10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

o TRANSITION REPORT PURSUANT TO 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 Registrant as Specified in Its Charter)

	Nevada		23-3023677
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

	837 Lindy Lane Bala Cynwyd, PA		19004
(Address of Principal Executive Offices)		(Zip Code)

	(610) 668-1952
(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days). Yes o No þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No þ

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	o	Accelerated file	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 145,144,603 shares of common stock outstanding at October 31, 2012.

PART I FINANCIAL INFORMATION
ITEM 1.	Financial Statements
Condensed Consolidated Balance Sheets ( Unaudited )		1
Condensed Consolidated Statements of Operations (Unaudited)		2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)		3
Condensed Consolidated Statements of Cash Flows (Unaudited)		8
Condensed Consolidated notes to financial statements (Unaudited)		10
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	20
ITEM 4.	Controls and Procedures
		28
PART II OTHER INFORMATION
ITEM 6.	Exhibits	29
SIGNATURES		30

1

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

CONTENTS

	PAGE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)	1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)	2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (Unaudited)	3 - 7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)	8 - 9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	10 - 19

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Condensed Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

	September 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	63,833		$	53,573
Accounts receivable, net of allowance of $0 at      September 30, 2012 and December 31, 2011		3,473			-
Inventory		31,554			35,137
Deferred finance charges		1,063			13,625
Prepaid expenses		-			117,760
TOTAL CURRENT ASSETS		99,923			220,095
PROPERTY AND EQUIPMENT
Capital equipment		32,604			32,604
Less accumulated depreciation		32,604			32,604
		-			-
Patent costs, net of accumulated amortization of      $87,179 and $78,851 as of September 30, 2012      and December 31, 2011		112,696			118,618
TOTAL ASSETS	$	212,619		$	338,713
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	1,882,437		$	1,583,853
Notes payable		740,000			50,000
TOTAL CURRENT LIABILITIES		2,622,437			1,633,853
LONG-TERM LIABILITIES
Senior secured convertible notes payable		781,500			781,500
Convertible notes payable		140,000			140,000
Notes payable, net of discount of $14,872 and $18,589 as of      September 30, 2012 and December 31, 2011		606,128			1,092,411
TOTAL LONG-TERM LIABILITIES		1,527,628			2,013,911
CONTINGENCIES
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;      174,940,506 shares issued and 145,144,603 outstanding at      September 30, 2012 and December 31, 2011		174,940			174,940
Additional paid in capital		8,829,020			8,817,382
Treasury stock, at cost (29,795,903 shares at September 30, 2012      and December 31, 2011)		(113,389	)		(113,389	)
Deficit accumulated during the development stage		(12,828,017	)		(12,187,984	)
STOCKHOLDERS’ DEFICIT		(3,937,446	)		(3,309,051	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	212,619		$	338,713

See the accompanying notes to the condensed consolidated financial statements.

-1-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2012 and 2011

And for the Period November 10, 1999 (Date of Inception) to September 30, 2012

				Three Months			Three Months			Nine Months			Nine Months
	Cumulative			Ended			Ended			Ended			Ended
	Since			September 30,			September 30,			September 30,			September 30,
	Inception			2012			2011			2012			2011
NET REVENUES
Sales	$	461,155		$	3,289		$	-		$	7,029		$	900
Royalties		645,180			-			2,404			10,000			7,984
TOTAL NET REVENUE		1,106,335			3,289			2,404			17,029			8,884
COST OF SALES		429,031			2,047			-			4,083			373
GROSS PROFIT		677,304			1,242			2,404			12,946			8,511
OPERATING EXPENSES
Research and development		866,245			493			1,000			3,873			6,050
Patent costs		65,000			-			-			-			-
Legal and Accounting		1,436,370			4,549			3,500			174,358			48,099
Sales and Marketing		5,586,694			55,463			51,274			155,725			206,052
General and administrative		3,826,453			18,911			28,289			89,898			159,451
Total operating expenses		11,780,762			79,416			84,063			423,854			419,652
LOSS BEFORE OTHER INCOME		(11,103,458	)		(78,174	)		(81,659	)		(410,908	)		(411,141	)
OTHER INCOME (EXPENSE)
Interest income		63,664			-			-			1			58
Interest expense		(2,142,187	)		(77,169	)		(82,940	)		(229,126	)		(251,408	)
Gain on debt forgiveness		184,242			-			-			-			184,242
Gain on disposition of assets		4,722			-			-			-			-
		(1,889,559	)		(77,169	)		(82,940	)		(229,125	)		(67,108	)
LOSS BEFORE INCOME TAX BENEFIT		(12,993,017	)		(155,343	)		(164,599	)		(640,033	)		(478,249	)
INCOME TAX BENEFIT		(165,000	)		-			-			-			-
NET LOSS	$	(12,828,017	)	$	(155,343	)	$	(164,599	)	$	(640,033	)	$	(478,249	)
BASIC AND DILUTED NET LOSS PER      COMMON SHARE				$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
BASIC AND DILUTED WEIGHTED AVERAGE      COMMON SHARES OUTSTANDING					145,144,603			145,144,603			145,144,603			146,387,227

See the accompanying notes to the condensed consolidated financial statements.

-2-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)

For the Period November 10, 1999 (Date of Inception) to September 30, 2012

													Deficit
	Common												Accumulated
	Stock						Deferred			Additional			During the
	Number of				Treasury		Consulting			Paid-In			Development
	Shares		Amount		Stock		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 condensed consolidated financial statements.

-3-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to September 30, 2012

														Deficit
	Common													Accumulated
	Stock								Deferred		Additional			During the
	Number of						Treasury		Consulting		Paid-In			Development
	Shares			Amount			Stock		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 condensed consolidated financial statements.

-4-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to September 30, 2012

														Deficit
	Common													Accumulated
	Stock								Deferred		Additional			During the
	Number of						Treasury		Consulting		Paid-In			Development
	Shares			Amount			Stock		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
Recognition of beneficial conversion feature		-			-			-		-		375,000			-			375,000
Net loss for the year ended December 31, 2007		-			-			-		-		-			(1,117,334	)		(1,117,334	)
Balance at December 31, 2007		73,440,506			73,440			-		-		7,626,687			(9,174,782	)		(1,474,655	)

See the accompanying notes to the condensed consolidated financial statements.

-5-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to September 30, 2012

											Deficit
	Common										Accumulated
	Stock						Deferred		Additional		During the
	Number of				Treasury		Consulting		Paid-In		Development
	Shares		Amount		Stock		Fees		Capital		Stage			Total
Fair value of non-employee stock options		-		-		-		-		28,752		-			28,752
Fair value of employee stock options		-		-		-		-		19,720		-			19,720
Fair value of warrants issued in conjunction with debt financing		-		-		-		-		25,000					25,000
Net loss for the year ended December  31, 2008		-		-		-		-		-		(931,338	)		(931,338	)
Balance at December 31, 2008		73,440,506		73,440		-		-		7,700,159		(10,106,120	)		(2,332,521	)
Fair value of non-employee stock options		-		-		-		-		1,524		-			1,524
Fair value of warrants issued in conjunction with debt financing		-		-		-		-		15,450					15,450
Issuance of shares for services		7,200,000		7,200		-		-		40,500		-			47,700
Shares issued for conversion of notes payable		48,750,000		48,750		-		-		263,291		-			312,041
Net loss for the year ended December  31, 2009		-		-		-		-		-		(694,910	)		(694,910	)
Balance at December 31, 2009		129,390,506		129,390		-		-		8,020,924		(10,801,030	)		(2,650,716	)
Fair value of non-employee stock options		-		-		-		-		364		-			364
Fair value of warrants issued in conjunction with debt financing		-		-		-		-		20,143					20,143
Issuance of shares for services		25,950,000		25,950		-		-		182,650		-			208,600
Net loss for the year ended Decemberr 31, 2010		-		-		-		-		-		(721,841	)		(721,841	)
Balance at December 31, 2010		155,340,506		155,340		-		-		8,224,081		(11,522,871	)		(3,143,450	)

See the accompanying notes to the condensed consolidated financial statements.

-6-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to September 30, 2012

														Deficit
	Common													Accumulated
	Stock								Deferred		Additional			During the
	Number of					Treasury			Consulting		Paid-In			Development
	Shares			Amount		Stock			Fees		Capital			Stage			Total
Issuance of shares for services		1,000,000			1,000		-			-		29,000			-			30,000
Contribution of common stock from related parties		(12,000,000	)		-		(95,594	)		-		95,594			-			-
Purchase of common stock for treasury		(17,795,903	)		-		(17,795	)		-		-			-			(17,795	)
Sale of common stock		15,500,000			15,500		-			-		384,500			-			400,000
Issuance of shares for stock issuance costs		2,100,000			2,100		-			-		(2,100	)		-			-
Stock issuance costs		-			-		-			-		(40,000	)		-			(40,000	)
Exercise of options		1,000,000			1,000					-		9,000			-			10,000
Fair value of warrants issued in conjunction with debt financing		-			-		-			-		21,275			-			21,275
Fair value of employee stock options		-			-		-			-		47,658			-			47,658
Fair value of non-employee stock options		-			-					-		48,374			-			48,374
Net loss for the year ended December 31, 2011		-			-		-			-		-			(665,113	)		(665,113	)
Balance at December 31, 2011		145,144,603			174,940		(113,389	)		-		8,817,382			(12,187,984	)		(3,309,051	)
Fair value of non-employee stock options		-			-					-		11,638			-			11,638
Net loss for the nine months ended September 30, 2012		-			-		-			-		-			(640,033	)		(640,033	)
Balance at September 30, 2012		145,144,603		$	174,940	$	(113,389	)	$	-	$	8,829,020		$	(12,828,017	)	$	(3,937,446	)

See the accompanying notes to the condensed consolidated financial statements.

-7-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2012 and 2011

And for the Period November 10, 1999 (Date of Inception) to September 30, 2012)

				Nine Months			Nine Months
	Cumulative			Ended			Ended
	Since			September 30,			September 30,
	Inception			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$	(6,859,542	)	$	(187,334	)	$	(241,289	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(35,749	)		-			-
Purchase of intangibles		(219,875	)		(2,406	)		(1,440	)
Proceeds from sale of assets		6,738			-			-
Net cash used in investing activities		(248,886	)		(2,406	)		(1,440	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		4,491,447			-			400,000
Proceeds from exercise of stock options		242,369			-			10,000
Proceeds from issuance of stock options		15,000			-			-
Proceeds from exercise of warrants		55,500			-			-
Proceeds from issuance of notes payable		2,789,000			200,000			-
Repayments of notes payable		(196,500	)		-			(58,500	)
Payment for treasury stock		(17,795	)		-			(17,795	)
Debt issuance costs		(62,000	)		-			-
Stock issuance costs		(144,760	)		-			(40,000	)
Net cash provided by financing activities		7,172,261			200,000			293,705
NET DECREASE IN CASH AND CASH EQUIVALENTS		63,833			10,260			50,976
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		-			53,573			77,330
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	63,833		$	63,833		$	128,306

See the accompanying notes to the condensed consolidated financial statements.

-8-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Condensed Consolidated Statements of Cash Flows (Unaudited) (Continued)

For the Nine Months Ended September 30, 2012 and 2011

And for the Period November 10, 1999 (Date of Inception) to September 30, 2012

				Nine Months		Nine Months
	Cumulative			Ended		Ended
	Since			September 30,		September 30,
	Inception			2012		2011
SUPPLEMENTAL DISCLOSURE OF NON-CASH      INVESTING AND FINANCING ACTIVITIES:
Cash paid during the year for:
Interest	$	39,440		$	-	$	5,245
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		$	-	$	-
Fair value of stock issued for conversion of notes payable	$	312,041		$	-	$	-
Fair value of beneficial conversion option	$	400,000		$	-	$	-
Fair value of warrants issued as debt discount	$	78,043		$	-	$	21,275
Issuance of common stock for stock issuance costs	$	2,100		$	-	$	2,100
Issuance of options as stock cost for treasury stock	$	5,594		$	-	$	5,594

See the accompanying notes to the condensed consolidated financial statements.

