-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wl56Qt4LOuI/s0gU1icA8TpEzJ/cHpP/mSlRoa7NtCR6YL9wR4Br4nlZF44gVIUU BiX7o0z5cWQYx8nMNiWfnw== 0001144204-05-015162.txt : 20050513 0001144204-05-015162.hdr.sgml : 20050513 20050513131102 ACCESSION NUMBER: 0001144204-05-015162 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050513 DATE AS OF CHANGE: 20050513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LASERLOCK TECHNOLOGIES INC CENTRAL INDEX KEY: 0001104038 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 233023677 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-31927 FILM NUMBER: 05827841 BUSINESS ADDRESS: STREET 1: 837 LINDY LANE CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6109091000 MAIL ADDRESS: STREET 1: 837 LINDY LANE CITY: BALA CYNWYD STATE: PA ZIP: 19004 10QSB 1 v018216_10qsb.txt United States 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 March 31, 2005 |_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________. Commission file number 0-31927 LASERLOCK TECHNOLOGIES, INC. --------------------------------------------------------------- (Exact Name of Small Buiness as Specified in Its Charter) NEVADA 23-3023677 - --------------------------------------------- ------------------ (State or Other Jurisdiction of Incorporation (I.R.S Employer or Organization) Identification No.) 837 Lindy Lane, Bala Cynwyd, PA 19004 --------------------------------------------------------------- (Address of Principal Executive Offices) (610) 668-1952 ---------------------------------- (Issuer's Telephone Number, Including Area Code) 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 Yes |X| No |_| 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 March 31, 2005 -------------------------- ----------------------------- Common Stock, no par value 60,590,506 Transitional Small Business Disclosure Form (check one): Yes |X| No |_| LASERLOCK TECHNOLOGIES, INC. TABLE OF CONTENTS FORM 10-QSB PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements Consolidated Balance Sheet at March 31, 2005 and December 31, 2004 1 Unaudited Consolidated Statement of Operations for the three months ended March 31, 2005 and 2004 2 Unaudited Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31, 2005 3 - 4 Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004 5 - 6 Notes to Unaudited Consolidated Financial Statements 7 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation 10 - 13 Item 3. Controls and Procedures 14 PART II OTHER INFORMATION Item 1. Legal Proceedings 15 Item 6. Exhibits and Reports on Form 8-K 16 - 17
LASERLOCK TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS
March 31, December 31, 2005 2004 ------------ ------------ (Unaudited) (Audited) ASSETS Current Assets Cash and cash equivalents $ 409,197 $ 676,593 Receivables 36,295 27,943 Inventory 40,765 20,423 Prepaid expenses 8,288 9,811 ------------ ------------ Total Current Assets 494,545 734,770 ------------ ------------ Property and Equipment Capital equipment 32,604 29,381 Less accumulated depreciation 9,275 7,965 ------------ ------------ 23,329 21,416 ------------ ------------ Patent costs, net of accumulated amortization of $9,734 as of March 31, 2005 and $8,366 as of December 31, 2004 87,649 80,297 ------------ ------------ TOTAL ASSETS $ 605,523 $ 836,483 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 34,943 $ 43,328 Deferred revenue 8,750 12,500 ------------ ------------ Total Current Liabilities 43,693 55,828 ------------ ------------ STOCKHOLDERS' EQUITY Preferred Stock, $.001 par value; 75,000,000 shares authorized, no shares issued and outstanding Common Stock, $.001 par value; 250,000,000 shares authorized, 60,590,506 shares outstanding at March 31, 2005 and December 31, 2004 60,590 60,590 Additional paid-in capital 5,958,685 5,903,685 Deficit accumulated during the development stage (5,457,445) (5,183,620) ------------ ------------ 561,830 780,655 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 605,523 $ 836,483 ============ ============
See accompanying notes to consolidated financial statements. 1 LASERLOCK TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
Three Months Three Months Cumulative Ended Ended Since March 31, March 31, Inception 2005 2004 ------------ ------------ ------------ REVENUES Sales $ 147,065 $ 22,695 $ 14,460 Royalties 225,054 41,014 15,421 ------------ ------------ ------------ Total revenues 372,119 63,709 29,881 ------------ ------------ ------------ COSTS AND EXPENSES Research and development 841,866 61,396 91,531 Patent costs 50,989 -- -- Legal and accounting 593,528 19,782 92,699 Sales and marketing 2,729,047 177,336 252,317 General and administrative 1,810,591 81,448 60,911 ------------ ------------ ------------ Total costs and expenses 6,026,021 339,962 497,458 ------------ ------------ ------------ LOSS BEFORE OTHER INCOME (5,653,902) (276,253) (467,577) OTHER INCOME (EXPENSE) Gain on disposition of assets 4,722 -- -- Interest income 56,005 2,428 704 Interest expense (29,270) -- -- ------------ ------------ ------------ LOSS BEFORE INCOME TAX BENEFIT (5,622,445) (273,825) (466,873) INCOME TAX BENEFIT (165,000) -- -- ------------ ------------ ------------ NET LOSS $ (5,457,445) $ (273,825) $ (466,873) ============ ============ ============ BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 60,590,506 41,990,506 ============ ============ BASIC AND DILUTED NET LOSS PER COMMON SHARE $ -- $ (0.01) ============ ============
