```

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

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2010

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               [X] Yes     [_] No

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).

                               [_] Yes     [_] No

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

Large accelerated filer [_]
Non-accelerated filer [_](do not check if a smaller reporting company)

Accelerated filer [_]
Smaller reporting company [X]

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

                               Yes [_]     No [X]

The number of shares of Common Stock outstanding as of April 28, 2010:
41,472,968
```

```

                            INKSURE TECHNOLOGIES INC.

                               INDEX TO FORM 10-Q

                                                                                     PAGE

PART I.       FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

              CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2010 (UNAUDITED)    3

              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              FOR THE THREE MONTHS ENDED ON MARCH 31, 2010 AND 2009                    4

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
              FOR THE THREE MONTHS ENDED ON MARCH 31, 2010 AND 2009                    5

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               6

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

ITEM 4T.      CONTROLS AND PROCEDURES                                                 12

PART II.      OTHER INFORMATION                                                       12

ITEM 6.       EXHIBITS                                                                12

SIGNATURES                                                                            13

                                       2
```

```

ITEM 1.  FINANCIAL STATEMENTS

                            INKSURE TECHNOLOGIES INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET

                           (U.S. DOLLARS IN THOUSANDS)

                                                                                                        MARCH 31,        DEC.31,
                                                                                                           2010            2009
                                                                                                        ----------      ----------
                                                                                                        UNAUDITED         AUDITED
                                                                                                        ----------      ----------

       ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                                                          $    2,855      $    1,283
     Restricted Cash                                                                                            13           1,513
     Trade receivables                                                                                         219             371
     Other accounts receivable and prepaid expenses                                                             77              91
     Inventories                                                                                               184             193
                                                                                                        ----------      ----------

TOTAL CURRENT ASSETS                                                                                         3,348           3,451

PROPERTY AND EQUIPMENT, NET                                                                                    199             211
LONG TERM DEPOSIT                                                                                               12               -
                                                                                                        ----------      ----------

TOTAL ASSETS                                                                                            $    3,559      $    3,662
                                                                                                        ==========      ==========

       LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
     Trade payables                                                                                     $      227      $      248
     Employees and payroll accruals                                                                            245             164
     Accrued expenses and other payables                                                                       528             770
     Convertible notes                                                                                           -           8,881
                                                                                                        ----------      ----------

TOTAL CURRENT LIABILITIES                                                                                    1,000          10,063

     Warrants to issue shares                                                                                  916             598
                                                                                                        ----------      ----------

TOTAL LIABILITIES                                                                                       $    1,916      $   10,661

STOCKHOLDERS' EQUITY (DEFICIENCY):
Capital Stock:
   Preferred stock of $ 0.01 par value - Authorized: 10,000,000 shares; Issued and outstanding: 0
   shares as of March 31,2010 and as of December 31, 2009
   Common stock of $ 0.01 par value - Authorized: 50,000,000; Issued and outstanding: 41,472,968 as
   of March 31, 2010 and 16,472,968 as of December 31, 2009                                                    415             164
   Additional paid-in capital                                                                               16,714          13,661
   Accumulated other comprehensive income                                                                      118             118
   Accumulated deficit                                                                                     (15,604)        (20,942)
                                                                                                        ----------      ----------

TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY)                                                                      1,643          (6,999)
                                                                                                        ----------      ----------

TOTAL LIABILITIES AND  STOCKHOLDERS' EQUITY (DEFICIENCY)                                                $    3,559      $    3,662
                                                                                                        ==========      ==========

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

                                        3
```

```

                            INKSURE TECHNOLOGIES INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

                                                           THREE MONTHS ENDED
                                                                MARCH 31,
                                                       --------------------------
                                                          2010            2009
                                                       ----------      ----------
                                                                UNAUDITED
