VerifyMe, Inc. - Quarter Report: 2008 June (Form 10-Q)

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(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, 2008

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-31927

LASERLOCK TECHNOLOGIES, INC.

(Exact name of small business issuer as specified in its charter)

NEVADA		23-3023677
(State or other jurisdiction of Incorporation		(IRS Employer
or Organization)		Identification No.)

837 Lindy Lane, Bala Cynwyd, PA 19004

(Address of Principal Executive offices) (Zip Code)

610-668-1952

(Issuer’s Telephone Number, Including Area Code)

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past twelve 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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of the securities under a plan confirmed by a court. Yes ¨ No ¨

APPLICABLE ONLT TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of the issuer’s classes of common stock, as of the latest practicable date.

As of July 31, 2008, there were 73,440,506 shares of common stock, par value $0.001 per share, outstanding.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Financial Statements

June 30, 2008 and 2007

- 2 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

CONTENTS

		PAGE

CONSOLIDATED BALANCE SHEETS		4

CONSOLIDATED STATEMENTS OF OPERATIONS		5

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT		6-9

CONSOLIDATED STATEMENTS OF CASH FLOWS		10-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		12-17

- 3 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Balance Sheets

June 30, 2008 and December 31, 2007

	June 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	25,620		$	348
Accounts receivable, net of allowance of $0 at June 30, 2008 and December 31, 2007		5,500			1,994
Inventory		24,160			28,726

TOTAL CURRENT ASSETS		55,280			31,068

PROPERTY AND EQUIPMENT
Capital equipment		32,604			32,604
Less accumulated depreciation		24,413			22,543
		8,191			10,061

Patent costs, net of accumulated amoritization of $41,727 and $36,318 as of June 30, 2008 and December 31, 2007		142,191			147,601

TOTAL ASSETS	$	205,662		$	188,730

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
Accounts payable and accrued expenses		773,685			641,213
Senior secured convertible notes payable		800,000			800,000
Convertible notes payable		400,000			375,000
Notes payable		286,000			70,000

TOTAL CURRENT LIABILITIES		2,259,685			1,886,213

STOCKHOLDERS' DEFICIT

Preferred Stock, $ .001 par value; 75,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $ .001 par value; 175,000,000 shares authorized; 73,440,506 shares issued and oustanding at June 30, 2008 and December 31, 2007		73,440			73,440

Additional paid in capital		7,256,783			7,251,687

Deficit accumulated during the development stage		(9,384,246	)		(9,022,610	)

STOCKHOLDERS' DEFICIT		(2,054,023	)		(1,697,483	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	205,662		$	188,730

See the accompanying notes to the consolidated financial statements.

- 4 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Operations

For the Three and Six Months Ended June 30, 2008 and 2007

And for the Period November 10, 1999 (Date of Inception) to June 30, 2008

(UNAUDITED)

				Three Months			Three Months			Six Months			Six Months
	Cumulative			Ended			Ended			Ended			Ended
	Since			June 30,			June 30,			June 30,			June 30,
	Inception			2008			2007			2008			2007

NET REVENUES
Sales	$	435,174		$	3,003		$	5,818		$	5,852		$	190,399
Royalties		538,759			12,291			14,694			25,221			54,143

TOTAL NET REVENUE		973,933			15,294			20,512			31,073			244,542

COST OF SALES		407,577			3,590			2,860			6,257			165,059

GROSS PROFIT		566,356			11,704			17,652			24,816			79,483

OPERATING EXPENSES
Research and development		818,622			5,138			4,711			10,892			8,092
Patent costs		61,187			865			900			1,311			900
Legal and Accounting		1,072,464			27,826			38,647			58,347			85,851
Sales and Marketing		4,666,170			59,724			104,889			120,876			207,166
General and administrative		2,893,999			52,553			81,335			120,116			139,291
Total operating expenses		9,512,442			146,106			230,482			311,542			441,300

LOSS BEFORE OTHER INCOME		(8,946,086	)		(134,402	)		(212,830	)		(286,726	)		(361,817	)

OTHER INCOME (EXPENSE)
Interest income		63,587			1			725			3			874
Interest expense		(671,469	)		(38,525	)		(81,997	)		(74,913	)		(178,941	)
Gain on disposition of assets		4,722			-			-			-			-
		(603,160	)		(38,524	)		(81,272	)		(74,910	)		(178,067	)

LOSS BEFORE INCOME TAX BENEFIT		(9,549,246	)		(172,926	)		(294,102	)		(361,636	)		(539,884	)

INCOME TAX BENEFIT		(165,000	)		-			-			-			-

NET LOSS	$	(9,384,246	)	$	(172,926	)	$	(294,102	)	$	(361,636	)	$	(539,884	)

BASIC AND DILUTED NET LOSS PER COMMON SHARE				$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)

BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING					73,440,506			73,440,506			73,440,506			73,440,506

See the accompanying notes to the consolidated financial statements.

- 5 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Period November 10, 1999 (Date of Inception) to June 30, 2008

											Deficit
	Common										Accumulated
	Stock							Additional			During the
	Number of				Consulting			Paid-In			Development
	Shares		Amount		Fees			Capital			Stage			Total

Issuance of initial 4,278,000 shares on November 10, 1999		4,278,000	$	4,278	$	-		$	16,595		$	-		$	20,873
Issuance of shares of common stock in exchange for services		1,232,000		1,232		-			35,728			-			36,960
Issuance of shares of common stock		2,090,000		2,090		-			60,610			-			62,700
Stock issuance costs		-		-		-			(13,690	)		-			(13,690	)
Net loss		-		-		-			-			(54,113	)		(54,113	)