-9-

LaserLock Technologies, Inc. and Subsidiaries

 (A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements are presented in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 915 for development stage entities.  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. The financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission.  Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

Comprehensive Income

The Company follows FASB ASC 220 in 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 loss, comprehensive loss is equal to net loss.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and notes payable.  The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturities. The Company believes the carrying amount of its notes payable and convertible debt approximates its fair value based on rates and other terms currently available to the Company for similar debt instruments.  The Company classifies the fair value of its notes payable and convertible debt within level 2 of the fair value hierarchy based on observable inputs used to estimate fair value.

Loss Per Share

The Company follows FASB ASC 260 when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share.  Because the Company reported a net loss for the three and nine months ended September 30, 2012 and 2011, common stock equivalents, including convertible debt, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same.

Segment Information

The Company is organized and operates as one operating segment wherein the Company’s patented technologies are utilized to address counterfeiting issues primarily in the gaming industry. In accordance with FASB ASC 280, Segment Reporting, the chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.  Since the Company operates in one segment and provides one group of similar products, all financial segment and product line information required by FASB ASC 280 can be found in the consolidated financial statements. 

-10-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04 (“ASC Update 2011-04”), Amendments to AchieveCommon Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS. This ASU is intended to update the fair value measurement and disclosure requirements in US GAAP for measuring fair value and for disclosing information about fair value measurements.  Some of the amendments clarify the Board’s intent about application of existing fair value measurement requirements, while others change a particular principle or requirement for measuring or disclosing fair value measurement information.  The amendments in this update are for interim and annual periods beginning after December 15, 2011.  The Company adopted the provisions of this ASU, and the required changes in presentation and disclosure requirements have been included in the September 30, 2012 condensed consolidated financial statements.  The adoption did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2012, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

NOTE 2 – GOING CONCERN

The accompanying condensed 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 its development stage. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception, the Company has focused on developing and implementing our business plan. The Company has not recently paid salaries to management and is utilizing subcontractors on a work for hire basis to continue the operations of the Company. The Company believes that its existing cash resources will not be sufficient to sustain operations during the next twelve months. The Company intends to raise funds through the issuance of debt and equity securities. The issuance of additional equity would result in dilution to the existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company may be unable to execute upon its the business plan or pay costs and expenses as they are incurred, which could have a material adverse effect on its business, financial condition and results of operations.

Even if the Company is successful in raising sufficient capital to complete the development of its products, the Company’s ability to continue in business as a viable going concern can only be achieved when revenues reach a level that sustains business operations. If sufficient funding cannot be obtained in the short term, the Company will need to reduce monthly expenditures to a level that will enable the Company to continue until such funds can be obtained.

The Company is in the development stage at September 30, 2012. Successful completion of the Company’s development program and, ultimately the attainment of profitable operations are 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 debt financing or equity investment or achieve an adequate sales level.

-11-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 3 – PATENTS

The Company has five issued patents for anti-counterfeiting technology. Accordingly, costs associated with the registration of these patents and legal defense have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents (17 years). Amortization expense for patents was $2,768 and $8,328 for the three and nine months ended September 30, 2012, respectively. Amortization expense for patents was $2,731 and $8,162 for the three and nine months ended September 30, 2011, respectively. Future estimated annual amortization for the remaining three months ending December 31, 2012 is approximately $3,000. Future estimated annual amortization over the next five years is approximately $11,000 per year for the years ending December 31, 2013 through 2017.

NOTE 4 - 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 Company shareholders and other accredited investors. As of December 31, 2006, the Company completed this private placement by selling all notes payable totaling $800,000. The notes are secured by a first priority lien on all of the tangible and intangible personal property of the Company. In May 2007, the due date of these notes was extended to August 2008 and the interest rate increased to 12% per annum during the extension period. In June 2011, the due date of $90,000 of the notes was extended to September 2013, $95,000 of the notes was extended to September 2014 and the due date of $596,500 of the notes was extended to September 2015. The interest rate associated with $762,500 of the extended notes in June 2011 is 10% per annum, while the remaining $19,000 is at 12% per annum. As of September  30, 2012 and December 31, 2011, the outstanding principal balance on these notes was $781,500. Accrued interest at September 30, 2012 and December 31, 2011 amounted to $580,563 and $521,665, respectively. Interest expense for the three and nine months ended September 30, 2012 was $19,633 and $58,898, respectively. Interest expense for the three and nine months ended September 30, 2011 was $21,763 and $69,763, respectively.

Purchasers of the notes were issued 8,000,000 10-year warrants exercisable into the Company’s shares of common stock at an exercise price of $0.01 per share. The warrants were valued at $392,376 and recorded as a debt discount on the notes payable. The Company used 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 notes. As of September 30, 2012, the Company has received $70,000 for the exercise of 7,000,000 of the warrants.

In addition, if an equity financing with total proceeds of more than $5,000,000 occurs while any notes are outstanding, holders of the 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. Since the embedded conversion feature is contingent upon the occurrence of the qualified financing, the value of the contingent conversion feature, if beneficial, will be recognized when the triggering event occurs and the contingency is resolved.

-12-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 5 - CONVERTIBLE NOTES PAYABLE

During 2007, the Company commenced a private placement of up to $400,000 principal amount of10% Convertible Promissory Notes originally due in August 2008 (the “Notes”). The Company raised $375,000 under this private placement in 2007 and the remaining $25,000 was raised in 2008. 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 June 2011, the noteholder of the $140,000 under this convertible note issue agreed to extend the maturity date of these notes to September 30, 2015 at an interest rate of 10% per annum. Additionally, the noteholder agreed in writing to suspend its right to convert its note until such time as the Company’s authorized shares have been increased. Remaining shares to be potentially issued under this convertible note issue are 26,250,000.

As of September 30, 2012 and 2011, the remaining principal balance on the notes is $140,000.  Accrued interest at September 30, 2012 and December 31, 2011 amounted to $75,250 and $64,750, respectively. Interest expense for the three and nine months ended September 30, 2012 and 2011 was $3,500 and $10,500 for both periods, respectively.

-13-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 6 - NOTES PAYABLE

Notes payable consists of the following:

	September 30, 2012			December 31, 2011
Unsecured notes payable; interest at 10% per annum; principal and accrued interest due at maturity from April 2013 through September 2015	$	761,000		$	561,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at extended maturity date in September 2015		150,000			150,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000			50,000
Notes payable, interest at 25% per annum; principal and interest due September 2013		400,000			400,000
Less: Debt discount		(14,872	)		(18,589	)
		1,346,128			1,142,411
Less: Current portion		740,000			50,000
Long-term portion	$	606,128		$	1,092,411

At September 30, 2012 and December 31, 2011, accrued interest on notes payable was $506,256 and $362,806, respectively. Interest expense for the three and nine months ended September 30, 2012 was $48,858 and $143,450, respectively. Interest expense for the three and nine months ended September 30, 2011 was $39,546 and $126,138, respectively.

-14-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 6 - NOTES PAYABLE (Continued)

Private Placement of 8% Series A Notes Payable

In August 2009, the Company commenced a private placement of up to $300,000 consisting of up to 6 units. Each unit consists of a $50,000, 8% Series A Note Payable, due September 30, 2011, and a non-detachable warrant to purchase 2 million shares of the Company’s common stock. During 2009, the Company sold 4 units, issued $200,000 of 8% Series A Notes Payable, issued 8 million warrants, and raised $180,000, net of commission of $20,000. In January 2010, the Company sold .5 units, issued $25,000 of 8% Series A Notes Payable, issued 1 million warrants, and raised $17,500 net of commissions of $7,500. The commissions were treated as deferred finance charges and are expensed over the term of notes payable. For the three and nine months ended September 30, 2011, amortization of deferred finance charges was $3,550 and $10,649, respectively. No amortization was recorded for the three and nine months ended September 30, 2012, since the deferred finance charges were fully amortized as of December 31, 2011.

In June 2011, the maturity date on $150,000 of the 8% Series A Notes Payable and the term on the associated 6 million warrants were extended to September 30, 2015. As a result, the warrants were revalued using the Black-Scholes option pricing model to calculate the incremental fair-value of the warrants of $21,275, with the following assumptions: no dividend yield, expected volatility of 60%, risk free interest rate of 1.52% and warrant life of approximately 1.25 years. As part of the debt extension, the lender holding the 6 million warrants agreed in writing to suspend its right to exercise these warrants until such time that the Company’s authorized shares have been increased.

The relative fair value of the warrants issued in conjunction with the 8% Series A Notes Payable have been treated as a debt discount with an offsetting credit to additional paid-in capital. The debt discount related to the warrant issuances are being accreted to interest expense over the term of the notes. When the warrants were revalued the incremental amount of $21,275 was also treated as additional debt discount and is being accreted over the new term of the 8% Series A Notes Payable. As of September 30, 2012 and December 31, 2011, the unaccreted debt discount related to warrants issued in conjunction with the 8% Series A Notes payable was $14,872 and $18,589, respectively. For the three and nine months ended September 30, 2012, interest expense from the accretion of the debt discount was $1,239 and $3,717, respectively. For the three and nine months ended September 30, 2011, interest expense from the accretion of the debt discount was $6,149 and $16,176, respectively.

Private Placement of 25% Notes Payable

In 2010, the Company issued $400,000 in notes payable in order to finance a patent infringement lawsuit (see Note 10 - Contingencies to these condensed consolidated financial statements). The notes payable accrue interest at 25% per annum and mature upon the earlier of September 1, 2013 or the date on which the Company receives net proceeds from the patent infringement claim. In addition to the base interest of 25% per annum, the lenders are entitled to Bonus Interest equal to the following:

a. First monies realized by the Company from its share of the net proceeds of the lawsuit shall be allocated and paid to the Lender until the principal and base interest accruing has been fully paid.

b. The next monies from the net proceeds of the litigation settlement will be paid to the Company to reimburse for out-of-pocket legal costs related to the lawsuit.

c. The next $825,000 of proceeds will be split 50%/50% between the Company and the Lenders.

-15-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 6 - NOTES PAYABLE (Continued)

d. The next $1 million realized by the Company shall be allocated 90% to the Company and 10% to the Lenders.

e. The next $1 million realized by Company shall be allocated 85% to Company and 15% to Lenders.

f. All remaining proceeds realized by Company shall be allocated 80% to Company and 20% to Lenders.

The Lenders have a security interest in the Company’s patent infringement claim in which the Lender has the right to the net proceeds of this lawsuit to satisfy outstanding principal and interest under the notes.

As part of the private placement of the 25% notes payable, the Company incurred debt placement fees of $34,500 in 2010. These debt placement fees have been treated as deferred finance charges and are being amortized to interest expense over the life of the notes payable.  For the three and nine months ended September 30, 2012, amortization of deferred finance charges was $3,937 and $12,562, respectively.   For the three and nine months ended September 30, 2011, amortization of deferred finance charges was $4,313 and $12,938, respectively.

Aggregate Maturities of Long-term Debt

Aggregate maturities of the senior secured convertible notes, convertible notes and notes payable over the next five years are as follows:

2012	$	50,000
2013		690,000
2014		95,000
2015		1,447,500
2016		-

NOTE 7 – 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 September 30, 2012, there are 3,100,000 options that have been issued and exercised, 13,825,996 options that have been issued and are unexercised, and 1,074,004 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.

-16-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 7 – STOCK OPTIONS AND WARRANTS (Continued)

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.

On July 16, 2012, the Company issued an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to a consultant. The fair value of options issued was $11,638.The Company used 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 133%, risk-free interest rate of 1.5% and expected option life of ten years. These options granted were fully vested as of the date of the agreement. As a result, the Company recorded $11,638 of consulting expense for the three and nine months ended September 30, 2012.

