UNITED STATES SECURITIES AND


EXCHANGE
COMMISSION


Washington,
D.C. 20549





FORM
10-Q





QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF


THE
SECURITIES EXCHANGE ACT OF 1934





For the
Quarter Ended December 31, 2008




Commission
File No:000-29249





True Product ID,
Inc.


(Name of
Small Business Issuer in Its Charter)




Delaware
            16-1499611(State of other jurisdiction of Incorporation or
      Organization)
            (Employer
      Identification Number)





1615
Walnut Street, 3rd
Floor


Philadelphia,
PA                 
                    19103


(Address
of principal executive offices) (Zip Code)





(215) 972-6999


(Issuer's
Telephone Number, Including Area Code)





Check
whether the Issuer: (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 30
days:     Yes [X]    No
[  ]





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





Large
Accelerated filer [   ] Accelerated filer [   ]
Non-accelerated filer [   ] Smaller Reporting Company
[X]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.
Yes    [   ]        No
[X]








AS
OF JANUARY 31, 2009, THERE WERE 15,967,899 SHARES OF COMMON STOCK ISSUED AND
OUTSTANDING.
















TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      BALANCE SHEETSDecember
      31,
                                              
                                              
                                              June,
      30ASSETS
                                              
                                              2008
                                              
                                              
                                              2008(Unaudited)
                                              
                                              
                                              (Audited)CURRENT
      ASSETS:Cash
      and cash equivalents
                                              
                                              $
                                              247,993
                                              
                                              
                                              $
                                              32,171Restricted
      cash
                                              
                                              
                                              1,750,000
                                              
                                              
                                              
                                              -Accounts
      receivable
                                              
                                              
                                              224,916
                                              
                                              
                                              
                                              152,751Other
      current assets
                                              
                                              
                                              304
                                              
                                              
                                              
                                              39,436Total
      current assets
                                              
                                              
                                              2,223,213
                                              
                                              
                                              
                                              224,358PROPERTY
      AND EQUIPMENT - Net
                                              
                                              
                                              138,512
                                              
                                              
                                              
                                              138,722Note
      receivable
                                              
                                              
                                              300,000
                                              
                                              
                                              
                                              300,000Interest
      on note receivable
                                              
                                              
                                              56,063
                                              
                                              
                                              
                                              47,438Intangible
      assets - net
                                              
                                              
                                              431,727
                                              
                                              
                                              
                                              461,674Goodwill
                                              
                                              
                                              13,301,191
                                              
                                              
                                              
                                              13,301,191TOTAL
      ASSETS
                                              
                                              $
                                              16,450,706
                                              
                                              
                                              $
                                              14,473,383LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                                              
                                              $
                                              1,315,141
                                              
                                              
                                              $
                                              991,700Saddington
      advances
                                              
                                              
                                              2,627,000
                                              
                                              
                                              
                                              -Current
      portion of capital lease
                                              
                                              
                                              8,202
                                              
                                              
                                              
                                              8,202Notes
      payable
                                              
                                              
                                              219,410
                                              
                                              
                                              
                                              219,410Accrued
      interest payable
                                              
                                              
                                              75,018
                                              
                                              
                                              
                                              54,853Total
      current liabilities
                                              
                                              
                                              4,244,771
                                              
                                              
                                              
                                              1,274,165NON-CURRENT
      LIABILITIES:Long-term
      portion of capital lease
                                              
                                              
                                              27,786
                                              
                                              
                                              
                                              27,786Accrued
      interest payable
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Convertible
      debenture
                                              
                                              
                                              500,000
                                              
                                              
                                              
                                              500,000Related
      party payable
                                              
                                              
                                              757,488
                                              
                                              
                                              
                                              668,781Accrued
      expenses
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Notes
      payable - SSTY
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -TOTAL
      LIABILITIES
                                              
                                              
                                              5,530,045
                                              
                                              
                                              
                                              2,470,732Minority
      interest
                                              
                                              
                                              (700,060
                                              )
                                              
                                              
                                              (468,644
                                              )Commitments
      and contingenciesSTOCKHOLDERS’
      EQUITY:Preferred
      Stock: $.001 Par value; 5,000,000 shares authorized; 0
                                                shares issued and outstanding at December 31, 2008 and
      June 30,
                                                2008, respectively
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Class
      A common stock, $.001 par value; 800,000,000 shares
                                                authorized; 15,967,899 shares issued and outstanding at
      December 31,
                                                2008;
      9,542,000  shares issued and 6,425,899 shares issuable at June
      30, 2008
                                              
                                              
                                              15,968
                                              
                                              
                                              
                                              15,968Class
      B common stock: $.001 par value; 200,000,000 shares
                                                authorized; 0 shares issued and outstanding at December
      31
                                                and June 30, 2008, respectively
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Additional
      paid-in capital
                                              
                                              
                                              58,055,744
                                              
                                              
                                              
                                              58,055,744Accumulated
      deficit during development stage
                                              
                                              
                                              (46,406,062
                                              )
                                              
                                              
                                              (45,563,739
                                              )Stock
      held in trust
                                              
                                              
                                              (1,500
                                              )
                                              
                                              
                                              (1,500
                                              )Foreign
      currency translation adjustment
                                              
                                              
                                              (43,429
                                              )
                                              
                                              
                                              (35,178
                                              )Total
      stockholders’ equity
                                              
                                              
                                              11,620,721
                                              
                                              
                                              
