`UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                   ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

                          (COMMISSION FILE NO. 0-24431)
                                ----------------

                            INKSURE TECHNOLOGIES INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                 DELAWARE                                84-1417774
      State or other jurisdiction of        (I.R.S. Employer Identification No.)
      incorporation or organization

       P.O. BOX 7006, AUDUBON, PENNSYLVANIA                19407
     (Address of principal executive offices)            (Zip Code)

                                 (954) 772-8507
                                 --------------
              (Registrant's telephone number, including area code)

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.

                             [X] Yes   [_] No

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 Regulation S-T (ss.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   [_] No

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "accelerated filer" "large accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer [_]              Accelerated filer [_]
Non-accelerated filer [_]                Smaller reporting company [X]

Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act)

                             [_] Yes   [X] No

The number of shares of Common Stock outstanding as of November 4, 2009:
16,472,968





                            INKSURE TECHNOLOGIES INC.

                               INDEX TO FORM 10-Q

                                                                                                                  PAGE

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

         CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2009 (UN-AUDITED)                                 3

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE NINE AND THREE MONTHS ENDED
         SEPTEMBER 30, 2009 AND 2008                                                                                4

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE AND THREE MONTHS ENDED
         SEPTEMBER 30, 2009 AND 2008                                                                                5

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                 6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                  7

ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                13

ITEM 4.  CONTROLS AND PROCEDURES                                                                                   13

PART II. OTHER INFORMATION                                                                                         13

ITEM 2.  EXHIBITS                                                                                                  13

SIGNATURES                                                                                                         14


                                       2



ITEM 1. FINANCIAL STATEMENTS

                           INKSURE TECHNOLOGIES INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET

                          (U.S. DOLLARS IN THOUSANDS)

                                                                                                           SEP 30,         DEC.31,
                                                                                                            2009            2008
                                                                                                          --------        --------
                                                                                                          UNAUDITED       AUDITED
                                                                                                          --------        --------

       ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                                                            $  2,032        $  1,826
     Restricted cash                                                                                            14             365
     Trade receivables                                                                                         407             104
     Other accounts receivable and prepaid expenses                                                             68              73
     Deferred charges                                                                                            -             400
     Inventories                                                                                               214             322
                                                                                                          --------        --------

TOTAL CURRENT ASSETS                                                                                         2,735           3,090

PROPERTY AND EQUIPMENT, NET                                                                                    227             279
LONG TERM DEPOSIT                                                                                                -               9
                                                                                                          --------        --------

TOTAL ASSETS                                                                                              $  2,962        $  3,378
                                                                                                          ========        ========

       LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
     Trade payables                                                                                       $    184        $    225
     Employees and payroll accruals                                                                            139             133
     Accrued expenses and other payables                                                                       543             648
     Convertible notes                                                                                       8,881           7,087
                                                                                                          --------        --------

TOTAL CURRENT LIABILITIES                                                                                    9,747           8,093

     Warrants to issue shares                                                                                  744               -

TOTAL LIABILITIES                                                                                         $ 10,491        $  8,093

STOCKHOLDERS' DEFICIENCY:
Capital Stock:
   Preferred stock of $ 0.01 par value - Authorized: 10,000,000 shares; Issued and outstanding: 0
   shares as of September 30,2009 and as of December 31, 2008
   Common stock of $ 0.01 par value - Authorized: 50,000,000; Issued and outstanding: 16,472,968 as
   of September 30,2009 and as of December 31, 2008                                                            164             164
   Additional paid-in capital                                                                               13,652          16,708
   Accumulated other comprehensive income                                                                      118             118
   Accumulated deficit                                                                                     (21,463)        (21,705)
                                                                                                          --------        --------

TOTAL STOCKHOLDERS' DEFICIENCY                                                                              (7,529)         (4,715)
                                                                                                          --------        --------

TOTAL LIABILITIES AND  STOCKHOLDERS' DEFICIENCY                                                           $  2,962        $  3,378
                                                                                                          ========        ========

The accompanying notes are an integral part of the consolidated financial statements.


                                       3



                           INKSURE TECHNOLOGIES INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

          (U.S. DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

                                                                    THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                                         SEP 30,                               SEP 30,
                                                             --------------------------------      --------------------------------
                                                                  2009              2008               2009                2008
                                                             -------------      -------------      -------------      -------------
                                                                        UNAUDITED                             UNAUDITED
                                                             --------------------------------      --------------------------------

Revenues                                                     $         935      $         817      $       2,300      $       1,316
Cost of revenues                                                       117                202                239                377
                                                             -------------      -------------      -------------      -------------

GROSS PROFIT                                                           818                615              2,061                939
                                                             -------------      -------------      -------------      -------------

Operating expenses:
   Research and development, net                                       236                351                742              1,421
   Selling and marketing                                               101                160                385                772
   General and administrative                                          139                225                460                746
                                                             -------------      -------------      -------------      -------------

TOTAL OPERATING EXPENSES                                               476                736              1,587              2,939
                                                             -------------      -------------      -------------      -------------

OPERATING PROFIT (LOSS)                                                342               (121)               474             (2,000)
                                                             -------------      -------------      -------------      -------------

Financial expenses                                                    (137)              (122)              (404)              (337)
Non cash financial income (expenses) related to convertible
notes, net                                                            (898)                71             (2,059)              (482)
                                                             -------------      -------------      -------------      -------------
Financial expenses, net                                             (1,035)               (51)            (2,463)              (819)

Net loss                                                     $        (693)     $        (172)     $      (1,989)     $      (2,819)
                                                             =============      =============      =============      =============

Basic and diluted net profit (loss) per share                $       (0.04)     $       (0.01)     $       (0.12)     $       (0.17)
                                                             =============      =============      =============      =============

Weighted average number of Common Stock used in computing
   basic and diluted net loss per share                         16,472,968         16,472,968         16,472,968         16,353,332
                                                             =============      =============      =============      =============

The accompanying notes are an integral part of the consolidated financial statements.