The following tables summarize non-employee stock option/warrant activity of the Company since December 31, 2011:

					Weighted Average
	Option/Warrant		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2011		15,385,996	$	.00125 to $.20	$	0.01
Granted		200,000		0.05		0.05
Exercised		-		-		-
Expired		-		-		-
Outstanding, September 30, 2012		15,585,996	$	.00125 to $.20	$	0.01
Exercisable, September 30, 2012		15,585,996	$	.00125 to $.20	$	0.01
Weighted Average Remaining Life,      Exercisable, September 30, 2012 (years)		5.9

-17-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 7 – STOCK OPTIONS AND WARRANTS (Continued)

A summary of incentive stock option transactions for employees since December 31, 2011 is as follows:

					Weighted Average
	Option		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2011		6,390,000	$	0.00125	$	0.00125
Granted		-		-		-
Exercised		-		-		-
Expired/Returned		-		-		-
Outstanding, September 30, 2012		6,390,000	$	0.00125	$	0.00125
Exercisable, September 30, 2012		6,390,000	$	0.00125	$	0.00125
Weighted Average Remaining Life,      Exercisable, September 30, 2012 (years)		8.6

All employee option holders have agreed in writing to suspend their right to exercise their outstanding options until such time as the Company’s authorized shares have been increased. No consideration was required to be paid to the employee option holders resulting from this agreement.

NOTE 8 – RELATED PARTY TRANSACTIONS

At September 30, 2012 and December 31, 2011, four shareholders of the Company held $357,500 of the senior secured convertible notes payable.

At September 30, 2012, two shareholders of the Company held $761,000 of unsecured notes payable. At December 31, 2011, one shareholder of the Company held $561,000 of unsecured notes payable.

The Company maintains its office at the home of its Chief Executive Officer and President. No formal lease agreement exists and no direct rent expense has been incurred. However, related occupancy costs of $9,360 and $24,523 were incurred during the three and nine months ended September 30, 2012, respectively. Occupancy costs for the three and nine months ended September 30, 2011 were $1,857 and $7,760, respectively.

NOTE 9 – MAJOR CUSTOMERS AND VENDORS

During the nine months ended September 30, 2012 and 2011, the Company earned a substantial portion of its revenue from one customer. During the nine months ended September 30, 2012 and 2011, revenue from this customer aggregated $13,075 and $7,984, respectively .  At September 30, 2012 and 2011, the amount due from this customer included in trade accounts receivable was $1,135 and $0, respectively.

-18-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Notes to Condensed Consolidated Financial Statements

NOTE 10 – CONTINGENCIES

In October 2010, the Company filed suit in the Western District of Pennsylvania against WS Packaging Group, Inc. (“WS”) alleging that WS infringed on one of the Company’s patents in the manufacture of MONOPOLY game pieces on behalf of McDonald’s Corp. On June 4, 2012, both WS and the Company filed a stipulation to dismiss the action without prejudice and enter into settlement negotiations. Settlement negotiations are ongoing.

NOTE 11 – SUBSEQUENT EVENTS

Effective October 8, 2012, the Company entered into a three year agreement with Norman Gardner as Vice Chairman of the Board and Chief Executive Officer of the Company  with an annual compensation of $200,000 per year. In addition, upon execution of the agreement the Company has agreed to issue options to Mr. Gardner to purchase 5% of the shares of the Company’s common stock at an exercise price of $.05 per share, subsequent to the Company receiving funding of $2.5 millon.

Effective October 16, 2012, the Company entered into a three year agreement with Neil Alpert as President and Chief Operating Officer of the Company with an annual compensation of $200,000 per year. In addition, upon execution of the agreement the Company has agreed to issue options to Mr. Alpert to purchase 5% of the shares of the Company’s common stock at an exercise price of $.05 per share, subsequent to the Company receiving funding of $2.5 million.

In October 2012, the Company entered into an agreement with a related party noteholder whereby $250,000 of the 25% Notes Payable and $200,000 of the unsecured notes payable plus accrued interest on these notes payable of $131,565 will be fully satisfied in exchange for the issuance of 12,923,622 shares of the Company’s common stock ($.045 per share).

In October 2012, the Company completed a private placement equity offering in which $250,000 was received in exchange for 5,555,556 shares of the Company’s common stock and warrants to purchase 5,555,556 shares of Company’s common stock at an exercise price of $.10 per share with a term of 3 years.

-19-

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Statements Regarding Forward-Looking Statements

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included or incorporated by reference in this quarterly report on Form 10-Q, including without limitation, statements regarding our future financial position, business strategy, budgets, projected revenues, projected costs and plans and objective of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expects,” “intends,” “plans,” “projects,” “estimates,” “anticipates,” or “believes” or the negative thereof or any variation thereon or similar terminology or expressions.

We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are not guarantees and are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to:  our ability to raise additional capital, the absence of any operating history or revenue, our ability to attract and retain qualified personnel, our dependence on third party developers who we cannot control, our ability to develop and introduce a new service to the market in a timely manner, market acceptance of our services, our limited experience in a relatively new industry, the ability to successfully develop licensing programs and generate business, rapid technological change in relevant markets, unexpected network interruptions or security breaches, changes in demand for current and future intellectual property rights, legislative, regulatory and competitive developments, intense competition with larger companies, general economic conditions, as well as other factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission, and “Item 2 — Management’s Discussions and Analysis of Financial Condition and Results of Operation” below.

All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the foregoing. Except as required by law, we assume no duty to update or revise our forward-looking statements.

Overview

We were incorporated in Nevada in November 1999. We are a technology development company that delivers product and document authentication and security. We plan to develop and market technologies in a variety of applications in the security fields.

We believe that the technologies we own will enable businesses to reconstruct their overall approaches to corporate security from counterfeit identification to employee or customer monitoring. Potential applications of our technologies are available in different types of products and industries - e.g., gaming, apparel, tobacco, perfume, compact disks, pharmaceuticals, event and transportation tickets, driver’s licenses, insurance cards, passports, computer software, DVDs, and credit cards. We intend to generate sales through licenses of our technology or through direct sales of our technology to end-users.

We have filed a total of five patent applications relating to our technology, which have all been issued. These patents seek to accomplish non-intrusive document and product authentication in order to reduce losses caused by unpermitted document reproduction or by product counterfeiting. The technologies involve the utilization of invisible or color shifting/changing inks, which are compatible with today’s printing machines. The inks may be used with certain printing systems such as offset, flexographic, silkscreen, gravure, and laser. Based upon the Company’s experience, we believe that the ink technologies may be incorporated into existing manufacturing processes. We believe that some of our patents may have non-security applications and we are attempting to commercialize these opportunities.

-20-

Strategic Outlook

We believe that the security and authentication industries will continue to grow over time, especially as counterfeiting becomes easier with advances in technology. Within the market, we intend to provide our products to government bodies, and merchants in the consumer products, gaming and financial services industries.

Sustained spending on technology, our ability to raise additional financing, and the continued growth of the security and authentication markets are all external conditions that may affect our ability to execute our business plan. In addition, certain potential customers may view our small size and limited financial resources as a negative even if they prefer our products to those of our competitors.

Our primary strategic objective over the next 12-24 months is to raise additional financing in order to successfully market our products and generate revenue that is sufficient to cover our operating expenses and support additional growth over the next several years.

We believe that our near-term success will depend particularly on our ability to develop customer awareness and confidence in our products. Since we have limited capital resources, we will need to closely manage our expenses and conserve our cash by continually monitoring any increase in expenses and reducing or eliminating unnecessary expenditures. Our prospects must be considered in light of the risks, expenses and difficulties encountered by companies in the development stage, particularly given that we operate in rapidly evolving markets, that we have limited financial resources, and face an uncertain economic environment. We may not be successful in addressing such risks and difficulties.

Results of Operations

Comparison of the Three Months Ended September 30, 2012 and 2011

The following discussion analyzes our results of operations for the three months ended September 30, 2012 and 2011. The following information should be considered together with our financial statements for such period and the accompanying notes thereto.

Net Loss for Three Months Ended September 30, 2012 and 2011

Net Revenue/Net Loss

We are a development stage company and have not generated significant revenue since our inception.  For the three months ended September 30, 2012 and 2011, we generated net revenues of $3,289 and $2,404, respectively.  Our net loss decreased $9,256 to $155,343 for the three months ended September 30, 2012 compared to $164,599 for the three months ended September 30, 2011, as a result of reductions in expenses as further described below.

Cost of Sales

For the three months ended September 30, 2012 and 2011, we incurred costs of sales of $2,047 and $0. There were no ink sales in 2011 (only royalties), thus no cost of sales was recorded in 2011.

Research and Development

Research and development expenses were $493 and $1,000, respectively, for the three months ended September 30, 2012 and 2011, a decrease of $507. The decrease in research and development expenses was due to the timing of research and development activities.

-21-

Legal and Accounting

Legal and accounting fees increased $1,049 to $4,549 for the three months ended September 30, 2012 from $3,500 for the three months ended September 30, 2011.   The increase in legal and accounting fees in 2012 was primarily related to preparation of filings to bring the Company back into compliance with the filing requirement under the Exchange Act.

Sales and Marketing

Sales and marketing expenses for the three months ended September 30, 2012 were $55,463 as compared to $51,274 for the three months ended September 30, 2011, an increase of $4,189.   The expenses consisted largely of expenses for marketing the new technology associated with the SecureLight patent issued in 2011. The increase resulted from a more active marketing program in 2012.

General and Administrative

For the three months ended September 30, 2012 general and administrative expenses were $18,911, a decrease of $9,378 from $28,289 for the three months ended September 30, 2011.  The decrease resulted primarily from a decrease in consulting expenses incurred when compared to the prior year.

Interest Expense

During the three months ended September 30, 2012, the Company incurred interest expense of $77,169, as compared to $82,940 for the three months ended September 30, 2011, a decrease of $5,771. The decrease in interest expense directly correlates to the decrease in the interest rate negotiated for the extension of certain notes payable in June 2011.

Comparison of the Nine Months Ended September 30, 2012 and 2011

The following discussion analyzes our results of operations for the nine months ended September 30, 2012 and 2011. The following information should be considered together with our financial statements for such period and the accompanying notes thereto.

Net Loss for Nine Months Ended September 30, 2012 and 2011

Net Revenue/Net Loss

We are a development stage company and have not generated significant revenue since our inception.  For the nine months ended September 30, 2012 and 2011, we generated net revenues of $17,029 and $8,884, respectively.  Our net loss increased $161,784 to $640,033 for the nine months ended September 30, 2012 compared to $478,249 for the nine months ended September 30, 2011, as a result of increased expenses in 2012 and a gain on debt forgiveness of $184,242, which was recorded in 2011 and is further described below.

Cost of Sales

Cost of sales increased $3,710 to $4,083 for the nine months ended September 30, 2012 compared to $373 for the nine months ended September 30, 2011. The increase in cost of sales was due to an increase in the sale of ink and penlights in 2012 compared to 2011.

Research and Development

Research and development expenses were $3,873 and $6,050, respectively, for the nine months ended September 30, 2012 and 2011, a decrease of $2,177. The decrease in research and development expenses was due to the timing of researching and development activities.

-22-

Legal and Accounting

Legal and accounting fees increased $126,259 to $174,358 for the nine months ended September 30, 2012 from $48,099 for the nine months ended September 30, 2011.   The increase in legal and accounting fees in 2012 was primarily related to a patent infringement lawsuit as well as for preparation of filings to bring the Company back into compliance with the filing requirement under the Exchange Act.

Sales and Marketing

Sales and marketing expenses for the nine months ended September 30, 2012 were $155,725 as compared to $206,052 for the nine months ended September 30, 2011, a decrease of $50,327.   The expenses consisted largely of expenses associated with marketing the new technology associated with the SecureLight patent issued in 2011 and were reduced in 2012 as a result of cost conservation measures.  

General and Administrative

For the nine months ended September 30, 2012 general and administrative expenses were $89,898, a decrease of $69,553 from $159,451 for the nine months ended September 30, 2011.  The decrease resulted primarily from decreases in consulting expenses of $41,000, insurance expense of $13,000 and payroll expenses of $46,000 related to share based compensation, offset by increases in occupancy costs of $15,000, miscellaneous expenses of $5,000 and office expenses of $11,000.

Interest Expense

During the nine months ended September 30, 2012, the Company incurred interest expense of $229,126, as compared to $251,408 for the nine months ended September 30, 2011, a decrease of $22,282. The decrease in interest expense directly correlates to the decrease in the interest rate negotiated for the extension of certain notes payable in June 2011.

Gain on Debt Forgiveness

During the nine months ended September 30, 2011, the Company received a benefit of $184,242 in debt forgiveness, as compared to $0 for the nine months ended September 30, 2012. This gain on debt forgiveness was the result of management’s negotiation with a vendor in the second quarter of 2011 to forgive amounts due that vendor.

