United States
                       Securities and Exchange Commission
                             Washington, D. C. 20549

                                   FORM 10-QSB

(Mark One)

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

         For the quarterly period ended September 30, 2005


[  ]     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For  the  transition period from _________________ to _________________


                          Commission File No. 000-50506

                            ASSURETEC Holdings, Inc.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)

           Delaware                                           20-0007441
-------------------------------                        ------------------------
(State or Other Jurisdiction of                       (I.R.S. Employer I.D. No.)
 incorporation or organization)

                    200 Perimeter Road, Manchester, NH 03103
                    ----------------------------------------
                    (Address of Principal Executive Offices)

                  Registrant's Telephone Number: (603) 641-8443

                                 Not Applicable
                                 --------------
         (Former name and former address, if changed since last Report)


Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
                                 Yes [ ] No [X]

Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                                 Yes [ ] No [X]


State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date. As of February 15, 2006, there were
971,069 shares of common stock of the Issuer outstanding.

Transitional Small Business Disclosure Format (check one):    Yes [  ] No [X]

<PAGE>



                                     Page 2

                                TABLE OF CONTENTS


PART I FINANCIAL INFORMATION..................................................3

ITEM 1         Condensed Consolidated Financial Statements....................3
       CONDENSED CONSOLIDATED BALANCE SHEET...................................4
       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS........................5
       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS........................6
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS...................8

   ITEM 2   Management's Discussion and Analysis of
               Financial Condition and Results of Operations.................20

   ITEM 3   Controls and Procedures..........................................26


PART II OTHER INFORMATION....................................................27

   ITEM 1   Legal Proceedings................................................27

   ITEM 2   Unregistered Sales of Equity Securities and Use of Proceeds......27

   ITEM 3   Defaults Upon Senior Securities..................................29

   ITEM 4   Submission of Matters to a Vote of Security Holders..............29

   ITEM 5   Other Information................................................29

   ITEM 6   Exhibits.........................................................29

   SIGNATURES ...............................................................30


                                     Page 2
<PAGE>



                          PART I FINANCIAL INFORMATION

ITEM 1 Condensed Consolidated Financial Statements

The condensed consolidated financial statements included herein have been
prepared by the registrant without audit pursuant to the rules and regulations
of the Securities and Exchange Commission. Although the registrant believes that
the disclosures are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such
rules and regulations. It is suggested that these financial statements be read
in conjunction with the audited financial statements and the notes thereto
included in the registrant's Report on Form 10-KSB for the year ended June 30,
2005, as filed with the Securities and Exchange Commission.


                                     Page 3
<PAGE>


                     ASSURETEC HOLDINGS INC. AND SUBSIDIARY

                      CONDENSED CONSOLIDATED BALANCE SHEET

                               September 30, 2005
                                   (Unaudited)

                                     ASSETS

Current Assets:
   Cash                                                            $    514,149
   Accounts receivable, net of an allowance for doubtful
   accounts of $41,489                                                   93,021
   Inventory                                                            100,464
   Prepaid software licensing fees                                      427,360
                                                                   ------------

          Total current assets                                        1,134,994

Property and equipment - net                                             41,450
Patents - net                                                            66,263
Deferred financing costs - net                                           66,667
Other assets                                                             11,254
                                                                   ------------

          Total Assets                                             $  1,320,628
                                                                   ============
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
   Accounts payable and accrued liabilities                           1,269,410
   Accrued compensation and related payroll taxes                     2,563,952
   Customer deposits                                                     16,100
   Deferred license revenue                                              28,200
   Debentures, net of debt discount of $150,262                         849,738
   Notes payable - related party                                         22,810
   Due to related parties                                               831,621
                                                                   ------------

          Total current liabilities                                $  5,581,831
                                                                   ------------

Commitments and Contingencies

Stockholders' Deficiency:
  Convertible Preferred stock - $0.001 par value;
      authorized 5,000,000 shares; issued and outstanding
      4,161 shares, (liquidation preference $4,161,000)                    --
   Common stock-$0.001par value; authorized,100,000,000 shares;
      issued and outstanding 637,719 shares                                 638
   Additional paid-in capital                                        10,571,404
   Deferred compensation                                                (43,002)
   Accumulated deficit                                              (14,790,243)
                                                                   ------------

          Total Stockholders' Deficiency                             (4,261,203)
                                                                   ------------
          Total Liabilities and Stockholders' Deficiency           $  1,320,628
                                                                   ============

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

                                     Page 4
<PAGE>


                     ASSURETEC HOLDINGS INC. AND SUBSIDIARY

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                             (Unaudited)
                                                     For the Three Months Ended
                                                           September 30,
                                                    ----------------------------
                                                        2005            2004
                                                    ---------------------------

Net revenues                                        $   105,525     $    16,600
Cost of revenues                                         50,824           7,557
                                                    -----------     -----------

          Gross profit                                   54,701           9,043
                                                    -----------     -----------

Costs and expenses:
   Selling, general and administrative (1)            1,027,511         355,616
   Engineering, research and development (1)          1,123,272         566,196
                                                    -----------     -----------

Total costs and expenses                              2,150,783         921,812
                                                    -----------     -----------

          Loss from operations                       (2,096,082)       (912,769)
                                                    -----------     -----------

Other income (expense):
   Interest expense - related party                      (8,726)        (10,685)
   Interest expense                                     (69,101)        (28,321)
   Other income                                             156             204
                                                    -----------     -----------

          Net loss                                  $(2,173,753)    $  (951,571)
                                                    -----------     -----------

Preferred stock dividends                           $   (50,492)    $      --
                                                    -----------     -----------

Net loss attributable to common stockholders        $(2,224,245)    $  (951,571)
                                                    ===========     ===========

Basic and diluted loss per common share             $     (3.49)    $     (1.44)
                                                    ===========     ===========
Weighted average shares outstanding - basic
   and diluted                                          637,719         661,743
                                                    ===========     ===========


(1) Includes stock based compensation:

Selling, general and administrative                 $   526,630     $      --
Engineering, research and development                   787,089           1,361
                                                    -----------     -----------

                                                    $ 1,313,719     $     1,361
                                                    ===========     ===========


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


                                     Page 5
<PAGE>
<TABLE>
<CAPTION>


                               ASSURETEC HOLDINGS INC. AND SUBSIDIARY

                            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                                 (Unaudited)

                                                                        For the Three Months Ended
                                                                                September 30,
                                                                    ------------------------------------
                                                                        2005                    2004
                                                                    ------------------------------------

<S>                                                                 <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                         $(2,173,753)            $  (951,571)
   Adjustments to reconcile net loss to net cash used in
      operating activities:
         Depreciation and amortization                                    6,610                   4,631
         Compensatory element of stock issuances                      1,313,719                   1,361
         Accretion of debt discount                                      30,053                    --
         Amortization of deferred financing costs                        23,333                    --
   Changes in operating assets and liabilities:
         Accounts receivable                                            (37,488)                (16,600)
         Inventory                                                      (78,288)                  6,600
         Prepaid software licensing fees                                  4,224                (201,024)
         Other current assets and other assets                           (7,710)                   --
         Accounts payable and accrued liabilities                        33,035                 384,770
         Accrued compensation                                            15,448                  63,273
         Deferred license revenue                                        28,200                    --
                                                                    -----------             -----------

             Net cash used in operating activities                     (842,617)               (708,560)
                                                                    -----------             -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of property and equipment                                    (5,692)                   (600)
   Acquisition of patents                                               (21,954)                   --
                                                                    -----------             -----------

