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

FORM 10-QSB

ý QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2005

Commission file Number: 0-32355

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

Nevada
(State or other jurisdiction of incorporation or organization)

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

Unit A
149 South Reeves Drive
Beverly Hills, California
90212
(Address of principal executive offices)
(310) 248-4860
(Issuer's telephone number)

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 333,498,160 common shares as at June 30, 2005

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

CYOP SYSTEMS INTERNATIONAL INCORORATED

INDEX

PART 1.	FINANCIAL INFORMATION		3.
	Item 1.	Financial Statements	3.
		Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004	4.
		Consolidated Statements of Changes in Stockholders' Equity for the six months ended June 30, 2005	5.
		Consolidated Statements of Operations for the six and three months ended June 30, 2005 and 2004	6.
		Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004	7.
		Notes to the Consolidated Financial Statements	8.
	Item 2.	Management Discussion and Analysis	22.
	Item 3.	Controls and Procedures	29.
PART II.	OTHER INFORMATION		30.
	Item 1.	Legal Proceedings	30.
	Item 2.	Changes in Securities	30.
	Item 3.	Defaults Upon Senior Securities	30.
	Item 4.	Submission of Matters to a Vote of Security Holders	30.
	Item 5.	Other Information	30.
	Item 6.	Exhibits and Reports on Form 8K	30.
	SIGNATURES		30.

2

CYOP SYSTEMS INTERNATIONAL
INCORPORATED

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

June 30, 2005

Index

Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004

Consolidated Statements of Operations for the six and three months ended June 30, 2005 and 2004

Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004

Consolidated Statement of Changes in Stockholders' Equity for the six months ended June 30, 2005

Notes to the Consolidated Financial Statements

3

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

		June 30,2005			December, 31, 2004
ASSETS
Current
Cash and cash equivalents	$	22,843		$	7,337
Accounts receivable		140,507			50,058
Prepaid expenses and deposit		18,954			2,440
Total current assets		182,304			59,835
Fixed assets, net		84,835			54,568
Investment in equity – method investee		1,637,446			1,668,285
Intangible assets, net		43,375			57,833
Total assets	$	1,947,960		$	1,840,521
LIABILITIES
Current
Demand loans related party	$	1,337,946		$	1,289,620
Accounts payable and accrued liabilities		262,304			288,785
Convertible debenture		-			70,000
Player funds on deposit		45,024			44,158
Short-term loan		212,725			212,725
Promissory note		140,000			100,000
Total current liabilities		1,997,999			2,005,288
Deferred revenue		2,173,449			2,173,822
Total Liabilities		4,171,448			4,179,110
Nature and continuance of operations
STOCKHOLDERS' DEFICIENCY
Share capital
Authorized:
500,000,000 shares of common stock with a par value
of $0.00002 per share
Issued, allotted and outstanding:
333,429,702 shares of common stock (2004 - 181,103,355)		6,669			3,623
Additional paid-in capital		2,605,103			1,062,970
Deficit accumulated		(4,835,260	)		(3,405,182	)
Total stockholders' deficiency		(2,223,488	)		(2,338,589	)
Total liabilities and stockholders' deficiency	$	1,947,960		$	1,840,521

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

4

CYOP SYSTEMS INTERNATIONAL INCORPORATED

Consolidated Statements of Stockholders' Deficiency
Six Months ended June 30, 2005
(Unaudited) Page 1of 1

(Expressed in U.S. Dollars)
										Total
					Additional					Stock-
	Common stock				paid-in		Deficit			Holders'
	Shares		Amount		Capital		accumulated			(deficiency)
Balance, December 31, 2004	181,103,355		3,623		1,062,970		(3,405,182	)		(2,338,589	)
Common Stock issued for cash	107,326,347		2,146		760,033					762,179
Common Stock issued for services	45,000,000		900		782,100					783,000
Net loss for the period							(1,430,078	)		(1,430,078	)
Balance, June 30, 2005	333,429,702	$	6,669	$	2,605,103	$	(4,835,260	)	$	(2,223,488	)

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

5

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Consolidated Statements of Operations
(Unaudited)

(Expressed in U.S. Dollars)
	For the Three Months Ended				For the Six Months
	June 30				Ended June 30
	2005		2004		2005		2004
Revenues
Service fees	1,876		2,785		4,309		10,122
Sale – Crediplay – related party (Note 6)	238		1,540		373		5,600
Banking fees	249		79		351		272
Total Revenues	2,363		4,404		5,033		15,994
Cost of sales	(28,330	)	(49,564	)	(36,405	)	(62,678	)
Gross profit (loss)	(25,967	)	(45,160	)	(31,372	)	(46,684	)
Sales and Marketing expenses	-		(5,050	)	(56,460	)	-
Consultants fees	(126,500	)	(113,072	)	(1,003,232	)	(201,072	)
Corporate finance fees	(849	)	-		(142,156	)	(262,500	)
General and admin fees	(42,553	)	(70,809	)	(112,957	)	(153,774	)
Operating Loss	(195,869	)	(234,091	)	(1,346,177	)	(664,030	)
Other income (loss)
Interest income related party			25,413		-		53,364
Interest expense	(19,720	)	(23,002	)	(53,062	)	(47,441	)
Equity in losses of equity-method investee	(15,880	)	-		(30,839	)	-
							-
Net loss for the period	(231,469	)	(231,680	)	(1,430,078	)	(658,107	)
Loss per share – basic and diluted
Loss from operations	(0.001	)	(0.00	)	(0.005	)	(0.000	)
Net loss	(0.001	)	(0.00	)	(0.005	)	(0.000	)
Weighted average number of
common shares outstanding	326,236,871		150,998,160		282,055,526		150,998,160
The accompanying notes are an integral part of these financial statements.

