SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                Annual Report Pursuant to Section 13 or 15(d) of
             The Securities Exchange Act of 1934 For the fiscal year
                   ended December 31, 2001


                          LASERLOCK TECHNOLOGIES, INC.
                         ------------------------------
             (Exact name of registrant as specified in Its charter)

           NEVADA                                   23-3023677
      -------------------------------             -------------------
      (State or other jurisdiction of               (IRS Employer
       Incorporation or Organization)             Identification No.)

                      837 Lindy Lane, Bala Cynwyd, PA    19004
          ------------------------------------------------------------
               (Address of Principal Executive offices) (Zip Code)


        Registrant's telephone number, with area code: (610) 668 - 1952

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

         Securities registered pursuant to Section 12(g) of the Act:
                  Common stock of $0.001 par value per share

     Indicate by, check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  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

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B in this form, and no disclosure will be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. X

     State Issuer's Revenues for its most recent fiscal year.  $11,803 Aggregate
market  value  of  the  voting  stock  held  by  non-affiliates  of  registrant:
$4,086,421 as of December 31, 2001

Number of shares outstanding as of December 31, 2001: 16,957,867

     Documents  incorporated by reference:  None.




<PAGE>



Part I.
Item 1   DESCRIPTION OF BUSINESS


ORGANIZATION  AND  CHARTER


     LaserLock  Technologies,  Inc., (the "Company" or  "LaserLock")  was formed
under the laws of Nevada on November 10,  1999.  The Company was formed in order
to develop  technologies  which will both allow for easy  product  and  document
authentication,  and to prevent product and document counterfeiting. The initial
amount of authorized capital was $50,000. This consisted of 40,000,000 shares of
Common Stock  authorized,  $0.001 par value, and 10,000,000  shares of Preferred
Stock authorized,  $0.001 par value. A copy of the Company's initial Articles of
Incorporation is attached hereto and is incorporated by reference. See Part III,
Item 1.

     The Company is fully reporting  under The Securities  Exchange Act of 1934.
As a fully  reporting  company under The  Securities  Exchange Act of 1934,  the
Company is required to file  quarterly  and annual and certain  event  triggered
reports  with  the  Securities   and  Exchange   Commission.   These   reporting
requirements add to the expense and timeliness of certain business  transactions
which the Company may endeavor to undertake in the future -- such as a merger or
any other material business undertaking.

     The Company's Common Stock trades on the OTC Bulletin Board (OTC:BB), under
the trading symbol "LLTI."

     The public may read and copy this  document,  and any other  materials  the
Company files with the Commission at the Commission's Public Reference Room, 450
Fifth Street,  N.W.,  Washington,  D.C.  20549.  Information is available on the
operation  of  the  Public   Reference   Room  by  calling  the   Commission  at
1-800-SEC-0330.   Additionally,   the  Commission  maintains  an  internet  site
(http://www.sec.gov)   that   contains  all  reports,   proxy  and   information
statements, and other information regarding companies which file electronically.
LaserLock currently has a web site at www.laserlocktech.com.


<PAGE>



BUSINESS OF THE COMPANY

Background

     LaserLock  Technologies,   Inc.  was  organized  to  utilize  a  technology
discovered  by its founder,  Norman A. Gardner,  which allows for  non-intrusive
document and product  authentication that can reduce losses caused by fraudulent
document  reproduction  and by product  counterfeiting  and/or  diversion.  This
technology  involves  the  utilization  of an ink  activating  system  which  is
completely  compatible with currently used printing systems (it is a part of the
ink and can be used in offset, flexographic,  silkscreen, gravure, and laser ink
systems) and based upon Mr. Gardner's experience, the Company believes it can be
incorporated into existing manufacturing processes.

     Since September of 2001, the Company has a 4 year exclusive  license in the
casino and gambling  industry from NoCopi  Technologies,  Inc.  which allows the
Company to utilize a technology called Rub & Reveal. This technology utilizes an
ink activating system which changes to certain specified colors when scratched.

     In December of 2001,  the Company's  wholly owned  subsidiary,  LL Security
Products, Inc. acquired E.D.S. Marketing,  Inc. in a cash and equity transaction
which gave the  Company  ownership  of  personal  computer  based  security  and
profiling   technology   (such   as   software   based   fingerprint   character
identification, and web or internal-network based access to security cameras).

     The Company  intends to be involved in the business of product and document
authentication and security.  It plans to develop and market its technology in a
variety of applications.  The Company believes that the proprietary technologies
it owns or  licenses  will  enable  businesses  to  re-construct  their  overall
approaches  to  corporate  security  - from  counterfeit  identification  and/or
diversion to employee or customer  monitoring.  Potential  applications  for the
Company's  technologies  are  available  in  different  types  of  products  and
industries - e.g.  gaming,  tobacco,  perfume,  compact disks,  pharmaceuticals,
event and transportation tickets, drivers licenses,  insurance cards, passports,
etc.  Sales are  intended to be made  either  through  licensees  or directly to
end-users.

     The first industry in which the Company is pursuing commercial  application
of its technology is the casino and gaming  industry.  The Company believes that
its  technologies are applicable to the industry in a variety of ways - from the
detection of counterfeit  dice,  cards, and chips, to internal employee security
verification via thumbprints for use in locks,  computer systems,  and to verify
cashless tickets from slot machines for fraud.

Anti-Counterfeiting and Anti-Diversion Technologies and Products

     Recent developments in copying and printing  technologies have made it even
easier to counterfeit a wide variety of documents.  Currency,  lottery  tickets,
gift certificates,  event and transportation  tickets,  casino fraud, travelers'
checks  and the like are all  susceptible  to  counterfeiting,  and the  Company
believes that losses from such counterfeiting have increased  substantially with
improvements   in   technology   ("Latest   Use  for  One's   DNA  -   Thwarting
Counterfeiters",   San  Francisco  Chronicle,  page  C1,  September  11,  2000).
Counterfeiting  has long caused losses to  manufacturers of brand name products,
and the Company believes these losses have also increased as the  counterfeiting
of labeling and packaging has become easier.

     The Company's document authentication technologies are useful to businesses
desiring to authenticate a wide variety of printed materials and products. These
include a technology  with the ability to print invisibly in specific areas of a
document which can then be activated or revealed by use of an inexpensive  laser
light  when  authentication  is  required,  and a  technology  which can allow a
certain code,  message or emblem to self-reveal when rubbed.  These technologies
are intended to be  substantially  different  than pen systems  currently in the
marketplace. Pen systems work by a similar invisible ink which is activated by a
special marker.  If the item is an original and not an  illegitimate  copy, then
the ink will be activated  and show a visible mark as a different  color than on
an illegitimate  copy.  LaserLock believes that its technologies are superior to
the pen system technology  because in the case of its laser technology,  it will
not result in a permanent mark on the  merchandise  which generally leads to the
disposal of the  merchandise or its sale as a "second"  rather than best quality
goods,  and in the case of its rubbed ink  technology  it does not  require  any
special tools to reveal the counterfeit.

<PAGE>
     Other possible  variations of the Company's laser based technology  involve
multiple color  responses  from a common laser,  visible marks of one color that
turn another color with a second laser or visible and invisible  marks that turn
into a multicolored image. These technologies  provide users with the ability to
authenticate products and detect counterfeit documents. Applications include the
authentication  of documents having intrinsic value,  such as currency,  checks,
travelers' checks,  gift certificates and event tickets,  and the authentication
of product labeling and packaging. When applied to product labels and packaging,
such  technologies can be used to detect  counterfeit  products whose labels and
packaging would not contain the  authenticating  marks invisibly  printed on the
packaging  or labels of the  legitimate  product,  as well as to combat  product
diversion   (i.e.,  the  sale  of  legitimate   products  through   unauthorized
distribution channels or in unauthorized markets).

     The Company believes that its  technologies  could also be used in a manner
which permits  manufacturers  and distributors to track the movement of products
from production to ultimate consumption when coupled with proprietary software.

     The  Company  has been  initially  focused  on the  widespread  problem  of
counterfeiting  in the gaming industry.  The product is to be incorporated  into
traditional gaming accessories such as playing cards, chips, and dice as well as
gaming based machinery such as slot machines and cashless  gaming systems.  This
is accomplished  during the regular  manufacturing and printing  processes.  The
protected  items can be viewed with the laser to reveal the  authenticity of the
item. These covert authenticating  technologies are also intended to be marketed
to   manufacturers   of  compact   discs  to  identify  CD's  produced  by  that
manufacturer.   The  Company  believes  that  this  technology  can  provide  CD
manufacturers  and  publishers  with a tool to  combat  the  significant  losses
sustained as a result of illegal pirating and  counterfeiting of data, music and
video discs.


Marketing

     The marketing approach of the Company is to have sufficient  flexibility in
its products and  technologies  so as to provide  cost-effective  solutions to a
wide  variety of  counterfeiting,  diversion  and copier  fraud  problems.  As a
technology  company,  the Company  intends to  generate  revenues  primarily  by
collecting  license  fees  from  manufacturers  who  incorporate  the  Company's
technologies  into their  manufacturing  process and their products,  and in the
case of cashless gaming systems via the right to sell advertising on the back of
cashless gaming tickets.

     The Company has  identified a number of major markets for its  technologies
and products,  including gaming,  document security  printers,  manufacturers of
labels and packaging  materials and distributors of brand name products.  Within
each market, key potential users have been identified.  Within North America and
Europe,  sales are  intended  to be  effected  via  direct  selling  by  company
personnel or consultants to create end user demand and selling through  licensee
sales forces with support from  company  personnel.  The Company has  determined
that  technical  sales support by its personnel  will be of great  importance to
increasing  its  licensees'  sales  of  products   incorporating  the  Company's
technologies  and,  therefore,  plans to be very  committed  to  providing  such
support.  The  Company  anticipates  that  should  European  sales be made,  the
technical  support could  initially be handled from the United  States,  and the
Company could eventually open a European support division should consumer demand
justify the associated costs.

     As continued improvements in color copier and desktop publishing technology
make  counterfeiting  and fraud  opportunities  less  expensive and the internet
makes  these  products  more  available,  the  Company  intends to  maintain  an
interactive  product development and enhancement program whereby it will utilize
its R&D and marketing  skills in order to constantly  upgrade and improve on its
technology with the combined efforts of marketing,  applications engineering and
research  and   development.   The  Company   believes  that   utilizing   these
methodologies - whereby a product is developed by the company,  delivered to the
client,  feedback  is received  from the client,  and the product is changed and
enhanced to reflect the client feedback,  will lead to faster development cycles
for the  Company's  products.  The  Company's  objective is to  concentrate  its
efforts on developing  market-ready  products with the most beneficial ratios of
market potential to development time and cost.

     The Company  intends to utilize the  extensive  contacts of its  President,
Norman A. Gardner, and its Vice-Chairman,  Edward J. Fishman, in the counterfeit
prevention and detection and gaming industries to effectuate initial sales.

<PAGE>
Manufacturing

     The Company does not have manufacturing facilities.  The Company intends to
subcontract  the  manufacture  of its  technology to third party  manufacturers.
Applications  of the  Company's  technology  are expected to be effected  mainly
through  printing and coating.  The inks are to be custom  manufactured  for the
Company by a third party. Because some of the processes that the Company intends
to use  in  its  applications  are  based  on  relatively  common  manufacturing
techniques,  there appears to be no technical or economic reason for the Company
to invest capital in its own manufacturing facilities at this stage.

     The Company  intends to establish a quality  control  program that includes
laboratory analysis of developed technologies. The Company intends to include as
part of this  quality  control  program the  placement  of a  specially  trained
technician  on  site  at  third  party  production  facilities  to  monitor  the
manufacturing process, when or if warranted.


Regulation

     The  Company  is not  currently  aware  of any  regulations  affecting  its
products;  however,  the  Company's  technology  is dependant  upon an ink based
product.  Therefore,  it is possible that the Company's products will be subject
to environmental regulations in the future.


Patents and Licenses

     The Company  acquired the rights to a pending U.S.  patent  application and
its equivalent international Patent Cooperation Treaty (PCT) application via its
employment  contract with its  President,  Norman A. Gardner.  The United States
patent application was assigned to LaserLock Technologies, Inc. upon filing, and
the  Assignment  has been  recorded at the US Patent and Trademark  Office.  The
Assignment by its terms  conveys the entire right,  title and interest in and to
the invention of the pending patent application (entitled "Counterfeit Detection
System") and all improvements  thereon which may be made,  conceived or acquired
by  Norman  Gardner  during  the  course  of  his  association   with  LaserLock
Technologies, Inc. and for one year thereafter. The PCT application was filed by
the Company as  applicant.  Patent  applications  for the  Company's  technology
(including  improvements in the technology) are intended to be filed in selected
jurisdictions  where commercial usage is foreseen,  including Europe,  Australia
and the Far East. There can be no assurance,  however, that such protection will
be obtained, or that if obtained that they can be maintained once obtained.

