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<SEC-DOCUMENT>0001082324-04-000002.txt : 20040514
<SEC-HEADER>0001082324-04-000002.hdr.sgml : 20040514
<ACCEPTANCE-DATETIME>20040514084434
ACCESSION NUMBER:		0001082324-04-000002
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20040331
FILED AS OF DATE:		20040514

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PASW INC
		CENTRAL INDEX KEY:			0001082324
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-COMPUTER PROGRAMMING SERVICES [7371]
		IRS NUMBER:				770390628
		STATE OF INCORPORATION:			CA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26895
		FILM NUMBER:		04804588

	BUSINESS ADDRESS:	
		STREET 1:		703 RANCHO CONEJO BLVD
		CITY:			NEWBURY PARK
		STATE:			CA
		ZIP:			75081
		BUSINESS PHONE:		8054997722

	MAIL ADDRESS:	
		STREET 1:		703 RANCHO CONEJO BLVD
		STREET 2:		10390 SANTA MONICA BLVD, FOURTH FL
		CITY:			NEWBURY PARK
		STATE:			CA
		ZIP:			75801

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	PACIFIC SOFTWORKS INC
		DATE OF NAME CHANGE:	19990322
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>paswq104.htm
<TEXT>
<html>

<head>
<title></title>
</head>

<body LINK="#0000ff">
<font SIZE="3"><b>

<p ALIGN="CENTER">UNITED STATES</p>

<p ALIGN="CENTER">SECURITIES AND EXCHANGE COMMISSION</p>

<p ALIGN="CENTER">WASHINGTON, D.C. 20549</p>

<p ALIGN="CENTER">FORM 10-QSB</p>

<blockquote>
  <p align="center">QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE</p>
</blockquote>

<p ALIGN="CENTER">SECURITIES EXCHANGE ACT OF 1934</p>

<p ALIGN="CENTER">For the quarterly period ended March 31, 2004</p>

<p ALIGN="CENTER">OR</p>

<p ALIGN="CENTER">( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934</p>

<p ALIGN="CENTER">Commission file number 333-75137</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">(Exact name of registrant as specified in its charter)</p>
</b></font>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="903">
  <tr>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="471" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">California</b></font></td>
    <td WIDTH="387" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">77-0390628</b></font></td>
  </tr>
  <tr>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="471" VALIGN="TOP"><b><p ALIGN="CENTER">(State or other jurisdiction of<font
    SIZE="3"> incorporation or organization)</font></b></td>
    <td WIDTH="387" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">(I.R.S. Employer
    Identification No.)</b></font></td>
  </tr>
</table>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="905">
  <tr>
    <td WIDTH="6" VALIGN="TOP"></td>
    <td WIDTH="466" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">9453 Alcosta Boulevard </p>
    <p ALIGN="CENTER">San Ramon, California</b></font></td>
    <td WIDTH="391" VALIGN="BOTTOM"><font SIZE="3"><b><p ALIGN="CENTER">94583</b></font></td>
  </tr>
  <tr>
    <td WIDTH="6" VALIGN="TOP"></td>
    <td WIDTH="466" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">(Address of principal
    executive offices)</b></font></td>
    <td WIDTH="391" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">(Zip Code)</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p ALIGN="CENTER">(925) 828-0934</p>

<p ALIGN="CENTER">Registrant&#146;s telephone number, including area code)</p>

<p>Indicate by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days.</p>

<p>Yes _<u> X</u>__ No____</p>

<p>There were 4,997,400 shares outstanding of the registrant&#146;s Common Stock, par
value $.001 per share, as of April 26, 2004.</p>

<p ALIGN="CENTER">&nbsp;</p>
</b></font>

<p ALIGN="CENTER"><font SIZE="3"><b>PASW, INC.</b></font></p>
<div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="618">
  <tr>
    <td WIDTH="35" VALIGN="TOP"></td>
    <td WIDTH="496" VALIGN="BOTTOM"><font SIZE="3"><b>&nbsp;<p ALIGN="CENTER">INDEX</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">Page No.</b></font></td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP"></td>
    <td WIDTH="496" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">PART I &#150; FINANCIAL
    INFORMATION</b></font></td>
    <td WIDTH="45" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item l. Financial Statements
    (Unaudited):</b></font></td>
    <td WIDTH="45" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP"></td>
    <td WIDTH="496" VALIGN="TOP"><font SIZE="3"><b>Balance Sheets at March 31, 2004 and
    December 31, 2003</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">3</b></font></td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP"></td>
    <td WIDTH="496" VALIGN="TOP"><font SIZE="3"><b>Statements of Operations for the three
    months ended March 31, 2004 and 2003 </b></font></td>
    <td WIDTH="45" VALIGN="BOTTOM"><font SIZE="3"><b><p ALIGN="CENTER">5</b></font></td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP"></td>
    <td WIDTH="496" VALIGN="TOP"><font SIZE="3"><b>Statements of Cash Flows for the three
    months ended March 31, 2004 and 2003</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">7</b></font></td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP"></td>
    <td WIDTH="496" VALIGN="TOP"><font SIZE="3"><b>Notes to Condensed Financial Statements</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">8</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2" HEIGHT="34"><b><font SIZE="3">Item 2.
    Management&#146;s Discussion and Analysis of Financial Condition and</font> <font SIZE="3">Plan
    of Operations </font></b></td>
    <td WIDTH="45" VALIGN="TOP" HEIGHT="34"><font SIZE="3"><b><p ALIGN="CENTER">10</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2" HEIGHT="23"><font SIZE="3"><b>Item 3.
    Quantitative and Qualitative Disclosures About Market Risk </b></font></td>
    <td WIDTH="45" VALIGN="TOP" HEIGHT="23"><font SIZE="3"><b><p ALIGN="CENTER">13</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2" HEIGHT="24"><font SIZE="3"><b>Item 4. Controls
    and Procedures</b></font></td>
    <td WIDTH="45" VALIGN="TOP" HEIGHT="24"><font SIZE="3"><b><p ALIGN="CENTER">15</b></font></td>
  </tr>
  <tr>
    <td WIDTH="35" VALIGN="TOP" HEIGHT="15"></td>
    <td WIDTH="496" VALIGN="TOP" HEIGHT="15"><font SIZE="3"><b><p ALIGN="CENTER">PART II
    &#150; OTHER INFORMATION</b></font></td>
    <td WIDTH="45" VALIGN="TOP" HEIGHT="15"></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 1. Legal Proceedings</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">16</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 2. Changes in Securities
    and Use of Proceeds</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">16</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 3. Defaults Upon Senior
    Securities</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">16</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 4. Submission of Matters
    to a Vote of Security Holders</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">16</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 5. Other Information</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">16</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Item 6. Exhibits and Reports on
    Form 8-K</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">16</b></font></td>
  </tr>
  <tr>
    <td WIDTH="545" VALIGN="TOP" COLSPAN="2"><font SIZE="3"><b>Signatures</b></font></td>
    <td WIDTH="45" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="CENTER">17</b></font></td>
  </tr>
</table>
</center></div><font SIZE="3"><b>