             Net cash used in investing activities                      (27,646)                   (600)
                                                                    -----------             -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from issuance of common and preferred stock             252,300                 267,425
   Proceeds from issuance of debentures                               1,125,000                    --
   Repayment of debentures                                             (125,000)                   --
   Fees paid from issuance of debentures                                (80,000)                   --
   Proceeds from notes payable - related party                             --                       100
   Advances from affiliates                                               6,994                 441,471
                                                                    -----------             -----------

             Net cash provided by financing activities                1,179,294                 708,996
                                                                    -----------             -----------

NET INCREASE (DECREASE) IN CASH                                         309,031                    (164)

CASH, BEGINNING OF PERIOD                                               205,118                   1,614
                                                                    -----------             -----------

CASH, END OF PERIOD                                                 $   514,149             $     1,450
                                                                    ===========             ===========

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


                                                   Page 6
<PAGE>



                                   ASSURETEC HOLDINGS INC. AND SUBSIDIARY

                              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (Continued)


                                                                                         (Unaudited)

                                                                                 For the Three Months Ended
                                                                                        September 30,
                                                                                ----------------------------
                                                                                   2005               2004
                                                                                ----------------------------

SUPPLEMENTAL CASH FLOW INFORMATION:
   Interest paid                                                                $    1,000           $  --
                                                                                ==========           =======
   Income taxes paid                                                            $     --             $  --
                                                                                ==========           =======

   Non-Cash Financing Activities:
      Conversion of notes payable into accrued compensation                     $     --             $83,205
                                                                                ==========           =======
      Granting of warrants in connection with the issuance of debentures        $  180,315           $  --
                                                                                ==========           =======
      Granting of options for the settlement of accrued compensation            $   50,000           $  --
                                                                                ==========           =======
      Amortization of the deferred compensation for the settlement
       of accrued compensation                                                  $   43,001           $  --
                                                                                ==========           =======
</TABLE>






















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


                                     Page 7
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)

NOTE 1.  Nature of Business and Operations

The Company

     AssureTec Holdings, Inc. through its subsidiary, AssureTec Systems, Inc.,
(collectively the "Company") develops integrated identity document management
applications for use in government and commercial security applications. The
Company's proprietary document management platform automatically reads, records
and authenticates identification documents, such as passports, visas or driver's
licenses, through its proprietary database software, thereby reducing the risk
of human error in detecting falsified or tampered forms of identification.

     Effective July 1, 2005, the Company is no longer a development stage
company as defined in Financial Accounting Standards Board ("FASB") Statement
No. 7, "Accounting and Reporting For Development Stage Companies."

Going Concern Uncertainty

     The accompanying condensed consolidated financial statements have been
prepared on a going concern basis. The Company has incurred losses of
approximately $14.8 million since inception. As of September 30, 2005, the
Company has a working capital deficit of approximately $4.4 million. The
Company's continued existence is dependent upon its ability to obtain needed
working capital through additional equity and/or debt financing, and the
acceptability of its integrated identity document management applications for
use in government and commercial security applications to create sales that will
help the Company achieve a profitable level of operations.

     These matters raise substantial doubt about the Company's ability to
continue as a going concern. However, the accompanying consolidated financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of the liabilities in the normal
course of business.

     The condensed consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset amounts
or the classifications of liabilities that might be necessary should the Company
be unable to continue as a going concern.

     Management is actively pursuing additional equity and/or debt financing.
The Company amended the terms of its September 2005 Debenture offering (see
Notes 3 and 8 below) to increase the maximum amount of financing to be raised
from $1.125 million to $1.650 million. The Company also extended the terms of
the exercise periods on warrants offered under both the Debenture offering and
the September 2005 Private Placement offering of up to 1,250,000 shares of
Common Stock (see Notes 5 and 8 below). The Company believes the extended terms
of the warrants better reflect current market expectations by potential
investors and may improve the ability of the Company to complete these
offerings. Management believes that it will be successful in obtaining
additional financing, from which the proceeds will be primarily used to execute
its operating plan. The Company plans to use its available cash to continue the
development of its technologies and expand the marketing efforts to build demand
for our products. However, no assurances can be provided that the Company will
obtain additional financing or achieve a profitable level of operations.


                                     Page 8
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 1.  Nature of Business and Operations (continued)

     Sales and marketing activities are gaining market penetration for our
products and services and, based on current forecasts from our sales channels,
we expect our revenues to increase significantly over the next six to twelve
months, although there can be no assurance this will happen. We have reduced
operating expenses while attempting to maintain our technology development and
sales development activities. With our gross margins averaging in the range of
45% to 50% of revenues, any increase from recent levels in revenue generation
will move us toward profitable operations, however, there can be no assurance
that we can maintain gross margins within this range.

NOTE 2.  Summary of Significant Accounting Policies

     Basis of Presentation -The condensed consolidated financial statements have
been prepared using the accounting records of AssureTec Holdings, Inc. ("ATH")
and its wholly owned subsidiary, AssureTec Systems, Inc. ("ATS") (collectively,
the "Company"). The accompanying financial data as of September 30, 2005 and for
the three months ended September 30, 2005 and 2004, have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations. These financial statements should be read in conjunction with
the financial statements and the notes thereto included in our Annual Report on
Form 10-KSB for the year ended June 30, 2005 as filed on December 9, 2005.

     In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations, and cash flows as of September 30, 2005 and for the three
months ended September 30, 2005 and 2004, respectively, have been made. The
results of operation for the period ended September 30, 2005 are not necessarily
indicative of the operating results for the full year.

     Principles of Consolidation - As described in Note 1, the condensed
consolidated financial statements include the accounts of ATH and ATS. All
material intercompany balances and transactions have been eliminated.

     Use of Estimates - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during each of the reporting periods. Actual results could
differ from those estimates.


                                     Page 9
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 2.  Summary of Significant Accounting Policies (continued)


     Accrued Compensation - Certain employees and management of the Company have
been deferring their earned compensation since the Company's inception due to
the Company's insufficient working capital levels. The Company properly expensed
these obligations and the corresponding employment taxes associated with these
deferred wages and salaries as incurred. The Company has accrued interest costs
at a rate of 3% per annum on the unpaid balances. During the three months ended
September 30, 2005 the Company granted employee stock options to acquire 16,129
shares of common stock for the settlement of $50,000 of accrued compensation.
(See NOTE 5).

     Revenue Recognition - The Company recognizes revenue in accordance with
guidance contained in SEC Staff Accounting Bulletin No. 104, "Revenue
Recognition in Financial Statements".

     Product Revenues
     Generally, revenue is recognized upon shipment to the customer (which
constitutes delivery), provided that persuasive evidence of an arrangement
exists, the fee is fixed or determinable, and collection is reasonably assured.
To the extent that one or more of these conditions are not met, which has
occurred in the past, revenue is deferred until such time as all four criteria
are met.

     In general, the Company requires an upfront deposit for significant
customer purchases. If the Company receives a payment from a customer prior to
meeting all of the revenue recognition criteria, the payment is recorded as
deferred revenue. The Company's current arrangements with its third party
integrators, value-added resellers and distributors generally do not provide for
any rights of return, price-protection or other contingencies. The Company's
general credit terms requires a 50% deposit on order and complete payment within
30 days of shipment. At September 30, 2005 there was a deposit of $16,100 for an
open order.

     The Company records a provision for estimated sales returns and allowances
on product sales in the same period as the related revenue is recorded. These
estimates are based on known and estimated factors. Sales returns and allowances
during each of the reporting periods have been deemed immaterial.


                                    Page 10
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 2.  Summary of Significant Accounting Policies (continued)

     License and Maintenance Fees
     Fees from the sale of license and maintenance contracts are recognized
ratably over the term of the contract, usually one year.

