U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10QSB

(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, 2004

[_]   Transition report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

For the transition period from ____________ to ______________


                     For the Period Ended September 30, 2004

                        Commission file number 000-33415


                              CYBERLUX CORPORATION
                 (Name of Small Business Issuer in Its Charter)


                  Nevada                                91-2048178
        (State of Incorporation)             (IRS Employer Identification No.)


                              4625 Creekstone Drive
                                    Suite 100
                             Research Triangle Park
                                Durham, NC 27703
                    (Address of Principal Executive Offices)

                                 (919) 474-9000
                            Issuer's Telephone Number


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  [x]           No [_]

As of September  30, 2004,  the Company had  19,915,905  shares of its par value
$0.001 common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):

Yes [_]          No [X]



                              CYBERLUX CORPORATION

                                      INDEX

PART I         FINANCIAL INFORMATION



                                                                                                        
               ITEM 1       Consolidated Balance Sheets -September 30, 2004 (unaudited) and
                            December 31, 2003                                                                   3

                            Consolidated  Statements  of  Operations - Three and Nine Months
                            Ended  September  30,  2004  and  2003 (unaudited)  and the of
                            Period May 17, 2000 (Date of Inception) Through September 30, 2004                  4

                            Condensed  Statement of (Deficiency) in  Stockholders'  Equity
                            For the Period From May 17, 2000 (Date of Inception) Through
                            September 30, 2004                                                                  5

                            Consolidated  Statements of Cash Flows - Nine Months Ended
                            September 30, 2004 and 2003  (unaudited)  and the Period  From
                            May 17,  2000  (Date of  Inception) Through September 30, 2004                     10

                            Notes to Interim Financial Statements (unaudited)                                  12

               ITEM 2       Management's  Discussion  and Analysis of Financial  Condition and
                            Results of Operations                                                              18

               ITEM 3       Controls and Procedures                                                            27

PART II        OTHER INFORMATION

               ITEM 1         Legal proceedings                                                                28
               ITEM 2         Changes in securities and use of proceeds                                        28
               ITEM 3         Defaults upon senior securities                                                  28
               ITEM 4         Submission of matters to a vote of security holders                              28
               ITEM 5         Other information                                                                28
               ITEM 6         Exhibits                                                                         28

               SIGNATURES                                                                                      30

               EXHIBITS



                                       2



ITEM 1. FINANCIAL STATEMENTS


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                            CONDENSED BALANCE SHEETS



                                                                     SEPTEMBER 30 ,2004
                                                                         (UNAUDITED)     DECEMBER 31 ,2003
                                                                         -----------     -----------------
                                                                                      
                              ASSETS

Current assets:
  Cash and cash equivalents                                              $   284,992        $    16,247
  Accounts receivable                                                         49,297                 --
                                                                         -----------        -----------

            Total current assets                                             334,289             16,247

Property, plant and equipment, net of
accumulated depreciation of
$82,662 and $44,649, respectively                                             50,830             68,845

Other assets, net of accumulated
amortization of $7,797 and $0, respectively                                  216,765            236,000

Total Assets                                                             $   601,884        $   321,092
                                                                         ===========        ===========


              LIABILITIES AND (DEFICIENCY) IN STOCKHOLDERS' EQUITY

Current liabilities:
  Accrued interest                                                       $    55,280        $   104,976
  Other accrued liabilities                                                  226,628            296,388
  Management fees payable - related party                                    272,838            996,508
  Short term notes payable - shareholders                                    115,245            207,845
  Convertible note payable (note D)                                          500,000                 --

  Short term notes payable                                                    65,000            320,000
                                                                         -----------        -----------

          Total current liabilities                                        1,234,991          1,925,717

Long Term liabilities                                                        406,525            347,610

(Deficiency) in Stockholders' Equity:
Convertible preferred stock                                                      801                  1
Common stock                                                                  19,916              8,049
Additional paid-in capital                                                 6,975,322          2,337,736
Subscription receivable                                                           --           (276,186)
Deficit accumulated during development stage                              (8,035,671)        (4,021,835)
                                                                         -----------        -----------

(Deficiency) in stockholders' equity                                      (1,039,632)        (1,952,235)
                                                                         -----------        -----------
    Total liabilities and (Deficiency) in Stockholders' Equity           $   601,884        $   321,092
                                                                         ===========        ===========


    See accompanying notes to the unaudited condensed financial information.


                                       3


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                       CONDENSED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



                                                                                                                  For the Period
                                                                                                                    May 17, 2000
                                                                                                                     (date of
                                                                                                                     inception)
                                             For the Three Months Ended     For the Nine Ended                        Through
                                                    September 30,              September 30,                       September 30,
                                                2004             2003              2004              2003              2004
                                           ------------      ------------      ------------      ------------      ------------
                                                                                                    
Revenue                                    $      2,082      $     87,375      $     23,288      $     87,375      $     97,526

Cost of goods sold                              (15,724)         (130,368)          (32,111)         (130,368)         (194,095)
                                           ------------      ------------      ------------      ------------      ------------

Gross profit (loss)                             (13,642)          (42,993)           (8,823)          (42,993)          (96,569)

Operating Expenses
   Depreciation and amortization                 14,159             5,675            45,811           240,924           371,709
   General and administrative expenses          589,083           319,289         2,505,898           880,155         5,096,206
                                           ------------      ------------      ------------      ------------      ------------


            Total Operating Expenses            603,242           324,964         2,551,709         1,121,079         5,467,915

(Loss) from Operations                         (616,884)         (367,957)       (2,560,532)       (1,164,072)       (5,564,484)

Other Income (expense)                               --                --                --                --                --
Interest Income                                       1                --                63                --               103
                                                                                                                       (935,041)

Interest Expense                               (598,741)          (15,189)         (653,367)          (54,123)
Income tax (benefit)                                 --                --                --                --                --
                                           ------------      ------------      ------------      ------------      ------------

Net Loss Before Preferred Dividend           (1,215,624)         (383,146)       (3,213,836)       (1,218,195)       (6,499,422)
Preferred dividend                              (24,000)               --           (48,000)               --           (48,000)
Preferred dividend-Beneficia
conversion discount on
convertible preferred                                --                --          (800,000)               --        (1,536,250)

Net loss attributable to
  common shareholders                      $ (1,239,624)     $   (383,146)     $ (4,061,836)     $ (1,218,195)     $ (8,083,672)
                                           ============      ============      ============      ============      ============

   Weighted average number of
   common shares outstanding -
   basic and fully diluted                   19,388,317         7,626,979        17,080,605         7,148,468               n/a
                                           ============      ============      ============      ============      ============

   Net (loss) per share - basic &
   fully diluted                           $      (0.06)     $      (0.05)     $      (0.24)     $      (0.17)              n/a
                                           ============      ============      ============      ============      ============


    See accompanying notes to the unaudited condensed financial information.

                                       4


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
        PERIOD MAY 17,2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004



                                                                                                  STOCK       DEFICIT      TOTAL
                                                                                               SUBSCRIPTION ACCUMULATED (DEFICIENCY)
                                                                                     ADDITIONAL RECEIVABLE/    DURING       IN
                                              COMMON STOCK        PREFERRED STOCK     PAID IN   RECEIVED IN DEVELOPMENT SHAREHOLDERS
                                          SHARES      AMOUNT     SHARES    AMOUNT     CAPITAL     ADVANCE     STAGE       EQUITY
                                         ---------  ---------  ---------  ---------  ---------   ---------  ---------    ---------
                                                                                               
Common shares issued in May, 2000 to
founders in exchange  for cash at $0.01
per share                                1,640,000  $   1,640         --         --  $     560         --         --   $   2,200

Common shares issued in May, 2000 in
exchange for research and development
services valued at $.09 per share          750,000        750         --         --     68,003         --         --      68,753

Common shares issued in May, 2000 in
exchange for services valued @$.05
per share                                  875,000        875         --         --     35,710         --         --      36,585

Common shares issued in July, 2000 in
exchange for convertible debt at $.15
per share                                  288,000        288         --         --     39,712         --         --      40,000

Capital contributed by principal
shareholders                                    --         --         --         --     16,000         --         --      16,000

Common shares issued in November, 2000
for cash in connection with private
placement $.15 per share                   640,171        640         --         --     95,386         --         --      96,026

Common shares issued in November, 2000
in exchange for services valued @$.15
per share issued for consulting
services                                   122,795        123         --         --     18,296         --         --      18,419

Net loss                                        --         --         --         --         --         --   (454,651)   (454,651)
                                         ---------  ---------  ---------  ---------  ---------  ---------  ---------   ---------

BALANCE, DECEMBER 31, 2000               4,315,966      4,316         --         --    273,667         --   (454,651)   (176,668)

Common shares issued in January, 2000
in exchange for convertible debt at
$.15 per share                             698,782        699         --         --    104,118         --         --     104,817

Stock options issued in May, 2001
valued @ $.15 per option in exchange
for services                                    --         --         --         --     52,500         --         --      52,500

Warrant issued in May 2001, valued at
$0.15 per warrant in exchange for
placement of debt                               --         --         --         --     75,000         --         --      75,000

Common shares issued in September                                                                                           2001
in exercise for warrant at $.15 per
share                                        3,000          3         --         --        447         --         --         450

Common shares issued in September 2001
for cash in connection  with exercise
of warrant at $.10 per share               133,000        133         --         --     13,167         --         --      13,300

Common shares issued in November 2001
for cash in connection with exercise
of warrant at $.0001 per share             500,000        500         --         --         --         --         --         500

Common shares issued in Nov, 01 on
exercise of options at $.0001 per share    350,000        350         --         --         --         --         --         350


    See accompanying notes to the unaudited condensed financial information.

