10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

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.)

	3112 M St NW, Washington, DC		20007
(Address of Principal Executive Offices)		(Zip Code)

	(202) 400-3700
(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 þ No o

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 þ No o

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: 299,129,630 shares of common stock outstanding at May 8, 2014.

PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets ( Unaudited )	1
Consolidated Statements of Operations (Unaudited)	2
Consolidated Statement of Changes in Stockholders’ Equity (Deficit) (Unaudited)	3
Consolidated Statements of Cash Flows (Unaudited)	9
Consolidated notes to financial statements (Unaudited)	11
ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	34
ITEM 4. Controls and Procedures	34
PART II OTHER INFORMATION
ITEM 6. Exhibits	35
SIGNATURES	36

1

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

CONTENTS

	PAGE
CONSOLIDATED BALANCE SHEETS	1
CONSOLIDATED STATEMENTS OF OPERATIONS	2
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT	3 - 8
CONSOLIDATED STATEMENTS OF CASH FLOWS	9 - 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	11 - 26

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Consolidated Balance Sheets

March 31, 2014 and December 31, 2013

	March 31, 2014			December 31, 2013
	(unaudited)			(audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	579,341		$	1,285,973
Accounts receivable, net of allowance of $0 at March 31, 2014 and December 31, 2013		3,573			3,573
Inventory		34,271			34,271
Prepaid expenses		186,841			189,474
TOTAL CURRENT ASSETS		804,026			1,513,291
PROPERTY AND EQUIPMENT
Capital equipment, net of accumulated depreciation of $109,265 and $91,952 as of March 31, 2014 and December 31, 2013		126,761			144,074
OTHER ASSETS
Deposits		37,197			37,197
Patents and trademarks, net of accumulated amortization of $108,670 and $105,393 as of March 31, 2014 and December 31, 2013		117,418			120,695
TOTAL ASSETS	$	1,085,402		$	1,815,257
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	230,777		$	316,785
Accrued interest - related party		17,666			16,667
Notes payable		50,000			50,000
TOTAL CURRENT LIABILITIES		298,443			383,452
LONG-TERM LIABILITIES
Warrant liability		7,334,000			6,000,000
Embedded derivative liability		1,100,000			800,000
Accrued interest - related parties		310,584			300,677
Senior secured convertible notes payable - related parties		330,249			330,249
TOTAL LONG-TERM LIABILITIES		9,074,833			7,430,926
STOCKHOLDERS’ DEFICIT
Convertible Preferred Stock, $ .001 par value; 75,000,000 shares authorized; 21,111,111 shares issued and outstanding as of March 31, 2014 and December 31, 2013		633,333			633,333
Common stock, $ .001 par value; 675,000,000 shares authorized; 328,925,532 shares issued and 299,129,630 outstanding at March 31, 2014 and 319,862,042 shares issued and 290,066,139 outstanding at December 31, 2013		328,925			319,862
Additional paid in capital		24,070,875			22,938,983
Treasury stock, at cost (29,795,903 shares at March 31, 2014 and December 31, 2013)		(113,389	)		(113,389	)
Deficit accumulated during the development stage		(33,207,618	)		(29,777,910	)
STOCKHOLDERS’ DEFICIT		(8,287,874	)		(5,999,121	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,085,402		$	1,815,257

See the accompanying notes to these consolidated financial statements.

-1-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Consolidated Statements of Operations

For the Three Months Ended March 31 2014 and 2013

And for the Period November 10, 1999 (Date of Inception) to March 31, 2014

(Unaudited)

				Three Months			Three Months
	Cumulative			Ended			Ended
	Since			March 31,			March 31,
	Inception			2014			2013
NET REVENUES
Sales	$	464,295		$	-		$	3,140
Royalties		645,180			-
TOTAL NET REVENUE		1,109,475			-			3,140
COST OF SALES		431,741			-			2,710
GROSS PROFIT		677,734			-			430
OPERATING EXPENSES
General and administrative		2,416,346			124,761			83,867
Legal and accounting		2,146,929			132,195			112,437
Patent costs		65,000			-			-
Payroll expenses (a)		14,004,172			1,074,680			567,500
Research and development		2,357,705			845,729			137,500
Sales and marketing		5,327,899			51,436			47,231
Total operating expenses		26,318,051			2,228,801			948,535
LOSS BEFORE OTHER INCOME (EXPENSE)		(25,640,317	)		(2,228,801	)		(948,105	)
OTHER INCOME (EXPENSE)
Interest income		63,664			-			-
Interest expense		(2,329,164	)		(10,907	)		(41,241	)
Loss on extinguishment of debt		(1,221,875	)		-			-
Change in fair value of warrants		(1,494,209	)		(890,000	)		(11,921,510	)
Change in fair value of embedded derivative liability		(100,000	)		(300,000	)		-
Fair value of warrants in excess of consideration for convertible preferred stock		(2,995,791	)		-			(2,995,791	)
Gain on debt forgiveness		340,352			-			-
Gain on disposition of assets		4,722			-			-
		(7,732,301	)		(1,200,907	)		(14,958,542	)
LOSS BEFORE INCOME TAX BENEFIT		(33,372,618	)		(3,429,708	)		(15,906,647	)
INCOME TAX BENEFIT		(165,000	)		-			-
NET LOSS		(33,207,618	)		(3,429,708	)		(15,906,647	)
Less:  Deemed dividend distribution		(1,000,000	)		-			(1,000,000	)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS	$	(34,207,618	)	$	(3,429,708	)	$	(16,906,647	)
NET LOSS PER COMMON SHARE
BASIC				$	(0.01	)	$	(0.07	)
DILUTED				$	(0.01	)	$	(0.07	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC					297,571,958			227,124,683
DILUTED					297,571,958			227,124,683

(a) - includes share based compensation of $9,360,091 cumulative, $740,954 for the three months ended March 31, 2014 and $332,599 for the three months ended March 31, 2013

See the accompanying notes to these consolidated financial statements.

-2-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the Period November 10, 1999 (Date of Inception) to March 31, 2014

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

-3-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to March 31, 2014

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

-4-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to March 31, 2014

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

-5-

LaserLock Technologies, Inc. and Subsidiary

 (A Development Stage Enterprise)

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

For the Period November 10, 1999 (Date of Inception) to March 31, 2014

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

-6-

LaserLock Technologies, Inc. and Subsidiary  
(A Development Stage Enterprise)

Consolidated Statement of Changes in Stockholders’ Equity (Deficit) (Continued)
For the Period November 10, 1999 (Date of Inception) to March 31, 2014

	Convertible																	Deficit
	Preferred				Common													Accumulated
	Stock				Stock					Deferred		Additional						During the
	Number of				Number of					Consulting		Paid-In			Treasury			Development
	Shares		Amount		Shares			Amount		Fees		Capital			Stock			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		-		8,817,382			(113,389	)		(12,187,984	)		(3,309,051	)
Issuance of shares for services		-		-		1,000,000			1,000		-		45,500			-			-			46,500
Issuance of shares of common stock		-		-		44,111,111			44,111		-		1,015,889			-			-			1,060,000
Issuance of stock for licensing		-		-		2,222,222			2,222		-		97,778			-			-			100,000
Issuance of stock for trademarks, etc.		-		-		2,222,222			2,222		-		97,778			-			-			100,000
Shares issued for conversion of notes payable and accrued interest		-		-		12,923,622			12,925		-		568,639			-			-			581,564
Exercise of options		-		-		10,490,996			10,491		-		2,622			-			-			13,113
Exercise of warrants		-		-		333,333			333		-		49,667			-			-			50,000
Fair value of employee stock options		-		-		-			-		-		332,036			-			-			332,036
Fair value of non-employee stock options		-		-		-			-		-		11,638			-			-			11,638
Forgiveness of debt - related party		-		-		-			-		-		349,000			-			-			349,000
Net loss for the year ended December 31, 2012		-		-		-			-		-		-			-			(1,199,057	)		(1,199,057	)
Balance at December 31, 2012		-		-		218,448,109			248,244		-		11,387,929			(113,389	)		(13,387,041	)		(1,864,257	)

See the accompanying notes to these consolidated financial statements.

-7-

LaserLock Technologies, Inc. and Subsidiary  
(A Development Stage Enterprise)  
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)
For the Period November 10, 1999 (Date of Inception) to March 31, 2014

	Convertible																		Deficit
	Preferred						Common												Accumulated
	Stock						Stock				Deferred		Additional						During the
	Number of						Number of				Consulting		Paid-In			Treasury			Development
	Shares			Amount			Shares		Amount		Fees		Capital			Stock			Stage			Total
Issuance of shares of preferred stock		33,333,333			1,000,000			-		-		-		-			-			-			1,000,000
Conversion of shares of preferred stock to common stock		(12,222,222	)		(366,667	)		12,222,222		12,222		-		354,445			-			-			-
Issuance of shares of common stock		-			-			4,811,111		4,811		-		230,189			-			-			235,000
Shares issued for conversion of notes payable and accrued interest		-			-			18,275,000		18,275		-		1,871,725			-			-			1,890,000
Exercise of options		-			-			3,335,000		3,335		-		14,584			-			-			17,919
Exercise of warrants		-			-			1,000,000		1,000		-		9,000			-			-			10,000
Fair value of employee stock options		-			-			-		-		-		8,619,136			-			-			8,619,136
Deemed dividend distribution		-			-			-		-		-		(1,000,000	)		-			-			(1,000,000	)
Conversion of Notes payable					-			31,974,697		31,975				1,451,975									1,483,950
Net loss for the year ended December 31, 2013		-			-			-		-		-		-			-			(16,390,869	)		(16,390,869	)
Balance at December 31, 2013 (audited)		21,111,111			633,333			290,066,139		319,862		-		22,938,983			(113,389	)		(29,777,910	)		(5,999,121	)
Issuance of shares of common stock for technology								6,349,206		6,349		-		393,651			-			-			400,000
Cashless exercise of options								2,714,285		2,714		-		(2,714	)		-			-			0
Fair value of stock options		-			-			-		-		-		740,955			-			-			740,955
Net loss for the three months ended March 31, 2014		-			-			-		-		-		-			-			(3,429,708	)		(3,429,708	)
Balance at March 31, 2014  (unaudited)		21,111,111		$	633,333			299,129,630	$	328,925	$	-		24,070,875		$	(113,389	)		(33,207,618	)	$	(8,287,874	)

See the accompanying notes to these consolidated financial statements.

-8-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Consolidated Statement of Cash Flows

For the Three Months Ended March 31, 2014 and 2013

And for the Period November 10, 1999 (Date of Inception) to March 31, 2014)

(Unaudited)

				ThreeMonths			ThreeMonths
	Cumulative			Ended			Ended
	Since			March 31,			March 31,
	Inception			2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(33,207,618	)	$	(3,429,708	)	$	(15,906,647	)
Adjustments to reconcile net loss to net cash used in
operating activities
Fair value of options issued in exchange for services		11,777,323			740,954			332,598
Accretion of interest on deferred finance charges		453,625			-			-
Accretion of discount on notes payable		446,954			-			1,239
Change in fair value warrant liability		1,494,209			890,000			11,921,510
Change in fair value embedded derivative liability		100,000			300,000			-
Fair value of warrants in excess of consideration for convertible preferred stock		2,995,791			-			2,995,791
Fair value of stock in excess of converted notes payable and accrued interest		1,221,875			-			-
Salary due to stockholder contributed to capital		15,000			-			-
Amortization and depreciation		632,574			20,590			6,045
Gain on disposition of assets		(4,722	)		-			-
Gain on debt forgiveness		(340,352	)		-			-
Stock & warrants issued in exchange for technology		1,397,760			844,000			-
Financing expenses paid directly from stock proceeds		5,270			-			-
Amortization of deferred consulting fees		40,800			-			-
(Increase) decrease in assets					-			-
Accounts receivable		(3,573	)		-			(3,140	)
Inventory		5,689			-			(9,872	)
Prepaid expenses		213,158			2,632			137,133
Deposit		(37,197	)		-			-
Increase in liabilities
Accounts payable and accrued expenses		2,258,765			(75,100	)		(220,820	)
Net cash used in operating activities		(10,534,669	)		(706,632	)		(746,163	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(48,682	)		-			(7,329	)
Purchase of patents and trademarks		(246,088	)		-			(18,443	)
Proceeds from sale of assets		6,738			-
Net cash used in investing activities		(288,032	)		-			(25,772	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock		1,000,000			-			1,000,000
Proceeds from issuance of common stock		5,786,447			-			235,000
Proceeds from exercise of stock options		273,401			-			17,919
Proceeds issuance of stock options		15,000			-			-
Proceeds from exercise of warrants		115,500			-			10,000
Proceeds from issuance of warrants		2,000,000			-			-
Proceeds from issuance of notes payable		2,789,000			-			-
Repayments of notes payable		(352,751	)		-			-
Payment for treasury stock		(17,795	)		-			-
Debt issuance costs		(62,000	)		-			-
Stock issuance costs		(144,760	)		-			-
Net cash provided by financing activities		11,402,042			-			1,262,919
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS		579,341			(706,632	)		490,984
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		-			1,285,973			2,994,350
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	579,341		$	579,341		$	3,485,334

See the accompanying notes to these consolidated financial statements.

-9-

LaserLock Technologies, Inc. and Subsidiary

(A Development Stage Enterprise)

Consolidated Statement of Cash Flows (Continued)

For the Three Months Ended March 31, 2014 and 2013

And for the Period November 10, 1999 (Date of Inception) to March 31, 2014)

(Unaudited)

Cash paid during the year for:
Interest	$	53,336		$	-	$	13,896
Income taxes	$	-		$	-	$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Cashless exercise of options	$	2,714		$	2,714	$	-
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
and accrued interest	$	2,985,680		$	-	$	262,000
Fair value of stock issued for conversion of preferred stock
to common stock	$	366,667		$	-	$	-
Fair value of stock issued for purchase of assets	$	100,000		$	-	$	-
Fair value of warrants issued for purchase of assets	$	100,000		$	-	$	-
Fair value of stock issued for licensing costs	$	100,000		$	-	$	-
Fair value of warrants issued for licensing costs	$	300,000		$	-	$	-
Accretion of discount on preferred stock as deemed dividend distribution	$	1,000,000		$	-	$	1,000,000
Fair value of beneficial conversion feature	$	1,500,000		$	-	$	1,000,000
Fair value of warrants issued as debt discount	$	78,043		$	-	$	-
Issuance of common stock for stock issuance costs	$	2,100		$	-	$	-
Issuance of options as stock cost for treasury stock	$	5,594		$	-	$	-
Forgiveness of debt-related party treated as additional paid in capital	$	349,000		$	-	$	-
Conversion of warrant in lieu of cash repayment of notes payable	$	60,000		$	-	$	-

See the accompanying notes to these consolidated financial statements.

-10-

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

LaserLock Technologies, Inc. and Subsidiary (the “Company”) is a development stage enterprise incorporated in the state of Nevada on November 10, 1999. The Company seeks to provide state-of-the-art authentication solutions to governments, health care providers, high-end retailers and the gaming industry. The Company is based in Washington, D.C. and is publically traded on the OTC Market under the ticker symbol “LLTI”. The Company markets security technology to protect governments, health care providers, high-end retail goods, the gaming industry and branded products from counterfeiting.

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, 2013 as filed with the Securities and Exchange Commission.  Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

Principle of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from these estimates.

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 income (loss), comprehensive income (loss) is equal to net income (loss).

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses and notes payable.  The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate their 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.

-11-

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial paper with original maturities of 90 days or less to be cash or cash equivalents.

Concentration of Credit Risk Involving Cash and Cash Equivalents

The Company’s cash and cash equivalents are held at two financial institutions. At times, the Company’s deposits may exceed Federal Deposit Insurance Corporation (FDIC) coverage limits.  The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits.

