**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549




**FORM
      10-QSB**




**MARK
      ONE**




x
            Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the Quarterly Period ended September 30, 2007;
                or




o
            Transition
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934 for the transition period from ________ to
                ________




*COMMISSION
      FILE NUMBER: 0-51170*




**IDO
      SECURITY INC.**


(Exact
      name of small business issuer as specified in its charter)






Nevada
            
            N/A(State
                or other jurisdiction of incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)






**17
      State Street**


**New
      York, New York 10004**


(Address
      of principal executive offices, including zip code)





**646-214-1234**  ****


(Issuer's
      telephone number, including area code)




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days. Yes x No o




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




As
        of
        November 19, 2007, there were 34,336,250 shares of issuer’s common stock, par
        value $0.001 per share outstanding.
 
 Transitional
      Small Business Disclosure Format (Check one) Yes o No x










INDEX
      PAGE







PART
                I -- FINANCIAL INFORMATIONPAGEForward
                Looking Statements
            iiItem
                1
            Financial
                Statements
            1Condensed
                Consolidated Balance Sheets September 30, 2007 (Unaudited) and
                December 31, 2006 (Audited)
            1Unaudited
                Condensed Consolidated Statements of Operations for the nine and
                three months ended September 30, 2007 and 2006
            2Unaudited
                Condensed Consolidated Statements of Cash Flows for the six months
                ended September 30, 2007 and 2006
            3Notes
                to Unaudited Condensed Consolidated Financial Statements
            4Item
                2
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            11Item
                3
            Controls
                and Procedures
            13PART
                II -- OTHER INFORMATIONItem
                1
            Legal
                Proceedings
            14Item
                2
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            14Item
                3
            Defaults
                upon Senior Securities
            14Item
                4
            Submission
                of Matters to a Vote of Security Holders
            14Item
                5
            Other
                Information
            14Item
                6
            Exhibits
            14SIGNATURES
            15












IDO
                  SECURITY INC. AND
                  SUBSIDIARYCONDENSED
                  CONSOLIDATED BALANCE
                  SHEETSSeptember
              
              
              December
                  31,2007
              
              
              2006ASSETS
              
              (unaudited)CURRENT
                  ASSETSCash
                  and  cash equivalents
              
              $
              57,139
              
              
              $
              7,484Inventory
              
              
              192,529
              
              
              
              -Prepaid
                  expenses and other current assets
              
              
              50,608
              
              
              
              -Total
                  current assets
              
              
              300,276
              
              
              
              7,484Property
                  and equipment,
                  net
              
              
              29,415
              
              
              
              -Patents,
                  net
              
              
              1,130,000
              
              
              
              -Goodwill
              
              
              755,002
              
              
              
              -Deferred
                  acquisition
                  costs
              
              
              -
              
              
              
              55,550Total
                  assets
              
              $
              2,214,693
              
              
              $
              63,034LIABILITIES
                  AND STOCKHOLDERS'
                  EQUITYCURRENT
                  LIABILITIESAccounts
                  payable and accrued liabilities
              
              $
              195,486
              
              
              $
              101,548Convertible
                  promissory notes (net of discount of $1,825,761)
              
              
              1,555,208
              
              
              
              -Loan
                  payable, related party
              
              
              44,826
              
              
              
              26,896Total
                  current liabilities
              
              
              1,795,520
              
              
              
              128,444NON-CURRENT
                  LIABILITIESAccrued
                  severance pay
              
              
              157,150
              
              
              
              -Total  liabilities
              
              
              1,952,670
              
              
              
              128,444STOCKHOLDERS'
                  EQUITY
                  (DEFICIT)Preferred
                  Stock20,000,000
                  shares authorized; none outstandingCommon
                  stock, $.001 par value;50,000,000
                  shares authorized; 34,336,250 and 30,600,000issued
                  and outstanding, respectively
              
              
              34,336
              
              
              
              30,600Additional
                  paid-in capital
              
              
              9,655,499
              
              
              
              124,331Stock
                  subscription receivable
              
              
              (25
              )
              
              
              (36,500
              )Accumulated
                  other comprehensive loss
              
              
              (331
              )
              
              
              (331
              )Accumulated
                  deficit
              
              
              (9,427,456
              )
              
              
              (183,510
              )Total
                  stockholders' equity (deficit)
              
              
              262,023
              
              
              
              (65,410
              )Total
                  liabilities and stockholders' equity (deficit)
              
              $
              2,214,693
              
              
              $
              63,034See
                  Notes to Condensed
                  Consolidated Financial Statements.






1




IDO
                  SECURITY INC. AND
                  SUBSIDIARYCONDENSED
                  CONSOLIDATED STATEMENTS
                  OF OPERATIONSNine
                  Months
              
              
              Three
                  MonthsEnded
              
              
              EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006(Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)
              
              
              (Unaudited)Revenues
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -Operating
                  expensesResearch
                  and development costs
              
              
              196,094
              
              
              
              -
              
              
              
              96,933
              
              
              
              -Selling,
                  general and administrative expenses
              
              
              601,489
              
              
              
              53,118
              
              
              
              289,180
              
              
              
              3,300Stock
                  based compensation
              
              
              2,567,829
              
              
              
              -
              
              
              
              1,111,752
              
              
              
              -Total
                  operating
                  expenses
              
              
              3,365,412
              
              
              
              53,118
              
              
              
              1,497,865
              
              
              
              3,300Loss
                  from
                  operations
              
              
              (3,365,412
              )
              
              
              (53,118
              )
              
              
              (1,497,865
              )
              
              
              (3,300
              )Interest
                  expense (including
                  related partiesof
                  $33,538, $0, $18,534 and $0)
              
              
              (414,798
              )
              
              
              -
              
              
              
              (213,732
              )
              
              
              -Interest
                  income
              
              
              2,578
              
              
              
              -
              
              
              
              1,041
              
              
              
              -Amortization
                  of debt
                  discount
              
              
              (4,905,467
              )
              
              
              -
              
              
              
              (3,262,788
              )
              
              
              -Amortization
                  of beneficial
                  conversion feature
              
              
              (448,264
              )
              
              
              -
              
              
              
              (120,298
              )
              
              
              -Amortization
                  of deferred finance
                  costs
              
              
              (112,583
              )
              
              
              -
              
              
              
              (20,401
              )
              
              
              -Net
                  loss
              
              
              (9,243,946
              )
              
              
              (53,118
              )
              
              
              (5,114,043
              )
              
              
              (3,300
              )Other
                  comprehensive
                  incomeForeign
                  currency translation adjustment
              
              
              -
              
              
              
              171
              
              
              
              -
              
              
              
              -Comprehensive
                  loss for the
                  period
              
              $
              (9,243,946
              )
              
              $
              (52,947
              )
              
              $
              (5,114,043
              )
              
              $
              (3,300
              )Basic
                  and diluted loss per
                  share:
              
              $
              (0.28
              )
              
              $
              0.00
              
              
              $
              (0.15
              )
              
              $
              0.00Weighted
                  average number of shares
                  outstandingBasic
                  and
                  diluted
              
              
              32,588,493
              
              
              
              16,732,721
              
              
              
              34,187,935
              
              
              
              30,450,000See
                  Notes to Condensed
                  Consolidated Financial Statements.