                                       5


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
        PERIOD MAY 17,2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
                                   (CONTINUED)



                                                                                            STOCK        DEFICIT      TOTAL
                                                                                         SUBSCRIPTION  ACCUMULATED (DEFICIENCY)
                                                                              ADDITIONAL RECEIVABLE/     DURING         IN
                                   COMMON STOCK           PREFERRED STOCK       PAID IN  RECEIVED IN  DEVELOPMENT  SHAREHOLDERS
                                SHARES      AMOUNT      SHARES      AMOUNT      CAPITAL    ADVANCE        STAGE       EQUITY
                              ----------  ----------  ----------  ----------  ----------  ----------   ----------   ----------
                                                                                           
Common shares issued in
December, 2001 in exchange
for convertible debt at
$.50 per share                   133,961         134          --          --      66,847          --           --       66,981

Common shares issued in
December, 2001 in exchange
for debt at $.50 per share        17,687          17          --          --          --          --        8,825        8,842

Net loss                              --          --          --          --          --          --     (636,274)    (636,274)
                              ----------  ----------  ----------  ----------  ----------  ----------   ----------   ----------

BALANCE AT DECEMBER 31, 2001   6,152,396       6,152          --          --     594,571          --   (1,090,925)    (490,202)

Common shares issued in
May, 2002 in exchange for
services valued at
$.70 per share                    70,000          70          --          --      49,928          --           --       49,998

Common shares issued in
November, 2002 in exchange
for services valued at
$.25 per share                   150,000         150          --          --      37,350          --           --       37,500

Common shares issued in
December, 2002 as rights
offerings at $0.25 per share     256,000         256          --          --      63,744          --           --       64,000
Subscription receivable
for 10,000 shares issued              --          --          --          --          --      (2,500)          --       (2,500)
                              ----------  ----------  ----------  ----------  ----------  ----------   ----------   ----------

Net loss                              --          --          --          --          --          --     (700,104)    (700,104)
                              ----------  ----------  ----------  ----------  ----------  ----------   ----------   ----------

BALANCE AT DECEMBER 31, 2002   6,628,396       6,628          --          --     745,593      (2,500)  (1,791,029)  (1,041,308)

Common shares issued in
March, 2003 in connection
with exercise of options
at $.0001 per share              250,000         250          --          --          --          --           --          250

Funds received for
stock subscription                    --          --          --          --          --       2,500           --        2,500

Common shares issued to
Cornell Capital Partners
in March 2003 in connection
with Loan Commitment valued
at $0.75 per share               300,000         300          --          --     224,700          --           --      225,000

Common shares issued in
March, 2003 in exchange for
services valued at
$0.75 per share                   13,333          14          --          --       9,987          --           --       10,001


    See accompanying notes to the unaudited condensed financial information.

                                       6


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
        PERIOD MAY 17,2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
                                   (CONTINUED)



                                                                                                STOCK        DEFICIT      TOTAL
                                                                                             SUBSCRIPTION  ACCUMULATED (DEFICIENCY)
                                                                                 ADDITIONAL  RECEIVABLE/     DURING         IN
                                      COMMON STOCK           PREFERRED STOCK       PAID IN   RECEIVED IN  DEVELOPMENT  SHAREHOLDERS
                                   SHARES      AMOUNT      SHARES      AMOUNT      CAPITAL     ADVANCE        STAGE       EQUITY
                                 ----------  ----------  ----------  ----------  ----------   ----------   ----------   ----------
                                                                                               
Robrady Design Note was
converted into 196,120 shares
@.25 per share                      196,120         196          --          --      48,833           --           --       49,029

Common Shares issued to Mark
Schmidt for services in June
2003. The 200,000 shares were
issued at $0.25 per share           200,000         200          --          --      49,800           --           --       50,000

Common shares issued to
Capital Funding Solutions
September 2003, 450,000 shares
were issued at $0.20 per share
Shares secure a sales factoring
agreement                           450,000         450          --          --      89,550           --           --       90,000

Common shares issued in
November 2003 for consulting
services valued at $0.50 per
share                                11,292          11          --          --       5,634           --           --        5,645

Convertible Preferred Shares
issued in December 2003 valued
at $5,000 per share, Class A             --          --         155           1     774,999     (276,186)          --      498,814

Warrants on convertible
preferred shares                         --          --          --          --    (347,610)          --           --     (347,610)
                                                                                                         
Beneficial conversion discount
on convertible preferred shares          --          --          --          --     736,250           --           --      736,250

Net (Loss)                               --          --          --          --          --           --   (2,230,806)  (2,230,806)
                                 ----------  ----------  ----------  ----------  ----------   ----------   ----------   ----------

Balance at December 31, 2003      8,049,141       8,049         155           1   2,337,736     (276,186)  (4,021,835)  (1,952,235)

Issuance of convertible
preferred shares Class B in
January 2004 for accrued
management fees at $1 per share          --          --     800,000         800     799,200           --           --      800,000

Proceeds from subscriptions
Receivable                               --          --          --          --          --      276,186           --      276,186

Common Shares issued in
January, 2004 in exchange for
services at $0.37 per share         260,000         260          --          --      95,940           --           --       96,200

Common Shares issued in January
2004 in exchange  for services
at $0.37 per share                  225,000         225          --          --      83,025           --           --       83,250

Common Shares issued in January
2004 in exchange for services
valued at $0.37 per share         2,100,000       2,100          --          --     774,900           --           --      777,000


    See accompanying notes to the unaudited condensed financial information.

                                       7


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
        PERIOD MAY 17,2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
                                   (CONTINUED)



                                                                                              STOCK        DEFICIT      TOTAL
                                                                                           SUBSCRIPTION  ACCUMULATED (DEFICIENCY)
                                                                               ADDITIONAL  RECEIVABLE/     DURING         IN
                                    COMMON STOCK           PREFERRED STOCK       PAID IN   RECEIVED IN  DEVELOPMENT  SHAREHOLDERS
                                 SHARES      AMOUNT      SHARES      AMOUNT      CAPITAL     ADVANCE        STAGE       EQUITY
                               ----------  ----------  ----------  ----------  ----------   ----------   ----------   ----------
                                                                                             
Shares issued for note
payable at $0.25 in
January 2004                     110,764          111           --          --      27,580           --          --       27,691

Shares issued for
consulting services
at $0.21 per share             1,200,000        1,200           --          --     250,800           --          --      252,000

Beneficial conversion
discount-preferred stock
dividend with respect
to convertible preferred
shares Class B                        --           --           --          --     800,000           --          --      800,000

Net loss                              --           --           --          --          --           --  (2,268,934)  (2,268,934)

BALANCE AT MARCH 31, 2004     11,944,905  $    11,945      800,155 $       801 $ 5,169,181  $        -- $(6,290,769) $(1,108,842)

Warrants issued in
exchange for Services,
April 2004                            --           --           --          --     243,000           --          --      243,000

Common shares canceled
for return of collateral
deposit with factor             (450,000)        (450)          --          --     (89,550)          --          --      (90,000)

Common shares issued for
cash in private placement
at $0.10 per share, May 2004   5,310,000        5,310           --          --     525,690           --          --      531,000

Class A Preferred shares
issued for cash at $5,000
per share, May 2004                   --           --       15.861          --      79,308           --          --       79,308

Warrants on convertible
preferred shares
Class A shares                        --           --           --          --     (58,915)          --          --      (58,915)

Common shares issued in
exchange for note payable
at $0.10 per share,
June, 2004                        50,000           50           --          --       4,950           --          --        5,000

Common Shares issued in
exchange for services
valued at $0.10 per share,
June 2004                      1,560,000        1,560           --          --     154,440           --          --      156,000

Common Shares issued 2004
in exchange for services
valued at $0.10 per share,
June 2004                        200,000          200           --          --      19,800           --          --       20,000

Subscriptions received in
advance for shares to
be issued                             --           --           --          --          --       22,500          --       22,500

Common Shares issued in
exchange for services
adjusted for issue prices             --           --           --          --     (44,640)          --          --      (44,640)

Net (Loss)                            --           --           --          --          --           --    (529,279)    (529,279)
                             -----------  -----------  ----------- ----------- -----------  ----------- -----------  -----------

BALANCE AT JUNE 30, 2004      18,614,905  $    18,615      800,171 $       801 $ 6,003,264  $    22,500 $(6,820,048) $  (774,868)
                             ===========  ===========  =========== =========== ===========  =========== ===========  ===========


    See accompanying notes to the unaudited condensed financial information.

                                       8


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
             STATEMENT OF DEFICIENCY IN STOCKHOLDER'S EQUITY FOR THE
        PERIOD MAY 17,2000 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2004
                                   (CONTINUED)



                                                                                                 STOCK        DEFICIT      TOTAL
                                                                                              SUBSCRIPTION  ACCUMULATED (DEFICIENCY)
                                                                                  ADDITIONAL  RECEIVABLE/     DURING         IN
                                       COMMON STOCK           PREFERRED STOCK       PAID IN   RECEIVED IN  DEVELOPMENT  SHAREHOLDERS
                                    SHARES      AMOUNT      SHARES      AMOUNT      CAPITAL     ADVANCE        STAGE       EQUITY
                                  ----------  ----------  ----------  ----------  ----------   ----------   ----------   ----------
                                                                                                
Common shares issued in
exchange for services valued at
$0.40 per share, July, 2004         100,000         100          --           --      39,900           --           --       40,000

Common shares issued for cash
in private placement at $0.10
per share, July 2004                100,000         100          --           --       9,900      (10,000)          --           --

Common shares issued for
conversion of convertible
preferred A shares, August 2004     200,000         200          (4)          --        (200)          --           --           --

Common shares issued for
exercise of warrants at $0.25
per share, August 2004              701,000         701          --           --     174,549      (12,500)          --      162,750

Warrants issued to consultants
for services                             --          --          --           --     106,173           --           --      106,173

Beneficial conversion feature
of convertible notes (Note D)            --          --          --           --     500,000           --           --      500,000

Value of warrants attached to
convertible notes (Note D)               --          --          --           --      91,937           --           --       91,937

Common shares issued for
exercise of warrants at $0.25
per share, September 2004           200,000         200          --           --      49,800           --           --       50,000

Net (Loss)                               --          --          --           --          --           --   (1,215,624)  (1,215,624)
                                ----------- ----------- -----------  ----------- -----------  -----------  -----------  -----------

BALANCE AT SEPTEMBER 30, 2004    19,915,905 $    19,916     800,167  $       801 $ 6,975,322  $        --  $(8,035,672) $(1,039,631)
                                =========== =========== ===========  =========== ===========  ===========  ===========  ===========


    See accompanying notes to the unaudited condensed financial information.