6

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Consolidated Statements of Cash Flows
(Unaudited)

(Expressed in U.S. Dollars)
	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2005			2004			2005			2004
Cash flows from (used in) operating activities
Net loss for the period		(231,469	)		(231,680	)		(1,430,078	)		(658,107	)
Adjustments to reconcile net loss to net cash
Used in operating activities:
- amortization of intangible assets		7,229			7,229			14,458			14,458
- depreciation of fixed assets		5,020			4,813			8,847			9,999
- imputed interest on related party loan		-			23,002			-			47,441
- share issuance for services		-			-			899,307			258,490
- investment in equity interest		15,881			-			30,839			-
- accredited to convertible debenture		-			1,284			-			2,568
Changes in assets and liabilities:		-			-			-
- accounts receivable		(140,271	)		(98	)		(90,450	)		(98	)
- interest receivable		-			(17,055	)		-			(32,094	)
- note receivable related party		-			(5,574	)		-			(11,148	)
- prepaid expenses		(16,512	)		(2,500	)		(16,512	)		-
- accounts payable and accrued liabilities		1,475			30,260			(26,481	)		(1,389	)
- player funds on deposit		685			710			865			(7,540	)
- deferred revenue		238			(1,540	)		373			(5,600	)
		(357,724	)		(191,149	)		(608,832	)		(383,020	)
Cash flows from (used in) investing activities
Increase in due from a director		48,205			153,811			48,326			220,151
Purchase of fixed assets		(39,115	)		-			(39,115	)		-
		9,090			153,811			9,211			220,151
Cash flows from financing activities
Shares issued		69,800			-			454,800			-
Proceeds from promissory note		140,000			50,000			200,000			50,000
Proceeds from convertible debenture		-			-			(70,000	)		125,000
		209,800			50,000			584,800			175,000
Foreign exchange gain (loss) on cash held in		18,212			-			30,327			-
foreign currency
Increase (decrease) in cash and cash equivalents		(120,622	)		12,662			15,506			12,131
Cash, beginning of period		143,465			8,526			7,337			9,057
Cash (deficiency), end of period	$	22,843		$	21,188		$	22,843		$	21,188
Cash represented by:
Cash on hand	$	19,000		$	21,188		$	19,000		$	21,188
Cash with processors		3,843						3,843
	$	22,843		$	21,188		$	22,843		$	21,188
The accompanying notes are an integral part of these financial statements.

SUPPLEMENTAL CASH FLOW INFORMATION

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

7

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

1.	Nature and Continuance of Operations
	The Company was incorporated on October 29, 1999 in as Triple 8 Development Corporation under the laws of the State of Nevada to engage in any lawful business or activity for which corporations may be organized under the laws of the State of Nevada. The Company changed its name to CYOP Systems International Incorporated on October 30, 2000. On November 3, 2000, the Company acquired 100% of the issued and outstanding shares of CYOP Systems Inc., Barbados (“CYOP Barbados”). This transaction was accounted for as a reverse acquisition and a recapitalization.
	CYOP Barbados was incorporated under the laws of Barbados on June 20, 2000. On August 31, 2000, CYOP Barbados acquired 100% of the issued and outstanding shares of Moshpit Entertainment Inc., Canada (“Moshpit”), a company incorporated under the laws British Columbia, Canada. CYOP Barbados sold 100% of the issued and outstanding shares of Moshpit by an agreement dated April 1, 2002 to a former stockholder and the sole director. On April 29, 2005 the Company incorporated Red Felt Software under the laws of the United Kingdom.
	The Company, and its subsidiaries, is a provider of multimedia transactional technology solutions and services for the entertainment industry. The Company’s range of products and services include financial transaction platforms for on-line video games and integrated e-commerce transaction technology for on-line merchants. These services are considered as one segment only based on internal organizational structure.
	These consolidated financial statements have been prepared using the generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has suffered recurring losses from operations and has a net capital deficiency. The ability of the Company to continue as a going concern is dependent upon many factors, including the ability of the Company to obtain financing to fund working capital requirements, the degree of competition encountered by the Company, technology risks, government regulation and general economic conditions. The Management’s plan in this regard is to raise equity financing as required and keep abreast with the multimedia technology. These consolidated financial statements do not include any adjustments that might result from this uncertainty.
2.	Significant Accounting Policies
	(a)	Basis of Consolidation
		These consolidated financial statements, prepared in accordance with accounting principles generally accepted in the United States of America, include the accounts of the Company and its wholly owned subsidiary CYOP Barbados and Red Felt Software, LTD. Significant inter- company accounts and transactions have been eliminated.

8

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

2.	Significant Accounting Policies (continued)
	(b)	Accounting Estimates
		The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Actual results may differ from those estimates.
	(c)	Cash Equivalents
		For purposes of the statement of cash flows cash equivalents usually consist of highly liquid investments which are readily convertible into cash with maturity of three months or less when purchased.
	(d)	Equity Investments
		The Company has certain investment in equity securities. These investments are accounted for using the equity method of accounting if the investment gives the Company the ability to exercise significant influence, but not control, over an investee. Significant influence is deemed to exist if the Company has an ownership interest in the voting stock of the investee of between 20% and 50%, although other factors, such as representation on the investee’s Board of Directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. The Company records its investment in equity-method investees on the consolidated balance sheet as “Investments in equity-method investees” and its share of the investees’ earnings or losses as “Equity in losses of equity-method investees”.
	(e)	Fixed Assets
		Fixed assets are recorded at historical cost. Depreciation is charged to earnings in amounts sufficient to allocate the costs over their estimated useful lives, as follows:

