct mail advertising to law enforcement agencies, and selective
advertising in law enforcement and security publications.

         IQB has used law enforcement trade shows to profile FACES(TM)
technology and to provide product information and demonstration CDs, and plans
to expand this channel.
<PAGE>

         The most successful sales and marketing channel for FACES(TM) remains
direct telesales. IQB entered into an agreement with CTS Associates, a training
organization for law enforcement personnel, in September 2004 under which CTS
has agreed to establish a telesales team who will sell FACES(TM) in conjunction
with the sale of investigator training programs. The availability of facial
composite training has led directly to the sale of FACES(TM) to a number of
police departments and is expected to be a strong driver for FACES(TM) sales in
future. The agreement is for three months and CTS will be compensated on a
commission basis, based on their sales of the product. The arrangement will be
reviewed at the end of three months and potentially extended based on the
success of the current agreement.

         IQB is in the process of re-evaluating its domestic reseller channel
due to its increasing focus on multi license, network license, and combined
offerings of technology, training and maintenance. Domestic resellers to date
have largely been successful only in marketing single user license versions of
FACES(TM).

         IQB has also reevaluated its international reseller program in order to
focus on key regions. IQB has provided FACES(TM) product information to a number
of resellers in the Asia Pacific and Southeast Asia markets and are currently in
active discussions with two potential distribution partners in these areas. IQB
contemplates developing versions of FACES(TM) that contain region-specific
languages and facial features in connection with these distribution
relationships. IQB has established a reseller relationship in Canada
targeting Royal Canadian Mounted Police departments. IQB believes that its next
geographic area of focus will be South America.

Education Markets

         IQB is also seeking to develop a sales and distribution network in the
U.S. for FACES(TM) EDU product. IQB hopes to achieve this by entering into
reseller agreements with leading school science supply providers, as well as
resellers to community colleges, technical colleges, vocational schools and
universities of products for criminal justice related courses and preparation.
For example, IQB has launched a joint initiative with Ward's Natural Science,
under which Ward's has purchased 10,000 copies of FACES(TM) for inclusion in
forensic kits, which will be marketed through Ward's domestic sales channels,
including online and print catalogues, to an existing client base of more than
1,400,000 teachers. If this initiative is successful, IQB expects additional
sales to Ward's for international distribution leveraging Ward's international
distributorship covering more than 48 countries. IQB plans to develop four new
language versions of FACES(TM) EDU for international markets.

Intellectual Property

         IQB regards its technology, patent applications, service marks,
trademarks, trade dress, trade secrets, copyrights and similar intellectual
property as critical to its success, and relies on a combination of patent law,
trademark law, trade secret protection, copyrights law and confidentiality
and/or license agreements with its employees, customers, partners and others to
protect its proprietary rights. For example, IQB licenses its software pursuant
to shrink-wrap or signed license agreements, which impose certain restrictions
on licensees' ability to utilize the software. In addition, IQB pursues the
registration of its trademarks and logos in the United States and Canada, and
has received registrations of certain of its trademarks and logos in the United
States and Canada.

         IQB currently has two United States patent applications covering
"Method and apparatus for creating facial images" and "InterCode(TM)".
Conceivably IQB's patents may not be granted, or (if granted) may subsequently
be found invalid or unenforceable, or otherwise be successfully challenged.
Furthermore, any patent issued to IQB may not provide IQB with any competitive
advantages, IQB may not develop future proprietary products or technologies that
are patentable, and the patents of others may seriously limit IQB's ability to
do business.

         Despite IQB's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of IQB's products or to obtain and use
information that IQB regards as proprietary. Policing unauthorized use of IQB's
products is difficult, and while IQB is unable to determine the extent to which
piracy of IQB's software products has occurred or will hereafter occur, software
piracy can be expected to be a potential problem. In addition, effective patent,
trademark, service mark, copyright and trade secret protection may not be
available in every country in which IQB's products are sold. There can be no
assurance that the steps taken by IQB to protect its proprietary rights will be
adequate or that third parties will not infringe or misappropriate IQB's
technology, patent applications, trademarks, trade dress and similar proprietary
rights.
<PAGE>

         In addition, while IQB is not aware of its products, trademarks or
other proprietary rights infringing the proprietary rights of third parties,
there can be no assurance that other parties will not assert infringement claims
against IQB in the future based on current or future products. IQB may be
subject to legal proceedings and claims from time to time in the ordinary course
of its business, including claims of alleged infringement of the patents,
trademarks and other intellectual property rights of third parties by IQB and
its licensees. Such claims, even if not meritorious, could result in the
expenditure of significant financial and managerial resources. In addition,
parties making these claims may be able to obtain an injunction, which could
prevent IQB from selling its products in the United States or abroad. Any of
these results could harm IQB's business. IQB may increasingly be subject to
infringement claims as the number of products and competitors in IQB's industry
grow and functionalities of products overlap.

Competition

         The software industry is intensely competitive and subject to rapid
technological change. IQB's success will depend significantly on its ability to
adapt to a changing competitive environment, to develop more advanced products
more rapidly and less expensively than its competitors, and to educate potential
customers as to the benefits of its products relative to those of its
competitors. IQB's current competitors include:

      *     Identikit from Smith & Wesson
      *     Suspect ID from ImageWare
      *     COMPHOTOFIT +COLOR from Sirchie
      *     E-fit from Aspley
      *     Facette from Identi.net

         We believe that the principal competitive factors in its markets are
price, product features, product performance, ease of use, quality of support
and service, company reputation. We intend to compete vigorously in all of these
aspects. We believe that its product offering is superior to competing products
in terms of price, ease of use, depth and extent of data bank, and data transfer
capacity. Nevertheless, most of our current and potential competitors have
longer operating histories, greater brand recognition, larger customer bases and
significantly greater financial, marketing and other resources than we do. Such
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements or devote greater resources to the
development, promotion and sales of their products than we do. Also, most
current and potential competitors have greater name recognition. Some could
possess the ability to leverage significant installed customer bases. These
companies could integrate their software with their widely accepted products
which would result in a loss of market share for our company. Moreover, current
and potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing their ability to address the needs of our company's prospective
customers. Our company's current or future vendors may in the future establish
cooperative relationships with current or potential competitors of our company,
thereby limiting our ability to sell its products through particular
distribution channels. Accordingly, new competitors or alliances among current
and new competitors could emerge and rapidly gain significant market share. Such
competition could materially adversely affect our ability to sell its products.

         We expect additional competition as other established and emerging
companies enter into the facial composite software market and new products and
technologies are introduced. Our company's future and existing competitors could
introduce products with superior features, scalability and functionality at
lower prices than our company's products. Increased competition could result in
price reductions, fewer customer orders, reduced gross margins, longer sales
cycles and loss of market share, any of which would materially adversely affect
our company's business, operating results and financial condition. Our company
may not be able to compete successfully against current and future competitors,
and the failure to do so would result in our company's business being materially
and adversely affected.

Employees

         As of June 30, 2004, our company had four full-time employees and 8
actively engaged consultants and part-time employees for a total of 12 persons.
Although the competition for employees is at times intense due to market
conditions, our company does not now foresee problems in hiring additional
qualified employees to meet its labor needs. Our company's employees are not
covered by a collective bargaining agreement and relations with them are
considered to be good.
<PAGE>

Facilities

         We lease our principal executive offices at 39111 Paseo Padre Parkway,
Suite 304, Fremont CA 94538. We have no reason to believe that the landlord
under the lease has any intention to terminate or otherwise not renew such
lease. In addition, IQB believes that adequate, alternative premises could be
located if such lease were ever terminated or otherwise not renewed.

                                  RISK FACTORS

                     Risks Related to Our Financial Results

WE CURRENTLY LACK LIQUIDITY AND WE WILL NEED TO RAISE ADDITIONAL EQUITY OR DEBT
FINANCING TO FUND OUR OPERATIONS.

To date, we have had no meaningful revenues and there is a "Going Concern"
reservation in our auditor's opinion for the year ended June 30, 2004. We have
heretofore financed our business through the procurement of capital investments.
At June 30, 2004, we had cash, cash equivalents and short-term investments of
$6,800; our accounts payable were approximately $329,000; and we had accrued
expenses of approximately $229,000. In July and August 2004 we raised an
additional $225,000 through the issuance of convertible notes whose conversion
features will mirror the next round of financing, should we complete one. In the
future, in order to address our liquidity issues, we will seek additional debt
or equity financing. We currently do not have any credit arrangements. We may
not be able to obtain additional debt or equity financing. If successful in
raising additional financing, we may not be able to do so on terms that are not
excessively dilutive to existing stockholders or less costly than existing
sources of financing. Failure to secure additional financing in a timely manner
and on favorable terms in the future could have a material adverse impact on our
financial performance and stock price and require us to implement certain cost
reduction initiatives and curtail our operations.

In addition, any financing arrangement may have potentially adverse effects on
us or our stockholders. Debt financing (if available and undertaken) may involve
restrictions limiting our operating flexibility. Moreover, if we issue equity
securities to raise additional funds, the following results may occur:

      *     The percentage ownership of our existing stockholders will be
            reduced;
      *     Our stockholders may experience additional dilution in net book
            value per share;
      *     The new equity securities may have rights, preferences or privileges
            senior to those of the holders of our common stock.

We are seeking to increase our revenues by increasing sales of our existing
products through the expansion of our marketing program and our sales force. We
are also exploring the development of new products that are synergistic to our
existing business and actively seeking out acquisition and partnering prospects
that would complement our existing product offerings, augment our market
coverage, or enhance our technological capabilities. On April 15, 2004, IQB and
Wherify Wireless, Inc. jointly announced the signing of a definitive agreement
under which IQB and Wherify would merge. Under the proposed transaction, IQB
will issue approximately 32 million newly issued common stock of IQB and the
shareholders of Wherify will hold approximately 80% of the combined company. The
proposed transaction has been unanimously approved by our board of directors and
is subject to certain terms and conditions, including approval by both the
stockholders of IQB and the shareholders of Wherify. There can be no assurance
that we will be successful in increasing sales of our existing products,
developing or locating new products, or consummating any acquisitions or
partnering transactions. Even if we were able to develop or acquire new
products, there can be no assurance that sales of these new products would
result in increased revenues, in which case our business, results of operations
and financial condition would be materially and adversely affected. IQB has no
material commitments for capital expenditures and there are no anticipated
material capital expenditures that are reasonably expected to have a material
impact on IQB.

OUR LIMITED OPERATING HISTORY MAKES AN EVALUATION OF US AND OUR FUTURE EXTREMELY
DIFFICULT.

To date, we have generated very limited revenues from sales of our FACES(TM 4.0
product. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULT OF OPERATIONS" and "BUSINESS." We have limited meaningful historical
financial data upon which to plan future operating expenses. Given our extremely
limited revenues to date and our current limited cash resources, if our revenues
in any period are lower than we project, our business, results of operations and
financial condition would be materially and adversely affected. In addition, our
ability to forecast accurately our quarterly revenue and expenses is limited due
to a number of factors, including:

         * The fact that we currently derive substantially all of our revenues
from sales of our FACES (TM) software product and our expectation that we will
continue to derive substantially all of our revenues from this product for the
foreseeable future;

         * The market's limited acceptance of our product to date;

         * Our ability to develop and increase our customer base;

         * Our need to expand our distribution capability;

         * Our ability to implement and successfully execute our sales and
marketing strategy;

         * Our need to introduce new products and services to respond to
technological and competitive developments and customer needs;

         * Our ability to manage the growth we are seeking to realize;

         * Our ability to respond to competitive developments;

         * Our dependence on our current executive officers and key employees;

There can be no assurance that we can successfully address some or all of these
risks but our failure to do so could materially and adversely affect our
business, prospects, financial condition and results of operations.

WE HAVE A HISTORY OF LOSSES AND DO NOT KNOW WHEN WE MAY BECOME PROFITABLE OR IF
WE DO BECOME PROFITABLE WHETHER WE CAN SUSTAIN PROFITABILITY.

We have incurred net losses of $13,263,099 since inception. As of June 30, 2004,
we had an accumulated stockholder deficit of $2,385,591 and we expect to
continue to incur net losses for the foreseeable future. We also expect to incur
significant sales and marketing and general and administrative expenses. As a
result, we will need to generate increased revenues to achieve profitability
which we may be unable to do. To increase our revenues, we must increase sales
of our existing products and introduce new products that we have either
developed internally or acquired through other arrangements. While we believe we
can grow our revenues from our existing product through internal actions, the
rate of growth will most likely not allow us to achieve our breakeven quarterly
revenue level in a timely manner. Therefore, we continue to evaluate business
combinations and partnering arrangements in our core business areas that would
improve our market share position, increase our revenue, improve on our net loss
position and accelerate our ability to reach profitability. On April 15, 2004,
IQB and Wherify Wireless, Inc. jointly announced the signing of a definitive
agreement under which IQB and Wherify would merge. Under the proposed
transaction, IQB is currently expected to issue approximately 32 million newly
issued common stock of IQB and the shareholders of Wherify is currently expected
to hold approximately 80% of the combined company. The proposed transaction has
been unanimously approved by our board of directors and is subject to certain
terms and conditions, including approval by both the stockholders of IQB and the
shareholders of Wherify. Even if our merger with Wherify is completed or if we
complete an acquisition or enter into a partnering relationship that we believe
would improve our financial results, actual financial results could differ and
we could continue to incur net losses. Even if we achieve profitability, we may
not be able to sustain or increase profitability on a quarterly or annual basis.

FLUCTUATIONS IN OUR BUSINESS AND OPERATING RESULTS MAY MATERIALLY AND ADVERSELY
AFFECT THE TRADING PRICE OF OUR COMMON STOCK.

We expect that our operating results will fluctuate in the future due to a
number of factors many of which are outside of our control. These factors
include the following:

      *     The budget crisis experienced by local, state and federal law
            enforcement agencies;

      *     Budgetary cycles of governmental agencies;

      *     Overall demand for our products;
<PAGE>

      *     Our ability to attract new customers at a steady rate;

      *     The rate at which we or our competitors introduce new products, the
            rate at which these products acquire market acceptance and the cost
            required to develop these products;

      *     Technical defects in our products that could delay product shipments
            or increase the costs of introducing new products;

      *     Changes in the pricing of our products or those of our competitors;

      *     The amount and timing of capital expenditures and other costs
            relating to the expansion of our operations;

      *     Costs relating to our marketing programs and our business in
            general;

      *     General economic conditions.

Any of the foregoing factors may cause our operating expenses to be
disproportionately high or cause our revenue and operating results to fluctuate
causing our business, financial condition and operating results to be adversely
affected. In addition, to respond to changes in our competitive environment, we
may occasionally make certain decisions from which we may benefit in the long
run. However, in the short run, such decisions could materially and adversely
affect our quarterly results of operations and financial condition. Due to all
of the foregoing factors, in some future quarter our operating results may fall
below our expectations and those of our stockholders. In such event, the trading
price of our common stock could be materially adversely affected. Further, we
believe that period-to-period comparisons of our financial results may not be
very meaningful. Accordingly, you should not conclude that such comparisons
indicate future performance.

                          Risks Related to Our Business

OUR BUSINESS WILL NOT GROW UNLESS THE MARKET FOR BIOMETRIC SOLUTIONS EXPANDS
BOTH DOMESTICALLY AND INTERNATIONALLY.

Our revenues are derived from the sale of biometric products. Biometric
solutions have not gained widespread commercial acceptance. We cannot accurately
predict the future growth rate, if any, or the ultimate size of the biometric
technology market. The expansion of the market for our products and services
depends on a number of factors including without limitation:

      *     the cost, performance and reliability of our products and services
            and the products and services of competitors;

      *     customers' perception of the perceived benefit of biometric
            solutions;

      *     public perceptions of the intrusiveness of these solutions and the
            manner in which firms are using the information collected;

      *     proposed or enacted legislation related to privacy of information;

      *     customers' satisfaction with our products and services; and

      *     marketing efforts and publicity regarding these products and
            services.

IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND
PROSPECTIVE CUSTOMERS, OUR BUSINESS WILL BE SERIOUSLY HARMED.

We believe that our success will depend on the continued growth of our customer
base as well as the sale of new and enhanced products to our existing customers.
Over 150,000 licenses to pre-4.0 versions of our FACES(TM) product have been
distributed to law enforcement agencies in the United States. If we are to be
successful in generating sales from our existing customers, we will need to
convince them that our new products provide them with additional benefits. In
addition, our ability to attract new customers will depend on a variety of
factors, including the reliability and cost-effectiveness of our products and
our ability to effectively market our products. If we fail to generate repeat
and expanded business from our current and prospective customers, our operating
results will be seriously harmed.
<PAGE>

IF WE FAIL TO PROMOTE OUR BRAND NAME SUCCESSFULLY OR IF WE INCUR SIGNIFICANT
EXPENSES PROMOTING AND MAINTAINING OUR BRAND NAME, OUR BUSINESS COULD BE HARMED.

Due in part to the emerging nature of the market for our products and the
substantial resources available to some of our competitors, there may be a
limited time opportunity for us to achieve and maintain a significant market
share. Developing and maintaining awareness of our brand name is critical to
achieving widespread acceptance of our products. Furthermore, we believe that
the importance of brand recognition will increase as competition in the market
for products such as ours increases. Successfully promoting and positioning our
brand will depend largely on the effectiveness of our marketing efforts. To
attract and retain customers and to promote and maintain our brands in response
to competitive pressures, we may need to increase our marketing budget or
otherwise to increase substantially our financial commitment to creating and
maintaining brand loyalty among vendors and consumers. If we are unable for
financial reasons to increase our sales and marketing budget or if we are unable
to successfully promote our brand, our business will suffer.

