UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-KSB**





(Mark
      One)





x   Annual
      Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for
      the
      Fiscal Year ended December 31, 2005





o 
Transition
      Report
      Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934





Commission
      File Number  0-31927


LASERLOCK
        TECHNOLOGIES, INC.
 (Exact
        name of registrant as specified in its charter)
  NEVADA
              
              23-3023677(State
                  or other jurisdiction of Incorporation
              
              (IRS
                  Employeror
                  Organization)
              
              Identification
                  No.)
  837
        Lindy
        Lane, Bala Cynwyd, PA 19004
 (Address
        of Principal Executive offices) (Zip Code)
  610-668-1952


(Issuer’s
      Telephone Number, Including Area Code)




Securities
      Registered under Section 12(b) of the Exchange Act: None.




Securities
      registered under Section 12(g) of the Exchange Act:




Common
      stock of $.001 par value per share.




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.




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act  Yes
o  No x




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




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.  o




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




State
      Issuer's Revenues for its most recent fiscal year: $209,158. Aggregate market
      value of the voting stock held by non-affiliates of registrant: $1,518,395
      as of
      January 31, 2006.




Number
      of
      shares outstanding as of January 31, 2006: 63,590,506




Transitional
      Small Business Issuer Format ****  Yes o  No x







**PART
      I**




**ITEM
      1**  **DESCRIPTION
      OF BUSINESS**




ORGANIZATION
      AND CHARTER




LaserLock
      Technologies, Inc. (LaserLock) is a corporation formed under the laws of Nevada
      on November 10, 1999. Our objective is to develop and market technologies that
      will allow for easy product and document authentication and prevent product
      and
      document counterfeiting. The initial amount of authorized capital stock was
      40,000,000 shares of common stock, $0.001 par value per share, and 10,000,000
      shares of preferred stock, $0.001 par value per share.




On
      December 17, 2003, our stockholders approved an amendment and restatement of
      our
      Articles of Incorporation, which increased the authorized number of shares
      of
      common stock from 40,000,000 to 250,000,000, and the authorized number of shares
      of preferred stock from 10,000,000 to 75,000,000 and also provides our board
      of
      directors with the authority to designate rights of, and to issue without
      further action by our stockholders, the 75,000,000 shares of preferred
      stock.




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




Our
      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 that we file
      with the Commission, at the Commission's Public Reference Room, 450 Fifth
      Street, N.W., Washington, D.C. 20549. Information is available from the Public
      Reference Room by calling the Commission at 1-800-SEC-0330. Additionally, the
      Commission maintains an website (http://www.sec.gov) that contains all reports,
      proxy and information statements, and other information that we file
      electronically. Our website is www.laserlocktech.com .




BUSINESS
      OF THE COMPANY




BACKGROUND




Several
      of our patents utilize technology developed by our founder, Norman A. Gardner.
      These patents seek to accomplish non-intrusive document and product
      authentication in order to reduce losses caused by unpermitted document
      reproduction or by product counterfeiting. The technologies involve the
      utilization of invisible inks which are compatible with today's printing
      machines. The invisible inks may be used with certain printing systems such
      as
      offset, flexographic, silkscreen, gravure, and laser. Based upon Mr. Gardner's
      experience, we believe that the invisible ink technologies may be incorporated
      into existing manufacturing processes.




In
      addition to our initial patents, we have filed for four additional patents
      for
      technologies that can be used for or in conjunction with document and product
      authentication. Three of these patents have been issued.




Since
      September of 2001, we have held a four-year exclusive license in the casino
      and
      gambling industry from NoCopi Technologies, Inc., the former employer of Mr.
      Gardner. The four-year exclusive license allows us to utilize a patented
      technology called "Rub & Reveal." This technology utilizes an ink-activating
      system by means of ink changes to certain specified colors when the surface
      is
      rubbed. At the end of the four-year period, the we have the option to renew
      the
      license agreement annually. We plan to develop and market its technologies
      in a
      variety of applications in the fields of product and document authentication
      and
      security. We believe that the technologies we own or license will enable
      businesses to reconstruct their overall approaches to corporate security -
      from
      counterfeit identification to employee or customer monitoring. Potential
      applications of our technologies are available in different types of products
      and industries - e.g., gaming, apparel, tobacco, perfume, compact disks,
      pharmaceuticals, event and transportation tickets, driver's licenses, insurance
      cards, passports, computer software, DVDs, and credit cards. Sales are intended
      to be made either through licensees or directly to end-users.




1


We
      are
      pursuing commercial application of our technologies in the casino and gaming
      industry. We believe that our technologies are applicable to the industry in
      a
      variety of ways - from the detection of counterfeit dice, cards, and chips,
      to
      the verification of cashless tickets from slot machines for fraud.




We
      also
      pursued the advertising and promotion business as it pertains to the gaming
      industry. We have entered into an exclusive contract with an advertising agency
      (Ambient Planet, LTD) to sell advertising on slot tickets distributed as part
      of
      the IGT EZ Pay system and similar systems used on many casinos. The first sale
      of this advertising model was in the fourth quarter of 2005. The results of
      the
      test program indicated that the business model did not perform as anticipated.
      As a result, we do not anticipate pursuing any future sales.





ANTI-COUNTERFEITING
      TECHNOLOGIES AND PRODUCTS




Recent
      developments in copying and printing technologies have made it easier to
      counterfeit a wide variety of documents. Currency, lottery tickets, gift
      certificates, event and transportation tickets, casino slot tickets, and
      travelers' checks are all susceptible to counterfeiting. We believe that losses
      from such counterfeiting have increased substantially with improvements in
      counterfeiting technology. Counterfeiting has long caused losses to
      manufacturers of brand name products, and we believe that these losses have
      increased as the counterfeiting of labeling and packaging has become
      easier.




We
      believe that our document authentication technologies are useful to businesses
      desiring to authenticate a wide variety of printed materials and products.
      Our
      technologies include (1) a technology utilizing invisible ink that can be
      revealed by use of laser light for authentication purposes, (2) a rub technology
      that allows a certain code, message or emblem to be revealed when rubbed, (3)
      an
      inkjet ink technology which allows invisible codes to be printed, and (4) a
      color shifting technology that is activated by certain types of lights. All
      of
      those technologies are intended to be substantially different than pen systems
      that are currently in the marketplace. Pen systems also rely on invisible ink
      that is activated by a special marker. If the item is an original and not an
      invisible print, then the ink will be activated and show a visible mark as
      a
      different color than on an illegitimate copy. We believe that our technologies
      are superior to the pen system technology because, in the case of its laser
      and
      color shifting technologies, it will not result in a permanent mark on the
      merchandise. Permanent marks generally lead to the disposal of the merchandise
      or its sale as a "second" rather than best-quality product. In the case of
      rubbed ink technology, no special tools are required to distinguish the
      counterfeit. Other possible variations of our 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 labeling and
      packaging, our technologies can be used to detect counterfeit products with
      labels and/or in packaging that do not contain the authenticating marks
      invisibly printed on the packaging or labels of legitimate products, as well
      as
      to combat product diversion (i.e., the sale of legitimate products through
      unauthorized distribution channels or in unauthorized markets). We believe
      that
      our 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.