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

9

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

2.	Significant Accounting Policies (continued)
	(f)	Revenue recognition
		The Company derives revenue from providing services on software development and online internet transaction platform maintenance. Service revenues are recognized when services have been performed and delivered in accordance with service agreements, the Company has no significant remaining performance requirements, there are no material uncertainties regarding customer acceptance and collection of the resulting receivable is deemed probable.
	(g)	Software Development Costs
		Software development costs incurred prior to the establishment of technological feasibility are charged to expenses as incurred
	(h)	Advertising and Promotion
		The Company expenses advertising and promotion costs as incurred. Total advertising and promotion costs charged to expenses for the period ended June 30, 2005 amounted to $56,460 (not classified as a separate item) and (2004 - $0.00).
	(i)	Foreign Currency Transactions
		The Company, CYOP Barbados and Red Felt Software Ltd., maintain their accounting records in the reporting currency. Foreign currency transactions are translated into their reporting currency in the following manner. At the transaction date, each asset, liability, revenue and expense is translated into the reporting currency by the use of the exchange rate in effect at that date. The resulting foreign exchange gains and losses are included in operations. The Company does not have any assets or liabilities in foreign countries or foreign denominations that would create translation income or losses under other comprehensive income.
	(j)	Income Taxes
		The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires the Company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns using the liability method. Under this method, deferred tax liabilities and assets are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The effect on deferred income tax assets and liabilities of a change in income tax rates is included in the period that includes the enactment date.

10

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

2.	Significant Accounting Policies (continued)
	(k)	Long-Lived Assets Impairment
		Effective January 1, 2002, certain long-term assets of the Company are reviewed when changes in circumstances require consideration as to whether their carrying value has become impaired pursuant to guidance established in Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. If impairment is deemed to exist, the assets will be written down to fair value. Prior to January 1, 2002, the Company evaluated long-term assets of the Company in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. The adoption of SFAS No. 144 did not have a material effect on the consolidated financial statements
	(l)	Financial Instruments and Concentration of Risks
		Fair value of financial instruments are made at a specific point in time, based on relevant information about financial markets and specific financial instruments. As these estimates are subjective in nature, involving uncertainties and matters of significant judgement, they cannot be determined with precision. Changes in assumptions can significantly affect estimated fair values.
		The carrying value of cash and cash equivalents, interest receivable, note receivable, demand loans, accounts payable and accrued liabilities, player funds on deposit and short-term loans approximate their fair values because of the short-term maturity of these instruments.
		Financial instruments that potentially subject the Company to concentration of credit risk consist of interest receivable and note receivable, the balances of which are stated on the balance sheet. The Company performs ongoing credit evaluations of its debtors and maintains allowances for possible losses with, when realized, have been within the range of management’s expectations. The Company places its cash in high credit quality financial institutions. The Company does not require collateral or other security to support financial instruments subject to credit risk.
	(m)	Accounting for Derivative Instruments and Hedging Activities
		The Financial Accounting Standards Board (“FASB”) issued SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the

11

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

2.	Significant Accounting Policies (continued)
		hedged asset or liability that are attributable to the hedged risk or (ii) the designated as a hedging instrument, the gain or loss is recognized in income in the period of change. As at June 30, 2005, the Company has not entered into any derivative contracts either to hedge existing risks or for speculative purposes.
	(n)	Net Income (Loss) Per Share
		Basic net income (loss) per share are computed using the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share incorporates the incremental shares issuable upon the assumed exercise of stock options and other dilutive securities.
	(o)	Stock-based Compensation
		The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-based Compensation". SFAS 123 encourages, but does not require, companies to adopt a fair value based method for determining expense related to stock-based compensation. The Company accounts for stock-based compensation issued to employees and directors using the intrinsic value method as prescribed under Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees” and related interpretations.
	(p)	Goodwill and Other Intangible assets
		Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. This statement requires that intangible assets with an indefinite life are not amortized. Intangible assets with a definite life are amortized over its useful life or estimated of its useful life. Indefinite life intangible assets will be tested for impairment annually, and will be tested for impairment between annual tests if any events occur or circumstances change that would indicate that the carrying amount may be impaired. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that a carrying amount of an asset (asset group) may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated non- discounted cash flows used in determining the fair value of the assets. The amount of the impairment loss to be recorded is calculated by the excess of the assets carrying value over its fair value.

12

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

2.	Significant Accounting Policies (continued)
	(q)	New Accounting Pronouncements
		In January 2003, the Financial Accounting Standard Board issued FASB Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities – An Interpretation of Accounting Research Bulletin (ARB) No. 51. This interpretation addressed the requirements for business enterprises to consolidate related entities in which they are determined to be the primary economic beneficiary as a result of their variable economic interest. The interpretation is intended to provide guidance in judging multiple economic interests in an entity and in determining the primary beneficiary. The interpretation outlines disclosure requirements for VIEs in existence prior to January 31, 2003, outlines consolidation requirements for VIEs created after January 31, 2003. The company has reviewed its major commercial relationship and its overall economic interests with other companies consisting of related parties, vendors, loan creditors and other suppliers to determine the extent of its variable economic interest in these parties. The review has not resulted in a determination that the Company would be judged to be the primary economic beneficiary in any material relationships, or that any material entities would be judged to be Variable Interest Entities of the Company.
		In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, "Accounting for Derivative
		Instruments and Hedging Activities". This Statement is effective for contracts entered into or modified after June 30, 2003. We do not expect the implementation of SFAS No. 149 to have a material impact on our consolidated financial statements.
		In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity". This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This Statement is effective for financial instruments entered into or modified after May 30, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We do not expect the implementation of SFAS No. 150 to have a material impact on our consolidated financial statements.