OUR REVENUES ARE DEPENDENT UPON THE AVAILABILITY AND TIMELY DISTRIBUTION OF
GOVERNMENTAL FUNDING.

Many of our prospective customers are local, state and federal law enforcement
and other governmental and quasi-governmental agencies. The ability of these
prospective customers to purchase our products are heavily dependent on the
availability or continued availability of federal, state or local government
funds or grants and general tax funding, including funding by the Office of
Homeland Security. Such funding may not be approved or, if approved, it may not
be available for the purchase of our products or solutions, and even if such
funding is approved and available, such funds may be subject to termination at
any time at the sole discretion of the government body providing or receiving
such funds.

RAPID TECHNOLOGICAL CHANGE IN OUR MARKET COULD CAUSE OUR PRODUCTS TO BECOME
OBSOLETE OR REQUIRE US TO REDESIGN OUR PRODUCTS.

We expect that our market will be characterized by rapid technological change,
frequent new product introductions and enhancements, uncertain product life
cycles, changing customer demands and evolving industry standards, any of which
can render existing products obsolete. We believe that our future success will
depend in large part on our ability to develop new and effective products in a
timely manner and on a cost effective basis. As a result of the complexities
inherent in our product, major new products and product enhancements can require
long development and testing periods, which may result in significant delays in
the general availability of new releases or significant problems in the
implementation of new releases. In addition, if we or our competitors announce
or introduce new products our current or prospective customers may defer or
cancel purchases of our products, which could materially adversely affect our
business, operating results and financial condition. Our failure to develop
successfully, on a timely and cost effective basis, new products or new product
enhancements that respond to technological change, evolving industry standards
or customer requirements would have a material adverse affect on our business,
operating results and financial condition.

IF WE LOSE ANY KEY PERSONNEL, OR FAIL TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, WE MAY BE UNABLE TO CONTINUE DEVELOPING OUR BUSINESS AND PRODUCT
LINE.

The loss of the services of one or more of our key personnel could materially
adversely affect our business, operating results and financial condition. We
cannot guarantee that we will be able to retain our key personnel. Our future
success also depends on our continuing ability to attract, assimilate and retain
highly qualified sales, technical and managerial personnel. Competition for
these individuals is intense, and there can be no assurance that we can attract,
assimilate or retain necessary personnel in the future.

FAILURE TO EXPAND OUR SALES AND DISTRIBUTION CHANNELS AND MANAGE OUR SALES AND
DISTRIBUTION RELATIONSHIPS COULD SIGNIFICANTLY REDUCE OUR REVENUES.
<PAGE>

We sell our products through a small network of distributors and resellers. Our
success will depend on our ability to manage relationships with our existing
network of distributors and resellers and to expand our network of resellers and
distributors. The sale of our products by our distributors and resellers depends
on the effectiveness of their selling efforts and their ability to meet their
own responsibilities under agreements with customers in a timely manner. At
times, our distributors and resellers may also offer products of our competitors
and our agreements with them have no minimum purchase commitments. We cannot
assure you that we will be able to expand our distribution channels, manage our
distribution relationships successfully or that our distributors and resellers
will market and sell our products effectively. Our failure to manage
successfully our distribution relationships or the failure of our distributors
and resellers to sell our products could reduce our revenues and have a material
adverse effect on business, results of operations and financial conditions.

OUR FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED BY COMPETITION.

The market for our products is characterized by significant competition. Most of
our current and potential competitors have longer operating histories and
significantly greater financial, technical and marketing resources than we do.
We expect competition to intensify in the future as new companies enter the
market on a regular basis. There can be no assurance that existing or future
competitors will not develop or offer products that provide significant
performance, price or other advantages over those we offer. Such a development
could result in price reductions or displacement of our products, which could
materially adversely affect our business, results of operations and financial
condition.

IF THE USE OF OUR PRODUCTS IS DEEMED TO BE AN INVASION OF PERSONAL PRIVACY
RIGHTS OUR BUSINESS MAY SUFFER.

From time to time, biometric products such as ours have been the focus of
organizations and individuals seeking to curtail or eliminate the use of these
technologies on the grounds that these technologies may be used to diminish
personal privacy rights. In the event that such initiatives result in
restrictive legislation, the market for products such as ours may be adversely
affected.

IF WE GROW OUR BUSINESS AS PLANNED, WE MAY NOT BE ABLE TO MANAGE PROPERLY OUR
GROWTH, WHICH MAY IMPEDE OUR ABILITY TO ACHIEVE PROFITABILITY.

If we are successful in growing our business as we plan, our operations may
expand rapidly and significantly. If our merger with Wherify is completed our
growth rate could increase rapidly. Any rapid growth could put a significant
strain on our management, operational and financial resources. In order to
manage the growth of our operations, we will be required to expand existing
operations, to implement new operational, financial and inventory systems,
procedures and controls, including improvement of our financial and other
internal management systems, and to hire, train, manage and expand our employee
base. If we are unable to manage growth effectively, our business, results of
operations and financial condition will be materially adversely affected. In
addition, if we are successful in growing our business as we plan, we expect
operating expenses to increase, and as a result, we will need to generate
increased revenue to achieve and maintain profitability. In particular, as we
grow our business, we would incur additional costs and expenses related to:

      *     The expansion of our sales force and distribution channels;

      *     The expansion of our product and services offerings;

      *     Development of relationships with strategic business partners;

      *     The expansion of management and infrastructure;

      *     Brand development, marketing and other promotional activities.

Costs associated with these activities could delay our ability to achieve or
maintain profitability.

                    Risks Related to Developing Our Products

SUBSTANTIALLY ALL OF THE SOFTWARE DEVELOPMENT FOR OUR FACES(TM) 4.0 PRODUCT WAS
OUTSOURCED TO A THIRD PARTY. IF WE CONTINUE TO USE THIRD PARTY DEVELOPERS FOR
FUTURE PRODUCT RELEASES WE MAY IN THE FUTURE BE SUBJECT TO DELAYS IN PRODUCT
RELEASES, ENHANCEMENTS AND UPGRADES AS WELL AS QUALITY CONTROL ISSUES.
<PAGE>

We outsourced the development of our FACES(TM) 4.0 software to Entreprise
Cogniscience, Inc. an independent software developer. Although, FACES(TM) 4.0
was commercially released in 2003, we have discovered and we may continue to
discover errors and defects in FACES(TM) 4.0. The fact that we do not directly
control the development of our product subjects us to the risk that we may
experience delays in issuing error corrections or enhancements to our most
recent release. Recently, Entreprise Cogniscience was acquired by a third party.
While, the agreement between us and Entreprise Cogniscience is binding upon any
successor-in-interest to Entreprise Cogniscience, we cannot guarantee that the
acquirer will devote as many resources to fulfilling the agreement as Entreprise
Cogniscience did before the acquisition or that the quality of their work will
meet our specifications. If the successor-in-interest fails to devote as many
resources to our product or if the quality of their work does not meet our
specification, it could lead to delays in releasing any error corrections or bug
fixes. In addition, if we continue to use Entreprise Cogniscience or another
independent software developer to develop future releases or products, we may
experience delays in future product releases, enhancements and upgrades, as well
as difficulties in maintaining quality control which may lead to higher than
expected error and defect rates, all of which could have an adverse effect on
our business, results of operations and financial condition.

WE DEPEND ON THIRD-PARTY TECHNOLOGY FOR THE DEVELOPMENT OF OUR SOFTWARE. IF WE
WERE TO TERMINATE OUR RELATIONSHIP WITH SUCH THIRD PARTY PROVIDER, WE COULD
EXPERIENCE DELAYS IN FUTURE PRODUCT RELEASES AND IMPROVEMENTS.

Entreprise Cogniscience, the third party software developer that assisted us in
the development of FACES(TM) 4.0, used a proprietary environment based on LISP
to develop our software. If we were to bring our software development in-house
or if our relationship with Entreprise Cogniscience were otherwise to terminate,
we would need to port our source code to a new development environment, which
may cause us to experience delays in future product releases, enhancements and
upgrades, as well as higher than expected error and defect rates, all of which
could have an adverse effect on our business, results of operations and
financial condition.

OUR SOFTWARE PRODUCTS ARE COMPLEX AND MAY CONTAIN UNKNOWN DEFECTS THAT COULD
RESULT IN NUMEROUS ADVERSE CONSEQUENCES.

Complex software products such as ours often contain latent errors or defects,
particularly when first introduced, when new versions or enhancements are
released and when configured for a specific customer. We currently have
experienced errors and defects in our most recent release. However, there can be
no assurance that despite testing, defects and errors will not be found in
current versions, new versions or enhancements of our products after
commencement of commercial shipments, any of which could result in damage to our
reputation, the loss of sales, a diversion of our product development resources,
or a delay in market acceptance, and thereby materially adversely affecting our
business, operating results and financial condition. The computer hardware
environment is characterized by a wide variety of non-standard configurations
that make prerelease testing for programming or compatibility errors very
difficult and time consuming. Despite our testing, errors may still be
discovered in some new products or enhancements after the products or
enhancements are delivered to customers. Furthermore, there can be no assurance
that our products will meet all of the expectations and demands of our
customers. The failure of our products to perform to customer expectations could
give rise to warranty claims. Any of these claims, even if not meritorious,
could result in costly litigation or divert management's attention and
resources. We do not currently maintain any general liability insurance.
Although through our license agreements with customers we try to include
provisions designed to limit our exposure to potential claims, such limitation
of liability provisions may not be effective as a result of existing or future
laws or unfavorable judicial decisions.

WE OUTSOURCED THE PACKAGING OF OUR FACES(TM) 4.0 PRODUCT TO A SINGLE THIRD PARTY
CONTRACTOR. IF WE CONTINUE TO USE THIRD PARTIES FOR THE PACKAGING OF OUR
PRODUCTS, WE MAY EXPERIENCE IN THE FUTURE DELAYS OR DISRUPTIONS IN THE
DISTRIBUTION OF OUR PRODUCTS OR QUALITY CONTROL ISSUES.

We outsource the packaging of our products to a third party contractor.
Packaging consists of transferring our software onto compact discs, quality
control testing and packaging the CDs and manuals. Although to date, we have not
experienced any packaging delays or quality control issues, if we continue to
use a third party contractor to package our products, we may experience delays,
disruptions or quality control problems, which could result in delays in
shipments of our products to our customers, which would negatively affect our
revenues, competitive position and reputation.
<PAGE>

                   Risks Related to Our Intellectual Property

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY.

Our future success depends upon our proprietary technology. We are protecting
our proprietary information through the use of patent, copyright, trademark,
trade secret laws, confidentiality procedures and contractual provisions.
Notwithstanding our efforts to protect our proprietary technology, policing
unauthorized use or copying of our proprietary information is difficult,
unauthorized use or copying occurs from time to time, and litigation to enforce
intellectual property rights could result in significant costs and diversion of
resources. Any patents we obtain in the future may be circumvented, challenged,
invalidated or designed around by other companies. Despite our efforts, we may
be unable to prevent third parties from infringing upon or misappropriating our
intellectual property. Moreover, the laws of some foreign jurisdictions do not
afford the same degree of protection to our proprietary rights as do the laws of
the United States, and effective trademark, copyright, and trade secret
protection may not be available in every country in which our products are
distributed. Furthermore, our competitors may independently develop similar
technology that substantially limits the value of our intellectual property. Our
inability to protect adequately our intellectual property for these or other
reasons could materially and adversely affects our business, financial condition
and operating results.

In addition, third parties may at some point claim certain aspects of our
business infringe their intellectual property rights. While we are not currently
subject to nor are aware of any such claim, any future claim (with or without
merit) could result in one or more of the following:

      *     Significant litigation costs;

      *     Diversion of resources, including the attention of management;

      *     Our agreement to pay certain royalty and/or licensing fees; and

      *     Cessation of our rights to use, market, or distribute such
            technology.

Any of these developments could materially and adversely affect our business,
results of operations and financial condition. In the future, we may also need
to file lawsuits to enforce our intellectual property rights, to protect our
trade secrets, or to determine the validity and scope of the proprietary rights
of others. Whether successful or unsuccessful, such litigation could result in
substantial costs and diversion of resources. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.

                       Risks Related to the Merger

WHILE IQB'S SHARE PRICE HAS BEEN VOLATILE IN RECENT PERIODS, THE MERGER EXCHANGE
RATIO IS FIXED AND NO ADJUSTMENT TO THE EXCHANGE RATIO WILL BE MADE AS A RESULT
OF FLUCTUATIONS IN THE MARKET PRICES OF IQB'S COMMON STOCK.

      IQB's share price has been volatile in the past and may continue to be
volatile in the future. In fiscal 2004, the closing price of IQB common stock
ranged from $2.43 to $.93. Upon completion of the merger, each share of Wherify
capital stock will be converted into the right to receive approximately 4.5
shares of IQB common stock. The exchange ratio will not change even if the
market price of the IQB common stock fluctuates. In addition, neither party may
withdraw from the merger or resolicit the vote of its stockholders solely
because of changes in the market price of IQB common stock. Any reduction in
IQB's share price will result in Wherify stockholders receiving less current
value in the merger at closing. Conversely, any increase in IQB's share price
will result in Wherify stockholders receiving more current value in the merger
at closing. The specific dollar value of IQB common stock that Wherify
stockholders will receive upon completion of the merger will depend on the
market value of IQB common stock at that time.

IQB AND WHERIFY WILL FACE CHALLENGES WITH INTEGRATING THE TWO COMPANIES WHICH
COULD CAUSE THE COMBINED COMPANY TO INCUR SIGNIFICANT EXPENSES

The integration of IQB and Wherify could be a complex, time consuming and
expensive process. We must operate as a combined organization utilizing common
information and communication systems, operating procedures, financial controls
and human resources practices to be successful. We cannot guarantee that the two
companies will be successful in integrating the two companies in a timely manner
or that the combined companies will generate sufficient revenues or earnings to
recover our investment in, or expenses related to, these acquisitions or that
any synergies will develop. If we are not successful in integrating the two
companies or if expected earnings or synergies do not materialize, the combined
company could be forced to incur significant expenses as well as non-cash
charges to write-off acquired assets, which could seriously harm its financial
condition and operating results.
<PAGE>

THE MERGER COULD CAUSE IQB OR WHERIFY TO LOSE KEY PERSONNEL, WHICH COULD
MATERIALLY AFFECT THE COMBINED COMPANY'S BUSINESS AND REQUIRE THE COMPANIES TO
INCUR SUBSTANTIAL COSTS TO RECRUIT REPLACEMENTS FOR LOST PERSONNEL.

         As a result of the announcement of the merger agreement, current and
prospective IQB and Wherify employees could experience uncertainty about their
future roles within IQB. This uncertainty may adversely affect the ability of
the combined company to attract and retain key management, sales, marketing and
technical personnel. IQB and Wherify employees may be concerned about the
strategic focus and direction of the combined company, and seek to find
employment elsewhere. Any failure to attract and retain key personnel prior to
and after the consummation of the merger could have a material adverse effect on
the business of the combined company.

SOME OF IQB'S AND WHERIFY'S OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF
INTEREST THAT MAY INFLUENCE THEM TO SUPPORT OR APPROVE ADOPTION OF THE MERGER
AGREEMENT.

      Some officers and directors of IQB and Wherify participate in arrangements
that provide them with interests in the merger that are different from yours,
including, among others, the continued service as an officer or director of the
combined company, acceleration of stock and stock option vesting, retention and
severance benefits, continued indemnification and the potential ability to sell
an increased number of shares of the combined company due to acceleration of the
vesting periods for certain stock and stock options. These potential interests,
among others, may influence the officers and directors of IQB and Wherify to
support or approve adoption of the merger agreement.

FAILURE TO COMPLETE THE MERGER MAY RESULT IN IQB OR WHERIFY PAYING A TERMINATION
FEE TO THE OTHER PARTY AND COULD HARM THE TRADING PRICE OF IQB'S COMMON STOCK
AND IQB'S AND WHERIFY'S RESPECTIVE FUTURE BUSINESS AND OPERATIONS.

      If the merger is not completed, IQB and Wherify may be subject to the
following risks:

      o     If the merger agreement is terminated under specified circumstances,
            IQB will be required to pay Wherify a termination fee of $500,000;

      o     If the merger agreement is terminated under specified circumstances,
            Wherify will be required to pay IQB a termination fee of $500,000;

      o     The trading price of IQB common stock may decline;

      o     Costs related to the merger, such as legal, accounting and various
            financial advisory fees, must be paid even if the merger is not
            completed; and

      o     IQB and Wherify may be required to seek alternate sources of capital
            in the near term.

         In addition, if the merger agreement is terminated and either IQB's or
Wherify's board of directors determines to seek another merger or business
combination, there can be no assurance that IQB or Wherify will be able to find
a partner willing to pay an equivalent or more attractive price than the price
to be paid in the merger.

THE MERGER MAY BE COMPLETED EVEN THOUGH MATERIAL ADVERSE CHANGES MAY RESULT FROM
INDUSTRY-WIDE CHANGES AND OTHER CAUSES SUBSEQUENT TO THE ANNOUNCEMENT OF THE
MERGER AGREEMENT.

         In general, either party can refuse to complete the merger if there is
a material adverse change affecting the other party between April 14, 2004, and
the closing. However, some types of adverse changes, events, circumstances or
developments will not prevent the merger from going forward, even if they would
have a material adverse effect on IQB or Wherify, including adverse changes,
events, circumstances or developments resulting from:

      o     General economic conditions or conditions generally affecting the
            markets for each of IQB's products, except to the extent that IQB or
            Wherify is materially disproportionately affected;
<PAGE>

      o     The announcement or pendency of the merger or any other transactions
            contemplated by the merger agreement;

      o     Compliance with the express terms and conditions of the merger
            agreement;

      o     Any change in the stock price or trading volume of IQB or Wherify;

      o     Any change in accounting requirements or principles or any change in
            applicable laws, rules or regulations or the interpretation thereof;
            or

      o     The continued incurrence of losses by IQB or Wherify.