     The subject patent application was filed December 10, 1999 and notification
of allowance was received in March,  2002.  The required issue fee has been paid
and the U.S. patent is expected to be granted by  approximately  June, 2002. The
allowed claims define the invention as a process  involving  latent marking that
is excited at plural excitation wavelengths outside of the visible spectrum.

     The  international  PCT  application  requires  entry into the  national or
regional phase by June 10, 2002.

     The LaserLock  technology  according to the allowed patent application is a
process whereby uniquely formulated normally-invisible code markings are applied
to a product and can be activated or revealed by an activation  device which the
company  intends to have  manufactured  and  supplied to users.  The Company has
filed  two new  patent  applications  for two new  methods  of  counterfeit  and
diversion protection in 2001.


<PAGE>
     When a new  product or  process is  developed,  the  developer  may seek to
preserve for itself the  economic  benefit of the product or process by applying
for a patent in each  jurisdiction  in which the product or process is likely to
be exploited. Generally, for a patent to be granted, the product or process must
be new and be inventively  different from what has been  previously  patented or
otherwise known anywhere in the world.  Patents  generally have a duration of 20
years from the date of  application  depending  on the  jurisdiction  concerned,
after which time any person is free to exploit the product or process covered by
a patent.  A person who is the owner of a patent has, within the jurisdiction in
which the  patent  is  granted,  the  exclusive  right to  exclude  others  from
practicing the subject matter defined in the patent claims.

     LaserLock Technologies,  Inc. intends to extend its patent filings to other
countries insofar as reasonably possible in view of the considerable  expense of
foreign patent applications and the increasing level of activity of the company.
Currently,  the Company  believes  that the only foreign  countries for which it
will be filing for  patent  protection  are  Europe,  Australia  and one or more
countries  in the Far East.  The  deadline  for  national  phase  filings on the
subject  matter of the Company's  initial  application  is June 10, 2002,  after
which  foreign  patents will be precluded  due to prior  publication  of the PCT
application, and shortly also due to the grant of the expected U.S. patent.

     The  granting of a patent  does not  prevent a third  party from  seeking a
judicial  determination  that the  patent is  invalid.  Such  challenges  to the
validity of a patent are not uncommon and are occasionally successful. There can
be no  assurance  that a  challenge  will  not be  filed  to one or  more of the
Company's  patents , if granted,  and that, if filed, such challenge(s) will not
be successful.  The granting of a U.S.  patent does not ensure that patents will
be granted in other countries where protection is sought. Standards for granting
patents vary and there is a possibility  that prior art not yet discovered could
arise and could prevent the grant of a foreign  patent and/or cast into question
the validity of any U.S. patent.

     Additionally,  the Company has licensed "Rub and Reveal"  technology  via a
license with NoCopi Technologies, Inc. The Agreement covers the exclusive use of
this patented  technology in gaming,  and the non-exclusive use of this patented
technology elsewhere.


Research and Development

     The  Company  has been  involved  in  research  and  development  since its
inception, and intends to continue its research and development activities.  The
Company plans to seek to expand its technology into new areas of  implementation
and to develop unique customer applications.

     For the period from  inception  at November  10, 1999 to December 31, 2000,
the  Company  spent  $60,718 on  research  and  development.  For the year ended
December  31,  2001,  the Company  spent a total of  $173,412  on  research  and
development  - all of  which  was  spent on the  enhancement  of its ink and its
activation  product,   and  the  application  of  its  Rub  and  Reveal  license
technology.  The  Company  plans to spend a similar  amount in R&D over the 2002
fiscal year.

     The Company's research and development is done in Glenn Mills, Pennsylvania
at the  facilities  of its research and  development  consultant.  The Company's
quality  control  program is run in Saranac,  New York at the  facilities of its
technical  consultant.  The consulting fees paid cover all costs associated with
facility and equipment usage.

<PAGE>
Product Development

     To date, the Company has only made very limited sales of its products.  The
Company has done independent  testing and commercial  trials have been completed
at several manufacturers and have been successful from a production perspective.

     The Company has also developed  what it believes to be a proprietary  trade
secret  enabling it to offer its  clients the ability to change the  combination
lock on the system to prevent any breach of security by counterfeiters.  This is
accomplished by changing the reaction between the Company's uniquely  formulated
code markings in its  products,  and the laser which reacts with it. The changes
are made via direct  interaction  by the Company  with the client to make slight
modifications  to the Company's  products on an personalized  level.  Management
believes that the Company is the only company  offering such a protection to its
product line.


Description of the Industry

     Recent developments in copying and printing  technologies have made it ever
easier to  counterfeit  a wide  variety  of  documents.  Lottery  tickets,  gift
certificates,  event and transportation tickets,  travelers' checks and the like
are all susceptible to counterfeiting, and the Company believes that losses from
such counterfeiting have increased substantially with improvements in technology
("Latest Use for One's DNA - Thwarting Counterfeiters", San Francisco Chronicle,
page C1,  September  11,  2000) .  Counterfeiting  has  long  caused  losses  to
manufacturers of brand name products, and the Company believes these losses have
also increased as the counterfeiting of labeling and packaging has become easier
("China Leads in Counterfeiting", Knight Ridder News Service, December, 2000).

     The Company's document authentication technologies are useful to businesses
desiring to authenticate a wide variety of printed documents and products. These
include a technology  with the ability to print  invisibly on certain areas of a
document which can be activated or revealed by use of a special laser light when
authentication  is required.  This is intended to be different  than pen systems
currently in the  marketplace  because it will not result in a permanent mark on
the merchandise, which generally leads to the disposal of the merchandise or its
sale as a "second" rather than best quality goods.

     Other  possible  variations of the Company's  technology  involve  multiple
color  responses  from a common  laser,  visible  marks of one  color  that turn
another  color with the laser or visible  and  invisible  marks that turn into a
multicolored  image.  These  technologies  provide  users  with the  ability  to
authenticate  documents and detect counterfeit  documents.  Applications include
the  authentication  of  documents  having  intrinsic  value,  such  as  checks,
travelers' checks,  gift certificates and event tickets,  and the authentication
of product labeling and packaging. When applied to product labels and packaging,
such  technologies can be used to detect  counterfeit  products whose labels and
packaging would not contain the  authenticating  marks invisibly  printed on the
packaging  or labels of the  legitimate  product,  as well as to combat  product
diversion   (i.e.,  the  sale  of  legitimate   products  through   unauthorized
distribution channels or in unauthorized markets).

     The Company  believes  that the  technology  could also be used in a manner
permitting manufacturers and distributors to track the movement of products from
production  to ultimate  consumption  when  coupled  with  proprietary  software
(Seminar  -  "Counterfeiting   Protection  Japan  2000",  October  15-19,  2000,
Yokohama,  Japan;  "Using Covert Codes",  Pharmaceutical  and Medical  Packaging
News, October 1999).

     The Company has focused initially on the widespread problem of fraud in the
gaming  industry.  Via initial  agreements which the Company has with some large
suppliers to the gaming  industry,  the  Company's  products will be used in ink
which is then incorporated  into dice, chips, and playing cards.  These products
can  be  viewed  with  the  laser  to  reveal  the  authenticity  of  the  item.
Additionally,  the Company has reached  agreement to have its technology used on
slot tickets in cashless gaming slot machines.  In this scenario,  the Company's
Laser Lock or Rub and Reveal  technologies  or a  combination  thereof  would be
utilized to reveal the  authenticity of a slot ticket prior to its redemption at
the cashier.


<PAGE>
Competition

     In the area of document and product  authentication and serialization,  the
Company  is  aware  of other  competing  technologies,  both  covert  and  overt
surface-marking techniques, requiring decoding elements or analytical methods to
reveal  the  relevant  information.  These  technologies  are  offered  by other
companies  for the same  anti-counterfeiting  and  anti-diversion  purposes  the
Company markets its covert technologies. These include, among others, biological
DNA  codes,  microtaggants,  thermochronic,  UV and  infrared  inks,  as well as
encryption,  2D symbology and laser engraving.  The Company is aware of at least
twenty companies which will be competing with it in these markets.  However, the
Company believes that it has proprietary technologies which provide a unique and
cost-effective solution to the problem of counterfeiting and gray marketing. The
Company is aware of a limited number of competitors which are attempting similar
approaches to the same problems which the Company's products address.

     Other indirect  competitors are marketing  products  utilizing the hologram
and copy void  technologies.  The  hologram,  which has been  incorporated  into
credit  cards to foil  counterfeiting,  is  considerably  more  costly  than the
Company's technology. Copy void is a security device which has been developed to
indicate whether a document has been photocopied.

     The Company  has  limited  resources,  and there can be no  assurance  that
businesses with greater resources than the Company will not enter the market and
compete with the Company.


Employees

     The Company currently has a five year employment contract in place with its
President,  Norman A. Gardner, which commenced October 1, 2001. Pursuant to this
agreement, Mr. Gardner's compensation is $10,000 per month, and will increase to
$12,500 per month on commencing October 1, 2003. Pursuant to the agreement,  Mr.
Gardner has options to purchase up to 500,000  shares of the Company's  stock at
prices ranging from $0.17 to $0.35.  In addition to base salary the Company will
from time to time pay Mr.  Gardner  incentive  bonuses and  reasonable  expenses
incurred in connection with the  performance of his duties.  Throughout the term
of this  employment  agreement,  the Company  will  furnish Mr.  Gardner with an
automobile and automobile expenses and will reimburse travel on Company business
as well as reimburse  employees for the expenses incurred in connection with the
Company's operation.

     Additionally,  pursuant to its acquisition of the assets E.D.S.  Marketing,
Inc., the Company has entered into employment  agreements with Edward J. Fishman
- the Company's  Vice Chairman of the Board of Directors,  Steven W. Meistrich -
the Company's  Executive  Vice  President,  and Doug Wise - the  Company's  Vice
President of Sales and Marketing.  Pursuant to these contracts, the Company pays
certain overhead expenses and limited guaranteed  salaries (draws on commission)
which total in the aggregate, $20,000 per month.

     All full time  Employees  shall be  entitled to health,  life,  accident or
disability  insurance  plans,  any profit sharing or retirement  plans and stock
option plans the Company makes  available.  The Company has one other  employee,
its book-keeper, who is a part time employee.


Outside Sales Agents / Independent Contractors

     The Company has  consulting  contracts  with nine outside  sales agents and
independent contractors who are being compensated via cash, stock options, stock
grants,  and for the sales agents,  commissions on sales to various customers of
the Company. The Company's outside sales agents and independent contractors will
also receive payment for certain expenses.

<PAGE>
RISK FACTORS


                 STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     The  Private  Securities  Litigation  Reform  Act of 1995  provides a "safe
harbor" for forward-looking statements. The Company desires to take advantage of
certain "Safe Harbor" provisions of the Reform Act and is including this special
note to enable the  Company to do so.  This  document  contains  forward-looking
statements  that reflect the views of the Company's  management  with respect to
future events and financial  performance.  These forward-looking  statements are
subject to  uncertainties  and other factors that could cause actual  results to
differ  materially from such statements.  These  uncertainties and other factors
include,  but  are  not  limited  to,  the  words   "anticipates",   "believes",
"estimates",  "expects", "plans", "projects", "targets", and similar expressions
that  identify  forward-looking  statements.  Readers are cautioned not to place
undue reliance on these  forward-looking  statements  which speak only as of the
date the statement was made.  The Company  undertakes no obligation to update or
revise any forward-looking  statements,  whether as a result of new information,
future events or otherwise.


Absence of Trading Market

     There is no trading  market for the Company's  Common Stock and there is no
assurance  that such a market will  develop  after this  offering,  or if such a
market  develops,  that  it will  be  maintained.  Holders  of the  Shares  may,
therefore,  have  difficulty  in selling their stock should they desire to do so
and should be able to withstand the risk of holding their Shares indefinitely.


Penny Stock Rules.

     The Company  believes  its Common  Stock will be subject to the Penny Stock
Rules  promulgated  under the  Securities  Exchange Act of 1934 due to its price
being less than $5.00 per share. If the Company were to meet the requirements to
exempt its securities from application of the Penny Stock Rules, there can be no
assurance  that such price will be maintained if a market  develops and thus the
Penny Stock Rules may come into effect.

     These  rules   regulate   broker-dealer   practices  in   connection   with
transactions  in "penny  stocks." Penny stocks  generally are equity  securities
with a price of less than $5.00  (other than  securities  registered  on certain
national  securities  exchanges or quoted on the NASDAQ  system,  provided  that
current  price and  volume  information  with  respect to  transactions  in such
securities is provided by the exchange or system). The Penny Stock Rules require
a  broker-dealer,  prior to a transaction in a penny stock not otherwise  exempt
from the rules, to deliver a standardized  risk disclosure  document prepared by
the Commission that provides  information  about penny stocks and the nature and
level of risks in the penny stock market.  The  broker-dealer  also must provide
the customer  with  current bid and offer  quotations  for the penny stock,  the
compensation of the  broker-dealer  and its salesperson in the transaction,  and
monthly account  statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations,  and the broker dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the  transaction and must be given to the customer in
writing before or with the customer's confirmation.

