Converted by FileMerlin

10QSB 1 maindoc.htm QUARTERLY REPORT Converted by FileMerlin

U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended September 30, 2001

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the transition period from to

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Commission File No. 0-31927

LASERLOCK TECHNOLOGIES, INC.

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(Exact name of Registrant as specified in its charter)

NEVADA 23-3023677

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(State or other jurisdiction of (IRS Employer

Incorporation or Organization) Identification No.)

837 Lindy Lane, Bala Cynwyd, PA 19004

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(Address of Principal Executive offices)

(610) 668 - 1952

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(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by

Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such

shorter period that the registrant was required to file such reports), and (2)

has been subject to such filing requirements for the past 90 days.

Yes X

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State the number of shares outstanding of each of the issuer's classes of common

equity, as of the latest practicable date:

Class Outstanding at September 30, 2001

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Common Stock, no par value 14,883,224

Transitional Small Business Disclosure Form (check one):

Yes X No

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LASERLOCK TECHNOLOGIES, INC.

TABLE OF CONTENTS

FORM 10-QSB

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets at September 30, 2001

(Unaudited) and December 31, 2000

Consolidated Statements of Operations (Unaudited)

for the three months and nine months ended September 30, 2001 and 2000.

Consolidated Statement of Shareholders' Equity

(Unaudited) for the period ended September 30, 2001.

Consolidated Statements of Cash Flows (Unaudited)

for the nine months ended September 30, 2001 and 2000

Notes to Consolidated Financial Statements

Item 2. Management's Discussion and Analysis or

Plan of Operation

PART II

OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

Item 6. Exhibits and Reports on Form 8-K

Signatures

Exhibits

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

LASERLOCK TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

	September 30,	December 31,
	2001	2000
	(Unaudited)

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$ 522,967	$ 656,803
Interest receivable	1,455	4,725
Prepaid expenses	34,250	4,250

Total assets	$ 558,672	$ 665,778

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses and
total liabilities	21,343	245

Commitments

STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 10,000,000 shares authorized,
no shares issued and outstanding
Common stock, $.001 par value; 40,000,000 shares authorized,
14,883,224 shares outstanding at September 30, 2001
and 13,289,999 shares outstanding at December 31, 2000	14,884	13,290
Deferred consulting fees	-	(20,683)
Additional paid-in capital	1,716,524	1,094,868
Deficit accumulated during the development stage	(1,194,079)	(421,942)

Total stockholders' equity	537,329	665,533

Total liabilities and stockholders' equity	$ 558,672	$ 665,778

See accompanying notes to consolidated financial statements

LASERLOCK TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 2001

(Unaudited)

		Three Months		Nine Months
	Cumulative	Ended		Ended
	Since	September 30,		September 30,
	Inception	2001	2000	2001	2000

REVENUES	$ -	$ -	$ -	$ -	$ -

COSTS AND EXPENSES:
Research and development	186,709	57,403		125,991
Patent	28,489	3,489		3,489
Legal and accounting	120,785	30,694	8,380	83,850	17,080
Selling, general and administrative	900,753	72,883	24,666	577,517	132,511

Total costs and expenses	1,236,736	164,469	33,046	790,847	149,591

LOSS BEFORE OTHER INCOME	(1,236,736)	(164,469)	(33,046)	(790,847)	(149,591)

OTHER INCOME:
Interest income	42,657	4,510	11,533	18,710	18,103

NET LOSS	$ (1,194,079)	$ (159,959)	$ (21,513)	$ (772,137)	$ (131,488)

BASIC AND DILUTED WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING		14,157,480	11,259,908	13,923,072	9,905,070

BASIC AND DILUTED NET LOSS PER COMMON SHARE		$ (0.01)	$ -	$ (0.06)	$ (0.01)

See accompanying notes to consolidated financial statements

LASERLOCK TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 2001

									Deficit
									Accumulated

Common Stock

Additional

during the

	Number of		Consulting	Paid-In	Development
	Shares	Amount	Fees	Capital	Stage	Total

Issuance of 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 240,000 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	1,593,225	1,594		283,406		285,000
Issuance of 1,500,000 stock options				15,000		15,000
Fair value of non-employee stock options grants				323,250		323,250
Amortization of deferred consulting fees			20,683			20,683
Net loss					(772,137)	(772,137)

