<PAGE>

                     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, 2003

    |_| 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)

           Nevada                                            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 March 31, 2003, was 11,982,166 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 Sheets as of March 31, 2003 (Unaudited)
              and as of December 31, 2002 (Audited)................................................................1

              Statements of Operations (Unaudited) for the
              Three Months Ended March 31, 2003 and 2002...........................................................3

              Consolidated Statements of Stockholders' Equity as of
              March 31, 2003 (Unaudited after December 31, 2002)...................................................4

              Consolidated Statements of Cash Flows (Unaudited) for the
              Three Months Ended March 31, 2003 and 2002...........................................................5

              Notes to Consolidated Financial Statements...........................................................7

Item 2.       Management's Discussion and Analysis or Plan of Operation............................................9

Item 3.       Controls and Procedures..............................................................................11

PART II.      OTHER INFORMATION....................................................................................12

Item 6.       Exhibits and Reports on Form 8-K ....................................................................12

SIGNATURES          ...............................................................................................13

CERTIFICATIONS      ...............................................................................................14

EXHIBITS            ...............................................................................................16
</TABLE>

<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands

<TABLE>
<CAPTION>

                                                                                          March 31,          December 31,
                                                                                             2003                2002
                                                                                       -----------------   ----------------
                                                                                           Unaudited
                                                                                       -----------------
     ASSETS
<S>                                                                                     <C>                 <C>
 CURRENT ASSETS:
   Cash and cash equivalents                                                            $       486         $          213
   Short-term deposits                                                                        3,274                  4,063
   Trade receivables                                                                              -                    730
   Other accounts receivable and prepaid expenses                                               309                    226
   Inventories                                                                                   88                     88
                                                                                       -----------------   ----------------

 Total current assets                                                                         4,157                  5,320
                                                                                       -----------------   ----------------

 SEVERANCE PAY FUND                                                                              84                     71
                                                                                       -----------------   ----------------

 PROPERTY AND EQUIPMENT, NET                                                                    350                    356
                                                                                       -----------------   ----------------

 OTHER ASSETS, NET                                                                              400                    418
                                                                                       -----------------   ----------------

 Total assets                                                                           $     4,991         $        6,165
                                                                                       =================   ================
</TABLE>

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


                                       1
<PAGE>

CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands (except share data)


<TABLE>
<CAPTION>
                                                                                          March 31,          December 31,
                                                                                             2003                2002
                                                                                       -----------------   ----------------
                                                                                           Unaudited
                                                                                       -----------------
     LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                                      <C>                 <C>
 CURRENT LIABILITIES:
   Trade payables                                                                        $        199        $        470
   Employees and payroll accruals                                                                 135                 110
   Accrued expenses and other liabilities                                                         153                 280
                                                                                       -----------------   ----------------

 Total current liabilities                                                                        487                 860
                                                                                       -----------------   ----------------

ACCRUED SEVERANCE PAY                                                                              93                  75
                                                                                       -----------------   ----------------

 STOCKHOLDERS' EQUITY:
   Stock capital:
     Preferred stock of $0.01 par value:
       Authorized: 10,000,000 stocks at March 31, 2003 and December 31, 2002;
       Issued and outstanding: 0 stocks at March 31, 2003 and December 31, 2002
     Common stock of $0.01 par value -
       Authorized: 35,000,000 stocks at March 31, 2003 and December 31, 2002;
       Issued and outstanding: 11,982,166 stocks at March 31, 2003 and
       December 31, 2002                                                                          119                 119
   Additional paid-in capital                                                                   9,741               9,741
   Accumulated other comprehensive income                                                         118                 118
   Accumulated deficit                                                                         (5,567)             (4,748)
                                                                                       -----------------   ----------------

 Total stockholders' equity                                                                     4,411               5,230
                                                                                       -----------------   ----------------

 Total liabilities and stockholders' equity                                              $      4,991        $      6,165
                                                                                       =================   ================
</TABLE>