     In addition, the Penny Stock Rules require that prior to a transaction in a
penny stock not otherwise exempt from such rules, the broker-dealer  must make a
special written  determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's  written agreement to the transaction.
These  disclosure  requirements  may have the  effect of  reducing  the level of
trading activity in the secondary market for the Company's securities. While the
Company's  Common Stock remains subject to the Penny Stock Rules,  investors may
find it more difficult to sell such securities.


Need for  Subsequent  Funding;  No Assurance of Future Offering

     In order to finance  expansion  of our business  operations,  to attempt to
patent our  technologies,  and to implement our business  plans,  we may need to
raise more  capital.  Our  ability  to  continue  in  business  and  effectively
implement its plans may depend upon its ability to raise additional funds. There
is no assurance  that  additional  funding,  if required,  will be obtainable in
amounts  or on  terms  favorable  or  acceptable  to the  Company.  The  capital
resources  required to develop  each new product  are  significant.  The Company
believes combined cash on hand and cash generated from future  operations,  will
provide the Company with the financing required to conduct its business at least
through the year 2002, but there is no guarantee that the Company is correct, or
that it will be able to raise  additional  capital,  if  required.  The  Company
completed a Private Placement raising $432,000 in March, 2002.

<PAGE>
Lack of Dividends

     We have not paid any cash  dividends  since our inception and do not intend
to pay dividends in the foreseeable future. We intend to retain all earnings, if
any, for use in our business operations.


Risks Associated With Our Being A New Business.

     Our  operations  are subject to all of the risks inherent in a new business
enterprise.  We currently have no revenue, no operating history,  and no salable
product. We are subject to the same types of risks that many new business face -
like  shortages  of cash,  under-capitalization,  and  expenses  of new  product
development.  We do not  anticipate  positive cash flow on a monthly basis until
the end of 2002 at the earliest, and even then we cannot give assurances that we
will be operating at  break-even  levels at that time or in the future.  Various
problems,  expenses,  complications  and delays may be encountered in connection
with our  development  both in terms of our  products and our  business.  Future
growth  beyond  present  capacity  will  require  significant  expenditures  for
expansion,  marketing,  research and development.  These expenses must either be
paid out of the  proceeds of this or future  offerings  or out of our  generated
revenues and profits,  if any.  The  availability  of funds from either of these
sources cannot be assured.


General Risks Of The Counterfeit Prevention Industry

     The  industry  in which we intend to compete is subject to the  traditional
risks faced by any business of adverse changes in general  economic  conditions,
the  availability  and expense of liability  insurance,  and adverse  changes in
local markets.  However, we will also be subject to industry specific risks such
as  counterfeiters  learning how to  circumvent  new and existing  technologies;
evolving consumer  preference and health-related  concerns;  federal,  state and
local chemical processing controls;  consumer product liability claims; risks of
product tampering.


Competition In Our Industry

     In  the  area  of  document   security  and  product   authentication   and
serialization,  we are aware of other companies and other similar  technologies,
both  covert  and overt  surface  marking  techniques,  which  require  decoding
elements  or  analytical  methods  to reveal  the  relevant  information.  These
technologies are offered by other companies for the same anti-counterfeiting and
anti-diversion purposes to which we plan to market our technologies.

     Other  competitors are marketing  products  utilizing the hologram and copy
void technologies.  The hologram,  which has been incorporated into credit cards
to foil  counterfeiting,  is considerably more costly than our technology.  Copy
void is a  security  device  which  has been  developed  to  indicate  whether a
document has been photocopied.

     It is anticipated that a significant  number of companies of varying sizes,
which may ultimately include divisions or subsidiaries of larger companies, will
be vying for the same  market  segment as we are. A number of these  competitors
may have substantially  greater financial and other resources available to them.
There can be no  assurance  that we can  compete  successfully  with such  other
companies.  Competitive pressures or other factors could cause us to lose market
share if it develops at all, or result in significant  price erosion,  either of
which would have a material adverse effect on our results of operations.


Governmental Regulation Of Our Fields

     Our operations may be subject to varying degrees of federal, state or local
laws and  regulations.  Operations  such as those we  intend to  conduct  may be
subject  to  federal,  state  and local  laws and  regulations  controlling  the
development of technologies related to privacy protection,  to the protection of
the  environment  from  materials  that we may  use in our  inks,  and  advanced
algorithm  formulations or encryption tactics that we may develop.  Any of these
regulations may have a materially adverse effect upon our operations.


Technology Staffing

     We anticipate that staffing will represent one of our largest expenses.  We
will compete with other copy security prevention  technologies in attracting and
retaining  qualified or skilled  personnel.  A shortage of trained  personnel or
general economic  inflationary  pressures may require us to enhance our wage and
benefits  package in order to  compete  with  other  employers.  There can be no
assurance that our labor costs will be  sustainable.  Our failure to attract and
retain  qualified  employees to control our labor costs or to match increases in
our labor  expenses  with  corresponding  increases  in  revenues  could  have a
material adverse effect on the business.

<PAGE>
Rapidly Changing Market.

     We believe  that the  market for our  products  is  rapidly  changing  with
evolving  industry  standards.  Our future  success will depend in part upon our
ability to  introduce  new  products  and  features  to meet  changing  customer
requirements and emerging industry standards.  There can be no assurance that we
will  successfully  complete  the  development  of future  products  or that our
current or future products will achieve market acceptance.  Any delay or failure
of these  products  to achieve  market  acceptance  would  adversely  affect our
business.  In addition,  there can be no assurance that products or technologies
developed by others will not render our products or technologies non-competitive
or obsolete.


Patents; Intellectual Property

     Pursuant to an employment agreement with our president,  Norman A. Gardner,
we have  received  all  rights  in a pending  U.S.  patent  application  and any
improvements,  and we have  additionally  filed two patent  applications  in the
United  States.  The initial  application  has been allowed and a  corresponding
international  (PCT) application has been found to meet the PCT requirements for
novelty, inventive step and industrial applicability.  There can be no assurance
that any patent,  or any other  patents  which we may obtain or apply for in the
future,  will be granted or will be granted with claims of  commercially  useful
breadth, or will be safe from challenge.  Until such time as a patent is issued,
we will not have the right to bring a patent infringement action against a third
party who makes a product or uses a process identical or similar to a product or
process that we employ. Even if patents were granted, there is no assurance that
such patents  would not be attacked by third parties or that, if any such attack
were made, it would not be successful.  The costs involved in defending a patent
or prosecuting a patent infringement action could be substantial.  At present we
do not have the resources to pursue or defend such an action.

     We plan to rely on confidentiality, non-compete and licensing agreements to
establish  and  protect  our rights in any  proprietary  technologies.  While we
intend to actively  protect these rights,  our  technologies  could  possibly be
compromised  through  reverse  engineering  or  other  means.  There  can  be no
assurance  that we will be able to protect  the basis of our  technologies  from
discovery by unauthorized third parties,  thus adversely  affecting our customer
and licensee relationships.


Prior Relationships Of Our President.

     Norman  A.  Gardner,  our  President,  founded  Nocopi  Technologies,  Inc.
('NoCopi'),  and  served as its  President  and  Chief  Executive  Officer  from
October,  1985,  until  October,  1997,  and as its  Chairman of the Board until
March,   1998.   Currently,   Mr.  Gardner  has  no  relationship   with  Nocopi
Technologies, Inc.

     We view Nocopi as one of our  competitors in our marketplace in that the we
plan to develop and sell  technology to prospects and clients that we believe is
completely different from, but competitive with, that sold by Nocopi to the same
or similar  prospects and clients.  The Agreement  with Nocopi does not impose a
post-termination  restrictive  covenant upon Mr.  Gardner,  and Mr.  Gardner has
assured us that he has not and will not, divulge, furnish, or make accessible to
anyone any confidences or secrets of Nocopi in violation of the Agreement.


<PAGE>
Rule 144 Shares

     A majority of the shares of Common Stock presently  outstanding  (9,100,000
shares,  or 61.15%) were issued on the date of the company's  inception or later
and are considered "restricted securities".  These shares may be publicly resold
in  compliance  with Rule 144  adopted  under  the  Securities  Act of 1933,  as
amended.  Rule 144 provides,  in part, that after holding restricted  securities
for a period of one (1) year  non-affiliated  shareholders  (affiliates  include
officers,  directors,  and ten percent or greater shareholders) may sell, during
any three months,  in a brokerage  transaction,  or to a market maker, an amount
equal to the greater of one percent  (1%) of the  Company's  outstanding  Common
Stock, or the average weekly trading volume,  if any, in the Common Stock during
four  calendar  weeks  preceding the filing of a Form 144 relating to such sale.
After two (2) years  non-affiliated  shareholders (who have been  non-affiliates
for at  least  three  months)  may sell an  unlimited  amount  of the  Company's
outstanding  Common Stock. Rule 144 also provides that after holding  restricted
securities  for a period of two (2) years,  affiliates  of the  company may sell
every third month in a brokerage  transaction,  or to a market maker,  an amount
equal to the greater of one percent  (1%) of the  Company's  outstanding  Common
Stock, or the average weekly trading volume,  if any, in the Common Stock during
four  calendar  weeks  preceding the filing of a Form 144 relating to such sale.
Such sales, if made under certain circumstances,  would depress the market price
and render difficult the sale of the Company's  securities  purchased hereunder.
Certain of the outstanding shares were be eligible for sale pursuant to Rule 144
as of November, 2000.


Dependence on Key Personnel

     We will be dependent on our current management for the foreseeable  future.
The loss of the  services of any member of these  persons  would have a material
adverse effect on our operations and prospects. Our success will be dependent to
a substantial  degree on our Chief  Executive  Officer,  Norman A. Gardner,  our
Vice-Chairman,  Ed Fishman, and other key management personnel.  Messrs. Gardner
and Fishman's continued involvement is particularly critical to us. In the event
Mr. Gardner or Mr. Fishman were  unavailable,  it would have a material  adverse
effect on our operations.  At this time, we have employment  agreements with Mr.
Norman A. Gardner,  our Chief Executive  Officer and President,  and Ed Fishman,
our Vice-Chairman,  Steven Meistrich,  our Executive Vice President,  Doug Wise,
our Senior Vice President of Sales and  Marketing,  and Ed Bell, our Director of
Research and Development.  We have only obtained "key man" insurance policies on
Mr.  Gardner.  The expansion of our business  will be largely  contingent on our
ability to attract and retain a highly  qualified  management  team. There is no
assurance  that we can find suitable  management  personnel or that we will have
the financial resources to attract or retain such people if found.


Indemnification

     The Company's  By-Laws  include  provisions  that indemnify any director or
officer  made a party  to any  action,  suit or  proceeding  for  negligence  or
misconduct in the performance of his duties made in good faith, by reason of the
fact that s/he is or was a director,  officer or employee of the Company against
reasonable  expense  including legal fees,  actually or necessarily  incurred by
him/her in connection with the defense of such action, suit or proceedings or in
connection with any appeal therein.

Dependence Upon Third Parties.

     We  intend  to  pursue  a  policy  of  licensing   our   technologies   for
incorporation  into products made and distributed by third parties.  Although we
plan to negotiate  guaranteed  minimum royalties in our licensing  arrangements,
our  revenues  will  be   substantially   dependent  on  the  sale  of  products
incorporating our technologies by third parties.  We intend to provide technical
marketing support to our licensees.  However,  the successful  marketing of such
products and, therefore, our revenues and operating income, depend substantially
on the marketing efforts of such third parties,  over which we will have little,
if any, control.


Technical Obsolescence.

     The value of our  technology  and any products  derived from our technology
could be  substantially  reduced as new or  modified  techniques  for  combating
document and product  counterfeiting  and product  diversion  are  developed and
become  widely   accepted.   We  can't   guarantee  that  future   technological
developments will not result in the obsolescence of our technologies.


Dependence Upon Marketing.

     While we believe that our products  hold  unsatisfied  market  demand,  our
ability to  generate  sales will  depend  upon  developing  and  implementing  a
marketing strategy.  There can be no assurance that we can successfully develop,
promote and maintain an active market for our products.

<PAGE>
Management Of Growth.

     If we are successful in increasing demand for our products,  of which there
can be no assurance,  our growth could create certain  additional  risks.  Rapid
growth can be expected to place a substantial burden on our management resources
and financial controls. Our ability to manage growth effectively will require us
to continue to implement and refine our  operational,  financial and information
management systems and to train, motivate and manage our employees.  Our ability
to attract and retain qualified  personnel will have a significant effect on our
ability to establish and maintain our position in our various  markets,  and our
failure to manage our growth  effectively could have material adverse effects on
our results of operations.