                                              12,471,295TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
                                              
                                              $
                                              16,450,706
                                              
                                              
                                              $
                                              14,473,383













2


TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF OPERATIONS (Unaudited)Period
      October 1,2005
      (Date ofFor
      the Three Months Ended
                                                
                                                
                                                For
      the Six Months Ended
                                                
                                                
                                                Inception)
      ThroughDecember
      31,
                                                
                                                
                                                December
      31,
                                                
                                                
                                                December
      31, 20082008
                                                
                                                
                                                2007
                                                
                                                
                                                2008
                                                
                                                
                                                2007REVENUE,
      net of returns
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -EXPENSES:Consulting
      fees
                                                
                                                
                                                118,900
                                                
                                                
                                                
                                                15,662,550
                                                
                                                
                                                
                                                135,900
                                                
                                                
                                                
                                                15,681,435
                                                
                                                
                                                
                                                28,038,021Officer
      and director compensation
                                                
                                                
                                                227,860
                                                
                                                
                                                
                                                8,390,000
                                                
                                                
                                                
                                                400,929
                                                
                                                
                                                
                                                9,157,500
                                                
                                                
                                                
                                                11,481,510General
      and administrative
                                                
                                                
                                                483,077
                                                
                                                
                                                
                                                314,958
                                                
                                                
                                                
                                                486,687
                                                
                                                
                                                
                                                552,352
                                                
                                                
                                                
                                                3,375,091Amortization
      and depreciation
                                                
                                                
                                                14,233
                                                
                                                
                                                
                                                23,020
                                                
                                                
                                                
                                                39,134
                                                
                                                
                                                
                                                46,011
                                                
                                                
                                                
                                                220,507Technology
      license fee
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                637,500Total
      expenses
                                                
                                                
                                                844,070
                                                
                                                
                                                
                                                24,390,528
                                                
                                                
                                                
                                                1,062,650
                                                
                                                
                                                
                                                25,437,298
                                                
                                                
                                                
                                                43,752,629NET
      LOSS FROM OPERATIONS
                                                
                                                
                                                (844,070
                                                )
                                                
                                                
                                                (24,390,528
                                                )
                                                
                                                
                                                (1,062,650
                                                )
                                                
                                                
                                                (25,437,298
                                                )
                                                
                                                
                                                (43,752,629
                                                )OTHER
      INCOME (EXPENSE):Write
      down for impairment of goodwill
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (4,300,000
                                                )Forgiveness
      of debt
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,583,753
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                1,583,753
                                                
                                                
                                                
                                                1,583,753Interest
      income
                                                
                                                
                                                4,762
                                                
                                                
                                                
                                                4,313
                                                
                                                
                                                
                                                9,075
                                                
                                                
                                                
                                                8,626
                                                
                                                
                                                
                                                56,709Interest
      expense
                                                
                                                
                                                (10,082
                                                )
                                                
                                                
                                                (10,082
                                                )
                                                
                                                
                                                (20,164
                                                )
                                                
                                                
                                                (21,631
                                                )
                                                
                                                
                                                (94,214
                                                )Loss
      on equity investment
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (65,513
                                                )NET
      LOSS BEFORE MINORITY INTEREST AND
                                                  DISCONTINUED
      OPERATIONS
                                                
                                                
                                                (849,390
                                                )
                                                
                                                
                                                (22,812,544
                                                )
                                                
                                                
                                                (1,073,739
                                                )
                                                
                                                
                                                (23,866,550
                                                )
                                                
                                                
                                                (46,571,894
                                                )MINORITY
      INTEREST
                                                
                                                
                                                175,617
                                                
                                                
                                                
                                                85,711
                                                
                                                
                                                
                                                231,416
                                                
                                                
                                                
                                                151,655
                                                
                                                
                                                
                                                700,060DISCONTINUED
      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
                                                
                                                
                                                (673,773
                                                )
                                                
                                                
                                                (22,726,833
                                                )
                                                
                                                
                                                (842,323
                                                )
                                                
                                                
                                                (23,714,895
                                                )
                                                
                                                
                                                (46,406,062
                                                )OTHER
      COMPREHENSIVE INCOME:Foreign
      currency translation adjustment
                                                
                                                
                                                (2,756
                                                )
                                                
                                                
                                                (10,484
                                                )
                                                
                                                
                                                (8,251
                                                )
                                                
                                                
                                                (14,107
                                                )
                                                
                                                
                                                (43,429
                                                )TOTAL
      COMPREHENSIVE LOSS
                                                
                                                $
                                                (676,529
                                                )
                                                
                                                $
                                                (22,737,317
                                                )
                                                
                                                $
                                                (850,574
                                                )
                                                
                                                $
                                                (23,729,002
                                                )
                                                
                                                $
                                                (46,449,491
                                                )NET
      LOSS PER SHARE:Basic
      and Diluted
                                                
                                                $
                                                (0.04
                                                )
                                                
                                                $
                                                (0.03
                                                )
                                                
                                                $
                                                (0.05
                                                )
                                                
                                                $
                                                (0.04
                                                )WEIGHTED-AVERAGE
      SHARES:Basic
      and Diluted
                                                
                                                
                                                15,967,899
                                                
                                                
                                                
                                                764,979,363
                                                
                                                
                                                
                                                15,967,899
                                                
                                                
                                                
                                                605,246,502


3





TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWS (Unaudited)Period
      October 1,Six
      Months Ended
                                
