SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 FORM
10-K/A
 
 [
      X ]
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 FOR THE
FISCAL YEAR ENDED JUNE 30, 2008
 
 
 [    ]
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934
  COMMISSION
FILE NUMBER 000-29249
 
 True
Product ID, Inc.
 (Exact
name of registrant as specified in its charter)
  Delaware
              
              
              
              16-1499611(State
      or other jurisdiction ofincorporation)
              
              
              
              (I.R.S.
      EmployerIdentification
      No.)
  1615 Walnut Street,
      3rd Floor
                Philadelphia,
      Pennsylvania
              19102(Address of
      principal executive offices)
              (Zip
      Code)
   Registrant's
telephone number, including area code:  215-972-6999
 
 Securities
registered pursuant to Section 12(b) of the Act:  None
 Securities
registered pursuant to Section 12(g) of the Act:
 Common
Stock, $0.001 par value
 (Title of
Class)
 
 Indicated
by check mark whether the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act Yes  No X
 
 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.
 Yes X    No
.
 
 The
aggregate market value of the voting stock held by non-affiliates of the
registrant was $68,509,991.13 as of December 31, 2007, computed on the basis of
the average of the bid and asked prices on such date.
 The
registrant’s revenues for the year ended June 30, 2008 were $-0-.
 
 As of
October 14, 2008 there were 36,514,390 shares of the registrant's Common
Stock issued and outstanding.
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [  X  ]
 
 Indicated
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act).   Yes  No X
 
  
  PART
I
 
 ITEM
1.  Business
 
 Overview
 
 True
Product ID, Inc. (the “Company” or the “Corporation”) produces integrators for
anti-counterfeiting and security surveillance applications and is a provider of
integrated tracking devices. The Company delivers anti-counterfeiting turnkey
solutions to governments, armed forces, and industry, through its own
proprietary technology and through aggregating the technology, products, and
services of third parties via licensing agreements and/or joint
ventures.
 
 Counterfeit,
by definition, denotes the copying, imitation, or forging of an article by a
perpetrator who lacks the legal right to do so, and with the express purpose of
deceiving or defrauding. Counterfeiting encompasses violation of intellectual
property (IP) rights that are legally enshrined in patents (linked with
inventions); copyright (covering literary, musical, artistic works, and
software); trademarks (including words, brands, and logos), industrial designs
and other forms of IP.
 
 The
counterfeiting industry comprises 5% to 7% of global trade and is worth roughly
$450 to $500 billion, according to the International Chamber of
Commerce.
 
 Business
 
 The
Company plans to be the world leader in the provision of anti-counterfeiting,
brand and product authentication, and security products and services. The
Company’s authentication solution is an integrated management system based on
synthetic taggant technology, in which specific taggants are formulated to tag
target objects for identification and authentication. Our higher end solutions
also employ a proprietary supporting computer database and application (KMAC) to
manage inspections, as well as collect and analyze data from scanners in the
field for trend spotting and responsive action. To best serve its customers’
needs, especially in China, and to best penetrate certain global markets, in
addition to its own technologies, the Company has also explored and is pursuing
strategic relationships with companies in the United States and Europe with
complimentary anti-counterfeiting technology and continues to explore the
technology market for novel anti-counterfeiting solutions in addition to taggant
or scanning technology.
 
 The
Company’s authentication management system is comprised of a suite of
world-class technologies, representing years of empirical research and
application to the business of authentication. The Company’s technology is both
focused on commercial and civil applications, and applies to a wide range of
businesses plagued by piracy and IP violations, everything from cigarettes to
pharmaceuticals, and from auto parts to currency, The Company’s cutting-edge
technology ultimately provides commercial or government end-users with the
authentication technology needed to protect brand integrity and revenue capture
from piracy and to help monitor, manage and address quality and safety issues
during the global supply chain.
   2
   One of
our tagging techniques is Synthetic DNA (S-DNA). This involves developing a
taggant based upon elements and placing that tag on or in the product or item to
be scanned. Both the physical and chemical properties of S-DNA are extremely
stable. It is free of toxicity or pollution because only a very small volume is
used, resistant to high temperature and abrasion, strong acid and strong
alkaline, the S-DNA does not dissolve in common solvents. Owing to its strong
permeability, S-DNA bonds to all objects on a molecular level with the exception
of cut glass and diamonds.
 
 Without
changing the original production process or adding any facilities, the
manufacturer only needs to apply S-DNA elemental taggant of different proportion
on different positions on the products (directly on the product itself or on its
packaging material) as information points, and then use a micro-intelligent
analysis system to authenticate the product information. The analysis and
management of the taggant information through the data management system can
effectively and economically protect the products against counterfeiting and
duplication.
 
 Another
of our tagging technology involves designing a molecule that responds to certain
Infra-Red or Ultra-Violet light. This tag is also highly specialized and similar
to S-DNA is extremely difficult to copy or fake.
 
 The last
of the Company’s tagging technology implements a technology known as particle
pattern recognition and verification. Each product is printed with a
two-dimensional data matrix that contains information about a random particle
pattern located somewhere on the package as well. The scanner then reads the
data matrix and the particle pattern and submits this information to KMAC or
another central database. That data can contain information related to the
product/location and whether or not the product is fake or real. KMAC can then
determine if that serial number for “appropriateness.” For example, if the same
product serial number passes through a scan point more than once, one of them
MUST be a counterfeit.
 
 The
customized information of a given tagged object is stored in KMAC, the Company’s
proprietary data management system. This system is able to detect all
information related to the identity of the tagged object at any time or location
with extremely high accuracy.
 
 To ensure
the highest level of security, our tagging system involves stacking tags. That
is, multiple technologies are used to generate a single tag, making it extremely
difficult to copy or spoof. This combined with the real time power of KMAC to
provide back-end verification, yields the most advanced anti-counterfeit
solution in the world.
 
 Our
authentication management system can be widely applied to various goods or
products such as medicine, food, apparel, tobacco, alcohol, vehicle parts,
cosmetics, electronic components, jewelry, art and cultural artifacts, athletic
merchandise, as well as financial instruments such as currency, checks, or
receipts. The Company’s proprietary authentication system is multi-functional
and can serve as a means to tag materials and products at each step in the
supply chain, from tagging raw materials and products during the manufacturing
process to, post-production movement of products from transport to distribution
to end-users. Above all, our authentication and tracking system is well suited
to law enforcement by, for example, customs agents preventing smuggling,
thwarting counterfeiting of financial documents and currency, and curtailing
piracy of high-end manufactured goods.
     3
 
 STRATEGY
 
 See Item
6 below - Management’s Discussions and Analysis of Financial Condition and
Results of Operation.
 
 THE
PRODUCTS AND SERVICES:
 
 Synthetic
DNA (S-DNA)
 
 The
Company’s marking process involves the application of a combination of inorganic
elements. These elements penetrate the surface of an object and a molecular bond
is formed. The method of application can vary depending on the item to be
tagged. Coded elements can be placed on an object using a colorless carrier
rendering them invisible to the human eye, or can include a fluorescent element
so that they glow under UV light. The specific ratios of elements that comprise
the synthetic DNA create a unique identity code for a given client, or a
specific product, division, or product run within the client’s area of concern.
The number of potential mix ratios or identity codes is in the
billions.
 
 Depending
on the surface structure, a high percentage of the chemical penetrates and bonds
with the item’s molecular structure. Once the synthetic DNA (S-DNA) has entered
the item, its removal, whether by chemical solvent or abrasion, is extremely
difficult. Total removal of the S-DNA that has penetrated the item is extremely
difficult.  We have tested and proven our capability to introduce a
synthetic DNA into a product during the manufacturing process. This enables us
to invisibly attach a “fingerprint to the product via synthetic DNA which can be
applied to industrial parts, apparel, consumer electronics, jewelry, CD-ROMs,
sporting goods, as well as currency.
 
 Handheld
Scanners/ Analyzers
 
 Like the
common commercial bar code scanner, the Company’s wireless hand-held analyzer is
used to identify synthetic DNA codes. This analysis, when combined with the
KMACK system, can identify, for example, the legitimate owner of the marked
item, the production run from which it originated and whether the product is
genuine or a counterfeit.  Our analyzer allows customers to engage
in:
 
 ·
              Product
      identification & authentication based on two types of distinct
      technologies: taggant and detection device
  technology.
 
 ·
              Our
      turnkey system enables brand owners (OEM’s) the ability to reduce
      liability, protect brand integrity, increase profitability and protect
      customer confidentiality.
 
 ·
              TPID
      taggant includes tags that can be (optionally) read by a number of
      different reader types including XRF, as well as Infa-Red
      (IR).   Scanners can read individual items for on the spot
      verification of a product’s
authenticity.
 
 ·
              Marker
      Systems uses microscopic particles; Optical/Audible System uses
      multi-functional additives; Elemental System – Elemental Additive Particle
      Pattern – Standard 2D bar code
scanner.
 
 We intend
to either lease or sell the scanners depending upon customer conditions and
other business considerations.
 
 4
  Consulting
and Data Services
 
 The
Company intends to generate consulting and data services from the use of its
KMAC proprietary computerized database, the sale of KMAC generated data and by
licensing the KMAC system to third parties.
 
 Product
Authentication Services
 
 Product
authentication services include: 1) credited scans associated with the work
order, 2) additional scans required; and 3) management of inspectors by the
Company.
 
 Competition
 
 There are
currently five competing technologies for anti-counterfeiting and security
surveillance applications and is an integrated tracking devices. The radio
frequency identification (“RFID”) systems, taggants, DNA (“Deoxyribonucleic
Acid”), synthetic DNA and traceless technology.
 Chip
      Based RFID competitors include:
                
                ●OmronLowry
      Computer Products
                  Markem
      Corporation
                  Tana
      Consultancy ServicesChipless
      RFID competitors include:
                
                ●InkodeCross
      IDInk
      Based Taggant competitors include:
                
                TraceTag
      InternationalSun
      ChemicalDupont
      Authentication Systems (DAS)(DAS)DNA
      competitors include:
                
                Applied
      DNA Sciences, InTraceTag
      InternationalSynthetic
      DNA competitors include:
                
                DNA
      Technologies, Inc.identify
      GmbHID
      GlobalTraceless
      Technology competitors include:
                
                ●Eastman KodakMicrotaggant
      competitors include:
                
                Microtrace
      LLCAuthentix
 
   5
   Intellectual
Property
 
 Currently,
the Company has filed an application for a patent with the State Intellectual
Property Office of the People’s Republic of China (No. 200510089020.1) filed
August 3, 2005, for the “Method and Apparatus Using Chemical Elemental Taggant
and the Chemical Elemental Taggant.”
 
 On August
2, 2006, the Company filed an application for a patent with the Patent
Cooperation Treaty (No. PCT/CN2006/001946) for the “Method for Tagging and
Detecting Articles and Apparatus thereof.”  In May 2007, the Chinese
State Intellectual Property Office, acting as an International Preliminary
Examining Authority (IPEA) under the Patent Cooperation Treaty (PCT), has issued
a favorable International Search Report (ISR) with respect to the PCT
application.  In the ISR, the IPEA did not identify any publication
that, alone or in combination, would prevent the invention, as claimed, from
meeting the novelty and inventive step requirements for patentability under the
PCT. While the ISR identified three publications (a Chinese patent, a US patent,
and a published paper), each of these publications was classified as a "category
A" publication designating it as "a document defining the general state of the
art which is not considered to be of particular relevance." The application will
be further examined at the national/regional stage, and additional publications
affecting patentability may be identified at that time.  The Company
believes that the favorable ISR, especially since it was issued by the Chinese
State Intellectual Property Office as the IPEA, bodes well for the future
success of the application and represents a significant step in protecting our
technology worldwide and in securing TPID's place as a global leader in the
authentication and anti-counterfeiting industry.
 
 The
Company subsequently requested the commencement of national phase examinations
of its PCT application for the United States, South Korea, Japan, Mexico, India,
Brazil, Indonesia, Canada, the Philippines, and the European Patent
Office.
 
 The
Company also has its KMAC proprietary computerized database system where new
plug-ins are continually developed to support interfacing with customer database
systems as well as any new potential scanners in the market place and real time
reporting to the central KMAC system.
 
 Employees
 
 As of
June 30, 2008, we had two employees based in the United States and 44 employees
based in China.
    6
 
 Web
Site Postings
 
 Our
annual report on Form 10-K and quarterly reports on Form 10-Q filed with the
U.S. Securities and Exchange Commission are available to the public free of
charge through its website as soon as reasonably practicable after making such
filings.  Our website can be accessed at the following address:
www.tpid.net.  The website of our Chinese joint venture company
affiliate, True Product ID Technology (Beijing) Limited (“TPID Beijing” or
“Chinese JV Company”), can be accessed at www.trueproductid.com.  The
information found on our and TPID Beijing’s website or that may be accessed
through our and TPID Beijing’s website is not part of this report and is not
incorporated herein by this reference.
 
 ITEM
2.                      Properties
 
 As of
June 30, 2007, we lease certain office space for our executive offices at 1615
Walnut Street, 3rd Floor,
Philadelphia, PA 19102.  The rent was approximately $1,500 per
month.  On September 28, 2007 the Chinese JV Company moved into a new
larger office located at 11th floor, Jade Palace Hotel, 76 Zhichun Road, Haidian
District, Beijing 100086.  The Chinese JV Company occupies the entire
11th
floor of the Jade Palace Hotel, a new and leading commercial and hotel complex
in Beijing, which is located in a special economic zone (SEZ) and thus allows
the Chinese JV Company to continue to enjoy the same tax and other SEZ-related
incentives it had at the old office.  The new office will now house
the Chinese JV Company’s administrative, sales, marketing, and accounting
departments and will also allow the Company to make taggant and to enlarge the
ability to conduct research and development.
 
 ITEM
3.                      Legal
Proceedings
 
 On
October 31, 2007, Daniel Fasano -- a shareholder and creditor of the Company --
filed a pro sepetition
for the statutory appointment of a receiver in the Delaware Court of
Chancery.  In his petition, Fasano claims that the Company is
insolvent due to, in part, over $900,000 he claims the Company owes him that
remains unpaid.  In its January 4, 2008 answer to the Petition, the
Company denied and continues to deny that it is insolvent and that the
appointment of a receiver is required.  The Company explained that
Fasano is a party to certain agreements pursuant to which the Company agreed to
pay him certain monies that have not yet been fully paid.  The Company
went on to explain that Fasano owes the Company in excess of $330,000, which
amount exceeds the amount which the Company believes Fasano is owed by the
Company pursuant to the aforementioned agreements.  Specifically, in
exchange for acquiring from the Company its former subsidiary, Seen OnTV, Inc.,
d/b/a, inter alia,
AsSeenOnTV.com (“Seen on TV”) and all of the assets of the Company associated
therewith, Fasano agreed in September 2005 to pay the Company a total of
$300,000 by paying the Company 25% of the net, after-tax income from the
operations of Seen on TV, d/b/a, inter alia, as
AsSeenOnTV.com, which amount would bear interest at 5.75% per year until such
debt, plus accrued interest, was paid in full. Fasano has never performed his
obligations under this contract.  A status conference on this matter
is listed for October 2008 and, unless resolved, will likely proceed to trial in
2008.
    7
   On or
about February 28, 2008, Fasano filed a lawsuit, pro se, in Broward County,
Florida against the Company for damages in the amount of approximately
$900,000.  The Company responded to the lawsuit by filing a Motion to
Dismiss on jurisdictional grounds.  The Company believes the lawsuit
is without merit (based in part on some of the contentions discussed above in
connection with Fasano’s Delaware litigation), and intends to vigorously defend
it.  Unless resolved, a hearing on the Company’s Motion to Dismiss
will likely take place in the Fall of 2008.
 
 In July
2008, Europlan Financial Services Ltd. as Trustee for Ormond Trust and Deborah
Richdale filed suit against the Company, Rene Hamouth, Hamouth Family Trust,
William R. Dunavant, Richard Specht and Wilson W. Hendricks III for an
unspecified amount of damages and injunctive relief.   The Company
believes that the claims against it are without merit.  The Plaintiff
agreed to extend the time for the Company to file a responsive pleading to
explore possible settlement negotiations.  If the matter cannot be amicably
resolved, the Company intends to defend the matter vigorously.
 
 We are
subject to dispute and litigation in the ordinary course of
business.  We are not aware of any pending or threatened litigation
that we believe is reasonably likely to have a material adverse effect on us,
based upon information available at this time.
 
 ITEM
4.                      Submission
of Matters to a Vote of Security Holders
 
 On
November 28, 2007 our board of directors (the “Board”) unanimously adopted a
resolution seeking stockholder approval to amend our Articles of Incorporation
to effect a 1 for 100 reverse stock split of our Common Stock.  On the same
day, and as subsequently re-affirmed, pursuant to our By-Laws and applicable
Delaware law, stockholders of ours holding over a majority of the total voting
rights for all our issued and outstanding shares of common and preferred stock
adopted by way of written consent, a resolution to approve and authorize actions
set forth in the Board’s November 28, 2008 resolution.  We filed a
preliminary information statement (Schedule PRE 14C) and definitive information
statement (Schedule DEF 14C) with regard to the approved reverse stock split on
April 23, 2008 and May 7, 2008 respectively and mailed on May 8-9, 2008 the
definitive information statement to all shareholders of record as of April 22,
2008.  On May 29, 2008 we amended our articles of incorporation to
reflect the 1 for 100 reverse stock split.  On June 10, 2008 NASDAQ
approved the reverse stock split effective the open of business on June 11,
2008.
 
 
 Part
II
 
 ITEM
5.                      Market
for Registrant's Common Equity, Related Stockholder Matters and
Issuer
 Purchases of Equity
Securities
 
 Our
common stock is traded on the OTC Bulletin Board (Symbol: TPID) and the
information presented for the following periods reflects the high and low bid
information as reported by the OTC Bulletin Board. Our common stock began
trading on the OTC Bulletin Board in the fourth quarter of fiscal
2006.  The prices below may not represent actual
transactions.  These quotations reflect inter-dealer prices, without
retail markup, markdown or commissions.
   Market
      Price RangeFiscal
      2008
                
                
                Fiscal
      2007High
                
                
                Low
                
                
                High
                
                
                LowFirst
      Quarter
                
                $
                0.070
                
                
                $
                0.040
                
                
                $
                0.210
                
                
                $
                0.100Second
      Quarter
                
                $
                0.150
                
                
                $
                0.030
                
                
                $
                0.199
                
                
                $
                0.026Third
      Quarter
                
                $
                0.080
                
                
                $
                0.040
                
                
                $
                0.250
                
                
                $
                0.100Fourth
      Quarter
                
                $
                2.000
                
                
                $
                0.020
                
                
                $
                0.170
                
                
                $
                0.050
   At
October 14, 2008, we had 2,852 stockholders of record.
 