                                       9



                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)



                                                                                     For the Period 
                                                                                      May 17, 2000 
                                                                                       (date of
                                                                                       inception)
                                                    For the Nine Months Ended           Through
                                                           September 30,             September 30,
                                                       2004              2003             2004
                                                    -----------      -----------      ----------- 
                                                                                      
CASH FLOW FROM OPERATING ACTIVITIES:

Net (loss) available to common stockholders         $(4,013,836)     $(1,218,195)     $(8,035,671)

Depreciation and amortization                            45,811          240,924          371,708
Beneficial conversion discount - preferred
stock dividend                                          800,000               --        1,536,250

Amortization of debt discount - beneficial
conversion feature of convertible note (Note D)         500,000               --          500,000

Amortization of debt discount - value of
warrants attached to convertible note (Note D)           91,937               --           91,937

Stock options issued for consulting services                 --           60,000          107,504

Shares issued for previously incurred debt               32,691            9,030           81,721

Warrants issued to consultants for services             349,173               --          349,173

Shares issued/(canceled) for factoring deposit          (90,000)          90,000               --

Loan extension write off                                     --               --           25,000

Preferred shares issued for conversion of
accrued management fees                                 723,670               --          723,670

Preferred shares issued for previously
incurred debt                                            76,330               --           76,330

Accrued expenses relating to escrow deposits                 --           20,000           23,814

Shares issued for consulting services                 1,367,810               --        1,540,960

Share issued for research and development                    --               --           68,753

(Increase)/ decrease in accounts receivable             (11,862)              --          (11,862)

(Increase)/ decrease in Due From Factor, net                 --          (18,710)              --

(Increase) / decrease in inventory                           --           (8,208)              --

Decrease (increase) in deposit                               --            8,614               --

(Increase) decrease in prepaid expenses                 (89,101)              --          (89,101)

(Increase) / decrease in other assets                    63,105               --         (172,895)

Increase (decrease) in accrued interest                 (49,696)          21,041           55,280

(Decrease) increase in management fee payable
- related party                                        (723,670)         424,418          272,838

Increase in accounts payable                            (69,760)         314,878          226,628
                                                    -----------      -----------      -----------

NET CASH USED IN OPERATING ACTIVITIES                  (997,398)         (56,208)      (2,257,963)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of fixed assets                                (19,998)         (33,000)        (133,492)
                                                    -----------      -----------      -----------

NET CASH USED IN INVESTING ACTIVITIES                   (19,998)         (33,000)        (133,492)

CASH FLOWS FROM FINANCING ACTIVITIES:

(Payments for) / proceeds from short-term
notes payable, net                                     (255,000)              --          212,455

Proceeds from short-term notes
payable-shareholders  (net)                             (92,600)          72,000          115,245

Issuance of preferred stock                              79,308               --          554,307

Capital contributed by shareholders                     276,186               --          292,186

Increase in convertible notes payable                   500,000               --          500,000

Receipts from subscriptions receivable                       --            2,500               --

Issuance of common stock                                778,247              250        1,002,254

NET CASH PROVIDED BY FINANCING ACTIVITIES             1,286,141           74,750        2,676,447
                                                    -----------      -----------      -----------


    See accompanying notes to the unaudited condensed financial information.

                                       10



                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                        CONDENSED STATEMENT OF CASH FLOWS
                                   (CONTINUED)
                                   (UNAUDITED)



                                                                                     
Net increase in cash                                   268,,745          (14,458)         284,992
                                                    -----------      -----------      -----------
Cash - beginning                                         16,247           26,086               --
                                                    -----------      -----------      -----------
Cash - ending                                       $   284,992      $    11,628      $   284,992
                                                    ===========      ===========      ===========

SUPPLEMENTAL DISCLOSURES:
   Interest paid                                        111,126           18,202          162,026
   Income taxes paid                                         --               --               --
Non Cash investing and financing activities:
Shares issued for research and development and
consulting                                          $        --      $        --      $   106,253
Shares issued for conversion of debt                     32,691            9,030          346,384

Warrants issued in connection with financing                 --               --           75,000
Warrants issued to consultants for services             349,173               --          349,173

Options issued in connection with services                   --               --           52,500
Shares issued in connection with services             1,367,810           60,000        1,540,960

Shares issued in connection with loan                        --          225,000          225,000
Shares issued in connection with factoring              (90,000)          90,000               --

Warrants issued (detachable) with convertible
preferred share                                          58,915               --          406,525
Amortization of debt discount - beneficial
conversion feature of convertible note (Note D)         500,000               --          500,000
Amortization of debt discount - value of
warrants attached to convertible note (Note D)           91,937               --           91,937
Beneficial conversion discount on convertible
preferred shares                                        800,000               --        1,536,250
Convertible preferred shares issued for
previously incurred debt                                 76,330               --           76,330
Convertible preferred shares issued for
accrued management fees                                 723,670               --          723,670


     See accompanying notes to the unaudited condensed financial information

                                       11


                              CYBERLUX CORPORATION
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)


NOTE A - SUMMARY OF ACCOUNTING POLICIES

GENERAL

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United  States  of  America  for  interim  financial  information  and  with the
instructions  to  Form  10-QSB.  Accordingly,  they  do not  include  all of the
information and footnotes required by generally accepted  accounting  principles
for complete financial statements.

In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Accordingly,  the results  from  operations  for the  three-month  period  ended
September 30, 2004,  are not  necessarily  indicative of the results that may be
expected  for  the  year  ended  December  31,  2004.  The  unaudited  condensed
consolidated  financial  statements  should  be read  in  conjunction  with  the
consolidated  December  31, 2003  financial  statements  and  footnotes  thereto
included in the Company's SEC Form 10-KSB.

BUSINESS AND BASIS OF PRESENTATION

Cyberlux  Corporation (the "Company") is in the development stage and its effort
have been principally devoted to seeking profitable business  opportunities.  To
date the Company has incurred expenses and has sustained  losses.  Consequently,
its operations are subject to all risks inherent in the  establishment  of a new
business  enterprise.  For the period from inception  through September 30 2004,
the Company has accumulated losses of $8,035,671.

STOCK BASED COMPENSATION

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No.  123,  "Accounting  for  Stock-Based  Compensation,"  to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  this
statement  amends  the  disclosure  requirements  of  SFAS  No.  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported  results.  The Company has chosen to continue to account
for stock-based  compensation using the intrinsic value method prescribed in APB
Opinion No. 25 and related  interpretations.  Accordingly,  compensation expense
for stock options is measured as the excess, if any, of the fair market value of
the  Company's  stock at the date of the grant  over the  exercise  price of the
related option. The Company has adopted the annual disclosure provisions of SFAS
No. 148 in its  financial  reports  for the year  ended  December  31,  2002 and
subsequent years.


                                       12



NOTE A - SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Had compensation  costs for the Company's stock options been determined based on
the fair value at the grant dates for the  awards,  the  Company's  net loss and
losses  per share  would  have been as  follows  (transactions  involving  stock
options issued to employees and Black-Scholes model assumptions are presented in
Note E):



                                                       For the three months ended        For the nine months ended
                                                              September 30,                   September 30,
                                                         2004              2003            2004              2003
                                                      -----------      -----------      -----------      -----------
                                                                                                      
Net loss attributable to common stockholders -        $(1,239,624)     $  (383,146)     $(4,061,836)     $(1,218,195)
as reported
Add: Total stock based employee compensation
expense as reported under intrinsic value method               --               --               --               --
(APB. No. 25)

Deduct: Total stock based employee compensation
expense as reported under fair value based                     
method (SFAS No. 123)                                          --               --               --               --
                                                      -----------      -----------      -----------      ----------- 

Net loss - Pro Forma                                  $(1,239,624)     $  (383,146)     $(4,061,836)     $(1,218,195)

Net loss  attributable  to common  stockholders -     $(1,239,624)     $  (383,146)     $(4,061,836)     $(1,218,195)

Pro forma
Basic (and assuming dilution) loss
per share - as reported                               $     (0.06)     $     (0.05)     $     (0.24)     $     (0.17)
Basic (and assuming dilution)
loss per share - Pro forma                            $     (0.06)     $     (0.05)           (0.24)           (0.17)



NEW ACCOUNTING PRONOUNCEMENTS

On June 30, 2004,  the  Financial  Accounting  Standards  Board (FASB)  issued a
proposed Statement, Share-Based Payment, an amendment of FASB Statements No. 123
and 95, that would require companies to account for stock-based  compensation to
employees using a fair value method as of the grant date. The proposed statement
addresses the accounting for transactions in which a Company  receives  employee
services  in  exchange  for  equity  instruments  such  as  stock  options,   or
liabilities that are based on the fair value of the Company's equity instruments
or that may be settled  through the issuance of such equity  instruments,  which
includes the  accounting  for  employee  stock  purchase  plans.  This  proposed
statement would eliminate a Company's ability to account for share-based  awards
to employees using APB Opinion 25,  Accounting for Stock Issued to Employees but
would not change  the  accounting  for  transactions  in which a company  issues
equity  instruments for services to non-employees or the accounting for employee
stock ownership plans. The proposed  statement,  if adopted,  would be effective
for awards that are  granted,  modified,  or settled in fiscal  years  beginning
after  December  15,  2004.  The  Company  is in the  process of  assessing  the
potential impact of this proposed statement to the financial statements.