13

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

2.	Significant Accounting Policies (continued)
		In December 2004, The Financial Accounting Standards Board issued Statement of Financial Accounting Standard number 123r, “ Share Based Payments” (“SFAS 123r”) which superseded SFAS 123 and APB No. 25. This statement eliminates the use of the intrinsic method as previously allowed under APB 25 and is effective for small issuers for years ending after December 15, 2005. The Company does not expect adoption of this statement to have an impact on their operations.
		In December 2004, The Financial Accounting Standards Board issued Statement of Financial Accounting Standard number 153 “Exchanges of Non Monetary Assets – An Amendment of APB No 29”. This statement removed the exemption in APB 29 to the use of the fair value method in certain transactions and is effective for years beginning after June 15, 2005. The Company does not expect the adoption of this statement to have an impact on their operations.
3.	Investment in equity method investee
	At December 31, 2004, The Company’s equity-method investee approximate ownership interest consisted of a 19.99% interest based on the outstanding shares of Gaming Transactions, Inc. (OTC:GGTS). The Company has the ability to significantly influence GGTS. Summarized Balance Sheet and Operations information is as follows:
	The Company acquired the investment in December 2004 and valued the investment at $1,674,973. During the month of December 2004 the Company recorded a $6,688 loss based on the proportionate share of the investee’s loss which resulted in a reduction in the carrying amount to $1,668,285 at December 31, 2004. During the period January 1, 2005 to June 30, 2005 the Company recorded a further loss of $30,838 reducing the carrying value to $1,637,446.

14

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

4.	Fixed assets
		June 30, 2005
					Accumulated		Net book
			Cost		depreciation		Value
	Audio and visual equipment	$	21,558	$	14,241	$	7,317
	Computer hardware		135,979		60,731		75,248
	Computer software		3,088		3,088		-
	Office furniture and equipment		9,227		6,957		2,270
	Total	$	169,852	$	85,017	$	84,835
		December 31, 2004
					Accumulated		Net book
			Cost		depreciation		Value
	Audio and visual equipment	$	21,558	$	13,450	$	8,108
	Computer hardware		96,864		52,920		43,944
	Computer software		3,088		3,088		-
	Office furniture and equipment		9,227		6,711		2,516
	Total	$	130,737	$	76,169	$	54,568
	For the six months ended June 30, 2005, depreciation expenses charged to cost of service, software development costs and general and administrative expenses were $5,020 (2004 - $3,827).

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

15

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

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

		2005			2004
Balance, beginning of year	$	57,833		$	86,749
Accumulated amortization		( 14,458	)		(28,916	)
Balance, end of period	$	43,375		$	57,833

6.	Loans
	(a)	Demand Loans Related Party

			June 30		December 31
			2005		2004
i. Interest bearing and unsecured at 5% per annum:
	- Andrea Carley – an officer	$	50,561	$	25,156
	- Mitch White – a director and stockholder		1,067,357		1,054,726
	- Gordon Samson – a director		87,876		104,457
	- Patrick Smyth – a director		87,527		60,656
Total		$	1,293,321	$	1,244,995

(b) Short term Loan

			June 30		December 31
i. Non-Interest bearing and unsecured			2005		2004
	- Jack Carley – related to a director and stockholder	$	44,625	$	44,625
Total		$	44,625	$	44,625

(c) Short-term Loan Related Party

			June 30,		December 31
			2005		2003
i. Interest at 10% per annum:
	- RedRuth Ventures		212,725		212,725
Total		$	212,725	$	212,725

16

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

(d)	Convertible debenture
	In connection with the standby equity distribution agreement as filed on March 1, 2004, the Company issued in January 2004 to the Investor $125,000 of convertible debentures that are convertible into shares of common stock at a discounted market price. The convertible debentures are secured by all of Company’s assets, interest bearing at 5% per annum and matured two years from the date of issuance. The Company has the right to redeem the debenture upon 30 days notice for 120% of the amount plus accrued interest. Upon such redemption, the Company will issue the investor a warrant to purchase 50,000 shares of common stock at an exercise price of $0.036 per share for every $100,000 of debentures that were redeemed.
	Upon the issuance of the notes, the net proceeds ($125,000) received were allocated between the liability and equity components of the notes. .
	The outstanding amount as at June 30, 2005 is $0.00
(e)	Promissory Notes
	On April 8, 2004 the Company executed a Promissory Note (the “Note”) with the Holder, Cornell Capital Partners, LP for $50,000.00. The Note is secured pursuant to the prior Security Agreement dated January 28, 2004 between the Holder and the Company. The Holder is entitled to interest at the rate of twenty four percent (24%) per annum or the highest permitted by applicable law, if lower.
	On December 13, 2004 the Company executed a Promissory Note (2) (the “Note 2”) with the Holder, Cornell Capital Partners, LP for $50,000. An issuance of 50,000,000 common shares was also completed at that time in security. The Holder is entitled to interest at the rate of twelve per cent (12%) per annum.
	Both notes (the “Note”) and (the “Note 2”) were retired as at March 31, 2005. During the period new notes (the “Note 3”) for $125,000 and (the “Note 4”) for $250,000 were executed and funds advanced from Cornell Capital, LP. Both notes (Note 3 and Note 4) were also retired as at June 30, 2005.
	On May 4, 2005 the Company executed a new note for $200,000 with Cornell Capital,LP. On execution $60,000 was advanced and $140,000 recorded as a receivable to be advanced on filing a new SB-2.
	As at June 30, 2005 outstanding amounts on (the “Note 5”) was $140,000.

