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

                                   FORM 10-QSB

[x]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the quarterly period ended:  March 31, 2005

                                       or

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission File Number:            000-51260

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

                Delaware                               14-1861651
    (State or Other jurisdiction of                   (IRS Employer
     incorporation or organization)                Identification No.)



  11601 Wilshire Boulevard, Suite 2160                    90025
 ----------------------------------------              ----------
         Los Angeles, California                       (Zip Code)
 (Address of principal executive offices)

                                 (310) 312-0700
                -----------------------------------------------
                (Issuer's telephone number including area code)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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 |_|  No |X|

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

Common Stock Outstanding as of May 9, 2005:  10,893,500 shares


Transitional Small Business Disclosure Format: Yes [ ] No [x]


<PAGE>


                       INNOVATIVE CARD TECHNOLOGIES, INC.

                               INDEX TO FORM 10QSB

                          PART I FINANCIAL INFORMATION

Item 1.     Financial Statements                                            PAGE

            Consolidated Balance Sheets at March 31, 2005 (unaudited)         3
            and December 31, 2004

            Consolidated Statements of Operations for the three month
            periods ended March 31, 2005 and March 31, 2004
            (unaudited)                                                       4

            Consolidated Statement of Shareholder's Deficit
            (unaudited)                                                       5

            Consolidated Statements of Cash Flows for the three month
            periods ended March 31, 2005 and March 31, 2004
            (unaudited)                                                       6

            Notes to Unaudited Consolidated Financial Statements              8

Item 2.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations                              28

Item 3.     Controls and Procedures                                          41

PART II     OTHER INFORMATION

Item 1.     Legal Proceedings                                                41

Item 2.     Unregistered Sales of Equity and Use of Proceeds                 41

Item 3.     Defaults Upon Senior Securities                                  41

Item 4.     Submission of Matters to a Vote of Security Holders              41

Item 5.     Other Information                                                41

Item 6.     Exhibits and Reports on Form 8-K                                 41

            SIGNATURES                                                       41


                                        2
<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                       INNOVATIVE CARD TECHNOLOGIES, INC.
                           CONSOLIDATED BALANCE SHEETS

                DECEMBER 31, 2004 AND MARCH 31, 2005 (UNAUDITED)



<TABLE>
<CAPTION>
                                                           March 31,     December 31,
                                                              2005           2004
ASSETS                                                    (unaudited)
                                                          -----------    -----------
<S>                                                       <C>            <C>
CURRENT ASSETS
   Cash and cash equivalents                              $   337,998    $   541,784
   Prepaids and other current assets                          157,982         41,431
   Accounts receivable                                          3,315          3,315
                                                          -----------    -----------
     Total current assets                                     499,295        586,530
PROPERTY AND EQUIPMENT, NET                                    38,156         42,443
                                                          -----------    -----------

Total assets                                              $   537,451    $   628,973
                                                          ===========    ===========

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
     Accounts payable and accrued expenses                $   235,164    $   157,254
     Notes payable                                            627,759        648,270
     Demand notes payable - related parties                   500,000             --
     Accounts payable - related parties                       393,875        373,980
     Short term portion of capital lease                        8,798          8,627
     Deferred revenue                                          38,859         40,485
                                                          -----------    -----------

     Total current liabilities                              1,804,455      1,228,617
                                                          -----------    -----------
LONG TERM LIABILITIES

     Long term portion of capital lease                        15,421         17,686
                                                          -----------    -----------
Total liabilities                                           1,819,876      1,246,303
                                                          -----------    -----------

SHAREHOLDERS' DEFICIT
   Preferred stock $0.001 par value, 5,000,000 shares
        Authorized, 2,843,500 (unaudited) and 2,843,500
        shares issued and outstanding                           2,844          2,844
   Common stock $0.001 par value, 50,000,000 shares
        Authorized, 8,050,000 (unaudited) and 8,050,000

        shares issued and outstanding                           8,050          8,050
   Additional paid-in capital                               3,673,715      3,673,715
   Accumulated deficit                                     (4,967,034)    (4,301,939)
                                                          -----------    -----------

     Total shareholders' deficit                           (1,282,425)      (617,330)
                                                          -----------    -----------

     Total liabilities and shareholders' deficit          $   537,451    $   628,973
                                                          ===========    ===========
</TABLE>

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

                                       3
<PAGE>


                       INNOVATIVE CARD TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2005 and 2004 (unaudited)


                                        Three months        Three months
                                           ended               ended
                                         March 31,           March  31,
                                           2005                 2004
                                        (unaudited)          (unaudited)
                                        -----------         -----------
Revenues, net                           $     1,626         $     5,027
                                        -----------         -----------

Operating expenses
   Administrative                           250,463              83,807
   Consulting Fees                            7,500              62,500
   Professional Fees                        134,693              44,236
   Research and development                 268,874              72,616
                                        -----------         -----------
Total operating expenses                    661,530             263,159
                                        -----------         -----------
Loss from operations                       (659,904)           (258,132)
                                        -----------         -----------

Other income (expense)
   Interest income                              124                   1
   Interest expense                          (5,317)            (13,149)
                                        -----------         -----------
Total other income (expense)                 (5,193)            (13,148)
                                        -----------         -----------
Net loss                                $  (665,097)        $  (271,280)
                                        -----------         -----------

Basic and diluted loss per share        $     (0.08)        $     (0.14)
                                        ===========         ===========
Weighed-average

 common shares outstanding                7,992,562           2,000,000
                                        ===========         ===========



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


                                       4
<PAGE>

                       INNOVATIVE CARD TECHNOLOGIES, INC.
                   For the Three Months Ended March 31, 2005
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
                                   (unaudited)


<TABLE>
<CAPTION>
                                      Series A Preferred
                                            Stock                    Common Stock         Additional
                                   ------------------------   -------------------------     Paid-in      Accumulated
                                      Shares       Amount        Shares       Amount        Capital        Deficit        Total
                                   -----------  -----------   -----------   -----------   -----------    -----------    -----------
<S>                                  <C>        <C>             <C>         <C>           <C>            <C>            <C>
Balance, December 31, 2004           2,843,500  $     2,844     8,050,000   $     8,050   $ 3,637,715    $(4,301,939)   $  (617,330)
Net loss for the three months ended
    March 31, 2005 (unaudited)             --           --            --            --            --        (665,097)      (665,097)
                                   -----------  -----------   -----------   -----------   -----------    -----------    -----------
Balance, March 31, 2005              2,843,500  $     2,844     8,050,000   $     8,050   $ 3,637,715    $(4,967,036)   $(1,282,427)
                                   ===========  ===========   ===========   ===========   ===========    ===========    ===========
</TABLE>



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

                                       5
<PAGE>

                       INNOVATIVE CARD TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2005 and 2004 (unaudited)



<TABLE>
<CAPTION>
                                                               For the Three Months Ended
                                                                       March 31,
                                                             -----------------------------
                                                                 2005              2004
                                                             -----------       -----------
                                                             (unaudited)        (unaudited)
<S>                                                          <C>              <C>
Cash flows from operating activities
   Net loss                                                  $ (665,097)      $  (271,280)
   Adjustments to reconcile net loss to net cash
     used in operating activities
        Depreciation and amortization                              4,287             1,007
        (Increase) decrease in
             Accounts receivable                                   --               13,645
             Prepaid expenses and other current assets          (116,551)            3,268
        Increase (decrease) in
             Accounts payable and accrued expenses                77,727            70,586
             Accounts payable - related parties                   19,895            72,625
             Deferred revenue                                     (1,626)               --
                                                             -----------       -----------
Net cash used in operating activities                           (681,366)         (110,149)
                                                             -----------       -----------
Net cash used in investing activities                                 --                --
                                                             -----------       -----------
Cash flows from financing activities
        Book overdraft                                                --            72,458
        Proceeds from notes payable related parties              500,000                --
        Interest payable- related parties                            183                --
        Payments on capital lease                                 (2,094)               --
                                                             -----------       -----------
Net cash provided by financing activities                        498,089            72,458
                                                             -----------       -----------
Net increase (decrease) in cash and cash
          equivalents                                           (183,277)          (37,691)
Cash and cash equivalents, beginning of year                     541,784            37,691
                                                             -----------       -----------
Cash and cash equivalents, end of year                       $   337,998       $        --
                                                             ===========       ===========
</TABLE>



The accompanying notes are an integral part of these financial statements


                                       6
<PAGE>


                       INNOVATIVE CARD TECHNOLOGIES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2005 and 2004 (unaudited)



Supplemental disclosures of cash flow
  information
Interest paid                               $    5,134        $    10,668
                                            ===========       ===========



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


                                       7
<PAGE>

                       INNOVATIVE CARD TECHNOLOGIES, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2005


NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

                                     GENERAL

The accompanying consolidated financial statements of Innovative Card
Technologies, Inc. ("ICTI") include the amounts of LensCard US, LLC ("LensCard
US"), formerly Universal Magnifier, LLC, organized under the laws of the State
of Delaware on January 7, 1999 and LensCard International Limited ("LensCard
International"), formerly Universal Magnifier International Limited ("UMIL"),
incorporated as an International Business Company under the laws of the British
Virgin Islands on August 21, 1995. On January 7, 1999, LensCard US merged with
Universal Magnifier LLC ("UMUS"), a California limited liability company founded
in January, 1998, for the purpose of changing the place of organization of UMUS.

LensCard Corporation ("LCC") was incorporated in the State of Delaware on
November 22, 2002 and had no financial activity from that date until January 1,
2004. PSACo., Inc. ("PSAC") was incorporated in the State of Delaware on August
27, 2003.

On April 2, 2004 through October 18, 2004, a series of integrated, mutually
dependent transactions were completed pursuant to previously-executed
agreements. These transactions are as follows:

o  On April 2, 2004, the following occurred:

certain members of LensCard US and another party who collectively hold certain
royalty rights ("Royalty Rights") collectively transferred their interests in
the Royalty Rights to LCC in exchange for an aggregate of 5,500,000 shares of
LCC common stock.

the Royalty Rights were transferred from LCC to PSAC in exchange for 100% of the
PSAC issued and outstanding common stock causing PSAC to become a wholly owned
subsidiary of LCC.

o  On April 6, 2004,the following occurred:

LensCard International was acquired by LCC in exchange for an aggregate of
1,000,000 shares of LCC common stock and merged with and into LCC.

LensCard US exchanged 100% of its membership interests with LCC for an aggregate
of 1,000,000 shares of LCC common stock.

o  On December 23, 2003, LCC entered into a Securities Purchase Agreement with a
   private investor under which it was to receive $50,000 in exchange for
   issuing 500,000 shares of LCC common stock and warrants to purchase 2,400,000
   shares of LCC common stock. The closing of the Securities Purchase Agreement
   was contingent upon the private investor introducing the Company to potential
   investors and the potential investors purchasing a minimum of $1,500,000 of


                                       8
<PAGE>

   the Company's series A preferred stock financing. As of May 5, 2004, the
   parties waived this contingency under the Securities Purchase Agreement. On
   May 5, 2004, LLC received $50,000 from the private investor and issued
   500,000 shares of common stock and warrants to purchase 2,400,000 shares of
   common stock. If LCC causes a Registration Statement to be effective, an
   aggregate 100,000 of the warrants will expire sixty days after the effective
   date of the Registration Statement, an aggregate 100,000 of the warrants will
   expire each month thereafter for nine months, and the remaining 1,400,000 of
   the warrants will expire on September 5, 2006.

o  On April 7, 2004, we issued convertible promissory notes in the principal
   amount of $340,000 to five accredited investors. These notes did not bear
   interest and were automatically converted into an aggregate 340,000 shares of
   series A preferred stock on May 5, 2004.


