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 JUNE 30, 2005

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
                         FOR THE TRANSITION PERIOD FROM __________ TO __________
                         COMMISSION FILE NUMBER ________________________________

                         STRIKEFORCE TECHNOLOGIES, INC.
                         -------------------------------
                 (Name of small business issuer in its charter)

             NEW JERSEY                               22-3827597
            -----------                              ------------
  (State or other jurisdiction of        (I.R.S. Employer Identification No.)
   incorporation or organization)

                     1090 King Georges Post Road, Suite 108
                     --------------------------------------
                                Edison, NJ 08837
                                ----------------
                    (Address of principal executive offices)

                    Issuer's telephone Number: (732) 661-9641
                                               --------------

                                 WITH COPIES TO:

                            Richard A. Friedman, Esq.
                       Sichenzia Ross Friedman Ference LLP
                           1065 Avenue of the Americas
                            New York, New York 10018
                                 (212) 930-9700
                               Fax: (212) 930-9725

     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]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares  outstanding of each of the issuer's  classes of
common  equity,  as of the latest  practicable  date: As of August 12, 2005, the
issuer had 17,438,855 outstanding shares of Common Stock.

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

<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                                       Page
                         PART I - FINANCIAL INFORMATION

<S>                                                           <C>                                                      <C>
Item 1.       Financial Statements
                Consolidated Balance Sheets...........................................................................   2
                Consolidated Statement of Operations..................................................................   3
                Consolidated of Statement of Stockholders' Equity.....................................................   4
                Consolidated Statements of Cash Flows.................................................................   5
                Notes to Consolidated Financial Statements............................................................   6

Item 2.       Management's Discussion and Analysis or Plan of Operation...............................................  29

Item 3.       Controls and Procedures.................................................................................  39

                         PART II - OTHER INFORMATION

Item 1.       Legal Proceedings.......................................................................................  40

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds.............................................  40

Item 3.       Defaults Upon Senior Securities.........................................................................  40

Item 4.       Submission of Matters to a Vote of Security Holders.....................................................  40

Item 5.       Other Information.......................................................................................  40

Item 6.       Exhibits ...............................................................................................  40

SIGNATURES............................................................................................................  42
</TABLE>
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements.

                         STRIKEFORCE TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                     Page Number
                                                                                     -----------

<S>                                                                                     <C>
Financial Statements

Balance sheet at June 30, 2005 and December 31, 2004 (Audited)                           2

Statement of operations for the three and six months ended June 30, 2005 and 2004        3

Statement of stockholders' equity for the six months ended
June 30, 2005                                                                            4

Statement of cash flows for the six months ended June 30, 2005 and 2004                  5

Notes to financial statements                                                          6 - 28
</TABLE>
<PAGE>


                        STRIKEFORCE TECHNOLOGIES, INC.
                                 BALANCE SHEET

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                              June 30,               December 31,
                                                                                                2005                     2004
                                                                                             (Unaudited)              (Audited)
<S>                                                                                              <C>                    <C>
                                                                                          -------------------    -------------------
Current Assets:
    Cash and cash equivalents                                                             $          153,027     $          103,745
    Accounts receivable, net                                                                           6,402                 12,698
    Prepaid expenses                                                                                 804,363                574,839
                                                                                          -------------------    -------------------
      Total current assets                                                                           963,792                691,282

Property and equipment, net                                                                           50,794                 33,706
Long-term portion of deferred financing costs                                                        170,300                 79,861
Long-term portion of deferred royalties                                                            3,369,539              2,798,792
Intangible assets, net                                                                                11,614                 13,852
Security deposit                                                                                       8,684                  8,684
Other assets                                                                                           1,000                      -
                                                                                          -------------------   -------------------
Total Assets                                                                              $        4,575,723     $        3,626,177
                                                                                          ===================    ===================
                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
    Convertible notes payable                                                             $          158,000     $          500,000
    Convertible notes payable - related parties                                                      247,500                247,500
    Notes payable - related parties                                                                  193,200                203,700
    Capital leases payable                                                                            23,774                 23,046
    Accounts payable                                                                                 109,219                121,731
    Accrued expenses                                                                                  86,312                134,057
    Payroll taxes payable                                                                             53,180                 52,930
    Due to related party                                                                              17,500                      -
    Due to employees                                                                                   2,576                  3,993
                                                                                          -------------------    -------------------
      Total current liabilities                                                                      891,261              1,286,957
                                                                                          -------------------    -------------------
Secured convertible notes payable                                                                  1,774,867                      -
Convertible notes payable                                                                            245,009                      -
Long-term portion of capital leases payable                                                           39,366                 50,780
                                                                                          -------------------    -------------------
      Total Liabilities                                                                            2,950,503              1,337,737
                                                                                          -------------------    -------------------
Commitments and contingencies

Stockholders' Equity

   Preferred stock, par value $0.10 - 10,000,000 shares authorized,
   -0- issued and outstanding                                                                              -                      -
   Common stock, par value $0.0001 - 100,000,000 shares
   authorized, 17,438,855 issued and outstanding                                                       1,744                  1,716
   Additional paid-in capital                                                                      7,794,150              6,290,961
   Accumulated deficit                                                                            (6,170,674)            (4,004,237)
                                                                                          -------------------    -------------------
     Total Stockholders' Equity                                                                    1,625,220              2,288,440
                                                                                          -------------------    -------------------
Total Liabilities and Stockholders' Equity                                                $        4,575,723     $        3,626,177
                                                                                          ===================    ===================
                     See notes to the financial statements.
</TABLE>
                                       2

<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                            STATEMENT OF OPERATIONS
           FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      For the three months                For the six months
                                                                           ended June 30,                    ended June 30,
                                                                       2005             2004             2005              2004
                                                                ----------------  ---------------  ---------------  ----------------
<S>                                                                    <C>               <C>              <C>              <C>
Revenues                                                        $         3,724   $       23,960   $       11,753   $        28,093

Cost of sales                                                             1,885                -            4,256                 -
                                                                ----------------  ---------------  ---------------  ----------------

Gross profit                                                              1,839           23,960            7,497            28,093
                                                                ----------------  ---------------  ---------------  ----------------
Operating expenses:
  Selling, general and administrative expenses                        1,065,342        1,254,558        1,847,256         1,495,927
  Research and development                                               70,365           29,657          174,464            72,311
                                                                ----------------  ---------------  ---------------  ----------------
    Total operating expenses                                          1,135,707        1,284,215        2,021,720         1,568,238
                                                                ----------------  ---------------  ---------------  ----------------
Loss from operations before other expense                            (1,133,868)      (1,260,255)      (2,014,223)       (1,540,145)
                                                                ----------------  ---------------  ---------------  ----------------
Other expense:
  Interest and financing expense                                        100,203           17,471          152,214            29,634
                                                                ----------------  ---------------  ---------------  ----------------
    Total other expense                                                 100,203           17,471          152,214            29,634
                                                                ----------------  ---------------  ---------------  ----------------
Net loss                                                        $    (1,234,071)  $   (1,277,726)  $   (2,166,437)  $    (1,569,779)
                                                                ================  ===============  ===============  ================
Basic and diluted loss per common share                         $         (0.07)  $        (0.09)  $        (0.13)  $         (0.11)
                                                                ================  ===============  ===============  ================
Weighted average number of common shares outstanding                 17,394,350       14,829,843       17,324,969        14,267,426
                                                                ================  ===============  ===============  ================

                     See notes to the financial statements.
</TABLE>

                                       3
<PAGE>

                         STRIKEFORCE TECHNOLOGIES, INC.
                       STATEMENT OF STOCKHOLDERS' EQUITY
                     FOR THE SIX MONTHS ENDED JUNE 30, 2005
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                              Common Stock             Additional                         Total
                                                        ---------------------------      Paid-in       Accumulated     Stockholders'
                                             Date          Shares          Amount        Capital         Deficit          Equity
                                           ---------    ------------    -----------   -------------   -------------   --------------
<S>                                           <C>            <C>             <C>            <C>            <C>              <C>
Balance at December 31, 2004                             17,160,313     $    1,716    $  6,290,961    $ (4,004,237)   $   2,288,440

Sale of shares for cash                     Jan-05           95,209             10          68,540               -           68,550

Beneficial conversion value
of secured debenture                        Jan-05                -              -         125,000               -          125,000

Issuance of shares for consulting
services                                    Mar-05           33,333              3          29,996               -           30,000

Revaluation of stock options granted
for future royalties                        Mar-05                -              -         954,175               -          954,175

Shares issued for financing expense
related to secured debentures               Apr-05          150,000             15         134,985               -          135,000

Beneficial conversion value of secured
debenture                                   Apr-05                -              -          93,750               -           93,750

Beneficial conversion value of secured
debenture                                   May-05                -              -          93,750               -           93,750

Net effect of beneficial conversion value
of consolidation and newly issued secured
debenture                                   Jun-05                -              -          37,469               -           37,469

Revaluation of stock options granted for
future royalties                            Jun-05                -              -         (34,476)              -          (34,476)

Net loss                                                          -              -              -       (2,166,437)      (2,166,437)
                                                        ------------   ------------   -------------   -------------     ------------
Balance at June 30, 2005                                 17,438,855    $     1,744    $  7,794,150    $ (6,170,674)     $ 1,625,220
                                                        ============   ============   =============   =============     ============
</TABLE>

                     See notes to the financial statements.


                                       4

<PAGE>

                         STRIKEFORCE TECHNOLOGIES, INC
                            STATEMENT OF CASH FLOWS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          2005                      2004
                                                                                  --------------------      --------------------
<S>                                                                                        <C>                      <C>
Cash flows from operating activities:
  Net loss                                                                        $        (2,166,437)      $        (1,569,779)
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
       Depreciation and amortization                                                           12,874                     9,652
       Amortization of deferred financing costs                                                79,336                     5,139
       Consulting expense through issuance of common stock and stock options                  119,500                   759,200
       Financing expense paid through issuance of common stock                                135,000                         -
       Royalty expense paid through issuance of stock options                                 243,844                         -
  Changes in assets and liabilities affecting operations:
   Accounts receivable, net                                                                     6,296                    (8,478)
   Prepaid expenses                                                                              (722)                   (6,309)
   Other assets                                                                                (1,000)                    3,000
   Accounts payable                                                                           (12,513)                  (53,400)
   Accrued expenses                                                                            (5,369)                  (28,180)
   Payroll taxes payable                                                                          250                    41,287
   Due to factor                                                                                    -                    (3,969)
   Due to related party                                                                             -                    12,000
   Due to employees                                                                            (1,417)                      632
                                                                                  --------------------      --------------------
Net cash used in operating activities                                                      (1,590,358)                 (839,205)
                                                                                  --------------------      --------------------

Cash flows from investing activities:
    Investment in website                                                                           -                    (2,100)
    Purchases of property and equipment                                                       (27,724)                   (1,909)
                                                                                  --------------------      --------------------
Net cash used in investing activities                                                         (27,724)                   (4,009)
                                                                                  --------------------      --------------------
Cash flows from financing activities:
   Proceeds from sale of common stock                                                          68,550                   643,797
   Proceeds from convertible notes payable                                                  1,620,000                         -
   Proceeds from convertible notes payable - related parties                                        -                   185,000
   Proceeds from notes payable - related parties                                                    -                   120,000
   Payments on convertible notes payable - related parties                                          -                   (20,000)
   Payments on notes payable - related parties                                                (10,500)                   (6,000)
   Payments on note payable                                                                         -                    (2,000)
   Principal payments for capital leases                                                      (10,686)                   (7,454)
                                                                                  --------------------      --------------------
Net cash provided by financing activities                                                   1,667,364                   913,343
                                                                                  --------------------      --------------------
Net increase in cash                                                                           49,282                    70,129

Cash, beginning of period                                                                     103,745                     4,285
                                                                                  --------------------      --------------------
Cash, end of period                                                               $           153,027       $            74,414
                                                                                  ====================      ====================
Supplemental disclosure of cash flow information:
    Interest expense                                                              $            19,251       $            12,936
                                                                                  ====================      ====================
    Income taxes                                                                  $                 -       $                 -
                                                                                  ====================      ====================
Supplemental schedule of non-cash activities:
    Deferred financing cost related to beneficial conversion
      value of secured debenture                                                  $           349,969       $                 -
                                                                                  ====================      ====================
    Revaluation of stock options issued for prepaid royalties                     $           919,698       $                 -
                                                                                  ====================      ====================
    Consulting services for convertible note                                      $            33,000       $                 -
                                                                                  ====================      ====================
    Accrued interest converted into convertible note                              $            24,876       $                 -
                                                                                  ====================      ====================
    Warrants issued in connection with convertible notes                          $                 -       $             1,709
                                                                                  ====================      ====================
    Capital contributions for services                                            $                 -       $            36,000
                                                                                  ====================      ====================

                     See notes to the financial statements.
</TABLE>

                                       5
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 1 -  NATURE OF OPERATIONS

          StrikeForce  Technical  Services  Corporation was  incorporated in the
          state of New  Jersey,  in August  2001.  On  September  3,  2004,  the
          shareholders approved an amendment to the Certificate of Incorporation
          to change the name from StrikeForce  Technical Services Corporation to
          StrikeForce  Technologies,  Inc.  (the  "Company").  Prior to December
          2002,  the  Company  was a reseller  of  computer  hardware,  software
          products, and  telecommunications  equipment and services. In December
          2002, the Company  purchased  intangible  technology,  as described in
          Note 15  (Asset  Purchase  Agreement),  which  upon  the  consummation
          changed the  direction  of the  Company's  business.  The Company is a
          software  development  and services  company.  The Company owns and is
          seeking to  commercially  exploit  various  identification  protection
          software  products that were  developed to protect  computer  networks
          from unauthorized  access and to protect network owners and users from
          identity theft. The Company is seeking to develop a market for a suite
          of products in the areas of eCommerce,  corporate and government.  The
          Company's   products  are  the  subject  of  various   pending  patent
          applications. The Company's operations are based in Edison, NJ.

NOTE 2 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a)   Interim period
          --------------

          The accompanying  unaudited financial statements have been prepared in
          accordance with accounting principles generally accepted in the United
          States of America for interim financial information,  the instructions
          to Form  10-QSB and Items 303 and  310(B) of  Regulation  S-B.  In the
          opinion of management,  the unaudited  financial  statements have been
          prepared  on the same basis as the  annual  financial  statements  and
          reflect  all   adjustments,   which  include  only  normal   recurring
          adjustments,  necessary to present fairly the financial position as of
          June 30, 2005 and the results of the  operations for the three and six
          months ended June 30, 2005,  changes in  stockholders'  deficiency and
          cash flows for the six months ended June 30, 2005. The results for the
          three  and six  months  ended  June  30,  2005,  are  not  necessarily
          indicative of the results to be expected for any subsequent quarter or
          the entire fiscal year ending December 31, 2005.

          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 the  Securities  and  Exchange  Commission's
          ("SEC") rules and regulations.

          These  unaudited  financial  statements  should be read in conjunction
          with the Company's audited financial  statements and notes thereto for
          the year ended  December 31, 2004 as included in the Company's  report
          on amended Form SB-2 filed on May 11, 2005.

     b)   Cash and cash equivalents
          --------------------------

          The Company considers all highly liquid investments with maturities of
          three  months  or less at the  time of  purchase  to be cash  and cash
          equivalents.  The Company  maintains  balances in  accounts,  which at
          times,  may  exceed  Federal  Deposit  Insurance  Corporation  insured
          limits.  The Company  believes  that such risk is minimal based on the
          reputation of the financial institution.