Balance, September 30, 2001 (unaudited)	14,883,224	$ 14,884	$ -	$ 1,716,524	$ (1,194,079)	$ 537,329

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LASERLOCK TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO SEPTEMBER 30, 2001

(Unaudited)

	Cumulative
	Since
	Inception	2001	2000

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (1,194,079)	$ (772,137)	$ (131,488)
Adjustments to reconcile net loss to net cash used in
operating activities:
Fair value of options issued in exchange for services	373,600	323,250
Stock issued in exchange for services	36,960
Amortization of deferred consulting fees	40,800	20,683
Changes in assets and liabilities:
(Increase) decrease in interest receivable	(1,455)	3,270
Increase in prepaid expenses	(34,250)	(30,000)	1,951
Increase in accounts payable	21,343	21,098	1,398

Net cash used in operating activities	(757,081)	(433,836)	(128,139)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock options	15,000	15,000
Proceeds from issuance of common stock	1,295,073	285,000	634,900
Stock issuance costs	(30,025)		(16,335)

Net cash provided by financing activities	1,280,048	300,000	618,565

Net increase (decrease) in cash	522,967	(133,836)	490,426

CASH, BEGINNING		656,803	55,230

CASH, ENDING	$ 522,967	$ 522,967	$ 545,656

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
ACTIVITIES
Common stock issued for services	$ 77,760

LASERLOCK TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2001 AND 2000

NOTE 1

BASIS OF PRESENTATIONS

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB and Item 310(b) of Regulation S-B. 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 nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 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, 2000.

The accompanying unaudited condensed consolidated financial statements include the accounts of LaserLock Technologies, Inc. and its wholly owned subsidiary, LL Security Products, Inc. All intercompany transactions have been eliminated in consolidation.

NOTE 2

REALIZATION OF ASSETS

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses from activities during the development stage. This condition raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3

STOCK OPTIONS

On February 20, 2001, the Company entered into an agreement, with a non-related third party, and sold 1,500,000 stock options for a price of $.01 per option. The agreement provides each option the right to purchase one share of common stock at $.16 per share; immediate vesting of options and expiration of options was mutually extended by both parties to July 31, 2001. In accordance with the fair value method as described in the accounting requirements of SFAS No. 123, the Company recognized an expense of $300,000 during the first quarter of 2001.

On April 7, 2001, the Company entered into an agreement with legal counsel for 150,000 stock options. The agreement provides each option the right to purchase one share of common stock at $.35 per share; immediate vesting of options and expiration of options on April 7, 2006. In accordance with the fair value method as described in the accounting requirements of SFAS No. 123, the Company recognized an expense of $23,250 during the second quarter 2001.

LASERLOCK TECHNOLOGIES, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2001 AND 2000

NOTE 4

ISSUANCE OF COMMON STOCK

In April 2000, the owner of the 1,500,000 stock options exercised 1,156,250 of the options and purchased 1,156,250 shares of common stock for $185,000. On July 1, 2001, the remaining 343,750 options were exercised and the Company received $55,000 for 343,750 shares of its common stock.

NOTE 5

INCOME TAXES

The Company has $650,000 in Federal and State net operating loss carryovers, which can be used to offset future taxable income. The net operating loss carryforwards expire in the year 2030.

The components of the Company’s deferred tax assets are as follows:

September 30,

December 31,

2000

Net operating loss carryforwards

$ 290,000

$143,000

Valuation allowance

(290,000)

(143,000)

Deferred tax asset

$ -

NOTE 6

ACQUISITIONS

EDS Marketing, Inc.

On October 29, 2001 the Company acquired 100% of EDS Marketing, Inc.’s outstanding common stock by exchanging 2,000,000 shares of its common stock valued at $.42 per share and 2,000,000 stock options granted to the key members of EDS management at exercise prices ranging from $.42 to $1.00. EDS Marketing, Inc. is a developer of security products primarily related to the gaming industry.

LL Security Products, Inc.

In July, 2001, the Company formed LL Security Products, Inc. with an investment of $50,000. LL Security Products, Inc. was incorporated to operate the Company’s marketing aspects of its business.