                                       9
<PAGE>

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS (CONTINUED)

o  From April 7, 2004 through October 18, 2004, investors purchased 2,568,500
   shares of LCC convertible series A preferred stock ("Preferred Stock") for
   $2,568,500, which includes the conversion of $340,000 worth of convertible
   promissory notes into 340,000 shares of series A preferred stock on April 7,
   2004. Not included in the $2,568,500 is the conversion of advances payable in
   the amount of $275,000 into 275,000 shares of series A preferred stock to
   certain shareholders. Each share of Preferred Stock has a 0.001 par value, a
   non-cumulative dividend of $0.06 per share when and if declared by the board
   of directors, liquidation preference over the common stock, and conversion
   rights into one share of common stock at $1 per share. Each share of
   Preferred Stock shall be automatically converted into shares of Common Stock
   upon either (i) the affirmative vote or written consent of not less than two-
   thirds of the shares of Preferred Stock outstanding; or (ii) the registration
   of the LCC's Common Stock under the Securities Act pursuant to the
   Registration Rights.

o  On June 25, 2004, LCC changed its name to Innovative Card Technologies, Inc.

Prior to April 1, 2004, the financial statements of LensCard US and LensCard
International were presented on a combined basis since the companies were under
common control. As a result of the transactions between LCC, LensCard US and
LensCard International on April 2, 2004 and April 6, 2004, respectively, the
financial statements have been restated to present the companies on a
consolidated basis as of the earliest date presented.

COMPANY OVERVIEW

The Company (as defined in Note 3) researches, develops and markets
technology-based card enhancements primarily for the credit card market that are
designed to enable issuers to improve card functionality, reduce attrition and
increase acquisition rates of customers. It commenced sales of its first
product, the LensCard, or a card embedded with a small magnifying lens, in 1998.
Since 2002, its core focus has been and continues to be on research and
development and marketing of its power inlay technology that is designed to
bring power-based applications, including light, sound and display screens, to
cards. Power inlay technology consists of a battery, circuit, and switch that
can power applications on credit cards and other information-bearing plastic
cards. It has devoted a significant majority of our efforts to complete the
development of its power inlay technology, initiate marketing and raising the
financing required to do so and fund its expenses. It has generated limited
revenues that derive from licensing agreements of its LensCard product, most of
which have terminated.


                                       10
<PAGE>

NOTE 2 - GOING CONCERN

The accompanying consolidated financial statements have been prepared in
conformity with United States generally accepted accounting principles which
contemplate continuation of the Company (as defined in Note 3) as a going
concern. During the year ended December 31, 2004 and three months ended March
31, 2005, the Company incurred net losses of $1,621,740 and $665,097
(unaudited), respectively, and had negative cash flows from operations of
$1,664,303 and $681,366 (unaudited), respectively. In addition, the Company had
accumulated deficits of $4,301,939 and $4,967,034 (unaudited) at December 31,
2004 and March 31, 2005, respectively. These factors raise substantial doubt
about the Company's ability to continue as a going concern.

Recovery of the Company's assets is dependent upon future events, the outcome of
which is indeterminable. Successful transition of the Company to the attainment
of profitable operations is dependent upon the Company achieving a level of
sales adequate to support the Company's cost structure. In addition, the Company
plans to continue to attempt to raise additional capital. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to continue in
existence.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                           PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Innovative Card
Technologies and its wholly-owned subsidiary, PSA Co., (the "Company"). All
significant inter-company accounts and transactions are eliminated in
consolidation.

                               REVENUE RECOGNITION

The Company's revenue is derived from various royalty agreements and is
recognized when sales are reported by the licensee. Deferred revenue consists of
payments received in advance of revenue being reported by the licensee to the
Company.

                              COMPREHENSIVE INCOME

The Company utilizes Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income." This statement establishes standards for
reporting comprehensive income and its components in a financial statement.
Comprehensive income as defined includes all changes in equity (net assets)
during a period from non-owner sources. Examples of items to be included in
comprehensive income, which are excluded from net income, include foreign
currency translation adjustments, minimum pension liability adjustments, and
unrealized gains and losses on available-for-sale securities. Comprehensive
income is not presented in the Company's financial statements since the Company
did not have any changes in equity from non-owner sources.

                            CASH AND CASH EQUIVALENTS

For the purpose of the statements of cash flows, the Company considers all
highly liquid investments purchased with original maturities of three months or
less to be cash equivalents.


                                       11
<PAGE>

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                             PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. The Company provides for depreciation
and amortization using the double-declining method over estimated useful lives
of five to seven years. Expenditures for maintenance and repairs are charged to
operations as incurred while renewals and betterments are capitalized. Gains or
losses on the sale of property and equipment are reflected in the statements of
operations.

                       FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments include cash and cash equivalents, prepaid
expenses and other current assets, due from related parties, accounts payable
and accrued expenses, advances payable, and deferred revenue. The book value of
all other financial instruments are representative of their fair values.

                            RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations as incurred.

                                       12
<PAGE>

                                 LOSS PER SHARE

The Company utilizes SFAS No. 128, "Earnings per Share." Basic loss per share is
computed by dividing loss available to common shareholders by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common shares had been issued and if the additional
common shares were dilutive. Common equivalent shares are excluded from the
computation if their effect is anti-dilutive.

Since their effect would have been anti-dilutive, common stock equivalents of
2,400,000 warrants and 2,843,500 shares of Series A Preferred Stock were
excluded from the calculation of diluted loss per share for the three months
ended March 31, 2005 and the year ended December 31, 2004. The Company did not
have any common stock equivalents outstanding at the year ended December 31,
2004 and during the three months ended March 31, 2005.

                                  INCOME TAXES

The Company utilizes Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this
method, deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income.

The results of operations presented for for the three months ended March 31,
2004 are those of LensCard US and LensCard International prior to the
transactions with LCC on April 1, 2004. LensCard US is a limited liability
company. Accordingly, all federal and state tax responsibilities of this entity
are those of the members' individually. LensCard International is a foreign
corporation whose income is derived from outside of the United States of
America. Pursuant to the Internal Revenue Code Section 871, LensCard
International is not subject to taxation in the United States of America.
Therefore, a tax provision for LCC for these dates is not presented.

The effective tax rate differs from the statutory tax rate primarily as a result
of the pre-merger LLC activity as discussed above and the change in the
valuation allowance account.

The Company has no material temporary differences that would result in deferred
taxes. The Company does, however, have loss carryforwards which may result in
deferred tax assets in the future. At March 31,2005, the Company has
approximately $2,035,000 (unaudited) and $2,034,000 (unaudited) in federal and
state loss carryforwards available to offset taxes through December 31, 2025 and
2011, respectively.

The Company's deferred tax asset at March 31, 2005 of $888,000 (unaudited)
consists of loss carryforwards, state taxes, and deferred revenue and has been
offset entirely by a valuation allowance. The valuation allowance account has
been increased by $297,000 during the three months ended March 31, 2005.

                              STOCK INCENTIVE PLAN

The Company accounts for its stock incentive plan under SFAS No. 123,
"Accounting for Stock-Based Compensation," using the fair value based method.
Under this method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period, which is usually
the vesting period.

                                    ESTIMATES

The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

                                       13
<PAGE>

                          CONCENTRATIONS OF CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk consist of cash and cash equivalents. The Company places its cash
and cash equivalents with high credit, quality financial institutions. At times,
such cash and cash equivalents may be in excess of the Federal Deposit Insurance
Corporation insurance limit of $100,000. At times, cash balances are in excess
of the insured limit.

                                 MAJOR SUPPLIER

The Company obtains the battery, a key component for the Company's power inlay
technology, from a single source, Solicore, Inc., on a purchase order basis. The
Company believes that alternative sources for this component in the event of a
disruption or discontinuation in supply would not be available on a timely
basis, which could disrupt Company operations, delay production for up to six
months and impair the Company's ability to manufacture and sell products.

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                                RECLASSIFICATION

Certain amounts included in the prior year financial statements have been
reclassified to conform with the current year presentation. Such
reclassification did not have any effect on the reported net loss.

                  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued a revision to FASB Statement No. 123,
Accounting for Stock-Based compensation. This Statement supersedes APB Opinion
No. 23, Accounting for Stock Issued to Employees. This Statement establishes
standards for the accounting for transactions in which an entity exchanges it
equity instructions for goods or services, It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services. It also
addresses transactions in which an entity incurs liabilities in exchange for
goods or services that are based on the fair value of entity's equity
instruments or that may be settled by the issuance of those equity instruments.
This Statement is effective for public entities that file as small business
issuers as of the beginning of the first interim or annual reporting period that
begins after December 15, 2005. The Company is in the process of determining the
effect on the financial statements.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment at March 31, 2005 and December 31, 2004 consisted of the
following:


                                       14
<PAGE>


                                                   March  31,       December 31,
                                                       2005             2004
                                                   -----------      -----------
                                                   (unaudited)
Computer equipment                                   $ 9,808          $ 9,808
Office equipment                                       8,168            8,168
Furniture and fixtures                                18,270           18,270
Production equipment, capital lease                   32,598           32,598
Leasehold improvements                                 5,610            5,610
                                                   -----------      -----------
Property and Equipment,
before depreciation and amortization allowance        74,454           74,454

Less accumulated depreciation and amortization        36,298           32,011
                                                   -----------      -----------
   TOTAL                                             $38,156          $42,443
                                                   ===========      ===========


                                       15
<PAGE>

NOTE 4 - PROPERTY AND EQUIPMENT (CONTINUED)

During the year ended December 31, 2004, the Company made commitments to
purchase $222,966 worth of production equipment that was not received by the
company by March 31, 2005 and therefore is not included in the Property and
Equipment balance above. Please see Note 6 for additional details.

Depreciation and amortization expense was $7,255, $4,287 (unaudited), and $1,007
(unaudited) for the year ended December 31, 2004 and the three months ended
March 31, 2005 and 2004, respectively.

NOTE 5 - NOTES PAYABLE

On October 30, 2002, the Company entered into a note payable with a financial
institution in exchange, for an aggregate borrowing limit of $450,000. Of the
$450,000, $350,000 was received during the 12 months ended December 31,2002
while $100,000 was received during the 12 months ended December 31,2003. The
loan was repaid on May 24, 2004. The balance of the note payable bears interest
at a rate of 4% per annum through the date of renewal, and 1.8% per annum
thereafter. As of December 31, 2004 and March 31, 2005 the outstanding balance
on the note payable was $0 and $0 (unaudited). The Company has no further
borrowing capacity under this agreement.

On April 22, 2003, the Company entered into a second note payable with the same
financial institution in exchange for gross proceeds of $150,000. The second
note has been renewed through April 30, 2005. The balance of the note payable
bears interest at 2.1% per annum through the date of renewal, and 1.8% per annum
thereafter. As of December 31, 2004 and March 31, 2005, the outstanding balance
on the note payable was $150,000 and $150,000 (unaudited).

On July 16, 2003, the Company entered into a third note payable with the same
financial institution in exchange for gross proceeds of $150,000. The third note
has been renewed through April 30, 2005. The balance of the note payable bears
interest at 1.8% per annum through the date of renewal, and 1.9% per annum
thereafter. As of December 31, 2004 and March 31, 2005, the outstanding balance
on the note payable was $150,000 and $150,000 (unaudited).

On September 24, 2003, the Company entered into a fourth note payable with the
same financial institution in exchange for gross proceeds of $150,000. The
fourth note has been renewed through March 31, 2005. The balance of the note
payable bears interest at 1.8% per annum through the date of renewal, and 1.8%
per annum thereafter. As of December 31, 2004 and March 31, 2005, the
outstanding balance on the note payable was $150,000 and $150,000 (unaudited).

On December 30 2003, the Company entered into a fifth note payable with the same
financial institution in exchange for gross proceeds of $200,000. The fifth note
matured on March 15, 2004 and was paid in full on May 24, 2004. The balance of
the note payable beared interest at a rate of 4.0% per annum. As of December 31,
2004 and March 31, 2005, the outstanding balance on the note payable was $0 and
$0 (unaudited). The Company has no further borrowing capacity under this
agreement.


                                       16
<PAGE>

NOTE 5 - NOTES PAYABLE (CONTINUED)

On May 24, 2004, the Company entered into a sixth note payable with the same
financial institution in exchange for gross proceeds of $246,128. The sixth note
matures on May 31, 2005. The balance of the note payable initially bears
interest at 4.00% through the date of renewal. The interest rate is subject to
change from time to time based on changes in an index which is based on the
financial institution's prime rate. At December 31, 2004 and March 31, 2005, the
outstanding balance on the note payable was $198,270 and $177,759 (unaudited).