         If such adverse changes occur and the merger is completed, IQB's stock
price may suffer. This in turn may reduce the value of the merger to Wherify
stockholders.

ACCOUNTING RULES APPLICABLE TO THE COMBINED COMPANY COULD ADVERSELY AFFECT
VALUATION.

The name of the surviving entity of this business combination will be Wherify
Wireless, Inc. After the combination, the former stockholders of Wherify are
currently expected to own approximately 80% of the stock of the combined entity.
SEC accounting rules call this a "reverse merger" whereby the financial history
and fiscal year-end of Wherify continue as before except for the capital
structure, which legally becomes that of IQB. All prior financial history of IQ
Biometrix is erased. The approximate 20% of the combined entity remaining with
the IQB shareholders will be valued based upon the current stock price and all
tangible and intangible assets of IQB revalued to an amount equal to the product
of the stock price multiplied by the shares held by the former IQB stockholders
plus IQB's total liabilities. The excess of IQB's total valuation less
identifiable assets and liabilities will be accounted for as goodwill.

The goodwill and any identifiable intangibles recorded in the merger transaction
is reviewed annually and must be written down to its estimated fair value based
on management's view of the present value of future estimated cash flows. Should
IQB's products not prove successful in the marketplace, the value of these
products may be impaired, which will materially and adversely affect the
operating results of the combined company.

                    Risks Related to Our Corporate Governance

OUR AUTHORIZED PREFERRED STOCK EXPOSES STOCKHOLDERS TO CERTAIN RISKS.

Our Certificate of Incorporation authorizes the issuance of up to 10,000,000
shares of preferred stock, par value $.01 per share. No shares of preferred
stock have been issued to date. The authorized preferred stock constitutes what
is commonly referred to as "blank check" preferred stock. This type of preferred
stock allows the Board of Directors to divide the preferred stock into series,
to designate each series, to fix and determine separately for each series any
one or more relative rights and preferences and to issue shares of any series
without further stockholder approval. Preferred stock authorized in series
allows our Board of Directors to hinder or discourage an attempt to gain control
of IQB by a merger, tender offer at a control premium price, proxy contest or
otherwise. Consequently, the preferred stock could entrench our management. In
addition, the market price of our common stock could be materially and adversely
affected by the existence of the preferred stock.

OUR COMMON STOCK HAS A LIMITED AND VOLATILE TRADING HISTORY.

Our common stock trades in the United States on the Over-the-Counter Electronic
Bulletin Board (OTCBB). The number of shares traded daily has been extremely
limited and the prices at which our common stock has traded have fluctuated
fairly widely. See "PRICE RANGE OF COMMON STOCK." There can be no assurance as
to the prices at which our common stock will trade in the future, although they
may continue to fluctuate significantly. Prices for our common stock will be
determined in the marketplace and may be influenced by many factors, including
the following:

      *     The depth and liquidity of the markets for our common stock;

      *     Investor perception of us and the industry in which we operate;
<PAGE>

      *     General economic and market conditions; and

      *     The effect that of any of the events highlighted in these Risk
            Factors may have on our business should they occur.

WE HAVE THE ABILITY AND THE OBLIGATION TO ISSUE ADDITIONAL SHARES OF COMMON
STOCK IN THE FUTURE, AND SUCH FUTURE ISSUANCE MAY MATERIALLY ADVERSELY AFFECT
STOCKHOLDERS.

We have various abilities and obligations to issue additional shares of common
stock in the future. These abilities and obligations include the following:

      *     Approximately 236,000 registered shares of our common stock are
            available as of August 31, 2004 for issuance to outside consultants
            to compensate them for services provided;

      *     Options to purchase approximately 2,936,000 shares of our common
            stock were outstanding as of August 31, 2004;

      *     Warrants to purchase approximately 2,946,000 shares of common stock
            were outstanding as of August 31, 2004;

      *     Debentures, convertible into 5,105,464 shares of common stock had
            been issued as of August 31, 2004

The options and warrants described above permit the holders to purchase shares
of common stock at specified prices. These purchase prices may be less than the
then current market price of our common stock. Any shares of common stock issued
pursuant to these options or warrants (or the convertible debentures described
above) would further dilute the percentage ownership of existing stockholders.
The terms on which we could obtain additional capital during the life of these
options, warrants or convertible debentures may be adversely affected because of
such potential dilution. Finally, we may issue additional shares in the future
other than as listed above. There are no preemptive rights in connection with
our common stock. Thus, the percentage ownership of existing stockholders may be
diluted if we issue additional shares in the future. For issuances of shares and
grants of options to consultants, our Board of Directors will determine the
timing and size of the issuances and grants, and the consideration or services
required thereof. Our Board of Directors intends to use its reasonable business
judgment to fulfill its fiduciary obligations to our then existing stockholders
in connection with any such issuance or grant. Nonetheless, future issuances of
additional shares could cause immediate and substantial dilution to the net
tangible book value of shares of common stock issued and outstanding immediately
before such transaction. Any future decrease in the net tangible book value of
such issued and outstanding shares could materially and adversely affect the
market value of the shares.

THE TRADING PRICE OF OUR COMMON STOCK ENTAILS ADDITIONAL REGULATORY
REQUIREMENTS, WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE.

The trading price of our common stock is currently below $5.00 per share. As a
result of this price level, trading in our common stock is subject to the
requirements of certain rules promulgated under the Securities Exchange Act of
1934. These rules require additional disclosure by broker dealers in connection
with any trades generally involving any non-NASDAQ equity security that has a
market price of less than $5.00 per share, subject to certain exceptions. Such
rules require the delivery, before any "penny stock" transaction, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker dealers who
sell penny stocks to persons other than established customers and accredited
investors (generally institutions). For these types of transactions, the
broker-dealer must determine the suitability of the penny stock for the
purchaser and receive the purchaser's written consent to the transaction before
sale. The additional burdens imposed upon broker dealers by such requirements
may discourage broker-dealers from effecting transactions in our common stock
affected. As a consequence, the market liquidity of our common stock could be
severely limited by these regulatory requirements.

STOCKHOLDERS HAVE NO GUARANTEE OF DIVIDENDS.

The holders of our common stock are entitled to receive dividends when, as and
if declared by the Board of Directors out of funds legally available therefore.
To date, we have not declared nor paid any cash dividends. The Board of
Directors does not intend to declare any dividends in the foreseeable future,
but instead intends to retain all earnings, if any, for use in our business
operations.
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

None.

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

None.
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
        AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.

IQB's common stock is traded on the OTC Bulletin Board under the symbol
"IQBM.OB". As of August 31, 2004, IQB had 179 holders of record. Presented below
is the high and low bid information of our common stock for the periods
indicated. The source of the following information is MSN Money. These
quotations reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.

                                                          High              Low
                                                        -------           ------

Fiscal year ending June 30, 2004:

Fourth Quarter                                              $2.40          $0.92

Third Quarter                                               $2.47          $1.11

Second Quarter                                              $1.44          $0.80

First Quarter                                               $1.46          $0.55

Fiscal year ending June 30, 2003:

Fourth Quarter                                              $1.56          $0.55

Third Quarter                                               $1.07          $0.20

Second Quarter                                              $0.90          $0.20

First Quarter                                               $0.95          $0.51

IQB has never paid cash dividends, and has no intentions of paying cash
dividends in the foreseeable future.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

General

         IQ Biometrix, Inc. is a provider of security software and services
primarily to law enforcement agencies and the security industry, headquartered
in Fremont, California. IQ Biometrix markets, distributes and sells a facial
composite software tool called FACES(TM) to federal, state and local law
enforcement agencies and the security industry in the United States and abroad.

         In July 2003, we launched FACES(TM) 4.0 and during fiscal year 2004 we
derived substantially all of our revenues from sales of our FACES(TM) 4.0
product. FACES(TM) 4.0 contains significant enhancements and new features over
FACES(TM) 3.0, including the ability to use the TRAK service offered by Social
Tech, Inc., which allows any police officer to create high-resolution photo
bulletins and share them electronically with other law enforcement
jurisdictions, the media, and the community where appropriate. Revenues in
fiscal year 2003 and 2004 were derived from a diverse customer base sold mainly
in units of 1 to 50. No customer was responsible for more than 2% of revenues
and 60% of our revenues came from sales to new customers.

<PAGE>

         We market and sell our products both directly through our own sales
force as well as indirectly through resellers and distributors in the United
States. To date, most of our sales have been in North America; however, we
recently began to seek relationships with international distributors and
resellers to sell our products internationally.

         Cost of revenues currently consists of inventory, shipping and
packaging costs of product which is or will be shipped to customers.

         Sales and marketing expenses consist primarily of salaries, commissions
and related expenses for personnel engaged in marketing, sales and customer
support, as well as costs associated with promotional activities and travel
expenses. We are currently seeking ways to increase market awareness and to
increase sales of our products. Although, we cannot be certain that any
increased expenditures will result in higher revenues, we believe that continued
investment in sales and marketing is critical to our success and expect these
expenses to increase in absolute dollars in the future.

         General and administrative expenses consist primarily of salaries and
related expenses for executive, finance, legal, accounting, information
technology, facilities, and human resources personnel. We expect these expenses
to increase as we continue to add personnel and incur additional costs related
to the growth of our business and our operations as a public company. In
addition for the fiscal year ended June 30, 2004, general and administrative
expenses included the issuance of approximately 3.7 million shares of our common
stock to consultants and other service providers.

         Research and development expenses consist primarily of salaries and
related personnel expenses, fees paid to consultants and outside service
providers, and other expenses related to the design, development, testing and
enhancements of our products. We expense our research and development costs as
they are incurred. We believe that a significant level of investment for product
research and development is required to remain competitive.

      On April 15, 2004, IQB and Wherify Wireless, Inc. jointly announced the
signing of a definitive agreement under which IQB and Wherify would merge. Under
the proposed transaction, IQB is currently expected to issue approximately 32
million newly issued common stock of IQB and the shareholders of Wherify are
currently expected to hold approximately 80% of the combined company. The
proposed transaction has been unanimously approved by our board of directors and
is subject to certain terms and conditions, including approval by both the
stockholders of IQB and the shareholders of Wherify. Assuming completion of the
transaction, for every share of Wherify capital stock held as of the record
date, each Wherify stockholder is currently expected to receive approximately
4.5 shares of IQB common stock. If either party terminates the proposed merger
under circumstances specified in the merger agreement, the terminating party
will be required to pay the other party a termination fee of $500,000.

Critical Accounting Policies

Intangible Assets

         Intangibles consist of software, including purchased software, and
development of new software products and enhancements to existing software
products. Until technological feasibility is established, costs associated with
software development, including costs associated with the acquisition of
intellectual property relating to software development is expensed as incurred.
After technological feasibility is established and until the products are
available for sale, software development costs are capitalized and amortized
over the greater of the amount computed using (a) the ratio that current gross
revenue for the product bears to the total of current and anticipated future
gross revenue for that product or (b) the straight line method over the
estimated economic life of the product including the period being reported on.
The amortization period has been determined as the life of the product, which is
three years. During fiscal 2003 and 2004, IQB's software costs were amortized
straight-line over three years resulting in $61,689 of amortization in fiscal
2004. IQB estimates amortization expense of approximately $50,000 in fiscal 2005
and $36,000 in fiscal 2006. At June 30, 2004 we had a net carrying value for our
intangible assets of approximately $87,500.

Revenue Recognition

         We adopted revenue recognition policies to comply fully with the
guidance in Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements." Revenue consists of shipped customer orders and completed services.
We have an increasing sale order backlog, however those orders are not
considered revenue until the order is shipped and services are rendered.
<PAGE>

         We account for the licensing of software in accordance with American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
97-2, Software Revenue Recognition. The application of SOP 97-2 requires
judgment, including whether a software arrangement includes multiple elements,
and if so, whether vendor-specific objective evidence (VSOE) of fair value
exists for those elements. Changes to the elements in a software arrangement,
the ability to identify VSOE for those elements, the fair value of the
respective elements, and changes to a product's estimated life cycle could
materially impact the amount of earned and unearned revenue. Judgment is also
required to assess whether future releases of certain software represent new
products or upgrades and enhancements to existing products.

Inflation

         In our opinion, inflation has not had a material effect on our
operations.

Results Of Operations For The Twelve Months Ended June 30, 2004 And 2003

         Revenues increased 155% from $106,000 for the twelve months ended June
30, 2003 to $270,000 for the twelve months ended June 30, 2004. Revenues
increased primarily because we released our new FACES(TM) version 4.0 in July of
2003 and substantially increased our license fee. Approximately 69% of the
increase in our revenues for the year ended June 30, 2004 was due to an increase
in our pricing, and the number of licenses sold increased by approximately 15%.
2004 revenues were derived primarily from the sale of FACES(TM) 4.0 while 2003
revenues were from the sale of our FACES(TM) version 3.1 and FACES(TM) version
LE products. Revenue for both years were from a diverse retail customer base
sold mainly in units of 1 to 50. No customer made up more than 2% of gross
revenue and 60% of our revenue came from new customers.

         Gross profit margin was 76% for the twelve months ended June 30, 2003
compared to 82% for the twelve months ended June 30, 2004. The increased margin
was due to an increase in sales price of our product, with little change in the
cost of producing the software and its packaging.

         Selling and marketing expense increased 43% from $260,000 for the
twelve months ended June 30, 2003 to $373,000 for the twelve months ended June
30, 2004. The increase in selling and marketing expenses was due to increased
personnel, promotion and marketing expenses incurred in conjunction with the
release of FACES(TM) 4.0 to try and better penetrate the market. Of these
expenses, $329,000 was paid with common stock. The increase was primarily due to
increased expenses for sales staff of $55,000, marketing services of $45,000
and accrued commissions of $30,000.

         General and administrative expenses increased 127% from $2,897,000 for
the twelve months ended June 30, 2003 to $6,651,000 for the twelve months ended
June 30, 2004. The spending was mainly for investor relations of $1,580,000,
investment banking fees of $793,900, business consulting fees of $914,000, legal
and audit fees of $1,985,000, and payroll of $615,000. The use of these services
is related to IQB's search for additional sources of capital, partnering or
acquisition opportunities, patent research and applications and creating the
corporate infrastructure needed in a public company. Of these expenses,
approximately $4,610,000 was paid in the form of shares of our common stock.

         Research and development expenses increased 17% from $148,000 for the
twelve months ended June 30, 2003 to $172,000 for the twelve months ended June
30, 2004. These expenditures are associated with the development of producing
Faces(TM) 4.0 and FACES(TM) EDU. We have not to date incurred any significant
costs for development of any future product releases. Of these expenses,
$154,000 was paid with common stock.

         Interest expense increased 373% from $282,000 for the twelve months
ended June 30, 2003 to $1,349,000 for the twelve months ended June 30, 2004. Of
this expense, approximately $1,179,000 was non cash amortization of debt and
warrant discounts related to the issuances of IQB's convertible debentures. The
increase in accrued interest was due to additional financings of $700,000 in the
first two quarters of 2004, as well as previous financings from fiscal 2003
falling in the last fiscal quarter, with little interest accrual in 2003.

                         LIQUIDITY AND CAPITAL RESOURCES

        From our inception in 2002 we have financed our operations primarily
through private sales of common stock, issuances of common stock as payment to
certain contractors and the issuance of convertible debentures. At June 30,
2004, we had negative working capital of approximately $2,478,000 which
consisted of convertible debentures in the amount of approximately $1,666,667,
$100,000 in short term notes and approximately $803,000 of payables and
commitments, offset by cash of $7,000, accounts receivable of $20,000 and
prepaid expenses of approximately $65,000.

<PAGE>

        Net cash used in operations was approximately $910,000 in the fiscal
year ended June 30, 2004 as compared to $981,000 in the fiscal year ended June
30, 2003. Primarily attributable to the $70,000 decrease in cash used in
operations, was an increase in payables of approximately $100,000, offset by an
increase in receivables of approximately $20,000. Our expenditures for capital
equipment were minimal in fiscal years ended June 30, 2003 and 2004. We expect
that our capital expenditures will continue to be minimal in fiscal 2005. We
have reduced our monthly net cash used to approximately $50,000 from $75,000,
and are continuing to seek cost reductions. Our internal cash flow model
indicates we can break even with our current cost structure with approximately
$1.0 million in revenue. In fiscal 2004, IQB raised $769,700 through financing
activities from the issuance of $700,000 in convertible debentures and $69,700
from the exercise of options and warrants.

        Until the merger with Wherify is consummated, we expect to use the
issuance of short term notes or convertible debentures to help fund our cash
flow needs. If conditions are favorable, IQB will look to raise additional
capital through debt and equity channels. We make no assurance that financing
can be achieved. Should we fail to meet our obligations, both past and as they
become due, through additional financing or increased revenue, we will not be
able to remain a viable entity. We expect operating losses and negative
operating cash flows to continue for at least the next twelve months, because of
operating costs and expenses related to brand development; marketing and other
promotional activities; hiring of management, sales and other personnel; the
expansion of infrastructure and customer support services; and strategic
relationship development.

         However, there can be no assurance that we will achieve profitability.
Due to these factors, we believe that period-to-period comparisons of our
results of operations are not necessarily a good indication of future
performance. The results of operations in some future periods may be below the
expectations of analysts and investors.

