U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

                                   (Mark One)

     [X] Quarterly report pursuant to Sections 13 or 15(d) of the Securities
                              Exchange Act of 1934

                  For the quarterly period ended June 30, 2004

    [_] Transition report pursuant to Sections 13 or 15(d) of the Securities
                              Exchange Act of 1934

        For the transition period from _______________ to _______________

                         COMMISSION FILE NUMBER: 0-24431

                            INKSURE TECHNOLOGIES INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

            DELAWARE                                         84-1417774
(State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

                   32 BROADWAY, SUITE 1314, NEW YORK, NY 10004
          (Address of Principal Executive Offices, Including Zip Code)


                                 (212) 269-0370
                (Issuer's Telephone Number, Including Area Code)

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

The number of shares outstanding of our Common Stock, $0.01 par value per share,
as of August 10, 2004, was 15,011,579 shares.

TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):

                               Yes [_]   No [X]

<PAGE>


                            INKSURE TECHNOLOGIES INC.


                              INDEX TO FORM 10-QSB


<TABLE>
<CAPTION>

                                                                                    PAGE
<S>            <C>                                                                   <C>
PART I         FINANCIAL INFORMATION                                                  3

Item 1         Financial Statements                                                   3

               Consolidated Balance Sheet as of June 30, 2004 (unaudited)             3

               Statements of Operations (unaudited) for the Six and
               Three Months Ended June 30, 2004 and 2003                              5

               Consolidated Statements of Stockholders' Equity as of
               June 30, 2004 (unaudited after December 31, 2003)                      6

               Consolidated Statements of Cash Flows (unaudited) for the six and
               Three Months Ended June 30, 2004 and 2003                              7

               Notes to Consolidated Financial Statements                             8

Item 2         Management's Discussion and Analysis or Plan of Operation             11

Item 3         Controls and Procedures                                               15



PART II        OTHER INFORMATION                                                     16

Item 6         Exhibits and Reports on Form 8-K                                      16

SIGNATURES                                                                           17
</TABLE>


                                     - 2 -
<PAGE>


                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<TABLE>
<CAPTION>

                                                    JUNE 30,
                                                      2004
                                                     ------
                                                    UNAUDITED
                                                    ---------
<S>                                                  <C>
    ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                          $1,661
  Short-term bank deposits                               21
  Trade receivables                                     355
  Other accounts receivable and prepaid expenses        190
  Inventories                                           299
                                                     ------
TOTAL current assets                                  2,526
                                                     ------
SEVERANCE PAY FUND                                      111
                                                     ------
PROPERTY AND EQUIPMENT, NET                             320
                                                     ------
TECHNOLOGY, NET                                          39
                                                     ------
GOODWILL                                                271
                                                     ------
TOTAL assets                                         $3,267
                                                     ======
</TABLE>




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


                                     - 3 -
<PAGE>

                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                                                        JUNE 30,
                                                                                                          2004
                                                                                                        --------
                                                                                                        UNAUDITED
                                                                                                        --------
<S>                                                                                                     <C>
     LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES:
   Trade payables                                                                                       $    374
   Employees and payroll accruals                                                                            108
   Accounts payable                                                                                          117
                                                                                                        --------

 TOTAL current liabilities                                                                                   599
                                                                                                        --------

ACCRUED SEVERANCE PAY                                                                                        127
                                                                                                        --------

 STOCKHOLDERS' EQUITY:
   Share capital:
     Preferred stock of $ 0.01 par value:
       Authorized: 10,000,000 stocks at June 30, 2004; Issued and outstanding: 0 stocks
       at June 30, 2004                                                                                        -
     Common Stock of $ 0.01 par value -
       Authorized: 35,000,000 stocks at June 30, 2004; Issued and outstanding: 13,886,578 stocks at
       June 30, 2004                                                                                         139
   Additional paid-in capital                                                                             10,930
   Accumulated other comprehensive income                                                                    118
   Accumulated deficit                                                                                    (8,646)
                                                                                                        --------

 TOTAL stockholders' equity                                                                                2,541
                                                                                                        --------

 TOTAL liabilities and stockholders' equity                                                             $  3,267
                                                                                                        ========
</TABLE>