                                       4



                           INKSURE TECHNOLOGIES INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                          (U.S. DOLLARS IN THOUSANDS)

                                                                                        NINE MONTHS ENDED
                                                                                            SEP 30,
                                                                                   ------------------------
                                                                                     2009            2008
                                                                                   --------        --------
                                                                                          UNAUDITED
                                                                                   ------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                           $ (1,989)       $ (2,819)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization                                                           464             223
Decrease in restricted cash                                                             351               -
Decrease (increase) in trade receivables                                               (303)            222
Non cash financial expenses related to convertible notes, net                         1,794             328
Non cash financial expenses related to warrants to issue shares                        (133)              -
Decrease (increase) in other accounts receivable and prepaid expenses                    14            (519)
Decrease (increase) in inventories                                                      108              22
Decrease in trade payables                                                              (41)           (103)
Increase (decrease) in employees and payroll accruals                                     6             (12)
Non cash financial expenses related to implementation of SFAS No. 123                    52             136
Increase (decrease) in other payables                                                  (105)            226
                                                                                   --------        --------
Net cash provided by (used in) operating activities                                     218          (2,296)
                                                                                   --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment                                                      (12)            (16)
Proceeds from long-term deposits                                                          -               7
                                                                                   --------        --------
Net cash used in investing activities                                                   (12)             (9)
                                                                                   --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of new convertible notes, net of legal fees                                      -           2,775
                                                                                   --------        --------
Net cash provided by financing activities                                                 -           2,775
                                                                                   --------        --------

Increase in cash and cash equivalents                                                   206             470
Cash and cash equivalents at the beginning of the period                              1,826             820
                                                                                   --------        --------
Cash and cash equivalents at the end of the period                                 $  2,032        $  1,290
                                                                                   ========        ========

The accompanying notes are an integral part of the consolidated financial statements.


                                       5



NOTE 1:- BASIS OF PRESENTATION

     The accompanying condensed unaudited interim consolidated financial
statements have been prepared by INKSURE TECHNOLOGIES INC. (the "Company") in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. These financial statements reflect all
adjustments, consisting of normal recurring adjustments and accruals, which are,
in the opinion of management, necessary for a fair presentation of the financial
position of the Company as of September 30, 2009 and the results of operations
and cash flows for the interim periods indicated in conformity with generally
accepted accounting principles applicable to interim periods. Accordingly,
certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements should be
read in conjunction with the audited financial statements and notes thereto of
the Company for the year ended December 31, 2008 that are included in the
Company's Form 10-K filed with the Securities and Exchange Commission on March
31, 2009, as amended (the "2008 10-K"). The results of operations presented are
not necessarily indicative of the results to be expected for future quarters or
for the year ending December 31, 2009.

     In June 2009, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 168, "The FASB Accounting
Standards Codification and the Hierarchy of Generally Accepted Accounting
Principles" (SFAS No. 168) [ASC 105-10]. SFAS No. 168 replaces SFAS No. 162,
"The Hierarchy of Generally Accepted Accounting Principles" and establishes the
FASB Accounting Standards Codification (Codification) as the source of
authoritative accounting principles recognized by the FASB to be applied by
non-governmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the SEC under authority
of federal securities laws are also sources of authoritative GAAP for SEC
registrants. The Codification has become the exclusive authoritative reference
effective September 30, 2009.

NOTE 2:- GOING CONCERN

     As reflected in the accompanying financial statements, the Company's
operations for the three months ended September 30, 2009, resulted in a net loss
of $693,000, and the Company's balance sheet reflects a net stockholders'
deficiency of $7,529,000.

     The Company's ability to continue operating as a "going concern" is
dependent on several factors, among them its ability to raise sufficient
additional working capital and its not being required to pay the approximately
$9 million principal amount currently outstanding under its Senior Secured
Convertible Notes (the "Notes").

     On September 30, 2009, the Company received a notice from a holder of one
of the Notes (the "Redemption Request Note") requesting the redemption of
$452,400 principal amount of such Note and $6,767.41 of accrued and unpaid
interest. Pursuant to the Notes, the Company was thus required to redeem the
Redemption Request Note and pay such amounts on October 15, 2009. The Company is
currently engaged in discussions with representatives of a significant majority
of the other note holders and the Company has not made payment of the Redemption
Request Note to date. Pursuant to the terms of the Notes, the failure to make
such payment under the Redemption Request Note constitutes an Event of Default
under the remaining Notes (the "Remaining Notes"), entitling the holders of the
Remaining Notes to declare an Event of Default Redemption and require the
Company to pay the principal and interest thereunder. The holders of the
Remaining Notes have not declared an Event of Default Redemption to date.