<p align="center">- 2 -</p>

<p ALIGN="CENTER">PART I &#150; FINANCIAL INFORMATION</p>

<p>ITEM 1. FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</p>

<p ALIGN="CENTER">(Unaudited)</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
</b></font>

<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="595">
  <tr>
    <td WIDTH="336" VALIGN="top" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="99" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31,<br>
    2004</b></font></td>
    <td WIDTH="6" VALIGN="top" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="98" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">December 31, <br>
    2003</b></font></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP" HEIGHT="20"><font SIZE="3"><b>ASSETS</b></font></td>
    <td WIDTH="99" VALIGN="TOP" HEIGHT="20"></td>
    <td WIDTH="6" VALIGN="TOP" HEIGHT="20"></td>
    <td WIDTH="98" VALIGN="TOP" HEIGHT="20"></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP"><font SIZE="3"><b>Current assets:</b></font></td>
    <td WIDTH="99" VALIGN="TOP"></td>
    <td WIDTH="6" VALIGN="TOP"></td>
    <td WIDTH="98" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP"><font SIZE="3"><b>Cash and cash equivalents</b></font></td>
    <td WIDTH="99" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">$
    200,510</b></font></td>
    <td WIDTH="6" VALIGN="baseline" align="right"></td>
    <td WIDTH="98" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">$
    189,053</b></font></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b>Accounts
    receivable, net of allowance of $0 and $0</b></font></td>
    <td WIDTH="99" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">11,182</b></font></td>
    <td WIDTH="6" VALIGN="bottom" align="right" style="border-bottom: thin solid">&nbsp;&nbsp;
    </td>
    <td WIDTH="98" VALIGN="bottom" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">26,470</b></font></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP"><font SIZE="3"><b>Total current assets</b></font></td>
    <td WIDTH="99" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">211,692</b></font></td>
    <td WIDTH="6" VALIGN="baseline" align="right"></td>
    <td WIDTH="98" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">215,523</b></font></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP"></td>
    <td WIDTH="99" VALIGN="baseline" align="right"></td>
    <td WIDTH="6" VALIGN="baseline" align="right"></td>
    <td WIDTH="98" VALIGN="baseline" align="right"></td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP" HEIGHT="24"><font SIZE="3"><b>Other assets</b></font></td>
    <td WIDTH="99" VALIGN="baseline" HEIGHT="24" align="right">&nbsp; </td>
    <td WIDTH="6" VALIGN="baseline" HEIGHT="24" align="right">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </td>
    <td WIDTH="98" VALIGN="baseline" HEIGHT="24" align="right">&nbsp; </td>
  </tr>
  <tr>
    <td WIDTH="336" VALIGN="TOP" HEIGHT="24"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><b>Total
    assets</b></font></td>
    <td WIDTH="99" VALIGN="baseline" HEIGHT="24" align="right"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 211,692</b></font></td>
    <td WIDTH="6" VALIGN="baseline" HEIGHT="24" align="right"
    style="border-top: thin solid; border-bottom: medium double">&nbsp;&nbsp; </td>
    <td WIDTH="98" VALIGN="baseline" HEIGHT="24" align="right"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 215,523</b></font></td>
  </tr>
</table>
<b><font FACE="Courier New" SIZE="3">

<p>&nbsp;</p>
</font><font SIZE="3">

<p>See accompanying notes to condensed financial statements.</p>

<p align="center">- 3 -</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED BALANCE SHEETS</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                    <p>(Unaudited)</p>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
</font></b>

<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="592">
  <tr>
    <td WIDTH="355" VALIGN="TOP" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="79" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">&nbsp;</p>
    <p ALIGN="CENTER">March 31,<br>
    2004</b></font></td>
    <td WIDTH="3" VALIGN="bottom" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="99" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">December 31, <br>
    2003</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>LIABILITIES AND STOCKHOLDERS&#146;EQUITY</b></font></td>
    <td WIDTH="79" VALIGN="TOP"></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="99" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Current liabilities:</b></font></td>
    <td WIDTH="79" VALIGN="TOP"></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="99" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Accounts payable and accrued expenses</b></font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 81,896</b></font></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="99" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 111,130</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Advances payable &#150; related party</b></font></td>
    <td WIDTH="79" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">32,075</b></font></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="99" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">32,075</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b>Total current liabilities</b></font></td>
    <td WIDTH="79" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">113,971</b></font></td>
    <td WIDTH="3" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid">&nbsp;
    </td>
    <td WIDTH="99" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">143,205</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP" HEIGHT="20"><font SIZE="3"><b>Commitments and contingencies</b></font></td>
    <td WIDTH="79" VALIGN="TOP" HEIGHT="20"></td>
    <td WIDTH="3" VALIGN="TOP" HEIGHT="20"></td>
    <td WIDTH="99" VALIGN="TOP" HEIGHT="20"></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Stockholders&#146; equity:</b></font></td>
    <td WIDTH="79" VALIGN="TOP"></td>
    <td WIDTH="3" VALIGN="TOP"></td>
    <td WIDTH="99" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Preferred stock, par value $.01 per share,
    10,000,000 shares authorized; no shares outstanding</b></font></td>
    <td WIDTH="79" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
    <td WIDTH="3" VALIGN="bottom" align="right"></td>
    <td WIDTH="99" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">0</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Common stock, par value $.001 per share,
    50,000,000 shares authorized; 4,997,400 and 4,997,400 shares issued and outstanding</b></font></td>
    <td WIDTH="79" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">4,998</b></font></td>
    <td WIDTH="3" VALIGN="bottom" align="right"></td>
    <td WIDTH="99" VALIGN="bottom" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">4,998</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Additional paid-in capital</b></font></td>
    <td WIDTH="79" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">6,398,754</b></font></td>
    <td WIDTH="3" VALIGN="baseline" align="right"></td>
    <td WIDTH="99" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">6,398,754</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Accumulated deficit</b></font></td>
    <td WIDTH="79" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">(6,311,720)</b></font></td>
    <td WIDTH="3" VALIGN="baseline" align="right"></td>
    <td WIDTH="99" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">(6,332,731)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP"><font SIZE="3"><b>Cumulative adjustment for currency
    translation</b></font></td>
    <td WIDTH="79" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="right">5,689 </b></font></td>
    <td WIDTH="3" VALIGN="baseline" align="right">&nbsp; </td>
    <td WIDTH="99" VALIGN="baseline" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">1,297</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP" style="border-top: thin solid; border-bottom: thin"><font
    SIZE="3"><b>Total stockholders&#146; equity</b></font></td>
    <td WIDTH="79" VALIGN="baseline" align="right"
    style="border-top: thin solid; border-bottom: thin"><font SIZE="3"><b><p ALIGN="RIGHT">97,721</b></font></td>
    <td WIDTH="3" VALIGN="baseline" align="right"
    style="border-top: thin solid; border-bottom: thin">&nbsp; </td>
    <td WIDTH="99" VALIGN="baseline" align="right"
    style="border-top: thin solid; border-bottom: thin"><font SIZE="3"><b><p ALIGN="RIGHT">72,318</b></font></td>
  </tr>
  <tr>
    <td WIDTH="355" VALIGN="TOP" style="border-top: thin solid; border-bottom: medium double">&nbsp;&nbsp;&nbsp;&nbsp;
    </td>
    <td WIDTH="79" VALIGN="baseline" align="right"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 211,692</b></font></td>
    <td WIDTH="3" VALIGN="baseline" align="right"
    style="border-top: thin solid; border-bottom: medium double">&nbsp; </td>
    <td WIDTH="99" VALIGN="baseline" align="right"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 215,523</b></font></td>
  </tr>
</table>
<b><font SIZE="3">