2




IDO
                  SECURITY INC. AND
                  SUBSIDIARYCONDENSED
                  CONSOLIDATED STATEMENTS
                  OF CASH FLOWSNine
                  MonthsEndedSeptember
                  30,2007
              
              
              2006INCREASE
                  (DECREASE) IN CASH AND
                  CASH EQUIVALENTS
              
              (Unaudited)
              
              
              (Unaudited)CASH
                  FLOWS FROM OPERATING
                  ACTIVITIESNet
                  loss
              
              $
              (9,243,946
              )
              
              $
              (53,118
              )Adjustments
                  to reconcile net loss
                  to net cash used in operating activities:Depreciation
                  and amortization
              
              
              186,128
              
              
              
              -Amortization
                  of note discount
              
              
              4,905,467
              
              
              
              -Amortization
                  of beneficial conversion feature of convertible
                  debt
              
              
              448,264
              
              
              
              -Accretion
                  of interest on notes payable
              
              
              380,969
              
              
              
              -Stock
                  based compensation
              
              
              2,567,829
              
              
              
              -Increase
                  in net liability for severance pay
              
              
              6,347
              
              
              
              -Increase
                  (decrease) in cash
                  attributable to changes in assets and liabilitiesInventory
              
              
              (110
              )
              
              
              -Prepaid
                  expenses and other current assets
              
              
              (37,764
              )
              
              
              -Accounts
                  payable
              
              
              (579
              )
              
              
              -Accrued
                  expenses and other current liabilities
              
              
              16,845
              
              
              
              9,939Net
                  cash used in operating
                  activities
              
              
              (770,550
              )
              
              
              (43,179
              )CASH
                  FLOWS
                  FROM  INVESTING ACTIVITIESAcquisition
                  of IDO Security Ltd., net of cash acquired of
                  $19,974
              
              
              (950,171
              )
              
              
              -Deferred
                  acquisition costs
              
              
              -
              
              
              
              (9,000
              )Purchases
                  of property and equipment
              
              
              (15,778
              )
              
              
              -Net
                  cash used in investing
                  activities
              
              
              (965,949
              )
              
              
              (9,000
              )CASH
                  FLOWS FROM FINANCING
                  ACTIVITIESIssuance
                  of common shares
              
              
              -
              
              
              
              80,375Stock
                  subscription receivable
              
              
              36,475
              
              
              
              (36,500
              )Proceeds
                  from issuance of secured convertible notes
              
              
              3,000,000
              
              
              
              -Payments
                  of deferred finance costs
              
              
              (325,000
              )
              
              
              -Proceeds
                  from related party loans
              
              
              12,735
              
              
              
              4,149Proceeds
                  from short-term debt
              
              
              47,738
              
              
              
              4,371Repayment
                  of short-term debt
              
              
              (985,794
              )
              
              
              -Net
                  cash provided by financing
                  activities
              
              
              1,786,154
              
              
              
              52,395Effect
                  of foreign currency
                  translation on cash
              
              
              -
              
              
              
              171INCREASE
                  IN CASH AND CASH
                  EQUIVALENTS
              
              
              49,655
              
              
              
              387CASH
                  AND CASH EQUIVALENTS -
                  BEGINNING OF PERIOD
              
              
              7,484
              
              
              
              -CASH
                  AND CASH EQUIVALENTS - END OF
                  PERIOD
              
              $
              57,139
              
              
              $
              387Supplemental
                  disclosures of cash
                  flow information:Cash
                  paid for interest
              
              $
              -
              
              
              $
              -Non-cash
                  activitiesIssuance
                  of common stock relating to convertible promissory
                  notes
              
              $
              1,261,435
              
              
              $
              -See
                  Notes to Condensed
                  Consolidated Financial Statements.






3




**IDO
        SECURITY
        INC.**
 (formerly
        The Medical Exchange,
        Inc.)
 NOTES
        TO THE CONDENSED CONSOLIDATED
        FINANCIAL STATEMENTS
 (UNAUDITED)
  **NOTE
        1 -
        GENERAL**
 
 **Overview**
 The
        condensed consolidated financial
        statements include the accounts of IDO Security Inc. ("IDO Inc.") (formerly
        known as “The Medical Exchange, Inc.” or "MedEx") and IDO Security Ltd. ("IDO
        Ltd."), its wholly-owned subsidiary (collectively the "Company"). All
        significant inter-company balances and transactions have been
        eliminated.
 
 The
        Company is engaged in the design,
        development and marketing of devices for the homeland security and loss
        prevention markets that are intended for use in security screening procedures
        and are designed to detect concealed metallic objects through the use of
        electro-magnetic fields. These devices were designed specifically for
        applications in the security screening and detection market to complement
        the
        current detection methods for detecting metallic items during security
        screenings at security checkpoints in venues such as airports, prisons, schools,
        stadiums and other public locations and venues requiring individual
        security screening. IDO Ltd. has designed and developed a security screening
        device containing proprietary technology known as the MagShoe. The MagShoe
        device creates specific electro-magnetic fields that are capable of detecting
        the presence of metallic objects inside a person’s footwear, as well as next to
        or above the ankles, while taking into account metallic objects that are
        typically part of the footwear. The MagShoe has been sold and deployed at
        certain venues in some countries.
 
 The
        Medical Exchange, Inc. was
        incorporated in the State ofNevadaonJanuary 23, 2004.
        OnJuly 25, 2006,
        IDO Ltd. and the holders of all of the
        issued and outstanding share capital of IDO Ltd. (collectively the “IDO Selling
        Shareholders”) entered into a Securities Purchase Agreement pursuant to which
        Med Ex agreed to purchase all of the issued and outstanding share capital
        of IDO
        Ltd. (the “Acquisition Transaction”). OnMarch 8, 2007,
        the Acquisition Transaction was
        consummated. Following the consummation of the Acquisition Transaction, IDO
        Ltd.
        became a wholly-owned subsidiary of Med Ex and Med Ex adopted the business
        of
        IDO Ltd.
 
 In
        June 2007, the Company changed its
        name to “IDO Security Inc.” and effected other changes to its capital structure
        discussed below in Note 6 (Capital Transactions). The Company also effected
        a
        three-for-one forward stock split of its shares of common stock, par value
        $0.001 (the “Common Stock”). All share figures and results in this Quarterly
        Report on Form 10-QSB are reflected on a post-split basis.
 
 **Basis
        of
        presentation**
 
 The
        accompanying unaudited consolidated
        financial statements of the Company have been prepared in accordance with
        generally accepted accounting principles for interim financial information
        and
        with Item 310(b) of Regulation S-B. Accordingly, they do not include all
        of the
        information and footnotes required by generally accepted accounting principles
        for complete financial statements. In the opinion of management, all adjustments
        (consisting of normal recurring accruals) considered necessary for a fair
        presentation have been included. Operating results for the nine and three
        months
        endedSeptember 30,
        2007, are not necessarily
        indicative of the results that may be expected for the year endingDecember 31, 2007.
        These unaudited consolidated financial
        statements should be read in conjunction with the audited consolidated financial
        statements and footnotes thereto included in the Company's Transition Annual
        Report on Form 10-KT for the six months endedDecember 31, 2006,
        as filed with the Securities and
        Exchange Commission onFebruary 23, 2007and with the Company’s Current Report
        on Form 8-K filed with the Securities and Exchange Commission onMarch 14, 2007.
        Previously, the Company had a June 30
        fiscal year. OnDecember
        28, 2006, the Company
        changed its fiscal year toDecember 31, 2006.
 
 These
        financial statements have been prepared in accordance with generally accepted
        accounting principles applicable to a going concern, which assumes that the
        Company will be able to meet its obligations and continue its operations
        for its
        next fiscal year. Realization values may be substantially different from
        carrying values as shown and these financial statements do not give effect
        to
        adjustments that would be necessary to the carrying values and classification
        of
        assets and liabilities should the Company be unable to continue as a going
        concern. See Note 3.
  **NOTE
        2 - SUMMARY OF SIGNIFICANT
        ACCOUNTING POLICIES**
 
 The
        following accounting policies have
        been identified as critical to the Company’s business operations and the
        understanding of its results of operations.
  **Principles
        of
        Consolidation**
 The
        accompanying condensed consolidated
        financial statements include the accounts of IDO Ltd., the Company's
        wholly-owned subsidiary. All significant inter-company transactions have
        been
        eliminated.
 