The first, fifth and sixth notes payable were guaranteed by three shareholders
of the Company. The second, third, and fourth notes payable are collateralized
by personal certificates of deposit belonging to an officer and a shareholder of
the Company. All outstanding principal, plus all accrued, unpaid interest are
due on the respective maturity dates. The Company is required to make regular
monthly payments of all accrued, unpaid interest due as of each payment date for
the second, third and fourth notes payable. For the sixth note payable, the
company is required to make eleven monthly payments of $6,837, subject to any
change in the index rate. As of March 31, 2005, there are two monthly payments
remaining for the sixth note payable.


                                       17
<PAGE>

NOTE 6 - COMMITMENTS

                        PRODUCTION EQUIPMENT COMMITTMENTS

The Company entered into commitments during the year ended December 31, 2004 for
production equipment. The amounts remaining under the commitments that the
company is required to pay for the equipment is as follows as of March 31, 2005:



                          Year Ending
                          December 31,
                             2005               $101,426
                                                --------
                             TOTAL(unaudited)   $101,426
                                                ========



Of the $101,426 the Company has committed to as of March 31, 2005, $48,191, is
an obligation due to a European manufacturer. The remaining amount committed,
$48,191, at March 31, 2004 is converted from 37,320 EURO. On April 5, 2005, the
company paid, $24,435.27 (unaudited), 50% of the remaining commitment, to the
European manufacturer. The remaining commitment will be paid once the equipment
is installed. During the three months ended March 31, 2005, the Company paid
$113,587 USD, to the European manufacturer towards this equipment, which is
classified as a prepaid expense at March 31, 2005.

The remaining balance of the $101,426 the Company has committed to as of March
31, 2005, $53,235, is to a domestic manufacturer for specifically designed
equipment. The progress payments are due to the domestic manufacturer upon
reaching specific milestones. To date, the Company has made $36,755 in progress
payments, which are classified as a prepaid expense at March 31, 2005. The
Company believes that the specifically designed equipment will be completed
during May 2005 at which time the remaining $53,235 will become due.


                                       18
<PAGE>

                                 EQUIPMENT LEASE

On November 30, 2004, the Company entered into a capital lease with CNC
Associates, Inc. for the purchase of production equipment. The lease requires
minimum monthly payments of $866 and expires on October 31, 2007. The capital
lease is personally guaranteed by an officer and shareholder of the Company.
Future minimum lease payments under this capital lease agreement at March 31,
2005 were as follows:



                      Year Ending
                      December 31,

                         2005                  $ 6,533
                         2006                    9,331
                         2007                    8,355
                                               -------
                           TOTAL (unaudited)    24,219

                      Less current portion       8,798

                                               -------
                      Long term portion         15,421



Equipment under capitalized lease amount to $32,598 and the related depreciation
expense amounted to $2,173, $3,042 (unaudited), and $0 (unaudited) for the year
ended December 31, 2004 and three months ended March 31, 2005 and 2004,
respectively.

                                      LEASE

The Company subleases its office space under a non-cancelable operating lease
agreement from a shareholder. The lease requires minimum monthly payments of
$2,568 and expires in May 2005 and requires the company to pay 15.03% of any
additional rents and/or charges of any kind due from Bemel & Ross. The
additional rents and/or charges that may be due consist of direct costs passed
through the master landlord to Bemel & Ross. The direct costs are based on
operating costs during the calendar year ending December 31, 2003, or the base
year. Thereafter, if the direct costs in a subsequent year exceed the direct
costs in the base year, the master landlord bills Bemel & Ross its proportionate
share of the excess of direct costs, which may include tax costs related to real
estate and/or costs and expenses incurred by the master landlord in connection
with common areas of the building, the parking structure or the cost of
operating the building. Through March 31, 2005, Bemel & Ross has charged the
company for additional rents and/or charges in the amount of $3,605. Future
minimum lease payments under this operating lease agreement at March 31, 2005
were as follows:


                     Year Ending
                     December 31,
                        2005                    5,136
                                              -------
                          TOTAL               $ 5,136
                                              =======


Rent expense was $10,161 and $7,704 for the three months ended March 31, 2005
and 2004, respectively.


                                       19
<PAGE>

                                AGENCY AGREEMENT

On February 19, 2001, the Company entered into an exclusive 10 year agreement
with a sales agent, not affiliated with the Company, to solicit orders for
certain of its products in all countries, except Canada, the United States and
all countries within South America. There are no minimum sales requirements that
must be met in order to maintain exclusivity. Under the agreement, this agent is
entitled to a percentage, ranging from 10% to 35%, of our revenues received on
orders obtained by the agent in this territory. The agreement may be terminated
for uncured material breach of contract, bankruptcy or insolvency, or upon the
death or disability of the holder of a majority of the agent's membership
interests. Since inception, the agent has obtained no orders and, therefore, no
amounts have been paid to the agent. This agreement was mutually terminated by
both parties on October 12, 2004.

                           REVENUE SHARING AGREEMENTS

In 1998, Universal Magnifier LLC, a California limited liability company, was
founded by Alan Finkelstein, the inventor of the LensCard, and Luc Berthoud for
the purpose of licensing the LensCard in the United States. In January 1999,
Universal Magnifier LLC merged into LensCard US LLC, a Delaware limited
liability company that was organized on January 7, 1999 for the purpose of
changing Universal Magnifier's name and place of organization. In 1995,
Universal Magnifier International Limited, an international business company
under the laws of the British Virgin Islands, was founded for the purpose of
licensing the LensCard worldwide other than the United States. In October 1998,
Universal Magnifier International Limited changed its name to LensCard
International Limited. In exchange for the rights to exploit the LensCard
patents, trademarks and related intangibles, LensCard US LLC and LensCard
International Limited agreed to make royalty payments to Alan Finkelstein and
Bradley Ross.

On April 2, 2004, Alan Finkelstein, Bradley Ross and Michael Paradise, who owned
one percent of Mr. Finkelstein's interest in the royalty payments, collectively
transferred their rights to the royalty payments to the company in exchange for
an aggregate of 5,500,000 shares of the company's common stock. The company then
immediately transferred these royalty rights to PSACo, Inc., a Delaware
corporation, in exchange for 25,000 shares of PSACo's common stock, or all of
its outstanding common stock, causing PSACo to become our wholly owned
subsidiary. As of June 30, 2004, these royalty payments accounted for 100% of
the company's revenue on a consolidated basis.

On April 6, 2004, LensCard US LLC exchanged all of its outstanding membership
interests the company for 1,000,000 shares of the company's common stock.
Effective April 6, 2004, LensCard International Limited merged with and into our
company. As a result of this reorganization and merger, the company owns the
intellectual property rights to the LensCard and are obligated to make payments
related to these rights to PSACo, our wholly owned subsidiary.

As of December 31, 2004 and 2003, annual sales have not been sufficient to
require any payments pursuant to the above agreements to PSACo., the company's
wholly owned subsidiary. Any future payments that may be required will be
recorded as a reduction of revenue.

                   PATENT AND TRADEMARK LICENSE AGREEMENTS

The Company has entered into various Patent and Trademark License Agreements
with financial institutions granting a limited, non-exclusive right and license
to make, distribute, market, sell, and use credit cards or debit cards
containing a magnifying lens (the "Licensed Products"). These agreements are as
follows:


                                       20
<PAGE>

NOTE 6 - COMMITMENTS (CONTINUED)

               PATENT AND TRADEMARK LICENSE AGREEMENTS (CONTINUED)

o  An agreement dated July 17, 1998, providing for royalties to the Company at
   the lesser of:

(a) the total of $0.45 and $0.225 for each Licensed Product when newly issued to
a customer or renewed by a customer, respectively.

(b) 90% of the lowest corresponding amounts paid by an other licensee of the
Company whose principal business is banking or other financial services.

Royalties will be due and payable quarterly within 60 days after the last day of
each calendar quarter. This agreement was cancelled on June 29, 2004.

o An agreement dated January 2, 2001, providing for royalties to the Company at
the following rates:

            Number of Licensed Products                Royalties
            Distributed in Calendar Year                per Card
            ----------------------------               ---------
            less than 100,000                           $ 2.20
            100,000 to 199,999                          $ 1.65
            200,000 to 249,999                          $ 1.25
            250,000 to 499,999                          $ 1.10
            500,000 and above                           $ 1.00


Royalties will be due and payable quarterly within 30 days after the last day of
each calendar quarter. The agreement was cancelled on September 30, 2003. No
products were distributed under this agreement.

o  An agreement dated January 26, 2001, providing for a flat fee of $10,000 in
   consideration of several marketing tests. The Agreement expired July 31,
   2001.

o  An agreement dated January 30, 2001, providing for royalties to the Company
   at the rate of $1 per Licensed Product issued to a customer. Royalties were
   due and payable quarterly within 30 days after the last day of each calendar
   quarter. The agreement expired on December 31, 2002.

o  An agreement dated July 9, 2001, providing for royalties to the Company at
   the rate of $1.20 per LensCard issued to a customer. Royalties will be due
   and payable quarterly within 30 days after the last day of each calendar
   quarter. The company receives sales reports within thirty days following the
   end of a calendar quarter from the customer. The agreement is effective until
   July 9, 2006.


                                       21
<PAGE>

NOTE 6 - COMMITMENTS (CONTINUED)

               PATENT AND TRADEMARK LICENSE AGREEMENTS (CONTINUED)

o An agreement dated January 16, 2002 and expiring on March 31, 2004, providing
for royalties to the Company at the rate of $1.50 per LensCard issued to a
customer. Royalties will be due and payable quarterly within 30 days after the
last day of each calendar quarter. The company receives sales reports within
thirty days following the end of a calendar quarter from this customer. On April
1, 2004, the agreement was extended requiring a $12,500 payment by the customer
with the Company receiving a royalty of $0.25 per licensed products and $0.50
for each additional LensCard sold thereafter. The revised agreement is effective
until April 1, 2008.

                        MASTER PATENT LICENSE AGREEMENTS

On July 1, 1999, the Company entered into a master agreement, providing for
royalties to the Company equaling a percentage of total royalties received by
the licensee as follows:

o  for amounts up to USD 200,000 95%

o  for amounts between USD 200,000 and USD 500,000 97%

o  for exceeding USD 500,000 98%

Royalties were due and payable within three business day after actual receipt by
the licensee. The agreement expired June 30, 2002.

On October 1, 1999, the Company entered into a license agreement with a
financial institution, providing for royalties to LensCard International at the
rate of $2.50 for each card in a designated territory and $5 for all other new
issuances. In addition, annual minimum royalty payments of $50,000 and $75,000
were due for the periods ending September 30, 2000 and 2001, respectively. The
agreement expired on September 30, 2001.

On September 9, 2000, the Company assigned all of its rights, duties, and
obligations under the October 1, 1999 license agreement to the licensee of the
July 1, 1999 master agreement. In connection with the assignment, the Company
guaranteed the licensee's performance on the October 1, 1999 agreement, with the
financial institution consenting to the assignment.

                              EMPLOYMENT AGREEMENT

The Company has entered into an Employment Agreement with an officer for the
term of three years, commencing January 1, 1998 and ending, unless terminated
earlier, on January 1, 2000; however, on each anniversary date of the Agreement,
a year is added automatically to the term. As of March 31, 2005, the termination
date is January 1, 2006. The officer earns $12,500 as a monthly salary.