17

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

7.	Sale and License-back of Computer Software
		On December 14, 2001, the Company sold computer software identified as Crediplay System to the sole director and a major stockholder and creditor of the Company for $3,000,000. The purchase price was settled by retiring $1,200,000 of debt owed to the purchaser and a promissory note for $1,800,000. The promissory note bears interest at 5% per annum with maturity on December 14, 2010. The promissory note is secured through a first priority lien and security interest in the Crediplay System and amount due to Mr. Mitch White (the “Purchaser”) totalling $517,613 (2001 – nil). As at December 31, 2002 the present value of the promissory note is $1,585,034 after calculating at the discount of 7% and accruing interest at 5%. Interest receivable was calculated at 1,800,000 X 5% or $90,000. As at December 31, 2003, the present value of the promissory note is $1,605,986 after calculating at the discount of 7% and accruing interest at 5%. Interest receivable was calculated at $1,800,000 X 5% or $90,000.
		Pursuant to a Marketing, Development and Distribution Agreement entered into on the same date, the Crediplay System was licensed back to the Company for a term of 15 years. A licensing fee payable will be calculated on Gross Earnings derived from the Crediplay System as follows:

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

As there have been only minor revenues since inception due to the lack of capitalization of the Company, the Promissory Note for $1.8 million (“the note”) was assigned to an affiliated company, Gaming Transactions Inc., after releasing the guarantee provided by the shareholder loan of Mitch White in consideration of twenty five (25) million shares of restricted stock of Gaming Transactions Inc., (“GGTS) a pink sheet issuer. As at December (Form 8-K filed December 13, 2004) this company was thinly traded and a deemed price of $0.075 per share was used. As no reductions have been made as contemplated in the agreements executed December 31, 2001 and filed on Edgar by Form 8-K on April 15, 2002 a market asset was exchanged to ensure value to the Company.

The development costs of the Crediplay System expended by the Company amounted to approximately $1,273,406 of which $778,348 was expensed previously. Management of the Company has estimated the $3,000,000 value based on the discounted future cash flow projection and the estimate provided by knowledgeable parties of the software.

18

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

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

Sales price
Retirement of loan due to the purchaser	$	1,200,000
Present value of $1,800,000 promissory note
discounted at 7% per annum		1,565,452
		2,765,452
Software development costs incurred in 2001		(495,058	)
Deferred gain 2001	$	2,270,394
Recognized gain		(71,842	)
Deferred gain 2002	$	2,198,552
Recognized gain in 2003		(16,040	)
Deferred gain in 2003	$	2,182,512
Recognized gain in 2004		(8,690	)
Deferred gain 2004		2,173,822
Recognized gain in 2005		(373	)
Deferred gain 2005		2,173,449

The deferred gain will continue to be amortized in proportion to the licensing fees payable over the term of the agreement.

8.	Stockholders’ Equity (Deficit)
	(a)	Issuance of Common Shares
		During 2004, the Company issued 88,130,195 shares to Cornell Capital LLP including a corporate finance fee including 312,500 to Newbridge Securities Corp as an escrow agent fee and 50,000,000 in escrow in connection with the Standby equity underwriting agreement for financing as originally filed on the Company’s SB-2 on March 1, 2004. During 2005 the Company has issued to June 30, 2005 107,326,347 common shares drawing down the escrow shares as well as new issuances to Cornell Capital, LP with 68,458 remaining in escrow with Cornell Capital, LP.

19

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

8.	Stockholders’ Equity (Deficit) (continued)
	(b)	2003 Consultant Stock Plan
		On October 21, 2003, the Board of Directors of the Company approved and adopted “2003 Consultant Stock Plan” (“2003 Plan”). Pursuant to the 2003 Plan, it is a ten (10) year plan to grant common shares or right to received common shares by consultants (per individual agreement) to a maximum 2,500,000 shares (restated for the company’s stock split). The allocated number of shares includes an indeterminate number of additional shares that may be issued to adjust the number of shares issued pursuant to the stock plan described herein as the result of any future stock split, stock dividend or similar adjustment of the registrant's outstanding common stock.
		On Feb 18, 2005, the Board of Directors of the Company approved and filed the “2005 Consultant Stock Plan” (“2005 Plan”).
	(c)	Stock Option
		There were no stock options granted for the period ended June 30, 2005
9.	Income Taxes
	As at June 30, 2005 the Company has non-capital losses and undepreciated capital cost of approximately $3,400,000 and $80,000, respectively, which can be carried forward for tax purposes and are available to reduce taxable income of future years. The non- capital losses expire commencing in 2006 through 2010.
	(a)	The tax effect of temporary differences that give rise to the Company’s deferred tax
	assets are as follows:

		2005			2004
Undepreciated capital cost of capital assets
over their net book value	$	30,000		$	19,000
Estimated tax loss carryforward		1,000,000			715,000
Less: valuation allowance		(1,030,000	)		(734,000	)
		-			-

The valuation allowance reflects the realization of the tax assets is unlikely.

20

CYOP SYSTEMS INTERNATIONAL INCORPORATED
Notes to Consolidated Financial Statements
For the six months ended June 30, 2005 and 2004
(Expressed in U.S. dollars)

10.	Related Party Transactions
	Related party transactions not disclosed elsewhere in the consolidated financial statements are as follows:
	(a)	From October 1, 2004 to June 30, 2005, the Company has accrued interest of $53,062 at an interest rate of 5% per annum on loans totaling $1,293,321 from directors of the Company.
	(b)	See Note 6, and 7.
		On December 1, 2004 by agreement (Form 8-K December 13, 2004) the discounted promissory note, face value $1,800,000.00 dated December 1, 2001 and maturing December 14, 2010 (the “note”) was assigned to an affiliated company, Gaming Transactions Inc., (“assignee”) in consideration of 25 million restricted shares of the assignee’s common stock. A director and shareholder of the Company is also a major shareholder of the assignee. This has been recorded as an equity investment of $1,674,643.
11.	Geographic Information
	All the Company’s operations and fixed assets are located in the United States.