 **Use
        of
        Estimates**
 These
        financial statements and
        accompanying notes have been prepared in accordance with accounting principles
        generally accepted in theUnited States of America.
        The preparation of these financial
        statements requires management to make estimates, judgments and assumptions
        that
        affect the reported amounts of assets, liabilities, revenues and expenses.
        The
        Company continually evaluates the accounting policies and estimates we use
        to
        prepare the consolidated financial statements. The Company bases its estimates
        on historical experiences and assumptions believed to be reasonable under
        current facts and circumstances. Actual amounts and results could differ
        from
        these estimates made by management.
  4
  **Functional
        Currency**
 The
        majority of Company’s expected
        future sales will be inUnited Statesdollars or inUnited Statesdollar linked currencies. In addition,
        the majority of the Company’s investing and financing activities are inUnited Statesdollars. Accordingly, the Company has
        determined theUnited
        Statesdollar as the
        currency of its primary economic environment and thus, its functional and
        reporting currency. Non-dollar transactions and balances have been measured
        inUnited Statesdollars in accordance with Statement of
        Financial Accounting Standard No. 52 “Foreign Currency Translation” (“SFAS No.
        52”). All transaction gains and losses from the measurement of monetary balance
        sheet items denominated in non-dollar currencies are reflected in the statement
        of operations as financial income or expenses, as
        appropriate.
 
 **Revenue
        Recognition**
 Revenue
        will be recognized upon the sale
        of product upon shipment to the customer, subject to the following criteria:
        persuasive evidence of an arrangement exists, the selling price is fixed
        and
        determinable and no significant obligations remain to the Company****and
        collection of the related receivable
        is reasonable assured. When the above stated revenue recognition criteria
        are
        not met, the Company will record deferred revenue.
 
 **Cash**
 The
        Company maintains cash in a bank
        account which may, at times, exceed federally insured limits. The Company
        has
        not experienced any loss on these accounts.
 
 **Inventories**
 Inventories,
        consisting of completed
        devices, devices partially completed and components are valued at the lower
        of
        cost determined by the moving-average basis or market. The value of the
        inventories is adjusted for estimated obsolescence or unmarketable inventory
        equal to the difference between the cost of inventory and the estimated market
        value based upon assumptions about future demand and market
        conditions.
 
 **Accounts
        Receivable**
 Accounts
        receivable will be reported at
        their outstanding unpaid principal balances reduced by an allowance for doubtful
        accounts. The Company will estimate doubtful accounts based on historical
        bad
        debts, factors related to specific customers’ ability to pay, and current
        economic trends. The Company will write off accounts receivable against the
        allowance when a balance is determined to be uncollectible.
 
 **Property
        and
        Equipment**
 Depreciation
        of property and equipment
        is provided for by the straight-line method over the estimated useful lives
        of
        the related assets. Long-lived assets are reviewed for impairment whenever
        events or changes in circumstances indicate that the carrying amount of the
        asset may not be recoverable.
 
 **Deferred
        Financing
        Costs**
 Deferred
        financing costs are being
        amortized over the respective lives of the convertible promissory
        notes.
 
 **Goodwill**
 Goodwill
        consists of the excess of cost
        over net assets acquired of IDO Ltd. onMarch 8, 2007.
        Management of the Company will
        evaluate the carrying value of goodwill annually or whenever a possible
        impairment is indicated.
 
 **Intangible
        Assets**
  The
        Company’s long-lived assets and
        certain identifiable intangibles are reviewed for impairment in accordance
        with
        Statement of Financial Accounting Standard No. 144, “Accounting for the
        Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”) whenever events or
        changes in circumstances indicate that the carrying amount of an asset may
        not
        be recoverable.Recoverability
        of assets to be
        held and used is measured by a comparison of the carrying amount of an asset
        to
        the future undiscounted cash flows expected to be generated by the assets.
        If
        such assets are considered to be impaired, the impairment to be recognized
        is
        measured by the amount by which the carrying amount of the assets exceeds
        the
        fair value of the assets. AtSeptember 30, 2007,
        Company believes that all of its
        long-lived assets are recoverable.
 
 Intangible
        assets consist of a patent
        that was purchased in connection with the Acquisition Transaction. The patent
        is
        being amortized using the straight line method over its estimated useful
        life of
        ten years. Amortization expense for the nine and three months endedSeptember 30, 2007amounted to $70,000 and $ 30,000,
        respectively. Amortization expense for each of the following fiscal years
        is
        expected to be as follows: 2007 - $100,000, 2008 through 2011 - $120,000
        per
        year and thereafter - $620,000.
 
 **Research
        and
        Development**
 Costs
        incurred in connection with the
        research and development of the Company's products are expensed as
        incurred.
 
 **Marketing
        and
        Advertising**
 Marketing
        and advertising costs are
        expensed as incurred.
  5
  **Severance
        pay**
 The
        Company’s subsidiary liability for
        severance pay is calculated pursuant to Israeli severance pay law based on
        the
        most recent salary of the employees multiplied by the number of years of
        employment as of balance sheet date. Employees are entitled to one month’s
        salary for each year of employment, or a portion thereof (on a pro-rata basis).
        Such liability inIsraelis fully provided by monthly deposits
        in accordance with insurance policies and by an accrual. The deposited funds
        include profits accumulated throughJune 30, 2007.
        The deposited funds may be withdrawn
        only upon the fulfillment of the obligation pursuant to Israeli severance
        pay
        law or labor agreements. The value of the deposited funds is based on the
        cash
        surrendered value of these policies, and includes immaterial
        profits.
 
 **Income
        Taxes**
 Income
        taxes are accounted for under the
        liability method. Under this method, deferred tax assets and liabilities
        are
        recorded based on the temporary differences between the financial statement
        and
        the tax bases of assets and liabilities and for operating loss carryforwards
        measured using the enacted tax rates in effect for the year in which the
        differences are expected to reverse. The Company periodically evaluates the
        realizability of its net deferred tax assets and records a valuation allowance
        if, based on the weight of available evidence, it is more likely than not
        that
        some or all of the deferred tax assets will not be realized.
 
 **Stock-Based
        Compensation**
 The
        Company accounts for stock-based
        compensation in accordance with the provisions of Statement of Financial
        Accounting Standards (SFAS) 123R*Share-Based
        Payment*(SFAS 123R). SFAS
        123R
        requires all share-based payments to employees, including grants of employee
        stock options, to be recognized in the financial statements based on grant-date
        fair value of the award. That cost will be recognized over the period during
        which an employee is required to provide service in exchange for the
        reward—known as the requisite service period. No compensation cost is recognized
        for equity instruments for which employees do not render the requisite service.
        The grant-date fair value of employee share options and similar instruments
        are
        estimated using option-pricing models adjusted for the unique characteristics
        of
        those instruments.
 
 Equity
        instruments issued to
        non-employees are recorded at their fair values as determined in accordance
        with
        SFAS No. 123 and Emerging Issues Task Force(EITF)96-18,“Accounting
        for Equity Instruments That
        Are Issued to Other Than Employees for Acquiring, or in Conjunction with
        Selling
        Goods and Services”,
        and are periodically revalued as the
        stock options vest and are recognized as expense over the related service
        period.
 
 **Earning
        (loss) per
        share**
 Basic
        earnings (loss) per share are
        computed by dividing net income (loss) by the weighted-average number of
        shares
        of common stock outstanding during the period. Diluted earnings (loss) per
        share
        give effect to dilutive convertible securities, options, warrants and other
        potential common stock outstanding during the period, only in periods in
        which
        such effect is dilutive. The following securities (at weighted average
        outstanding) have been excluded from the calculation of net loss per share,
        as
        their effect would be antidilutive:
  Shares
                  of Common
                  StockIssuable
                  upon Conversion/Exerciseof
                  asSeptember
                  302007
              
              2006Warrants
              
              
              
              20,211,000
              
              
              
              ---Convertible
                  notes
              
              
              
              2,028,557
              
              
              
              ---Stock
                  options
              
              
              
              2,750,000
              
              
              
              ---
  **Recently
        issued accounting
        pronouncements**
 In
        February 2007, the Financial
        Accounting Standards Board ("FASB") issued Statement of Financial Accounting
        Standard ("SFAS") No. 159, "The Fair Value Option for Financial Assets and
        Financial Liabilities, including an amendment of FASB Statement No. 115".
        SFAS
        No. 159 permits entities to choose to measure many financial instruments
        and
        certain other items at fair value at specified election dates. This Statement
        applies to all entities, including not-for- profit organizations. SFAS No.
        159
        is effective as of the beginning of an entity's first fiscal year that begins
        afterNovember 15,
        2007. The Company is
        currently evaluating the impact of SFAS No. 159 on its consolidated financial
        statements.
 