 On May 4,
2006, we amended our articles of incorporation to increase the authorized shares
of common stock from 100,000,000 to 1,000,000,000, of which 800,000,000 shares
are designated as Class A and 200,000,000 shares are designated as Class
B.
    8
 
 On May 8,
2006, we declared a 2 for 1 forward stock split of our common stock, to be
effective on May 23, 2006.
 
 In
November 2007, our Board voted to effect a 1 for 30 reverse stock split of our
common stock.  On November 29, 2007 the Board voted to amend the ratio for
the reverse stock split to 1 for 100.  This action was then authorized and
approved by the holders of a majority of the outstanding common shares of the
Company authorized to vote.  We filed a Schedule PRE 14C preliminary
information statement in connection with the 1 for 100 reverse stock split on
April 23, 2008.  Upon receiving no comment from the SEC, we filed a
Schedule DEF 14C definitive information statement in connection with the 1 for
100 reverse stock split with the SEC on May 7, 2008; and mailed on May 9, 2008
the definitive information statement to all shareholders of record as of April
22, 2008.
 
 On May
29, 2008 we amended our articles of incorporation to reflect the 1 for 100
reverse stock split.  Article IV of the Articles of the Corporation
was amended as follows:
 
 “ The
authorized capital stock of the Corporation shall be 1,005,000,000 shares
consisting of 1,000,000,000 shares of Common Stock, par value $0.001 per share
(800,000,000 shares being Class A Common Stock and 200,000,000 shares being
Class B Common Stock) and 5,000,000 shares of Preferred Stock, par value $0.001
per share. The outstanding shares of Common Stock shall be reverse split on a
one-for-one hundred basis, effective as of the effective date of this
Certificate of Amendment.  No fractional shares shall be issued in
connection with the reverse split. Instead, any resulting fractional shares
shall be rounded up to the nearest whole number.
 
 On June
10, 2008 NASDAQ approved the 1 for 100 reverse stock split effective the open of
business on June 11, 2008.
 
 A total
of 300 million of the registrant’s common stock (pre-reverse stock split) was
issued to the Hamouth Family Trust, part in November 2007 with the balance in
January 2008.  In a Form 8-K filed November 7, 2007, we stated that
the stock was issued “as consideration for consulting the Company regarding
market matters.”
 
 A total
of 200 million of the registrant’s common stock (pre-reverse stock split) was
issued to William R. Dunavant, part in November 2007 with the balance in January
2008.  The stock was issued per Dunavant’s employment agreement dated
November 4, 2007.
 
 In
November 2007, we raised $200,969 as a result of the sale of equity units
consisting of one share of the Company’s common stock and a warrant to purchase
1⁄2 share of common stock at an exercise price of $0.10 per share for a period of
one year subsequent to the purchase of the equity unit.  The price of the
units was $0.065 per share resulting in the issuance of 3,091,823 shares of the
Company’s common stock and the issuance of 1,545,912 warrants to purchase the
Company’s common stock.  The proceeds were wired to the Chinese JV Company
to fund China operations.
 
 In
January 2008, we raised $450,000 as a result of the sale of equity units
consisting of one share of the Company’s common stock and a warrant to purchase
1⁄2 share of common stock at an exercise price of $0.085 per share for a period of
one year subsequent to the purchase of the equity unit.  The price of the
units was $0.05 per share resulting in the issuance of 9,000,000 shares of the
Company’s common stock and the issuance of 9,000,000 warrants to purchase the
Company’s common stock.
 
  9
  On July
11, 2008, upon the completion of the reverse stock split, as authorized by the
Board, the following shares and warrants were issued to below individuals and
entities who/which had provided funding to the registrant from November 2007 to
May 2008:
 
 Funder
              Amount
      of funding
              Shares
      issued
              Shares
      in WarrantsDavina
      Lockhart
              $58,500
              39,000
              14,625Justin
      Stanley
              $50,000
              33,333
              12,500Jerry
      Bratton
              $50,000
              33,333
              12,500Jerry
      Bratton
              $100,000
              66,667
              25,000BC
      LTD
              $100,000
              66,667
              25,000DOUBLE
      U MASTER FUND L.P.
              $50,000
              33,333
              12,500Webster
      Mrak & Blumberg Pension Planf/b/o
      Richard Blumberg
              $197,800
              131,867
              49,450Webster
      Mrak & Blumberg Pension Planf/b/o
      Christine Mrak
              $196,200
              130,800
              49,050Richard
      Blumberg
              $177,500
              118,333
              $44,375
 
 The above
share issuances were valued at US$1.50 per share with warrants to purchase the
same amount of shares of common stock at US $4.00 per share.
 
 On July
11, 2008, as authorized by the Board, the following shares were issued to the
below personnel for services rendered:
 
 Name
              Shares
              
              Services
      providedJames
      MacKay
              19,142,742
              
              Per
      consulting and debt forgiveness agreements.  MacKay was our
      founder and the founder of TPID Beijing, TPID HK, and all of our China
      initiatives; the originator of AQSIQ Gas Tank Contract and all other China
      contracts, our former chairman, chairman of TPID Beijing, and current
      consultant since 2005Ke
      Ke Wang
              250,000
              
              Per
      employment agreement.  Wang has been our president since January
      2008Wilson
      Hendricks
              1,000,000
              
              Per
      employment agreement.  Hendricks was former CEO and Director
      from March-October 2008 and our former COO from  November 2007
      to March 2008Brandee
      Dunavant
              100,000
              
              Per
      services agreement.  Dunavant has been a consultant since
      November 2007Jon
      Brunot
              100,000
              
              Per
      services agreement. Brunot has been a consultant since November
      2007Celebrity
      Foods
              1,000,000
              
              Per
      consultant agreement.  It has been a  consultant since
      2006Michael
      Antonoplos
              400,000
              
              Per
      consultant agreement.  Antonoplos has been a consultant since
      the Fall of 2006, a director since April 2007 and our secretary since
      November 2007.William
      Chan
              1,000,000
              
              Per
      consulting agreement. Chan was a former director, TPID Beijing; the former
      president TPID HK; and has been consultant since before
    2006Sergio
      da Luz
              1,000,000
              
              Per
      consulting agreement. Da Luz was our former president & director from
      May 2007 to June 2008 and a former director TPID Beijing  since
      2007Eric
      Littman
              200,000
              
              securities
      counsel since March 2008Tom
      Hess
              200,000
              
              corporate
      counsel since November 2007Richard
      Blumberg
              300,000
              
              Per
      consulting agreement; consultant & counsel since March
      2008Herbert
      Towning
              180,000
              
              Per
      consulting agreement related to fund raising; since April
    2008Ann
      Shek
              100,000
              
              Consultant,
      TPID Beijing and TPID HK (since 2006)Liu
      Leung Wai
              100,000
              
              Consultant,
      TPID Beijing and TPID HK (since 2006)Chan
      Chi Wei
              100,000
              
              Consultant,
      TPID Beijing and TPID HK (since 2006)David
      Hong
              100,000
              
              Current
      director; Consultant, TPID Beijing and TPID HK (since December
      2007)
   10
  
 We have
not historically declared or paid dividends with respect to our common stock and
have no intention to pay dividends in the foreseeable future.
 
 ITEM
6.                      Management's
Discussion and Analysis of Financial Condition and Results of Operations
 
 The
following discussion should be read in conjunction with, and is qualified in its
entirety by, our audited financial statements and notes thereto, and other
financial information included elsewhere in the Annual Report on Form
10-KSB.
 
 Certain
statements contained in this “Management’s Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report are
forward-looking   statements that involve risks
and   uncertainties.   These Statements
relate to future events or our future financial performance.  In some
cases, forward-looking statements can be identified by terminology such as
"may", "will", "should", "expect", "anticipate", "intend", "plan", "believe",
"estimate",  "potential", or "continue", the negative of these terms
or other comparable terminology.   These statements involve a
number of  risks  and uncertainties.   Actual
events or results may differ materially from any forward-looking statement as a
result of various factors, including those described above under "Risk
Factors."
 
 The Company’s Current
Strategy and Priorities
 
 The
Company’s current priority is to solidify its strategic position and
opportunities in China. Many of the goods in the world are manufactured in
China.  That includes both Chinese manufacturers and multinational
corporations.  That includes goods manufactured in China for both the
domestic Chinese market and for export.  As such, China and its
government and industries face many of the more significant challenges
associated with counterfeiting and product safety, which the Company seeks to
address through its technology.  It is China where the Company and its
Chinese joint venture affiliate have earned the respect of government and
industry.  As reported on the website sponsored by the Association of
Chinese Anti-Counterfeiting Technology, www.21cata.com.cn,
our technology was recently recognized by representatives from the Chinese
Ministry of Public Security. As reported on TPID Beijing’s website, our
technology also received a favorable initial assessment from the Chinese
Ministry of Science and Technology.  It is China where the Company and
its Chinese joint venture affiliate are working with government and industry on
significant anti-counterfeiting, safety, and other initiatives and where the
Company’s technology has been designated and/or registered as an exclusive or
preferred technology in connection with those initiatives.  It is
China where the Company, through its Chinese joint venture affiliate, has
entered into significant contracts.  The Company’s immediate priority
is to begin fulfilling and generating revenues from China
contracts.
 
  11
  The National Contract with
AQSIQ To Mark Chinese Liquefied Natural Gas Container and Special
Equipment
 
 In August
2007, the Company, through its Chinese joint venture affiliate, entered into a
contract with the National Quality Inspection Department of the State General
Administration for Quality Supervision, Inspection and Quarantine of the
People's Republic of China ("AQSIQ"), to develop a national safety/security
system for China's liquefied natural gas and other pressurized canisters and
other special equipment.
 
 AQSIQ is
a ministerial administrative organ directly under the State Council of the
People's Republic of China in charge of national quality, metrology, entry-exit
commodity inspection, entry-exit health quarantine, entry-exit animal and plant
quarantine, import-export food safety, certification and accreditation,
standardization, as well as administrative law-enforcement.  AQSIQ is
considered the Chinese counterpart to the United States Consumer Product Safety
Commission.
 
 The AQSIQ
Contract follows an AQSIQ Circular to every quality and technical supervision
bureau in all provinces, autonomous regions and municipalities under the control
of the Chinese Central Government.  The AQSIQ Circular sets out a
5-year AQSIQ National Security/Safety Plan to protect against the illegal
production, circulation, and use of certain "special equipment" (the
"Plan").  AQSIQ's mission in the Circular is, among other things, to
protect public safety from safety accidents and other risks caused by
counterfeit and substandard "special equipment."  Among the “special
equipment” referenced in the AQSIQ Circular are liquefied gas tanks, oxygen
tanks, and other pressurized containers and pipes, elevators, lift machinery;
and equipment at large recreational facilities and automobile
plants.
 
 In its
Circular, AQSIQ has explicitly designated our technology and our Chinese joint
venture company affiliate as the exclusive technology and technology provider to
help AQSIQ develop, implement and administer its National Security/Safety
Plan.  Under the AQSIQ Circular, TPID Beijing is to help AQSIQ develop
national special equipment security identification standards (the "standards"),
a special equipment identification information security management system (the
"management system"), and a special equipment security/safety logo (the
"logo").
 
 As a
result of the Circular, AQSIQ has entered into a Project Cooperation Agreement
with the Company's Chinese joint venture company affiliate (Contract No.
0076180).  ASQIQ subsequently entered into supplementary provisions to
the Project Cooperation Agreement in connection with the initial phase of
AQSIQ's National Security/Safety Plans relating to liquefied natural gas
containers (the "LNG Contract").
 
 Under the
LNG Contract, TPID is to provide and apply a security logo to all LNG containers
in China.  According to Chinese government statistics, the total
number of LNG containers in China is currently over 130 million and is expected
to increase in quantity by 10% every year. Under the LNG Contract, TPID is to
receive a fixed taggant price per LNG container.  The specific taggant
price per LNG container is not being disclosed due to its proprietary
nature.
    12
 
 Under the
LNG Contract, TPID is to provide 50,000 units of one of its highly proprietary
scanners and 15,000 units of another of its highly proprietary scanners to
approximately 20,000 LNG gas stations, 30,000 special equipment manufacturers,
and 40,000 "platforms" in China.  Under the LNG Contract, TPID is to
receive a fixed price per scanner, with a different fixed price for each type of
scanner.  The specific price per scanner is not being disclosed due to
its proprietary nature.
 
 Finally,
under the LNG Contract, TPID is to establish a security management information
system for 50,000 enterprises. Under the LNG Contract, TPID is to receive a
fixed price per enterprise.  The specific price per enterprise is not
being disclosed due to its proprietary nature. According to AQSIQ, among such
enterprises and platforms include 5,016 enterprises in charge of manufacturing
LNG containers and other pressurized containers, 14,995 enterprises in charge of
charging LNG containers, 8,747 enterprises in charge of manufacturing,
installing, reequipping and repairing boilers, and approximately 1,823
institutes in the Chinese state quality inspection system which check LNG
containers.
 
 Since
AQSIQ's Circular, Project Cooperation Agreement and LNG Contract, the Company
(1) has met and continues to meet with AQSIQ on a routine basis to develop,
coordinate and implement the roll out of AQSIQ's National Safety/Security Plan
as to LNG containers; (2) has developed a roll out plan and budget to implement
the initial phase of AQSIQ’s National Safety/Security Plan pertaining to LNG
containers and the initial designated areas of Beijing, Zhejiang, Shenzhen,
Chongqing, Liaoning, and Yunnan Province; and (3) has completed the development
of a fully operational automated production facility to mark China's LNG tanks,
which AQSIQ has reviewed and approved, and which pursuant to AQSIQ’s Circular
and mandate, LNG tank manufacturers and LNF refilling stations will be required
to purchase from the Company.
 
 On
December 1, 2007, AQSIQ conducted critical discussions in Beijing with key
Chinese national, provincial, and industry leaders regarding the Company’s
Synthetic DNA and KMACK anti-counterfeiting and product safety monitoring
technology and the AQSIQ Contract.  Attending the official conference
that evening were leaders from AQSIQ, each provincial quality inspection
administration, China Special Equipments Inspection Association and each LNG
tank factory, gas station, gas tank inspection station, as well as other
enterprises. The Honorable Cui Gang, Deputy Director of AQSIQ's Special
Equipment Security Supervision Bureau, addressed the
conference.  Earlier in the day, TPID Beijing held seminars at its new
offices to discuss implementation of the S-DNA Special Equipment Security
Taggant Information Supervision System Project mandated in AQSIQ's Circular. The
seminar was hosted by the Honorable Huang Xiaohu, Director of AQSIQ's Credit
Committee. Mr. Zuo Lie, Vice Manager of TPID Beijing, presented a specific
implementation plan for AQSIQ's S-DNA Special Equipment Security Taggant
Information Management System and Project. The seminar was attended by leaders
and enterprises from Beijing, Shanghai, Guangdong, Hubei, Zhejiang and Liaoning
Provinces, all of whom agreed with AQSIQ's endorsement of TPID's technology and
provided comments on implementation.
 
 The
Company has subsequently met with AQSIQ's senior leadership, including its
Director General and Secretary.
 
 The plan
is for the Company to form a new joint venture company in Beijing with AQSIQ
and/or its affiliates.  The new joint venture will be only with the US
parent, True Product ID, Inc. (“TPID US”), rather than TPID Beijing, and will be
owned 70% TPID US, 30% AQSIQ.  The first step will be to begin the
roll out of AQSIQ’s National Security/ Safety Plan in six provinces and
cities designated by AQSIQ within approximately six months.  Upon
successful completion of this initial six month roll out, AQSIQ will enact
additional national laws specifying the details of the continued roll out of the
Company’s SDNA and KMACK technology in the remaining provinces and cities in
China.  AQSIQ has also proposed extending its mandate to use the
Company’s technology to applications other than LNG tanks, including, but not
limited to, elevator parts, other pressurized containers, amusement park
equipment, automobile manufacturing equipment, and cell phone
batteries.
    13
 
 On
January 29, 2008, AQSIQ further formalized its partnership with the Company by
formally issuing the first documents associated with the official written
commitments known as “Red Hat” documents.  The Red Hat Documents are
the initial set of official documents filed by AQSIQ to form the new joint
venture with the Company.  They officially confirm AQSIQ’s commitment
to form the new joint venture with the Company and to implement the LNG Contract
with the Company.  The new joint venture will be called China
Inspection True Product Technology Inc. Limited.  In the initial
documents filed, AQSIQ approved the name, creation, and ownership for the new
joint venture.  The Company and AQSIQ are proceeding with the
remaining steps to register the new joint venture, which the Company believes
will be completed in the Fall of 2008.
 
 In the
Spring of 2008, Company representatives travelled to Liaoning Province, one of
the initial pilot provinces, to help set up the implementation for the Gas Tank
Project in that province.  Company CEO Wilson W. Hendricks III also
flew to China to help with the initial rollout of the Gas Tank
Project.  The Company continued to meet with AQSIQ representatives
regarding the scope for the initial rollout and the use of the Company’s SDNA
and KMACK technology for categories of special equipment other than gas
tanks.
 
 The
Company’s last revenue projections for only the LNG component of the five-year
AQSIQ Contract is over US$2 billion gross and over US$1billion net.
 
