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 March 31, 2005

     [_] 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.)

                1770 N.W. 64TH STREET FORT LAUDERDALE, FL 433309
          (Address of Principal Executive Offices, Including Zip Code)


                                 (954) 772-8507
                (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 May 5, 2005, 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                                              1

Item 1           Financial Statements                                               1

                 Consolidated Balance Sheet as of March 31, 2005 (unaudited)        1

                 Statements of Operations (unaudited) for the
                 Three Months Ended March 31, 2005 and 2004                         3

                 Consolidated Statements of Stockholders' Equity as of
                 March 31, 2005 (unaudited after December 31, 2004)                 4

                 Consolidated Statements of Cash Flows (unaudited) for the
                 Three Months Ended March 31, 2005 and 2004                         5

                 Notes to Consolidated Financial Statements                         6

Item 2           Management's Discussion and Analysis or Plan of Operation          8

Item 3           Controls and Procedures                                           12


PART II          OTHER INFORMATION                                                 12

Item 6           Exhibits and Reports on Form 8-K                                  12

SIGNATURES                                                                         13

</TABLE>

                                     - i -
<PAGE>
                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

Part I.  Financial Information
--------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                                          MARCH 31,
                                                            2005
                                                           ------
                                                          UNAUDITED
                                                           ------
<S>                                                        <C>
     ASSETS

 CURRENT ASSETS:
   Cash and cash equivalents                               $1,341
   Trade receivables                                          273
   Other accounts receivable and prepaid expenses             160
   Inventories                                                446
                                                           ------

 TOTAL CURRENT ASSETS                                       2,220
                                                           ------

 SEVERANCE PAY FUND                                           118
                                                           ------

 PROPERTY AND EQUIPMENT, NET                                  245
                                                           ------

 GOODWILL                                                     271
                                                           ------

 TOTAL ASSETS                                              $2,854
                                                           ======
</TABLE>


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

                                       1

<PAGE>
                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

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


<TABLE>
<CAPTION>
                                                                                                              MARCH 31,
                                                                                                                2005
                                                                                                              --------
                                                                                                             UNAUDITED
                                                                                                              --------
<S>                                                                                                           <C>
     LIABILITIES AND STOCKHOLDERS' EQUITY

 CURRENT LIABILITIES:
   Trade payables                                                                                             $    405
   Employees and payroll accruals                                                                                  106
   Accrued expenses                                                                                                137
                                                                                                              --------

 TOTAL CURRENT LIABILITIES                                                                                         648
                                                                                                              --------

ACCRUED SEVERANCE PAY                                                                                              132
                                                                                                              --------

 STOCKHOLDERS' EQUITY:
   share capital:
     Preferred stock of $ 0.01 par value:
       Authorized: 10,000,000 stocks at March 31, 2005; Issued and outstanding: 0 stocks at March
       31, 2005
     Common Stock of $ 0.01 par value -
       Authorized: 35,000,000 stocks at March 31, 2005; Issued and outstanding: 15,011,579 stocks at
       March 31, 2005                                                                                              150
   Additional paid-in capital                                                                                   12,089
   Deferred compensation                                                                                           (55)
   Accumulated other comprehensive income                                                                          118
   Accumulated deficit                                                                                         (10,228)
                                                                                                              --------

 TOTAL STOCKHOLDERS' EQUITY                                                                                      2,074
                                                                                                              --------

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                                   $  2,854
                                                                                                              ========

</TABLE>


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

                                       2
<PAGE>

                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

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


<TABLE>
<CAPTION>

                                                                                                 THREE MONTHS ENDED
                                                                                                       MARCH 31,
                                                                                          -----------------------------------
                                                                                              2005                   2004
                                                                                          ------------           ------------
                                                                                                       UNAUDITED
                                                                                          -----------------------------------

<S>                                                                                         <C>                    <C>
 Revenues                                                                                   $      494             $      157
 Cost of revenues                                                                                  302                     45
                                                                                          ------------           ------------

 Gross profit                                                                                      192                    112
                                                                                          ------------           ------------

 Operating expenses:
   Research and development                                                                        182                    198
   Selling and marketing                                                                           350                    296
   General and administrative                                                                      125                    188
                                                                                          ------------           ------------

 TOTAL operating expenses                                                                          657                    682
                                                                                          ------------           ------------

 Operating loss                                                                                   (465)                  (570)
                                                                                          ------------           ------------

 Financial income, net                                                                              11                      6
                                                                                          ------------           ------------

 Net loss                                                                                   $     (454)            $     (564)
                                                                                          ============           ============

 Basic and diluted net loss per share                                                       $    (0.03)            $    (0.05)
                                                                                          ============           ============

 Weighted average number of Common Stock used in computing basic and diluted net
   loss per share                                                                           15,011,579             12,107,732
                                                                                          ============           ============