Inventory

Inventory principally consists of penlights and pigments and is stated at the lower of cost (determined by the first-in, first-out method) or market.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, principally five to seven years. Maintenance and repairs of property are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the costs and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in operations. Depreciation of property and equipment was $17,313 and $312 for the three months ended March 31, 2014 and 2013, respectively.

Patents and Trademark

The Company has five issued patents, filed for three additional patents for anti-counterfeiting technology and purchased a trademark. Costs associated with the registration and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents that were determined to be 17 to 20 years.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets in accordance with ASC 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

Deferred Financing Costs

Costs incurred in securing long-term debt are deferred and amortized, as a charge to interest expense, over the term of the related debt. In the case of long-term debt modifications, the Company follows the guidance provided by ASC 470-50 “Debt – Modification and Extinguishments.”

Convertible Notes Payable

Convertible notes payable, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective or actual rate of conversion per the terms of the convertible note agreement is below market value. In these instances, the Company accounts for the value of the beneficial conversion feature (BCF) as a debt discount, which is then accreted to interest expense over the life of the related debt using the straight-line method which approximates the effective interest method.

-12-

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Topic 480 of the FASB Accounting Standards Codification and Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative if required to be bifurcated is marked-to-market each balance sheet date and recorded as a liability. The change in fair value is recorded in the Statement of Operations as a component of other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

Revenue Recognition

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition (Codified in FASB ASC 605), the Company recognizes 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) collectability of the revenue 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.

Income Taxes

The Company follows FASB ASC 740 when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Stock-based Payments

The Company accounts for stock-based compensation under the provisions of ASC 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. The Company estimates 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.

-13-

The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). Under ASC 505-50, the Company determines 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.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were approximately $27,283 and $2,303 for the three months ended March 31, 2014 and 2013, respectively and are included in sales and marketing expenses.

Research and  Development Costs

In accordance with FASB ASC 730, research and development costs are expensed when incurred.

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 months ended March 31, 2014 and 2013, common stock equivalents, including 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. In accordance with 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 ASC 280 can be found in the consolidated financial statements.

Recently Adopted Accounting Pronouncements

As of March 31, 2014 and for the period then ended, there were no recently adopted accounting pronouncements that had a material effect on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of March 31, 2014, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

Reclassification 

Certain amounts in the 2013 and cumulative since inception statement of operations and the embedded derivative liability in the balance sheet have been reclassified in order for them to conform with the 2014 presentation.

NOTE 2 – MANAGEMENT PLANS

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

-14-

The Company believes that its existing cash resources will not be sufficient to sustain operations during the next twelve months. The Company currently needs to generate revenue in order to sustain its operations. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to 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 the business plan or pay costs and expenses as they are incurred, which could have a material, adverse effect on the business, financial condition and results of operations.

If sufficient revenues are not generated to sustain operations or additional 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 March 31, 2014. Successful completion of the Company’s development program, and 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 equity investment or achieve an adequate sales level.

NOTE 3 – PATENTS AND TRADEMARK

The Company has five issued patents and filed for three additional 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 to 20 years). During the three months ended March 31, 2014 and 2013, the Company capitalized patent costs of $0 and $18,443, respectively. Amortization expense for patents was $3,277 and $5,733 for the three months ended March 31, 2014 and 2013, respectively. Future estimated annual amortization over the next five years is approximately $13,100 per year for the years ended December 31, 2014 through 2018.

NOTE 4 – INCOME TAXES

Income tax expense was $0 for the three months ended March 31, 2014 and 2013.

As of January 1, 2014, the Company had no unrecognized tax benefits, and accordingly, the Company did not recognize interest or penalties during 2014 related to unrecognized tax benefits.  There has been no change in unrecognized tax benefits during the three months ended March 31, 2014, and there was no accrual for uncertain tax positions as of March 31, 2014.  Tax years from 2010 through 2013 remain subject to examination by major tax jurisdictions.

There is no income tax benefit for the losses for the three months ended March 31, 2014 and 2013, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.

NOTE 5 - SENIOR SECURED CONVERTIBLE NOTES PAYABLE

In February 2006, the Company commenced a private placement of up to $800,000 principal amount of 10% senior secured convertible promissory notes due twelve months from the date of issue to certain 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 interest rate on all of the notes was reset to 10% and $596,500 of the notes and accrued interest was extended until September 15, 2015. During the fourth quarter of 2012 the remaining $178,749 of unextended notes and the associated accrued interest were extended to September 30, 2015. In June 2013, $225,000 of these notes payable plus accrued interest of $181,125 were converted into 7.4 million shares of the Company’s common stock, which was valued at $1,628,000. The excess of the fair value of the Company’s common stock over the value of the notes payable and accrued interest was recorded as loss on extinguishment of debt in accordance with FASB ASC 470-50.

-15-

During the fourth quarter of 2013, $220,000 of senior convertible notes plus accrued interest of $395,000, were converted into 7,900,000 shares of common stock.  Since this transaction was with related parties, the conversion was treated as a capital transaction in accordance with FASB ASC 470-50-40-3.

As of March 31, 2014, the outstanding principal balance on these notes was $330,249.  Accrued interest at March 31, 2014 amounted to $310,584.

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. 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 if the triggering event occurs and the contingency is resolved.

NOTE 6 - CONVERTIBLE NOTES PAYABLE

During 2007, the Company commenced a private placement of up to $400,000 principal amount of 10% Convertible Promissory Notes 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. Previously $260,000 of the Notes were converted into shares of the Company’s common stock.  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. It is the intention, however, that the option holder will convert the Notes into shares of the Company’s common stock.  The Notes are unsecured.

In accordance with ASC 470, a beneficial conversion feature of $375,000 and $25,000 was required to be recorded in 2007 and 2008, respectively, since the fair value of the Company’s common stock at the date of issuance ($0.016 per share) was greater than the conversion price of $0.005333 per share. The value of the beneficial conversion feature was recorded to additional paid-in capital with the offset to discount on notes payable. The debt discount was accreted to interest expense over the one-year original term of the notes. 

In August 2009, noteholders exercised their option to convert $260,000 of the notes payable plus accrued interest into 48,750,000 shares of common stock. The noteholder of the remaining $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 as the Company’s authorized shares have been increased. Remaining shares to be potentially issued under this convertible note issue is 26,250,000.

On March 19, 2013, the investor holding $140,000 of convertible notes transferred $14,000 of the $140,000 convertible notes to the Vice Chairman of the Company. Also on March 19, 2013, the investor agreed to convert $28,000 of the investor’s remaining $126,000 of convertible notes into 5,250,000 shares of the Company’s common stock.

-16-

On March 19, 2013, the Vice Chairman of the Company agreed to convert $14,000 of convertible notes into 2,625,000 of the Company’s common stock.

During the fourth quarter of 2013, the remaining $98,000 of convertible notes plus accrued interest of $87,150 were converted into 12,375,000 shares of common stock.  Since this conversion was with a related party it was treated as a capital transaction in accordance with FASB ASC 470-50-40-3.

NOTE 7 - NOTES PAYABLE

During the fourth quarter of 2013, all of the $561,000 of unsecured notes payable, less $9,914 of unamortized discount, plus accrued interest of $83,715 was converted into 4,473,333 shares of common stock plus a cash repayment of $150,000.  Since this conversion was with a related party it was treated as a capital transaction in accordance with FASB ASC 470-50-40-3.

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 15 - Contingencies to these 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 $1,000,000 realized by the Company shall be allocated 90% to the Company and 10% to the Lenders.

e. The next $1,000,000 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 were being amortized to interest expense over two years.  The remainder of amortization $13,625 was recorded the years ended December 31, 2012.

In December 2012, 250,000 of these notes payable and accrued interest of $122,397 were converted into 8,219,911 shares of the Company’s common stock. In March 2013, the remaining $150,000 of the notes payable and accrued interest of $70,000 were converted into 3,000,000 shares of the Company’s common stock. Accrued interest of $13,895 was paid in cash.

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Notes payable consists of the following:
 

	March 31, 2014		December 31, 2013
Unsecured notes payable due to related parties; interest at 10% per annum; principal and accrued interest due at maturity in September 2015	$	330,000	$	330,000
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
		380,000		380,000
Less: Current portion		50,000		50,000
Long-term portion	$	330,000	$	330,000

At March 31, 2014 and December 31, 2013, accrued interest on notes payable was $328,251 and $317,344, respectively.  Interest expense was $10,907 and $41,241 for the three months ended March 31, 2014 and 2013, respectively.

NOTE 8 – WARRANT LIABILITY

On December 31, 2012, the Company entered into an Investment Agreement, a Technology and Services Agreement, a Technology and Services Agreement with Zaah Technologies, Inc. (“Zaah”) a Patent and Technology License Agreement, and an Asset Purchase Agreement (collectively the “Agreements”). Included in these Agreements were warrants to purchase shares of the Company’s common stock.

The warrants associated with these Agreements are subject to anti-dilution adjustments outlined in the Agreements. In accordance with FASB ASC 815, the warrants were classified as a liability in the total amount of $2.4 million at December 31, 2012. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings.  As of March 31, 2014 and December 31, 2013, the fair value of the warrant liability was $4,197,000 and $3,700,000.

On January 1, 2014 the company issued 6,349,206 warrants as consideration for technology received from VerifyMe related to the December 31, 2012 Agreement. The warrants are exercisable at $.10 per share and have an exercise price of $.10 per share. The warrants are subject to anti-dilution adjustments outlined in the Agreement. In accordance with FASB ASC 815, the warrants were classified as a liability with an initial fair value of $444,000, which was immediately expensed as research and development costs. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of March 31, 2014, the fair value of the warrant liability was $505,000.

At the time of payment, the Company made the payment, on a good faith basis, on the assumption that the technology conveyed to it would be patentable and licensable.  The Company has not reached a conclusion that the technology will be patentable and licensable, and can provide no assurance to this effect.

Should the Company ultimately conclude that the technology received is patentable and licensable, the Company would be required to make, on January 1, 2015, an additional payment pursuant to December 31, 2012 Patent and Technology Agreement in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000), to be paid by issuing (i) a number of Shares equal to (x) $4,500,000 divided by (y) a price which equals a 10% discount to the market price at the time of issuance and (ii) warrants to purchase an equal number of shares of common stock exercisable at a price of ten cents ($0.10) per share.  Based upon the current share price of $0.07 per share, this would result in the issuance of approximately an additional 70 million shares of common stock and warrants to purchase an additional 70 million shares. 

NOTE 9– CONVERTIBLE PREFERRED STOCK

Subscription Agreement

The Company entered into a Subscription Agreement with VerifyMe, Inc. (“VerifyMe”) on January 31, 2013 (the “Subscription Agreement”). Under the terms of the Subscription Agreement VerifyMe subscribed to purchase 33,333,333 shares of the Company’s preferred stock (the “Preferred Shares”) and a warrant to purchase 33,333,333 shares of the Company’s common stock for $1 million at an exercise price of $0.12 per share.

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At any time within two years after January 31, 2013, the subscriber has the right, but not the obligation to require the Company to repurchase all, but not less than all, of the capital stock of the Company and warrants exercisable for capital stock of the Company held by subscriber in exchange for the price originally paid by the subscriber therefore upon the occurrence of any of the following events:(i) the consummation of any bona fide business acquisition, (ii) the incurring of any indebtedness by the Company in an amount in excess of $2 million, (iii) the issuance or sale of any security having a preference on liquidation senior to common stock, or (iv) the sale by the Company of capital stock or warrants exercisable for its capital stock at a price below $0.03 per share.

In accordance with FASB ASC 480 and 815, the Preferred Stock has been classified as permanent equity and was valued at $1 million at January 31, 2013.

The conversion feature of the Preferred Stock is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair value of $1 million at January 31, 2013, $800,000 at December 31, 2013 and $1.1 million at March 31, 2014. This was classified as an embedded derivative liability and a discount to Preferred Stock. Because the Preferred Stock can be converted at any time, the full amount of the original fair value was accreted and classified as a reduction to the discount on Preferred Stock and a deemed dividend distribution in the full amount of $1 million, in 2013.

The warrants associated with the Preferred Stock were also classified as a liability since they are subject to anti-dilutive adjustments outlined in the warrant agreement and valued at a fair market of $2,995,791 at January 31, 2013. Because this amount was entirely in excess of the transaction price, this amount was recorded as a charge to expenses of $2,995,791 in 2013. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of March 31, 2014, and December 31, 2013 the fair value of the warrants was $2,632,000 and $2,300,000.

The Preferred Stock has a preference in liquidation that the holders of the Preferred Stock are to be paid out of assets available for distribution prior to holders of common stock. The Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Preferred Stock can be converted. In addition, the Preferred Stockholders are to be paid dividends, based on the number of shares of Preferred Stock as if the shares had been converted to common shares, prior to the common stockholders receiving a dividend.

The conversion price of the shares of Preferred Stock is currently $0.03 per share. There are no arrearages on cumulative dividends.

In August 2013, VerifyMe elected to convert in a cashless transaction an equal number of shares of Preferred Stock valued at $366,667 to 12,222,222 shares of common stock.

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Derivative Liabilities

For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock.  The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

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Liabilities measured at fair value on a recurring basis are summarized as follows:

March 31, 2014	Level 1		Level 2		Level 3		Total
Derivative liability related to fair value of beneficial conversion feature	$	-	$	1,100,000	$	--	$	1,100,000
Derivative liability related to fair value of warrants		-		-		7,334,000		7,334,000
Total	$	-	$	1,100,000	$	7,334,000	$	8,434,000

The following table details the approximate fair value measurements within the fair value hierarchy of the Company’s derivative liabilities using Level 3 inputs:

	Total
Balance at January 1, 2014	$	6,000,000
Additional Warrants issued January 2014		444,000
Change in fair value of derivative liabilities		890,000
Balance at March 31, 2014	$	7,334,000

As of March 31, 2014, the beneficial conversion feature of the Preferred Stock is treated as an embedded derivative liability and changes in the fair value were recognized in earnings.  The Preferred Stock shares are convertible into shares of the Company’s common stock, which did trade in an active securities market, therefore the embedded derivative liability was valued using the following market based inputs:

Closing trade price of Common Stock	$	0.08
Series A Preferred Stock Conversion Price	$	0.03
Intrinsic value of conversion option per share	$	0.05

The Company has no assets that are measured at fair value on a recurring basis.  There were no assets or liabilities measured at fair value on a non-recurring basis during the three months ended March 31, 2014.

As of March 31, 2014 the Company’s outstanding warrants are treated as derivative liabilities and changes in the fair value were recognized in earnings.  These common stock purchase warrants did not trade in an active securities market, and as such, the Company estimated the fair value of these warrants using Black-Scholes and the following assumptions:

	March 31, 2014
Annual Dividend Yield	0.0%
Expected Life (Years)	3.75 – 3.84
Risk-Free Interest Rate	1.67%
Expected Volatility	250.9%

Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believed this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term of these warrants. The Company had no reason to believe future volatility over the expected remaining life of these warrants was likely to differ materially from historical volatility.  The expected life was based on the remaining contractual term of the warrants. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the warrants.

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NOTE 11 – STOCKHOLDERS’ EQUITY

In January and February 2013, the Company received $185,000 from the sale of 3,700,000 units from private placements consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at an exercise price of $0.10 per share. The shares and warrants were sold in units with each unit comprised of one share and one warrant at a purchase price of $.05 per unit.

In January 2013, the Company commenced private placements consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at an exercise price of $0.12 per share. The shares and warrants were sold in units with each unit comprised of one share and one warrant at a purchase price of $.045 per unit. The company sold 1,111,111 units and raised $50,000.

On February 1, 2013, an investor exercised a warrant to purchase 1,000,000 shares of the Company’s common stock that raised $10,000 for the Company.

In February and March 2013, four investors exercised options to purchase 3,335,000 shares of the Company’s common stock that raised $17,919 for the Company.