Risks Associated With  The Company's Ability To Continue As A Going Concern.

     The Company has no  operating  history,  limited  sales,  and has  incurred
operating losses since inception and requires additional capital to continue its
operations  and to  implement  its  business  plans.  The  Company's  certifying
accountants  have issued a going concern  qualification  in their report for the
year ended  December  31,  2001.  Although  the Company  intends to raise money,
implement sales, and become profitable,  if the Company fails to achieve any one
of these goals,  then it is unlikely  that the Company will be  successful,  and
very likely that the Company will become  insolvent or otherwise forced to close
its doors. If this occurs, it will have a material adverse affect on the Company
and any results of operations.



Lack Of Diversification.

     The  Company's  proposed  operations,  even  if  successful,  will  in  all
likelihood result in the Company's  engaging in a business which is concentrated
in only one industry.  Consequently, the Company's activities will be limited to
the  anti-counterfeiting  industry.  The  Company's  inability to diversify  its
activities  into  a  number  of  areas  may  subject  the  Company  to  economic
fluctuations within a particular  business or industry and, therefore,  increase
the risks associated with the Company's operations.







<PAGE>

Item 2.  DESCRIPTION OF PROPERTY

     The Company's  east coast offices are presently  located in 1000 sq. ft. of
office space in the home of its president, Norman A. Gardner, at 837 Lindy Lane,
Bala Cynwyd, PA 19004. The Company pays no rent for the use of this space.

     The Company's  west coast offices are presently  located in 1725 sq. ft. of
office space at 2659  Townsgate  Rd., Suite 113,  Westlake  Village,  California
91361 through  February,  2003. The Company is paying  approximately  $3,000 per
month for the rent of this space.

     The Company has been assigned one patent,  and the rights to two additional
patent applications  submitted by its President,  Norman A. Gardner. The Company
believes that the granting of its patent  application will enhance the Company's
position in the market place, but that even if not granted,  the Company will be
able to compete effectively in the market place by utilizing non-competition and
confidentiality  terms in contracts it will enter into with any  employees,  and
non-disclosure and non-analysis agreements given to every potential supplier and
customer of the Company.

Item 3.  LEGAL PROCEEDINGS

     The  are no  material  legal  proceedings  pending  or,  to  the  Company's
knowledge, threatened against the Company.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     The Company  submitted no matters to a vote of its security  holders during
its fiscal year ended December 31, 2001.

<PAGE>

Part II.


Item  4.     RECENT  SALES  OF  UNREGISTERED  SECURITIES

     From  inception  in November  of 1999  through  December,  1999 the Company
issued  7,600,000 common shares to its founder,  Norman Gardner;  several people
who assisted Mr.  Gardner in the  formation of the Company and its  technology -
Michael J. Prevot, a director,  and George Hess and his children,  Eric J. Hess,
Mark A. Hess, and Brian K. Hess; its attorneys,  Jay Hait and Tom Schneider, and
several business  associates and friends of Mr. Gardner's,  who are not involved
in the day to day business  operations of the Company in exchange for assets and
services valued at $99,660.

     From  April,  2000,  to  September  2000,  the  Company  issued  a total of
5,449,999  shares  of  its  common  stock  at  $0.17  per  share,  for  a  total
consideration  of  $926,500,  in an  offering  done  pursuant  to  Rule  504  as
promulgated  under Regulation D of the Securities Act of 1933, and registered in
the  State  of  New  Jersey.   No  commission  was  paid  on  these  sales.  The
determination as to whether or not the shares are restricted or free trading was
made based upon whether the purchaser (a)was an accredited investor, as based on
the results of a questionnaire,  and (b)lived in a state in which the securities
were  registered  with a  qualitative  review,  or (c) lived in a state with the
appropriate  applicable  exemption  after the shares had been  registered with a
qualitative review in a different state.

     From July,  2000, to September,  2000 the Company  issued 240,000 shares of
Common Stock to a total of nine non-employee consultants, for services valued at
$40,800,  pursuant to Rule 701 promulgated  under Section 3(b) of the Securities
Act of 1933. The Company relied on the following facts in determining  that Rule
701 was available:  (a) the shares were issued  pursuant to a written  agreement
between the consultants and the Company,  (b) the consultants  rendered bonafide
services  not in  connection  with the offer or sale of  securities  in  capital
raising transactions,  (c) the shares were issued pursuant to a written contract
relating to the issuance of shares paid as compensation  for services  rendered,
and (d) the amount of shares  offered  and sold in  reliance on Rule 701 did not
exceed  $500,000 and all securities sold in the last 12 months have not exceeded
$5,000,000.

     In July of 2000 the Company issued options to purchase  1,135,000 shares of
the Company's  common stock to sales  employees and  consultants.  In October of
2001, the Company entered into a new employment contract with its President, and
pursuant to the new employment contract it has granted him options to purchase a
total 500,000  shares of it's common stock,  250,000  shares at $0.17 per share,
and 250,000 shares at $0.35 per share.

     In March of 2001, pursuant to Rule 506 as promulgated under Regulation D of
the  Securities  Act of 1933,  the  Company  sold an option  for  $15,000 to PFK
Acquisition Group II, LLC, a California  Limited Liability  Corporation,  and an
accredited  investor,  which gives it the right to purchase  1,500,000 shares of
the  Company's  common stock at a price of $0.16 per share by May 22, 2001.  PFK
paid to the  Company  $85,000 of the option  execution  price,  and the  Company
extended  the  option  until June 22,  2001,  by which  date PFK  exercised  the
options.

     In March of 2002, pursuant to Rule 506 as promulgated under Regulation D of
the Securities Act of 1933, the Company sold 1,350,000  common shares at a price
of $0.32 per share for a total of $432,000.  The shares were sold to  accredited
investors who were personal  acquaintances  of the Company's  President,  Norman
Gardner, and its Vice-Chairman, Edward Fishman.



<PAGE>
Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

(a)  The Company's Common Stock is quoted on the bulletin board under the symbol
     "LLTI"  The  following  table  sets  forth  the high and low bid  prices as
     reported by the National  Association of Securities  Dealers (NASD) for the
     periods ending December 31, 2001.  These  quotations  reflect  inter-dealer
     prices,  without  retail  mark-up,  mark-down or  commissions,  and may not
     reflect actual  transactions.  As of April 1, 2002 there were approximately
     125 shareholders of Common Stock.


                                             High              Low
                                            -----              ----
                  2001
                  -----
                  First Quarter             0.55                0.25

                  Second Quarter            0.50                0.30

                  Third Quarter             0.50                0.35

                  Fourth Quarter            0.60                0.32



(b)  As of  December  31,  2002,  there were  approximately  100  holders of the
     Company's Common Stock.

(c)  No dividends were paid during the fiscal year ending December 31, 2001.






<PAGE>
Item 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS OR PLAN OF OPERATION

     The following  discussion and analysis  should be read in conjunction  with
LaserLock's  financial  statements and the Notes thereto contained  elsewhere in
this   registration    statement.    This   registration    statement   contains
forward-looking  statements  that involve risks and  uncertainties.  LaserLock's
actual results may differ significantly from the result discussed in the forward
looking statements.  Factors that might cause such a difference are discussed in
"Risk Factors."

Overview

     In March 2002, the Company's original patent application for its technology
for  laser  activated  ink  technologies  which  may  be  used  as  part  of  an
anti-counterfeiting  protection process was granted. In addition the Company has
applied for two additional patents which offer alternative solutions to stopping
counterfeiting  and  diversion.  We believe  that our laser and ink  combination
products are ready for commercial  production and we have been soliciting orders
for our products.  We have entered into licensing  agreements with the Bud Jones
Company,  Bourgogne et Grasset,  and Slot Tickets to utilize our  technology the
gaming  industry.  We anticipate  that these  contracts  will generate our first
operating revenues by the third quarter of 2002.

     From  its  inception  in 1999,  LaserLock  has been  engaged  primarily  in
activities  devoted  towards  obtaining  the  patent  rights to the  technology,
general business operations, research and development,  negotiating licenses and
agreements   with   potential   customers,   creating  a  sales  and  management
infrastructure by hiring consultants and independent contractors , and obtaining
financing.  The  Company  intends  to spend  between  $50,000  to  $100,000  for
consultant  services  during  the 2002  fiscal  year.  There  have been  limited
revenues from sales to date.

     The Company is a technology licensing Company which licenses its technology
to both third parties who incorporate it into their products for resale to their
customers,  and also directly to end users who  incorporate  the technology into
their products at their manufacturing facilities.  The Company receives per unit
royalties on volume  usage of its  technology.  The Company  intends to require,
whenever  possible,  minimum  annual  royalties  to enter into  these  licensing
agreements.

     The Company  believes  that its current  office  space,  which  consists of
approximately  1,000  square feet located in the home of its  President,  Norman
Gardner,  and for which it pays no rent,  and its 1,725 feet of office  space at
offices in Los  Angeles at 2659  Townsgate  Rd.,  Suite 113,  Westlake  Village,
California 91361 will be sufficient to house its operations for the next year.

     Results of Operations  for the year ended  December 31, 2001 as compared to
the year ended December 31, 2000

     It  is  difficult  for  LaserLock  to  forecast  its  revenue  or  earnings
accurately.  We  believe  that  period-to-period  comparisons  of our  operating
results may not be meaningful.  We believe that we will start generating  larger
amounts  of  revenue in the  coming  fiscal  year due to the sales and  products
infrastructure  which we have  been  attempting  to create  over the past  year,
including our asset purchase of EDS Marketing, Inc.

     As a result of our  extremely  limited  operating  history,  we do not have
historical  financial data for a significant  number of periods on which to base
planned operating  expenses.  Our expense levels are based upon our expectations
concerning future revenue.  Thus, quarterly revenue and results of operation are
difficult to project.

     For the year ending  December 31, 2001, the Company had Sales and Royalties
revenues of $11,803,  as opposed to Sales and  Royalties  revenues of $0 for the
year ending  December 31, 2000.  The increase in sales and revenues is do to the
Company's   consummation  and  initial  deliverance  of  materials  pursuant  to
contracts the Company has entered into or intends to enter into.

<PAGE>
     The Company's  general and  administrative  costs aggregated  approximately
$422,700  for the year ended  December  31, 2001 as compared to $119,767 for the
year ended December 31, 2000  representing an increase of $302,933.  Included in
general and administrative  expense is a $310,000 charge for the excess purchase
price of the acquired  assets of EDS  Marketing,  Inc. over their after tax fair
market  value.  These  assets  were  acquired  in a tax-free  transaction.  As a
consequence of this transaction, an income tax benefit in the amount of $310,000
was recorded  representing a reduction in the valuation  allowance  necessary to
off-set deferred tax assets.  The Company's sales and marketing costs aggregated
approximately  $625,641  for the year ended  December  31,  2001 as  compared to
$149,356  for the year ended  December  31,  2000  representing  an  increase of
$476,285.  This increase represents  increased spending related to the Company's
purchase of the assets EDS Marketing,  Inc.'s.  Specifically,  the Company began
marketing its products in earnest this year by attending  trade shows,  creating
promotional  materials,  adding  sales  staff,  and  building  a web  site.  The
Company's research and development costs aggregated  approximately  $173,412 for
the year ended  December  31,  2001 as  compared  to $60,718  for the year ended
December 31, 2000 representing an increase of $112,694. This increase represents
increased  spending related to the full time presence of the Company's  research
team which has resulted in the application for two additional patents during the
year. Finally, the Company's legal and accounting costs aggregated approximately
$146,845  for the year ended  December  31,  2001 as compared to $36,935 for the
year ended December 31, 2000 representing an increase of $109,910. This increase
represents the increased legal costs the Company incurred in its purchase of the
assets EDS Marketing,  Inc, its pursuit of patents,  and its license acquisition
from Nocopi Technologies, Inc.


Liquidity and Capital Resources

     The Company  decreased its cash balance by $ 387,819 from a cash balance at
December 31, 2000 of $656,803 to $268,984 at December 31, 2001.  Working capital
at December  31, 2001 is positive at $275,473.  For the year ended  December 31,
2001 working capital was provided by the decrease in cash and cash equivalents.

     LaserLock  has  incurred  negative  cash  flows  from  operation  since its
inception. The Company has begun to solicit business, and expects to continue to
expend sums to market and sell its products.