Balance, December 31, 1999		7,600,000		7,600		-			99,243			(54,113	)		52,730

Issuance of shares of common stock		5,449,999		5,450		-			921,050			-			926,500
Issuance of shares of common stock in exchange for services		240,000		240		(40,800	)		40,560			-			-
Stock issuance costs		-		-		-			(16,335	)		-			(16,335	)
Fair value of non-employee stock options grants		-		-		-			50,350			-			50,350
Amortization of deferred consulting fees		-		-		20,117			-			-			20,117
Net loss		-		-		-			-			(367,829	)		(367,829	)

Balance, December 31, 2000		13,289,999		13,290		(20,683	)		1,094,868			(421,942	)		665,533

Issuance of shares of common stock		217,500		218		-			77,723			-			77,941
Issuance of shares of common stock and stock options for acquisition of subsidiary		2,000,000		2,000		-			736,000			-			738,000
Issuance of stock options		-		-		-			15,000			-			15,000
Exercise of options		1,450,368		1,450		-			230,609			.			232,059
Fair value of non-employee stock options		-		-		-			323,250			-			323,250
Amortization of deferred consulting fees		-		-		20,683			-			-			20,683
Net loss		-		-		-			-			(1,052,299	)		(1,052,299	)

Balance, December 31, 2001		16,957,867		16,958		-			2,477,450			(1,474,241	)		1,020,167

See the accompanying notes to the consolidated financial statements.

- 6 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)

For the Period November 10, 1999 (Date of Inception) to June 30, 2008

												Deficit
	Common											Accumulated
	Stock								Additional			During the
	Number of						Consulting		Paid-In			Development
	Shares			Amount			Fees		Capital			Stage			Total

Issuance of shares of common stock		3,376,875			3,377			-		687,223			-			690,600
Fair value of non-employee stock options		-			-			-		94,000			-			94,000
Salary due to shareholder contributed capital		-			-			-		15,000			-			15,000
Return of shares of common stock related to purchase price adjustment		(1,000,000	)		(1,000	)		-		(353,000	)		-			(354,000	)
Net loss		-			-					-			(1,195,753	)		(1,195,753	)

Balance, December 31, 2002		19,334,742			19,335			-		2,920,673			(2,669,994	)		270,014

Issuance of shares of common stock		22,512,764			22,512			-		1,387,109			-			1,409,621
Fair value of non-employee stock options		-			-			-		213,300						213,300
Issuance of shares of common stock in exchange for services		143,000			143			-		23,857						24,000
Stock issuance costs		-			-			-		(49,735	)					(49,735	)
Net loss		-			-			-		-			(1,107,120	)		(1,107,120	)

Balance, December 31, 2003		41,990,506			41,990			-		4,495,204			(3,777,114	)		760,080

Stock issuance costs		-			-			-		(25,000	)		-			(25,000	)
Fair value of non-employee stock options		-			-			-		493,600			-			493,600
Issuance of shares of common stock		18,600,000			18,600			-		939,881			-			958,481
Net loss		-			-			-		-			(1,406,506	)		(1,406,506	)

Balance, December 31, 2004		60,590,506			60,590			-		5,903,685			(5,183,620	)		780,655

See the accompanying notes to the consolidated financial statements.

- 7 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)

For the Period November 10, 1999 (Date of Inception) to June 30, 2008

												Deficit
	Common											Accumulated
	Stock								Additional			During the
	Number of						Consulting		Paid-In			Development
	Shares			Amount			Fees		Capital			Stage			Total

Fair value of non-employee stock options		-			-			-		286,762			-			286,762
Issuance of shares of common stock		3,000,000			3,000			-		102,000			-			105,000
Net loss for the year ended December 31, 2005		-			-			-		-			(1,266,811	)		(1,266,811	)

Balance at December 31, 2005		63,590,506			63,590			-		6,292,447			(6,450,431	)		(94,394	)

Fair value of non-employee stock options		-			-			-		215,463			-			215,463
Fair value of employee stock options		-			-			-		135,098			-			135,098
Fair value of warrants issued for deferred finance charges		-			-			-		392,376			-			392,376
Exercise of warrants		5,550,000			5,550			-		49,950			-			55,500
Exercise of options		4,300,000			4,300			-		(3,870	)		-			430
Shares retired upon cancellation of consulting agreements		(1,200,000	)		(1,200	)		-		1,080			-			(120	)
Issuance of shares for services		1,200,000			1,200					53,800						55,000
Net loss for the year ended December 31, 2006		-			-			-		-			(1,607,017	)		(1,607,017	)

Balance at December 31, 2006		73,440,506			73,440			-		7,136,344			(8,057,448	)		(847,664	)

Fair value of non-employee stock options		-			-			-		47,692			-			47,692
Fair value of employee stock options		-			-			-		67,651			-			67,651
Net loss for the year ended December 31, 2007		-			-			-					(965,162	)		(965,162	)

Balance at December 31, 2007		73,440,506			73,440			-		7,251,687			(9,022,610	)		(1,697,483	)

See the accompanying notes to the consolidated financial statements.

- 8 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)

For the Period November 10, 1999 (Date of Inception) to June 30, 2008

									Deficit
	Common								Accumulated
	Stock						Additional		During the
	Number of				Consulting		Paid-In		Development
	Shares		Amount		Fees		Capital		Stage			Total

Fair value of non-employee stock options		-		-		-		5,096		-			5,096
Net loss for the six months ended June 30, 2008		-		-		-				(361,636	)		(361,636	)

Balance at June 30, 2008 (Unaudited)		73,440,506	$	73,440	$	-	$	7,256,783	$	(9,384,246	)	$	(2,054,023	)

See the accompanying notes to the consolidated financial statements.

