**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 June 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
        August 17, 2007, there were 32,933,750 shares
        of
        issuer’s common stock, par value $0.001 per share outstanding. The number of
        shares outstanding reflects the three-for-one stock split that was effected
        in
        July 2007.
 
 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 June 30, 2007 (Unaudited) and December
                  31,
                  2006 (Audited)
              1Unaudited
                  Condensed Consolidated Statements of Operations for the six and
                  three
                  months ended June 30, 2007 and 2006
              2Unaudited
                  Condensed Consolidated Statements of Cash Flows for the six months
                  ended
                  June 30, 2007 and 2006
              3Notes
                  to Condensed Consolidated Financial Statements
              4Item
                  2 -
              Management's
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              11Item
                  3 -
              Controls
                  and Procedures
              15PART
                  II -- OTHER INFORMATIONItem
                  1 -
              Legal
                  Proceedings
              15Item
                  2 -
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              15Item
                  3 -
              Defaults
                  upon Senior Securities
              16Item
                  4 -
              Submission
                  of Matters to a Vote of Security Holders
              16Item
                  5 -
              Other
                  Information
              16Item
                  6 -
              Exhibits
              17SIGNATURES
              18
   
  IDO
                  SECURITY INC. AND SUBSIDIARY(formerly
                  The Medical Exchange, Inc.)CONDENSED
                  CONSOLIDATED BALANCE SHEETSJune
                  30,
              
              December
                  31,2007
              
              2006(unaudited)ASSETSCURRENT
                  ASSETSCash
              
              $
              488,469
              
              $
              7,484Inventory
              
              
              192,529
              
              
              -Prepaid
                  expenses and other current assets
              
              
              18,322
              
              
              -Total
                  current assets
              
              
              699,320
              
              
              7,484Property
                  and equipment, net of accumulated depreciationof
                  $28,399 and $0, respectively
              
              
              18,491
              
              
              -Intangible
                  assets, net of amortization of $40,000 and $0,
                  respectively
              
              
              1,160,000
              
              
              -Goodwill
              
              
              755,002
              
              
              -Deferred
                  financing costs, net of amortization of $92,182 and $0,
                  respectively
              
              
              20,401
              
              
              -Deferred
                  acquisition costs
              
              
              -
              
              
              55,550Total
                  assets
              
              $
              2,653,214
              
              $
              63,034LIABILITIES
                  AND STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable and accrued liabilities
              
              $
              198,150
              
              $
              101,548Secured
                  convertible notes, net of discount of $1,653,979and
                  $0, respectively
              
              
              1,531,792
              
              
              -Loans
                  payable, related parties
              
              
              44,826
              
              
              26,896Total
                  current liabilities
              
              
              1,774,768
              
              
              128,444NON-CURRENT
                  LIABILITIESAccrued
                  severance pay
              
              
              169,000
              
              
              -Total
                  liabilities
              
              
              1,943,768
              
              
              128,444STOCKHOLDERS'
                  EQUITY (DEFICIT)Preferred
                  Stock20,000,000
                  shares authorized; none outstandingCommon
                  stock, $.001 par value;50,000,000
                  shares authorized; 32,715,000 and 30,600,000issued
                  and outstanding, respectively
              
              
              32,715
              
              
              10,200Additional
                  paid-in capital
              
              
              4,990,500
              
              
              144,731Stock
                  subscription receivable
              
              
              (25
              )
              
              (36,500
              )Accumulated
                  other comprehensive loss
              
              
              (331
              )
              
              (331
              )Deficit
                  accumulated during the development stage
              
              
              (4,313,413
              )
              
              (183,510
              )Total
                  stockholders' equity (deficit)
              
              
              709,446
              
              
              (65,410
              )Total
                  liabilities and stockholders' equity (deficit)
              
              $
              2,653,214
              
              $
              63,034See
                  Notes to Condensed Consolidated Financial
                  Statements.
  1
  IDO
                  SECURITY INC. AND SUBSIDIARY(formerly
                  The Medical Exchange, Inc.)CONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONSSix
                  Months
              
              Three
                  MonthsEnded
              
              EndedJune
                  30,
              
              June
                  30,2007
              
              2006
              
              2007
              
              2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)
              
              (Unaudited)Revenues
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Operating
                  expensesResearch
                  and development costs
              
              
              99,161
              
              
              -
              
              
              72,155
              
              
              -Selling,
                  general and administrative expenses
              
              
              312,309
              
              
              49,818
              
              
              230,314
              
              
              47,979Stock
                  based compensation
              
              
              1,456,077
              
              
              -
              
              
              1,456,077
              
              
              -Total
                  operating expenses
              
              
              1,867,547
              
              
              49,818
              
              
              1,758,546
              
              
              47,979Loss
                  from operations
              
              
              (1,867,547
              )
              