 In
        September 2006, the Securities and
        Exchange Commission (“SEC”)
        issued Staff Accounting Bulletin
        (“SAB”)
        No. 108, "Considering the
        Effects of Prior Year Misstatements when Quantifying Misstatements in Current
        Year Financial Statements."SAB108 provides guidance on the
        consideration of effects of the prior year misstatements in quantifying current
        year misstatements for the purpose of a materiality assessment. TheSECstaff believes registrants must
        quantify errors using both a balance sheet and income statement approach
        and
        evaluate whether either approach results in quantifying a misstatement that,
        when all relevant quantitative and qualitative factors are considered, is
        material.SAB108 was effective for the first annual
        period ending afterNovember 15, 2006with early application encouraged. The
        Company adopted the provisions ofSAB108 onDecember 31, 2006and there was no impact of adoption to
        its consolidated financial statements.
  6
  In
        September 2006, the FASB issued SFAS
        No. 157, "Fair Value Measurements" which applies under most other accounting
        pronouncements that require or permit fair value measurements. SFAS No. 157
        provides a common definition of fair value as the price that would be received
        to sell or paid to transfer a liability in a transaction between market
        participants. The new standard also provides guidance on the methods used
        to
        measure fair value and requires expanded disclosures related to fair value
        measurements. SFAF No. 157 is effective for financial statements issued for
        fiscal years beginning afterNovember 15, 2007.
        The Company does not expect this
        guidance to have a material impact on the financial
        statements.
 
 Management
        does not believe that any
        recent issued, but not yet effective, accounting standards if currently adopted,
        would have a material affect on the accompanying financial
        statements.
  **NOTE
        3 - GOING
        CONCERN**
 
 The
        accompanying consolidated financial
        statements have been prepared assuming the Company will continue as a going
        concern.
 
 AtSeptember
        30, 2007, the Company had not
        achieved
        profitable operations, has accumulated losses of $9,427,456(since
        its inception), has a working
        capital deficiency of $1,495,244and
        expects to incur further losses in
        the development of its business. These conditions raise substantial doubt
        about
        the Company’s ability to continue as a going concern.
 
 The
        Company’s ability to continue as a
        going concern is dependent upon its ability to generate future profitable
        operations and/or to obtain the necessary financing to meet its obligations
        and
        repay its liabilities arising from the ordinary course of its business
        operations when they come due. There can be no assurance the Company will
        be
        able to generate profitable operations and additional funding being
        available.
 
 The
        financial statements do not include
        any adjustments that might result from the outcome of this uncertainty. There
        can be no assurance that management will be successful in implementing a
        business plan or that the successful implementation of a business plan will
        actually improve the Company's operating results.
 
 The
        Company’s current cash resources are
        not sufficient to support any unforeseen contingencies that may arise or
        permit
        the Company to take advantage of business opportunities that may
        arise.
 
 The
        Companyhas beenfundingits operatingfrom February to September
        2007from thenetproceedsof
        approximately $2.675 million from theprivate placement ofits short-termconvertible
        debentureswhich are to come
        dueNovember 29, 2007.In
        October 2007, the Company raised net
        proceeds of $225,000 from the private placement of its 90 day promissory
        notes.
 
 **NOTE
        4 -
        ACQUISITION**
 
 OnJuly
        25, 2006, IDO Inc., IDO Ltd.
        and the IDO Selling
        Shareholders entered into a Securities Purchase Agreement pursuant to which
        IDO
        Inc. agreed to purchase all of the issued and outstanding share capital of
        IDO
        Ltd. OnMarch 8,
        2007, the Acquisition
        Transaction was completed for total consideration of $1,000,000. Acquisition
        costs of $25,695 were incurred by IDO Inc. to complete the transaction.
        Following the consummation of the transaction, IDO Ltd. became a wholly-owned
        subsidiary of IDO Inc. and IDO Inc. adopted the business of IDO
        Ltd.
  The
        Acquisition Transaction was
        accounted for as a purchase. The following table summarizes the estimated
        aggregated fair values of the assets acquired and the liabilities
        assumed.
  Cash
              
              $
              19,974Inventories
              
              
              192,419Other
                  current
                  assets
              
              
              12,844Patents
              
              
              1,200,000Property
                  and
                  equipment
              
              
              17,182Goodwill
              
              
              755,002Accounts
                  payable and accrued
                  expenses
              
              
              (77,672
              )Amounts
                  due from related
                  parties
              
              
              (943,251
              )Accrued
                  severance
                  pay
              
              
              (150,803
              )$
              1,025,695
  Prior
        to the Acquisition Transaction,
        IDO Ltd. received loans for working capital purposes from third parties,
        including stockholders of IDO Inc. At the date of the Acquisition Transaction,
        IDO Ltd. owed these parties the aggregate amount of $959,361. In connection
        with
        the Acquisition Transaction, these third parties assigned their rights to
        the
        loans to IDO Inc. As such, the loan balances were offset against
        goodwill.
  7
  In
        addition, prior to the Acquisition
        Transaction, IDO Ltd. received working capital loans from certain non-management
        related stockholders of IDO Inc. Following the consummation of the Acquisition
        Transaction, the outstanding principal amount and accrued interest were repaid
        from the proceeds of the private placement of Company's securities referred
        to
        in Note 5.The following table presents unaudited
        pro forma revenue, net loss and loss per share giving effect to the Acquisition
        Transaction as if it had been completed at the beginning of each period
        presented:
 
 Nine
                  Months
                  Ended
              
              
              Three
                  Months
                  EndedSeptember
                  302007
              
              
              2006
              
              
              2007
              
              
              2006Revenue
              
              $
              19,985
              
              
              $
              27,511
              
              
              $
              -
              
              
              $
              19,461Net
                  loss
              
              $
              (6,810,118
              )
              
              $
              (1,294,870
              )
              
              $
              (3,723,042
              )
              
              $
              (196,610
              )Net
                  loss per
                  share,basic
                  and
                  diluted
              
              $
              (0.21
              )
              
              $
              (0.08
              )
              
              $
              (0.11
              )
              
              $
              (0.00
              )
 
 **NOTE
        5 - PRIVATE PLACEMENT OF DEBT
        SECURITIES**
 
 OnFebruary
        28, 2007andMarch
        29, 2007, the Company raised
        gross proceeds of
        $1,050,000 and $1,250,000, respectively, from the private placement of its
        120
        day Secured Convertible Notes (the “Notes”). The Notes were issued pursuant to a
        Subscription Agreement, datedFebruary 28, 2007(the "Subscription Agreement”), between
        the Company and certain investors ("Investors") pursuant to which the Company
        was able to raise up to $3 million from the placement of its promissory notes.
        OnApril 18,
        2007, the Company raised
        an
        additional $700,000 under the Subscription Agreement. In connection with
        the
        issuance of the Notes, the Company issued warrants (the “Investor Warrants”) to
        purchase up to 9,720,000 shares (post split) of the Company’s common stock, par
        value $0.001 (the “Common Stock”) at a per share exercise price of $1.67. The
        warrants are exercisable through the fifth anniversary of the effective date
        of
        a resale registration statement relating to the Common Stock underlying the
        securities sold. Under the terms of the Subscription Agreement, the Investors
        also received 1,800,000 restricted shares (post split) (the “Incentive
        Shares”) of the Company’s Common Stock.
 
 Pursuant
        to the Subscription Agreement,
        the Company issued Notes to the Investors in the aggregate principal amount
        of
        $3,240,000, which reflects an original issue discount on the principal amount
        of
        the loan of 8% with respect to the 120 day loan period and an effective annual
        interest rate of 23%. Each of the Notes has an originalterm of 120 days and is convertible
        into shares of the Company’s Common Stock at the holder’s option at any time at
        an initial conversion price of $1.67 per share, subject to adjustment in
        the
        event of certain capital adjustments or similar transactions, such as a stock
        split or merger and as further described below;*provided
        that*,
        following the first anniversary of issuance, the conversion price will be
        the
        lesser of (i) $1.67 or (ii) seventy-five percent (75%) of the average of
        the
        three highest closing bid prices of the Common Stock as reported by Bloomberg
        L.P. for the stock’s principal trading market for the five trading days
        preceding but not including the date of conversion. Under certain conditions,
        the Company, upon request of the Note holders, is required to redeem the
        Notes
        by payment of 120% of their stated value..
 