- 9 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2008 and 2007

And for the Period November 10, 1999 (Date of Inception) to June 30, 2008

(UNAUDITED)

				Six Months			Six Months
	Cumulative			Ended			Ended
	Since			June 30,			June 30,
	Inception			2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(9,384,246	)	$	(361,636	)	$	(539,884	)
Adjustments to reconcile net loss to net cash used in operating activities
Fair value of options issued in exchange for services		1,932,262			5,096			76,422
Amortization of deferred finance charges		392,375			-			129,251
Salary due to stockholder contributed to capital		15,000			-			-
Provision for bad debts		-			-			17,500
Amortization and depreciation		471,270			7,280			9,460
Gain on disposition of assets		(4,722	)		-			-
Stock issued in exchange for services		220,960			-			-
Financing expenses paid directly from stock proceeds		5,270			-			-
Amortization of deferred consulting fees		40,800			-			-
(Increase) decrease in assets
Receivables		(5,500	)		(3,506	)		(19,750	)
Inventory		(24,160	)		4,566			10,524
Increase in liabilities
Accounts payable and accrued expenses		773,685			132,472			121,206

Net cash used in operating activities		(5,567,006	)		(215,728	)		(195,271	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(35,749	)		-			-
Purchase of intangibles		(20,000	)		-			-
Purchase of patent costs		(183,919	)		-			(19,726	)
Loan payable, officer		-			-			(5,000	)
Proceeds from sale of assets		6,738			-			-

Net cash used in investing activities		(232,930	)		-			(24,726	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		4,091,447			-			-
Proceeds from exercise of stock options		232,369			-			-
Proceeds from issuance of stock options		15,000			-			-
Proceeds from exercise of warrants		55,500			-			-
Proceeds from issuance of notes		1,636,000			241,000			400,000
Repayments of notes		(100,000	)		-			(100,000	)
Stock issuance costs		(104,760	)		-			-

Net cash provided by financing activities		5,825,556			241,000			300,000

NET DECREASE IN CASH AND CASH EQUIVALENTS		25,620			25,272			80,003

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		-			348			2,058

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	25,620		$	25,620		$	82,061

See the accompanying notes to the consolidated financial statements.

- 10 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Consolidated Statements of Cash Flows (Continued)

For the Six Months Ended June 30, 2008 and 2007

And for the Period November 10, 1999 (Date of Inception) to June 30, 2008

(UNAUDITED)

				Six Months		Six Months
	Cumulative			Ended		Ended
	Since			June 30,		June 30,
	Inception			2008		2007

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the year for:
Interest	$	29,623		$	13	$	145

Income taxes	$	-		$	-	$	-

Return of shares of common stock related to purchase price adjustment
Common stock		(1,000	)		-		-
Additional paid-in capital		(353,000	)		-		-

Intangible assets	$	(354,000	)	$	-	$	-

Issuance of common stock and stock options for acquisition of subsidiary	$	738,000		$	-	$	-

Proceeds from common stock sales applied directly to debt and financing expenses repayment	$	55,270		$	-	$	-

Fair value of warrants issued for deferred finance charges	$	392,376		$	-	$	-

See the accompanying notes to the consolidated financial statements.

- 11 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentations

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Rule 8-03 of Regulation S-X. 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. Operating results for the six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the year ended December 31, 2008. The unaudited financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company’s annual report on Form 10-KSB for the year ended December 31, 2007.

The financial statements are presented in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 7, “Accounting and Reporting by Development Stage Enterprises.”

Recently Issued Pronouncements

During September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which is effective for fiscal years beginning after November 15, 2007 with earlier adoption encouraged. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until January 1, 2009. The Company adopted SFAS 157 on January 1, 2008 for all financial assets and liabilities, but the implementation did not require additional disclosures or have a significant impact on the Company's financial statements. The Company has not yet determined the impact the implementation of SFAS 157 will have on the Company’s non-financial assets and liabilities which are not recognized or disclosed on a recurring basis. However, the Company does not anticipate that the full adoption of SFAS 157 will significantly impact their financial statements.

During February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115 (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The objective of SFAS 159 is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The Company has adopted SFAS 159 on January 1, and has elected not to measure any additional financial assets, liabilities or other items at fair value.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. This statement is effective for the Company beginning January 1, 2009 and will change the accounting for business combinations on a prospective basis.

- 12 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Pronouncements (Continued)

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This statement is effective for the Company beginning January 1, 2009. SFAS 160 is not currently applicable to the Company since the Company’s subsidiary is wholly owned.

In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”), which is effective January 1, 2009. SFAS 161 requires enhanced disclosures about derivative instruments and hedging activities to allow for a better understanding of their effects on an entity’s financial position, financial performance, and cash flows. Among other things, SFAS 161 requires disclosures of the fair values of derivative instruments and associated gains and losses in a tabular formant. SFAS 161 is not currently applicable to the Company since the Company does not have derivative instruments or hedging activity.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles (“FAS 162"). This Standard identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. FAS 162 directs the hierarchy to the entity, rather than the independent auditors, as the entity is responsible for selecting accounting principles for financial statements that are presented in conformity with generally accepted accounting principles. The Standard is effective 60 days following SEC approval of the Public Company Accounting Oversight Board amendments to remove the hierarchy of generally accepted accounting principles from the auditing standards. FAS 162 is not expected to have an impact on the financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. This Staff Position is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. This FSP is not currently applicable to the Company.

In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities. This FSP provides that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company does not currently have any share-based awards that would qualify as participating securities. Therefore, application of this FSP is not expected to have an effect on the Company's financial reporting.

In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) ("FSP 14-1"). FSP 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008. The FSP includes guidance that convertible debt instruments that may be settled in cash upon conversion should be separated between the liability and equity components, with each component being accounted for in a manner that will reflect the entity's nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods. The Company has not determined the effect that the implementation of FSP 14-1 will have on its financial statements.

- 13 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Comprehensive Income

The company follows the Statement of Financial Accounting Standard (“SFAS”) No. 130, “Reporting Comprehensive Income.” Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. Since the Company has no items of other comprehensive income, comprehensive income (loss) is equal to net income (loss).

Reclassifications

Certain amounts in the 2007 financial statements have been reclassified in order for them to be in conformity with the 2008 presentation.