</TABLE>



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


                                       3
<PAGE>

                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

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

<TABLE>
<CAPTION>

                                                                                            ACCUMULATED
                                                                   ADDITIONAL                  OTHER                      TOTAL
                                                         SHARE       PAID-IN    DEFERRED   COMPREHENSIVE  ACCUMULATED STOCKHOLDERS'
                                                        CAPITAL      CAPITAL  COMPENSATION     INCOME       DEFICIT       EQUITY
                                                        --------     --------   --------      --------     --------      --------
<S>                                                     <C>          <C>        <C>           <C>          <C>           <C>
Balance as of January 1, 2005                           $    150     $ 12,031   $      -      $    118     $ (9,774)     $  2,525

  Deferred compensation (Unaudited)                            -           58        (58)            -            -             -

  Amortization of deferred compensation (Unaudited)            -            -          3             -            -             3

  Net loss (Unaudited)                                         -            -          -             -         (454)         (454)
                                                        --------     --------   --------      --------     --------      --------

Balance as of March 31, 2005 (Unaudited)                $    150     $ 12,089   $    (55)     $    118     $(10,228)     $  2,074
                                                        ========     ========   ========      ========     ========      ========
</TABLE>

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

                                       4
<PAGE>

                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES

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


<TABLE>
<CAPTION>
                                                                                          THREE MONTHS ENDED
                                                                                               MARCH 31,
                                                                                       -------------------------
                                                                                        2005              2004
                                                                                       -------           -------
                                                                                               UNAUDITED
                                                                                       -------------------------
<S>                                                                                    <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

  Net loss                                                                             $  (454)          $  (564)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                                           25                36
    Accrued severance pay, net                                                               -                (3)
    Decrease (increase) in trade receivables                                                45               (39)
    Increase in other accounts receivable and prepaid expenses                             (49)              (70)
    Decrease (increase) in inventories                                                      84               (45)
    Increase (decrease) in trade payables                                                   23               (40)
    Increase (decrease) in employees and payroll accruals                                   (1)                3
    Increase in other payables                                                              24                61
                                                                                       -------           -------

Net cash used in operating activities                                                     (303)             (661)
                                                                                       -------           -------

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchase of property and equipment                                                        (4)              (26)
                                                                                       -------           -------

Net cash provided by (used in) investing activities                                         (4)              (26)
                                                                                       -------           -------

CASH FLOWS FROM FINANCING ACTIVITIES:

  Receipts on account of stock                                                               -             1,295
                                                                                       -------           -------

Net cash provided by (used in) financing activities                                          -             1,295
                                                                                       -------           -------

Increase (decrease) in cash and cash equivalents                                          (307)              608
Cash and cash equivalents at the beginning of the period                                 1,648             1,432
                                                                                       -------           -------

Cash and cash equivalents at the end of the period                                     $ 1,341           $ 2,040
                                                                                       =======           =======
</TABLE>


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

                                       5
<PAGE>
                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES


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-QSB 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 March 31, 2005
     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, 2004 that are included in the
     Company's Form 10-KSB filed with the Securities and Exchange Commission on
     March 30, 2005 (the "2004 10-KSB"). 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, 2005.


NOTE 2:- 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 three months ended March 31,
     2005 and 2004: weighted-risk-free interest rate of 4.2% and 1.5% 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 1.12
     and 1.04, and a weighted-average expected life of the options of 5 and 2
     years. Stock compensation, for pro forma purposes, is amortized over the
     vesting period.

     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:

                                       6
<PAGE>

                                                       INKSURE TECHNOLOGIES INC.
                                                            AND ITS SUBSIDIARIES


<TABLE>
<CAPTION>
                                                                            THREE MONTHS ENDED
                                                                                  MARCH 31,
                                                                          ---------------------
                                                                           2005           2004
                                                                          ------         ------
                                                                                UNAUDITED
                                                                          ---------------------
<S>                                                                       <C>            <C>
 Net loss, as reported                                                    $ (454)        $ (564)
 Deduct: Total stock-based compensation expense determined under
   fair value method for all awards                                          (76)           (59)
                                                                          ------         ------

 Pro forma net loss                                                       $ (530)        $ (623)
                                                                          ======         ======

 Basic and diluted net loss per share, as reported                        $(0.03)        $(0.05)
                                                                          ======         ======

 Basic and diluted net loss per share, pro forma                          $(0.04)        $(0.05)
                                                                          ======         ======
</TABLE>

                                       7
<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.

                                       8
<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 first quarter of 2005 consisted of revenues from
(i) our new sales agreements for brand protection with two North American
customers; and (ii) ink and readers sales related to a project in Turkey. In the
first quarter of 2005 approximately 92% of our revenues were earned from
customers located in the United States

     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. 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 March 31, 2005. 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, 2004.

                                       9
<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.

     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"
("EITF 00-21"), 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.

     INVENTORIES. Inventories are stated at the lower of cost or net realizable
value. Cost is determined by calculating raw materials using the "first in,
first out" method, work in process and finished products on the basis of direct
manufacturing costs with the addition of allocable indirect manufacturing costs.