Liquidity and Capital Resources

As of the date of this report, we had cash on hand of $388,117.

Net cash used in operating activities for the nine months ended September 30, 2012 decreased to $187,334 from $241,289 for the nine months ended September 30, 2011 a decrease of $53,955. The decrease in net cash used in operating activities is mainly related to increases in accounts payable and accrued expenses and a decrease in prepaid expenses.

Net cash used in investing activities, consisting of patent costs, was $2,406 for the nine months ended September 30, 2012. Investing activities for the nine months ended September 30, 2011, consisting of patent costs, was $1,440.

Net cash provided by financing activities was $200,000 and $293,705, respectively, for the nine months ended September 30, 2012 and 2011. The net cash provided by financing activities for the nine months ended September 30, 2012 was a result of additional debt financing of $200,000 obtained during the three months ended June 30, 2012. The net cash provided by financing activities for the nine months ended September 30, 2011 relates to $410,000 in proceeds received from the issuance of common stock and exercise of stock options, offset by payments of stock issuance costs of $40,000, repayments of notes payable of $58,500 and payment for treasury stock of $17,795.

-23-

In February 2006, the Company commenced a private placement of up to $800,000 principal amount of senior secured convertible promissory notes. As of September 30, 2012, $781,500 of these notes was outstanding. In June 2011, the due dates on these notes were extended as follows: $90,000 in September 2013; $95,000 in September 2014; $596,500 in September 2015. The interest rate associated with $762,500 of the notes is 10% per annum, while the remaining $19,000 of the notes is at 12% per annum. 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. Accrued interest on these notes at September 30, 2012 amounted to $580,563. 

During 2007, the Company commenced a private placement of up to $400,000 principal amount of10% Convertible Promissory Notes. As of September 30, 2012, the outstanding principal balance on the notes was $140,000.  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 June 2011, the noteholder of the $140,000 under this convertible note issue agreed to extend the maturity date of these notes to September 30, 2015 at an interest rate of 10% per annum. Additionally, the noteholder agreed in writing to suspend its right to convert its notes until such time as the Company’s authorized shares have been increased. Remaining shares to be potentially issued under this convertible note issue are 26,250,000.  Accrued interest on these notes at September 30, 2012 amounted to $75,250.

As of September 30, 2012, the Company has outstanding unsecured notes payable of $761,000, which bear interest at the rate of 10% per annum. In April 2012, $200,000 of these notes were issued with a maturity date of April 2013. During June 2011, the due date of $561,000 of these notes was extended to September 30, 2015. As of September 30, 2012, accrued interest on these notes payable amounted to $251,861.

In August 2009, the Company commenced a private placement of up to $300,000 consisting of up to 6 units. Each unit consists of a $50,000, 8% Series A Note Payable, due September 30, 2011, and a warrant to purchase 2,000,000 shares of the Company’s common stock. The notes are unsecured. The Company sold 4.5 units under this private placement. As of September 30, 2012, $200,000 of these 8% Series A Notes Payable remain outstanding. In June 2011, $150,000 of the 8% Series A Notes Payable and the associated 6,000,000 warrants were extended to September 30, 2015. The remaining $50,000 was due in October 2011 and is currently past due. Accrued interest on the 8% Series A Notes Payable at September 30, 2012 amounted to $48,667.

In 2010, the Company issued $400,000 in notes payable in order to finance a patent infringement lawsuit (see Contingencies Note 10 to the condensed consolidated financial statements). The notes payable accrue interest at 25% per annum and mature upon the earlier of September 1, 2013 or the date on which the Company receives net proceeds from the patent infringement claim. In addition to the base interest of 25% per annum, the lenders are entitled to Bonus Interest equal to the following:

a. First monies realized by the Company from its share of the net proceeds of the lawsuit shall be allocated and paid to the Lender until the principal and base interest accruing has been fully paid.

b. The next monies from the net proceeds of the litigation settlement will be paid to the Company to reimburse for out-of-pocket legal costs related to the lawsuit.

c. The next $825,000 of proceeds will be split 50%/50% between the Company and the Lenders.

d. The next $1 million realized by the Company shall be allocated 90% to the Company and 10% to the Lenders.

e. The next $1 million realized by the Company shall be allocated 85% to Company and 15% to Lenders.

f. All remaining proceeds realized by the Company shall be allocated 80% to Company and 20% to Lenders.

-24-

Accrued interest on these 25% notes payable at September 30, 2012 amounted to $205,729.

In October 2012, the Company entered into an agreement with a related party noteholder whereby $250,000 of the 25% Notes Payable and $200,000 of the unsecured notes payable plus accrued interest on these notes payable of $131,565 will be fully satisfied in exchange for the issuance of 12,923,622 shares of the Company’s common stock ($.045 per share).

In October 2012, the Company completed a private placement equity offering in which $250,000 was received in exchange for 5,555,556 shares of the Company’s common stock and warrants to purchase 5,555,556 shares of Company’s common stock at an exercise price of $.10 per share with a term of 3 years.

The Company is in the development stage. During the nine months ended September 30, 2012, the Company’s operational resources were used primarily to fund general and administrative expenses to continue operations and a significantly reduced sales and marketing program. 

As we have not realized significant revenues since our inception, we have financed our operations through public and private offerings of debt and equity securities.  We do not currently maintain a line of credit or term loan with any commercial bank or other financial institution.  

Since our inception, we have focused on developing and implementing our business plan.   Our business plans are dependent on our ability to raise capital through private placements of our common stock and/or preferred stock, through the possible exercise of outstanding options and warrants, through debt financing and/or through a future public offering of our securities. There is no assurance that we will raise sufficient capital in order to meet our goals of implementing a sales and marketing effort to introduce the products.  We believe that our existing cash resources will not be sufficient to sustain our operations during the next twelve months. We intend to raise such financing through private placements and/or the sale of debt and equity securities.  The issuance of additional equity would result in dilution to our existing shareholders.  If we are unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms favorable to us, we may be unable to execute upon our business plan or pay our costs and expenses as they are incurred, which could have a material, adverse effect on our business, financial condition and results of operations.

-25-

Even if we are successful in raising sufficient capital in order to complete the marketing program for our products, our ability to continue in business as a viable going concern can only be achieved when our revenues reach a level that sustains our business operations. While it is impossible to predict the amount of revenues, if any, that we may receive from our products, we presently believe, based solely on our internal projections, that we will generate revenues sufficient to fund our planned business operations if the products are marketed effectively in accordance with our plans.  There can be no assurance that we will raise sufficient proceeds, or any proceeds, for us to implement fully our proposed business plan.  Moreover there can be no assurance that even if our products are marketed effectively, that we will generate revenues sufficient to fund our operations.  In either situation, we may not be able to continue our operations and our business might fail.

Off-Balance Sheet Arrangements

As of September 30, 2012, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.  As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.

Stock-based Compensation

We account for stock-based compensation under the provisions of FASB ASC Topic 718,  Compensation—Stock Compensation   (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes model.  The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

We account for stock-based compensation awards to non-employees in accordance with FASB ASC Topic 505-50, Equity-Based Payments to Non-Employees   (“ASC 505-50”). Under ASC 505-50, we determine the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Any stock options issued to non-employees are recorded as an expense and additional paid-in capital in stockholders’ equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each period.

Revenue Recognition

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, Revenue Recognition (Codified in FASB ASC 605), we recognize revenue when (i) persuasive evidence of a customer or distributor arrangement exists, (ii) a retailer, distributor or wholesaler receives the goods and acceptance occurs, (iii) the price is fixed or determinable, and (iv) collectibility of the sales revenues is reasonably assured. Subject to these criteria, the Company recognizes revenue from product sales, consisting mainly of pigments and penlights, upon shipment to the customer.  Royalty revenue is recognized upon receipt of notification from a customer that the Company’s product has been used in the customer’s production process.

-26-

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are discussed in Note 1 of the Notes to Condensed Consolidated Financial Statements contained elsewhere in this report.

-27-

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES.

As of September 30, 2012, we carried out the evaluation of the effectiveness of our disclosure controls and procedures required by Rule 13a-15(e) under the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that, as of September 30, 2012, our disclosure controls and procedures were not effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure, because of the material weakness described below.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements would not be prevented or detected. A material weakness in the Company’s internal controls exists in that there is limited segregation of duties amongst the Company’s employees with respect to the Company’s preparation and review of the Company’s financial statements. This material weakness is a result of the Company’s limited number of personnel. This material weakness may affect management’s ability to effectively review and analyze elements of the financial statement closing process and prepare financial statements in accordance with U.S. GAAP.

There has been no change in our internal control over financial reporting identified in connection with this evaluation that occurred during our fiscal quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

-28-

PART II – OTHER INFORMATION

ITEM 6. EXHIBITS

31.1	Certification of Chief Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

-29-

SIGNATURE

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.

Date: October 31, 2012	By:	/s/ Norman A. Gardner
		Norman A. Gardner Chairman of the Board, Chief Executive Officer, and President

-30-

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFCER

PURSUANT TO RULES 13a-14a AND 15d-14a

OF THE SECURITIES AND EXCHANGE ACT OF 1934

AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Norman A. Gardner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of LaserLock Technologies, Inc.;

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

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’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 evaluation; and

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

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

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

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

Date: October 31, 2012      By: /s/ Norman A. Gardner

                                                        Norman A. Gardner

                                                        Chief Executive Officer and Principal

                                                         Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

OF LASERLOCK TECHNOLOGIES, INC.

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Quarterly Report on Form 10-Q of LaserLock Technologies, Inc. (the "Company") for the period ended September 30, 2012, as filed with the Securities and Exchange Commission (the "Report"), I, Norman A. Gardner, Chief Executive Officer and Principal Financial Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

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

Date: October 31, 2012      By: /s/ Norman A. Gardner

                                                        Norman A. Gardner

                                                        Chief Executive Officer and Principal

                                                         Financial Officer

XML

STOCK OPTIONS AND WARRANTS (Detail Textuals)	0 Months Ended		9 Months Ended
	Jul. 16, 2012 Stock options	Dec. 31, 2000 Stock option 2000 plan Stock options	Sep. 30, 2012 Stock option 2003 plan Incentive stock options	Dec. 17, 2003 Stock option 2003 plan Incentive stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized to grant options		1,500,000		18,000,000
Exercise of options (in shares)	200,000		3,100,000
Number of options issued and unexercised			13,825,996
Number of options available to be issued			1,074,004

XML

NOTES PAYABLE (Detail Textuals 2) (Series A Notes Payable Due September 2015, USD $)	1 Months Ended
	Jun. 30, 2011	Sep. 30, 2012
Series A Notes Payable Due September 2015
Debt Instrument [Line Items]
Amount of note payable	$ 150,000
Interest rate	8.00%	8.00%
Warrants issued	6,000,000
Method used to calculate fair value of warrants	Black-Scholes option pricing model
Fair-value of the warrants	$ 21,275
Dividend yield	0.00%
Expected volatility	60.00%
Risk-free interest rate	1.52%
Expected warrant term	1 year 3 months

XML

SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Detail Textuals 3) (Senior secured convertible notes payable, USD $)	9 Months Ended
	Sep. 30, 2012
Debt Instrument [Line Items]
Warrants issued	8,000,000
Term of warrants	10 years
Exercise Price (in dollars per share)	0.01
Proceeds from equity financing	$ 392,376
Expected warrant term	10 years
Amortization period	1 year
Method used to calculate fair value of warrants	Black-Scholes option pricing model
Amount received for exercised of warrants	70,000
Number of warrants issued	7,000,000
Percent Discount On Transfer	30.00%
Maximum
Debt Instrument [Line Items]
Expected volatility	284.00%
Risk-free interest rate	4.50%
Minimum
Debt Instrument [Line Items]
Expected volatility	169.00%
Risk-free interest rate	3.60%
Proceeds From Equity Finance	$ 5,000,000

XML

RELATED PARTY TRANSACTIONS (Detail Textuals) (USD $)	Sep. 30, 2012 Shareholders	Dec. 31, 2011 Shareholders
Senior secured convertible notes payable
Debt Instrument [Line Items]
Number of shareholders	4	4
Senior secured convertible notes payable	$ 357,500	$ 357,500
Unsecured notes payable due at maturity from April 2013 through September 2015
Debt Instrument [Line Items]
Number of shareholders	2	1
Unsecured notes payable	$ 761,000	$ 561,000