                                
                                2005
      (Date ofDecember
      31,
                                
                                
                                
                                
                                
                                Inception)
      Through2008
                                
                                
                                2007
                                
                                
                                December
      31, 2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                
                                $
                                (842,323
                                )
                                
                                $
                                (23,714,895
                                )
                                
                                $
                                (46,340,478
                                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
                                
                                
                                39,134
                                
                                
                                
                                46,104
                                
                                
                                
                                220,507Stock
      based compensation
                                
                                
                                -
                                
                                
                                
                                8,925,000
                                
                                
                                
                                11,080,581Issuance
      of common stock for consulting fees
                                
                                
                                -
                                
                                
                                
                                15,600,000
                                
                                
                                
                                27,902,121Forgiveness
      of debt
                                
                                
                                -
                                
                                
                                
                                (1,583,753
                                )
                                
                                
                                (1,583,753
                                )Write
      off of goodwill
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                4,300,000Loss
      from equity investment
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                65,513Loss
      on disposal of subsidiaries
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                523,983Loss
      from operations of disposed subsidiaries
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                10,245Minority
      interest
                                
                                
                                (231,416
                                )
                                
                                
                                (151,655
                                )
                                
                                
                                (700,060
                                )Changes
      in operating assets and liabilities:
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                -Accounts
      receivable
                                
                                
                                (72,165
                                )
                                
                                
                                (142,150
                                )
                                
                                
                                (224,916
                                )Other
      current assets
                                
                                
                                39,132
                                
                                
                                
                                1,648
                                
                                
                                
                                (304
                                )Interest
      on note receivable
                                
                                
                                (8,625
                                )
                                
                                
                                (8,626
                                )
                                
                                
                                (56,063
                                )Accounts
      payable and accrued expenses
                                
                                
                                323,441
                                
                                
                                
                                689,776
                                
                                
                                
                                2,121,850Accrued
      expenses - related party
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                87,500Accrued
      interest payable
                                
                                
                                20,165
                                
                                
                                
                                -
                                
                                
                                
                                75,018Net
      cash used in operating activities
                                
                                
                                (732,657
                                )
                                
                                
                                (338,551
                                )
                                
                                
                                (2,518,256
                                )CASH
      FLOWS FROM INVESTING ACTIVITIES:Investment
      in acquired entity
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                43,422Purchase
      of fixed assets
                                
                                
                                (8,977
                                )
                                
                                
                                (28,336
                                )
                                
                                
                                (191,819
                                )Cash
      and cash equivalents in disposed subsidiaries
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (50,823
                                )Net
      cash used in investing activities
                                
                                
                                (8,977
                                )
                                
                                
                                (28,336
                                )
                                
                                
                                (199,220
                                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      of cash restricted
                                
                                
                                (1,750,000
                                )
                                
                                
                                -
                                
                                
                                
                                (1,750,000
                                )Proceeds
      from related parties
                                
                                
                                88,707
                                
                                
                                
                                -
                                
                                
                                
                                757,488Proceeds
      from saddington advances
                                
                                
                                2,627,000
                                
                                
                                
                                -
                                
                                
                                
                                2,627,000Proceeds
      from issuance of common stock for cash
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                500,968Proceeds
      from convertible debt
                                
                                
                                -
                                
                                
                                
                                158,450
                                
                                
                                
                                500,000Proceeds
      from financing
                                
                                
                                -
                                
                                
                                
                                253,420
                                
                                
                                
                                489,862Repayment
      of capital lease obligation
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (14,704
                                )Repayment
      of debt
                                
                                
                                -
                                
                                
                                
                                (1,170
                                )
                                
                                
                                (101,716
                                )Net
      cash provided by financing activities
                                
                                
                                965,707
                                
                                
                                
                                410,700
                                
                                
                                
                                3,008,898FOREIGN
      CURRENCY TRANSLATION
                                
                                
                                (8,251
                                )
                                
                                
                                (14,107
                                )
                                
                                
                                (43,429
                                )NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                                
                                
                                215,822
                                
                                
                                
                                29,706
                                
                                
                                
                                247,993BEGINNING
      OF PERIOD
                                
                                
                                32,171
                                
                                
                                
                                42,774
                                
                                
                                
                                -END
      OF PERIOD
                                
                                $
                                247,993
                                
                                
                                $
                                72,480
                                
                                
                                $
                                247,993Supplementary
      disclosure of cash flow information:Cash
      paid for interest
                                
                                $
                                -
                                
                                
                                $
                                789
                                
                                
                                $
                                1,223Cash
      paid for taxes
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                -










4






TRUE
      PRODUCT ID, INC.(A
      DEVELOPMENT STAGE COMPANY)CONSOLIDATED
      STATEMENTS OF CASH FLOWS - continued
                                                          
                                                          Period
      October 1,Six
      Months Ended
                                                          
                                                          
                                                          2005
      (Date ofDecember
      31,
                                                          
                                                          
                                                          Inception)
      Through2008
                                                          
                                                          
                                                          2007
                                                          
                                                          
                                                          September
      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
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          17,597,500Sale
      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
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          443,848Adjustment
      to restructuring agreement
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          -
                                                          
                                                          
                                                          $
                                                          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







5


TRUE
PRODUCT ID, INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE
A - BASIS OF PRESENTATION





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 financial
statements are presented on the basis that the Company is a going concern, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.  The Company has incurred operating losses since
its inception. This condition raises substantial doubt as to the Company’s
ability to continue as a going concern as such continuance is dependent upon the
Company’s ability to raise sufficient capital.