<p>See accompanying notes to condensed financial statements.</p>
</font><font FACE="Courier New" SIZE="3">

<p align="center">&nbsp;</p>
</font><font SIZE="3">

<p align="center">- 4 -</p>

<p>&nbsp;</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF OPERATIONS</p>

<p align="center">(Unaudited)</p>
</font></b>

<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="607">
  <tr>
    <td WIDTH="60%" VALIGN="TOP">&nbsp;&nbsp; </td>
    <td WIDTH="40%" VALIGN="top" COLSPAN="3" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">For the Three Months Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="top" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31,<br>
    2004</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31,<br>
    2003</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" HEIGHT="5"></td>
    <td WIDTH="18%" VALIGN="TOP" HEIGHT="5"></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="5"></td>
    <td WIDTH="19%" VALIGN="TOP" HEIGHT="5"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Revenue - Royalties </b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 41,792 </b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 46,844 </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b>Cost of
    revenue - Royalty fees</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><p align="right">-</td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><p align="right">-</td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"><font SIZE="3"><b>Gross profit</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" align="right"><font SIZE="3"><b><p ALIGN="right">41,792</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" align="right">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP" align="right"><font SIZE="3"><b><p ALIGN="right">46,844</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b>Expenses
    - Selling, general and administrative</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">20,782</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="19%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="right">40,984</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" HEIGHT="42"><font SIZE="3"><b>Income from operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" HEIGHT="42" align="right"><font SIZE="3"><b><p ALIGN="right">21,010</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="42" align="right">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP" HEIGHT="42" align="right"><font SIZE="3"><b><p ALIGN="RIGHT">5,680</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" style="border-bottom: thin solid"><font SIZE="3"><b>Other
    income:<p>Gain on sale of fixed assets &#150; net of depreciation</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">&nbsp;</p>
    <p ALIGN="right">-</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,627 </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b>Gain from continuing operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b><p ALIGN="RIGHT">21,010</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="19">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b><p ALIGN="RIGHT">10,487</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b>Loss from discontinued
    operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b><p ALIGN="RIGHT">-</b></font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="19">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b><p ALIGN="RIGHT">(3,207)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" HEIGHT="19"><font SIZE="3"><b>Income taxes</b></font></td>
    <td WIDTH="18%" VALIGN="TOP" HEIGHT="19"><p align="right"><font SIZE="3"><b>- </b></font></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="19">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP" HEIGHT="19"><p align="right"><font SIZE="3"><b>- </b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b>Net income (loss)</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 21,010</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double">
    &nbsp; &nbsp; </td>
    <td WIDTH="19%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 7,280</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" style="border-bottom: medium double"><font SIZE="3"><b>Net
    income (loss) per common share:<p>Basic and diluted</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.00</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: medium double">&nbsp; </td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.00</b></font></td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="18%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="19%" VALIGN="TOP">&nbsp; </td>
  </tr>
  <tr>
    <td WIDTH="60%" VALIGN="TOP" style="border-bottom: medium double"><font SIZE="3"><b>Weighted
    average common stock shares outstanding Basic and diluted</b></font></td>
    <td WIDTH="18%" VALIGN="bottom" style="border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,997,400</b></font></td>
    <td WIDTH="3%" VALIGN="bottom" style="border-bottom: medium double">&nbsp; </td>
    <td WIDTH="19%" VALIGN="bottom" style="border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,997,400</b></font></td>
  </tr>
</table>
<font SIZE="3"><b>

<p>See accompanying notes to condensed financial statements.</p>

<p align="center">- 5 -</p>

<p>&nbsp;</p>

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</p>

<p align="center">(Unaudited)</p>
</b></font>

<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="571">
  <tr>
    <td WIDTH="65%" VALIGN="TOP">&nbsp;&nbsp; </td>
    <td WIDTH="35%" VALIGN="top" COLSPAN="3" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">For the Three Months Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="top" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="16%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31, 2004</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="16%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31, 2003</b></font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP" HEIGHT="4"></td>
    <td WIDTH="16%" VALIGN="TOP" HEIGHT="4"></td>
    <td WIDTH="3%" VALIGN="TOP" HEIGHT="4"></td>
    <td WIDTH="16%" VALIGN="TOP" HEIGHT="4"></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP"><font SIZE="3"><b>Net income</b></font></td>
    <td WIDTH="16%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 21,010</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="16%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 7,280</b></font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP"><font SIZE="3"><b>Other comprehensive income (loss):</b></font></td>
    <td WIDTH="16%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="16%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="TOP"><blockquote>
      <font SIZE="3"><b><p>Foreign currency translation adjustment</b></font></p>
    </blockquote>
    </td>
    <td WIDTH="16%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,392</b></font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="16%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">(5,379)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b>Comprehensive income </b></font></td>
    <td WIDTH="16%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="right">$ 25,402</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double">&nbsp;
    </td>
    <td WIDTH="16%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><p
    align="right"><font SIZE="3"><b>$ 1,901</b></font></td>
  </tr>
</table>
<b><font SIZE="3">

<p>&nbsp;</p>

<p>See accompanying notes to condensed financial statements.</p>
</font><font FACE="Courier New" SIZE="3">

<p align="center"></font><font SIZE="3">- 6 -</font><font FACE="Courier New" SIZE="3"></p>
</font><font SIZE="3">

<p>&nbsp;</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                    <p>PASW, INC.</p>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>