     Management's plans in regard to the Notes include, among other things,
raising additional cash from current and potential stockholders or lenders in
order to pay the Notes and negotiating amended payment terms of the Notes. There
can be no assurance that the Company will be successful in these endeavors or
that the holders of the Notes will not accelerate payment of principal and
interest, causing all such amounts to be due immediately.

NOTE 3:- LEGAL PROCEEDINGS

     On December 12, 1999, Secu-Systems filed a lawsuit with the District Court
in Tel Aviv-Jaffa against Supercom Ltd. (the former owner of the company's
business) and InkSure Ltd. seeking a permanent injunction and damages. The
plaintiff asserted in its suit that the printing method applied to certain
products that have been developed by InkSure Ltd. constitutes, inter alia: (a)
breach of a confidentiality agreement between the plaintiff and Supercom; (b)
unjust enrichment of Supercom (by virtue of the sale of our shares) and InkSure
Ltd.; (c) a breach of fiduciary duties owed to the plaintiff by Supercom and
InkSure Ltd.; and (d) a tort of misappropriation of trade secret and damage to
plaintiff's property. As part of its complaint, Secu-Systems sought, among other
things, an injunction and a 50% share of profits from the printing method at
issue.

     On March 15, 2006, the court rendered a decision (i) denying the claim for
breach of contract; (ii) finding that there was a misappropriation of trade
secret, but not assessing any damages with respect thereto; (iii) requiring the
defendants to cease all activities involving the use of any confidential
information; and (iv) awarding the plaintiff reimbursement of the costs of the
litigation in the amount of NIS 130,000 (about $35,000 at the exchange rate as
of September 30, 2009), plus interest and VAT, which the defendants intend to
split equally. InkSure recorded in its 2006 financial statements a provision of
NIS 65,000 (about $17,200 at the exchange rate as of September 30, 2009).


                                       6



     Both the plaintiff and the defendants appealed the court's decision.

     On November 1, 2007, the Supreme Court ruled in favor of Secu-Systems'
appeal. This ruling accepts that InkSure and Supercom have breached the
confidentiality agreement. Consequently, the appeal that had been filed by
InkSure and Supercom was dismissed. The Supreme Court instructed that the case
will be returned to the District Court for determining the remedies to which
Secu-Systems is entitled.

     On February 18, 2008, Secu-Systems filed a petition with the district court
to amend the amount for which it has sued to NIS 25,000,000 (Approximately $
6,650,000 at the exchange rate as of September 30, 2009).

     On March 24, 2008, SuperCom (which changed its name to Vuance Ltd.)
provided us with an opinion of an external accounting expert according to which,
the following conclusions can be drawn:

     a.   In light of the costs analysis, SuperCom had no economic profit from
          the sale of Inksure's shares.

     b.   The consideration received from the sale of Inksure's shares in 2002,
          incorporates the value of the cash flow of InkSure following the sale.
          Therefore, a calculation based upon both the sale price and the future
          cash flow of InkSure is not accurate and does not agree with customary
          accountant standards, since it calculates the factor of the future
          cash flow twice.

     c.   The examination of the outcome of InkSure's business activity from
          2002-2007, as reflected in its financial reports, show that InkSure
          had not made any profit, and incurred losses during such period. The
          financial statements also reflect that InkSure had negative cash flow
          during these years, which was financed by bank loans and fund raising.

     On September 8, 2009, the court denied Secu-System's request to amend the
sum for which it has sued. The only evidence that the court allowed Secu-System
to submit in order to prove damages is evidence which can show that the reports
which previously submitted by Inksure are incorrect. The court ordered
Secu-System to submit its evidence within 45 days. Inksure will be entitled to
submit its evidence within 45 days thereafter. The court set a preliminary
hearing for this matter on January 12, 2010.

     In light of the above, provided that the Inksure's reports are accepted by
the court, we believe that no material amounts will be awarded to Secu-System in
these proceedings.

NOTE 4:- WARRANTS TO ISSUE SHARES

     The Company initially applied the provisions of EITF 07-5 DETERMINING
WHETHER AN INSTRUMENT (OR EMBEDDED FEATURE) IS INDEXED TO AN ENTITY'S OWN STOCK
(ASC815-40-15) in the interim financial statements for the quarter ended March
31, 2009. The result of the application was that warrants series A, B1 and B2
were determined to be not solely indexed to the Company's shares and have to be
classified as liability. The reason for the reclassification was an
anti-dilution clause dependent upon future fund raising that may adjust the
exercise price of the warrants. The Company evaluated the fair values of the
reclassified warrants as of the date of initial application (January 1, 2009).
The difference between the fair value and the fair value at issuance of the
warrants (classified initially in equity) was recognized in retained earnings.
As of January 1, 2009 these warrants are carried at fair values with changes
recognized in earnings.


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

     In this section, "Management's Discussion and Analysis or Plan of
Operation," references to "we," "us," "our," and "ours" refer to InkSure
Technologies Inc. and its consolidated subsidiaries.