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


                                     - 4 -
<PAGE>

                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS (EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                            SIX MONTHS ENDED                   THREE MONTHS ENDED
                                                                JUNE 30,                            JUNE 30,
                                                     ------------------------------      ------------------------------
                                                         2004              2003              2004              2003
                                                     ------------      ------------      ------------      ------------
                                                               UNAUDITED                           UNAUDITED
                                                     ------------------------------      ------------------------------

<S>                                                  <C>               <C>               <C>               <C>
Revenues                                             $        539      $          -      $        382      $          -
Cost of revenues                                              224                 -               179                 -
                                                     ------------      ------------      ------------      ------------

Gross profit                                                  315                 -               203                 -
                                                     ------------      ------------      ------------      ------------

Operating expenses:
  Research and development                                    394               608               196               318
  Selling and marketing, net                                  555               753               259               375
  General and administrative                                  309               384               121               211
                                                     ------------      ------------      ------------      ------------

TOTAL operating expenses                                    1,258             1,745               576               904
                                                     ------------      ------------      ------------      ------------

Operating loss                                               (943)           (1,745)             (373)             (904)
Financial income                                               10                37                 4                15
                                                     ------------      ------------      ------------      ------------

Net loss                                             $       (933)     $     (1,708)     $       (369)     $       (889)
                                                     ============      ============      ============      ============

Weighted average number of Common Stock used in
  computing basic and diluted net loss per share       12,997,155        11,982,166        13,886,578        11,982,166
                                                     ============      ============      ============      ============

Basic and diluted net loss per share                 $      (0.07)     $      (0.14)     $      (0.03)     $      (0.07)
                                                     ============      ============      ============      ============
</TABLE>


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


                                     - 5 -
<PAGE>

                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES


STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS

<TABLE>
<CAPTION>

                                                                       ACCUMULATED
                                                           ADDITIONAL      OTHER                       TOTAL
                                               SHARE        PAID-IN    COMPREHENSIVE  ACCUMULATED   STOCKHOLDERS'
                                              CAPITAL       CAPITAL       INCOME        DEFICIT        EQUITY
                                              -------       -------       -------       -------        -------

<S>                                           <C>           <C>           <C>           <C>            <C>
Balance as of January 1, 2004                 $   119       $ 9,683       $   118       $(7,713)       $ 2,207

  Issuance of Common stock, net                    20         1,247             -             -          1,267
  Net loss                                          -             -             -          (933)          (933)
                                              -------       -------       -------       -------        -------

Balance as of June 30, 2004 (Unaudited)       $   139       $10,930       $   118       $(8,646)       $ 2,541
                                              =======       =======       =======       =======        =======
</TABLE>






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


                                     - 6 -
<PAGE>

                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. DOLLARS IN THOUSANDS


<TABLE>
<CAPTION>
                                                          SIX MONTHS ENDED          THREE MONTHS ENDED
                                                               JUNE 30,                  JUNE 30,
                                                         --------------------      --------------------
                                                          2004         2003         2004         2003
                                                         -------      -------      -------      -------
                                                              UNAUDITED                  UNAUDITED
                                                         --------------------      --------------------
<S>                                                      <C>          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                 $  (933)     $(1,708)     $  (369)     $  (889)
  Adjustments to reconcile net loss to net cash used
    in operating activities:
    Depreciation and amortization                             73           77           37           38
    Accrued severance pay, net                                (7)           7           (4)           2
    Decrease in trade receivables                            144          730          183            -
    Decrease (increase) in other accounts receivable
      and prepaid expenses                                   (53)        (143)          17          (60)
    Increase in inventories                                 (194)         (20)        (149)         (20)
    Increase (decrease) in trade payables                     12         (132)          52          139
    Increase (decrease) in employees and payroll
      accruals                                               (19)          85          (22)          60
    Decrease in accounts payable                              (7)        (141)         (68)         (14)
    Accumulated interest on short-term bank deposits           -          (40)           -          (20)
                                                         -------      -------      -------      -------

Net cash used in operating activities                       (984)      (1,285)        (323)        (764)
                                                         -------      -------      -------      -------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property and equipment                         (54)         (30)         (28)         (15)
  Proceeds from short-term bank deposits                       -        1,119            -          310
                                                         -------      -------      -------      -------