         We currently have no borrowings available to us under any credit
arrangement, and we will look for additional debt and equity financings should
cash provided from operations be insufficient to support the ongoing operations
of the business. Adequate funds may not be available on terms acceptable to us.
If additional funds are raised through the issuance of equity securities,
dilution to existing stockholders may result. If funding is insufficient at any
time in the future, we may be unable to develop or enhance our products or
services, take advantage of business opportunities or respond to competitive
pressures, any of which could have a material adverse effect on our financial
position, results of operations and cash flows.

RECENT EVENTS

         In May and June 2004, IQB issued short term notes to Greg J. Micek, a
member of the board of directors, and Forte Capital Partners, LLC, whose
managing partner is Daniel McKelvey also a member of IQB's board of directors.
The loans were for working capital needs and made in the normal course of
business with an annual interest rate of 6% and are due at the end of July 2004.
In July 2004, Mr. Micek assigned his loan to an individual investor. In July and
August, IQB issued a convertible debenture for $225,000 to an individual
investor ($75,000) and Forte Capital Partners, LLC ($150,000). The short term
note from Forte Capital Partners ($50,000), LLC, was rolled into this note. This
debenture carries a 10% annual interest rate and is convertible on the same
terms as the next round of financing. Warrants were issued to both parties in
conjunction with this debenture.
<PAGE>

ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         The report of Company's Independent Auditors appear at Page F-1 hereof,
and the Financial Statements of IQB appear at Page F-2 through F-13 hereof.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

         Not applicable.

ITEM 8A. CONTROLS AND PROCEDURES

         IQB maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in its Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to its management, including its Chief Executive Officer/Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure based closely on the definition of "disclosure controls and
procedures" in Rule 13a-14(c). In designing and evaluating the disclosure
controls and procedures, management recognized 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 necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. IQB maintains that the controls and procedures
in place do provide reasonable assurance that all necessary disclosures are
communicated as required.

         At the end of the period covered by this Annual Report, IQB carried out
an evaluation, under the supervision and with the participation of its
management, including its Chief Financial Officer, of the effectiveness of the
design and operation of IQB's disclosure controls and procedures. Based on the
foregoing, IQB's Chief Financial Officer concluded that IQB's disclosure
controls and procedures were effective to ensure that all material information
required to be filed in this Annual Report has been made known to them in a
timely fashion.

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

ITEM 8B. OTHER INFORMATION

      None

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
          WITH SECTION 16(A) OF THE EXCHANGE ACT

The directors and executive officers of IQB are as follows:

Name                       Age              Positions

William Scigliano          43               Director and Chief Executive Officer
Greg J. Micek              49               Director
Daniel McKelvey            38               Director
Michael Walsh              42               Chief Financial Officer, Treasurer &
                                            Controller

William Scigliano has served as a Director of IQB since November 2002 and as
Chief Executive Officer of IQB since September 2002. From 1991 until September
2002, he served as Executive Director of the Corporate and Public Issues
Division of the Ministry of the Attorney General of British Columbia. Mr.
Scigliano received a Bachelors Degree from the University of Victoria and a
Masters Degree from the Graduate School of Business Administration of the
University of Oregon.
<PAGE>

Greg J. Micek has served as a Director of IQB since inception. In addition, from
March to September 2003, Mr. Micek served as IQB's Vice President of Corporate
Development. From July 2002 until March 2003, Mr. Micek served as IQB's
President. From March 2002 until July 2002, Mr. Micek served as IQB's Executive
Vice President and Chief Financial Officer. Since 1983, Mr. Micek has been a
principal of The Micek Group, a consulting firm. Mr. Micek received a Bachelor
of Arts and a Doctorate of Jurisprudence from Creighton University.

Daniel P. McKelvey was appointed to IQB's Board of Directors on March 26, 2004.
Mr. McKelvey has been a managing member of Forte Capital Partners LLC, an
investment advisory firm, and the general partner of Special Equity IV, L.P.,
since August 1998. In addition, from February 2002 until December 2002, Mr.
McKelvey was an investment banker with HPC Ventures, a broker-dealer, and from
January 2003 until August 2003, Mr. McKelvey was an investment banker with
Trautman, Wasserman & Co., a broker-dealer. Mr. McKelvey received a Bachelor of
Science in math and computer science from the University of New Hampshire.

Michael Walsh joined IQB as Chief Financial Officer, Treasurer and Controller on
January 15, 2004. From May 2001 until January 2004 Mr. Walsh was acting Chief
Financial Officer and Director of Finance for Financial Interactive, Inc., a
private software company. From February 2000 until April 2001 Mr. Walsh was the
Controller for OnLight, Inc. a private telecommunications company. From April
1998 until January 2000 Mr. Walsh was Director of Planning, Analysis and
Reporting for First Franklin Financial Corporation, a financial services company
wholly-owned by National Citibank. Mr. Walsh received a BS in Accounting from
Central Michigan University in 1985 and a Masters Degree in business from St.
Mary's College in Moraga, California in 1999.

         If the merger with Wherify Wireless, Inc. is consummated, the board of
directors of IQB will consist of five directors. The Chairman of the board of
directors will continue to be William Scigliano. Wade Fenn and Timothy Neher,
two directors from Wherify's current board of directors, will join the IQB board
of directors. In addition, Todd DeMatteo, currently a consultant to IQB will be
appointed to the IQB board of directors. The fifth member of the IQB board of
directors will be designated by Timothy Neher.

         Currently, our directors receive no remuneration for their services as
such, but IQB will reimburse the directors for any expenses incurred in
attending any directors' meeting.

         There are no family relationships, or other arrangements or
understandings between or among any of the directors, executive officers or
other person pursuant to which such person was selected to serve as a director
or officer.

Section 16(A) of the Exchange Act

         Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules of the Securities and Exchange Commission promulgated
thereunder require IQB's directors and executive officers to file reports of
their ownership and changes in ownership of common stock with the Securities and
Exchange Commission. Based solely on information provided to IQB, IQB believes
that during the last fiscal year, the following reports required by Section
16(a) of the Exchange Act to be filed by its Directors and executive officers
were not timely filed: William Scigliano, Daniel McKelvey and Michael Walsh each
were late in filing a Form 3; and Greg J. Micek failed to timely file a Form 4.

Code of Ethics

         IQB has adopted a code of ethics that applies to its Chief executive
officer and chief financial officer. The code of ethics is available by request,
without charge, from the corporate offices by calling (510) 795-2900.

ITEM 10. EXECUTIVE COMPENSATION.

                           SUMMARY COMPENSATION TABLE

The following table sets forth the compensation paid by IQB to its Chief
Executive Officer for services in all capacities to the during the fiscal years
ended June 30, 2004 and 2003 (no other executive officer of IQB had total annual
salary and bonus for the fiscal years ended June 30, 2004 or 2003 exceeding
$100,000) (for purposes hereof, the Chief Executive Officer is referred to
herein as the "Named Executive Officer").
<PAGE>

                         SUMMARY COMPENSATION TABLE (1)

                                          ANNUAL                 LONG-TERM
                                       COMPENSATION            COMPENSATION
   (A)                            (B)             (C)               (F)
                                 FISCAL                         RESTRICTED
NAME AND                       YEAR ENDED        SALARY        STOCK AWARDS
PRINCIPAL POSITION

William Scigliano               6/30/04         $133,967         $0
Chief Executive
Officer
                                6/30/03         $130,000(2)      $0
----------

(1) The Columns designated by the Commission for the reporting of certain
bonuses, other annual compensation, securities underlying options/SARs, long
term incentive plan payouts, and all other compensation, have been eliminated as
no such bonuses, other annual compensation, underlying securities, payouts or
compensation were awarded to, earned by, paid to or outstanding with respect to
any specified person during any fiscal year covered by the table.

(2) Mr. Scigliano became Chief Executive Officer in July, 2002.

                               STOCK OPTION GRANTS

The table below set forth information pertaining to stock options granted to the
Named Executive Officer during the fiscal year ended June 30, 2004. No SAR's of
any kind were granted.

                      OPTION GRANTS IN THE LAST FISCAL YEAR

<TABLE>
<CAPTION>
(A)                        (B)              (C)                      (D)        (E)
                           NUMBER OF
                           SECURITIES       PERCENTAGE OF TOTAL
                           UNDERLYING       OPTIONS GRANTED
                           OPTIONS          TO EMPLOYEES             EXERCISE   EXPIRATION
NAME                       GRANTED(1)       IN FISCAL YEAR           PRICE      DATE
--------------------------------------------------------------------------------------------
<S>                        <C>              <C>                      <C>        <C>
William Scigliano          200,000(1)       44%                      $1.50(2)   2/28/09
</TABLE>

----------

(1) This option vests with respect to 8,333 option shares every month after the
grant until the option become fully vested.

(2) The closing price of IQB common stock was $1.52 on February 29, 2002, the
last day on which such common stock traded preceding this option grant. The
closing price of IQB common stock was $1.79 on March 2, 2004, the next day on
which such common stock traded after this option grant.

                  OPTION EXERCISES/VALUE OF UNEXERCISED OPTIONS

During the fiscal year ended June 30, 2004, no stock options were exercised by
the Named Executive Officer. As of June 30, 2004, IQB had not granted any SAR's
of any kind. The table below set forth information pertaining to the value of
unexercised stock options held by the Named Executive Officer as of June 30,
2004.
<PAGE>

                       AGGREGATED OPTION EXERCISES IN LAST
                FISCAL YEAR AND FISCAL YEAR END OPTION VALUES (1)

<TABLE>
<CAPTION>
(A)                               (D)                                    (E)
                          NUMBER OF SECURITIES
                         UNDERLYING UNEXERCISED              VALUE OF UNEXERCISED
                        OPTIONS AT JUNE 30, 2004            IN-THE-MONEY OPTIONS AT
                           (NUMBERS OF SHARES)                 JUNE 30, 2004(2)
NAME                 EXERCISABLE       UNEXERCISABLE     EXERCISABLE      UNEXERCISABLE
----                 -----------       -------------     -----------      -------------
<S>                   <C>               <C>               <C>              <C>
William Scigliano     733,333           266,667           $534,750         $23,250
Chief Executive
Officer
</TABLE>

----------

(1) The Columns designated by the Securities and Exchange Commission for the
reporting of the number of shares acquired upon exercise and the value realized
have been eliminated as no options were exercised by the Named Executive Officer
during any fiscal year covered by the table.

(2) Based on the June 30, 2004 closing price of IQB common stock of $0.93 per
share.

                   COMPENSATION AGREEMENTS WITH KEY PERSONNEL

         On March 2, 2004, IQB entered into an employment agreement with Mr.
Scigliano. Under the agreement, Mr. Scigliano agreed to serve as President and
Chief Executive Officer of IQB at an annual salary of $142,700. In addition, IQB
granted Mr. Scigliano an option to purchase 200,000 shares of IQB common stock
at an exercise price of $1.50 per share. In addition to the compensation
described above, IQB also agreed to award Mr. Scigliano additional cash bonuses
in the event IQB achieved certain milestones as described in the agreement
("Milestone Bonuses"). Mr. Scigliano also receives a housing allowance of $1,500
per month and an automobile allowance of $1,000 per month. Mr. Scigliano is also
entitled to participate in any and all employee benefit plans hereafter
established for IQB employees and is entitled to standard expense
reimbursements.

         IQB and Mr. Scigliano have amended his employment agreement, which
amendment will be effective upon the closing of the merger with Wherify
Wireless, Inc. Under Mr. Scigliano's amended employment agreement with Wherify,
IQB has agreed to establish, as soon as practicable after the closing of the
merger, a Public Sector Business Unit for which Mr. Scigliano will be
responsible.

         In addition, as long as Mr. Scigliano is employed by IQB, IQB's board
of directors agrees to nominate him to serve as a member of the board of
directors and so long as Mr. Scigliano continues to be elected to IQB's board of
directors, the board of directors agrees to elect him as Chairman of the board.

Mr. Scigliano is entitled to the following severance benefits:

      o     If Mr. Scigliano's employment is terminated as a result of his death
            or disability, his estate is entitled to receive his monthly salary
            plus 1/12th of any bonus to which Mr. Scigliano is entitled for a
            period equal to the greater of one (1) year following such
            termination or the remainder of the term of the agreement.
      o     If Mr. Scigliano's employment is terminated for Cause (as defined in
            the agreement), Mr. Scigliano is entitled to receive his salary and
            any bonus payable through the date of his termination.
      o     If Mr. Scigliano's employment is terminated without Cause, death or
            disability, or if Mr. Scigliano terminates his employment for Good
            Reason after 6 months following Change of Control, Mr. Scigliano is
            entitled to receive: (a) all salary and other benefits to which he
            would be entitled for the remainder of the term of the agreement;
            plus (b) a lump sum payment at the effective date of termination of
            an amount equal to all Milestone Bonuses payable under the
            agreement. Additionally, all stock options granted to Mr. Scigliano,
            which are unvested as of the termination date, shall fully vest and
            shall be exercisable for a period of one year after the date of
            termination.
      o     If Mr. Scigliano's employment is terminated without Cause or if Mr.
            Scigliano terminates his employment for Good Reason within six
            months following a Change in Control as defined in the agreement,
            Mr. Scigliano is entitled to receive: (a) his salary and other
            benefits through and including the date of such termination; and,
            (b) an amount equal to (i) 3 times his base salary and (ii) 3 times
            the total amount of all Milestone Bonuses payable under the
            agreement. Additionally, all stock options to purchase IQB stock
            granted to Mr. Scigliano, which are unvested as of such termination,
            shall automatically vest and shall be exercisable for a period of
            one year.
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS.

                           BENEFICIAL STOCK OWNERSHIP

The following table sets forth as of August 31, 2004 information regarding the
beneficial ownership of common stock (i) by each stockholder who is known by IQB
to own beneficially in excess of 5% of IQB's outstanding common stock; (ii) by
each director; (iii) by each executive officer; and (iv) by all executive
officers and directors as a group. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to
their shares of common stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with
respect to their shares of common stock.

--------------------------------------------------------------------------------
Name and Address of Beneficial Owners              Beneficial Ownership (1)
--------------------------------------------------------------------------------

               5% Stockholders               Number of Shares     % Ownership
--------------------------------------------------------------------------------
John Micek, Jr.                                1,678,508(2)           6.4%
12809 W. Dodge Road
Omaha, NE 68154

--------------------------------------------------------------------------------

Liviakis Financial                             1,444,000              5.7%
655 Redwood Highway, #255
Mill Valley, CA 94941
--------------------------------------------------------------------------------

Clyde Berg                                     1,559,145              6.2%
10600 N. De Anza Boulevard
Cupertino, California 95014

--------------------------------------------------------------------------------

       Executive Officers and Directors
--------------------------------------------------------------------------------

Daniel P. McKelvey                               739,857(3)           2.9%
201 Mission Street, Suite 1930
San Francisco, CA 94105

--------------------------------------------------------------------------------

Greg J. Micek                                  1,766,064(4)           6.9%
5444 Westheimer, Suite 2080
Houston, TX 77056

--------------------------------------------------------------------------------

William Scigliano                                825,000(5)           3.2%
39111 Paseo Padre Parkway, Suite 304
Fremont, CA 94538

--------------------------------------------------------------------------------

Michael Walsh                                    103,750(6)             *
39111 Paseo Padre Parkway, Suite 304
Fremont, CA 94538

--------------------------------------------------------------------------------

All directors and officers                       3,3,671(7)
as a group (four persons)

--------------------------------------------------------------------------------

*     Less than one percent

(1)   Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission and derives from either voting or
      investment power with respect to securities. Shares of common stock
      issuable upon conversion of convertible debentures, or shares of common
      stock issuable upon exercise of warrants and options currently
      exercisable, or exercisable within 60 days of August 30, 2004, are deemed
      to be beneficially owned for purposes hereof.

(2)   Includes 75,000 shares issuable pursuant to warrants exercisable, and
      900,000 shares issuable pursuant to convertible debentures, within 60 days
      of August 30, 2004.

(3)   Includes 60,000 shares owned by Forte Capital Partners, LLC, and 310,000
      shares issuable upon exercise of a warrants owned by Forte Capital
      Partners LLC. Forte Capital Partners LLC is the general partner of Special
      Equity IV, LP and thus may be deemed to beneficially own shares owned by
      Special Equity IV, LP. Mr. McKelvey serves as a managing member of Forte
      Capital Partners LLC and thus may be deemed to beneficially own shares
      owned by Forte Capital Partners LLC and Special Equity IV, LP.

<PAGE>

(4)   Includes 325,000 shares issuable pursuant to stock options exercisable
      within 60 days of August 30, 2004 and 60,000 shares held in trust for the
      benefit of Mr. Micek's minor children over which Mr. Micek holds voting
      and dispositive control.

(5)   Includes 825,000 shares issuable pursuant to stock options exercisable
      within 60 days of August 30, 2004.

(6)   Includes 93,750 shares issuable pursuant to stock options exercisable
      within 60 days of August 30, 2004.

(7)   Includes 1,553,750 shares issuable pursuant to stock options and warrants
      that are exercisable within 60 days of August 30, 2004.


                            EQUITY COMPENSATION PLANS

IQB has three equity compensation plans for its employees, directors and
consultants pursuant to which options, rights or shares may be granted or
issued. These plans include the 2004 Consultant Compensation Plan, 2000
Non-Qualified Stock Option Plan and the IQ Biometrix California, Inc. 2001 Stock
Plan. Further information on the material terms of these plans is given below.