                                                       --------------------------

Revenues                                               $      628      $      781
Cost of revenues                                              114              79
                                                       ----------      ----------

GROSS PROFIT                                                  514             702
                                                       ----------      ----------
Operating expenses:
   Research and development, net                              356             235
   Selling and marketing                                      180             176
   General and administrative                                 304             196
                                                       ----------      ----------

TOTAL OPERATING EXPENSES                                      840             607
                                                       ----------      ----------

OPERATING PROFIT (LOSS)                                      (326)             95

OTHER INCOME (EXPENSE)
Gain on debt restructuring                                  5,881               -
Financial income (expenses)                                   101            (130)
Non cash financial expenses related to convertible
notes and warrants, net                                      (318)           (866)
                                                       ----------      ----------
Financial income (expenses), net                            5,664            (996)

NET PROFIT (LOSS)                                      $    5,338      $     (901)
                                                       ==========      ==========

Basic net profit (loss) per share                      $     0.24      $    (0.05)
                                                       ==========      ==========

Diluted net profit (loss) per share                    $     0.21      $    (0.05)
                                                       ==========      ==========

Weighted average number of Common Stock used in
computing basic net profit (loss) per share            22,306,301      16,472,968
                                                       ==========      ==========

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

                                       4
```

```

                            INKSURE TECHNOLOGIES INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                           (U.S. DOLLARS IN THOUSANDS)

                                                                                       THREE MONTHS ENDED
                                                                                            MARCH 31,
                                                                                   --------------------------
                                                                                      2010            2009
                                                                                   ----------      ----------
                                                                                           UNAUDITED
                                                                                   --------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:

   Net profit (loss)                                                               $    5,338      $     (901)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                         18              83
     Decrease in restricted cash                                                            -             134
     Decrease (increase) in trade receivables                                             152             (99)
     Non cash financial (income) expenses related to convertible notes, net            (5,881)            231
     Non cash financial expenses related to warrants to issue shares                      318             577
     Decrease in other accounts receivable and prepaid expenses                            14              22
     Decrease in inventories                                                                9              44
     Decrease in trade payables                                                           (21)            (70)
     Increase in employees and payroll accruals                                            81              12
     Non cash financial expenses related to implementation of SFAS No. 123                249              22
     Decrease in accrued expenses and other payables                                     (242)           (136)
                                                                                   ----------      ----------

Net cash provided by (used for) operating activities                                       35             (81)
                                                                                   ----------      ----------

CASH FLOWS FROM INVESTING ACTIVITIES:

   Purchase of equipment                                                                   (6)             (1)
   Long-term lease deposits made                                                          (12)              -
                                                                                   ----------      ----------

Net cash used for investing activities                                                    (18)             (1)
                                                                                   ----------      ----------

CASH FLOWS FROM FINANCING ACTIVITIES:

Changes in restricted cash                                                                500               -
Proceeds from private placement, net                                                    1,055               -
                                                                                   ----------      ----------

Net cash provided by financing activities                                               1,555               -
                                                                                   ----------      ----------

Increase (decrease) in cash and cash equivalents                                        1,572             (82)
Cash and cash equivalents at the beginning of the period                                1,283           1,826
                                                                                   ----------      ----------

Cash and cash equivalents at the end of the period                                 $    2,855      $    1,744
                                                                                   ==========      ==========

NON-CASH TRANSACTIONS

Conversion of debt to shares                                                            2,000               -
Repayment as part of debt restructuring from restricted cash                            1,000               -

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

                                       5
```

```

NOTE 1:- BASIS OF PRESENTATION

     The accompanying condensed unaudited interim consolidated financial
statements have been prepared by INKSURE TECHNOLOGIES INC. (the "Company") in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. These financial statements reflect all
adjustments, consisting of normal recurring adjustments and accruals, which are,
in the opinion of management, necessary for a fair presentation of the financial
position of the Company as of March 31, 2010 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, 2009 that are included in the
Company's Form 10-K filed with the Securities and Exchange Commission on
February 26, 2010. 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, 2010.