     The Company has not had any sales with undeliverable elements for the three
months ended September 30, 2005.

Revenues for the three months ended September 30, 2005 and 2004 consisted of the
following:

                                                        September 30,
                                                      2005          2004
                                                      ----         ----
      Product revenues                               $84,425       $16,600
      Cost of product revenues                        50,824         7,557
                                                     -------       -------
      Gross profit from product revenues              33,601         9,043
      License and maintenance fees                    21,100          --
                                                     -------       -------
      Gross profit                                   $54,701       $ 9,043
                                                     =======       =======

     Product Warranties - The Company sells its products with a product warranty
that provides repairs to the hardware and software components outside of normal
wear and tear at no cost. The length of coverage is from ninety days up to one
year. The Company accrues its estimated exposure to warranty claims based upon
historical warranty claim costs as a percentage of sales. Management reviews
these estimates on a regular basis and adjusts the warranty provisions as actual
experience differs from historical estimates. For the three months ended
September 30, 2005 warranty claims were deemed immaterial.

     Stock-Based Compensation - The Company accounts for stock-based employee
compensation arrangements using the intrinsic value method in accordance with
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees" and complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation" as amended by SFAS No. 148 "Accounting for stock-based
compensation - Transition and Disclosure, an amendment of FASB 123", issued in
December 2002.

     Equity instruments issued to non-employee vendors are accounted for in
accordance with the provisions of SFAS No. 123, and Emerging Issues Task Force
("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are Issued To
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services." All transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted for based on the
fair value of the equity instrument issued, whichever is more reliably
measurable. The measurement date of the fair value of the equity instrument
issued is the date on which the counter party's performance is complete.


                                    Page 11
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 2.  Summary of Significant Accounting Policies (continued)

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation- Transition and Disclosure - an Amendment of FASB Statement No.
123." This statement amends SFAS No. 123 to provide alternative methods of
transition for a voluntary change to the fair-value based method of accounting
for stock-based employee compensation, In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. SFAS No. 148 also requires that those effects be disclosed more
prominently by specifying the form, content and location of those disclosures.
The Company adopted the increased disclosure requirements of SFAS No. 148 during
the year ended June 30, 2003.

     The Company does not maintain a formal incentive compensation plan covering
its employees, directors and independent contractors. Options to purchase the
Company's Common Stock vest at varying intervals, but in general, typically vest
over two to four year periods. An option's maximum term is ten years.

     The following table provides an expanded reconciliation for all periods
presented that adds back to reported net loss the recorded expense under APB No.
25, deducts the total fair value expense under SFAS No. 123, and shows the
reported and pro forma earnings per share amounts:
<TABLE>
<CAPTION>

                                                                                 Three Months Ended
                                                                                    September 30,
                                                                             2005                     2004
                                                                         ------------------------------------

<S>                                                                      <C>                      <C>
Net loss attributable to common stockholders, as reported                $(2,224,245)             $  (951,571)
Add:  stock-based employee compensation costs
  included in net loss, as reported                                           56,779                     --
Less:  stock-based employee compensation as
determined under fair value based method for all awards                      (65,369)                 (28,309)
Fair value adjustment for variable accounting of
employee stock options included in net loss, as reported
                                                                           1,336,558                     --
                                                                         -----------              -----------

Pro forma net loss attributable to common stockholders                   $  (896,277)             $  (979,880)
                                                                         ===========              ===========

Weighted average shares outstanding, basic and diluted                       637,719                  661,743
                                                                         ===========              ===========

Net loss per share, basic and diluted, as reported                       $     (3.49)             $     (1.44)
                                                                         ===========              ===========

Net loss per share, basic and diluted, pro forma                         $     (1.41)             $     (1.48)
                                                                         ===========              ===========
</TABLE>

     The fair value of each employee option grant is estimated on the date of
the grant using the Black-Scholes option-pricing model. Key weighted-average
assumptions used to apply this pricing model are as follows:

                                                         2005           2004
                                                    ----------------------------

Risk-free interest rate                                  4.0%           3.30%
Expected life of option grants                       5 to 7 years      4 years
Expected volatility of underlying stock                   20%            20%


                                    Page 12
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 2.  Summary of Significant Accounting Policies (continued)

     Net Loss Per Share - Net loss per share is computed in accordance with
Statement of Financial Standards No. 128, "Earnings Per Share"("SFAS No. 128").
SFAS No. 128 requires the presentation for both basic and diluted earnings per
share.

     Basic net loss per common share is computed by dividing net loss
attributable to common stockholders by the weighted average number of common
shares outstanding during the year. Diluted net loss per common share reflects,
in addition to the weighted average number of common shares, the potential
dilution if common stock options and warrants were exercised into common stock,
unless the effects of such exercise would be antidilutive.

     Basic and diluted loss per common share are the same for 2005 and 2004 as
potentially dilutive stock options, preferred stock, and warrants totaling
3,730,939 at September 30, 2005 and 935,964 at September 30, 2004 have not been
included in calculations of diluted net loss per share, as their inclusion would
be antidilutive.

A summary of these potentially dilutive securities are as follows:

                                                              September 30,
                                                           2005           2004
                                                        ------------------------

Options                                                 1,939,469        565,642
Warrants                                                  449,215           --
Convertible Preferred Stock -See Note 5
    Series A-1                                          1,342,255        370,322
    Series A-2                                               --             --
                                                        ---------      ---------
                                                        3,730,939        935,964
                                                        =========      =========


NOTE 3.  Debentures

     In September 2005 the Company issued $1,125,000 of debentures. These
debentures have a six month term and bear interest at 12% annually. For each
$3.00 of debentures purchased, the Company granted one warrant to purchase one
share of Common Stock at $6.00 per share for a period of one year from the date
of investment or upon an initial public offering, whichever occurs earlier. The
Company granted warrants to acquire 375,667 shares of Common Stock. The fair
value of the warrants was calculated using the Black-Scholes Option Valuation
Model. The Company recorded a debt discount of $180,315 which will accrete to
interest expense over the life of the debt.

     The Company incurred fees of approximately $90,000 for the acquisition of
the debentures. These costs have been capitalized and will be amortized to
interest expense over the life of the debt. There was $23,333 amortized during
the three month period ended September 30, 2005.

     The Company repaid $125,000 of the debentures during the three months ended
September 30, 2005, The remaining balance was repaid with proceeds received from
the September 15, 2005 Private Placement during the three months ended December
31, 2005, as discussed in Note 5.


                                    Page 13
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 4.  Accounts Payable and Accrued Liabilities

     Accounts Payable and Accrued Liabilities at September 30, 2005 consisted of
the following:

                                                          September 30,
                                                              2005
                                                           ----------

      Trade Payables                                       $  860,390
      Professional Fees                                       197,315
      Accrued Interest                                        163,189
      Accrued Dividends Payable                                38,516
      Accrued Commissions                                      10,000
                                                           ----------

                                                           $1,269,410
                                                           ==========

NOTE 5.  Stockholders' Deficiency

     Common Stock

     The Company has 100,000,000 authorized shares of common stock, $0.001 par
value. At September 30, 2005, there were 637,719 shares of common stock issued
and outstanding.

     On September 15, 2005, the Company commenced a private offering to
accredited investors only of up to 1,250,000 shares of Common Stock. Pursuant to
this private offering, the Company is offering units for gross proceeds of
$12.00 per unit. Each unit is comprised of two shares of Common Stock at $6.00
per share with one warrant to acquire one share of Common Stock at $6.00 per
share, for each two shares of Common Stock purchased. The warrants granted in
this offering were initially exercisable for a period of one year from the date
of investment or upon an initial public offering by the Company, whichever
occurred earlier. As of December 31, 2005, a total of 333,350 shares have been
sold, and 166,675 warrants have been granted, pursuant to this offering raising
gross proceeds of $2.0 million, of which $1.125 million was applied to retire
the September 1, 2005 debentures.