We
      have
      focused on the widespread problem of counterfeiting in the gaming industry.
      We
      have incorporated our technology into traditional gaming accessories such as
      playing cards, casino chips, and dice as well as gaming-based machinery such
      as
      slot machines with cashless gaming systems. This is accomplished during the
      regular manufacturing and printing processes. The protected items can be viewed
      with a laser to reveal the authenticity of the item. These covert authenticating
      technologies are also intended to be marketed to manufacturers of compact discs,
      or CDs, to identify CDs produced by those manufacturers. We believe 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




In
      developing our marketing approach, we have attempted to achieve sufficient
      flexibility in our products and technologies so as to provide cost-effective
      solutions to a wide variety of counterfeiting problems. We intend to generate
      revenues primarily by collecting license fees from manufacturers who incorporate
      our technologies into their manufacturing processes and their products as well
      as the sale of inks, and in the case of cashless gaming systems, via the right
      to sell advertising on the back of cashless gaming tickets.




2


We
      have
      identified a number of key markets for our technologies and products, including
      gaming, document security printers, manufacturers of labels for the apparel
      industry, manufacturers of 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 our personnel or consultants to create end-user demand and utilization of
      licensee sales forces with support from our personnel. We have determined that
      technical sale support by our personnel will be of great importance to
      increasing our licensees' sales of products incorporating our technologies.
      We
      plan to be very committed to providing such support. We anticipate that should
      European sales be made, the technical support could initially be handled from
      the United States. We could eventually open a European support division and
      establish a sales and marketing relationship with a European company 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 as the internet
      makes
      these technologies more available, we intend to maintain an interactive product
      development and enhancement program. We will utilize our research and
      development and marketing skills in order to constantly upgrade and improve
      on
      our technology with the combined efforts of marketing, applications engineering
      and research and development. We believe that these methodologies - whereby
      we
      develop a product, deliver it to the client, receive feedback from the client,
      and change the product based on consumer feedback - will lead to faster
      development cycles for our products. Our objective is to concentrate our efforts
      on developing market-ready products with the most beneficial ratios of market
      potential to development time and cost.




We
      are
      utilizing the extensive contacts of our president, Norman A. Gardner, in the
      counterfeit prevention and detection and gaming industries in an effort to
      effectuate sales.




MANUFACTURING




We
      do not
      have manufacturing facilities. We acquire components from various suppliers
      which are manufactured to our specifications and reprocess these components.
      We
      intend to subcontract the manufacturing of our ink technology to third-party
      manufacturers. Applications of our technology are expected to be effected mainly
      through printing and coating of products with both visible and invisible ink.
      These inks will be custom manufactured for us by a third party. Because some
      of
      the processes that we intend to use in our applications are based on relatively
      common manufacturing techniques, there is no technical or economic reason for
      us
      to invest our own capital in manufacturing facilities at this
      stage.




We
      have
      established a quality-control program that includes laboratory analysis of
      developed technologies. We intend to include as part of this quality control
      program a specially trained technician on site at third-party production
      facilities to monitor the manufacturing process when warranted.




REGULATION




We
      are
      not currently aware of any regulations affecting our products; however, our
      technology is dependent upon an ink-based product. Therefore, it is possible
      that our products will be subject to environmental regulations in the future.




PATENTS
      AND LICENSES




When
      a
      new product or process is developed, we may seek to preserve 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 life span of 20 years from the date of
      application depending on the relevant jurisdiction, 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.




We
      intend
      to extend our patent filings to other countries where doing so is economically
      reasonable, considering the expense of foreign patent applications and the
      increasing level of our activity. Currently, we believe that we will be filing
      for patent protection only in Europe, Australia and one or more countries in
      the
      Far East. 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 our
      patents, if granted, and that, if filed, such a challenge 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 cast into question
      the
      validity of a U.S. patent.




3


We
      continue to develop new anti-counterfeiting technologies and to apply for patent
      protection for these technologies wherever possible. Our current patent
      portfolio consists of four granted patents (one granted in 2002, two granted
      in
      2004 and one granted in 2005) and one patent pending. We believe that some
      of
      the patents that have been granted may have commercial application in the future
      but will require additional capital and/or a strategic partner in order to
      reach
      the potential markets.




Additionally,
      we have licensed our "Rub & Reveal" technology via a renewable license
      agreement 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




We
      have
      been involved in research and development, or R&D, since our inception and
      intend to continue our R&D activities, funds permitting. We hope 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, 2005, we incurred
      costs of $929,022 on R&D. For the year ended December 31, 2005, we incurred
      costs of $148,552 (of which $1,140 represents costs associated with the granting
      of non employee stock options) on R&D. At the current time, we expect to
      spend between $10,000 to $50,000 in cash on R&D during the course of the
      2006 fiscal year. This amount does not include any monies that would be spent
      upon the completion of the acquisition of ExaqtWorld S.A.R.L.




Our
      R&D is done in Glen Mills, Pennsylvania at the facilities of our R&D
      consultant. Our quality control program is run in Raleigh, North Carolina at
      the
      facilities of our technical consultant. The consulting fees paid cover all
      costs
      associated with facility and equipment usage.




PRODUCT
      DEVELOPMENT




To
      date,
      we have made only very limited sales of our products. We have completed
      independent testing and commercial trials with several manufacturers for our
      technologies.




We
      also
      have developed what we believe to be a proprietary trade secret enabling us
      to
      offer our clients the ability to change the combination lock on our lasers
      to
      prevent any breach of security by counterfeiters. This is accomplished by
      changing the reaction between our uniquely formulated code markings in our
      products, and the laser which works to read such markings. The changes are
      made
      via our direct interaction with the client to make slight modifications to
      our
      products. We believe that we are the only company offering such a protection
      to
      our product line.




DESCRIPTION
      OF THE INDUSTRY




Recent
      developments in printing technologies have made it easier to counterfeit a
      wide
      variety of documents. Lottery tickets, gift certificates, event and
      transportation tickets, and travelers' checks are all susceptible to
      counterfeiting, and we believe that losses from such counterfeiting have
      increased substantially due to improvements in technology. Counterfeiting has
      long caused losses to manufacturers of brand name products, and we believe
      that
      these losses have increased as the counterfeiting of labeling and packaging
      has
      become easier.




Other
      possible variations of our technologies involve multiple color responses from
      a
      common laser, visible marks of one color that turn another color with a laser
      or
      other generally available light sources or visible and invisible marks that
      turn
      into a multicolored image. These technologies provide users with the ability
      to
      authenticate documents and detect counterfeit products. Applications include
      the
      authentication of documents having intrinsic value, such as checks, travelers'
      checks, currency, tax stamps, 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).




4


We
      believe 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.




We
      have
      focused initially on the widespread problem of fraud in the gaming industry.
      Through certain initial agreements that we have with some large suppliers to
      the
      gaming industry, our products will use ink that is incorporated into dice and
      casino chips. These products can be viewed with a laser to reveal the
      authenticity of the item. Additionally, we have reached an agreement to have
      our
      technology used on slot tickets in cashless gaming slot machines. In this
      scenario, our Rub & Reveal technology would be utilized to reveal the
      authenticity of a slot ticket prior to its redemption at the
      cashier.




COMPETITION




In
      the
      area of document and product authentication and serialization, we are 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 for which we market our covert
      technologies. These include, among others, biological DNA codes, microtaggants,
      thermochromic, UV and infrared inks, as well as encryption, 2D symbology and
      laser engraving. We are aware of at least twenty-five companies which will
      be
      competing with us in these markets. However, we believe that we have proprietary
      technologies which provide a unique and cost-effective solution to the problem
      of counterfeiting and gray marketing. We are aware of a limited number of
      competitors which are attempting similar approaches to addressing the same
      problems that our 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 our technology. Copy void technologies are
      security devices which have been developed to indicate whether a document has
      been photocopied.




We
      have
      limited resources, and there can be no assurance that businesses with greater
      resources will not enter the market and compete with us.