XML

STOCK OPTIONS AND WARRANTS - Non-Employee Stock Option/Warrant Activity (Details) (Stock Options and Warrants, USD $)	9 Months Ended
	Sep. 30, 2012
Share Based Compensation Arrangement By Share Based Payment Award Options and Warrants Outstanding [Roll Forward]
Option/Warrant Shares Outstanding, December 31, 2011	15,385,996
Option/Warrant Shares Granted	200,000
Option/Warrant Shares Exercised
Option/Warrant Shares Expired
Option/Warrant Shares Outstanding, September 30, 2012	15,585,996
Option/Warrant Shares Exercisable, September 30, 2012	15,585,996
Weighted Average Remaining Life, Exercisable, September 30, 2012 (years)	5 years 10 months 24 days
Share Based Compensation Arrangement By Share Based Payment Award Options and Warrants Outstanding Exercise Price [Roll Forward]
Exercise Price Granted	$ 0.05
Exercise Price Exercised
Exercise Price Expired
Share Based Compensation Arrangement By Share Based Payment Award Options and Warrants Outstanding Weighted Average Exercise Price [Roll Forward]
Weighted Average Price Outstanding, December 31, 2011	$ 0.01
Weighted Average Price Granted	$ 0.05
Weighted Average Price Exercised
Weighted Average Price Expired
Weighted Average Price Outstanding, September 30, 2012	$ 0.01
Weighted Average Price Exercisable, September 30, 2012	$ 0.01
Minimum
Share Based Compensation Arrangement By Share Based Payment Award Options and Warrants Outstanding Exercise Price [Roll Forward]
Exercise Price Outstanding, September 30, 2012	$ 0.00125
Exercise Price Exercisable, September 30, 2012	$ 0.00125
Maximum
Share Based Compensation Arrangement By Share Based Payment Award Options and Warrants Outstanding Exercise Price [Roll Forward]
Exercise Price Outstanding, September 30, 2012	$ 0.20
Exercise Price Exercisable, September 30, 2012	$ 0.20

XML

PATENTS

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

PATENTS

NOTE 3 – PATENTS

The Company has five issued patents for anti-counterfeiting technology. Accordingly, costs associated with the registration of these patents and legal defense have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents (17 years). Amortization expense for patents was $2,768 and $8,328 for the three and nine months ended September 30, 2012, respectively. Amortization expense for patents was $2,731 and $8,162 for the three and nine months ended September 30, 2011, respectively. Future estimated annual amortization for the remaining three months ending December 31, 2012 is approximately $3,000. Future estimated annual amortization over the next five years is approximately $11,000 per year for the years ending December 31, 2013 through 2017.

XML

RELATED PARTY TRANSACTIONS (Detail Textuals 1) (Chief Executive Officer and President, USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Chief Executive Officer and President
Related Party Transaction [Line Items]
Occupancy costs	$ 9,360	$ 1,857	$ 24,523	$ 7,760

XML

NOTES PAYABLE - Summary (Details) (Parentheticals)	Sep. 30, 2012	Jun. 30, 2011
Unsecured notes payable due at maturity from April 2013 through September 2015
Debt Instrument [Line Items]
Interest rate	10.00%
Series A Notes Payable Due September 2015
Debt Instrument [Line Items]
Interest rate	8.00%	8.00%
Series A Notes Payable Due October 2011
Debt Instrument [Line Items]
Interest rate	8.00%
Notes Payable Due September 2013
Debt Instrument [Line Items]
Interest rate	25.00%

XML

NOTES PAYABLE - Summary (Details) (USD $)	Sep. 30, 2012		Dec. 31, 2011
Debt Instrument [Line Items]
Notes payable	$ 1,346,128		$ 1,142,411
Less: Debt discount	(14,872)		(18,589)
Less: Current portion	740,000	[1]	50,000
Long-term portion	606,128	[1]	1,092,411
Unsecured notes payable due at maturity from April 2013 through September 2015
Debt Instrument [Line Items]
Notes payable	761,000		561,000
Series A Notes Payable Due September 2015
Debt Instrument [Line Items]
Notes payable	150,000		150,000
Series A Notes Payable Due October 2011
Debt Instrument [Line Items]
Notes payable	50,000		50,000
Notes Payable Due September 2013
Debt Instrument [Line Items]
Notes payable	$ 400,000		$ 400,000

[1] (Unaudited)

XML

MAJOR CUSTOMERS AND VENDORS (Detail Textuals) (USD $)	9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011
Revenue, Major Customer [Line Items]
Trade accounts receivable	$ 3,473	[1]
Customer One
Revenue, Major Customer [Line Items]
Revenue from customer	13,075		7,984
Trade accounts receivable	$ 1,135		$ 0

[1] (Unaudited)

XML

NOTES PAYABLE - Aggregate Maturities of Long-term Debt (Details 1) (USD $)	Sep. 30, 2012
Debt Disclosure [Abstract]
2012	$ 50,000
2013	690,000
2014	95,000
2015	1,447,500
2016

XML

NOTES PAYABLE (Detail Textuals) (Notes Payable Due September 2013, USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Notes Payable Due September 2013
Debt Instrument [Line Items]
Accrued Interest	$ 506,256		$ 506,256		$ 362,806
Interest Expense	$ 48,858	$ 39,546	$ 143,450	$ 126,138

XML

GOING CONCERN

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

GOING CONCERN

NOTE 2 – GOING CONCERN

The accompanying condensed 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 its development stage. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Since inception, the Company has focused on developing and implementing our business plan. The Company has not recently paid salaries to management and is utilizing subcontractors on a work for hire basis to continue the operations of the Company. The Company believes that its existing cash resources will not be sufficient to sustain operations during the next twelve months. The Company intends to raise funds through the issuance of debt and equity securities. The issuance of additional equity would result in dilution to the existing shareholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company may be unable to execute upon its the business plan or pay costs and expenses as they are incurred, which could have a material adverse effect on its business, financial condition and results of operations.

Even if the Company is successful in raising sufficient capital to complete the development of its products, the Company’s ability to continue in business as a viable going concern can only be achieved when revenues reach a level that sustains business operations. If sufficient funding cannot be obtained in the short term, the Company will need to reduce monthly expenditures to a level that will enable the Company to continue until such funds can be obtained.

The Company is in the development stage at September 30, 2012. Successful completion of the Company’s development program and, ultimately the attainment of profitable operations are 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 debt financing or equity investment or achieve an adequate sales level.

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NOTES PAYABLE (Detail Textuals 1) (USD $)	1 Months Ended		3 Months Ended			9 Months Ended			12 Months Ended
	Jan. 31, 2010 units	Aug. 31, 2009 units	Sep. 30, 2012		Sep. 30, 2011	Sep. 30, 2012		Sep. 30, 2011	Dec. 31, 2009 units	Dec. 31, 2011	Jun. 30, 2011
Debt Instrument [Line Items]
Convertible notes payable			$ 140,000	[1]		$ 140,000	[1]			$ 140,000
Discount, notes payable (in dollars)			14,872			14,872				18,589
Series A Notes Payable
Debt Instrument [Line Items]
Convertible notes payable	25,000	300,000			50,000			50,000	200,000
Number of units		6							4
Number of units sold	0.5
Interest rate	8.00%				8.00%			8.00%	8.00%		8.00%
Number of shares of common stock					2,000,000			2,000,000
Warrants issued	1,000,000								8,000,000
Proceeds from note payable	17,500								180,000
Amount of commissions	7,500								20,000
Amortization of deferred charges					3,550			10,649
Discount, notes payable (in dollars)			14,872			14,872				18,589	21,275
Interest Expense			$ 1,239		$ 6,149	$ 3,717		$ 16,176

[1] (Unaudited)

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STOCK OPTIONS AND WARRANTS (Detail Textuals 1) (Stock option 2003 plan, Incentive stock options, USD $)	Sep. 30, 2012
Stock option 2003 plan | Incentive stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Minimum percentage for exercise price of option, percentage of the fair market value of the common stock	100.00%
Minimum percentage for exercise price of option in case outstanding stock held by grantee, percentage of the fair market value of the common stock	110.00%
Percentage of outstanding stock held by grantee	10.00%
Maximum Threshold limit for aggregate fair market value of stock for which an employee may exercise incentive stock options	$ 1,000,000
Maximum value of options to be exercised	100,000
Maximum value of options shall be deemed to be Non-Statutory Stock Options	$ 100,000

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Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2012		Dec. 31, 2011
CURRENT ASSETS
Cash and cash equivalents	$ 63,833	[1]	$ 53,573
Accounts receivable, net of allowance of $0 at September 30, 2012 and December 31, 2011	3,473	[1]
Inventory	31,554	[1]	35,137
Deferred finance charges	1,063	[1]	13,625
Prepaid expenses		[1]	117,760
TOTAL CURRENT ASSETS	99,923	[1]	220,095
PROPERTY AND EQUIPMENT
Capital equipment	32,604	[1]	32,604
Less accumulated depreciation	32,604	[1]	32,604
Property, Plant and Equipment, Net		[1]
Patent costs, net of accumulated amortization of $87,179 and $78,851 as of September 30, 2012 and December 31, 2011	112,696	[1]	118,618
TOTAL ASSETS	212,619	[1]	338,713
CURRENT LIABILITIES
Accounts payable and accrued expenses	1,882,437	[1]	1,583,853
Notes payable	740,000	[1]	50,000
TOTAL CURRENT LIABILITIES	2,622,437	[1]	1,633,853
LONG-TERM LIABILITIES
Senior secured convertible notes payable	781,500	[1]	781,500
Convertible notes payable	140,000	[1]	140,000
Notes payable, net of discount of $14,872 and $18,589 as of September 30, 2012 and December 31, 2011	606,128	[1]	1,092,411
TOTAL LONG-TERM LIABILITIES	1,527,628	[1]	2,013,911
CONTINGENCIES		[1]
STOCKHOLDERS' DEFICIT
Preferred Stock, $ .001 par value; 75,000,000 shares authorized; no shares issued and outstanding		[1]
Common stock, $ .001 par value; 175,000,000 shares authorized; 174,940,506 shares issued and 145,144,603 outstanding at September 30, 2012 and December 31, 2011	174,940	[1]	174,940
Additional paid in capital	8,829,020	[1]	8,817,382
Treasury stock, at cost (29,795,903 shares at September 30, 2012 and December 31, 2011)	(113,389)	[1]	(113,389)
Deficit accumulated during the development stage	(12,828,017)	[1]	(12,187,984)
STOCKHOLDERS' DEFICIT	(3,937,446)	[1]	(3,309,051)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 212,619	[1]	$ 338,713

[1] (Unaudited)

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SUBSEQUENT EVENTS (Detail Textuals) (USD $)	2 Months Ended			0 Months Ended			1 Months Ended
	Dec. 31, 1999	Sep. 30, 2012	Dec. 31, 2011	Oct. 08, 2012 Subsequent Event Norman Gardner	Oct. 16, 2012 Subsequent Event Neil Alpert	Oct. 31, 2012 Subsequent Event Related party noteholder	Oct. 31, 2012 Subsequent Event Private placement
Subsequent Event [Line Items]
Annual compensation per year				$ 200,000	$ 200,000
Term of agreement				3 years	3 years		3 years
Percentage shares purchase (in shares)				5.00%	5.00%
Funding received by company				2,500,000	2,500,000
Exercise price of funding (in dollars per share)				$ 0.05	$ 0.05
Notes payable		1,346,128	1,142,411			250,000
Percentage of notes payable						25.00%
Unsecured notes payable						200,000
Issuance of private placement equity offering	20,873						250,000
Issuance of private placement equity offering (in shares)							5,555,556
Accrued interest						$ 131,565
Common stock, shares issued		174,940,506	174,940,506			12,923,622	5,555,556
Common Stock, Par Value		$ 0.001	$ 0.001			$ 0.045	$ 0.10