                                       22
<PAGE>

NOTE 7 - SHAREHOLDERS' DEFICIT

                                 PREFERRED STOCK

The Company has 5,000,000 authorized shares of $0.001 par value preferred stock.
The preferred stock may be issued in series, from time to time, with such
designations, rights, preferences, and limitations as the Board of Directors may
determine by resolution.

o  From April 7, 2004 through October 18, 2004, investors purchased 2,568,500
   shares of LCC convertible series A preferred stock ("Preferred Stock") for
   $2,568,500, which includes the conversion of $340,000 worth of convertible
   promissory notes into 340,000 shares of Series A Preferred Stock that were
   issued on April 7, 2004. Not included in the $2,568,500 is, certain
   shareholders converted unsecured advances owed to them by the Company
   totaling $275,000 into 275,000 shares of Series A Preferred Stock. Each share
   of Preferred Stock has a $.001 par value, a non-cumulative dividend of $0.06
   per share when and if declared by the board of directors, liquidation
   preference over the common stock, and conversion rights into one share of
   common stock at $1 per share. Each share of Preferred Stock shall be
   automatically converted into shares of Common Stock upon either (i) a
   majority of the outstanding shares of Preferred Stock, voting as a separate
   class, approves the conversion; or (ii) some or all of the common shares
   underlying the Preferred Stock are covered by an effective registration
   statement filed with the SEC.

                                  COMMON STOCK

During the year ended December 31, 2002, the Company completed the following:

o  A shareholder contributed $21,000

o  Certain shareholders converted notes payable - related parties totaling
   $664,484 into capital.

During the year ended December 31, 2003, the Company completed the following:

o  On December 23, 2003, LCC entered into a Securities Purchase Agreement with a
   private investor under which it was to receive $50,000 in exchange for a unit
   that consisted of 500,000 shares of LCC common stock and warrants to purchase
   2,400,000 shares of LCC common stock. The 2,400,000 warrants were then issued
   to the following private investors/groups: 700,000 warrants to Elmsmere Group

                                       23
<PAGE>


   Ltd, 700,000 warrants to Freemount Trading Ltd., 375,000 warrants to Diana
   Derycz-Kessler, 375,000 warrants to Paul Kessler, 200,000 warrants to Steve
   Emerson, and 50,000 warrants to Tyler Runnels. The closing was contingent
   upon the private investor introducing potential investors to us and these
   potential investors or investment funds affiliated with the private investor
   purchasing a minimum of $1,500,000 worth of the Company's series A preferred
   stock at a price per share of $1.00 before February 1, 2004. As of May 5,
   2004, the parties waived this closing contingency under the Securities
   Purchase Agreement. On May 5, 2004, the Company received $50,000 from the
   private investor and issued 500,000 shares of its common stock and warrants
   to purchase 2,400,000 shares of its common stock pursuant to the Securities
   Purchase Agreement. Each warrant issued to the private investor vests
   immediately and allows the holder to purchase one share of common stock for
   $1.00. Of the 2,400,000 shares, the right to purchase 100,000 shares will
   expire 60 days after the effective date of the registration statement
   registering the underlying shares, and thereafter, the right to purchase an
   additional 100,000 shares will expire on a monthly basis for the next nine
   months. In any event, the warrants will expire on September 5, 2006. If there
   is no effective registration statement registering the underlying shares by
   May 5, 2005, these warrants contain cashless exercise provisions that allow
   the holder to exercise the warrant for a lesser number of shares of common
   stock in lieu of paying cash. The fair value of each warrant was estimated
   using the Black-Scholes option-pricing model with the following
   weighted-average assumptions: dividend yield of 0%; expected volatility of
   200%; risk-free interest rate of 2.34%; and expected life of 2.5 years. The
   number of shares that would be issued in this case would be based upon the
   market price of the common stock at the time of the net exercise, or if there
   is no market price, the price per share as determined by the Company's board
   of directors.

During the twelve months ended December 31, 2004, the Company completed the
following:

o  On June 28, 2004, LCC issued 50,000 shares of common stock at a price per
   share of $1.00 as payment for legal services.

                                    WARRANTS

The following summarizes the warrant transactions:



                                             Warrants           Weighted-Average
                                            Outstanding          Exercise Price
                                            -----------          --------------
Outstanding,
   December 31, 2004                        2,400,000            $        1.00
   Granted                                         --            $          --

Outstanding, March 31, 2005                 2,400,000            $        1.00

Exercisable, March 31, 2005                 2,400,000            $        1.00



The weighted-average fair value of the warrants granted during the twelve months
ended March 31, 2005 for which the exercise price equals the market price on the
grant date was $0.88, and the weighted-average exercise price was $1.00. No
warrants were granted during the three months ended March 31, 2005 for which the
exercise price was less than or greater than the market price on the grant date.
The weighted-average remaining contractual life of the warrants as of March 31,
2005 is fifteen months.

                            2004 STOCK INCENTIVE PLAN

The Company's Board of Directors and stockholders approved the 2004 Stock
Incentive Plan in August 2004. The 2004 Stock Incentive Plan provides for the
grant of incentive stock options to the Company's employees, and for the grant
of non-statutory stock options, restricted stock, stock appreciation rights and
performance shares to the Company's employees, directors and consultants.

The Company has reserved a total of 2,215,000 shares of its common stock for
issuance pursuant to the 2004 Stock Incentive Plan. The board of directors, or a
committee of the board, administers the 2004 Stock Incentive Plan. Stock options
are generally granted with terms of up to ten years and vest over a period of
five years under the 2004 Stock Incentive Plan. The administrator determines the


                                       24
<PAGE>

exercise price of options granted under the 2004 Stock Incentive Plan, but the
exercise price must not be less than 85% of the fair market value of the
Company's common stock on the date of grant. In the event the participant owns
10% or more of the voting power of all classes of the Company's stock, the
exercise price must not be less than 110% of the fair market value per share of
the Company's common stock on the date of grant. With respect to all incentive
stock options, the exercise price must at least be equal to the fair market
value of the Company's common stock on the date of grant. The term of an
incentive stock option may not exceed 10 years, except that with respect to any
participant who owns 10% of the voting power of all classes of the Company's
outstanding stock or the outstanding stock of any parent or subsidiary of the
Company, the term must not exceed five years an the exercise price must equal at
least 110% of the fair market value on the grant date. The administrator
determines the term of all other options; however, no option will have a term in
excess of 10 years from the date of grant.

The 2004 Stock Incentive Plan will automatically terminate on August 5, 2014,
unless it terminates sooner because all shares available under the Plan have
been issued or all outstanding options terminate in connection with a change of
control. In addition, the Board of Directors has the authority to amend the 2004
Stock Incentive Plan provided this action does not impair the rights of any
participant. As of March 31, 2005, 1,275,000 incentive stock options were issued
under the Plan, however, no non-statutory stock options, restricted stock, stock
appreciation rights or performance shares have been granted under the Plan. On
October 12, 2004, we granted to employees, officers, directors and consultants
options to purchase 1,275,000 shares of common stock at an exercise price of
$1.00 per share. As of December 31, 2004, 940,000 shares are available for grant
under the 2004 Stock Incentive Plan. No compensation cost was recognized for the
three months ended March 31, 2005 as no stock options were exercised.

The fair value of each option was estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions: dividend
yield of 0%; expected volatility of 200%; risk-free interest rate of 2.34%; and
expected life of 10 years. The number of shares that would be issued in this
case would be based upon the market price of the common stock at the time of the
net exercise, or if there is no market price, the price per share as determined
by the Company's board of directors.

Stock options - A summary of stock option activity and weighted average exercise
prices for the three months ended March 31, 2005 and year ended December 31,
2004 is as follows:



<TABLE>
<CAPTION>
                                          2005                           2004
                                         Shares       Exercise Price    Shares       Exercise Price
                                         ------       --------------    ------       --------------
<S>                                    <C>             <C>                             <C>
Outsanding,
  beginning of year                    1,275,000       $    1.00              --       $      --
Granted                                       --              --       1,275,000       $    1.00
Exercised                                     --              --              --              --
Forfeited                                     --              --              --              --
                                       ---------       ---------       ---------       ---------
Outstanding,
  at March 31, 2005 and
  December 31, 2004, respectively      1,275,000       $    1.00       1,275,000       $    1.00
                                       =========       =========       =========       =========
Exercisable,
  at March 31, 2005 and
  December 31, 2004, respectively        305,000       $    1.00         285,000       $    1.00
</TABLE>



The following table summarizes information concerning options outstanding and
options exercisable as of March 31, 2005


                                       25
<PAGE>

<TABLE>
<CAPTION>
                                        Outstanding                                       Exercisable

                                                Weighted
                                                Average
                                               Remaining            Weighted                         Weighted
                                              Contractual           Average                          Average
Range of Exercise Price             Shares    Life (years)      Exercise Price        Shares     Exercise Price
-----------------------             ------    ------------      --------------        ------     --------------
<C>                                 <C>              <C>               <C>              <C>           <C>
$1.00                               2,215,000        9                 $1.00            305,000       $1.00
                                    ---------    -----             ---------        -----------       -----
                                    2,215,000        9                 $1.00            305,000       $1.00
                                    =========    =====             =========        ===========       =====
</TABLE>


NOTE 8 - RELATED PARTY TRANSACTIONS

                            DUE FROM RELATED PARTIES

From time to time, the Company enters into related party transactions with
several officers, shareholders, and other related parties. As of March 31, 2005
and December 31, 2004, the Company was due $0 (unaudited) and $0, respectively.

                       ADVANCES PAYABLE - RELATED PARTIES

Advances payable - related parties at December 31, 2004 and March 31, 2005
consisted of unsecured advances that were made to the Company for working
capital purposes that were originally advanced to the company in 2001 and 2002.
The related parties that advanced the funds to the Company were Luc Berthoud,
Bradley Ross, and Alan Finkelstein. The unsecured advances were
non-interest-bearing and payable upon demand. Luc Berthoud, Bradley Ross and
Alan Finkelstein converted their $275,000 in advances owed to them by the
company into 275,000 shares of Series A Preferred Stock on June 22, 2004.



                                       26
<PAGE>

NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)

                       ACCOUNTS PAYABLE - RELATED PARTIES

Accounts payable - related parties at March 31, 2005 and December 31, 2004
consisted of amounts due for consulting, legal, and accounting services rendered
and were $393,875 (unaudited) and $373,980 respectively. As of March 31, 2005,
$4,513 is due for estimated costs for additional rents and/or charges relating
to the lease of office space that the Company has Bemel and Ross, a certified
public accounting firm that Bradley Ross is a partner in. And $133,333 is due to
Forest Finkelstein for consulting services rendered through March 31, 2005 and
$240,387 is owed to Blakely, Sokoloff, Taylor & Zafman, LLP (BSTZ), a law firm
which, the Company's director, George Hoover, is a partner in. The amounts are
currently due to all three parties. The deferred amount payable to Forest
Finkelstein and BSTZ are non-interest bearing and are payable upon demand.
However, both parties have deferred payment until we have sufficient liquidity
to pay.

                              CONSULTING AGREEMENTS

The Company entered into Consulting Agreements with Alan Finkelstein and Forest
Finkelstein, both of whom are related parties. For Alan Finkelstein, during the
three months ended March 31, 2005 and 2004, the Company paid $0 and $0,
respectively. For Forest Finkelstein, during the years ended March 31, 2005 and
2004, the Company paid $2,500 and $0, respectively.

                               ACCOUNTING SERVICES

Bradley Ross, one of the Company's shareholders, is a partner in a certified
public accounting firm, Bemel & Ross, which has provided accounting and tax
services to the Company. During the three months ended March 31, 2005 and 2004,
the Companies paid $0, and $0, respectively, to this entity for services
rendered.

                                       27
<PAGE>

                                 LEGAL SERVICES

The Company receives legal services from Blakely, Sokoloff, Taylor and Zafman,
LLP, a law firm that George Hoover, a director of the Company, is a partner in.
During the three months ended March 31, 2005 and 2004, the Company paid $73,471
and $0, respectively, to this entity for legal services rendered.

NOTE 9 - SUBSEQUENT EVENTS (UNAUDITED)

On May 5, 2005, the Security and Exchange Commission declared the Company's SB-2
registration statement filed on October 19, 2004, as amended, effective. On that
date all 2,843,500 shares of convertible series A preferred stock ("Preferred
Stock") was converted to common stock on a one-for-one basis. After the
conversion, there were no shares of Preferred Stock outstanding.