                                    Page 14
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 5.  Stockholders' Deficiency (continued)

     Convertible Preferred Stock

     The Company has 5,000,000 shares of Convertible Preferred Stock, $0.001 par
value, authorized, issuable in series with rights, preferences, privileges and
restrictions as determined by the Board of Directors.

     Series A-1
     On August 13, 2004, ATH authorized 1,000,000 shares of its Series A-1
Convertible Preferred Stock. Each share of ATH's Series A-1 Convertible
Preferred Stock is convertible into 322.58 shares of Common Stock. The holders
of Series A-1 Convertible Preferred Stock vote with the shares of Common Stock
being entitled to such number of votes as is equal to the whole number of shares
of Common Stock into which such holder's aggregate number of shares of Series
A-1 Convertible Preferred Stock are convertible. Holders of Series A-1
Convertible Preferred Stock have no redemption rights. Holders of Series A-1
Convertible Preferred Stock are entitled to receive dividends cumulative out of
funds legally available, therefor, at the rate of 5% of the applicable "Series
A-1 Price", adjusted to reflect any stock-split, stock dividend, combination,
recapitalization or reorganization occurring after the original issue date.

     In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, before any payment or distribution shall be
made to the holders of Common Stock, the holders of Series A Convertible
Preferred Stock are entitled to receive out of the assets of the Company an
amount equal to the greater of (i) applicable "Series A-1 Price" per share then
outstanding, plus a sum equal to all declared but unpaid dividends thereon to
the date of final payment or distribution, or (ii) the pro rata amount per share
of the entire assets of the Company available for distribution to the holders of
all Convertible Preferred Stock and Common Stock based upon the total number of
share of Common Stock then outstanding (assuming conversion into Common Stock of
all series and shares of Convertible Preferred Stock); provided, however, that
if the remaining assets of the Company are insufficient to make payment in full
to all holders of Series A Preferred of the foregoing liquidation preference,
then such assets shall be distributed among the holders of Series A Convertible
Preferred Stock at the time outstanding, ratably in proportion to the full
amounts to which they would otherwise be respectively entitled. Any transaction
or series of transactions which results in a change of control is deemed to be a
liquidation, dissolution or winding up, unless the holders of at least 75% of
the outstanding shares of ATH's Series A-1 Convertible Preferred Stock approve
the transaction.

     Series A-2
     In April 2004, ATH authorized 500 shares of Series A-2 Convertible
Preferred Stock, $0.001 par value. The price per share was $10,000. Each share
is convertible into 2,000 shares of Common Stock. The holders of Series A-2
Convertible Preferred Stock vote with the shares of Common Stock being entitled
to such number of votes as is equal to the whole number of shares of Common
Stock into which such holder's aggregate number of shares of Series A-2
Convertible Preferred Stock are convertible. Holders of Series A-2 Convertible
Preferred Stock have no redemption rights. Holders of Series A-2 Convertible
Preferred Stock are entitled to receive dividends cumulative in the form of
shares of Common Stock. Dividends accrue at an annual rate of 200 shares of
Common Stock per share of Series A-2 Convertible Preferred Stock on a pro-rata
basis based upon the Original Issue Date. In August 2004, holders of Series A-2
Convertible Preferred Stock were given rescission rights and/or rights to
exchange their shares for Series A-1 Convertible Preferred Stock.


                                    Page 15
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 5.  Stockholders' Deficiency (continued)

Convertible Preferred Stock (continued)

     At September 30, 2005, outstanding shares of Convertible Preferred Stock
were as follows:

                                          Authorized Shares    Issued Shares
                                     ------------------------------------------
          Series A-1                         1,000,000            4,161
          Series A-2                               500               --


     During the quarter ended September 30, 2005, the Company sold 290 shares of
Convertible Preferred Stock for gross proceeds of $290,000 (net cash proceeds of
$252,300).

     Warrants

     In September 2005, the Company granted warrants to acquire 73,548 shares of
Common Stock exercisable at $3.255 per share to registered broker dealers and
their assigns for fundraising services provided to the Company. The warrants are
fully vested and have a life of 5 years. The Company valued the stock warrants
using the Black-Scholes Option Valuation Model and incurred a stock based
compensation charge of $55,382.

     Options

     In July 2005, the Company granted employee stock-options to acquire 16,129
shares of Common Stock exercisable at $0.50 per share for the settlement of
accrued compensation of $50,000. The employee stock-options are fully vested and
have a life of seven years.

     In July 2005, at the option of the ex-employee, the Company retired 21,774
shares of Common Stock originally issued as part of a severance package for
consideration of $135,000 and in their place granted stock options to acquire
21,838 shares of Common Stock exercisable at $0.50 per share. The stock options
are fully vested and have a life of seven years. The Company valued the stock
options using the Black-Scholes Option Valuation Model and incurred a stock
based compensation charge of $56,779.

     In September 2005, the Company granted employee stock-options to acquire
900 shares of Common Stock, exercisable at $6.00 per share, for services
provided. The employee stock-options will vest over a period of three years and
have a life of five years. The Company did not incur a charge to stock based
compensation since there was no intrinsic value from the granting of the
options.

     On June 30, 2005 the Company cancelled 80,632 employee stock options and
granted 460,882 options as replacement options. The replacement options have a
life of seven years are fully vested and are exercisable at $0.50 per share.
Pursuant to Financial Accounting Standards Board Interpretation No. 44:
"Accounting for Certain Transactions involving Stock Compensation" such options
became subject to variable accounting treatment. For the three months ended
September 30, 2005, the Company recognized a fair-value charge of $1,336,558.


                                    Page 16
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 6.  Commitments and Contingencies

Litigation

     In the normal course of business, the Company may be involved in legal
proceedings in the ordinary course of business. Such matters are subject to many
uncertainties, and outcomes are not predictable with assurance. The Company
currently is not involved in any legal proceedings which are not in the ordinary
course of business.

NOTE 7.  Related Party Transactions

     As of September 30, 2005 amounts due to related parties consisted of the
following:

                                                      September 30,
                                                          2005
                                                      -------------

       Advances                                         $564,368
       Professional Fees                                 132,500
       Accrued Interest                                  122,777
       Accrued Dividends Payable                          11,976
                                                        --------

                                                        $831,621
                                                        ========

     Certain of the Company's obligations have been funded by RT Robertson
Consultants, Inc. and Robertson Financial Advisors, LLC, companies owned and
controlled by the family of the Company's chief executive officer (the "Related
Party"). At September 30, 2005, the Company owes the Related Party $564,368.
Effective July 1, 2002, the Company agreed to accrue interest on these amounts
at 5.0% per annum. The Company recorded approximately $8,726 in the three months
ended September 30, 2005 and $10,685 in 2004 in interest expense - related party
in the Condensed Consolidated Statements of Operations. As of September 30,
2005, $122,777 of accrued interest was owed to the related party.

     The Company believes that the interest rate applied to the Related Party
obligation is on terms as favorable as those it could obtain from independent
sources.

     As of September 30, 2005, the Company owed the Chief Executive Officer and
Treasurer in the aggregate $132,500 for certain professional and management fees
incurred during the years ended June 30, 2003 and 2002. The Company has not
incurred these charges during the three months ended September 30, 2005.