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended		155 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash used in operating activities	$ (187,334)	$ (241,289)	$ (6,859,542)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			(35,749)
Purchase of intangibles	(2,406)	(1,440)	(219,875)
Proceeds from sale of assets			6,738
Net cash used in investing activities	(2,406)	(1,440)	(248,886)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock		400,000	4,491,447
Proceeds from exercise of stock options		10,000	242,369
Proceeds from issuance of stock options			15,000
Proceeds from exercise of warrants			55,500
Proceeds from issuance of notes payable	200,000		2,789,000
Repayments of notes payable		(58,500)	(196,500)
Payment for treasury stock		(17,795)	(17,795)
Debt issuance costs			(62,000)
Stock issuance costs		(40,000)	(144,760)
Net cash provided by financing activities	200,000	293,705	7,172,261
NET DECREASE IN CASH AND CASH EQUIVALENTS	10,260	50,976	63,833
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	53,573	77,330
CASH AND CASH EQUIVALENTS - END OF PERIOD	63,833	128,306	63,833
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid during the year for Interest		5,245	39,440
Cash paid during the year for 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
Fair value of stock issued for conversion of notes payable			312,041
Fair value of beneficial conversion option			400,000
Fair value of warrants issued as debt discount		21,275	78,043
Issuance of common stock for stock issuance costs		2,100	2,100
Issuance of options as stock cost for treasury stock		$ 5,594	$ 5,594

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NOTES PAYABLE (Detail Textuals 4) (USD $)	12 Months Ended
	Dec. 31, 2010
Litigation Case Three
Debt Instrument [Line Items]
Proceeds from litigation settlement	$ 825,000
Percentage allocated to company	50.00%
Percentage allocated to lenders	50.00%
Litigation Case Four
Debt Instrument [Line Items]
Proceeds from litigation settlement	1,000,000
Percentage allocated to company	90.00%
Percentage allocated to lenders	10.00%
Litigation Case Five
Debt Instrument [Line Items]
Proceeds from litigation settlement	$ 1,000,000
Percentage allocated to company	85.00%
Percentage allocated to lenders	15.00%
Litigation Case Six
Debt Instrument [Line Items]
Percentage allocated to company	80.00%
Percentage allocated to lenders	20.00%

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SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Detail Textuals) (Senior secured convertible notes payable, USD $)	1 Months Ended	12 Months Ended
	May 31, 2007	Dec. 31, 2006	Sep. 30, 2012	Jun. 30, 2011	Feb. 28, 2006
Senior secured convertible notes payable
Debt Instrument [Line Items]
Principal amount			$ 19,000	$ 762,500	$ 800,000
Interest rate			12.00%	10.00%	10.00%
Sale price of notes payable		$ 800,000
Amount of interest rate increased	12.00%

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NOTES PAYABLE (Detail Textuals 5) (Private placement, USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2010
Private placement
Debt Instrument [Line Items]
Interest rate					25.00%
Debt placement fees					$ 34,500
Amortization of deferred charges	$ 3,937	$ 4,313	$ 12,562	$ 12,938

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SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Detail Textuals 2) (Senior secured convertible notes payable, USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011	Jun. 30, 2011	Feb. 28, 2006
Senior secured convertible notes payable
Debt Instrument [Line Items]
Principal amount	$ 19,000		$ 19,000			$ 762,500	$ 800,000
Interest rate	12.00%		12.00%			10.00%	10.00%
Note payable, amount	781,500		781,500		781,500
Accrued Interest	580,563		580,563		521,665
Interest Expense	$ 19,633	$ 21,763	$ 58,898	$ 69,763

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements are presented in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 915 for development stage entities. 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. The financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

Comprehensive Income

The Company follows FASB ASC 220 in 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 loss, comprehensive loss is equal to net loss.

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and notes payable. The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturities. The Company believes the carrying amount of its notes payable and convertible debt approximates its fair value based on rates and other terms currently available to the Company for similar debt instruments. The Company classifies the fair value of its notes payable and convertible debt within level 2 of the fair value hierarchy based on observable inputs used to estimate fair value.

Loss Per Share

The Company follows FASB ASC 260 when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for the three and nine months ended September 30, 2012 and 2011, common stock equivalents, including convertible debt, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same.

Segment Information

The Company is organized and operates as one operating segment wherein the Company’s patented technologies are utilized to address counterfeiting issues primarily in the gaming industry. In accordance with FASB ASC 280, Segment Reporting, the chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Since the Company operates in one segment and provides one group of similar products, all financial segment and product line information required by FASB ASC 280 can be found in the consolidated financial statements.

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04 (“ASC Update 2011-04”), Amendments to AchieveCommon Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS. This ASU is intended to update the fair value measurement and disclosure requirements in US GAAP for measuring fair value and for disclosing information about fair value measurements. Some of the amendments clarify the Board’s intent about application of existing fair value measurement requirements, while others change a particular principle or requirement for measuring or disclosing fair value measurement information. The amendments in this update are for interim and annual periods beginning after December 15, 2011. The Company adopted the provisions of this ASU, and the required changes in presentation and disclosure requirements have been included in the September 30, 2012 condensed consolidated financial statements. The adoption did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2012, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

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Condensed Consolidated Balance Sheets (Parentheticals) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Statement Of Financial Position [Abstract]
Allowance for Accounts receivable (in dollars)	$ 0	$ 0
Accumulated amortization, patent costs (in dollars)	87,179	78,851
Discount, notes payable (in dollars)	$ 14,872	$ 18,589
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	75,000,000	75,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	175,000,000	175,000,000
Common stock, shares issued	174,940,506	174,940,506
Common stock, shares outstanding	145,144,603	145,144,603
Treasury stock, shares	29,795,903	29,795,903

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

Effective October 8, 2012, the Company entered into a three year agreement with Norman Gardner as Vice Chairman of the Board and Chief Executive Officer of the Company with an annual compensation of $200,000 per year. In addition, upon execution of the agreement the Company has agreed to issue options to Mr. Gardner to purchase 5% of the shares of the Company’s common stock at an exercise price of $.05 per share, subsequent to the Company receiving funding of $2.5 millon.

Effective October 16, 2012, the Company entered into a three year agreement with Neil Alpert as President and Chief Operating Officer of the Company with an annual compensation of $200,000 per year. In addition, upon execution of the agreement the Company has agreed to issue options to Mr. Alpert to purchase 5% of the shares of the Company’s common stock at an exercise price of $.05 per share, subsequent to the Company receiving funding of $2.5 million.

In October 2012, the Company entered into an agreement with a related party noteholder whereby $250,000 of the 25% Notes Payable and $200,000 of the unsecured notes payable plus accrued interest on these notes payable of $131,565 will be fully satisfied in exchange for the issuance of 12,923,622 shares of the Company’s common stock ($.045 per share).

In October 2012, the Company completed a private placement equity offering in which $250,000 was received in exchange for 5,555,556 shares of the Company’s common stock and warrants to purchase 5,555,556 shares of Company’s common stock at an exercise price of $.10 per share with a term of 3 years.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	LASERLOCK TECHNOLOGIES INC
Entity Central Index Key	0001104038
Trading Symbol	llti
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		145,144,603
Document Type	10-Q
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The financial statements are presented in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) 915 for development stage entities. 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. The financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.

Comprehensive Income

Comprehensive Income

The Company follows FASB ASC 220 in 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 loss, comprehensive loss is equal to net loss.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued expenses and notes payable. The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate fair value because of their short maturities. The Company believes the carrying amount of its notes payable and convertible debt approximates its fair value based on rates and other terms currently available to the Company for similar debt instruments. The Company classifies the fair value of its notes payable and convertible debt within level 2 of the fair value hierarchy based on observable inputs used to estimate fair value.

Loss Per Share

Loss Per Share

The Company follows FASB ASC 260 when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for the three and nine months ended September 30, 2012 and 2011, common stock equivalents, including convertible debt, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same.

Segment Information

Segment Information

The Company is organized and operates as one operating segment wherein the Company’s patented technologies are utilized to address counterfeiting issues primarily in the gaming industry. In accordance with FASB ASC 280, Segment Reporting, the chief operating decision-maker has been identified as the Chief Executive Officer, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Since the Company operates in one segment and provides one group of similar products, all financial segment and product line information required by FASB ASC 280 can be found in the consolidated financial statements.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04 (“ASC Update 2011-04”), Amendments to AchieveCommon Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS. This ASU is intended to update the fair value measurement and disclosure requirements in US GAAP for measuring fair value and for disclosing information about fair value measurements. Some of the amendments clarify the Board’s intent about application of existing fair value measurement requirements, while others change a particular principle or requirement for measuring or disclosing fair value measurement information. The amendments in this update are for interim and annual periods beginning after December 15, 2011. The Company adopted the provisions of this ASU, and the required changes in presentation and disclosure requirements have been included in the September 30, 2012 condensed consolidated financial statements. The adoption did not have a material impact on the Company’s condensed consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2012, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended		155 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012
NET REVENUES
Sales	$ 3,289		$ 7,029	$ 900	$ 461,155
Royalties		2,404	10,000	7,984	645,180
TOTAL NET REVENUE	3,289	2,404	17,029	8,884	1,106,335
COST OF SALES	2,047		4,083	373	429,031
GROSS PROFIT	1,242	2,404	12,946	8,511	677,304
OPERATING EXPENSES
Research and development	493	1,000	3,873	6,050	866,245
Patent costs					65,000
Legal and Accounting	4,549	3,500	174,358	48,099	1,436,370
Sales and Marketing	55,463	51,274	155,725	206,052	5,586,694
General and administrative	18,911	28,289	89,898	159,451	3,826,453
Total operating expenses	79,416	84,063	423,854	419,652	11,780,762
LOSS BEFORE OTHER INCOME	(78,174)	(81,659)	(410,908)	(411,141)	(11,103,458)
OTHER INCOME (EXPENSE)
Interest income			1	58	63,664
Interest expense	(77,169)	(82,940)	(229,126)	(251,408)	(2,142,187)
Gain on debt forgiveness				184,242	184,242
Gain on disposition of assets					4,722
Nonoperating Income (Expense)	(77,169)	(82,940)	(229,125)	(67,108)	(1,889,559)
LOSS BEFORE INCOME TAX BENEFIT	(155,343)	(164,599)	(640,033)	(478,249)	(12,993,017)
INCOME TAX BENEFIT					(165,000)
NET LOSS	$ (155,343)	$ (164,599)	$ (640,033)	$ (478,249)	$ (12,828,017)
BASIC AND DILUTED NET LOSS PER COMMON SHARE (in dollars per share)	$ 0.00	$ 0.00	$ 0.00	$ 0.00
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (in shares)	145,144,603	145,144,603	145,144,603	146,387,227

XML

NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTE 6 - NOTES PAYABLE

Notes payable consists of the following:

	September 30, 2012			December 31, 2011
Unsecured notes payable; interest at 10% per annum; principal and accrued interest due at maturity from April 2013 through September 2015	$	761,000		$	561,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at extended maturity date in September 2015		150,000			150,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000			50,000
Notes payable, interest at 25% per annum; principal and interest due September 2013		400,000			400,000
Less: Debt discount		(14,872	)		(18,589	)
		1,346,128			1,142,411
Less: Current portion		740,000			50,000
Long-term portion	$	606,128		$	1,092,411

At September 30, 2012 and December 31, 2011, accrued interest on notes payable was $506,256 and $362,806, respectively. Interest expense for the three and nine months ended September 30, 2012 was $48,858 and $143,450, respectively. Interest expense for the three and nine months ended September 30, 2011 was $39,546 and $126,138, respectively.

Private Placement of 8% Series A Notes Payable

In August 2009, the Company commenced a private placement of up to $300,000 consisting of up to 6 units. Each unit consists of a $50,000, 8% Series A Note Payable, due September 30, 2011, and a non-detachable warrant to purchase 2 million shares of the Company’s common stock. During 2009, the Company sold 4 units, issued $200,000 of 8% Series A Notes Payable, issued 8 million warrants, and raised $180,000, net of commission of $20,000. In January 2010, the Company sold .5 units, issued $25,000 of 8% Series A Notes Payable, issued 1 million warrants, and raised $17,500 net of commissions of $7,500. The commissions were treated as deferred finance charges and are expensed over the term of notes payable. For the three and nine months ended September 30, 2011, amortization of deferred finance charges was $3,550 and $10,649, respectively. No amortization was recorded for the three and nine months ended September 30, 2012, since the deferred finance charges were fully amortized as of December 31, 2011.