<p ALIGN="CENTER">CONSOLIDATED STATEMENTS OF CASH FLOWS</p>

<blockquote>
  <blockquote>
    <blockquote>
      <blockquote>
        <blockquote>
          <blockquote>
            <blockquote>
              <blockquote>
                <blockquote>
                  <blockquote>
                    <p>(Unaudited)</p>
                  </blockquote>
                </blockquote>
              </blockquote>
            </blockquote>
          </blockquote>
        </blockquote>
      </blockquote>
    </blockquote>
  </blockquote>
</blockquote>
</font></b>

<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="625">
  <tr>
    <td WIDTH="65%" VALIGN="TOP">&nbsp;&nbsp; </td>
    <td WIDTH="35%" VALIGN="top" COLSPAN="3" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">For the Three Months Ended </b></font></td>
  </tr>
  <tr>
    <td WIDTH="65%" VALIGN="top" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="16%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31, 2004</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="16%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">March 31, 2003</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Cash flows from operating activities:<p>Continuing
    operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Net income (loss)</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 21,010</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">$ 10,487</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Adjustments to reconcile net loss to net
    cash used in operating activities:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>(Increase) decrease in assets:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Accounts receivable</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">15,288</b></font></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">21,803</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Prepaid expenses</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><p align="right">-</td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">66</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Sale of fixed assets </b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><p align="right">-</td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,242</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Increase (decrease) in liabilities:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b>Accounts
    payable and accrued expenses</b></font></td>
    <td WIDTH="18%" VALIGN="top" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">( 29,233)</b></font></td>
    <td WIDTH="3%" VALIGN="top" align="right" style="border-bottom: thin solid">&nbsp; &nbsp; </td>
    <td WIDTH="17%" VALIGN="top" align="right" style="border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">(27,240)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">7,065 </b></font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="right">9,358</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Loss from discontinued operations</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><u><b><p ALIGN="RIGHT"></b></u></font>-</td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><u><p ALIGN="RIGHT"></u>(3,207) </b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b>Net cash used in operating activities </b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="RIGHT">7,065</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid">&nbsp;
    &nbsp;&nbsp; </td>
    <td WIDTH="17%" VALIGN="top" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="right">6,151</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Cash flows from investing activities:</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b>Net cash
    from (used) in investing activities</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT"></b></font>-</td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="17%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">-</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Cash flows from financing activities</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP"></td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b>Net cash
    provided by financing activities</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">-</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="17%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">-</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"></td>
    <td WIDTH="18%" VALIGN="TOP"></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b>Effect of
    exchange rate changes on cash</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">4,392</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-bottom: thin solid">&nbsp; </td>
    <td WIDTH="17%" VALIGN="top" style="border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="RIGHT">(5,735)</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Net increase (decrease) in cash</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">11,457</b></font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">416</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="TOP"><font SIZE="3"><b>Cash &#150; Beginning</b></font></td>
    <td WIDTH="18%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">189,053</b></font></td>
    <td WIDTH="3%" VALIGN="TOP">&nbsp;&nbsp;&nbsp; </td>
    <td WIDTH="17%" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">98,901</b></font></td>
  </tr>
  <tr>
    <td WIDTH="62%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b>Cash &#150; Ending</b></font></td>
    <td WIDTH="18%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 200,510</b></font></td>
    <td WIDTH="3%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double">&nbsp;
    &nbsp;&nbsp; </td>
    <td WIDTH="17%" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="RIGHT">$ 99,317</b></font></td>
  </tr>
</table>
<b><font SIZE="3">

<p>Supplemental non-cash financing activities: None</p>

<p>See accompanying notes to condensed financial statements.</p>
</font><font FACE="Courier New" SIZE="3">

<p align="center"></font><font SIZE="3">- 7 -</p>
</font><font FACE="Courier New" SIZE="3">

<p>&nbsp;</p>
</font><font SIZE="3">

<p ALIGN="CENTER">PASW, INC.</p>

<p ALIGN="CENTER">NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</p>

<p ALIGN="CENTER">(UNAUDITED)</p>
</b><u>

<p>General</p>
</u>

<p>Certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States
have been condensed or omitted. Results of operations for the interim periods presented
are not necessarily indicative of results which may be expected for any other interim
period or for the year as a whole. The information contained in this Form 10-QSB should be
read in conjunction with audited financial statements and related notes for the year ended
December 31, 2003 which are contained in the Company&#146;s Annual Report on Form 10-KSB
filed with the Securities and Exchange Commission (the &quot;SEC&quot;) on March 29, 2004,
and the Company&#146;s Registration Statement on Form SB-2 filed with the Securities and
Exchange Commission on July 29, 1999 (File 333-75137).</p>

<p>The accompanying unaudited interim financial statements include all adjustments which
are, in the opinion of management, necessary to a fair statement of the results for the
interim periods presented.</p>
<u>

<p>Nature of Operations</p>
</u>

<p>PASW, Inc., formerly Pacific Softworks, Inc. (&quot;We&quot;, &quot;Ours&quot; or
&quot;the Company&quot;), was incorporated in California in November 1992. We developed
and licensed Internet and Web related software and software development tools that enable
communications, based on a set of rules known as protocols. Our products were embedded
into systems and developed or manufactured by others. In August 2000, we sold all the
assets of our Internet and Web operations. From January 2001 our operations, consisting of
sales of software and licenses, were conducted principally through an administrative
office in Northern California and a sales office of our subsidiary, National Research
Corporation &#150; Japan (&quot;NRCJ&quot;). In January 2003 the sales office was closed
however NRCJ will continue to receive royalty income from former NRCJ customers.</p>
<u>

<p>Use of Estimates</p>
</u>

<p>Preparing financial statements in conformity with generally accepted accounting
principles requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.</p>
<u>

<p>Revenue Recognition </p>
</u>

<p>We are a licensor of software and generate revenue primarily from the one-time sales of
licensed software. Generally, revenue is recognized upon shipment of the licensed
software. For multiple element license arrangements, the license fee is allocated to the
various elements based on fair value. When a multiple element arrangement includes rights
to a post-contract customer support, the portion of the license fee allocated to each
function is recognized ratably over the term of the arrangement.</p>
<u>

<p align="center"></u>&nbsp;</p>
<b><font FACE="Courier New" SIZE="3">

<p align="center"></font>- 8 -<u></p>
</b>

<p>Translation of Foreign Currency</p>
</u>

<p>We translate foreign currency financial statements of NRCJ in accordance with SFAS 52,
&quot;Foreign Currency Translation.&quot; Assets and liabilities are translated at current
exchange rates and related revenues and expenses are translated at average exchange rates
in effect during the period. Resulting translation adjustments are recorded as a separate
component in stockholders&#146; equity. Foreign currency transaction gains and losses are
included in determining net income.</p>
<u>

<p>Stock-Based Compensation</p>
</u>

<p>We use the intrinsic value method of accounting for stock-based compensation for
employees in accordance with Accounting Principles Board Opinion (&quot;APB&quot;) No. 25.</p>
<u>