     This Quarterly Report on Form 10-Q contains statements that may constitute
"forward-looking statements" within the meaning, and made pursuant to the Safe
Harbor provisions, of the Private Securities Litigation Reform Act of 1995.
Generally, forward-looking statements include words or phrases such as
"anticipates," "believes," "estimates," "expects," "intends," "plans,"
"projects," "could," "may," "might," "should," "will" and words and phrases of
similar import. Such statements are based on management's current expectations
and are subject to a number of risks and uncertainties, including, but not
limited to, the difficulty inherent in operating an early-stage company in a new
and rapidly evolving market, market and economic conditions, the impact of
competitive products, product demand and market acceptance risks, changes in
product mix, costs and availability of raw materials, fluctuations in operating
results, delays in development of highly complex products, risk of customer
contract or sales order cancellations and other risks detailed from time to time
in our filings with the Securities and Exchange Commission. These risks and
uncertainties could cause our actual results to differ materially from those
described in the forward-looking statements. Any forward-looking statement
represents our expectations or forecasts only as of the date it was made and
should not be relied upon as representing its expectations or forecasts as of
any subsequent date. Except as required by law, we undertake no obligation to
correct or update any forward-looking statement, whether as a result of new
information, future events or otherwise, even if our expectations or forecasts
change.


                                       7



     The following discussion and analysis should be read in conjunction with
the financial statements, related notes and other information included in this
Quarterly Report on Form 10-Q and with the Risk Factors included in the 2008
10-K.

     OVERVIEW

     We specialize in comprehensive security solutions, designed to protect
branded products and documents of value from counterfeiting, fraud, and
diversion. By creating "Smart Protection" systems from proprietary
machine-readable authentication technologies, we help governments, companies and
organizations worldwide regain control over their most valuable assets, their
products, their reputation and their revenues. We employ a team of experts in
the fields of material science, electro-optics and software. We utilize
cross-disciplinary technological innovations to implement customized and cost
efficient security systems for data and asset integrity within the customer's
existing infrastructure and environment.

     Our SmartInkTM solutions enable authentication and tracking of documents
and products by adding special chemical markers to standard inks and coatings.
The combination of markers, inks and materials produce electro-optic
"signatures", unique codes that are seamlessly incorporated into the printed
media used by the customer. Proprietary computerized readers, available in
hand-held, stationary and modular kit configurations, quickly verify these codes
by manual or automatic operation. By focusing on customer driven solutions, we
are able to offer added value through enhanced reader functionality, including
high-speed automatic sorting, one-to-many code matching, first and second level
track and trace, code activation at the point of distribution and detrimental
authentication for debit applications. The inherent flexibility of our
technology also enables overlaying the machine-readable codes onto holograms and
other overt features, resulting in multi-layered security that is both effective
and economical.

     We are currently developing chipless Radio Frequency Identification
("RFID") technology that is being designed to enable low-cost tagging of items.
This RFID technology is being designed to permit "no line of sight"
identification and to be suitable for a variety of applications, including
production floor control, authentication, supply chain management, proof of
ownership, and life cycle information.

     REVENUES

     We concentrate on developing and implementing large-scale projects. Such
projects involve the use of our generic products and/or products developed for
such projects. These potential projects are subject to a long sales cycle and
the timetable is lengthy for entering and implementing such projects. We
anticipate that these projects would involve high volume sales through
multiple-year sales contracts. In the third quarter of 2009, approximately 56%
of our revenues were earned from one customer located in Europe.

     COSTS AND OPERATING EXPENSES

     Costs and operating expenses consist of cost of revenues, research and
development expenses, selling and marketing expenses, general and administrative
expense and depreciation.

     Our cost of revenues consists primarily of materials including taggants and
electronic and optical parts, payments to sub-contractors and compensation costs
for our operations staff.

     Our research and development expenses consist primarily of costs associated
with development of new generic products and solutions targeted for existing and
new customers and market segments. These expenses may fluctuate as a percentage
of revenue depending on the projects undertaken during the reporting period.
Since our inception, we have expensed all research and development costs in each
of the periods in which they were incurred

     Our selling and marketing expenses consist primarily of costs associated
with our direct sales force that have been incurred to attract potential
business customers, professional advisors and commissions. We anticipate that as
we add new customers we will be able to spread these costs over a larger revenue
base and accordingly improve our operating margins.

     Our general and administrative expenses consist primarily of costs related
to compensation and employees benefits of our management (including the costs of
directors' and officers' insurance), legal and accounting fees, as well as the
expenses associated with being a publicly traded company.

     We have not recorded any income tax benefit for net losses and credits
incurred for any period from inception to September 30, 2009. The utilization of
these losses and credits depends on our ability to generate taxable income in
the future. Because of the uncertainty of our generating taxable income, we have
recorded a full valuation allowance with respect to these deferred assets.

CRITICAL ACCOUNTING POLICIES

     Our financial statements are prepared in accordance with US GAAP. The
significant accounting policies followed in the preparation of the financial
statements, applied on a consistent basis and which have been prepared in
accordance with the historical cost convention, are set forth in Note 2 to the
Consolidated Financial Statements as of and for the year ended December 31, 2008
that are included in the 2008 10-K.


                                       8



     Of these significant accounting policies, certain policies may be
considered critical because they are most important to the portrayal of our
financial condition and results, and they require management's most difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.