In June 2011, the maturity date on $150,000 of the 8% Series A Notes Payable and the term on the associated 6 million warrants were extended to September 30, 2015. As a result, the warrants were revalued using the Black-Scholes option pricing model to calculate the incremental fair-value of the warrants of $21,275, with the following assumptions: no dividend yield, expected volatility of 60%, risk free interest rate of 1.52% and warrant life of approximately 1.25 years. As part of the debt extension, the lender holding the 6 million warrants agreed in writing to suspend its right to exercise these warrants until such time that the Company’s authorized shares have been increased.

The relative fair value of the warrants issued in conjunction with the 8% Series A Notes Payable have been treated as a debt discount with an offsetting credit to additional paid-in capital. The debt discount related to the warrant issuances are being accreted to interest expense over the term of the notes. When the warrants were revalued the incremental amount of $21,275 was also treated as additional debt discount and is being accreted over the new term of the 8% Series A Notes Payable. As of September 30, 2012 and December 31, 2011, the unaccreted debt discount related to warrants issued in conjunction with the 8% Series A Notes payable was $14,872 and $18,589, respectively. For the three and nine months ended September 30, 2012, interest expense from the accretion of the debt discount was $1,239 and $3,717, respectively. For the three and nine months ended September 30, 2011, interest expense from the accretion of the debt discount was $6,149 and $16,176, respectively.

Private Placement of 25% Notes Payable

In 2010, the Company issued $400,000 in notes payable in order to finance a patent infringement lawsuit (see Note 10 - Contingencies to these condensed consolidated financial statements). The notes payable accrue interest at 25% per annum and mature upon the earlier of September 1, 2013 or the date on which the Company receives net proceeds from the patent infringement claim. In addition to the base interest of 25% per annum, the lenders are entitled to Bonus Interest equal to the following:

a. First monies realized by the Company from its share of the net proceeds of the lawsuit shall be allocated and paid to the Lender until the principal and base interest accruing has been fully paid.

b. The next monies from the net proceeds of the litigation settlement will be paid to the Company to reimburse for out-of-pocket legal costs related to the lawsuit.

c. The next $825,000 of proceeds will be split 50%/50% between the Company and the Lenders.

d. The next $1 million realized by the Company shall be allocated 90% to the Company and 10% to the Lenders.

e. The next $1 million realized by Company shall be allocated 85% to Company and 15% to Lenders.

f. All remaining proceeds realized by Company shall be allocated 80% to Company and 20% to Lenders.

The Lenders have a security interest in the Company’s patent infringement claim in which the Lender has the right to the net proceeds of this lawsuit to satisfy outstanding principal and interest under the notes.

As part of the private placement of the 25% notes payable, the Company incurred debt placement fees of $34,500 in 2010. These debt placement fees have been treated as deferred finance charges and are being amortized to interest expense over the life of the notes payable. For the three and nine months ended September 30, 2012, amortization of deferred finance charges was $3,937 and $12,562, respectively. For the three and nine months ended September 30, 2011, amortization of deferred finance charges was $4,313 and $12,938, respectively.

Aggregate Maturities of Long-term Debt

Aggregate maturities of the senior secured convertible notes, convertible notes and notes payable over the next five years are as follows:

2012	$	50,000
2013		690,000
2014		95,000
2015		1,447,500
2016		-

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CONVERTIBLE NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

Convertible Notes Payable [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 5 - CONVERTIBLE NOTES PAYABLE

During 2007, the Company commenced a private placement of up to $400,000 principal amount of10% Convertible Promissory Notes originally due in August 2008 (the “Notes”). The Company raised $375,000 under this private placement in 2007 and the remaining $25,000 was raised in 2008. 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 June 2011, the noteholder of the $140,000 under this convertible note issue agreed to extend the maturity date of these notes to September 30, 2015 at an interest rate of 10% per annum. Additionally, the noteholder agreed in writing to suspend its right to convert its note until such time as the Company’s authorized shares have been increased. Remaining shares to be potentially issued under this convertible note issue are 26,250,000.

As of September 30, 2012 and 2011, the remaining principal balance on the notes is $140,000. Accrued interest at September 30, 2012 and December 31, 2011 amounted to $75,250 and $64,750, respectively. Interest expense for the three and nine months ended September 30, 2012 and 2011 was $3,500 and $10,500 for both periods, respectively.

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SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Detail Textuals 1) (USD $)	1 Months Ended
	Jun. 30, 2011
Extended Notes Payable One
Debt Instrument [Line Items]
Note payable, amount	$ 90,000
Maturity date	Sep. 30, 2013
Extended Notes Payable Two
Debt Instrument [Line Items]
Note payable, amount	95,000
Maturity date	Sep. 30, 2014
Extended Notes Payable Three
Debt Instrument [Line Items]
Note payable, amount	$ 596,500
Maturity date	Sep. 30, 2015

XML

NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

Schedule of notes payable

	September 30, 2012			December 31, 2011
Unsecured notes payable; interest at 10% per annum; principal and accrued interest due at maturity from April 2013 throug September 2015	$	761,000		$	561,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at extended maturity date in September 2015		150,000			150,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000			50,000
Notes payable, interest at 25% per annum; principal and interest due September 2013		400,000			400,000
Less: Debt discount		(14,872	)		(18,589	)
		1,346,128			1,142,411
Less: Current portion		740,000			50,000
Long-term portion	$	606,128		$	1,092,411

Schedule of aggregate maturities of notes payable over the next five years

2012	$	50,000
2013		690,000
2014		95,000
2015		1,447,500
2016		-

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MAJOR CUSTOMERS AND VENDORS

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

MAJOR CUSTOMERS AND VENDORS

NOTE 9 – MAJOR CUSTOMERS AND VENDORS

During the nine months ended September 30, 2012 and 2011, the Company earned a substantial portion of its revenue from one customer. During the nine months ended September 30, 2012 and 2011, revenue from this customer aggregated $13,075 and $7,984, respectively. At September 30, 2012 and 2011, the amount due from this customer included in trade accounts receivable was $1,135 and $0, respectively.

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STOCK OPTIONS AND WARRANTS

9 Months Ended

Sep. 30, 2012

Equity [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE 7 – 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 September 30, 2012, there are 3,100,000 options that have been issued and exercised, 13,825,996 options that have been issued and are unexercised, and 1,074,004 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.

On July 16, 2012, the Company issued an option to purchase 200,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to a consultant. The fair value of options issued was $11,638.The Company used 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 133%, risk-free interest rate of 1.5% and expected option life of ten years. These options granted were fully vested as of the date of the agreement. As a result, the Company recorded $11,638 of consulting expense for the three and nine months ended September 30, 2012.

The following tables summarize non-employee stock option/warrant activity of the Company since December 31, 2011:

					Weighted Average
	Option/Warrant		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2011		15,385,996	$	.00125 to $.20	$	0.01
Granted		200,000		0.05		0.05
Exercised		-		-		-
Expired		-		-		-
Outstanding, September 30, 2012		15,585,996	$	.00125 to $.20	$	0.01
Exercisable, September 30, 2012		15,585,996	$	.00125 to $.20	$	0.01
Weighted Average Remaining Life, Exercisable, September 30, 2012 (years)		5.9

A summary of incentive stock option transactions for employees since December 31, 2011 is as follows:

					Weighted Average
	Option		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2011		6,390,000	$	0.00125	$	0.00125
Granted		-		-		-
Exercised		-		-		-
Expired/Returned		-		-		-
Outstanding, September 30, 2012		6,390,000	$	0.00125	$	0.00125
Exercisable, September 30, 2012		6,390,000	$	0.00125	$	0.00125
Weighted Average Remaining Life, Exercisable, September 30, 2012 (years)		8.6

All employee option holders have agreed in writing to suspend their right to exercise their outstanding options until such time as the Company’s authorized shares have been increased. No consideration was required to be paid to the employee option holders resulting from this agreement.

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

At September 30, 2012 and December 31, 2011, four shareholders of the Company held $357,500 of the senior secured convertible notes payable.

At September 30, 2012, two shareholders of the Company held $761,000 of unsecured notes payable. At December 31, 2011, one shareholder of the Company held $561,000 of unsecured notes payable.

The Company maintains its office at the home of its Chief Executive Officer and President. No formal lease agreement exists and no direct rent expense has been incurred. However, related occupancy costs of $9,360 and $24,523 were incurred during the three and nine months ended September 30, 2012, respectively. Occupancy costs for the three and nine months ended September 30, 2011 were $1,857 and $7,760, respectively.

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CONTINGENCIES

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

NOTE 10 – CONTINGENCIES

In October 2010, the Company filed suit in the Western District of Pennsylvania against WS Packaging Group, Inc. (“WS”) alleging that WS infringed on one of the Company’s patents in the manufacture of MONOPOLY game pieces on behalf of McDonald’s Corp. On June 4, 2012, both WS and the Company filed a stipulation to dismiss the action without prejudice and enter into settlement negotiations. Settlement negotiations are ongoing.

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NOTES PAYABLE (Detail Textuals 3) (Notes Payable, USD $)	Dec. 31, 2010
Notes Payable
Debt Instrument [Line Items]
Note payable, amount	$ 400,000
Interest rate	25.00%

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PATENTS (Detail Textuals) (Patents, USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Patents
Finite-Lived Intangible Assets [Line Items]
Number of patents issued			5
Amortization method of patents			straight-line basis
Estimated lives of patents			17 years
Amortization expense	$ 2,768	$ 2,731	$ 8,328	$ 8,162
Future estimated annual amortization in December 31, 2012	3,000		3,000
Future estimated annual amortization in December 31, 2017	$ 11,000		$ 11,000

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CONVERTIBLE NOTES PAYABLE (Detail Textuals) (USD $)				1 Months Ended	12 Months Ended
	Sep. 30, 2012		Dec. 31, 2011	Jun. 30, 2011 Convertible Notes Payable	Dec. 31, 2008 Convertible Notes Payable	Dec. 31, 2007 Convertible Notes Payable	Sep. 30, 2012 Convertible Notes Payable	Sep. 30, 2011 Convertible Notes Payable	Dec. 31, 2007 Convertible Notes Payable Series A Preferred Stock
Debt Instrument [Line Items]
Private Placement of convertible notes						$ 400,000
Interest rate				10.00%		10.00%
Maturity Date				2015-09		2008-08
Proceeds from note payable					25,000	375,000
Conversion price per share (in dollars per share)									$ 0.005333
Convertible notes payable	$ 140,000	[1]	$ 140,000	$ 140,000			$ 140,000	$ 140,000
Warrants issued				26,250,000

[1] (Unaudited)

XML

STOCK OPTIONS AND WARRANTS (Detail Textuals 2) (Stock options, USD $)	0 Months Ended	3 Months Ended	9 Months Ended
	Jul. 16, 2012	Sep. 30, 2012	Sep. 30, 2012
Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise of options (in shares)	200,000
Exercise price of common stock	$ 0.05
Term for options	10 years
Fair value of options issued	$ 11,638
Method used to calculate the grant-date fair value of the warrants	Black-Scholes option pricing model
Expected volatility	133.00%
Risk-free interest rate	1.50%
Expected option life (in years)	10 years
Consulting expenses		$ 11,638	$ 11,638