                                       6
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 2 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)

     c)   Accounts receivable
          -------------------

          Accounts  receivable  are recorded at the  outstanding  amounts net of
          each respective allowance for doubtful accounts.  The Company utilizes
          the  allowance  method  for  recognizing  the  collectibility  of  its
          accounts receivables. The allowance method recognizes bad debt expense
          based on review of the individual accounts  outstanding as well as the
          surrounding facts.

     d)   Property and equipment
          ----------------------

          Property  and  equipment  is  recorded  at  cost.   Depreciation   and
          amortization  of  property  and  equipment  is  provided  for  by  the
          straight-line method over the estimated useful lives of the respective
          assets. The estimated useful lives of furniture and fixtures are seven
          years,  and office  equipment  and  machinery  and  equipment are five
          years.  Computer  equipment  and software are  depreciated  over three
          years.

     e)   Long-lived assets
          -----------------

          Reviews  are  regularly  performed  to  determine  whether  facts  and
          circumstances  exist which indicate that the carrying amount of assets
          may not be recoverable  or the useful life is shorter than  originally
          estimated.  The Company assesses the  recoverability  of its assets by
          comparing the projected  undiscounted  net cash flows  associated with
          the  related  asset or group of  assets  over  their  remaining  lives
          against their  respective  carrying  amounts.  Impairment,  if any, is
          based on the  excess of the  carrying  amount  over the fair  value of
          those  assets.  If assets are  determined to be  recoverable,  but the
          useful lives are shorter than originally estimated, the net book value
          of the  assets  is  depreciated  over the newly  determined  remaining
          useful lives.

     f)   Income taxes
          ------------

          The  Company   accounts  for  income  taxes  in  accordance  with  the
          "liability  method"  of  accounting  for  income  taxes.  Accordingly,
          deferred  tax  assets  and  liabilities  are  determined  based on the
          difference between the financial statement and tax bases of assets and
          liabilities,  using  enacted tax rates in effect for the year in which
          the  differences  are  expected to reverse.  Current  income taxes are
          based on the respective  periods' taxable income for federal and state
          income tax reporting purposes.

     g)   Revenue recognition
          -------------------

          The  Company's  revenues  are  derived  principally  from the sale and
          installation  of  its  various   identification   protection  software
          products and related  hardware and  services.  The Company  recognizes
          revenue  when it is realized  or  realizable  and earned.  The Company
          considers  revenue  realized  or  realizable  and  earned  when it has
          persuasive  evidence  of an  arrangement, that  the  product  has been
          shipped or the services  have been  provided to the customer  that the
          sales price is fixed or determinable and, collectibility is reasonably
          assured.  The Company reduces revenue for estimated  customer returns.
          In addition to the  aforementioned  general policy,  the following are
          the specific revenue  recognition  policies for each major category of
          revenue:


                                       7
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 2 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)

     g)   Revenue recognition - (cont'd)
          ------------------------------

          Hardware - Revenue from hardware sales is recognized  when the product
          is shipped to the customer and there are either no unfulfilled company
          obligations  or any  obligations  that will not affect the  customer's
          final acceptance of the arrangement.  Any cost of these obligations is
          accrued  when the  corresponding  revenue is  recognized.  For the six
          months  ended June 30,  2005 and 2004,  total  hardware  revenues  for
          products  shipped or delivered were $829 (which was 7% total revenues)
          and $7,300 (which was 26% total revenues), respectively.

          Software - Revenue from delivered elements of one-time charge licensed
          software is recognized at the inception of the license term,  provided
          the Company has  vendor-specific  objective evidence of the fair value
          of  each  delivered  element.  Revenue  is  deferred  for  undelivered
          elements.  The Company  recognizes  revenue  from the sale of software
          licenses  when  persuasive  evidence  of an  arrangement  exists,  the
          product has been  delivered,  the fee is fixed and  determinable,  and
          collection of the resulting receivable is reasonably assured. Delivery
          generally  occurs when the product is delivered  to a common  carrier.
          The  Company  assesses  collection  based  on  a  number  of  factors,
          including  past   transaction   history  with  the  customer  and  the
          creditworthiness  of  the  customer.  The  Company  does  not  request
          collateral from customers.  If the Company  determines that collection
          of a fee is not  reasonably  assured,  the Company  defers the fee and
          recognizes revenue at the time collection becomes reasonably  assured,
          which is generally upon receipt of cash. Revenue from monthly software
          licenses is recognized  on a  subscription  basis.  For the six months
          ended June 30, 2005 and 2004,  total  software  revenues  for software
          shipped or delivered were $5,500 (which was 47% of total revenues) and
          $3,950 (which was 14% of total revenues), respectively.

          Services - Revenue from time and service  contracts is  recognized  as
          the services are provided.  The Company offers an Application  Service
          Provider  hosted  service  whereby  customer  usage  transactions  are
          invoiced monthly on a cost per transaction  basis. The service is sold
          via the execution of a Customer  Agreement between the Company and the
          Company's end user. Initial set-up fees are recognized upon completion
          of service.  For the six months  ended June 30,  2005 and 2004,  total
          revenues for  services  provided  were $5,424  (which was 46% of total
          revenues) and $14,495 (which was 52% of total revenues), respectively.

          Revenue from fixed price  long-term  service  contracts is  recognized
          over the contract  term based on the  percentage  of services that are
          provided during the period compared with the total estimated  services
          to be  provided  over the  entire  contract.  Losses  on  fixed  price
          contracts  are  recognized  during  the period in which the loss first
          becomes  apparent.  Revenue from  maintenance  is recognized  over the
          contractual period or as the services are performed. Revenue in excess
          of billings on service  contracts is recorded as unbilled  receivables
          and is included in trade  accounts  receivable.  Billings in excess of
          revenue  that is  recognized  on service  contracts  are  recorded  as
          deferred income until the aforementioned  revenue recognition criteria
          are met.

          Commissions  - In 2001 the Company  became a reseller of Nextel and XO
          Communication cellular services. These sales provided both commissions
          on the sale of Nextel  phones and residual  commission  income from XO
          Communications  beginning  in January  2002.  For the six months ended
          June 30, 2005 and 2004, commission income was $0 and $2,348 (which was
          8% of total  revenues),  respectively.  The commission  revenue varied
          from month to month,  dependent on the  utilization of the services by
          the customer and the terms of their contracts.  Effective August 2004,
          the Company no longer received these


                                       8
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)

     g)   Revenue recognition - (cont'd)
          ------------------------------

          commissions  due to the  conclusion of the residual  terms between the
          Company  and XO  Communications,  and the  Company  ceasing  to resell
          Nextel  phones.  All revenue  from  commissions  was  recognized  when
          received.

     h)   Software development costs
          --------------------------

          Statement  of  Financial   Accounting   Standards   ("SFAS")  No.  86,
          "Accounting for the Costs of Computer Software to be Sold,  Leased, or
          Otherwise  Marketed," requires  capitalization of software development
          costs   incurred   subsequent  to   establishment   of   technological
          feasibility  and prior to the  availability of the product for general
          release to customers.  Systematic  amortization  of capitalized  costs
          begins when a product is  available  for general  release to customers
          and is computed on a product-by-product  basis at a rate not less than
          straight-line  basis over the product's  remaining  estimated economic
          life.  To date,  all costs have been  accounted  for as  research  and
          development   costs  and  no  software   development   cost  has  been
          capitalized.  Total research and development  costs for the six months
          ended June 30, 2005 and 2004 were $174,464 and $72,311, respectively.

          Management  will evaluate the net  realizable  value of software costs
          capitalized by comparing  estimated  future gross revenues  reduced by
          the estimated future costs of completing, disposing of and maintaining
          the  software.  These  costs  also  include  the  costs of  performing
          maintenance and customer support required by the Company.

     i)   Comprehensive income
          --------------------

          The  Company  adopted  SFAS No.  130,  "Accounting  for  Comprehensive
          Income."  This  statement  establishes  standards  for  reporting  and
          disclosing  of  comprehensive  income  and its  components  (including
          revenues,  expenses,  gains and losses) in full set of general-purpose
          financial statements. The items of other comprehensive income that are
          typically required to be disclosed are foreign currency items, minimum
          pension  liability  adjustments  and  unrealized  gains and  losses on
          certain investments in debt and equity securities.  The Company had no
          items or other comprehensive  income for the six months ended June 30,
          2005 and 2004.

     j)   Stock-based compensation
           ------------------------

          In December 2004, the Financial  Accounting  Standards  Board ("FASB")
          issued  Statement No. 123 (revised 2004) ("123R") Share Based Payment.
          Statement 123R supersedes  Accounting Principles Board ("APB") Opinion
          No.  25,  and its  related  implementation  guidance.  This  statement
          establishes  standards for the accounting for transactions in which an
          entity  exchanges its equity  instruments  for goods and services.  It
          also addresses  transactions in which an entity incurs  liabilities in
          exchange  for goods and  services  that are based on the fair value of
          the entity's equity instruments or that may be settled by the issuance
          of those equity instruments.  123R focuses primarily on accounting for
          transactions  in  which  an  entity  obtains   employee   services  in
          share-based  payment  transactions.  The Company will be  considered a
          small business issuer for which the implementation of 123R is required
          as of the  beginning of the first interim or annual  reporting  period
          after  December  15, 2005.  The Company is required to implement  123R
          beginning in the fiscal year beginning  January 1, 2006. The effect of
          this pronouncement on the Company cannot be determined at this time.


                                       9
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)

     j)   Stock-based compensation - (cont'd)
          --------------------------------

          The Company currently accounts for its employee incentive stock option
          plans  using  the  intrinsic  value  method  in  accordance  with  the
          recognition  and  measurement   principles  of  APB  Opinion  No.  25,
          "Accounting  for Stock Issued to Employees",  as permitted by SFAS No.
          123. Had the Company determined compensation expense based on the fair
          value at the grant dates for those awards  consistent  with the method
          of SFAS No.  123,  the  Company's  net loss per share  would have been
          increased to the  following pro forma amounts for the six months ended
          June 30, 2005 and 2004:

<TABLE>
<CAPTION>

                                                                     2005                 2004
                                                                     ----                 ----
<S>                                                                    <C>                 <C>
Net loss as reported                                            $    (2,166,437)    $    (1,569,779)
Deduct: total stock based employee compensation
expense determined under fair value based methods
for all award                                                           (85,335)            (80,643)
                                                                ----------------    ----------------
Pro forma net loss                                              $    (2,251,772)    $    (1,650,422)
                                                                ================    ================
Basic and diluted net loss per share as reported                $         (0.13)    $         (0.11)

Pro forma basic and diluted net loss per share                  $         (0.13)    $         (0.12)

</TABLE>


The above pro forma  disclosure  may not be  representative  of the  effects  on
reported  net  operations  for future years as options vest over three years and
the Company may continue to grant options to employees.

The fair market  value of each option  grant is  estimated  at the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions:

                 Dividend yield                                   0.00%
                 Expected volatility                     6.00% - 17.00%
                 Risk-free interest rate                           3-5%
                 Expected life                             5 -10 years

     k)   Loss per common share
          ---------------------

          Loss per common share is computed pursuant to SFAS No. 128,  "Earnings
          Per  Share."  Basic loss per share is  computed  as net income  (loss)
          available  to common  shareholders  divided  by the  weighted  average
          number of common shares  outstanding for the period.  Diluted loss per
          share  reflects the  potential  dilution  that could occur from common
          shares issuable through stock options, warrants, and convertible debt.
          As of June 30, 2005 and 2004,  options and warrants were excluded from
          the  diluted  loss per share  computation,  as their  effect  would be
          anti-dilutive.


                                       10
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 2  - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (cont'd)

     l)   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 the  disclosure  of contingent
          assets and liabilities at the date of the financial statements and the
          reported amounts of revenues and expenses during the reporting period.
          Actual results could differ from those estimates.

     m)   Fair value disclosure
          ---------------------

          The carrying value for cash,  receivables,  accounts and notes payable
          approximate  fair  values  because  of  the  immediate  or  short-term
          maturities of these financial instruments. The carrying amounts of the
          Company's long-term debt also approximate fair values based on current
          rates for similar debt.

     n)   New accounting pronouncements
          -----------------------------

          In December  2004,  the FASB issued  Statement No. 123 (revised  2004)
          ("123R")  Accounting for Stock Based  Compensation,  effective for the
          interim  period  beginning  after  December 15, 2005.  Statement  123R
          supercedes  APB  Opinion  No.  25,  Accounting  for  Stock  Issued  to
          Employees, and its related implementation guidance. The effect of this
          pronouncement on the Company cannot be determined at this time.

          The Company does not believe that any recently issued and adopted, but
          not yet effective,  accounting  standards would have a material effect
          on the accompanying financial statements.

NOTE 3  - GOING CONCERN

          The accompanying financial statements have been prepared assuming that
          the Company  will  continue  as a going  concern,  which  contemplates
          continuity of operations,  realization of assets,  and  liquidation of
          liabilities  in the normal course of business.  At June 30, 2005,  the
          Company's accumulated deficit was $6,170,674,  its working capital was
          $72,531  and  approximately  95%  of its  assets  consist  of  prepaid
          expenses and deferred charges. In addition, the Company had net losses
          of $2,166,437 for the six months ended June 30, 2005.

          Currently, the Company is aggressively attempting to increase revenues
          and improve profit margins by  implementing a revised sales  strategy.
          In principle,  the Company is redirecting  its sales focus from direct
          sales to companies using an internal sales force, to selling through a
          distribution  channel of Value Added Resellers and Original  Equipment
          Manufacturers.  The profit margin for this approach is more  lucrative
          than selling direct due to the increase in sales volume.  This revised
          sales  approach  should  increase the Company's  sales and revenues in
          order to mitigate  future losses.  In addition,  management has raised
          funds through  convertible  debt instruments and the sale of equity in
          order to alleviate the working capital  deficiency.  In December 2004,
          recognizing  the  necessity  for  greater  capital  requirements,  the
          Company  formally  began a  registration  process to bring the Company
          into the  public  capital  markets.  With the  commitment  to become a
          publicly  traded entity,  the Company raised an additional  $1,000,000
          through two separate Secured  Convertible  Debentures of $500,000 each
          executed in December 2004 and January 2005 (see Note 8). Additionally,
          the Company raised an additional $750,000 through two separate


                                       11
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)

NOTE 3  - GOING CONCERN - (cont'd)

          Secured Convertible Debentures of $375,000 each executed in April 2005
          and May 2005 (see  Note 8).  Through  the  utilization  of the  public
          capital  markets,  the Company  plans to raise the funds  necessary to
          continue,  expand and  enhance its  growth,  however,  there can be no
          assurance  that  this  will be  able to  increase  revenues  or  raise
          additional  capital.  The Securities and Exchange  Commission declared
          the Company's  registration  statement on Form SB-2  effective.  These
          factors  raise  substantial  doubt  about  the  Company's  ability  to
          continue as a going concern.  The financial  statements do not include
          adjustments  relating to the  recoverability and realization of assets
          and  classification  of liabilities that might be necessary should the
          Company be unable to continue in operation.

NOTE 4 -  PREPAID EXPENSES
<TABLE>
<CAPTION>

          At June 30, 2005, prepaid expenses consist of the following:

<S>                                                                                       <C>
             Short term portion of royalties                                     $         470,168
             Consulting services                                                           111,500
             Short term portion of prepaid financing costs                                 221,860
             Other                                                                             835
                                                                                 ------------------
                          Total                                                  $         804,363
                                                                                 ==================
</TABLE>

          Prepaid  royalties  were derived from an agreement on December 2, 2004
          with NetLabs.Com,  Inc. (see Note 15). The prepaid royalties are being
          amortized over the term of the agreement which  terminates  August 31,
          2013.  For the six months ended June 30,  2005,  $243,843 of royalties
          was expensed,  $470,168 was classified as short-term prepaid royalties
          and the remainder of $3,369,539 was classified as long-term  assets on
          the balance sheet.

          Consulting  services  were derived from an agreement in June 2004 with
          an advisory firm in which the advisor was compensated  with stock (see
          Note 15) and in June  2005 with a public  relations  firm in which the
          firm was  compensated in the form of a convertible  note (see Note 9).
          The  consulting  costs are valued at $285,000 and are being  amortized
          over the term of the agreements which terminate  December 2005 and May
          2005,  respectively.  For the six  months  ended  June 30,  2005,  the
          Company has recorded  $89,500 of  consulting  expense  related to this
          agreement.