On January 1, 2014, per the Patatent and Technology agreement the company issued 6,349,206 shares of common stock to VerifyMe. The shares were in payment for technology received. Per the Agreement, payment of $400,000 worth of the Company’s common stock was to be paid at a 10% discount to the market at time of payment. The closing price was $.07 per share discounted 10% to $.063. The $400,000 payment divided by the $.063 per share resulted in 6,349,206 shares to be issued. The entire $400,000 payment was expensed to research and development.

At the time of payment, the Company made the payment, on a good faith basis, on the assumption that the technology conveyed to it would be patentable and licensable.  The Company has not reached a conclusion that the technology will be patentable and licensable, and can provide no assurance to this effect.

Should the Company ultimately conclude that the technology received is patentable and licensable, the Company would be required to make, on January 1, 2015, an additional payment pursuant to December 31, 2012 Patent and Technology Agreement in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000), to be paid by issuing (i) a number of Shares equal to (x) $4,500,000 divided by (y) a price which equals a 10% discount to the market price at the time of issuance and (ii) warrants to purchase an equal number of shares of common stock exercisable at a price of ten cents ($0.10) per share.  Based upon the current share price of $0.07 per share, this would result in the issuance of approximately an additional 70 million shares of common stock and warrants to purchase an additional 70 million shares.

The authorized shares of the Company’s common stock were increased on May 23, 2013 from 425,000,000 to 675,000,000.

NOTE 12 – 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”).

During 2013, our Board adopted a new comprehensive incentive compensation plan which will serve as the successor incentive compensation plan to the earlier plan, and provide the Company with an omnibus plan to design and structure grants of stock options, stock units, stock awards, stock appreciation rights and other stock-based awards for selected individuals in our employ or service. Our Board of Directors believes that the availability of (i) 20,000,000 new shares of our common stock, plus (ii) the number of shares of our common stock subject to outstanding grants under the 2003 Plan as of the date of the Annual Meeting, plus (iii) the number of shares of our common stock remaining available for issuance under the 2003 Plan but not subject to previously exercised, vested or paid grants, for issuance under the 2013 Plan.

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As of March 31, 2014, there are 24,425,996 options that have been issued, and 13,574,004 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.

FASB ASC 718-10-55, Staff Accounting Bulletin No. 107 (SAB 107) and Staff Accounting Bulletin No. 110 (SAB 110), regarding Share-Based Payments, express the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of ‘plain vanilla’ share options and allows usage of the simplified method for share option grants.  The guidance allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of plain vanilla share option grants after December 31, 2007.  SAB 110 is effective January 1, 2008.  The Company has adopted the simplified method for estimating the expected term of share option grants because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.   The simplified method is based on the average of the vesting tranches and the contractual life of each grant.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions.  The Company uses the Black-Scholes option pricing model to value its stock option awards.  The assumption used in calculating the fair value represents management’s best estimates and involve inherent uncertainties and judgment.

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 year ended December 31, 2012.

On November 21, 2012, the Company issued options to purchase an aggregate of 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the Chief Executive Officer and the Chief Operating Officer. The fair value of options issued was $89,538 and was expensed immediately.

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On November 21, 2012, the Company issued options to purchase an aggregate of 10,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the five members of the Board of Directors. The fair value of options issued was $447,689 of which $223,844 was expensed immediately and the remainder was expensed over 2013.   Expense for the three months ended March 31, 2013 was $55,194.

All of the options issued on November 21, 2012 were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 131%, risk-free interest rate of 1.7% and expected option life of ten years.

On January 22, 2013, the Company issued options to an employee to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years. The options vest as follows: 250,000 immediately, 250,000 in one year and 500,000 in two years 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 222%, risk-free interest rate of 1.9% and expected option life of ten years. The fair value of options issued was $99,972 of which $25,000 was expensed immediately and the remainder is being expensed over the vesting terms.   The total expense for the three months ended March 31, 2014 and 2013 was $7,669, and $34,305, respectively.

On February 25, 2013, the Company issued options to an employee to purchase 500,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years. The options vest as follows: 200,000 in one year, 200,000 in two years and 100,000 in three years. 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 259%, risk-free interest rate of 1.9% and expected option life of ten years. The fair value of options issued was $89,998. The total expense recognized for the three months ended March 31, 2013, was $5,000.  The options were cancelled during the three months ended June 30, 2013. The total expense recognized of $5,000 was reversed upon cancellation of the options.

On March 13, 2013, the Company issued an option to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to a member of the Board of Directors. The options vest 50% immediately and 50% on March 13, 2014. 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 235%, risk-free interest rate of 2.0% and expected option life of ten years. The fair value of the option issued was $439,963 of which $219,982 was expensed immediately and the remainder will be expensed over one year.  The total expense for the three months ended March 31, 2014 and 2013 was $43,394 and $230,830, respectively.

On May 4, 2013, the Company issued an option to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the a member of the Board of Directors. The options vest 50% immediately and 50% on May 4, 2014. 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 235%, risk-free interest rate of 1.78% and expected option life of ten years. The fair value of the option issued was $460,000 of which $230,000 was expensed immediately and the remainder will be expensed over one year.  The total expense for the three months ended March 31, 2014 was $56,712.

On September 30, 2013, the Company issued an option to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.15, with a term of ten years, to the Company’s Chief Operating Officer. The options vest 50% after the first year and 50% at the end of 24 months.  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 ranging from 268.4% to 272.8%, risk-free interest rate of 1.39% and expected option life ranging from 10 years.  The fair value of the option issued was $99,840.  The total expense for the three months ended March 31, 2014 was $18,492.

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On December 2, 2013, the Company issued an option to purchase 1 million shares of the Company’s common stock at an exercise price of $.15, with a term of ten years, to the Company’s Chief Financial Officer.  The options vest 50% after the first year and 50% at the end of 24 months.  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 ranging from 266.1%, risk-free interest rate of 2.64% and expected option life of 10 years.  The fair value of the option issued was $79,994, which will be expensed over the vesting term.  The total expense for the three months ended March 31, 2014 was $14,794.

On March 28, 2014, the Company issued options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to one of the Board of Directors. The fair value of options issued was $599,893 of which all was expensed immediately.

All of the options issued on March 28, 2014 were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 229%, risk-free interest rate of 2.73% and expected option life of ten years.

On February 7, 2014, 6,000,000 options of the company were exercised as part of a cashless exercise of options.   Based on a stock price of $.07 per share and an exercise price of $.05 per share 6,000,000 options were received and 1,714,285 shares of stock were issued.

On February 25, 2014, 6,000,000 options of the company were exercised by the Company’s Chief Executive Officer as part of a cashless exercise of options.   Based on a stock price of $.06 per share and an exercise price of $.05 per share 6,000,000 options were received and 1,000,000 shares of stock were issued.

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The following tables summarize non-employee stock option/warrant activity of the Company since December 31, 2012:

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		82,807,221		$0.00125 to $0.20	$	0.01
Granted		38,144,444		0.10 to 0.15		0.03
Exercised		(9,435,000	)	0.00125 - 0.07		-
Expired		-		-		-
Outstanding, December 31, 2013		111,516,665		0.00125 to 0.20		0
Granted		6,349,209		0.10		0.01
Exercised						-
Expired		(700,000	)	.07 -.20		-
Outstanding, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10
Exercisable, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10
Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		6.5

A summary of incentive stock option transactions for employees since December 31, 2012 is as follows:

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		15,766,667		0.00125 to 0.10	$	0.06000
Granted		45,500,000		0.05 - 0.15		0.04
Exercised		(900,000	)	0.00125 - 0.15		-
Expired/Returned		(500,000	)	-		-
Outstanding, December 31, 2013		59,866,667		.05 to .15		0.05
Granted		6,000,000		.05		.01
Exercised		(12,000,000	)	.05		.01
Expired/Returned		-		-		-
Outstanding, March 31, 2014		53,866,667		$0.05 to $0.15	$	0.05
Exercisable, March 31, 2014		45,366,667		$0.05 to $0.15	$	0.06
Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		9.3

NOTE 13 - OPERATING LEASES

For the three months ended March 31, 2014 and 2013, total rent expense under leases amounted to $17,727 and $0, respectively, and is included in general and administrative expense. At March 31, 2014, the Company was obligated under various non-cancelable operating lease arrangements for property as follows:

2014	$	54,234
2015		74,637
2016		31,605
	$	160,476

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NOTE 14 – RELATED PARTY TRANSACTIONS

At March 31, 2014, five shareholders of the Company held $330,249 of the senior secured convertible notes payable.

At March 31, 2014, five shareholders of the Company were owed accrued interest of $328,251 related to the senior secured convertible notes payable.

NOTE 15 – 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 16 – SUBSEQUENT EVENTS

The Company has developed agreements with each of the note holders, with the exception of one holder that maintains a $50,000 note, to exchange their debt for an equity position. The Company expects to eliminate all of the current debt with the exception of the $50,000 note during the second quarter of 2014. The Company expects to exchange $330,249 of debt plus $307,281 of accrued interest for 12,750,619 shares of common stock.

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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, 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 including 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 five issued patents and submitted three additional applications relating to our technology. 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.

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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 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 plan to achieve this objective through a targeted marketing program. As we grow, we intend to hire professionals to develop new products and market our products.

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 March 31, 2014 and 2013

The following discussion analyzes our results of operations for the three months ended March 31, 2014 and 2013. 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 March 31, 2014 and 2013

Net Revenue/Net Loss

We are a development stage company and have not generated significant revenue since our inception.  For the three months ended March 31, 2014 and 2013, we generated net revenues of $0 and $3,140 respectively.  Our net loss decreased $12,476,939 to $3,429,708 for the three months ended March 31, 2014 compared to $15,906,647 for the three months ended March 31, 2013.  The result of the decrease in expenses was primarily due to the fair value adjustments to the warrant liability and embedded derivative liability associated with the Investment Agreement entered into on December 31, 2012 and the Subscription Agreement entered into on January 31, 2013.  The increase in the fair value of these liabilities as of March 31, 2014 was not as much as the increase on March 31, 2013 and thus the associated expense was not as high.

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Cost of Sales

For the three months ended March 31, 2014 and 2013, we incurred costs of sales of $0 and $2,710, respectively. 

General and Administrative Expenses

General and administrative expenses increased $40,894 to $124,761 for the three months ended March 31, 2014 from $83,867 for the three months ended March 31, 2013.  The increase was primarily attributable to results from the hiring of employees and the opening of an office in Washington D.C.

Legal and Accounting

Legal and accounting fees increased $19,758 to $132,195 for the three months ended March 31, 2014 from $112,437 for the three months ended March 31, 2013.   The increase in legal and accounting fees in 2014 was primarily related to legal fees associated with business development contracts underway during the first quarter of 2014.

Payroll Expenses

Payroll expenses were $1,074,680 for the three months ended March 31, 2014, an increase of $507,180 from $567,500 for the three months ended March 31, 2013.  The increase resulted primarily from an issuance of 6,000,000 warrant to a board member during the three months ended March 31, 2014.

Research and Development

Research and development expenses were $845,729 and $137,500, respectively, for the three months ended March 31, 2014 and 2013, an increase of $708,229.  The increase in research and development expenses was due to primarily to warrants and shares of stock issued in the quarter ended March 31, 2014 related to the patent and technology service agreement entered into on December 31, 2012.

Sales and Marketing

Sales and marketing expenses for the three months ended March 31, 2014 were $51,436 as compared to $47,321 for the three months ended March 31, 2013, a decrease of $4,115.   The expenses consisted largely of expenses for marketing new and existing technology.

Interest Expense

During the three months ended March 31, 2014, the Company incurred interest expense of $10,907, as compared to $41,241 for the three months ended March 31, 2013, a decrease of $30,334. The decrease in interest expense directly correlates to the notes payable that have been converted into common stock during 2013.

Liquidity and Capital Resources

As of the date of this report, we had cash on hand of $461,322.

Net cash used in operating activities for the three months ended March 31, 2014 decreased to $706,632 from $746,163 for the three months ended March 31, 2013 a decrease of $39,531. The net cash used in operating activities is expected to remain at the current level until revenue is generated as the Company looks to market and develop its new and existing line of products.

Net cash used in investing activities, consisting of equipment purchases and patent costs, was $25,772 for the three months ended March 31, 2013.

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Net cash provided by financing activities was $0 and $1,262,919 for the three months ended March 31, 2014 and 2013.  The net cash provided by financing activities for the three months ended March 31, 2013 relates to $1 million from the sale of the Company’s preferred stock and a warrant, and $262,919 in proceeds received from the issuance of common stock and exercise of stock options. 

The Company is in the development stage. During the three months ended March 31, 2014 and 2013, the Company’s operational resources were used primarily to fund general and administrative expenses, hire employees and expand the continuing 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.  The following sets forth our primary sources of capital during the previous two years.

The following agreements were executed on December 31, 2012 and provided the Company with $2 million in funding.

Investment Agreement

The Company entered into an Investment Agreement with VerifyMe, Inc. (“VerifyMe”) on December 31, 2012 (the “Investment Agreement”). Under the terms of the Investment Agreement, VerifyMe  purchased 22,222,222 shares of the Company’s common stock as well as a warrant to purchase 22,222,222 shares of the Company’s common stock for $1 million.  In addition, a Subscription Agreement (discussed below) was to be entered into on or before January 31, 2013.

Registration Rights Agreement

In connection with the Investment Agreement, the Company entered into a Registration Rights Agreement with VerifyMe (the “Registration Rights Agreement”), pursuant to which VerifyMe has the right to demand at any time on or after four months after December 31, 2012, that the Company file a registration statement relative to shares owned by VerifyMe.

After receiving extensions to the required timing, the Company filed a Form S-1 Registration Statement with respect to the shares owned by VerifyMe on August 5, 2013 in accordance with the terms of the Registration Rights Agreement.

Technology and Service Agreement

In connection with the Investment Agreement, the Company entered into a Technology and Service Agreement with VerifyMe (the “Technology and Service Agreement ”), pursuant to which VerifyMe purchased warrants of the Company to purchase 22,222,222 shares of the Company’s common stock for $1 million.  Additionally, the Company executed a services agreement with Zaah Technologies, Inc. (“Zaah”) concurrently with this agreement (the “Zaah Technology and Service Agreement”).  The Company is to use up to $550,000 of the proceeds from the Technology and Service Agreement for the purpose of the Company’s hiring (i) a full-time Chief Technology Officer or Chief Information Officer and (ii) two full-time business developers.

Technology and Service Agreement with Zaah

Under the Zaah Technology and Service Agreement, Zaah will provide the Company (a) twelve (12) months of technical support, (b) up to twelve (12) days of meetings annually between the respective management teams of the Company and Zaah, (c) updates to technology as agreed in writing between the Company and Zaah, and (d) twelve (12) months of technical hosting.

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The Company is required to pay Zaah the following:

(a) $450,000 on the date of the agreement (December 31, 2012), consisting of $250,000 in cash and warrants to purchase 4,444,444 shares of common stock under a cashless exercise initially at an exercise price of $0.045 on the terms set forth under the warrants issued by the Company to Zaah, dated as of December 31, 2012,

(b) $100,000, accrued in full as of the date of the agreement, but payable in twelve (12) months from the date hereof to a designee of Zaah’s selection, with a right to convert (at Zaah’s sole discretion, from time to time at any time) to shares of common stock at the prevailing market price per share of common stock (which, as long as the common stock is listed, shall be the closing price on the last trading day prior to such issuance or sale of the common stock as traded on a national securities exchange, the NASDAQ Global Market, the NASDAQ Capital Market, or another nationally recognized trading system (including Pink OTC Markets, Inc.)), and

(c) a commission of 10% of the revenue generated by any Company transaction originated through the efforts of Zaah, as substantiated by a written agreement between the Company and Zaah, specifically referencing the transaction in which Zaah is entitled to such commission, payable by the Company to Zaah in cash. Such payment shall be made on the earlier of (i) the date of the signing of such transaction, (ii) the date of the closing of such transaction, or (iii) any date on which any funds are paid to the Company in respect to such transaction.