     Our future capital  requirements  and the adequacy of available  funds will
depend on numerous factors,  including the successful  commercialization  of our
existing products, cost of filing, prosecuting,  defending and enforcing current
and any future patent claims and other intellectual  property rights,  competing
technological  and  market  developments,   and  the  development  of  strategic
alliances  for the  development  and  marketing  of our  products.  In the event
LaserLock's plans change or its assumptions  change or prove to be inaccurate or
the funds  available  prove to be insufficient to fund operations at the planned
level (due to further unanticipated  expenses,  delays,  problems or otherwise),
LaserLock  could be required to obtain  additional  funds through equity or debt
financing,  strategic  alliances with corporate  partners and others, or through
other  sources  in order to bring its  products  through  to  commercialization.
LaserLock does not have any committed sources of additional financing, and there
can be no assurance that additional funding, if necessary,  will be available on
acceptable  terms,  if at all. If adequate  funds are not  available,  we may be
required to further  delay,  scale-back,  or  eliminate  certain  aspects of our
operations or attempt to obtain funds through  arrangements  with  collaborative
partners or others that may  require us to  relinquish  rights to certain of our
technologies, product candidates, products, or potential markets.

     Specifically,  the Company may have to delay its anticipated  marketing and
delivery dates, or scale back its third party  production  capabilities if it is
unable to consummate  sales, or to eliminate  certain areas of further  research
and  development.  If adequate  funds are not available,  LaserLock's  business,
financial condition,  and results of operations will be materially and adversely
affected.


<PAGE>
     The actual research and development and related activities of LaserLock may
vary significantly  from current plans depending on numerous factors,  including
changes in the costs of such activities from current  estimates,  the results of
LaserLock's research and development programs,  the results of clinical studies,
the timing of regulatory submissions,  technological advances, determinations as
to commercial  potential  and the status of  competitive  products.  The Company
expects  to expend  $100,000  on its  research  and  development  program in the
upcoming year and the Company's  research and development  plans to perform over
the next year includes the  application of its product to additional  materials,
as well as improving its existing  products in conjunction with client feedback.
The focus and direction of  LaserLock's  operations  will also be dependent upon
the establishment of collaborative  arrangements with other companies, and other
factors.

     The Company has no plans to change the number of employees  or  independent
contractors  it employs  at this  time,  and plans to  continue  to utilize  its
current employees and contractors for at least the duration of 2002. The Company
intends to third party manufacture all of its products during 2002, and does not
believe that it will be making major plant and equipment  purchases  during this
year.

     Until  required for  operations,  LaserLock's  policy is to invest its cash
reserves in bank deposits,  certificates of deposit, commercial paper, corporate
notes,   U.S.   government   instruments  or  other   investment-grade   quality
instruments.

     There can be no assurance that LaserLock will be able to commercialize  its
technologies,  or that  profitability  will ever be achieved.  LaserLock expects
that its operating results will fluctuate  significantly from quarter to quarter
in the future and will depend on a number of factors,  most of which are outside
LaserLock's control.


<PAGE>
ITEM 7. FINANCIAL STATEMENTS

The financial statements are attached hereto at page 26.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     The  Company  has  not  had  any  disagreements  with  its  accountants  on
accounting or financial disclosure.



Part III.

ITEM 9.  DIRECTORS,   EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS  OF
         REGISTRANT

     The Board of  Directors  of the Company is  comprised  of only one class of
director.  Each director is elected to hold office until the next annual meeting
of shareholders and until his successor has been elected and qualified. Officers
are elected  annually by the Board of Directors and hold office until successors
are duly elected and qualified. The following is a brief account of the business
experience of each director and executive officer of the Company.

     The position(s)  held by each Officer and Director of the Company are shown
on the following table. Directors Norman Gardner and Michael Prevot were elected
in November,  1999, and Directors Ed Fishman, Steven Meistrich,  and Joel Pinsky
were elected  during 2001.  All  Directors  will serve for one year or until the
next annual  meeting of the  Company's  Shareholders  and until a  successor  is
elected and has qualified.


Name               Age        Position
Norman A. Gardner  59         CEO,  and Chairman of the Board of Directors
Ed Fishman         58         Vice Chairman of the Board of Directors
Steven Meistrich   43         Executive Vice President and a Director
Ed Bell            53         Director of Research and Development
Joel A. Pinsky     65         Secretary, Treasurer, and a Director
Michael J. Prevot  46         Vice- President and a Director
Doug Wise          56         Vice President of Sales and Marketing


NORMAN A. GARDNER

     Norman A. Gardner has been the President of the Company since  inception on
November 11, 1999. From 1974 to 1985 Mr. Gardner served as President of Polymark
Management, Ltd., a Canadian public relations firm. In 1982, Mr. Gardner founded
Nocopi Technologies,  Inc. of West Conshohocken,  PA, a publicly traded company.
He served as  President  and Chief  Executive  Officer of Nocopi from 1985 until
1997, and as Chairman of its board until March,  1998. Mr. Gardner  received his
B.A. in English from McGill University in 1963.


ED FISHMAN

     Mr.  Fishman has been the Company's Vice Chairman of the Board of Directors
since the Company's acquisition of EDS Marketing, Inc, where he was the Chairman
of the board since 2000.  Prior to that,  Mr.  Fishman had been the Chairman and
CEO of Players International,  Inc., which he founded, built and eventually sold
to  Harrah's.  Mr.  Fishman  received  his B.A.  degree  from  California  State
University, Northridge, in 1966.


STEVEN MEISTRICH

     Mr.  Meistrich  has been  the  Company's  Executive  Vice  President  and a
Director since the Company's acquisition of EDS Marketing,  Inc, in Los Angeles,
where he was the  Chief  Executive  Officer  since  2000.  Prior  to  that,  Mr.
Meistrich had been the founder of Best Bet TV of Los Angeles, since 1999, CEO of
Entertainment  Marketing  Technology of Los Angeles since 1998,  and founder and
CEO of the Lab-e-rinth  Group of Los Angeles since 1989. Mr. Meistrich  received
his Masters degree from Johns Hopkins in 1979.


<PAGE>
ED BELL

     Mr. Bell has been the Company's  Director of Research &  Development  since
2000. From 1989 to 1999, Mr. Bell was  Vice-President of Olde Philadelphia Mint.
In 1999, Mr. Bell formed  Educational  Computer Company which consults with Coin
Mechanisms  Inc.  and  Kilmartin  Industries  Inc.  Mr.  Bell holds over a dozen
patents in the fields of fluidics, mechanics and electronics.

JOEL PINSKY

     Mr. Pinsky has been the Secretary and International  Counsel of the Company
since October 2001. Mr. Pinsky is a founding partner with the law firm of GROSS,
PINSKY and has practiced his profession in Montreal,  Canada on full-time  basis
for 40 years.  He received his B.A.  degree from McGill  University in 1957, his
B.C.L. degree from McGill University in 1960 and his B.Com degree from Concordia
University in 1961.

MICHAEL J. PREVOT

     Michael  Prevot has been the  Vice-President  of Sales of the Company since
inception.  From 1985 to 1999,  Mr.  Prevot  has  served as  President  of Vista
Security  Papers,  a San Francisco based company which sells security  products.
Mr.  Prevot  studied  business  at the  College  of  San  Mateo  in  San  Mateo,
California,  in 1974-1975,  and at Skyline  College in San Bruno,  California in
1975-1976. Mr. Prevot dedicates 10 - 20 percent of his time performing his tasks
for the Company. These tasks include approaching potential clients and arranging
for sales meetings and presentations.

DOUG WISE

     Mr. Wise has been the Company's Vice President of Sales and Marketing since
the Company's acquisition of EDS Marketing, Inc, where he was the Executive Vice
President of Sales since 200.  Prior to that, Mr. Wise had been the Director and
Vice President of Marketing for Entertainment  Marketing  Technology since 1988,
and Senior Vice President of Development and Marketing for Players International
since 1986.  Mr. Wise  received his B.B.A degree from  University  of Memphis in
1968.

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth the compensation paid during the fiscal year
ended December 31, 2001, to the Company's  Chief  Executive  Officer and each of
the Company's  officers and  directors.  No other person  received  compensation
equal to or exceeding $100,000 in fiscal 2001 and no bonuses were awarded during
fiscal 2001.


<TABLE>
<CAPTION>

                                         Annual  Compensation               Awards             Payouts
                                   ------------------------------  -------------------------  ---------
                                                           Other                                            All
                                                           Annual   Restricted    Securities               Other
                                                          compen-      Stock      Underlying     LTIP     Compen-
                                                           sation    Award(s)    Options/SAR   Payouts    sation
Name and Principal Position  Year  Salary ($)  Bonus ($)    ($)         ($)          (#)          ($)        ($)
- ----------                   ----  ----------  ---------  -------  -----------  ------------  ---------  --------
<S>                          <C>   <C>         <C>        <C>       <C>          <C>           <C>       <C>
Norman Gardner(1)
President,                   2001  86,250(3)       -0-     15,600(2)(3) -0-             500,000  -0-         -0-
Director                     2000  75,000          -0-     15,600(2)    -0-             -0-      -0-         -0-
                             1999      -0-         -0-         -0-      -0-             -0-      -0-         -0-

Michael Prevot
Vice President of Marketing, 2001      -0-         -0-         -0-      -0-             -0-      -0-         -0-
Director                     2000      -0-         -0-         -0-      -0-             -0-      -0-         -0-
                             1999      -0-         -0-         -0-      -0-             -0-      -0-         -0-

Ed Fishman,                  2001      8,000(4)    -0-         -0-      -0-             500,000  -0-         -0-
Vice Chairman of
Board of Directors

Steven Meistrich,            2001      8,000(4)    -0-         -0-      -0-             500,000  -0-         -0-
Executive Vice President
Director

Ed Bell,                     2001      -0-         -0-         -0-      -0-             500,000  -0-         -0-
Director of
Research and Development

Joel Pinsky,                 2001      -0-         -0-         -0-      -0-             -0-      -0-         -0-
Secretary, Treasurer
Director

Doug Wise,                   2001      8,000(4)    -0-         -0-      -0-             500,000  -0-         -0-
Vice President
Sales and Marketing


<FN>

---------------------------------------------

1.   On October 1, 2001 the Company entered into a new employment agreement with
     its President,  Norman Gardner, which provides for compensation of $120,000
     annually,  commencing  October 1, 2001,  and  escalating  to  $150,000  per
     annually from October 1, 2003,  and which expires on September 30, 2006. In
     addition the agreement  grants Mr. Gardner  500,000 options to purchase the
     Company's  common  stock,  250,000  shares at $0.17 per share,  and 250,000
     shares at $0.35 per share. In all other respects,  the contract is the same
     as his employment agreement from January 1, 2000.

2.   Company car, insurance, repairs and expenses.

3.   Computed as funds expended as of the date of this filing.

4.   Advances against commissions.
</FN>
</TABLE>

<PAGE>



Item 11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS


     The  following  table sets forth certain  information  known to the Company
regarding the  beneficial  ownership of Common Stock as of December 31, 2001, by
(i) each Director of the Company,  (ii) each  executive  officer of the Company,
(iii) all  directors  and  executive  officers as a group,  and (iv) each person
known  to  the  Company  to be the  beneficial  owner  of  more  than  5% of its
outstanding shares of Common Stock.


<TABLE>
<CAPTION>
                                     Shares Beneficially Owned
                                     -------------------------
                                                   Percentage
Directors and Executive Officers      Shares Held   Owned (1)
- --------------------------------      -----------   ---------
<S>                                     <C>          <C>
Norman Gardner                           3,750,000    22.11%
President
837 Lindy Lane
Bala Cynwyd, PA 19004

Michael J. Prevot                        106,500       0.59%
419 Buena Vista Ave.
San Mateo, CA 94403

Ed Fishman                               500,000       2.95%
27234 Pacific Coast Highway
Malibu, CA 90265

Steven Meistrich                         500,000       2.95%
4312 Manorview Court
Moorpark, CA 93021

Doug Wise                                500,000       2.95%
5318 Old Hwy 96
Franklin, TN 37064

Ed Bell                                   45,010       0.26%
5 Alexandra Court
Glenn Mills, PA 19342



Directors and Officers as a Group      5,401,510      31.85%

(1) Percentage of ownership is based on 16,957,867 shares of Common Stock issued
and outstanding as of December 31, 2001.


</TABLE>

<PAGE>


Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS  WITH  MANAGEMENT  AND  OTHERS

     On December 23, 2001, the Company purchased the assets of E.D.S. Marketing,
Inc. for 2,000,000 shares of restricted  stock.  Prior to the  transaction,  the
Company  had no  relationship  with  that  Company  or with  management  of that
Company.  As a result  of the  acquisition,  three  former  employees  of E.D.S.
Marketing,  Inc. became management employees of the Company. These people are Ed
Fishman,  the  Company's  Vice  Chairman  of  the  Board  of  Directors,  Steven
Meistrich, the Company's Executive Vice President and a Director, and Doug Wise,
the Company's  Vice  President of Sales and  Marketing.  In addition to becoming
employees  of the  Company,  pursuant  to the  transaction  each of these  three
persons  received  500,000 of the total  2,000,000  shares used to purchase  the
assets E.D.S.  Marketing,  Inc.,  and received  grants of options to purchase an
additional 500,000 shares each.