Certain
information and footnote disclosures normally included in financial statements
prepared in conjunction with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.  These condensed consolidated financial
statements should be read in conjunction with the annual audited consolidated
financial statements and the notes thereto included in the Company's Form 10-KSB
Annual Report and other reports filed with the Securities and Exchange
Commission (SEC).





The
accompanying unaudited interim consolidated financial statements reflect all
adjustments of a normal and recurring nature which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations and cash flows of the Company for the interim periods
presented.  The results of operations or these periods are not
necessarily comparable to, or indicative of, results of any other interim period
or for the fiscal year taken as a whole.





SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES




Principals
of Consolidation




The
consolidated financial statements include the accounts of the Company and any
wholly owned subsidiaries. All material inter-company transactions and balances
have been eliminated in consolidation.





Use
of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statement and the reported amounts of revenues and
expenses during the reporting period. Estimates that are critical to the
accompanying financial statements arise from the determination of the fair value
of the Company’s investment. Because such determination involves subjective
judgment, it is at least reasonably possible that the Company’s estimates could
change in the near term with respect to this matter.





Fair
Value of Financial Instruments





Cash and
cash equivalents, prepaid expenses and other current assets, accounts payable
and accrued expenses, as reflected in the consolidated financial statements,
approximate fair value because of the short-term maturity of these instruments.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.





Revenue
Recognition





The
Company has adopted and follows the guidance provided in the SEC’s Staff
Accounting Bulletin (“SAB”) No. 104, which provides guidance on the recognition,
presentation and disclosure of revenue in the financial statements.





Warrants





The
Company issues warrants to purchase the Company’s common stock in conjunction
with debt and certain preferred stock issues. Warrants are accounted for in
accordance with the provisions of Accounting Principles Bulletin (“APB”) No. 14,
“Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants”
(“APB No.14”) and Emerging Issues Task Force (“EITF”) No. 00-19, “Accounting for
Derivative Financial Instruments Accounting for Derivative Financial Instruments
Indexed to or Potentially Settled in Indexed to or Potentially Settled in a
Company’s Own Stock” (“EITF 00-19”). The fair value of warrants granted in
conjunction with debt and equity issuances is estimated on the grant date using
the Black-Scholes option pricing model. The value of warrants is separated from
the total consideration of each issue and included as an element of additional
paid-in capital.






6






Net
Loss Per Share





Basic and
diluted net losses per common share are presented in accordance with Statement
of Financial Accounting Standards (“SFAS”) No.128, “Earning Per Share", for all
periods presented. Stock subscriptions, options and warrants have been excluded
from the calculation of the diluted loss per share for the periods presented in
the statements of operations, because all such securities were anti-dilutive.
The net loss per share is calculated by dividing the net loss by the weighted
average number of shares outstanding during the periods.





Reclassification





Certain
amounts in the prior year consolidated financial statements have been
reclassified for comparative purposes to conform to the presentation in the
current year consolidated financial statements.





RECENT
ACCOUNTING PRONOUNCEMENTS





Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities


Employers’
Disclosures about Postretirement Benefit Plan Assets





In
December 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
Staff Position on Financial Accounting Standard (“FSP FAS”) No. 132(R)-1,
“Employers’ Disclosures about Postretirement Benefit Plan
Assets”.  This FSP amends FASB Statement No. 132(R) (“SFAS No.
132(R)”), “Employers’ Disclosures about Pensions and Other Postretirement
Benefits”, to provide guidance on an employer’s disclosures about plan assets of
a defined benefit pension or other postretirement plan.  FSP FAS No.
132(R)-1 also includes a technical amendment to SFAS No. 132(R) that requires a
nonpublic entity to disclose net periodic benefit cost for each annual period
for which a statement of income is presented.  The required
disclosures about plan assets are effective for fiscal years ending after
December 15, 2009.  The technical amendment was effective upon
issuance of FSP FAS No. 132(R)-1.  The Company is currently assessing
the impact of FSP FAS No. 132(R)-1 on its consolidated financial position and
results of operations.





Effective
Date of FASB Interpretation No. 48 for Certain Nonpublic
Enterprises





In
December 2008, the FASB issued FSP FIN No. 48-3, “Effective Date of FASB
Interpretation No. 48 for Certain Nonpublic Enterprises”.  FSP FIN No.
48-3 defers the effective date of FIN No. 48, “Accounting for Uncertainty in
Income Taxes”, for certain nonpublic enterprises as defined in SFAS No. 109,
“Accounting for Income Taxes”.  However, nonpublic consolidated
entities of public enterprises that apply U.S. generally accepted accounting
principles (GAAP) are not eligible for the deferral.  FSP FIN No. 48-3
was effective upon issuance.  The impact of adoption was not material
to the Company’s consolidated financial condition or results of
operations.