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


                                       2
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
U.S. dollars in thousands (except share and per share data)


<TABLE>
<CAPTION>
                                                                                                Three months ended
                                                                                                     March 31,
                                                                                       --------------------------------------
                                                                                             2003                2002
                                                                                       ------------------  ------------------
                                                                                                     Unaudited
                                                                                       --------------------------------------
<S>                                                                                    <C>                 <C>
 Revenues                                                                              $          -        $      1,059
 Cost of revenues                                                                                 -                 186
                                                                                       ------------------  ------------------

 Gross profit                                                                                     -                 873
                                                                                       ------------------  ------------------

 Operating expenses:
   Research and development                                                                     290                 160
   Selling and marketing, net                                                                   378                 370
   General and administrative                                                                   173                 122
                                                                                       ------------------  ------------------

 Total operating expenses                                                                       841                 652
                                                                                       ------------------  ------------------

 Operating income (loss)                                                                       (841)                221
 Financial expenses (income), net                                                               (22)                  1
                                                                                       ------------------  ------------------

 Net income (loss)                                                                             (819)                220
 Redeemable Preferred A shares deemed dividend                                                    -                (200)
                                                                                       ------------------  ------------------

 Net income (loss) applicable to Common stockholders                                   $       (819)       $         20
                                                                                       ==================  ==================

 Weighted average number of Common shares used in computing basic and diluted net
   loss per share                                                                        11,982,166           5,808,822
                                                                                       ==================  ==================

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

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


                                       3
<PAGE>

STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
--------------------------------------------------------------------------------
U.S. dollars in thousands


<TABLE>
<CAPTION>
                                                                                                                     Accumulated
                                                                     Receipts       Additional       Deferred           other
                                                        Share       on account       paid-in          stock         comprehensive
                                                       capital       of shares       capital       compensation         income
                                                    -------------  -------------  -------------- ----------------  ----------------
<S>                                                  <C>            <C>            <C>            <C>               <C>
 Balance as of January 1,2002                        $      57      $     250      $   1,997      $       (61)      $        118

   Issuance of  Common stock and warrants, net              48           (250)         5,972                -                  -
   Issuance of Common stock due to the reverse
     acquisition, net                                       14              -            153                -                  -
   Capital surplus in respect of transaction
     between InkSure Delaware and Supercom Ltd.              -              -          1,480                -                  -
   Reversal of deferred compensation due to
     forfeiture of stock options to employees                -              -            (61)              61                  -
   Deemed dividend upon conversion of Common
     stock to Redeemable Preferred A shares                  -              -            200                -                  -
   Net loss                                                  -              -              -                -                  -
                                                    -------------  -------------  -------------- ----------------  ----------------

 Balance as of December 31, 2002                           119              -          9,741                -                118

   Net loss                                                  -              -              -                -                  -
                                                    -------------  -------------  -------------- ----------------  ----------------

 Balance as of March 31, 2003 (unaudited)            $     119      $       -      $   9,741      $         -       $        118
                                                    =============  =============  ============== ================  ================
</TABLE>

<TABLE>
<CAPTION>
                                                                            Total
                                                                        shareholders'
                                                       Accumulated          equity
                                                         deficit         (deficiency)
                                                     ----------------  ----------------
<S>                                                   <C>               <C>
 Balance as of January 1,2002                         $     (3,927)     $     (1,566)

   Issuance of  Common stock and warrants, net                   -             5,770
   Issuance of Common stock due to the reverse
     acquisition, net                                            -               167
   Capital surplus in respect of transaction
     between InkSure Delaware and Supercom Ltd.                  -             1,480
   Reversal of deferred compensation due to
     forfeiture of stock options to employees                    -                 -
   Deemed dividend upon conversion of Common
     stock to Redeemable Preferred A shares                   (200)                -
   Net loss                                                   (621)             (621)
                                                     ----------------  ----------------

 Balance as of December 31, 2002                            (4,748)            5,230

   Net loss                                                   (819)             (819)
                                                     ----------------  ----------------

 Balance as of March 31, 2003 (unaudited)             $     (5,567)     $      4,411
                                                     ================  ================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.