     REVENUE RECOGNITION. Revenues from product sales are recognized in
accordance with Staff Accounting Bulletin No. 104, "Revenue Recognition in
Financial Statements" when delivery has occurred, persuasive evidence of an
agreement exists, the vendor's fee is fixed or determinable, no further
obligation exists and collectability is probable. Delivery is considered to have
occurred upon shipment of products. We do not grant a right of return to our
customers. Had we had a right of return we would have deferred revenues until
the right of return expired.

     Revenues from certain arrangements may include multiple elements within a
single contract. Our accounting policy complies with the provisions of Emerging
Issues Task Force Issue 00-21, "Revenue Arrangements with Multiple Deliverables"
(ASC605-25-30) relating to the separation of multiple deliverables into
individual accounting units with determinable fair value.

     In cases where we have partial delivery at the cut off dates and no fair
value exist for the undelivered elements revenues are being deferred and
recognized only at the point where the entire arrangement has been delivered.

     CONVERTIBLE NOTES AND WARRANTS TO ISSUE SHARES, Financial Accounting
Standards No. 157, Fair Value Measurements (FAS 157) (ASC820-10). FAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. The Company has applied FAS 157
prospectively as of the beginning of the year. FAS 157 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. FAS
157 also establishes a fair value hierarchy that emphasizes use of observable
inputs and minimizes use of unobservable inputs when measuring fair value. The
standard describes three levels of inputs that may be used to measure fair
value:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities.

     Estimating fair values require subjective judgments and are approximate.
[The Company is required to estimate the fair value of its warrants that have
been reclassified from equity due to the initial adoption of EITF 07-5
(ASC815-40-15)]. Valuation of options requires the use of assumptions among
which are volatility, interest rate and the underlying share price. The above
estimates of fair value are not necessarily representative of amounts that could
be realized in actual market transactions, nor of the underlying value of the
Company. Changes in the assumptions could significantly affect the estimated
fair value.

     INVENTORIES. Inventories are stated at the lower of cost or net realizable
value. Cost is determined by calculating raw materials, work in process and
finished products using the "first in, first out" method.

     OTHER ACCRUED EXPENSES. We also maintain other accrued expenses. These
accruals are based on a variety of factors including past experience and various
actuarial assumptions and, in many cases, require estimates of events not yet
reported to us. If future experience differs from these estimates, operating
results in future periods would be impacted.

THREE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2008

     REVENUES. Revenues consist of gross sales of products less discounts. We
concentrate on developing and implementing large-scale projects. In the three
months ended September 30, 2009, we had revenue of $935,000, compared to
$817,000 in the three months ended September 30, 2008. The increase in the
revenue is mainly due to new deliveries to customers, primarily for one new
customer located in the USA.

     COST OF REVENUES. Our cost of revenues consists of materials,
sub-contractors and compensation costs. Cost of revenues was $117,000 in the
three months ended September 30, 2009, compared to $202,000 in the three months
ended September 30, 2008. Cost of revenues as a percentage of sales was 12% in
the three months ended September 30, 2009, compared with 25% in the three months
ended September 30, 2008. The decrease in costs of revenue, as a percentage of
sales, in the three months ended September 30, 2009 was mainly due to more
profitable sales of certain SmartInkTM products in 2009 and approximately
$40,000 increase in provision for inventory losses in the three months ended
September 30, 2008.


                                       9



     RESEARCH AND DEVELOPMENT EXPENSES, NET Research and development expenses
consist primarily of compensation costs attributable to employees engaged in
ongoing research and development activities, development-related raw materials
and sub-contractors, and other related costs. Research and development expenses,
net decreased by $115,000, or 33%, to $236,000 in the three months ended
September 30, 2009 from $351,000 in the three months ended September 30, 2008.
This decrease in research and development expenses is primarily related to the
reduction in labor and subcontractors expenses.

     Research and Development Expenses included non-cash expenses of $3,000
related to the implementation of SFAS No. 123(R) (ASC718-10).

     SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist
primarily of costs relating to compensation attributable to employees engaged in
sales and marketing activities, promotion, advertising, trade shows and
exhibitions, sales support, travel, commissions and related expenses. Selling
and marketing expenses decreased by $59,000, or 37%, to $101,000 in the three
months ended September 30, 2009 from $160,000 in the three months ended
September 30, 2008. This decrease in selling and marketing expenses was
primarily due to a settlement and disposal of our local sales office in Florida.

     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of compensation costs for administration, finance and general
management personnel, insurance, legal, accounting and administrative costs.
General and administrative expenses decreased by $86,000, or 38%, to $139,000 in
the three months ended September 30, 2009 from $225,000 in the three months
ended September 30, 2008. This decrease in general and administrative expenses
is mainly due to a decrease in the non-cash expenses related to the
implementation of SFAS No. 123(R) (ASC718-10) and due to a decrease in legal and
labor expenses.

     OPERATING PROFIT. As a result of the foregoing, the Company had an
operating profit of $342,000 in the three months ended September 30, 2009
compared to an operating loss of $121,000 in the three months ended September
30, 2008.

     FINANCIAL EXPENSES, NET. Financial expenses, net were $1,035,000 in the
three months ended September 30, 2009. Financial expenses, net were comprised
of: (i) Interest (financial) expense, net of $137,000 and (ii) non cash
financial expenses of $898,000 related to the convertible notes and warrants.
Financial expenses, net increased by $984,000 from $51,000 in the three months
ended September 30, 2008. This increase in financial expenses, net was primarily
due to the increase in the non-financial expenses relating to the convertible
notes.