The following table provides information as of June 30, 2004 with respect to our
compensation plans (including individual compensation arrangements), under which
securities are authorized for issuance aggregated as to (i) compensation plans
previously approved by stockholders, and (ii) compensation plans not previously
approved by stockholders:

                      EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                                             NUMBER OF SECURITIES
                                                                             REMAINING AVAILABLE
                                                                             FOR FUTURE
                                                                             ISSUANCE UNDER
                           NUMBER OF SECURITIES TO    WEIGHTED-AVERAGE       EQUITY COMPENSATION
                           ISSUED UPON EXERCISE       EXERCISE PRICE OF      PLANS (EXCLUDING
                           OF OUTSTANDING OPTIONS,    OUTSTANDING OPTIONS,   SECURITIES REFLECTED
                           WARRANTS AND RIGHTS        WARRANTS AND RIGHTS    IN COLUMN (A))
PLAN CATEGORY                    (A)                        (B)                       (C)
<S>                           <C>                          <C>                   <C>
Equity compensation
plans approved by                -0-                        -0-                       -0-
security holders

Equity compensation
plans not approved by         2,876,425(1)                 $0.81(1)              2,818,354(2)
security holders

TOTAL                         2,876,425 (1)                $0.81(1)              2,818,354(2)
</TABLE>

(1)   Of these options, warrant and rights, 97,429 were assumed by IQB in
      connection with its merger involving IQ Biometrix California, Inc. The
      weighted-average exercise price of the assumed options, warrant and rights
      was $0.49.

(2)   Of these securities, 374,497 were available for issuance as of June 30,
      2004 pursuant to the 2004 Consultant Compensation Plan, other than upon
      the exercise of an option, a warrant or a right. Subsequent to June 30,
      2004, all of these 371,867 shares of common stock have been issued.
<PAGE>

                        2004 CONSULTANT COMPENSATION PLAN

Purpose.

         The IQB 2004 Consultant Compensation Plan (the "Plan") is intended to
promote the interests of IQB and its subsidiaries by offering its outside
consultants who assist in its development and success, the opportunity to
participate in a compensation plan designed to reward them for their services
and to encourage them to continue to provide services to IQB.

Administration.

         The Plan is administered by the Board of Directors or by a committee of
not less than two directors of the IQB Board.

Eligibility.

         Only individuals who are outside consultants, or directors, officers,
partners or employees of outside may participate in the plan.

Number of Shares of Common Stock Available Under the Plan.

         A total of 1,000,000 shares of IQB common stock are currently reserved
for issuance under this plan. Any shares awarded and later forfeited are again
subject to award or sale under the Plan.

Term and Amendment of Plan.

         This Plan expires on December 31, 2004. The Board may terminate or
amend the Plan in any respect at any time, except no action of the IQB Board or
any committee thereof may, without the consent of a Participant, alter or impair
such Participant's rights under any shares previously granted.

                 COMPANY'S 2000 NON-QUALIFIED STOCK OPTION PLAN

The following is a description of the material features of IQB's 2000
Non-Qualified Stock Option Plan.

Purpose.

         The 2000 Non-Qualified Stock Option Plan is intended to attract and
retain the best available personnel for service as employees and consultants to
IQB and to encourage their continued service to IQB. The 2000 Non-Qualified
Stock Option Plan currently permits the grant of non-qualified stock options.

Administration.

         The Non-Qualified Plan is administered by a committee of not less than
two directors of the IQB Board of Directors selected by, and serving at the
pleasure of, the IQB Board of Directors.

Eligibility.

         The Committee has substantial discretion pursuant to the Non-Qualified
Plan to determine the persons to whom Non-Qualified Options may be granted or
authorized and also to determine the amounts, time, price, exercise terms, and
restrictions imposed in connection therewith. Non-Qualified Options may be
granted to any consultant, non-employee director, or full-time employee (which
may include officers and directors who are also employees) of IQB or of any
Affiliate. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions of the Code. IQB currently
has two employees and four directors. The number of consultants varies.

SHARES SUBJECT TO THE NON-QUALIFIED PLAN. Pursuant to the Non-Qualified Plan,
714,286 shares of Common Stock are authorized to be issued. If a Non-Qualified
Option expires or becomes unexercisable for any reason without having been
exercised in full, the unpurchased shares that were subject thereto shall become
available for future grants under the Non-Qualified Plan.
<PAGE>

OUTSTANDING OPTIONS. Options to purchase 21,429 shares of Common Stock pursuant
to the Non-Qualified Plan were outstanding as of June 30, 2004.

RESTRICTIONS. Options are, in general, non-assignable. IQB may reserve a right
to repurchase shares acquired upon the exercise of a Non-Qualified Option
following the related optionee's termination (i.e. the ceasing for any reason
ceased to provide services as an employee, officer, director or consultant to
IQB or an Affiliate), at any time within 90 days after such termination, at the
optionee's exercise price for the shares, provided, that such right to
repurchase shares at the exercise price shall lapse at the rate of at least 20%
per year over five years from the date of grant of the Non-Qualified Option. To
enforce any restrictions on an optionee's shares acquired upon exercise of a
Non-Qualified Option (including, without limitation, a right of repurchase), the
Committee may require the optionee to deposit all certificates representing the
shares acquired, together with stock powers or other instruments of transfer
approved by the Committee, appropriately endorsed in blank, with IQB or an agent
designated by IQB to hold in escrow until such restrictions have lapsed or
terminated, and the Committee may cause a legend or legends referencing such
restrictions to be placed on the certificates.

CORPORATE TRANSACTIONS. In the event of (i) a dissolution or liquidation of IQB,
(ii) a merger or consolidation in which IQB is not the surviving corporation
(other than a merger or consolidation with a wholly-owned subsidiary, a
reincorporation of IQB in a different jurisdiction, or other transaction in
which there is no substantial change in the shareholders of IQB or their
relative stock holdings and the Non-Qualified Options granted under the
Non-Qualified Plan are assumed, converted or replaced by the successor or
acquiring corporation, which assumption, conversion or replacement will be
binding on all optionees), (iii) a merger in which IQB is the surviving
corporation but after which the shareholders of IQB immediately prior to such
merger (other than any shareholder which merges with IQB in such merger, or
which owns or controls another corporation which merges, with IQB in such
merger) cease to own their shares or other equity interests in IQB, or (iv) the
sale of all or substantially all of the assets of IQB, any or all outstanding
Non-Qualified Options may be assumed, converted or replaced by the successor or
acquiring corporation (if any), which assumption, conversion or replacement will
be binding on all optionees. In the alternative, the successor or acquiring
corporation may substitute equivalent options or provide substantially similar
consideration to optionees as was provided to shareholders (after taking into
account the existing provisions of the Non-Qualified Options). In the event such
successor or acquiring corporation (if any) does not assume or substitute
options, then notwithstanding any other provision in the Non-Qualified Plan to
the contrary, the vesting of such Non-Qualified Options will accelerate and the
Non-Qualified Options will become exercisable in full prior to the consummation
of such event at such times and on such conditions as the Committee determines,
and if such Non-Qualified Options are not exercised prior to the consummation of
the corporate transaction, they shall terminate upon the consummation of such
corporate transaction.

AMENDMENT AND TERMINATION. IQB's Board of Directors may at any time amend,
alter, suspend or discontinue the Non-Qualified Plan, but no amendment,
alteration, suspension or discontinuation shall be made that would materially
and adversely affect the rights of any holder of any Non-Qualified Option under
any outstanding grant, without his or her consent.

TERM. The Non-Qualified Plan became effective on August 2, 2000 and shall remain
in effect until terminated by the Board of Directors. However, no Non-Qualified
Options may be granted more than ten years after the effective date of the
Non-Qualified Plan.

FEDERAL INCOME TAX CONSEQUENCES. The following brief summary of the principal
Federal income tax consequences of transactions under the Non-Qualified Plan is
based on current Federal income tax laws. This summary is not intended to
constitute tax advice and, among other things, does not address possible state
or local tax consequences. Accordingly, a participant in the Non-Qualified Plan
should consult a tax advisor with respect to the tax aspects of transactions
under the Non-Qualified Plan.

A participant will not recognize taxable income upon the grant of a
Non-Qualified Option. Upon the exercise of a Non-Qualified Option, a participant
will recognize taxable ordinary income equal to the difference between the fair
market value of the shares on the date of exercise and the option exercise
price. When a participant sells the shares, the participant will have short-term
or long-term capital gain or loss, as the case may be, equal to the difference
between the amount the participant received from the sale and the tax basis of
the shares sold. The tax basis of the shares generally will be equal to the
greater of the fair market value of the shares on the exercise date or the
option exercise price.
<PAGE>

As a condition of the exercise of an Non-Qualified Option granted under the
Non-Qualified Plan, the participant (or in the case of the participant's death,
the person exercising the Non-Qualified Option) shall make such arrangements as
the Committee may require for the satisfaction of any applicable federal, state,
local or foreign withholding tax obligations that may arise in connection with
the exercise of the Non-Qualified Option and the issuance of shares. In certain
circumstances, the Committee may allow withholding obligations to be satisfied
by the retention by IQB of shares that have a fair market value determined as of
the applicable date equal to the amount required to be withheld.

                  IQ BIOMETRIX CALIFORNIA, INC. 2001 STOCK PLAN

The following is a description of the material features of the IQ Biometrix
California, Inc. 2001 Stock Plan (the "2001 Plan").

GENERAL. On July 26, 2001, the Board of Directors and a majority of the
outstanding shares of IQ Biometrix California, Inc. approved the 2001 Plan. In
connection with the merger of IQ Biometrix California, Inc. with and into IQB,
IQB assumed the 2001 Plan. Under the 2001 Plan, the grants described below are
available to employees, consultants and directors so as to attract and retain
the best available personnel for positions of substantial responsibility and to
provide additional incentive and to promote the success of IQB's business.

TYPES OF AWARDS. The 2001 Plan provides for the grant of incentive stock options
("ISO's") qualifying under the Internal Revenue Code of 1986, as amended (the
"Code"), nonqualified options ("Non-Qualified Options"), and opportunities to
make purchases of stock in IQB ("Purchase Rights") (ISO's and Non-Qualified
Options are referred to hereinafter from time to time as "Options").

ADMINISTRATION. The 2001 Plan is now administered by IQB's Board of Directors.

ELIGIBILITY. The Board of Directors has substantial discretion pursuant to the
2001 Plan to determine the persons to whom ISO's, Non-Qualified Options and
Purchase Rights may be granted or authorized and also to determine the amounts,
time, price, exercise terms, and restrictions imposed in connection therewith.
Non-Qualified Options and Purchase Rights may be granted only to employees and
consultants of IQB and any of its subsidiary or affiliates, and to directors of
IQB. ISO's may be granted only to employees and directors of IQB. IQB currently
has two employees and four directors. The number of consultants varies.

SHARES SUBJECT TO THE 2001 PLAN. Two million (2,000,000) shares of Common Stock
are authorized to be issued pursuant to the 2001 Plan. If an award expires or
becomes unexercisable for any reason without having been exercised in full, the
unpurchased shares that were subject thereto shall become available for future
grant under the 2001 Plan. In addition, any shares which are retained by IQB
upon exercise of an award in order to satisfy the exercise or purchase price for
such award or any withholding taxes due with respect to such exercise or
purchase shall be treated as not issued and shall continue to be available under
the 2001 Plan.

OUTSTANDING OPTIONS AND PURCHASE RIGHTS. Options to purchase 249,000 shares of
Common Stock pursuant to the 2001 Stock Plan were outstanding as of June 30,
2004

TERMINATION OF OPTIONS. Generally, when an optionee ceases to be an employee or
consultant of IQB or any of its subsidiary or affiliates, or a director of IQB,
other than by reason of death, disability or for cause, an optionee's Options
shall terminate 30 days following the date on which such optionee's status as
such ceases. If an optionee's employment is terminated by reason of disability,
the optionee may exercise his Option at any time prior to the earlier of the
specified expiration date of the Option or six months from the date of the
termination of employment. In the case of death, an optionee's Options may be
exercised by his estate, personal representative or beneficiary at any time
prior to the earlier of the specified expiration date of the Option or 12 months
days from the date of the optionee's death. In the case of termination for
cause, an optionee's Options shall terminate on the date that notice of
termination is first given. In such event, IQB shall also have the right to
purchase all vested shares acquired upon exercise of an Option granted prior to
the date, if any, within 90 days of termination of the terminated optionee for a
purchase price equal to the fair market value of the shares as of the date of
termination.
<PAGE>

PURCHASE RIGHTS. The Board of Directors determines, in its sole discretion, the
terms, conditions, restrictions, number of shares, the price to be paid, and the
time within which a purchase must occur with respect to each Purchase Right. In
the case of a Purchase Right granted prior to the date, if any, on which IQB's
common stock becomes a Listed Security and if required by the applicable laws at
that time, the purchase price of shares subject to a Purchase Right shall not be
less than 85% of the fair market value of the shares as of the date of the
offer, or, in the case of a Ten Percent Holder, the price shall not be less than
100% of the fair market value of the shares as of the date of the offer. If the
applicable laws do not impose the requirements set forth in the preceding
sentence and with respect to any Purchase Rights granted after the date, if any,
on which IQB's common stock becomes a Listed Security, the purchase price of
Shares subject to Purchase Rights shall be as determined by the Board of
Directors. Unless the Board of Directors determines otherwise, each Purchase
Right is subject to a repurchase option in favor of IQB, at the original
purchase price paid by the purchaser, upon the voluntary or involuntary
termination of the purchaser's employment with IQB for any reason (including
death or disability). The repurchase option shall lapse at such rate as the
Board of Directors may determine, provided that with respect to a Purchase Right
granted prior to the date, if any, on which IQB's common stock becomes a Listed
Security to a purchaser who is not an officer, director or consultant of IQB or
any subsidiary of IQB, it shall lapse at a minimum rate of 20% per year if
required by the applicable laws.

RESTRICTIONS. Options and Purchase Rights are, in general, non-assignable. The
Board of Directors may place any restrictions on Options and Purchase Rights
that it believes are appropriate, in its discretion.

CORPORATION TRANSACTION. In the event of a sale of all or substantially all of
IQB's assets, or a merger, consolidation or other capital reorganization of IQB
with or into another corporation, each outstanding Option or Purchase Right
shall be assumed or an equivalent option or right shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation
(the "Successor Corporation"), unless the Successor Corporation does not agree
to assume the award or to substitute an equivalent option or right, in which
case such Option or Purchase Right shall terminate upon the consummation of the
transaction.

CHANGE IN CONTROL. Notwithstanding the above, in the event (i) of a Change of
Control, and (ii) a participant holding an Option or Purchase Right assumed or
substituted by the Successor Corporation in the Change of Control, or holding
restricted stock issued upon exercise of an Option or Purchase Right with
respect to which the Successor Corporation has succeeded to a repurchase right
as a result of the Change of Control, is involuntarily terminated by the
Successor Corporation without cause in connection with, or within sixty (60)
days following consummation of, the transaction, then any assumed or substituted
Option or Purchase Right held by the terminated participant at the time of
termination shall accelerate and become exercisable as to the number of shares
that would otherwise have vested and been exercisable as of the date thirty (30)
days from the date of termination, and any repurchase right applicable to any
shares shall lapse as to the number of shares as to which the repurchase right
would otherwise have lapsed as of the date thirty (30) days from the date of
termination, in each case assuming the participant remained in Continuous
Service Status for such period. "Change of Control" means a sale of all or
substantially all of IQB's assets, or any merger or consolidation of IQB with or
into another corporation other than a merger or consolidation in which the
holders of more than 50% of the shares of capital stock of IQB outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of IQB, or such surviving entity,
outstanding immediately after such transaction.

AMENDMENT AND TERMINATION. IQB's Board of Directors may at any time amend,
alter, suspend or discontinue the 2001 Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would materially and adversely
affect the rights of any holder of an Option or a Purchase Right under any
outstanding grant, without his or her consent.

TERM. The 2001 Plan shall expire on July 25, 2011 unless sooner terminated.

FEDERAL INCOME TAX CONSEQUENCES. The following brief summary of the principal
Federal income tax consequences of transactions under the 2001 Plan is based on
current Federal income tax laws. This summary is not intended to constitute tax
advice and, among other things, does not address possible state or local tax
consequences. Accordingly, a participant in the 2001 Plan should consult a tax
advisor with respect to the tax aspects of transactions under the 2001 Plan.

Non-Qualified Options. A participant will not recognize taxable income upon the
grant of a Non-Qualified Option. Upon the exercise of a Non-Qualified Option, a
participant will recognize taxable ordinary income equal to the difference
between the fair market value of the shares on the date of exercise and the
option exercise price. When a participant sells the shares, the participant will
have short-term or long-term capital gain or loss, as the case may be, equal to
the difference between the amount the participant received from the sale and the
tax basis of the shares sold. The tax basis of the shares generally will be
equal to the greater of the fair market value of the shares on the exercise date
or the option exercise price.
<PAGE>

ISO's. A participant will not recognize taxable income upon the grant of an ISO.
If a participant exercises an ISO during employment or within three months after
his or her employment ends (12 months in the case of disability), the
participant will not recognize taxable income at the time of exercise (although
the participant generally will have taxable income for alternative minimum tax
purposes at that time as if the option were a Non-Qualified Option). If a
participant sells or exchanges the shares after the later of (i) one year from
the date the participant exercised the option and (ii) two years from the grant
date of the option, the participant will recognize long-term capital gain or
loss equal to the difference between the amount the participant received in the
sale or exchange and the option exercise price. If a participant disposes of the
shares before these holding period requirements are satisfied, the disposition
will constitute a disqualifying disposition, and the participant generally will
recognize taxable ordinary income in the year of disposition equal to the
excess, as of the date of exercise of the option, of the fair market value of
the shares received over the option exercise price (or, if less, the excess of
the amount realized on the sale of the shares over the option exercise price).
Additionally, the participant will have long-term or short-term capital gain or
loss, as the case may be, equal to the difference between the amount the
participant received upon disposition of the shares and the option exercise
price increased by the amount of ordinary income, if any, the participant
recognized.