Net cash provided by (used in) investing activities          (54)       1,089          (28)         295
                                                         -------      -------      -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Issuance of Common stock, net                            1,267            -            -            -
  Issuance expenses                                            -            -          (28)           -
                                                         -------      -------      -------      -------

Net cash provided by (used in) financing
  activities                                               1,267            -          (28)           -
                                                         -------      -------      -------      -------

Increase (decrease) in cash and cash equivalents             229         (196)        (379)        (469)
Cash and cash equivalents at the beginning of the
  period                                                   1,432          213        2,040          486
                                                         -------      -------      -------      -------

Cash and cash equivalents at the end of the period       $ 1,661      $    17      $ 1,661      $    17
                                                         =======      =======      =======      =======
</TABLE>


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


                                     - 7 -
<PAGE>


                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1:- GENERAL

InkSure Technologies Inc. (formerly: Lil Marc Inc.) and its subsidiaries
(together, "the Company") was incorporated under the laws of the state of
Nevada, U.S., on April 22, 1997. On July 8, 2003, InkSure Technologies Inc.
effected a reincorporation from Nevada to Delaware, through a merger with and
into its wholly-owned subsidiary, InkSure Technologies (Delaware) Inc., which
was incorporated as of June 30, 2003. The surviving corporation in the merger
was InkSure Technologies (Delaware) Inc., which thereafter renamed itself
InkSure Technologies Inc.

The Company specializes in comprehensive security solutions, designed to protect
branded products and documents of value from counterfeiting, fraud and
diversion.

The Company conducts its operations and business with and through its direct and
indirect subsidiaries, InkSure Inc., a Delaware corporation incorporated in
March 2000; IST Operating Inc., a Delaware corporation, incorporated in May 2000
(formerly: InkSure Technologies Inc.) (as of June 30, 2004, IST Operating Inc.
is inactive); InkSure Ltd., which was incorporated in December 1995 under the
laws of Israel and InkSure RF Inc., a Delaware corporation incorporated in March
2000 (as of June 30, 2004, InkSure RF Inc. is inactive).

NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES

     a. The significant accounting policies applied in the annual financial
statements of the Company as of December 31, 2003, are applied consistently in
these financial statements.

In addition, the following accounting policy is applied:

     b. Accounting for stock-based compensation:

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation" ("FIN No. 44") in accounting for its employee stock option plans.
Under APB No. 25, when the exercise price of the Company's stock options is less
than the market price of the underlying shares on the date of grant,
compensation expense is recognized.

Under Statement of Financial Accounting Standard No. 123, "Accounting for Stock
Based Compensation" ("SFAS No. 123"), pro forma information regarding net loss
and loss per share is required, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes Option Valuation model with the following weighted-average
assumptions for six months ended June 30, 2004 and 2003: weighted-risk-free
interest rate of 1.5% and 2% for each period respectively, with dividend yields
of 0% for each period, volatility factors of the expected market price of the
Company's Common Stock of 1.04 and 0.99, and a weighted-average expected life of
the options of 2 and 5 years. Stock compensation, for pro forma purposes, is
amortized over the vesting period


                                     - 8 -
<PAGE>

                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     The following table illustrates the effect on net loss and loss per share
     as if the fair value method had been applied to all outstanding and
     unvested awards in each period:

<TABLE>
<CAPTION>

                                        SIX MONTHS ENDED          THREE MONTHS ENDED
                                            JUNE 30,                  JUNE 30,
                                      ---------------------      --------------------
                                       2004         2003         2004         2003
                                      -------      -------      -------      -------
                                           UNAUDITED                 UNAUDITED
                                      ---------------------      --------------------
<S>                                   <C>          <C>          <C>          <C>
Net loss, as reported                 $  (933)     $(1,708)     $  (369)     $  (889)
Deduct: Total stock-based
  compensation expense determined
  under fair value method for all
  awards                                 (144)         (80)         (85)         (25)
                                      -------      -------      -------      -------

Pro forma net loss                    $(1,077)     $(1,788)     $  (454)     $  (914)
                                      =======      =======      =======      =======