NOTE B - COMMON STOCK

In January, 2004, the Company collected the balance of its previously recognized
subscriptions receivable of $276,186.

In January,  2004,  the Company  issued  260,000  shares of its common  stock in
exchange  for  services  totaling  $96,200.  The  stock  issued  was  valued  at
approximately  $0.37 per  share,  which  represents  the fair value of the stock
issued, which did not differ materially from the value of the services rendered.

In January,  2004,  the Company  issued  225,000  shares of its common  stock in
exchange  for  services  totaling  $83,250.  The  stock  issued  was  valued  at
approximately  $.0.37 per share,  which  represents  the fair value of the stock
issued, which did not differ materially from the value of the services rendered.

In January,  2004,  the Company issued  2,100,000  shares of its common stock in
exchange  for  services  totaling  $777,000.  The  stock  issued  was  valued at
approximately $0.37 per share, which represents the fair value and which did not
differ materially from the value of the services rendered.

In January,  2004,  the holder of a $27,691  note payable  exchanged  the unpaid
principal  together with accrued  interest for 110,764 shares at $0.25 per share
of the Company's common stock.

In January,  2004, the Company issued  1,200,000  shares of its common stock for
cash at $0.21 per share for $252,000.


                                       13



NOTE B - COMMON STOCK (CONTINUED)

In April,  2004 the Company received back and cancelled 450,000 shares of common
stock for return of  collateral  deposit  with a creditor  previously  valued at
$90,000.

During  the  period  ended  June  30,  2004,  the  Company  issued  warrants  to
consultants  for services for $243,000  which  represents  the fair value of the
warrants issued,  which did not differ materially from the value of the services
rendered.

In May, 2004 the Company  issued  5,310,000  shares of common stock at $0.10 per
share for private  placement  for cash.  In  connection  with the offering , the
investors  received a warrant to purchase  the  Company's  common stock for each
share of common  stock  purchased  ( "Class A Warrants ") The  warrants  have an
exercise price of $0.25 per share and expire June 30, 2004.

In May, 2004 the Company issued 50,000 shares of common stock at $0.10 per share
on conversion of notes payable.

In June,  2004 the Company issued  1,760,000  shares of common stock in exchange
for services rendered to the Company valued at $176,000.  The shares were issued
at $0.10 per share which represents the fair value of the stock issued which did
not materially differ from the value of the services rendered.

In  June  2004,  the  Company   received  cash  $22,500  in  connection  with  a
subscription to acquire shares of the Company's  common stock. In July 2004, the
Company issued 100,000 shares of common stock at $0.10 per share.

In July,  2004 the Company issued 100,000 shares of common stock in exchange for
services  rendered to the Company  valued at $40,000.  The shares were issued at
$0.40 per share which  represents  the fair value of the stock  issued which did
not materially differ from the value of the services rendered.

In August  2004,  the Company  issued  701,000  shares of common  stock  against
exercise of warrants at $0.25 per share for $150,250 in cash and balance $12,500
was adjusted out of cash received in June 2004.

In August 2004,  the Company  issued 200,000 shares of common stock for exercise
of warrants at $0.25 per share for cash.

In August 2004, holders of 4 preferred shares series A exercised their rights to
convert into 200,000 shares of common stock.

In September 2004, the Company  recognized and measured an aggregate of $500,000
of  the  proceeds,  which  is  equal  to the  intrinsic  value  of the  imbedded
beneficial  conversion  feature,  to additional  paid in capital and expensed as
interest.

In September 2004, the Company recognized the value attributable to the warrants
in the amount of $91,937 to additional paid in capital and as interest expenses.

During the three months ended September 30, 2004, the Company issued warrants to
consultants  for services for $106,173  which  represents  the fair value of the
warrants issued,  which did not differ materially from the value of the services
rendered.


                                       14


NOTE C - CONVERTIBLE PREFERRED STOCK

SERIES A PREFERRED STOCK

In May 2004,  the Company  issued  15.861 Series A Preferred  shares,  par value
$0.001 per share,  at $5,000 per share in  exchange  for  $79,308.  The Series A
Preferred shares are convertible at the option of the holder to 50,000 shares of
the  Company's  common  stock for each share of Series A  Preferred  stock.  The
Series A Preferred  holders also received two (2) warrants ("Series A and Series
B Warrants") to purchase  50,000 shares of Common Stock,  per warrant,  for each
share of Series A Preferred (or fraction thereof) issued.  The Series A Warrants
shall have an exercise  price per share equal to $0.25 and shall expire in three
(3) years. The Series B Warrants shall have an exercise price per share equal to
$1.05 and shall expire five (5) years, subject to the number of number of shares
acquired  pursuant  to the  Series A  Warrants.  In August  2004,  holders  of 4
preferred  shares series A exercised their rights to convert into 200,000 shares
of common stock.

SERIES B PREFERRED STOCK

In January,  2004, the Company issued 800,000 shares of its preferred stock B in
lieu of certain  accrued  management  services  fee  payable  and notes  payable
including  interest payable thereon totaling $800,000 to officers of the company
The stock issued was valued at approximately  $1.00 per share,  which represents
the fair value of the stock.  The shares of preferred stock are convertible into
common  shares at $0.20 per share  which was  amended in April 2004 to $0.10 per
share.  In connection  with the  transaction,  the Company  recorded  beneficial
conversion discount of $800,000 - preferred dividend relating to the issuance of
convertible preferred stock.

NOTE D - CONVERTIBLE NOTES PAYABLE

A summary of convertible notes payable at September 30, 2004 is as follows:



                                                                                        
  On  September  23,  2004,  interest  at 10%,  mature  two  years  from the date of
  issuance,  and are  convertible  into the  Company's  common  stock,  at the lower
  of  a)$0.72;  b)50% of the average of the three  lowest  intraday  trading  prices
  for the common stock.. The full principal amount of the secured  convertible notes
  is due upon a default under the terms of secured  convertible  notes.  The note is
  secured on  substantially  all of the  Company's  assets,  including the assets of
  wholly owned  subsidiaries,  and  intellectual  property.  During the period ended       $ 500,000
  September  30, 2004,  a total of $0 of  convertible  note was  converted to common
  stock of the Company.
  Less: current portion                                                                      500,000
                                                                                           ---------
                                                                                           $      --
                                                                                           =========


In  accordance  with  Emerging  Issues  Task Force Issue  98-5,  Accounting  for
Convertible  Securities  with a Beneficial  Conversion  Features or Contingently
Adjustable  Conversion Ratios ("EITF 98-5"),  the Company recognized an imbedded
beneficial  conversion  feature  present in the  convertible  note.  The Company
allocated a portion of the proceeds equal to the intrinsic value of that feature
to additional  paid in capital.  During the period ended September 30, 2004, the
Company recognized and measured an aggregate of $500,000 of the proceeds,  which
is equal to the intrinsic value of the imbedded  beneficial  conversion feature,
to additional paid in capital and a discount  against the convertible  note. The
debt  discount  attributed  to the  beneficial  conversion  feature is  expensed
immediately as interest  expense since note can be converted in to common shares
at any time.


                                       15



NOTE D - CONVERTIBLE NOTES PAYABLE (CONTINUED)

In connection  with the placement of the  convertible  note,  the Company issued
non-detachable warrants granting the holders the right to acquire 750,000 shares
of the Company's  common stock at $0.50 per share.  In accordance  with Emerging
Issues  Task  Force  Issue  00-27,  Application  of Issue  No.  98-5 to  Certain
Convertible  Instruments  ("EITF -  0027"),  the  Company  recognized  the value
attributable  to the  warrants  in the amount of $91,937 to  additional  paid in
capital and a discount  against the  convertible  note.  The Company  valued the
warrants in accordance with EITF 00-27 using the Black-Scholes pricing model and
the following  assumptions:  contractual  terms of 5 years, an average risk free
interest rate of 1.01%, a dividend yield of 0%, and volatility of 127%. The debt
discount  attributed to the value of the warrants issued is expensed as interest
expense.

NOTE E - WARRANTS TO PURCHASE COMMON STOCK

The following condensed table summarizes the changes in warrants outstanding and
the  related  prices  for the shares of the  Company's  common  stock  issued to
consultants and shareholders at September 30, 2004.



                                WARRANTS OUTSTANDING                                   WARRANTS EXERCISABLE
                                --------------------                                   --------------------
                                            WEIGHTED AVERAGE          WEIGHED                        WEIGHTED
                           NUMBER        REMAINING CONTRACTUAL        AVERAGE         NUMBER         AVERAGE
    EXERCISE PRICES     OUTSTANDING           LIFE (YEARS)        EXERCISE PRICE    EXERCISABLE   EXERCISE PRICE
    ---------------     -----------           ------------        --------------    -----------   --------------
                                                                                   
         $ 0.10            91,500                  5                    $ 0.10          91,500       $ 0.10
           0.20           705,000                  4                      0.20         705,000         0.20
           0.25        10,101,564                  3                      0.25      10,101,564         0.25
           0.50         1,050,000                  4                      0.50       1,050,000         0.50
           1.05         8,643,064                  3                      1.05       8,643,064         1.05
                       ----------                                                   ----------

                       20,591,128                 2.86                              20,591,128
                       ==========                 ====                              ==========


Transactions involving the Company's warrant issuance are summarized as follows:


                                                   Number of   Weighted Average
                                                    Shares     Price Per Share
                                                    ------     ---------------

          Outstanding at December 31, 2003        15,895,000     $     0.25
             Granted                               4,696,128     $     0.36
             Exercised                                    --             --
             Canceled or expired                          --             --
                                                  ----------     ----------
          Outstanding at June 30, 2004            20,591,128     $     0.60
                                                  ==========     ==========

The  weighted-average  fair value of warrants granted to consultants  during the
period ended  September 30, 2004 and 2003 and the  weighted-average  significant
assumptions  used to determine those fair values,  using a Black-Scholes  option
pricing model are as follows:



                                                                 2004           2003
                                                              ----------     ----------
                                                                       
          Significant assumptions (weighted-average):
              Risk-free interest rate at  grant date                1.01%           n/a
              Expected stock price volatility                        127%           n/a
              Expected dividend payout                                --             --
              Expected option life-years (a)                  3- 4 years            n/a



      (a)   The expected option life is based on contractual expiration dates

The estimated  value of the warrants  granted to consultants was in lieu of cash
compensation  for  services  performed.  The  amount of the  expense  charged to
operations in connection  with granting the warrants to consultants was $349,173
and $0 during the period ended September 30, 2004 and 2003, respectively.