NOTE 2 – GOING CONCERN

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and experienced negative cash flow during the development stage. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company is in the development stage at June 30, 2008. Successful completion of the Company’s development program and, ultimately the attainment of profitable operations is dependent upon future events, including obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company’s cost structure. However, there can be no assurances that the Company will be able to secure additional equity investment or achieve an adequate sales level.

NOTE 3 – PATENTS

The Company continues to apply for patents. Accordingly costs associated with the registration of these patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents (17 years). During the six months ended June 30, 2008, there were no additional capitalized patent costs incurred. Amortization expense for patents was $2,705 and $5,410 for the three and six months ended June 30, 2008 and $2,519 and $7,483 for the three and six months ended June 30, 2007.

NOTE 4 – INCOME TAXES

As of January 1, 2008, we had no unrecognized tax benefits, and accordingly, we have not recognized any interest or penalties during 2008 related to unrecognized tax benefits. There has been no change in unrecognized tax benefits during the six months ended June 30, 2008, and there was no accrual for uncertain tax positions as of June 30, 2008.

There is no income tax benefit for the losses for the six months ended June 30, 2008 and 2007, since management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of such benefits.

- 14 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 5 - SENIOR SECURED CONVERTIBLE NOTES PAYABLE

In February 2006, the Company commenced a private placement of up to $800,000 principal amount of 10% senior secured convertible promissory notes due twelve months from the date of issue to certain of our shareholders and other accredited investors. On May 7, 2007, the due date of these notes was extended to August 31, 2008 and the interest rate increased to 12% during the extension period. Purchasers of the notes were issued 10-year warrants exercisable into the Company’s shares at an exercise price of $0.01 per share. In addition, if an equity financing with total proceeds of more than $5,000,000 occurs while any notes are outstanding, holders of notes will have the right, at their option, to convert the outstanding principal and interest of the notes into shares at a discount of 30% of the price per share in the qualified financing. In accordance with Emerging Issue Task Force No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, the contingent beneficial conversion feature is not recognized unless the triggering event occurs and the contingency is resolved. The notes are secured by a first priority lien on all of the tangible and intangible personal property of the Company.

As of December 31, 2006, the Company sold $800,000 principal amount of the notes and issued 8,000,000 warrants. In accordance with FAS 123(R), warrants were valued at $392,376 and recorded as deferred finance charges. The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 169% and 284%, risk-free interest rate between 3.6% and 4.5% and expected warrant life of ten years. The deferred finance charges were amortized over one year, which was the original term of the convertible notes. The Company received $55,500 for the exercise of 5,550,000 of the warrants during 2006. Accrued interest at June 30, 2008 and December 31, 2007 amounted to $193,700 and $145,700.

NOTE 6 - CONVERTIBLE NOTES PAYABLE

During 2007, the Company commenced a private placement of up to $400,000 principal amount of 10% Convertible Promissory Notes due August 31, 2008 (the “Notes”). Holders of Notes will have the right, at their option, to convert the outstanding principal and interest of the Notes into shares of the Company’s Series A Preferred Stock at any time and from time to time at the option of the holder at the initial conversion price of $0.005333 per share. The Notes are unsecured. In accordance with Emerging Issue Task Force No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, there is no intrinsic value to the embedded conversion option since the conversion price is higher than the fair value as determined by management. During 2007 the Company issued notes payable under the private placement totaling $375,000. During 2008 the Company issued an additional $25,000 of the notes payable to complete the private placement. The notes are due on August 31, 2008 and bear interest at 10%. Accrued interest at June 30, 2008 and December 31, 2007 amounted to $38,542 and $18,542.

NOTE 7 – NOTES PAYABLE

During 2007, the Company issued $70,000 of unsecured notes payable, which are payable on demand and bear interest at the rate of 10%. During 2008, the Company issued an additional $216,000 of these unsecured notes payable. Accrued interest at June 30, 2008 and December 31, 2007 amounted to $17,150 and $10,250.

- 15 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 8 – STOCK OPTIONS AND WARRANTS

During 1999, the Board of Directors (“Board”) of the Company adopted, with the approval of the stockholders, a Stock Option Plan. In 2000, the Board superseded that plan and created a new Stock Option Plan, pursuant to which it is authorized to grant options to purchase up to 1.5 million shares of common stock. On December 17, 2003, the Board, with approval of the stockholders, superseded this plan and created the 2003 Stock Option Plan (the “Plan”). Under the Plan the Company is authorized to grant options to purchase up to 18,000,000 shares of common stock to the Company’s employees, officers, directors, consultants, and other agents and advisors. The Plan is intended to permit stock options granted to employees under the Plan to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (“Incentive Stock Options”). All options granted under the Plan, which are not intended to qualify as Incentive Stock Options, are deemed to be non-qualified options (“Non-Statutory Stock Options”). As of June 30, 2008, there are 3,100,000 options that have been issued and exercised, 14,006,662 options that have been issued and are unexercised, and 893,338 options that are available to be issued under the Plan.

The Plan is administered by a committee of the Board of Directors (“Stock Option Committee”) which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market value (determined at the time of the grant) of stock for which an employee may exercise Incentive Stock Options under all plans of the company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.

The Company issued non-statutory stock options pursuant to contractual agreements to non-employees. Options granted under the agreements are expensed when the related service or product is provided. For the three and six months ended June 30, 2008, the Company expensed approximately $2,500 and $5,000 and for the three and six months ended June 30, 2007, the Company expensed approximately $18,000 and $43,000 relative to non-employee options granted. As of June 30, 2008, there was approximately $6,000 of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized through January 2009.