Patent and Technology License Agreement

In connection with the Investment Agreement, the Company entered into a Patent and Technology License Agreement with VerifyMe, pursuant to which VerifyMe granted the Company exclusive and non-exclusive licenses relative to a specific list of patents in return for the following:

(a) Payment 1, payable upon execution of the agreement on December 31, 2012: The sum of One Hundred Thousand Dollars ($100,000), to be paid by issuing (i) a number of shares of common stock, of the Company equal to (x) $100,000 divided by (y) $0.045 (2,222,222 shares) and (ii) cashless exercise warrants to purchase an equal number of shares exercisable at a price of Ten Cents ($0.10) per share with a term of five (5) years.

(b) Payment 2, payable on January 1, 2014: The sum of Four Hundred Thousand Dollars ($400,000), to be paid by issuing (i) a number of shares equal to (x) $400,000 divided by (y) a price which equals a 10% discount to market and (ii) cashless exercise warrants to purchase an equal number of shares exercisable at a price of Ten Cents ($0.10) per share with a term of five (5) years.

(c) Payment 3, payable on January 1, 2015: The sum of Four Million Five Hundred Thousand Dollars ($4,500,000), to be paid by issuing (i) a number of shares equal to (x) $4,500,000 divided by (y) a price which equals a 10% discount to market and (ii) cashless exercise warrants to purchase an equal number of shares exercisable at a price of Ten Cents ($0.10) per share with a term of five (5) years.

(d) Future Payments Contingent: The Company’s payment of Payment 2 and Payment 3 is contingent. To the extent that VerifyMe does not develop and license to the Company at a time subsequent to Payment 1, further technology and/or a further patent right related to the local, mobile and cloud based biometric security systems, then any payments not already paid, will not longer be due to VerifyMe, this nonperformance being a likelihood, more likely than not.

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Asset Purchase Agreement

In connection with the Investment Agreement, the Company entered into an Asset Purchase Agreement with VerifyMe, pursuant to which the Company purchased trademark rights, software and a domain name at a purchase price of $100,000 to be paid by issuing shares equal to $100,000/0.045 (2,222,222 shares) and cashless exercise warrants to purchase an equal number of shares at an exercise price of ten cents per share with a term of five years.

The following agreement was executed on January 31, 2013 and provided the Company with $1 million in funding:

Subscription Agreement

VerifyMe subscribed to purchase 33,333,333 shares of the Company’s preferred stock and a warrant to purchase 33,333,333 shares of the Company’s common stock for $1 million at an exercise price of $0.12.  This agreement was executed on January 31, 2013.

In January and February 2013, the Company received $185,000 from the sales of 3,700,000 units from private placements consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at an exercise price of $0.10 per share.  The shares and warrants were sold in units with each unit comprised of one share and one warrant at a purchase price of $.05 per unit.  

In January, 2013, the Company commenced private placements consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at an exercise price of $0.12 per share.  The shares and warrants were sold in units with each unit comprised of one share and one warrant at a purchase price of $.045 per unit.  The company sold 1,111,111 units and raised $50,000 as of the date of this report.

On February 1, 2013, an investor exercised a warrant to purchase 1 million shares of the Company’s common stock that raised $10,000 for the Company.

In February and March 2013, four investors exercised options to purchase 3,335,000 shares of the Company’s common stock that raised $17,919 for the Company.

Since our inception, we have focused on developing and implementing our business plan.  Our business plan is 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 our products.  

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Our existing cash resources will not be sufficient to sustain our operations during the next twelve months, and we may need to raise additional funds. 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 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.

Even if we are successful in raising sufficient capital, 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 March 31, 2014, 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.

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Topic 480 of the FASB Accounting Standards Codification and Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative if required to be bifurcated is marked-to-market each balance sheet date and recorded as a liability. The change in fair value is recorded in the Statement of Operations as a component of other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

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.

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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.

Recently Issued Accounting Pronouncements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

ITEM 4. CONTROLS AND PROCEDURES.

As of March 31, 2014, 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 Chief Financial Officer.  Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2014, our disclosure controls and procedures were 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 Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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 March 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 6. EXHIBITS

31.1	Certification of Chief Executive 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.
31.2	Certification of Chief 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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief 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

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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: May 15, 2014	By:	/s/ Neil Alpert
		Neil Alpert Chief Executive Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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, Neil Alpert, 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.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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

Date:  May 15, 2014	By:	/s/ Neil Alpert
		Neil Alpert
		Chief Executive Officer

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EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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, Edward Weisberger, 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.  The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) 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.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

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

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

Date:  May15, 2014	By:	/s/ Edward Weisberger
		Edward Weisberger
		Chief Financial Officer

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EX-32.1

Exhibit 32.1

CERTIFICATION OF

CHIEF EXECUTIVE 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 March 31, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Neil Alpert, Chief Executive 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:  May 15, 2014	/s/ Neil Alpert
	Neil Alpert
	Chief Executive Officer

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EX-32.2

Exhibit 32.2

CERTIFICATION OF

CHIEF 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 March 31, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Edward Weisberger, Chief 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:  May 15, 2014	/s/ Edward Weisberger
	Edward Weisberger
	Chief Financial Officer

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XML

NOTES PAYABLE (Detail Textuals 1) (Private Placement of 25% Notes Payable, USD $)	Dec. 31, 2010
Private Placement of 25% Notes Payable
Debt Instrument [Line Items]
Note payable, amount	$ 400,000
Interest rate	25.00%

XML

STOCK OPTIONS AND WARRANTS (Detail Textuals 2) (Stock options, USD $)	0 Months Ended
	Feb. 07, 2014	Jul. 16, 2012 Exercise price of $.05 Consultant
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise of options (in shares)	6,000,000	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 expense		$ 11,638

XML

STOCKHOLDERS' EQUITY (Details Textuals) (USD $)	2 Months Ended	3 Months Ended		12 Months Ended						173 Months Ended			2 Months Ended		1 Months Ended	2 Months Ended
	Dec. 31, 1999	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2006	Dec. 31, 2003	Mar. 31, 2014	Dec. 31, 2013	May 23, 2013	Mar. 31, 2013 Investor	Feb. 01, 2013 Investor	Jan. 31, 2013 Private placement Warrant Unit	Feb. 28, 2013 Private placement Warrant Unit
Stockholders Equity Note [Line Items]
Warrants exercise price (in dollars per share)															0.12	0.10
Sale of units under private offering, Issue price per unit (in dollars per unit)															0.045	0.05
Number of units sold under private offering (in units)															1,111,111	3,700,000
Number of units sold under private offering value															$ 50,000	$ 185,000
Number of share of common stock consist in each offering unit															1	1
Number of warrant consist in each offering unit															1	1
Stock option exercised share (in shares)													3,335,000
Proceeds from exercise of stock options			17,919							273,401			17,919
Worth of common stock to be paid	36,960			46,500	30,000	208,600	47,700	55,000	24,000
Number of common stock called by warrants (in shares)														1,000,000
Amount received for exercised of warrants														$ 10,000
Number of investors													4
Common stock, shares authorized		675,000,000								675,000,000	675,000,000	425,000,000

XML

STOCK OPTIONS AND WARRANTS (Details Textuals 3) (USD $)	1 Months Ended	0 Months Ended	1 Months Ended		3 Months Ended
	Nov. 21, 2012 Board of Directors	Feb. 07, 2014 Stock options	Nov. 21, 2012 Stock options Chief Executive Officer and Chief Operating Officer	Nov. 21, 2012 Stock options Board of Directors Director	Dec. 31, 2013 Stock options Board of Directors
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options issued to purchase aggregate common stocks	10,000,000	6,000,000	2,000,000	10,000,000
Exercisable common stock share price			$ 0.05	$ 0.05
Term for options			10 years	10 years
Fair value of options issued			$ 89,538	$ 447,689
Fair value of option issued expensed immediately				$ 223,844	$ 55,194
Number of board of directors				5
Expected volatility				131.00%
Risk-free interest rate				1.70%
Expected option life (in years)				10 years

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Estimated fair value of embedded derivative liability using Black-Scholes (Details 2) (USD $)	Mar. 31, 2014
Fair Value Disclosures [Abstract]
Closing trade price of Common Stock	$ 0.08
Series A Preferred Stock Conversion Price	$ 0.03
Intrinsic value of conversion option per share	$ 0.05

XML

SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Detail Textuals) (USD $)		1 Months Ended		3 Months Ended		12 Months Ended
	Mar. 31, 2014	Jun. 30, 2013 10% Senior Secured Convertible Promissory Notes	May 31, 2007 10% Senior Secured Convertible Promissory Notes	Dec. 31, 2013 10% Senior Secured Convertible Promissory Notes	Dec. 31, 2012 10% Senior Secured Convertible Promissory Notes	Dec. 31, 2006 10% Senior Secured Convertible Promissory Notes	Jun. 30, 2011 10% Senior Secured Convertible Promissory Notes	Feb. 28, 2006 10% Senior Secured Convertible Promissory Notes
Debt Instrument [Line Items]
Debt instrument principal amount		$ 225,000		$ 220,000			$ 596,500	$ 800,000
Interest rate							10.00%	10.00%
Sale price of notes payable						800,000
Amount of interest rate increased			12.00%
Remaining debt and accrued interest was extended until September 15, 2015					178,749
Accrued interest	310,584	181,125		395,000
Common stock shares issued on conversion of debt (in shares)		7,400,000		7,900,000
Amount of notes converted into common stock shares		1,628,000
Outstanding principal balance on notes	$ 330,249

XML

STOCK OPTIONS AND WARRANTS (Details Textuals 5) (Stock options, USD $)	0 Months Ended	1 Months Ended
	Feb. 07, 2014	Feb. 25, 2014 Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option exercised share (in shares)	6,000,000	6,000,000
Closing price of share	$ 0.07	$ 0.06
Exercise price	$ 0.05	$ 0.05
Number of options received	6,000,000	6,000,000
Number of stock issued	1,714,285	1,000,000

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Principle of Consolidation

Principle of Consolidation

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

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from these estimates.

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 income (loss), comprehensive income (loss) is equal to net income (loss).

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses and notes payable.  The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate their 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.

Cash and Cash Equivalents

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial paper with original maturities of 90 days or less to be cash or cash equivalents.

Concentration of Credit Risk Involving Cash and Cash Equivalents

Concentration of Credit Risk Involving Cash and Cash Equivalents

The Company’s cash and cash equivalents are held at two financial institutions. At times, the Company’s deposits may exceed Federal Deposit Insurance Corporation (FDIC) coverage limits.  The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits.

Inventory

Inventory

Inventory principally consists of penlights and pigments and is stated at the lower of cost (determined by the first-in, first-out method) or market.

Property and Equipment

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, principally five to seven years. Maintenance and repairs of property are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the costs and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in operations. Depreciation of property and equipment was $17,313 and $312 for the three months ended March 31, 2014 and 2013, respectively.

Patents and Trademark

Patents and Trademark

The Company has five issued patents, filed for three additional patents for anti-counterfeiting technology and purchased a trademark. Costs associated with the registration and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents that were determined to be 17 to 20 years.

Long-Lived Assets

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets in accordance with ASC 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

Deferred Financing Costs

Deferred Financing Costs

Costs incurred in securing long-term debt are deferred and amortized, as a charge to interest expense, over the term of the related debt. In the case of long-term debt modifications, the Company follows the guidance provided by ASC 470-50 “Debt – Modification and Extinguishments.”

Convertible Notes Payable

Convertible Notes Payable

Convertible notes payable, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective or actual rate of conversion per the terms of the convertible note agreement is below market value. In these instances, the Company accounts for the value of the beneficial conversion feature (BCF) as a debt discount, which is then accreted to interest expense over the life of the related debt using the straight-line method which approximates the effective interest method.

Derivative Instruments

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Topic 480 of the FASB Accounting Standards Codification and Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative if required to be bifurcated is marked-to-market each balance sheet date and recorded as a liability. The change in fair value is recorded in the Statement of Operations as a component of other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

Revenue Recognition

Revenue Recognition

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition (Codified in FASB ASC 605), the Company recognizes 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) collectability of the revenue 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.

Income Taxes

Income Taxes

The Company follows FASB ASC 740 when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Stock-based Payments

Stock-based Payments

The Company accounts for stock-based compensation under the provisions of ASC 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. The Company estimates 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.

The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). Under ASC 505-50, the Company determines 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.

Advertising Costs

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were approximately $27,283 and $2,303 for the three months ended March 31, 2014 and 2013, respectively and are included in sales and marketing expenses.

Research and Development Costs

Research and  Development Costs

In accordance with FASB ASC 730, research and development costs are expensed when incurred.

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 months ended March 31, 2014 and 2013, common stock equivalents, including 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. In accordance with 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 ASC 280 can be found in the consolidated financial statements.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

As of March 31, 2014 and for the period then ended, there were no recently adopted accounting pronouncements that had a material effect on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

As of March 31, 2014, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

Reclassification

Reclassification

Certain amounts in the 2013 and cumulative since inception statement of operations and the embedded derivative liability in the balance sheet have been reclassified in order for them to conform with the 2014 presentation.

XML

STOCK OPTIONS AND WARRANTS - Non-Employee Stock Option/Warrant Activity (Details) (Stock Options and Warrants, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Option/Warrant Shares
Outstanding	111,516,665	82,807,221
Granted	6,349,209	38,144,444
Exercised		(9,435,000)
Expired	(700,000)
Outstanding	117,165,874	111,516,665
Exercisable, December 2013	117,165,874
Weighted Average Remaining Life, Exercisable, December 31, 2013 (years)	6 years 6 months
Exercise Price
Granted	$ 0.10
Expired
Weighted Average Exercise Price
Outstanding	$ 0	$ 0.01
Granted	$ 0.01	$ 0.03
Exercised
Expired
Outstanding	$ 0.10	$ 0
Exercisable, December 2013	$ 0.10
Minimum
Exercise Price
Outstanding	$ 0.00125	$ 0.00125
Granted		$ 0.10
Exercised		$ 0.00125
Expired	$ 0.07
Outstanding	$ 0.01	$ 0.00125
Exercisable, December 2013	$ 0.01
Maximum
Exercise Price
Outstanding	$ 0.20	$ 0.20
Granted		$ 0.15
Exercised		$ 0.07
Expired	$ 0.20
Outstanding	$ 0.20	$ 0.20
Exercisable, December 2013	$ 0.20

XML

WARRANT LIABILITY (Detail Textuals) (USD $)								1 Months Ended	12 Months Ended	1 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Warrants issued on December 31, 2012	Dec. 31, 2013 Warrants issued on December 31, 2012	Mar. 31, 2014 Verify Me Warrants issued on January 1, 2014	Dec. 31, 2012 Agreements Zaah Technologies	Mar. 31, 2014 Agreements Verify Me	Jan. 31, 2014 Agreements Verify Me Research and Development Expense	Dec. 31, 2012 Patent And Technology Agreement	Jan. 31, 2014 Patent And Technology Agreement Verify Me
Major Agreements [Line Items]
Additional payment for patent and technology									$ 4,500,000
Discount to market price at time of issuance									10.00%
Warrant liability	7,334,000	6,000,000				2,400,000
Number of warrants issued							6,349,206
Exercise price (in dollars per share)							0.10		0.10
Current share price (in dollars per share)	$ 0.08								$ 0.07
Initial fair value of warrant expensed as research and development cost								444,000
Fair value of warrant liability			$ 4,197,000	$ 3,700,000	$ 505,000
Additional shares issued for patent and technology agreement (in shares)									70,000,000	6,349,206
Number of common stock shares purchased under warrants (in shares)									70,000,000