EMPLOYEES




We
      currently have a five-year employment agreement in place with our president
      and
      chief executive officer, Norman A. Gardner, dated November 5, 2003. Pursuant
      to
      the terms of the employment agreement, Mr. Gardner is entitled to receive (a)
      $150,000 annual base salary payable in semi-monthly installments for each of
      the
      first two 12-month periods and (b) $180,000 annual base salary payable in
      semi-monthly installments for each of the last three 12-month periods. In
      addition to his base salary, Mr. Gardner is eligible to receive a bonus not
      to
      exceed $125,000 in any year during the five-year employment period within which
      our net income (before taxes) exceeds $350,000. In connection with his
      employment agreement, our board of directors granted an option to Mr. Gardner
      to
      purchase up to 2,000,000 shares of our common stock, or common shares, at an
      option price equal to the last sale price at which our common shares were sold
      on the date of the grant ($.20). The option originally vested as follows:
      500,000 common shares vest on December 31, 2003; 250,000 common shares vest
      on
      the date that is one year from the effective date of the employment agreement;
      250,000 common shares vest on the date that is two years from the effective
      date
      of the employment agreement; 500,000 common shares vest on the date that is
      three years from the effective date of the employment agreement; and 500,000
      common shares vest on the date that is four years from the effective date of
      the
      employment agreement. On December 13, 2005, our board of directors approved
      an
      amendment to this option to reduce the option price to the last sale price
      at
      which our common shares were sold on December 13, 2005 ($.03), extend the
      expiration date to December 13, 2015 and provide for vesting of the common
      shares subject to the option in 36 equal monthly installments beginning December
      15, 2005. Also on December 13, 2005, our board of directors approved an
      amendment to two options granted to Mr. Gardner on January 1, 2001 and January
      2, 2001, respectively, to purchase an aggregate of 500,000 common shares
      pursuant to our original stock option plan in order to make the option price,
      term and vesting provisions identical to those of the amended 2,000,000 share
      option granted to Mr. Gardner in connection with his employment agreement.
      In
      addition, in April 2004, Mr. Gardner was granted an option to purchase 2,500,000
      common shares at an exercise price of $.06. The option expires in June 2009
      and
      vests in 27 equal monthly installments from April 2004 to June 2006. Pursuant
      to
      a resolution passed our board of directors, on April 21, 2005, Mr. Gardner
      was
      granted options to purchase 450,000 common shares at the last sale price at
      which our common shares were sold on April 21, 2005 ($.075). The option expires
      April 21, 2010 and was exercisable immediately. Our board granted Mr. Gardner
      3,000,000 common shares in consideration for services provided to us on December
      15, 2005.




5


If
      and
      when we hire full time employees other than our president, Norman A. Gardner,
      all full-time employees shall be entitled to health, life, accident and
      disability insurance plans, and any profit-sharing or retirement plans and
      stock
      option plans that we make available. We have one part-time employee, our
      secretary.




INDEPENDENT
      CONTRACTORS




We
      have
      consulting contracts with two key independent contractors who are being
      compensated via consulting fees and stock options. The contract with Howard
      Goldberg was terminated on December 22, 2005.




Howard
      Goldberg




Howard
      Goldberg has been a private investor and has provided consulting services to
      startup companies since 1999. From 1994 through 1998, Mr. Goldberg served as
      president and chief executive officer of Player's International, a public
      company in the gaming business, prior to its being sold to Harrah's
      Entertainment Inc. In addition, from 1995 to 2000, Mr. Goldberg served on the
      board of directors of Imall Inc, a public company that provided on-line shopping
      and which was ultimately sold to Excite-at-Home. He currently serves on the
      board of directors of Shelbourne Properties, Shelbourne Properties II, and
      Shelbourne Properties III, each of which is an American Stock Exchange-listed
      real estate investment trust. He serves on the audit committee of each of these
      companies. Mr. Goldberg also serves on the board of trustees of First Union
      Realty Investment Trust and is a member of the audit committee. Mr. Goldberg
      has
      a law degree from New York University and was previously the managing partner
      of
      a large New Jersey law firm.




On
      October 8, 2003, we extended an offer to Howard Goldberg to serve in a
      consulting capacity as our chief operating officer. Pursuant to the terms of
      the
      engagement letter, Mr. Goldberg performed the services customarily performed
      by
      a chief operating officer of a business and devoted substantial time and effort
      with respect to our development for a term of 12 months, subject to the ability
      to extend the term of the engagement by mutual agreement. This contract had
      been
      extended to June 30, 2006. Mr. Goldberg was and is not an employee of LaserLock.
      Effective as of September 1, 2003, Mr. Goldberg has received compensation of
      $12,500 per month, which base compensation continued during the term of the
      engagement. In addition, the Board has granted stock options to Mr. Goldberg
      for
      his services. Mr. Goldberg was granted an option to acquire 3,056,662 shares
      of
      our common stock, or common shares, representing approximately 7.5% of the
      fully
      diluted common shares outstanding as of October 8, 2003. The purchase price
      for
      the common shares issuable upon the exercise of Mr. Goldberg's option is $0.07
      per common share. The option will be exercisable for 10 years from the date
      of
      grant and includes a cashless exercise feature whereby the option will vest
      and
      become exercisable on the following basis: (1) 25% became exercisable upon
      the
      execution of the engagement agreement, (2) 6% vested on December 31, 2003 and
      an
      additional 6% vests at the end of each three-month period during which Mr.
      Goldberg performed or performs services for us beginning September 1, 2003
      and
      (3) the balance of the options will vest upon the achievement (as determined
      by
      our board of directors) of certain qualitative objectives related to the
      development and implementation of the slot ticket advertising plan. Because
      of
      the qualitative nature of the objectives, our board of directors, in its sole
      discretion, determines whether such objectives have been achieved. In April
      2004
      Mr. Goldberg was granted an option to purchase an additional 1,700,000 common
      shares at a purchase price of $.06 per common share. The option expires in
      March
      2014 and vests in 27 equal monthly installments beginning in April 2004. On
      April 21, 2005, Mr. Goldberg was granted options to purchase 450,000 common
      shares at $.075. These options expire April 21, 2010 and became fully
      exercisable on April 21, 2005.




6


On
      December 22, 2005 our board of directors approved an agreement with Mr. Goldberg
      terminating his compensation as a business advisor to us as of January 1, 2006.
      In consideration of this agreement, our board of directors amended certain
      terms
      of Mr. Goldberg’s options. The option price for Mr. Goldberg’s option
      exercisable into 3,065,662 common was reduced to the last price at which our
      common shares were sold on December 22, 2005 ($.03). The unvested portion of
      these options as of January 1, 2006 will vest in six equal monthly amounts
      ending June 30, 2006. The option price for Mr. Goldberg’s option exercisable
      into 1,700,000 common shares was reduced to the last price at which our common
      shares were sold on December 22,2005 ($.03). The unvested portion of these
      options as of January 1, 2006 will vest in six equal monthly amounts ending
      June
      30, 2006. The option price for Mr. Goldberg’s option exercisable into 450,000
      common shares was reduced to last price at which shares were sold on December
      22, 2005 ($.03) and became immediately vested.