 Medical Equipment and
Smartcards in China
 
 In June
2008, the Company was asked, and agreed, to use its S-DNA and KMACK technology
to protect medical devices, sensors and other products and medical smartcards
associated with a Chinese national healthcare joint venture called Worldwide
Lifecare Limited (the “Carelife JV”).  The Carelife JV is affiliated
with James MacKay.  The Carelife JV will provide the non-invasive
breast cancer detection technology of Biofield Corp. (another company affiliated
with James MacKay) and other comprehensive medical technology and services in
China.  The Carelife JV will open a network across China of medical
clinic centers, call centers and data centers for R&D. The first medical
clinic center is scheduled to open in November 2008 at Carelife's China
Headquarters in Shanghai.  In partnership with China's National Labor
Union and funded with an investment by Chinese Government and others of
approximately US$363 million, the Carelife JV anticipates opening more than 500
medical clinic centers across China before 2012 at different Labor Union centers
covering 60% of China's urban population. This national network will be part of
China's national healthcare program to instill best healthcare management
practices and to address critical problems related to its aging population.
China's top insurance companies (China Life Insurance and Ping An Insurance) and
top bank, China Industrial Commercial Bank, have agreed to refer subscribers,
employees, and clients to join the Carelife network.  This National
Healthcare Network will also provide its members the latest smartcard technology
from Versa Card Inc. (a company also affiliated with James MacKay). Versa Card's
medical smartcards will allow Carelife members to make membership,
healthcare-related and other payments and will also provide an electronic data
base for members' medical records and history.  TPID's S-DNA and KMACK
technology will protect members' medical smartcards as well as the medical
devices, sensors and other products provided to members against the
counterfeiting and substandard quality epidemic in China.  Carelife
anticipates that it will enter a strategic partnership with the Chinese Ministry
of Health and the Chinese FDA by the end of 2008 which will extend its network
to state-owned and military hospitals in China, for whom Carelife has agreed to
use our technology to anti-counterfeit medical devices.
 
 Chinese JV Company Outgrows
Old Office and Moves to New Larger Office
 
 To keep
pace with its growth and development, and to help better enable the Chinese JV
Company to fulfill Chinese contracts, on September 28, 2007 the Chinese JV
Company moved into a new larger office located at 11th floor, Jade Palace Hotel,
76 Zhichun Road, Haidian District, Beijing 100086.  The Chinese JV
Company occupies the entire 11th floor
of the Jade Palace Hotel, a new and leading commercial and hotel complex in
Beijing, which is located in a special economic zone (SEZ) and thus allows the
Chinese JV Company to continue to enjoy the same tax and other SEZ-related
incentives it had at the old office.  The new office will now house
the Chinese JV Company’s administrative, sales, marketing, and accounting
departments and will also allow the Company to make taggant and to enlarge the
ability to conduct research and development.
 
 The Company's Continued
Efforts in Non-China Markets
 
 As stated
above, the Company's immediate priority is to focus on solidifying its foothold
in China, implementing its China contracts, especially the AQSIQ Contract, and
generating revenues from its China contracts.  Nonetheless, the
Company continues its efforts to penetrate markets outside China.
 
 With
respect to the United States, the Company has completed its initial business
plan and will target certain strategic industries and applications where the
Company has already successfully demonstrated and tested in the United States or
China, often with multinational companies based in the United States which
manufacture their goods in China. Those industries include, among others,
packaging, pharmaceutical/ biotech (blister packs and bottles), cosmetics, toys
and consumer products, pressurized tanks, and sports and lottery
tickets.
    14
 
 Its
current strategy for non-China markets outside the United States is to enter
into strategic relationships (whether in the form of a joint venture, licensing
or other arrangement) with leading companies in certain markets outside China,
which have developed their own technologies complimentary to the Company's, have
established significant distribution networks in those markets, and/or have
expressed an interest in distributing the Company's technologies in those
markets.  To that end, the Company has met with and received interest
from companies with significant networks in India, the Philippines, Malaysia,
Indonesia, Europe, the United States, Canada and the Middle East.  The
Company's strategy is to benefit from those companies' already established
distribution networks and operational capabilities in those markets, while
minimizing the resources the Company itself would need to distribute and operate
in those markets.  The Company has also met and generated significant
interest from a leading multinational company in the inspection, certification,
and testing
 
 The
Company continues to meet with private and government entities to use its
technology in the United States, Europe, the Philippines, Southeast Asia, the
Middle East, Canada, and Latin America, including in connection with
anti-counterfeiting gas tanks along the lines of the AQSIQ Chinese National Gas
Tank Project.
 
 Among the
industries/applications in China which we have been approached to use our
technology are (1) automobile, motorcycles and automobile/motorcycle parts and
auto insurance policies and other documentations; (2) cigarettes; (3) currency,
checks, and other financial documentation; (4) computer software, hardware, and
other electronics; (5) national welfare and sports lottery tickets; (6)
government records and other items, such as property records, official invoices,
and military uniforms; (7) sports tickets; (8) soft drink, liquor, and other
beverages; (9) art and antiques; and (10) building-related
materials.
 
 Officers, Directors and
Other Personnel/Consultants
 
 Starting
March 2006, James MacKay agreed to serve as the chairman of our Board for a
three-year term with an annual compensation of $300,000.  We entered
into a formal consulting agreement with MacKay, memorializing our arrangement,
on November 11, 2006.  On November 13, 2006 MacKay vested 39,559,961
shares of the Company's common stock as part of the aforementioned Services
Agreement.  The common shares of the Company's stock closed trading on
November 13, 2006 at $0.07 per share resulting in a valuation of $2,769,197,
which was expensed in the quarter ending December 31, 2006. On March 12, 2007,
MacKay resigned as a director. Richard A. Bendis, our then CEO and President,
replaced MacKay as chairman. MacKay continued to support the Company's
initiatives in China and elsewhere.  As stated below, MacKay rejoined
the Company as chairman in August 2007 upon Bendis’ resignation but resigned in
November 2007 upon the appointment of Dunavant as chairman.  Pursuant
to the Company’s agreements wherein MacKay eliminated certain debt owed to him
and the MacKay Group by the Company as of November 2007 and wherein MacKay
agreed to help secure the AQSIQ Chinese National Gas Tank Contract, in June
2008, the Board authorized the issuance to MacKay of 19,142,742 restricted
shares of common stock.
 
 In March
2006, we entered into an employment agreement with Bendis, where he became our
President and CEO for a three-year term, with annual compensation of
$500,000.  In March 2007, he became chairman upon MacKay’s
resignation.  On November 13, 2006 Bendis vested 30,329,303 shares of
the Company's common stock as part of the aforementioned employment
agreement.  The common shares of the Company's stock closed trading on
November 13, 2006 at $0.07 per share resulting in a valuation of $2,123,051,
which was expensed in the quarter ending December 31, 2006.
 
 On August
17, 2007 Bendis voluntarily resigned as chairman, CEO, and president and as a
director of the Company; MacKay rejoined the Company as
chairman.  Sergio da Luz, who was also involved in facilitating the
development of the Chinese markets, joined the Company as president. Li Ning,
the CEO of the Chinese JV Company, joined the Company's Board.  The
Company entered into an agreement with Li Ning to issue him 10,000,000
restricted common shares in return for his serving as a member of the Company's
Board and otherwise supporting the Company with regard to its initiatives in
China.  The common shares of the Company's stock closed trading on
August 16, 2007 at $0.06 per share resulting in a valuation of $600,000, which
was expensed in the first fiscal quarter (September 30, 2007) of Fiscal
2008.  Li Ning resigned as director in February 2008.  In
November 2007, da Luz’s position was changed to president of the Company’s China
operations.
    15
 
 On
November 7, 2007 our Board appointed William R. Dunavant as
CEO.  James MacKay voluntarily relinquished his position as chairman
of the Board to Dunavant who was appointed the new chairman.  Under
his employment agreement with the Company,  Dunavant was to receive,
among other things, an annual salary of $240,000 and 200 million restricted
shares of the Company's common stock (pre reverse split), which he received part
in November 2007 and part in January 2008.  The common shares of the
Company's stock closed trading on November 4, 2007 at $0.031 per share resulting
in a valuation of $6,200,000, which was expensed in the second fiscal quarter
(December 31, 2007) of Fiscal Year 2008.  As discussed below, in March
2008, Dunavant resigned as CEO and chairman and became the managing director of
global strategic initiatives pursuant to an amended employment
agreement.
 
 On
November 7, 2007 the Board voted to retain Rene Hamouth (Hamouth Family Trust
trustee) to consult and assist the Company in market matters.  The
Company issued the Hamouth Family Trust a total of 300 million common shares
(pre the 1-100 reverse stock split), part in November 2007, part in January
2008.  The common shares of the Company's stock closed trading on
November 7, 2007 at $0.052 per share resulting in a valuation of
$15,600,000,  which was expensed in the second fiscal quarter
(December 31, 2007) of Fiscal Year 2008.  On June 24, 2008, the
Company terminated any arrangement with Hamouth.
 
 Effective
November 8, 2007, Michael J. Antonoplos (a director since April 2007) was
appointed as the Company’s Secretary.  In June 2008, the Company, as
authorized by the Board, issued Antonoplos 400,000 restricted common shares for
services rendered.
 
 Effective
November 15, 2007, the Board appointed Wilson W.  Hendricks IIIas
the Company’s COO.  Under his then employment agreement, Hendricks was
to receive, among other things, an annual salary of $150,000 and 250,000
restricted shares of the Company's common stock post reverse split. As stated
below, in March 2008, Hendricks was appointed as CEO and a director of the
Company under an amended employment agreement and resigned as an officer and
director of the Company in October 2008.  In November 2007, new
management engaged Brandee Dunavant, Jon Brunot, and Zack Rivera as consultants
related to investor and public relations and preparation of financial materials
and engaged Tom Hess and Saul Ewing as corporate and securities
counsel.  In June 2008, Dunavant, Brunot and Hess were issued 100,000,
100,000, and 200,000 common shares respectively.   The Obermayer
law firm continued to act as counsel.
 
 On
January 14, 2008, our Board appointed KeKe Wang as our
president.  Under his three-year employment agreement, Wang is to
receive, among other things, an annual salary of$150,000 and 250,000
restricted shares of the Company's common stock post reverse split.
 
 On
February 18, 2008 the Board accepted the resignation of Li Ning as a director of
the Registrant, effective immediately.
 
 On March
4, 2008, Dunavant resigned as CEO and as a director, and the Board approved the
appointment of Wilson Hendricks III as CEO and a director.  We entered
into a new employment agreement with Hendricks wherein Hendricks is to earn a
base salary of no less than $240,000 per year and receive 500,000 restricted
shares of common stock immediately upon completion of the Company’s 1 for 100
reverse stock split with an opportunity to receive additional shares based on
performance.  In June 2008, the Board authorized the issuance of
1,000,000 restricted shares of common stock to Hendricks.
 
 On March
4, 2008, upon his resignation as CEO and director of the Company, the Company
entered into an Amendment to Dunavant’s November 7, 2007 Employment Agreement.
 Pursuant to the amendment, Dunavant’s title and position was changed from
Chief Executive Officer to Managing Director of Global Strategic Initiatives;
Dunavant’s base salary was changed from $240,000 per annum to $200,000 per
annum. All other terms and conditions in Dunavant’s November 4, 2007 employment
agreement with the Company remained unchanged and in full force.
 
 In March
2008, we engaged Eric Littman as securities counsel.  In May 2008, we
engaged Richard Blumberg as consultant to help advise on funding, legal and
other matters.  In June 2008, Littman and Blumberg received 200,000
and 300,000 common shares.
 
 Sergio da
Luz resigned from the Board, effective June 9, 2008.  In June 2008,
the Board authorized the issuance of 1,000,000 restricted shares of common stock
to da Luz.
    Funding
Initiativesduring FY 2008
 
 Since May
2006, we have relied on funding for our U.S. and Chinese operations primarily
from James MacKay and the MacKay Group, from the sale of our stock, and from
bridge loans from certain individuals and entities.  In November 2007,
Dunavant and Hamouth and their team were brought in to raise approximately US$3
million in bridge loans and US$15-20 million in major funding to rollout the
AQSIQ Chinese National Gas Tank Contract and for US operations.  In
November 2007, we raised $200,969 as a result of the sale of equity units
consisting of one share of the Company’s common stock and a warrant to purchase
1⁄2 share of common stock at an exercise price of $0.10 per share for a period of
one year subsequent to the purchase of the equity unit.  The price of the
units was $0.065 per share resulting in the issuance of 3,091,823 shares of the
Company’s common stock and the issuance of 1,545,912 warrants to purchase the
Company’s common stock.  The proceeds were wired to the Chinese JV Company
to fund China operations.  In January 2008, we raised $450,000 as a
result of the sale of equity units consisting of one share of the Company’s
common stock and a warrant to purchase 1⁄2 share of common stock at an exercise
price of $0.085 per share for a period of one year subsequent to the purchase of
the equity unit.  The price of the units was $0.05 per share resulting in
the issuance of 9,000,000 shares of the Company’s common stock and the issuance
of 9,000,000 warrants to purchase the Company’s common stock.
   16
  
 However,
the total necessary funding have not yet been secured and we were forced to
pursue alternative funding efforts.  In April 2008, we engaged Herbert
Towning and his company, Brantridge Holdings Limited, pursuant to a consulting
agreement to raise the funding needed to implement the AQSIQ Chinese National
Gas Tank Contract.  In July 2008 Brantridge advised us that we had
received commitments for the first two million dollars (US$2,000,000) towards
our initial US$5 million private placement.  This funding however has
not yet been secured, other than a stock subscription (46,315 shares) by
accredited investor, Neville Sequeira, at US$1.50 per share for £35,000 in
August 2008.
 
 In the
interim, we continue to receive funding from James MacKay and the MacKay
Group.  Since November 2007, MacKay and the MacKay Group have helped
fund us and TPID Beijing over US$450,000.  At the same time, MacKay
has kept the AQSIQ Chinese National Gas Tank Contract alive through his
relationships with Chinese Government.
 
 However,
without immediate funding, the future of this Company, TPID Beijing, and the
AQSIQ Chinese National Gas Tank Contract is in serious jeopardy.  We
need approximately US$2 Million in funding to commence the initial rollout of
the AQSIQ Chinese National Gas Tank Contract and complete the registration of
the new Chinese Gas Tank JV with AQSIQ.  We need funding to engage
experts from outside China to help rollout the AQSIQ Chinese National Gas Tank
Contract.  We need funding to support TPID Beijing.  We need
funding for our U.S. operations.  The current state of the world
financial markets has only exacerbated our funding situation and has affected
several of the more prominent potential institutional funders we have
met.
 
 We expect
that our existing cash balances and cash flows from operations (as of June 30,
2008) will not be sufficient to finance our working capital and capital
expenditures requirements through Fiscal Year 2009.  We continue to
seek strategic debt and equity investors and partners who share our vision and
will invest in the long-term strategic vision of our ability to go
forward.  Additionally, we may generate cash via the sale of shares in
the equity markets or from cash generated from product licensing
transactions.  However, if events occur or circumstances change such
that we fail to meet our operating plan as expected, we may require additional
funds to support our working capital requirements or for other purposes and may
seek to raise additional funds through public or private equity or debt
financing or from other sources.  We cannot be assured that any form
of such financing will be available on commercially reasonable terms or at
all.
 
 Debt Reduction Efforts in FY
2008
 
 On August
15, 2007, MacKay Group Limited (“MKG”) executed a binding term sheet to provide
us with a line of credit of up to US$150,000 to help fund the initiatives and
operations in China and the U.S.  The terms and conditions were as
follows:
  ·
              Repayment Term:
      one (1) year commencing from the receipt of each tranche of Funds (the
      “Repayment Term”);
  ·
              Interest: 12%
      compound interest per annum;
  ·
              Prepayment: no
      prepayment without MKG’s approval
  ·
              Convertibility:
  ·
              At
      anytime during the Repayment Term, MKG has the right to convert the entire
      amount of principal and accrued interest or any portions thereof into
      shares of the Company at a share price equal to the lesser of: (a) the 70%
      of the share price at the close of the market as of receipt of funds; or
      (b) the terms extended by the Company to a funder making a total equity
      investment of at least US$2 million or in connection with a
      merger/acquisition or change in control (the “Convert
    Rate”);
  ·
              Warrants: The
      Registrant shall issue to MKG without additional consideration warrants to
      purchase that number of shares of the Company’s common stock equal to the
      principal amounts advanced by MKG, exercisable at a share exercise price
      equal to the Convert Rate.  The term for the warrants shall be five
      (5) years.
   17
   In August
2007 MKG executed a memorandum of understanding (“MOU”) with us, in which upon
MKG’s request, we will repay MKG for monies which MKG advanced to or for us or
TPID Beijing, between May 30, 2006 and August 1, 2007 (approximately US$1
Million), to help support TPID Beijing’s operations in China (the “MKG Advanced
China Funds”).  To qualify for repayment, the MKG Advanced China Funds must
be properly documented, must have been used solely for TPID JV and its
operations related to the field of anti-counterfeiting and product
authentication, and are subject to other requirements. Under the MOU, MKG
and the Company shall work in good faith to agree upon the repayment terms and
conditions, which shall be memorialized in a definitive written agreement(s).
  The parties agree that the repayment arrangement shall come in the
form of a convertible note with appropriate compound interest with warrants.
 The terms and conditions shall be, at a minimum, comparable to those we
have given to funders as of August 1, 2007.
 
 On August
16, 2007, our Board authorized the Company to amend Bendis' and MacKay's
employment and consulting agreements to give Bendis and MacKay the right, but
not the obligation, to convert any monies they are owed by the Company into the
Company's common shares at a share price equal to the share price of our common
stock at the close of the market on August 3, 2007.
 
 In
November 2007 we reached agreements with three parties that reduced the
Company’s total current liabilities by approximately $2,742,000.  The
three parties agreed to cancel the debt owed them pursuant to various agreements
with the Company.  The first such agreement was reached with James MacKay
individually.  As of September 30, 2007 MacKay was owed $462,500
representing all compensation earned by him and expenses owed him since he
joined the Company. He agreed to cancel that amount in full.
  The
second such agreement was reached with MKG. As reported in the Company’s
 Form 8-K filed  August 17,  2007,  according  to
financial records  relating to TPID Beijing,  As of August 1,
2007 MKG had advanced approximately  US$1 million to or for TPID Beijing
and its anti-counterfeiting/product authentication operations. Also, as reported
in the Company's  August 17, 2007 Form 8-K, on August 15, 2007,  MKG
executed a binding term sheet to provide the Company with a line of credit of up
to One Hundred Fifty Thousand Dollars  (US$150,000) to help fund the
initiatives and operations in China and the U.S. The terms and conditions were
described in the Company’s August 17, 2007 Form 8-K. MKG has agreed to cancel
these amounts, approximately $1,150,000, in full.
 