 For
        financial reporting purposes, the
        Company recorded a discount of $2,042,361 to reflect the value of the warrants
        and shares issued and in accordance with EITF No. 00-27, an additional discount
        of $448,263 to reflect the beneficial conversion feature of the Notes. The
        discounts are being amortized to the date of maturity unless converted
        earlier.
 
 A
        Note in the aggregate principal amount
        of $1,134,000 was originally scheduled to mature onJune 28, 2007.
        In July 2007, the Company and the
        holder of such Note agreed to extend toAugust 31, 2007the maturity date of this Note. In
        consideration of the extension, the Company issued to the holder warrants
        to
        purchase an additional 1,701,000 shares (post split) of the Company’s Common
        Stock on terms and conditions that are identical to the Investor Warrants
        and
        also issued 315,000 Incentive Shares (post split). For financial reporting
        purposes, the Company recorded a discount of $897,902 to reflect the value
        of
        the warrants and shares.The
        discountisbeing amortized to the date of maturity
        unless converted earlier.
 
 OnJuly
        26, 2007, the maturity date
        for Notes in the
        aggregate principal amount of $1,350,000, which were originally scheduled
        to
        mature onJuly 29,
        2007, have also been
        extended toAugust 31,
        2007. In consideration
        of
        this extension, the Company issued to these investors warrants to purchase
        an
        additional 1,217,249 shares (post split) of the Company’s Common Stock on terms
        and conditions that are identical to the Investor Warrants and also issued
        218,750 Incentive Shares (post split). For financial reporting purposes,
        the
        Company recorded a discount of $958,452 to reflect the value of the warrants
        and
        shares.The
        discountisbeing amortized to the date of maturity
        unless converted earlier.
 
 AsofAugust
        16, 2007, the maturity date
        for Notes in the
        aggregate principal amount of $3,323,222, which were originally scheduled
        to
        mature onAugust 31,
        2007, have also been
        extended toNovember 29,
        2007. In consideration
        of
        this extension, the Company issued to these investors warrants to purchase
        an
        additional 7,573,500 shares (post split) of the Company’s Common Stock on terms
        and conditions that are identical to the Investor Warrants and also issued
        1,402,500 Incentive Shares (post split). For financial reporting purposes,
        the
        Company recorded a discount of $2,832,514 to reflect the value of the warrants
        and shares.The
        discountsibeing amortized to the date of maturity
        unless converted earlier.
  8
  Interest
        incurred on the Notes amounted
        to $380,969 and $195,198 for the nine and three months endedSeptember 30, 2007,
        respectively
 
 Amortization
        of debt discount and
        beneficial conversion for thenineand
        three months endedSeptember 30, 2007amounted to $5,353,731and $3,383,086.
 
 To
        secure Company’s obligations under
        the Notes and the Subscription Agreement, the Company granted to the Investors
        a
        security interest in substantially all of its assets, including without
        limitation, its intellectual property, under the terms and conditions of
        a
        Security Interest Agreement dated as of the date of the Notes. The security
        interest terminates upon payment or satisfaction of all of Company’s obligations
        under the Note.
 
 **NOTE
        6 - CAPITAL
        TRANSACTIONS**
 
 OnMarch
        9, 2007, the Company’s Board of Directors
        and
        the majority of Company’s stockholders authorized:
 
 ·
              An
                  increase in the number of
                  authorized shares of the Company’s Common Stock from 25,000,000 to 50,0000
                  shares; and·
              the
                  designation of 20 million
                  shares of the Company’s authorized capital stock as preferred stock with
                  the Board of Directors authorized to fix the number of shares of
                  any
                  series of preferred stock and to determine the designation of any
                  such
                  series, including the authority to determine the designation of
                  any such
                  series, including the authority to determine the rights, preferences,
                  privileges and restrictions on any such series of preferred
                  stock.
  In
        conjunction with the above, the Board
        of Directors of the Company approved a three-for-one forward stock split.
        The
        increase in the number of authorized shares of Common Stock and designation
        of
        preferred stock referred to above became effective in June 2007. The forward
        stock split was effected in June 2007.
 
 **NOTE
        7 - Stock Option
        Grants**
 
 In
        June and September 2007, the
        Company’s board of directors approved grants of stock options to employees and
        consultants to purchase an aggregate of 2.75
        million shares of its common stock
        with exercise prices ranging from $.17 to $7.50. The options have terms ranging
        from five to seven years and vest at various times over a two year period.
        The
        weighted average per share fair value of options granted during the nine
        months
        endedSeptember 30,
        2007was $2.06. The fair
        value of the options granted was estimated using the Black-Scholes
        option-pricing model under the following assumptions; volatility - 134.97%,
        expected life of options - five to seven years, risk free interest rate -
        4.20%
        to 5.03% and a dividend yield of 0%.
  The
        Company recognized stock
        compensation expense of $2,567,829and $1,111,752for the nine and three months endedSeptember 30,
        2007.
 
 **NOTE
        8 - RELATED PARTY
        TRANSACTIONS**
 
 The
        Company has received working capital
        loans from certain non-management affiliated stockholders of IDO Inc. (see
        Note
        4). Amounts owed on the loans aggregatedto $44,826 atSeptember
        30, 2007and $26,896 atDecember
        31, 2006. Interest incurred
        on the loans
        amounted to $33,538and
        $18,534for the nine and
        three months endedSeptember
        30, 2007, respectively.
 
 One
        of the individual investors who
        advanced the Company $200,000 in connection with the private placement of
        the
        Notes referred to in Note 5 above is the spouse of Ms. Irit Reiner, one of
        the
        Company’s non-employee directors.
 