                                       16



NOTE F - COMMITMENTS AND CONTIGENCIES

On September 23, 2004, the Company entered into a Securities  Purchase Agreement
with investors for the sale of (i) $1,500,000 in secured  convertible  notes and
(ii)  warrants to purchase  2,250,000  shares of  Company's  common  stock.  The
secured  convertible  notes bear interest at 10%, mature two years from the date
of issuance,  and are convertible into Company's common stock, at the investors'
option,  at the lower of  a)$0.72;  b)50% of the  average  of the  three  lowest
intraday  trading prices for the common stock on the  Over-The-Counter  Bulletin
Board for the 20 trading days before but not including the conversion  date. The
full principal  amount of the secured  convertible  notes are due upon a default
under the terms of secured  convertible notes. In addition,  the Company granted
the  investors a security  interest in  substantially  all of Company's  assets,
including the assets of Company's  wholly owned  subsidiaries,  and intellectual
property.  The  warrants  are  exercisable  until  five  years  from the date of
issuance at a purchase price of $0.50 per share.  The investors may exercise the
warrants  on a  cashless  basis if the  shares of common  stock  underlying  the
warrants  are  not  then  registered  pursuant  to  an  effective   registration
statement. In the event the investors exercise the warrants on a cashless basis,
then we will not receive any proceeds.  In addition,  the exercise  price of the
warrants  will be adjusted in the event we issue  common  stock at a price below
market,  with  the  exception  of any  securities  issued  as of the date of the
warrants or issued in  connection  with the  secured  convertible  notes  issued
pursuant to the  Securities  Purchase  Agreement.  As of September 30 2004,  the
Company has received $500,000 for convertible note payable.

NOTE G - SUBSEQUENT EVENTS

Company's plan to increase the number of authorized  shares of common stock from
100,000,000 shares to 300,000,000 shares.


                                       17



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion contains forward-looking statements that are subject to
significant risks and uncertainties  about us, our current and planned products,
our current and  proposed  marketing  and sales,  and our  projected  results of
operations.  There are several important factors that could cause actual results
to differ  materially  from  historical  results  and  percentages  and  results
anticipated  by the  forward-looking  statements.  The  Company  has  sought  to
identify the most significant risks to its business,  but cannot predict whether
or to what  extent  any of such  risks  may be  realized  nor can  there  be any
assurance  that the Company has  identified all possible risks that might arise.
Investors  should  carefully  consider  all  of  such  risks  before  making  an
investment   decision  with  respect  to  the  Company's  stock.  The  following
discussion  and  analysis  should  be read in  conjunction  with  the  financial
statements  of the  Company and notes  thereto.  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 from our Management.

GENERAL OVERVIEW

      We are in the  development  stage and our  efforts  have been  principally
devoted to designing,  developing  manufacturing and marketing advanced lighting
systems that utilize  white (and other) light  emitting  diodes as  illumination
elements.

      We are  developing  and  marketing  new  product  applications  of  diodal
illumination(TM) that demonstrate added value over traditional lighting systems.
Using proprietary technology, we are creating a family of products for emergency
and security  lighting offer extended light life and greater cost  effectiveness
than other  existing  forms of  illumination.  We are  expanding  our  marketing
activity into channels of retail, commercial and institutional sales.

      Our target markets  include  long-term  interim  lighting needs in hotels,
hospitals,  nursing  homes,  airports,  shopping  centers  and  multiple  family
complexes;  long-term  evacuation  solutions  for  theaters,  office  and public
buildings;  reduced  maintenance cost solutions for property managers as applied
to walkway,  corridor or landscape lighting;  and certain sensitive applications
for the military.

      On April 27, 2004, we received an initial  purchase order from the City of
Cleveland  for  the  pilot  phase   implementation  of  our  Emergency  Lighting
Augmentation  System project.  The nature and purpose of our Emergency  Lighting
Augmentation  System  is its  ability  to  provide  up to 60  hours  of light in
bathrooms,  stairwells,  elevators,  corridors,  equipment  rooms  and  interior
offices from its custom  constant  charge battery pack and  expandable  lighting
element  configuration.  The system retrofits into existing fluorescent fixtures
where its patented sensor differentiates  between power off at a wall switch and
a power outage in the building's electrical system. We concluded the pilot phase
in June 2004 and are  working on  proposals  to extend our  installation  of our
Emergency Lighting Augmentation System for the Cleveland  municipality including
 the Cleveland Hopkins International Airport.

      During the second quarter of 2004, we met with officials from the State of
New York who expressed interest in our long-term interim lighting solutions.  We
also met with security  administrators of the Metropolitan Transit Authority and
the Port Authority in the City of New York. The Metropolitan  Transit  Authority
requested that we submit a proposal to provide long term interim  lighting pilot
installations in New York City's subway system to include  passenger  platforms,
rail cars and tunnel accesses. We anticipate a similar proposal request from the
Port  Authority  relative to Newark,  LaGuardia  and JFK  airports  and the Port
Authority Holland Tunnel system.

      Although,  we have been  focused on  emergency  lighting due to power grid
failures and blackout concerns expressed by Homeland Security officials, we have
also made  advances from the retail  segment of our business.  For the Christmas
retail season,  we are developing a camping light  positioning and are marketing
the "CampLamp" to major national retailers.  In addition,  our Home Safety Light
is continuing to gain sales  acceptance  across the broad retail  channel and we
anticipate  launching the next generation of Home Safety Light for the Christmas
season.


                                       18



CRITICAL ACCOUNTING POLICIES

      The  preparation of our  consolidated  financial  statements in conformity
with accounting  principles  generally accepted in the United States requires us
to make  estimates and judgments that affect our reported  assets,  liabilities,
revenues, and expenses, and the disclosure of contingent assets and liabilities.
We base our  estimates and  judgments on  historical  experience  and on various
other  assumptions we believe to be reasonable under the  circumstances.  Future
events,   however,  may  differ  markedly  from  our  current  expectations  and
assumptions.  While  there  are a  number  of  significant  accounting  policies
affecting  our  consolidated  financial  statements;  we believe  the  following
critical accounting policies involve the most complex,  difficult and subjective
estimates and judgments:

      o     stock-based compensation; and

      o     revenue recognition.

STOCK-BASED COMPENSATION

      In  December  2002,  the  FASB  issued  SFAS  No.  148  -  Accounting  for
Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS
No. 123 - Accounting for Stock-Based Compensation, providing alternative methods
of voluntarily transitioning to the fair market value based method of accounting
for stock based employee  compensation.  FAS 148 also requires disclosure of the
method used to account for stock-based  employee  compensation and the effect of
the method in both the annual and interim financial  statements.  The provisions
of this statement  related to transition  methods are effective for fiscal years
ending  after  December  15,  2002,  while  provisions   related  to  disclosure
requirements  are effective in financial  reports for interim periods  beginning
after December 31, 2002.

      The Company  elected to continue to account for  stock-based  compensation
plans using the intrinsic value-based method of accounting prescribed by APB No.
25,  "Accounting  for Stock Issued to Employees,"  and related  interpretations.
Under the  provisions  of APB No. 25,  compensation  expense is  measured at the
grant  date for the  difference  between  the fair  value of the  stock  and the
exercise price.

REVENUE RECOGNITION

      For  revenue  from  product  sales,  the  Company  recognizes  revenue  in
accordance with SEC Staff Accounting  Bulletin No. 101, "Revenue  Recognition in
Financial  Statements"  ("SAB 101").  SAB 101 requires that four basic  criteria
must be met before  revenue can be  recognized:  (1)  persuasive  evidence of an
arrangement  exists;  (2) delivery has occurred;  (3) the selling price is fixed
and determinable; and (4) collectibility is reasonably assured. Determination of
criteria (3) and (4) are based on  management's  judgments  regarding  the fixed
nature of the selling prices of the products delivered and the collectibility of
those  amounts.  Provisions  for discounts  and rebates to customers,  estimated
returns and  allowances,  and other  adjustments  are  provided  for in the same
period the related sales are recorded.  The Company defers any revenue for which
the product has not been  delivered or is subject to refund until such time that
the  Company  and the  customer  jointly  determine  that the  product  has been
delivered or no refund will be required.

RESULTS OF OPERATIONS

REVENUES

We have  generated  operating  revenues  from  operations  of  $97,526  from our
inception.  We believe we will begin  earning  revenues  from  operations in our
second year of actual  operation as the Company  transitions  from a development
stage company to that of an active growth and acquisition stage company

COSTS AND EXPENSES

From our inception  through  September 30, 2004, we have  generated  revenues of
$97,526 from  operations.  We have  incurred  losses of  $6,499,422  during this
period.   These  expenses  were   associated   principally   with   equity-based
compensation  to  employees  and  consultants,  product  development  costs  and
professional services.