<p>Earnings Per Share</p>
</u>

<p>SFAS No. 128, &quot;Earnings Per Share&quot; requires presentation of basic earnings
per share (&quot;Basic EPS&quot;) and diluted earnings per share (&quot;Diluted
EPS&quot;). Basic earnings per share is computed by dividing earnings available to common
stockholders by the weighted average number of outstanding common shares during the
period. Diluted EPS gives effect to all dilutive potential common shares outstanding
during the period. The computation of diluted EPS does not assume conversion, exercise or
contingent exercise of securities that would have an anti-dilutive effect on losses.</p>
<b>

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="CENTER">COMPUTATION OF WEIGHTED AVERAGE</p>

<p ALIGN="CENTER">COMMON SHARES OUTSTANDING</p>
</b></font><div align="center"><center>

<table BORDER="0" CELLSPACING="0" CELLPADDING="7" WIDTH="626">
  <tr>
    <td WIDTH="342" VALIGN="TOP" style="border-top: thin solid; border-bottom: thin solid">&nbsp;
    </td>
    <td WIDTH="85" VALIGN="baseline" style="border-top: thin solid; border-bottom: thin solid"><font
    SIZE="3"><b><p ALIGN="CENTER">Total Number of Shares</b></font></td>
    <td WIDTH="0" VALIGN="baseline" style="border-top: thin solid; border-bottom: thin solid">&nbsp;
    </td>
    <td WIDTH="127" VALIGN="baseline"
    style="border-top: thin solid; border-bottom: thin solid"><font SIZE="3"><b><p
    ALIGN="CENTER">Three Months Ended <br>
    March 31, 2004</b></font></td>
  </tr>
  <tr>
    <td WIDTH="342" VALIGN="TOP"><font SIZE="3"><b>Outstanding shares as of January 1, 2004</b></font></td>
    <td WIDTH="85" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,997,400</b></font></td>
    <td WIDTH="0" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="127" VALIGN="TOP"><font SIZE="3"><b><p ALIGN="RIGHT">4,997,400</b></font></td>
  </tr>
  <tr>
    <td WIDTH="342" VALIGN="TOP" HEIGHT="22"><font SIZE="3"><b>Options treated as Common Stock</b></font></td>
    <td WIDTH="85" VALIGN="TOP" HEIGHT="22"><font SIZE="3"><b><p ALIGN="RIGHT">1,142,674</b></font></td>
    <td WIDTH="0" VALIGN="TOP" HEIGHT="22">&nbsp; </td>
    <td WIDTH="127" VALIGN="TOP" HEIGHT="22"><font SIZE="3"><b><p ALIGN="RIGHT">1,142,674</b></font></td>
  </tr>
  <tr>
    <td WIDTH="342" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><b><font
    SIZE="3">Total weighted average</font> <font SIZE="3">shares outstanding</font></b></td>
    <td WIDTH="85" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="RIGHT">6,140,074</b></font></td>
    <td WIDTH="0" VALIGN="top" style="border-top: thin solid; border-bottom: medium double">&nbsp;
    </td>
    <td WIDTH="127" VALIGN="top" style="border-top: thin solid; border-bottom: medium double"><font
    SIZE="3"><b><p ALIGN="RIGHT">6,140,074</b></font></td>
  </tr>
  <tr>
    <td WIDTH="342" VALIGN="TOP"><font SIZE="3"><b>Net income</b></font></td>
    <td WIDTH="85" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="0" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="127" VALIGN="top" style="border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 21,101</b></font></td>
  </tr>
  <tr>
    <td WIDTH="342" VALIGN="TOP"><font SIZE="3"><b>Net gain (loss) per common share basic and
    diluted</b></font></td>
    <td WIDTH="85" VALIGN="TOP"></td>
    <td WIDTH="0" VALIGN="TOP">&nbsp; </td>
    <td WIDTH="127" VALIGN="top" style="border-bottom: medium double"><font SIZE="3"><b><p
    ALIGN="RIGHT">$ 0.00 </b></font></td>
  </tr>
</table>
</center></div><font SIZE="3">

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="center">&nbsp;</p>
<u>

<p align="center"></u>&nbsp;</p>
<b><font FACE="Courier New" SIZE="3">

<p align="center"></font>- 9 -<u></p>
</u>

<p ALIGN="JUSTIFY">ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION</p>

<p ALIGN="JUSTIFY">AND RESULTS OF OPERATIONS.</p>

<p>General</p>
</b>

<p>Since the closure of our US development and sales facilities in 2000 and our Japanese
office in January 2003 we receive royalties from former customers of our NRCJ subsidiary
which serves as our principal source of revenue. We operate an office in San Ramon,
California in which we perform all administrative functions necessary to keep the Company
in compliance with regulatory requirements. Since the closing of sales and licensing
activities in the United States we have sought, and continue to seek, potential merger
opportunities. </p>

<p>We operate in one business segment and our fiscal year ends on December 31.</p>
</font>