Disclosures
by Public Entities (Enterprises) about Transfers of Financial Assets and
Interests in Variable Interest Entities





In
December 2008, the FASB issued FSP FAS No. 140-4 and FIN No. 46(R) -8,
“Disclosures by Public Entities (Enterprises) about Transfers of Financial
Assets and Interests in Variable Interest Entities”.  This FSP amends
SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities”, to require public entities to provide
additional disclosures about transfers of financials assets.  FSP FAS
No. 140-4 also amends FIN No. 46(R)-8, “Consolidation of Variable Interest
Entities”, to require public enterprises, including sponsors that have a
variable interest entity, to provide additional disclosures about their
involvement with a variable interest entity.  FSP FAS No. 140-4 also
requires certain additional disclosures, in regards to variable interest
entities, to provide greater transparency to financial statement
users.  FSP FAS No. 140-4 is effective for the first reporting period
(interim or annual) ending after December 15, 2008, with early application
encouraged.  The Company is currently assessing the impact of FSP FAS
No. 140-4 on its consolidated financial position and results of
operations.








7








Accounting
for an Instrument (or an Embedded Feature) with a Settlement Amount That is
Based on the Stock of an Entity’s Consolidated Subsidiary





In
November 2008, the FASB issued FSP Emerging Issues Task Force (“EITF”) Issue No.
08-8, “Accounting for an Instrument (or an Embedded Feature) with a Settlement
Amount that is based on the Stock of an Entity’s Consolidated
Subsidiary”.  EITF No. 08-8 clarifies whether a financial instrument
for which the payoff to the counterparty is based, in whole or in part, on the
stock of an entity’s consolidated subsidiary is indexed to the reporting
entity’s own stock.  EITF No. 08-8 also clarifies whether or not stock
should be precluded from qualifying for the scope exception of SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, or from being
within the scope of EITF No. 00-19, “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock”,  EITF No. 08-8 is effective for fiscal years beginning on or
after December 15, 2008, and interim periods within those fiscal
years.  The Company is currently assessing the impact of EITF No. 08-8
on its consolidated financial position and results of operations.





Accounting
for Defensive Intangible Assets





In
November 2008, the FASB issued EITF Issue No. 08-7, “Accounting for Defensive
Intangible Assets”.  EITF No. 08-7 clarifies how to account for
defensive intangible assets subsequent to initial measurement.  EITF
No. 08-7 applies to all defensive intangible assets except for intangible assets
that are used in research and development activities.  EITF No. 08-7
is effective for intangible assets acquired on or after the beginning of the
first annual reporting period beginning on or after December 15,
2008.  The Company is currently assessing the impact of EITF No. 08-7
on its consolidated financial position and results of operations.





Equity
Method Investment Accounting Considerations





In
November 2008, the FASB issued EITF Issue No. 08-6 (“EITF No. 08-6”), “Equity
Method Investment Accounting Considerations”.  EITF No. 08-6 clarifies
accounting for certain transactions and impairment considerations involving the
equity method.  Transactions and impairment dealt with are initial
measurement, decrease in investment value, and change in level of ownership or
degree of influence.  EITF No. 08-6 is effective on a prospective
basis for fiscal years beginning on or after December 15, 2008.  The
Company is currently assessing the impact of EITF No. 08-6 on its consolidated
financial position and results of operations.





Determining
the Fair Value of a Financial Asset When the Market for That Asset is Not
Active





In
October 2008, the FASB issued FSP FAS No. 157-3, “Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active”.  This
FSP clarifies the application of SFAS No. 157, “Fair Value Measurements,” in a
market that is not active.  The FSP also provides examples for
determining the fair value of a financial asset when the market for that
financial asset is not active.  FSP FAS No. 157-3 was effective upon
issuance, including prior periods for which financial statements have not been
issued.  The impact of adoption was not material to the Company’s
consolidated financial condition or results of operations.





Issuer’s
Accounting for Liabilities Measured at Fair Value with a Third-Party Credit
Enhancement





In
September 2008, the FASB issued EITF Issue No. 08-5 (“EITF No. 08-5”), “Issuer’s
Accounting for Liabilities Measured at Fair Value with a Third-Party Credit
Enhancement”.  This FSP determines an issuer’s unit of accounting for
a liability issued with an inseparable third-party credit enhancement when it is
measured or disclosed at fair value on a recurring basis.  FSP EITF
No. 08-5 is effective on a prospective basis in the first reporting period
beginning on or after December 15, 2008.  The Company is currently
assessing the impact of FSP EITF No. 08-5 on its consolidated financial position
and results of operations.





Disclosures
about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement
No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date
of FASB Statement No. 161





In
September 2008, the FASB issued FSP FAS No. 133-1, “Disclosures about Credit
Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and
FASB Interpretation No. 45; and Clarification of the Effective Date of FASB
Statement No. 161”.  This FSP amends FASB Statement No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, to require
disclosures by sellers of credit derivatives, including credit derivatives
embedded in a hybrid instrument.  The FSP also amends FASB
Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others”, to require
and additional disclosure about the current status of the payment/performance
risk of a guarantee.  Finally, this FSP clarifies the Board’s intent
about the effective date of FASB Statement No. 161, “Disclosures about
Derivative Instruments and Hedging Activities”.  FSP FAS No. 133-1 is
effective for fiscal years ending after November 15, 2008.  The
Company is currently assessing the impact of FSP FAS No. 133-1 on its
consolidated financial position and results of operations.