Harvey
      Goldberg




Harvey
      Goldberg has held senior financial executive positions at several public and
      private companies. His vast experience includes many types of transactions,
      including acquisitions, divestitures, public offerings, private placements,
      banking arrangements and extensive contract negotiation. Since 1994, he has
      been
      a consultant to several start-up companies, including some involved in the
      Internet, computer components and direct marketing. From 1986 to 1993, he was
      the senior vice president and chief financial officer of Players International,
      a gaming-related company. From 1982 to 1986, he served as senior vice president
      and chief financial officer of Paul Marshall Products, an import company. From
      1971 to 1982, he was vice president and controller of Marcade Group, a retail
      and manufacturing company. From 1970 to 1971, he was the assistant controller
      of
      Revlon, and from 1966 to 1970, he held various accounting positions at CBS.
      Prior to joining CBS in 1966, Mr. Goldberg was employed in public accounting,
      where he became a Certified Public Accountant. He has a B.S. in Accounting
      from
      Brooklyn College (now part of the City University of New York). Mr. Goldberg
      currently serves as treasurer and a member of the board of directors of the
      Tarzana Improvement Association, a business improvement district located in
      Los
      Angeles, California. He also has been elected to the board of governors of
      the
      Tarzana Neighborhood Council and serves as its treasurer.




We
      entered into a consulting agreement with Mr. Goldberg to perform services for
      us
      as a business advisor to help develop business models and to assist with other
      business planning functions as mutually agreed upon by management and by Mr.
      Goldberg. The consulting agreement with Mr. Goldberg currently expires June
      30,
      2006.




In
      October 2003, Mr. Goldberg was granted an option to purchase 200,000 of our
      common shares at $.07 per share. These options vested in six equal monthly
      installments beginning October 2003 and expire in October 2013. In April 2004,
      Mr. Goldberg was granted an option to purchase an additional 800,000 common
      shares at a purchase price of $.06 per share. This option expires in March
      2014
      and vests in 27 monthly installments beginning in April 2004.




On
      December 22, 2005 the Board approved amendments to Mr. Goldberg’s options. The
      amendments reduced the option price to the last price at which our common shares
      were sold on December 13,2005 ($.03). 1/36 of the common shares subject to
      Mr.
      Goldberg’s options became exercisable on the date they were granted to Mr.
      Goldberg. The balance of the common shares subject to Mr. Goldberg’s options are
      exercisable in 35 equal monthly amounts beginning January 15, 2006.




Thomas
      A.
      Nicolette




Thomas
      A.
      Nicolette served as chairman, president and chief executive officer of several
      public and private companies in the electronic security systems sector, the
      most
      notable being Knogo Corporation, a multinational company present in 32 countries
      with more than 4,000 employees, which was sold to Sensormatic Electronics,
      now a
      part of Tyco International.. He holds a degree in Criminal Justice from Michigan
      State University, an MBA in International Management from Shepperton University
      in London and also is an inventor of eight patents connected to security and
      authentication products. In the past 5 years, Mr. Nicolette has been active
      in
      the authentication industry as chief executive officer of DNA Technologies,
      Inc.
      which he sold to a Canadian public company, CrossOff, Inc. Mr. Nicolette
      currently serves on the board of directors of Identif GmbH, based in Erlangen,
      Germany and SenTech EAS Corporation, based in Pompano Beach, Florida..





7


In
      February 2005, we entered into a six-month agreement with the Nicolette
      Consulting Group Limited utilizing the services of Mr. Nicolette. The agreement
      contemplated that Nicolette Consulting Group Limited would provide sales and
      marketing services to us. These services were expanded to include strategic
      planning and long term objectives. In July 2005 and February 2006, the contract
      was extended for subsequent six month periods with the understanding that Mr.
      Nicolette would provide executive services to us, although he would not be
      an
      officer of LaserLock. We paid Nicolette Consulting Group Limited $12,500 per
      month for the services of Mr. Nicolette through January 2006. Beginning February
      2006, the amount was increased to $15,000 per month. If and when the acquisition
      of ExaqtWorld S.A.R.L. is completed, we will appoint Mr. Nicolette as our
      president and chief executive officer as well as a one of our directors.




On
      December 13, 2005 we granted Mr. Nicolette options to purchase 1,000,000 common
      shares at the last price at which our common shares were sold on December 13,
      2005 ($.03). These options expire on December 13, 2015 and vest in 36 equal
      monthly amounts beginning December 15, 2005.




We
      have
      also entered into contracts or agreements with other consultants to provide
      R
& D and distribution services.




RISK
      FACTORS




STATEMENT
      REGARDING FORWARD-LOOKING STATEMENTS




The
      Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
      forward-looking statements. We desire to take advantage of certain "safe harbor"
      provisions of this act and are including this special note to enable us to
      do
      so. This document contains forward-looking statements that reflect the our
      views
      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. We undertake 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 active trading market for our common stock and there is no assurance that
      such a market will develop, or if such a market develops, that it will be
      maintained. Holders of the shares may, therefore, have difficulty in selling
      their shares of common stock should they desire to do so and should be able
      to
      withstand the risk of holding their shares indefinitely.




PENNY
      STOCK RULES




We
      believe that shares of our common stock will be subject to the Penny Stock
      Rules
      promulgated under the Securities Exchange Act of 1934, as amended, due to its
      price being less than $5.00 per share. If we 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.




8


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 our securities. While our common
      stock remains subject to the Penny Stock Rules, investors may find it more
      difficult to sell our 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 need to raise more
      capital. Our ability to continue in business and effectively implement our
      plans
      depend upon our ability to raise additional funds. There is no assurance that
      additional funding will be obtainable in amounts or on terms favorable or
      acceptable to us. The capital resources required to develop each new product
      are
      significant..




We
      completed an offshore placement raising approximately $1,400,000 in 2003 and
      a
      Regulation D and offshore placement raising approximately $960,000 in 2004.




We
      recently commenced a private placement of up to $800,000 principal amount of
      10%
      senior secured convertible promissory notes due twelve months from the date
      of
      issue to certain of our shareholders and other accredited investors. Purchasers
      of notes will be issued 10 year warrants exercisable into Laserlock’s shares at
      an exercise price of $0.01 per share. In addition, if we complete an equity
      financing with total proceeds of more than $5,000,000 while any notes are
      outstanding, holders of notes will have the right, at their option, to convert
      the outstanding principal and interest of the notes into shares at a discount
      of
      30% of the price per share in the financing. The notes are secured by a first
      priority lien on all of the tangible and intangible personal property of
      LaserLock. The private placement will rely upon applicable exemptions from
      registration under Section 4(2) of the Securities Exchange Act of 1934, as
      amended, and Section 506 of Regulation D promulgated thereunder.




In
      connection with the private placement, on February 13, 2006, we entered into
      a
      Senior Secured Convertible Note and Warrant Purchase Agreement with Nob Hill
      Capital Partners, L.P., under which the we issued and sold to Nob Hill Capital
      Partners, L.P. a note in the principal amount of $100,000 and a warrant
      exercisable into 1,000,000 of LaserLock’s shares and entered into a security
      agreement granting Nob Hill Capital Partners, L.P. a security interest in our
      tangible and intangible personal property as security for LaserLock’s
      obligations under the note. The note and warrant were issued in reliance upon
      applicable exemptions from registration under Section 4(2) of the Securities
      Exchange Act of 1934, as amended, and Section 506 of Regulation D promulgated
      thereunder.





We
      may
      issue additional notes in the aggregate principal amount of up to $700,000
      and
      warrants exercisable into up to 7,000,000 shares in the offering after February
      13, 2006.





In
      addition to the above notes, in order to implement our strategy, it will be
      necessary for us to raise additional capital and/or enter into strategic
      alliances or partnerships. There can be no assurances that such capital or
      strategic alliances or partnerships will be available and, if available, that
      we
      will be able to secure such capital or arrangements on acceptable
      terms.