With respect to both Non-Qualified Options and ISO's, special rules apply if a
participant uses shares already held by the participant to pay the exercise
price or if the shares received upon exercise of the option are subject to a
substantial risk of forfeiture by the participant.

Purchase Rights. The tax consequences of other stock or cash-based awards will
depend on the specific terms of each award. Upon receipt of restricted stock, a
participant generally will recognize taxable ordinary income when the shares
cease to be subject to restrictions in an amount equal to the fair market value
of the shares at such time. However, no later than 30 days after a participant
receives the restricted stock, the participant may elect to recognize taxable
ordinary income in an amount equal to the fair market value of the shares at the
time of receipt. Provided that the election is made in a timely manner, when the
restrictions on the shares lapse, the participant will not recognize any
additional income. If the participant forfeits the shares to IQB (e.g., upon the
participant's termination prior to expiration of the restriction period), the
participant may not claim a deduction with respect to the income recognized as a
result of the election. Dividends paid with respect to shares of restricted
stock generally will be taxable as ordinary income to the participant at the
time the dividends are received.

Tax Consequences to IQB. IQB generally will be entitled to a deduction at the
same time and in the same amount as a participant recognizes ordinary income,
subject to the limitations imposed under Section 162(m).

Tax Withholding. As a condition of the exercise of an Option or Purchase Right
granted under the 2001 Plan, the participant (or in the case of the
participant's death, the person exercising the Option or Purchase Right) shall
make such arrangements as the Board of Directors may require for the
satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of the Option or
Purchase Right and the issuance of shares. IQB shall not be required to issue
any shares under the 2001 Plan until such obligations are satisfied. In certain
circumstances, the Board of Directors may allow withholding obligations to be
satisfied by the retention or surrendering to IQB of shares that have a fair
market value determined as of the applicable date equal to the amount required
to be withheld.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

As part of the Merger, IQB assumed the existing advisory agreement (the "McAfee
Advisory Agreement") between IQ Biometrix California, Inc. and Eric A. McAfee, a
director of IQB. The McAfee Advisory Agreement had a term of two years and was
to expire in accordance with its term at the end of April 2004, subject to
earlier termination upon the occurrence of certain events. Under the McAfee
Advisory Agreement Mr. McAfee was to receive $9,600 per month. Mr. McAfee was
also entitled to participate in any and all employee benefit plans established
for the employees of IQB and to receive an expense reimbursement for Cupertino
office rent of $2,800 per month. The McAfee Advisory Agreement did not contain
any covenant not to compete. The McAfee Advisory Agreement was terminated as of
March 31, 2003. Mr. McAfee received a total of $48,000 under the agreement in
advisory fees and $30,800 in expense reimbursements prior to termination. On
November 11, 2003, Mr. McAfee stepped down from IQB's board of directors and IQB
entered into a settlement agreement with Mr. McAfee in connection with the
termination of the McAfee Advisory Agreement. Under the settlement agreement,
IQB paid Mr. McAfee $24,000 on November 15, 2003, and agreed to pay Mr. McAfee
an additional $50,000 at such time as IQB raises financing in an aggregate
amount of $2,000,000. In addition, IQB released Mr. McAfee from his agreement to
deliver up to 700,000 shares of IQ Biometrix common stock held by Mr. McAfee to
IQB in connection with the MVION Note described below.
<PAGE>

In connection with a financing transaction with Special Equity IV, L.P.
("SEIVLP") involving warrants, IQB acquired from SEIVLP a Secured Convertible
Promissory Note having a face amount of a $2.5 million dollar (the "MVION Note")
due from MVION, Inc., a technology company known as KachinaGuide. Eric A.
McAfee, a director of IQB, is the sole director and officer of MVION. Daniel
McKelvey, a selling stockholder, is a managing member of Forte Capital Partners
LLC, the general partner of SEIVLP. The KachinaGuide, was a realtime interactive
tool to conduct highly refined searches across heterogeneous data sources.
KachinaGuide's searching technology uses patented algorithms that processed
queries in the users' own words leading customers to specific data (i.e.
products and services) or suggests alternatives based on the users' preferences.
MVION's business failed, and the MVION Note was in default at the time of IQB's
acquisition of it. The MVION Note is secured by a lien on MVION's assets, which
in the event MVION defaulted on the Note would entitle the holder thereof to
acquire all of the assets, including the intellectual property assets of MVION.
When IQB acquired the Note from SEIVLP, management believed that MVION's assets,
particularly its intellectual property assets, were worth the approximately
$168,000 value of the stock and warrants issued to SEIVLP. In addition, Eric
McAfee agreed that if the intellectual property assets of MVION were later
determined to be worth less than the value of the stock and warrants issued to
SEIVLP, he would return a number of shares of IQB's common stock held by him, up
to 700,000 shares, to IQB. At the time IQB entered into the transaction, very
little due diligence was performed on the value of the MVION Note or the
technology securing the MVION Note based upon Mr. McAfee's personal assertions
of the value of the MVION technology and his pledge of stock. As stated above,
IQB later released Mr. McAfee from his obligation to return shares to IQB in
connection with a settlement agreement entered into with Mr. McAfee in November
2003 in connection with the termination of the McAfee Advisory Agreement. IQB
has subsequently determined that the cost of perfecting any patent work and
subsequent incorporation of the intellectual property of MVION into the FACES
software was too costly and, therefore, has not foreclosed on the MVION Note.
However, IQB has recently begun exploring the possibility of exercising its
rights as a secured creditor with respect to the MVION assets securing the MVION
Note, however, IQB can give no assurances as to its ability to collect on MVION
Note, its efforts to exercise its rights with respect to the MVION Note, or the
benefit of the assets securing such note in the event that IQB eventually
acquires ownership of them.

In May and June 2004, IQB issued short term notes to Greg J. Micek, a member of
the board of directors, and Forte Capital Partners, LLC, whose managing partner
is Daniel McKelvey also a member of IQB's board of directors. The loans were for
working capital needs and made in the normal course of business with an annual
interest rate of 6% and are due at the end of July 2004. In July 2004, Mr. Micek
assigned his loan to An individual investor In July and August, IQB issued a
convertible debenture for $225,000 to An individual investor ($75,000) and Forte
Capital Partners, LLC ($150,000). The short term note from Forte Capital
Partners ($50,000), LLC, was rolled into this note. This debenture carries a 10%
annual interest rate and is convertible on the same terms as the next round of
financing. Warrants were issued to both parties in conjunction with this
debenture.

Conflict of Interest Policy

We believe that all transactions with affiliates described above were made on
terms no less favorable to us than could have been obtained from unaffiliated
third parties. Our policy is to require that a majority of the independent and
disinterested non-employee directors on the Board approve all transactions
between IQB and its officers, directors, principal stockholders and their
affiliates. Such transactions will continue to be on terms no less favorable to
us than we could obtain from unaffiliated third parties.

All transactions between us and our officers, directors, principal stockholders
and their affiliates will be approved by a majority of the Board, including a
majority of the independent and disinterested non-employee directors, or, if
required by law, a majority of disinterested stockholders and will continue to
be on terms no less favorable to us than could be obtained from unaffiliated
third parties.
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Documents filed as part of this report:

(i) Consolidated Financial Statements:

Report of Independent Auditors                                   F-1

Consolidated Balance Sheet as of June 30, 2004                   F-2

Consolidated Statements of Income for the years
ended June 30, 2004 and 2003                                     F-3

Consolidated Statements of Stockholders' Equity for
the years ended June 30, 2004 and 2003                           F-4

Consolidated Statements of Cash Flows for the years
 ended June 30, 2004 and 2003                                    F-5

Notes to Consolidated Financial Statements                       F-6

(ii) Financial Statement Schedules:

         Schedule II - Valuation and Qualifying Accounts

(iii) Exhibits:

The following exhibits are filed with this Annual Report or are incorporated
herein by reference:

Exhibit No.   Description
-----------   -----------
2.01  Agreement and Plan of Merger dated as of April 14, 2004, by and among I.Q,
      Biometrix, Inc., Wherify Acquisition, Inc. and Wherify Wireless, Inc.
      (included as Appendix A to the joint proxy statement/prospectus which is
      part of this Registration Statement)

3.01  Certificate of Incorporation of IQB is incorporated herein by reference
      from IQB's Registration Statement on Form SB-2 (SEC File No. 333-41635)
      filed December 29, 1997.

3.02  Bylaws of IQB is incorporated herein by reference from IQB's Registration
      Statement on Form SB-2 (SEC File No. 333-41635) filed December 29, 1997.

3.03  Certificate of Amendment to Certificate of Incorporation of IQB is
      incorporated herein by reference from IQB's (SEC File No. 0-24001)
      Quarterly Report on Form 10-QSB filed with the SEC on February 20, 2001.

4.01  Specimen Common Stock Certificate is incorporated herein by reference from
      IQB's Registration Statement on Form SB-2 (SEC File No. 333-41635) filed
      December 29, 1997.

9.01  Voting Agreement dated as of February 27, 2002 by Pierre Cote, Sylvie
      Lariviere and Eric McAfee in favor of Greg J. Micek is incorporated herein
      by reference from IQB's (SEC File No. 0-24001) Current Report on Form 8-K
      filed with the SEC on April 8, 2002.

10.01 Agreement and Plan of Merger, dated as of February 27, 2002 (the "Merger
      Agreement"), by and among (a) JVWeb, Inc., a Delaware corporation, (b) IQB
      Acquisition Corporation, a newly-formed, wholly-owned Delaware subsidiary
      of JVWeb, Inc., (c) IQ Biometrix California, Inc., a California
      corporation, and (d) Pierre Cote, Sylvie Lariviere and Eric McAfee is
      incorporated herein by reference from IQB's (SEC File No. 0-24001) Current
      Report on Form 8-K filed with the SEC on April 8, 2002.

10.02 Sale and Purchase Agreement dated as of February 27, 2002 by and between
      JVWeb, Inc., a Delaware corporation, and Greg J. Micek is incorporated
      herein by reference from IQB's (SEC File No. 0-24001) Current Report on
      Form 8-K filed with the SEC on April 8, 2002.

10.04 Memorandum of Understanding between the University Business Center and IQ
      Biometrix dated August 1, 2002 between IQB and the University Business
      Center of Fresno State Letter of Intent - University is incorporated
      herein by reference from IQB's (SEC File No. 0-24001) Annual Report on
      Form 10-KSB filed with the SEC on October 15, 2002.
<PAGE>

10.06 Asset Purchase Agreement dated November 12, 2001 between IQ Biometrix
      California, Inc. and CISystems, Inc. is incorporated herein by reference
      from IQB's (SEC File No. 0-24001) Annual Report on Form 10-KSB filed with
      the SEC on October 15, 2002.

10.09 Executive Employment Agreement dated effective as of August 1, 2002 by and
      between IQB and William Scigliano is incorporated herein by reference from
      IQB's (SEC File No. 0-24001) Annual Report on Form 10-KSB filed with the
      SEC on October 15, 2002.

10.10 Memorandum of Agreement regarding stock options dated August 1 2002 by and
      between IQB and William Scigliano is incorporated herein by reference from
      IQB's (SEC File No. 0-24001) Annual Report on Form 10-KSB filed with the
      SEC on October 15, 2002.

10.11 Executive Employment Agreement dated effective as of September 25, 2002 by
      and between IQB and Greg J. Micek is incorporated herein by reference from
      IQB's (SEC File No. 0-24001) Annual Report on Form 10-KSB filed with the
      SEC on October 15, 2002.

10.12 Memorandum of Agreement regarding stock options dated August 1, 2002 by
      and between IQB and Greg J. Micek is incorporated herein by reference from
      IQB's (SEC File No. 0-24001) Annual Report on Form 10-KSB filed with the
      SEC on October 15, 2002.

10.15 Asset Purchase Agreement dated February 11, 2003 by and between Special
      Equity IV, L.P. and IQB is incorporated herein by reference from IQB's
      (SEC File No. 0-24001) Quarterly Report on Form 10-QSB filed with the SEC
      on February 19, 2003.

10.16 Stock Purchase Agreement dated February 11, 2003 by and between Special
      Equity IV, L.P. and IQB is incorporated herein by reference from IQB's
      (SEC File No. 0-24001) Quarterly Report on Form 10-QSB filed with the SEC
      on February 19, 2003.

10.18 Bill of Sale and Assignment dated February 11, 2003 executed by Special
      Equity IV, L.P. in favor of IQB is incorporated herein by reference from
      IQB's (SEC File No. 0-24001) Quarterly Report on Form 10-QSB filed with
      the SEC on February 19, 2003.

10.19 Purchase and Sale Agreement dated February 11, 2003 between IQB and
      Special Equity IV, L.P. is incorporated herein by reference from IQB's
      Registration Statement on Form SB-2 (SEC File No. 333-107570) filed August
      1, 2003.

10.20 Bill of Sale and Assignment of Interest dated February 11, 2003 between
      IQB and Special Equity IV, L.P. is incorporated herein by reference from
      IQB's Registration Statement on Form SB-2 (SEC File No. 333-107570) filed
      August 1, 2003.

10.21 Warrant to Purchase Common Stock dated February 11, 2003 between IQB and
      Special Equity IV, L.P. is incorporated herein by reference from IQB's
      Registration Statement on Form SB-2 (SEC File No. 333-107570) filed August
      1, 2003.

10.22 Stock Purchase Agreement dated February 11, 2003 between IQB and Special
      Equity IV, L.P. is incorporated herein by reference from IQB's
      Registration Statement on Form SB-2 (SEC File No. 333-107570) filed August
      1, 2003.

10.23 Security Agreement dated March 31, 2003 between IQB and Lenders is
      incorporated herein by reference from IQB's Registration Statement on Form
      SB-2 (SEC File No. 333-107570) filed August 1, 2003.

10.24 Warrant to Purchase Common Stock Issued to Holder is incorporated herein
      by reference from IQB's Registration Statement on Form SB-2 (SEC File No.
      333-107570) filed August 1, 2003.

10.25 10% Secured Convertible Debenture dated May 28, 2003 between IQB and John
      J. Micek, Jr. is incorporated herein by reference from IQB's Registration
      Statement on Form SB-2 (SEC File No. 333-107570) filed August 1, 2003.

10.26 10% Secured Convertible Debenture dated May 28, 2003 between IQB and Neil
      Morris is incorporated herein by reference from IQB's Registration
      Statement on Form SB-2 (SEC File No. 333-107570) filed August 1, 2003.
<PAGE>

10.27 10% Secured Convertible Debenture dated May 28, 2003 between IQB and Elisa
      Micek and Forte Capital Partners, LLC is incorporated herein by reference
      from IQB's Registration Statement on Form SB-2 (SEC File No. 333-107570)
      filed August 1, 2003.

10.28 10% Secured Promissory Note between IQB and Network Storage Systems, Inc.
      dated May 4, 2003 is incorporated herein by reference from IQB's
      Registration Statement on Form SB-2 (SEC File No. 333-107570) filed August
      1, 2003.

10.29 Security Agreement between IQB the Lenders dated May 4, 2003 is
      incorporated herein by reference from IQB's Registration Statement on Form
      SB-2 (SEC File No. 333-107570) filed August 1, 2003.

10.30 Assignment of Rights and Consent to Assignment between IQB and Network
      Storage Systems, Inc, dated May 14, 2003 is incorporated herein by
      reference from IQB's Registration Statement on Form SB-2 (SEC File No.
      333-107570) filed August 1, 2003.

10.31 Assignment of Accounts Receivable between IQB and Network Storage Systems,
      Inc, dated May 14, 2003 is incorporated herein by reference from IQB's
      Registration Statement on Form SB-2 (SEC File No. 333-107570) filed August
      1, 2003.

10.32 6% Secured Convertible Debenture dated September 19, 2003 between IQB and
      Platinum Partners Value Arbitrage Fund, LP 2003 is incorporated herein by
      reference from IQB's Registration Statement on Form 10-KSB-2 (SEC File No.
      000-24001) filed October 14, 2003.

10.33 6% Secured Convertible Debenture dated September 19, 2003 between IQB and
      Platinum Partners Value Macro Fund, LP 2003 is incorporated herein by
      reference from IQB's Registration Statement on Form 10-KSB-2 (SEC File No.
      000-24001) filed October 14, 2003.

10.34 Warrant to Purchase Common Stock Issued to Platinum Partners Value
      Arbitrage Fund, LP 2003 is incorporated herein by reference from IQB's
      Registration Statement on Form 10-KSB-2 (SEC File No. 000-24001) filed
      October 14, 2003.

10.35 Warrant to Purchase Common Stock Issued to Platinum Partners Macro Fund,
      LP 2003 is incorporated herein by reference from IQB's Registration
      Statement on Form 10-KSB-2 (SEC File No. 000-24001) filed October 14,
      2003.

10.36 6% Secured Convertible Debenture dated October 16, 2003 between IQB and
      William Ritger is incorporated herein by reference from IQB's Registration
      Statement on Form 10-QSB (SEC File No. 000-24001) filed November 14, 2003.

10.37 6% Secured Convertible Debenture dated November 3, 2003 between IQB and
      Jacob Engel is incorporated herein by reference from IQB's Registration
      Statement on Form 10-QSB (SEC File No. 000-24001) filed November 14, 2003.

10.38 Warrant to Purchase Common Stock Issued to William Ritger is incorporated
      herein by reference from IQB's Registration Statement on Form 10-QSB (SEC
      File No. 000-24001) filed November 14, 2003.