 The third
agreement was reached with Sure Trace Security Corporation (”SSTY”). On January
4, 2007, the Company entered into a Restructuring Agreement with Sure Trace
Security Corporation. (the “Restructuring Agreement”). Pursuant to the
Restructuring Agreement, the Company acquired a 40% ownership interest in the
Chinese JV Company, held by SSTY, STA, and Chan. Under the Restructuring
Agreement, the Company agreed, in part:
 
 (i)
              To
      pay SSTY a royalty in the amount of 2% of its gross receipts which the
      Company actually receives and collects from customers outside China, Hong
      Kong, and Macau for a period of 2 years commencing as of January 4, 2007
      the “Royalty”); and
  (ii)
              To pay SSTY,
      on an interest-free basis, within 3 years of the effective date of the
      Restructuring Agreement $1,130,000, minus the amount of penalties and
      interest TPID must pay the former control block holder under the Amended
      Payment Agreement (the “Subject
Payment”).
  In return
for the Licensing Rights defined below, SSTY agreed to cancel its rights to
receive the Royalty and to cancel in full, the total Subject Payment of
$1,130,000 effective immediately. The Company has agreed to grant SSTY, or
its assignee or designee, the exclusive worldwide Licensing Rights in and to any
home consumer applications of the Company’s anti-counterfeiting and
authentication technologies intended for self-application/use by the consumer
solely on his/her personal items, including, but not limited to, S-DNA and
related technologies that exist and as they may be developed in the future, in
all channels of direct response and consumer distribution.  Subject to the
Company and SSTY reaching mutually acceptable terms in the manner and form to be
mutually agreed upon by the parties within 30 days of the date of this letter
agreement. SSTY shall also be granted the right to sub-license others to air
and/or sell through broadcast and cable television media via telemarketing,
direct mail, package inserts, syndication and any other direct response
marketing media and via catalogue, internet and related electronic marketing,
retail sales and any other means and the non-exclusive right to use the
copyrights, trademarks, patents, service marks and trade names in connection
with their sales thereof.
 
 On March
31, 2008, Bendis agreed to eliminate all compensation and other monies owed by
the Company under any employment and consulting agreement (approximately
$863,244), in return for the Company’s agreement to allow him to maintain stock
previously issued to him.
    18
 
 RESULTS
OF OPERATIONS
 
 Year
Ended June 30, 2008 and 2007
 
 During
the twelve months ended June 30, 2008 and 2007, the Company’s had no revenues,
as the operations of the Chinese JV Company had not begun customer sales, except
for certain trial runs the Chinese JV Company conducted for Chinese
customers
 
 The
Company had operating expenses of $34.5 million for the twelve months of fiscal
2008, with the majority of the expense ($32.8 million) related to stock
compensation of employees and consultants, compared to operating expenses of
$6.6 million for the first twelve months of fiscal 2007, with the majority of
the expense ($5.8 million) related to stock compensation of an employee and
consultant.  General and administrative expenses increased by
approximately $1.2 million for the twelve moths ended June 30, 2008 when
compared to the same period in 2007. The increase is primarily due to legal and
travel expenses, relating to the acquisition of the Chinese joint ventures. All
other expenses remained relatively constant.  During fiscal year 2008,
11.1 million shares of the Company’s common stock were issued or issuable for
services and stock based compensation, resulting in a charge of $32.9 million
based upon the closing price of the Company’s common stock on the date the
respective shares issuances were authorized by the Company’s board of directors,
compared to approximately 71.3 million shares of the Company’s common stock
issued for services and stock based compensation, during the same period in
2007, resulting in a charge of $5.1 million, based upon the closing price of the
Company’s common stock on the date the respective shares issuances were
authorized by the Company’s board of directors. The Company had a 100 for 1
reverse stock split in the fiscal year ended June 30, 2008 (see notes to
consolidated financial statements). The increase of operating expenses from the
twelve months ended June 30, 2008 when compared to the same period in is
attributable to additional expense related to the Gas Tank Contract with AQSIQ
and to stock compensation of employees and consultants, when the Company brought
in new management and personnel (a new chief executive officer, chief operating
officer, and consultant) in November 2007 to help implement and fund the Gas
Tank Contract with AQSIQ.
 
 The
Company reported a loss before minority interest of approximately $37.2 million
for the twelve months ended June 30, 2008, compared to a loss before minority
interest of approximately $6.7 million for the twelve months ended June 30,
2007, an increase of $30.5 million as a direct result of the additional expense
related to the Gas Tank Contract with AQSIQ and stock compensation of employees
and consultants, when the Company brought in new management and personnel (a new
chief executive officer, chief operating officer, and consultant) in November
2007 to help implement and fund the Gas Tank Contract with AQSIQ.
 
 Other
income in the current period included approximately $1.6 million for the write
off of liabilities, as discussed previously in Note J to the financial
statements.  In November 2007, as discussed in Note J, MKG agreed (1)
to assign to TPID US the rights MKG has regarding the MKG $1 Million Advance and
(2) to forgive any debt which MKG may have directly vis-a-vis TPID US as a
result of the MKG $1 Million Advance and/or MKG’s assignment to TPID US related
thereto. Accordingly, any right that MKG may have, vis-à-vis the Chinese JV
Company, as a result of the MKG $1 Million Advance (whether in the form of
repayment, increased capital, some combination of both or otherwise), has been
assigned to TPID US and should be considered an asset of TPID
US.  Similarly, as of November 16, 2007, MKG had forgiven any debt it
may be owed by TPID US as a result of the above-mentioned assignment (whether
the rights being assigned took the form of additional capital in the Chinese JV
Company or otherwise). The amounts due MKG by the Chinese JV Company remain
recorded upon the financial statements of the Chinese JV Company and as such are
recorded in the attached consolidated financial statements of the Company at
June 30, 2008.
 
 Minority
interest for the current fiscal period was approximately
$344,000.  The add back of minority interest represents the 40%
portion of the Chinese JV loss not owned by the Company, as the Company only
owns a 60% interest in the Chinese JV.  Minority interest for the
fiscal year ended June 30, 2007 was approximately $27,000.
 
 Therefore,
for the twelve-months ended June 30, 2008, the Company had a loss of
$36.9million, compared to a loss of $6.6 million for the same period in 2007,
attributed to the additional expense related to the Gas Tank Contract with AQSIQ
and to stock compensation of employees and consultants, when the Company brought
in new management and personnel (a new chief executive officer, chief operating
officer, and consultant) in November 2007 to help implement and fund the Gas
Tank Contract with AQSIQ.
   19
  
 FINANCIAL
CONDITION
 
 Liquidity
and Capital Resources
 
 During
the twelve months ended June 30, 2008, the Company's cash decreased by
approximately $11,000 to approximately $32,000.
 
 The
decrease in cash and cash equivalents during the first twelve months of fiscal
2008 is attributable to cash out flows of approximately $881,000, from operating
activities.  These cash out flows were partially offset by in flows
from financing activities of approximately $937,000 and cash outflows from
investing of approximately $42,000, associated with the purchase of fixed
assets.
 
 Financing
activities cash inflows consisted of approximately $501,000 of proceeds from the
sale of equity by the Company and approximately $444,000 of financing, offset by
approximately $7,400 in repayment of lease obligation for the twelve months
ended June 30, 2008.
 
 Cash
utilized by operating activities totaled approximately $881,000 in the twelve
months ended June 30, 2008. Cash outflows included the approximated $37.2million
net loss for the period, the $1.6 million write off of liabilities which was
non-cash in nature, the $344,000 credit for minority interest which was also
non-cash in nature. There was an approximately $4,300,000 of write down of
impairment of goodwill for the twelve months ended June 30, 2008. The goodwill
is associated with the acquisition of the Chinese Joint Ventures in 2007, which
were also non-cash in nature. Other non cash activities included approximately
$5.0 million of stock based compensation, $27.8 million for the issuance of
common stock for consulting fees, approximately $99,000 of depreciation and
amortization, approximately $669,000increase in related party payable and
approximately $55,000 in accrued interest payable. Partially offset by a
decrease in accounts receivable, prepaid expenses and interest on notes
receivable of approximately $121,000, 37,000 and 17,000,
respectively.
 
 As
discussed in Note J, in November 2007, MKG agreed (1) to assign to TPID US the
rights MKG has regarding the MKG $1 Million Advance and (2) to forgive any debt
which MKG may have directly vis-a-vis TPID US as a result of the MKG $1 Million
Advance and/or MKG’s assignment to TPID US related thereto. Accordingly, any
right that MKG may have, vis-à-vis the Chinese JV Company, as a result of the
MKG $1 Million Advance (whether in the form of repayment, increased capital,
some combination of both or otherwise), has been assigned to TPID US and should
be considered an asset of TPID US.  Similarly, as of November 16,
2007, MKG had forgiven any debt it may be owed by TPID US as a result of the
above-mentioned assignment (whether the rights being assigned took the form of
additional capital in the Chinese JV Company or otherwise). The amounts due MKG
by the Chinese JV Company remain recorded upon the financial statements of the
Chinese JV Company and as such are recorded in the attached consolidated
financial statements of the Company at June 30, 2008.
 
 Off-Balance Sheet
Arrangements
 
 We do not
have any off-balance sheet arrangements.
 
 ITEM
7A.  Quantitative and Qualitative Disclosures about Market
Risk
 
 RISK
FACTORS:  RISKS RELATED TO OPERATING A BUSINESS IN THE PEOPLE'S
REPUBLIC OF CHINA ("PRC")
 
 Joint
ventures such as TPID Beijing are subject to general risks of operating in the
PRC.  These include risks associated with the political and economic
environment, foreign currency exchange and the legal system in the PRC. The
economy of the PRC differs significantly from the economies of the western
industrialized nations in such respects as structure, level of development,
growth rate, capital reinvestment, repatriation, resource allocation,
self-sufficiency, rate of inflation and balance of payment positions, among
others. The PRC government encourages substantial private economic activities,
but this has only been the case since the early 1990's. Recent pronouncements in
the PRC were enacted to facilitate foreign investment in certain segments of
Chinese industries which to date were primarily reserved for Chinese-owned or
Chinese state-owned enterprises. Moreover, recent pronouncements were enacted to
facilitate the ability of Western entities to either hold a majority interest in
a Chinese joint venture company or to form a wholly-owned foreign-owned
enterprise.  Given the recent nature of these pronouncements, it
remains to be seen how uniformly they will be enforced and interpreted
throughout China.  Further, despite the recent pronouncements, when a
western entity is involved in significant Chinese government-related initiatives
as the Company is, there remains advantages to forming a Sino-Western joint
venture to build the type of relationships needed to secure and effectuate such
government-related initiatives.
   20
 
 The
Chinese economy has experienced significant growth in the past several years,
but such growth has been uneven among various sectors of the economy and
geographic regions.  On one hand, China's development and growth have
presented opportunities for the Company. The Company and its Chinese joint
venture company affiliate have been designated to help Chinese government and
industry address issues and challenges precipitated by such development and
growth. On the other hand, such development and growth may present risks to
entities operating a business in the PRC such as the Company and its Chinese
joint venture company affiliate and their contracts and other opportunities in
China.  Because of the challenges created by such growth, the PRC
government has indicated and taken certain steps to control such growth and
address such challenges. Actions by the PRC government to control inflation, for
example, have restrained economic expansion in the recent past across several
industrial sectors.  Similar and continued actions by the PRC
government in the future could have a significant adverse effect on domestic
economic condition in the PRC.
 
 While
there have been tremendous strides since its admission into the WTO, the PRC's
comprehensive system of laws is still developing and evolving, and enforcement
of existing laws at many different government levels may be uncertain, sporadic,
and not uniform. There have been many laws and regulations promulgated in recent
years dealing with economic matters in general and foreign investment in
general.
 
 There is
no guarantee that there will not be any changes respecting Chinese government,
economy, laws, and regulation which may adversely affect the Company and its
Chinese joint venture company affiliate and the AQSIQ Gas Tank
Project.  There is no guarantee that Chinese Government may in the
future enact regulatory, legal, economic and political regulations or policies
which would adversely affect the Company and its Chinese joint venture company
affiliate and the contracts and opportunities in China, including the AQSIQ Gas
Tank Project.
 
 RISK
FACTORS:  RISKS RELATED TO CURRENT WORLD FINANCIAL
MARKETS
 
 While the
Company has sought and continues to seek the necessary funding (including for
the AQSIQ Gas Tank Project) from sources throughout the world, it has as of yet
unable to secure such funding.  The recent difficulties and conditions
regarding world markets have exacerbated the Company’s funding
situation.  The current difficulties of the world markets have
affected several of the more prominent potential funders the Company has
approached.  Without immediate funding, the survival of the Company
and the AQSIQ Gas Tank project is at risk.
 
 ITEM
7.                            Financial
Statements
 
 Our
consolidated financial statements and the reports of Rotenberg & Co. LLP and
Jewett, Schwartz, Wolfe & Associates, for the year ended June 30, 2007 and
2008 respectively are attached to this Annual Report on Form 10-K beginning on
page F-1 and are incorporated herein by reference.
 
 ITEM
8.                          
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
 
  Effective
May 6, 2008, our Board dismissed Rotenberg & Co., LLP (“Rotenberg”)  as
our independent registered public accounting firm and retained  the
accounting firm of Jewett, Schwartz, Wolfe & Associates (“JSWA”) as our new
independent registered public accounting firm.  The primary reason for the
change is that JSWA has a working relationship with the our current counsel and
financial personnel.
  Rotenberg’s
report on our financial statements for the past two years did not contain an
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles.
  The
decision to change our accountants was recommended and approved by our Board on
May 6, 2008.
  During
our most recent two fiscal years and any subsequent interim period preceding
such dismissal, there were no disagreements with Rotenberg on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
   21
   On May 6,
2008 we engaged JSWA as our new principal independent registered accounting firm
to audit our financial statements for the fiscal year ended December 31, 2008.
 Our Board recommended and approved the engagement of JSWA.
  During
the Company’s fiscal years ended December 31, 2006 and 2005 and through May 6,
2008, we did not consult JSWA with respect to (i) the application of accounting
principles to a specified transaction, either completed or proposed; or the type
of audit opinion that might be rendered on the Company's consolidated financial
statements; or (ii) any matter that was either the subject of a disagreement or
a reportable event.
  ITEM 8A. CONTROLS AND
PROCEDURES
 
 Our chief
executive officer and chief financial officer (the “Certifying Officers”) are
responsible for establishing and maintaining disclosure controls and procedures
for our company and our subsidiary. Such officers have concluded (based upon his
evaluation of these controls and procedures as of the end of the period covered
by this report) that our disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in this report is
accumulated and communicated to management, including our principal executive
officers as appropriate, to allow timely decisions regarding required
disclosure.
 
 The
Certifying Officers have also indicated that there were no significant changes
in our internal controls or other factors that could significantly affect such
controls subsequent to the date of his evaluation, and there were no corrective
actions with regard to significant deficiencies and material
weaknesses.
  Our
management, including the Certifying Officers, do not expect that our disclosure
controls or our internal controls will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. In addition, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within a company have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people or by management
override of the control. The design of any systems of controls also is based in
part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Because of these inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.
 
 CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING
 
 As
required by Rule 13a-15(d), the Company's Chief Executive Officer and Chief
Accounting Officer, also conducted an evaluation of the Company’s internal
controls over financial reporting to determine whether any changes occurred
during the fourth fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting. During the preparation of the Company's financial
statements as of and for the year ended June 30, 2008, the Company concluded
that the then current system of disclosure controls and procedures needed
improvement, partly due to the transition to new management, facilities, and
auditors. As a result of this conclusion, the Company initiated changes in
internal control. It should be noted that any system of controls, however well
designed and operated, can provide only reasonable, and not absolute, assurance
that the objectives of the system will be met. In addition, the design of any
control system is based in part upon certain assumptions about the likelihood of
future events.
 Lack of
Adequate Accounting Staff
 
 Due to
limitations in financial and management resources, the Company does not have
adequate accounting staff.  As a result, the Company took steps to
address its understaffed Finance and Accounting team to correct this material
weakness.  The Company engaged an independent contractor with
extensive CFO-level management and SEC reporting experience in public
companies.  The Company feels this addition to the Company's Finance
and Accounting team will improve the quality of future period financial
reporting.
 
 ITEM
8B.   Other Information
 
 None
    22
 
 PART
III
 
 Item
9.                      Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act
 
 The
following table sets forth information regarding the directors of the
Corporation as of October 14, 2008, all of which were appointed for a one-year
term.
 
 Name,
      Age and
                Principal
      Occupation
              Year
                First
                Appointed
              Certain
      Other Information
 
 Michael
      J. Antonopolos (56), Director
              2007
              Antonopolos
      is a 32-year veteran of the commercial real estate industry and is a
      principal of a firm he started in 2000 which provides debt and equity for
      a variety of real estate investments.  As a partner in a
      privately held real estate investment fund, Antonopolos was instrumental
      in raising and placing over $700 million in investment opportunities. He
      has been involved in the development of over 7 million square feet of
      office, retail, and industrial properties and has negotiated lease and
      equity transactions valued at more than $9 billion.  Antonopolos
      was also a part of a 23 person strategic task force charged with preparing
      a 5-year strategic plan for a $350 million international service company.
      Prior to 2000, Antonoplos was Senior Vice President and Managing Director
      for a national real estate services company where he directed all
      corporate advisory activities throughout the Eastern U.S.  In
      this capacity,  Antonoplos advised corporate clients on
      administration and strategic implementation of their real estate
      portfolios, which exceeded $7 billion in total value.David
      Bruce Hong (39), Director
              2008
              Educated
      in the United States and England, Hong previously helped oversee
      distribution, sales and business development for Asian and multinational
      companies in a variety of diverse industries in the People’s Republic of
      China, Hong Kong, Macau, Taiwan, Philippines, Thailand, Malaysia,
      Indonesia, Japan and the United States, serving as CEO, a board member,
      director for the Asian-Pacific Region, director for business development,
      and other capacities. He helped oversee distribution, sales, promotions,
      and business development in the Asian-Pacific Region for such companies as
      7-Eleven, KFC, Sands, 3M, Audi, Budweiser, Citibank, J. Walter Thompson,
      and Nestle, among others. He was also a licensed financial controller
      within the insurance industry for more than 10 years, and has extensive
      logistic management experience.  Hong has helped our Chinese
      operations since December 2007.
 