 **NOTE
        9 -
        COMMITMENTS**
 
 EMPLOYMENT
        AGREEMENTS
  OnJune
        20, 2007, the Board of Directors
        of the Company
        appointed Michael Goldberg, the Company’s acting Chief Executive Officer since
        July 2006, to the position of President. Mr. Goldberg’s appointment became
        effective onJuly 2,
        2007. In connection with
        his appointment as President, the Company and Mr. Goldberg entered into an
        employment agreement pursuant to which Mr. Goldberg will be paid an annual
        salary of $198,000, payable monthly. Mr. Goldberg agreed to defer $4,500
        of his
        monthly gross salary until such time as the Company shall have concluded
        permanent financing. The employment agreement has an initial term of one
        year;
        thereafter, the employment agreement provides that it is to be renewed
        automatically for additional one year periods unless either party shall advise
        the other 90 days before expiration of the initial (or a renewal term) of
        its
        intention to not renew the agreement beyond its then scheduled expiration
        date.
        Mr. Goldberg can terminate the employment agreement and the relationship
        thereunder at any time upon 60 days’ notice. If during the initial term the
        Company were to terminate the agreement for any reason other than “Just Cause”
(as defined the employment agreement), then the Company is to pay to Mr.
        Goldberg the salary then payable under the agreement through the scheduled
        expiration of the initial term; if such termination for any reason other
        than
“Just Cause” were to take place during a renewal period, then the Company is to
        pay to Mr. Goldberg an amount equal to three months’ salary. Under the
        agreement, Mr. Goldberg will be awarded options to purchase 1,200,000
        shares (post split) of the Company’s common stock, of which options for 525,000
        shares, at a per share purchase price of $0.17, shall be fully vested at
        the
        time of grant and options for the remaining shares are to vest in equal
        installments of 84,375 shares at the end of each calendar quarter, beginningSeptember 30,
        2007, at per share exercise
        prices ranging between $0.25 and $1.25.
  9
  OnJuly
        1, 2007, Mr. Henry Shabat
        was appointed Chief
        Operating Officer of IDO Ltd. In connection with Mr. Shabat’s retention as IDO
        Ltd.’s Chief Operating Officer, onJuly 1, 2007,
        IDO Ltd. and Henry Shabat Ltd., a
        company owned by Mr. Henry Shabat, entered into a Management Agreement pursuant
        to which Mr. Shabat is to serve as IDO Ltd.’s Chief Operating Officer. Under the
        management agreement, Mr. Shabat is to be paid a monthly fee of $6,000. The
        management agreement has an initial term of one year; thereafter, the management
        agreement provides that it is to be renewed automatically for additional
        one
        year periods unless either party shall advise the other 90 days before
        expiration of the initial (or a renewal term) of its intention to not renew
        the
        agreement beyond its then scheduled expiration date. Under the agreement,
        Mr. Shabat will be awarded options to purchase 240,000 shares (post split)
        of the Company’s common stock, which are scheduled to vest in equal installments
        of 30,000 shares at the end of each 90 day period following the execution
        of the
        management agreement. The per share exercise price range between $0.17 and
        $1.67
        (post split level).
  CONSULTING
        AGREEMENTS
  OnJune
        29, 2007, Mr. Jorge Wolf was
        appointed as
        Manager of Business Development for each of the Company and IDO Ltd. In that
        capacity, it is intended that Mr. Wolf will be assuming day-to-day management
        with respect to business development activities, subject to the oversight
        of Mr.
        Goldberg, as President. In connection with his appointment, each of the Company
        and IDO Ltd. entered into a consultancy agreement with Mr. Jorge Wolf pursuant
        to which Mr. Wolf is to be paid a monthly fee of $5,286 under each agreement.
        Each of the consulting agreements has an initial term of two years; thereafter,
        each agreement provides that it is to be renewed automatically for successive
        two year periods unless either party shall advise the other 90 days before
        expiration of the initial (or a renewal term) of its intention to not renew
        the
        agreement beyond its then scheduled expiration date. The agreement further
        provides that the Company may, after the first anniversary of retention,
        terminate the consulting relationship for any reason upon 90 days’ notice. Under
        the consulting agreement with the Company, Mr. Wolf will be awarded options
        to purchase 1,200,000 shares (post split) of the Company’s common stock, which
        are scheduled to vest in equal installments of 150,000 shares at the end
        of each
        90 day period following the execution of the consulting agreement. The per
        share
        exercise price range between $0.17 and $1.67 (post split
        level).
 
 **NOTE
        10 - SUBSEQUENT
        EVENT**
  On
        October 11, 2007, the Company raised gross proceeds of $250,000 from the
        private
        placement (the “Private Placement”) to institutional investors (the “Investors”)
        of its 90 day Promissory Notes (collectively, the “Notes”, each
        a  “Note”). The loan was advanced pursuant to a Subscription
        Agreement, dated as of October 11, 2007 (the “Subscription Agreement”), between
        the Company and the Investors. Pursuant to the Subscription Agreement, the
        Company issued to the Investors its Notes, scheduled to mature on January
        11,
        2008, in the aggregate principal amount of $265,957. In connection with the
        issuance of the Notes, the Company issued to the Investors five-year warrants
        (the “Investor Warrants”) to purchase up to 265,957 shares of the Company’s
        Common Stockat a per share exercise price of $1.77. In connection with its
        investment, the Investors also received an aggregate of 25,000 restricted
        shares
        of the Company’s Common Stock.
 
 Under
        the
        terms of the Notes, the holder of the Note may declare the Note immediately
        due
        and payable upon the occurrence of any of the following events of default
        (each
        an “Event of Default”): (i)  the Company fails to pay any
        installment of principal, interest or other sum due under the Note when due
        and
        such failure continues for a period of five (5) days after the due date,
        (ii)
        the Company breaches any material covenant or other term or condition of
        the
        Subscription Agreement or the Note in any material respect and such breach,
        if
        subject to cure, continues for a period of ten (10) business days after written
        notice to us from the Holder, (iii) any material representation or warranty
        made
        by the Company in the Note, in the Subscription Agreement, or in any agreement,
        statement or certificate given in writing pursuant hereto or in connection
        therewith shall be false or misleading in any material respect as of the
        date
        made and the Closing Date, (iv) the Company makes an assignment for the benefit
        of creditors, or apply for or consent to the appointment of a receiver or
        trustee for it or for a substantial part of its property or business; or
        such a
        receiver or trustee shall otherwise be appointed, (v) any money judgment,
        writ
        or similar final process shall be entered or filed against the Company or
        any of
        its property or other assets for more than $150,000, and shall remain unvacated,
        unbonded or unstayed for a period of forty-five (45) days, (vi) bankruptcy,
        insolvency, reorganization or liquidation proceedings or other proceedings
        or
        relief under any bankruptcy law or any law, or the issuance of any notice
        in
        relation to such event, for the relief of debtors shall be instituted by
        or
        against the Company and are not dismissed within 45 days of initiation, or
        (vii)
        a default by the Company of a material term, covenant, warranty or undertaking
        of any other agreement to which the Company and Holders are parties, or the
        occurrence of a material event of default under any such other agreement
        which
        is not cured after any required notice and/or cure period.
 
 The
        Investor Warrants contain a cashless exercise provision. The warrants also
        provide for protection against dilution in the event that we issue shares
        prior
        to exercise of the warrant, so that upon exercise the investor receives the
        same
        proportion shares in relation to the then outstanding shares of the Company
        that
        he would have received when originally issued the warrants. If any subsequent
        transaction has a lower per share
        purchase price or conversion price or a lower per share warrant or option
        price
        then, as applicable, we must issue to the Investor that number of additional
        shares of **** Common Stock so that the average per share
        purchase price of the shares of Common Stock issued to the Investor (of only
        the
        Common Stock or Warrant Shares still owned by the Investor) is equal to such
        other lower price per share and the Conversion Price and Warrant exercise
        price
        shall automatically be adjusted to such lower purchase or issue
        price.
 
 Out
        of
        the gross proceeds received the Company paid a due diligence fee of $25,000
        and
        other offering related fees and expenses totaling $2,500.
  10
  **ITEM
                  2.**
              **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION**
 
 We
        urge
        you to read the following discussion in conjunction with our condensed
        consolidated financial statements and the notes thereto included elsewhere
        herein.
  **CAUTION
        REGARDING FORWARD-LOOKING STATEMENTS**
  Our
        prospects are subject to uncertainties and risks. In this Quarterly Report
        on
        Form 10-QSB, we make forward-looking statements in this Item 2 and elsewhere
        that also involve substantial uncertainties and risks. These forward-looking
        statements are based upon our current expectations, estimates and projections
        about our business and our industry, and reflect our beliefs and assumptions
        based upon information available to us at the date of this report. In some
        cases, you can identify these statements by words such as “if,” “may,” “might,”
“will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “potential,” “continue,” and other similar terms. These
        forward-looking statements include, among other things, projections of our
        future financial performance and our anticipated growth, descriptions of
        our
        strategies, our product and market development plans, the trends we anticipate
        in our business and the markets in which we operate, and the competitive
        nature
        and anticipated growth of those markets.
  We
        caution readers that forward-looking statements are predictions based on
        our
        current expectations about future events. These forward-looking statements
        are
        not guarantees of future performance and are subject to risks, uncertainties
        and
        assumptions that are difficult to predict. Our actual results, performance
        or
        achievements could differ materially from those expressed or implied by the
        forward-looking statements as a result of a number of factors, including
        but not
        limited to the risks and uncertainties discussed in our other filings with
        the
        SEC, including the risk factors section of the Company’s Current Report on Form
        8-K filed with the Securities and Exchange Commission on March 14, 2007.
        We
        undertake no obligation to revise or update any forward-looking statement
        for
        any reason.
  **OVERVIEW**
 
 IDO
        Security Inc. (the “Company,” “we,” “our,” or “us”) is engaged in the design,
        development and marketing of devices for the homeland security and loss
        prevention markets that are intended for use in security screening procedures
        to
        detect metallic objects concealed on or in footwear, ankles and feet through
        the
        use of electro-magnetic fields. These devices were designed specifically
        for
        applications in the security screening to complement the current methods
        for the
        detection of metallic items during security screenings and at security
        checkpoints in venues such as airports, prisons, schools, stadiums and
        other public locations and other venues requiring individual security screening.
        Our common stock trades on the OTC Bulletin Board under the symbol
        IDOI.
 