The following tables summarize non-employee stock option/warrant activity of the Company since December 31, 2007:

					Weighted Average
	Option/Warrant		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2007		12,856,662		$.01 to $.28	$	0.06

Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-

Outstanding, June 30, 2008		12,856,662		$.01 to $.28	$	0.06

Exercisable, June 30, 2008		12,689,996		$.01 to $.28	$	0.08

Weighted Average Remaining Life, Exercisable, June 30, 2008 (years)		4.7

- 16 -

LaserLock Technologies, Inc. and Subsidiaries

(A Development Stage Company)

Notes to Consolidated Financial Statements

NOTE 8 – STOCK OPTIONS AND WARRANTS (Continued)

A summary of incentive stock option transactions for employees since December 31, 2007 is as follows:

					Weighted Average
	Option		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2007		6,550,000		$.03 to $.28	$	0.12

Granted		-		-		-
Exercised		-		-		-
Expired		-		-		-

Outstanding, June 30, 2008		6,550,000		$.03 to $.28	$	0.12

Exercisable, June 30, 2008		6,491,666		$.03 to $.28	$	0.12

Weighted Average Remaining Life, Exercisable, June 30, 2008		4.1

NOTE 9 – RELATED PARTY TRANSACTIONS

Six shareholders of the Company hold $680,000 of the Senior secured convertible notes payable, one shareholder holds $140,000 of the convertible notes payable and one shareholder holds $50,000 of the notes payable as of June 30, 2008.

The Company maintains its office at the home of its President. No formal lease agreement exists and no direct rent expense has been incurred. However, related occupancy costs of $1,260 and $2,633 were incurred during the three and six months ended June 30, 2008 and $1,260 and $2,195 were incurred during the three and six months ended June 30, 2007.

At June 30, 2008 and December 31, 2007, the Company had accrued salary to the President in the amount of $144,750 and $99,750.

NOTE 10 – MAJOR CUSTOMERS AND VENDORS

During the three and six months ended June 30, 2008, the Company earned a substantial portion of its revenue from two customers and during the three and six months ended June 30, 2007 earned a substantial portion of its revenue from two and one customer. During the three and six months ended June 30, 2008, revenue from those customers aggregated $15,294 and $30,614 and during the three and six months ended June 30, 2007, revenue from those customers aggregated $17,432 and $227,126. At June 30, 2008 and 2007, amounts due from those customers included in trade accounts receivable were $5,500 and $26,290.

NOTE 11 – SUBSEQUENT EVENTS

On August 4, 2008, the management contract with the Company’s President, which expires November 4, 2008 was extended for a term of 5 years under the same terms and conditions.

- 17 -

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Information

The following Management’s Discussion and Analysis should be read in conjunction with our unaudited financial statements and notes thereto for the six month period ended June 30, 2008 included herein and our audited financial statements and notes thereto for the year ended December 31, 2007 included in our Annual Report on Form 10-KSB filed with the Securities and Exchange Commission.

This discussion, analysis and other sections of this report contain, in addition to historical information, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements expressed or implied by these forward-looking statements to differ materially from such forward-looking statements. The forward-looking statements included in this report may prove to be inaccurate. These statements are based on a number of assumptions concerning future events, and are subject to a number of uncertainties and other factors, many of which are outside our control. Actual results may differ materially from such statements for a number of reasons, including the effects of regulation and changes in capital requirements and funding. In light of the significant uncertainties inherent in these forward-looking statements, you should not consider this information to be a guarantee by us or any other person that our objectives and plans will be achieved. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results (expressed or implied) will not be realized.

Overview

We are a technology licensing company that licenses our technology to both third parties who incorporate it into their products for resale to their customers, and to end users who incorporate the technology into their products at their manufacturing facilities. We receive royalties on volume usage of our technology from third parties who sell products incorporating such technologies. We intend to require, whenever possible, minimum annual royalties to enter into these licensing agreements.

Our initial focus involved offering security solutions to the gaming industry through third parties that supply various products and services to the gaming industry. We license our technology to these third-party product and service suppliers who, in turn, incorporate our technology into the products they sell. We receive a royalty on each license. As part of these security solutions, we sell inks and pigments used to detect counterfeit products and documents to these same third-party product and service suppliers. By the end of fiscal year 2003, we had signed agreements to provide technology for the protection of playing cards, dice, and casino chips from fraud with Gaming Partners International and CoPAG U.S.A. Inc. (“CoPAG”). The agreement with Gaming Partners International is still in effect. The agreement with CoPAG expired in September 2005 and was not renewed.

In February 2005 we entered into a six-month agreement with the Nicolette Consulting Group Limited (“NCG”) utilizing the services of Thomas A. Nicolette, its principal. The agreement anticipated that NCG would mainly provide sales and marketing services to LaserLock. During the initial term these services were expanded to include strategic planning and the longer-term objectives. In July 2005, February 2006 and August 2006, the contract was extended for further six month periods with the understanding that Mr. Nicolette would, in addition to his sales and marketing services, provide services similar to those of a senior executive, although he would not be an officer of LaserLock. This agreement expired on January 31, 2007.

On December 13, 2005 we signed a Letter of Intent (“LOI”) to acquire a minimum of 95% of the outstanding shares of ExaqtWorld S.A.R.L. (“Exaqt”) based in Paris, France for 36.6% of the outstanding shares of LaserLock (assuming 100% of the shares of Exaqt are tendered). With the acquisition of Exaqt we would own the worldwide rights in the security sector to a fundamental patent to manufacturer multi-tech Electronic Article Surveillance (“EAS”) systems, which simultaneously detect multiple EAS frequencies (RF, EM, AM and RFID). The multi-tech EAS systems allow the seamless integration of source tagging of products at the manufacturing level of the supply chain of the retail industry. The LOI was subject to the signing of a definitive agreement between Exaqt and us. The standstill agreement contained in the LOI expired June 13, 2006. In the first quarter of 2007 we elected not to pursue the acquisition of Exaqt.

- 18 -

We continue to develop new anti-counterfeiting technologies and to apply for patent protection for these technologies wherever possible. Our current patent portfolio consists of four granted patents (one granted in 2002, two granted in 2004 and one granted in 2005) and one patent pending. Management believes that some of the patents that have been granted may have commercial application in the future but will require additional capital and/or a strategic partner in order to reach the potential markets.