          Deferred  financing costs of $443,719 were derived from the beneficial
          conversion  value of the debentures  entered into with Cornell Capital
          Partners,   LP  ("Cornell")  and  with  Highgate  House  Funds,   Ltd.
          ("Highgate")  (see Note 8).  The  deferred  financing  costs are being
          amortized over the terms of the  debentures.  For the six months ended
          June 30, 2005,  $79,366 of financing  costs were  expensed and at June
          30, 2005,  $221,860 was  classified  as short-term  prepaid  financing
          costs and $170,300 has been classified as long-term.


                                       12
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 5  - PROPERTY AND EQUIPMENT, NET

          At June 30, 2005,  property  and  equipment,  at cost,  consist of the
          following:
<TABLE>
<CAPTION>

<S>                                                                                        <C>
                   Computer equipment and software                               $            66,793
                   Furniture and fixtures                                                     10,157
                   Office equipment                                                           15,906
                                                                                 --------------------
                   Total property and equipment                                               92,856
                   Less:  accumulated depreciation                                           (42,062)
                                                                                 --------------------

                   Property and equipment, net                                   $            50,794
                                                                                 ====================

          Depreciation  expense for the six months  ended June 30, 2005 and 2004
          amounted to $19,636 and $8,414, respectively.

NOTE 6 -  INTANGIBLE ASSETS

          At June 30, 2005, intangible assets, consist of the following:

                          Website                                                $            13,426
                          Technology                                                           4,329
                                                                                 --------------------
                          Total intangible assets                                             17,755
                          Less:  accumulated amortization                                     (6,141)
                                                                                 --------------------
                          Intangible assets, net                                 $            11,614
                                                                                 ====================

               Amortization expense for the six months ended June 30, 2005 and
               2004 amounted to $2,238 and $1,238, respectively.

NOTE 7  - ACCRUED EXPENSES

          Accrued expenses consist of the following at June 30, 2005:

                          Interest                                               $            58,381
                          Commitment fees                                                     12,500
                          Salaries                                                            15,431
                                                                                 --------------------

                          Total accrued expenses                                 $            86,312
                                                                                 ====================
</TABLE>
NOTE 8  - SECURED CONVERTIBLE NOTES PAYABLE

          In December  2004,  the Company  entered  into a  Securities  Purchase
          Agreement for the sale of an aggregate of $1,000,000  principal amount
          of convertible  debentures  with Cornell.  The terms of the Securities
          Purchase Agreement provide for the first secured convertible debenture
          of  $500,000  to be issued  upon  signing of the  Securities  Purchase
          Agreement and the second  secured  convertible  debenture to be issued
          with the same terms as the first secured  convertible  debenture  five
          business  days after a  registration  statement is filed with the SEC.
          The convertible debentures are due and payable, bearing

                                       13

<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 8  - SECURED CONVERTIBLE NOTES PAYABLE  - (cont'd)

          interest  at 8% per  annum,  three  years  from the date of  issuance,
          unless sooner converted into shares of our common stock. The holder is
          entitled,  at its option, to convert, and sell on the same day, at any
          time and from time to time,  until payment in full of this  debenture,
          all or any part of the principal amount of the debenture, plus accrued
          interest,  into shares of the Company's  common stock at the price per
          share  equal to the lesser of an amount  equal to 120% of the  initial
          bid  price or an amount  equal to 80% of the  lowest  volume  weighted
          average price of the Company's  common stock for the last five trading
          days  immediately  preceding the conversion  date. If not converted at
          the  holder's  option,  the entire  principal  amount and all  accrued
          interest  shall be due to the holder on the third year  anniversary of
          the debenture.  The Company,  at its option, may redeem,  with fifteen
          days  advance  written  notice,  a portion or the  entire  outstanding
          convertible  debenture.  The  redemption  price  shall  be 110% of the
          amount redeemed plus accrued interest.  The convertible debentures are
          secured by the assets of the Company and accrued  interest  payable is
          due at the end of the term.

          In  December  2004,  in  accordance   with  the  Securities   Purchase
          Agreement,  upon signing the Security  Purchase  Agreement the Company
          issued an 8% secured  convertible  debenture in the amount of $500,000
          with Cornell.

          In January  2005,  the  Company  executed  an 8%  secured  convertible
          debenture  in the  amount of  $500,000  with  Cornell.  The  holder is
          entitled,  at its option, to convert, and sell on the same day, at any
          time and from time to time,  until payment in full of this  debenture,
          all or any part of the principal amount of the debenture, plus accrued
          interest, convertible into shares of the Company's common stock at the
          price per share equal to the lesser of an amount  equal to 120% of the
          initial  bid  price or an  amount  equal to 80% of the  lowest  volume
          weighted average price of the Company's common stock for the last five
          trading  days  immediately  preceding  the  conversion  date.  If  not
          converted at the holder's option,  the entire principal amount and all
          accrued  interest  shall  be due  to the  holder  on  the  third  year
          anniversary of the debenture.  The Company, at its option, may redeem,
          with fifteen days advance written notice, a portion or all outstanding
          convertible  debenture.  The  redemption  price  shall  be 110% of the
          amount redeemed plus accrued interest.

          On April 27, 2005, the Company entered into an amended and restated 8%
          secured   convertible   debenture  with  Cornell   ("Amended   Cornell
          Debenture")  in the amount of  $1,024,876,  which  terminated  the two
          $500,000  debentures  entered into with  Cornell in December  2004 and
          January 2005. The new debenture  entitles  Cornell,  at its option, to
          convert,  and sell on the same day, at any time and from time to time,
          until  payment  in  full  of this  debenture,  all or any  part of the
          principal amount of the debenture, plus accrued interest,  convertible
          into shares of the Company's common stock at the price per share equal
          to the lesser of (i) the  greater of $0.25 or an amount  equal to 120%
          of the initial bid price or (ii) an amount  equal to 80% of the lowest
          volume  weighted  average price of the Company's  common stock for the
          last five trading days  immediately  preceding the conversion date. If
          not converted at Cornell's option, the entire principal amount and all
          accrued  interest  shall  be due to the  Cornell  on the  second  year
          anniversary of the debenture.  The Company, at its option, may redeem,
          with fifteen days advance written notice, a portion or all outstanding
          convertible  debenture.  The  redemption  shall be 110% of the  amount
          redeemed plus accrued  interest  remaining for the first six months of
          the executed  debenture and after that time the  redemption is 120% of
          the amount redeemed plus accrued interest remaining.

          On April 27, 2005,  the Company  entered  into a  Securities  Purchase
          Agreement  with  Highgate  pursuant to which the Company is to receive
          $750,000  in  exchange  for  two  7%  secured  convertible  debentures
          amounting  to  $750,000  that mature in 2 years,  and the  issuance of
          150,000 shares of the Company's common stock. The Securities  Purchase
          Agreement provides for the execution of funding under two

                                       14
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)

NOTE 8  - SECURED CONVERTIBLE NOTES PAYABLE  - (cont'd)

          secured convertible  debentures.  The first debenture funding occurred
          upon the signing of the aforementioned  Securities  Purchase Agreement
          and the second  debenture and funding  occurred upon the filing of the
          Form SB-2.  The Company  issued the  aforementioned  securities to the
          investor pursuant to Rule 506 of Regulation D as promulgated under the
          Securities  Act of 1933, as amended (the "Act"),  and/or Section 4 (2)
          of the Act.  In  addition,  the  Company  has  agreed to  reserve  for
          issuance an  aggregate  of 2,000,000  shares of the  Company's  common
          stock,  which may be adjusted  from time to time as agreed upon by the
          parties,  to be issued to the  debenture  holder  upon  conversion  of
          accrued  interest  and  liquidated   damages  into  common  stock  and
          additional  shares  of  common  stock  required  to be  issued  to the
          debenture holder in accordance with the Securities Purchase Agreement.
          The  2,000,000  shares  are not  being  registered  in the Form  SB-2.
          Additionally,  in accordance with the Securities  Purchase  Agreement,
          the Company is required  to maintain in escrow and  register  with the
          SEC five  times the  number of shares of common  stock  that  would be
          needed  to  satisfy  the  full  conversion  of  all  such  Convertible
          Debentures  outstanding (currently 6,510,000 shares in reserve) and to
          issue  additional  shares as needed if the  number of shares in escrow
          becomes  less  than  that  required.  Further,  following  a notice of
          conversion,  the investors may sell escrowed  shares in the registered
          distribution  before they are actually  delivered,  but, the investors
          will not engage in short sales.

          The aforementioned  debentures bear interest at a rate of 7% per annum
          and expire 2 years  after the date of  issuance.  The  debentures  are
          convertible  into  shares of our common  stock at a  conversion  price
          equal to the lesser of (i) 120% of the  average  closing bid price for
          the 5 trading days immediately preceding the closing date; or (ii) 80%
          of the lowest  closing  bid price for the 5 trading  days  immediately
          preceding  the date of  conversion.  In addition,  the Company has the
          right to redeem the  debentures,  at any time  prior to its  maturity,
          upon  3  business  days  prior  written  notice  to  the  holder.  The
          redemption  price is equal to 120% of the face  amount  redeemed  plus
          accrued interest. In the event that the Company redeems the debentures
          within 180 days after the date of issuance, the redemption price shall
          be 110% of the face amount  redeemed plus accrued  interest.  Interest
          expense  for the  three  secured  convertible  debentures  for the six
          months ended June 30, 2005 was approximately $46,865.

          The Security  Agreement  contains certain negative covenants that will
          remain  in effect  until the  repayment  obligations  pursuant  to the
          convertible  debenture  have been  satisfied.  In accordance  with the
          agreement,  the Company may not, without  Highgate's  written consent,
          directly  or  indirectly  permit  to exist any  assignment,  transfer,
          pledge, mortgage, security interest or other lien or encumbrance in or
          against any part of the pledged property, assign, pledge or in any way
          transfer or encumber  Highgate's  right to receive any income or other
          distribution  from any part of the  pledged  property,  enter into any
          sale-leaseback  financing respecting any part of the pledged property,
          materially  change  our  ownership,  executive  staff  or  management,
          including the CEO and CFO; declare or pay any dividend of any kind, in
          cash or in property,  on any class of our capital  stock,  or make any
          distribution of any kind in respect  thereof,  or make any payments in
          respect of any pension,  profit  sharing,  retirement,  stock  option,
          stock bonus, incentive compensation or similar plan, without the prior
          written  consent  of  Highgate.  In  addition,  the  Company  may  not
          guarantee or be liable in any manner,  whether directly or indirectly,
          or become contingently liable after the date of the Security Agreement
          in connection with the indebtedness of any person,  except for (i) the
          indebtedness  currently secured by the liens identified on the pledged
          property and (ii) the endorsement of negotiable instruments payable to
          us for  deposit or  collection  in the  ordinary  course of  business.
          Further,  the Company may not: make any loan,  advance or extension of
          credit to any person other than in the normal  course of our business,
          and  create,  incur,  or assume  any  additional  indebtedness  of any
          description  whatsoever  in an aggregate  amount in excess of $25,000,
          excluding trade accounts payable and accrued expenses  incurred in the
          ordinary course of business. In addition,  the Company may continue to
          accept  debt  and/or  convertible  debt  investments  from  accredited
          investors for

                                       15
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)

NOTE 8  - SECURED CONVERTIBLE NOTES PAYABLE  - (cont'd)

          a maximum  total of up to  $2,000,000,  providing  no terms are better
          than the Cornell and Highgate convertible debenture terms. The Company
          has paid  $75,000 for  structuring  fees and  expenses  and $5,000 for
          commitment fees related to this Securities Purchase Agreement.

          The  debentures  have  included a  beneficial  conversion  value.  The
          beneficial conversion value represents the difference between the fair
          market  value of the common stock on the date the  debenture  was sold
          and the price at which the  debenture  could be converted  into common
          stock. The beneficial conversion value for the debentures is $443,719,
          which is being amortized over the two year term of the debentures. For
          the six months ended June 30, 2005,  the Company has recorded  $79,336
          of interest  expense  related to the  amortization  of the  beneficial
          conversion  value.  At  June  30,  2005,  $142,523  of the  beneficial
          conversion  value  is  classified  as  short-term  financing  costs in
          prepaid expenses on the balance sheet.

NOTE 9 -  CONVERTIBLE NOTES PAYABLE

          In January 2005, the Company  executed an 8% convertible  debenture in
          the  amount  of  $125,000  with an  investor.  At any time  after  the
          effective date of the Company's registration statement,  the holder is
          entitled,  at its option, to convert, and sell on the same day, at any
          time and from time to time,  until  payment in full of the  debenture,
          all or any part of the principal amount of the debenture, plus accrued
          interest,  into shares of the  Company's  common stock at the price of
          $0.90 per share. If not converted at the holder's  option,  the entire
          principal  amount and all accrued  interest shall be due to the holder
          on the first year anniversary of the debenture.  This note is included
          in current liabilities on the balance sheet at June 30, 2005.

          In March 2005, the Company executed an 8% convertible debenture in the
          amount of $235,000 with an investor group.  Now that the Form SB-2 has
          been declared  effective,  the holder is entitled,  at its option,  to
          convert,  and sell on the same day, at any time and from time to time,
          until  payment  in  full  of the  debenture,  all or any  part  of the
          principal amount of the debenture,  plus accrued interest, into shares
          of the Company's  common stock at the price of $0.90 per share. If not
          converted at the holder's option,  the entire principal amount and all
          accrued  interest  shall  be due  to the  holder  on  the  third  year
          anniversary of the debenture.

          In June 2005, the Company executed a non-interest  bearing convertible
          note in the  amount  of  $33,000  with a  public  relations  firm  for
          services  rendered.  At any time prior to repayment of all outstanding
          principle, the holder is entitled, at its option, to convert, and sell
          on the same day, at any time and from time to time,  until  payment in
          full of the debenture,  all or any part of the principal amount of the
          debenture  into shares of the  Company's  common stock at the price of
          $0.90 per share. If not converted at the holder's  option,  the entire
          principal  amount  shall  be due  to the  holder  on  the  first  year
          anniversary of the note. This note is included in current  liabilities
          on the balance sheet at June 30, 2005.

          In June 2005, the Company executed an 8% convertible  debenture in the
          amount of $10,000 with an individual.  Now that the Form SB-2 has been
          declared effective, the holder is entitled, at its option, to convert,
          and sell on the same  day,  at any time and from  time to time,  until
          payment  in full of the  debenture,  all or any part of the  principal
          amount of the  debenture,  plus accrued  interest,  into shares of the
          Company's  common  stock  at the  price  of $0.90  per  share.  If not
          converted at the holder's option,  the entire principal amount and all
          accrued interest shall be due to the holder on March 28, 2008.

          Interest expense for the convertible  notes payable for the six months
          ended June 30, 2005 was approximately $9,191.

                                       16
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)

NOTE 10 - CONVERTIBLE NOTES PAYABLE - RELATED PARTIES

          Convertible notes payable - related parties at June 30, 2005,  consist
          of  convertible  promissory  notes that the Company  executed with the
          Chief  Executive  Officer  ("CEO"),  the Vice  President  of Technical
          Services ("VPTS") and relatives of a former officer of the Company.

          The terms of the convertible  promissory notes state that principal is
          payable in full in immediately  available  funds of $1,000,000 or more
          through any sales or  investment  by the end of  December  31, 2004 or
          later if agreed upon by each individual and the Company. All notes not
          issued to the CEO bear  interest at a rate of prime plus 2% and 4% per
          year and the remaining  notes bear interest equal to the CEO's private
          banking account monthly lending rate. Interest is payable at such time
          as the principal on the note is due. At any time prior to repayment of
          all  outstanding  principal  and accrued  interest  hereunder,  at the
          election of each  individual,  the individual  shall have the right to
          convert the then  outstanding  principal  amount of this note, and all
          outstanding  accrued interest  thereon,  into that number of shares of
          the common stock of the Company,  determined by dividing the amount of
          principal and interest then  outstanding  hereon by a conversion price
          of either $0.72 or $1.00, depending on the note.