 James
MacKay was chairman of our Board from May 2006 to March 2007 and from August
2007 to November 2007.  Richard Bendis was chairman of our Board from
March to August 2007.  William Dunavant was chairman of our Board from
November 2007 to March 2008.  Wilson Hendricks was a director from
March 2008 to October 2008.  Li Ning was a director from August 2007
to February 2008.  Sergio da Luz was a director from May 2007 to June
2008.
 
 EXECUTIVE OFFICERS
 Name
                Age
                Position HeldKe
      Ke Wang
                48
                PresidentMichael
      J. Antonoplos
                56
                Secretary,
      Chief Accounting Officer &
Director
 
 Bendis
was CEO from May 2006 to August 2007.  Dunavant was CEO from November
2007 to March 2008.  Hendricks was CEO from March 2008 to October
2008.
 
 Da Luz
was President from May 2007 to November 2007 and President, China Operations
from November 2007 to January 2008. Hendricks was COO from November 2007 to
March 2008.
 
 Board
of Directors and Committees
 
 The Board
currently has two directors.  The Corporation currently does not have
regular Board meetings but the directors consult on significant matters
affecting the Corporation.  The Corporation also does not have an
Audit Committee.  In the fiscal year ending June 30, 2009, the
Corporation expects to hold regular Board meeting, to increase the size of the
Board and to constitute Board committees including a Audit, Nominating and
Compensation Committees.
 
 The
Corporation currently does not have a Code of Ethics but expects to develop one
during the fiscal year ending June 30, 2009.
 
 Item
10.                                Executive
Compensation
 
 The chart
below lists the Company’s former and current officers, directors, and employees
and their compensation.
 
 Richard
      A. Bendis
                -President/CEO
      (March 2006 to August 2007)
                -Chairman
      (March 12, 2007 to August 2007)
              Employment
      Agreement:
                --March
      2006 to August 9, 2007
                --$500,000/
      year
                --30,329,303
      shares
                
                Consulting
      Agreement:
                --August
      9, 2007 to March 31, 2008
                --$240,000/
      year
                
                On
      March 31, 2008, Bendis agreed to eliminate all compensation and other
      monies owed by the Company under any employment and consulting agreement
      (approximately $863,244), in return for the Company’s agreement to allow
      him to maintain stock previously issued to
him.
  23
  
 James
      MacKay
                Chairman
      (March 2006 to March 2007; August 2007 to November 2007)
              Consulting
      Agreement-November 2007:
                -$300,000/year
                -39,559,961
      shares
                
                In
      November 2007, MacKay agreed to eliminate all consulting fees owed to him
      up to November 7, 2007 (approximately $462,500).
                
                Pursuant
      to the Company’s agreements wherein MacKay eliminated certain debt owed to
      him and the MacKay Group by the Company as of November 2007 and wherein
      MacKay agreed to help secure the AQSIQ Chinese National Gas Tank Contract,
      in June 2008, the Board authorized the issuance to MacKay of 19,142,742
      restricted shares of common stock.William
      R. Dunavant
                --CEO
      and Chairman (November 2007 to March 2008)
                --Managing
      Director, Global Strategic Initiative (March-July 2008)
              Employment
      Agreement-November 2007
                --$240,000/year
                --200,000,000
      shares
                Amended
      Employment Agreement-March 2008
                --$200,000/yearWilson
      W. Hendricks
                --COO
      (November 2007 to March 2008)
                --CEO
      and director (March to October 2008)
              Employment
      Agreement-November 2007
                --$150,000/year
                Amended
      Employment Agreement-March 2008
                --$240,000/year
                --500,000
      shares upon completion of reverse stock split (anticipated May
      2008)
                --opportunity
      to receive another 500,000 shares at end of year 1
                
                In
      June 2008, as authorized by the Board, Hendricks was issued 1,000,000
      restricted common shares.KeKe
      Wang
                -President
      (January 2008)
              Employment
      Agreement-January 2008
                --$150,000/year
                --250,000
      shares upon completion of reverse stock split (anticipated May
      2008)
                --opportunity
      to receive another 250,000 shares at end of year 1Li
      Ning
                --Director
      (August 2007 to February 2008)
              Director’s
      Agreement—August 2007:
                --10,000,000
      sharesSergio
      da Luz
                --Director
      (May 2007 to June 2008)
                --President
      (August 2007 to November 2007)
                --President,
      China (November 2007 to January 2008)
              Currently
      an employment contract does not exist.
                
                In
      June 2008, as authorized by our Board, da Luz was issued 1,000,000
      restricted common shares.Michael
      J. Antonoplos
                --Director
      (April 2007)
                --Secretary
      (November 2007)
              Director’s
      Agreement :
                --
      1,000,000 shares (pre-reverse stock split)
                
                In
      June 2008, as authorized by the Board, Antonoplos was issued 400,000
      restricted common shares.David
      Hong
                --director (october 9, 2008-)
              Not
      yet determined
                In July 2008, as authorized by the Board, Hong was
      issued 100,000 restricted common shares for consulting services rendered
      to our Asian operations since December
2007
 
   24
   Item
11.                      Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
 
 The
following table sets forth information with respect to the beneficial ownership
of the Corporation’s Common Stock as of October 10, 2008 by:
 
 ·
              Each
      person who is known by us to beneficially own 5% or more of our
      outstanding common stock;
 ·
              Each
      of our executive officers named in the Summary Compensation
      Table;
 ·
              Each
      of our directors; and
 ·
              All
      of our officers and directors as a
group.
 
 Beneficial
ownership is determined in accordance with SEC rules, and the information is not
necessarily indicative of beneficial ownership for any other purpose. In
computing the number of shares beneficially owned by a person, we have included
shares for which the named person has sole or shared power over voting or
investment decisions and also any shares of Common Stock which the named person
has the right to acquire, through conversion or option exercise, or otherwise,
within 60 days after October 14, 2008 Beneficial ownership calculations for 5%
stockholders are based solely on publicly-filed Schedule 13Ds or 13Gs, which 5%
stockholders are required to file with the SEC.  The inclusion of any
shares of stock deemed to be beneficially owned does not constitute an admission
of beneficial ownership of those shares. Except as otherwise indicated, and
subject to applicable community property laws, to the Corporation’s knowledge,
the persons named below have sole voting and investment power with respect to
all shares of Common Stock held by them as of September 30, 2007. Unless
otherwise indicated, the address of each beneficial owner listed below is c/o
Corporate Secretary, True Product ID, Inc., 1615 Walnut Street, 3rd Floor,
Philadelphia, PA 19102.
 
 
 Name
      of Beneficial Owner
              
              Amount
      and Nature of BeneficialOwnership
      of Stock
              
              Percentage
      of class of Common Shares OwnedJames
      MacKay (3)
              
              19,406,006
              
              53.21%Rene
      Hamouth (4)
              
              3,000,000
              
              8.23%William
      Dunavant (5)
              
              2,000,000
              
              5.48%Michael
      Antonopolos (1) (2) (6)
              
              400,000
              
              1.1%David
      Hong (1) (7)
              
              100,000
              
              <1%Ke
      Ke Wang (2) (8)
              
              250,000
              
              <1%All
      of our directors and officers as a group including those named
      above
                (3
      persons)
              
              750,000
              
              2.06%
 
 (1)
              Director
 (2)
              Officer
 (3)
              Includes
      19,142,742 shares of Common Stock issued to MacKay pursuant to his
      agreements to forgive debt owed to him and MKG prior to August 1, 2007 and
      to help the Company with the AQSIQ National Gas Tank Contract, as well as
      shares received as a result of the May 2006 issuance of dividend shares.
      MacKay also holds 1,000,000 shares of Series A Preferred Stock of the
      Corporation
 (4)
              Issued
      to the Hamouth Family Trust as consideration for consulting the Company
      regarding market matters.
 (5)
              Issued
      to Dunavant pursuant to his November 2007 employment
    agreement
 (6)
              Issued
      to Antonoplos for services rendered as director since April 2007,
      secretary since November 2007 and as a consultant since Fall of
      2006
 (7)
              Issued
      to Hong for services rendered as consultant to TPID Beijing and TPID HK
      since December 2007
 (8)
              Issued
      to Wang pursuant to his January 2008 employment
  agreement
    25
  Item
12. Certain Relationships and Related Transactions
 
 As part
of his November 2006 Consulting Agreement, we agreed to pay MacKay (1) a
contract-related incentive of 2% of our collected bookable gross receipts from
the sale or licensing of and/or other compensation received with respect to our
products, technology and services worldwide; and (2) a funding-related incentive
of 2% of our gross proceeds received by us as a result of any funding or
financing, which arose in whole or in part from MacKay’s efforts.
 
 On June
12, 2007, the Corporation entered into a fund-raising agreement with Antonopolos
that provided that:
 (1)           in
the event he introduces a potential funding or financing source for the
Corporation and that source directly or indirectly provides funding or financing
to the Corporation through itself or one of its affiliates or relationships in
an amount of up to Two Million U.S. Dollars (US$2,000,000), the Corporation will
pay you or one of your affiliated entities:
 (a)           five
percent (5%) of such monies raised in cash upon the Corporation’s receipt of
such funds; and
 (b)           five
percent (5%) of such monies raised in restricted common stock of the Corporation
based on the Corporation’sshare price at the close of the market on the business
day before the date the Corporation receives such funds, which shall be issued
and shall vest immediately upon receipt of such
funds;  and
 (2).           In
the event you introduce a potential funding or financing source for the
Corporation and that source directly or indirectly provides funding or financing
to the Corporation through itself or one of its affiliates or relationships in
an amount over Two Million U.S. Dollars (US$2,000,000), the Corporation will pay
you or one of your affiliated Entities four percent (4%) of such funds raised
over and above US$2 Million.
 
 On August
15, 2007, MKG, of which Mr. MacKay is a principal, executed a binding term sheet
to provide the Corporation with a line of credit of up to One Hundred Fifty
Thousand Dollars (US$150,000) to help fund the initiatives and operations in
China and the U.S.  The terms and conditions were as
follows:
 Repayment Term: one
(1) year commencing from the receipt of each tranche of Funds (the “Repayment
Term”);
 Interest: 12%
compound interest per annum;
 Prepayment: no
prepayment without MKG’s approval
 Convertibility:  At
anytime during the Repayment Term, MKG has the right to convert the entire
amount of principal and accrued interest or any portions thereof into shares of
the Corporation at a share price equal to the lesser of: (a) the 70% of the
share price at the close of the market as of receipt of funds; or (b) the terms
extended by the Corporation to a funder making a total equity investment of at
least US$2 million or in connection with a merger/acquisition or change in
control (the “Convert Rate”);
 Warrants: The
Corporation shall issue to MKG without additional consideration warrants to
purchase that number of shares of the Corporation’s common stock equal to the
principal amounts advanced by MKG, exercisable at a share exercise price equal
to the Convert Rate.  The term for the warrants shall be five (5)
years.
 
 Other
than the transactions disclosed within this annual report, we have not entered
into any material transactions with any director, executive officer, beneficial
owner of five percent (5%) or more of our Common Stock, or family members of
such person, in which the amount involved exceeds $60,000.
 
 Director
Independence
 
 Our Board
of Directors is comprised of two individuals, one of whom (Mr. Antonopolos) the
Company has determined is independent under SEC rules.
 
 Item
13.  Exhibits:
 
 Exhibit
Index
 
 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002
 
 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
OFFICER
 PURSUANT
TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF SARBANES-OXLEY
ACT
 
 Item
14.  Principal Accountant Fees and Services
 
 The  information  set  forth  in
our  definitive  Proxy  Statement  pursuant  to
Regulation  14A of the Exchange Act to be filed with the Securities
and Exchange Commission is incorporated herein by reference in response to this
Item 14.
 
  26
  
 The  information  set  forth  in
our  definitive  Proxy  Statement  pursuant  to
Regulation  14A of the Exchange Act to be filed with the Securities
and Exchange Commission is incorporated herein by reference in response to this
Item 14.
  SIGNATURES
 
 Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 TRUE
      PRODUCT ID, INC./s/  Ke
      Ke WangKe
      Ke Wang, President/s/  Michael
      J. AntonoplosMichael
      J. Antonoplos
 
 Date:
October 14, 2008
 
 
 
  27
  
 
 
 TRUE
      PRODUCT ID, INC.
                (A
      DEVELOPMENT STAGE COMPANY)
                PHILADELPHIA,
      PENNSYLVANIA
                
                
                
                TABLE
      OF CONTENTS
                
                
                Report
      of Independent Registered Public Accounting Firm for the Year Ended June
      30, 2008        F-2
                
                
                Consolidated
      Balance Sheets at June 30, 2008 and June 30,
      2007                                                          F-3
                
                
                Consolidated
      Statements of Operations for the Years Ended June 30, 2008 and
      2007                        F-4
                
                
                Consolidated
      Statements of Changes in Stockholders Equity for the Years
      Ended
                June
      30, 2008, 2007 and
      2006                                                                                                                    F-5
                
                Consolidated
      Statements of Cash Flows for the Years Ended June 30, 2008 and
      2007                       F-6-F-7
                
                Notes
      to Consolidated Financial
      Statements                                                                                            
      F-8-F-20
 
 
  F-1
  
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Stockholders’ of
 True
Product ID, Inc.
 
 
 We have
audited the accompanying consolidated balance sheet of True Product ID, Inc. and
Subsidiaries, (the Company) as of June 30, 2008 and the related consolidated
statements of operations, changes in stockholders’ equity and cash flows for the
year ended June 30, 2008 and from October 1, 2005 (inception) to June 30, 2008.
These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.  The consolidated financial
statements of the Company as of June 30, 2007 and from October 1, 2005
(inception) to June 30, 2007 were audited by other auditors whose report dated
October 1, 2007 on those statements included an explanatory paragraph describing
conditions that raised substantial doubt about the Company’s ability to continue
as a going concern. The consolidated financial statements for the period October
1, 2005 (inception) through June 30, 2008 includes no revenues and net loss of
$45,563,739. Our opinion on the consolidated statements of operations, changes
in stockholders’ equity, and cash flows for the period October 1, 2005
(inception) through June 30, 2008, insofar as it relates to amounts for periods
through June 30, 2007, is based solely on the report of the other
auditors.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material aspects, the consolidated financial position of True Product ID,
Inc. and Subsidiaries at June 30, 2008, and the consolidated results of its
operations and its cash flows for the year ended June 30, 2008, in conformity
with accounting principles generally accepted in the United States of
America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note B to the
consolidated financial statements, the Company has a net loss and net cash used
in operating activities in 2008 of $36,899,863 and $881,005 respectively and has
a deficit accumulated during the development stage of $45,563,739 at June 30,
2008.  These matters raise substantial doubt about it’s ability to
continue as a going concern. Management’s Plan in regards to these matters is
also described in Note B. The consolidated financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
 
 
 /s/Jewett, Schwartz, Wolfe
and Associates
 Jewett,
Schwartz, Wolfe and Associates
 Hollywood,
Florida
 October
13, 2008
 
 
    F-2
  TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      BALANCE SHEETSJune 30,ASSETS
                
                2008
                
                
                2007CURRENT
      ASSETS:Cash
      and cash equivalents
                
                $
                32,171
                
                
                $
                42,774Accounts
      receivable
                
                
                152,751
                
                
                
                31,806Other
      current assets
                
                
                39,436
                
                
                
                2,933Total
      current assets
                
                
                224,358
                
                
                
                77,513PROPERTY
      AND EQUIPMENT - Net
                
                
                138,722
                
                
                
                136,305Interest
      on note receivable
                
                
                47,438
                
                
                
                30,188Note
      receivable
                
                
                300,000
                
                
                
                300,000Intangible
      assets - net
                
                
                461,674
                
                
                
                521,566Goodwill
                
                
                13,301,191
                
                
                
                17,601,191TOTAL
      ASSETS
                
                $
                14,473,383
                
                
                $
                18,666,763LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                
                $
                991,700
                
                
                $
                1,345,642Current
      portion of capital lease
                
                
                8,202
                
                
                
                7,351Notes
      payable
                
                
                219,410
                
                
                
                219,410Accrued
      interest payable
                
                
                54,853
                
                
                
                -Total
      current liabilities
                
                
                1,274,165
                
                
                
                1,572,403NON-CURRENT
      LIABILITIES:Long-term
      portion of capital lease
                
                
                27,786
                
                
                
                35,989Accrued
      interest payable
                
                
                -
                
                
                
                176,240Convertible
      debenture
                
                
                500,000
                
                
                
                500,000Related party payable
                
                
                668,781
                
                
                
                -Accrued
      expenses
                
                
                -
                
                
                
                521,500Notes
      payable - SSTY
                
                
                -
                
                
                
                1,095,590TOTAL
      LIABILITIES
                
                
                2,470,732
                
                
                
                3,901,722Minority
      interest
                
                
                (468,644
                )
                
                
                (124,466
                )Commitments
      and contingenciesSTOCKHOLDERS’
      EQUITY:Preferred
      Stock:  $.001 Par value; 5,000,000 shares authorized; 0 shares
      issued and outstanding at June 30, 2008 and 2007
                
                
                -
                
                
                
                -Class
      A common stock, $.001 par value; authorized 800,000,000 shares
      authorized;  9,542,000 shares issued and 6,425,899 shares
      issuable at June 30, 2008 and 440,622,335 shares issued and
      outstanding  at June 30, 2007, respectively
                
                
                15,968
                
                
                
                440,622Class
      B common stock: $.001 par value; 200,000,000 shares authorized; shares
      issued and outstanding at June 30, 2008 and 2007
                
                
                -
                
                
                
                -Additional
      paid-in capital
                
                
                58,055,744
                
                
                
                23,123,913Accumulated
      deficit during development stage
                
                
                (45,563,739
                )
                
                
                (8,663,876
                )12,507,973
                
                
                
                14,900,659Less:
      stock held in trust
                
                
                (1,500
                )
                
                
                (1,500
                )Foreign
      currency translation adjustment
                
                
                (35,178
                )
                