     As of September 30, 2005, the related party is owed $11,976 in accrued
dividends payable for the 958 shares of Convertible Preferred Stock owned by the
related party.


                                    Page 17
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 8.  Subsequent Events

     Convertible Preferred Stock
     ---------------------------

     In October 2005, the Company sold 25 shares of Convertible Preferred Stock
for gross proceeds of $25,000, and net cash proceeds of $21,750.

     In October 2005, the Company allowed a former director of the Company to
return 25 of 50 shares of Series A-1 Convertible Preferred Stock and returned
$25,000 of the $50,000 original investment to the former director of the
Company.

     Warrants
     --------

     In October 2005, the Company granted warrants to acquire 200,000 shares of
Common Stock, exercisable at $6.00 per share, to the Related Party in exchange
for the Related Party's agreement not to request repayment of advances to the
Company by the Related Party which were in excess of $600,000 (including
interest on the advances) and which were currently payable by the Company. The
warrants are fully vested and have a life of two years from date of forbearance
or within one year from any initial public offering by the Company, whichever
occurs earlier. The Company valued the stock warrants using the Black-Scholes
Option Valuation Model and incurred a stock based compensation charge of
$180,530 which will be included as part of interest expense on the Condensed
Consolidated Statements of Operations.

     In October 2005, the Company granted warrants to acquire 16,667 shares of
Common Stock exercisable at $6.30 per share to registered broker dealers and
their assigns for fundraising services provided to the Company. The warrants are
fully vested and have a life of 5 years. The Company valued the stock warrants
using the Black-Scholes Option Valuation Model and incurred a stock based
compensation charge of $26,609.

     In October 2005, the Company granted warrants to acquire 33,333 shares of
Common Stock exercisable at $6.30 per share to registered broker dealers and
their assigns for fundraising services provided to the Company. The warrants are
fully vested and have a life of 5 years. The Company valued the stock warrants
using the Black-Scholes Option Valuation Model and incurred a stock based
compensation charge of $53,216.

     In December 2005, the Company extended the exercise period for 542,342
warrants granted under the September 1, 2005 Debentures offering, the September
15, 2005 Common Stock Offering, and the 200,000 warrants granted to the Related
Party. The life of the warrants was extended from a period of one year from date
of investment or upon an initial public offering by the Company, whichever
occurs earlier, to a period of two years from date of investment or within one
year from any initial public offering by the Company, whichever occurs earlier.
As a result of this amendment, the Company recognized a fair-value adjustment of
$175,762.


                                    Page 18
<PAGE>


                     ASSURETEC HOLDINGS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (UNAUDITED)
                                   (Continued)

NOTE 8.  Subsequent Events (continued)

     Options
     -------

     In October 2005, the Company granted employee stock options to acquire
103,000 shares of Common Stock, exercisable at $6.00 per share, for services
provided. The employee stock options will vest over a period of three years and
have a life of five years. The Company did not incur a charge for stock based
compensation since there was no intrinsic value from the granting of the
options.

     In December 2005, the Company granted employee stock options to acquire
35,000 shares of Common Stock, exercisable at $6.00 per share, for services
provided. The employee stock options will vest over a period of three years and
have a life of five years. The Company did not incur a charge for stock based
compensation since there was no intrinsic value from the granting of the
options.

     In December 2005, the Company granted options to a vendor to acquire 14,190
shares of common stock for the settlement of vendor payables of $42,572. The
options are fully vested, have an exercise price of $0.50 per share, and have a
life of 7 years.

     Debentures
     ----------

     In December 2005, the Company amended the September 1, 2005 Debenture
offering to increase the offering amount from $1.125 million to $1.650 million
and extended the exercise period of the warrants from a period of one year from
date of investment or upon an initial public offering by the Company, whichever
occurs earlier, to a period of two years from date of investment or within one
year from any initial public offering by the Company, whichever occurs earlier.

     In December 2005, the Debenture offering raised an additional gross
proceeds amount of $90,000, and the Company issued warrants to acquire 30,000
shares of Common Stock. The fair value of the warrants was calculated using the
Black-Scholes Option Valuation Model. The Company recorded a debt discount of
$20,816 which will accrete to interest expense over the life of the debt.

     In January 2006, the Debenture offering raised an additional gross proceeds
amount of $100,000, and the Company issued warrants to acquire 33,333 shares of
Common Stock. The Company is evaluating the financial and accounting impact of
this transaction.

     Other
     -----

     In December 2005, the Company signed a memorandum of understanding with a
third-party manufacturer to become an exclusive distributor of the
manufacturer's products in North America, and non-exclusive distributor for the
rest of the world. The third party manufacturer will modify, develop and
manufacture document reader products which the Company will integrate into and
sell as part of its extended line of document authentication systems. The
Company has committed to pay $100,000 during the first six months of 2006 and an
additional $100,000 in July 2006 as an advance against the purchase of 5,000
units. The Company has paid $50,000, and is obligated to pay an additional
$20,000 for modifications to the manufacturer's products requested by the
Company.


                                    Page 19
<PAGE>



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

Forward-Looking Statements

     Under the Private Securities Litigation Reform Act of 1995, companies are
provided with a "safe harbor" for making forward-looking statements about the
potential risks and rewards of their strategies. Forward-looking statements
often include the words "believe," "expect," "anticipate," "intend," "plan,"
"estimate" or similar expressions. In this report, forward-looking statements
also include:

     o    statements about our business plans;

     o    estimates of future financial performance;

     o    statements regarding other factors that could affect our future
          operations or financial position; and

     o    other statements that are not matters of historical fact.

     These statements may be found under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" below as well as in this
report generally. Our ability to achieve our goals depends on many known and
unknown risks and uncertainties, including changes in general economic and
business conditions. These factors could cause our actual performance and
results to differ materially from those described or implied in forward-looking
statements.

     These forward-looking statements speak only as of the date of this report.
We believe it is in the best interests of our investors to use forward-looking
statements in discussing future events. However, we are not required to, and you
should not rely on us to, revise or update these statements or any factors that
may affect actual results, whether as a result of new information, future events
or otherwise.

     The discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" should be read together with our financial
statements and related notes included elsewhere in this Quarterly Report on Form
10-QSB.

Overview

     We develop integrated identity document management applications for use in
government and commercial security applications. Our proprietary document
management platform automatically reads, records and authenticates
identification documents, such as passports, visas or driver's licenses, through
our proprietary database software thereby reducing the risk of human error in
detecting falsified or tampered forms of identification. We are subject to a
number of risks including dependencies on key individuals, competition from
other substitute products and larger companies, the successful development and
marketing of our products and the need to obtain adequate financing necessary to
fund our future operations.

     Our historical results of operations have been prepared using the
historical accounting records of AssureTec Holdings and our wholly owned
subsidiary AssureTec Systems. The operations of AssureTec Holdings are limited
and consist primarily of certain management costs, such as compensation and
third party management and accounting services. Historical references to our
operations primarily consist of those transactions executed by AssureTec Systems
in the development of our integrated identity document management applications.

                                    Page 20

<PAGE>


     Our historical results of operations and financial condition do not include
any adjustments relating to the recoverability of assets or the classification
of liabilities that might be necessary should we be unable to continue as a
going concern. Our independent public accounting firm's audit report for the
fiscal year ended June 30, 2005 indicates that there is substantial doubt about
our ability to continue as a going concern.

Critical Accounting Policies

     The discussion and analysis of our financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of those financial statements requires us to make
estimates and judgments that affect the reported amount of assets and
liabilities at the date of our financial statements. Actual results may differ
from these estimates under different assumptions or conditions.