21

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

The following management's discussion and analysis of the Company should be read in conjunction with the financial statements and the related notes thereto included elsewhere in this quarterly report for the three and six months ended June 30, 2005. This quarterly report contains certain forward-looking statements and the Company's future operation results could differ materially from those discussed herein.

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

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

The Company, and its subsidiaries, is a provider of multimedia transactional technology solutions and services for the entertainment industry. The Company’s range of products and services include financial transaction platforms for on-line video games, licensed online gaming software and integrated e-commerce transaction technology for on-line merchants.

In 2005 the Company embarked on an aggressive strategy to build up its services and productions capabilities by embarking on a number of new ventures. These “business centres” are all subsidiaries of the Company and join the existing divisions of the Company. They are as follows:

CrediPlay Transaction Software

The company has licensed a proprietary technology called CrediPlay, which essentially combines online games of skill to a database platform that allows players to compete against each other for money. It also houses a transaction platform, not unlike a virtual bank, which allows players to deposit money using their credit cards, pay for the games and ask to withdraw any winnings instantly in real time. This software is utilized as the ecommerce backend for the Company’s games and websites.

SkillArcade.com

www.skillarcade.com is CYOP’s central games portal; an online games destination where people play popular skill games against other players and compete in tournaments to win real money prizes. Games on the site include over the Internet, including Puzzle, Board, Trivia, Learning games, Action Games, Strategy, & Role Play games. Online skill games are games that have been formatted so that the rules of the game eliminate elements of luck, without changing the fundamental nature of what makes the game enjoyable and appealing. Players win cash and/or prizes based on one or more skills including; hand-eye coordination, reaction time, dexterity, spatial memory, long-term memory, pattern recognition, organizational skills, strategic planning, game play knowledge, general knowledge and intelligence.

Each contestant pays an entry fee to enter a tournament and the winner collects all the entry fees paid minus a tournament maintenance fee to CYOP Systems for providing the games, online tournament software and ecommerce banking.

The fee’s collected by CYOP range between $0.25 cents to $2.00 per game per player. This system of micro-payments is based on users playing multiple games over a user-session online. Tournaments generally run no longer than five minutes and involve five people on average. CYOP’s current

22

hardware configuration can currently operate 10,000 tournaments consecutively at any given time, and the Company has the ability to increase that to 100,000 tournaments consecutively in the close future.

The Company also allows players to play on SkillArcade.com for free, and is planning to monetize these customers by placement of advertising on the website and by converting the free-player database into cash-players through aggressive interactive marketing strategies. SkillArcade.com currently has about 250,000 members.

CrediPlay.com Network

The games found on SkillArcade.com are available to third party operators whereby the third party operator pays a set up fee, and an ongoing percentage of the net revenues to CYOP. The third party operator is responsible for marketing the licensed website and for driving traffic that may be converted into cash play. Licensing in this manner builds brand awareness quickly and is commonplace throughout the online gaming industry.

CrediPlay.cn

The Company reached an agreement to feature CYOP's licensed pool and poker games on an exclusive basis with SINA.com Online, the North American subsidiary of SINA Corporation; a leading online media company and value-added information service provider for China and for global Chinese communities.

The executed joint marketing agreement provides exclusivity to CYOP to be the provider of online poker and online billiards type games on Game Channel pages throughout the SINA’s network sites, including mainland China, United States, Hong Kong and Taiwan. The expected launch date is targeted for the third quarter of 2005 on SINA’s network.

SINA Corporation is the leading online media company and value-added information service provider for China and for Chinese communities worldwide and has more than 100 million registered users. With the most recognized Internet brand in China, SINA has established a network of localized Web sites that target Greater China and overseas Chinese communities. SINA is a publicly traded company on the NASDAQ has close to 2,000 employees in its offices in six cities throughout Asia and the U.S. and maintains a network of four localized Web sites. At December 31, 2004 SINA generated annual net revenue of $200.0 million.

The games on the site are “Play-for-Free” meaning that customers may play the games and enter tournament for free after joining the site and providing personal data about themselves.

The Company intends to monetize the site by selling advertising on the site and within the games, by selling sponsorship opportunities and by renting out the player database to third party advertisers.

Red Felt Software

The Company launched www.redfeltsoftware.com through a newly formed United Kingdom Company, Red Felt Software Ltd., which has been organized as a wholly owned subsidiary of CYOP Systems International Inc.

With Red Felt Software Ltd. the Company will pursue in the iGaming market place turnkey licensing opportunities for enterprises wishing to enter and capitalize in this market space. The United Kingdom

23

is being recognized as a jurisdiction embracing and regulating this sector. The first products are online Poker and online Bingo.

Online gaming will continue to be an explosive cash generator. Gaming consultants Christian Capital forecast that gaming revenue will rise to $22.7 billion (US) by 2009, from $8.2 billion in 2004, a growth of 22 percent. Online gaming is also expected grab an 8.1% share of the worldwide global gaming market.

Red Felt Software is a simple non-download gaming system that can be easily deployed by any webmaster or administrator. The Company also provides the necessary management experience and support to its licensees and their customers.

Red Felt Software Inc. provides the following to licensees who pay an upfront set up fee, a percentage of the net and a monthly hosting fee for:

• Fully built gaming site
• Non-Download gaming software
• Real Time live reporting
• Hosting & Server monitoring
• Credit Card Processing

TenseatPoker.com

The TenSeatPoker.com site will be the flagship play-for-cash poker site featuring the Company’s licensed poker games, and will be marketed with the goal of establishing brand recognition and driving revenues from targeted audience areas. Operated through its subsidiary, Red Felt Software, the Company has launched in Beta and expects to launch the full cash site in Q3.