See accompanying notes to consolidated financial statements. 2 LASERLOCK TECHNOLOGIES, INC. (A DEVELOMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
Common Stock ------------------------- Number of Consulting Shares Amount Fees ------------- --------- ------------ Issuance of initial 4,278,000 shares on November 10, 1999 4,278,000 $4,278 $ -- Issuance of shares of common stock in exchange for services 1,232,000 1,232 -- Issuance of shares of common stock 2,090,000 2,090 -- Stock issuance costs -- -- -- Net loss -- -- -- -------------- ---------- ------------- Balance, December 31, 1999 7,600,000 7,600 -- Issuance of shares of common stock 5,449,999 5,450 -- Issuance of shares of common stock in exchange for services 240,000 240 (40,800) Stock issuance costs -- -- -- Fair value of non-employee stock options grants -- -- -- Amortization of deferred consulting fees -- -- 20,117 Net loss -- -- -- -------------- ---------- ------------- Balance, December 31, 2000 13,289,999 13,290 (20,683) Issuance of shares of common stock 217,500 218 -- Issuance of shares of common stock and stock options for acquisition of subsidiary 2,000,000 2,000 -- Issuance of stock options -- -- -- Exercise of options 1,450,368 1,450 -- Fair value of non-employee stock options -- -- -- Amortization of deferred consulting fees -- -- 20,683 Net loss -- -- -- -------------- ---------- ------------- Balance, December 31, 2001 16,957,867 16,958 -- Issuance of shares of common stock 3,376,875 3,377 -- Fair value of non-employee stock options -- -- -- Salary due to shareholder contributed to capital -- -- -- Return of shares of common stock related to purchase price adjustment (1,000,000) (1,000) -- Net loss -- -- -- -------------- ---------- ------------- Balance, December 31, 2002 19,334,742 19,335 --
Accumulated Additional During the Paid-In Development Capital Stage Total -------------- -------------- -------------- Issuance of initial 4,278,000 shares on November 10, 1999 $ 16,595 $ -- $ 20,873 Issuance of shares of common stock in exchange for services 35,728 -- 36,960 Issuance of shares of common stock 60,610 -- 62,700 Stock issuance costs (13,690) -- (13,690) Net loss -- (54,113) (54,113) -------------- --------------- --------------- Balance, December 31, 1999 99,243 (54,113) 52,730 Issuance of shares of common stock 921,050 -- 926,500 Issuance of shares of common stock in exchange for services 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 Net loss -- (367,829) (367,829) -------------- --------------- --------------- Balance, December 31, 2000 1,094,868 (421,942) 665,533 Issuance of shares of common stock 77,723 -- 77,941 Issuance of shares of common stock and stock options for acquisition of subsidiary 736,000 -- 738,000 Issuance of stock options 15,000 -- 15,000 Exercise of options 230,609 -- 232,059 Fair value of non-employee stock options 323,250 -- 323,250 Amortization of deferred consulting fees -- -- 20,683 Net loss -- (1,052,299) (1,052,299) -------------- --------------- --------------- Balance, December 31, 2001 2,477,450 (1,474,241) 1,020,167 Issuance of shares of common stock 687,223 -- 690,600 Fair value of non-employee stock options 94,000 -- 94,000 Salary due to shareholder contributed to capital 15,000 -- 15,000 Return of shares of common stock related to purchase price adjustment (353,000) -- (354,000) Net loss -- (1,195,753) (1,195,753) -------------- --------------- --------------- Balance, December 31, 2002 2,920,673 (2,669,994) 270,014
See accompanying notes to consolidated financial statements. 3 LASERLOCK TECHNOLOGIES, INC. (A DEVELOMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued) FOR THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
Common Stock Accumulated -------------------------- Additional During the Number of Consulting Paid-In Development Shares Amount Fees Capital Stage ------------ ------------ ------------ ------------ ------------ Issuance of shares of common stock 22,512,764 22,512 -- 1,387,109 -- Fair value of non-employee stock options -- -- -- 213,300 -- Issuance of shares of common stock for services 143,000 143 -- 23,857 -- Stock issuance costs -- -- -- (49,735) -- Net loss -- -- -- -- (1,107,120) ------------ ------------ ------------ ------------ ------------ Balance, December 31, 2003 41,990,506 41,990 -- 4,495,204 (3,777,114) Stock issuance costs -- -- -- (25,000) -- Fair value of non-employee stock options -- -- -- 493,600 -- issuance of shares of common stock 18,600,000 18,600 -- 939,881 -- Net loss -- -- -- -- (1,406,506) ------------ ------------ ------------ ------------ ------------ Balance December 31, 2004 60,590,506 60,590 -- 5,903,685 (5,183,620) Fair value of non-employee stock options -- -- -- 55,000 -- Net loss for the three months ended March 31, 2005 -- -- -- -- (273,825) ------------ ------------ ------------ ------------ ------------ Balance March 31, 2005 60,590,506 $ 60,590 $ -- $ 5,958,685 $ (5,457,445) ============ ============ ============ ============ ============