 IDO
        Security Inc. (formerly knows as “The Medical Exchange Inc.”) was incorporated
        in the State of Nevada on January 23, 2004. On July 25, 2006, we, IDO Security
        Ltd. (“IDO Ltd.”) and IDO Ltd.’s Selling Shareholders entered into a Securities
        Purchase Agreement (the “Purchase Agreement”) pursuant to which we purchased, in
        March 2007, all of the issued and outstanding share capital of IDO Ltd. (the
        “Acquisition Transaction”). Following the Acquisition Transaction, IDO Ltd.
        became a wholly-owned subsidiary of the Company and Med Ex adopted the business
        of IDO Ltd. In June 2007, the Company changed its name to “IDO Security
        Inc.”
 
 We
        have
        designed and developed a security screening device containing proprietary
        technology known as the MagShoe. The MagShoe creates specific electro-magnetic
        fields that can intelligently detect the presence of metallic objects inside
        a
        person’s footwear, as well as next to or above the ankles, while ignoring those
        metal objects that are normally found inside shoes. The proprietary software
        included in the Magshoe provides for the collation and delivery of the screening
        data to the operator for immediate analysis. The Magshoe obviates the need
        to
        remove the footwear being inspected.
 
 A
        patent has been issued to us by the United States Patent and Trademark Office
        in
        November 2005 covering various aspects of the unique technology contained
        in the
        Magshoe and there is one patent application pending in Israel. In January
        2006,
        the Magshoe was approved for use by the Department for Transport in the United
        Kingdom, after fields trials were conducted for the Home Office’s Police
        Scientific Development Branch. In addition, we have been certified by the
        International Organization for Standardization (“ISO”) under ISO 9001:2000
        compliance for the design, development and manufacture of electronic,
        electro-optic and electro-mechanical systems.
 
 We
        believe that the market for security and inspection products will continue
        to be
        positively impacted by the threat of terrorist activities and by new government
        regulations and appropriations for security and inspection products and
        procedures. We anticipate that the promulgation of new governmental regulation
        and standards will establish performance baselines against which we will
        be able
        to direct certain of our continued research and development spending and
        market
        our products to customers, worldwide. In addition, we believe that the
        increasing awareness on security, in general, will bring to an increasing
        awareness on available products and methods, such ours, for anti-crime and
        loss
        prevention fileds.
  Following
        the Acquisition Transaction, we reorganized the management and operational
        activities of the Company. Our acting Chief Executive Officer was appointed
        President. We retained a Chief Operating Officer for IDO Ltd., a Manager
        of
        Business Development for the Company as well as other personnel and outside
        consultants. We have been seeking to expand our contact base and are
        aggressively seeking collaborative arrangements worldwide for our Magshoe
        product. We will need to raise additional working capital to accelerate our
        sales, marketing, manufacturing and customer service activities, as well
        as to
        repay approximately $3.3 million in short-term loans that will become due
        and
        payable in August 2007. We presently do not have the capital resources to
        undertake any of these steps or to repay these debts. We have a non-binding
        financing proposal from several entities that is subject to the completion
        of
        due diligence and no assurance can be provided that we will be able to raise
        funds on commercially acceptable terms (or at all)
  11
  **CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES**
 
 Our
        financial statements and accompanying notes have been prepared in accordance
        with accounting principles generally accepted in the United States of America
        ("GAAP"). The preparation of these financial statements required management
        to
        make estimates, judgments and assumptions that affect the reported amounts
        of
        assets, liabilities, revenues and expenses. We continually evaluate the
        accounting policies and estimates it uses to prepare the consolidated financial
        statements and bases its estimates on historical experiences and assumptions
        believed to be reasonable under current facts and circumstances. Actual amounts
        and results could differ from these estimates made by management.
 
 We
        believe our use if estimates and underlying accounting assumptions adhere
        to
        GAAP and are consistently and conservatively applied. We base our estimates
        on
        historical experience and on various other assumptions that we believe to
        be
        reasonable under the circumstances. Actual results may differ materially
        from
        these estimates under different assumptions or conditions. We continue to
        monitor significant estimates made during the preparation of our financial
        statements.
  Our
        significant accounting policies are summarized in Note 2 of Notes to Condensed
        Consolidated Financial Statements. While all these significant accounting
        policies impact its financial condition and results of operations, the Company
        views certain of these policies as critical. Policies determined to be critical
        are those policies that have the most significant impact on our consolidated
        financial statements and require management to use a greater degree of judgment
        and estimates. Actual results may differ from those estimates. Our management
        believes that given current facts and circumstances, it is unlikely that
        applying any other reasonable judgments or estimate methodologies would cause
        effect on our consolidated results of operations, financial position or
        liquidity for the presented in this report.
  **Plan
        of Operations**
 
 We
        are
        aggressively pursuing our business plan with respect to product development
        and
        enhancement and field testing, as well as initial marketing efforts. Following
        the Acquisition Transaction, we had seven employees. Through June 30, 2008,
        we
        intend to expand our internal management and administrative capacities. We
        expect to continue making substantial investment in equipment and to acquire
        inventory to facilitate the expansion of pilots and to prepare for
        commercialization.
 
 All
        references to financial results prior to the date of the Acquisition Transaction
        (e.g., March 8, 2007) shall mean and refer to the financial results of IDO
        Ltd.
        All references to results following the date of the Acquisition Transaction
        shall mean and refer to the financial results of the IDO Security Inc. and
        its
        consolidated subsidiary, IDO Ltd.
  **Revenues**
        - No revenues were recorded for the nine or three months ended September
        30,
        2007 or during the corresponding periods in 2006.
 
 **Research
        and development**  **-** Research and development
        expense consist primarily of expenses incurred in designing, developing and
        field testing our products. These expenses consist primarily of salaries
        and
        related expenses for personnel, contract design and testing services, supplies
        used and consulting and license fees paid to third parties. We incurred research
        and development expenses in the amount of $196,094 and $96,933 for,
        respectively, the nine and three months ended September 30, 2007. For the
        corresponding periods in 2006, no research and development expenses were
        incurred.
 
 **Selling,
        general and administrative expenses** - Selling, general and
        administrative expenses primarily consist of salaries and other related costs
        for personnel in executive and other administrative functions. Other significant
        costs include professional fees for legal, accounting and other services.
        We
        incurred selling, general and administrative expenses of $601,489 and $289,180
        for, respectively, the nine and three months ended September 30, 2007 as
        compared to $53,118 and $3,300 for the corresponding periods in 2006. The
        increase in selling, general and administrative expenses is principally
        attributable to the intensified activities following the Acquisition
        Transaction.
 
 **Stock
        Based Compensation** . In June through September  2007, we
        granted stock options to employees and consultants valued at $5.66 million.
        The
        value of these options are being amortized over the vesting periods of each
        grant. Stock based compensation totaled $2,567,829 and 1,111,752  for
        the nine and three months ended September 30, 2007, respectively. Stock-based
        compensation is non-cash and, therefore, has no impact on cash flow or
        liquidity.
 
 **Interest
        expense -** Interest expense for the nine and three months ended
        September 30, 2007 was $414,798 and $213,732, respectively. No interest was
        incurred in the corresponding periods in 2006. For the nine months ended
        September 30, 2007, interest included $381,260 related to the convertible
        promissory notes and $33,538 to related parties . For the three months ended
        September 30, 2007, interest included $195,198 related to the convertible
        promissory notes and $18,534 to related parties .
  12
  **Amortization**
        - During the nine and three months ended September 30, 2007, we recorded
        amortization of $5,466,314 and $3,403,487, respectively. Amortization related
        to
        the debt discount, beneficial conversion feature and deferred finance costs
        incurred in connection with the placement of our convertible promissory notes
        which were issued in February, March and April 2007. These costs are amortized
        to the date of maturity of the debt unless converted earlier.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 To
        date
        we have financed our operations primarily from the sale of our
        securities.
 