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

NOTE 2:- PAST PERIOD NEGATIVE CASH FLOWS AND LOSSES

     During past periods we have incurred substantial losses and negative cash
flows from operating activities. In addition, we owed nearly $9,000,000 in
convertible notes, which if not restructured and eventually settled, would have
required us to obtain additional capital. Accordingly, our previous consolidated
financial statements (including those filed with our Annual Report on Form 10-K
for the year ended December 31, 2009 and our Quarterly Reports on Form 10-Q for
the 3-month periods ended March 31, 2009, June 30, 2009 and September 30, 2009)
have been presented on the basis that we will continue as a going concern. On
January 19, 2010, a group of investors paid $2,000,000, together with an amount
of $1,000,000 from our sources to our note holders and as a result $6,881,080 of
our notes were retired. In addition, on March 11, 2010, we closed a private
placement financing, raising a total amount of $3,125,000, of which $2,000,000
was used for retirement of the balance of our outstanding debt, $1,000,000 was
used to replenish our investment in the retirement of the notes mentioned above,
and $125,000 was used for legal accounting and other expenses and for working
capital. In addition, during 2009 we have generated $972,000 from operating
activities. We therefore believe that our existing resources, together with
further cash generated from operating activities will be sufficient to support
our operations for at least 12 months.

NOTE 3:- DEBT RESTRUCTURING AND CLSOING OF PRIVATE PLACEMENT

     On January 19, 2010, a group of investors paid $2,000,000, together with an
amount of $1,000,000 from our sources to our note holders and as a result
$6,881,080 of our notes were retired. In addition, on March 11, 2010, we closed
a private placement financing, raising a total amount of $3,125,000, of which
$2,000,000 was used for retirement of the balance of our outstanding debt,
$1,000,000 was used to replenish our investment in the retirement of the notes
mentioned above, and $125,000 was used for legal accounting and other expenses
and for working capital. 25,000,000 new common shares were issued against the
total amount of $3,125,000.

NOTE 4:- LEGAL PROCEEDINGS

     On December 12, 1999, Secu-System Ltd. filed a lawsuit with the District
Court in Tel Aviv-Jaffa against Supercom Ltd. (the former owner of the company's
business) and InkSure Ltd. seeking a permanent injunction and damages at an
estimated amount of NIS 500,000 (approximately $ 134,700 at the exchange rate as
of March 31, 2010) asserting that the printing method applied to certain
products that have been developed by InkSure Ltd. constitutes, inter alia: (a)
breach of a confidentiality agreement between the plaintiff and Supercom; (b)
unjust enrichment of Supercom (by virtue of the sale of our shares) and InkSure
Ltd.; (c) a breach of fiduciary duties owed to the plaintiff by Supercom and
InkSure Ltd.; and (d) a tort of misappropriation of trade secret and damage to
plaintiff's property. As part of its complaint, Secu-System sought, among other
things, an injunction and a 50% share of profits from the printing method at
issue.

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

                                       6
```

```

     On February 18, 2008 Secu-System filed a motion with the District Court
asking that the Court allow Secu-System to amend the amount for which it sued as
stated in the Statement of Claims to NIS 25,000,000 (approximately $ 6,733,100
at the exchange rate as of March 31, 2010). The motion is mainly based on the
fact that during 2002 Inksure was sold by SuperCom to a third party for a
consideration of approximately $6,000,000. Another argument made by Secu-System
relates to the profit which Inksure, allegedly, generated from the breach of the
confidentiality agreement; this argument is based on a gross profit of $6.4
million according to the financial statements of Inksure for the years
2002-2007.

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

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

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

c.   An examination of the results of Inksure's business activity during the
     period between 2002-2007, as reflected in its financial statements, shows
     that Inksure did not generate any profits during such period, but rather it
     suffered losses and had a negative cash flow, which was financed by bank
     loans and fund raising.