Total ------------ Issuance of shares of common stock 1,409,621 Fair value of non-employee stock options 213,300 Issuance of shares of common stock for services 24,000 Stock issuance costs (49,735) Net loss (1,107,120) ------------ Balance, December 31, 2003 760,080 Stock issuance costs (25,000) Fair value of non-employee stock options 493,600 issuance of shares of common stock 958,481 Net loss (1,406,506) ------------ Balance December 31, 2004 780,655 Fair value of non-employee stock options 55,000 Net loss for the three months ended March 31, 2005 (273,825) ------------ Balance March 31, 2005 $ 561,830 ============
See accompanying notes to consolidated financial statements. 4 LASERLOCK TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
Three Months Three Months Cumulative Ended Ended Since March 31, March 31, Inception 2005 2004 ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (5,457,445) $ (273,825) $ (466,873) Adjustments to reconcile net loss to net cash flows used in operating activities Fair value of options issued in exchange for services 1,229,500 55,000 204,300 Salary due to stockholder contributed to capital 15,000 -- -- Amortization and depreciation 424,140 2,678 1,269 Gain on disposition of assets (4,722) -- -- Stock issued in exchange for services 60,960 -- -- Financing expenses paid directly from stock proceeds 5,270 -- -- Amortization of deferred consulting fees 40,800 -- -- (Increase) decrease in assets Receivables (36,295) (8,352) (12,534) Inventory (40,765) (20,342) (36,483) Prepaid expenses (8,288) 1,523 967 Increase (decrease) in liabilities Accounts payable and accrued expenses 34,944 (8,385) 31,814 Deferred revenue 8,750 (3,750) (3,750) ------------ ------------ ------------ Net cash used in operating activities (3,728,151) (255,453) (281,290) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of capital equipment (35,752) (3,223) (3,755) Purchase of intangibles (20,000) -- -- Purchase of patent costs (97,383) (8,720) -- Proceeds from sale of assets 6,737 -- -- ------------ ------------ ------------ Net cash used in investing activities (146,398) (11,943) (3,755) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of common stock 4,091,447 -- -- Proceeds from exercise of stock options 232,059 -- -- Proceeds from issuance of stock options 15,000 -- -- Proceeds from short-term borrowings 50,000 -- -- Stock issuance costs (104,760) -- -- ------------ ------------ ------------ Net cash provided by financing activities 4,283,746 -- -- ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 409,197 (267,396) (285,045) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD -- 676,593 810,264 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS - END OF PERIOD $ 409,197 $ 409,197 $ 525,219 ============ ============ ============
See accompanying notes to consolidated financial statements. 5 LASERLOCK TECHNOLOGIES, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO MARCH 31, 2005 (UNAUDITED)
Three Months Three Months Cumulative Ended Ended Since March 31, March 31, Inception 2005 2004 ------------ ------------ ------------ SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: 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 $ -- $ -- ============ ============ ============
See accompanying notes to consolidated financial statements. 6 LASERLOCK TECHNOLOGIES, INC. 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-QSB and item 310(b) of Regulation S-B of the Securities Exchange Act of 1934. 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 three months ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ended December 31, 2005. 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, 2004. Recently Issued Accounting Pronouncements In December 2004, the FASB revised SFAS 123, "Accounting for Stock-Based Compensation" to require all companies to expense the fair value of employee stock options. SFAS 123R is effective for the first period ending after December 15, 2005 for a small business issuer. The following recently issued accounting pronouncements are currently not applicable to the Company. In January 2003, subsequently revised in December 2003, the FASB issued FASB Interpretation No. 46R ("FIN 46R"), Consolidation of Variable Interest Entities - - An Interpretation of AARB N. 51. FIN 46R requires that if any entity has a controlling financial interest in a variable interest entity, the assets, liabilities and results of activities of the variable interest entity should be included in the consolidated financial statements of the entity. FIN 46R provisions are effective for all arrangements entered into after January 31, 2003. FIN 46R provisions are required to be adopted for the first period ending after December 15, 2004 for a small business issuer. FAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, requires financial instruments within its scope to be classified as liabilities (or assets in some circumstances). The Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003, except for certain mandatorily redeemable financial instruments. It is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. Restatement is not permitted. The effective date of certain provisions of Statement 150 for certain mandatorily redeemable financial instruments has been deferred by FSP FAS 150-3. Under the FSP, certain mandatorily redeemable shares are subject to the provisions of Statement 150 for the first fiscal period beginning after December 15, 2004. Other mandatorily redeemable shares are deferred indefinitely but may be subject to classification or disclosure provisions of the Statement. A table indicating the revised effective dates of Statement 150 for particular kinds of entities and instruments is available on the FASB website. 