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) (USD $)	Common Stock	Treasury Stock	Deferred Consulting Fees	Additional Paid-In Capital	Deficit Accumulated During the Development Stage	Total
Balance at Nov. 09, 1999
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of initial 4,278,000 shares on November 10, 1999	$ 4,278			$ 16,595		$ 20,873
Issuance of initial 4,278,000 shares on November 10, 1999 (in shares)	4,278,000
Issuance of shares of common stock in exchange for services	1,232			35,728		36,960
Issuance of shares of common stock in exchange for services (in shares)	1,232,000
Issuance of shares of common stock	2,090			60,610		62,700
Issuance of shares of common stock (in shares)	2,090,000
Stock issuance costs				(13,690)		(13,690)
Net loss					(54,113)	(54,113)
Balance at Dec. 31, 1999	7,600			99,243	(54,113)	52,730
Balance (in shares) at Dec. 31, 1999	7,600,000
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services	240		(40,800)	40,560
Issuance of shares of common stock in exchange for services (in shares)	240,000
Issuance of shares of common stock	5,450			921,050		926,500
Issuance of shares of common stock (in shares)	5,449,999
Stock issuance costs				(16,335)		(16,335)
Amortization of deferred consulting fees			20,117			20,117
Fair value of non-employee stock options grants				50,350		50,350
Net loss					(367,829)	(367,829)
Balance at Dec. 31, 2000	13,290		(20,683)	1,094,868	(421,942)	665,533
Balance (in shares) at Dec. 31, 2000	13,289,999
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock	218			77,723		77,941
Issuance of shares of common stock (in shares)	217,500
Amortization of deferred consulting fees			20,683			20,683
Fair value of non-employee stock options grants				323,250		323,250
Issuance of shares of common stock and stock options for acquisition of subsidiary	2,000			736,000		738,000
Issuance of shares of common stock and stock options for acquisition of subsidiary (in shares)	2,000,000
Issuance of stock options				15,000		15,000
Exercise of options	1,450			230,609		232,059
Exercise of options (in shares)	1,450,368
Net loss					(1,052,299)	(1,052,299)
Balance at Dec. 31, 2001	16,958			2,477,450	(1,474,241)	1,020,167
Balance (in shares) at Dec. 31, 2001	16,957,867
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock	3,377			687,223		690,600
Issuance of shares of common stock (in shares)	3,376,875
Fair value of non-employee stock options grants				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)			(353,000)		(354,000)
Return of shares of common stock related to purchase price adjustment (in shares)	(1,000,000)
Net loss					(1,195,753)	(1,195,753)
Balance at Dec. 31, 2002	19,335			2,920,673	(2,669,994)	270,014
Balance (in shares) at Dec. 31, 2002	19,334,742
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services	143			23,857		24,000
Issuance of shares of common stock in exchange for services (in shares)	143,000
Issuance of shares of common stock	22,512			1,387,109		1,409,621
Issuance of shares of common stock (in shares)	22,512,764
Stock issuance costs				(49,735)		(49,735)
Fair value of non-employee stock options grants				213,300		213,300
Net loss					(1,107,120)	(1,107,120)
Balance at Dec. 31, 2003	41,990			4,495,204	(3,777,114)	760,080
Balance (in shares) at Dec. 31, 2003	41,990,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock	18,600			939,881		958,481
Issuance of shares of common stock (in shares)	18,600,000
Stock issuance costs				(25,000)		(25,000)
Fair value of non-employee stock options grants				493,600		493,600
Net loss					(1,406,506)	(1,406,506)
Balance at Dec. 31, 2004	60,590			5,903,685	(5,183,620)	780,655
Balance (in shares) at Dec. 31, 2004	60,590,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock	3,000			102,000		105,000
Issuance of shares of common stock (in shares)	3,000,000
Fair value of non-employee stock options grants				286,762		286,762
Net loss					(1,266,811)	(1,266,811)
Balance at Dec. 31, 2005	63,590			6,292,447	(6,450,431)	(94,394)
Balance (in shares) at Dec. 31, 2005	63,590,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services	1,200			53,800		55,000
Issuance of shares of common stock in exchange for services (in shares)	1,200,000
Fair value of non-employee stock options grants				215,463		215,463
Fair value of employee stock options				135,098		135,098
Exercise of options	4,300			(3,870)		430
Exercise of options (in shares)	4,300,000
Fair value of warrants issued for deferred finance charges				392,376		392,376
Exercise of warrants (in shares)	5,550			49,950		55,500
Exercise of warrants	5,550,000
Shares retired upon cancellation of consulting agreements	(1,200)			1,080		(120)
Shares retired upon cancellation of consulting agreements (in shares)	(1,200,000)
Net loss					(1,607,017)	(1,607,017)
Balance at Dec. 31, 2006	73,440			7,136,344	(8,057,448)	(847,664)
Balance (in shares) at Dec. 31, 2006	73,440,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Fair value of non-employee stock options grants				47,692		47,692
Fair value of employee stock options				67,651		67,651
Recognition of beneficial conversion feature				375,000		375,000
Net loss					(1,117,334)	(1,117,334)
Balance at Dec. 31, 2007	73,440			7,626,687	(9,174,782)	(1,474,655)
Balance (in shares) at Dec. 31, 2007	73,440,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Fair value of non-employee stock options grants				28,752		28,752
Fair value of employee stock options				19,720		19,720
Fair value of warrants issued for deferred finance charges				25,000		25,000
Net loss					(931,338)	(931,338)
Balance at Dec. 31, 2008	73,440			7,700,159	(10,106,120)	(2,332,521)
Balance (in shares) at Dec. 31, 2008	73,440,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services	7,200			40,500		47,700
Issuance of shares of common stock in exchange for services (in shares)	7,200,000
Fair value of non-employee stock options grants				1,524		1,524
Fair value of warrants issued for deferred finance charges				15,450		15,450
Shares issued for conversion of notes payable	48,750			263,291		312,041
Shares issued for conversion of notes payable (in shares)	48,750,000
Net loss					(694,910)	(694,910)
Balance at Dec. 31, 2009	129,390			8,020,924	(10,801,030)	(2,650,716)
Balance (in shares) at Dec. 31, 2009	129,390,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services	25,950			182,650		208,600
Issuance of shares of common stock in exchange for services (in shares)	25,950,000
Fair value of non-employee stock options grants				364		364
Fair value of warrants issued for deferred finance charges				20,143		20,143
Net loss					(721,841)	(721,841)
Balance at Dec. 31, 2010	155,340			8,224,081	(11,522,871)	(3,143,450)
Balance (in shares) at Dec. 31, 2010	155,340,506
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services	1,000			29,000		30,000
Issuance of shares of common stock in exchange for services (in shares)	1,000,000
Stock issuance costs				(40,000)		(40,000)
Fair value of non-employee stock options grants				48,374		48,374
Fair value of employee stock options				47,658		47,658
Exercise of options	1,000		9,000		10,000
Exercise of options (in shares)	1,000,000
Fair value of warrants issued for deferred finance charges				21,275		21,275
Exercise of warrants (in shares)
Contribution of common stock from related parties		(95,594)		95,594
Contribution of common stock from related parties (in shares)	(12,000,000)
Purchase of common stock for treasury		(17,795)				(17,795)
Purchase of common stock for treasury (in shares)	(17,795,903)
Sale of common stock	15,500			384,500		400,000
Sale of common stock (in shares)	15,500,000
Issuance of shares for stock issuance costs	2,100			(2,100)
Issuance of shares for stock issuance costs (in shares)	2,100,000
Net loss					(665,113)	(665,113)
Balance at Dec. 31, 2011	174,940	(113,389)		8,817,382	(12,187,984)	(3,309,051)
Balance (in shares) at Dec. 31, 2011	145,144,603
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Fair value of non-employee stock options grants				11,638		11,638
Net loss					(640,033)	(640,033)
Balance at Sep. 30, 2012	$ 174,940	$ (113,389)		$ 8,829,020	$ (12,828,017)	$ (3,937,446)	[1]
Balance (in shares) at Sep. 30, 2012	145,144,603

[1] (Unaudited)

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SENIOR SECURED CONVERTIBLE NOTES PAYABLE

9 Months Ended

Sep. 30, 2012

Senior Secured Convertible Notes Payable [Abstract]

SENIOR SECURED CONVERTIBLE NOTES PAYABLE

NOTE 4 - 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 Company shareholders and other accredited investors. As of December 31, 2006, the Company completed this private placement by selling all notes payable totaling $800,000. The notes are secured by a first priority lien on all of the tangible and intangible personal property of the Company. In May 2007, the due date of these notes was extended to August 2008 and the interest rate increased to 12% per annum during the extension period. In June 2011, the due date of $90,000 of the notes was extended to September 2013, $95,000 of the notes was extended to September 2014 and the due date of $596,500 of the notes was extended to September 2015. The interest rate associated with $762,500 of the extended notes in June 2011 is 10% per annum, while the remaining $19,000 is at 12% per annum. As of September 30, 2012 and December 31, 2011, the outstanding principal balance on these notes was $781,500. Accrued interest at September 30, 2012 and December 31, 2011 amounted to $580,563 and $521,665, respectively. Interest expense for the three and nine months ended September 30, 2012 was $19,633 and $58,898, respectively. Interest expense for the three and nine months ended September 30, 2011 was $21,763 and $69,763, respectively.

Purchasers of the notes were issued 8,000,000 10-year warrants exercisable into the Company’s shares of common stock at an exercise price of $0.01 per share. The warrants were valued at $392,376 and recorded as a debt discount on the notes payable. The Company used 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 notes. As of September 30, 2012, the Company has received $70,000 for the exercise of 7,000,000 of the warrants.

In addition, if an equity financing with total proceeds of more than $5,000,000 occurs while any notes are outstanding, holders of the 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. Since the embedded conversion feature is contingent upon the occurrence of the qualified financing, the value of the contingent conversion feature, if beneficial, will be recognized when the triggering event occurs and the contingency is resolved.

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CONVERTIBLE NOTES PAYABLE (Detail Textuals 1) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2012		Sep. 30, 2011	Sep. 30, 2012		Sep. 30, 2011	Dec. 31, 2011	Jun. 30, 2011
Convertible notes payable	$ 140,000	[1]		$ 140,000	[1]		$ 140,000
Convertible Notes Payable
Convertible notes payable	140,000		140,000	140,000		140,000		140,000
Accrued Interest	75,250			75,250			64,750
Interest Expense	$ 3,500		$ 3,500	$ 10,500		$ 10,500

[1] (Unaudited)

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STOCK OPTIONS AND WARRANTS - Incentive Stock Option Transactions (Details 1) (Stock option 2003 plan, Incentive stock options, USD $)	9 Months Ended
	Sep. 30, 2012
Stock option 2003 plan | Incentive stock options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Option Shares Outstanding, December 31, 2011	6,390,000
Option Shares Granted
Option Shares Exercised	3,100,000
Option Shares Expired/Returned
Option Shares Outstanding, September 30, 2012	6,390,000
Option Shares Exercisable, September 30, 2012	6,390,000
Weighted Average Remaining Life, Exercisable, September 30, 2012 (years)	8 years 7 months 6 days
Share Based Compensation Arrangement By Share Based Payment Award Options and Warrants Outstanding Exercise Price [Roll Forward]
Exercise Price Outstanding, December 31, 2011	$ 0.00125
Exercise Price Granted
Exercise Price Exercised
Exercise Price Expired
Exercise Price Outstanding, September 30, 2012	$ 0.00125
Exercise Price Exercisable, September 30, 2012	$ 0.00125
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Weighted Average Exercise Price Outstanding, December 31, 2011	$ 0.00125
Weighted Average Exercise Price Granted
Weighted Average Exercise Price Exercised
Weighted Average Exercise Price Expired/Returned
Weighted Average Exercise Price Outstanding, September 30, 2012	$ 0.00125
Weighted Average Exercise Price Exercisable, September 30, 2012	$ 0.00125

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STOCK OPTIONS AND WARRANTS (Tables)

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Non-employee stock option/warrant activity

					Weighted Average
	Option/Warrant		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2011		15,385,996	$	.00125 to $.20	$	0.01
Granted		200,000		0.05		-
Exercised		-		-		-
Expired		-		-		-
Outstanding, September 30, 2012		15,585,996	$	.00125 to $.20	$	0.01
Exercisable, September 30, 2012		15,585,996	$	.00125 to $.20	$	0.01
Weighted Average Remaining Life,
Exercisable, September 30, 2012 (years)		5.9

Incentive Stock options

					Weighted Average
	Option		Exercise		Exercise
	Shares		Price		Price
Outstanding, December 31, 2011		6,390,000	$	0.00125	$	0.00125
Granted		-		-		-
Exercised		-		-		-
Expired/Returned		-		-		-
Outstanding, September 30, 2012		6,390,000	$	0.00125	$	0.00125
Exercisable, September 30, 2012		6,390,000	$	0.00125	$	0.00125
Weighted Average Remaining Life,
Exercisable, September 30, 2012 (years)		8.6