     There  have  been  no  other  material  transactions,   series  of  similar
transactions, or currently proposed transactions, to which the Company was or is
to be a party,  in which the amount  involved  exceeds  $60,000 and in which any
director  or  executive  officer,  or any  security  holder  who is known to the
Company to own of record or beneficially more than five percent of the Company's
Common  Stock,  or any member of the  immediate  family of any of the  foregoing
persons, had a material interest.

CERTAIN  BUSINESS  RELATIONSHIPS

     There have been no material  transactions,  series of similar transactions,
currently proposed transactions, or series of similar transactions, to which the
Company was or is to be a party,  in which the amount  involved  exceeds $60,000
and in which any director or executive  officer,  or any security  holder who is
known to the Company to own of record or beneficially  more than five percent of
the Company's  Common Stock, or any member of the immediate family of any of the
foregoing  persons,  had a  material  interest  other  than  the one  listed  in
Transaction with Management and Others section, above.


Item 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K

     (a) All required  exhibits are  incorporated  herein by reference  from the
Company's Form 10-SB filed on November 14, 2000, and Amendments thereto.





<PAGE>











                       THIS PAGE LEFT INTENTIONALLY BLANK




<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)

                                TABLE OF CONTENTS

                           DECEMBER 31, 2001 AND 2000



                                                                     Page

INDEPENDENT AUDITOR'S REPORT                                          F-1

CONSOLIDATED BALANCE SHEETS                                           F-2

CONSOLIDATED STATEMENTS OF OPERATIONS                                 F-3

CONSOLIDATED STATEMENTS OF CHANGES IN
  STOCKHOLDERS' EQUITY                                                F-4

CONSOLIDATED STATEMENTS OF CASH FLOWS                                 F-5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                            F-6



<PAGE>



                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
LaserLock Technologies, Inc.
(A Development Stage Company)
Bala Cynwyd, Pennsylvania

We have  audited  the  accompanying  consolidated  balance  sheets of  LaserLock
Technologies, Inc. and Subsidiaries (a development stage company) as of December
31,  2001 and 2000,  and the  related  consolidated  statements  of  operations,
changes in stockholders'  equity and cash flows for the years then ended and for
the period  November 10, 1999 (date of  inception)  to December 31, 2001.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audit.

We conducted  our audits in accordance  with U.S.  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  LaserLock
Technologies, Inc. and Subsidiaries (a development stage company) as of December
31, 2001 and 2000 and the results of their  operations  and their cash flows for
the years then ended and for the period November 10, 1999 (date of inception) to
December  31,  2001  in  conformity  with  U.S.  generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated  financial statements,  the Company's losses from development stage
activities  raise  substantial  doubt  about its  ability to continue as a going
concern.  Management's  actions in regard to this matter are also  described  in
Note 2. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.


                                /s/LARSON, ALLEN, WEISHAIR & CO., LLP
                                   LARSON, ALLEN, WEISHAIR & CO., LLP

Blue Bell, Pennsylvania
March 26, 2002


                                      (F-1)


<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>

                                                                                         2001                 2000
                                                                                   -----------------    -----------------
                                      ASSETS
CURRENT ASSETS
<S>                                                                                 <C>                 <C>
  Cash and cash equivalents                                                               $ 268,984            $ 656,803
  Receivables                                                                                 5,593                4,725
  Note receivable                                                                            15,000                    -
  Prepaid expenses                                                                           26,250                4,250
                                                                                   -----------------    -----------------
          Total current assets                                                              315,827              665,778
                                                                                   -----------------    -----------------

OTHER ASSETS
  Intangible assets, net of accumulated amortization of $13,305                             744,694                    -
                                                                                   -----------------    -----------------
          Total assets                                                                  $ 1,060,521            $ 665,778
                                                                                   =================    =================

                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable and accrued expenses                                                    $ 19,312                $ 245
  Deferred revenue                                                                           21,042                    -
                                                                                   -----------------    -----------------
          Total current liabilities                                                          40,354                  245
                                                                                   -----------------    -----------------

COMMITMENTS

STOCKHOLDERS' EQUITY
  Preferred stock, $.001 par value; 10,000,000 shares authorized,
    no shares issued and outstanding
  Common stock, $.001 par value; 40,000,000 shares authorized,
    16,957,867 shares at December 31, 2001 and 13,289,999
    shares at December 31, 2000 issued and outstanding                                       16,958               13,290
  Deferred consulting fees                                                                        -              (20,683)
  Additional paid-in capital                                                              2,477,450            1,094,868
  Deficit accumulated during the development stage                                       (1,474,241)            (421,942)
                                                                                   -----------------    -----------------
          Total stockholders' equity                                                      1,020,167              665,533
                                                                                   -----------------    -----------------
          Total liabilities and stockholders' equity                                    $ 1,060,521            $ 665,778
                                                                                   =================    =================
</TABLE>

                 See accompanying notes to financial statements
                                      (F-2)


<PAGE>



                    LOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
          FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND THE PERIOD
           NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                  Cumulative           Year Ended          Year Ended
                                                                    Since             December 31,        December 31,
                                                                  Inception               2001                2000
                                                               -----------------    -----------------   ------------------
REVENUES
<S>                                                             <C>                 <C>                 <C>
  Sales                                                                 $ 6,595              $ 6,595                  $ -
  Royalties                                                               5,208                5,208                    -
                                                               -----------------    -----------------   ------------------
      Total revenues                                                     11,803               11,803                    -
                                                               -----------------    -----------------   ------------------
COSTS AND EXPENSES
  Research and development                                              234,130              173,412               60,718
  Patent                                                                 50,989               25,989               25,000
  Legal and accounting                                                  183,780              146,845               36,935
  Sales and marketing                                                   774,997              625,641              149,356
  General and administrative                                            596,580              422,700              119,767
                                                               -----------------    -----------------   ------------------
      Total costs and expenses                                        1,840,476            1,394,587              391,776
                                                               -----------------    -----------------   ------------------
LOSS BEFORE OTHER INCOME                                             (1,828,673)          (1,382,784)            (391,776)
                                                               -----------------    -----------------   ------------------
OTHER INCOME
  Interest income                                                        44,432               20,485               23,947
                                                               -----------------    -----------------   ------------------
LOSS BEFORE INCOME TAX BENEFIT                                       (1,784,241)          (1,362,299)            (367,829)
INCOME TAX BENEFIT                                                      310,000              310,000                    -
                                                               -----------------    -----------------   ------------------
NET LOSS                                                            $(1,474,241)         $(1,052,299)          $ (367,829)
                                                               =================    =================   ==================
BASIC AND DILUTED WEIGHTED AVERAGE
  COMMON SHARES OUTSTANDING                                                               14,105,028           10,015,407
                                                                                    =================   ==================
BASIC AND DILUTED NET LOSS PER
  COMMON SHARE                                                                               $ (0.07)             $ (0.04)
                                                                                    =================   ==================

</TABLE>
                 See accompanying notes to financial statements
                                      (F-3)


<PAGE>



                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
    FOR THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2001

<TABLE>
<CAPTION>

                                                                                                            Deficit
                                                                                                          Accumulated
                                                           Common Stock                       Additional   during the
                                                     -------------------------
                                                     Number of                   Consulting    Paid-In   Development
                                                     Shares        Amount           Fees       Capital      Stage        Total
                                                     -----------  ------------   ----------  ----------- ------------   ---------
<S>                                                  <C>            <C>           <C>          <C>          <C>          <C>
Issuance of 4,278,000 shares on November 10, 1999     4,278,000       $ 4,278                  $ 16,595          $ -    $ 20,873
Issuance of 1,232,000 shares of common stock in
  exchange for services                               1,232,000         1,232                    35,728            -      36,960
Issuance of 2,090,000 shares of common stock          2,090,000         2,090                    60,610                   62,700
Stock issuance costs                                          -             -                   (13,690)           -     (13,690)
Net loss                                                      -             -                         -      (54,113)    (54,113)
                                                     -----------  ------------   ----------  ----------- ------------   ---------
Balance December 31, 1999                             7,600,000         7,600                    99,243      (54,113)     52,730
Issuance of 5,449,999 shares of common stock          5,449,999         5,450                   921,050            -     926,500
Issuance of 240,000 shares of common stock in
  exchange for services                                 240,000           240    $ (40,800)      40,560
Stock issuance costs                                          -             -                   (16,335)           -     (16,335)
Fair value of non-employee stock options                                                         50,350                   50,350
Amortization of deferred consulting fees                                            20,117                                20,117
Net loss                                                                    -            -            -     (367,829)   (367,829)
                                                     -----------  ------------   ----------  ----------- ------------   ---------
Balance December 31, 2000                            13,289,999        13,290      (20,683)   1,094,868     (421,942)    665,533

Issuance of 217,500 shares of common stock              217,500           218                    77,723            -      77,941
Issuance of 2,000,000 shares of common stock and
  2,000,000 stock options for purchase of intangibles 2,000,000         2,000                   736,000                  738,000
Issuance of 1,500,000 stock options                                                              15,000                   15,000
Exercise of 1,450,368 options                         1,450,368         1,450                   230,609                  232,059
Fair value of non-employee stock options                                                        323,250                  323,250
Amortization of deferred consulting fees                                            20,683                                20,683
Net loss                                                                    -            -            -   (1,052,299) (1,052,299)
                                                     -----------  ------------   ----------  ----------- ------------ -----------
Balance December 31, 2001                            16,957,867      $ 16,958          $ -   $2,477,450  $(1,474,241) $1,020,167
                                                     ===========  ============   ==========  =========== ============ ===========

</TABLE>
                 See accompanying notes to financial statements
                                      (F-4)


<PAGE>



                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 AND THE PERIOD
           NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2001


<TABLE>
<CAPTION>
                                                                        Cumulative         Year Ended         Year Ended
                                                                          Since             December           December
                                                                        Inception           31, 2001           31, 2000
                                                                      ---------------    ----------------   ----------------
<S>                                                                     <C>               <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                              $ (1,474,241)       $ (1,052,299)        $ (367,829)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Noncash items included in net income:
      Amortization                                                            13,305              13,305
      Fair value of options issued in exchange for services                  373,600             323,250             50,350
      Stock issued in exchange for services                                   36,960
      Amortization of deferred consulting fees                                40,800              20,683             20,117
    Changes in assets and liabilities:
        (Increase) decrease in interest receivable                            (5,593)               (868)            (4,725)
        Increase in prepaid expenses                                         (26,250)            (22,000)              (750)
        (Decrease) increase in accounts payable                               19,313              19,068             (5,755)
        Increase in deferred revenue                                          21,042              21,042                  -
                                                                      ---------------    ----------------   ----------------
          Net cash used in operating activities                           (1,001,064)           (677,819)          (308,592)
                                                                      ---------------    ----------------   ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of intangibles                                                    (20,000)            (20,000)
  Increase in note receivable                                                (15,000)            (15,000)
                                                                      ---------------    ----------------
          Net cash used in financing activities                              (35,000)            (35,000)
                                                                      ---------------    ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                                   1,088,014              77,941            926,500
  Proceeds from exercise of stock options                                    232,059             232,059                  -
  Proceeds from issuance of stock options                                     15,000              15,000
  Stock issuance costs                                                       (30,025)                  -            (16,335)
                                                                      ---------------    ----------------   ----------------
          Net cash provided by financing activities                        1,305,048             325,000            910,165
                                                                      ---------------    ----------------   ----------------
          Net increase (decrease) in cash                                    268,984            (387,819)           601,573

CASH, BEGINNING                                                                                  656,803             55,230
                                                                      ---------------    ----------------   ----------------
CASH, ENDING                                                               $ 268,984           $ 268,984          $ 656,803
                                                                      ===============    ================   ================

SUPPLEMENTAL DISCLOSURE OF NONCASH
  FINANCING ACTIVITIES
  Common stock issued for services                                          $ 77,760                               $ 40,800
                                                                      ===============                       ================
  Common stock and stock options issued for purchase
    of intangibles                                                         $ 738,000           $ 738,000
                                                                      ===============    ================

</TABLE>

                 See accompanying notes to financial statements
                                      (F-5)


<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 1    NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Nature of activities

          The Company is a  development  stage  enterprise  incorporated  in the
          state of Nevada on November 10, 1999. Since  inception,  substantially
          all of the  efforts of the  Company  have been  devoted to  developing
          technologies    for   the   prevention   of   product   and   document
          counterfeiting.  The  Company is in the  development  stage of raising
          capital,  financial  planning,  establishing  sources of  supply,  and
          acquiring  property,  plant and  equipment.  The  Company  anticipates
          establishing markets for its technologies in North America and Europe.

          Principle of consolidation

          The  accompanying   consolidated   financial  statements  include  the
          accounts  of   LaserLock   Technologies,   Inc.  and  its  100%  owned
          subsidiaries,  LL Security Products, Inc. and EDS Marketing,  Inc. All
          intercompany transactions have been eliminated in consolidation.