<p align="center"><strong><font SIZE="3">- 10 -</font></strong></p>

<p>Results of Operations </p>
<font SIZE="3">

<p ALIGN="JUSTIFY">The following table sets forth, for the periods indicated, the
percentage relationship to net revenue of certain items in the consolidated statements of
operations and comprehensive income</p>
</font><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="456">
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="26" style="border-top: thin solid">&nbsp; </td>
    <td WIDTH="154" VALIGN="baseline" COLSPAN="2" HEIGHT="26" style="border-top: thin solid"><font
    SIZE="3"><p ALIGN="CENTER"><strong>Unaudited</strong></font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="37">&nbsp;&nbsp; </td>
    <td WIDTH="154" VALIGN="baseline" COLSPAN="2" HEIGHT="37"><font SIZE="3"><p ALIGN="CENTER"><strong>For
    the Three Months Ended</strong><br>
    <strong>March 31,</strong></font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="9" style="border-bottom: thin solid">&nbsp;&nbsp; </td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="9" style="border-bottom: thin solid"><font
    SIZE="3"><p ALIGN="CENTER"><strong>2004</strong></font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="9" style="border-bottom: thin solid"><font
    SIZE="3"><p ALIGN="CENTER"><strong>2003</strong></font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="4"><font SIZE="3"><p ALIGN="JUSTIFY">Net revenue</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="4" align="center"><font SIZE="3"><p
    ALIGN="center">100.00%&nbsp;</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="4"><font SIZE="3"><p ALIGN="center">100.00%&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="4" style="border-bottom: thin solid"><font SIZE="3"><p
    ALIGN="JUSTIFY">Cost of revenue</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="4" align="center"
    style="border-bottom: thin solid"><font SIZE="3"><p ALIGN="center">0.00</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="4" style="border-bottom: thin solid"><font
    SIZE="3"><p ALIGN="center">0.00</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="4"><font SIZE="3"><p ALIGN="JUSTIFY">Gross profit</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="4" align="center"><font SIZE="3"><p
    ALIGN="center">100.00</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="4"><font SIZE="3"><p ALIGN="center">100,00&nbsp;</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="4"><font SIZE="3"><p ALIGN="JUSTIFY">Selling, general
    and administrative</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="4"><font SIZE="3"><p ALIGN="center">49.72</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="4"><font SIZE="3"><p ALIGN="center">87.49</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="5" style="border-bottom: thin solid"><font SIZE="3"><p
    ALIGN="JUSTIFY">Other income: Gain in sale of fixed assets</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="5" style="border-bottom: thin solid"><font
    SIZE="3"><p ALIGN="center">0.00</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="5" style="border-bottom: thin solid"><font
    SIZE="3"><p ALIGN="center">9.87</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="4"><font SIZE="3"><p ALIGN="JUSTIFY">Income from
    continuing Operations</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="4"><font SIZE="3"><p ALIGN="center">50.28</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="4"><font SIZE="3"><p ALIGN="center">22.38</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="5"><font SIZE="3"><p ALIGN="JUSTIFY">Income (loss)
    from discontinued Operations</font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="5"><font SIZE="3"><p ALIGN="center">0.00&nbsp;</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="5"><font SIZE="3"><p ALIGN="center">(6.85)</font></td>
  </tr>
  <tr>
    <td WIDTH="274" VALIGN="TOP" HEIGHT="4"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><p
    ALIGN="JUSTIFY">Net income </font></td>
    <td WIDTH="74" VALIGN="baseline" HEIGHT="4"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><p
    ALIGN="center">50.28%</font></td>
    <td WIDTH="66" VALIGN="baseline" HEIGHT="4"
    style="border-top: thin solid; border-bottom: medium double"><font SIZE="3"><p
    ALIGN="center">15.53%</font></td>
  </tr>
</table>
</center></div><div align="center"><center>

<table CELLSPACING="0" BORDER="0" CELLPADDING="7" WIDTH="616">
</table>
</center></div><font SIZE="3"><b>

<p ALIGN="center">- 11 -</p>

<p ALIGN="JUSTIFY">Three months ended March 31, 2004 and 2003.</p>

<p>Net revenue </p>
</b>

<p>For the three months ended March 31, 2004 our royalty revenues decreased 10.8% to
$41,792 from $46,844 for the three months ended March 31, 2003. Our revenue for both 2004
and 2003 is derived from a single customer in Japan. While sales of products of that
customer that contain our software have been increasing over the last two years the
licensing agreement renews annually and the unit fee has been reduced over the past two
years. The net result is a lower royalty stream in 2004. </p>
<b>

<p>Cost of revenue</p>
</b>

<p>There is no cost associated with receipt of the royalty revenue in either the three
months ended March 31, 2004 or 2003. </p>
<b>

<p>Selling, general and administrative</p>
</b>

<p>Our selling, general and administrative expense was $20,782 for the three months ended
March 31, 2004 compared to $40,984 for the three months ended March 31, 2003. The 2003
expense contains costs associated with closing the sales office in Japan in January 2003
as well as legal fees both in the United States and Japan relating to the closure. In the
three months ended March 31, 2004 the expenses of the Japanese royalty processing are
limited to an outside accounting firm and limited legal expense to maintain filing and tax
fees in Japan, a total of approximately $9,000. The amounts in both periods reflect the
continuing expenses of our corporate office, which is focusing on seeking a reverse merger
or other financial transaction for the Company. </p>
<b>

<p>Other income and expenses</p>
</b>

<p>We had no other income or expense items in the three months ended March 31, 2004. In
the three months ended March 31, 2003 we disposed of some property in our former Japanese
office for a net gain of $4,627.</p>
<b>

<p>Provision for taxes</p>
</b>

<p>Commencing in 1995 we elected to be treated as a subchapter S corporation. Through 1998
all federal tax liabilities were recognized at the individual stockholder level. In
February 1999 we terminated the S election and became subject to taxation at the corporate
level. Had the Company been subject to taxation as a C corporation in 1998, it would have
received a pro forma tax benefit of $1,099. Since we have a substantial Net Operating Loss
Carryforward we had no income tax liability for the three months ended March 31, 2004.</p>
<b>

<p>Liquidity and capital resources</p>
</b>

<p>At March 31, 2004 and December 31, 2003 we had working capital of $97,721 and $72,318
and cash and cash equivalents of $200,510 and $189,053.</p>

<p>We generated $7,065 in cash flow from operating activities in the three months ended
March 31, 2004 compared to $6,151 in the three months ended March 31, 2003. The principal
reasons for the increase in use of cash of $914 was the result of an decrease of $6,515 in
accounts receivable caused by having only a single customer in 2004, a write off of fixed
assets of $4,242 in 2003 through the sale of the furniture and fixtures in our former
Japanese office, an increase of $1,993 in accounts payable and a decrease of $3,207
primarily associated with the operation of the Japanese distribution activities which we
sold in January 2003. Cash generated or used in operating activities principally reflects
the gain or loss from operations and the related changes in working capital components.</p>

<p>We did not have any investing or financing activities in either of the three months
ended March 31, 2004 or 2003. </p>
<b>

<p ALIGN="center">- 12 -</p>

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="JUSTIFY">ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK </p>
</b>

<p>This report, including Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations, contains forward-looking statements and other prospective
information relating to future events. These forward-looking statements and other
information are subject to certain risks and uncertainties that could cause results to
differ materially from historical or anticipated results, including the following:</p>

<p><b>We received a Going Concern opinion from our auditors on our financial statements
for the years ended December 31, 2003 and December 31, 2002. Those statements indicate
that we have reported losses for two of our last three years and if we do not become
profitable our business could be adversely affected.</p>

<p></b>We reported loss of $36,093 in 2002 and a profit of $70,032 for 2003. We also have
an accumulated deficit of $6,332,731 and a stockholders' equity of $72,318 as of December
31, 2003. We can provide no assurance we will be profitable in the future and if we do not
become profitable our business could be adversely affected.</p>
<b>

<p>We were delisted by the NASDAQ Stock Market on October 9, 2001 and our stock has been
trading on the OTC Bulletin Board Market (OTCBB) since that time.</font><font
FACE="Courier New" SIZE="3"> </p>
</font></b><font SIZE="3">

<p>The NASDAQ National/Small Cap Market delisted our stock at the opening of business on
October 9, 2001. The securities were removed from NASDAQ and subsequent to that date the
PASW Common Stock traded on the OTC Bulletin Board Market (OTCBB) as were the Warrants
(PASWW) until their expiration on November 30, 2002. While we still have market makers for
our securities there can be no assurance we can continue to rely on our current market
makers and that the price and trading volume of our securities could not be materially
affected.</p>
</font><b><font SIZE="3" COLOR="#ff0000">