                                       19



LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2004,  we had a working  capital  deficit of $900,702.  As a
result of our operating losses from our inception through September 30, 2004, we
generated a cash flow deficit of  $2,257,963  from  operating  activities.  Cash
flows used in investing  activities was $133,492  during the period May 17, 2000
(date of our inception) through September 30, 2004. We met our cash requirements
during this period  through the private  placement  of  $1,848,747,  through the
issuance of our common and  preferred  stock,  and $712,455 from the issuance of
notes payable and advances of $115,245,  net of repayments,  to our officers and
shareholders and advances.

While we have raised capital to meet our working  capital and financing needs in
the past,  additional  financing  is  required  in order to meet our current and
projected cash flow deficits from operations and development.

By adjusting our operations and development to the level of  capitalization,  we
believe  we have  sufficient  capital  resources  to meet  projected  cash  flow
deficits  through the next twelve months.  However,  if  thereafter,  we are not
successful  in generating  sufficient  liquidity  from  operations or in raising
sufficient  capital  resources,  on terms  acceptable  to us,  this could have a
material  adverse effect on our business,  results of operations,  liquidity and
financial condition.

Our independent  certified public accountant has stated in their report included
in our  December  31,  2003  Form  10-KSB,  as  amended,  that we have  incurred
operating  losses  in the  last  two  years,  and  that  we are  dependent  upon
management's  ability to develop  profitable  operations.  These  factors  among
others may raise  substantial  doubt  about our  ability to  continue as a going
concern.

To obtain  funding  for our ongoing  operations,  we entered  into a  Securities
Purchase Agreement with four accredited  investors on September 23, 2004 for the
sale of (i)  $1,500,000  in secured  convertible  notes and (ii) warrants to buy
2,250,000  shares  of our  common  stock.  We  filed  a  registration  statement
pertaining  to  the  resale  of  the  common  stock   underlying  these  secured
convertible  notes and warrants was filed on October 13, 2004. The investors are
obligated to provide us with an aggregate of $1,500,000 as follows:

      o     $500,000 was disbursed on September 23, 2004;

      o     $500,000 was disbursed on October 20; and

      o     $500,000  will be  disbursed  within  five days of the  registration
            statement being declared effective.

Accordingly,  we have received a total of $1,000,000  pursuant to the Securities
Purchase  Agreement.  The  proceeds  received  from  the  sale  of  the  secured
convertible  notes  will be used  for  business  development  purposes,  working
capital needs, pre-payment of interest, payment of consulting and legal fees and
purchasing inventory.

The secured  convertible  notes bear interest at 10%,  mature two years from the
date of issuance,  and are convertible  into our common stock, at the investors'
option, at the lower of (i) $0.72 or (ii) 50% of the average of the three lowest
intraday  trading  prices for the common stock on a principal  market for the 20
trading days before but not including the  conversion  date.  The full principal
amount of the secured  convertible  notes is due upon default under the terms of
secured  convertible  notes. The warrants are exercisable  until five years from
the date of issuance at a purchase  price of $0.50 per share.  In addition,  the
conversion price of the secured  convertible notes and the exercise price of the
warrants  will be  adjusted in the event that we issue  common  stock at a price
below the fixed conversion price,  below market price, with the exception of any
securities  issued in connection  with the Securities  Purchase  Agreement.  The
conversion price of the secured  convertible notes and the exercise price of the
warrants  may be  adjusted  in certain  circumstances  such as if we pay a stock
dividend, subdivide or combine outstanding shares of common stock into a greater
or lesser number of shares, or take such other actions as would otherwise result
in dilution of the selling stockholder's position. The selling stockholders have
contractually  agreed to restrict  their  ability to convert or  exercise  their
warrants  and receive  shares of our common stock such that the number of shares
of common  stock  held by them and their  affiliates  after such  conversion  or
exercise  does not  exceed  4.9% of the then  issued and  outstanding  shares of
common stock. In addition,  we have granted the investors a security interest in
substantially  all of our  assets and  intellectual  property  and  registration
rights.


                                       20



Since the  conversion  price  will be less than the  market  price of the common
stock at the time the  secured  convertible  notes  are  issued,  we  anticipate
recognizing  a charge  relating  to the  beneficial  conversion  feature  of the
secured convertible notes during the quarter in which they are issued, including
the third quarter of fiscal 2004 when $500,000 of secured convertible notes were
issued.

We will still need  additional  investments  in order to continue  operations to
cash flow break even.  Additional  investments  are being sought,  but we cannot
guarantee  that  we  will  be  able  to  obtain  such   investments.   Financing
transactions  may include the issuance of equity or debt  securities,  obtaining
credit facilities, or other financing mechanisms.  However, the trading price of
our common stock and the downturn in the U.S.  stock and debt markets could make
it more  difficult  to obtain  financing  through the issuance of equity or debt
securities. Even if we are able to raise the funds required, it is possible that
we could  incur  unexpected  costs and  expenses,  fail to  collect  significant
amounts owed to us, or experience  unexpected cash requirements that would force
us to seek alternative financing. Further, if we issue additional equity or debt
securities,  stockholders may experience  additional  dilution or the new equity
securities  may  have  rights,  preferences  or  privileges  senior  to those of
existing  holders of our common stock. If additional  financing is not available
or is not available on acceptable  terms, we will have to curtail our operations
again.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

On June 30, 2004,  the  Financial  Accounting  Standards  Board (FASB)  issued a
proposed Statement, Share-Based Payment, an amendment of FASB Statements No. 123
and 95, that would require companies to account for stock-based  compensation to
employees using a fair value method as of the grant date. The proposed statement
addresses the accounting for transactions in which a Company  receives  employee
services  in  exchange  for  equity  instruments  such  as  stock  options,   or
liabilities that are based on the fair value of the Company's equity instruments
or that may be settled  through the issuance of such equity  instruments,  which
includes the  accounting  for  employee  stock  purchase  plans.  This  proposed
statement would eliminate a Company's ability to account for share-based  awards
to employees using APB Opinion 25,  Accounting for Stock Issued to Employees but
would not change  the  accounting  for  transactions  in which a company  issues
equity  instruments for services to non-employees or the accounting for employee
stock ownership plans. The proposed  statement,  if adopted,  would be effective
for awards that are  granted,  modified,  or settled in fiscal  years  beginning
after  December  15,  2004.  The  Company  is in the  process of  assessing  the
potential impact of this proposed statement to the financial statements.

NON-GAAP FINANCIAL MEASURES

The financial  statements  appearing in this quarterly  report on Form 10-QSB do
not contain any financial  measures  which are not in accordance  with generally
accepted accounting procedures.

NEW ACCOUNTING PRONOUNCEMENTS

In  January  2003,  the FASB  issued  interpretation  No. 46,  Consolidation  of
Variable   Interest   Entities  (FIN  46),  as  revised   December  2003.   This
interpretation of Accounting  Research  Bulletin No. 51, Condensed  Consolidated
Financial  Statements,   addresses  consolidation  by  business  enterprises  of
variable interest entities (VIEs) that either: (1) do not have sufficient equity
investment  at risk to permit  the  entity to  finance  its  activities  without
additional  subordinated  financial support, or (2) the equity investors lack an
essential   characteristic   of   a   controlling   financial   interest.   This
interpretation  applies  immediately  to VIEs created after January 31, 2003. It
applies in the first  fiscal  year or interim  period  beginning  after June 15,
2003, to VIEs in which an enterprise holds a variable  interest that it acquired
before  February  1,  2003.  The  application  of FIN 46 did not have a material
effect on our consolidated financial statements.

INFLATION

In the opinion of  management,  inflation  has not had a material  effect on the
Company's financial condition or results of its operations


                                       21



OFF-BALANCE SHEET ARRANGEMENTS

The  Company  does  not  maintain  off-balance  sheet  arrangements  nor does it
participate in non-exchange  traded  contracts  requiring fair value  accounting
treatment.

TRENDS, RISKS AND UNCERTAINTIES

We have sought to identify what we believe to be the most  significant  risks to
our business,  but we cannot  predict  whether,  or to what extent,  any of such
risks may be realized nor can we guarantee that we have  identified all possible
risks that might arise.  Investors  should  carefully  consider all of such risk
factors before making an investment decision with respect to our Common Stock.

CAUTIONARY FACTORS THAT MAY AFFECT FUTURE RESULTS

We provide the  following  cautionary  discussion  of risks,  uncertainties  and
possible inaccurate assumptions relevant to our business and our products. These
are factors  that we think could cause our actual  results to differ  materially
from expected  results.  Other factors besides those listed here could adversely
affect us.

WE HAVE A HISTORY OF LOSSES WHICH MAY CONTINUE,  WHICH MAY NEGATIVELY IMPACT OUR
ABILITY TO ACHIEVE OUR BUSINESS OBJECTIVES.

      We incurred net losses of $1,494,556  for the year ended December 31, 2003
and  $1,336,970 for the year ended December 31, 2002. For the three months ended
September 30, 2004, we incurred a net loss of  $1,239,624.  We cannot assure you
that we can achieve or sustain  profitability  on a quarterly or annual basis in
the future. Our operations are subject to the risks and competition  inherent in
the  establishment  of a business  enterprise.  There can be no  assurance  that
future operations will be profitable.  Revenues and profits, if any, will depend
upon various factors, including whether we will be able to continue expansion of
our  revenue.  We may not achieve  our  business  objectives  and the failure to
achieve such goals would have an adverse impact on us.

IF WE ARE UNABLE TO OBTAIN  ADDITIONAL  FUNDING OUR BUSINESS  OPERATIONS WILL BE
HARMED AND IF WE DO OBTAIN ADDITIONAL  FINANCING OUR THEN EXISTING  SHAREHOLDERS
MAY SUFFER SUBSTANTIAL DILUTION.