     NET LOSS. We had a net loss of $693,000 in the three months ended September
30, 2009, compared with a net loss of $172,000 in the three months ended
September 30, 2008. The 303% increase in net loss in the three months ended
September 30, 2009 compared to the three months ended September 30, 2008 is
attributable to the increase of $984,000 in our financial expenses, net
partially offset by the increase of $463,000 in our operating profit.

NINE MONTHS ENDED SEPTEMBER 30, 2009 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2008

     REVENUES. Revenues consist of gross sales of products less discounts. We
concentrate on developing and implementing large-scale projects. In the nine
months ended September 30, 2009, we had revenue of $2,300,000, compared to
$1,316,000 in the nine months ended September 30, 2008. The increase in the
revenue is mainly due to new deliveries to customers, primarily for one customer
located in Europe.

     COST OF REVENUES. Our costs of revenues consist of materials,
sub-contractors and compensation costs. Cost of revenues was $239,000 in the
nine months ended June 30, 2009, compared to $377,000 in the nine months ended
September 30, 2008. Cost of revenues as a percentage of sales was 10% in the
nine months ended September 30, 2009, compared with 29% in the nine months ended
September 30, 2008. The decrease in costs of revenue, as a percentage of sales,
in the nine months ended September 30, 2009 was mainly due to more profitable
sales of certain SmartInkTM products in 2009.

     RESEARCH AND DEVELOPMENT EXPENSES. NET Research and development expenses
consist primarily of compensation costs attributable to employees engaged in
ongoing research and development activities, development-related raw materials
and sub-contractors, and other related costs. Research and development expenses
decreased by $679,000, or by 48%, to $742,000 in the nine months ended September
30, 2009 from $1,421,000 in the nine months ended September 30, 2008. This
decrease in research and development expenses is primarily related to the
decrease in subcontractors and labor expenses ($400,000) and increase of OCS
grants ($232,000).

     SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist
primarily of costs relating to compensation attributable to employees engaged in
sales and marketing activities, promotion, advertising, trade shows and
exhibitions, sales support, travel, commissions and related expenses. Selling
and marketing expenses decreased by $387,000, or 50%, to $385,000 in the nine
months ended September 30, 2009 from $772,000 in the nine months ended September
30, 2008. This decrease in selling and marketing expenses was primarily due to a
decrease in our sales force labor headcount and related costs.


                                       10



     GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist primarily of compensation costs for administration, finance and general
management personnel, insurance, legal, accounting and administrative costs.
General and administrative expenses decreased by $286,000, or 38%, to $460,000
in the nine months ended September 30, 2009 from $746,000 in the nine months
ended September 30, 2008. This decrease in General and administrative expenses
was primarily due to the decrease of $100,000 in non-cash expenses related to
the implementation of SFAS No. 123(R) (ASC718-10) and the decrease of $153,000
in legal and labor expenses.

     OPERATING PROFIT. As a result of the foregoing, the Company had an
operating profit of $474,000 in the nine months ended September 30, 2009
compared to an operating loss of $2 million in the nine months ended September
30, 2008

     FINANCIAL EXPENSES, NET. Financial expenses, net were $2,463,000 in the
nine months ended September 30, 2009. Financial expenses, net was comprised of:
(i) Interest (financial) expense, net of $404,000 and (ii) non cash financial
expenses of $2,059,000 related to the convertible note and the warrants.
Financial expenses, net increased by $1,644,000 or by 201% from $819,000 in the
nine months ended September 30, 2008. This increase in financial expenses, net
was primarily due to changes in the fair market value of the outstanding
convertible notes and the implementation of EITF 07-5 (ASC815-40-15).

     NET LOSS. We had a net loss of $1,989,000 in the nine months ended
September 30, 2009, compared with a net loss of $2,819,000 in the nine months
ended September 30, 2008. The 29% decrease in net loss in the nine months ended
September 30, 2009 compared to the nine months ended September 30, 2008 is
attributable to the increase in our gross profit of $1,122,000 and decrease in
our Operating expenses of $1,352,000, which were partially offset by the
increase in the financial expenses, net of $1,644,000.


                                       11



     LIQUIDITY AND CAPITAL RESOURCES

     We have incurred substantial losses since our inception in April 1997. We
had an accumulated deficit of approximately $21,463,000 as of September 30,
2009, and had a negative working capital (current assets less current
liabilities) of approximately $7,012,000 as of September 30, 2009. Losses are
continuing and will continue in the foreseeable future.

     Capital expenditures were approximately $12,000 in the nine months ended
September 30, 2009 and $16,000 in the nine months ended September 30, 2008.
These expenditures were principally for computers and research and development
equipment purchases. We do not have any material commitments for capital
expenditures as of September 30, 2009.

     As of September 30, 2009, we had cash, cash equivalents and short-term
deposits of approximately $2,032,000, compared to $1,826,000 as of December 31,
2008. This increase is primarily due to the cash received from operating
activities during the nine months ended September 30, 2009.