     On September 8, 2009 the Court denied Secu-System' motion to increase the
amount of the complaint. The only evidence that the Court allowed Secu-System to
submit in order to prove damages, is evidence which can show that the reports
which Inksure and SuperCom submitted are incorrect. The Court ordered
Secu-System to submit its evidence within 45 days. Inksure shall be entitled to
submit its evidence within 45 days thereafter.

     On December 15, 2009 Secu-System filed affidavits of prime testimony on its
behalf, and Inksure filed a motion to strike such affidavits for being outside
scope of the Court's decision of September 8, 2009. At this stage the Court
suggested that the parties will try a mediation process in order to try to come
to an agreement, and the parties agreed. The parties are now in the mediation
process and in case the parties don't reach an agreement in this process and
provided that the Expert's opinion is adopted by the Court, and further provided
that Inksure's financial reports indeed reflect its business outcome, we believe
that no material amounts will be awarded to Secu-Systems in these proceedings.

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

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

     This Quarterly Report on Form 10-Q contains statements that may constitute
"forward-looking statements". Generally, forward-looking statements include
words or phrases such as "anticipates," "believes," "estimates," "expects,"
"intends," "plans," "projects," "could," "may," "might," "should," "will" and
words and phrases of similar import. Such statements are based on management's
current expectations and are subject to a number of risks and uncertainties,
including, but not limited to, the difficulty inherent in operating an
early-stage company in a new and rapidly evolving market, market and economic
conditions, the impact of competitive products, product demand and market
acceptance risks, changes in product mix, our ability to improve our margins,
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-Q and with the Risk Factors included in Item 1A in
our Annual Report on Form 10-K for the year ended December 31, 2009, or the 2009
10-K.

     OVERVIEW

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

                                       7
```

```

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

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

     REVENUES

     We concentrate on developing and implementing large-scale projects. Such
projects involve the use of our generic products and/or products developed for
such projects. These potential projects are subject to a long sales cycle and
the timetable is lengthy for entering and implementing such projects. We
anticipate that these projects would involve high volume sales through
multiple-year sales contracts. In the first quarter of 2010, approximately 57%
of our revenues were earned from one customer located in Europe.

     COSTS AND OPERATING EXPENSES

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

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

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

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

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

     We have not recorded any income tax benefit for net losses and credits
incurred for any period from inception to March 31, 2010. 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.

     ASU 2009-13

     In October 2009, the FASB issued Accounting Standards Update, or ASU,
2009-13 "Multiple Deliverable Revenue Arrangements a consensus of EITF"
(formerly topic 08-1) an amendment to ASC 605-25. The update provides amendments
to the criteria in Subtopic 605-25 for separating consideration in
multiple-deliverable arrangements. The amendments in this update establish a
selling price hierarchy for determining the selling price of a deliverable. The
selling price used for each deliverable will be based on vendor-specific
objective evidence if available, third-party evidence if vendor-specific
objective evidence is not available, or estimated selling price if neither
vendor-specific objective evidence nor third-party evidence is available. The
amendments in this update will also replace the term "fair value" in the revenue
allocation guidance with the term "selling price" in order to clarify that the
allocation of revenue is based on entity-specific assumptions rather than
assumptions of a marketplace participant.

The amendments will also eliminate the residual method of allocation and require
that arrangement consideration be allocated at the inception of the arrangement
to all deliverables using the relative selling price method. The relative
selling price method allocates any discount in the arrangement proportionally to
each deliverable on the basis of each deliverable's selling price.

The update will be effective for revenue arrangements entered into or modified
in fiscal years beginning on or after June 15, 2010 with earlier adoption
permitted. The adoption of this update is not expected to have material impact
on the Company's consolidated financial statements.