      We will  require  additional  funds to  sustain  and  expand our sales and
marketing  activities.  We anticipate  that we will require up to  approximately
$900,000 to fund our continued operations for the next twelve months,  depending
on revenue from operations.  Additional  capital will be required to effectively
support the operations and to otherwise implement our overall business strategy.
There can be no  assurance  that  financing  will be  available in amounts or on
terms  acceptable to us, if at all. The inability to obtain  additional  capital
will  restrict  our  ability to grow and may reduce our  ability to  continue to
conduct business operations. If we are unable to obtain additional financing, we
will  likely be  required to curtail our  marketing  and  development  plans and
possibly  cease our  operations.  Any  additional  equity  financing may involve
substantial dilution to our then existing shareholders.

OUR INDEPENDENT  AUDITORS HAVE EXPRESSED  SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO
CONTINUE  AS A GOING  CONCERN,  WHICH MAY  HINDER OUR  ABILITY TO OBTAIN  FUTURE
FINANCING.

      In their report dated April 6, 2004, our independent  auditors stated that
our  financial  statements  for the year ended  December 31, 2003 were  prepared
assuming that we would continue as a going concern. Our ability to continue as a
going  concern  is an issue  raised as a result of  losses  for the years  ended
December  31,  2003  and  2002  in the  amounts  of  $1,494,556  and  1,336,970,
respectively.  We continue to experience  net operating  losses.  Our ability to
continue  as a going  concern  is subject  to our  ability to  generate a profit
and/or  obtain  necessary  funding from  outside  sources,  including  obtaining
additional  funding  from  the  sale  of our  securities,  increasing  sales  or
obtaining loans and grants from various financial  institutions  where possible.
Our  continued  net operating  losses  increases the  difficulty in meeting such
goals and there can be no assurances that such methods will prove successful.


                                       22



IF WE ARE UNABLE TO RETAIN THE SERVICES OF MESSRS.  EVANS,  SCHMIDT OR RINGO, OR
IF WE  ARE  UNABLE  TO  SUCCESSFULLY  RECRUIT  QUALIFIED  MANAGERIAL  AND  SALES
PERSONNEL  HAVING  EXPERIENCE  IN  BUSINESS,  WE MAY NOT BE ABLE TO CONTINUE OUR
OPERATIONS.

      Our success depends to a significant  extent upon the continued service of
Mr. Donald F. Evans,  our Chief  Executive  Officer,  Mr. Mark D.  Schmidt,  our
President and Mr. John Ringo, our Secretary and Corporate  Counsel.  Loss of the
services of Messrs. Evans, Schmidt or Ringo could have a material adverse effect
on our growth,  revenues,  and prospective  business. We do not maintain key-man
insurance  on the life of  Messrs.  Evans or  Ringo.  In  addition,  in order to
successfully  implement and manage our business plan, we will be dependent upon,
among other  things,  successfully  recruiting  qualified  managerial  and sales
personnel having experience in business.  Competition for qualified  individuals
is intense.  There can be no assurance that we will be able to find, attract and
retain  existing  employees or that we will be able to find,  attract and retain
qualified personnel on acceptable terms.

OUR PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS OWN A CONTROLLING INTEREST IN
OUR VOTING STOCK AND INVESTORS WILL NOT HAVE ANY VOICE IN OUR MANAGEMENT.

      Our officers and directors, in the aggregate,  hold approximately 83.3% of
the voting rights of all outstanding shares of capital stock. As a result, these
stockholders,  acting together,  will have the ability to control  substantially
all matters submitted to our stockholders for approval, including:

      o     election of our board of directors;

      o     removal of any of our directors;

      o     amendment of our certificate of incorporation or bylaws; and

      o     adoption of measures that could delay or prevent a change in control
            or impede a merger, takeover or other business combination involving
            us.

      As a result of their ownership and positions,  our directors and executive
officers  collectively are able to influence all matters  requiring  stockholder
approval,  including  the  election of  directors  and  approval of  significant
corporate transactions. In addition, sales of significant amounts of shares held
by our directors and executive  officers,  or the prospect of these sales, could
adversely  affect  the  market  price of our common  stock.  Management's  stock
ownership  may  discourage  a potential  acquirer  from making a tender offer or
otherwise  attempting  to obtain  control of us,  which in turn could reduce our
stock price or prevent our stockholders  from realizing a premium over our stock
price.

MANY OF OUR  COMPETITORS  ARE  LARGER  AND  HAVE  GREATER  FINANCIAL  AND  OTHER
RESOURCES  THAN WE DO AND THOSE  ADVANTAGES  COULD MAKE IT  DIFFICULT  FOR US TO
COMPETE WITH THEM.

      The  lighting  and  illumination  industry is  extremely  competitive  and
includes  several  companies  that have achieved  substantially  greater  market
shares than we have, and have longer operating  histories,  have larger customer
bases,  and have  substantially  greater  financial,  development  and marketing
resources  than we do. If overall  demand for our  products  should  decrease it
could have a materially adverse affect on our operating results.

OUR  TRADEMARK  AND OTHER  INTELLECTUAL  PROPERTY  RIGHTS MAY NOT BE  ADEQUATELY
PROTECTED OUTSIDE THE UNITED STATES, RESULTING IN LOSS OF REVENUE.

      We believe that our trademarks, whether licensed or owned by us, and other
proprietary rights are important to our success and our competitive position. In
the course of our international expansion, we may, however,  experience conflict
with  various  third  parties who acquire or claim  ownership  rights in certain
trademarks.  We cannot  assure that the actions we have taken to  establish  and
protect  these  trademarks  and other  proprietary  rights  will be  adequate to
prevent imitation of our products by others or to prevent others from seeking to
block sales of our products as a violation  of the  trademarks  and  proprietary
rights of others.  Also, we cannot assure you that others will not assert rights
in, or ownership of, trademarks and other proprietary  rights of ours or that we
will  be  able  to  successfully   resolve  these  types  of  conflicts  to  our
satisfaction. In addition, the laws of certain foreign countries may not protect
proprietary rights to the same extent, as do the laws of the United States.


                                       23



THERE ARE A LARGE NUMBER OF SHARES  UNDERLYING  OUR SECURED  CONVERTIBLE  NOTES,
SERIES A  CONVERTIBLE  PREFERRED  STOCK AND WARRANTS  THAT MAY BE AVAILABLE  FOR
FUTURE SALE AND THE SALE OF THESE  SHARES MAY  DEPRESS  THE MARKET  PRICE OF OUR
COMMON STOCK.

      As of September 22, 2004, we had 19,915,905  shares of common stock issued
and outstanding,  secured  convertible  notes  outstanding that may be converted
into an estimated  3,750,938  shares of common stock at current  market  prices,
series A convertible preferred stock convertible into 8,543,032 shares of common
stock, and outstanding  warrants to purchase  21,834,064 shares of common stock.
Additionally,   we  have  an  obligation  to  sell  secured   convertible  notes
outstanding  that may be converted into an estimated  7,501,876 shares of common
stock at current market prices and issue warrants to purchase  1,500,000  shares
of common stock in the near future. In addition,  the number of shares of common
stock issuable upon conversion of the outstanding  secured convertible notes may
increase if the market price of our stock declines. All of the shares, including
all of the shares  issuable upon conversion of the notes and preferred stock and
upon  exercise of our  warrants,  may be sold without  restriction.  The sale of
these shares may adversely affect the market price of our common stock.

THE  ISSUANCE OF SHARES UPON  CONVERSION  OF THE SECURED  CONVERTIBLE  NOTES AND
SERIES A CONVERTIBLE  PREFERRED  STOCK AND EXERCISE OF OUTSTANDING  WARRANTS MAY
CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO OUR EXISTING STOCKHOLDERS.

      The issuance of shares upon  conversion of the secured  convertible  notes
and series A convertible  preferred stock and exercise of warrants may result in
substantial  dilution to the interests of other  stockholders  since the selling
stockholders  may  ultimately  convert  and  sell the full  amount  issuable  on
conversion.  Although  AJW  Partners,  LLC,  AJW  Qualified  Partners,  LLC, AJW
Offshore,  Ltd.,  and New  Millennium  Partners  II, LLC may not  convert  their
secured  convertible  notes and/or exercise their warrants if such conversion or
exercise would cause them to own more than 4.9% of our outstanding common stock,
this  restriction  does not prevent AJW Partners,  LLC, AJW Qualified  Partners,
LLC, AJW Offshore,  Ltd.,  and New Millennium  Partners II, LLC from  converting
and/or  exercising  some of their holdings and then converting the rest of their
holdings.  In this way, AJW  Partners,  LLC, AJW  Qualified  Partners,  LLC, AJW
Offshore,  Ltd., and New  Millennium  Partners II, LLC could sell more than this
limit while never  holding more than this limit.  There is no upper limit on the
number  of shares  that may be issued  which  will  have the  effect of  further
diluting the  proportionate  equity  interest and voting power of holders of our
common stock, including investors in this offering.

IF WE ARE REQUIRED FOR ANY REASON TO REPAY OUR OUTSTANDING  SECURED  CONVERTIBLE
NOTES,  WE WOULD BE REQUIRED TO DEPLETE OUR WORKING  CAPITAL,  IF AVAILABLE,  OR
RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE SECURED  CONVERTIBLE  NOTES, IF
REQUIRED,  COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE
OF SUBSTANTIAL ASSETS.