The Company has negotiated with a number of payment processors to ensure global payments including the ability to leverage Check 21, laws regulating paper drafts, and new technologies to provide the optimal online payment processing. This also includes direct debit from banking institutions, major credit cards and multiple currencies.

More than 200 online poker sites collectively are generating about $3 billion a year in revenues, equal to 60% of last year's $5 billion in gambling revenues from all of the Las Vegas “Strip”. An estimated 1.7 million players are active online; meaning they've played Internet poker in the past six months. And about 150,000 people play on an average day, according to PokerPulse.com.

The Company plans to derive revenues from a percentage of the rake and through processing fees. Rake is the percentage of the pot that the house collects as compensation for hosting the game. The maximum rake in ring games is $3, with a minimum pot size needed for any rake. Tournament style games do not have a rake, but have an entry fee.

TenSeatPoker.com Chinese

The Company will be localizing the Company’s TenSeatPoker.com cash play site into Traditional and Simplified Chinese.

The TensSeatPoker.com site will be translated, leveraging our tournament sponsorship and advertising model with the design to convert players from third-party portals in Asia to a cash play gaming site.

24

The Company is continuing to seek out new partners in Asia who have large vertical portals and who are looking to add content and functionality to their web properties.

Even with its minimal penetration rate, China already ranks second in the world in total Internet users. According to eMarketer, during the 2004-2008 period, the US Internet population will grow at a 2.6% annual rate. In contrast, China's Internet population will grow during the 2004-2008 period by over 14.3% on an annual basis.

The Company plans to derive revenues from a percentage of the rake and through processing fees. Rake is the percentage of the pot that the house collects as compensation for hosting the game. The maximum rake in ring games is $3, with a minimum pot size needed for any rake. Tournament style games do not have a rake, but have an entry fee.

BingoBurst.com

The BingoBurst.com site will be the flagship play-for-cash Bingo site featuring the Company’s licensed multiplayer bingo games, and will be marketed with the goal of establishing brand recognition and driving revenues from targeted audience areas. Operated through its subsidiary, Red Felt Software, the Company expects to launch the full cash site in Q3.

Bingo is the largest and most socially accepted method of gambling throughout the world, and the current Internet bingo market is estimated to be more than $800 million with a 400% annual growth rate. Currently, between $70 and $90 billion USD is wagered at land based bingo halls each year around the world and there are approximately 60 million bingo players worldwide.

An estimated $10 billion is wagered each year at nearly 50,000 bingo halls in North America alone. This represents per capital spending of approximately $30 on bingo games.

The Company plans to derive revenues from a percentage of the Net Loss from customers who sign up, deposit and wager on the site and through processing fees. Net Loss is defined as the amount wagered by players minus payouts.

Red Felt Studios

The Company will be opening a game studio this Fall in Central Europe to capitalize on the growth of online casino gaming technologies.

CYOP intends to develop “Next Generation” 3D casino games, which will be made for cross platform integration. These games will be available for mobile gaming, console gaming and Internet PC applications. Variations of popular games such as Blackjack, Roulette, Pai Gow, Slots, Video Poker will be constructed for license to third-party operators, and game hardware suppliers.

The studio will be a wholly owned subsidiary of CYOP Systems International Inc., and will be centrally located in Slovakia. After weighing the pros and cons of a number of countries, it was decided that Slovakia’s business-friendly government policies that have helped facilitate a foreign investment boom made it an excellent choice. Slovakia's economic growth exceeded expectations in 2001-04, despite the general European slowdown. And their labour market liberalization and a 19% flat tax are also appealing.

The Slovak Republic joined the OECD, a group of 30 of the most developed countries in the world, in the year 2000 and is also a member of the European Union and NATO.

25

US video game sales totalled almost $10 billion in 2004, and will rise to $16 billion by 2007, an increase of 61%. Software sales totalled $6.3 billion in 2004, and will rise to $8.0 billion in 2008.

CYOP is looking to increase its presence in Europe, and build a global infrastructure. The Company feels that the growth opportunities in Europe are better given that the locals have not reached the saturation point s of the North American marketplaces. The Company also believes that the capital and labour market opportunities are better, and that attitudes towards online gaming are friendlier.

The Company intends to derive revenues from third party game licensors and also intends to market the games on its proprietary websites.

CrediPlay M Games

The Company has begun preliminary talks with mobile developers into launching mobile games. The Company has long realized the potential for wireless gaming and in now doing due diligence on and meeting with mobile platform developers. While games have been provided as a value added service so far, there is a move towards gearing up both subscription and pay for play skill based wireless apps. CYOP intends to be the leader in pay for play skill wireless gaming, and is actively working with strategic partners to exploit this niche over the next 12 months.

Carriers are rolling out packages that place emphasis on games, and value added services such as SMS, stock quotes and email. The growth of wireless gaming is the next step in the evolution of the video game industry. While Japan was the leader in wireless gaming technology, Europe has been getting a good reputation in developing SMS, MMS and Java games for a variety of Wireless ASP’s looking to develop their content. Now the US market is heating up, and both carriers and developers are determining how they may profit by the explosion of SMS and MMS technology in the North American marketplace. While games have been provided, as a value added service so far, there is a move towards gearing up both subscription and casino based wireless apps.

Gaming on mobile phones and wireless devices is set to generate revenues of US$19.3bn by 2009, according to a new report from Juniper Research, and in the short term the report said 2005 would see total mobile gambling revenues pass the US$2bn mark. The Asia-Pacific region is expected to contribute the largest share of total gross revenues with 39% of the market and Europe follows closely behind with a 37% market share, with the US making up the majority of the remainder.