XML

NOTES PAYABLE - Information regarding notes payable - (Parentheticals) (Details)	Mar. 31, 2014 Unsecured notes payable due to related parties; interest at 10% per annum; principal and accrued interest due at maturity in September 2015	Dec. 31, 2012 Unsecured notes payable due to related parties; interest at 10% per annum; principal and accrued interest due at maturity in September 2015	Mar. 31, 2014 Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)	Dec. 31, 2013 Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)
Debt Instrument [Line Items]
Interest rate	10.00%	10.00%	8.00%	8.00%

XML

STOCK OPTIONS AND WARRANTS (Detail Textuals)			3 Months Ended
	Dec. 31, 2000 Stock option 2000 plan Stock options	Dec. 31, 2013 Stock option 2003 plan Common Stock	Mar. 31, 2014 Stock option 2003 plan Stock options	Dec. 17, 2003 Stock option 2003 plan Stock options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized to grant options	1,500,000	20,000,000		18,000,000
Number of option issued			24,425,996
Number of options available to be issued			13,574,004

XML

SUBSEQUENT EVENTS (Detail Textuals) (Subsequent Event, Notes Payable, USD $)	3 Months Ended
	Jun. 30, 2014
Subsequent Event | Notes Payable
Subsequent Event [Line Items]
Amount of note holder agreed for exchange debt for an equity position	$ 50,000
Debt conversion, principle amount	330,249
Debt conversion, accrued interest	$ 307,281
Number of shares issued upon conversion of debt	12,750,619

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS - Estimated fair value of warrants using Black-Scholes (Details 3) (Warrants treated as Derivative Liabilities)	3 Months Ended
	Mar. 31, 2014
Fair Value Inputs Quantitative Information [Line Items]
Annual Dividend Yield	0.00%
Risk-Free Interest Rate	1.67%
Expected Volatility	250.90%
Minimum
Fair Value Inputs Quantitative Information [Line Items]
Expected Life (Years)	3 years 9 months 0 days
Maximum
Fair Value Inputs Quantitative Information [Line Items]
Expected Life (Years)	3 years 10 months 2 days

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

LaserLock Technologies, Inc. and Subsidiary (the “Company”) is a development stage enterprise incorporated in the state of Nevada on November 10, 1999. The Company seeks to provide state-of-the-art authentication solutions to governments, health care providers, high-end retailers and the gaming industry. The Company is based in Washington, D.C. and is publically traded on the OTC Market under the ticker symbol “LLTI”. The Company markets security technology to protect governments, health care providers, high-end retail goods, the gaming industry and branded products from counterfeiting.

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, 2013 as filed with the Securities and Exchange Commission.  Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.

Principle of Consolidation

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

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from these estimates.

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 income (loss), comprehensive income (loss) is equal to net income (loss).

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, accounts receivable, accounts payable and accrued expenses and notes payable.  The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate their 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.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and certificates of deposit and commercial paper with original maturities of 90 days or less to be cash or cash equivalents.

Concentration of Credit Risk Involving Cash and Cash Equivalents

The Company’s cash and cash equivalents are held at two financial institutions. At times, the Company’s deposits may exceed Federal Deposit Insurance Corporation (FDIC) coverage limits.  The Company has not experienced any losses from maintaining cash accounts in excess of federally insured limits.

Inventory

Inventory principally consists of penlights and pigments and is stated at the lower of cost (determined by the first-in, first-out method) or market.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, principally five to seven years. Maintenance and repairs of property are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the costs and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in operations. Depreciation of property and equipment was $17,313 and $312 for the three months ended March 31, 2014 and 2013, respectively.

Patents and Trademark

The Company has five issued patents, filed for three additional patents for anti-counterfeiting technology and purchased a trademark. Costs associated with the registration and legal defense of the patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents that were determined to be 17 to 20 years.

Long-Lived Assets

The Company evaluates the recoverability of its long-lived assets in accordance with ASC 360 “Property, Plant, and Equipment.” The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cash flows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

Deferred Financing Costs

Costs incurred in securing long-term debt are deferred and amortized, as a charge to interest expense, over the term of the related debt. In the case of long-term debt modifications, the Company follows the guidance provided by ASC 470-50 “Debt – Modification and Extinguishments.”

Convertible Notes Payable

Convertible notes payable, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if the effective or actual rate of conversion per the terms of the convertible note agreement is below market value. In these instances, the Company accounts for the value of the beneficial conversion feature (BCF) as a debt discount, which is then accreted to interest expense over the life of the related debt using the straight-line method which approximates the effective interest method.

Derivative Instruments

The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with Topic 480 of the FASB Accounting Standards Codification and Topic 815 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative if required to be bifurcated is marked-to-market each balance sheet date and recorded as a liability. The change in fair value is recorded in the Statement of Operations as a component of other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.

Revenue Recognition

In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition (Codified in FASB ASC 605), the Company recognizes 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) collectability of the revenue 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.

Income Taxes

The Company follows FASB ASC 740 when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes.  Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Stock-based Payments

The Company accounts for stock-based compensation under the provisions of ASC 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. The Company estimates 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.

The Company accounts for stock-based compensation awards to non-employees in accordance with ASC 505-50, Equity-Based Payments to Non-Employees (“ASC 505-50”). Under ASC 505-50, the Company determines 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.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were approximately $27,283 and $2,303 for the three months ended March 31, 2014 and 2013, respectively and are included in sales and marketing expenses.

Research and  Development Costs

In accordance with FASB ASC 730, research and development costs are expensed when incurred.

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 months ended March 31, 2014 and 2013, common stock equivalents, including 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. In accordance with 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 ASC 280 can be found in the consolidated financial statements.

Recently Adopted Accounting Pronouncements

As of March 31, 2014 and for the period then ended, there were no recently adopted accounting pronouncements that had a material effect on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of March 31, 2014, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements.

Reclassification 

Certain amounts in the 2013 and cumulative since inception statement of operations and the embedded derivative liability in the balance sheet have been reclassified in order for them to conform with the 2014 presentation.

XML

CONVERTIBLE PREFERRED STOCK (Detail textuals) (USD $)	3 Months Ended		12 Months Ended	173 Months Ended	1 Months Ended		3 Months Ended		1 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Mar. 31, 2014	Jan. 31, 2013 Subscription Agreement	Jan. 31, 2013 Subscription Agreement Verify Me	Mar. 31, 2014 Subscription Agreement Verify Me	Dec. 31, 2013 Subscription Agreement Preferred Class	Aug. 31, 2013 Subscription Agreement Convertible Preferred Stock Verify Me	Jan. 31, 2013 Subscription Agreement Convertible Preferred Stock Verify Me	Aug. 31, 2013 Subscription Agreement Common Stock Verify Me	Jan. 31, 2013 Subscription Agreement Common Stock Verify Me
Class of Stock [Line Items]
Number of preferred stock purchased										33,333,333
Number of common stock called by warrants (in shares)												33,333,333
Value of shares issued												$ 1,000,000
Exercise price of warrants										0.12		0.12
Convertible preferred stock description					(i) the consummation of any bona fide business acquisition, (ii) the incurring of any indebtedness by the Company in an amount in excess of $2 million, (iii) the issuance or sale of any security having a preference on liquidation senior to common stock, or (iv) the sale by the Company of capital stock or warrants exercisable for its capital stock at a price below $0.03 per share.
Excess amount for incurring indebtedness					2,000,000
Exercise price of capital stock or warrant					$ 0.03
Preferred stock value	633,333		633,333	633,333	1,000,000
Beneficial conversion feature at fair market value						1,000,000	1,100,000
Fair value of warrants in excess of consideration for convertible preferred stock		2,995,791		2,995,791	2,995,791
Fair value of warrants recorded as charge to expenses	2,632,000		2,300,000		2,995,791
Initial conversion price per share (in dollars per share)								$ 0.03
Preferred stock value in noncash transaction									$ 366,667
Shares of common stock shares issued on conversion											12,222,222

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OPERATING LEASES (Tables)

3 Months Ended

Mar. 31, 2014

Leases, Operating [Abstract]

Schedule of non-cancelable operating lease arrangements for property

2014	$	54,234
2015		74,637
2016		31,605
	$	160,476

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STOCK OPTIONS AND WARRANTS (Tables)

3 Months Ended

Mar. 31, 2014

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

Schedule of non-employee stock option/warrant activity

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		82,807,221		$0.00125 to $0.20	$	0.01
Granted		38,144,444		0.10 to 0.15		0.03
Exercised		(9,435,000	)	0.00125 - 0.07		-
Expired		-		-		-
Outstanding, December 31, 2013		111,516,665		0.00125 to 0.20		0
Granted		6,349,209		0.10		0.01
Exercised						-
Expired		(700,000	)	.07 -.20		-
Outstanding, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10
Exercisable, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10
Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		6.5

Schedule of incentive stock option transactions for employees

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		15,766,667		0.00125 to 0.10	$	0.06000
Granted		45,500,000		0.05 - 0.15		0.04
Exercised		(900,000	)	0.00125 - 0.15		-
Expired/Returned		(500,000	)	-		-
Outstanding, December 31, 2013		59,866,667		.05 to .15		0.05
Granted		6,000,000		.05		.01
Exercised		(12,000,000	)	.05		.01
Expired/Returned		-		-		-
Outstanding, March 31, 2014		53,866,667		$0.05 to $0.15	$	0.05
Exercisable, March 31, 2014		45,366,667		$0.05 to $0.15	$	0.06
Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		9.3

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STOCK OPTIONS AND WARRANTS (Details Textuals 4) (USD $)	1 Months Ended	0 Months Ended	1 Months Ended	3 Months Ended	1 Months Ended	3 Months Ended		1 Months Ended	3 Months Ended	0 Months Ended	3 Months Ended		0 Months Ended	3 Months Ended	1 Months Ended	3 Months Ended	1 Months Ended		0 Months Ended	3 Months Ended	1 Months Ended
	Nov. 21, 2012 Director	Feb. 07, 2014 Stock options	Nov. 21, 2012 Stock options Director	Dec. 31, 2013 Stock options Director	Jan. 22, 2013 Stock options January 22, 2013 Employee	Mar. 31, 2014 Stock options January 22, 2013 Employee	Mar. 31, 2013 Stock options January 22, 2013 Employee	Feb. 25, 2013 Stock options February 25, 2013 Employee	Mar. 31, 2014 Stock options February 25, 2013 Employee	Mar. 13, 2013 Stock options March 13, 2013 Director	Mar. 31, 2014 Stock options March 13, 2013 Director	Mar. 31, 2013 Stock options March 13, 2013 Director	May 04, 2013 Stock options May 4, 2013 Director	Mar. 31, 2014 Stock options May 4, 2013 Director	Sep. 30, 2013 Stock options September 30, 2013 Chief Operating Officer	Mar. 31, 2014 Stock options September 30, 2013 Chief Operating Officer	Sep. 30, 2013 Stock options September 30, 2013 Chief Operating Officer Maximum	Sep. 30, 2013 Stock options September 30, 2013 Chief Operating Officer Minimum	Dec. 02, 2013 Stock options December 2, 2013 Chief Financial Officer	Mar. 31, 2014 Stock options December 2, 2013 Chief Financial Officer	Mar. 28, 2014 Stock options March 28, 2014 Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options issued to purchase aggregate common stocks	10,000,000	6,000,000	10,000,000		1,000,000			500,000		2,000,000			2,000,000		1,000,000				1,000,000		6,000,000
Exercisable common stock share price			$ 0.05		$ 0.05			$ 0.05		$ 0.05			$ 0.05		$ 0.15				$ 0.15		$ 0.05
Term for options					10 years			10 years		10 years			10 years		10 years				10 years		10 years
Fair value of options issued			$ 447,689		$ 99,972			$ 89,998		$ 439,963			$ 460,000		$ 99,840				$ 79,994		$ 599,893
Fair value of option issued expensed immediately			223,844	55,194	25,000					219,982			230,000
Options vest immediately					250,000
Options vest one year					250,000			200,000
Options vest two years					500,000			200,000
Options vests year three								100,000
Percentage of options vests immediately										50.00%			50.00%
Percentage of options vests										50.00%			50.00%
Percentage of option vests after the first year															50.00%				50.00%
Percentage of option vests at the end of 24 month															50.00%				50.00%
Expected volatility			131.00%		222.00%			259.00%		235.00%			235.00%				272.80%	268.40%	266.10%		229.00%
Risk-free interest rate			1.70%		1.90%			1.90%		2.00%			1.78%		1.39%				2.64%		2.73%
Expected option life (in years)			10 years		10 years			10 years		10 years			10 years		10 years				10 years		10 years
Method used to calculate the grant-date fair value of the warrants					Black-Scholes option pricing model			Black-Scholes option pricing model		Black-Scholes option pricing model			Black-Scholes option pricing model		Black-Scholes option pricing model				Black-Scholes option pricing model		Black-Scholes option pricing model
Allocated Share-based Compensation Expense						7,669	34,305				43,394	230,830		56,712		18,492				14,794
Stock based compensation reversed upon cancellation of stock options									$ 5,000

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FAIR VALUE OF FINANCIAL INSTRUMENTS - Liabilities measured at fair value on recurring basis (Details) (Fair value on a recurring basis, USD $)	Mar. 31, 2014
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liability related to fair value of beneficial conversion feature
Derivative liability related to fair value of warrants
Total
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liability related to fair value of beneficial conversion feature	1,100,000
Derivative liability related to fair value of warrants
Total	1,100,000
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liability related to fair value of beneficial conversion feature
Derivative liability related to fair value of warrants	7,334,000
Total	7,334,000
Total
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative liability related to fair value of beneficial conversion feature	1,100,000
Derivative liability related to fair value of warrants	7,334,000
Total	$ 8,434,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Detail Textuals) (USD $)	3 Months Ended
	Mar. 31, 2014 Segment Institution	Mar. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Number of financial institutions at which company's cash and cash equivalents are held	2
Depreciation method of Property and equipment	straight-line method
Estimated useful lives Property and equipment	five to seven years
Depreciation on Property and equipment	$ 17,313	$ 312
Number of operating segment	1
Sales and marketing expenses
Finite-Lived Intangible Assets [Line Items]
Advertising costs	$ 27,283	$ 2,303
Patents and Trademark
Finite-Lived Intangible Assets [Line Items]
Number of patents issued	5
Amortization method of patents	straight-line basis
Patents and Trademark | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated lives of patents	17 years
Patents and Trademark | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated lives of patents	20 years

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PATENTS AND TRADEMARK (Detail Textuals) (USD $)	3 Months Ended
	Mar. 31, 2014 Patent	Mar. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Future estimated annual amortization in December 31, 2014	$ 13,100
Future estimated annual amortization in December 31, 2015	13,100
Future estimated annual amortization in December 31, 2016	13,100
Future estimated annual amortization in December 31, 2017	13,100
Future estimated annual amortization in December 31, 2018	13,100
Patents and Trademark
Finite-Lived Intangible Assets [Line Items]
Number of patents issued	5
Amortization method of patents	straight-line basis
Capitalized patent costs	0	18,443
Amortization expense	$ 3,277	$ 5,733
Patents and Trademark | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated lives of patents	17 years
Patents and Trademark | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated lives of patents	20 years