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 limited revenue, limited operating history, and
      limited salable product. We are subject to the same types of risks that many
      new
      businesses 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 2005 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 be paid either out of the proceeds of this or future offerings of our
      securities or out of our generated revenues and profits, if any. The
      availability of funds from either of these sources cannot be ensured.




9


GENERAL
      RISKS OF THE COUNTERFEIT PREVENTION INDUSTRY




The
      industry in which we intend to compete is subject to the traditional risks
      faced
      by any industry 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 federal, state and local chemical processing
      controls; consumer product liability claims; and 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, including 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 for 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 to 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
      material 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 and 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. If we are unable to hire or maintain
      similarly positioned staff again in the future, we could experience material
      adverse effects.




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.




10


PATENTS;
      INTELLECTUAL PROPERTY




Pursuant
      to an employment agreement signed in 1999 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 four patent applications in the
      United States. The initial application and three of the other applications
      have
      been allowed and a corresponding international, or 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 license
      relationships.




PRIOR
      RELATIONSHIPS OF OUR PRESIDENT




Norman
      A.
      Gardner, our president, founded NoCopi Technologies, Inc., or 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.




We
      view
      NoCopi as one of our competitors in our marketplace in that 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. Mr. Gardner's termination agreement with NoCopi does
      not
      impose a post-termination restrictive covenant upon Mr. Gardner, and Mr. Gardner
      has assured us that he has not divulged, furnished or made accessible, and
      will
      not divulge, furnish, or make accessible, to anyone any confidences or secrets
      of NoCopi in violation of the agreement. Furthermore, we have a working
      relationship with NoCopi, and have licensed certain technologies from NoCopi
      for
      a four-year period beginning in 2001, which automatically renews each year
      after
      the initial period.




RULE
      144
      SHARES




A
      majority of our shares outstanding as of December 31, 2005 (approximately
      48,535,013 shares, or 80.1%) were issued on the date of our 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 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 our shares, or the average weekly
      trading volume, if any, of our shares during the 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 shares. Rule 144 also provides that
      after holding restricted securities for a period of two (2) years, our
      affiliates 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 our shares, or
      the
      average weekly trading volume, if any, in our shares during the four calendar
      weeks preceding the filing of a Form 144 relating to such a sale. Such sales,
      if
      made under certain circumstances, would depress the market price and render
      difficult the sale of our securities purchased hereunder. Certain of our
      outstanding shares were to be eligible for sale pursuant to Rule 144 as of
      November 2000.




11


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 and president, Norman A. Gardner. Mr.
      Gardner's continued involvement is particularly critical to us. In the event
      Mr.
      Gardner is unavailable, it would have a material adverse effect on our
      operations. At this time, we have an employment agreement with Mr. Norman A.
      Gardner, our chief executive officer and president. We have 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 will be able to find suitable management
      personnel or that we will have the financial resources to attract or retain
      such
      people if found.




If
      and
      when the acquisition of ExaqtWorld S.A.R.L., or Exaqt, is completed, we will
      also become dependent on Mr. Alain Favier, the co-founder of Exaqt and Mr.
      Thomas A. Nicolette, currently a consultant to us. In connection with the
      acquisition of Exaqt, we plan to enter into long term employment and/or
      consulting agreements with both Mr. Favier and Mr. Nicolette. The loss of the
      services of either Mr. Favier or Mr. Nicolette would have a material adverse
      effect on our operations and prospects.




INDEMNIFICATION




Our
      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 he
      is
      or was a director, officer or employee of LaserLock, against reasonable
      expenses, including legal fees, actually or necessarily incurred by him in
      connection with the defense of such action, suit or proceedings or in connection
      with any appeal thereof. Currently, we spend $24,486 annually on its directors
      and officers liability insurance for a policy which has a limit of $1,000,000




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 cannot guarantee that future technological developments will not
      result in the obsolescence of our technologies.




DEPENDENCE
      UPON MARKETING




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




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.




12


RISKS
      ASSOCIATED WITH OUR ABILITY TO CONTINUE AS A GOING CONCERN




We
      have
      no operating history, have limited sales, have incurred operating losses since
      inception and require additional capital to continue our operations and
      implement our business plans. Our certifying accountants have issued a going
      concern qualification in their report for the year ended December 31, 2005.
      Although we intend to raise money, implement sales, and become profitable,
      if we
      fail to achieve any one of these goals, then it is unlikely that we will be
      successful, and very likely that we will become insolvent or otherwise forced
      to
      close our doors. If this occurs, it will have a material adverse effect on
      our business and any results of operations.




LACK
      OF
      DIVERSIFICATION




Our
      proposed operations, even if successful, will in all likelihood result in our
      engaging in a business which is concentrated in only one industry. Consequently,
      our activities will be limited to the anti-counterfeiting industry. Our
      inability to diversify our activities into a number of areas may subject us
      to
      economic fluctuations within a particular business or industry and, therefore,
      increase the risks associated with our operations. Our acquisition of ExaqtWorld
      S.A.R.L., if completed, will expand its product line but still leave it with
      a
      concentration in the security sector.




**ITEM
      2.**  **DESCRIPTION
      OF PROPERTY**




Our
      office is presently located in 1000 sq. ft. in space owned by its president,
      Norman A. Gardner, at 837 Lindy Lane, Bala Cynwyd, PA 19004. We pay no rent
      for
      the use of this space.




We
      have
      been assigned each patent and the rights to the additional patent application
      submitted by our president, Norman A. Gardner and our various consultants.
      We
      believe that the granting of our patent application will enhance our position
      in
      the market place, but that even if not granted, we will be able to compete
      effectively in the market place by utilizing non-competition and confidentiality
      terms in contracts it will enter into with future employees or consultants,
      and
      non-disclosure and non-analysis agreements given to all of our potential
      suppliers and customers.




Our
      patents generally relate to anti-counterfeiting and product authentication.
      The
      patents may be used in anti-counterfeiting, product authentication or other
      areas. In general, our technologies relate to color shifting of inks or the
      use
      of invisible inks that appear though the use of various types of light sources.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




There
      are
      no material legal proceedings pending or, to our knowledge, threatened
      against us.




**ITEM
      4.**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**




Not
      applicable.




**PART
      II**




**ITEM
      5.**  **MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS**




MARKET
      INFORMATION




Our
      common stock is quoted on the OTC 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, 2005 and December 31, 2004. These quotations reflect inter-dealer
      prices, without retail mark-up, markdown or commissions, and may not reflect
      actual transactions.







13






2005
            
            High
            
            LowFourth
                Quarter
            
            $
            .06
            
            $
            .022Third
                Quarter
            
            $
            .072
            
            $
            .05Second
                Quarter
            
            $
            .083
            
            $
            .056First
                Quarter
            
            $
            .13
            
            $
            .072004Fourth
                Quarter
            
            $
            .10
            
            $
            .05Third
                Quarter
            
            $
            .05
            
            $
            .13Second
                Quarter
            
            $
            .17
            
            $
            .09First
                Quarter
            
            $
            .44
            
            $
            .16







HOLDERS




As
      of
      December 31, 2005, we had 154 stockholders of record of our common stock. Such
      number of record holders was derived from the records maintained by our transfer
      agent, Interwest Stock Transfer Company, Inc and Cede and Co.




DIVIDENDS




To
      date,
      we have not declared or paid any cash dividends and do not intend to do so
      in
      the foreseeable future. We intend to retain all earnings, if any, to finance
      the
      continued development of our business. Any future payment of dividends will
      be
      determined solely by our board of directors.




Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights
              (a)
            
            Weighted
                average exercise price of outstanding options, warrants and
                rights
              (b)
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Equity
                compensation plans approved by security holders
            
            
            14,006,662
            (1)
            
            .05
            
            
            3,993,338
            (1)Equity
                compensation plans not approved by security holders
            
            
            3,814,632
            (2)
            
            .19
            
            
            --Total
            
            
            17,821,294
            
            
            .08
            
            
            3,993,338




(1)
              The
                  stockholders approved the LaserLock Technologies, Inc. 2003 Stock
                  Option
                  Plan at the special meeting of stockholders on December 17,
                  2003.
 (2)
              These
                  options were granted by the Company to certain consultants and
                  advisors
                  upon approval from the Board of
                  Directors.




Our
      consolidated financial statements, which are attached to this report, contain
      a
      description of LaserLock’s equity compensation plans not approved by our
      security holders.




**ITEM
      6.**  **MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS** ****




The
      following Management’s Discussion and Analysis should be read in conjunction
      with our audited financial statements and notes thereto contained elsewhere
      in
      this report on form 10-KSB.




14


This
      discussion, analysis and other sections of this report contain, in addition
      to
      historical information, forward-looking statements within the meaning of the
      Private Securities Litigation Reform Act of 1995. Forward-looking statements
      involve known and unknown risks, uncertainties and other factors, which may
      cause our actual results, performance or achievements expressed or implied
      by
      these forward-looking statements to differ materially from such forward-looking
      statements. The forward-looking statements included in this report may prove
      to
      be inaccurate. These statements are based on a number of assumptions concerning
      future events, and are subject to a number of uncertainties and other factors,
      many of which are outside our control. Actual results may differ materially
      from
      such statements for a number of reasons, including the effects of regulation
      and
      changes in capital requirements and funding. In light of the significant
      uncertainties inherent in these forward-looking statements, you should not
      consider this information to be a guarantee by us or any other person that
      our
      objectives and plans will be achieved. We do not undertake to publicly update
      or
      revise our forward-looking statements even if our experience or future
      changes make it clear that any projected results (expressed or implied) will
      not
      be realized.




OVERVIEW




We
      are a
      technology licensing company which licenses our 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. We receive royalties on volume usage of our
      technology from third parties who sell products incorporating such technologies.
      We intend to require, whenever possible, minimum annual royalties to enter
      into
      these licensing agreements.




Beginning
      in early 2003, we began to refocus our goals and alter our business plans.
      Initially, the plan was to primarily market anti-counterfeiting solutions to
      the
      gaming industry. In 2003, we restructured our management team and refocused
      our
      short and long-term goals.




We
      offer
      security solutions to the gaming industry through third parties. These third
      parties sell to the gaming industry various supplies and services. We have
      licensed to these companies our technology receiving royalty payments, and
      selling to the same companies inks and pigments that are used to detect
      counterfeit products and documents. The third parties incorporate our technology
      into the products they sell to the gaming industry. By the end of fiscal year
      2003, we had signed agreements to provide technology for the protection of
      playing cards, dice, and casino chips from fraud with Gaming Partners
      International (formerly known as Bud Jones, Bourgogne et Grasset, and Paul
      Son)
      and CoPAG U.S.A. Inc. The agreement with Gaming Partners International is still
      in effect. The agreement with CoPAG expired in September 2005 and was not
      renewed. In addition, we supply technology for the protection of slot tickets
      from fraud.




We
      have
      also made a commitment to sell advertising on the back of slot tickets in the
      cashless ticket-in ticket-out slot machines such as those using the EZ Pay
      system developed by IGT. We signed an agreement with Ambient Planet, Ltd.
      (“Ambient”), a media and marketing company, in February 2004. The agreement was
      extended by mutual consent in September 2004 through September 2007. The first
      sale of this advertising model was in the fourth quarter of 2005. The results
      of
      the test program indicated that the business model did not perform as
      anticipated. As a result, we do not anticipate pursuing any future sales.




In
      January 2005, we entered into an agreement with Enigma Importacao e Exportacco
      Ltdn. (“Enigma”), in which we granted Enigma four, three-month options, to
      develop in Brazil uses for our pending patent. During each option period Enigma
      will pay us a fee and purchase product to be used in testing and development
      of
      the products. At the end of the option period Enigma has the right to enter
      into
      a license agreement with us based on a minimum license fee and purchase price
      of
      product that includes a built in royalty. Enigma did not exercise the last
      three-month option. Several tests have been conducted by Enigma, potential
      customers and/or their agents that indicate use of our technology might be
      commercially feasible. One potential customer advised Enigma that our technology
      is acceptable for their use. LaserLock and Enigma continue to work together
      in
      anticipation of developing commercial applications in Brazil, however, to date,
      no contracts have been entered into for the commercial use of this technology.




In
      February 2005 we entered into a six-month agreement with the Nicolette
      Consulting Group Limited (“NCG”) utilizing the services of Thomas A. Nicolette,
      its principal. The agreement anticipated that NCG would mainly provide sales
      and
      marketing services to LaserLock. During the initial term these services were
      expanded to include strategic planning and the longer-term objectives. In July
      2005 and February 2006, the contract was extended for further six month periods
      with the understanding that Mr. Nicolette would, in addition to his sales and
      marketing services, provide services similar to those of a senior executive,
      although he would not be an officer of LaserLock.




15


On
      December 13, 2005 we signed a Letter of Intent (“LOI”) to acquire a minimum of
      95% of the outstanding shares of ExaqtWorld S.A.R.L. (“Exaqt”) based in Paris,
      France for 36.6% of the outstanding shares of LaserLock (assuming 100% of the
      shares of Exaqt are tendered). With the acquisition of Exaqt we will own the
      worldwide rights in the security sector of a fundamental patent to manufacturer
      multi-tech Electronic Article Surveillance (“EAS”) systems, which simultaneously
      detect multiple EAS frequencies (RF, EM, AM and RFID). The multi-tech EAS
      systems allow the seamless integration of source tagging of products at the
      manufacturing level of the supply chain of the retail industry. The LOI is
      subject to the signing of a definitive agreement between Exaqt and us. The
      standstill agreement contained in the LOI currently expires April 13, 2006.
      It
      will be necessary for us to obtain sufficient funding to successfully operate
      and expand the business of Exaqt. When the acquisition of Exaqt is completed,
      Thomas A. Nicolette, a consultant to us, will receive approximately 38% of
      the
      shares to be issued in this transaction. Also, Mr. Nicolette will become
      President and Chief Executive Officer and a Director of LaserLock upon the
      completion of the transaction.




We
      continue to develop new anti-counterfeiting technologies and to apply for patent
      protection for these technologies wherever possible. Our current patent
      portfolio consists of four granted patents (one granted in 2002, two granted
      in
      2004 and one granted in 2005) and one patent pending. Management believes that
      some of the patents that have been granted may have commercial application
      in
      the future but will require additional capital and/or a strategic partner in
      order to reach the potential markets.




We
      are
      currently exploring the uses of our technologies in general industry and
      government. We, whenever possible, will use licenses and strategic partners
      that
      currently service those industries who will pay royalties and/or a share of
      the
      revenues/profits from their use of our technology.




In
      the
      second quarter of 2004, we raised $933,481, net of expenses, in additional
      capital.




We
      recently commenced a private placement of up to $800,000 principal amount of
      10%
      senior secured convertible promissory notes due twelve months from the date
      of
      issue to certain of our shareholders and other accredited investors. Purchasers
      of notes will be issued 10-year warrants exercisable into LaserLock’s shares at
      an exercise price of $0.01 per share. In addition, if an equity financing with
      total proceeds of more than $5,000,000 occurs while any notes are outstanding,
      holders of notes will have the right, at their option, to convert the
      outstanding principal and interest of the notes into shares at a discount of
      30%
      of the price per share in the qualified financing. The notes are secured by
      a
      first priority lien on all of the tangible and intangible personal property
      of
      LaserLock. The private placement will rely upon applicable exemptions from
      registration under Section 4(2) of the Securities Exchange Act of 1934, as
      amended, and Section 506 of Regulation D promulgated thereunder.