              (49,818
              )
              
              (1,758,546
              )
              
              (47,979
              )Interest
                  expense (including related partiesof
                  $15,004, $0, $3,368 and $0)
              
              
              (201,066
              )
              
              -
              
              
              (168,753
              )
              
              -Interest
                  income
              
              
              1,537
              
              
              -
              
              
              1,537
              
              
              -Amortization
                  of debt discount
              
              
              (1,642,679
              )
              
              -
              
              
              (1,486,974
              )
              
              -Amortization
                  of beneficial conversion feature
              
              
              (327,966
              )
              
              -
              
              
              (323,177
              )
              
              -Amortization
                  of deferred finance costs
              
              
              (92,182
              )
              
              -
              
              
              (68,759
              )
              
              -Net
                  loss
              
              
              (4,129,903
              )
              
              (49,818
              )
              
              (3,804,672
              )
              
              (47,979
              )Other
                  comprehensive lossForeign
                  currency translation adjustment
              
              
              -
              
              
              171
              
              
              -
              
              
              170Comprehensive
                  loss for the period
              
              $
              (4,129,903
              )
              $
              (49,647
              )
              $
              (3,804,672
              )
              $
              (47,809
              )Basic
                  and diluted loss per share:
              
              $
              (0.13
              )
              $
              (0.01
              )
              $
              (0.12
              )
              $
              0.00Weighted
                  average number of shares outstandingBasic
                  and diluted
              
              
              31,581,547
              
              
              9,667,956
              
              
              32,330,769
              
              
              12,961,813See
                  Notes to Condensed Consolidated Financial
                  Statements.
 2
  IDO
                  SECURITY INC. AND SUBSIDIARY(formerly
                  The Medical Exchange, Inc.)CONDENSED
                  CONSOLIDATED STATEMENTS OF CASH FLOWSSix
                  MonthsEndedJune
                  30,2007
              
              2006INCREASE
                  (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              (Unaudited)
              
              (Unaudited)CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (4,129,903
              )
              $
              (49,818
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              133,832
              
              
              -Amortization
                  of note discount
              
              
              1,642,679
              
              
              -Amortization
                  of beneficial conversion feature of convertible debt
              
              
              327,966
              
              
              -Accretion
                  of interest on notes payable
              
              
              185,771
              
              
              -Stock
                  based compensation
              
              
              1,456,077
              
              
              -Increase
                  in net liability for severance pay
              
              
              18,197
              
              
              -Increase
                  (decrease) in cash attributable to changes in assets and
                  liabilitiesInventory
              
              
              (110
              )
              
              -Prepaid
                  expenses and other current assets
              
              
              (5,478
              )
              
              -Accounts
                  payable and accrued liabilities
              
              
              18,930
              
              
              15,674Net
                  cash used in operating activities
              
              
              (352,039
              )
              
              (34,144
              )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
              
              
              (2,959
              )
              
              -Net
                  cash used in investing activities
              
              
              (953,130
              )
              
              (9,000
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESIssuance
                  of common shares
              
              
              -
              
              
              80,375Proceeds
                  from (issuance of) stock 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
              
              
              480,985
              
              
              9,422CASH
                  - BEGINNING OF PERIOD
              
              
              7,484
              
              
              -CASH
                  - END OF PERIOD
              
              $
              488,469
              
              $
              9,422Supplemental
                  disclosures of cash flow information:Cash
                  paid for interest
              
              $
              -
              
              $
              -Non-cash
                  activitiesIssuance
                  of common stock and warrants relating toconvertible
                  promissory notes
              
              $
              3,624,623
              
              $
              -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 ignoring 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 of Nevada on January
        23,
        2004. On July 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”). On March 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 six and three months ended June 30, 2007, are not
        necessarily indicative of the results that may be expected for the year ending
        December 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 ended December 31, 2006, as filed with the Securities
        and Exchange Commission on February 23, 2007 and with the Company’s Current
        Report on Form 8-K filed with the Securities and Exchange Commission on March
        14, 2007. Previously, the Company had a June 30 fiscal year. On December
        28,
        2006, the Company changed its fiscal year to December 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.
  4
  **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 the United 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.
 
 **Functional
        Currency**
 The
        majority of Company’s sales are in United States dollars or in United States
        dollar linked currencies. In addition, the majority of the Company’s investing
        and financing activities are in United States dollars. Accordingly, the Company
        has determined the United States dollar as the currency of its primary economic
        environment and thus, its functional and reporting currency. Non-dollar
        transactions and balances have been measured in United States dollars 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. on March
        8,
        2007. Management of the Company will evaluate the carrying value of goodwill
        annually or whenever a possible impairment is indicated.
  5
 **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. At June 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 six
        and
        three months ended June 30, 2007 amounted to $40,000 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.
 