          At June 30, 2005, the Company has two convertible  notes with its VPTS
          that  mature  June 30,  2005.  The first note is for $50,000 and bears
          interest at prime plus 2% per annum. The second note is for $7,500 and
          bears interest at prime plus 4% per annum.  In June 2005, the maturity
          dates of the notes were extended to December 31, 2005.

          At  June  30,  2005,  the  Company  has   convertible   notes  payable
          aggregating  $140,000 with its CEO. All the convertible  notes payable
          bear  interest  equal to the CEO's  private  banking  account  monthly
          lending rate and are convertible  into the Company's common stock at a
          price of $.72 per share.  The maturity  dates of the notes payable are
          September  30, 2005  related to a $60,000  note and  December 31, 2005
          related to $80,000 of notes.

          In November  2004,  the Company  received  $50,000 from three separate
          individuals  who are  relatives  of a former  officer for  convertible
          promissory  notes.  The  notes  are due on  April  30,  2006  and bear
          interest at prime plus 2% per year.

          In connection  with several of the  convertible  notes payable entered
          into, the Company issued to the individual's  warrants  exercisable in
          the aggregate  into 47,500 shares of the Company's  common stock at an
          exercise  price of $1.00 per share.  The  warrants  were issued at the
          ratio of one warrant for each $10 of convertible notes payable.  These
          warrants are exercisable for a period of ten years from issuance.  The
          fair value of all the warrants issued using the  Black-Scholes  Option
          Pricing Model was $12,566.  For the six months ended June 30, 2005 and
          2004,  the Company did not record any interest and  financing  expense
          related to the issuance of these warrants.

          At June 30, 2005,  accrued  interest due to the CEO and VPTS for their
          convertible  notes was $0 and $255,  respectively,  and is included in
          accrued expenses in the accompanying  balance sheet.  Interest expense
          for  convertible  notes  payable - related  parties for the six months
          ended June 30,  2005 and 2004 was  approximately  $8,969 and  $11,319,
          respectively.

                                       17
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)

NOTE 11 - NOTES PAYABLE - RELATED PARTIES

          Notes  payable -  related  parties  at June 30,  2005  consist  of the
          following:

          In July 2002,  advances from a former  officer were  converted  into a
          promissory  note in the amount of $8,700.  The note is a  non-interest
          bearing  demand  note.  At  June  30,  2005  the  balance  due  on the
          promissory note was $4,200.

          At June 30, 2005,  the Company had executed notes payable with its CEO
          aggregating  $189,000.  The notes are due  December  31, 2005 and bear
          interest  at a per  annum  rate  equal to the  CEO's  private  account
          monthly  lending  rate,  for the six months ended June 30, 2005 ranged
          between 6.375% and 6.875% per annum.

          Interest  expense  for notes  payable -  related  parties  for the six
          months ended June 30, 2005 and 2004 included  approximately $6,482 and
          $2,415, respectively.

NOTE 12 - OBLIGATIONS UNDER CAPITAL LEASES

          In May 2004,  the  Company  and a lessor  signed an amended  agreement
          consolidating  six of the  Company's  capital  leases into one monthly
          payment and  restructuring  the term of the  agreement.  This  amended
          agreement  cured a prior  default  for  non-payment.  The terms of the
          agreement   called  for  one  payment   upon  signing  of  $8,052  and
          subsequently  43 monthly  payments of $2,020.  The balance at June 30,
          2005, reflects the amended changes to these capital leases. As of June
          30, 2005 certain leases were in default due to non payment.

          At June  30,  2005,  the  aggregate  future  minimum  remaining  lease
          payments under capital leases are as follows:

          Period Ending
          December 31,

               2005                                                $    15,466
               2006                                                     28,702
               2007                                                     26,552
                                                                   ------------
                 Total                                                  70,720

               Less: amount representing interest                       (7,580)
                                                                   ------------
               Net present value of capital lease obligations           63,140
               Current portion                                         (23,774)
                                                                   ------------
               Long-term portion                                   $    39,366
                                                                   ============

          The  capital  leases  listed  above  include  net assets  relating  to
          property and equipment in the amount of $11,830.



                                       18
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)

NOTE 13 - COMMITMENTS AND CONTINGENCIES

          Lease Commitments
          -----------------

          The Company has a non-cancelable operating lease for office space that
          expires in February  2008. The lease does not contain a renewal option
          and  requires  the  Company  to  pay  all  executory   costs  such  as
          maintenance and insurance.  Additionally, the Company leases equipment
          under non-cancelable operating leases.

          In January 2005,  the Company  became a third party  beneficiary  of a
          settlement in a bankruptcy suit between the lessor and supplier of the
          Company's  telephony  equipment and carrier  services.  The settlement
          between the lessor and supplier reduced the remaining lease commitment
          of approximately  $43,000 by 85%, to a balance of $6,467. This balance
          is to be paid in 24 installments of $270 per month effective March 30,
          2005.  The  settlement  has  been  reflected  in the  following  lease
          commitment schedule.

          The approximate future minimum rentals under non-cancelable  operating
          leases  in  effect  on June 30,  2005  are as  follows:

                                                            Space
                                             Office        Equipment
                                          -------------   ------------
                         2005              $     37,089    $     3,864
                         2006                    74,483          6,604
                         2007                    74,483          3,910
                         2008                     6,207          1,966
                                           -------------   ------------
                                           $    192,262    $    16,344
                                           =============   ============

          Rent expense charged to operations for office space for the six months
          ended June 30,  2005 and 2004  amounted to  approximately  $34,520 and
          $18,783, respectively. The expense charged to operations for equipment
          rental for the six months  ended June 30,  2005 and 2004  amounted  to
          approximately $2,763 and $8,782, respectively.

          Payroll Taxes
          -------------

          As of June 30, 2005,  the Company owes  $53,180 of payroll  taxes,  of
          which  approximately  $44,817  are  delinquent  from  the  year  ended
          December 31, 2003.  The Company has also  recorded  $29,249 of related
          estimated  penalties  and interest on the  delinquent  payroll  taxes,
          which are  included  in  accrued  liabilities  on the  balance  sheet.
          Although  the  Company  has not  entered  into  any  formal  repayment
          agreements with the respective tax  authorities,  management  plans to
          make payment as funds become available.

          Nature of Business
          ------------------

          The  Company is subject to risks and  uncertainties  common to growing
          technology  companies,  including  rapid  technological  developments,
          reliance on continued  development  and  acceptance  of the  Internet,
          intense competition and a limited operating history.

          Significant Customers
          ---------------------

          Financial instruments,  which may expose the Company to concentrations
          of credit risk, consist primarily of accounts  receivable.  As of June
          30, 2005 and 2004, one customers represented 94% and two

                                       19
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 13 - COMMITMENTS AND CONTINGENCIES - (cont'd)

          Significant Customers - (cont'd)
          --------------------------------

          customers   represented   100%  of  the  total  accounts   receivable,
          respectively.  For the six months  ended June 30,  2005 and 2004,  the
          Company  had five  unrelated  customers,  which  accounted  for  100%,
          respectively, of total revenue.

          Employment Agreements
          ---------------------

          In May 2003, the Company entered into an employment agreement with its
          CEO.  The term of the  agreement  is from May 20, 2003 through June 1,
          2006. As part of the agreement, the CEO committed to making a $300,000
          capital investment in the Company.  The Company is required to pay the
          CEO a salary of $75,000 per year until the  closing  date of the first
          $2,000,000  in funding,  and  $150,000 per year  thereafter.  In April
          2004, the agreement was amended to pay the CEO $111,000 per year as of
          April 2004.  The  agreement  also  granted the CEO options to purchase
          1,000,000  shares of the Company's  common stock on a fully converted,
          fully diluted basis after the  completion  of the funding  round.  The
          options have an exercise  price of $1.00,  a term of 10 years from the
          vesting date,  and shall vest over a three year period  beginning June
          1, 2004. The agreement  also provides the CEO with severance  payments
          in the event the  Company  terminates  his  employment  for any reason
          other than for cause, as defined in the agreement,  or other than as a
          result of the CEO's death or disability,  or if the CEO terminates his
          employment  with  the  Company  for good  reason,  as  defined  in the
          agreement.

          During 2003, the Company  entered into various  three-year  employment
          agreements  with employees of the Company,  commencing  June 16, 2003,
          and expiring at various dates through October 14, 2006. The Company is
          required to pay salaries  and  severance  payments,  as defined in the
          individual employment  agreements.  In addition, two of the agreements
          each  provide  options to  purchase  100,000  shares of the  Company's
          common  stock on a fully  converted,  fully  diluted  basis  after the
          completion of the funding round. The options have an exercise price of
          $1.00, a term of 10 years from the vesting date, and shall vest over a
          three year period,  beginning one year from the anniversary  date. One
          agreement provides options to purchase 130,000 shares of the Company's
          common  stock on a fully  converted,  fully  diluted  basis  after the
          completion of the funding round. The options have an exercise price of
          $1.00, a term of 10 years from the vesting date, and shall vest over a
          three year period, beginning one year from the anniversary date.

          Panasonic
          ---------

          In August 2003,  the Company  entered into a five year  agreement with
          Panasonic in which Panasonic is an Authorized Service Provider ("ASP")
          for the Company's  products.  As an authorized ASP, Panasonic operates
          the Company's products in their data center for the benefit of clients
          who  contract   with  Company  for  their   security   products.   The
          relationship  can be terminated by either party on six months  notice.
          Panasonic  is   compensated   by  the  Company   based  on  contracted
          percentages of the client's fees to the Company as to be documented in
          each client contract.

          In May 2005,  the Company and  Panasonic  revised the ASP agreement to
          state that the Company has fulfilled its contractual  requirements for
          the years prior to 2005.

                                       20
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 13 - COMMITMENTS AND CONTINGENCIES - (cont'd)

          Panasonic - (cont'd)
          --------------------

          As of June 30, 2005, the contract  requires yearly minimum  commitment
          fees from the Company beginning in 2005 as follows:

               Year ending
                December 31,
                  2005                                $    25,000
                  2006                                     50,000
                  2007                                     50,000
                  2008                                     50,000
                                                      ------------
                  Total                               $   175,000
                                                      ============

          As of June 30,  2005 the  Company  has  accrued  $12,500  against  the
          balance due for the December 31, 2005 period.

          Finder's Agreement
          ------------------

          In May 2005, the Company entered into a consulting  finder's agreement
          with an investment  advisory firm, whereas the services to be provided
          by the advisory firm involve the  introduction of potential  investors
          to the Company.  No fee is due to the advisory firm unless a financial
          arrangement between the investor and the Company is consummated. If an
          arrangement  is  accepted  and  concluded  with  the  Company  and  an
          introduced investor, then the advisory firm is entitled to a fee equal
          to ten percent of the investment. This fee may be in the form of cash,
          equity or a combination  of both. The term of the agreement is for one
          year,  is non  exclusive  and may be cancelled by either party upon 30
          days written notice.

NOTE 14 - REGISTRATION STATEMENT

          On  January  18,  2005,  the  Company  filed a Form SB-2  Registration
          Statement with the SEC, in order to register shares for trading on the
          OTC Bulletin Board. On February 2, 2005, the Company withdrew the Form
          SB-2  filing  as a result of the  termination  of the  Standby  Equity
          Distribution  Agreement  (see Note below).  On February 11, 2005,  the
          Company  re-filed the Form SB-2  Registration  Statement  with the SEC
          omitting the Standby Equity Distribution Agreement. On April 15, 2005,
          the  Company  withdrew  the Form SB-2  filing.  On May 11,  2005,  the
          Company  re-filed the Form SB-2  Registration  Statement with the SEC.
          The  Securities  and  Exchange   Commission   declared  the  Company's
          Registration Statement on Form SB-2 effective on August 3, 2005.

NOTE 15 - STOCKHOLDERS' EQUITY

          Issuance of Stock for Services
          ------------------------------

          In April 2004,  the Company  retained a financial  advisory  firm as a
          business  consultant  to  assist  in a variety  of areas  relating  to
          financing,  strategic and related  development  growth of the Company.
          The term of the engagement is fourteen months and can be terminated by
          either party prior to June 30, 2005.  Transactions  consummated within
          the subsequent  period following the termination of this agreement may
          have fees due and payable to the financial  advisory  firm.  Under the
          terms of the  agreement the Company has issued  800,000  shares of the
          Company's common stock as a commencement bonus. The value of the

                                       21
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 15 - STOCKHOLDERS' EQUITY - (cont'd)

          Issuance of Stock for Services - (cont'd)
          -----------------------------------------

          services  is not stated in the  agreement,  therefore  the Company has
          determined the services shall be measured based upon the fair value of
          the shares  issued,  which was  $576,000  and has been  recorded  as a
          consulting  expense  for  the  year  ended  December  31,  2004.  This
          commencement bonus is fully paid for, non-assessable,  non-refundable,
          non-apportionable  and  non-ratable  and is not a repayment for future
          services.  The Company included all shares issued to the consultant in
          the  registration  statement  filed  by  the  Company  with  the  SEC.
          Additionally,  if the  consultant  introduces the Company to a lender,
          equity purchaser or merger/acquisition candidate, not already having a
          preexisting  relationship with the Company,  the Company agrees to pay
          the  consultant  a finder's fee of 5% of the total gross  funding,  in
          payment for the  consultant's  services to help secure the  financing.
          Also,  if the  consultant,  through  an  intermediary,  establishes  a
          financing  arrangement  for the Company,  then the consultant  will be
          entitled to a 2.5% finder's fee.

          In January 2005, the Company entered into a consulting  agreement with
          an  unrelated   corporation  that  will  provide  financial   advisory
          services.  The  consultant  was paid an  engagement  fee of  $5,000 in
          February,  2005 and issued 33,333 shares of common stock. The value of
          the services is not stated in the agreement, therefore the Company has
          determined the services shall be measured based upon the fair value of
          the shares issued,  which is a per share price of $0.90 in March 2005.
          In addition to the engagement fee, the consultant shall be paid a cash
          success  fee equal to 7% of the total  funds  raised in each  round of
          investments  and warrants in the Company  (priced at the current round
          which is set at $0.90 per  share)  and equal to 7% of the total  funds
          raised in each round.  The warrants  shall have an expiration  date of
          five  years  from  the  closing  of  the   warrants  in  the  Company.
          Out-of-pocket  expenses  regarding  travel  and  incidentals  shall be
          reimbursed  to the  consultant  by the Company at a cost not to exceed
          $2,000 per month unless approved previously by the Company.

          In March 2005, the Company cancelled 500 shares of common stock issued
          in November 2004 to a consultant.  The  consultant did not provide the
          service,  therefore  negating the  reciprocity of  consideration.  The
          Company  recorded the  cancellation  of this stock  transaction in the
          year ended December 31, 2004.

          Issuance of Stock for Financing
          -------------------------------

          In April 2005,  the Company  issued  150,000 shares of common stock to
          Highgate,  in connection with the Securities  Purchase  Agreement (see
          Note 8).

          Issuance of Options for Services
          --------------------------------

          In January 2005, the Company  issued stock options to purchase  25,000
          shares  of common  stock to a new  employee  pursuant  to his terms of
          employment as a Software  Developer.  These options are exercisable at
          $1.00 per share and  expire on  January  11,  2015.  The  shares  vest
          annually  over a three year  period.  This  issuance  was exempt  from
          registration requirements pursuant to Section 4(2) of the Act.

          In February 2005, the Company issued stock options to purchase  25,000
          shares  of common  stock to a new  employee  pursuant  to his terms of
          employment as a Software  Developer.  These options are exercisable at
          $1.00 per share and  expire on  February  8,  2015.  The  shares  vest
          annually  over a three year  period.  This  issuance  was exempt  from
          registration requirements pursuant to Section 4(2) of the Act.


                                       22
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 15 - STOCKHOLDERS' EQUITY - (cont'd)

          Sales of Common Stock
          ---------------------

          In January 2005,  the Company  issued 95,209 shares of common stock to
          eleven  individuals  at a price  of  $0.72  per  share  for a total of
          $68,550.  This  issuance  was exempt  from  registration  requirements
          pursuant to Regulation D.