                
                (9,652
                )Total
      stockholders’ equity
                
                
                12,471,295
                
                
                
                14,889,507TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                
                $
                14,473,383
                
                
                $
                18,666,763See
      notes to consolidated financial statements.
  F-3
 
 TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF OPERATIONSPeriod
      October 1,2005
      (Date ofFor
      the Year Ended
                  
                  
                  
                  
                  
                  Inception)
      ThroughJune
      30,
                  
                  
                  
                  
                  
                  June
      30, 20082008
                  
                  
                  2007REVENUE,
      net of returns
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -EXPENSES:Consulting
      fees
                  
                  
                  27,839,621
                  
                  
                  
                  62,500
                  
                  
                  
                  27,902,121Officer
      and director compensation
                  
                  
                  5,025,000
                  
                  
                  
                  5,739,748
                  
                  
                  
                  11,080,581General
      and administrative
                  
                  
                  1,526,559
                  
                  
                  
                  286,299
                  
                  
                  
                  2,888,404Amortization
      and depreciation
                  
                  
                  99,011
                  
                  
                  
                  64,893
                  
                  
                  
                  181,373Technology
      license fee
                  
                  
                  -
                  
                  
                  
                  450,000
                  
                  
                  
                  637,500Total
      expenses
                  
                  
                  34,490,191
                  
                  
                  
                  6,603,440
                  
                  
                  
                  42,689,979NET
      LOSS FROM OPERATIONS
                  
                  
                  (34,490,191
                  )
                  
                  
                  (6,603,440
                  )
                  
                  
                  (42,689,979
                  )OTHER
      INCOME (EXPENSE):Write
      down on impairment of goodwill
                  
                  
                  (4,300,000
                  )
                  
                  
                  -
                  
                  
                  
                  (4,300,000
                  )Forgiveness
      of debt
                  
                  
                  1,583,753
                  
                  
                  
                  -
                  
                  
                  
                  1,583,753Interest
      income
                  
                  
                  17,250
                  
                  
                  
                  17,447
                  
                  
                  
                  47,634Interest
      expense
                  
                  
                  (54,853
                  )
                  
                  
                  (19,197
                  )
                  
                  
                  (74,050
                  )Loss
      on equity investment
                  
                  
                  -
                  
                  
                  
                  (65,513
                  )
                  
                  
                  (65,513
                  )NET
      LOSS BEFORE MINORITY INTEREST AND
                    DISCONTINUED
      OPERATIONS
                  
                  
                  (37,244,041
                  )
                  
                  
                  (6,670,703
                  )
                  
                  
                  (45,498,155
                  )MINORITY
      INTEREST
                  
                  
                  344,178
                  
                  
                  
                  27,279
                  
                  
                  
                  468,644DISCONTINUED
      OPERATIONSLoss
      from operations of disposed subsidiaries, net of taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (10,245
                  )Loss
      from disposal of subsidiaries, net of taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (523,983
                  )Loss
      from discontinued operations
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (534,228
                  )NET
      LOSS
                  
                  
                  (36,899,863
                  )
                  
                  
                  (6,643,424
                  )
                  
                  
                  (45,563,739
                  )OTHER
      COMPREHENSIVE INCOME:Foreign
      currency translation adjustment
                  
                  
                  25,526
                  
                  
                  
                  9,652
                  
                  
                  
                  35,178TOTAL
      COMPREHENSIVE LOSS
                  
                  $
                  (36,874,337
                  )
                  
                  $
                  (6,633,772
                  )
                  
                  $
                  (45,528,561
                  )NET
      LOSS PER SHARE:Basic
      and Diluted
                  
                  $
                  (5.29
                  )
                  
                  $
                  (0.02
                  )WEIGHTED-AVERAGE
      SHARES:Basic
      and Diluted
                  
                  
                  6,974,112
                  
                  
                  
                  322,888,146See
      notes to consolidated financial statements.
  F-4
    TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITYCommon Stock
                  
                  
                  Preferred Stock
                  
                  
                  
                  
                  
                  AdditionalShares
                  
                  
                  
                  
                  
                  $
                  
                  
                  
                  Shares
                  
                  
                  
                  
                  
                  $
                  
                  
                  
                  Accumulated
                    Deficit
                  
                  
                  Paid
      in Capital
                  
                  
                  Stock
      Held
                    in
      Trust
                  
                  
                  Treasury
                    StockBalance
      October 1, 2005
                  
                  
                  23,721,861
                  
                  
                  $
                  23,721
                  
                  
                  
                  
                  
                  
                  
                  20,000
                  
                  
                  $
                  20
                  
                  
                  
                  
                  
                  
                  $
                  (855,372
                  )
                  
                  $
                  1,057,079
                  
                  
                  $
                  (1,500
                  )
                  
                  $
                  (17,709
                  )Transfer
      to related party in connection with sale of subsidiary
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  17,709Issuance
      of stock  for acquisition of technology license
                  
                  
                  52,349,249
                  
                  
                  
                  52,349
                  
                  
                  
                  
                  
                  
                  
                  16,000
                  
                  
                  
                  16
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  546,562
                  
                  
                  
                  -
                  
                  
                  
                  -2
      for 1 stock split
                  
                  
                  23,721,861
                  
                  
                  
                  23,722
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  (23,722
                  )
                  
                  
                  -
                  
                  
                  
                  -Additional
      issuance of common stock to STC for acquisition of
                    technology
      license and cancellation of preferred stock
                  
                  
                  154,919,125
                  
                  
                  
                  154,920
                  
                  
                  
                  
                  
                  
                  
                  (36,000
                  )
                  
                  
                  (36
                  )
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  (154,844
                  )
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  (1,165,080
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Balance
      June 30, 2006
                  
                  
                  254,712,096
                  
                  
                  $
                  254,712
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  
                  
                  
                  $
                  (2,020,452
                  )
                  
                  $
                  1,425,075
                  
                  
                  $
                  (1,500
                  )
                  
                  $
                  -19
      to 1 stock split
                  
                  
                  8,574,547
                  
                  
                  $
                  8,575
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  $
                  (8,575
                  )
                  
                  
                  -
                  
                  
                  
                  -Common
      stock issuance for consulting agreement
                  
                  
                  446,428
                  
                  
                  
                  446
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  62,054
                  
                  
                  
                  -
                  
                  
                  
                  -Stock
      based compensation
                  
                  
                  70,889,264
                  
                  
                  
                  70,889
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  4,931,339
                  
                  
                  
                  -
                  
                  
                  
                  -Common
      stock issued as part of restructuring agreement
                  
                  
                  6,000,000
                  
                  
                  
                  6,000
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  1,314,000
                  
                  
                  
                  -
                  
                  
                  
                  -Acquisition
      of additional 20% of chinese venture
                  
                  
                  100,000,000
                  
                  
                  
                  100,000
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  15,400,000
                  
                  
                  
                  -
                  
                  
                  
                  -Miscellaneous
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  20
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  (6,643,424
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Balance
      June 30, 2007
                  
                  
                  440,622,335
                  
                  
                  $
                  440,622
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  
                  
                  
                  $
                  (8,663,876
                  )
                  
                  $
                  23,123,913
                  
                  
                  $
                  (1,500
                  )
                  
                  $
                  -Common
      stock issuance for consulting agreement
                  
                  
                  465,000,000
                  
                  
                  
                  465,000
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  20,354,621
                  
                  
                  
                  -
                  
                  
                  
                  -Stock
      based compensation
                  
                  
                  35,000,000
                  
                  
                  
                  35,000
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  2,815,000
                  
                  
                  
                  -
                  
                  
                  
                  -Issuance
      of common stock for cash
                  
                  
                  12,842,866
                  
                  
                  
                  12,843
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  488,125
                  
                  
                  
                  -
                  
                  
                  
                  -100
      to 1 reverse stock split
                  
                  
                  (943,923,201
                  )
                  
                  
                  (943,923
                  )
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  943,923
                  
                  
                  
                  -
                  
                  
                  
                  -Common
      stock issuance for consulting agreement
                  
                  
                  4,680,000
                  
                  
                  
                  4,680
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  7,015,320
                  
                  
                  
                  -
                  
                  
                  
                  -Stock
      based compensation
                  
                  
                  1,450,000
                  
                  
                  
                  1,450
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  2,173,550
                  
                  
                  
                  -
                  
                  
                  
                  -Issuance
      of common stock for retirement of debt
                  
                  
                  295,899
                  
                  
                  
                  296
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  443,552
                  
                  
                  
                  -
                  
                  
                  
                  -Adjustment
      to restructuring agreement
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  697,740
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      loss
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  (36,899,863
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Foreign
      currency translation adjustment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Balance
      June 30, 2008
                  
                  
                  15,967,899
                  
                  
                  $
                  15,968
                  
                  
                  
                  
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  
                  
                  
                  $
                  (45,563,739
                  )
                  
                  $
                  58,055,744
                  
                  
                  $
                  (1,500
                  )
                  
                  $
                  -See
      notes to consolidated financial statements.
  F-5
    TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWSPeriod
      October 1,Year
      Ended
                  
                  
                  
                  
                  
                  2005
      (Date ofJune
      30,
                  
                  
                  
                  
                  
                  Inception)
      Through2008
                  
                  
                  2007
                  
                  
                  June
      30, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                  
                  $
                  (37,244,041
                  )
                  
                  $
                  (6,670,703
                  )
                  
                  $
                  (45,498,155
                  )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                  
                  
                  99,011
                  
                  
                  
                  64,893
                  
                  
                  
                  181,373Stock
      based compensation
                  
                  
                  5,025,000
                  
                  
                  
                  5,002,248
                  
                  
                  
                  11,080,581Issuance
      of common stock for consulting fees
                  
                  
                  27,839,621
                  
                  
                  
                  62,500
                  
                  
                  
                  27,902,121Forgiveness
      of debt
                  
                  
                  (1,583,753
                  )
                  
                  
                  -
                  
                  
                  
                  (1,583,753
                  )Write
      off of goodwill
                  
                  
                  4,300,000
                  
                  
                  
                  -
                  
                  
                  
                  4,300,000Loss
      from equity investment
                  
                  
                  -
                  
                  
                  
                  65,513
                  
                  
                  
                  65,513Loss
      on disposal of subsidiaries
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  523,983Loss
      from operations of disposed subsidiaries
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  10,245Minority
      interest
                  
                  
                  (344,178
                  )
                  
                  
                  (27,279
                  )
                  
                  
                  (468,644
                  )Changes
      in operating assets and liabilities:Accounts
      receivable
                  
                  
                  (120,945
                  )
                  
                  
                  (400
                  )
                  
                  
                  (152,751
                  )Prepaid
      expenses
                  
                  
                  -
                  
                  
                  
                  (1,247
                  )
                  
                  
                  -Other
      current assets
                  
                  
                  (36,503
                  )
                  
                  
                  -
                  
                  
                  
                  (39,436
                  )Interest
      on note receivable
                  
                  
                  (17,250
                  )
                  
                  
                  (17,250
                  )
                  
                  
                  (47,438
                  )Accounts
      payable and accrued expenses
                  
                  
                  478,399
                  
                  
                  
                  1,101,974
                  
                  
                  
                  1,798,409Related
      party payable
                  
                  
                  668,781
                  
                  
                  
                  -
                  
                  
                  
                  668,781Accrued
      expenses - related party
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  87,500Accrued
      interest payable
                  
                  
                  54,853
                  
                  
                  
                  -
                  
                  
                  
                  54,853Net
      cash provided by (used in) operating activities
                  
                  
                  (881,005
                  )
                  
                  
                  (419,751
                  )
                  
                  
                  (1,116,818
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Investment
      in acquired entity
                  
                  
                  -
                  
                  
                  
                  43,422
                  
                  
                  
                  43,422Purchase
      of fixed assets
                  
                  
                  (41,536
                  )
                  
                  
                  (8,191
                  )
                  
                  
                  (182,842
                  )Cash
      and cash equivalents in disposed subsidiaries
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (50,823
                  )Net
      cash used in investing activities
                  
                  
                  (41,536
                  )
                  
                  
                  35,231
                  
                  
                  
                  (190,243
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of common stock for cash
                  
                  
                  500,968
                  
                  
                  
                  -
                  
                  
                  
                  500,968Proceeds
      from sale of convertible debentures
                  
                  
                  -
                  
                  
                  
                  500,000
                  
                  
                  
                  500,000Proceeds
      from financing
                  
                  
                  443,848
                  
                  
                  
                  46,014
                  
                  
                  
                  489,862Repayment
      of capital lease obligation
                  
                  
                  (7,352
                  )
                  
                  
                  (7,352
                  )
                  
                  
                  (14,704
                  )Repayment
      of debt
                  
                  
                  -
                  
                  
                  
                  (101,716
                  )
                  
                  
                  (101,716
                  )Net
      cash provided by financing activities
                  
                  
                  937,464
                  
                  
                  
                  436,946
                  
                  
                  
                  1,374,410FOREIGN
      CURRENCY TRANSLATION
                  
                  
                  (25,526
                  )
                  
                  
                  (9,652
                  )
                  
                  
                  (35,178
                  )NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                  
                  
                  (10,603
                  )
                  
                  
                  42,774
                  
                  
                  
                  32,171BEGINNING
      OF PERIOD
                  
                  
                  42,774
                  
                  
                  
                  -
                  
                  
                  
                  -END
      OF PERIOD
                  
                  $
                  32,171
                  
                  
                  $
                  42,774
                  
                  
                  $
                  32,171Supplementary
      disclosure of cash flow information:Cash
      paid for interest
                  
                  $
                  -
                  
                  
                  $
                  1,223
                  
                  
                  $
                  1,223Cash
      paid for taxes
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -See
      notes to consolidated financial statements.
  F-6
 TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWS - continued
                  
                  
                  Period
      October 1,Year
      Ended
                  
                  
                  
                  
                  
                  2005
      (Date ofJune
      30,
                  
                  
                  
                  
                  
                  Inception)
      Through2008
                  
                  
                  2007
                  
                  
                  June
      30, 2008NON-CASH
      INVESTING AND FINANCING ACTIVITIESIssuance
      of common stock and notes payable and elimination of accrued royalty
      as
                    part
      of acquisition of 60% interest in chinese joint venture
                  
                  $
                  -
                  
                  
                  $
                  17,597,500
                  
                  
                  $
                  17,597,500Sale
      of subsidiary via the issuance of note receivable
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  300,000Issuance
      of common and preferred stock for acquisition of technology
      license
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  598,927Issuance
      of common stock for retirement of debt
                  
                  $
                  443,848
                  
                  
                  $
                  -
                  
                  
                  $
                  443,848Adjustment
      to restructuring agreement
                  
                  $
                  697,740
                  
                  
                  $
                  -
                  
                  
                  $
                  697,740Assets
      and liabilities transferred to related party in connection with sale
      of
                    subsidiaries:Cash
      and cash equivalents
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  50,823Inventory
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  296,544Property
      and equipment
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  54,189Accounts
      receivable - related party
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  37,850Deposits
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  6,667Due
      from officer
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  82,193Intangible
      assets
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  260,542Investments
      in affiliates
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  107,561Accounts
      payable and accrued expenses
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  (210,769
                  )Debt
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  (6,321
                  )Due
      to related party
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  137,240Treasury
      stock
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  17,709
 See notes
to consolidated financial statements.
   
 
 
 F-7
 
 TRUE
PRODUCT ID, INC.
 (A
DEVELOPMENT STAGE COMPANY)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 JUNE
30, 2008 AND 2007
 
 NOTE
A - NATURE OF BUSINESS
 
 True
Product ID, Inc. (TPID or the Company) is a Delaware corporation.  The
Company is in the development stage as defined by Statement of Financial
Accounting Standard (SFAS) No. 7, “Accounting and Reporting for Development
Stage Enterprises”.   TPID is primarily engaged in business
activities that include finalizing the development of products that provide
anti-counterfeiting, brand and product authentication, and security products and
services. The Company’s authentication solution is an integrated management
system based on synthetic taggant technology, in which specific taggants are
formulated to tag target objects for identification and authentication. The
higher end solutions also employ a proprietary supporting computer database and
application (KMAC) to manage inspections, as well as collect and analyze data
from scanners in the field for trend spotting and responsive action. To best
serve its customers’ needs, especially in China, and to best penetrate certain
global markets, in addition to its own technologies, the Company has also
explored and is pursuing strategic relationships with companies in the United
States and Europe with complimentary anti-counterfeiting technology and
continues to explore the technology market for novel anti-counterfeiting
solutions in addition to taggant or scanning technology.
 
 The
Company’s authentication management system is comprised of a suite of
world-class technologies, representing years of empirical research and
application to the business of authentication. The Company’s technology is both
focused on commercial and civil applications, and applies to a wide range of
businesses plagued by piracy and intellectual property violations, everything
from cigarettes to pharmaceuticals, and from auto parts to currency. The
Company’s cutting-edge technology ultimately provides commercial or government
end-users with the authentication technology needed to protect brand integrity
and revenue capture from piracy and to help monitor, manage and address quality
and safety issues in the global supply chain.
 
 One of
our tagging techniques is Synthetic DNA (S-DNA). This involves developing a
taggant based upon elements and placing that tag on or in the product or item to
be scanned. Both the physical and chemical properties of S-DNA are extremely
stable. It is free of toxicity or pollution because only a very small volume is
used, resistant to high temperature and abrasion, strong acid and strong
alkaline, the S-DNA does not dissolve in common solvents. Owing to its strong
permeability, S-DNA bonds to all objects on a molecular level with the exception
of cut glass and diamonds.
 
 The
Company will continue to report as a development stage company until significant
revenues are generated.  The corporate office is located in
Philadelphia, Pennsylvania.
 
 NOTE
B - GOING CONCERN
 
 The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America which
contemplate continuation of the Company as a going concern.  However,
the Company has year end losses and no revenues from operations in 2008 and
2007.  During the year ended June 30, 2008, the Company has incurred
net losses of $36,899,863 and accumulated losses of $45,563,739 since
inception.  Further, the Company has inadequate working capital to
maintain or develop its operations, and is dependent upon funds from private
investors and the support of certain stockholders.
 
 These
factors raise substantial doubt about the ability of the Company to continue as
a going concern.  The financial statements do not include any
adjustments that might result from the outcome of these
uncertainties.  In this regard, Management is planning to raise any
necessary additional funds through loans and additional sales of its common
stock. There is no assurance that the Company will be successful in raising
additional capital.
 