8






Endowments
of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an
Enacted Version of the Uniform Prudent Management of Institutional Funds Act,
and Enhanced Disclosures for all Endowment Funds





In August
2008, the FASB issued FSP FAS No. 117-1, “Endowments of Not-for-Profit
Organizations: Net Asset Classification of Funds Subject to an Enacted Version
of the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), and
Enhanced Disclosures for all Endowment Funds”.  The intent of this FSP
is to provide guidance on the net asset classification of donor-restricted
endowment funds.  The FSP also improves disclosures about an
organization’s endowment funds, both donor-restricted and board-designated,
whether or not the organization is subject to the UPMIFA.  FSP FAS No.
117-1 is effective for fiscal years ending after December 31,
2008.  Earlier application is permitted provided that annual financial
statements for that fiscal year have not been previously issued.  The
Company is currently assessing the impact for FSP FAS No. 117-1 on its
consolidated financial position and results of operations.





Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities





In
June 2008, the 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 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 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.








9






Determination
of the Useful Life of Intangible Assets





In April
2008, the FASB issued 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 No. 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.




Delay
in Effective Date




In
February 2008, the FASB issued FSP FAS No. 157-2, “Effective Date of FASB
Statement No. 157”. This FSP delays the effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those that are
recognized or disclosed at fair value on a recurring basis (at least annually)
to fiscal years beginning after November 15, 2008, and interim periods
within those fiscal years. The impact of adoption was not material to the
Company’s consolidated financial condition or results of
operations.





NOTE
B - FOREIGN OPERATIONS





Since May
2007, the majority of the Company’s operating activities have been in
China.  The functional currency of the Chinese affiliate is the Yuan
and the financial statements of the Chinese affiliate have been converted from
Yuan to U.S. Dollars at the exchange rate in effect.  For the six
months ended December 31, 2008, there was $8,251 of foreign currency
transaction losses included in the December 31, 2008 statement of
operations.  A cumulative foreign currency translation adjustment of
$43,429 is included as a component of shareholders’ equity at December 31, 2008,
to reflect the change in value of assets and liabilities in the Chinese
affiliate’s balance sheet.





NOTE
C - NATIONAL CONTRACT WITH THE PEOPLE’S REPUBLIC OF CHINA





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.





On
November 3, 2008, the Company entered into several definitive agreements with
Saddington Limited (“Saddington”), a British Virgin Island company, which has
resulted in, among other things, funding for 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”)
(collectively, the “Saddington Agreements”).





Under the
Saddington Agreements, Saddington has secured and will provide the funding
needed to immediately roll out and maintain the rights to the AQSIQ Chinese
National Gas Tank Contract and the Company will receive a 5% share of the
revenues from the AQSIQ National Gas Tank Project and any other projects and
contracts with AQSIQ under AQSIQ’s 2007 Official National Special Equipment
Security Standard Circular to anti-counterfeit other Chinese special equipment
(medical gas tanks, elevator parts, automobile manufacturing equipment,
amusement park apparatus, cell phone batteries), the Chinese National Car and
Motorcycle Part Contract with the China Federation of Industry and Commerce Auto
& Motorbike Parts articles for Use Chamber of Commerce, the Chinese Painting
and Calligraphy Contract with the Beijing & Calligraphy Collector
Association, and the Chinese Pharmaceutical Contract with Helida (Xinyang)
Pharmaceuticals Co., Ltd.






10





In
return, Saddington will receive the all rights to the intellectual property of
the Company, including all trademarks, patents, marks, and logos; all rights to
all contracts with AQSIQ, including the AQSIQ Gas Tank Contract; the AQSIQ
Gas Tank Joint Venture; and any and all other contracts in Asia; all of the
Company’s fixed assets and business in Asia, including the right to use the
business name of TPID in Asia; the Company’s interest in TPID Beijing; and the
entire share capital of TPID Hong Kong.




Approximately
$2.6 million in funding has already been received from Saddington, of which
$1.75 million is currently classified on the balance sheet as restricted cash
for the funding and operations of the Chinese National Gas Tank Contract.
 As of December 31, 2008 Saddington was still engaged in their final due
diligence and the transaction had not yet closed.  The transaction is
expected to close during the second half of fiscal year 2009.





NOTE
D- RELATED PARTY PAYABLE





During
the current fiscal year, 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 December 31, 2008 is approximately
$758,000.





NOTE
E - SUBSEQUENT EVENTS





On
February 6, 2009, the Company appointed Charles Rufai as the new Chief
Accounting Officer replacing Michael J. Antonoplos.





Charles
Rufai, 47, has over 21 years experience in accounting and finance. He has held
positions as Financial Reporting Manager, Corporate Treasurer and Corporate
Controller. His experience has spanned the fields of Insurance, Banking, Real
Estate, Asset Management and Certified Public Accounting; and has been with both
publicly and privately held companies. He also has extensive internal and
external audit experience. Charles has a BS degree in Accounting and he is a
Certified Public Accountant in New York.


















11


ITEM
2. 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."





RESULTS
OF OPERATIONS





Comparison
of Three Months Ended December 31, 2008 and 2007





During
the first three months ended December 31, 2008 of fiscal 2009, the Company had
no revenues, as the operations of the Chinese affiliate had not begun customer
sales, except for certain trial runs conducted for Chinese
customers.  In the first three months ended December 31, 2007 of
fiscal 2008, there were no revenues.





The
Company had operating expenses of $844,070 for the second quarter of Fiscal
2009, with the majority of the expense related to accrued compensation of
employees, consultants, and administrative expenses; as compared to operating
expenses of approximately $24.4 million for the same period in the second fiscal
quarter of 2008, with the majority of the expense related to stock compensation
of an employee and consultant.