7 LASERLOCK TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Reclassifications Certain reclassifications have been made to the financial statements related to prior periods to conform to the presentation in the financial statements related to the current period. 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 - 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 patent (17 years). During the three months ending March 31, 2005, additional capitalized patent costs incurred amounted to $8,720. Amortization expense for patents for the three months ended March 31, 2005 and 2004 totaled $1,368 and $833. NOTE 4 - INCOME TAXES There is no income tax benefit for the losses for the three months ended March 31, 2005 and 2004 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. NOTE 5 - STOCK OPTIONS In January 2004, in conjunction with three consulting agreements, the Company granted options to purchase 200,000 shares of common stock at an exercise price of $0.07 per share, options to purchase 500,000 shares of common stock at an exercise price of $0.20 per share and options to purchase 3,056,662 shares of common stock (7.5% of outstanding shares as of October 8, 2003) at an exercise price of $0.07 per share. The options to acquire 200,000 shares of common stock vested immediately and expire in ten years from the date of grant. The options to acquire 500,000 shares of common stock vested in six monthly installments beginning in January 2004 and expire in ten years from the date of grant. The options to purchase 3,056,662 shares of common stock expire in ten years from the date of grant, with 25% vesting on December 17, 2003 and 6% vesting at the quarter's end of each subsequent quarter until fully vested. 183,400 of such 3,056,662 options vested in the quarter ended March 31, 2005. In April 2005, the Board of Directors elected to fully vest the remaining 1,192,098 options. In accordance with the fair value method as described in accounting requirements of SFAS No. 123, the Company recognized consulting expenses of $20,000 and $33,400 for the three months ended March 31, 2005 and 2004. 8 LASERLOCK TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 5 - STOCK OPTIONS (Continued) In April 2004, in conjunction with consulting contracts, the Company granted options to purchase 1,700,000 shares of common stock and 800,000 shares of common stock at an exercise price of $0.06 per share, expiring in June 2009, and vesting in equal monthly installments commencing April 2004 through June 2006. In accordance with the fair value method as described in accounting requirements of SFAS No. 123, the Company recognized consulting expenses of $33,400 and $-0- for the three months ended March 31, 2005 and 2004. In April 2004, the Company granted an employee options to purchase 2,500,000 shares of common stock at an exercise price of $0.06 per share, expiring in June 2009, and vesting in equal monthly installments commencing April 2004 through June 2006. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for the issuance of its stock options. Accordingly, no compensation cost has been recognized for its stock options issued to employees during the three months ended March 31, 2005. Had compensation cost for the Company's issuance of vested stock options been determined based on the fair value at grant dates for options consistent with the method of SFAS No. 123, the Company's net loss would have been increased to the pro forma amounts indicated below. The net loss per share would not change. Fair value amounts were estimated using the Black-Scholes model with the following assumptions: no dividend yield, expected volatility of 60%, and risk-free interest rate of 5% for the three ended March 31, 2005. There were no options issued for the three months ended March 31, 2004. Three Months Ended March 31, 2005 ---------------------- Net loss As reported $ 273,825 Pro forma $ 312,025 Net loss per share As reported $ -- Pro forma $ 0.01 NOTE 6 - RELATED PARTIES The Company's office is owned by its President and Chief Executive Officer. No lease exists and there was no rent expense incurred. However, the Company incurred other occupancy expenses of $2,842 and $3,125 for the three months ended March 31, 2005 and 2004. 