     We had positive cash flow from operating activities of approximately
$218,000 during the nine months ended September 30, 2009 compared to negative
cash flow from operating activities of $2,296,000 during the nine months ended
September 30, 2008. The increase in the cash flow from operating activities is
primarily due to the decrease in the net loss during the nine months ended
September 30, 2009.

     We had negative cash flow from investing activities of approximately
$12,000 during the nine months ended September 30, 2009 compared to negative
cash flow of $9,000 during the nine months ended September 30, 2008. The
negative cash flow from investing activities during the nine months ended
September 30, 2009 was due to purchase of fixed assets.

     We believe that our existing cash, together with cash to be collected from
customers and governmental grants, will be sufficient to support our operations
for the next twelve months, provided we are not required to pay the
approximately $9 million principal amount currently outstanding under our Senior
Secured Convertible Notes (the "Notes") prior to maturity. See below. Continuing
product development and enhancement, expected new product launches, corporate
operations and marketing expenses will continue to require additional capital.
Our current revenues from operations are insufficient to cover our long term
business plans.

     On September 30, 2005, we completed a private placement of convertible
notes, in the aggregate principal amount of $6,000,000. The notes were
interest-only, with interest payments due quarterly at the rate of 4% per annum.
The convertible notes were unsecured and will become due on September 30, 2010;
the investors have the option to cause us to redeem the notes on September 30,
2009. These notes were exchanged for new notes with the terms as per the new
$3,000,000 notes issued on April 9, 2008.

     On April 9, 2008, we completed a private placement of senior secured
convertible notes in an aggregate principal amount of $3,000,000 pursuant to
Amendment, Exchange and Purchase Agreements. The private placement resulted in
gross proceeds of $3,000,000, of which $750,000 was placed in a cash collateral
account to secure interest payments under the notes.

     Pursuant to those Amendments, Exchange and Purchase Agreements, the
investors were issued $3,000,000 principal amount of new notes and exchanged
their $6,000,000 principal amount of existing notes for the same principal
amount of amended and restated senior secured convertible notes (together with
the $3,000,000 principal amount of new notes, referred to as the "new notes")
each of which is convertible into shares of common stock at a conversion price
of $0.60, subject to adjustment. The new notes are secured by our assets and the
assets of our subsidiaries and are guaranteed by each of our subsidiaries. In
addition, all of the shares of each of our subsidiaries are pledged as
collateral to secure our obligations under the new notes, the security
agreements and related documents. The investors may require us to redeem all or
any portion of the outstanding $9,000,000 principal amount of the new notes in
cash plus accrued but unpaid interest on or after September 30, 2009. We may
require the investors to convert all or any portion of the new notes into shares
of common stock upon the occurrence of certain conditions relating to the
trading price of our common stock. Upon any such conversion, the investors will
be entitled to receive a pro rata amount of the cash in the collateral account
which we have established to secure interest payments under the new notes based
on the principal amount of the new notes that we require to be converted. We may
also redeem the new notes at any time by paying the buyers a premium of 5%-25%
of the outstanding principal amount of the notes (based upon the time of
redemption) plus interest and the amounts in the collateral account; at the time
of such redemption we will also issue to the buyers warrants to purchase common
stock, expiring on September 30, 2010, at an exercise price of $0.60. If we sell
or license all or substantially all of the assets in our ink business, we may be
required to redeem the new notes at 100% of their outstanding principal amount
up to the net proceeds of such sale or licensing transaction. If we consummate a
transaction that results in a change of control or other merger or
reorganization or recapitalization, we may be required to redeem the new notes
at 125% of their outstanding principal amount. The new notes are due on
September 30, 2010, unless they are redeemed or converted earlier. In addition,
we issued to the investors warrants to acquire 3,570,337 shares at an exercise
price of $0.60. These warrants have a term of ten years.


                                       12



     On September 30, 2009, the Company received a notice from a holder of one
of the Notes (the "Redemption Request Note") requesting the redemption of
$452,400 principal amount of such Note and $6,767.41 of accrued and unpaid
interest. Pursuant to the Notes, the Company was thus required to redeem the
Redemption Request Note and pay such amounts on October 15, 2009. The Company is
currently engaged in discussions with representatives of a significant majority
of the other note holders and the Company has not made payment of the Redemption
Request Note to date. Pursuant to the terms of the Notes, the failure to make
such payment under the Redemption Request Note constitutes an Event of Default
under the remaining Notes (the "Remaining Notes"), entitling the holders of the
Remaining Notes to declare an Event of Default Redemption and require the
Company to pay the principal and interest thereunder. The holders of the
Remaining Notes have not declared an Event of Default Redemption to date.

     Management's plans in regard to the Notes include, among other things,
raising additional cash from current and potential stockholders or lenders in
order to pay the Notes and negotiating amended payment terms of the Notes. There
can be no assurance that we will be successful in these endeavors or that the
holders of the Notes will not accelerate payment of principal and interest,
causing all such amounts to be due immediately.

     RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

     We believe that our future success will depend upon our ability to enhance
our existing products and systems and introduce new commercially viable products
and systems addressing the demands of the evolving markets for brand and
document protection. As part of the product development process, we work closely
with current and potential customers, distribution channels and leaders in
certain industry segments to identify market needs and define appropriate
product specifications. Our employees also participate in industry forums in
order to stay informed about the latest industry developments.