On May 10, 2005, the Company's Board of Directors gave Company management
authorization to negotiate with the Company's current warrant holders of 2.4
million warrants ("Warrant Holders") incentives to exercise their warrants by
offering the Warrant Holders a new warrant for each warrant exercised.
Additionally, on May 10, 2005, the Company's Board of Directors gave Company
management authorization to negotiate with the Company's creditors ("Debt
Holders") to convert any existing debt that the Company owes into stock. As of
May 13, 2005, no definitive agreements have been reached with Debt Holders or
Warrant Holders.

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

      The following Management's Discussion and Analysis of our Financial
Condition and Results of Operations should be read in conjunction with the
consolidated financial statements and notes thereto included as part of this
Quarterly Report. This report contains forward-looking statements that are based
upon current expectations. We sometimes identify forward-looking statements with
such words as "may", "will", "expect", "anticipate", "estimate", "seek",
"intend", "believe" or similar words concerning future events. The
forward-looking statements contained herein, include, without limitation,
statements concerning future revenue sources and concentration, gross profit
margins, selling and marketing expenses, research and development expenses,
general and administrative expenses, capital resources, additional financings or
borrowings and additional losses and are subject to risks and uncertainties
including, but not limited to, those discussed below and elsewhere in this Form
10-QSB, particularly in "Factors That May Affect Results," that could cause
actual results to differ materially from the results contemplated by these
forward-looking statements. We also urge you to carefully review the risk
factors set forth in other documents we file from time to time with the
Securities and Exchange Commission.

 Overview

      Our predecessor entities, Universal Magnifier International Limited and
Universal Magnifier LLC, were co-founded in 1995 and 1998 by Alan Finkelstein,
the LensCard inventor. We commenced sales of the LensCard in 1998. Since our
inception in 2002, our core focus has been and continues to be on research and
development and marketing of our power inlay technology that is designed to
bring power-based applications, including light, sound and display screens, to
ISO compliant cards. Power inlay technology consists of a battery, circuit, and
switch that can power applications on credit cards and other information-bearing
plastic cards. We have devoted a significant majority of our efforts to complete
the development of our power inlay technology, initiate marketing and raising
the financing required to do so and fund our expenses. We have generated limited
revenues that derive from licensing agreements of our LensCard product, most of
which have terminated. At this time, we have no plans to renew these agreements
or to further market or sell the LensCard, unless requested by a customer.

      Since inception, we have been unprofitable. We incurred a net loss of
$665,097 for the three months ended March 31, 2005. As of March 31, 2005, we had
an accumulated deficit of $4,967,034. Our continued existence is dependent upon
our ability to obtain additional financing. We anticipate that the sales of our
LightCard will not be sufficient enough to sustain our operations, and further
anticipate that after such introduction we will continue to incur net losses due
to our costs exceeding our revenues for an indefinite period of time. Our
capital requirements for the next 12 months, as they relate to retaining and
obtaining key personnel, further research and development relating to the
production of our power inlay technology, and purchasing necessary equipment for
production, have been and will continue to be significant. As of March 31, 2005,
we have funded our operations through loans in the amount of $627,759 from a
bank, accounts payable due to Forest Finkelstein in the amount of $133,333,
accounts payable due to Blakely Sokoloff, Taylor & Zafman, LLP a law firm that
George Hoover, one of our directors, is a partner in, in the amount of $240,387,
and a series A preferred stock offering whereby we raised $2,568,500, which
includes the conversion of $340,000 worth of convertible promissory notes into


                                       28
<PAGE>

340,000 shares of series A preferred stock that were issued on April 7, 2004. On
June 22, 2004, we issued 275,000 shares of series A preferred stock to related
parties in a conversion of $275,000 in unsecured advances owed to them. In March
2005, two of our principal stockholders, Union Finance International Corp. and
Bristol Investment Fund, Ltd., loaned us a combined total of $500,000 in the
form of secured demand promissory notes, which create security interests in our
assets, excluding assets subject to liens, leases, encumbrances, defenses or
other claims.

      We will need to obtain additional financing in addition to the funding
already raised through the sale of equity securities and debt financing. For the
next several months, we anticipate that we will continue to attempt to use
promissory notes from our stockholders. However, if we are unable to borrow
funds from our stockholders, we will need to raise additional capital from other
sources. Our resources will not be sufficient to fund operations during May
2005. We currently do not have any binding commitments for, or readily available
sources of, additional financing and will not receive any proceeds from this
offering. Our future liquidity is dependent upon our ability to raise additional
capital. We may be forced to sell assets, cease our business and operations, and
we may become insolvent.


                                       29
<PAGE>

Critical Accounting Policies and Estimates

      Our discussion and analysis of our financial condition and results of
operations are based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the U.S.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses for each period. The following represents a summary of our critical
accounting policies, defined as those policies that we believe are the most
important to the portrayal of our financial condition and results of operations
and that require management's most difficult, subjective or complex judgments,
often as a result of the need to make estimates about the effects of matters
that are inherently uncertain.

      Revenue recognition. We recognize revenues in accordance with SEC Staff
Accounting Bulletin No. 104, or SAB 104. Revenues are recognized when persuasive
evidence of an arrangement exists, delivery has occurred or services have been
rendered, the price is fixed and determinable and collectibility is reasonably
assured.

      We generate revenue from one source: licensing of the LensCard to various
credit card issuers. The LensCard is composed of a credit card with a small
magnifying lens embedded into the card. We sell time-based licenses to various
credit card issuers. We recognize royalties attributable to these time-based
licenses as they are sold to the credit card issuers' customers. Royalty revenue
is recognized when each LensCard is sold by an issuer in accordance with SAB
104.

      We anticipate that the majority of our revenues in the coming year will
come from financial cards that contain a light and a magnifying lens as well as
a light. We intend to sell these cards directly to banks that issue financial
cards. Additionally, we intend to enter into arrangements whereby our
intellectual properties will be licensed to other strategic partners and we will
share in revenues or licensing fees.

      We currently have no arrangements with any companies with regard to
revenue sharing or licensing fees for financial cards that contain a light and
magnifying lens as well as a light. We have agreements with two banks that issue
financial cards for the LensCard product, one which expired on December 31,
2004. The revenue generated from the LensCard agreements is negligible, and we
expect that the sales of the LensCard will have no impact on our results of
operations.

      Deferred revenue is recorded when the payments from the credit card
issuers are received by us prior to the sale of the LensCard to the credit card
issuers' customers.

      Accounts receivable allowances. Because our sales to date have been to
large credit card issuers, we have experienced very few issues surrounding
payment for products and services. Consequently, we have no allowances for
doubtful accounts. We perform a regular review of our customer activity and
associated credit risks and do not require collateral from our customers.

      Our first product, the LightCard, or a financial card that has a light
with or without a magnifying lens, has been fully developed. We are currently
creating a mass production process for the LightCard that we expect to complete
when our ordered capital equipment arrives in May 2005. We anticipate that
from April 2005 through June 2005, we will be able to produce between 1,000 to
5,000 LightCards per month. In July 2005, if we are able to complete the
manufacturing process for producing LightCards on a mass production basis and
obtain sufficient additional financing to do so, we will be able to manufacture
25,000 LightCards per month. If the demand for the LightCard is substantial, we
may be able to increase our capacity to 100,000 cards per month by late 2005,
however, our ability to produce this amount of LightCards is limited to the
amount of component parts that we are able to procure, one of which is only
presently available from one supplier. The battery, a key component of our power
inlay technology, is presently available from only one supplier, Solicore, Inc.
Our projected cost to manufacture the LightCards is unknown at this time, as we
have not produced the LightCards on a mass production basis. However, if the
capital equipment needed for mass production is defective or does not conform to
production requirements, or we unable to procure component parts from our key
suppliers, there will be substantial delays in manufacturing and selling the
LightCards. Additionally, if there is no demand for the LightCard by banks that
issue financial cards we will have no benefit from the LightCard.

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<PAGE>

      Our other products that are designed to use the power inlay technology are
still in the early stages of development. At this time, we are unable to
determine when the other products will become fully developed, manufactured and
sold to banks that issue financial cards.

We estimate that our capital requirements for the next twelve months will be as
follows:

Line of Credit and notes payable repayment obligations                $  650,000
Capital equipment expenditures and capital lease obligations             360,000
General and administrative expenses                                    1,320,000
Professional Fees                                                        880,000
Consulting Fees                                                          120,000
Research and development                                                 550,000
Total estimated capital requirements                                  $3,880,000

      Costs of production are not included in our capital requirements as we
intend to only incur these costs once orders for our products are received from
our potential customers.

Results of Operations

Comparison of the Three Months Periods Ended March 31, 2005 and March 31, 2004

Overview

Our financial results for the three months ended March 31, 2005 reflect a net
loss of $665,097, or $0.08 per share (basic and diluted), compared to a net loss
of $271,280, or $0.14 per share (basic and diluted), for the three months ended
March 31, 2004.

The major factors contributing to our net loss of $665,097 during the first
quarter of 2005 were general and administrative expenses, research and
development expenses relating to new products, and professional fees. The major
factors contributing to our net loss during the first quarter of 2004 were
primarily the result of consulting fees, administrative expenses, and research
and development expense.

Revenue. Revenue consists of royalties from the LensCard.

Total revenue decreased from $5,027 for the three months ended March 31, 2004 to
$1,626 for the three months ended March 31, 2005. The decrease resulted
primarily from fewer royalties of the LensCard as we have not been actively
marketing the LensCard product or licensing the LensCard product to third
parties.

Administrative. Administrative expense consists of travel and marketing
expenses, compensation expense, administrative fees and depreciation expense.

Administrative expense increased from $83,807 for the three months ended March
31, 2004 to $250,463 for the three months ended March 31, 2005. Administrative
expense increased primarily due to the establishment of our office, hiring
additional employees, and additional travel expenses relating to business
development. We anticipate that administrative expense will increase in absolute
dollars as we incur increased costs associated with continuing to establish our
operations.

Consulting expense. Consulting expense consists of payments made to independent
contractors that provide services for the company.

Consulting expense decreased from $62,500 for the three months ended March 31,
2004 to $7,500 for the three months ended March 31, 2005. Consulting expense
primarily decreased as a result of a consultant converting to a full time
employee. We anticipate that our consulting expense will decrease in absolute
dollars as the company does not presently have the intention of hiring outside
consultants.

Professional fees expense. Professional fees consist of amounts paid to our
external counsel, auditors and other outside services rendered to the company.

                                       31
<PAGE>

Professional fees expense increased from $44,236 for the three months ended
March 31, 2004 to $134,693 for the three months ended March 31, 2005.
Professional fees expense primarily increased due to additional amounts paid to
our external auditors and counsel in connection with the filing of the company's
registration statement as well as fees relating to the maintenance and
establishment of the company's intellectual property rights. We anticipate that
professional fees will continue to increase in absolute dollars as the company
will continue to incur greater costs in maintaining and establishing its
intellectual property rights as well as costs of operating as a public company.

Research and Development. Research and development expense consists primarily of
costs relating to the development of new credit card enhancements.

Research and development costs increased from $72,616 for the three months ended
March 31, 2004 to $268,874 for the three months ended March 31, 2005 due to
increased research and development of the LightCard and SoundCard. We expect our
research and development expenses to increase in absolute dollars as we continue
to invest in developing new credit card enhancements.

Interest expense. Interest expense decreased from $13,149 for the three months
ended March 31, 2004 to $5,317 for the three months ended March 31, 2005 due to
the partial retirement of notes payable.


Liquidity and Capital Resources

Discussion of Results

Our principal sources of liquidity are cash and cash equivalent balances, which
were $337,998 at March 31, 2005, and $541,784 at December 31, 2004. Our cash and
cash equivalent balances will not be enough to satisfy our obligations due in
May 2005. Since our inception, we have incurred significant losses, and as of
December 31, 2004 and March 31, 2005 we had an accumulated deficit of $4,301,939
and $4,967,034, respectively.

      Net cash used in operating activities was $681,366 for the three months
ended March 31, 2005 as compared with $110,149 for the three months ended March
31, 2004. The increase was due primarily to greater net loss, decreases in
accounts payable and accrued expenses, and prepayments for equipment that has
not been placed into production.

      Net cash provided by financing activities was $498,089 for the three
months ended March 31, 2005 as compared to net cash provided by financing
activities of $72,458 for the three months ended March 31, 2004. The increase
was due to $500,000 of proceeds of notes payable loaned to us by related parties
during the three months ended March 31, 2005.