          Use of estimates

          The  preparation of  consolidated  financial  statements in conformity
          with U.S. generally accepted accounting principles requires management
          to make estimates and assumptions  that affect the reported amounts of
          assets  and  liabilities  and  disclosure  of  contingent  assets  and
          liabilities  at the date of the financial  statements and the reported
          amounts of revenues and expenses during the reporting  period.  Actual
          results could differ from these estimates.

          Cash and cash equivalents

          For purposes of reporting cash flows,  the Company  considers all cash
          accounts,   which  are  not  subject  to  withdrawal  restrictions  or
          penalties,  and  certificates  of deposit  and  commercial  paper with
          original maturities of 90 days or less to be cash or cash equivalents.

          Revenue recognition

          The  Company  recognizes  revenue  from  the  sale  of  counterfeiting
          prevention  technology when shipped.  Revenue from licensing fees will
          be  recognized  proportionately  over  the  period  of  the  licensing
          agreement.



                                      (F-6)

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 1    NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Earnings per share of common stock

          In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
          Earnings  per Share.  SFAS No. 128 replaced  the  previously  reported
          primary and fully  diluted  earnings  per share with basic and diluted
          earnings  per  share,  respectively.  Unlike the  previously  reported
          primary  earnings  per share,  basic  earning per share  excludes  the
          dilutive  effects  of stock  options.  Diluted  earnings  per share is
          similar to the previously  reported fully diluted  earnings per share.
          Loss per  share  amounts  have  been  calculated  in  accordance  with
          requirements of SFAS No. 128. For the year ended December 31, 2001 and
          2000,  the  computation  of diluted  loss per share was  antidilutive;
          therefore,  the amounts reported for basic and dilutive loss per share
          were the same.

          Income taxes

          Federal income taxes are provided for the tax effects of  transactions
          reported in the consolidated financial statements and consist of taxes
          currently due plus deferred taxes related to  differences  between the
          bases  of  assets  and   liabilities  for  financial  and  income  tax
          reporting.  Deferred tax assets and  liabilities  represent the future
          tax return  consequences  of those  differences,  which will either be
          taxable or deductible when the assets and liabilities are recovered or
          settled.  Deferred taxes are also recognized for operating losses that
          are available to offset future income taxes and  intangibles  acquired
          with no tax basis. A valuation  allowance is provided when realization
          of a deferred tax asset is unlikely.

          Recently issued accounting principles

          In June 2001, the Financial Accounting Standards Board issued SFAS No.
          141, Accounting for Business Combinations and SFAS No. 142, Accounting
          for Goodwill and Other Intangible Assets.

          The  provisions  of SFAS  No.  141  applies  to  business  combination
          transactions  that occur  after June 30,  2001.  SFAS No. 141 will not
          effect the consolidated financial statements of the Company.

          The  provisions  of SFAS No.  142 shall be  applied  to  fiscal  years
          beginning  after  December 31, 2001.  The  provisions  of SFAS No. 142
          eliminated goodwill amortization and provides for standards on testing
          the  impairment  of  goodwill  and  other  intangible  assets at least
          annually.  The adoption of this standard is expected to have no effect
          on the Company's consolidated financial statements.

          Start-Up and organization costs

          In accordance  with AICPA Statement of Position 98-5 "Reporting on the
          Costs of Start-up  Activities,"  the costs of start-up  activities and
          organization costs are expensed as incurred.


                                      (F-7)

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 1    NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Research and development costs

          Research and  development  costs are  expensed  when  incurred.  Total
          amount  expensed  for the year ending  December  31, 2001 and 2000 was
          $173,412 and $60,718, respectively.

          Reclassification

          Certain items in the 2000 financial  statements have been reclassified
          to conform with the  presentation in the 2001  consolidated  financial
          statements. There was no effect on net income or shareholders' equity.

NOTE 2    REALIZATION OF ASSETS

          The accompanying  consolidated financial statements have been prepared
          assuming  that the  Company  will  continue  as a going  concern.  The
          Company has incurred  losses from  activities  during the  development
          stage.  This condition  raises  substantial  doubt about the Company's
          ability to continue as a going  concern.  The  consolidated  financial
          statements do not include any  adjustments  that might result from the
          outcome of this uncertainty.

          As  part  of  its  development  stage  activities,  the  Company  sold
          approximately 2.1 million shares to private investors in December 1999
          providing  net proceeds of  approximately  $63,000.  Additionally,  in
          2000, management raised net proceeds of $910,165 of capital by selling
          approximately 5.45 million shares of its common stock pursuant to Rule
          504 of Regulation D of the Securities Act of 1933. Management believes
          the Company can meet all of its  obligations as they become due during
          the next twelve months.

NOTE 3    CONVERTIBLE PROMISSORY NOTE RECEIVABLE

          On  November  30,  2001  LaserLock  loaned  an  unrelated  corporation
          $15,000.  The note bears 10% interest per annum and is due and payable
          sixty  (60)  days  from  the  date  the  money  is   received  by  the
          corporation.

          LaserLock can convert all or any portion of the outstanding  principal
          amount  together  with accrued  interest  thereon into common stock at
          $.20 per share until such time as the borrower sells  preferred  stock
          in the amount of not less than  $1,500,000.  Upon  consummation of the
          aforementioned  financing,  LaserLock can convert the note and accrued
          interest into preferred  shares at a conversion  price equal to 80% of
          the purchase price at which the preferred  equity is made available to
          bona fide third parties.

NOTE 4    DEFERRED REVENUE

          At December 31, 2001,  LaserLock  was in the process of  negotiating a
          contract with an unrelated third party.  As part of the  negotiations,
          the  unrelated  third party  agreed to advance  LaserLock  $60,000 and
          LaserLock  agreed that the advance  would be credited  against  future
          royalties if an agreement was finalized. LaserLock received $20,000 in
          2001 and  recorded  the  payment as deferred  revenue.  In January and
          February 2002 LaserLock received two more payments totaling $40,000.



                                      (F-8)

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000

NOTE 5    INCOME TAXES

          The income tax benefit consists of the following:

                                                  2001              2000
                                                  ----              ----

           Current                               $      -          $       -
           Deferred                               303,000           (135,000)
           Change in valuation allowance            7,000            135,000
                                                ---------         ----------

                                                 $310,000          $       -
                                                 ========         ==========

          At December 31,  2001,  the Company had a net  operating  loss ("NOL")
          that  approximated  $1,150,000.  Consequently,  the  Company  had  NOL
          carryforwards  available for federal income tax purposes,  which begin
          to expire in 2014.

          The following is a  reconciliation  of the tax derived by applying the
          U.S. Federal Statutory Rate of 35% to the earnings before income taxes
          and comparing that to the recorded income tax provisions.

<TABLE>
<CAPTION>
                                                    2001                        2000
                                              ---------------------      ----------------------
                                              Amount     Percentage       Amount     Percentage

         U.S. federal income tax benefit
                                               <S>            <C>          <C>           <C>
          at federal statutory rate            $(477,000)     (35)%        $(128,700)    (35)%
         State tax, net of federal tax effect    (47,000)      (3)           (23,900)     (3)
         Non-deductible excess purchase
            price                                109,000        8                  -       -
         Non-deductible options                  112,000        8             17,620       2
         Change in valuation allowance            (7,000)      (1)           134,980      36
                                              ----------   ----------    -----------  --------

            Income tax benefit                $ (310,000)     (23)%       $        0       0%
                                              ===========   =======       ==========  =======

</TABLE>
                The primary components of the Company's 2001 and 2000 deferred
                tax assets and the related valuation allowance are as follows:

                                                       2001            2000
                                                       ----            ----

          Deferred tax asset for NOL carryforwards    $452,000       $154,000
          Deferred tax liability for intangibles      (305,000)             -
          Valuation allowance for NOL carryforwards   (147,000)      (154,000)
                                                     ----------     ----------

          Net deferred tax asset                     $       0        $     0
                                                     ==========     ==========

          Management  has  determined  that the  realization of the deferred tax
          asset is not assured and has  created a  valuation  allowance  for the
          entire amount of such benefits.




                                      (F-9)

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 6    CAPITAL STOCK ISSUED FOR SERVICES

          In 1999,  the  Company  issued  1,232,000  shares of  common  stock to
          non-employee  consultants,  200,000  shares  for  legal  services  and
          1,032,000 for marketing  and  financial  consulting.  The value of the
          common  stock,  based on the selling price of the stock at the date of
          issuance, was $36,960, which has been included in organization costs.

          In  2000,  the  Company  issued  240,000  shares  of  common  stock to
          non-employee  consultants,   200,000  shares  for  marketing  services
          rendered and 40,000 shares for research and development.  The value of
          the common  stock  issued for  services  was based on the most  recent
          selling  price of the stock at the date of  issuance,  $.17 per share,
          totaling $40,800.

NOTE 7    STOCK OPTION PLAN

          During  1999,  the Board of  Directors  (the  "Board")  of the Company
          adopted,  with the approval of the stockholders,  a Stock Option Plan.
          In 2000, the Board superseded that plan and created a new Stock Option
          Plan (the "Plan"), pursuant to which it is authorized to grant options
          to purchase up to 1.5 million  shares of common stock to the Company's
          employees,  officers,  directors,  consultants,  and other  agents and
          advisors.  The Plan is intended  to permit  stock  options  granted to
          employees  under the Plan to qualify as incentive  stock options under
          Section  422  of  the  Internal  Revenue  Code  of  1986,  as  amended
          ("Incentive Stock Options"). All options granted under the Plan, which
          are not intended to qualify as Incentive Stock Options,  are deemed to
          be non-qualified options ("Non-Statutory Stock Options").

          The Plan will be administered by a committee of the Board of Directors
          ("Stock  Option  Committee")  which will determine the persons to whom
          awards  will be  granted,  the number of awards to be granted  and the
          specific terms of each grant,  including the vesting thereof,  subject
          to the provisions of the Plan.

          In connection with Incentive Stock Options, the exercise price of each
          option  may not be less  than  100% of the  fair  market  value of the
          common stock on the date of grant (or 110% of the fair market value in
          the case of a grantee holding more than 10% of the  outstanding  stock
          of the Company).  The aggregate  fair market value  (determined at the
          time of the  grant)  of stock  for  which  an  employee  may  exercise
          Incentive  Stock  Options  under  all plans of the  Company  shall not
          exceed  $100,000 per  calendar  year.  If any employee  shall have the
          right to  exercise  any  options  in excess  of  $100,000  during  any
          calendar year, the options in excess of $100,000 shall be deemed to be
          Non-Statutory    Stock    Options,    including    price,    duration,
          transferability and limitations on exercise.


                                      (F-10)

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 7    STOCK OPTION PLAN

          Stock option  transactions  for employees during 2001 and 2000 were as
          follows:

<TABLE>
<CAPTION>
                                                                                               Weighted Average
                                                                             Exercise Price        Exercise Price
                                                 Option       Vested            Per Vested           Per Vested
                                                 Shares        Shares       Common Share          Common Share
                                                 ------       --------      ------------       -----------------
              <S>                                   <C>          <C>         <C>                   <C>
              Granted/vested during the year        25,000        25,000     $.17                   $.17
              Exercised during the year                  -             -
                                                   -------       -------

              Balance, December 31, 2000            25,000        25,000     $.17                   $.17

              Granted/vested during the year       500,000       500,000     $.17-.35               $.26
              Exercised during the year                  -             -
                                                   -------       -------

              Balance, December 31, 2001           525,000       525,000     $.17-$.35              $.26
                                                   =======       =======
</TABLE>

          Information  with respect to employee  stock options  outstanding  and
          employee stock options exercisable at December 31, 2001 is as follows:

<TABLE>
<CAPTION>
                                                      Employee Options Outstanding
                                    --------------------------------------------------------------------
                   Range of          Number Outstanding       Weighted Average Remaining             Weighted Average
                Exercise Prices         at 12/31/01                Contractual Life                  Exercise Price
                  <S>                      <C>                         <C>                             <C>
                  $0.00-$1.00              525,000                     3.83 years                      $.26
</TABLE>
<TABLE>
<CAPTION>

                                                              Employee Options Exercisable
                        -----------------------------------------------------------------------------------------------------
                        Range of                Number Outstanding               Weighted Average
                     Exercise Prices              at 12/31/01                    Exercise Price
                        <S>                           <C>                         <C>
                        $0.00-$1.00                   525,000                      $.26

</TABLE>
          The Company  accounts for stock-based  compensation in accordance with
          SFAS No.  123,  Accounting  for  Stock-Based  Compensation,  which for
          employee  stock  options  permits the use of  intrinsic  value  method
          described  in APB  Opinion  No.  25,  Accounting  for Stock  Issued to
          Employees,  and requires the Company to disclose the pro forma effects
          of accounting for stock-based compensation using the fair value method
          as described in the optional accounting  requirements of SFAS No. 123.
          As permitted by SFAS No. 123, the Company will continue to account for
          stock-based  compensation  under APB Opinion  No. 25,  under which the
          Company has recognized no  compensation  expense for employee  granted
          options.