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Consolidated Statement of Cash Flows (Unaudited) (USD $)	3 Months Ended		173 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (3,429,708)	$ (15,906,647)	$ (33,207,618)
Adjustments to reconcile net loss to net cash used in operating activities
Fair value of options issued in exchange for services	740,954	332,598	11,777,323
Accretion of interest on deferred finance charges			453,625
Accretion of discount on notes payable		1,239	446,954
Change in fair value warrant liability	890,000	11,921,510	1,494,209
Change in fair value embedded derivative liability	300,000		100,000
Fair value of warrants in excess of consideration for convertible preferred stock		2,995,791	2,995,791
Fair value of stock in excess of converted notes payable and accrued interest			1,221,875
Salary due to stockholder contributed to capital			15,000
Amortization and depreciation	20,590	6,045	632,574
Gain on disposition of assets			(4,722)
Gain on debt forgiveness			(340,352)
Stock & warrants issued in exchange for technology	844,000		1,397,760
Financing expenses paid directly from stock proceeds			5,270
Amortization of deferred consulting fees			40,800
(Increase) decrease in assets
Accounts receivable		(3,140)	(3,573)
Inventory		(9,872)	5,689
Prepaid expenses	2,632	137,133	213,158
Deposit			(37,197)
Increase in liabilities
Accounts payable and accrued expenses	(75,100)	(220,820)	2,258,765
Net cash used in operating activities	(706,632)	(746,163)	(10,534,669)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(7,329)	(48,682)
Purchase of patents and trademarks		(18,443)	(246,088)
Proceeds from sale of assets			6,738
Net cash used in investing activities		(25,772)	(288,032)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of preferred stock		1,000,000	1,000,000
Proceeds from issuance of common stock		235,000	5,786,447
Proceeds from exercise of stock options		17,919	273,401
Proceeds issuance of stock options			15,000
Proceeds from exercise of warrants		10,000	115,500
Proceeds from issuance of warrants			2,000,000
Proceeds from issuance of notes payable			2,789,000
Repayments of notes payable			(352,751)
Payment for treasury stock			(17,795)
Debt issuance costs			(62,000)
Stock issuance costs			(144,760)
Net cash provided by financing activities		1,262,919	11,402,042
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(706,632)	490,984	579,341
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	1,285,973	2,994,350
CASH AND CASH EQUIVALENTS - END OF PERIOD	579,341	3,485,334	579,341
Cash paid during the year for:
Interest		13,896	53,336
Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cashless exercise of options	2,714		2,714
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 and accrued interest		262,000	2,985,680
Fair value of stock issued for conversion of preferred stock to common stock			366,667
Fair value of stock issued for purchase of assets			100,000
Fair value of warrants issued for purchase of assets			100,000
Fair value of stock issued for licensing costs			100,000
Fair value of warrants issued for licensing costs			300,000
Accretion of discount on preferred stock as deemed dividend distribution		1,000,000	1,000,000
Fair value of beneficial conversion feature		1,000,000	1,500,000
Fair value of warrants issued as debt discount	0		78,043
Issuance of common stock for stock issuance costs	0		2,100
Issuance of options as stock cost for treasury stock	0		5,594
Forgiveness of debt-related party treated as additional paid in capital			349,000
Conversion of warrant in lieu of cash repayment of notes payable			$ 60,000

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INCOME TAXES (Detail Textuals) (USD $)	3 Months Ended		173 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)			$ (165,000)

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NOTES PAYABLE (Detail Textuals 2) (Private Placement of 25% Notes Payable, 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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STOCK OPTIONS AND WARRANTS (Detail Textuals 1) (Stock option 2003 plan, Incentive stock options, USD $)	Mar. 31, 2014
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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Consolidated Balance Sheets (USD $)	Mar. 31, 2014	Dec. 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 579,341	$ 1,285,973
Accounts receivable, net of allowance of $0 at March 31, 2014 and December 31, 2013	3,573	3,573
Inventory	34,271	34,271
Prepaid expenses	186,841	189,474
TOTAL CURRENT ASSETS	804,026	1,513,291
PROPERTY AND EQUIPMENT
Capital equipment, net of accumulated depreciation of $109,265 and $91,952 as of March 31, 2014 and December 31, 2013	126,761	144,074
OTHER ASSETS
Deposits	37,197	37,197
Patents and trademarks, net of accumulated amortization of $108,670 and $105,393 as of March 31, 2014 and December 31, 2013	117,418	120,695
TOTAL ASSETS	1,085,402	1,815,257
CURRENT LIABILITIES
Accounts payable and accrued expenses	230,777	316,785
Accrued interest - related party	17,666	16,667
Notes payable	50,000	50,000
TOTAL CURRENT LIABILITIES	298,443	383,452
LONG-TERM LIABILITIES
Warrant liability	7,334,000	6,000,000
Embedded derivative liability	1,100,000	800,000
Accrued interest - related parties	310,584	300,677
Senior secured convertible notes payable - related parties	330,249	330,249
TOTAL LONG-TERM LIABILITIES	9,074,833	7,430,926
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock, $ .001 par value; 75,000,000 shares authorized; 21,111,111 shares issued and outstanding as of March 31, 2014 and December 31, 2013	633,333	633,333
Common stock, $ .001 par value; 675,000,000 shares authorized; 328,925,532 shares issued and 299,129,630 outstanding at March 31, 2014 and 319,862,042 shares issued and 290,066,139 outstanding at December 31, 2013	328,925	319,862
Additional paid in capital	24,070,875	22,938,983
Treasury stock, at cost (29,795,903 shares at March 31, 2014 and December 31, 2013)	(113,389)	(113,389)
Deficit accumulated during the development stage	(33,207,618)	(29,777,910)
STOCKHOLDERS' DEFICIT	(8,287,874)	(5,999,121)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 1,085,402	$ 1,815,257

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FAIR VALUE OF FINANCIAL INSTRUMENTS - Fair value measurements within fair value hierarchy of derivative liabilities using Level 3 inputs (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2014
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at January 1, 2014	$ 6,000,000
Additional Warrants issued January 2014	444,000
Change in fair value of derivative liabilities	890,000
Balance at March 31, 2014	$ 7,334,000

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Consolidated Statements of Changes in Stockholders' Equity (Deficit) (USD $)	Convertible Preferred Stock	Common Stock	Deferred Consulting Fees	Additional Paid-In Capital	Treasury Stock	Deficit Accumulated During the Development Stage	Total
Balance (in shares) at Nov. 10, 1999							4,278,000
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)
Fair value of non-employee stock options				50,350			50,350
Amortization of deferred consulting fees			20,117				20,117
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
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
Exercise of options		1,450		230,609			232,059
Exercise of options (in shares)		1,450,368
Fair value of non-employee stock options				323,250			323,250
Issuance of stock options				15,000			15,000
Amortization of deferred consulting fees			20,683				20,683
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				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				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				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				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
Exercise of options		4,300		(3,870)			430
Exercise of options (in shares)		4,300,000
Shares retired upon cancellation of consulting agreements		(1,200)		1,080			(120)
Shares retired upon cancellation of consulting agreements (in shares)		(1,200,000)
Exercise of warrants		5,550		49,950			55,500
Exercise of warrants (in shares)		5,550,000
Fair value of employee stock options				135,098			135,098
Fair value of non-employee stock options				215,463			215,463
Fair value of warrants issued for deferred finance charges				392,376			392,376
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 employee stock options				67,651			67,651
Fair value of non-employee stock options				47,692			47,692
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 warrants issued in conjunction with debt financing				25,000			25,000
Fair value of employee stock options				19,720			19,720
Fair value of non-employee stock options				28,752			28,752
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
Shares issued for conversion of notes payable and accrued interest		48,750		263,291			312,041
Shares issued for conversion of notes payable and accrued interest (in shares)		48,750,000
Fair value of warrants issued in conjunction with debt financing				15,450			15,450
Fair value of non-employee stock options				1,524			1,524
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 warrants issued in conjunction with debt financing				20,143			20,143
Fair value of non-employee stock options				364			364
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
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
Stock issuance costs				(40,000)			(40,000)
Exercise of options		1,000		9,000			10,000
Exercise of options (in shares)		1,000,000
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						(665,113)	(665,113)
Balance at Dec. 31, 2011		174,940		8,817,382	(113,389)	(12,187,984)	(3,309,051)
Balance (in shares) at Dec. 31, 2011		145,144,603
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock in exchange for services		1,000		45,500			46,500
Issuance of shares of common stock in exchange for services (in shares)		1,000,000
Issuance of shares of common stock		44,111		1,015,889			1,060,000
Issuance of shares of common stock (in shares)		44,111,111
Issuance of stock for licensing		2,222		97,778			100,000
Issuance of stock for licensing (in shares)		2,222,222
Issuance of stock for trademarks, etc.		2,222		97,778			100,000
Issuance of stock for trademarks, etc. (in shares)		2,222,222
Shares issued for conversion of notes payable and accrued interest		12,925		568,639			581,564
Shares issued for conversion of notes payable and accrued interest (in shares)		12,923,622
Exercise of options		10,491		2,622			13,113
Exercise of options (in shares)		10,490,996
Exercise of warrants		333		49,667			50,000
Exercise of warrants (in shares)		333,333
Fair value of employee stock options				332,036			332,036
Fair value of non-employee stock options				11,638			11,638
Forgiveness of debt-related party				349,000			349,000
Net loss						(1,199,057)	(1,199,057)
Balance at Dec. 31, 2012		248,244		11,387,929	(113,389)	(13,387,041)	(1,864,257)
Balance (in shares) at Dec. 31, 2012		218,448,109
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of preferred stock	1,000,000						1,000,000
Issuance of shares of preferred stock (in shares)	33,333,333
Conversion of shares of preferred stock to common stock	(366,667)	12,222		354,445
Conversion of shares of preferred stock to common stock (in shares)	(12,222,222)	12,222,222
Issuance of shares of common stock		4,811		230,189			235,000
Issuance of shares of common stock (in shares)		4,811,111
Shares issued for conversion of notes payable and accrued interest		18,275		1,871,725			1,890,000
Shares issued for conversion of notes payable and accrued interest (in shares)		18,275,000
Exercise of options		3,335		14,584			17,919
Exercise of options (in shares)		3,335,000
Exercise of warrants		1,000		9,000			10,000
Exercise of warrants (in shares)		1,000,000
Fair value of employee stock options				8,619,136			8,619,136
Deemed dividend distribution				(1,000,000)			(1,000,000)
Conversion of Notes payable		31,975		1,451,975			1,483,950
Conversion of Notes payable (in shares)		31,974,697
Net loss						(16,390,869)	(16,390,869)
Balance at Dec. 31, 2013	633,333	319,862		22,938,983		(29,777,910)	(5,999,121)
Balance (in shares) at Dec. 31, 2013	21,111,111	290,066,139
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of shares of common stock for technology		6,349		393,651			400,000
Issuance of shares of common stock for technology (in shares)		6,349,206
Exercise of options		2,714		(2,714)			0
Exercise of options (in shares)		2,714,285
Fair value of employee stock options				740,955			740,955
Net loss						(3,429,708)	(3,429,708)
Balance at Mar. 31, 2014	$ 633,333	$ 328,925		$ 24,070,875	$ (113,389)	$ (33,207,618)	$ (8,287,874)
Balance (in shares) at Mar. 31, 2014	21,111,111	299,129,630

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OPERATING LEASES (Detail Textuals) (General and administrative expense, USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
General and administrative expense
Schedule Of Operating Lease [Line Items]
Total rent expense under leases	$ 17,727	$ 0

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CONVERTIBLE NOTES PAYABLE (Detail Textuals) (USD $)	3 Months Ended	173 Months Ended		1 Months Ended	3 Months Ended	12 Months Ended				1 Months Ended
	Mar. 31, 2014	Mar. 31, 2014	Dec. 31, 2013	Aug. 31, 2009 10% Convertible Promissory Notes	Dec. 31, 2013 10% Convertible Promissory Notes	Dec. 31, 2008 10% Convertible Promissory Notes	Dec. 31, 2007 10% Convertible Promissory Notes	Mar. 19, 2013 10% Convertible Promissory Notes	Dec. 31, 2007 10% Convertible Promissory Notes Series A Preferred Stock	Mar. 19, 2013 10% Convertible Promissory Notes Vice Chairman	Mar. 19, 2013 10% Convertible Promissory Notes Investor
Debt Instrument [Line Items]
Debt instrument principal amount							$ 400,000
Interest rate				10.00%			10.00%
Maturity date				2015-09			2008-08
Proceeds from issuance of notes payable		2,789,000				25,000	375,000
Amount of notes converted in to common stock shares				260,000			260,000
Number of common stock shares issued on conversion of notes				48,750,000
Initial conversion price per share (in dollars per share)							$ 0.005333		$ 0.005333
Convertible notes payable				140,000
Convertible notes transferred										14,000
Remaining convertible notes payable								126,000
Convertible notes payble, conversion amount										14,000	28,000
Convertible notes payable, conversion of principle amount					98,000
Accrued interest	328,251	328,251	317,344		87,150
Common stock shares issued on conversion of debt (in shares)					12,375,000					2,625,000	5,250,000
Warrants issued				26,250,000
Beneficial conversion feature related to the issuance of convertible notes payable						$ 25,000	$ 375,000
Common stock issuance price per share for convertible notes payable (in dollars per share)							0.016

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2014

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 14 – RELATED PARTY TRANSACTIONS

At March 31, 2014, five shareholders of the Company held $330,249 of the senior secured convertible notes payable.

At March 31, 2014, five shareholders of the Company were owed accrued interest of $328,251 related to the senior secured convertible notes payable.

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NOTES PAYABLE - Summary of notes payable (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Notes payable	$ 380,000	$ 380,000
Less: Current portion	50,000	50,000
Long-term portion	330,000	330,000
Unsecured notes payable due to related parties; interest at 10% per annum; principal and accrued interest due at maturity in September 2015
Debt Instrument [Line Items]
Notes payable	330,000	330,000
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)
Debt Instrument [Line Items]
Notes payable	$ 50,000	$ 50,000

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2014

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 16 – SUBSEQUENT EVENTS

The Company has developed agreements with each of the note holders, with the exception of one holder that maintains a $50,000 note, to exchange their debt for an equity position. The Company expects to eliminate all of the current debt with the exception of the $50,000 note during the second quarter of 2014. The Company expects to exchange $330,249 of debt plus $307,281 of accrued interest for 12,750,619 shares of common stock.

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Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Parentheticals)	Nov. 10, 1999
Statement Of Stockholders' Equity [Abstract]
Issuance of shares	4,278,000

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Consolidated Balance Sheets (Parentheticals) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Statement Of Financial Position [Abstract]
Allowance for accounts receivable (in dollars)	$ 0	$ 0
Accumulated depreciation on capital equipment (in dollars)	109,265	91,952
Accumulated amortization, patent and trademarks (in dollars)	$ 108,670	$ 105,393
Convertible preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Convertible preferred stock, shares authorized	75,000,000	75,000,000
Convertible preferred stock, shares issued	21,111,111	21,111,111
Convertible preferred stock, shares outstanding	21,111,111	21,111,111
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	675,000,000	675,000,000
Common stock, shares issued	328,925,532	319,862,042
Common stock, shares outstanding	299,129,630	290,066,139
Treasury stock, shares	29,795,903	29,795,903

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CONVERTIBLE PREFERRED STOCK

3 Months Ended

Mar. 31, 2014

Features of Convertible Preferred Stock [Abstract]

CONVERTIBLE PREFERRED STOCK

NOTE 9– CONVERTIBLE PREFERRED STOCK

Subscription Agreement

The Company entered into a Subscription Agreement with VerifyMe, Inc. (“VerifyMe”) on January 31, 2013 (the “Subscription Agreement”). Under the terms of the Subscription Agreement VerifyMe subscribed to purchase 33,333,333 shares of the Company’s preferred stock (the “Preferred Shares”) and a warrant to purchase 33,333,333 shares of the Company’s common stock for $1 million at an exercise price of $0.12 per share.

At any time within two years after January 31, 2013, the subscriber has the right, but not the obligation to require the Company to repurchase all, but not less than all, of the capital stock of the Company and warrants exercisable for capital stock of the Company held by subscriber in exchange for the price originally paid by the subscriber therefore upon the occurrence of any of the following events:(i) the consummation of any bona fide business acquisition, (ii) the incurring of any indebtedness by the Company in an amount in excess of $2 million, (iii) the issuance or sale of any security having a preference on liquidation senior to common stock, or (iv) the sale by the Company of capital stock or warrants exercisable for its capital stock at a price below $0.03 per share.