Basic and diluted net loss per
  share, as reported                  $ (0.07)     $ (0.14)     $ (0.03)     $ (0.07)
                                      =======      =======      =======      =======

Basic and diluted net loss per
  share, pro forma                    $ (0.08)     $ (0.15)     $ (0.03)     $ (0.08)
                                      =======      =======      =======      =======
</TABLE>

NOTE 3:- UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

     The accompanying unaudited interim consolidated financial statements have
     been prepared in accordance with generally accepted accounting principles
     in the United States for interim financial information. Accordingly, they
     do not include all the information and footnotes required by generally
     accepted accounting principles in the United States for complete financial
     statements. In the opinion of management, all adjustments (consisting of
     normal recurring accruals) considered necessary for a fair presentation
     have been included. Operating results for the six-month period ended June
     30, 2004 are not necessarily indicative of the results that may be expected
     for the year ended December 31, 2004.

NOTE 4:- INVESTMENT AGREEMENT

     In April 2004, the Company entered into an investment agreement with
     certain accredited investors. Under the agreement, the Company issued in a
     private placement 1,904,412 units with each unit consisting of a share of
     Common Stock and a five-year warrant to purchase a share of Common Stock at
     an exercise price of $ 1 per share. The price per unit was $0.68 with net
     proceeds to the Company of $ 1,267 (net of issuance expenses).


                                     - 9 -
<PAGE>

                                  INKSURE TECHNOLOGIES INC. AND ITS SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 5:- SUBSEQUENT EVENTS

     In July 2004, the Company entered into an additional investment agreement
     with certain accredited investors. According to the agreement the Company
     issued in a private placement an aggregate of 1,125 of shares of Common
     stock, at a price per share equal to $ 1 with gross proceeds to the Company
     of $ 1,125.

                              - - - - - - - - - - -


                                     - 10 -
<PAGE>


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

     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-QSB 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. 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.

     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-QSB.

     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 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'
existing infrastructure and environment.

     Our SmartInk(TM) 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.

     FACTORS AFFECTING FUTURE RESULTS

     Industry and Economic Factors: Our operations and earnings are affected by
local, regional and global events or conditions that affect supply and demand
for products and services. These events or conditions are generally not
predictable and include, among other things, general economic growth rates and
the occurrence of economic recessions; the development of new supply sources;
supply disruptions; technological advances, including advances in security
technology and advances in technology relating to security usage; changes in
demographics, including population growth rates and consumer preferences; and
the competitiveness of alternative security sources or product substitutes.
Currently, the economy in general is suffering. As a result, raising capital has
become extremely difficult, and there is pressure on the pricing of our products
and services.

     COMPETITIVE FACTORS: The brand and document protection industry is
competitive. There is competition with the traditional document protection
suppliers (mainly protection for bank notes) and also with other emergent "next
generation" technology providers. We compete with other firms in the sale and
purchase of various products and services in many national and international
markets and employ all methods of competition, which are lawful and appropriate
for such purposes. We believe that a key component of our competitive position
is our technology.


                                     - 11 -
<PAGE>


     POLITICAL FACTORS: Our operations and earnings have been, and may in the
future be, affected from time to time in varying degree by political instability
and by other political developments and laws and regulations, such as forced
divestiture of assets; restrictions on production; imports and exports; war or
other international conflicts; civil unrest and local security concerns that
threaten the safe operation of our facilities, particularly those that are
located in Israel; price controls; expropriation of property; and the
cancellation of contract rights. Both the likelihood of such occurrences and
their overall effect upon us vary greatly from country to country and are not
predictable.

     PROJECT FACTORS: In addition to the factors cited above, the advancement,
cost and results of particular projects depend on the outcome of negotiations
with potential partners, governments, suppliers, customers or other third
parties; changes in operating conditions or costs; and the occurrence of
unforeseen technical difficulties.

     REVENUES

     We are currently concentrating on entering and implementing large-scale
projects. These potential contracts are subject to a long sales cycle and the
timetable is lengthy for entering and implementing such projects. These projects
involve high volume sales through multiple-year sales contracts. We have
completed several successful field trials during the last year related to these
projects. Our revenues in the second quarter of 2004 consisted of revenues from
(i) ink and readers sales related to the new project in Turkey; (ii) our new
sales agreement for brand protection with a North American customer; (iii)
initial sales related to our agreement with Sun Chemical; and (iv) the receipt
of initial order from one of our new customers.