          Asset Purchase Agreement
          -------------------------

          In July 2002,  the Company  entered  into  pending  negotiations  with
          NetLabs,  and the  Sellers,  to  purchase  NetLabs'  COBAS  technology
          product.  In December 2002, in accordance with the  negotiations,  the
          Sellers and the Company  informally  agreed to a payment of  7,516,998
          shares of the Company's common stock, valued at $3,758, to the Sellers
          for the  transfer  of  NetLabs  intellectual  property  and the  COBAS
          product to the Company,  net of  subscriptions.  Concurrently with the
          agreement,  the Company  issued  600,000 shares of its common stock to
          the  Sellers.  Upon  issuance of these  shares,  the Sellers  became a
          controlling  interest in the Company.  The remaining  6,916,998 common
          shares due, in  accordance  with the  agreement,  were issued in March
          2003,  after  approval  by the  State of New  Jersey to  increase  the
          Company's  authorized  shares  from  1,000,000  shares  to  20,000,000
          shares.  In February  2003,  the Company agreed to issue an additional
          1,140,000  shares of its common stock to the Sellers as  consideration
          for all of NetLabs  intellectual  property rights,  technology and the
          COBAS product which has been valued at $570.  These shares were issued
          in March 2003 after  approval  by the State of New Jersey to  increase
          the Company's  authorized  shares from 1,000,000  shares to 20,000,000
          shares. In total,  8,656,998 shares of the Company's common stock were
          issued to the Sellers.

          On September 11, 2003, the Company signed the Asset Purchase Agreement
          with  NetLabs  whereby the Company  received  all of the  intellectual
          property  rights to COBAS  inclusive  of the  additional  intellectual
          property received in the December 2002 informal  agreement.  The Asset
          Purchase  Agreement also required the Company to pay NetLabs a royalty
          of 10% of the net  revenues  received  by the Company for the sales of
          its  products,  as  defined  in  the  Asset  Purchase  Agreement.  The
          royalties would apply to net revenues received during a period of five
          years  beginning  September 1, 2003 and continuing  through August 31,
          2008.  The Asset  Purchase  Agreement was amended on September 2, 2004
          and made  effective  as of the  Effective  Date to extend the  royalty
          period from five years to ten years, through August 31, 2013.

          On December 2, 2004,  the Company and NetLabs  agreed to terminate the
          royalty  portion of the Asset  Purchase  Agreement for the issuance to
          NetLabs of  options  to  purchase  7,600,000  shares of the  Company's
          common  stock  at a price  of  $0.36.  The  options  vest as  follows:
          2,530,000 shares at September 11, 2004,  2,530,000 shares at September
          11, 2005 and 2,540,000 shares at September 11, 2006 and the fair value
          of the options are $4,113,972 using the  Black-Scholes  Option Pricing
          Model. The options are considered payments in lieu of future royalties
          and beginning December 2, 2004,  $4,113,972 of prepaid royalty expense
          will be amortized over the remaining term of the royalty  provision of
          the  agreement,  which  expires  August 31, 2013.  The fair values for
          these  options are to be measured as follows:  at the time the options
          vest,  the fair value of the options will be fixed.  Prior to vesting,
          the options  fair value will be measured at the end of each  reporting
          period.


                                       23
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 15 - STOCKHOLDERS' EQUITY - (cont'd)

          Asset Purchase Agreement - (cont'd)
          -----------------------------------

          At June  30,  2005  (the end of the  reporting  period)  the  unvested
          options were  remeasured  and the value of the options  increased from
          $2,127,879  at  December  2, 2004 to  $3,047,577  at June 30,  2005 an
          increase of  $919,698.  Measurement  for each period is based upon the
          Black-Scholes Model using the following assumptions:

                                        December 31, 2004       June 30, 2005
                                        -----------------       -------------

           Market share price                      $0.72               $0.90
           Expected volatility                     10.00%               6.00%
           Risk-free interest rate                  3.63%               3.72%
           Expected life                        10 years            10 years

          Warrant Agreements
          ------------------

          At June 30,  2005,  the Company  has  warrants  issued  related to its
          convertible notes payable - related parties.  All the warrants entitle
          the  noteholders  to purchase the Company's  common stock at $1.00 per
          share  for each  warrant  received  and have an  exercise  term of ten
          years.  At June 30, 2005,  the warrants  outstanding  are 11,000 which
          expire in the year 2013 and 16,500 which  expire in the year 2014.  In
          the event that any portion of the warrants  remain  unexercised  as of
          the  expiration  date,  and the market price of the  Company's  common
          stock as of the expiration  date is greater than the exercise price as
          of the expiration  date,  then the warrant will be deemed to have been
          exercised   automatically  for  the  maximum  number  of  shares  then
          purchasable.

          There were no  warrants  issued  during the six months  ended June 30,
          2005.

          Standby Equity Distribution Agreement
          -------------------------------------

          On December  20,  2004,  the  Company  entered  into a Standby  Equity
          Distribution  Agreement  with Cornell.  Pursuant to the Standby Equity
          Distribution   Agreement,   the  Company   may,  at  its   discretion,
          periodically  sell shares of common stock,  for a maximum draw down of
          $500,000,  per advance,  once registration is determined  effective by
          the SEC, for a total  purchase  price of up to  $10,000,000.  For each
          share of common stock purchased under the Standby Equity  Distribution
          Agreement,  the investor  will pay 98% of the lowest  volume  weighted
          average price of the common stock during the five consecutive  trading
          days immediately following the notice date. In addition,  Cornell will
          retain  5% of each  advance  under  the  Standby  Equity  Distribution
          Agreement.  The Company's  obligation  to issue shares is  essentially
          limitless.  Cornell  received  540,000  shares  of  common  stock as a
          commitment fee.

          In February  2005,  the Company  and  Cornell  terminated  the Standby
          Equity Distribution Agreement,  the Registration Rights Agreement, the
          Placement Agent Agreement and the Escrow Agreement. As a result of the
          terminations,  all  respective  rights or  obligations  granted to the
          Company and Cornell under or with respect to the  Agreements  are also
          terminated. Cornell has returned the 540,000 shares of common stock to
          the  Company.  The  Company  has  recorded  the  termination  of  this
          transaction in the year ended December 31, 2004.


                                       24
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 15 - STOCKHOLDERS' EQUITY - (cont'd)

          Placement Agent
          ---------------

          In  February  2005,  the  Company's  Agreement  with its  unaffiliated
          registered  broker-dealer  was  terminated  in  conjunction  with  the
          termination  of  the  Standby  Equity  Distribution   Agreement.   The
          Placement  Agent  Agreement was  co-terminus  with the Standby  Equity
          Distribution Agreement.

NOTE 16 - INCOME TAXES

          Income taxes are provided for the tax effects of transactions reported
          in the financial  statements,  and consist of taxes currently due plus
          deferred taxes related to differences  between the financial statement
          and tax bases of assets and  liabilities  for financial  statement and
          income tax  reporting  purposes.  Deferred tax assets and  liabilities
          represent  the  future  tax  return  consequences  of these  temporary
          differences,  which will either be taxable or  deductible  in the year
          when the assets or liabilities are recovered or settled.  Accordingly,
          measurement of the deferred tax assets and liabilities attributable to
          the book-tax basis differentials are computed at a rate of 34% federal
          and 7% state.

          As  of  June  30,  2005,  the  Company  had  deferred  tax  assets  of
          approximately  $2,178,000 resulting from temporary differences and net
          operating loss carry-forwards of approximately  $5,641,000,  which are
          available to offset future taxable  income,  if any,  through 2025. As
          utilization  of the net operating  loss  carry-forwards  and temporary
          difference  is not  assured,  the  deferred  tax asset has been  fully
          reserved through the recording of a 100% valuation allowance.

          The tax effects of temporary differences,  loss carry-forwards and the
          valuation  allowance  that give rise to deferred  income tax assets at
          June 30, 2005 are as follows:
<TABLE>
<CAPTION>

            Temporary differences:

<S>                                                                                      <C>
                        Fair value of warrants and options                         $        146,000
                        Net operating losses                                              2,178,000
                        Less valuation allowance                                         (2,324,000)
                                                                                   -----------------
                          Deferred tax assets
                                                                                   $              -
                                                                                   =================

            The  reconciliation of the effective income tax rate to
                 the federal statutory rate for the period ended
                 June 30, 2005 is as follows:
                        Federal income tax rate                                                39.0%
                        Change in valuation allowance on net operating
                           loss carry-forwards                                                (39.0)%
                                                                                   -----------------
                        Effective income tax rate
                                                                                                0.0%
                                                                                   =================
</TABLE>
NOTE 17 - RELATED PARTY TRANSACTIONS

          Agreements
          ----------

          In September  2003,  the Company  entered into a consulting  agreement
          with the spouse of the Company's Chief Technology Officer ("CTO"). The
          consulting  agreement calls for payments every two weeks in the amount
          of $1,500 in  consideration of services to be rendered to the Company.
          Effective February 2005, the terms of the agreement were amended where
          the payments were increased to $5,000 a month in

                                       25
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 17 - RELATED PARTY TRANSACTIONS - (cont'd)

          Agreements - (cont'd)
          ---------------------

          consideration of services to the Company. The term of the agreement is
          predicated  upon a  determination  by the  Company as to when  certain
          product  lines are  completed.  For the six months ended June 30, 2005
          and  2004,  $28,000  and  $18,000,  respectively,   were  recorded  as
          consulting   expense  and  is   included   in  selling,   general  and
          administrative  expenses on the statement of  operations.  At June 30,
          2005, the Company has a balance due to this related party of $17,500.

NOTE 18 - STOCK OPTIONS

          2004 Equity Incentive Plan
          --------------------------

          The  shareholders  approved the 2004 Equity Incentive Plan ("Incentive
          Plan") in September  2004.  The Incentive  Plan is effective  April 1,
          2003. Officers,  key employees and non-employees,  who in the judgment
          of the Company render significant service to the Company, are eligible
          to  participate.  The Incentive Plan provides for the award of a broad
          variety of stock-based compensation alternatives such as non-qualified
          stock options, incentive stock options,  restricted stock, performance
          awards and stock  appreciation  rights.  The  Incentive  Plan provides
          5,000,000 shares of common stock to be offered from either  authorized
          and unissued  shares or issued shares,  which have been  reacquired by
          the  Company.  All  options  vest  equally  over a three  year  period
          beginning one-year from the grant.

          As  of  June  30,  2005,  an  aggregate  of  1,655,000   options  were
          outstanding under the Incentive Plan. The exercise price for all these
          options is $1.00.

          Non-Incentive Plan Stock Option Grants
          --------------------------------------

          As of June 30,  2005,  the Company had  outstanding  an  aggregate  of
          7,600,000 and no options  outside of the Incentive  Plan. The exercise
          price for all these options is $0.36.

          The table below  summaries the Company's stock option activity for the
          six months ended June 30, 2005:

<TABLE>
<CAPTION>
                                                                                                        Non-Plan
                                                            Incentive           Non-Qualified        Non-Qualified
                                                             Options              Options               Options           Total
                                                          -------------         -------------        -------------    -------------
<S>                                                            <C>                   <C>                 <C>                  <C>
              Outstanding at December 31, 2004                       -             1,605,000            7,600,000        9,205,000
                    Granted                                          -                50,000                                50,000
                    Exercised                                        -                     -                                     -
                    Forfeited                                        -                     -                                     -
                                                          -------------         -------------        -------------    -------------
              Outstanding at June 30, 2005                           -             1,655,000            7,600,000        9,255,000
                                                          =============         =============        =============    =============

              Vesting for the year ended:
                    Vested at December 31, 2004                      -               820,694            2,771,429        3,592,123
                                                          -------------         -------------        -------------    -------------
                     December 31, 2005                               -               534,305            2,897,143        3,431,448
                                                          -------------         -------------        -------------    -------------
                     December 31, 2006                               -               248,611            1,931,428        2,180,039
                                                          -------------         -------------        -------------    -------------
                     December 31, 2007                               -                51,390                    -           51,390
                                                          -------------         -------------        -------------    -------------
</TABLE>

                                       26
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 18 - STOCK OPTIONS - (cont'd)

          Non-Incentive Plan Stock Option Grants - (cont'd)
          -------------------------------------------------

          The  weighted  average  fair value of options  granted  during the six
          months ended June 30, 2005 amounted to $0.72.

          For the six months ended June 30, 2005 and 2004, the Company  recorded
          $919,698 and $0,  respectively,  of royalties (as more fully described
          in Note 15), and no compensation  expense, in connection with granting
          of options.

NOTE 19 - SUBSEQUENT EVENTS

          Issuance of Options for Services
          --------------------------------

          In July 2005,  the Company  issued  stock  options to purchase  25,000
          shares  of common  stock to a new  employee  pursuant  to his terms of
          employment as a sales person.  These options are  exercisable at $1.00
          per share and expire on July 2015.  The shares  vest  annually  over a
          three  year  period.   This  issuance  was  exempt  from  registration
          requirements pursuant to Section 4(2) of the Act.

          In July 2005,  the Company  issued stock  options to purchase  100,000
          shares of common stock to four  existing  employees at 25,000  options
          each.  These options are  exercisable at $1.00 per share and expire on
          July 2015.  The shares vest  annually  over a three year period.  This
          issuance was exempt from registration requirements pursuant to Section
          4(2) of the Act.

          In July 2005,  the Company  entered into an agreement  with a law firm
          whereas the law firm is to provide  representation  for the Company on
          certain  general  corporate  matters  and  provide  advisory  services
          respective to government filings. Additionally, the agreement provides
          for the law firm to assist the Company in raising funds. In accordance
          with this agreement,  the fee structure  includes both a cash retainer
          of $3,500 per month and stock of $1,500 per month.  Moreover,  the law
          firm will  receive an  additional  100,000  shares of common stock for
          legal  fees in  conjunction  with  certain  negotiations  of  business
          transactions.  The  shares  to be issued  to the law firm  shall  have
          piggyback  registration  rights with respect to the next  registration
          statement on Form S-8 the Company files.

          In July 2005, the Company entered into a retainer agreement with a law
          firm,  whereas the firm is to provide  representation  to the Company,
          respective to general  corporate  matters and to assist the Company in
          raising  funds.  The  agreement  is at will and requires a retainer of
          $10,000,  which will be applied against  billing in these matters.  If
          the time charges, plus chargeable expenses,  exceed the retainer,  the
          law firm may request an  additional  retainer  which will be similarly
          applied.

          Finder's Agreement
          ------------------

          In July 2005, the Company entered into a consulting  agreement with an
          independent  consultant  whereas  the  services  to be provided by the
          consultant  involve the  introduction  of  potential  investors to the
          Company  and  the  potential  sale of  products.  No fee is due to the
          consultant unless a financial  arrangement between an investor and the
          Company is  consummated  or a sale of product  is  consummated.  If an
          arrangement  is  accepted  and  concluded  with  the  Company  and  an
          introduced investor, then the consultant is entitled to a fee equal to
          seven  percent  of  the  investment.  If a  sale  is  consummated  the
          consultant is entitled to a fee equal to ten percent of the sale. If a
          sale is made by a third  party,  based  upon the  introduction  by the
          consultant, the consultant is entitled to a fee of five percent of the
          sale. The

                                       27
<PAGE>
                         STRIKEFORCE TECHNOLOGIES, INC.
                          NOTES TO FINANCIAL STATEMENTS
                 FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
                                   (UNAUDITED)


NOTE 19 - SUBSEQUENT EVENTS - (cont'd)

          Finder's Agreement - (cont'd)
          -----------------------------

          term of the  agreement is for six months,  is non exclusive and may be
          cancelled by either party upon 30 days written notice.

          Consulting Agreement
          --------------------

          In July 2005, in accordance with an agreement with a recruitment  firm
          executed  in  February  2005,  the Company  issued  18,889  options to
          purchase common stock to two of the firm's owners.  The agreement with
          the executive  recruitment firm is to conduct a search for two account
          executives  for a fee  equal  to  twenty  percent  of the  first  year
          salaries.  The fee is  payable  to the  recruitment  firm in cash  and
          options  equal  to  an  amount  of  $22,000.   The  Company  paid  the
          recruitment  firm  $2,500 in April  2005 and the  balance of $2,500 in
          July 2005.