                                       4
<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands
<TABLE>
<CAPTION>
                                                                                                Three months ended
                                                                                                     March 31,
                                                                                       --------------------------------------
                                                                                             2003                2002
                                                                                       ------------------  ------------------
                                                                                                     Unaudited
                                                                                       --------------------------------------
<S>                                                                                    <C>                 <C>
 Cash flows from operating activities:

   Net income (loss)                                                                   $       (819)       $        220
   Adjustments to reconcile net income (loss) to net cash provided by (used in)
     operating activities:
     Depreciation and amortization                                                               38                  34
     Accrued severance pay, net                                                                   5                  (4)
     Decrease (increase) in trade receivables                                                   722                 128
     Increase in other accounts receivable and prepaid expenses                                 (75)                 (1)
     Decrease in inventories                                                                      -                 135
     Increase (decrease) in trade payables                                                     (271)               (117)
     Increase (decrease) in employees and payroll accruals                                       25                 (73)
     Decrease in accrued expenses and other liabilities                                        (127)               (253)
     Accumulated interest on short-term deposits                                                (20)                  -
                                                                                       ------------------  ------------------

 Net cash provided by (used in) operating activities                                           (522)                 69
                                                                                       ------------------  ------------------

 Cash flows from investing activities:

   Purchase of property and equipment                                                           (14)                 (2)
   Investment in short-term deposits                                                              -                   -
   Proceeds from short-term deposits                                                            809                   -
                                                                                       ------------------  ------------------

 Net cash provided by (used in) investing activities                                            795                  (2)
                                                                                       ------------------  ------------------

 Cash flows from financing activities:

   Short-term bank credit, net                                                                    -                (184)
   Proceeds from issuance of Common stock and warrants, net
                                                                                                  -                  81
   Principal payment of long-term loans from related party                                        -                 (50)
   Proceeds from issuance of Redeemable Preferred A shares                                        -                 150
   Cash received in connection with reverse acquisition                                           -                   -
                                                                                       ------------------  ------------------

 Net cash used in financing activities                                                            -                  (3)
                                                                                       ------------------  ------------------

 Increase in cash and cash equivalents                                                          273                  64
 Cash and cash equivalents at the beginning of the period                                       213                   2
                                                                                       ------------------  ------------------

 Cash and cash equivalents at the end of the period                                    $        486        $         66
</TABLE>

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


                                       5
<PAGE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands


<TABLE>
<CAPTION>
                                                                                                Three months ended
                                                                                                     March 31,
                                                                                       --------------------------------------
                                                                                             2003                2002
                                                                                       ------------------  ------------------
                                                                                                     Unaudited
                                                                                       --------------------------------------
<S>                                                                                    <C>                 <C>
 Non-cash transactions:

   In respect of transaction between the Company and Supercom Ltd.                     $          -        $      1,480
                                                                                       ==================  ==================

   Conversion of Common stock into Redeemable Preferred A shares                       $          -        $      1,000
                                                                                       ==================  ==================

 Supplemental disclosure of cash flows information:

   Cash paid during the period for:

     Interest                                                                          $          -         $         8
                                                                                       ==================  ==================
</TABLE>

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


                                       6
<PAGE>

NOTE 1:       GENERAL

              InkSure Technologies Inc. and its subsidiaries (formerly: Lil
              Marc. Inc.) ("the Company") was incorporated under the laws of
              the state of Nevada on April 22, 1997. 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: Insure
              Technologies Inc.); InkSure Ltd., which was incorporated in
              December 1995 under the laws of Israel and InkSure RF Inc. a
              Delaware corporation incorporated in March 2002 (as of March 31,
              2003 InkSure RF Inc. is inactive).