     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 the development of new products
related to customer projects. 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 June 30, 2004. 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 December 31, 2003.


                                     - 12 -
<PAGE>


     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", or SAB No. 104, 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. When a right of return exists, we
defer revenues until the right of return expires. We do not grant a right of
return to our customers.

     In November 2002, the Emerging Issues Task Force, or EITF, reached a
consensus on Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables".
EITF Issue No. 00-21 provides guidance on how to account for arrangements that
involve the delivery or performance of multiple products, services and/or rights
to use assets. The provisions of EITF Issue No. 00-21 applied to revenue
arrangements entered into in fiscal periods beginning after June 15, 2003.
Additionally, companies will be permitted to apply the consensus guidance in
this issue to all existing arrangements as the cumulative effect of a change in
accounting principle in accordance with APB Opinion No. 20, "Accounting
Changes". The adoption of EITF Issue No. 00-21 did not have a material impact
upon our financial position, cash flows or results of operations in 2003.

     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 JUNE 30, 2004 COMPARED WITH THREE MONTHS ENDED JUNE 30, 2003

     REVENUES. Revenues consist of gross sales of products less discounts. We
are currently concentrating on entering and implementing large-scale projects.
These potential contracts are subject to a long sales cycle and fluctuated
timetable for entering and implementing such projects. This affected our results
for the three months ended June 30, 2004, where we had revenue of $382,000,
compared to $0 in the three months ended June 30, 2003.

     COST OF REVENUE. Our cost of revenue consists of materials, sub-contractors
and compensation costs. Cost of revenue in the three months ended June 30, 2004
was $179,000, compared to $0 in the three months ended June 30, 2003.

     RESEARCH AND DEVELOPMENT EXPENSES. 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 $122,000, or 38.4 %, to $196,000 in the three months ended June 30,
2004 from $318,000 in the three months ended June 30, 2003. This decrease in
research and development expenses is primarily related to lower payments to
subcontractors in connection with the development of new products and new
generations of our existing products in the three months ended June 30, 2004.

     SELLING AND MARKETING EXPENSES, NET. Selling and marketing expenses, net
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, net decreased by $116,000, or 30.9 %, to
$259,000 in the three months ended June 30, 2004 from $375,000 in the three
months ended June 30, 2003. This decrease in selling and marketing expenses, net
was primarily due to higher marketing expenses in 2003 related to several
marketing agreements we had entered into. We believe that the significant
investment in pre-sales and marketing activities will contribute to our
short-term and long-term sales levels.


                                     - 13 -
<PAGE>


     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 $90,000, or 42.6 %, to $121,000
in the three months ended June 30, 2004 from $211,000 in the three months ended
June 30, 2003. The decrease was primarily related to lower legal expenses.

     FINANCIAL INCOME, NET. Financial income, net decreased by $11,000, or 73.3
% to $4,000 in the three months ended June 30, 2004 from $15,000 in the three
months ended June 30, 2003. This decrease was due to the lower interest rate
earned on our lower short-term deposits.

     NET LOSS. We had a net loss of $369,000 in the three months ended June 30,
2004, compared with a net loss of $889,000 in the three months ended June 30,
2003. The 58.5% decrease in net loss in the three months ended June 30, 2004 in
comparison with the three months ended June 30, 2003 is attributable mainly to
the increase in revenue and to the decrease in operating expenses described
above.

SIX MONTHS ENDED JUNE 30, 2004 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2003

     REVENUE. Revenue consists of gross sales of products less discounts. We are
currently concentrating on entering and implementing large-scale projects. These
potential contracts are subject to a long sales cycle and fluctuated timetable
for entering and implementing such projects. This affected our results for the
six months ended June 30, 2004 where we had revenue of $539,000, compared to $0
in the six months ended June 30, 2003.

     COST OF REVENUE. Our cost of revenue consists of materials, sub-contractors
and compensation costs. Cost of revenue in the six months ended June 30, 2004
was $224,000, compared to $0 in the six months ended June 30, 2003.