      In September 2004, we entered into a Securities Purchase Agreement for the
sale of an  aggregate  of  $1,500,000  principal  amount of secured  convertible
notes. The secured convertible notes are due and payable, with 10% interest, two
years from the date of  issuance,  unless  sooner  converted  into shares of our
common stock.  Although we currently  have $500,000  secured  convertible  notes
outstanding,   the  investors  are  obligated  to  purchase  additional  secured
convertible  notes in the  aggregate of  $1,000,000.  In addition,  any event of
default  such as our failure to repay the  principal  or interest  when due, our
failure to issue  shares of common  stock upon  conversion  by the  holder,  our
failure  to timely  file a  registration  statement  or have  such  registration
statement declared effective, breach of any covenant, representation or warranty
in the Securities Purchase Agreement or related convertible note, the assignment
or  appointment  of a receiver to control a substantial  part of our property or
business,  the filing of a money  judgment,  writ or similar process against our
company in excess of $50,000,  the  commencement  of a  bankruptcy,  insolvency,
reorganization or liquidation  proceeding  against our company and the delisting
of our common stock could require the early repayment of the secured convertible
notes,  including a default  interest rate of 15% on the  outstanding  principal
balance  of the notes if the  default  is not  cured  with the  specified  grace
period. We anticipate that the full amount of the secured convertible notes will
be converted  into shares of our common stock,  in accordance  with the terms of
the  secured  convertible  notes.  If we were  required  to  repay  the  secured
convertible  notes,  we would be required to use our limited working capital and
raise additional funds. If we were unable to repay the notes when required,  the
note holders could  commence legal action against us and foreclose on all of our
assets to recover the amounts due.  Any such action would  require us to curtail
or cease operations.


                                       24


IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS,  WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF  BROKER-DEALERS  TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR  SECURITIES IN
THE SECONDARY MARKET.

      Companies trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports  under  Section 13, in order to maintain  price
quotation  privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements,  we could be removed from the OTC Bulletin Board. As
a result,  the market liquidity for our securities  could be severely  adversely
affected by limiting the ability of  broker-dealers  to sell our  securities and
the ability of stockholders to sell their securities in the secondary market.

OUR  COMMON  STOCK IS  SUBJECT  TO THE  "PENNY  STOCK"  RULES OF THE SEC AND THE
TRADING MARKET IN OUR  SECURITIES IS LIMITED,  WHICH MAKES  TRANSACTIONS  IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

      The  Securities  and  Exchange  Commission  has  adopted  Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes  relevant to us,
as any equity  security  that has a market price of less than $5.00 per share or
with an  exercise  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  For any  transaction  involving a penny stock,  unless exempt,  the
rules require:

      o     that a broker or dealer approve a person's  account for transactions
            in penny stocks; and

      o     the broker or dealer  receive from the investor a written  agreement
            to the  transaction,  setting forth the identity and quantity of the
            penny stock to be purchased.

In order to approve a person's  account for  transactions  in penny stocks,  the
broker or dealer must:

      o     obtain financial information and investment experience objectives of
            the person; and

      o     make a  reasonable  determination  that  the  transactions  in penny
            stocks are  suitable  for that person and the person has  sufficient
            knowledge  and  experience  in  financial  matters  to be capable of
            evaluating the risks of transactions in penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

      o     sets  forth  the  basis on  which  the  broker  or  dealer  made the
            suitability determination; and

      o     that the broker or dealer received a signed,  written agreement from
            the investor prior to the transaction.

Generally,  brokers may be less willing to execute  transactions  in  securities
subject  to the  "penny  stock"  rules.  This  may  make it more  difficult  for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

      Disclosure  also has to be made  about  the  risks of  investing  in penny
stocks  in  both  public  offerings  and in  secondary  trading  and  about  the
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.


                                       25


RECENT ACCOUNTING PRONOUNCEMENTS

On March 31, 2004,  the  Financial  Accounting  Standards  Board (FASB) issued a
proposed Statement, Share-Based Payment, an amendment of FASB Statements No. 123
and 95, that would require companies to account for stock-based  compensation to
employees using a fair value method as of the grant date. The proposed statement
addresses the accounting for transactions in which a company  receives  employee
services  in  exchange  for  equity  instruments  such  as  stock  options,   or
liabilities that are based on the fair value of the company's equity instruments
or that may be settled  through the issuance of such equity  instruments,  which
includes the  accounting  for  employee  stock  purchase  plans.  This  proposed
statement would eliminate a company's ability to account for share-based  awards
to employees using APB Opinion 25,  Accounting for Stock Issued to Employees but
would not change  the  accounting  for  transactions  in which a company  issues
equity  instruments for services to non-employees or the accounting for employee
stock ownership plans. The proposed  statement,  if adopted,  would be effective
for awards that are granted, modified, or settled in fiscal years after December
15, 2004.  The Company is in the process of assessing  the  potential  impact of
this proposed statement to the financial statements.

PRODUCT RESEARCH AND DEVELOPMENT

We  anticipate  performing  further  research  and  development  for our exiting
products during the next twelve months. Those activities include the ReliaBright
Emergency Lighting Augmentation System, ReliaBright Solo, Bright Owl Home Safety
Light,  Bright Owl Mini,  Night Owl Power Outage  Adapter and  VersaBright  Area
Light These projected  expenditures  are dependent upon our generating  revenues
and obtaining sources of financing in excess of our existing capital  resources.
There is no guarantee  that we will be successful in raising the funds  required
or generating  revenues  sufficient to fund the projected  costs of research and
development during the next twelve months

TRENDS, RISKS AND UNCERTAINTIES

We have sought to identify what we believe to be the most  significant  risks to
our business,  but we cannot  predict  whether,  or to what extent,  any of such
risks may be realized nor can we guarantee that we have  identified all possible
risks that might arise.  Investors  should  carefully  consider all of such risk
factors before making an investment decision with respect to our Common Stock.


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ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:  As of September 30, 2004, the
Company's  management  carried out an evaluation,  under the  supervision of the
Company's  Chief  Executive  Officer  and the  Chief  Financial  Officer  of the
effectiveness  of the design and operation of the Company's system of disclosure
controls  and  procedures  pursuant to the  Securities  and Exchange  Act,  Rule
13a-15(e) and 15d-15(e) under the Exchange Act). Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure  controls  and  procedures  were  effective,  as of the date of their
evaluation,  for the purposes of recording,  processing,  summarizing and timely
reporting material  information required to be disclosed in reports filed by the
Company under the Securities Exchange Act of 1934.

CHANGES IN INTERNAL  CONTROLS:  There were no changes in internal  controls over
financial  reporting,  known to the Chief  Executive  Officer or Chief Financial
Officer  that  occurred  during  the  period  covered  by this  report  that has
materially  affected,  or is likely to materially effect, the Company's internal
control over financial reporting.


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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From  time to time,  we may  become  involved  in  various  lawsuits  and  legal
proceedings which arise in the ordinary course of business.  However, litigation
is subject to inherent  uncertainties,  and an adverse  result in these or other
matters may arise from time to time that may harm our business. We are currently
not aware of any such legal  proceedings  or claims  that we believe  will have,
individually  or in the  aggregate,  a material  adverse affect on our business,
financial condition or operating results.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

On July  14,  2004,  we  issued  100,000  shares  of our  Common  Stock  to John
Hanemaayer  at $0.10 per  share.  This  issuance  was exempt  from  registration
pursuant to Section 4(2) of the Securities Act.

On July 15, 2004, we issued 100,000 stock purchase warrants exercisable at $0.20
per share to Michael G. Konicek for services rendered.  This issuance was exempt
from registration pursuant to Section 4(2) of the Securities Act.

On July 30, 2004, we issued  100,000 shares of our Common Stock to David Bomberg
pursuant to a consulting  agreement.  This  issuance  was a private  transaction
pursuant to Section 4(2) of the Securities Act.

On August  24,  2004,  we issued  701,000  shares of our  Common  Stock  against
exercise  of  warrants  at $0.25  per  share.  This  issuance  was  exempt  from
registration pursuant to Section 4(2) of the Securities Act.

On August 24, 2004,  holders of 4 shares of our Series A  Convertible  Preferred
Stock exercised their rights to convert into 200,000 shares of our Common Stock.
This  issuance  was exempt from  registration  pursuant  to Section  4(2) of the
Securities Act.

On September  17, 2004,  we issued  200,000  shares of our Common Stock  against
exercise  of  warrants  at $0.25  per  share.  This  issuance  was  exempt  from
registration pursuant to Section 4(2) of the Securities Act.

On September  17,2004,  we issued 150,000 stock  purchase  warrants to Donald B.
Hutton for services  rendered at $0.25 per share.  This issuance was exempt from
registration pursuant to Section 4(2) of the Securities Act.

On September 23, 2004, pursuant to a securities  purchase  agreement,  we issued
277,500,  120,000,  330,000 and 22,500 stock purchase  warrants to AJW Offshore,
LTD, AJW Partners,  LLC, AJW Qualified  Partners,  LLC and New Millenium Capital
Partners II, LLC,  respectively,  all of which have an exercise  price of $0.50.
This  issuance  was exempt from  registration  pursuant  to Section  4(2) of the
Securities Act.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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

None

ITEM 5. OTHER INFORMATION.

None


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ITEM 6. EXHIBITS

            31.1 -  Certification  of Chief Executive  Officer  pursuant to Rule
            13a-14 and Rule  15d-14(a),  promulgated  under the  Securities  and
            Exchange Act of 1934, as amended

            31.2 -  Certification  of Chief Financial  Officer  pursuant to Rule
            13a-14  and Rule 15d 14(a),  promulgated  under the  Securities  and
            Exchange Act of 1934, as amended

            32.1 - Certification  pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant  to Section  906 of the  Sarbanes-Oxley  Act of 2002 (Chief
            Executive Officer)

            32.2 - Certification  pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant  to Section  906 of the  Sarbanes-Oxley  Act of 2002 (Chief
            Financial Officer)


                                       29



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.


                                CYBERLUX CORPORATION

Date:  November 16, 2004        By: /S/ DONALD F. EVANS
                                    --------------------
                                    Donald F. Evans
                                    Chief Executive Officer


Date:  November 16, 2004        By: /S/ DAVID D. DOWNING
                                    ---------------------
                                    David D. Downing
                                    Chief Financial Officer


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