We are currently exploring the uses of our technologies in general industry and government. Whenever possible, we will license our technology to strategic partners that currently service those industries and charge them royalty fees and/or a share of the revenues/profits from their use of our technology.

In February 2006 we commenced a private placement of up to $800,000 principal amount of 10% senior secured convertible promissory notes due twelve months from the date of issue to certain of our shareholders and other accredited investors. Purchasers of notes were issued 10-year warrants exercisable into LaserLock’s equity securities at an exercise price of $0.01 per share. Additionally, if an equity financing with total proceeds of more than $5,000,000 occurs while any notes are outstanding, holders of notes will have the right, at their option, to convert the outstanding principal and interest of the notes into shares at a discount of 30% of the price per share in the qualified financing. The notes are secured by a first priority lien on all of the tangible and intangible personal property of LaserLock. The private placement relied upon applicable exemptions from registration under Section 4(2) of the Securities Exchange Act of 1934, as amended, and Section 506 of Regulation D promulgated thereunder. We completed the private placement on August 10, 2006. In total, we sold $800,000 of notes and issued warrants for the purchase of 8,000,000 shares of our common stock in the private placement. On May 7, 2007, we entered into an agreement with the holders of the notes whereby the parties extended the due date of the notes to August 31, 2008. Interest under the notes was increased to 12% during the extended period.

In October 2006 we entered into an agreement with UTEK Corporation (“UTEK”) a publicly traded company located in Tampa, Florida to conduct a study of our intellectual property portfolio. The study focused on potential uses of our intellectual property portfolio for non-security applications. The approximate cost of the study was $55,000. We issued 1,200,000 restricted Common Shares to UTEK to pay the costs of the study. The shares had a market price of $.045. UTEK completed its initial study in December 2006 and provided a report, which, indicated that there was significant opportunity for licensing our intellectual property for non-security applications.

On November 2, 2006, we entered into an agreement with Athanor Capital Partners Limited, based in London, United Kingdom ("Athanor"), under which Athanor will act as a corporate advisor and broker to us. With Athanor's guidance, we intended to form a new holding company in the United Kingdom ("Newco") and raise up to $5,000,000 through the issuance of Newco's shares on the London Stock Exchange's AIM market ("AIM"). Under the terms of the agreement, Athanor would provide corporate finance advice and capital raising assistance to us in connection with a proposed application for the admission of Newco's shares to trade on the AIM. The proceeds of the offering would be used to complete the acquisition of the assets of Exaqt, including Exaqt’s patent portfolio, fund the global sales and marketing operations of the combined product lines, and exchange all outstanding shares of LaserLock for shares in Newco. On signing the agreement, we paid Athanor a $10,000 non-refundable fee and granted them options to purchase 1,000,000 Common Shares at $.0001 per share. This option was promptly exercised. In the first quarter of 2007 we elected not to pursue the acquisition of Exaqt and the listing on AIM.

On February 28, 2007, we entered into a commercialization agreement with UTEK under which it will market on our behalf the non-security applications of our intellectual property. Upon execution of the agreement, we paid UTEK an initial fee of $5,000, which will be credited against future commissions payable to UTEK under the commercialization agreement. Commissions payable to UTEK are based on the net revenues of LaserLock attributable to licenses and/or sales of the non-security applications of our intellectual property during the term of the agreement. The agreement has an initial term of six months, which will be automatically extended in the event contact is made during the initial term with any prospective licensees or purchasers of the non-security applications of our intellectual property.

- 19 -

On March 9, 2007, we entered into a non-exclusive sales and marketing agreement with RCD Technologies Inc. (“RCD”). RCD is a security technology company, which specializes in RFID technology. During the initial six-month period of the agreement, RCD has agreed to market the LaserLock technologies using its in-house sales force and to share the net revenues with LaserLock on a 50-50 basis. This agreement was not extended.

As of May 17, 2007, the Company filed a Certificate of Designation of Series A Preferred Stock with the Secretary of State of the State of Nevada designating 75,000,000 shares of the Company’s preferred stock as Series A Preferred Stock. The Series A Preferred Stock is non-voting. In the event of any liquidation, dissolution or winding up of the affairs of the Company, before any payment is made to the holders of the Company’s common stock, the holders of Series A Preferred Stock will be entitled to receive an amount equal to $0.0213 per share out of the assets available for distribution by the Company. This preference amount is subject to adjustment for any stock dividends, combinations or splits with respect to shares of Series A Preferred Stock. At any time after the earlier of May 18, 2009 or the date the Company becomes insolvent, each share of Series A Preferred Stock is convertible at the option of the holder into one share of the Company’s common stock, in each case as adjusted for any stock dividends, combinations or splits with respect to such shares.

In May 2007 we commenced a private placement of up to $400,000 principal amount of 10% convertible promissory notes due August 31, 2008 (the “Notes”). Holders of Notes will have the right, at their option, to convert the outstanding principal and interest of the Notes into shares of our Series A Preferred Stock at any time and from time to time at the option of the holder at the initial conversion price of $0.005333 per share. The Notes are unsecured.

As of January 31, 2008 all of the Notes were sold to Nob Hill Capital Partners LP and Clydesdale Partners II, LLC. The Notes were issued in reliance upon applicable exemptions from registration under Section 4(2) of the Securities Exchange Act of 1934, as amended, and Section 506 of Regulation D promulgated thereunder.

On June 23, 2008, we entered into a worldwide Exclusive Agreement (the “Agreement”) with Arthur Blank & Company, Inc. (“AB”), under which AB and its affiliates will have exclusive use of specific applications of our color changing proprietary pigments known as WHYTELITE® technology. Under the terms of the Agreement, the exclusive products are defined as all plastic cards printed with WHYTELITE® pigments. Exclusions to the exclusivity are the American Express card and all applications or products not using plastic as a substrate.