NOTE 2:       SIGNIFICANT ACCOUNTING POLICIES

              The significant accounting policies applied in the annual
              financial statements of the Company as of December 31, 2002, are
              applied consistently in these financial statements. In addition,
              the following accounting policy is applied:

              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 three months ended
              March 31, 2003 and 2002: risk-free interest rate of 2% for each
              period, with dividend yields of 0% for each period, volatility
              factors of the expected market price of the Company's Common stock
              of 0.99 and 0.5, and a weighted-average expected life of the
              options of 3 and 5 years. Stock compensation, for pro-forma
              purposes, is amortized over the vesting period.


                                       7
<PAGE>

NOTE 2:       SIGNIFICANT ACCOUNTING POLICIES (Cont.)

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


<TABLE>
<CAPTION>
                                                                                            Three months ended
                                                                                                March 31,
                                                                                     ---------------------------------
                                                                                          2003              2002
                                                                                     ---------------    --------------
                                                                                                Unaudited
                                                                                     ---------------------------------
<S>                                                                                    <C>                <C>
               Net income (loss), as reported                                          $    (819)         $      20
               Deduct: Total stock-based compensation expense determined under
                 fair value method for all awards                                            (69)              (165)
                                                                                     ---------------    --------------

               Pro forma net loss                                                      $    (888)         $    (145)
                                                                                     ===============    ==============

               Basic and diluted net earnings (loss) per share, as reported            $   (0.07)         $       -
                                                                                     ===============    ==============

               Basic and diluted net loss per share, pro forma                         $   (0.07)         $   (0.03)
                                                                                     ===============    ==============
</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 three-month period ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003.


                                       8
<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

         On October 28, 2002, a wholly owned subsidiary of Lil Marc, Inc. merged
with and into InkSure Technologies, Inc., a Delaware corporation ("InkSure
Delaware") and InkSure Delaware became a wholly-owned subsidiary of Lil Marc in
a transaction accounted for as a reverse acquisition of Lil Marc by InkSure
Delaware. Prior to the reverse merger, Lil Marc was a non-operating public shell
corporation with nominal assets. Following the reverse merger, the management of
InkSure Delaware controlled the merged company and the principal shareholders of
InkSure Delaware became principal shareholders of the merged company. Following
the closing of the reverse merger, Lil Marc changed its name to InkSure
Technologies Inc. As a result of the reverse merger transaction, InkSure
Delaware changed its name to IST Operating Inc. and continued as an operating
entity and as our wholly owned subsidiary, and the historical financial
statements of InkSure Delaware replaced those of Lil Marc.

A. RESULT OF OPERATIONS

         The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes. The financial statements have been prepared in
accordance with US Generally Accepted Accounting Principles, or GAAP.

         This discussion contains forward-looking statements that involve risks
and uncertainties.

         Our actual results may differ materially from those anticipated in
these forward-looking statements as a result of certain factors.

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.

         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.


                                       9
<PAGE>

         Revenue recognition. We derive revenues from the selling of security
inks and readers by utilizing a combination of our own sales personnel,
strategic alliances and licenses with intermediaries. Revenues from product
sales are recognized in accordance with Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements", ("SAB No. 101"), 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. 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 we
receive from licenses to market and utilize our technologies are recognized over
the term of the license agreement.

         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.

Three Months Ended March 31, 2003 Compared with Three Months Ended
March 31, 2002

         Revenue. Revenue consists of gross sales of products less discounts and
refunds and costs associated with technology transfer. 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 March 31, 2003, where we had no revenue, compared to $1,059,000 in
the three months ended March 31, 2002. Revenue in the three months ended March
31, 2002 consisted primarily of the first shipments and implementation of the
transportation project in Turkey. Revenues from this agreement were $569,000 for
the three months ended March 31, 2002.

         Revenue from the agreement with Westvaco Brand Security was $ 382,000
for the three months ended March 31, 2002. The agreement expired on December 31,
2002.