In
      connection with the private placement, on February 13, 2006, we entered into
      a
      Senior Secured Convertible Note and Warrant Purchase Agreement with Nob Hill
      Capital Partners, L.P., under which the we issued and sold to Nob Hill Capital
      Partners, L.P. a note in the principal amount of $100,000 and a warrant
      exercisable into 1,000,000 of LaserLock’s shares and entered into a security
      agreement granting Nob Hill Capital Partners, L.P. a security interest in
      Laserlock’s tangible and intangible personal property as security for
      LaserLock’s obligations under the note. The note and warrant were issued in
      reliance upon applicable exemptions from registration under Section 4(2) of
      the
      Securities Exchange Act of 1934, as amended, and Section 506 of Regulation
      D
      promulgated thereunder.





Additional
      notes in the aggregate principal amount of up to $700,000 and warrants
      exercisable into up to 7,000,000 shares may be issued by LaserLock in the
      offering after February 13, 2006. As of March 24, 2006, we sold an aggregate
      of
      $580,000 in notes and issued 5,800,000 in warrants, including Nob Hill Capital
      Partners, L.P.





In
      addition to the above notes, in order to implement our strategy, it will be
      necessary for us to raise additional capital and/or enter into strategic
      alliances or partnerships. There can be no assurances that such capital or
      strategic alliances or partnerships will be available and, if available, that
      we
      will be able to secure such capital or arrangements on acceptable
      terms.





16


RESULTS
      OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005 AS COMPARED TO THE YEAR
      ENDED
      DECEMBER 31, 2004




Since
      we
      were and currently still are in our startup stages it is difficult for us to
      forecast our 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 near future due to our
      attempts to cultivate business relationships over the past year.




As
      a
      result of our limited operating history, we do not have meaningful historical
      financial data on which to base planned operating expenses. Thus, annual revenue
      and results of operation are difficult to project.




For
      the
      year ended December 31, 2005, we had sales and royalties revenues of $209,158,
      as compared to $108,187 for the year ending December 31, 2004. The increase
      results primarily from increased royalty fees from the use of our casino chip
      security systems in several new gaming casinos and license fees paid to us
      during the development process of new business in Brazil.




Our
      research and development costs aggregated approximately $148,552 for the year
      ended December 31, 2005 as compared to $310,615 for the year ended December
      31,
      2004, a decrease of $162,063. This decrease is substantially the result of
      lower
      non-employee stock option expense of $211,000 for options granted to technology
      consultants partially offset by increases in the cost of products sold in 2005
      of $40,283.




Our
      patent costs were $5,375 for 2005. There was no expense for 2004. This expense
      is the cost for maintaining the patents that have been issued to the
      company.




Our
      legal
      and accounting costs aggregated approximately $124,437 for the year ended
      December 31, 2005 as compared to $149,322 for the year ended December 31, 2004,
      a decrease of $24,885. This decrease relates primarily to lower costs incurred
      for outside legal counsel of approximately $15,000 and lower accounting, tax
      and
      auditing fees of approximately $10,000.




Our
      sales
      and marketing costs aggregated $809,667 for the year ended December 31, 2005
      as
      compared to $684,044 for the year ended December 31, 2004 an increase of
      $125,623. This increase results from increases in the expense of
      marketing-related non-employee stock options of $84,722 and from an expansion
      of
      the use of marketing consultants.




Our
      general and administrative costs aggregated $393,314 for the year ended December
      31, 2005 as compared to $376,634 for the year ended December 31, 2004, an
      increase of $16,680 The significant variances between 2005 and 2004 were as
      follows: the current year included increased expenses from 2004 for salaries
      and
      related payroll costs of approximately $30,000 principally as a result of the
      issuance of a stock grant to the President, insurance costs of approximately
      $15,000 and increases in general administrative expenses of approximately
      $53,000. These increases were partially offset by a reduction of $81,700 from
      non-employee stock options.




The
      net
      loss for 2005 was $1,266,811 or $0.02 per share. This compares to a net loss
      of
      $1,406,506 or $0.03 for 2004.




LIQUIDITY
      AND CAPITAL RESOURCES




Our
      cash
      balance at December 31, 2005 of $6,705 was $669,888 less than the $676,593
      as of
      December 31, 2004. Working capital at December 31, 2005 was a negative $245,984
      representing a decrease in working capital of $924,926 from December 31, 2004.
      This decrease in cash and working capital relates principally to the cash
      portion of our net loss for the year ended December 31, 2005.




Our
      cash
      flow from operations, since inception, has been and continues to be negative.
      We
      continue to attempt to solicit customers and expect to continue to expend funds
      in excess of our revenues during the balance of the current year.




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 any current and future
      patent claims and other intellectual property rights, competing technological
      and marketing of our products. In the event our plans change or our 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), we could be required to obtain additional funds
      through equity or debt financing, through strategic alliances with corporate
      partners and others, or through other sources in order to bring our products
      through to commercialization. We do 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
      aspect of our operations or attempt to obtain funds through arrangements with
      collaborative partners or others that may require us to surrender rights to
      certain of our technologies, product development projects, certain products
      or
      existing markets. Specifically, if we are unable to consummate sales, we may
      have to delay our anticipated marketing and delivery dates, scale back our
      third-party production capabilities or eliminate certain areas of further
      research and development. If adequate funds are not available, our business,
      financial condition, and results of operations will be materially and adversely
      affected.




17


On
      March
      10, 2004, we began seeking to raise up to approximately $2 million in capital
      through the issuance of additional shares of our stock in transactions that
      are
      exempt from the registration requirements under the Securities Act of 1933,
      as
      amended. As of June 30, 2004, we had raised $933,481 through the issuance of
      18,600,000 shares of common stock in these transactions. We ceased our efforts
      to sell additional shares because we consider the price of our shares
      unsatisfactory for such efforts. In the future, there can be no assurance given
      that we will be successful in raising additional capital through similar
      transactions.




We
      recently commenced a private placement of up to $800,000 principal amount of
      10%
      senior secured convertible promissory notes due twelve months from the date
      of
      issue to certain of our shareholders and other accredited investors. Purchasers
      of notes will be issued 10-year warrants exercisable into LaserLock’s shares at
      an exercise price of $0.01 per share. In addition, if an equity financing with
      total proceeds of more than $5,000,000 occurs while any notes are outstanding,
      holders of notes will have the right, at their option, to convert the
      outstanding principal and interest of the notes into shares at a discount of
      30%
      of the price per share in the qualified financing. The notes are secured by
      a
      first priority lien on all of Laserlock’s tangible and intangible personal
      property. The private placement will rely upon applicable exemptions from
      registration under Section 4(2) of the Securities Exchange Act of 1934, as
      amended, and Section 506 of Regulation D promulgated thereunder. As of March
      24,
      2006, we sold an aggregate of $580,000 in notes and issued 5,800,000 in
      warrants.







In
      addition to the above notes, in order to implement our strategy, it will be
      necessary for us to raise additional capital and/or enter into strategic
      alliances or partnerships. There can be no assurances that such capital or
      strategic alliances or partnerships will be available and, if available, that
      we
      will be able to secure such capital or arrangements on acceptable
      terms.