The term of the Agreement ends on December 31, 2009, but the Agreement has automatically renewing one-year terms for each of the following four years if the royalties paid to us by AB exceed certain levels during the year immediately preceding any potential renewal year, or if AB makes additional non-royalty payments that, if combined with the actual royalty amounts received, would equal such threshold levels. The Agreement automatically expires on December 31, 2013.

In addition to the above, in order to implement our strategy, it will be necessary for us to raise additional capital and/or enter into strategic alliances or partnerships. There can be no assurances that such capital or strategic alliances or partnerships will be available and, if available, that we will be able to secure such capital or arrangements on acceptable terms.

Results of Operations

Comparison of the Three-Month Periods Ended June 30, 2008 and June 30, 2007.

Since we were and currently still are in our startup stages it is difficult for us to forecast our revenue or earnings accurately. We believe that period-to-period comparisons of our operating results may not be meaningful. We believe that we will start generating larger amounts of revenue in the future due to our attempts to cultivate business relationships over the past years.

As a result of our limited operating history, we do not have meaningful historical financial data on which to base planned operating expenses. Thus, annual revenue and results of operation are difficult to project.

For the three months ended June 30, 2008, we had sales and royalty revenues of $15,294 as compared to $20,512 for the three months ending June 30, 2007. During the period, sales were $3,003 as compared to $5,818 for last year. Royalty revenues decreased to $12,291 from $14,694. The number of chips using our ink in 2008 was less than in the 2007 period resulting in lower sales and royalty income.

- 20 -

Our cost of sales was $3,590 for the three months ended June 30, 2008 as compared to $2,860 for the three months ended June 30, 2007. The total sales during both periods were not material enough to permit a realistic calculation of cost of sales.

Our research and development costs aggregated $5,138 for the three months ended June 30, 2008 as compared to $4,711 for the three months ended June 30, 2007, an increase of $427. The increase results principally from development efforts related to the non security uses of our WhyteLite product.

Our patent costs for the three months ended June 30, 2008 were $865 as compared to $900 for the three month period ending June 30, 2007. This expense is the cost for maintaining the patents that have been issued to the Company.

Our legal and accounting costs aggregated $27,826 for the three months ended June 30, 2008 as compared to $38,647 for the three months ended June 30, 2007, a decrease of $10,821. Legal fees for the 2008 period decreased to $14,326 from $16,347 in the prior year. Accounting fees were $13,500 in the 2008 period as compared to $22,300 for the same period last year a decrease of $8,800.

Our sales and marketing costs aggregated $59,724 for the three months ended June 30, 2008 as compared to $104,889 for the three months ended June 30, 2007, a decrease of $45,165. The reduction in the costs result primarily from reduced charges for the issuance of stock options of approximately $27,000, and lower travel related costs of approximately $17,000.

Our general and administrative costs aggregated $52,553 for the three months ended June 30, 2008 as compared to $81,335 for the three months ended June 30, 2007, a decrease of $28,782. The decrease is principally the result of reduced costs for office related expenses of $8,000 and insurance costs of $7,700, and a 2007 charge for bad debts of $13,200.

Our interest expense for the three months ended June 30, 2008 was $38,525 as compared to $81,997 for the three months ended June 30, 2007. Accrued interest expense on the Company’s debt was $38,525 for the three months ended June 30, 2008 as compared to $28,441 for the 2007 period resulting from an increase in the average amount of Notes outstanding during 2008 as compared to 2007 and an increase in the interest rate from 10% to 12%. The amortization of the deferred finance charges related to the issuance of warrants related to the Notes was $53,469 for the three months ended June 30, 2007.

The net loss for the three months ended June 30, 2008 was $172,926 or $0.00 per share (rounded to the nearest $0.01). This compares to a net loss of $294,102 or $0.00 per share (rounded to the nearest $0.01) for the same period in 2007, a decrease in the net loss of $121,176. Included in the net loss for the 2008 period was $2,548 that represents the expense portion of the fair value of stock options issued compared to $87,930 in the 2007 period, that also includes the fair value of warrants issued, a decrease of $85,382.

Comparison of the Six-Month Periods Ended June 30, 2008 and June 30, 2007.

For the six months ended June 30, 2008, we had sales and royalty revenues of $31,073 as compared to $244,542 for the six months ending June 30, 2007. During the period, sales were $5,852 as compared to $190,399 for last year. Royalty revenues decreased to $25,221 from $54,143. The reduction in sales results from the use of our ink in casino chips during the 2007 period in a manner that required more ink per chip than in other periods. In addition, the number of chips using our ink in 2008 was less than in the 2007 period resulting in lower sales and royalty income.

- 21 -

Our cost of sales was $6,257 for the six months ended June 30, 2008 as compared to $165,059 for the six months ended June 30, 2007. For the 2007 period the costs were 86.7% of sales. The total sales during the current period were not material enough to permit a realistic calculation of cost of sales.

Our research and development costs aggregated $10,892 for the six months ended June 30, 2008 as compared to $8,092 for the six months ended June 30, 2007, an increase of $2,800. The increase results principally from development efforts related to the non security uses of our WhyteLite product.

Our patent costs for the six months ended June 30, 2008 were $1,311 as compared to $900 during the six month period ending June 30, 2007. This expense is the cost for maintaining the patents that have been issued to the Company.

Our legal and accounting costs aggregated $58,347 for the six months ended June 30, 2008 as compared to $85,851 for the six months ended June 30, 2007, a decrease of $27,504. Legal fees for the 2008 period decreased to $41,847 from $53,751 in the prior year. The decrease principally results from costs for legal work in the 2007 period in connection with the potential acquisition of Exaqt and listing on the London Stock Exchange’s AIM Market. In the first quarter of 2007 we elected not to pursue the acquisition of Exaqt and the AIM listing. Accounting fees were $16,500 in the 2008 period as compared to $32,100 for the same period last year, a decrease of $15,600.