 **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 in Israel is fully
        provided by monthly deposits in accordance with insurance policies and by
        an
        accrual. The deposited funds include profits accumulated through June 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 have been excluded from the calculation of net loss
        per
        share, as their effect would be antidilutive:
  6
  Shares
                  of Common StockIssuable
                  upon Conversion/Exerciseof
                  asJune
                  302007
              
              2006Warrants
              
              
              11,421,000
              
              
              ---Convertible
                  notes
              
              
              1,911,463
              
              
              ---Stock
                  options
              
              
              1,650,000
  **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 after November 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." SAB 108 provides guidance on the consideration of effects of
        the
        prior year misstatements in quantifying current year misstatements for the
        purpose of a materiality assessment. The SEC staff 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. SAB 108 was effective for the first annual period ending after
        November 15, 2006 with early application encouraged. The Company adopted
        the provisions of SAB 108 on December 31, 2006 and there was no impact of
        adoption to its consolidated financial statements.
 
 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 after November 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.
 
 At
        June
        30, 2007, the Company had not achieved profitable operations, has accumulated
        losses of $4,313,413(since its inception), has a working capital deficiency
        of
        $1,075,448 and 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.
 
 **NOTE
        4 - ACQUISITION**
 
 On
        July
        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. On March 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.
  7
  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.
  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:
 
 Six
                  Months Ended
              
              Three
                  Months EndedJune
                  302007
              
              2006
              
              2007
              
              2006Revenue
              
              $
              19,985
              
              $
              8,050
              
              $
              0
              
              $
              0Net
                  loss
              
              
              ($3,087,076
              )
              
              ($1,098,260
              )
              
              ($2,332,242
              )
              
              ($401,928
              )Net
                  loss per share,basic
                  and diluted
              
              
              ($0.10
              )
              
              ($0.11
              )
              
              ($0.07
              )
              
              ($0.03
              )
 
 **NOTE
        5 - PRIVATE PLACEMENT OF DEBT SECURITIES**
 
 On
        February 28, 2007 and March 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, dated February 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. On April 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
        a term 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.
  8
  Interest
        incurred on the Notes amounted to $185,771 and $165,365 for the six and three
        months ended June 30, 2007, respectively.
 
 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
        on June 28, 2007. In July 2007, the Company and the holder of such Note agreed
        to extend to August 31, 2007 the 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 issued and in accordance with EITF No. 00-27, an additional discount
        of
        $236,098 to reflect the beneficial conversion feature of the Notes. The
        discounts are being amortized to the date of maturity unless converted
        earlier.
 
 Amortization
        of debt discount and beneficial conversion for the six and three months ended
        June 30, 2007 amounted to $1,970,645 and $1,810,151.
 
 On
        July
        26, 2007, the maturity date for Notes in the aggregate principal amount of
        $1,350,000, which were originally scheduled to mature on July 29, 2007, have
        also been extended to August 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).
 
 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**
 
 On
        March
        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 2007, the Company’s board of directors approved grants of stock
        options to employees and consultants to purchase an aggregate of 1.65 million
        shares of its common stock with exercise prices ranging from $.17 to $3.50.
        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 six months ended June 30, 2007 was $2.20. 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 - 5.00% to 5.03% and a dividend
        yield of 0%.
  The
        Company recognized stock compensation expense of $1,456,077 for the six and
        three months ended June 30, 2007.
  9
 **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
        aggregated to $44,826 at June 30, 2007 and $26,896 at December 31, 2006.
        Interest incurred on the loans amounted to $15,004 and $3,368 for the six
        and
        three months ended June 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
  On
        June
        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 on July 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, beginning
        September 30, 2007, at per share exercise prices ranging between $0.25 and
        $1.25.
  On
        July
        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, on
        July 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
        AGREEMENT
  On
        June
        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 agreement, 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).
  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.
  11
  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. 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)
 
 **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.
   12
  **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 six or three months ended June 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 $99,161 and
        $72,155 for, respectively, the six and three months ended June 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 $312,309 and $230,314 for, respectively, the six and three months
        ended June 30, 2007 as compared to $49,818 and $47,979 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
        2007, we granted stock options to employees and consultants valued at $3.6
        million. The value of these options are being amortized over the vesting
        periods
        of each grant. Stock based compensation totaled $1,456,077 for the six and
        three
        months ended June 30, 2007. Stock-based compensation is non-cash and, therefore,
        has no impact on cash flow or liquidity.
 