                                       8
```

```

THREE MONTHS ENDED MARCH 31, 2010 COMPARED WITH THREE MONTHS ENDED MARCH 31,
2009

     REVENUES. Revenues consist of gross sales of products less discounts. We
concentrate on developing and implementing large-scale projects. In the three
months ended March 31, 2010, we had revenue of $628,000, compared to $781,000 in
the three months ended March 31, 2009. The decrease in the revenue is mainly due
to lower volume of deliveries to one of our customers, located in Europe.

     COST OF REVENUES. Our cost of revenues consists of materials,
sub-contractors and compensation costs. Cost of revenues was $114,000 in the
three months ended March 31, 2010, compared to $79,000 in the three months ended
March 31, 2009. Cost of revenues as a percentage of sales was 18% in the three
months ended March 31, 2010, compared with 10% in the three months ended March
31, 2009. The increase in costs of revenue, as a percentage of sales, in the
three months ended March 31, 2010 was mainly due to approximately $27,000
increase in provision for inventory losses in the three months ended March 31,
2010.

     RESEARCH AND DEVELOPMENT EXPENSES, NET Research and development expenses
consist primarily of compensation costs attributable to employees engaged in
ongoing research and development activities, development-related raw materials
and sub-contractors, and other related costs. Research and development expenses,
net increased by $121,000, or 52%, to $356,000 in the three months ended March
31, 2010 from $235,000 in the three months ended March 31, 2009. This increase
in research and development expenses is primarily related to the increase of
subcontractors expenses ($179,000) which was partially offset by the increase in
the research and development grant in amount of $117,000.

     Research and Development Expenses included non-cash expenses of $33,000
related to the implementation of SFAS No. 123(R) (ASC718-10). To date, all
research and development expenses have been charged to operating expenses as
incurred.

     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 $4,000, or 2%, to $180,000 in the three
months ended March 31, 2010 from $176,000 in the three months ended March 31,
2009.

     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 $108,000, or 55%, to $304,000
in the three months ended March 31, 2010 from $196,000 in the three months ended
March 31, 2009. This increase in general and administrative expenses is mainly
due to the increase in the non-cash expenses related to the implementation of
SFAS No. 123(R) (ASC718-10) in an amount of $145,000, which was partially offset
by the decrease in legal and accountancy expenses ($20,000) and provision for
doubtful debt ($18,000) incurred on the three months ended March 31, 2009.

     OPERATING PROFIT (LOSS). As a result of the foregoing, the Company had an
operating loss of $326,000 in the three months ended March 31, 2010 compared to
an operating profit of $95,000 in the three months ended March 31, 2009.

     GAIN ON DEBT RESTRUCTURING. Gain on debt restructuring was $5,881,000 in
the three months ended March 31, 2010 compared with zero gain on debt
restructuring in the three months ended on March 31, 2009. The gain on debt
restructuring in the three months ended on March 31, 2010 was as a result of the
restructuring of our senior secured convertible notes.

     FINANCIAL INCOME (EXPENSES), NET. Financial income, net was $5,664,000 in
the three months ended March 31, 2010. Financial expenses, net were comprised
of: (i) gain on debt restructuring in amount of 5,881,000, (ii) financial
income, net of $101,000 and (iii) non cash financial expenses of $318,000
related to warrants to issue shares. Financial income (expenses), net increased
by $6,660,000 from financial expenses, net of $996,000 in the three months ended
March 31, 2009. This increase in financial income (expenses), net was primarily
due to the gain on debt restructuring.

     NET PROFIT (LOSS). We had a net profit of $5,338,000 in the three months
ended March 31, 2010, compared with a net loss of $901,000 in the three months
ended March 31, 2009. The net profit in the three months ended March 31, 2010
compared to the net loss in the three months ended March 31, 2009 is
attributable mainly to the gain on the debt restructuring.

     LIQUIDITY AND CAPITAL RESOURCES

     We have incurred substantial losses since our inception in April 1997. We
had an accumulated deficit of approximately $15,604,000 as of March 31, 2010. We
had a positive working capital (current assets less current liabilities) of
approximately $2,348,000 as of March 31, 2010. Losses may continue in the
foreseeable future.