<p></font><font SIZE="3">Our only operating subsidiary lost its major supplier of product
in July 2002. </p>

<p></b>Our NRCJ subsidiary was a distributor for products supplied by NetSilicon, Inc.
Revenue from licenses of the suite of Internet and Web products and sales of services
accounted for substantially all of its revenue in the years ended December 31, 2002 and
2001. In July 2002 Net Silicon, Inc. ceased producing products used by NRCJ. During the
remainder of 2002 the sales of licenses of the subsidiary decreased to a point where
operations became unprofitable. The operations were sold in January 2003. There is no
assurance that the remaining royalty income is sufficient to allow the Company to continue
operations. </p>

<p align="center"><strong>- 13 -</strong></p>

<p><b>We have limited resources available to continue operations unless a successful
transaction is completed with a merger partner or that additional funding can be obtained
from outside sources.</p>
</b>

<p>At the present time we have limited resources available to continue operations other
than maintaining day-to-day activities without any capabilities for expansion. The revenue
received from royalties of our NRCJ subsidiary is sufficient to handle only maintenance
administrative operations for the Company. While efforts are in process to seek a merger
partner or other means of financing there is no assurance that any means can be obtained
to permit the Company to resume any form of operations which could expand the business.</p>
<b>

<p>Because our ownership is concentrated, our officers and directors and independently our
majority stockholder will be able to control all matters requiring stockholder approval
including delaying or preventing a change in our corporate control or taking other actions
of which individual shareholders may disapprove.</p>

<p></b>Our officers, directors and independently the majority stockholder beneficially own
approximately 60% of our outstanding common stock. These parties will be able to exercise
control over all matters requiring stockholder approval and other investors will have
minimal influence over the election of directors or other stockholder actions. As a
result, our officers, directors and independently the majority stockholder could approve
or cause the Company to take actions of which you disapprove or that are contrary to your
interests. </p>

<p><b>Issuance of our authorized preferred stock could discourage a change in control,
could reduce the market price of our common stock and could result in the holders of
preferred stock being granted voting rights that are superior to those of the holders of
common stock.</p>

<p></b>The Company is authorized to issue preferred stock without obtaining the consent or
approval of stockholders. The issuance of preferred stock could have the effect of
delaying, deferring, or preventing a change in control. Management also has the right to
grant superior voting rights to the holders of preferred stock. Any issuance of preferred
stock could materially and adversely affect the market price of the common stock and the
voting rights of the holders of common stock. The issuance of preferred stock may also
result in the loss of the voting control of holders of common stock to the holders of
preferred stock.</p>

<p><b>Trading in our common stock may be limited and could negatively affect the ability
to sell your securities.</p>

<p></b>A public market for our common stock has existed only since July 29, 1999, the date
of our initial public offering. We do not know how liquid the market for our stock will
remain and if the market becomes illiquid, it may negatively affect your ability to resell
your securities. </p>

<p align="center">&nbsp;</p>

<p align="center"><strong>- 14 -</strong></p>
<b>

<p ALIGN="JUSTIFY">ITEM 4. CONTROLS AND PROCEDURES </p>

<p>Evaluation of Disclosure Controls and Procedures</p>
</b>

<p>The Company maintains disclosure controls and procedures designed to ensure information
required to be disclosed in Company reports filed under the Securities Exchange Act of
1934, as amended (the Exchange Act), is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange Commission's rules and
forms. Disclosure controls and procedures are designed to provide reasonable assurance
that information required to be disclosed in Company reports filed under the Exchange Act
is accumulated and communicated to management, including the Company's Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure.</p>

<p>Within 90 days prior to the date of this report the Company's management, under the
supervision and with the participation of the Company's Chief Executive Officer and Chief
Financial Officer, has </p>

<p>evaluated the effectiveness of the Company's disclosure controls and procedures as of
the end of the period covered by this report. Based upon that evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls
and procedures are effective.</p>

<p>There were no changes in the Company's internal control over financial reporting during
the Company's fiscal quarter ending March 31, 2004, that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over financial
reporting.</p>
</font><font FACE="Courier New"><b>

<p align="center"></b></font><font SIZE="3"><strong>- 15 -</strong></font><b><font
FACE="Courier New"></p>
</font><font SIZE="3">

<p>PART II - OTHER INFORMATION</p>

<p ALIGN="JUSTIFY">ITEM 1. LEGAL PROCEEDINGS</p>
</b>

<p ALIGN="JUSTIFY">We are not currently involved in any litigation that is expected to
have a material adverse effect on our business or financial position. There can be no
assurance, however, that third parties will not assert infringement or other claims
against the Company in the future which, regardless of the outcome, could have an adverse
impact on the Company as a result of defense costs, diversion of management resources and
other factors. </p>
<b>

<p ALIGN="JUSTIFY">ITEM 2. CHANGES IN SECURITIES.</p>

<p ALIGN="JUSTIFY">Not Applicable.</p>

<p ALIGN="JUSTIFY">ITEM 3. DEFAULTS UPON SENIOR SECURITIES.</p>

<p ALIGN="JUSTIFY">Not Applicable.</p>

<p ALIGN="JUSTIFY">ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.</p>

<p ALIGN="JUSTIFY">Not Applicable</p>

<p>ITEM 5. OTHER INFORMATION.</p>

<p ALIGN="JUSTIFY">Not Applicable.</p>

<p ALIGN="JUSTIFY">ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.</p>

<blockquote>
  <blockquote>
    <p ALIGN="JUSTIFY">Exhibits &#150; </p>
  </blockquote>
</blockquote>
</b></font>

<table CELLSPACING="0" BORDER="0" WIDTH="628">
  <tr>
    <td WIDTH="8%" VALIGN="TOP"><font SIZE="2"><p ALIGN="CENTER">31</font></td>
    <td WIDTH="2%" VALIGN="TOP"></td>
    <td WIDTH="91%" VALIGN="TOP"><font SIZE="2">Rule 13a-14(a) Certifications.</font></td>
  </tr>
  <tr>
    <td WIDTH="8%" VALIGN="TOP"><font SIZE="2"><p ALIGN="CENTER">32</font></td>
    <td WIDTH="2%" VALIGN="TOP"></td>
    <td WIDTH="91%" VALIGN="TOP"><font SIZE="2">Section 1350 Certifications.</font></td>
  </tr>
</table>
<font SIZE="3"><b>

<blockquote>
  <blockquote>
    <p ALIGN="JUSTIFY">Reports on Form 8-K - None</p>
    </b><p>&nbsp;</p>
    <b><p ALIGN="center">&nbsp;</p>
    <font FACE="Courier New"><p align="center"></font><strong>- 16 -</strong><font
    FACE="Courier New"></p>
    </font>
  </blockquote>
</blockquote>