Item 2. Management Discussion and Analysis of Plan of Operation

Three Months Ending September 30, 2001 Compared

to the Three Months September 30, 2000

The Company had no sales for the three-month periods ending September 30, 2001 and September 30, 2000. We are negotiating several contracts in the gaming, anti-counterfeiting, and anti-diversion industries which management believes will be consummated. We have consummated a non-exclusive worldwide contract with The Bud Jones Company and Bourgogne et Grasset, both of whom have recently merged to become the world's largest provider of casino chips and dice. The agreement provides for guaranteed minimum annual royalties offset against a specific royalty per chip and per pair of dice. Since any revenues generated under this agreement will be predicated on sales made by The Bud Jones Company and Bourgogne et Grasset to third parties, the Company cannot estimate what quarterly revenues will be generated under this agreement in the future. We have applied internationally for two patents for our technology for laser activated ink technologies which may be used as part of an anti-counterfeiting protection process. We have acquired the exclusive rights for the gaming industry of a patented technology which we intend to utilize to offer anti-counterfeit protection for cashless gaming coupons. We believe that our laser and ink combination products are ready for commercial production and we have been soliciting orders for our products although we have not yet entered into any contracts. We intend to have made our first commercial sales of our products by the end of the fourth quarter of 2001.

The Company's net loss increased 643% from $21,513 for the three months ending

September 30, 2000 to $159,959 for the three months ending September 30, 2001. The increase was primarily caused by an increase in research and development costs which totaled $57,403 in the three months ending September 30, 2001, as opposed to $0 in the three months ending September 30, 2000; and an increase in selling, general and administrative costs which totaled $72,883 in the three months ending September 30, 2001, as opposed to $24,666 in the Three Months Ending March 31, 2000. The increase in these expenses was the result of the Company's active solicitation of orders for our products, participation in gaming industry trade shows, and the development of an administrative infrastructure to handle such sales when they are consummated. The remaining increase in net loss of resulted from the increased cost of professional services to comply with certain governmental regulations.

Other income for the Three-month period totaled $4,510. This income was interest

received on the Company's cash reserves.

Liquidity and Capital Resources

During the first three months of 2001, the Company was able to meet its

financial needs by continuing to utilize its cash reserves. The Company's cash

reserves decreased from $592,608 at the beginning of the period to $522,967 at

the end of the period.

As indicated in the Company's most recent financial statements available herein,

the Company continues to be cash flow negative. There can be no assurances that

the Company's ongoing operations will begin to generate a positive cash flow or

that unforeseen events may require more working capital than the Company

currently has at its disposal. At the current time the Company intends to fund

its capital requirements by continuing to utilize its cash reserves. As the

Company completes the development and commercialization of its products, sales

are expected to be generated. If the Company is unable to meet all of its cash

flow requirements through the utilization of its cash reserves, additional funds

may be borrowed or raised through sales of its common or preferred stock. If the

Company cannot cover its negative cash flows with its current cash reserves, or

is unable to consummate any of these sales or borrowings, it will realize

significant adverse impacts on its operations.

PART II - OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds

On February 20, 2001, the Company entered into an agreement, with PFK Acquisition Group II, LLC ,a non-related third party, which sold 1,500,000 stock options for a price of $.01 per option. The agreement provided each option the right to purchase one share of common stock at $.16 per share; immediate vesting of options and expiration of options was mutually extended by both parties to July 31, 2001. In April 2001, the owner of the 1,500,000 stock options exercised 1,156,250 of the options and purchased 1,156,250 shares of common stock for $185,000. On July 1, 2001, the remaining 343,750 options were exercised and the Company received $55,000 for 343,750 shares of its common stock.

Item 6. Exhibits and Reports on Form 8-K

(A) Exhibits

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None

(B) Reports on Form 8-K

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On October 17, 2001 the Company filed a form 8k on a proposed transaction whereby the Company's wholly owned subsidiary, LL Security Products, Inc., a Nevada corporation ('LL'), would purchase E.D.S. Marketing Inc., a

Nevada corporation ('E.D.S.) In the interim period, the Company, LL, and EDS have executed all required documentation and the sale has been concluded, pending an opinion of counsel by E.D.S counsel.

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant

caused this report to be signed on its behalf by the undersigned, thereunto duly

authorized.

LaserLock Technologies, Inc.

(Registrant)

Dated: November 14, 2001 By: /s/ Norman Gardner

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Norman Gardner

President and CEO