         Cost of Revenue. Our cost of revenue consists of materials,
sub-contractors and compensation costs. We had no cost of revenue in the three
months ended March 31, 2003, compared to $186,000 in the three months ended
March 31, 2002. Cost of revenue in the three months ended March 31, 2002 was in
connection with the initiation of our transportation project in Turkey.

         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
increased by $130,000, or 81%, to $290,000 in the three months ended March 31,
2003 from $160,000 in the three months ended March 31, 2002.

         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 $8,000, or 2%, to $378,000 in the three
months ended March 31, 2003 from $370,000 in the three months ended March 31,
2002. 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 increased by $51,000, or 42%, to
$173,000 in the three months ended March 31, 2003 from $122,000 in the three
months ended March 31, 2002. This increase was primarily a result of the merger
and the higher insurance, legal and accounting costs related to our being a
public company.

         Financial Income, Net. Financial income, net increased by $23,000, to
$22,000 in the three months ended March 31, 2003 from $(1,000) in the three
months ended March 31, 2002. This increase was due to the interest earned on our
short-term deposits.

         Net loss from Continued Operations. We had a net loss of $819,000 in
the three months ended March 31, 2003, compared with a net income of $220,000 in
the three months ended March 31, 2002. The increase in net loss in the three
months ended March 31, 2003 in comparison with the three months ended March 31,
2002 is attributable to the various influences described above, which resulted
in us having no revenue in the three months ended March 31, 2003.


                                       10
<PAGE>

B. LIQUIDITY AND CAPITAL RESOURCES

         We have incurred substantial losses since our inception in May 2000. We
had an accumulated deficit of approximately $5,567,000 at March 31, 2003, and
had a working capital (current assets less current liabilities) of approximately
$3,670,000 at March 31, 2003.

         Capital expenditures were approximately $14,000 in the three months
ended March 31, 2003 and $2,000 in the three months ended March 31, 2002. We do
not have any material commitments for capital expenditures for the year ending
December 31, 2003.

         At March 31, 2003, we had cash, cash equivalents and short-term
deposits of approximately $3,760,000 ($66,000 in 2002); $0 short-term bank
credit ($226,000 in 2002) and a $0 in principal and interest outstanding under a
long-term loan from a former related party ($200,000 in 2002). The differences
from March 31, 2003 to March 31, 2002 in the three amounts stated above are due
to amounts raised in the InkSure Delaware offering, the paying off of all
short-term bank credit following the InkSure Delaware offering and the related
party's cancellation of the loan following our payment of $200,000 to such
related party, respectively.

         We generated negative cash flow from operating activities of
approximately $522,000 in the three months ended March 31, 2003 compared to
positive cash flow of $69,000 in the three months ended March 31, 2002.

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 $290,000 in
the three months ended March 31, 2003, compared to $160,000 in the three months
ended March 31, 2002. To date, all research and development expenses have been
charged to operating expense as incurred.

          We currently hold 6 pending patents on our technologies.

D. CONTRACTUAL OBLIGATIONS AND COMMITMENTS

         Our contractual obligations and commitments at March 31, 2003
principally include obligations associated with our future-operating lease
obligations. Our total future obligation is $274,000 until 2008. 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-14(c) and 15d-14(c)) within 90 days of the date of this 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 significant changes in
our internal controls or in other factors that could significantly affect these
controls subsequent to the date of their evaluation. Since there were no
significant deficiencies or material weaknesses in our internal controls, no
corrective actions were required or undertaken.