The Yankee Group says there are already 27 million U.S. users playing games on their handsets, and CYOP intends to introduce its skill gaming model to this growing segment.

The Company intends to monetize it M-games through licensing to third parties and from marketing to mobile players through its proprietary gaming portals.

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

26

Liquidity and Capital Resources

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

The Company had cash and cash equivalents of $22,843 at June 30, 2005 and a working capital deficit of $(1,815,695) with the deficiency arising primarily from $1,550,671 in loans from directors and accrued compensation for executives, compared to a working capital deficit of ($1,574,699) at June 30, 2004 to satisfy requirements for operations for the same period ending June 30, 2004. This reflects the continued commitment by management with an increase of advancing shareholder loans to cover the cost of operations.

Net cash provided by financing activities for the six month period ending June 30, 2005 was $584,800 for the period originating from common shares purchased by Cornell Capital, LP, a further promissory note from Cornell Capital, LP and settlement of their convertible debenture which compares to $175,000 in net cash provided to the Company for the same period in 2004.

During the six month period ended June 30, 2005, the Company used cash of $608,833 in operating activities compared to using $383,020 in the prior period ended June 30, 2004. This is a reflection of primarily three things; significant legal expenses and corporate finance fees incurred in connection with the equity financing being undertaken and consulting fees issued with common stock.

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

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

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

Results of operations for the six months ended June 31, 2005 as compared to the six months ended June 31, 2004.

Revenue

For the six months ended June 30, 2005 the Company generated revenue of $5,033, from operations. The same six month period ending June 30, 2004 generated revenues of $15,994. The reduction in revenues for the comparable periods primarily is a reflection of the decrease in marketing efforts.

27

General and Administrative expenses

General and administrative expenses consist primarily of, legal and audit professional fees, insurance and other general corporate and office expenses, for the six-month period ending June 30, 2005 of $112,957. General and administrative expenses decreased by $40,817 for the six-month period ended June 30, 2004 from $153,774. This decrease is primarily due to cost cutting measures related to overhead.

Consultants Fees

Consultant fees consist of the company’s contract labour primarily hi-tech services and management. Of the total $1,003,232 expense $783,000 is on account of stock issued as compensation. The balance $220,232 is actual cash expenses that have been paid or accrued. For the same six month period ended June 30, 2004 the expense was $201,072 in cash and accrued compensation.

Interest Expense

Interest expense increased by $5,621 from $47,441 for the six months ended June 30, 2004 to $53,063 for the six months ended June 30, 2005 primarily due to interest amounts on shareholder loans being accrued rather than forgiven.

Equity Method Investment

During the six months ended June 30, 2005 the Company recorded $30,839 of losses from it’s investment in equity securities accounted for by the equity method. The Company acquired the investment in December 2004.

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

Revenue

For the quarter ended June 31, 2005 the Company generated revenue of $2,363, from operations. The same quarter period ending June 30, 2004 generated revenues of $4,404. Current revenues are now from a wide variety of affiliates and the company’s proprietary URL.

Cost of Sales

Cost of Sales for the three-month period ended June 30, 2005 was $28,330 and for the same three-month period ended June 30, 2004 $49,564 all with various third parties marketing companies. This cost of sales is primarily sales and marketing expenses for co-brand advertising and keyword buys for our site and participation in trade shows.

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

28

General and Administrative expenses

General and administrative expenses consist primarily of, legal and audit professional fees, insurance and other general corporate and office expenses, for the three-month period ending June 30, 2005 of $42,553. General and administrative expenses decreased by $28,256 for the three-month period ended June 30, 2004 from $70,809. This decrease is primarily due to cost cutting measures related to overhead.

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

Consultants Fees

Consultant fees consist of the company’s contract labour primarily hi-tech services and management. Of the total $126,500 expense in the period $44,500 was accrued compensation and $81,500 was an actual cash expense.

Interest Expenses

Interest expenses of $19,720 is a reflection of accrued interest on shareholder and related party loans. The imputed amount for the same quarter in 2004 was $23,002. This is a reflection of interest expense being accrued on shareholder loans and related party loans at a market rate.

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

Item 3. Controls and Procedures

The company’s management, under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, 2005. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2005, the company’s disclosure controls and procedures were effective.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes in the company’s internal controls over financial reporting that occurred during the quarter ended June 30, 2005, that have materially affected, or are reasonably likely to materially affect, the company’s internal controls over financial reporting.

29

PART II

OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS
	None
Item 2	CHANGES IN SECURITIES AND USE OF PROCEEDS
	None
Item 3	DEFAULTS UPON SENIOR SECURITIES
	None
Item 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	None
Item 5	OTHER INFORMATION
	None
Item 6	EXHIBITS AND REPORTS ON FORM 8-K
	(a)	Exhibits
		Exhibit 31.1 Rule 13(a) – 14(a)/15(d) – 14(a) Certification (CEO)
		Exhibit 31.2 Rule 13(a) – 14(a)/15(d) – 14(a) Certification (CFO)
		Exhibit 32.1 Section 1350 Certifications (CEO)
		Exhibit 32.2 Section 1350 Certifications (CFO)
	(b)	Reports on Form 8-K
		On February 18, 2005 The Company filed a report on Form 8-K, Item 4 describing the change in auditors.
		On March 8, 2005 The Company filed a report on Form 8-K, Item 5.02 describing the appointment of an independent director and audit committee member.
		On April 5, 2005 The Company filed a report on Form 8-K, Item 5.02 describing the appointment of an independent director.

SIGNATURES

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

	CYOP SYSTEMS INTERNATIONAL INCORPORATED
Dated:  July 20, 2005	By:	/s/ Mitch White
	Title:	Mitch White CEO, and Director

30