10.39 Warrant to Purchase Common Stock Issued to Jacob Engel is incorporated
      herein by reference from IQB's Registration Statement on Form 10-QSB (SEC
      File No. 000-24001) filed November 14, 2003.

10.40 Employment Agreement between IQ Biometrix and William B. Scigliano dated
      March 2, 2004.

10.41 Consulting Agreement between IQ Biometrix and Daniel P. McKelvey dated
      August 1, 2003.

10.42 Agreement and Plan of Merger dated April 14, 2004 is incorporated by
      reference from IQB's Current Report on Form 8-K (SEC File No. 000-24001)
      filed April 15, 2004.

10.43 10% Secured Convertible Debenture dated August 18, 2004 between IQB and
      John Micek, Jr. and Forte Capital Partners, LLC.
<PAGE>

10.44 Warrant to Purchase Common Stock Issued to Forte Capital Partners, LLC
      dated July 2004.

10.45 Warrant to Purchase Common Stock Issued to John Micek, Jr. dated July
      2004.

10.46 Amendment to consulting agreement between IQB and Daniel McKelvey dated
      August 1, 2004.

10.47 Warrant to Purchase Common Stock Issued to Forte Capital Partners, LLC
      dated August 17, 2004.

10.48 Warrant to Purchase Common Stock Issued to John Micek, Jr. dated August
      17, 2004.

14.01 Code of Ethics

23.01 Consent of Malone & Bailey, PLLC.

31.1  Sarbanes Oxley Section 302 Certification.

32.1  Sarbanes Oxley Section 906 Certification

99.01 IQB's Year 2002 Consultant Compensation Plan is incorporated herein by
      reference from IQB's Registration Statement on Form S-8 (SEC File No.
      333-96873) filed July 7, 2002, Item 8, Exhibit 4.02.

99.02 IQB's Year 2003 Consultant Compensation Plan is incorporated herein by
      reference from IQB's Registration Statement on Form S-8 (SEC File No.
      333-107447) filed July 28, 2003, Item 8, Exhibit 4.02.

99.03 IQB's 2000 Non-Qualified Stock Option Plan is incorporated herein by
      reference from IQB's Registration Statement on Form S-8 (SEC File No.
      333-43884) filed August 16, 2000, Item 8, Exhibit 4.02.

99.04 IQ Biometrix California, Inc. 2001 Stock Plan is incorporated herein by
      reference from IQB's (SEC File No. 0-24001) Annual Report on Form 10-KSB
      filed with the SEC on October 15, 2002, Item 13(a) (iii), Exhibit 99.03.

99.05 IQB's Year 2004 Consultant Compensation Plan is incorporated herein by
      reference from IQB's Registration Statement on Form S-8 (SEC File No.
      333-112937) filed February 18, 2004, Item 8, Exhibit 4.1.

(b) Reports on Form 8-K

         Form 8-K filed on April 19, 2004 related to IQB's press release
announcing the planned merger with Wherify Wireless, Inc. and filing the
Agreement and Plan of Merger dated April 14, 2004.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         Malone & Bailey, PLLC, Certified Public Accountants, are IQB's
independent auditors to examine the financial statements of IQB for the fiscal
years ended June 30, 2003 and June 30, 2004. Malone & Bailey, PLLC has performed
the following services and has been paid the following fees for these fiscal
years:

Audit Fees

         Malone & Bailey, PLLC was paid aggregate fees of approximately $35,000
for the fiscal year ended June 30, 2003 and approximately $48,000 for the fiscal
year ended June 30, 2004 for professional services rendered for the audit of the
IQB's annual financial statements and for the reviews of the financial
statements included in IQB`s quarterly reports on Form 10-QSB during these
fiscal years.
<PAGE>

Audit - Related Fees

         Malone & Bailey, PLLC was not paid any additional fees for the fiscal
year ended June 30, 2003 and June 30, 2004 for assurance and related services
reasonably related to the performance of the audit or review of IQB's financial
statements.

Tax Fees

         Malone & Bailey, PLLC was not paid any aggregate fees for the fiscal
years ended June 30, 2003 and June 30, 2004 for professional services rendered
for tax compliance, tax advice and tax planning.

Other Fees

         Malone & Bailey, PLLC was paid no other fees for professional services
during the fiscal years ended June 30, 2003 and June 30, 2004.

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders IQ Biometrix, Inc. Fremont,
California

We have audited the accompanying consolidated balance sheet of IQ Biometrix,
Inc. as of June 30, 2004 and the related statements of operations, stockholders'
deficit and cash flows for the two years then ended. These financial statements
are the responsibility of IQ Biometrix's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IQ Biometrix, Inc.
as of June 30, 2004 and the results of its operations and its cash flows for the
two years then ended, in conformity with accounting principles generally
accepted in the United States.

The accompanying financial statements have been prepared assuming that IQ
Biometrix will continue as a going concern. As shown in the financial
statements, IQ Biometrix incurred net losses of $8,391,143 and $3,887,691 in
fiscal 2004 and 2003, respectively, and has a working capital deficiency of
$2,478,431 and a stockholders' deficit of $2,385,591 as of June 30, 2004. These
conditions raise substantial doubt about IQ Biometrix's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.


MALONE & BAILEY, PLLC
Houston, Texas

September 9, 2004


                                       F-1
<PAGE>

                               IQ BIOMETRIX, INC.
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2004

                                     ASSETS

<TABLE>
<CAPTION>
<S>                                                                                <C>
CURRENT ASSETS:
   Cash                                                                            $      6,860
   Trade accounts receivable, net of allowance for doubtful accounts of $6,000           20,255
   Inventory                                                                              1,027
   Prepaid expenses                                                                      65,036
                                                                                   ------------
                         Total current assets                                            93,178

INTANGIBLES, net                                                                         87,572
OFFICE EQUIPMENT, net                                                                     5,268
                                                                                   ------------
                         Total assets                                              $    186,018
                                                                                   ============

                          LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
   Convertible debentures, net of unamortized discount of $183,333                 $  1,666,667
   Note payable                                                                         100,000
   Committed stock                                                                      246,851
   Accounts payable                                                                     328,818
   Accrued expenses                                                                     229,273
                                                                                   ------------
                         Total current liabilities                                    2,571,609
                                                                                   ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
   Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued
   Common stock, $0.01 par value; 50,000,000 shares authorized; 24,701,190
     shares outstanding                                                                 247,012
   Additional paid-in capital                                                        10,630,496
   Accumulated deficit                                                              (13,263,099)
                                                                                   ------------
                         Total stockholders' deficit                                 (2,385,591)
                                                                                   ------------
                         Total liabilities and stockholders' deficit               $    186,018
                                                                                   ============
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.


                                       F-2
<PAGE>

                               IQ BIOMETRIX, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       Years Ended June 30, 2004 and 2003

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

Revenue - software sales                      $    269,724         $    105,772

Operating expenses
      Cost of sales                                 49,748               25,851
      Selling expense                              373,606              260,477
      General and administrative                 6,650,535            2,896,509
      Research and development                     171,918              147,562
      Interest, net                              1,349,090              282,461
      Impairment                                         0              350,000
      Depreciation and amortization                 65,970               30,603
                                              ------------         ------------
        Total operating expenses                 8,660,867            3,993,463
                                              ------------         ------------
Net Loss                                      $ (8,391,143)        $ (3,887,691)
                                              ============         ============

Basic and Diluted loss per share                    $(0.38)              $(0.23)
Weighted average shares outstanding             21,979,673           16,928,344

See accompanying summary of accounting policies and notes to financial
statements.


                                      F-3
<PAGE>

                               IQ BIOMETRIX, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

             Years ended June 30, 2004 and Year Ended June 30, 2003

<TABLE>
<CAPTION>
                                            Common
                                    Shares           Amount          Capital         Earnings              Total
                                   --------------------------------------------------------------------------------------
<S>                                   <C>             <C>            <C>             <C>                     <C>
Balances, June 30, 2002               16,454,285      $  164,543     $   970,469     $    (984,265)          $   150,747

Shares sold                              500,000           5,000         195,000                                 200,000
Options exercised                        103,000           1,030           9,270                                  10,300
Shares issued for services             1,848,600          18,486       1,588,388                               1,606,874
Options issued for services                                    0         184,630                                 184,630
Discount - convertible debt                    0               0         879,641                                 879,641
Discount - note payable                                        0          22,561                                  22,561
Net loss                                                                                (3,887,691)           (3,887,691)
                                   --------------------------------------------------------------------------------------
Balances, June 30, 2003               18,905,885         189,059       3,849,959        (4,871,956)             (832,938)
                                   --------------------------------------------------------------------------------------

Shares for stock payable                 760,000           7,600         219,895                                 227,495
Options and warrants exercised           652,840           6,528          63,172                                  69,700
Shares issued for services             4,121,717          41,217       5,051,668                               5,092,885
Shares for accrued expenses              189,637           1,896         173,518                                 175,414
Shares for intangibles                    71,111             711          54,285                                  54,996
Discount convertible debt                                      0         700,000                                 700,000
Option expense                                                 0         518,000                                 518,000
Net loss                                                                                (8,391,143)           (8,391,143)
                                   --------------------------------------------------------------------------------------
Balances, June 30, 2004               24,701,190     $   247,012    $ 10,630,496     $ (13,263,099)          $(2,385,591)
                                   ======================================================================================
</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.


                                      F-4
<PAGE>

                               IQ BIOMETRIX, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       Years Ended June 30, 2004 and 2003

<TABLE>
<CAPTION>
                                                                 2004              2003
                                                              -----------       -----------
<S>                                                           <C>               <C>
OPERATING ACTIVITIES:

     Net loss                                                 $(8,391,143)      $(3,887,691)

     Adjustments to reconcile net loss to
       net cash used in operating activities
         Depreciation and amortization                             65,970            30,603
         Provision  for bad debt                                    8,496           350,000
         Option Expense                                           518,000           184,630
         Common stock and options issued for services           5,092,885         1,606,874
         Amortization of debt discount                          1,178,847           240,022
         Changes in assets and liabilities:
             Accounts receivable                                  (22,778)           (5,973)
             Prepaid expenses                                     (27,154)          (11,603)
             Inventory                                              4,981            24,952
             Accrued liabilities                                  230,472           174,217
             Committed stock                                      246,851           227,495
             Accounts payable                                     185,897            85,805
                                                              -----------       -----------
     Net cash used in operating activities                       (908,676)         (980,669)
                                                              -----------       -----------

     Investing activities
             Purchase of fixed assets                              (1,845)          (11,161)
             Purchase of intellectual property                         --                --
             Collection of Advance to NSS                          50,000          (400,000)
             Purchase of intangible asset                              --           (63,002)
                                                              -----------       -----------
     Net cash used in investing activities                         48,155          (474,163)
                                                              -----------       -----------

     Financing activities
             Proceeds from sale of common stock                        --           200,000
             Proceeds from exercise of options                     69,700            10,300
             Proceeds from new convertible notes payable          700,000         1,200,000
             Payments on short term notes payable                (100,000)               --
             Proceeds from short term notes payable               100,000            50,000
                                                              -----------       -----------
     Net cash provided by financing activities                    769,700         1,460,300
                                                              -----------       -----------

     Net increase (decrease) in cash                              (90,821)            5,468

     Cash, beginning of year                                       97,681            92,213
                                                              -----------       -----------

     Cash, end of year                                        $     6,860       $    97,681
                                                              ===========       ===========
     Non-Cash:
             Stock for accrued expenses                       $   175,414       $        --
             Stock for intangibles                                 54,996                --

</TABLE>

See accompanying summary of accounting policies and notes to financial
statements.


                                      F-5
<PAGE>

                               IQ BIOMETRIX, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

IQ Biometrix, Inc. ("IQ Biometrix") is a security software and services company
headquartered in Fremont, California. IQ Biometrix is a provider of facial
composite software to local and national law enforcement agencies, the US
military and other government agencies across North America.

The FACES technology is a software tool that allows the creation and re-creation
of billions of human faces. FACES replaces the need for a human sketch artist.
This advanced technology can be used by any agency or organization whose
responsibility lies in the public safety and security arena. The morphological
coding of the FACES database of approximately 6,000 facial features has made it
possible to set an industry standard for the comparison of facial images from
law enforcement agencies, private security and businesses.

IQ Biometrix California, Inc. ("IQB - California") was formed July 10, 2001 as a
California corporation to purchase certain software-related assets from a
Canadian bankruptcy court from a former Canadian company named InterQuest, Inc.
("InterQuest"). The software was developed in Canada beginning in 1988. The
software was completed and marketing started in 1998. In 2000, InterQuest filed
for bankruptcy protection in a Canadian court and went dormant. IQB - California
arranged for purchase of the software and various packaging supplies in 2001 and
paid $118,818 in early 2002. The purchase price was allocated as follows:
$80,818 to software and $38,000 to supplies inventory.

On March 22, 2002, IQB - California agreed to a reorganization with JVWeb, an
inactive publicly-traded Delaware company. Pursuant to this acquisition, IQ
Biometrix - California shareholders agreed to exchange all of their shares for
12,854,231 shares of JVWeb. JVWeb also formed a new wholly-owned subsidiary, IQB
Acquisition Corporation, which was renamed at the merger date to IQ Biometrix
Operations, Inc., a Delaware company. IQB - California was merged into IQ
Biometrix Operations, Inc. which remains a wholly-owned subsidiary of JVWeb.
This reorganization is accounted for as a "reverse merger" with IQ Biometrix -
California (now IQB Operations, Inc.) treated as the acquiror which purchased
JVWeb and accounted for the acquisition using the purchase method. IQ Biometrix
officially changed its name to IQ Biometrix, Inc. in October 2002.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of IQ Biometrix, Inc.
and its subsidiary IQB Operations after the elimination of inter-company
accounts and transactions.

CASH AND CASH EQUIVALENTS

IQ Biometrix considers all highly liquid debt instruments with original
maturities not exceeding three months to be cash equivalents. At June 30, 2004,
IQ Biometrix did not hold any cash equivalents.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out method) or
market. IQ Biometrix periodically reviews for obsolete and slow-moving inventory
based on historical usage, and future requirements. At June 30, 2004, inventory
consisted of packaging materials related to the FACES 4.0 software.
<PAGE>

OFFICE EQUIPMENT

Equipment is stated at cost. Depreciation is computed using the straight-line
method over 3 to 10 years.

      Computer equipment - 3 yrs                    $ 13,467
      Furniture & fixtures - 10 yrs                    1,000
                                                    --------
                                                      14,467
      Less: accumulated depreciation                  (9,199)
                                                    --------
                                                    $  5,268
                                                    ========

INTANGIBLES

Intangibles consist of software, including purchased software, and development
of new software products and enhancements to existing software products. Until
technological feasibility is established, costs associated with software
development, including costs associated with the acquisition of intellectual
property relating to software development is expensed as incurred. After
technological feasibility is established and until the products are available
for sale, software development costs are capitalized and amortized over the
greater of the amount computed using (a) the ratio that current gross revenue
for the product bears to the total of current and anticipated future gross
revenue for that product or (b) the straight line method over the estimated
economic life of the product including the period being reported on. The
amortization period has been determined as the life of the product, which is
three years.

During fiscal 2003 and 2004, IQ Biometrix's software costs were amortized using
the straight-line method over three years resulting in $61,689 of amortization
in fiscal 2004. IQB estimates its amortization expense to be approximately
$50,000 in fiscal 2005 and $36,000 in fiscal 2006.

The following summarizes intangible assets at June 30, 2004:

      Original software cost                     $    80,818
      FACES 4.0 upgrade                              117,998
                                                 -----------
                                                     198,816
      Less: accumulated amortization                 111,244
                                                 -----------
                                                 $    87,572
                                                 ===========

REVENUE RECOGNITION

IQ Biometrix follows the provisions of the statement of position "SOP" 97-2,
Software Revenue Recognition as amended by SOP 98-9, Modification of SOP 97-2
Software Revenue Recognition, with Respect to Certain Transactions. Generally,
IQ Biometrix recognizes revenue when it is realized or realizable and earned. IQ
Biometrix considers revenue realized or realizable and earned when persuasive
evidence of an arrangement exists, the product has been shipped or the services
have been provided to the customer, the sales price is fixed or determinable and
collectibility is reasonably assured. IQ Biometrix reduces revenue for estimated
customer returns, rotations and sales rebates when such amounts are estimable.
When not estimable, IQ Biometrix defers revenue until the product is sold to the
end customer. As part of its product sales price, IQ Biometrix provides
telephone support, which is generally utilized by the customer shortly after the
sale. The cost of the phone support is not significant but is accrued in the
financial statements. To date, IQ Biometrix has not had any product returns.

IQ Biometrix recognizes revenue for training on the date the training is
performed. IQ Biometrix has only recognized approximately $11,000 related to
training revenue since inception.
<PAGE>

INCOME TAXES

The asset and liability approach is used to account for income taxes by
recognizing deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. IQ Biometrix records a valuation allowance to
reduce the deferred tax assets to the amount that is more likely than not to be
realized.

LOSS PER COMMON SHARE

The basic net loss per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding.

Diluted net loss per common share is computed by dividing the net loss, adjusted
on an "as if converted" basis, by the weighted average number of common shares
outstanding plus potential dilutive securities. For fiscal 2004 and 2003,
potential dilutive securities had an anti-dilutive effect and were not included
in the calculation of diluted net loss per common share.

USE OF ESTIMATES

In preparing financial statements, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities in the balance sheet
and revenue and expenses in the income statement. Actual results could differ
from those estimates.