     RESEARCH AND DEVELOPMENT EXPENSES. 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 $214,000, or 35.2 %, to $394,000 in the six months ended June 30,
2004 from $608,000 in the six months ended June 30, 2003. This decrease in
research and development expenses is primarily related to lower payments to
subcontractors in connection with the development of new products and new
generations of our existing products in the six months ended June 30, 2004.

     SELLING AND MARKETING EXPENSES, NET. Selling and marketing expenses, net
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, net decreased by $198,000, or 26.3 %, to
$555,000 in the six months ended June 30, 2004 from $753,000 in the six months
ended June 30, 2003. This decrease in selling and marketing expenses, net was
primarily due to higher marketing expenses in 2003 related to several marketing
agreements we had entered into. We believe that the significant investment in
pre-sales and marketing activities will contribute to our short-term and
long-term sales levels.

     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 $75,000, or 19.5 %, to $309,000
in the six months ended June 30, 2004 from $384,000 in the six months ended June
30, 2003. This decrease was primarily related to lower legal expenses.

     FINANCIAL INCOME, NET. Financial income, net decreased by $27,000, to
$10,000 in the six months ended June 30, 2004 from $37,000 in the six months
ended June 30, 2003. This decrease was due to the lower interest rate earned on
our short-term deposits.

     NET LOSS. We had a net loss of $933,000 in the six months ended June 30,
2004, compared with a net loss of $1,708,000 in the six months ended June 30,
2003. The 45.4% decrease in net loss in the six months ended June 30, 2004 in
comparison with the six months ended June 30, 2003 is attributable to the
various influences described above.


                                     - 14 -
<PAGE>


B.   LIQUIDITY AND CAPITAL RESOURCES

     We have incurred substantial losses since our inception in May 2000. We had
an accumulated deficit of approximately $8,646,000 at June 30, 2004, and had a
working capital (current assets less current liabilities) of approximately
$1,927,000 at June 30, 2004.

     Capital expenditures were approximately $28,000 in the three months ended
June 30, 2004 and $15,000 in the three months ended June 30, 2003. Capital
expenditures were approximately $54,000 in the six months ended June 30, 2004
and $30,000 in the six months ended June 30, 2003 .We do not have any material
commitments for capital expenditures for the year ending December 31, 2004.

     At June 30, 2004, we had cash, cash equivalents and short-term deposits of
approximately $1,682,000 ($3,001,000 in June 2003). The differences from June
30, 2004 to June 30, 2003 are due to the negative cash flow from operating
activities during the last fiscal year.

     We generated negative cash flow from operating activities of approximately
$323,000 in the three months ended June 30, 2004 compared to $764,000 in the
three months ended June 30, 2003. We generated negative cash flow from operating
activities of approximately $984,000 in the six months ended June 30, 2004
compared to $1,285,000 in the six months ended June 30, 2003.

     In July 2004, we completed private placement to accredited investors of an
aggregate of 1,125,000 of shares of Common Stock at a price per share of $1.00
with gross proceeds to us of $1,125,000.

     We believe that cash generated from operations and cash from the private
placement will provide sufficient cash resources to finance our operations and
the projected expansion of our marketing and research and development activities
for the next fifteen months. However, if our operations do not generate cash to
the extent currently anticipated, or we grow more rapidly than currently
anticipated, it is possible that we would require more funds than presently
anticipated.

C.   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 $196,000 in the
three months ended June 30, 2004, compared to $318,000 in the three months ended
June 30, 2003. Our research and development expenses were approximately $394,000
in the six months ended June 30, 2004, compared to $608,000 in the six months
ended June 30, 2003. To date, all research and development expenses have been
charged to operating expense as incurred.

     We currently hold six pending patents on our technologies.

D.   CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     Our contractual obligations and commitments at June 30, 2004 principally
include obligations associated with our future-operating lease obligations and
the lease of several automobiles. Our total future obligation is approximately
$350,000 until 2008. We expect to finance these contractual commitments from
cash on hand and cash generated from operations.