9 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 for the three month period ended March 31, 2005 included herein and our audited financial statements and notes for the year ended December 31, 2004 included in our Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. This discussion and other sections of this Quarterly 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. The Company does not undertake to publicly update or revise its 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 which licenses our technology to both third parties who incorporate it into their products for resale to their customers, and also directly 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. Beginning in early 2003, we began to refocus our goals and alter our business plans. Initially, the plan was to primarily market anti-counterfeiting solutions to the gaming industry. In 2003, we restructured our management team and refocused our short and long-term goals. We offer security solutions to the gaming industry through third parties. These third parties sell to the gaming industry various supplies and services. We have licensed to these companies our technology and receive royalty payments, and sell to the same companies inks that are used to detect counterfeit products and documents. The third parties incorporate our technology into the products they sell to the gaming industry. 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 (formerly known as Bud Jones, Bourgogone et Grasset, and Paul Son) and CoPAG U.S.A. Inc. these agreements are still in effect. In addition, we supply technology for the protection of slot tickets from fraud. We have also made a commitment to sell advertising on the back of slot tickets in the cashless ticket-in ticket-out slot machines such as those using the EZ Pay system developed by IGT. We signed an agreement with Ambient Planet, Ltd., a media and marketing company, in February 2004. The agreement was extended by mutual consent in September 2004 through September 2007. Although no advertising sales have been consummated, Ambient Planet has informed the Company that it is not unusual for a new advertising media, such as slot ticket, to take a long time to be implemented and that they remain optimistic about the potential for advertising sales. Ambient and the Company are also currently exploring the potential of selling advertising on lottery tickets. 10 Overview (Continued) 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. We, whenever possible, will use licensees and strategic partners that currently service those industries who will pay royalties and/or a share of the revenues/profits from their use of our technology. In the second quarter of 2004, we raised $933,481, net of expenses, in additional capital. However in order to fully implement our strategy, it may be necessary for us to raise additional capital. There can be no assurances that such capital will be available and, if available, or that we will be able to secure such capital on acceptable terms. Comparison of the Three Month Period Ended March 31, 2005 and March 31, 2004. Results of Operations 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 near future due to our attempts to cultivate business relationships over the past year. 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 March 31, 2005, we had sales and royalties revenues of $63,709, as compared to sales and royalties revenues of $29,881 for the three months ending March 31, 2004, resulting from additional casinos adopting our laser technology coupled with the continued use by existing casinos. Our research and development costs, which also include the cost of products sold, aggregated approximately $61,396 for the three months ended March 31, 2005 as compared to $91,531 for the three months ended March 31, 2004, a decrease of $30,135. Last year expenses included a non cash item of $85,300 related to the issuance of stock options. For the three months ended March 31, 2005 costs of products sold are higher as a result of the increased sales in 2005. Our legal and accounting costs aggregated approximately $19,782 for the three months ended March 31, 2005 as compared to $92,699 for the three months ended March 31, 2004, representing a decrease of $79,917. Included in the expenses for last year was the cost for preparation of a proxy for a special shareholders meeting. We did not have that cost for the current year. Our sales and marketing costs aggregated $177,336 for the three months ended March 31, 2005 as compared to $252,317 for the three months ended March 31, 2004, representing a decrease of $74,981. Sales and marketing includes consulting and marketing services associated with sales and marketing agreements and the related value of options granted in connection with these agreements. The value assigned to 2005 and 2004 stock options was $42,700 and $119,000, which are non cash expenses. Our general and administrative costs aggregated $81,448 for the three months ended March 31, 2005 as compared to $60,911 for the three months ended March 31, 2004, representing an increase of $20,537. Included in general and administrative expenses is the value assigned to stock options during the three months ended March 31, 2005 of $12,300, which is a non cash expense. 