The
Company had other expenses of $5,320 for the three months ended December 31,
2008, as compared to other income of approximately $1.6 million in the same
period in 2007. Other income in 2007 included a gain on debt forgiveness of
approximately $1.6 million, offset in part by expenses of $5,769.





The
Company reported a loss before minority interest of $849,390 for the three
months ended December 31, 2008, compared to a loss before minority interest of
approximately $22.8 million for the three months ended December 31, 2007.
Minority interest for the current fiscal quarter was a credit of $175,617.
Minority interest for the same period in fiscal 2008 was a credit of $85,711.
The add back of minority interest represents the 40% portion of the affiliate
loss not owned by the Company.  The Company began consolidating
the results of the Chinese affiliate in the fourth quarter of fiscal 2008, when
the Company’s interest increased to 60%.





For the
quarter ended December 31, 2008, the Company had a net loss of $673,773,
compared to a net loss of approximately $22.7 million, for the quarter ended
December 31, 2007.





Significant
reduction in overall expenses in 2008 compared to the same period in 2007 was as
a result of stock based compensation to new directors and officers in
2007.





Comparison
of Six Months Ended December 31, 2008 and 2007





During
the six months ended December 31, 2008 of fiscal 2009, the Company had no
revenues, as the operations of the Chinese affiliate had not begun customer
sales, except for certain trial runs conducted for Chinese
customers.  In the first six months ended December 31, 2007 of fiscal
2008, there were no revenues.





The
Company had operating expenses of approximately $1.1 million for the second
quarter of Fiscal 2009, with the majority of the expense related to accrued
compensation of employees, consultants and administrative expenses; as compared
to operating expenses of approximately $25.4 million for the same period in the
second fiscal quarter of 2008, with the majority of the expense related to stock
compensation of an employee and consultant.





The
Company had other expenses of $11,089 for the six months ended December 31,
2008, as compared to other income of approximately $1.6 million in the same
period in 2007. Other income in 2007 included a gain on debt forgiveness of
approximately $1.6 million, offset in part by expenses of $13,005.






12






The
Company reported a loss before minority interest of approximately $1.1 million
for the six months ended December 31, 2008, compared to a loss before minority
interest of approximately $23.9 million for the six months ended December 31,
2007. Minority interest for the six months of fiscal year 2009 was a credit of
$231,416. Minority interest for the same period in fiscal 2008 was a credit of
$151,655. The add back of minority interest represents the 40% portion of the
affiliate loss not owned by the Company.  There was no comparable
amount for the second quarter of fiscal 2007, as the Company only began
consolidating the results of the Chinese affiliate in the fourth quarter of
fiscal 2008, when the Company’s interest increased to 60%.





For the
six months ended December 31, 2008, the Company had a net loss of $842,323,
compared to a net loss of approximately $23.7 million, for the quarter ended
December 31, 2007.





Significant
reduction in overall expenses in 2008 compared to the same period in 2007 was as
a result of stock based compensation to new directors and officers in
2007.





FINANCIAL
CONDITION





Liquidity
and Capital Resources





During
the three months ended December 31, 2008, the Company's cash increased by
$1,965,822 to $1,997,993, of which $1,750,000 is restricted for the funding and
operations of the Chinese National Gas Tank contract.





Cash
provided by operating activities totaled $1,983,050 for the six months ended
December 31, 2008.  Cash outflows included the $842,323 net loss for
the period, $231,416 for minority interest which was also non-cash in nature, an
increase in accounts receivable of $72,165 and an increase in interest on notes
receivable of $8,625; offset by a decrease in other current assets of $39,132
and increases in accrued interest payable of $20,165, accounts payable and
accrued expenses of $323,441 and $39,134 of depreciation and
amortization.





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.





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 World Trade
Organization, 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.








13





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 Administration for Quality
Supervision, Inspection and Quarantine of the People's Republic of
China  “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 THE COMPANY’S CONTINUED EFFORTS IN
NON-CHINA MARKETS





As stated
above, the Company's immediate priority has been the focus on China,
implementing its China contracts, especially the AQSIQ Contract, and generating
revenues from its China contracts.  In the future, the the Company
plans to focus its efforts to penetrate markets outside China.





With
respect to the United States, the Company is refining its initial business plan
and intends to 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.





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, 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 field.





There can
be no assurance that the Company’s marketing plan and efforts outside China will
be successful.








RISK
FACTORS:  RISKS RELATED TO CURRENT WORLD FINANCIAL
MARKETS





While the
Company has obtained financing from Saddington Limited, the current difficulties
in world markets could adversely affect Saddington, and accordingly, there can
be no assurance that Saddington will be able to fully perform under the
Saddington Agreements.








ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





Not
Applicable





ITEM
4T. CONTROLS AND PROCEDURES





Our
President and Chief Accounting 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.








14






Our
management, including the Certifying Officers, does 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.





15


PART
II





ITEM
1.     LEGAL PROCEEDINGS





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.





FASANO
LITIGATION





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
December 31, 2008 is $356,063.





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 December 31, 2008 is
$294,428.





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 second half of fiscal 2009.  A prerequisite to
Fasano maintaining his action in Delaware is that TPID be
insolvent.  Although the Company disputes that it was ever insolvent,
based upon its recent contract with Saddington Limited, TPID clearly is not
insolvent under Delaware law.  The Company expects to prevail in this
litigation.





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.








16






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.”





In net
terms, Fasano is not a creditor of TPID.  The Company expects to
prevail in this litigation.