In accordance with FASB ASC 480 and 815, the Preferred Stock has been classified as permanent equity and was valued at $1 million at January 31, 2013.

The conversion feature of the Preferred Stock is an embedded derivative, which is classified as a liability in accordance with FASB ASC 815 and was valued in accordance with FASB ASC 470 as a beneficial conversion feature at a fair value of $1 million at January 31, 2013, $800,000 at December 31, 2013 and $1.1 million at March 31, 2014. This was classified as an embedded derivative liability and a discount to Preferred Stock. Because the Preferred Stock can be converted at any time, the full amount of the original fair value was accreted and classified as a reduction to the discount on Preferred Stock and a deemed dividend distribution in the full amount of $1 million, in 2013.

The warrants associated with the Preferred Stock were also classified as a liability since they are subject to anti-dilutive adjustments outlined in the warrant agreement and valued at a fair market of $2,995,791 at January 31, 2013. Because this amount was entirely in excess of the transaction price, this amount was recorded as a charge to expenses of $2,995,791 in 2013. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of March 31, 2014, and December 31, 2013 the fair value of the warrants was $2,632,000 and $2,300,000.

The Preferred Stock has a preference in liquidation that the holders of the Preferred Stock are to be paid out of assets available for distribution prior to holders of common stock. The Preferred Stockholders may cast the number of votes equal to the number of whole shares of common stock into which the shares of Preferred Stock can be converted. In addition, the Preferred Stockholders are to be paid dividends, based on the number of shares of Preferred Stock as if the shares had been converted to common shares, prior to the common stockholders receiving a dividend.

The conversion price of the shares of Preferred Stock is currently $0.03 per share. There are no arrearages on cumulative dividends.

In August 2013, VerifyMe elected to convert in a cashless transaction an equal number of shares of Preferred Stock valued at $366,667 to 12,222,222 shares of common stock.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2014	May 08, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	LASERLOCK TECHNOLOGIES INC
Entity Central Index Key	0001104038
Trading Symbol	llti
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		299,129,630
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 10 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Derivative Liabilities

For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock.  The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.
 

Liabilities measured at fair value on a recurring basis are summarized as follows:

March 31, 2014	Level 1		Level 2		Level 3		Total
Derivative liability related to fair value of beneficial conversion feature	$	-	$	1,100,000	$	--	$	1,100,000
Derivative liability related to fair value of warrants		-		-		7,334,000		7,334,000
Total	$	-	$	1,100,000	$	7,334,000	$	8,434,000

The following table details the approximate fair value measurements within the fair value hierarchy of the Company’s derivative liabilities using Level 3 inputs:

	Total
Balance at January 1, 2014	$	6,000,000
Additional Warrants issued January 2014		444,000
Change in fair value of derivative liabilities		890,000
Balance at March 31, 2014	$	7,334,000

As of March 31, 2014, the beneficial conversion feature of the Preferred Stock is treated as an embedded derivative liability and changes in the fair value were recognized in earnings.  The Preferred Stock shares are convertible into shares of the Company’s common stock, which did trade in an active securities market, therefore the embedded derivative liability was valued using the following market based inputs:

Closing trade price of Common Stock	$	0.08
Series A Preferred Stock Conversion Price	$	0.03
Intrinsic value of conversion option per share	$	0.05

The Company has no assets that are measured at fair value on a recurring basis.  There were no assets or liabilities measured at fair value on a non-recurring basis during the three months ended March 31, 2014.

As of March 31, 2014 the Company’s outstanding warrants are treated as derivative liabilities and changes in the fair value were recognized in earnings.  These common stock purchase warrants did not trade in an active securities market, and as such, the Company estimated the fair value of these warrants using Black-Scholes and the following assumptions:

	March 31, 2014
Annual Dividend Yield	0.0%
Expected Life (Years)	3.75 – 3.84
Risk-Free Interest Rate	1.67%
Expected Volatility	250.9%

Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believed this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term of these warrants. The Company had no reason to believe future volatility over the expected remaining life of these warrants was likely to differ materially from historical volatility.  The expected life was based on the remaining contractual term of the warrants. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the warrants.

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended				173 Months Ended
	Mar. 31, 2014		Mar. 31, 2013		Mar. 31, 2014
NET REVENUES
Sales			$ 3,140		$ 464,295
Royalties					645,180
TOTAL NET REVENUE			3,140		1,109,475
COST OF SALES			2,710		431,741
GROSS PROFIT			430		677,734
OPERATING EXPENSES
General and administrative	124,761		83,867		2,416,346
Legal and accounting	132,195		112,437		2,146,929
Patent costs					65,000
Payroll expenses	1,074,680	[1]	567,500	[1]	14,004,172	[1]
Research and development	845,729		137,500		2,357,705
Sales and marketing	51,436		47,231		5,327,899
Total operating expenses	2,228,801		948,535		26,318,051
LOSS BEFORE OTHER INCOME (EXPENSE)	(2,228,801)		(948,105)		(25,640,317)
OTHER INCOME (EXPENSE)
Interest income					63,664
Interest expense	(10,907)		(41,241)		(2,329,164)
Loss on extinguishment of debt					(1,221,875)
Change in fair value of warrants	(890,000)		(11,921,510)		(1,494,209)
Change in fair value of embedded derivative liability	(300,000)				(100,000)
Fair value of warrants in excess of consideration for convertible preferred stock			(2,995,791)		(2,995,791)
Gain on debt forgiveness					340,352
Gain on disposition of assets					4,722
TOTAL OTHER INCOME (EXPENSE)	(1,200,907)		(14,958,542)		(7,732,301)
LOSS BEFORE INCOME TAX BENEFIT	(3,429,708)		(15,906,647)		(33,372,618)
INCOME TAX BENEFIT					(165,000)
NET LOSS	(3,429,708)		(15,906,647)		(33,207,618)
Less: Deemed dividend distribution			(1,000,000)		(1,000,000)
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS	$ (3,429,708)		$ (16,906,647)		$ (34,207,618)
NET LOSS PER COMMON SHARE
BASIC (in dollars per share)	$ (0.01)		$ (0.07)
DILUTED (in dollars per share)	$ (0.01)		$ (0.07)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC (in shares)	297,571,958		227,124,683
DILUTED (in shares)	297,571,958		227,124,683

[1] includes share based compensation of $9,360,091 cumulative, $740,954 for the three months ended March 31, 2014 and $332,599 for the three months ended March 31, 2013

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INCOME TAXES

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 4 – INCOME TAXES

Income tax expense was $0 for the three months ended March 31, 2014 and 2013.

As of January 1, 2014, the Company had no unrecognized tax benefits, and accordingly, the Company did not recognize interest or penalties during 2014 related to unrecognized tax benefits.  There has been no change in unrecognized tax benefits during the three months ended March 31, 2014, and there was no accrual for uncertain tax positions as of March 31, 2014.  Tax years from 2010 through 2013 remain subject to examination by major tax jurisdictions.

There is no income tax benefit for the losses for the three months ended March 31, 2014 and 2013, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.

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PATENTS AND TRADEMARK

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

PATENTS AND TRADEMARK

NOTE 3 – PATENTS AND TRADEMARK

The Company has five issued patents and filed for three additional 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 to 20 years). During the three months ended March 31, 2014 and 2013, the Company capitalized patent costs of $0 and $18,443, respectively. Amortization expense for patents was $3,277 and $5,733 for the three months ended March 31, 2014 and 2013, respectively. Future estimated annual amortization over the next five years is approximately $13,100 per year for the years ended December 31, 2014 through 2018.

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CONTINGENCIES

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

NOTE 15 – 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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STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2014

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

NOTE 11 – STOCKHOLDERS’ EQUITY

In January and February 2013, the Company received $185,000 from the sale of 3,700,000 units from private placements consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at an exercise price of $0.10 per share. The shares and warrants were sold in units with each unit comprised of one share and one warrant at a purchase price of $.05 per unit.

In January 2013, the Company commenced private placements consisting of shares of the Company’s common stock and warrants to purchase shares of the Company’s common stock at an exercise price of $0.12 per share. The shares and warrants were sold in units with each unit comprised of one share and one warrant at a purchase price of $.045 per unit. The company sold 1,111,111 units and raised $50,000.

On February 1, 2013, an investor exercised a warrant to purchase 1,000,000 shares of the Company’s common stock that raised $10,000 for the Company.

In February and March 2013, four investors exercised options to purchase 3,335,000 shares of the Company’s common stock that raised $17,919 for the Company.

On January 1, 2014, per the Patatent and Technology agreement the company issued 6,349,206 shares of common stock to VerifyMe. The shares were in payment for technology received. Per the Agreement, payment of $400,000 worth of the Company’s common stock was to be paid at a 10% discount to the market at time of payment. The closing price was $.07 per share discounted 10% to $.063. The $400,000 payment divided by the $.063 per share resulted in 6,349,206 shares to be issued. The entire $400,000 payment was expensed to research and development.

At the time of payment, the Company made the payment, on a good faith basis, on the assumption that the technology conveyed to it would be patentable and licensable.  The Company has not reached a conclusion that the technology will be patentable and licensable, and can provide no assurance to this effect.

Should the Company ultimately conclude that the technology received is patentable and licensable, the Company would be required to make, on January 1, 2015, an additional payment pursuant to December 31, 2012 Patent and Technology Agreement in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000), to be paid by issuing (i) a number of Shares equal to (x) $4,500,000 divided by (y) a price which equals a 10% discount to the market price at the time of issuance and (ii) warrants to purchase an equal number of shares of common stock exercisable at a price of ten cents ($0.10) per share.  Based upon the current share price of $0.07 per share, this would result in the issuance of approximately an additional 70 million shares of common stock and warrants to purchase an additional 70 million shares.

The authorized shares of the Company’s common stock were increased on May 23, 2013 from 425,000,000 to 675,000,000.

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NOTES PAYABLE

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

NOTES PAYABLE

NOTE 7 - NOTES PAYABLE

During the fourth quarter of 2013, all of the $561,000 of unsecured notes payable, less $9,914 of unamortized discount, plus accrued interest of $83,715 was converted into 4,473,333 shares of common stock plus a cash repayment of $150,000.  Since this conversion was with a related party it was treated as a capital transaction in accordance with FASB ASC 470-50-40-3.

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 15 - Contingencies to these 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 $1,000,000 realized by the Company shall be allocated 90% to the Company and 10% to the Lenders.

e. The next $1,000,000 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 were being amortized to interest expense over two years.  The remainder of amortization $13,625 was recorded the years ended December 31, 2012.

In December 2012, 250,000 of these notes payable and accrued interest of $122,397 were converted into 8,219,911 shares of the Company’s common stock. In March 2013, the remaining $150,000 of the notes payable and accrued interest of $70,000 were converted into 3,000,000 shares of the Company’s common stock. Accrued interest of $13,895 was paid in cash.

Notes payable consists of the following:
 

	March 31, 2014		December 31, 2013
Unsecured notes payable due to related parties; interest at 10% per annum; principal and accrued interest due at maturity in September 2015	$	330,000	$	330,000
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
		380,000		380,000
Less: Current portion		50,000		50,000
Long-term portion	$	330,000	$	330,000

At March 31, 2014 and December 31, 2013, accrued interest on notes payable was $328,251 and $317,344, respectively.  Interest expense was $10,907 and $41,241 for the three months ended March 31, 2014 and 2013, respectively.

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RELATED PARTY TRANSACTIONS (Detail Textuals) (Senior secured convertible notes payable, USD $)	Mar. 31, 2014 Shareholder
Senior secured convertible notes payable
Debt Instrument [Line Items]
Number of shareholders	5
Convertible notes payable	$ 330,249
Amount of accrued interest owed by shareholders	$ 328,251

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SENIOR SECURED CONVERTIBLE NOTES PAYABLE

3 Months Ended

Mar. 31, 2014

Senior Secured Convertible Notes Payable [Abstract]

SENIOR SECURED CONVERTIBLE NOTES PAYABLE

NOTE 5 - SENIOR SECURED CONVERTIBLE NOTES PAYABLE

In February 2006, the Company commenced a private placement of up to $800,000 principal amount of 10% senior secured convertible promissory notes due twelve months from the date of issue to certain 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 interest rate on all of the notes was reset to 10% and $596,500 of the notes and accrued interest was extended until September 15, 2015. During the fourth quarter of 2012 the remaining $178,749 of unextended notes and the associated accrued interest were extended to September 30, 2015. In June 2013, $225,000 of these notes payable plus accrued interest of $181,125 were converted into 7.4 million shares of the Company’s common stock, which was valued at $1,628,000. The excess of the fair value of the Company’s common stock over the value of the notes payable and accrued interest was recorded as loss on extinguishment of debt in accordance with FASB ASC 470-50.

During the fourth quarter of 2013, $220,000 of senior convertible notes plus accrued interest of $395,000, were converted into 7,900,000 shares of common stock.  Since this transaction was with related parties, the conversion was treated as a capital transaction in accordance with FASB ASC 470-50-40-3.

As of March 31, 2014, the outstanding principal balance on these notes was $330,249.  Accrued interest at March 31, 2014 amounted to $310,584.

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. 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 if the triggering event occurs and the contingency is resolved.

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CONVERTIBLE NOTES PAYABLE

3 Months Ended

Mar. 31, 2014

Convertible Notes Payable [Abstract]

CONVERTIBLE NOTES PAYABLE

NOTE 6 - CONVERTIBLE NOTES PAYABLE

During 2007, the Company commenced a private placement of up to $400,000 principal amount of 10% Convertible Promissory Notes 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. Previously $260,000 of the Notes were converted into shares of the Company’s common stock.  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. It is the intention, however, that the option holder will convert the Notes into shares of the Company’s common stock.  The Notes are unsecured.

In accordance with ASC 470, a beneficial conversion feature of $375,000 and $25,000 was required to be recorded in 2007 and 2008, respectively, since the fair value of the Company’s common stock at the date of issuance ($0.016 per share) was greater than the conversion price of $0.005333 per share. The value of the beneficial conversion feature was recorded to additional paid-in capital with the offset to discount on notes payable. The debt discount was accreted to interest expense over the one-year original term of the notes. 

In August 2009, noteholders exercised their option to convert $260,000 of the notes payable plus accrued interest into 48,750,000 shares of common stock. The noteholder of the remaining $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 as the Company’s authorized shares have been increased. Remaining shares to be potentially issued under this convertible note issue is 26,250,000.

On March 19, 2013, the investor holding $140,000 of convertible notes transferred $14,000 of the $140,000 convertible notes to the Vice Chairman of the Company. Also on March 19, 2013, the investor agreed to convert $28,000 of the investor’s remaining $126,000 of convertible notes into 5,250,000 shares of the Company’s common stock.

On March 19, 2013, the Vice Chairman of the Company agreed to convert $14,000 of convertible notes into 2,625,000 of the Company’s common stock.

During the fourth quarter of 2013, the remaining $98,000 of convertible notes plus accrued interest of $87,150 were converted into 12,375,000 shares of common stock.  Since this conversion was with a related party it was treated as a capital transaction in accordance with FASB ASC 470-50-40-3.

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WARRANT LIABILITY

3 Months Ended

Mar. 31, 2014

Warrants Liability [Abstract]

WARRANT LIABILITY

NOTE 8 – WARRANT LIABILITY

On December 31, 2012, the Company entered into an Investment Agreement, a Technology and Services Agreement, a Technology and Services Agreement with Zaah Technologies, Inc. (“Zaah”) a Patent and Technology License Agreement, and an Asset Purchase Agreement (collectively the “Agreements”). Included in these Agreements were warrants to purchase shares of the Company’s common stock.

The warrants associated with these Agreements are subject to anti-dilution adjustments outlined in the Agreements. In accordance with FASB ASC 815, the warrants were classified as a liability in the total amount of $2.4 million at December 31, 2012. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings.  As of March 31, 2014 and December 31, 2013, the fair value of the warrant liability was $4,197,000 and $3,700,000.