          Convertible Notes Payable
          -------------------------

          In  July  2005,  the  Company   executed  8%  convertible   debentures
          aggregating $140,000 with individuals. At any time after the Form SB-2
          is  deemed  effective,  the  holder is  entitled,  at its  option,  to
          convert,  and sell on the same day, at any time and from time to time,
          until  payment  in  full  of the  debenture,  all or any  part  of the
          principal amount of the debenture,  plus accrued interest, into shares
          of the Company's  common stock at the price of $0.90 per share. If not
          converted at the holder's option,  the entire principal amount and all
          accrued  interest  shall  be due  to the  holder  on  the  third  year
          anniversary of the debenture, July 2008.


                                       28
<PAGE>
Item 2.  Management's Discussion and Analysis or Plan of Operation

Forward-Looking Statements

     The  information  in  this  quarterly   report   contains   forward-looking
statements within the meaning of the Private Securities litigation Reform Act of
1995.  This Act  provides a "safe  harbor"  for  forward-looking  statements  to
encourage companies to provide prospective  information about themselves so long
as they  identify  these  statements as forward  looking and provide  meaningful
cautionary  statements  identifying  important  factors  that could cause actual
results to differ from the projected  results.  All statements  other than these
statements  of  historical  fact made in this  report are  forward  looking.  In
particular,  the  statements  herein  regarding  industry  prospects  and future
results of  operations  or financial  position are forward  looking  statements.
Forward-looking  statements reflect  management's  current  expectations and are
inherently   uncertain.   Our  actual  results  may  differ  significantly  from
management's expectations.

     The following  discussion and analysis  should be read in conjunction  with
the financial statements of StrikeForce  Technologies,  Inc., included herewith.
This  discussion  should not be  construed  to imply that the results  discussed
herein will necessarily continue into the future, or that any conclusion reached
herein will necessarily be indicative of actual operating results in the future.
Such discussion represents only the best present assessment of our management.

Background

     We are a software  development and services  company that offers a suite of
integrated computer network security products using proprietary  technology.  We
were  organized  in August 2001 under New Jersey law as Strike  Force  Technical
Services,  Inc. We initially conducted  operations as an integrator and reseller
of computer hardware and telecommunications  equipment and services. In December
2002 which was formally  memorialized  by an agreement  in  September  2003,  we
acquired  certain  assets  from  NetLabs.com  which  included  the  intellectual
property rights to their principal  products and certain officers of NetLabs.com
joined  StrikeForce  as officers and directors of our company.  We  subsequently
changed our name to StrikeForce Technologies, Inc., under which we had conducted
our business since August 2001. Our strategy is to develop and exploit our suite
of  network  security  products  for  customers  in  the  corporate,  financial,
government  and  e-commerce  sectors.  We  plan  to grow  our  business  through
internally generated sales, rather than by acquisitions. We have no subsidiaries
and we conduct our operations from our office in Edison, New Jersey.

     We  began  our  operations  in 2001 as a  reseller  of  computer  hardware,
primarily products manufactured by LG Electronics USA and Panasonic Corporation.
We derived  the  majority  of our  revenues  from our  activities  as a reseller
through  the  first  half  of  2003.  Beginning  with  the  acquisition  of  the
intellectual  property  assets of  NetLabs.com  in December 2002, we shifted the
focus of our business  from the resale of hardware to  developing  and marketing
the suite of security  products that we acquired from  NetLabs.com.  Although we
have maintained our relationship with Panasonic as a reseller,  we do not expect
to generate significant revenues from such sales, which consist primarily of the
sale of biometric  identification  equipment,  such as Panasonic's iris scanner,
that can be used with our software products.  We generated nominal revenues from
our activities as a reseller during 2004.

     We expect to generate  substantially  all of our revenue in the future from
sales of our suite of security products and related service  contracts.  For the
period  ended June 30, 2004,  we  generated  $28,093 from the sales of biometric
products  and our  security  products  and for the period ended June 30, 2005 we
generated  $11,753  from the sales of our security  products.  We seek to locate
customers  in a variety  of ways.  These  include  contracts  with  value  added
resellers,  direct  sales calls  initiated by our sales  staff,  exhibitions  at
security  and  technology  trade  shows,  through the media and through  word of
mouth. Our sales generate revenue either as an Original  Equipment  Manufacturer
(OEM) model, or through a Hosting/License  agreement.  We price our products for
consumer  transactions based on the number of transactions in which our software
products are utilized and we price our products for business  applications based
on the number of users. We also expect that we may generate  revenue from annual
maintenance contracts.


                                       29
<PAGE>

     We have incurred substantial operating losses since commencing  operations.
We  believe  that our  products  provide a  cost-effective  and  technologically
competitive  suite of  products to problems  of network  security  and  identity
theft.  There  can  be no  assurance,  however,  that  our  products  will  gain
acceptance in the commercial marketplace or that one of our competitors will not
introduce  a  technically  superior  product.  The  products  that we  offer  to
customers are discussed in more detail below.

     Management,  in late 2004,  introduced  procedures that assess our business
performance through a number of financial and non-financial indicators. Since we
are in the process of introducing our products in the commercial marketplace, we
attempt to assess our performance principally through indications of present and
potential sales. These include the following:

     o Number of contracts  signed,  or projected to be signed  within 30 and 90
       day periods;
     o Number of prospects in our sales pipeline;
     o Number of Requests for  Information and Requests for Proposal in which we
       are invited to participate; and
     o The  frequency  with  which  we  are  mentioned  in   trade  or  consumer
       publications or other media.

     We also assess the number of problems  that are reported  with each product
and over specific time frames, e.g. monthly,  quarterly.  We review our revenues
generated in the  aggregate  per quarter and the average  revenue  generated per
customer.

Use of Estimates

     Management's  Discussion and Analysis of Financial Condition and Results of
Operations are based upon our financial statements,  which have been prepared in
accordance with generally accepted  accounting  principles in the United States.
When  preparing our financial  statements,  we make estimates and judgments that
affect the reported amounts on our balance sheets and income statements, and our
related  disclosure  about  contingent  assets and  liabilities.  We continually
evaluate  our  estimates,  including  those  related to revenue,  allowance  for
doubtful  accounts,  reserves  for income  taxes,  and  litigation.  We base our
estimates on historical  experience and on various other  assumptions,  which we
believe to be reasonable in order to form the basis for making  judgments  about
the carrying values of assets and liabilities  that are not readily  ascertained
from  other  sources.  Actual  results  may  deviate  from  these  estimates  if
alternative assumptions or conditions are used.

Results of Operations

Three  Months  Ended June 30, 2005  Compared to the Three  Months Ended June 30,
2004

     Revenues for the three  months ended June 30, 2005 were $3,724  compared to
$23,960  for the three  months  ended June 30,  2004,  a decrease  of $20,236 or
84.45%.  The resultant  decrease in revenues was primarily due to the refocusing
of the Company's direction from a reseller of biometric technology to becoming a
developer of our own technology  designed to thwart identity theft. The revenues
generated  consisted of hardware  sales,  software  sales,  revenue from sign on
fees, transaction revenues and commissions.  Hardware sales for the three months
ended June 30, 2005 were $0 compared to $7,300 for June 30,  2004, a decrease of
$7,300.  The  resultant  decrease in hardware  revenues was primarily due to the
refocusing of the Company's direction from a reseller of biometric technology to
becoming a developer of our own technology.  Software sales for the three months
ended June 30, 2005 were $0 compared to $11,150 for the three  months ended June
30, 2004, a decrease of $11,150. The resultant decrease in software revenues was
primarily due to the  refocusing of the Company's  direction  from a reseller of
biometric technology to becoming a developer of our own technology. Sign on fees
for our ASP  transaction  model amounted to $2,500 for the period ended June 30,
2005  compared to $0 for the three months  ended June 30,  2004,  an increase of
$2,500. The increase was due to signing up two new clients. Transaction revenues
from the ASP hosting  model were $1,224 for the three months ended June 30, 2005
and $3,904 for the three months  ended June 30, 2004, a decrease of $2,680.  The
decrease was due primarily to the lack of ASP transactions and awaiting the ramp
up of the new  clients.  Commission  income for the three  months ended June 30,
2005 was $0  compared  to $1,606 for the three  months  ended June 30,  2004,  a
decrease  of $1,606.  In 2001 the  Company  became a  reseller  of Nextel and XO
Communication  cellular  services.  These sales provided both commissions on the
sale of Nextel  phones and  residual  commission  income from XO  Communications
beginning in January 2002. The residual  commission revenue varied from month to
month,  dependent  on the  utilization  of the  services by the customer and the
terms of their contracts.  Effective August 2004, the Company no longer received
residual  commissions  due to the  conclusion of the residual  terms between the
Company and XO Communications.


                                       30
<PAGE>

     Our principal expenses during the three months ended June 30, 2005 and 2004
were payroll  expenses and  professional  expenses.  Our  professional  expenses
included  legal,  accounting,  public  relations and lobbying  consultants.  The
increased  level of expenses  being  incurred  by the Company  arises out of its
efforts to commercially exploit its suite of network security products.  Some of
the  specifics  include  additional  sales  support,  contracting  a new  public
relations  firm  and   contracting  a  lobbyist  group  in  Washington  D.C.  to
concentrate on the government sector.

     Cost of revenues for three  months ended June 30, 2005 was $1,885  compared
to $0 for the three months ended June 30, 2004,  an increase of $1,885.  The net
increase resulted primarily from costs incurred by third parties for transaction
fees as  customers  began  implementation  of the  platform,  related to our ASP
hosting service and transaction charges.

     Gross profit for three  months  ended June 30, 2005 was $1,839  compared to
$23,960 for the three  months  ended June 30,  2004,  a decrease of $22,121,  or
92.32%.  The decrease  was  primarily  due to  refocusing  the  direction of the
Company  from being a reseller of  biometric  technology  to becoming a software
developer of our own security products.

     Research and development  expenses for the three months ended June 30, 2005
were $70,365  compared to $29,657 for the three  months ended June 30, 2004,  an
increase of $40,708,  or 137.26%.  The increase is primarily  attributable to an
increase  in  compensation  costs as a  result  of  increases  in  research  and
development  personnel  added after June 30, 2004.  The  salaries,  benefits and
overhead costs of personnel  conducting research and development of our software
products comprise research and development expenses.

     Selling,  general and  administrative  expenses  for the three months ended
June 30, 2005 were $1,065,342  compared to $1,254,558 for the three months ended
June 30,  2004,  a decrease  of  $189,216 or 15.08%.  The net  decrease  was due
primarily to the additional compensation expense to consultants during the three
months ended June 30, 2004.

     Selling,  general and administrative expenses at June 30, 2005 and June 30,
2004 consist  primarily of salaries,  benefits and overhead  costs for executive
and  administrative  personnel,   insurance,  fees  for  professional  services,
including  consulting,  legal, and accounting fees, travel costs, non-cash stock
compensation   expense  for  the   issuance  of  stock  and  stock   options  to
non-employees and other general corporate expenses.

     Other  expense for the three  months  ended June 30,  2005 was  $100,203 as
compared to $17,471 for the three months ended June 30,  2004,  representing  an
increase in other  expenses of $82,732,  or 473.54%.  The increase was primarily
due to  interest  charges  for notes  payable  and  deferred  financing  charges
relating to the convertible promissory notes.

     Our net loss for the  three  months  ended  June  30,  2005 was  $1,234,071
compared to a net loss of  $1,277,726  for three  months  ended June 30, 2004, a
decrease of $43,655,  or 3.42%.  The decrease in the loss was  primarily  due to
refocusing  the  direction  of the Company  from being a reseller  of  biometric
technology to a developer of our own  proprietary  technology to thwart identity
theft.

Six Month Period Ended June 30, 2005 Compared to Six Month Period Ended June 30,
2004

     Revenues for the six months  ended June 30, 2005 were  $11,753  compared to
$28,093 for the six months ended June 30, 2004, a decrease of $16,340 or 58.16%.
The resultant  decrease in revenues was  primarily due to the  refocusing of the
Company's  direction  from a reseller  of  biometric  technology  to  becoming a
developer of our own technology.  The revenues  generated  consisted of hardware
sales,  software  sales,  revenue  from sign on fees,  transaction  revenues and
commissions.  Hardware  sales for the six months  ended June 30,  2005 were $829
compared  to $7,300 for June 30,  2004,  a decrease  of  $6,471.  The  resultant
decrease  in  hardware  revenues  was  primarily  due to the  refocusing  of the
Company's  direction  from a reseller  of  biometric  technology  to  becoming a
developer of our own  technology.  Software  sales for the six months ended June
30, 2005 were $5,500 compared to $3,950 for the six months ended June 30, 2004,



                                       31
<PAGE>

a increase of $1,550.  The resultant increase in software revenues was primarily
due to the  sales  of our  own  software  platform.  Sign  on  fees  for our ASP
transaction  model  amounted  to $4,200 for the six months  ended June 30,  2005
compared to $0 for the six months  ended June 30,  2004,  an increase of $4,200.
The increase was due to signing up three new clients.  Transaction revenues from
the ASP  hosting  model were  $1,224 for the six months  ended June 30, 2005 and
$14,495 for the six months  ended June 30,  2004,  a decrease  of  $13,271.  The
decrease was due primarily to the lack of ASP transactions and awaiting the ramp
up of the new clients.  Commission income for the six months ended June 30, 2005
was $0 compared to $2,348 for the six months  ended June 30, 2004, a decrease of
$2,348.  In 2001 the Company  became a reseller  of Nextel and XO  Communication
cellular  services.  These sales provided both commissions on the sale of Nextel
phones and  residual  commission  income  from XO  Communications  beginning  in
January  2002.  The  residual  commission  revenue  varied  from month to month,
dependent  on the  utilization  of the services by the customer and the terms of
their contracts.  Effective August 2004, the Company no longer received residual
commissions  due to the conclusion of the residual terms between the Company and
XO Communications.

     Our principal  expenses  during the six months ended June 30, 2005 and 2004
were payroll  expenses and  professional  expenses.  Our  professional  expenses
included  legal,  accounting,  public  relations and lobbying  consultants.  The
increased  level of expenses  being  incurred  by the Company  arises out of its
efforts to commercially exploit its suite of network security products.  Some of
the  specifics  include  additional  sales  support,  contracting  a new  public
relations  firm  and   contracting  a  lobbyist  group  in  Washington  D.C.  to
concentrate on the government sector.

     Cost of revenues for six months ended June 30, 2005 was $4,256  compared to
$0 for the six months  ended  June 30,  2004,  an  increase  of $4,256.  The net
increase resulted primarily from costs incurred by third parties for transaction
fees as  customers  began  implementation  of the  platform,  related to our ASP
hosting service and transaction charges.

     Gross  profit for six months  ended June 30,  2005 was $7,497  compared  to
$28,093  for the six months  ended June 30,  2004,  a decrease  of  $20,596,  or
73.31%.  The decrease  was  primarily  due to  refocusing  the  direction of the
Company  from being a reseller of  biometric  technology  to becoming a software
developer of our own security products.

     Research  and  development  expenses for the six months ended June 30, 2005
were  $174,464  compared to $72,311 for the six months ended June 30,  2004,  an
increase of $102,153,  or 141.27%. The increase is primarily  attributable to an
increase  in  compensation  costs as a  result  of  increases  in  research  and
development  personnel  added after June 30, 2004.  The  salaries,  benefits and
overhead costs of personnel  conducting research and development of our software
products comprise research and development expenses.

     Selling,  general and administrative expenses for the six months ended June
30, 2005 were  $1,847,256  compared to $1,495,927  for the six months ended June
30, 2004, an increase of $351,329 or 23.49%.  The net increase was due primarily
to increases in our staffing,  advertising,  promotion and marketing,  legal and
accounting, consulting costs and overhead.