Our sales and marketing costs aggregated $120,876 for the six months ended June 30, 2008 as compared to $207,166 for the six months ended June 30, 2007, a decrease of $86,290. The reduction in the costs result primarily from reduced charges for the issuance of stock options for marketing consultants of approximately $37,500, reduced travel related costs of approximately $28,000, a $5,000 fee paid in 2007 to UTEK for a commercialization contract and most of the balance, reduced fees and costs paid to marketing consultants.

Our general and administrative costs aggregated $120,116 for the six months ended June 30, 2008 as compared to $139,291 for the six months ended June 30, 2007, a decrease of $19,175. The decrease is principally the result of lower costs in most expense categories for 2008 and a 2007 charge for bad debts of $17,500. Offsetting these reductions was an increase in payroll and related payroll taxes of $10,800.

Our interest expense for the six months ended June 30, 2008 was $74,913 as compared to $178,941 for the six months ended June 30, 2007. Accrued interest expense on the Company’s debt was $74,900 for the six months ended June 30, 2008 as compared to $49,690 for the 2007 period resulting from an increase in the average amount of Notes outstanding during 2008 as compared to 2007 and an increase in the interest rate from 10% to 12%. The amortization of the deferred finance charges related to the issuance of warrants related to the Notes was $129,251 for the six months ended June 30, 2007.

The net loss for the six months ended June 30, 2008 was $361,636 or $0.00 per share (rounded to the nearest $0.01). This compares to a net loss of $539,884 or $0.01 per share (rounded to the nearest $0.01) for the same period in 2007, a decrease in the net loss of $178,248. Included in the net loss for the 2008 period was $5,096 that represents the expense portion of the fair value of stock options issued compared to $205,673 in the 2007 period, that also includes the fair value of warrants issued, a decrease of $200,577.

Liquidity and Capital Resources

Our cash balance at June 30, 2008 of $25,620 was $25,272 more than the $348 as of December 31, 2007. Working capital at June 30, 2008 was a negative $2,204,405 representing a decrease in working capital of $349,260 from the negative $1,855,145 at December 31, 2007. This decrease in working capital relates principally to the cash portion of our net loss for the six months ended June 30, 2008.

Our cash flow from operations, since inception, has been and continues to be negative. We continue to attempt to solicit customers and expect to continue to expend funds in excess of our revenues in the near future.

- 22 -

Future capital requirements and the adequacy of available funds will depend on numerous factors, including the successful commercialization of our existing products, cost of filing, prosecuting, defending and enforcing any current and future patent claims and other intellectual property rights, competing technological and marketing of our products. In the event our plans change, our assumptions change or prove to be inaccurate or the funds available prove to be insufficient to fund operations at the planned level (due to further unanticipated expenses, delays, problems or otherwise), we could be required to obtain additional funds through equity or debt financing, through strategic alliances with corporate partners and others, or through other sources in order to bring our products through to commercialization. We do not have any committed sources of additional financing, and there can be no assurance that additional funding, if necessary, will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to further delay, scale back, or eliminate certain aspects of our operations or attempt to obtain funds through arrangements with collaborative partners or others that may require us to surrender rights to certain of our technologies, product development projects, certain products or existing markets. Specifically, if we are unable to consummate sales, we may have to delay our anticipated marketing and delivery dates, scale back our third-party production capabilities or eliminate certain areas of further research and development. If adequate funds are not available, our business, financial condition, and results of operations will be materially and adversely affected.

Our actual research and development and related activities may vary significantly depending on numerous factors, including changes in the costs of such activities from current estimates, the results of our research and development programs, the results of clinical studies, the timing of regulatory submissions, technological advances, determinations as to commercial potential, the status of competitive products and the availability of sufficient funds to achieve our goals. At this time we cannot project our cash expenditures on our research and development program for fiscal year 2008. Our research and development plans over the current year are uncertain but may include the application of our product to additional materials, as well as improving our existing products in conjunction with client feedback and the commercialization of new products. The focus and direction of our operations also will be dependent upon the establishment of collaborative arrangements with other companies.

Our current policy is to invest our cash reserves in bank deposits, certificates of deposit, commercial paper, corporate notes, U.S. government instruments or other investment-grade quality instruments.

There can be no assurance that we will be able to commercialize our technologies or that profitability will ever be achieved. We expect that our operating results will fluctuate significantly from year to year in the future and will depend on a number of factors, most of which are beyond our control.

Off-Balance Sheet Arrangements

As of June 30, 2008, we did not have any off-balance sheet arrangements as defined in Item 303 of Regulation S-K.

- 23 -

Item 4(T). Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of August 15, 2008, our board of directors carried out an evaluation of the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) under the supervision and with the participation of our management, including Norman Gardner, our president and chief executive officer. Based upon that evaluation, Mr. Gardner concluded that our disclosure controls and procedures are not effective based on material weaknesses identified by management as described in Management’s Report on Internal Control over Financial Reporting set forth in Item 7 of our Annual Report on Form 10-KSB for the period ended December 31, 2007.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's (the “SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

- 24 -

PART II – OTHER INFORMATION

Item 6. Exhibits

10.1 Worldwide Exclusive Agreement, dated June 23, 2008, between the Company and Arthur Blank & Company, Inc.

31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).*

32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).*

* The same individual serves as the Company's Principal Executive Officer and Principal Financial Officer.

+ Confidential treatment has been requested as to certain portions of this exhibit pursuant to Rule 24b-2 under the Securities Act of 1934, as amended.

+ Filed herewith.

- 25 -

SIGNATURES

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.

		LaserLock Technologies, Inc.
		(Registrant)

Date: August 19, 2008	By:	/s/ Norman A. Gardner
		Norman A. Gardner
		President and CEO

- 26 -