<p ALIGN="CENTER">SIGNATURES</p>
</b>

<p ALIGN="JUSTIFY">Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.</p>
<b>

<p ALIGN="JUSTIFY">Date: May 13, 2004 </p>

<p ALIGN="JUSTIFY">PASW, INC.</p>

<p ALIGN="JUSTIFY"><u>/s/ WILLIAM E. SLINEY</u></p>

<p ALIGN="JUSTIFY">William E. Sliney</p>

<p ALIGN="JUSTIFY">President and Chief Financial Officer</p>

<p ALIGN="JUSTIFY">(Duly Authorized Officer and Principal</p>

<p ALIGN="JUSTIFY">Financial and Accounting Officer)</p>

<p ALIGN="JUSTIFY">&nbsp;</p>

<p ALIGN="center"><strong>- 17 -</strong></p>
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<pre><strong>

                                                                      EXHIBIT 31

                                 CERTIFICATIONS</strong>

I, Glenn P. Russell, Chief Executive Officer of PASW, Inc., certify that:

         1.       I have reviewed this quarterly report on Form 10-Q for the quarter
                  ended March 31, 2004 of PASW, Inc.;

         2.       Based on my knowledge, this quarterly report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the periods covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrant and have:

                  (a)      Designed such disclosure controls and procedures, or
                           caused such disclosure controls and procedures to be
                           designed under our supervision, to ensure that
                           material information relating to the registrant,
                           including its consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this quarterly
                           report is being prepared;

                  (b)      Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures and presented in
                           this quarterly report our conclusions about the
                           effectiveness of the disclosure controls and
                           procedures, as of the end of the periods covered by
                           this quarterly report based on such evaluation; and

                  (c)      Disclosed in this quarterly report any change in the
                           registrant's internal control over financial
                           reporting that occurred during the registrant's most
                           recent fiscal quarter (the registrant's fourth fiscal
                           quarter in the case of an annual report) that has
                           materially affected, or is reasonably likely to
                           materially affect, the registrant's internal control
                           over financial reporting; and

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

                  (a)      All significant deficiencies and material weaknesses
                           in the design or operation of internal control over
                           financial reporting which are reasonably likely to
                           adversely affect the registrant's ability to record,
                           process, summarize and report financial information;
                           and

                  (b)      Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal control over
                           financial reporting.

Date: May 13, 2004

/s/ Glenn P. Russell
- -------------------

Glenn P. Russell
Chief Executive Officer


                          <strong>       CERTIFICATIONS</strong>

I, William E. SLiney, President and Chief Financial Officer of PASW, Inc., certify that:

         1.       I have reviewed this quarterly report on Form 10-Q for the quarter
                  ended March 31, 2004 of PASW, Inc.;

         2.       Based on my knowledge, this quarterly report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the periods covered by this
                  quarterly report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the registrant as of,
                  and for, the periods presented in this quarterly report;

         4.       The registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-15(e) and 15d-15(e)) for the registrant and have:

                  (a)      Designed such disclosure controls and procedures, or
                           caused such disclosure controls and procedures to be
                           designed under our supervision, to ensure that
                           material information relating to the registrant,
                           including its consolidated subsidiaries, is made
                           known to us by others within those entities,
                           particularly during the period in which this quarterly
                           report is being prepared;

                  (b)      Evaluated the effectiveness of the registrant's
                           disclosure controls and procedures and presented in
                           this quarterly report our conclusions about the
                           effectiveness of the disclosure controls and
                           procedures, as of the end of the periods covered by
                           this quarterly report based on such evaluation; and

                  (c)      Disclosed in this quarterly report any change in the
                           registrant's internal control over financial
                           reporting that occurred during the registrant's most
                           recent fiscal quarter (the registrant's fourth fiscal
                           quarter in the case of an annual report) that has
                           materially affected, or is reasonably likely to
                           materially affect, the registrant's internal control
                           over financial reporting; and

         5.       The registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation of internal
                  control over financial reporting, to the registrant's auditors
                  and the audit committee of the registrant's board of directors
                  (or persons performing the equivalent functions):

                  (a)      All significant deficiencies and material weaknesses
                           in the design or operation of internal control over
                           financial reporting which are reasonably likely to
                           adversely affect the registrant's ability to record,
                           process, summarize and report financial information;
                           and

                  (b)      Any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the registrant's internal control over
                           financial reporting.

Date: May 13, 2004

/s/ William E. Sliney
- ---------------------

William E. Sliney
President and Chief Financial Officer


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<pre>

                                                                      <strong>EXHIBIT 32

                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER</strong>

         Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of PASW, Inc. (the
&quot;Company&quot;) hereby certifies that:

         (i)      the accompanying Quarterly Report on Form 10-Q of the Company for
                  the quarter ended March 31, 2004 (the &quot;Report&quot;) fully
                  complies with the requirements of Section 13(a) or Section
                  15(d), as applicable, of the Securities Exchange Act of 1934,
                  as amended; and

         (ii)     information contained in the Report fairly presents, in all
                  material respects, the financial condition and results of
                  operations of the Company.

Dated: May 13, 2004                           /s/ Glenn P. Russell
                                          --------------------------------------
                                                   Glenn P. Russell
                                          	   Chief Executive Officer


A signed original of this written statement required by Section 906 of
the Sarbanes-Oxley Act of 2002 (&quot;Section 906&quot;), or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to PASW, Inc. and will be retained by
PASW, Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.


                    <strong>CERTIFICATION OF CHIEF FINANCIAL OFFICER</strong>

         Pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the
Sarbanes-Oxley Act of 2002, the undersigned officer of PASW, Inc. (the
&quot;Company&quot;) hereby certifies that:

         (i)      the accompanying Quarterly Report on Form 10-Q of the Company for
                  the quarter ended March 31, 2004 (the &quot;Report&quot;) fully
                  complies with the requirements of Section 13(a) or Section
                  15(d), as applicable, of the Securities Exchange Act of 1934,
                  as amended; and

         (ii)     information contained in the Report fairly presents, in all
                  material respects, the financial condition and results of
                  operations of the Company.

Dated: May 13, 2004                               /s/ William E. Sliney
                                              ----------------------------------
                                                        William E. Sliney
                                              		President and Chief Financial Officer

A signed original of this written statement required by Section 906 of
the Sarbanes-Oxley Act of 2002 (&quot;Section 906&quot;), or other document
authenticating, acknowledging, or otherwise adopting the signature that appears
in typed form within the electronic version of this written statement required
by Section 906, has been provided to PASW, Inc. and will be retained by
PASW, Inc. and furnished to the Securities and Exchange Commission or its staff upon
request.



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