     Critical accounting policies are those that reflect significant judgments
or uncertainties, and potentially result in materially different results under
different assumptions and conditions. The Company believes that our most
critical accounting policies include: recognition of revenue transactions and
accounting for stock options and warrants.

Revenue Recognition
     The Company recognizes revenues earned in accordance with guidance
contained in SEC Staff Accounting Bulletin No. 104, "Revenue Recognition in
Financial Statements".

     Revenues generated are generally from product revenues, and software
licenses and hardware/software maintenance fees.

Product Revenues
     Generally, revenue is recognized upon shipment to the customer (which
constitutes delivery), provided that persuasive evidence of an arrangement
exists, the fee is fixed or determinable, and collection is reasonably assured.
To the extent that one or more of these conditions are not met, which has
occurred in the past, revenue is deferred until such time as all four criteria
are met.

     In general, the Company requires an upfront deposit for significant
customer purchases. If the Company receives a payment from a customer prior to
meeting all of the revenue recognition criteria, the payment is recorded as
deferred revenue. The Company's current arrangements with its third party
integrators, value-added resellers and distributors generally do not provide for
any rights of return, price-protection or other contingencies. The Company's
general credit terms require a 50% deposit on order and complete payment within
30 days of shipment.

     The Company records a provision for estimated sales returns and allowances
on product sales in the same period as the related revenue is recorded. These
estimates are based on known and estimated factors such as history with the
customer and the specific terms to the sales agreement.

License and Maintenance Fees
     Fees from the sale of software license and maintenance contracts are
recognized ratably over the term of the contract, usually one year.

     The Company has not had any sales with undeliverable elements for the three
months ended September 30, 2005.

                                    Page 21

<PAGE>


Accounting for Stock-Based Compensation
     We account for options granted to employees in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for
Stock Issued to Employees, and comply with the disclosure provisions of SFAS No.
123, Accounting for Stock-Based Compensation. Under APB No. 25, compensation
expense is recognized based on the difference, if any, on the date of grant
between the estimated market value of the Company's stock and the amount an
employee must pay to acquire the stock. Compensation expense is recognized
immediately for past services and ratably for future services over the
option-vesting period.

     We account for the fair value of options and warrants for non-employees in
accordance with SFAS No. 123, "Accounting for Stock Based Compensation," which
requires that compensation cost be measured after the grant date based on the
value of the award and is recognized over the service period, which is also the
vesting period. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model. We will be required to
account for options and warrants for employees during the annual reporting
period on July 1, 2006 as a result of the FASB's issuance of SFAS No. 123R
"Accounting For Stock Based Compensation."

     The Black-Scholes option-pricing model is used to estimate the fair value
of a stock option. The model calculates the theoretical fair value based on a
number of assumptions utilizing, the stock price, strike price, expiration date,
risk-free rate of return, and the standard deviation (volatility) of the stock's
return. Stock based compensation valuations may differ significantly if the
Company used a different option model, based on the before mentioned assumptions
and the alternative model's formula driven calculations. The Company has not
relied on any other option pricing models for the issuance of its options or
warrants as the Black-Scholes option-pricing model is currently the model most
widely used for reporting companies. The uncertain assumptions estimating the
valuation of these equity transactions may have a material effect on our
financial performance during the reported periods.

Results of Operations - For The Three Months Ended September 30, 2005 and 2004

     Total revenues for the three months ended September 30, 2005 and 2004 were
$105,525 and $16,600, respectively. Revenues are comprised of product sales and
software licensing and maintenance fees. Revenues related to product sales were
$84,425 and $16,600 for the quarters ended September 30, 2005 and 2004
respectively, while revenues related to software licensing and maintenance fees
were $21,100 and $0 for the same periods. Revenues for the quarter ended
September 30, 2005 resulted from the sale and shipment of hardware and software
to six different systems integrators/reseller partners, as we continue expanding
our market penetration domestically and internationally. We had minimal sales
for the quarter ended September 30, 2004, and they were all to a single systems
integrator for a government program.

     Cost of revenues for the three months ended September 30, 2005 and 2004 was
$50,824 and $7,557, respectively. Cost of revenues represent the cost of the
hardware components, manufacturing and related overhead, labor and other costs
for the products we shipped. The increase in costs from 2004 to 2005 was due to
the increased volume. There are no costs for the revenues generated from our
software licensing and maintenance fees.

     Selling, general and administrative expenses for the three months ended
September 30, 2005 increased to $1,027,511 from $355,616 in the comparable
period in 2004. The increase in selling, general and administrative expenses was
primarily attributable to an increase in sales and marketing costs as the
Company seeks to increase market penetration for its products and services, and


                                    Page 22

<PAGE>


the fair-value charge for the replacement stock options that were granted to
employees on June 30, 2005, which are reflected in the compensatory element of
stock issuance expenses for the three months ended September 30, 2005. The
issuance of stock-based compensation to employees and consultants for services
provided is accounted for using the intrinsic value method in accordance with
APB No. 25 and the disclosure provisions of SFAS No. 123. The compensatory
element of stock issuance expense increased from $0 for the three months ended
September 30, 2004 to $526,630 for the three months ended September 30, 2005.

     Engineering, research and development expenses for the three month period
ended September 30, 2005 increased to $1,123,272 from $566,196 in the comparable
period in 2004. The increase in engineering, research and development costs was
a result primarily of a reduction of approximately $250,000 in engineering,
research and development expenses, offset by a significant increase in the
compensatory element of stock issuance expenses. The fair-value charge for the
replacement stock options that were granted to employees on June 30, 2005, are
reflected in the compensatory element of stock issuance expenses for the three
months ended September 30, 2005. The issuance of stock-based compensation to
employees and consultants for services provided is accounted for using the
intrinsic value method in accordance with APB No. 25 and the disclosure
provisions of SFAS No. 123. The compensatory element of stock issuance expense
increased from $1,361 for the three month period ended September 30, 2004, to
$787,089 for the three month period ended September 30, 2005.

     Other expense for the three months ended September 30, 2005 increased to
$77,671 compared to $38,802 for the three months ended September 30, 2004. The
increase was attributable primarily to the interest expense related to the
accretion of the debt discount of $30,053, and $23,333 amortized to interest
expense for deferred financing fees related to the acquisition of the debentures
offered on September 1, 2005.

     For the three months ended September 30, 2005 and 2004 net loss
attributable to common shareholders was $2,224,245, or $3.49 per share (basic
and diluted), and $951,571, or $1.44 per share (basic and diluted),
respectively. The increase in net loss of $1,272,674 was primarily attributable
to an increase in selling and marketing costs as the Company seeks to increase
market penetration for our products and services, the increase in the
compensatory element of stock issuance expenses and the increase in interest
expenses related to the debenture issuance in September 2005.

Financial Condition, Liquidity and Capital Resources

     We were formed in October 2001 and since our formation through September
30, 2005 had raised $4.2 million through financing activities, and approximately
$958,000 from parties affiliated with our CEO, Dr. Reeves. In addition to these
funds raised, we have relied at times on our employees' deferment of some
portion of their compensation. In December 2004, several employees converted
$2.2 million of deferred compensation into 769,000 options to purchase a like
number of shares of common stock in the Company. At September 30, 2005,
compensation in the aggregate of approximately $2.1 million has been formally
deferred by the employees until the Company's Board of Directors deems cash is
sufficient from operating cash flow to make payments on these deferred amounts.
At September 30, 2005, we had a working capital deficiency of approximately $4.4
million. These matters raise substantial doubt about the Company's ability to
continue as a going concern, and our continuation as a going concern will
require that we raise significant additional capital.