Equity and Debt Financings and Accounts Payable

      To date, our operations have been funded through bank loans in the amount
of $1,346,128, loans in the form of secured demand promissory notes totaling
$500,000 from Bristol Investment Fund, Ltd. and Union International Finance
Corp., the issuance of series A preferred stock, including the conversion of
$340,000 worth of convertible promissory notes into 340,000 shares of Series A
preferred stock in which we raised gross proceeds of $2,568,500, and the
conversion of $275,000 in unsecured advances due to related parties into Series
A preferred stock. As of March 31, 2005, we had accounts payable due to related
parties, Forest Finkelstein, in the amount of $133,333, and Blakely, Sokoloff,
Taylor and Zafman, LLP, a law firm that George Hoover, one of our directors, is
a partner in, in the amount of $240,387. The agreements with Forest Finkelstein
and Blakely, Sokoloff, Taylor and Zafman to defer payments are based on written
communications that may not be enforceable. If Forest Finkelstein or Blakely,
Sokoloff, Taylor and Zafman require us to make these payments, we may not have
the funds to do so and we may become insolvent.

      On December 23, 2003, we entered into a Securities Purchase Agreement with
Bristol Capital, LLC under which we were to sell a unit that consisted of
500,000 shares of our common stock and warrants to purchase 2,400,000 shares of
our common stock at an exercise price of $1.00 per share in exchange for
$50,000. The closing was contingent upon Bristol Capital, LLC introducing
potential investors to us and these potential investors or investment funds
affiliated with Bristol Capital purchasing a minimum of $1,500,000 worth of our
series A preferred stock at a price per share of $1.00 before February 1, 2004.
As of May 5, 2004, the parties waived this closing contingency under the
Securities Purchase Agreement. On May 5, 2004, we received $50,000 from Bristol
Capital, LLC and issued 500,000 shares of our common stock and warrants to

                                       32
<PAGE>

purchase 2,400,000 shares of our common stock pursuant to the Securities
Purchase Agreement.

      From April 7, 2004 to October 18, 2004, we issued 2,568,500 shares of
Series A preferred stock at a price per share of $1.00 to a number of investors
pursuant to a private placement, including the conversion of $340,000 worth of
convertible promissory notes into 340,000 shares of series A preferred stock
that were issued on April 7, 2004, and raised gross proceeds of $2,568,500.

      On May 24, 2004, we obtained a loan in the amount of $246,128. We are
required to pay interest at a rate equal to a prime rate set by City National
Bank, which currently is 4.0%, on the loan. Beginning on June 30, 2004, we must
pay this loan in 11 principal payments of $6,837 and one final principal and
interest payment of $171,511 on the maturity date of May 31, 2005. Additionally,
on May 24, 2004, we renewed three notes payable, each in the amount of $150,000,
from City National Bank that were originally dated April 22, 2003, July 16, 2003
and September 24, 2003. Of the three notes payable, two of them have an interest
rate of 1.8% and one has an interest rate of 1.9%. Beginning on June 30, 2004,
we are required to pay monthly interest payments on amounts drawn from the notes
payable, with all outstanding principal and accrued and unpaid interest due on
April 30, 2005. As of March 31, 2005 with respect to each note payable, we had
drawn the full amount, $150,000 on each note payable, for an aggregate amount of
$450,000 drawn through March 31, 2005. There is no further borrowing capacity
available under each of the notes payable. Upon maturity of the notes payable
and loan, we plan to either renew these with City National Bank or repay the
notes payable or loan if we are able to obtain additional funding.

      On June 22, 2004, we issued 275,000 shares of series A preferred stock to
Alan Finkelstein, Bradley Ross and Luc Berthoud in a conversion of $275,000 in
unsecured advances due to Alan Finkelstein, Bradley Ross and Luc Berthoud. The
conversion was made at $1.00 per share.

      On November 30, 2004, we entered into a capital lease for equipment that
cost $32,598 with CNC Associates, Inc. for production equipment that was
personally guaranteed by our chief executive officer, Alan Finkelstein. The
lease requires minimum monthly payments of $866 and expires on October 31, 2007.

      In March 2005, we obtained loans in the form of secured demand promissory
notes totaling $500,000 from Bristol Investment Fund, Ltd. and Union Finance
International, Corp, a company that Karim Souki is a director of. Karim Souki,
is the brother of Charif Souki, a member of our board of directors. Union
Finance International Corp. loaned us $333,000 on March 31, 2005 while Bristol
Investment Fund, Ltd. loaned us $167,000 on March 30, 2005 for the combined
total of $500,000. The secured demand promissory notes create security interests
in our assets, excluding assets subject to liens, leases, encumbrances, defenses
or other claims. The secured demand promissory notes are payable without notice
by the demand of Union Finance International Corp. or Bristol Investment Fund,
Ltd. There is no further borrowing capacity under both of the secured demand
promissory notes and we plan to repay the secured demand promissory notes if we
are able to obtain additional funding.

      During late March and early April 2005, certain principal stockholders,
directors and executive officers agreed to defer payments owed to them. The
parties that have agreed to defer payments owing to them are as follows: $5,600
to Bemel & Ross, of which one of our principal stockholders, Bradley Ross, is a
partner in, $4,200 to Alan Finkelstein, our chief executive officer and chairman
of the board, and $5,000 to Forest Finkelstein, who is the son of Alan
Finkelstein. These agreements are based on written communications that may not
be enforceable. If Bemel & Ross, Alan Finkelstein or Forest Finkelstein require
us to make these payments, we may not have the funds to do so and we may become
insolvent.

Liquidity Risk

Our cash and cash equivalent balances will not be sufficient to satisfy our
obligations due in May 2005. We will need to obtain additional financing in
addition to the funds already raised through the sale of equity securities and
debt financing to fund our cash needs and continue our operations during May
2005. We currently do not have any binding commitments for, or readily available
sources of, additional financing. Additional financing, whether through public
or private equity or debt financing, arrangements with stockholders or other
sources to fund operations, may not be available, or if available, may be on
terms unacceptable to us. Our ability to maintain sufficient liquidity is
dependent on our ability to raise additional capital. If we issue additional
equity securities to raise funds, the ownership percentage of our existing
stockholders would be reduced. New investors may demand rights, preferences or


                                       33
<PAGE>

privileges senior to those of existing holders of our common stock. Debt
incurred by us would be senior to equity in the ability of debt holders to make
claims on our assets. The terms of any debt issued could impose restrictions on
our operations. If adequate funds are not available to satisfy either short or
long-term capital requirements, our operations and liquidity could be materially
adversely affected and we could become insolvent and be forced to cease
operations.

Factors That May Affect Results

AS A COMPANY IN THE EARLY STAGE OF DEVELOPMENT WITH AN UNPROVEN BUSINESS
STRATEGY, OUR LIMITED HISTORY OF OPERATIONS MAKES EVALUATION OF OUR BUSINESS AND
PROSPECTS DIFFICULT.

      Our business prospects are difficult to predict because of our limited
operating history, early stage of development and unproven business strategy.
Since our incorporation on November 22, 2002, we have primarily been and
continue to be involved in development of products using our power inlay
technology and marketing these products under development to industry partners.
In 1998, Alan Finkelstein commenced commercialization of our first product, the
LensCard, and entered into license agreements with banks and credit card
issuers, most of which have terminated. After discovering the possibility of
placing power into an International Organization of Standards (ISO) compliant
card, we began to focus our efforts on the development of our power inlay
technology and not on the marketing of the LensCard. For these reasons, we
expect that future orders for the LensCard will be substantially less. Although
management believes that our power inlay technology and products under
development have significant profit potential, we may not attain profitable
operations and our management may not succeed in realizing our business
objectives. If we are unsuccessful in developing our business, the common stock
you receive may never have value.

WE HAVE AN ACCUMULATED DEFICIT OF $4,967,034 AS OF MARCH 31, 2005 AND HAVE
RECEIVED AN OPINION FROM OUR AUDITORS REGARDING OUR ABILITY TO CONTINUE AS A
GOING CONCERN, AND WE MAY NEVER ACHIEVE PROFITABILITY.

      We have incurred significant net losses every year since our inception,
including net losses of $665,097 for the three months ended March 31, 2005. As
of March 31, 2005, we had an accumulated deficit of $4,967,034. These losses
have resulted principally from expenses incurred in our research and development
programs and general and administrative expenses. To date, we have not yet
generated significant recurring revenues. Our limited revenues that derive from
sales of the LensCard and the limited revenues that we may receive from sales of
the LightCard have not been and will not continue to be sufficient to sustain
our operations. We anticipate that we will continue to incur substantial
operating losses based on projected sales revenues less manufacturing, general
and administrative and other operating costs for an indefinite period of time.
We expect that our revenues will not be sufficient to sustain our operations for
the foreseeable future, notwithstanding any anticipated revenues we may receive
when our power-based card enhancement products are initially introduced to
markets, due to the significant costs associated with the development and
marketing of our products. No assurances can be given when we will ever be
profitable.

      Our independent auditors have added an explanatory paragraph to their
audit opinion issued in connection with the financial statements for the year
ended December 31, 2004 relative to the substantial doubt about our ability to
continue as a going concern. Our ability to obtain additional funding will
determine our ability to continue as a going concern. Our financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

WE HAVE ENTERED INTO SECURED DEMAND PROMISSORY NOTES THAT CONTAIN NO NOTICE OR
DEMAND PERIOD WITH TWO PRINCIPAL STOCKHOLDERS. IF A DEMAND FOR PAYMENT IS MADE
AND WE HAVE NO FUNDS AVAILABLE TO MAKE PAYMENT, OUR ASSETS MAY BE SUBJECT TO
FORECLOSURE AND WE MAY BECOME INSOLVENT.

      In March 2005, two of our principal stockholders, Union Finance
International Corp. and Bristol Investment Fund, Ltd. collectively loaned us
$500,000 through secured demand promissory notes. Karim Souki, a director of
Union Finance International Corp., is the brother of Charif Souki, who is a
member of our board of directors. Union Finance International Corp. loaned us
$333,000 on March 31, 2005 while Bristol Investment Fund, Ltd. loaned us
$167,000 on March 30, 2005 for a combined total of $500,000. The secured demand


                                       34
<PAGE>

promissory notes create security interests in our assets, excluding assets
subject to liens, leases, encumbrances, defenses or other claims. The secured
demand promissory notes are payable without notice by the demand of Union
Finance International Corp and Bristol Investment Fund, Ltd. If a demand for
payment is made by Union Finance International Corp. or Bristol Investment Fund
Ltd. and we have no funds available to make payment, our unencumbered operating
and non-operating assets may be subject to foreclosure subject to the terms of
the secured demand promissory notes and we may become insolvent.

OUR SUCCESS  REQUIRES  ADDITIONAL  CAPITAL.  IF WE DO NOT  RECEIVE  ADDITIONAL
FUNDING, WE MAY BECOME INSOLVENT.

      Our resources will not be sufficient to fund operations during May 2005
even though certain parties have agreed to defer payments owed to them. The
parties that have agreed to defer payments owing to them are as follows: $4,513
to Bemel & Ross, of which one of our principal stockholders, Bradley Ross, is a
partner in, $15,641 to Alan Finkelstein, and $133,333 to Forest Finkelstein, who
is the son of Alan Finkelstein. In addition, Blakely Sokoloff, Taylor and
Zafman, LLP, a law firm that George Hoover, one of our directors, is a partner
in, has agreed to to defer payments for an aggregate amount of $240,387 as long
as we continue to make the $7,000 to $10,000 monthly payments, until we have
sufficient liquidity to pay the balance. All of these agreements to defer
payments are based on written communications and may not be enforceable. If
Blakely Sokoloff, Taylor and Zafman, Bemel & Ross, Alan Finkelstein or Forest
Finkelstein require us to make payments, we may not have the funds to do so and
we may become insolvent. We will require additional capital in order to operate
beyond April 2005. In March 2005, we received $500,000 in the form of secured
demand promissory notes from two of our principal stockholders as noted in the
prior risk factor. For the next several months, we anticipate that we will
continue to attempt to use promissory notes from our stockholders. However, if
we are unable to borrow funds from our stockholders, we will need to raise
additional capital from other sources to fund our cash needs and continue our
operations. We currently do not have any binding commitments for, or readily
available sources of, additional financing and will not receive any proceeds
from this offering. As noted in the prior risk factor addressing our accumulated
deficit of $4,967,034, we anticipate that the sales of our LightCard will not be
sufficient enough to sustain our operations, and further anticipate that after
such introduction we will continue to incur net losses due to our costs
exceeding our revenues for an indefinite period of time. If we do not obtain
additional financing, our operations and liquidity would be materially adversely
affected and we could become insolvent.

WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS, AND WE WILL BE UNABLE TO MANUFACTURE
OR DELIVER OUR PRODUCTS IF SHIPMENTS FROM THESE SUPPLIERS ARE INTERRUPTED OR ARE
NOT SUPPLIED ON A TIMELY BASIS.

      We obtain the battery, a key component for our power inlay technology,
from a single source on a purchase order basis from Solicore, Inc. We believe
that alternative sources for this component in the event of a disruption or
discontinuation in supply would not be available on a timely basis, which would
disrupt our operations, delay production for up to six months and impair our
ability to manufacture and sell our products.

      Our dependence upon outside suppliers exposes us to risks, including:

      o  the possibility that our suppliers could terminate their services at
         any time;

      o  the potential inability of our suppliers to obtain required components
         or products;

      o  reduced control over pricing, quality and timely delivery, due to the
         difficulties in switching to alternative suppliers;

      o  the potential delays and expense of seeking alternative sources of
         suppliers; and

      o  increases in prices of key components.

                                       35
<PAGE>

IF WE ARE NOT ABLE TO DEVOTE ADEQUATE RESOURCES TO PRODUCT DEVELOPMENT AND
COMMERCIALIZATION, WE MAY NOT BE ABLE TO DEVELOP OUR PRODUCTS.

      Our business strategy is to develop and market new products using our
power inlay technology that can enhance payment and other information-bearing
plastic cards. We believe that our revenue growth and profitability, if any,
will substantially depend upon our ability to:

      o  raise sufficient capital for research and development;

      o  complete development of new products; and

      o  successfully introduce and commercialize new products.

      Most of our products are under development, including an Encrypted
SoundCard and SoundCard. Because we have limited resources to devote to product
development and commercialization, any delay in the development of one product
or reallocation of resources to product development efforts that prove
unsuccessful may delay or jeopardize the development of other future products.
If we do not develop new products and bring them to market, our operations will
not be successful.

FAILURE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS COULD ENABLE THIRD PARTIES
TO USE OUR TECHNOLOGY, OR VERY SIMILAR TECHNOLOGY, AND COULD REDUCE OUR ABILITY
TO COMPETE IN THE MARKET, AND ANY PROPRIETARY RIGHTS LITIGATION COULD BE TIME
CONSUMING AND EXPENSIVE TO PROSECUTE AND DEFEND.

      Establishment of patents and other proprietary rights is important to our
success and our competitive position. Performance in the payment card industry
can depend, among other factors, on patent protection. Our policy is to identify
patentable inventions developed by our company, and to seek to acquire patent
rights for such inventions. Many of our current patents on the LensCard begin to
expire in 2012. We mainly develop and patent technology in the fields of card
enhancements and methods of card manufacturing. We seek to obtain a reasonably
broad territorial protection for our patented technologies. We usually file
initial patent applications in the United States, and subsequently file
corresponding applications in foreign countries depending on the relevant
circumstances. We may elect to forego patent protection for some of our
proprietary technologies and treat such technologies as trade secrets. Despite
our efforts to establish and protect our patents, trade secrets or other
proprietary rights, unauthorized parties may attempt to copy aspects of our
technology or to obtain and use information that we regard as proprietary. In
addition, the laws of some foreign countries do not protect our proprietary
rights to as great an extent as do the laws of the United States. Our means of
establishing and protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around our patents or our other proprietary rights.

      Due to the importance of proprietary technology in the payment card
industry, our business involves a risk of overlap with third party patents and
subsequent litigation with competitors or patent-holders. Any claims, with or
without merit, could be time-consuming, result in costly litigation, or cause us
to enter into licensing agreements.

WE DEPEND ON KEY PERSONNEL IN A COMPETITIVE MARKET FOR SKILLED EMPLOYEES, AND
FAILURE TO RETAIN AND ATTRACT QUALIFIED PERSONNEL COULD SUBSTANTIALLY HARM OUR
BUSINESS.

      We rely to a substantial extent on the management, marketing and product
development skills of our key employees, particularly Alan Finkelstein, our
co-founder and chief executive officer, Bennet Lientz, our chief financial
officer, and Murdoch Henretty, our chief technology officer, to formulate and
implement our business plan, including the development of our power inlay
technology. Our success depends to a significant extent upon our ability to
retain and attract key personnel. Competition for employees can be intense in
the payment card industry and the process of locating key personnel with the
right combination of skills is often lengthy. The loss of the services of our
key personnel may significantly delay or prevent the achievement of product
development and could have a material adverse effect on us.

                                       36
<PAGE>

IF OUR FUTURE PRODUCTS DO NOT ACHIEVE A SIGNIFICANT LEVEL OF MARKET ACCEPTANCE,
IT IS HIGHLY UNLIKELY THAT WE EVER WILL BECOME PROFITABLE.

      To our knowledge, no credit card issuers have adopted power-based card
enhancements to date using our power inlay technology. As a result, our ability
to enable issuers to improve and add card functionality, reduce attrition and
increase acquisition rates, and enhance security and anti-fraud protection for
customers through power-based card enhancements has yet to be proven. The
commercial success of our future products will depend upon the adoption of our
power inlay technology as a preferred method of applying card enhancements to
payment cards. In order to be successful, our future products must meet the
technical and cost requirements for card enhancements within the payment card
industry. Market acceptance will depend on many factors, including:

      o  our ability to convince prospective strategic partners and customers to
         adopt our products;

      o  the willingness and ability of prospective strategic partners and
         customers to adopt our products; and

      o  our ability to sell and service sufficient quantities of our products.

      Because of these and other factors, our products may not achieve market
acceptance. If our products do not achieve a significant level of market
acceptance, demand for our future products will not develop as expected and it
is highly unlikely that we ever will become profitable.

WE HAVE GRANTED THIRD PARTIES SUBSTANTIAL MARKETING RIGHTS TO CERTAIN OF OUR
PRODUCTS AND PRODUCTS UNDER DEVELOPMENT. IF THE THIRD PARTIES ARE NOT SUCCESSFUL
IN MARKETING OUR PRODUCTS WE MAY NOT BE ABLE TO COMMERCIALIZE OUR PRODUCTS.

      Our agreements with our corporate marketing partners generally contain no
minimum purchase requirements in order for them to maintain their exclusive
marketing rights. We have entered into an agreement with VISA to market certain
of our products that we are currently developing to VISA's regional offices and
member banks. One or more of these marketing partners may not devote sufficient
resources to marketing our products. Furthermore, although VISA has agreed not
to promote power-enabling technologies from other parties, there is nothing to
prevent VISA from pursuing non-power alternative technologies or products that
may compete with our products. In the future, third party marketing assistance
may not be available on reasonable terms, if at all. If any of these events
occur, we may not be able to commercialize our products, which could negatively
impact our results of operations or substantially limit our ability to execute
our business strategy.

WE MAY EXPERIENCE CUSTOMER CONCENTRATION, WHICH MAY EXPOSE US TO ALL OF THE
RISKS FACED BY OUR POTENTIAL MATERIAL CUSTOMERS.

      Since our agreement with VISA requires us to not offer or provide our
power inlay technology to certain other major credit card issuers for a period
of at least two years, we may experience customer concentration. Until and
unless we secure multiple customer relationships, we may experience periods
during which we will be highly dependent on one or a limited number of
customers. Dependence on a single or a few customers will make it difficult to
satisfactorily negotiate attractive prices for our products and will expose us
to the risk of substantial losses if a single dominant customer stops conducting
business with us. Moreover, to the extent that we may be dependent on any single
customer, we could be subject to the risks faced by that customer to the extent
that such risks impede the customer's ability to stay in business and make
timely payments to us.

THE POWER  INLAY  TECHNOLOGY  HAS NOT BEEN  PROVEN IN FULL  SCALE  PRODUCTION.
FAILURE  TO  DEVELOP  THE  PROTOTYPE  SCALE  INTO MASS  PRODUCTION  MAY HAVE A
MATERIAL NEGATIVE EFFECT ON OUR BUSINESS STRATEGY AND OPERATIONS.

      Our power inlay technology has been proven during the manufacture of cards
in prototype quantities. Furthermore, we have developed an automated process in
our laboratory and are now taking steps towards mass production. However, our
product has yet to be proven to be manufactured in full scale mass production.
We are applying our own resources and are also working in cooperation with other
companies that have specialized technical expertise related to the manufacturing
process of power inlay technology for ISO-compliant credit cards. We have
entered into agreements with these other companies to protect confidential
information exchanged by the parties and expect to enter into further agreements
that will grant us ownership or exclusive license rights to the manufacturing
process of the power inlay technology for use in credit and other
information-bearing plastic cards. Failure to secure or maintain exclusive


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<PAGE>

rights or failure of the prototype technology to successfully transfer to full
scale production, without the use of proprietary technology of others, may have
a material negative effect on our business strategy and operations.

WE HAVE LIMITED MANUFACTURING EXPERIENCE AND CAPACITY AND WILL RELY
SUBSTANTIALLY ON THIRD-PARTY MANUFACTURERS. THE LOSS OF ANY THIRD-PARTY
MANUFACTURER COULD LIMIT OUR ABILITY TO LAUNCH OUR PRODUCTS IN A TIMELY MANNER,
OR AT ALL.

      To be successful, we must manufacture, or contract for the manufacture of,
our future products in compliance with industry standards and on a timely basis,
while maintaining product quality and acceptable manufacturing costs. As
discussed in the risk factor above, we are working in cooperation with other
companies that have specialized technical expertise related to the manufacturing
process of our power inlay technology for ISO-compliant credit cards. We also
currently use a limited number of sources for most of the supplies and services
that we use in the manufacturing of our power inlay technology and prototypes.
We do not have agreements with our suppliers. Our manufacturing strategy
presents the following risks:

      o  delays in the quantities needed for product development could delay
         commercialization of or products in development;

      o  if we need to change to other commercial manufacturers, any new
         manufacturer would have to be educated in, or develop substantially
         equivalent processes necessary for the production of our products;

      o  if market demand for our products increases suddenly, our current
         manufacturers might not be able to fulfill our commercial needs, which
         would require us to seek new manufacturing arrangements and may result
         in substantial delays in meeting market demand; and

      o  we may not have intellectual property rights, or may have to share
         intellectual property rights, to any improvements in the manufacturing
         processes or new manufacturing processes for our products.

      Any of these factors could delay commercialization of our products under
development, entail higher costs and result in our being unable to effectively
sell our products.

RISKS RELATED WITH OWNERSHIP OF OUR SECURITIES

THERE MAY NOT BE AN ACTIVE, LIQUID TRADING MARKET FOR OUR COMMON STOCK, SO YOU
MAY BE UNABLE TO LIQUIDATE YOUR SHARES IF YOU NEED MONEY.

      As of the date of this Quarterly Report, there has been no public market
for our common stock. An active trading market for our common stock may not
develop following this offering due to a number of factors, including the fact
that we are a small company that is relatively unknown to stock analysts, stock
brokers, institutional investors and others in the investment community that
generate or influence sales volume, and that even if we came to the attention of
such persons, they tend to be risk-averse and would be reluctant to follow an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we became more seasoned and viable. As a consequence,
there may be periods of several days or more when trading activity in our shares
is minimal or non-existent, as compared to a seasoned issuer which has a large
and steady volume of trading activity that will generally support continuous
sales. We cannot give you any assurance that an active public trading market for
our common shares will develop or be sustained. You may not be able to liquidate
your shares quickly or at the market price if trading in our common stock is not
active.