STOCK BASED COMPENSATION

IQ Biometrix adopted the disclosure requirements of Financial Accounting
Standard No. 123, Accounting for Stock-Based Compensation (FAS No. 123) and FAS
No. 148 with respect to pro forma disclosure of compensation expense for options
issued. For purposes of the pro forma disclosures, the fair value of each option
grant is estimated on the grant date using the Black-Scholes option-pricing
model. Had IQ Biometrix recorded compensation expense for the fair value of
stock options, net loss and loss per share would have been affected as indicated
by the pro forma amounts below.

IQ Biometrix applies APB No. 25 in accounting for its stock option plans and,
accordingly, no compensation cost has been recognized in IQ Biometrix's
financial statements for stock options under any of the stock plans which on the
date of grant the exercise price per share was equal to or exceeded the fair
value per share. However, compensation cost has been recognized for warrants and
options granted to non-employees for services provided. If under FAS No. 123, IQ
Biometrix determined compensation cost based on the fair value at the grant date
for its stock options, net loss and loss per share would have been increased to
the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                           2004              2003
                                                        ------------      -----------
<S>                                                     <C>               <C>
Net loss
   As Reported                                          $(8,391,143)      $(3,887,691)
   Deduct: total stock based employee compensation
     expense determined under fair value method            (228,072)         (466,340)
   Add: toal stock based employee compensation
     expense determined under intrinsic value method        108,967                --
                                                        -----------------------------
   Pro forma                                            $(8,510,248)      $(4,354,031)
                                                        =============================

Basic and diluted loss per share
   As reported                                          $     (0.38)      $     (0.23)

   As reported                                          $     (0.38)      $     (0.26)
</TABLE>
<PAGE>

The weighted average fair value of each option granted under IQ Biometrix's
employee option plans during fiscal 2004 and 2003 was approximately $1.66 and
$0.75, respectively. These amounts were determined using the Black Scholes
option-pricing model, which values options based on the stock price at the grant
date, the expected life of the option, the estimated volatility of the stock,
expected dividend payments and the risk-free interest rate over the expected
life of the option. The dividend yield was zero in 2004 and 2003. The expected
volatility was based on the historic stock prices. The expected volatility
ranged from 130% to 212%, and 133% for 2004 and 2003, respectively. The
risk-free interest rate was the rate available on zero coupon U.S. government
issues with a term equal to the remaining term for each grant. The risk-free
rate was ranged from 1.5% to 3.5%% in 2004 and 3.5% in 2003. The expected life
of the options was estimated to be between two and five years.

The effects of applying FAS 123 on providing pro-forma disclosures are not
necessarily likely to be representative of the effects on reported net income
for future years

RECENT ACCOUNTING PRONOUNCEMENTS

IQ Biometrix does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on its results of operations,
financial position or cash flow.

NOTE 2 - GOING CONCERN

IQ Biometrix's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and settlement of
liabilities and commitments in the normal course of business for the foreseeable
future. Since inception in July 2001, IQ Biometrix has accumulated losses
aggregating $13,263,099, has a negative working capital of $2,478,431; and a
stockholders' deficit of $2,385,591 as of June 30, 2004 all of which raise
substantial doubt about IQ Biometrix's ability to continue as a going concern.

Management's plans for IQ Biometrix's continued existence include selling
additional stock or borrowing additional funds to pay overhead expenses while
current marketing efforts continue to raise its sales volume.

IQ Biometrix's future success is dependent upon its ability to achieve
profitable operations, generate cash from operating activities and obtain
additional financing. There is no assurance that IQ Biometrix will be able to
generate sufficient cash from operations, sell additional shares of common stock
or borrow additional funds.

IQ Biometrix's inability to obtain additional cash could have a material adverse
effect on its financial position, results of operations and its ability to
continue in existence. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

NOTE 3 - ACCRUED EXPENSES

Accrued expenses consisted of the following at June 30, 2004:

      Accrued interest                              $172,084
      Accrued insurance                                5,846
      Accrued payroll                                 16,342
      Accrued commissions                             30,000
      Acrrued taxes                                    5,001
                                                    --------
                                                    $229,273
                                                    ========

NOTE 4 - NOTE PAYABLE

In April and May, 2004, IQ Biometrix received a total of $50,000 respectively,
for a 6% unsecured demand note payable from Greg J. Micek, a former officer and
current director. In June 2004, IQ Biometrix received $50,000 for a 6% unsecured
demand note payable from Forte Capital Partners, LLC, which is managed by Daniel
McKelvey, a current board member. The total note balance at June 30, 2004 is
$100,000.
<PAGE>

NOTE 5 - CONVERTIBLE DEBENTURES

In August and September 2002, IQ Biometrix sold convertible debentures with a
face value of $350,000 to various individuals. The debentures are convertible
into shares of IQ Biometrix at the option of the holder at 80% of the average
closing price as of date of conversion, with a minimum conversion amount of $.50
and a maximum conversion amount of $1.50 per share. The debentures accrue
interest at 6% per annum and were due on August 1, 2003, but were not paid. The
conversion price of the debentures is subject to adjustment at any time as the
result of any subdivision, stock split, and combination of shares or
recapitalization. Each debenture holder should have received 10,000 shares of
common stock per $100,000 loaned as an origination fee. As of June 30, 2004, no
shares have been issued.

In March, April, and May 2003, IQ Biometrix sold convertible debentures with a
face value of $400,000 and warrants to acquire up to 1,600,000 shares of common
stock to two investors. The debentures are convertible into shares of IQ
Biometrix at $.20 per share at maturity or upon prepayment of at least 75% of
the face amount at the option of the holder. The debentures are due on September
30, 2004 and accrue interest at 10% per annum payable at maturity. At the option
of the holder, the interest can be paid in either cash or additional shares of
common stock. Warrants exercisable for 400,000 shares of IQ Biometrix common
stock were issued upon the closing of this transaction and additional warrants
exercisable for 400,000 shares of IQ Biometrix common stock are issued every
quarter until the debentures mature. The warrants are exercisable for a period
of five years from the date of issuance. The conversion price of the debentures
and exercise price of the warrants are subject to adjustment at any time as the
result of any subdivision, stock split, and combination of shares or
recapitalization.

In May and June 2003, IQ Biometrix sold convertible debentures with a face value
of $400,000 and warrants exercisable for up to 320,000 shares of IQ Biometrix
common stock to two individuals. The debentures are convertible into shares of
IQ Biometrix at $.30 to $.50 per share at maturity or upon prepayment of at
least 75% of the face amount at the option of the holder. The debentures are due
on June 1, 2004 and accrue interest at 10% per annum payable at maturity. At the
option of the holder, the interest can be paid in either cash or additional
shares of common stock. The warrants are exercisable at $.50 per share for a
period of five years from the date of issuance. The conversion price of the
debentures and exercise price of the warrants are subject to adjustment at any
time as the result of any subdivision, stock split, and combination of shares or
recapitalization.

In September and October 2003, IQB issued its 6% convertible debentures due on
September 18, 2004 in the aggregate principal amount of $500,000 and $200,000,
respectively, to four accredited investors. Of these four investors, two were
affiliated institutional funds. These debentures are convertible anytime at the
option of the holder into IQ Biometrix common stock at $.64 per share. In
addition, IQ Biometrix issued warrants to the holders of these debentures to
purchase up to 1,093,750 shares of the common stock of IQ Biometrix at a per
share exercise price of $1.25.

Under generally accepted accounting principles, IQ Biometrix is required to
record the value of the beneficial conversion feature of these convertible
debentures as a debt discount. In addition, the value of the warrants using the
Black Scholes method is also recorded as a debt discount. The total debt
discount recorded on the sales of convertible debentures during fiscal 2004 was
approximately $700,000. This debt discount will be amortized and charged to
interest expense over the terms of the respective debentures. In the event the
investors convert the debentures prior to the maturity of the agreements then
generally accepted accounting principles require IQ Biometrix to expense the
unamortized balance of the debt discount in full.

Through June 30, 2004, approximately $1,179,000 has been recorded as non-cash
interest expense on IQ Biometrix statement of operations relative to the
amortization of debt discount on these convertible debentures. Going forward, IQ
Biometrix will incur non-cash interest expense of approximately $183,000 through
June 30, 2005.

Accrued and unpaid interest on these notes is approximately $172,000 at June 30,
2004.

NOTE 6 - CAPITAL STOCK

The total number of shares of capital stock which IQ Biometrix has the authority
to issue is 60,000,000 shares. This included 10,000,000 shares of $.01 par value
preferred stock and 50,000,000 share of $.01 par value common stock. The board
of directors is authorized to create the preferred stock and designate the
powers, preferences and rights of the preferred stock.

During fiscal 2004, IQ Biometrix issued 4,121,717 shares of its common stock to
various non-employees for consulting services valued at $5,092,885. IQ Biometrix
also issued 760,000 shares of stock valued at approximately 227,00 for stock
payable from the June 2003 balance sheet, 189,637 shares valued at approximately
$175,000 for accrued expenses and 71,111 valued at approximately $55,000 as
payment for intangible property pertaining to our product . The stock was valued
using the closing price of IQB's common stock on the date issued and expensed
immediately because, in general, the consultants had fully performed the
services. This is in accordance with EITF 00-18, Accounting Recognition for
Certain Transactions involving Equity Instruments Granted to Other Than
Employees, which requires recognizing equity instruments when issued if no
obligation to earn the equity instrument exists.
<PAGE>

During fiscal 2004, consultants exercised options to purchase 652,840 shares of
common stock. IQ Biometrix received proceeds of $69,700.

NOTE 7 - STOCK OPTIONS AND WARRANTS

IQ Biometrix's 2001 Stock Option Plan provides for the grant of both qualified
and non-qualified stock options to directors, employees and consultants. The
option grants are administered by the Board of Directors, who has substantial
discretion to determine which persons, amounts, time, price, exercise terms, and
restrictions, if any.

The following table summarizes stock option activity:

Outstanding July 1, 2002                                              2,310,162
Granted                                                               1,855,000
Canceled or expired                                                     (58,320)
Exercised                                                              (103,000)
                                                                     ----------
Outstanding June 30, 2003                                             4,003,842
                                                                     ==========

Exercisable June 30, 2003                                             2,738,871
                                                                     ==========

Weighted average option price of options
granted during the year                                              $     0.32
                                                                     ==========

Average remaining years of contractual life                                   3
                                                                     ==========

Outstanding July 1, 2003                                              4,003,842
Granted                                                                 991,500
Canceled or expired                                                  (1,502,573)
Exercised                                                              (582,840)
                                                                     ----------
Outstanding June 30, 2004                                             2,909,929
                                                                     ==========

Exercisable June 30, 2004                                             1,741,089
                                                                     ==========

Weighted average option price of options
granted during the year                                              $     1.30
                                                                     ==========

Average remaining years of contractual life                                   4
                                                                     ==========

Included in the 991,500 options issued during fiscal 2004 were 541,500 options
issued to third party consultants. During fiscal 2004, IQ Biometrix expensed
$409,033 related to the fair value of the options issued to these consultants.
The fair value was determined using the Black Scholes pricing model, which
values options based on the stock price at the grant date, the expected life of
the option, the estimated volatility of the stock, expected dividend payments
and the risk-free interest rate over the expected life of the option. The
dividend yield was zero. The expected volatility ranged from 130% to 212% and
was based on the historic stock prices. The risk-free interest rate was the rate
available on zero coupon U.S. government issues with a term equal to the
remaining term for each grant. The risk-free rate ranged from 1.5% to 3.5% in
2004. The expected life of the options was estimated to be between two and five
years.
<PAGE>

The following table summarizes stock warrant activity:

Outstanding July 1, 2002                                  --
Granted                                            1,720,000
Canceled or expired                                       --
Exercised                                                 --
                                                  ----------
Outstanding June 30, 2003                          1,720,000
                                                  ==========

Exercisable June 30, 2003                          1,720,000
                                                  ==========

Weighted average exercise price                   $     0.72
                                                  ==========

Outstanding July 1, 2003                           1,720,000
Granted                                            1,881,200
Canceled or expired                               (1,000,000)
Exercised                                            (70,000)
                                                  ----------
Outstanding June 30, 2004                          2,531,200
                                                  ==========

Exercisable June 30, 2004                          2,531,200
                                                  ==========

Weighted average exercise price                   $     0.53
                                                  ==========

In September 2003, IQ Biometrix issued warrants exercisable for 400,000 shares
of IQB's common stock to investors in connection with a sale of convertible
debentures in the amount of $500,000. IQ Biometrix valued these warrants using
the Black Scholes pricing model and will amortize the cost of the warrants over
the term of the debentures and will include these costs as part of the debt
discount. There was also a grant of 51,200 warrants to a third party as a
finder's fee for the financing. IQ Biometrix valued these warrants using the
Black Scholes pricing model and expensed the cost in the quarter ended September
30, 2003.

In October 2003, IQ Biometrix issued warrants exercisable for 160,000 shares of
IQB's common stock to investors in connection with a sale of convertible
debentures in the amount of $200,000. IQ Biometrix valued these warrants using
the Black Scholes pricing model and will amortize the cost of the warrants over
the term of the debentures and will include these costs as part of the debt
discount.

In April 2003, IQ Biometrix issued 400,000 warrants to investors in connection
with a sale of convertible debentures in the amount of $400,000. Additional
warrants of 1,200,000 as part of the origination fee related to this debenture
have accrued. IQ Biometrix valued these warrants using the Black Scholes pricing
model and will amortize the cost of the warrants over the term of the debentures
and will include these costs as part of the debt discount.

The fair value of the warrants was determined using the Black Scholes pricing
model, which values warrants based on the stock price at the grant date, the
expected life of the warrant, the estimated volatility of the stock, expected
dividend payments and the risk-free interest rate over the expected life of the
option. The dividend yield was zero in 2004 and 2003. The expected volatility
was based on IQB's historic stock prices. The expected volatility ranged from
130% to 212% for all warrants issued in 2004. The risk-free interest rate was
the rate available on zero coupon U.S. government issues with a term equal to
the remaining term for each grant. The risk-free rate ranged from 1.5% to 3.5%
in 2004 and the expected life of the warrants was estimated to be between two
and five years.

NOTE 8 - INCOME TAXES

Income taxes are not due since IQ Biometrix has incurred a loss since inception.
IQ Biometrix has deductible net operating losses of approximately $5,400,000 at
June 30, 2004. These expire 20 years after incurred.
<PAGE>

Components of deferred tax assets and liabilities at June 30, 2004 are as
follows:

Deferred tax asset                               $ 1,800,000
Valuation allowance                               (1,800,000)
                                                 -----------
   Net deferred tax asset                        $        --
                                                 ===========

IQ Biometrix has recorded a full valuation allowance against its deferred tax
asset since it believes it is more likely than not that such deferred tax asset
will not be realized. The valuation allowance for deferred tax assets as of June
30, 2004 is approximately $1,800,000. The net change in the total valuation
allowance for the years ended June 30, 2004 and 2003 was an increase of $906,000
and $588,000, respectively.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

IQ Biometrix signed an office space lease effective February 1, 2004 and
expiring January 31, 2005. The rent amount is $935 per month. During the year
ended June 30, 2004, rent expense was $11,220 and for the year ended June 30,
2003 it was $91,808. The current lease expires in December 2004, and due to the
pending merger, the lease has not been extended.

IQ Biometrix has a commitment to issue stock valued at approximately $247,000 in
its liabilities at June 30, 2004 for consultants. These shares were issued
subsequent to year end as payment for services performed in fiscal 2004.

The company is currently named in a lawsuit with a former director seeking
damages estimated at $75,000. IQ Biometrix is vigorously defending itself in
this matter.

NOTE 10 - RELATED PARTY TRANSACTIONS

In May and June 2004, IQB issued short term notes to Greg J. Micek, a member of
the board of directors, and Forte Capital Partners, LLC, whose managing partner
is Daniel McKelvey also a member of IQB's board of directors. The loans were for
working capital needs and made in the normal course of business with an annual
interest rate of 6% and are due at the end of July 2004. In July 2004, Mr. Micek
assigned his loan to an individual investor. In July and August, IQB issued a
convertible debenture for $225,000 to an individual investor ($75,000) and Forte
Capital Partners, LLC ($150,000). The short term note from Forte Capital
Partners ($50,000), LLC, was rolled into this note. This debenture carries a 10%
annual interest rate and is convertible on the same terms as the next round of
financing. Warrants were issued to both parties in conjunction with this
debenture.

NOTE 11 - SUBSEQUENT EVENTS

Subsequent to June 30, 2004, IQ Biometrix issued 596,867 shares of its common
stock to various consultants. IQ Biometrix recorded $503,377 in expense based on
the closing price of the stock on the date issued.

In July and August, IQB issued a convertible debenture for $225,000 to an
individual investor ($75,000) and Forte Capital Partners, LLC ($150,000). A
short term note from Forte Capital Partners ($50,000), LLC, was rolled into this
note. This debenture carries a 10% annual interest rate and is convertible on
the same terms as the next round of financing. Warrants were issued to both
parties in conjunction with this debenture.

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, IQ Biometrix, Inc. has duly caused this annual report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.

September 30, 2004                              IQ BIOMETRIX, INC.


                                             By: /s/ William Scigliano
                                                -------------------------------
                                                William Scigliano,
                                                Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

Name                              Title                              Date

/s/ William Scigliano       Chief Executive Officer           September 30, 2004
----------------------      (Principal Executive Officer)
William Scigliano

/s/ Greg  J. Micek          Director                          September 30, 2004
----------------------
Greg J. Micek

/s/ Daniel P. McKelvey      Director                          September 30, 2004
----------------------
Daniel P. McKelvey

/s/ Michael Walsh           Chief Financial Officer,          September 30, 2004
----------------------      Treasurer & Controller
Michael Walsh               (Principal Financial Officer
                            and Principal Accounting
                            Officer)