     We believe that we will continue to be successful in obtaining additional
financing, from which the proceeds will be primarily used for general corporate
purposes including working capital, capital expenditures, research and


                                    Page 23

<PAGE>


development and other strategic investments. However, no assurances can be
provided that we will obtain additional financing sufficient to meet our future
needs on commercially reasonable terms or otherwise. We have not yet developed
revenues sufficient to bring us to a positive cash flow position which has led
to substantial doubt about our ability to continue as a going concern. Our
continuation as a going concern is dependent upon our ability to raise
additional capital, generate sufficient cash flow and meet our obligations on a
timely basis and ultimately attain profitability.

     On September 1, 2005, we initiated a private placement to accredited
investors of debentures with warrants to purchase Common Stock. These debentures
have a six month term from the date of investment and bear interest at 12%
annually and are to be repaid from proceeds from any subsequent offering. For
each $3.00 of debentures purchased, the Company issued one warrant to purchase
one share of Common Stock at $6.00 per share for a period of one year from the
date of investment or upon an initial public offering by the Company, whichever
occurs earlier. This private debenture offering raised gross proceeds of $1.125
million and net proceeds of approximately $1.035 million.

     On September 15, 2005, we commenced a private offering to accredited
investors of up to 1,250,000 shares of Common Stock. Pursuant to this private
offering, the Company is offering Common Stock at $6.00 per share with one
warrant to acquire one share of Common Stock at $6.00 per share, for each two
shares of Common Stock purchased. The warrants issued in this offering were
initially exercisable for a period of one year from the date of investment or
upon an initial public offering by the Company, whichever occurred earlier. As
of December 31, 2005, a total of 333,350 shares have been sold pursuant to this
offering raising gross proceeds of $2.0 million, of which $1.125 million was
applied to retire the September 1, 2005 debentures.

     In December 2005, the Company extended the exercise period on 542,342
warrants, including those issued, under the September 1, 2005 Debentures
offering, the September 15, 2005 Common Stock Offering, and the 200,000 warrants
granted to the Related Party. The exercise period was extended from a period of
one year from date of investment or upon an initial public offering by the
Company, whichever occurs earlier, to a period of two years from date of
investment or within one year from any initial public offering by the Company,
whichever occurs earlier. The Company believes the extended terms better reflect
market expectations of investors and may improve the ability of the Company to
complete these offerings. As a result of this amendment, the Company recognized
a fair-value adjustment of $175,762 related to a total of 542,342 issued
warrants.

     In December 2005, the Company amended the September 1, 2005 Debenture
offering to increase the offering amount from $1.125 million to $1.650 million
in addition to extending the exercisable period on the warrants from a period of
one year from date of investment or upon an initial public offering by the
Company, whichever occurs earlier, to a period of two years from date of
investment or within one year from any initial public offering by the Company,
whichever occurs earlier.

     In December 2005, the Debenture offering raised an additional gross
proceeds amount of $90,000, and the Company issued warrants to acquire 30,000
shares of Common Stock. The fair value of the warrants is $20,816 and is
recorded as a debt discount which will accrete to interest expense over the life
of the debt.

     In December 2005, the Company granted options to a vendor to acquire 14,190
shares of common stock for the settlement of vendor payables of $42,572. The
options are fully vested, have an exercise price of $0.50 per share, and have a
life of 7 years.


                                    Page 24

<PAGE>


     In January 2006, the Debenture offering raised an additional gross proceeds
amount of $100,000, and the Company issued warrants to acquire 33,333 shares of
Common Stock. The Company is evaluating the financial and accounting impact of
this transaction.

     We will use the balance of new proceeds from these offerings, if any, after
retiring the debenture, primarily to strengthen our sales and marketing efforts
and to better position us for another private placement or a public offering. We
believe that this additional outside financing will be available to us; however,
there can be no assurance that we will obtain this additional financing in an
amount sufficient to meet our future needs.

     We plan to continue our development and enhancement of our technology
products during the next twelve months. We will be introducing two new product
lines during the second half of this fiscal year, a new high-resolution system
with RFID (radio frequency identification) capability required in many
government programs, and a new low-end model designed for the high volume market
place. Our sales and marketing activities with our current product line are
gaining market penetration and, along with the introduction of these new models,
we expect our revenues to increase significantly over the next six to twelve
months based on current forecasts from our sales channels, however there can be
no assurance that will occur. If we are successful in obtaining additional
financing, we will need to hire additional employees, primarily in the areas of
marketing, sales, finance, administration, engineering and quality assurance.
This will require us to purchase additional computer equipment; however, any
such purchases are not expected to be significant.

     As of September 30, 2005, we had sufficient cash, in our estimation, to
sustain operations for a period of approximately three months. In addition, with
the Private Placement offering of shares and warrants begun in September 2005,
we are attempting to raise up to $7.5 million ($6.9 million net of expenses).
Successfully closing this subscription, in addition to the cash currently on
hand, would allow us to operate for a period in excess of two years without
significant revenues. There is no assurance that we will be successful in
raising these additional funds.

     Our facility lease, which has been personally guaranteed by our chief
executive officer, runs through June 30, 2007 and requires minimum annual
payments of approximately $48,000 though its expiration.

     The Company has entered into an agreement with an outside vendor to provide
Optical Character Recognition ("OCR") and Intelligent Character Recognition
("ICR") technologies. Under the software license agreement, the Company is
obligated to purchase 2,500 units of the software to allow the Company to
utilize the software with the Company's technologies. At September 30, 2005, the
Company has recorded as prepaid software licensing fees in the aggregate of
$427,360.

     In December 2005, the Company signed a memorandum of understanding with a
third-party manufacturer for the Company to become an exclusive distributor of
the manufacturer's products in North America, and non-exclusive distributor for
the rest of the world. The manufacturer will modify, develop and manufacture
document reader products which the Company will integrate into and sell as part
of its extended line of document authentication systems. The Company has
committed to pay $100,000 during the first six months of 2006 and an additional
$100,000 in July 2006 as an advance against the purchase of a minimum of 5,000
units. The Company has paid $50,000, and is obligated to pay an additional
$20,000 for modifications to the manufacturer's products requested by the
Company. The $50,000 is included as part of Other Assets on the Condensed
Consolidated Balance Sheet.


                                     Page 25

<PAGE>


     ITEM 3   Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

     We maintain "disclosure controls and procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15(d)-15(e)) designed to
ensure that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the specified time periods.

     Our chief executive officer and principal financial officer, with the
participation of our management, have evaluated the effectiveness of the design
and operation of our disclosure controls and procedures as of September 30,
2005. Based upon that evaluation, the chief executive officer and principal
financial officer concluded that, while our disclosure controls and procedures
are effective in timely alerting them to material information required to be
included in our periodic filings with the Securities and Exchange Commission,
there is a lack of segregation of duties at the Company due to the small number
of employees dealing with general administrative and financial matters. In
addition, the accounting department does not currently have the depth of
experience to critically evaluate and appropriately implement certain new
accounting pronouncements, such as sophisticated stock based transactions
involving options and warrants, requiring our auditors from time to time to
propose audit adjustments. These constitute a significant deficiency in the
financial reporting.

     Management is currently evaluating this situation with intentions to
attempt to minimize the risks associated with the significant deficiency
identified and discussed in the immediately preceding section of this item 3. If
the volume of the business increases and sufficient capital is secured, it is
the Company's intention to increase staffing to mitigate the current lack of
segregation of duties and increase the depth of technical knowledge within the
general administrative and financial functions.

     However, at this time management has decided that, considering the
employees involved and the control procedures in place, the risks associated
with such lack of segregation are currently manageable, and the potential
benefits of adding additional employees to clearly segregate duties and add
depth of experience do not justify the expenses associated with such increases.