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     Capital expenditures were approximately $6,000 in the three months ended
March 31, 2010 and $1,000 in the three months ended March 31, 2009. These
expenditures were principally for computers and research and development
equipment purchases. We do not have any material commitments for capital
expenditures as of March 31, 2010.

     As of March 31, 2010, we had cash, cash equivalents and short-term deposits
of approximately $2,855,000, compared to $1,283,000 as of December 31, 2009.
This increase is primarily due to the replenishment in the amount of $1,500,000,
which we received in connection with the private placement financing following
our debt restructuring during the three months ended March 31, 2010.

     We had positive cash flow from operating activities of approximately
$35,000 during the three months ended March 31, 2010 compared to negative cash
flow from operating activities of $81,000 during the three months ended March
31, 2009.

     We had negative cash flow from investing activities of approximately
$18,000 during the three months ended March 31, 2010 compared to negative cash
flow of $1,000 during the three months ended March 31, 2009. The negative cash
flow from investing activities during the three months ended March 31, 2010 was
due to purchase of fixed assets and deposits made in connection of long term
lease.

     We believe that our existing cash, together with cash to be collected from
customers and governmental grants, will be sufficient to support our operations
for the next twelve months. Continuing product development and enhancement,
expected new product launches, corporate operations and marketing expenses will
continue to require additional capital. Our current revenues from operations are
insufficient to cover our long term business plans.

     On January 19, 2010, we, together with a group of seven different
investors, or the Investors, paid a total of $3,000,000 to all of the holders,
or the Noteholders of our $8,881,080 of our outstanding Senior Secured
Convertible Notes, or the Notes. An amount of $1,000,000 of the funds was
provided by us from available cash, and the balance of $2,000,000 was provided
by the Investors. As a result of the transaction, $6,881,080 of the Notes were
retired. The balance of $2,000,000 remained outstanding as a secured senior
obligation to the Investors in accordance with the terms of the Notes. In
addition, as part of the transaction, we and the Noteholders exchanged mutual
releases, all of our Series B-1 and Series B-2 Warrants issued in the names of
the Noteholders, which were exercisable for an aggregate of 15,000,000 shares of
our common stock, were cancelled, and our Series A Warrants issued in the name
of one of the Noteholders, which were exercisable for an aggregate of 3,570,337
shares of our common stock at an exercise price of $0.60 per share, were
amended, such that they may be exercised for an aggregate of 2,183,000 shares of
our common stock at an exercise price of $0.15 per share.

     On March 11, 2010, we closed a private placement financing, raising a total
amount of $3,125,000 from twenty different accredited investors, or the New
Investors. In connection with the private placement, we issued to the New
Investors a total of 25,000,000 shares of our common stock at a purchase price
of $0.125 per share.

     We used the proceeds from the private placement to retire all of our
remaining outstanding notes.

     An additional $1,000,000 of the proceeds was used to replenish the
$1,000,000 used by us in connection with the January 19, 2010 purchase of the
Notes. The balance of the private placement proceeds of $125,000 was used to pay
the legal and other costs of the private placement and the Notes repurchase, and
for working capital purposes.

     During the first quarter of 2010, we granted to our employees, directors
and officers new stock options to purchase up to 4,520,000 shares of our common
stock in cancellation and replacement of substantially all of their then
existing stock option grants. In addition, we granted to certain directors and
to our new Chief Executive Officer stock options to purchase up to 1,100,00
shares of our common stock.

     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.

     With respect to the RFID technology we are developing, we have filed five
patent families related to various aspects of the RFID technology. Two of our
patent families have already matured into patents granted in the following
jurisdictions: United States (US6,819,244 and US6,997,388), France, Germany,
Switzerland and United Kingdom (EP1374156 and EP1599831). Our third patent
family has matured into a patent granted in the United States (US6,922,146) and
France, Germany Switzerland, United Kingdom (EP1618516), while EP divisional
application (EP2037397) is still being examined in Europe. Regarding our fourth
patent family, we have filed an International Patent Application (PCT). In
addition, during 2008, we filed an International Patent Application (PCT)
relating to our fifth patent family.