 NOTE
C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 PRINCIPLES OF
CONSOLIDATION:
 
 The
accompanying consolidated financial statements are comprised of True Product ID,
Inc. (TPID US) and its 60% owned subsidiary, collectively known as TPID or the
Company.
    F-8
 
 Subsequent
to TPID US’ May 11, 2007 acquisition of an additional 20% ownership interest in
True Product ID Technology (Beijing) Limited (the “Chinese JV”), raising TPID
US’ ownership interest in the Chinese JV to 60% and giving TPID US control of
the Chinese JV, the accounts of the Chinese JV are fully consolidated with the
accompanying minority interest reflected.  Prior to May 11, 2007, but
subsequent to TPID US’ acquisition of its January 5, 2007 initial 40% ownership
of the Chinese JV, TPID US accounted for its investment under the equity method
of accounting, whereby TPID US recognized its proportional share of the Chinese
JV’s net income / loss on the Statement of Operations under the caption “Loss on
Equity Investment.” All material inter-company transactions have been eliminated
in consolidation.
 
 In
preparing its consolidated financial statements, the Company included only
expenses and other financial information of the consolidated Chinese JV from May
2007, when TPID US acquired majority ownership and control of the Chinese
JV.  This method of presentation is consistent with Accounting
Research Bulletin (ARB) No.51.
 
 
 USE OF ESTIMATES:
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosed amounts of contingent assets and liabilities and
the  reported  amounts  of  revenue and
expenses.  If the underlying  estimates and assumptions upon
which the financial  statements  are based change in the
future,  actual amounts may  differ  from
those  included  in
the  accompanying  consolidated financial
statements.
 
 RECLASSIFICATIONS:
 
 Certain
amounts in the financial statements for the period ended June 30, 2007, have
been reclassified to conform with the 2008 presentation.
 
 REVENUE RECOGNITION:
 
 The
Company follows the guidance of the Securities and Exchange Commission's Staff
Accounting Bulletin No. 104 for revenue recognition. In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectability is reasonably assured.
 
 Revenue
from collaborative agreements is recorded when performance targets have been
met.  The Company receives funds from collaborative agreements in two
forms – milestone payments based upon achieving certain performance targets and
reimbursement of research and development expenses.  Milestone
payments are recorded as revenue and payments for expense reimbursement are
recorded as a reduction of expense not revenue. Although some of the Company’s
products have expiration dates, the Company has not had to issue any credits or
allowances for expired products to date, as no related expense has been
incurred.
 
 Service
revenues are considered to have been earned when
provided.   Accordingly, the Company records revenue from service
contracts where the service is completed and the customer is invoiced in
accordance with the terms of a written, duly executed service contract or
purchase order.
 
 For the
year ended June 30, 2008 the Company had no revenue.
 
 CASH AND CASH
EQUIVALENTS:
 
 Cash and
cash  equivalents  consist  principally  of
currency on hand, demand  deposits
at  commercial  banks,  and
liquid  investment  funds having maturity of three months or
less at the time of purchase.
 
 ACCOUNTS
RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:
 
 Accounts
receivable are customer obligations due under normal trade terms. Senior
management reviews accounts receivable on a monthly basis to determine if any
receivables will potentially be uncollectible. The Company includes any accounts
receivable balances that are determined to be uncollectible, along with a
general reserve, in its overall allowance for doubtful accounts. After all
attempts to collect a receivable have failed, the receivable is written off
against the allowance.
    F-9
 
 PROPERTY, PLANT AND
EQUIPMENT:
 
 Property,
plant and equipment is stated at cost and depreciated over the estimated useful
lives of the assets using the straight-line method. The estimated useful lives
of the related assets are generally three to seven years.  Leasehold
improvements are amortized over the lesser of the lease term or the useful life
of the improvements. Expenditures for maintenance and repairs are expensed as
incurred.
 
 IMPAIRMENT
OF LONG-LIVED ASSETS:
 
 The
Company accounts for long-lived assets in accordance with the provisions of SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets”.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.
 
 GOODWILL:
 
 In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," goodwill represents the excess of the
purchase price and related costs over the value assigned to net tangible and
identifiable intangible assets of businesses acquired and accounted for under
the purchase method, acquired in business combinations and is assigned to
reporting units that are expected to benefit from the synergies of the
combination as of the acquisition date. Under this standard, goodwill and
intangibles with indefinite useful lives are no longer amortized. The Company
assesses goodwill and indefinite-lived intangible assets for impairment annually
during the fourth quarter, or more frequently if events and circumstances
indicate impairment may have occurred in accordance with SFAS No. 142. If the
carrying value of a reporting unit's goodwill exceeds its implied fair value,
the Company records an impairment loss equal to the difference.
 .
 
 CAPITAL
LEASE:
 
 The
company is the lessee of equipment under capital lease expiring in
2012.  The company accounts for capital leases in accordance with SFAS
No. 13, "Accounting for leases", the assets and liabilities under capital leases
are recorded at the lower of the present value of the minimum lease payments or
the fair value of the asset. The assets are amortized (or depreciated) over the
lower of their related lease terms or their estimated productive
lives.
 
 INCOME
TAXES:
 
 The
Company accounts for income taxes pursuant to the provisions of SFAS
No. 109, "Accounting for Income Taxes”, which requires, among other things,
an asset and liability approach to calculating deferred income taxes. The asset
and liability approach requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. A
valuation allowance is provided to offset any net deferred tax assets for which
management believes it is more likely than not that the net deferred asset will
not be realized.
 
 Beginning
July 1, 2007, the Company adopted the provisions of the FASB’s Financial
Interpretation Number 48 (FIN. 48), “Accounting for Uncertain
Income Tax Position”.When tax returns are
filed, it is highly certain that some positions taken would be sustained upon
examination by the taxing authorities, while others are subject to uncertainty
about the merits of the position taken or the amount of the position that would
be ultimately sustained. In accordance with the guidance of FIN 48, the benefit
of a tax position is recognized in the financial statements in the period during
which, based on all available evidence, management believes it is more likely
than not that the position will be sustained upon examination, including the
resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions. Tax positions that meet the
more-likely-than-not recognition threshold are measured as the largest amount of
tax benefit that is more than 50 percent likely of being realized upon
settlement with the applicable taxing authority. The portion of the benefits
associated with tax positions taken that exceeds the amount measured as
described above should be reflected as a liability for unrecognized tax benefits
in the accompanying balance sheet along with any associated interest and
penalties that would be payable to the taxing authorities upon examination. The
Company believes its tax positions are all highly certain of being upheld upon
examination. As such, the Company has not recorded a liability for unrecognized
tax benefits.
    F-10
  Effective
July 1, 2007, the Company adopted FASB Staff Position FIN 48-1,
“Definition of Settlement in FASB Interpretation No. 48”, (“FSP FIN 48-1”),
which was issued on May 2, 2007. FSP FIN 48-1 amends FIN 48 to provide guidance
on how an entity should determine whether a tax position is effectively settled
for the purpose of recognizing previously unrecognized tax benefits. The term
“effectively settled” replaces the term “ultimately settled” when used to
describe recognition, and the terms “settlement” or “settled” replace the terms
“ultimate settlement” or “ultimately settled” when used to describe measurement
of a tax position under FIN 48. FSP FIN 48-1 clarifies that a tax position can
be effectively settled upon the completion of an examination by a taxing
authority without being legally extinguished. For tax positions considered
effectively settled, an entity would recognize the full amount of tax benefit,
even if the tax position is not considered more likely than not to be sustained
based solely on the basis of its technical merits and the statute of limitations
remains open. The adoption of FSP FIN 48-1 did not have an impact on the
accompanying consolidated financial statements.
 
 FOREIGN
CURRENCY TRANSLATION:
 
  The
company accounts for currency translations in accordance with SFAS No. 52,
"Foreign currency translation",  financial statements of operating
subsidiaries outside the United States of America (U.S.) generally are measured
using the local currency as the functional currency. Adjustments to translate
those statements into U.S. dollars are recorded in other comprehensive
income.
  
 FAIR VALUE OF FINANCIAL
INSTRUMENTS:
 
 As of
June 30, 2008 and 2007, the carrying value of cash and cash equivalents,
accounts receivables, accounts payable and notes payable approximated fair value
due to their short nature.
 
 CONCENTRATION OF RISK:
 
 The
Company may be subject to concentrations of credit risk through
cash.
 
 ACCOUNTING FOR STOCK-BASED
COMPENSATION:
 
 On
January 1, 2006, the Company implemented SFAS 123 (revised 2004) (“SFAS
123(R)”), “Share-Based Payment” which replaced SFAS 123 “Accounting for
Stock-Based Compensation” and superseded APB Opinion No. 25, “Accounting for
Stock Issued to Employees.”  In March 2005, the Securities and
Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107 (SAB
107) regarding its interpretation of SFAS 123(R).  SFAS 123(R) and
related interpretations requires the fair value of all stock-based employee
compensation awarded to employees to be recorded as an expense over the related
requisite service period. The statement also requires the recognition of
compensation expense for the fair value of any unvested stock option awards
outstanding at the date of adoption.  The Company values any employee
or non-employee stock based compensation at fair value using the Black Scholes
Pricing Model.  In adopting SFAS 123(R), the Company used the modified
prospective application (“MPA”). MPA requires the Company to account for all new
stock based compensation to employees using fair value, and for any portion of
awards prior to January 1, 2006 for which the requisite service has not been
rendered and the options remain outstanding as of January 1, 2006, the Company
should recognize the compensation cost for that portion of the award that the
requisite service was rendered on or after January 1, 2006. The fair value for
these awards is determined based on the grant-date.  There was no
effect of applying the MPA method.
 
 Prior to
January 1, 2006, the Company accounted for stock based compensation under the
provisions of SFAS No. 123, "Accounting for Stock Based Compensation". SFAS No.
123. During the years ended June 30, 2008 and 2007, there were no grants of
stock options to either employees or non-employees.
  SEGMENT
REPORTING:
 
 SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS No. 131
defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by management in
deciding how to allocate resources and in assessing performance.  For
the years ended June 30, 2008 and 2007 the Company consisted of only one
operating segment.
    F-11
 
 COMPREHENSIVE
INCOME:
 
 In
accordance with SFAS No. 130, "Reporting comprehensive
income",  Comprehensive loss is the total of (1) net loss plus (2) all
other changes in net assets arising from non-owner sources, which are referred
to as other comprehensive income. The company has presented a statement of
operations that includes other comprehensive income. An analysis of changes in
components of accumulated other comprehensive income is presented in the
consolidated statement of stockholders' equity.
 
 NOTE
D - RECENT ACCOUNTING PRONOUNCEMENTS
 
 Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities
 
 In
June 2008, the Financial Accounting Standards Board (“FASB”) issued FSP
Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities.” The FSP addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in computing earnings
per share under the two-class method. The FSP affects entities that accrue
dividends on share-based payment awards during the awards’ service period when
the dividends do not need to be returned if the employees forfeit the award.
This FSP is effective for fiscal years beginning after December 15, 2008.
The Company is currently assessing the impact of FSP EITF No. 03-6-1 on its
consolidated financial position and results of operations.
 
 Determining
Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own
Stock
 
 In June
2008, the FASB ratified EITF Issue No. 07-5, "Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock" (EITF No.
07-5).  EITF No. 07-5 provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument's
contingent exercise and settlement provisions.  It also clarifies on
the impact of foreign currency denominated strike prices and market-based
employee stock option valuation instruments on the evaluation.  EITF
No. 07-5 is effective for fiscal years beginning after December 15,
2008.  The Company is currently assessing the impact of EITF No. 07-5
on its consolidated financial position and results of operations.
 
 Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (
Including Partial Cash Settlement)
 
 In
May 2008, the FASB issued FSP Accounting Principles Board (“APB”) Opinion
No. 14-1, “Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash Settlement).” The FSP
clarifies the accounting for convertible debt instruments that may be settled in
cash (including partial cash settlement) upon conversion.  The FSP
requires issuers to account separately for the liability and equity components
of certain convertible debt instruments in a manner that reflects the issuer's
nonconvertible debt (unsecured debt) borrowing rate when interest cost is
recognized.  The FSP requires bifurcation of a component of the debt,
classification of that component in equity and the accretion of the resulting
discount on the debt to be recognized as part of interest expense in our
consolidated statement of operations.  The FSP requires retrospective
application to the terms of instruments as they existed for all periods
presented.  The FSP is effective for us as of January 1, 2009 and
early adoption is not permitted.  The Company is currently evaluating
the potential impact of FSP APB No. 14-1 upon its consolidated financial
statements.
  The
Hierarchy of Generally Accepted Accounting Principles
  In May
2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No.
162, "The Hierarchy of Generally Accepted Accounting Principles" (SFAS
No.162).  SFAS No. 162 identifies the sources of accounting principles
and the framework for selecting the principles used in the preparation of
financial statements.  SFAS No. 162 is effective 60 days following the
SEC's approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles".  The implementation of this standard
will not have a material impact on the Company's consolidated financial position
and results of operations.
    F-12
   Determination
of the Useful Life of Intangible Assets
   In April
2008, the FASB issued FASB Staff Position on Financial Accounting Standard (“FSP
FAS”) No. 142-3, “Determination of the Useful Life of Intangible Assets”, which
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of intangible assets under
SFAS No. 142 “Goodwill and Other Intangible Assets”.  The intent of this
FSP is to improve the consistency between the useful life of a recognized
intangible asset under SFAS No. 142 and the period of the expected cash flows
used to measure the fair value of the asset under SFAS No. 141 (revised 2007)
“Business Combinations” and other U.S. generally accepted accounting
principles.    The Company is currently evaluating the potential
impact of FSP FAS No. 142-3 on its consolidated financial
statements.
  Disclosure
about Derivative Instruments and Hedging Activities
  In March
2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and
Hedging Activities, an amendment of SFAS No. 133”, (SFAS 161). This statement
requires that objectives for using derivative instruments be disclosed in terms
of underlying risk and accounting designation. The Company is required to adopt
SFAS No. 161 on January 1, 2009. The Company is currently evaluating the
potential impact of SFAS No. 161 on the Company’s consolidated financial
statements.
   Business
Combinations
   In
December 2007, the FASB issued SFAS No. 141(R) “Business Combinations” (SFAS
141(R)).  This Statement replaces the original SFAS No.
141.  This Statement retains the fundamental requirements in SFAS
No. 141 that the acquisition method of accounting (which SFAS No. 141
called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. The objective of SFAS
No. 141(R) is to improve the relevance, and comparability of the information
that a reporting entity provides in its financial reports about a business
combination and its effects. To accomplish that, SFAS No. 141(R) establishes
principles and requirements for how the acquirer:
   a.
              Recognizes
      and measures in its financial statements the identifiable assets acquired,
      the liabilities assumed, and any noncontrolling interest in the
      acquiree.
  b.
              Recognizes
      and measures the goodwill acquired in the business combination or a gain
      from a bargain purchase.
  c.
              Determines
      what information to disclose to enable users of the financial statements
      to evaluate the nature and financial effects of the business
      combination.
   This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 and may not be applied before
that date. The Company is unable at this time to determine the effect that its
adoption of SFAS No. 141(R) will have on its consolidated results of operations
and financial condition.
   Noncontrolling
Interests in Consolidated Financial Statements—an amendment of ARB No.
51
   In
December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (SFAS No.
160).  This Statement amends the original Accounting Review Board
(ARB) No. 51 “Consolidated Financial Statements” to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This Statement is
effective for fiscal years and interim periods within those fiscal years,
beginning on or after December 15, 2008 and may not be applied before that
date.  The Company is unable at this time to determine the effect that
its adoption of SFAS No. 160 will have on its consolidated results of operations
and financial condition.
  
 
 NOTE
E – PROPERTY PLANT AND EQUIPMENT
 
 Property
and equipment are recorded at cost. Depreciation is computed using the
straight-line method over estimated useful lives of three to seven years.
Expenditures for repairs and maintenance are expensed as incurred. Property and
equipment are summarized as follows at June 30, 2008 and 2007:
    F-13
 
 Year
      Ended
                June
      30,2008
              
              
              2007Equipment,
      Furniture and fixtures
              
              $
              204,121
              
              
              $
              141,307Less
      accumulated depreciation
              
              
              (65,399
              )
              
              
              (5,002
              )Total
              
              $
              138,722
              
              
              $
              136,305
 
 Depreciation
expense for the periods ended June 30, 2008 and 2007 was $ 39,119 and $5,002,
respectively.
  
  NOTE
F -   INTANGIBLE ASSETS
 
 In  2006,  the  Company  acquired  a  Technology  License  ("License")  from
Sure  Trace  Security  Corporation  ("SSTY")
for an
initial  term  of  five  years,  with  an  automatic  renewal  for
an additional  five years.  The License grants the Company
the worldwide
rights   to    manufacture    and   sell    products    using   STC's
"anti-counterfeiting technology".  In exchange for this License, the
Company issued 52,349,249 shares of common stock and 16,000 shares of preferred
stock, valued in total at $598,927.  The License is being amortized as
a charge to operations on a straight-line method over the ten year term of the
License.
 
 
 Estimated
annual amortization expense for the five years succeeding March 31, 2008 is as
follows:
   2009
              
              
              2010
              
              
              2011
              
              
              2012
              
              
              2013
              
              
              Thereafter$
              59,893
              
              
              $
              59,892
              
              
              $
              59,893
              
              
              $
              59,893
              
              
              $
              59,893
              
              
              $
              162,208
 
  During
the year ended June 30, 2008 and 2007, the Company incurred $59,892 and
$450,000, respectively, of expense for a technology license
from.  Effective April 15, 2006 the license requires that $75,000 per
month be paid for a period of five years. At June 30, 2008 and 2007, the entire
amount of the expense remains unpaid and is included in accounts payable and
accrued expenses.
 