          Had  compensation  cost  for the  Company's  stock  option  plan  been
          determined  based on the fair value of the  Company's  common stock at
          the dates of awards  under the fair value  method of SFAS No. 123, the
          Company's  net loss per common share would have been  increased to the
          pro forma amounts indicated below.


                                      (F-11)
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 7        STOCK OPTION PLAN
<TABLE>
<CAPTION>
                                                                                       2001            2000
                    <S>                                                              <C>             <C>
                    Net loss:
                          As reported                                                $(1,052,299)    $(367,829)
                          Pro forma                                                  $(1,072,299)    $(369,329)

                    Net loss per common share basic and diluted:
                          As reported                                                      $(.07)        $(.04)
                          Pro forma                                                        $(.08)        $(.04)

</TABLE>
          Significant  assumptions used to calculate the above fair value of the
          awards are as follows:

<TABLE>
<CAPTION>
                                                                                       2001            2000
                                                                                       ----            ----
                    <S>                                                               <C>              <C>
                    Risk free interest rates of return                                    5.00%           6.00%
                    Expected option life                                              60 months       60 months
                    Volatility                                                              30%             25%
                    Expected dividends                                                       $0              $0
                    Weighted average fair value                                            $.04            $.06

</TABLE>
          In  addition  to options  granted to  employees  under the plans,  the
          Company  issued stock options  pursuant to  contractual  agreements to
          non-employees.  Options  granted under these  agreements  are expensed
          when the related service or product is provided.

          Stock option transactions for non-employees  during 2001 and 2000 were
          as follows:

<TABLE>
<CAPTION>
                                                                              Exercise Price        Weighted Average
                                                 Option         Vested           Per Vested         Exercise Price Per
                                                 Shares         Shares        Common Share      Vested Common Share

                <S>                            <C>            <C>               <C>                   <C>
                Granted/vested during the year 1,110,000      1,110,000         $.17 - $.35           $.22
                Exercised during the year        -               -
                                              -----------    -----------

                Balance, December 31, 2000     1,110,000      1,110,000         $.17 - $.35           $.22

                Granted/vested during the year 3,650,000      1,650,000         $.17-$.35             $.18
                Exercised during the year     (1,450,368)    (1,450,368)        $.17                  $.16
                                              -----------    -----------

                Balance, December 31, 2001     3,309,632      1,309,632         $.17-$.35             $.23
                                              ==========     ==========

</TABLE>
          Included  in options  granted  during  2001 are the  2,000,000  option
          shares  granted in connection  with the  acquisition of EDS Marketing,
          Inc. as disclosed in Note 13.

          Total  expense  recognized  by the  Company  during  2001 and 2000 for
          non-employee  granted options was $323,250 and $50,350,  respectively.
          Significant  assumptions used to calculate the above fair value of the
          awards  for 2001  and 2000 are no  dividend  yield  for  either  year,
          expected  volatility of 30% and 25%; risk free interest rate of return
          of 5% and 6%, respectively and expected option life of five years.

                                      (F-12)
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 7    STOCK OPTION PLAN

          Information with respect to non-employee stock options outstanding and
          non-employee  stock  options  exercisable  at December  31, 2001 is as
          follows:
<TABLE>
<CAPTION>
                                                  Non-Employee Options Outstanding
                                    --------------------------------------------------------------------
                   Range of          Number Outstanding              Weighted Average Remaining       Weighted Average
                Exercise Prices         at 12/31/01                    Contractual Life              Exercise Price
                  <S>                   <C>                               <C>                         <C>
                   $0.00-$1.00           3,309,632                         3.11 years                  $.49
</TABLE>
<TABLE>
<CAPTION>

                                                        Non-Employee Options Exercisable
                        ---------------------------------------------------------------------------------------------------
                        Range of                Number Outstanding               Weighted Average
                     Exercise Prices              at 12/31/01                    Exercise Price
                        <S>                         <C>                           <C>
                        $0.00-$1.00                 1,309,632                      $.23
</TABLE>

NOTE 8    RELATED PARTY TRANSACTIONS

          Effective  January 1, 2000,  the Company  entered  into an  employment
          agreement with its president, providing for a minimum annual salary of
          $75,000. As part of the employment  agreement,  the president conveyed
          the entire  right,  title and  interest  in a patent  application  for
          counterfeit  technology to the Company.  No value was assigned to such
          patent.  In October  2000,  the Company  entered into a new  four-year
          employment agreement with its president effective January 1, 2001. The
          agreement  provides for annual  compensation of $90,000 and payment of
          certain fringe benefits, including use of an automobile. Additionally,
          the agreement provides for the issuance of Non-Statutory Stock Options
          (not covered by the Stock Option Plan discussed in Note 5) to purchase
          250,000 shares of common stock at $.17 per share and 250,000 shares at
          $.35 per share.  Effective  October 1, 2001, the Company  modified its
          employment  agreement with its President.  The  modifications  include
          raising the annual  compensation  to $120,000 until September 30, 2003
          and then to $150,000  per annum  during the period  October 1, 2003 to
          September 30, 2006. All other terms of employment remain the same.

          During  1999,  the Company  paid  approximately  $10,000 to one of its
          stockholders  for legal services  rendered in connection with issuance
          of the  Company's  common  stock.  The amount has been  included  as a
          reduction of additional paid-in capital.

          The  Company  maintains  its office at the home of its  President.  No
          formal lease agreement exists and no rent expense has been incurred.


                                      (F-13)

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 9    COMMITMENTS

          Office lease

          The  Company's  subsidiary  leases  office  space in  California.  The
          current  lease  expires in February  2003.  The minimum  annual  lease
          payments are as follows:

             2002             $37,136
             2003               4,804
                             --------

                              $41,940

          During 2000, the Company entered into commission agreements with sales
          representatives. Under the terms of the contracts, expiring on various
          dates,  the  representatives  are  entitled  to  commissions  based on
          certain  percentages of sales, as defined in the agreements  which may
          be renewed  annually.  The commissions  from sales will be expensed as
          sales are generated.  However,  the commission from sales will be paid
          over 4-year terms at defined percentages.

          The  Company  entered  into a  consulting  agreement  with  one of its
          minority  stockholders  to manage the Company's  sales force effective
          June 2000.  The  contract,  which  expires in May 2001,  provides  for
          monthly payments of $5,000.

NOTE 10   LICENSING AGREEMENT

          In October 2001,  LaserLock  Technologies,  Inc. (the Company) entered
          into a licensing agreement with a company located in the United States
          and a company  located in France  (together the Licensee) which grants
          the Licensee the non-exclusive  right to use the Company's  technology
          to  market,   promote,   sell,   manufacture  and  have   manufactured
          non-exclusive  products or components of non-exclusive products in the
          Licensee's territory. The Licensee's territory is the world.

          In  consideration  of the  rights  granted to the  Licensee  under the
          agreement,  the  Licensee  agrees to pay to the Company  royalties  in
          accordance  with the  agreement.  The  minimum  annual  royalty fee of
          twenty-five  thousand dollars  ($25,000) shall be paid by the Licensee
          to the Company by way of four  quarterly  payments of six thousand two
          hundred fifty dollars ($6,250). The Company received $6,250 in 2001.

          The  agreement is for one year and may be  automatically  renewed from
          year to year by the Licensee.

NOTE 11   FINANCIAL INSTRUMENTS

          Concentration of credit risk

          Financial  instruments,  which  potentially  subject  the  Company  to
          concentration of credit risk, consist primarily of cash.

                                      (F-14)
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 11   FINANCIAL INSTRUMENTS

          The Company has  concentrated  its credit risk for cash by maintaining
          substantially  all of its  depository  accounts in a single  financial
          institution.  Accounts  in the  bank  are  guaranteed  by the  Federal
          Depository  Insurance  Corporation  (FDIC) up to $100,000.  At various
          times  throughout the year the Company had cash balances that exceeded
          FDIC limit. The financial  institution has a strong credit rating, and
          management believes that the credit risk is minimal.

          Fair value of financial instruments
          -----------------------------------

          Cash and  accounts  payable  approximate  their fair values due to the
          short maturity of these instruments.

NOTE 12   PATENTS

          The Company has  acquired  the rights to a patent  application  in the
          United States via its employment  contract with its President,  Norman
          A. Gardner.  The pending United States patent application was assigned
          to LaserLock  Technologies,  Inc. upon filing,  and the Assignment has
          been recorded at the US Patent and Trademark Office. The Assignment by
          its terms conveys the entire  right,  title and interest in and to the
          invention of the pending  patent  application  (entitled  "Counterfeit
          Detection  System") and all  improvements  thereon  which may be made,
          conceived  or  acquired  by Norman  Gardner  during  the course of his
          association  with  LaserLock  Technologies,  Inc.  and  for  one  year
          thereafter.   Patent   applications   for  the  Company's   technology
          (including improvements in the technology) are intended to be filed in
          other  jurisdictions  where  commercial  usage is foreseen,  including
          countries in Europe.  There can be no  assurance,  however,  that such
          protection will be obtained.

          The  subject  patent  application  was  filed  December  10,  1999 and
          notification that it will be granted was received March 12, 2002.

NOTE 13   ACQUISITIONS

          EDS Marketing, Inc.

          On  December  31,  2001 the Company  acquired  100% of EDS  Marketing,
          Inc.'s common stock for $20,000,  2,000,000 shares of its common stock
          and  options to purchase  2,000,000  shares of its common  stock.  The
          value of the  2,000,000  shares of common  stock was  $708,000 and the
          value of the options to purchase  2,000,000 shares of common stock was
          $30,000.  The  total  consideration  for the  common  stock of EDS was
          $758,000.

          EDS Marketing,  Inc. is a recently formed corporation  consisting of a
          collection of assets  transferred  into the  corporation  prior to the
          merger. EDS Marketing, Inc. was not an operating business prior to the
          acquisition.  At the time of the acquisition,  three of EDS's officers
          entered into  employment  contracts  whereby they are employed at will
          and one officer entered into a consulting agreement that terminates on
          March 31, 2002 unless extended by the parties.


                                      (F-15)
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2001 AND 2000


NOTE 13   ACQUISITIONS

          EDS assigned four marketing  agreements with unrelated  enterprises to
          the Company.  The  agreements  were for 120 days with options to renew
          for 24 months.

          The  companies  are  engaged  in  security  technology  involving  the
          following activities:

          - Biometric security and profiling
          - Anonymous internet shopping
          - Anonymous telecommunications
          - Offsite supervision through the internet

          Management  believes  that these  technologies  have  gaming  industry
          applications.

          EDS also assigned an agreement to market and sell slot machine tickets
          with third party advertising  thereon to casinos and others engaged in
          the gaming industry.

          Management  assigned the purchase price to the  intangible  assets and
          lives to the intangible assets as follows:

                                                    Value          Life

                   Employment contracts              $100,000    24 months
                   Four marketing agreements          300,000    24 months
                   Slot machine tickets agreement     358,000    36 months
                                                    ---------

                                                     $758,000
                                                    =========

          The assets  acquired  have no tax basis.  Accordingly,  a deferred tax
          liability of $310,000 was recorded upon  acquisition.  The  difference
          between the net assets  acquired,  after  considering the deferred tax
          liability,  and  the  purchase  price  was  immediately  expensed.  In
          addition,  the deferred tax liability reduced the need for a valuation
          allowance in the same amount resulting in a tax benefit during 2001.

          The amortization expense for 2001 totaled $13,305.

          LL Security Products, Inc.

          In July 2001,  the Company formed LL Security  Products,  Inc. with an
          investment of $50,000. LL Security Products,  Inc. was incorporated to
          operate the Company's marketing aspects of its business.

NOTE 14   SUBSEQUENT EVENTS

          Pursuant  to a private  placement  in March  2002,  the  Company  sold
          1,350,000  shares of its common  stock for $.32 per  share.  The total
          proceeds were $432,000.





<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


DATE:   4-10-02                          By: /s/ Norman A. Gardner
                                            Norman Gardner
                                            President


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and dates indicated.


Signature               Title                                 Date


/s/ Norman A. Gardner                                         4-10-02
Norman A. Gardner       Pres. CEO,  Chairman Bd of Dir.

/s/ Ed Fishman                                                4-10-02
Ed Fishman              Vice Chairman Bd of Dir.

/s/ Steven Meistrich                                          4-10-02
Steven Meistrich        Executive V.P., Director

/s/ Ed Bell                                                   4-10-02
Ed Bell                 Dir. of Research and Development

/s/ Joel Pinsky                                               4-10-02
Joel Pinsky             Secretary, Treasurer, Director

/s/ Michael J. Prevot                                         4-10-02
Michael J. Prevot       V.P., Director

/s/ Doug Wise                                                 4-10-02
Doug Wise               V.P. of Sales and Marketing