11 Liquidity and Capital Resources We decreased our cash balance position by $267,396, from a cash balance at December 31, 2004 of $676,593 to a cash balance of $409,197 at March 31, 2005. Working capital at March 31, 2005 was $450,852, representing a decrease in working capital of $228,900 from December 31, 2004. This decrease in cash and working capital relates principally to the cash portion of our net loss for three months ended March 31, 2005 and the cost of new patents and fixed asset purchases, reduced by increases in receivables and inventory and a reduction in current liabilities. 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 during the balance of the current year. 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 market developments, and the building of strategic alliances for the development and marketing of our products. In the event our plans change or 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, 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 from current plans 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 and the status of competitive products. We expect to expend between $100,000 and $300,000 in cash on our research and development program for fiscal 2005. Our research and development plans over the next year 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. 12 Liquidity and Capital Resources (Continued) We have plans to increase the number of employees and/or independent contractors we employ at this time contingent upon our ability to have sufficient funds to achieve our goals. We intend to license or use third parties to manufacture all of our products, and do not believe that we will be making any plant or equipment purchases during the coming year. 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 We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors. 13 Item 3 - Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and principal financial officer evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and principal financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. We note that the same person serves as both the Chief Executive Officer and principal financial officer. (b) Change in Internal Control over Financial Reporting No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. 14 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their properties is the subject that are expected to have a material effect on our financial position, results of operations or cash flows. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits 10.1 Amendment to Regulation S Stock Purchase Agreement by and between the Company and Californian Securities, S. A., dated October 15, 2003 31.1 Certification of Chief Executive Officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1 Certification of Chief Executive Officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* - ------------------------------ * The same individual serves as the Company's Chief Executive Officer and principal financial officer. (B) Reports on Form 8-K The Company did not file any Current Reports on Form 8-K during the period covered by this report. 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) Date: By: /s/Norman Gardner ---------------------------- Norman Gardner President and CEO EX-31.1 2 v018216_ex31-1.txt EXHIBIT 31.1 LASERLOCK TECHNOLOGIES, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 Date: I, Norman Gardner certify that: 1. I have reviewed this quarterly report on Form 10-QSB of LaserLock Technologies, 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 period covered by this 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 small business issuer as of, and for, the periods presented in this report; 4. The small business issuer'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 small business issuer and have: a) designed such disclosure controls and procedures, or caused such internal controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, the small business issuer's auditors and the audit committee of the small business issuer'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 reportings which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial data; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: May __, 2005 By: /s/_NORMAN A. GARDNER --------------------- Norman A. Gardner President and CEO (Principal executive officer and principal financial officer) EX-32.1 3 v018216_ex32-1.txt EXHIBIT 32.1 LASERLOCK TECHNOLOGIES, INC. CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-QSB for the period ended March 31, 2005 of LaserLock Technologies, Inc. (the "Company") as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Norman Gardner, Chief Executive Officer (principal executive officer) and principal financial officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m(a) or Section 78o(d)); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. May __, 2005 /s/ NORMAN GARDNER ------------------ Norman Gardner President and CEO (Principal executive officer and principal financial officer) Explanatory Note: The same individual serves as Chief Executive Officer (principal executive officer) and principal financial officer. Accordingly, there are no other individuals who are "other certifying officers" referred to in this certification. -----END PRIVACY-ENHANCED MESSAGE-----