     Our research and development expenses were approximately $742,000 during
the nine months ended September 30, 2009, compared to $1,421,000 during the nine
months ended September 30, 2008. To date, all research and development expenses
have been charged to operating expense as incurred.

     With respect to the RFID technology we are developing, we have filed five
patent families related to various aspects of the RFID technology. Two of our
patent families have already matured into patents granted in the following
jurisdictions: United States (US6,819,244 and US6,997,388), France, Germany,
Switzerland and United Kingdom (EP1374156 and EP1599831). Our third patent
family has matured into a patent granted in the United States (US6,922,146),
while it is still being examined in Europe. Regarding our fourth patent family,
we have filed an International Patent Application (PCT). In addition, during the
second quarter of 2008, we filed an International Patent Application (PCT)
relating to our fifth patent family.

     With respect to the product-authentication we are developing, we entered
into an assignment agreement by which we have acquired a license for certain of
AuthentiForm Technology LLC's intellectual property portfolio regarding
authentication methods and enhanced product-authentication technology. During
the second quarter of 2009, and due to a change of priorities, the company
decided not to pursue the use and the patent prosecution of this intellectual
property.

     CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     Our contractual obligations and commitments at September 30, 2009
principally include obligations associated with operating lease obligations and
the lease of several automobiles. Our total future obligation is approximately
$110,000 until September, 2011. We expect to finance these contractual
commitments from cash on hand and cash generated from operations.

     During 2007-2008 and through September 30, 2009, we received a governmental
research and development grant of approximately US$1,102,000 (of which $484,000
was received during 2008) from the OCS. This royalties-bearing research and
development grant partially covers our innovative research and development
project expenses. Royalties would become due to OCS only if the RFID research
and development project funded by the grant is successfully commercialized and
results in sales revenues based on the know-how developed during the RFID
project. The royalty rate is 3%-4% of the sales revenues based on the RFID
research and development project funded by the grant, and is capped at the grant
amount actually received from the OCS plus interest. We have no assurance that
the RFID project or commercialization plan will be successful.


                                       13



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are a smaller reporting company, as defined by Rule 12b-2 of the
Exchange Act of 1934, as amended, and are not required to provide information
under this item.

ITEM 4. CONTROLS AND PROCEDURES

     (a) Evaluation of Disclosure Controls and Procedures. Our principal
executive officer and principal financial officer, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this
Quarterly Report on Form 10-Q, have concluded that, based on such evaluation,
our disclosure controls and procedures were adequate and effective to ensure
that material information relating to us, including our consolidated
subsidiaries, was made known to them by others within those entities,
particularly during the period in which this Quarterly Report on Form 10-Q was
being prepared.

     (b) Changes in Internal Controls. There were no changes in our internal
control over financial reporting, identified in connection with the evaluation
of such internal control that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

PART II. OTHER INFORMATION

ITEM 2. DEFAULTS UPON SENIOR SECURITIES

See "Liquidity and Capital Resources" under Item 2 of Part I. The total amount
outstanding under the convertible notes as of September 30, 2009 is
approximately $8,881,000.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the annual meeting of stockholders of the Company held on September 23, 2009,
14,072,701 shares of common stock of the Company or approximately 85.4% of the
total common stock outstanding on the record date for such meeting, were
represented.

The stockholders of the Company elected Messrs. Elie Housman, Yaron Meerfeld,
Gadi Peleg, Randy F. Rock, David W. Sass and Pierre L. Schoenheimer as directors
to hold office until the next annual stockholders meeting and until their
respective successors have been duly elected and qualified. Of the shares voted
with respect to the election of Mr. Housman, 13,602,951 were voted in favor and
469,750 were withheld. Of the shares voted with respect to the election of Mr.
Meerfeld, 9,461,840 were voted in favor and 4,610,861 were withheld. Of the
shares voted with respect to the election of Mr. Peleg, 14,060,056 were voted in
favor and 12,645 were withheld. Of the shares voted with respect to the election
of Mr. Rock, 14,060,056 were voted in favor and 12,645 were withheld. Of the
shares voted with respect to the election of Mr. Sass, 14,060,056 were voted in
favor and 12,645 were withheld. Of the shares voted with respect to the election
of Mr. Schoenheimer, 14,060,056 were voted in favor and 12,645 were withheld.

As previously disclosed, on October 2, 2009, Mr. Housman resigned as a director
of the Company.

ITEM 6. EXHIBITS

The following exhibits are being filed with this Report:

 EXHIBIT
  NUMBER       DESCRIPTION
------------   -------------

31.1           Certification of Principal Financial Officer Pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Sections 1350.

31.2           Certification of Principal Executive Officer Pursuant to Section
               302 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.1           Certification of Principal Executive Officer and Principal
               Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
               Act of 2002, 18 U.S.C. Section 1350.


                                       14



                                   SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                                  INKSURE TECHNOLOGIES INC.

Dated: November 13, 2009                          By: /s/ Tzlil Peker
                                                  ------------------------
                                                  Tzlil Peker
                                                  Chief Financial Officer,
                                                  Secretary and Treasurer
                                                  (Principal Financial Officer)

Dated: November 13, 2009                          By: /s/ Yaron Meerfeld
                                                  --------------------------
                                                  Yaron Meerfeld
                                                  Acting Chief Executive Officer
                                                  (Principal Executive Officer)


                                       15`