 (b) Changes in Internal Controls

     During the period covered by this report, there have been no changes in our
internal control over financial reporting that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.


                                    Page 26
<PAGE>


                            PART II OTHER INFORMATION

ITEM 1 Legal Proceedings

     None.

ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds

     The Company and subsidiary made the following issuances of unregistered
securities during the past three years, all of which were made pursuant to
Section 4(2) of the Securities Act and pursuant to Regulation D promulgated
thereunder.

     Common Stock

     On September 15, 2005 the Company commenced a private offering to
accredited investors of up to 1,250,000 shares of Common Stock. Pursuant to this
private offering, the Company is offering units for gross proceeds of $12.00 per
unit. Each unit is comprised of two shares of Common Stock at $6.00 per share
with one warrant to acquire one share of Common Stock at $6.00 per share, for
each two shares of Common Stock purchased. The warrants granted in this offering
are exercisable for a period of one year from the date of investment or upon an
initial public offering by the Company, whichever occurs earlier. As of December
31, 2005 a total of 333,350 shares had been sold, and 166,675 warrants have been
granted, pursuant to this offering raising gross proceeds of $2.0 million, of
which $1.125 million was applied to retire the September 1, 2005 debentures.

     Convertible Preferred Stock

     During the quarter ended September 30, 2005, the Company sold 290 shares of
Convertible Preferred Stock for gross proceeds of $290,000 (net cash proceeds of
$252,300).

     In October 2005, the Company sold 25 shares of Convertible Preferred Stock
for gross proceeds of $25,000, and net cash proceeds of $21,750.

     In October 2005, the Company allowed a former director of the Company to
return 25 of 50 shares of Series A-1 Convertible Preferred Stock and returned
$25,000 of the original $50,000 investment to the former director of the
Company.

     Options

     In July 2005, the Company granted employee stock-options to acquire 16,129
shares of Common Stock exercisable at $0.50 per share for the settlement of
accrued compensation of $50,000. The employee stock-options are fully vested and
have a life of seven years.

     In July 2005, at the option of the ex-employee, the Company retired 21,774
shares of Common Stock for consideration of $135,000 and in their place granted
stock-options to acquire 21,838 shares of Common Stock exercisable at $0.50 per
share. The stock-options are fully vested and have a life of seven years..

     In September 2005, the Company granted employee stock-options to acquire
900 shares of Common Stock, exercisable at $6.00 per share, for services
provided. The employee stock-options will vest over a period of three years and
have a life of five years. The Company did not incur a charge to stock based
compensation since there was no intrinsic value from the granting of the
options.

                                    Page 27

<PAGE>


     In October 2005, the Company granted employee stock options to acquire
103,000 shares of Common Stock, exercisable at $6.00 per share, for services
provided. The employee stock options will vest over a period of three years and
have a life of five years. The Company did not incur a stock based compensation
charge since there was no intrinsic value from the granting of the options.

     In December 2005, the Company granted employee stock options to acquire
35,000 shares of Common Stock, exercisable at $6.00 per share, for services
provided. The employee stock options will vest over a period of three years and
have a life of five years. The Company did not incur a stock based compensation
charge since there was no intrinsic value from the granting of the options.

     In December 2005, the Company granted options to a vendor to acquire 14,190
shares of common stock for the settlement of vendor payables of $42,572. The
options are fully vested, have an exercise price of $0.50 per share, and have a
life of 7 years.

     Debentures

     On September 1, 2005 the Company initiated a private placement to
accredited investors of debentures with warrants to purchase Common Stock. These
debentures have a six month term from date of investment and bear interest at
12% annually. For each $3.00 of debentures purchased, the Company issued one
warrant to purchase one share of Common Stock at $6.00 per share for a period of
one year from the date of investment or upon an initial public offering by the
Company, whichever occurs earlier. This private offering raised gross proceeds
of $1.125 million and net proceeds of approximately $1.035 million and in
October 2005, the Company granted warrants to acquire 375,667 shares of Common
Stock.

     In December 2005, the Company amended the September 1, 2005 Debenture
offering to increase the offering amount from $1.125 million to $1.650 million
and extended the exercise period of the warrants from a period of one year from
date of investment or upon an initial public offering by the Company, whichever
occurs earlier, to a period of two years from date of investment or within one
year from any initial public offering by the Company, whichever occurs earlier.

     In December 2005, the Debenture offering raised an additional gross
proceeds amount of $90,000, and the Company granted warrants to acquire 30,000
shares of Common Stock.

     In January 2006, the Debenture offering raised an additional gross proceeds
amount of $100,000, and the Company granted warrants to acquire 33,333 shares of
Common Stock.

     Warrants

     In September 2005, the Company granted warrants to acquire 73,548 shares of
Common Stock exercisable at $3.255 per share to registered broker dealers and
their assigns for fundraising services provided to the Company. The warrants are
fully vested and have a life of 5 years.

     In October 2005, the Company granted warrants to acquire 200,000 shares of
Common Stock, exercisable at $6.00 per share, to the Related Party in exchange
for the Related Party's agreement not to request repayment of advances to the
Company by the Related Party which were in excess of $600,000 (including
interest) and which were currently payable by the Company. The warrants are
fully vested and have a life of two years from date of investment or within one
year of any initial public offering by the Company, whichever occurs earlier.

                                    Page 28

<PAGE>


     In October 2005, the Company granted warrants to acquire 16,667 shares of
Common Stock exercisable at $6.30 per share to registered broker dealers and
their assigns for fundraising services provided to the Company. The warrants are
fully vested and have a life of 5 years.

     In October 2005, the Company granted warrants to acquire 33,333 shares of
Common Stock exercisable at $6.30 per share to registered broker dealers and
their assigns for fundraising services provided to the Company. The warrants are
fully vested and have a life of 5 years.

     In December 2005, the Company extended the exercise period for 542,342
warrants issued under the September 1, 2005 Debentures offering, the September
15, 2005 Common Stock offering, and the 200,000 warrants granted to the Related
Party. The life of the warrants was extended from a period of one year from date
of investment or upon an initial public offering by the Company, whichever
occurs earlier, to a period of two years from date of investment or within one
year from any initial public offering by the Company, whichever occurs earlier.

     Each of the above issuances was made pursuant to Section 4(2) of the
Securities Act of 1933 and pursuant to Regulation D promulgated thereunder.




ITEM 3 Defaults Upon Senior Securities

     None

ITEM 4 Submission of Matters to a Vote of Security Holders

     None.

ITEM 5 Other Information

     None.



ITEM 6 Exhibits

Exhibit No.                          Exhibit Description
-----------                          -------------------

31.1           Chief Executive Officer Certification pursuant to section 302 of
               the Sarbanes-Oxley Act of 2002
31.2           Principal Financial Officer Certification pursuant to section 302
               of the Sarbanes-Oxley Act of 2002
32.1           Chief Executive Officer and Principal Financial Officer
               Certifications pursuant to section 906 of the Sarbanes-Oxley Act
               of 2002


                                    Page 29

<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, hereunto duly authorized.

                                             ASSURETEC HOLDINGS, INC.



Date: February 21, 2006                      By:   /s/ R. Bruce Reeves
                                                   -----------------------------
                                                   R. Bruce Reeves, Ph.D.
                                                   President, CEO and Director


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

                                             ASSURETEC HOLDINGS, INC.



Date:  February 21, 2006                     By:   /s/R. Bruce Reeves
                                                   -----------------------------
                                                   R. Bruce Reeves, Ph.D.
                                                   President, CEO and Director


                                    Page 30