On January 1, 2014 the company issued 6,349,206 warrants as consideration for technology received from VerifyMe related to the December 31, 2012 Agreement. The warrants are exercisable at $.10 per share and have an exercise price of $.10 per share. The warrants are subject to anti-dilution adjustments outlined in the Agreement. In accordance with FASB ASC 815, the warrants were classified as a liability with an initial fair value of $444,000, which was immediately expensed as research and development costs. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of March 31, 2014, the fair value of the warrant liability was $505,000.

At the time of payment, the Company made the payment, on a good faith basis, on the assumption that the technology conveyed to it would be patentable and licensable.  The Company has not reached a conclusion that the technology will be patentable and licensable, and can provide no assurance to this effect.

Should the Company ultimately conclude that the technology received is patentable and licensable, the Company would be required to make, on January 1, 2015, an additional payment pursuant to December 31, 2012 Patent and Technology Agreement in the amount of Four Million Five Hundred Thousand Dollars ($4,500,000), to be paid by issuing (i) a number of Shares equal to (x) $4,500,000 divided by (y) a price which equals a 10% discount to the market price at the time of issuance and (ii) warrants to purchase an equal number of shares of common stock exercisable at a price of ten cents ($0.10) per share.  Based upon the current share price of $0.07 per share, this would result in the issuance of approximately an additional 70 million shares of common stock and warrants to purchase an additional 70 million shares.

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SENIOR SECURED CONVERTIBLE NOTES PAYABLE (Detail Textuals 1) (10% Senior Secured Convertible Promissory Notes)

3 Months Ended

Mar. 31, 2014

10% Senior Secured Convertible Promissory Notes

Debt Instrument [Line Items]

Debt instrument conditional covenants amount

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.

Percentage of discount on price per share

30.00%

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STOCK OPTIONS AND WARRANTS - Incentive Stock Option Transactions (Details 1) (Incentive stock options, USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Option/Warrant Shares
Outstanding	59,866,667	15,766,667
Granted	6,000,000	45,500,000
Exercised	(12,000,000)	(900,000)
Expired/Returned		(500,000)
Outstanding	53,866,667	59,866,667
Exercisable	45,366,667
Weighted Average Remaining Life, Exercisable, March 31, 2014 (years)	9 years 3 months 18 days
Exercise Price
Granted	$ 0.05
Exercised	$ 0.05
Expired/Returned
Weighted Average Exercise Price
Outstanding	$ 0.05	$ 0.06000
Granted	$ 0.05	$ 0.04
Exercised	$ 0.05
Expired/Returned
Outstanding	$ 0.05	$ 0.05
Weighted Average Remaining Life, Exercisable, March 31, 2014 (years)	$ 0.06
Minimum
Exercise Price
Outstanding		$ 0.00125
Granted		$ 0.05
Exercised		$ 0.00125
Outstanding	$ 0.05	$ 0.05
Exercisable	$ 0.05
Maximum
Exercise Price
Outstanding		$ 0.10
Granted		$ 0.15
Exercised		$ 0.15
Outstanding	$ 0.15	$ 0.15
Exercisable	$ 0.15

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OPERATING LEASES

3 Months Ended

Mar. 31, 2014

Leases, Operating [Abstract]

OPERATING LEASES

NOTE 13 - OPERATING LEASES

For the three months ended March 31, 2014 and 2013, total rent expense under leases amounted to $17,727 and $0, respectively, and is included in general and administrative expense. At March 31, 2014, the Company was obligated under various non-cancelable operating lease arrangements for property as follows:

2014	$	54,234
2015		74,637
2016		31,605
	$	160,476

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NOTES PAYABLE (Tables)

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Schedule of notes payable

	March 31, 2014		December 31, 2013
Unsecured notes payable due to related parties; interest at 10% per annum; principal and accrued interest due at maturity in September 2015	$	330,000	$	330,000
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
		380,000		380,000
Less: Current portion		50,000		50,000
Long-term portion	$	330,000	$	330,000

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STOCKHOLDERS' EQUITY (Detail Textuals 1) (USD $)	2 Months Ended	3 Months Ended		12 Months Ended						173 Months Ended	12 Months Ended	1 Months Ended
	Dec. 31, 1999	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2006	Dec. 31, 2003	Mar. 31, 2014	Dec. 31, 2012 Patent And Technology Agreement	Jan. 31, 2014 Patent And Technology Agreement Verify Me	Mar. 31, 2014 Patent And Technology Agreement Verify Me
Stockholders Equity Note [Line Items]
Issuance of shares for services (in shares)											70,000,000	6,349,206
Worth of common stock to be paid	$ 36,960			$ 46,500	$ 30,000	$ 208,600	$ 47,700	$ 55,000	$ 24,000			$ 400,000
Percentage of discount											10.00%	10.00%
Closing price of share											$ 0.07		$ 0.07
Closing price of share after discount													$ 0.063
Research and development		845,729	137,500							2,357,705		400,000
Additional payment for patent and technology											$ 4,500,000
Number of common stock shares purchased under warrants (in shares)											70,000,000

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NOTES PAYABLE (Detail Textuals 3) (USD $)	3 Months Ended		173 Months Ended		1 Months Ended	12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2013 Private Placement of 25% Notes Payable	Dec. 31, 2012 Private Placement of 25% Notes Payable	Dec. 31, 2010 Private Placement of 25% Notes Payable	Dec. 31, 2013 Notes Payable	Dec. 31, 2012 Notes Payable
Debt Instrument [Line Items]
Interest rate							25.00%
Debt placement fees							$ 34,500
Amortization of deferred finance charges			40,800			13,625
Private placement of convertible notes					150,000	250,000
Accrued interest	328,251		328,251	317,344	70,000	122,397		317,344	394,281
Accrued interest paid in cash		13,896	53,336			13,895
Number of shares issued upon conversion of debt					3,000,000	8,219,911
Interest expense	$ 10,907	$ 41,241	$ 2,329,164

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Consolidated Statements of Operations (Unaudited) (Parentheticals) (Payroll expenses, USD $)	3 Months Ended		173 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014
Payroll expenses
Share based compensation	$ 740,954	$ 332,599	$ 9,360,091

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MANAGEMENT PLANS

3 Months Ended

Mar. 31, 2014

Management Plans [Abstract]

MANAGEMENT PLANS

NOTE 2 – MANAGEMENT PLANS

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

The Company believes that its existing cash resources will not be sufficient to sustain operations during the next twelve months. The Company currently needs to generate revenue in order to sustain its operations. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to 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 the business plan or pay costs and expenses as they are incurred, which could have a material, adverse effect on the business, financial condition and results of operations.

If sufficient revenues are not generated to sustain operations or additional 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 March 31, 2014. Successful completion of the Company’s development program, and 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 equity investment or achieve an adequate sales level.

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OPERATING LEASES (Details) (USD $)	Mar. 31, 2014
Leases, Operating [Abstract]
2014	$ 54,234
2015	74,637
2016	31,605
Total	$ 160,476

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Schedule of liabilities measured at fair value on a recurring basis

March 31, 2014	Level 1		Level 2		Level 3		Total
Derivative liability related to fair value of beneficial conversion feature	$	-	$	1,100,000	$	--	$	1,100,000
Derivative liability related to fair value of warrants		-		-		7,334,000		7,334,000
Total	$	-	$	1,100,000	$	7,334,000	$	8,434,000

Schedule of fair value measurements within the fair value hierarchy of derivative liabilities using Level 3 inputs

	Total
Balance at January 1, 2014	$	6,000,000
Additional Warrants issued January 2014		444,000
Change in fair value of derivative liabilities		890,000
Balance at March 31, 2014	$	7,334,000

Schedule of embedded derivative liability valuation assumptions

Closing trade price of Common Stock	$	0.08
Series A Preferred Stock Conversion Price	$	0.03
Intrinsic value of conversion option per share	$	0.05

Schedule of common stock purchase warrants valuation assumptions

	March 31, 2014
Annual Dividend Yield	0.0%
Expected Life (Years)	3.75 – 3.84
Risk-Free Interest Rate	1.67%
Expected Volatility	250.9%

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NOTES PAYABLE (Detail Textuals) (USD $)	3 Months Ended	173 Months Ended		3 Months Ended
	Mar. 31, 2014	Mar. 31, 2014	Dec. 31, 2013	Dec. 31, 2013 Unsecured notes payable	Dec. 31, 2012 Unsecured notes payable
Debt Instrument [Line Items]
Debt instrument principal amount				$ 561,000
Amount of unamortized discount				9,914
Accrued interest	328,251	328,251	317,344	83,715	9,167
Number of shares issued upon conversion of debt				4,473,333
Amount of cash repaid		$ 352,751		$ 150,000

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STOCK OPTIONS AND WARRANTS

3 Months Ended

Mar. 31, 2014

Equity [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE 12 – 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”).

During 2013, our Board adopted a new comprehensive incentive compensation plan which will serve as the successor incentive compensation plan to the earlier plan, and provide the Company with an omnibus plan to design and structure grants of stock options, stock units, stock awards, stock appreciation rights and other stock-based awards for selected individuals in our employ or service. Our Board of Directors believes that the availability of (i) 20,000,000 new shares of our common stock, plus (ii) the number of shares of our common stock subject to outstanding grants under the 2003 Plan as of the date of the Annual Meeting, plus (iii) the number of shares of our common stock remaining available for issuance under the 2003 Plan but not subject to previously exercised, vested or paid grants, for issuance under the 2013 Plan.

As of March 31, 2014, there are 24,425,996 options that have been issued, and 13,574,004 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.

FASB ASC 718-10-55, Staff Accounting Bulletin No. 107 (SAB 107) and Staff Accounting Bulletin No. 110 (SAB 110), regarding Share-Based Payments, express the views of the staff regarding the use of the “simplified” method in developing an estimate of expected term of ‘plain vanilla’ share options and allows usage of the simplified method for share option grants.  The guidance allows public companies which do not have historically sufficient experience to provide a reasonable estimate to continue use of the “simplified” method for estimating the expected term of plain vanilla share option grants after December 31, 2007.  SAB 110 is effective January 1, 2008.  The Company has adopted the simplified method for estimating the expected term of share option grants because it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.   The simplified method is based on the average of the vesting tranches and the contractual life of each grant.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions.  The Company uses the Black-Scholes option pricing model to value its stock option awards.  The assumption used in calculating the fair value represents management’s best estimates and involve inherent uncertainties and judgment.

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 year ended December 31, 2012.

On November 21, 2012, the Company issued options to purchase an aggregate of 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the Chief Executive Officer and the Chief Operating Officer. The fair value of options issued was $89,538 and was expensed immediately.

On November 21, 2012, the Company issued options to purchase an aggregate of 10,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the five members of the Board of Directors. The fair value of options issued was $447,689 of which $223,844 was expensed immediately and the remainder was expensed over 2013.   Expense for the three months ended March 31, 2013 was $55,194.

All of the options issued on November 21, 2012 were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 131%, risk-free interest rate of 1.7% and expected option life of ten years.

On January 22, 2013, the Company issued options to an employee to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years. The options vest as follows: 250,000 immediately, 250,000 in one year and 500,000 in two years 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 222%, risk-free interest rate of 1.9% and expected option life of ten years. The fair value of options issued was $99,972 of which $25,000 was expensed immediately and the remainder is being expensed over the vesting terms.   The total expense for the three months ended March 31, 2014 and 2013 was $7,669, and $34,305, respectively.

On February 25, 2013, the Company issued options to an employee to purchase 500,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years. The options vest as follows: 200,000 in one year, 200,000 in two years and 100,000 in three years. 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 259%, risk-free interest rate of 1.9% and expected option life of ten years. The fair value of options issued was $89,998. The total expense recognized for the three months ended March 31, 2013, was $5,000.  The options were cancelled during the three months ended June 30, 2013. The total expense recognized of $5,000 was reversed upon cancellation of the options.

On March 13, 2013, the Company issued an option to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to a member of the Board of Directors. The options vest 50% immediately and 50% on March 13, 2014. 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 235%, risk-free interest rate of 2.0% and expected option life of ten years. The fair value of the option issued was $439,963 of which $219,982 was expensed immediately and the remainder will be expensed over one year.  The total expense for the three months ended March 31, 2014 and 2013 was $43,394 and $230,830, respectively.

On May 4, 2013, the Company issued an option to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to the a member of the Board of Directors. The options vest 50% immediately and 50% on May 4, 2014. 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 235%, risk-free interest rate of 1.78% and expected option life of ten years. The fair value of the option issued was $460,000 of which $230,000 was expensed immediately and the remainder will be expensed over one year.  The total expense for the three months ended March 31, 2014 was $56,712.

On September 30, 2013, the Company issued an option to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $.15, with a term of ten years, to the Company’s Chief Operating Officer. The options vest 50% after the first year and 50% at the end of 24 months.  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 ranging from 268.4% to 272.8%, risk-free interest rate of 1.39% and expected option life ranging from 10 years.  The fair value of the option issued was $99,840.  The total expense for the three months ended March 31, 2014 was $18,492.

On December 2, 2013, the Company issued an option to purchase 1 million shares of the Company’s common stock at an exercise price of $.15, with a term of ten years, to the Company’s Chief Financial Officer.  The options vest 50% after the first year and 50% at the end of 24 months.  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 ranging from 266.1%, risk-free interest rate of 2.64% and expected option life of 10 years.  The fair value of the option issued was $79,994, which will be expensed over the vesting term.  The total expense for the three months ended March 31, 2014 was $14,794.

On March 28, 2014, the Company issued options to purchase an aggregate of 6,000,000 shares of the Company’s common stock at an exercise price of $.05, with a term of ten years, to one of the Board of Directors. The fair value of options issued was $599,893 of which all was expensed immediately.

All of the options issued on March 28, 2014 were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 229%, risk-free interest rate of 2.73% and expected option life of ten years.

On February 7, 2014, 6,000,000 options of the company were exercised as part of a cashless exercise of options.   Based on a stock price of $.07 per share and an exercise price of $.05 per share 6,000,000 options were received and 1,714,285 shares of stock were issued.

On February 25, 2014, 6,000,000 options of the company were exercised by the Company’s Chief Executive Officer as part of a cashless exercise of options.   Based on a stock price of $.06 per share and an exercise price of $.05 per share 6,000,000 options were received and 1,000,000 shares of stock were issued.

The following tables summarize non-employee stock option/warrant activity of the Company since December 31, 2012:

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		82,807,221		$0.00125 to $0.20	$	0.01
Granted		38,144,444		0.10 to 0.15		0.03
Exercised		(9,435,000	)	0.00125 - 0.07		-
Expired		-		-		-
Outstanding, December 31, 2013		111,516,665		0.00125 to 0.20		0
Granted		6,349,209		0.10		0.01
Exercised						-
Expired		(700,000	)	.07 -.20		-
Outstanding, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10
Exercisable, March 31, 2014		117,165,874		$0.01 to $.20	$	0.10
Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		6.5

A summary of incentive stock option transactions for employees since December 31, 2012 is as follows:

					Weighted Average
	Option/Warrant			Exercise	Exercise
	Shares			Price	Price
Outstanding, December 31, 2012		15,766,667		0.00125 to 0.10	$	0.06000
Granted		45,500,000		0.05 - 0.15		0.04
Exercised		(900,000	)	0.00125 - 0.15		-
Expired/Returned		(500,000	)	-		-
Outstanding, December 31, 2013		59,866,667		.05 to .15		0.05
Granted		6,000,000		.05		.01
Exercised		(12,000,000	)	.05		.01
Expired/Returned		-		-		-
Outstanding, March 31, 2014		53,866,667		$0.05 to $0.15	$	0.05
Exercisable, March 31, 2014		45,366,667		$0.05 to $0.15	$	0.06
Weighted Average Remaining Life,
Exercisable, March 31, 2014 (years)		9.3