                                       11
<PAGE>

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             Description
Number              -----------
------
<S>                 <C>
2.1                 Agreement and Plan of Merger, dated July 5, 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).
3.1                 Certificate of Change in Number of Authorized Shares of Class and Series of the Company
                    (Incorporated by reference to the Company's report filed on Form 8-K, filed with the Commission
                    on November 11, 2002).
3.2                 Certificate of Amendment of Articles of Incorporation of the
                    Company (Incorporated by reference to the Company's report
                    filed on Form 8-K, filed with the Commission on November 11,
                    2002).
3.3                 Articles of  Incorporation of the Company (Incorporated by reference to the Company's Form
                    10-SB,  filed with the  Commission  on June 10, 1998).
3.4                 Amendment to Bylaws of the Company.
3.5                 By-Laws of the Company (Incorporated by reference to the Company's Form 10-SB, filed with the
                    Commission on June 10, 1998).
10.1                2002 Employee, Director and Consultant Stock Option Plan.
10.2                Employment Agreement, dated as of February 6, 2002, by and between the Company and Elie Housman.
99.1                Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18
                    U.S.C. Section 1350, as adopted pursuant to Section 906 of
                    the Sarbanes-Oxley Act of 2002.
</TABLE>

(b) Reports on Form 8-K

During the three months ended March 31, 2003, we filed no reports on Form 8-K.


                                       12
<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 15, 2003                        By: /s/ Eyal Bigon
                                                     --------------------------
                                                 Eyal Bigon
                                                 Chief Financial Officer,
                                                 Secretary, and Treasurer
                                                 (Principal Financial and
                                                 Accounting Officer)


Dated: As of May 15, 2003                        By: /s/ Yaron Meerfeld
                                                     --------------------------
                                                 Yaron Meerfeld
                                                 Chief Executive Officer
                                                 (Principal Executive Officer)



                                       13
<PAGE>

I, Eyal Bigon, certify that:

1.       I have reviewed this quarterly report on Form 10-QSB of InkSure
         Technologies Inc.;

2.       Based on my knowledge, this quarterly 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 quarterly report; and

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly 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 quarterly report.

4.       The Registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
         we have:

              a) designed such disclosure controls and procedures 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 quarterly report
         is being prepared;

              b) evaluated the effectiveness of the Registrant's disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this quarterly report (the "Evaluation Date"); and

              c) presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.       The Registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the Registrant's auditors and the
         audit committee of the Registrant's board of directors (or persons
         performing the equivalent function):

              a) all significant deficiencies in the design or operation of
         internal controls which could adversely affect the Registrant's ability
         to record, process, summarize and report financial data and have
         identified for the Registrant's auditors any material weakness in
         internal controls; and

              b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the Registrant's
         internal controls; and

6.       The Registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.


Dated:  May 15, 2003                                By: /s/ Eyal Bigon
                                                        -----------------------
                                                    Eyal Bigon
                                                    Chief Financial Officer,
                                                    Secretary, and Treasurer
                                                    (Principal Financial and
                                                    Accounting Officer)


                                       14
<PAGE>

I, Yaron Meerfeld, certify that:

5.       I have reviewed this quarterly report on Form 10-QSB of InkSure
         Technologies Inc.;

6.       Based on my knowledge, this quarterly 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 quarterly report; and

7.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly 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 quarterly report.

8.       The Registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
         we have:

              a) designed such disclosure controls and procedures 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 quarterly report
         is being prepared;

              b) evaluated the effectiveness of the Registrant's disclosure
         controls and procedures as of a date within 90 days prior to the filing
         date of this quarterly report (the "Evaluation Date"); and

              c) presented in this quarterly report our conclusions about the
         effectiveness of the disclosure controls and procedures based on our
         evaluation as of the Evaluation Date;

5.       The Registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the Registrant's auditors and the
         audit committee of the Registrant's board of directors (or persons
         performing the equivalent function):

              a) all significant deficiencies in the design or operation of
         internal controls which could adversely affect the Registrant's ability
         to record, process, summarize and report financial data and have
         identified for the Registrant's auditors any material weakness in
         internal controls; and

              b) any fraud, whether or not material, that involves management or
         other employees who have a significant role in the Registrant's
         internal controls; and

6.       The Registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.

Dated:  May 15, 2003                            By: /s/ Yaron Meerfeld
                                                    ---------------------------
                                                Yaron Meerfeld
                                                Chief Executive Officer
                                                (Principal Executive Officer)


                                       15