     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 MARCH 31, 2005 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2004

     REVENUES. Revenues consist of gross sales of our products. 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. In the three months ended March 31,
2005, we had revenue of $494,000, compared to $157,000 in the three months ended
March 31, 2004, primarily due to our new customers located in the United States.
Revenues increased by $337,000, or 215%, in the three months ended March 31,
2005 compared to the three months ended March 31, 2004.

     COST OF REVENUE. Our cost of revenue consists of materials, sub-contractors
and compensation costs. Cost of revenues increased by $257,000, or 571%, to
$302,000 in the three months ended March 31, 2005 from $45,000 in the three
months ended March 31, 2004. The increase in cost of revenues is mainly due to
the increase of sales and the increase of cost as a percentage of revenues. Cost
of revenues as a percentage of sales was 61% in the three months ended March 31,
2005, compared with 29% in the three months ended March 31, 2004. This increase
is due to the fact that we sold more readers during the last quarter, and such
readers have a higher cost of sales compared to the cost of sales of our ink.

     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 $16,000, or 8%, to $182,000 in the three months ended March 31,
2005 from $198,000 in the three months ended March 31, 2004. This decrease in
research and development expenses is primarily related to the decrease in
amortization of purchased technology.

     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 increased by $54,000, or 18%, to $350,000 in the three
months ended March 31, 2005 from $296,000 in the three months ended March 31,
2004. This increase in selling and marketing expenses was primarily due to
higher marketing expenses related to the new sales agreements we have entered
into.


                                       10
<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 $63,000, or 33% to $125,000 in
the three months ended March 31, 2005 from $188,000 in the three months ended
March 31, 2004. The decrease was primarily related to lower legal and D&O
insurance expenses.

     FINANCIAL INCOME, NET. Financial income, net increased by $5,000, or 83% to
$11,000 in the three months ended March 31, 2005 from $6,000 in the three months
ended March 31, 2004. This increase is due to changes in the exchange rate
between the United States Dollar and the Israeli New Shekel.

     NET LOSS. We had a net loss of $454,000 in the three months ended March 31,
2005, compared with a net loss of $564,000 in the three months ended March 31,
2004. The decrease in net loss in the three months ended March 31, 2005 in
comparison with the three months ended March 31, 2004 is attributable mainly to
the increase in revenue and to the decrease in operating expenses described
above.

B.   LIQUIDITY AND CAPITAL RESOURCES

     We have incurred substantial losses since our inception in May 2000. We had
an accumulated deficit of approximately $10,228,000 at March 31, 2005, and had a
working capital (current assets less current liabilities) of approximately
$1,572,000 at March 31, 2005.

     Capital expenditures were approximately $4,000 in the three months ended
March 31, 2005 and $26,000 in the three months ended March 31, 2004. We do not
have any material commitments for capital expenditures for the year ending
December 31, 2005.

     At March 31, 2005, we had cash, cash equivalents and short-term deposits of
approximately $1,341,000, compared to $2,061,000 in March 2004. The difference
from March 31, 2005 to March 31, 2004 is due to the negative cash flow from
operating activities during the last fiscal year.

     We generated negative cash flow from operating activities of approximately
$303,000 in the three months ended March 31, 2005 compared to $661,000 in the
three months ended March 31, 2004. This decrease is attributable mainly to the
increase in revenue and to the decrease in operating expenses described above.

     We believe that cash generated from operations will provide sufficient cash
resources to finance our operations and the projected expansion of our marketing
and research and development activities for the next twelve 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 $182,000 in the
three months ended March 31, 2005, compared to $198,000 in the three months
ended March 31, 2004. To date, all research and development expenses have been
charged to operating expense as incurred.

     We currently hold five pending patents on our technologies and we have been
issued one patent related to our RF technology in the United States. In addition
a patent application for such technology has been approved in the European
Union. Currently we are seeking additional protection for such technology in
certain European countries.


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<PAGE>


D.   CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     Our contractual obligations and commitments at March 31, 2005 principally
include obligations associated with our future-operating lease obligations and
the lease of several automobiles. Our total future obligation is approximately
$209,000 until 2007. We expect to finance these contractual commitments from
cash on hand and cash generated from operations.

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.)

16.1                Letter from Kost, Forer Gabbay & Kasierer, a member of Ernst and Young Global (Incorporated by
                    reference to the Company's report filed on Form 8-K, filed with the Commission on April 14,
                    2004).

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 March 31, 2005, we filed no reports on Form 8-K.


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<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 May 5, 2005                           By: /S/ Eyal Bigon
                                                   ------------------
                                                   Eyal Bigon
                                                   Chief Financial Officer,
                                                   Secretary, and Treasurer
                                                   (Principal Financial and
                                                   Accounting Officer)



Dated: As of May 5, 2005                           By:  /S/ Yaron Meerfeld
                                                   -----------------------
                                                   Yaron Meerfeld
                                                   Chief Executive Officer
                                                   (Principal Executive Officer)



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