 **Interest
        expense -** Interest
        expense for the six and three months ended June 30, 2007 were $201,066 and
        $168,753, respectively. No interest was incurred in the corresponding periods
        in
        2006. For the six months ended June 30, 2007, interest included $185,771
        related
        to the convertible promissory notes and $15,004 to related parties . For the
        three months ended June 30, 2007, interest included $165,366 related to the
        convertible promissory notes and $3,368 to related parties .
 
 **Amortization** - During
        the six and three months ended June 30, 2007, we recorded amortization of
        $2,068,827 and $1,878,910, 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
        June 30, 2007, we had a cash balance of $488,469.
 
 Between
        February 28 and April 18, 2007, we raised $3,000,000 from the private placement
        (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. The Company and certain of
        the
        investors are in the process of working to extend the maturity dates of Notes
        in
        the principal amount of $756,000.
  13
  Cash
        used
        in operating activities was $352,039. The decrease in cash was primarily
        attributable to funding the loss for the period.
 
 Cash
        used
        in investing activities was $953,130 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 August 2007. 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 that are scheduled to come due in August 2007. 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.
  
  14
  **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 June
        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.
 
 **PART
        II - OTHER INFORMATION**
 
 **ITEM
                  1.**
              **LEGAL
                  PROCEEDINGS.**
  None.
 
 **ITEM
                  2.**
              **UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS**
  During
        the three months ended June 30, 2007, we issued unregistered securities as
        follows:
  (i)
        On
        April 18, 2007, we issued to certain investors our 120 day promissory notes
        in
        the aggregate principal of $756,000 in consideration of gross proceeds of
        $700,000. The Notes were issued pursuant to a Subscription Agreement, dated
        February 28, 2007 (the "Subscription Agreement”), between the Company and the
        investors pursuant to which were able to raise up to $3 million. In connection
        therewith, we issued to these investors warrants (the “Investor Warrants”) to
        purchase in the aggregate up to756,000 shares of the Company’s common stock, par
        value $0.001 (the “Common Stock”) at a per share exercise price of $5.00
        (pre-split). Under the terms of the Subscription Agreement, the Investors
        also
        received 140,000 restricted shares (pre split). Following the three for one
        forward split of the Common Stock that was effected in July 2007, the number
        of
        shares issuable under the Investor Warrants is 2,268,000 and corresponding
        the
        per share exercise price is $1.67 and the restricted shares were increased
        to
        420,000.
  (ii)
        In
        connection with the extension to August 31, 2007 of the maturity date of
        a Note
        in the aggregate principal amount of $1,134,000 originally scheduled to mature
        on June 28, 2007, the Company issued, as of such date, to the holder of such
        Note 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
        Warrants and also issued 315,000 Incentive Shares (post split).
 
 These
        securities were issued without registration under the Securities Act in reliance
        upon the exemption provided in Section 4(2) of the Securities Act. Appropriate
        legends were affixed to the share certificates issued in all of the above
        transactions. The Company believes that each of the recipients was an
“accredited investor” within the meaning of Rule 501(a) of Regulation D under
        the Securities Act, or had such knowledge and experience in financial and
        business matters as to be able to evaluate the merits and risks of an investment
        in our common stock. All recipients had adequate access, through their
        relationships with the Company and its officers and directors, to information
        about the Company. None of the transactions described above involved general
        solicitation or advertising.
  15
 
 **ITEM
                  3.**
              **DEFAULTS
                  UPON SENIOR SECURITIES.**
  None.
 
 **ITEM
                  4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS.**
  None.
 
 **ITEM
                  5.**
              **OTHER
                  INFORMATION.**
  None.
     16
  **ITEM
                  6.**
              **EXHIBITS.**
 
 Exhibit
                Number
              Description10.1
              Consultancy
                  Agreement dated as of May 15, 2007 between IDO Security Inc. and
                  Jorge
                  Wolf.10.2
              Management
                  Agreement dated as of May 15, 2007 between IDO Security Ltd. and
                  Jorge
                  Wolf10.3
              Modification
                  Agreement dated as of June 26, 2007 between IDO Security Inc. and
                  the
                  holder identified herein10.4
              Employment
                  Agreement dated as of June 1, 2007 between IDO Security Inc. and
                  Michael
                  Goldberg10.5
              Management
                  Agreement dated as of July 1, 2007 between IDO Security Ltd. and
                  Henry
                  Shabat Ltd.31
              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
 
 
 17
 
 **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: 
                  August 20, 2007IDO
                  SECURITY INC./s/
                  MICHAEL GOLDBERGMICHAEL
                  GOLDBERGACTING
                  CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
                  FINANCIAL AND ACCOUNTING OFFICER) AND
                  PRESIDENT
    18