     Selling,  general and administrative expenses at June 30, 2005 and June 30,
2004 consist  primarily of salaries,  benefits and overhead  costs for executive
and  administrative  personnel,   insurance,  fees  for  professional  services,
including  consulting,  legal, and accounting fees, travel costs, non-cash stock
compensation   expense  for  the   issuance  of  stock  and  stock   options  to
non-employees and other general corporate expenses.

     Other  expense  for the six months  ended  June 30,  2005 was  $152,214  as
compared  to $29,634 for the six months  ended June 30,  2004,  representing  an
increase in other expenses of $122,580,  or 413.65%.  The increase was primarily
due to  interest  charges  for notes  payable  and  deferred  financing  charges
relating to the convertible promissory notes.

     Our net loss for the six months ended June 30, 2005 was $2,166,437 compared
to a net loss of  $1,569,779  for six months ended June 30, 2004, an increase of
$596,658,  or 38.01%.  The increase was  primarily  due to interest  charges for
notes  payable  and  deferred  financing  charges  relating  to the  convertible
promissory notes.

                                       32
<PAGE>

Liquidity and Capital Resources

     Our total current assets at June 30, 2005 were $963,792, including $153,027
in cash as compared  with  $346,019 in total  current  assets at June 30,  2004,
which included cash of $74,414.  Additionally,  we had a shareholders  equity in
the amount $1,625,220 at June 30, 2005 as compared to a shareholders  deficiency
of $505,240 at June 30, 2004. The increases in shareholders  equity are a result
of the Company's sales of common stock and conversions of debt  instruments.  We
have  historically  incurred  losses and have  financed our  operations  through
loans,  principally from affiliated parties such as our directors,  and from the
proceeds of the corporation selling shares of our common stock privately.

     The number of common shares outstanding increased from 15,913,419 shares at
the second  quarter of 2004 to  17,438,855  at the  second  quarter of 2005,  an
increase  of 9.59%.  During that period our  shareholders'  deficit,  due to the
injection  of  capital,  was  reversed  from a deficit of $505,240 at the second
quarter of 2004 to an equity  position of  $1,625,220  at the second  quarter of
2005, an increase of approximately  421.67%. We had $153,027 of cash at June 30,
2005, compared to $74,414 cash at the six months ended June 30, 2004 an increase
of approximately  105.64%.  We financed our operations during the second quarter
of 2005 through secured debentures,  unsecured loans, principally from unrelated
parties and sales by us of our common stock  through  private  transactions.  To
date, we have not generated  significant revenues and we anticipate that we will
not generate  any  significant  revenues  until the fourth  quarter of 2005.  We
expect that we will rely, at least in the near future,  upon a limited number of
customers for a substantial  percentage of our revenues and may continue to have
customer concentrations.  Inherently,  as time progresses and corporate exposure
in the  market  grows,  we will  attain  greater  numbers of  customers  and the
concentrations  will diminish.  Until this is accomplished,  we will continue to
attempt to secure  additional  financing  through  both the  public and  private
market sectors to meet our continuing  commitments of capital  expenditures  and
our sales revenue can provide greater liquidity.

     We do not expect to sell significant  equipment over the next twelve months
except within the demands of potential  acquisitions  that we may pursue or part
of our distribution or reseller business.

     We have historically incurred losses and expect to continue to incur losses
in  the  foreseeable  future.  Our  operations   presently  require  funding  of
approximately  $250,000 per month. Our current  forecast and potential  pipeline
substantiate our becoming profitable by the end of the 4th quarter of 2005 based
on some key  potential  clients  contracting  with the Company in the  financial
industry in the United States and in Asia.  There can be no assurance,  however,
that  the  sales  anticipated  will  materialize  or that we  will  achieve  the
profitability we have forecasted.

     On April 27,  2005,  the Company  entered  into an amended and  restated 8%
secured convertible  debenture with Cornell Capital Partners,  LP ("Cornell") in
the amount of $1,024,876,  which terminated the two $500,000  debentures entered
into with Cornell in December 2004 and January 2005. The new debenture  entitles
Cornell,  at its option,  to convert,  at any time and from time to time, all or
any part of the principal amount of the debenture,  plus accrued interest,  into
shares of the Company's  common stock at the price per share equal to the lesser
of (i) the greater of $0.25 or an amount  equal to 120% of the initial bid price
or (ii) an amount equal to 80% of the lowest  volume  weighted  average price of
the Company's common stock for the last five trading days immediately  preceding
the conversion  date. The debenture  matures on April 27, 2007. The Company,  at
its option,  may redeem,  with fifteen days advance written notice, a portion or
all  outstanding  convertible  debenture.  The  redemption  shall be 110% of the
amount redeemed plus accrued interest  remaining for the first six months of the
executed  debenture  and after  that time the  redemption  is 120% of the amount
redeemed plus accrued interest remaining.

     On April 27, 2005, the Company entered into a Securities Purchase Agreement
with Highgate House Funds, Ltd. ("Highgate") pursuant to which the Company is to
receive $750,000 in exchange for two 7% secured convertible debentures amounting
to $750,000  that mature in 2 years,  and the issuance of 150,000  shares of the
Company's  common stock.  The  Securities  Purchase  Agreement  provides for the
execution of funding  under two closings.  The first  closing  occurred upon the
signing  of the  aforementioned  Securities  Purchase  Agreement  and the second
closing  occurred upon the filing of a registration  statement on Form SB-2. The
Company issued the  aforementioned  securities to the investor  pursuant to Rule
506 of Regulation D as promulgated  under the Securities Act of 1933, as amended
(the "Act"), and/or Section 4 (2) of the Act.


                                       33
<PAGE>

     In  addition,  the Company  has  reserved  for  issuance  an  aggregate  of
2,000,000 shares of the Company's common stock,  which may be adjusted from time
to time as agreed upon by the parties, to be issued to the debenture holder upon
conversion  of accrued  interest and  liquidated  damages  into common  stockThe
2,000,000  shares  were  not  required  to be  registered  in  the  registration
statement on Form SB-2. Additionally, in accordance with the Securities Purchase
Agreement,  the Company is required  to maintain in escrow and  registered  five
times the number of shares of common  stock that would be needed to satisfy  the
full  conversion  of all  such  convertible  debentures  outstanding  (currently
6,510,000  shares in reserve)  and to issue  additional  shares as needed if the
number of shares in escrow becomes less than required.

     In accordance  with the use of proceeds,  the funds  received from Highgate
are to be used to:

     o cover our current monthly burn rate during the filing period,
     o hire one to two additional junior sales persons and interns,
     o purchase  related  technology  equipment in order to meet our current and
       potential client requirements,
     o cover our working capital requirements  dedicated to increasing the sales
       and revenues of our Company.
     o cover monthly  payments for our public  relations and investor  relations
       firms and our Washington D.C. lobby group
     o stress testing our software,
     o purchase strategic cold call listings,
     o pay for costs relating to our SEC filing  obligations,  financial audits,
       quarterly reviews and legal expenses incurred during filing period, and
     o cover expenses associated with marketing events,  trade shows, travel and
       entertainment.

     Furthermore,  we are  prohibited  from  using  the  proceeds  to repay  any
indebtedness of any of our insiders.

     The  aforementioned  debentures bear interest at a rate of 7% per annum and
expire 2 years after the date of issuance.  The debentures are convertible  into
shares of our common stock at a conversion price equal to the lesser of (i) 120%
of the average  closing bid price for the 5 trading days  immediately  preceding
the closing date; or (ii) 80% of the lowest  closing bid price for the 5 trading
days immediately preceding the date of conversion.  In addition, the Company has
the right to redeem the  debentures,  at any time prior to its maturity,  upon 3
business day's prior written notice to the holder. The redemption price is equal
to 120% of the face amount redeemed plus accrued interest. In the event that the
Company redeems the debentures  within 180 days after the date of issuance,  the
redemption  price  shall  be 110%  of the  face  amount  redeemed  plus  accrued
interest.

     In addition, we entered into a Security Agreement with Highgate dated as of
April 27, 2005 pursuant to which we granted  Highgate a secured  interest in all
of our assets.  Such secured interest shall be second in priority to the secured
interest  which we granted to Cornell  Capital  Partners,  L.P. on December  20,
2004,  as further  described  below.  The Security  Agreement  contains  certain
negative  covenants  that will remain in effect until our repayment  obligations
pursuant to the convertible  debenture have been  satisfied.  In accordance with
such agreement,  we may not, without  Highgate's  written  consent,  directly or
indirectly:

     o permit to exist any  assignment,  transfer,  pledge,  mortgage,  security
interest  or other lien or  encumbrance  in or against  any part of the  pledged
property,

     o assign,  pledge or in any way  transfer or encumber  Highgate's  right to
receive any income or other distribution from any part of the pledged property,

     o enter  into  any  sale-leaseback  financing  respecting  any  part of the
pledged property,

     o materially change our ownership, executive staff or management, including
Mark L. Kay and Mark Corrao;

     o declare or pay any dividend of any kind,  in cash or in property,  on any
class of our  capital  stock,  or make any  distribution  of any kind in respect
thereof, or


                                       34
<PAGE>

     o make any payments in respect of any pension, profit sharing,  retirement,
stock option, stock bonus,  incentive  compensation or similar plan, without the
prior written consent of Highgate.

     In  addition,  we may not  guarantee  or be liable in any  manner,  whether
directly or  indirectly,  or become  contingently  liable  after the date of the
Security Agreement in connection with the indebtedness of any person, except for
(i) the  indebtedness  currently  secured by the liens identified on the pledged
property and (ii) the  endorsement of negotiable  instruments  payable to us for
deposit or collection in the ordinary course of business.

     Further,  we may not make any loan,  advance or  extension of credit to any
person other than in the normal course of our business,  and create,  incur,  or
assume any additional indebtedness of any description whatsoever in an aggregate
amount in excess of  $25,000  (excluding  trade  accounts  payable  and  accrued
expenses incurred in the ordinary course of business).  In addition, the Company
may continue to accept debt and/or  convertible debt investments from accredited
investors for a maximum total of up to $2,000,000, providing no terms are better
than the Cornell and Highgate convertible debenture terms.

     Additionally,  the Company  issued  unsecured  notes payable during the six
months ended June 30, 2005 in an aggregate  total of $370,000 to three unrelated
parties.

     It is unlikely that we will be able to generate sufficient funds internally
to sustain our  operations  until the fourth quarter 2005. We will seek to raise
additional  funds to continue our  operation.  It is  management's  plan to seek
additional  funding  through the sale of common  stock and the issuance of notes
and debentures, including notes and debentures convertible into common stock. If
we issue  additional  shares of common  stock,  the value of shares of  existing
stockholders is likely to be diluted.

     However, the terms of the secured convertible  debentures issued to certain
of the selling  stockholders  require that we obtain the consent of such selling
stockholders prior to our entering into subsequent  financing  arrangements.  No
assurance can be given that we will be able to obtain additional financing, that
we will be able to obtain additional financing on terms that are favorable to us
or that the holders of the secured  debentures  will  provide  their  consent to
permit us to enter into subsequent financing arrangements.

     Our future  revenues and profits,  if any, will  primarily  depend upon our
ability to secure sales of our suite of network security products.  We do not at
present generate  significant  revenue from the sales of our products.  Although
management  believes that our products area competitive for customers  seeking a
high level of network security, we cannot forecast with any reasonable certainty
whether our products will gain  acceptance in the marketplace and if so by when.
In addition,  we are a reseller and potential  distributor for various  security
and  telecommunications  related  products,  for  which  we  anticipate  minimal
revenues over the next twelve (12) months.

     Except  for the  limitations  imposed  upon us  respective  to the  secured
convertible  debentures of Cornell and Highgate,  there are no material or known
trends that will restrict either short term or long-term liquidity.

Off-Balance Sheet Arrangements

     We do not have  any off  balance  sheet  arrangements  that are  reasonably
likely to have a current or future effect on our financial condition,  revenues,
results of operations, liquidity or capital expenditures.

Going Concern

     We  are  assuming  that  we  will  continue  as  a  going  concern,   which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the  normal  course  of  business.  We have  incurred  net  operating  losses of
approximately  $2,166,437  for the six months ended June 30,  2005,  compared to
$1,569,779  for the six  months  ended  June 30,  2004.  At June 30,  2005,  the
Company's  accumulated  deficit was $6,170,674,  its working capital was $72,531



                                       35
<PAGE>

and  approximately  95% of its assets  consist of prepaid  expenses and deferred
charges.  Additionally,  for the six months ended June 30, 2005, we had negative
cash flows from  operating  activities of  approximately  $1,590,358.  Since our
inception,  we have  incurred  losses,  had an  accumulated  deficit,  and  have
experienced  negative cash flows from operations.  The expansion and development
of  our  business  may  require  additional   capital.   This  condition  raises
substantial  doubt  about  our  ability  to  continue  as a going  concern.  Our
management expects cash flows from operating activities to improve in the fourth
quarter of fiscal 2005, primarily as a result of an increase in sales, and plans
to raise  financing  through  various  methods to achieve  the  business  plans,
although  there  can be no  assurance  thereof.  The  accompanying  consolidated
financial  statements  do not include any  adjustments  that might be  necessary
should we be unable  to  continue  as a going  concern.  If we fail to  generate
positive cash flows or obtain additional financing when required, we may have to
modify, delay or abandon some or all of our business and expansion plans.

Critical Accounting Policies

     In accordance with generally accepted accounting  principles  ("GAAP"),  we
record certain assets at the lower of cost and/or fair value. In determining the
fair value of certain  of our  assets,  we must make  judgments,  estimates  and
assumptions  regarding  circumstances  or trends that could  affect the value of
theses  assets,  such as economic  conditions.  Those  judgments,  estimates and
assumptions are made based on current information  available to us at that time.
Many of those  conditions,  trends and circumstances are outside our control and
if changes were to occur in the events,  trends or other  circumstances on which
our judgments or estimates  were based,  we may be required under GAAP to adjust
those of our earlier  estimates that are affected by those  changes.  Changes in
such  estimates  may require that we reduce the  carrying  value of the affected
assets on our balance sheet (which are commonly  referred to as "write downs" of
the assets involved.

     It is our practice to establish  reserves or allowances to record  downward
adjustments or "write-downs"  in the carrying value of assets,  such as accounts
receivable.  Such  write-downs are recorded as charges to income or increases in
the expense in our  statement of operations in the periods when such reserves or
allowances are established or increased to take account of changed conditions or
events.  As a result,  our  judgments,  estimates and  assumptions  about future
events can and will,  affect not only the amounts at which we record such assets
on our balance sheet, but, also our results of operations.

     In making our  estimates  and  assumptions,  we follow GAAP and  accounting
practices applicable to our business and those that we believe will enable us to
make fair and  consistent  estimates  of the fair value of assets and  establish
adequate reserves or allowances.  Set forth below is a summary of the accounting
policies,  that we believe are  material to an  understanding  of our  financial
condition and results of operations.

     SFAS No. 86,  "Accounting  for the Costs of  Computer  Software to be Sold,
Leased, or Otherwise Marketed," requires  capitalization of software development
costs incurred  subsequent to  establishment  of  technological  feasibility and
prior to the  availability  of the  product for  general  release to  customers.
Systematic  amortization of capitalized costs begins when a product is available
for general release to customers and is computed on a  product-by-product  basis
at a rate  not less  than  straight-line  basis  over  the  product's  remaining
estimated  economic life. To date, all costs have been accounted for as research
and development costs and no software development cost has been capitalized.

     Management  will  evaluate  the net  realizable  value  of  software  costs
capitalized  by  comparing  estimated  future  gross  revenues  reduced  by  the
estimated future costs of completing, disposing of and maintaining the software.
These  costs also  include  the costs of  performing  maintenance  and  customer
support required by us.

Revenue Recognition

     Sales  transactions  are recorded  automatically  and posted to the general
ledger  from the invoice  produced  when  shipment of the product is  completed.
Invoices and sales returns are  reconciled  monthly.  Each customer  completes a
credit  application  and a credit check is completed  before  credit is granted.
Credit terms vary between thirty (30) and forty five (45) days and are dependent
on the size of the customer and the agreement with the individual customer.  The
sales transaction is recorded when the product is delivered to the customer.