 NOTE
G - GOODWILL
 
 The
acquisition of ultimately 60% of the Chinese Joint Venture resulted in
significant contract opportunities in China (Chinese JV).  Pursuant to
a joint venture contract with the Company’s predecessor, the Chinese Joint
Venture has the exclusive rights to all contracts relating to SDNA and KMAC
technologies in the PRC, Hong Kong, and Macau.  The Chinese JV has
developed significant relationships with important Chinese government and
industry agencies and entities
 
 As of
June 30, 2007, we have a total of $ 17,601,191 in goodwill resulting from an
acquisition of the Chinese Joint Venture in 2007. Pursuant to SFAS No. 142
“Goodwill and Other Intangible Assets”(SFAS No. 142), if the book value of the
reporting unit exceeds its fair value, there is potential for goodwill
impairment. During the year ended June 30, 2008, based on the impairment test
performed, we determined an impairment loss of approximately $4.3 million. This
amount has been reflected on the Company’s statements of
operations.
 
 
 
 NOTE
H -   INCOME TAXES
 
 The
provision (benefit) for income taxes from continued operations for the years
ended June 30, 2008 consists of the following:
 
 2008
              
              
              2007Current:Federal
              
              $
              -
              
              
              $
              -State
              
              
              -
              
              
              
              -Deferred:Federal
              
              
              (12,702,778
              )
              
              
              (2,286,999
              )State
              
              
              (2,241,667
              )
              
              
              (403,588
              )Tax
      (benefit) from the decrease in valuation allowance
              
              
              14,944,445
              
              
              
              2,690,587Provision
      (benefit) for income taxes, net
              
              $
              -
              
              
              $
              -
    F-14
  
 The
difference between income tax expense computed by applying the federal statutory
corporate tax rate and actual income tax expense is as follows:
 
 2008Statutory
      federal income tax rate
              
              
              35.0
              %State
      income taxes
                Other
                Valuation
      allowance
              
              
              5.5%
                -
      %
                (40.5)
              %Effective
      tax rate
              
              
              (0.0
              )%
 
 Deferred
income taxes result from temporary differences in the recognition of income and
expenses for financial reporting purposes and for tax purposes.  The
tax effect of these temporary differences representing deferred tax assets and
liabilities result principally from the following:
 
 2008Net
      operating loss-carryforwardsexpiring
      between 2019-2026
              
              $
              45,563,739Depreciation
      and amortization
              
              
              -Other
              
              
              -Deferred
      income tax asset
              
              $
              45,563,739
 
 The net
deferred tax assets and liabilities are comprised of the following:
 
 2008Deferred
      tax assets:
              
              $
              -Current
              
              
              -Non-current
              
              
              18,453,314Less:
      valuation allowance
              
              
              (18,453,314
              )Net
      deferred income tax asset
              
              $
              -
 
  NOTE
I- CAPITAL LEASE
 
 The
following is a schedule by years of minimum future rentals on non-cancellable
capital leases as of June 30, 2008:
    2009
              
              $
              11,7552010
              
              
              11,7562011
              
              
              11,7552012
              
              
              8,816Total minimum
      payments required
              
              
              44,082Less amount
      representing interest
              
              
              (8,094
              )Present value
      of net minimum lease payments
              
              $
              35,988Current
      portion of capital leases
              
              $
              8,202Long-term
      portion of capital leases
              
              $
              27,786
  
 F-15
  Fixed
assets included $42,803 of assets under capital lease with amortization expense
of $4,404 and $2,253 for the years ended June 30, 2008 and 2007 respectively.
Total contingent rentals for the year ended June 30, 2008 was
$11,756.
 
 NOTE
J- CONVERTIBLE DEBENTURE
 
 On
January 17, 2007 the Company  closed an
initial  bridge  financing  with a
private  investor for  $500,000;  a portion of
these  proceeds   will go to fulfill existing orders in
China; and the Company has
sent  a  representative  from the US
to  Beijing  to work with the  Chinese Venture to
fulfill these orders.
 
 The
financing took the form of a convertible note with an 8% interest rate, and is
referenced in the above balance sheet as a "Convertible
Debenture".  For the sake of clarity, the reference to Convertible
Debenture in the Company’s balance sheets means the bridge financing described
in this Note. Additionally, investors will receive warrants to
purchase  additional  shares of Company's  common
stock at a price  per share  equal to the price per share of
the  shares  issued in the
First  Equity  Financing,  with
20%  warrant  coverage  if the bridge converts
within 4 months; 35% warrant coverage if the bridge converts within 8
months;  and 50%  warrant  coverage  if
the bridge  converts after 8 months.  The "First Equity
Financing" is defined as the first financing  following  the
date of Closing in which the
Company  sells  preferred  stock or other
equity  securities and obtains net
proceeds  (including  debt  conversion)  in
an amount  not less than $2
million  (including  the  conversion of the
Debt).  The warrants shall have a seven-year exercise
period.
 
 The
Debt (including  accrued  interest)
shall  automatically  convert   into
the  Company's  preferred  stock issued
in  connection  with the  closing of the First
Equity  Financing at 100% of the price per share paid to the Company
for such securities.   If the
Debt  does  not  convert  in  connection  with
a First  Equity Financing on or before the Maturity Date, the Debt
shall be converted  into  shares of
the  Company's  common  stock at a price equal to
the average  closing price per share for the 30-day
period  preceding the Maturity Date.
 
 The
maturity date is the earliest to occur of (i) the date of
closing   of the
First  Equity  Financing,  (ii) the date of
the  closing  of a
merger  or  reorganization  of
the  Company  with or
into  any  other  entity,  or a sale of
all or  substantially  all of the assets of the
corporation,   or  any  other   transaction   or  series  of  related
transactions in which the Company's stockholders immediately prior to
such  transaction(s) own immediately after
such  transaction(s)  less than
fifty  percent  (50%) of the equity  securities of
the surviving corporation  or
its  parent  or  (iii)  any  time  after  the  second
anniversary of the date of Closing.
 
  NOTE
K- RELATED PARTY PAYABLE
 
 During
fiscal year 2008, the officers and executives of the Company provided
significant amount of loans to the Beijing operation on various occasions. Total
related party loan payables as of June 30, 2008 is approximately
$668,781.
 
 NOTE
L- FORGIVENESS OF DEBT
 
 In
November 2007, the Company eliminated the following debt, which was
forgiven.
    Compensation
      due James MacKay
              
              $
              462,500Borrowings on
      line of credit provided by MKG
              
              
              52,451Accrued
      interest on line of credit
              
              
              638Note payable
      to SSTY
              
              
              1,068,164Total
              
              $
              1,583,753
    F-16
   The total
amount forgiven was recorded as a component of Other Income for the year ended
June 30, 2008.
 
 NOTE
M – EQUITY
 
 During
2008, prior to the 100 to 1 reverse stock split, 465,000,000 shares of common
stock were issued for consulting agreements valued, based upon services
rendered, at $20,819,621 and 35,000,000 shares of common stock were issued for
stock based compensation valued at $2,850,000.
 
 Also
prior to the 100 to 1 reverse stock split, in 2008, the Company issued
12,842,866 shares of equity units at an average price of $0.04 per share for
cash totaling $500,968.  The sale of equity units, consisted of one
share of the Company’s common stock and a warrant to purchase 1⁄2 share of common
stock at an average exercise price of $0.09  per share for a period of
one year subsequent to the purchase of the equity unit.
 
 In June
2008 the Company finalized a 100 to 1 reverse stock split which resulted in
reverse splitting the 953,465,201 shares issued and outstanding at the time to
9,542,000 shares.  The par value of the common stock remained at $.001
per share.
 
 Immediately
proceeding the reverse stock split several obligations of the Company were
executed per board resolution that resulted in 6,425,899 shares of issuable
common stock.  These obligations were related to 4,680,000 shares of
issuable common stock for consulting agreements valued, based upon services
rendered. at $7,20,000, 1,450,000 shares of issuable common stock for stock
based compensation valued at $2,175,000 and 295,899 shares of issuable common
stock for the retirement of debt valued at $443,848.
 
 In 2008
an adjustment was made to additional paid-in capital for the amount of $697,740,
representing principle and interest, to reflect an adjustment to a previous
restructuring agreement.  From 2003 through 2005, salary was accrued
by the pre-close company of the April 2006 reverse merger into TPID (SSTY-Fasano
Agreement and the OnTV Acquisition) for the then company president and chairman
totaling approximately $500,000.  In conjunction with the close of the
transaction the Company was released from this claim.   The
former president and chairman has filed several pro se petitions in fiscal
year 2008 related to this claim.  See Note N for legal
matters.
 
 NOTE
N - LEGAL MATTERS
 
 The
Company is subject to disputes and litigation in the ordinary course of
business. The Company is not aware of any pending or threatened litigation that
it believes is reasonably likely to have a material adverse effect on the
financial statement or results of operations, based upon the information
available at this time.
 
 There are
certain claims between the Company and Daniel M. Fasano (Fasano), the former
president and chairman of the Company’s predecessor, OnTV, Inc.  In
April 2006, TPID’s former parent, Sure Trace Security Corporation (“SSTY”)
acquired the controlling interest of OnTV from Fasano.  OnTV then spun
off from SSTY and became a separate and independent company (renamed True
Product ID, Inc.) as a result of a dividend to SSTY shareholders effective June
1, 2006.
 
 Monies
owed the Company by Fasano as a Result of His 2005 Purchase of All Assets of the
Company’s Subsidiary Seen OnTV
 
 In
September 2005, Fasano (then the Company’s president and chairman) purchased of
all the shares of the Company’s subsidiary, Seen OnTV, and other assets
incidental to the business of Seen OnTV, including the domain name, trademark,
and trade name “AsSeenOnTV.com”.  As reported in the Company’s Form
10SB12G filed January 31, 2000, the Company purchased the domain name
“AsSeenOnTv.com” in January 2000 for approximately $5
million.  Pursuant to a written agreement, Fasano owes the Company
$300,000, plus interest at 5.75% per year (since September 2005).  As
of the date of this filing, no monies have been received for this purchase.
Total amount due, including principal and interest, to the Company as of June
30, 2008 is $347,438.
    F-17
 
 Outstanding
Monies owed by the Company to Fasano from the 2006 SSTY Acquisition of
ONTV
 
 The
Company entered into an amended pay agreement regarding the monies owed to
Fasano from the 2006 SSTY acquisition of OnTV.  Pursuant to the
amended pay agreement, the Company agreed to pay Fasano (1) $100,000 by March
31, 2007; (2) $185,000 by June 30, 2007; and (3) $34,410 in interest and
penalties by June 30, 2007.  Any and all unpaid portions of any
payments due under the amended pay agreement shall accrue simple annual interest
at twenty-five percent (25%), simple, annual interest (or the highest
permissible interest rate allowed in Pennsylvania, New York, Delaware, and/or
Florida).
 
 The
Company remitted the first $100,000 payment but has not yet made the other two
payments totaling $219,410 due June 30, 2007 or any accrued interest thereon
(the “Outstanding ONTV Acquisition Balance”).Total amount due, including
principal and interest, to Fasano by the Company as of June 30, 2008 is
$274,263.
 
 Litigation
Filed By Fasano
 
 On
October 31, 2007, Fasano filed a pro se petition for the
statutory appointment of a receiver in the Delaware Court of
Chancery.  In his petition, Fasano claims that the Company is
insolvent based, in part, due to in excess of $900,000 he claims the Company
owes him that remains unpaid.  In its January 4, 2008 answer to the
Petition, the Company denied and continues to deny that it is insolvent and that
the appointment of a receiver is required.  Unless the matter can be
resolved, a hearing on will likely be scheduled for the fall of
2008.
 
 Around
the same time, the SEC commenced a review of aspects of the SSTY Acquisition of
OnTV concerning the dividend of unregistered shares of the Company to SSTY
shareholders which resulted in the spin off of the Company from
SSTY.  There was a concern that the SEC would rescind the entire
acquisition.  However, the SEC chose not to rescind the dividend or
the acquisition but instead filed a consent complaint against SSTY and certain
of its executives in September 2007 stating that SSTY failed to register the
spin off of OnTV in violation of Section 5 of the 1933 Securities
Act.
 
 In
February 2008, Fasano filed a separate lawsuit, pro se, in Broward County,
Florida against the Company for damages in the amount of approximately
$900,000.  The Company responded to the lawsuit by filing a Motion to
Dismiss on jurisdictional grounds. The Company believes the lawsuit is without
merit and, if the matter cannot be amicably resolved, intends to vigorously
defend it.
 
 In the
course of the litigation, the Company learned from Fasano that part of his
claims against the Company related to deferred salary he was purportedly owed by
the Company prior to the closing of SSTY’s Acquisition of OnTV amounting to
approximately $500,000 as of September 30, 2005.  The Company’s
position is that these types of pre-acquisition expenses, as agreed, would be
extinguished post closing.  Moreover, the Company believes that
Fasano’s claims were released by section 6 of the January 2007 amended pay
agreement, which provides:
 
 “Subject
to the terms and conditions of this Amendment, in consideration of the payments
and undertakings described above and in further consideration which is hereby
acknowledged, Fasano hereby releases and forever discharges SSTY and TPID, their
predecessors, successors, assigns, affiliated companies, shareholders,
administrators, partners, officers, directors, employees, agents and attorneys
from any and all claims and causes of action whatsoever, known or unknown,
foreseen or unforeseen, which any party has or may have by reason of any matter,
cause or thing whatsoever, arising from the March 21, 2006 SSTY-Fasano Agreement
and the ONTV Acquisition, from the beginning of the world to the day of this
Agreement, other than those obligations set forth herein.”
  Other
Litigation
 
 In July
2008, Europlan Financial Services Ltd. as Trustee for Ormond Trust and Deborah
Richdale filed suit against the Company, Rene Hamouth, Hamouth Family Trust,
William R. Dunavant, Richard Specht and Wilson W. Hendricks III for an
unspecified amount of damages and injunctive relief.   The Company
believes that the claims against it are without merit.  The Plaintiff
agreed to extend the time for the Company to file a responsive pleading to
explore possible settlement negotiations.  If the matter cannot be amicably
resolved, the Company intends to defend the matter vigorously.
    F-18
 
 NOTE
O – COMMITMENTS AND CONTINGENCIES
  The
Company shares about 300 square feet of office share located at 1615 Walnut
Street, 3rd Floor, Philadelphia, PA 19102.  Its share of rent is
$1,583.33.
 
 The
Company’s subsidiary in Beijing rent an office space of approximately 1,300
square meters. The leasing period begins from November 1, 2007 and ends at
October 31, 2009.
 
 Lease
obligation under the rental agreement is as follow:
   2009
              
              $
              118,6962010
              
              
              197,826Total lease
      obligation remaining
              
              $
              316,522
  NOTE P –FOREIGN
OPERATIONS
 
 Since May
2007, the majority of the Company’s operating activities have been in
China.  The functional currency of the Chinese Venture is the Yuan and
the financial statements of the Chinese JV Company have been converted from Yuan
to U.S. Dollars at the exchange rate in effect.  There were no foreign
currency gains or losses included in the June 30, 2008 Statement of
Operations.  A Foreign Currency Translation Adjustment of $35,178 is
included as a component of Shareholders’ Equity at June 30, 2008, to reflect the
change in value of assets and liabilities in the Chinese JV Company’s balance
sheet.
 
 NOTE
Q– SUBSEQUENT EVENTS
 
 On July
28, 2008, after extensive meetings based primarily in Europe, the Registrant’s
consultant, Brantridge Holdings Limited (“Brantridge”), has confirmed that the
Registrant has received commitments for the first two million dollars
(US$2,000,000) towards the Registrant’s initial US$5 million private
placement.  Brantridge confirms that a portion of the initial $2
million will be received as early as the week of July 28 with the balance
anticipated to be received shortly thereafter.  Funds will be used to
implement the Chinese National Gas Tank Contract with the State General
Administration for Quality Supervision, Inspection and Quarantine of the
People's Republic of China (“AQSIQ”), and in particular to send western experts
to help roll out the AQSIQ Contract and to manufacture the marking equipment and
scanners needed to fulfill purchase orders from Chinese gas tank manufacturers,
retail stores, and inspection stations and Chinese government municipalities per
AQSIQ’s Official Government Circular mandating the use of the Registrant’s
anti-counterfeiting and product safety monitoring technology for all 130 million
gas tanks in China.  Upon manufacture of the marking equipment and
scanners, Chinese gas tank manufacturers, retail stores, and inspection stations
and Chinese government municipalities will begin to put down deposits of up to
30% towards the purchase orders. Brantridge
anticipates being able to complete the balance of the initial US$5 million
private placement this summer.  Discussions are taking place about the
possible need for and role of the Registrant’s anti-counterfeiting and product
safety monitoring technology in Europe. Although
its efforts are ongoing, Brantridge, however, has not yet secured this funding,
and the Company has been forced to pursue alternative funding
options.
 
 Subsequent
to year end the Company received funding through various sources totaling
approximately $641,708 in exchange for 427,805 shares of common stock. 
Additionally, James MacKay received 19,072,371 shares of stock in order to bring
his total number of
shares owned to 51% of the total shares outstanding for ownership
purposes.
  On
October 9, 2008, the Registrant’s Board of Directors (the “Board”) accepted
Wilson W. Hendricks III’s resignation from the Board and as the Registrant’s
chief executive officer and chief accounting officer, effective October 8,
2008.  The resignation was not a result of any disagreement with the
Registrant.  Hendricks was not a member of any committees of the
Board. Hendricks is expected to continue to assist the Registrant in a
consulting capacity relating to the rollout of the Chinese National Gas Tank
Contract with AQSIQ.
 
 On
October 9, 2008, the Board appointed David Bruce Hong as a member of the
Registrant’s Board to fill the vacancy created by Hendricks’
resignation.  Educated in the United States and England, Hong
previously helped oversee distribution, sales and business development for Asian
and multinational companies in a variety of diverse industries in the People’s
Republic of China, Hong Kong, Macau, Taiwan, Philippines, Thailand, Malaysia,
Indonesia, Japan and the United States, serving as CEO, a board member, director
for the Asian-Pacific Region, director for business development, and other
capacities. He helped oversee distribution, sales, promotions, and business
development in the Asian-Pacific Region for such companies as 7-Eleven, KFC,
Sands, 3M, Audi, Budweiser, Citibank, J. Walter Thompson, and Nestle, among
others. He was also a licensed financial controller within the insurance
industry for more than 10 years, and has extensive logistic management
experience. Hong has helped with several of the Registrant’s initiatives in
China and with Chinese Government.
 
 
  F-19