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     CONTRACTUAL OBLIGATIONS AND COMMITMENTS

     Our contractual obligations and commitments at March 31, 2010 principally
include obligations associated with operating lease obligations and the lease of
several automobiles. Our total future obligation is approximately $91,000 until
September, 2011. We expect to finance these contractual commitments from cash on
hand and cash generated from operations.

     During 2007-2009 and through March 31, 2010, we received a governmental
research and development grant of approximately $1,834,000 from the Office of
the Chief Scientist of Israel, or the OCS. This royalties-bearing research and
development grant partially covers our innovative research and development
project expenses. Royalties would become due to OCS only if the RFID research
and development project funded by the grant is successfully commercialized and
results in sales revenues based on the know-how developed during the RFID
project. The royalty rate is 3%-4% of the sales revenues based on the RFID
research and development project funded by the grant, and is capped at the grant
amount actually received from the OCS plus interest. We have no assurance that
the RFID project or commercialization plan will be successful.

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ITEM 4T. CONTROLS AND PROCEDURES

     (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain a system
of disclosure controls and procedures that are designed for the purposes of
ensuring that information required to be disclosed in our SEC reports is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and forms, and that such information is accumulated and
communicated to our management, including our Chief Executive Officer, or CEO,
and our Chief Financial Officer, or CFO, as appropriate to allow timely
decisions regarding required disclosures.

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our CEO and our
CFO, of the effectiveness of our disclosure controls and procedures as defined
in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on
that evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are effective.

     (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

The following exhibits are being filed with this Report:

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

4.1                 Amendment to Series A Warrant dated January 19, 2010
                    (incorporated by reference to Exhibit 4.1 of our Current
                    Report on Form 8-K filed with the SEC on January 21, 2010.)

10.1                Purchase Agreement dated January 19, 2010, between InkSure
                    Technologies Inc. and various noteholders (incorporated by
                    reference to Exhibit 10.1 of our Current Report on Form 8-K
                    filed with the SEC on January 21, 2010.)

10.2                Assignment of Senior Secured Convertible Promissory Note,
                    Security Agreement and Guarantee (incorporated by reference
                    to Exhibit 10.2 of our Current Report on Form 8-K filed with
                    the SEC on January 21, 2010.)

10.3                Employment Agreement between InkSure Technologies, Inc. and
                    Tal Gilat (incorporated by reference to Exhibit 10.1 of our
                    Current Report on Form 8-K filed with the SEC on March 8,
                    2010.)

10.4                Stock Option Agreement between InkSure Technologies, Inc.
                    and Tal Gilat (incorporated by reference to Exhibit 10.2 of
                    our Current Report on Form 8-K filed with the SEC on March
                    8, 2010.)

10.5                Form of Subscription Agreement (incorporated by reference to
                    Exhibit 10.1 of our Current Report on Form 8-K filed with
                    the SEC on March 16, 2010.)

31.1                Certification of Principal Executive Officer Pursuant to
                    Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
                    Act of 1934, as amended.*

31.2                Certification of Principal Financial Officer Pursuant to
                    Rules 13a-14(a) and 15d-14(a) under the Securities Exchange
                    Act of 1934, as amended.*

32.1                Certification of Principal Executive Officer and Principal
                    Financial Officer Pursuant to 18 U.S.C. Section 1350.*

* Filed herewith

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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: May 4, 2010                      By: /s/ Tal Gilat
                                        --------------------------
                                        Tal Gilat
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)

Dated: May 4, 2010                      By: /s/ Tzlil Peker
                                        ------------------------
                                        Tzlil Peker
                                        Chief Financial Officer,
                                        Secretary and Treasurer
                                        (Principal Financial Officer)

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