                                       36
<PAGE>

     We recognize  revenue from the sales of software  licenses when  persuasive
evidence of an arrangement  exists,  the product has been delivered,  the fee is
fixed and determinable and collection of the resulting  receivable is reasonably
assured.  Delivery  generally  occurs when the product is  delivered to a common
carrier.

     We  assess  collection  based  on  a  number  of  factors,  including  past
transaction history with the customer and the  creditworthiness of the customer.
We do not request collateral from our customers. If we determine that collection
of a fee is not reasonably  assured,  we defer the fee and recognize  revenue at
the time  collection  becomes  reasonably  assured,  which is generally upon the
receipt of cash.

     For  technology   arrangements  with  multiple  obligations  (for  example,
undelivered  software,  maintenance  and support),  we allocate  revenue to each
component of the  arrangement  using the residual value method based on the fair
value or the fixed agreement of the undelivered elements.  Accordingly, we defer
technology  revenue  in the  amount  equivalent  to the fair  value or the fixed
agreement of the undelivered elements.

     We recognize  revenue for  maintenance  services  ratably over the contract
term.  Our  training and  consulting  services are billed at hourly rates and we
generally  recognize  revenue as these  services are  performed.  However,  upon
execution of a contract,  we determine  whether any services included within the
arrangement  require  us  to  perform  significant  work  either  to  alter  the
underlying  software  or to  build  additional  complex  interfaces  so that the
software  performs as the customer  requests.  If these services are included as
part of an arrangement,  we recognize the fee using the percentage of completion
method. We determine the percentage of completion based on our estimate of costs
incurred to date compared with the total costs budgeted to complete the project.

Impairment of Intangible Assets

     We  operate  in  an  industry  that  is  rapidly   evolving  and  extremely
competitive.  It is  reasonably  possible  that our  accounting  estimates  with
respect to the useful life and ultimate  recoverability of our carrying basis of
intangible  assets  could  change in the near  term and that the  effect of such
changes on the  financial  statements  could be  material.  In  accordance  with
Statement  of  Financial  Accounting  Standards  No.  142,  "Goodwill  and Other
Intangible  Assets",  we  complete  a  test  for  impairment  of  certain  other
intangible  assets  annually and  whenever  events or  circumstances  indicate a
potential impairment.

Stock Based Transactions

     We have concluded various  transactions  where we paid the consideration in
shares of our common stock and/or  warrants or options to purchase shares of our
common stock. These transactions include:

     - Acquiring  the services of various  professionals  who provided us with a
range of  corporate  consultancy  services,  including  developing  business and
financial models, financial advisory services,  strategic planning,  development
of  business  plans,  investor  presentations  and  advice and  assistance  with
investment funding;

     - Retaining  the services of our Advisory  Board to promote the business of
the Company;

     - Settlement of our indebtedness; and

     - Providing  incentives to attract,  retain and motivate  employees who are
important to our success.

     When our stock is used in  transactions,  the  transactions  are  generally
valued  using the price of the shares being  transferred  at the time the shares
are issued for the services provided. If the value of the asset or service being
acquired is available and is believed to fairly  represent its market value, the
transaction is valued using the value of the asset or service being provided.

     When  options or warrants to  purchase  our stock are used in  transactions
with third parties, the transaction is valued using the Black-Scholes  valuation
method.  The  Black-Scholes  valuation  method is widely  used and  accepted  as
providing  the fair market value of an option or warrant to purchase  stock at a
fixed  price  for a  specified  period  of  time.  Black-Scholes  uses  five (5)
variables to establish market value of stock options or warrants:


                                       37
<PAGE>

     - strike price (the price to be paid for a share of our stock);
     - price of our stock on the day options or warrants are granted;
     - number of days that the options or warrants can be exercised  before they
       expire;
     - trading volatility of our stock; and
     - annual interest rate on the day the option or warrant is granted.

     The  determination of expected  volatility  requires  management to make an
estimate and the actual  volatility may vary  significantly  from that estimate.
Accordingly, the determination of the resulting expense is based on a management
estimate. To date the Company's volatility has not fluctuated  significantly but
may in the future once there is a public market.

     When options or warrants to purchase our stock are used as  incentives  for
employees,  officers  or  directors,  we  use  the  intrinsic  value  method  in
accordance  with  the  recognition  and  measurement  principles  of  Accounting
Principles  Board Opinion No. 25 "Accounting for Stock Issued to Employees",  as
permitted by Statement of  Financial  Accounting  Standards  "SFAS" No. 123. The
intrinsic  value  method  calculates  the value of the  option or warrant at the
difference  between  the strike  price and the price of the stock on the day the
option or warrant is granted, except that such value is zero if the strike price
is higher than the price of the stock.

     If the Company determined  compensation  expense based on the fair value at
the dates for those  awards  consistent  with the method of SFAS No. 123 and not
the intrinsic value method,  the effect on the historical  financial  statements
for the periods presented would be as follows:


-------------------- --------------------- ----------------- -------------------
        Period        Loss as Originally     Additional        Adjusted Loss For
                         Reported           Employee             The Period
                                            Compensation
                                              Expense
-------------------- --------------------- ----------------- -------------------
Year Ended December  $            800,717  $        120,311  $          921,028
31, 2003
-------------------- --------------------- ----------------- -------------------
Year Ended December             2,993,529           163,985           3,157,514
31, 2004
-------------------- --------------------- ----------------- -------------------
Six Months Ended June           1,569,779            80,643           1,650,422
30, 2004
-------------------- --------------------- ----------------- -------------------
Six Months Ended June           2,166,437            85,335           2,251,772
30, 2005
-------------------- --------------------- ----------------- -------------------

     Additionally,  the  effect  on  shareholders'  equity  would  have  been  a
reduction from $1,625,220 to $1,539,885 at June 30, 2005.

     When  the  Company  offers  incentives  to  it's  employees,   officers  or
directors,  through the issuance of options or warrants,  the Company calculates
the fair value of the  instruments  at the time of the  negotiations  as part of
it's evaluation of the compensation  package offered to the parties. At the time
the fair value of the  instruments  is evaluated all variables used to establish
fair value are also re-evaluated.

     When the  instruments  are provided for past services or are provided fully
vested and are not subject to return,  the shares are valued at the market price
at the time the  instrument  is delivered.  When the  instrument is provided for
future  services,  the  expense  is  based  on  the  fair  market  value  of the
instruments when the services are provided.

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<PAGE>

     Once the  transaction  value is determined,  GAAP requires us to record the
transaction value as an expense or asset as determined by the transaction and to
record an increase in our paid in capital.

Recent Accounting Pronouncements

     In December  2004,  the FASB  revised  Statement  of  Financial  Accounting
Standards  No. 123  Accounting  for  Stock-Based  Compensation.  This  statement
supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and the
related  implementation  guidance.  This statement establishes standards for the
accounting for transactions in which an entity exchanges its equity  instruments
for goods and services. It also addresses transactions in which an entity incurs
liabilities  in exchange for goods and services that are based on the fair value
of the  entity's  equity  instruments  or that may be settled by the issuance of
those equity  instruments.  This statement  focuses  primarily on accounting for
transactions in which an entity obtains employee services in share-based payment
transactions.  For public  entities  that are not small  business  issuers,  the
implementation  of this  statement is required as of the  beginning of the first
interim or annual reporting period after June 15, 2005. For public entities that
are small business issuers,  like us, the  implementation of this statement,  is
required as of the  beginning of the first  interim or annual  reporting  period
after  December 15, 2005.  Management  is required to implement  its  statements
beginning in the fiscal year January 1, 2006 and they are  currently  evaluating
the impact of implementation of this statement on us.

Item 3.  Controls and Procedures.

     As of the  end of the  period  covered  by this  report,  we  conducted  an
evaluation,  under  the  supervision  and with the  participation  of our  chief
executive  officer and chief  financial  officer of our disclosure  controls and
procedures  (as defined in Rule  13a-15(e)  and Rule  15d-15(e)  of the Exchange
Act).  Based  upon  this  evaluation,  our  chief  executive  officer  and chief
financial  officer  concluded  that our  disclosure  controls and procedures are
effective  to ensure  that  information  required to be  disclosed  by us in the
reports that we file or submit  under the  Exchange Act is recorded,  processed,
summarized and reported,  within the time periods  specified in the Commission's
rules  and  forms.  There was no change  in our  internal  controls  or in other
factors that could affect these controls during our last fiscal quarter that has
materially affected,  or is reasonably likely to materially affect, our internal
control over financial reporting.

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<PAGE>

                                     PART II

Item 1.  Legal Proceedings.

     The  Company  is not  currently  a  party  to,  nor is any of its  property
currently  the subject of, any pending legal  proceeding.  None of the Company's
directors,  officers or  affiliates  is involved in a proceeding  adverse to the
Company's business or has a material interest adverse to the Company's business.

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

     On April 27, 2005,  we entered into a Securities  Purchase  Agreement  with
Highgate House Funds,  Ltd.  ("Highgate")  pursuant to which we sold a principal
amount  $750,000 7% secured  convertible  debentures,  and 150,000 shares of our
common stock,  par value $.0001 per share.  The secured  debentures  bear simple
interest  at a rate of 7% per  annum  and  expire  2  years  after  the  date of
issuance. The secured debentures are convertible into shares of our common stock
at a conversion price equal to the lesser of (i) 120% of the average closing bid
price for the 5 trading days immediately preceding the closing date; or (ii) 80%
of the lowest closing bid price for the 5 trading days immediately preceding the
date of  conversion.  In  addition,  we have the  right to  redeem  the  secured
debentures,  at any time  prior to its  maturity,  upon 3  business  days  prior
written notice to the holder. In the event that we redeem the secured debentures
within 180 days after the date of issuance,  the redemption  price shall be 110%
of the remaining balance of the secured debentures plus accrued interest.  After
180 days the secured debentures may be redeemed at 120% of the remaining balance
of the secured debentures plus accrued interest.

     * All of the above  offerings and sales were deemed to be exempt under rule
506 of Regulation D and Section 4(2) of the  Securities Act of 1933, as amended.
No advertising or general  solicitation was employed in offering the securities.
The  offerings and sales were made to a limited  number of persons,  all of whom
were  accredited  investors,  business  associates of  StrikeForce  or executive
officers  of  StrikeForce,   and  transfer  was  restricted  by  StrikeForce  in
accordance  with the  requirements of the Securities Act of 1933. In addition to
representations  by the  above-referenced  persons,  we  have  made  independent
determinations  that all of the  above-referenced  persons  were  accredited  or
sophisticated  investors, and that they were capable of analyzing the merits and
risks of their  investment,  and that they understood the speculative  nature of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.

Item 3.  Defaults Upon Senior Securities.

     Not applicable.

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

     Not applicable.

Item 5.  Other Information.

     None.

Item 6.  Exhibits.

Exhibit
Number                                   Description
--------------------------------------------------------------------------------
3.1         Amended and Restated  Certificate  of  Incorporation  of StrikeForce
            Technologies, Inc. (1)
3.2         By-laws of StrikeForce Technologies, Inc. (1)
10.1        2004 Stock Option Plan. (1)
10.2        Securities  Purchase Agreement dated December 20, 2004, by and among
            StrikeForce Technologies, Inc. and Cornell Capital Partners, LP. (1)
10.3        Secured Convertible Debenture with Cornell Capital Partners, LP. (1)
10.4        Investor  Registration  Rights Agreement dated December 20, 2004, by
            and between  StrikeForce  Technologies,  Inc.  and  Cornell  Capital
            Partners,  LP in connection with the Securities  Purchase Agreement.
            (2)


                                       40
<PAGE>

10.5        Escrow   Agreement,   dated   December  20,  2004,  by  and  between
            StrikeForce  Technologies,  Inc. and Cornell Capital Partners, LP in
            connection with the Securities Purchase Agreement. (2)
10.6        Security   Agreement   dated  December  20,  2004,  by  and  between
            StrikeForce  Technologies,  Inc. and Cornell Capital Partners, LP in
            connection with the Securities Purchase Agreement. (1)
10.7        Secured  Convertible  Debenture with Cornell  Capital  Partners,  LP
            dated January 18, 2005. (1)
10.8        Asset Purchase Agreement with NetLabs.com, Inc. and Amendments. (1)
10.9        Employment  Agreement  dated  as of May  20,  2003,  by and  between
            StrikeForce Technologies, Inc. and Mark L. Kay. (1)
10.10       Amended and  Restated  Secured  Convertible  Debenture  with Cornell
            Capital Partners, LP dated April 27, 2005. (1)
10.11       Amendment  and Consent  dated as of April 27,  2005,  by and between
            StrikeForce Technologies, Inc. and Cornell Capital Partners, LP. (1)
10.12       Securities  Purchase  Agreement  dated as of April  27,  2005 by and
            between  StrikeForce  Technologies,  Inc. and Highgate  House Funds,
            Ltd. (1)
10.13       Investor Registration Rights Agreement dated as of April 27, 2005 by
            and between StrikeForce Technologies, Inc. and Highgate House Funds,
            Ltd. (2)
10.14       Secured Convertible  Debenture with Highgate House Funds, Ltd. dated
            April 27, 2005. (2)
10.15       Escrow  Agreement  dated  as  of  April  27,  2005  by  and  between
            StrikeForce  Technologies,  Inc.,  Highgate  House  Funds,  Ltd. and
            Gottbetter & Partners, LLP. (1)
10.16       Escrow  Shares  Escrow  Agreement  dated as of April 27, 2005 by and
            between StrikeForce  Technologies,  Inc., Highgate House Funds, Ltd.
            and Gottbetter & Partners, LLP. (1)
10.17       Security  Agreement  dated  as of  April  27,  2005  by and  between
            StrikeForce Technologies, Inc. and Highgate House Funds, Ltd. (1)
10.18       Network  Service  Agreement  with Panasonic  Management  Information
            Technology Service Company dated August 1, 2003 (and amendment). (1)
10.19       Client Non-Disclosure Agreement. (1)
10.20       Employee Non-Disclosure Agreement. (1)
10.21       Secured Convertible  Debenture with Highgate House Funds, Ltd. dated
            May 6, 2005. (2)
10.22       Termination  Agreement  with  Cornell  Capital  Partners,  LP  dated
            February 19, 2005. (1)
31.1        Exchange   Act,   promulgated   pursuant   to  Section  302  of  the
            Sarbanes-Oxley Act of 2002. (3)
31.2        Certification by Chief Financial Officer, required by Rule 13a-14(a)
            or Rule  15d-14(a)  of the  Exchange  Act,  promulgated  pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002. (3)
32.1        Certification by Chief Executive Officer, required by Rule 13a-14(b)
            or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63
            of Title 18 of the  United  States  Code,  promulgated  pursuant  to
            Section 906 of the Sarbanes-Oxley Act of 2002. (3)
32.2        Certification by Chief Financial Officer, required by Rule 13a-14(b)
            or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63
            of Title 18 of the  United  States  Code,  promulgated  pursuant  to
            Section 906 of the Sarbanes-Oxley Act of 2002. (3)


(1) Filed as an exhibit to the  Registrant's  Form SB-2 dated as of May 11, 2005
and incorporated herein by reference.

(2) Filed as an exhibit to the  Registrant's  Amendment No. 1 to Form SB-2 dated
as of June 27, 2005 and incorporated herein by reference.

(3) Filed herewith.



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<PAGE>

                                   SIGNATURES

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

                                       STRIKEFORCE TECHNOLOGIES, INC.


Dated:   August 19, 2005               By: /s/ Mark L. Kay
                                       ---------------------
                                       Mark L. Kay
                                       Chief Executive Officer


Dated:   August 19, 2005               By: /s/ Mark Joseph Corrao
                                       ---------------------------
                                       Mark Joseph Corrao
                                       Chief Financial Officer and
                                       Principal Accounting Officer



                                       42