EUROPLAN
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 plaintiffs allege
that certain consultants or representatives of the Company made
misrepresentations regarding, among other things, the prospective share price of
the Company’s stock, which the plaintiffs allegedly relied upon to purchase our
stock on the open market.  The Company believes that the claims
against it are without merit.  Plaintiffs 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.





DUNAVANT
LITIGATION




In
January 2009, the Company filed suit seeking injunctive relief against William R
Dunavant for violations of certain terms of Mr. Dunavant’s employment agreement
with the Company.




ITEM
5.    OTHER INFORMATION




Subsequent
to the filing of the Company’s Form 10-K for the year ended June 30, 2008, the
Company received emails from Rene Hamouth and Roger Dunuvant, both of whom
expressed their opinions that the language in the 10-K which referenced that
they were brought in to raise money for the Company was inaccurate.  They
believe that the language implies that they were going to be paid money or
consideration to raise money for the Company.  The Company therefore wants
to clarify that both Mr. Hamouth and Mr. Dunuvant were issued shares prior to
any services being rendered and that any assistance which either of them
rendered to the Company in raising money was done without further compensation
and no commissions were paid to either therefrom.





In order
to assure the accuracy of this statement, on November 8, 2008, a letter
including the above paragraph was emailed and faxed to Rene Hamouth’s attorney,
W. Gordon Dobie, Esquire of Winston & Strawn, LLP.  In the letter to
Dobie, the Company requested that he review this language and give us whatever
comments he may have or suggestions.  We further informed Mr. Dobie that if
we did not hear from him, that the Company would assume that he and Mr. Hamouth
had no problem with this language being inserted into TPID’s 10-Q for the period
ended December 31, 2008.  We did not hear back from Dolbie and as such are
including the language in this filing.





On
October 9, 2008, the Board accepted the resignation of Wilson W. Hendricks III
from the Board and as our chief executive officer and chief accounting officer,
effective October 8, 2008. On October 9, 2008, the Board appointed David Bruce
Hong as a member of the Board to fill the vacancy created by Hendricks'
resignation.





On
November 3, 2008, the Company entered into several definitive agreements with
Saddington Limited (“Saddington”), a British Virgin Island company, which has
resulted in, among other things, funding for 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”)
(collectively, the “Saddington Agreements”).








17






Under the
Saddington Agreements, Saddington has secured and will provide the funding
needed to immediately roll out and maintain operations of the AQSIQ Chinese
National Gas Tank Contract  and the Company will receive a 5% share of
the revenues from the AQSIQ National Gas Tank Project and any other project and
contract with AQSIQ under AQSIQ’s 2007 Official National Special Equipment
Security Standard Circular to anti-counterfeit other Chinese special equipment
(medical gas tanks, elevator parts, automobile manufacturing equipment,
amusement park apparatus, cell phone batteries), the Chinese National Car and
Motorcycle Part Contract with the China Federation of Industry and Commerce Auto
& Motorbike Parts articles for Use Chamber of Commerce, the Chinese Painting
and Calligraphy Contract with the Beijing & Calligraphy Collector
Association, and the Chinese Pharmaceutical Contract with Helida (Xinyang)
Pharmaceuticals Co., Ltd.





In
return, Saddington will receive the all rights to the intellectual property of
the Company, including all trademarks, patents, marks, and logos; all rights to
all contracts with AQSIQ, including the AQSIQ Gas Tank Contract; the AQSIQ
Gas Tank Joint Venture; and any and all other contracts in Asia; all of the
Company’s fixed assets and business in Asia, including the right to use the
business name of TPID in Asia; the Company’s interest in TPID Beijing; and the
entire share capital of TPID Hong Kong.




Approximately
$2.6 million in funding has already been received from Saddington, of which
$1.75 million is currently classified on the balance sheet as restricted cash
for the funding and operations of the Chinese National Gas Tank Contract.
 As of December 31, 2008 Saddington was still engaged in their final due
diligence and the transaction had not yet closed.  The transaction is
expected to close during the second half of fiscal year 2009.





On
December 5, 2008, the Board of Directors released Ke Ke Wang as the President
and appointed Michael J. Antonoplos as President.  Mr. Antonoplos
is also a director and the Company’s secretary.





On February
6, 2009, the Company appointed Charles Rufai as the new Chief Accounting Officer
replacing Michael J. Antonoplos. Charles Rufai, 47, has over 21 years experience
in accounting and finance. He has held positions as Financial Reporting Manager,
Corporate Treasurer and Corporate Controller.  His experience has
spanned the fields of Insurance, Banking, Real Estate, Asset Management and
Certified Public Accounting; and has been with both publicly and privately held
companies.  He also has extensive internal and external audit
experience. Charles has a BS degree in Accounting and he is a Certified Public
Accountant in New York.







ITEM
6.    EXHIBITS AND REPORTS ON FORM 8-K FILED DURING QUARTER
ENDED DECEMBER 31, 2008





(a)
Exhibits





Number                                Title





31                                Rule
13a-14(a) Certification





32                                Section
1350 Certification





























18









SIGNATURES








In
accordance with the requirements of the Exchange Act, the Registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.








True
      Product ID, Inc.By:  /s/ 
      Michael J. AntonoplosMichael
      J. AntonoplosPresidentBy:  /s/ 
      Charles A. RufaiCharles A.
      RufaiChief Accounting
      officerDate:  February
      19, 2009



















19