 As
        of
        September 30, 2007, we had a cash balance of $57,139.
 
 Between
        February 28 and April 18, 2007, we raised $3,000,000 from the private placement
        to certain institutional and private investors (collectively, the “Investors”)
        of our 120 day Secured Convertible Notes (collectively, the “Notes”). The loans
        were advanced pursuant to a Subscription Agreement, dated as of February
        28,
        2007 (the “Subscription Agreement”). Pursuant to the Subscription Agreement, the
        Company issued to the Investors its Notes in the aggregate principal amount
        of
        $3,240,000, reflecting an original issue discount on the principal amount
        of the
        loans of 8% over the 120 day loan period. Notes in the aggregate principal
        amount of $1,134,000, $1,350,000 and $756,000 were or are scheduled to mature,
        respectively, on June 28, 2007, July 29, 2007 and August 16, 2007. These
        investors have been granted a lien on all of our assets, including our
        intellectual property, to secure the repayment of amounts owing under the
        Notes
        and the Subscription Agreement. The maturity dates of Notes totaling $2,484,000
        that were scheduled to mature on June 28, 2007 and July 29, 2007 were extended
        to August 31, 2007. These Notes, as well as Notes in the principal amount
        of
        $756,000 that were scheduled to mature on August 16, 2007, were extended
        to
        November 29, 2007. Following these extensions, the aggregate principal amount
        of
        $3,499,360 payable in respect of the Notes is due and payable by November
        29,
        2007.
 
 On
        October 11, 2007, we raised gross proceeds of $250,000 from the private
        placement to institutional investors (the “October  07 Investors”) of
        its 90 day Promissory Notes (collectively, the “Notes”, each
        a  “Note”). The loan was advanced pursuant to a Subscription
        Agreement, dated as of October 11, 2007 (the “Subscription Agreement”), between
        the Company and the Investors. Pursuant to the Subscription Agreement, the
        Company issued to the October 07 Investors its Notes, scheduled to mature
        on
        January 11, 2008, in the aggregate principal amount of $265,957.
 
 Cash
        used
        in operating activities was $770,550. The decrease in cash was primarily
        attributable to funding the loss for the period.
 
 Cash
        used
        in investing activities was $950,171 and was primarily attributable to the
        consummation of the Acquisition Transaction.
 
 Cash
        provided by financing activities was $1,786,154. The Company received proceeds
        of $3 million from the issuance of the Notes, $36,475 from the collections
        of
        subscriptions receivable and proceeds from short-term debt incurred by IDO
        Ltd.
        of $47,738. In connection with the issuance of the Notes, the Company incurred
        financing costs of $325,000. In addition, the Company repaid short-term debt
        incurred by IDO Ltd. totaling $985,794.
 
 We
        will
        need to raise additional funds to be able to satisfy our cash requirements
        over
        the next twelve months, including satisfying the repayment obligations on
        the
        Notes that are scheduled to mature in November 2007 and January 2008. Product
        development, corporate operations and marketing expenses will continue to
        require additional capital. Our current revenue from operations is insufficient
        to cover our current operating expenses and projected expansion plans which
        include the repayment of the Notes. We therefore are aggressively seeking
        additional financing through the sale of our equity and/or debt securities.
        No
        assurance can be provided that additional capital will be available to us
        on
        commercially acceptable or at all. Our auditors included a "going concern"
        qualification in their auditors' report for the six month period ended December
        31, 2006. Such "going concern" qualification may make it more difficult for
        us
        to raise funds when needed. Additional equity financings may be dilutive
        to
        holders of our Common Stock.
  **ITEM
                  3.**
              **CONTROLS
                  AND PROCEDURES**
  EVALUATION
        OF DISCLOSURE CONTROLS AND PROCEDURES. We maintain disclosure controls and
        procedures that are designed to ensure that information required to be disclosed
        in our Exchange Act reports is recorded, processed, summarized and reported
        within the time periods specified in the SEC's rules and forms, and that
        such
        information is accumulated and communicated to management, including our
        acting
        Chief Executive Officer (and Principal Financial and Accounting Officer),
        to
        allow timely decisions regarding required disclosure based closely on the
        definition of "disclosure controls and procedures" in Rule
        13a-14(c).
  As
        of the
        end of the period covered by this report, we carried out an evaluation, under
        the supervision and with participation of management, including our acting
        Chief
        Executive Officer (and Principal Financial and Accounting Officer), of the
        effectiveness of the design and operation of our disclosure controls and
        procedures. Based on the foregoing, our acting Chief Executive Officer (and
        Principal Financial and Accounting Officer)concluded that our disclosure
        controls and procedures were effective.
  CHANGES
        IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the quarter ended
        September 30, 2007, there have been no changes in our internal controls over
        financial reporting that have materially affected, or are reasonably likely
        to
        materially affect, these controls.
  13
 
 **PART
        II - OTHER INFORMATION**
 
 **ITEM
                  1.**
              **LEGAL
                  PROCEEDINGS.**
  None.
   **ITEM
                  2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS**
  None.
  
 **ITEM
                  3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES.**
  None.
  
 **ITEM
                  4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS.**
  None.
  
 **ITEM
                  5.**
              **OTHER
                  INFORMATION.**
  (i)
            On
            September 4, 2007, John P. Mitola was appointed to the Company's Board
            of
            Directors. Since August 1, 2006, Mr. Mitola has been affiliated with
            Belair
            Capital Partners Inc. and Kingsdale Capital International, financial
            advisory
            and consulting firms. From January 2000 through February, 2006, Mr. Mitola,
            was
            the Chief Executive Officer of Lime Energy Co. (formerly “Electric City Corp.”),
            a publicly traded company. From August 1993 until December 1999, Mr. Mitola
            was with Unicom Thermal Technologies (now Exelon Thermal Technologies),
            Unicom
            (now Exelon) Corporation’s largest (at that time) unregulated subsidiary at the
            time, serving as vice president and general manager prior to his departure
            for
            Electric City Corp. Mr. Mitola led the growth of Unicom Thermal through the
            development of Unicom Thermal’s Northwind TM ice technology and through thermal
            energy joint ventures between Unicom Thermal and several leading electric
            utility companies across North America. Prior to his appointment at Unicom
            Thermal, Mr. Mitola was director of business development for Commonwealth
            Edison Company, the local electric utility serving Chicago, Illinois
            and the
            northern Illinois region. Since April 2003, Mr. Mitola has also served as
            the chairman of the Illinois State Toll Highway Authority, appointed
            by the
            Governor of Illinois.
 
 In
            connection with his appointment, Mr. Mitola was awarded options to purchase
            up
            to 100,000 shares of the Company’s Common Stock at a per share exercise price of
            $1.00, of which options for 25,000 shares are scheduled at the end of
            each
            quarter, beginning September 30, 2007.
 
 (ii)
            On
            September 2, 2007, Mr. Jorge Wolf, who since May 15, 2007 has served
            the Manager
            of Business Development for each of the Company and IDO Ltd., was appointed
            as
            Chief Executive Officer of IDO Ltd.


**ITEM
                6.**
            **EXHIBITS.**





Exhibit
              Number
            Description31
            Certification
                Pursuant to Rule 13a-14a of the Securities Exchange Act of 1934,
                as
                amended32
            Certification
                Pursuant to Section 906 of  Sarbanes-Oxley Act of
                2002






14





**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the small business issuer
      has caused this report to be signed by the undersigned thereunto duly
      authorized.






DATE: 
                November 19, 2007IDO
                SECURITY INC./s/
                MICHAEL GOLDBERGMICHAEL
                GOLDBERGACTING
              CHIEF EXECUTIVE OFFICER (PRINCIPALEXECUTIVE
              OFFICER AND PRINCIPAL FINANCIAL ANDACCOUNTING
                OFFICER) AND PRESIDENT








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