                                     - 15 -
<PAGE>


ITEM 3. 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-QSB, 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-QSB 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 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

The following exhibits are being filed with this Report:


<TABLE>
<CAPTION>
EXHIBIT
NUMBER      DESCRIPTION

<S>         <C>
2.1         Agreement and Plan of Merger, dated July 5, 2002, among the Company, LILM Acquisition and
            InkSure Delaware.  (Incorporated by reference to the Company's Information Statement on
            Schedule 14C, filed with the Commission on October 8, 2002.)

2.2         Agreement and Plan of Merger, dated July 3, 2003 among the Company and InkSure Technologies
            (Delaware) Inc.  (Incorporated by reference to the Company's report filed on Form 8-K, filed
            with the Commission on July 22, 2003.)

3.1         Certificate of Incorporation of the Company. (Incorporated by reference to the Company's report
            filed on Form 8-K, filed with the Commission on July 22, 2003.)

3.2         By-Laws of the Company.  (Incorporated by reference to the Company's report filed on Form 8-K,
            filed with the Commission on July 22, 2003.)

10.1        2002 Employee, Director and Consultant Stock Option Plan.  (Incorporated by reference to the
            Company's Quarterly Report on Form 10-QSB, filed with the Commission on November 14, 2002.)

10.2        Employment Agreement, dated as of February 6, 2002, by and between the Company and Elie
            Housman.  (Incorporated by reference to the Company's Quarterly Report on Form 10-QSB, filed
            with the Commission on November 14, 2002.)

10.3        Exclusive Distribution Agreement by and between InkSure Inc. and
            ISBAK A.S. (Istanbul Belediyeler Bakim Ulasim San Vetic A.S.) (Incorporated by reference to the
            Amendment No. 1 to the Registration Statement on Form SB-2, filed with the Commission on June
            26, 2003.)

31.1*       Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act
            of 2002, 18 U.S.C. Section 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.
</TABLE>

* Filed herewith

(b)  Reports on Form 8-K

       During the three months ended June 30, 2004, we filed one report on
          Form 8-K with the SEC on June 3, 2004 in connection with the
              private placement that was completed in April 2004.


                                     - 16 -
<PAGE>


                                   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: As of August 10, 2004                     By: /S/ Eyal Bigon
                                                 ------------------
                                                 Eyal Bigon
                                                 Chief Financial Officer,
                                                 Secretary, and Treasurer
                                                 (Principal Financial and
                                                 Accounting Officer)



Dated: As of August 10, 2004                     By: /S/ Yaron Meerfeld
                                                 ----------------------
                                                 Yaron Meerfeld
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)








                                     - 17 -
<PAGE>


                                                                    Exhibit 31.1


                                  CERTIFICATION





     I, Eyal Bigon, certify that:

     1. I have reviewed this quarterly report of InkSure 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)) 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) 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

     c) 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: August 10, 2004


/S/ Eyal Bigon
--------------
Eyal Bigon
Chief Financial Officer, Secretary and Treasurer

<PAGE>


                                                                    Exhibit 31.2


                                  CERTIFICATION


     I, Yaron Meerfeld, certify that:

     1. I have reviewed this quarterly report of InkSure 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)) 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) 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

     c) 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: August 10, 2004


/S/ Yaron Meerfeld
------------------
Yaron Meerfeld
Chief Executive Officer

<PAGE>


                                                                    Exhibit 32.1


                                  CERTIFICATION


            PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


             (SUBSECTIONS (A) AND (B) OF SECTION 1350, CHAPTER 63 OF


                          TITLE 18, UNITED STATES CODE)



     Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of section 1350, chapter 63 of title 18, United States Code), each of
the undersigned officers of InkSure Technologies Inc., a Delaware corporation
(the "Company"), does hereby certify, to such officer's knowledge, that:

     The Form 10-QSB for the quarter ended June 30, 2004 (the "Form 10-QSB") of
the Company fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, and the information contained in the Form
10-QSB fairly presents, in all material respects, the financial condition and
results of operations of the Company.





         Dated: August 10, 2004          /S/ Yaron Meerfeld
                                         ------------------

                                         Yaron Meerfeld, Chief Executive Officer








         Dated: August 10, 2004          /S/ Eyal Bigon
                                         --------------

                                         Eyal Bigon, Chief Financial Officer




A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission or its staff upon request.