WE DO NOT ANTICIPATE PAYING ANY CASH DIVIDENDS IN THE FORESEEABLE FUTURE, WHICH
MAY REDUCE YOUR RETURN ON AN INVESTMENT IN OUR COMMON STOCK.

      We plan to use all of our earnings, to the extent we have earnings, to
fund our operations. We do not plan to pay any cash dividends in the foreseeable
future. We cannot guarantee that we will, at any time, generate sufficient
surplus cash that would be available for distribution as a dividend to the
holders of our common stock. Therefore, any return on your investment would
derive from an increase in the price of our stock, which may or may not occur.

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<PAGE>

SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE.

      Based on the number of shares outstanding as of May 12, 2005, we had
10,893,500 shares of common stock outstanding. Of these shares, 3,178,331,
assuming conversion of warrants for 250,000 shares of common stock, are freely
tradable without restriction or further registration under the federal
securities laws, subject in some cases to volume and other limitations.

      In addition, we intend to file a registration statement on Form S-8 under
the Securities Act of 1933, as amended, to register 1,275,000 shares of our
common stock underlying options granted to our officers, directors, employees
and consultants and 940,000 shares of common stock reserved for issuance under
our 2004 Stock Incentive Plan. These shares, if issued in accordance with these
plans, will be eligible for immediate sale in the public market, subject to
volume limitations.

      If our stockholders sell substantial amounts of common stock in the public
market, or the market perceives that such sales may occur, the market price of
our common stock could fall. The sale of a large number of shares could impair
our ability to raise needed capital by depressing the price at which we could
sell our common stock.

WE MAY RAISE  ADDITIONAL  CAPITAL  THROUGH A  SECURITIES  OFFERING  THAT COULD
DILUTE YOUR OWNERSHIP INTEREST AND VOTING RIGHTS.

      Our certificate of incorporation currently authorizes our board of
directors to issue up to 50,000,000 shares of common stock and 5,000,000 shares
of preferred stock. As of May 12, 2005, after taking into consideration our
outstanding common shares, our board of directors will be entitled to issue up
to 36,950,000 additional common shares and 5,000,000 preferred shares. The power
of the board of directors to issue shares of common stock, preferred stock or
warrants or options to purchase shares of our stock is generally not subject to
stockholder approval.

      We require substantial working capital to fund our business. If we raise
additional funds through the issuance of equity, equity-related or convertible
debt securities, these securities may have rights, preferences or privileges
senior to those of the holders of our common stock. The issuance of additional
common stock or securities convertible into common stock by our board of
directors will also have the effect of diluting the proportionate equity
interest and voting power of holders of our common stock.

WE ARE CONTROLLED BY OUR PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND
DIRECTORS, AND AS A RESULT, THE TRADING PRICE FOR OUR SHARES MAY BE DEPRESSED
AND THESE STOCKHOLDERS CAN TAKE ACTIONS THAT MAY BE ADVERSE TO YOUR INTERESTS.

      Our principal stockholders, executive officers and directors, in the
aggregate, beneficially own approximately 85.3% of our common stock, on an
as-converted basis, including warrants and options held by each principal
stockholder, executive officer and director that are exercisable within 60 days
of May 12, 2005. These stockholders, acting together, will have the ability to
exert substantial influence over all matters requiring approval by our
stockholders, including the election and removal of directors and any proposed
merger, consolidation or sale of all or substantially all of our assets. In
addition, they could dictate the management of our business and affairs. This
concentration of ownership could have the affect of delaying, deferring or
preventing a change in control, or impeding a merger or consolidation, takeover
or other business combination that could be favorable to you. This significant
concentration of share ownership may also adversely affect the trading price for
our common stock because investors may perceive disadvantages in owning stock in
companies with controlling stockholders.

                                       39
<PAGE>

OUR INCORPORATION DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER THAT
STOCKHOLDERS CONSIDER FAVORABLE AND COULD ALSO LIMIT THE MARKET PRICE OF YOUR
STOCK, WHICH MAY INHIBIT AN ATTEMPT BY OUR STOCKHOLDERS TO CHANGE OUR DIRECTION
OR MANAGEMENT.

      Our amended and restated certificate of incorporation and bylaws contain
provisions that could delay or prevent a change in control of our company. Some
of these provisions:

      o  authorize our board of directors to determine the rights, preferences,
         privileges and restrictions granted to, or imposed upon, the preferred
         stock and to fix the number of shares constituting any series and the
         designation of such series without further action by our stockholders;

      o  prohibit stockholders from calling special meetings;

      o  prohibit cumulative voting in the election of directors, which would
         otherwise allow less than a majority of stockholders to elect director
         candidates;

      o  establish advance notice requirements for submitting nominations for
         election to the board of directors and for proposing matters that can
         be acted upon by stockholders at a meeting; and

      o  prohibit stockholder action by written consent, requiring all
         stockholder actions to be taken at a meeting of our stockholders.

      In addition, we are governed by the provisions of Section 203 of Delaware
General Corporate Law. These provisions may prohibit large stockholders, in
particular those owning 15% or more of our outstanding voting stock, from
merging or combining with us, which may prevent or frustrate any attempt by our
stockholders to change our management or the direction in which we are heading.
These and other provisions in our amended and restated certificate of
incorporation and bylaws and under Delaware law could reduce the price that
investors might be willing to pay for shares of our common stock in the future
and result in the market price being lower than it would be without these
provisions.

WE WILL BE SUBJECT TO THE PENNY  STOCK  RULES  ONCE OUR COMMON  STOCK  BECOMES
ELIGIBLE FOR TRADING.  THESE RULES MAY ADVERSELY  AFFECT TRADING IN OUR COMMON
STOCK.

      We expect that our common stock will be a "low-priced" security under the
"penny stock" rules promulgated under the Securities Exchange Act of 1934. In
accordance with these rules, broker-dealers participating in transactions in
low-priced securities must first deliver a risk disclosure document which
describes the risks associated with such stocks, the broker-dealer's duties in
selling the stock, the customer's rights and remedies and certain market and
other information. Furthermore, the broker-dealer must make a suitability
determination approving the customer for low-priced stock transactions based on
the customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the customer,
obtain specific written consent from the customer, and provide monthly account
statements to the customer. The effect of these restrictions will probably
decrease the willingness of broker-dealers to make a market in our common stock,
decrease liquidity of our common stock and increase transaction costs for sales
and purchases of our common stock as compared to other securities.

      Stockholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differential and markups by selling broker-dealers; and (v)
the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do not expect to be in a position to dictate the
behavior of the market or of broker-dealers who participate in the market,
management will strive within the confines of practical limitations to prevent
the described patterns from being established with respect to our securities.

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<PAGE>

Item 3. Controls and Procedures

          (a) Evaluation of disclosure controls and procedures. As of the end of
the period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were
effective as of the end of the applicable period to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act (i) is recorded, processed, summarized and reported within the time
periods specified in Securities and Exchange Commission rules and forms and (ii)
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosures.

          (b) Changes in internal controls over financial reporting. There was
no change in our internal control over financial reporting during our most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings

            Not Applicable

Item 2.     Unregistered Sales of Equity and Use of Proceeds

            Not Applicable

Item 3.     Defaults Upon Senior Securities

            Not Applicable

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

            Not Applicable

Item 5.     Other Information

            Not Applicable

Item 6.     Exhibits and Reports on Form 8-K

(a)         Exhibits

      The exhibits listed in the Exhibit Index are filed as a part of this
report.

                                   SIGNATURES

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

                               Innovative Card Technologies, Inc.


Date: May 13, 2005             /s/ Alan Finkelstein
                               --------------------
                                Alan Finkelstein
                               Chief Executive Officer, President
                               Secretary and Chairman of the Board


Date: May 13, 2005             /s/  Bennet P. Lientz, Jr.
                               --------------------------
                               Bennet P. Lientz, Jr.
                               Chief Financial Officer


                                       41
<PAGE>

                                  Exhibit Index

Exhibit
Number            Description

2.1(1)      Exchange agreement by and among the registrant, LensCard US, LLC,
            Alan Finkelstein, Forest Finkelstein, Bradley Ross and Luc
            Berthoud, dated April 1, 2004
2.2(1)      Exchange agreement by and among the registrant, Alan Finkelstein,
            Bradley Ross and Michael Paradise, dated April 1, 2004
2.3(1)      Exchange agreement between the registrant and its wholly-owned
            subsidiary, PSACo, Inc., dated April 1, 2004
2.4(1)      Merger agreement between the registrant and LensCard International
            Limited, a British Virgin Islands International
            Business Company, dated April 6, 2004
3.5(1)      Amended and Restated Certificate of Incorporation of the
            registrant
3.7(1)      Amended and Restated Bylaws of the registrant 10.1(1)* 2004 stock
            incentive plan 10.2(1) Sublease agreement between registrant and
            Bemel & Ross for premises at 11601 Wilshire Blvd., #2160, Los
            Angeles, California 90025, dated January 5, 2003
10.3(1)     Guaranty of lease between Alan Finkelstein and Bemel & Ross, dated
            January 5, 2003
10.4(1)     Form of common stock warrant
10.5(1)     Securities purchase agreement between registrant and Bristol
            Capital, LLC dated December 23, 2003
10.5(a)(1)  Waiver of section 2.3 of the securities purchase agreement between
            registrant and Bristol Capital, LLC
10.6(1)     Shares for debt agreement between registrant and Alan Finkelstein,
            dated June 22, 2004
10.7(1)     Shares for debt agreement between registrant and Bradley Ross, dated
            June 22, 2004
10.8(1)     Shares for debt agreement between registrant and Luc Berthoud, dated
            June 22, 2004
10.9(1)     Promissory note (loan no. 00003) between registrant and City
            National Bank, dated May 24, 2004
10.10(1)    Promissory note (loan no. 00005) between registrant and City
            National Bank, dated May 24, 2004
10.11(1)    Promissory note (loan no. 00004) between registrant and City
            National Bank, dated May 24, 2004
10.12(1)    Promissory note (loan no. 00006) between registrant and City
            National Bank, dated May 24, 2004
10.13(1)    Commercial guaranty between Alan Finkelstein and City National Bank
            dated May 24, 2004
10.14(1)    Commercial guaranty between Bradley Ross and City National Bank
            dated May 24, 2004
10.15(1)    Commercial guaranty between Luc Berthoud and City National Bank
            dated May 24, 2004
10.16(1)*   Offer letter between registrant and Murdoch Henretty dated July 28,
            2004
10.17(1)*   Employment agreement between registrant and Alan Finkelstein
            dated January 1998
10.18(1)+   Strategic Alliance Agreement between registrant and Visa
            International Service Association dated May 26, 2004
10.19(1)    Secured Demand Promissory Note between registrant and Union Finance
            International Corp. dated March 31, 2005
10.20(1)    Secured Demand Promissory Note between registrant and Bristol
            Investment Fund, Ltd. dated March 30, 2005
10.21(1)    Capital Lease Agreement between registrant and CNC Associates, Inc.
            dated November 30, 2004
10.22(1)+   Guaranty between Alan Finkelstein and CNC Associates, Inc. dated
            November 30, 2004
10.23(1)    Security Agreement between registrant and Union Finance
            International Corp. dated March 31, 2005 (See Exhibit 10.19)
10.24(1)    Security Agreement between registrant and Bristol Investment Fund,
            Ltd. dated March 30, 2005 (See Exhibit 10.20)
31.1        Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive
            Officer
31.2        Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial
            Officer
32.1        Certification by the Chief Executive Officer and Chief Financial
            Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
            Section 906 of the Sarbanes-Oxley Act of 2002.
--------------
(1) Incorporated by reference to the exhibit of the same number to the
Registrant's Registration Statement on Form SB-2 (File No. 333-119814) filed
with the Securities and Exchange Commission on October 19, 2004, as amended.

* Identifies a management contract or compensatory plan of arrangement required
to be filed as an exhibit to this report.

+ Confidential treatment granted as to certain portions, which portions were
omitted and filed separately with the Securities and Exchange Commission.


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