Our
      actual research and development and related activities may vary significantly
      from current plans depending on numerous factors, including changes in the
      costs
      of such activities from current estimates, the results of our research and
      development programs, the results of clinical studies, the timing of regulatory
      submissions, technological advances, determinations as to commercial potential,
      the status of competitive products and the availability of sufficient funds
      to
      achieve our goals. We expect to expend between $10,000 and $50,000 in cash
      on
      our research and development program for fiscal 2006. This amount does not
      include any provision for research and development activities as a result of
      the
      acquisition of Exaqt. Our research and development plans over the next year
      include the application of our product to additional materials, as well as
      improving our existing products in conjunction with client feedback and the
      commercialization of new products. The focus and direction of our operations
      also will be dependent upon the establishment of collaborative arrangements
      with
      other companies.




Our
      current policy is to invest our 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 we will be able to commercialize our technologies or that
      profitability will ever be achieved. We expect that our operating results will
      fluctuate significantly from year to year in the future and will depend on
      a
      number of factors, most of which are beyond our control.




18


OFF
      BALANCE SHEET ARRANGEMENTS




As
      of
      December 31, 2005, we did not have any off-balance sheet arrangements as defined
      in Item 303(c) of Regulation S-B.




**ITEM
      7.**  **FINANCIAL
      STATEMENTS** ****




Attached
      hereto and filed as a part of this report are our consolidated financial
      statements for the fiscal year ended December 31, 2005.




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




None.




**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES**




EVALUATION
      OF DISCLOSURE CONTROLS AND PROCEDURES




As
      of
      December 31, 2005, our board of directors carried out an evaluation of the
      effectiveness of the design and operation of our "disclosure controls and
      procedures" (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e))
      under
      the supervision and with the participation of our management, including Norman
      Gardner, our chief executive officer and chief financial officer. Based upon
      that evaluation, Mr. Gardner concluded that our disclosure controls and
      procedures are effective.




Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that information required to be disclosed in our reports filed or
      submitted under the Exchange Act are recorded, processed, summarized and
      reported, within the time periods specified in the Securities and Exchange
      Commission's rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in our reports filed under the Securities Exchange
      Act,
      as amended, is accumulated and communicated to management to allow timely
      decisions regarding required disclosure.




CHANGES
      IN INTERNAL CONTROLS




There
      were no significant changes in our internal controls or, to our knowledge,
      in
      other factors that could significantly affect our disclosure controls and
      procedures subsequent to the date we carried out this evaluation.




ITEM
      8B.  OTHER
      INFORMATION




None







**PART
      III**




**ITEM
      9.**  **DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF REGISTRANT; COMPLIANCE
      WITH
      SECTION 16(a) OF THE EXCHANGE ACT**




Our
      board
      of directors is comprised of only one class of directors. 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
      of our directors and executive officers. The position(s) held by each officer
      and director are shown on the following table. Directors Norman A. Gardner
      and
      Michael J. Prevot were first elected in November 1999. Julius Goldfinger, who
      was elected to the board of directors in 2003, resigned from his position on
      September 30, 2005. All directors will serve for one year or until our next
      annual shareholder meeting and until a successor is elected and has qualified.




19


Name
            
            Age
            
            PositionNorman
                A. Gardner
            
            63
            
            Chief
                Executive Officer and Chairman of the Board of DirectorsMichael
                J. Prevot
            
            49
            
            Director




NORMAN
      A.
      GARDNER




Norman
      A.
      Gardner has been our president 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.




MICHAEL
      J. PREVOT




Michael
      Prevot has been a sales consultant for LaserLock and one of our directors since
      inception. From 1985 to the present time, Mr. Prevot serves as president of
      Vista Security Papers, a California based company that markets security
      products. Mr. Prevot is also a commercial insurance broker. Mr. Prevot studied
      business at the College of San Mateo in San Mateo, California from 1974 to
      1975,
      and at Skyline College in San Bruno, California from 1975 to 1976.




SECTION
      16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE




Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
      officers, directors and ten percent or greater stockholders to file reports
      of
      ownership and changes in ownership with the SEC. The same persons are required
      to furnish us with copies of all Section 16(a) forms they file. Based solely
      upon a review of the copies of the forms furnished to us and the representations
      made by the reporting persons to us, only Michael J. Prevot failed to file
      a
      Form 4 on a timely basis in connection with an option we issued to him on
      December 20, 2005. The option is exercisable into 250,000 shares of our common
      stock. Excluding this transaction, we believe that during fiscal year 2005
      our
      directors, officers and ten percent or greater stockholders complied with all
      filing requirements under Section 16(a) of the Exchange Act.




We
      do not
      have a designated audit committee. We do not have an audit committee financial
      expert because none of our directors qualify as a financial expert.




CODE
      OF
      ETHICS




We
      expect
      all of our employees to conduct themselves honestly and ethically, particularly
      in handling actual and apparent conflicts of interest and providing full,
      accurate, and timely disclosure to the public. Although we have not adopted
      a
      formal code of ethics that applies to our senior executive officers, we are
      developing a code that we expect will be approved by our board of directors
      in
      the near future. The delay in the preparation of the code of ethics is the
      result of having only one full time and one part time employee, coupled with
      the
      limited resources for developing such code.




**ITEM
      10.**  **EXECUTIVE
      COMPENSATION**




The
      following table sets forth the compensation paid during the fiscal year ended
      December 31, 2005, 2004 and 2003 to our chief executive officer. No other person
      received compensation equal to or exceeding $100,000 in fiscal 2005, 2004 and
      2003 and no bonuses were awarded during fiscal 2005, 2004 and 2003.







20


Annual
                  Compensation
              
              Long
                  Term CompensationName
                  and Principal Position
              
              Year
              
              Salary
                  ($)
              
              Bonus
                  ($)
              
              Other
                Annual
                Compen-
                sation
                  ($)
              
              Restricted
                Stock
                Award(s)
                  ($)
              
              Securities
                Underlying
                Options/SAR(#)
              
              LTIP
                Payouts($)
              
              All
                Other
                Compensation
                ($)Norman
                  A. Gardner (1)
              
              2005
              
              $157,500
              (4)
              ---
              
              $22,854
              (2)
              ---
              
              450,000
              (3)
              ---
              
              ---President
                  & CEO
              
              2004
              
              150,000
              
              ---
              
              27,400
              (2)
              ---
              
              2,500,000
              
              ---
              
              ---2003
              
              128,750
              
              ---
              
              21,400
              (2)
              ---
              
              2,000,000
              
              ---
              
              ---




(1)
              We
                  currently have a five-year employment agreement in place with our
                  president and chief executive officer, Norman A. Gardner, dated
                  November
                  5, 2003. Pursuant to the terms of the employment agreement, Mr.
                  Gardner is
                  entitled to receive (a) $150,000 annual base salary payable in
                  semi-monthly installments for each of the first two 12-month periods
                  and
                  (b) $180,000 annual base salary payable in semi-monthly installments
                  for
                  each of the last three 12-month periods. In addition to his base
                  salary,
                  Mr. Gardner is eligible to receive a bonus not to exceed $125,000
                  in any
                  year during the five-year employment period within which our net
                  income
                  (before taxes) exceeds $350,000. In connection with his employment
                  agreement, our board of directors granted an option to Mr. Gardner
                  to
                  purchase up to 2,000,000 shares of our common stock, or common
                  shares, at
                  an option price equal to the last sale price at which our common
                  shares
                  were sold on the date of the grant ($.20). The option originally
                  vested as
                  follows: 500,000 common shares vest on December 31, 2003; 250,000
                  common
                  shares vest on the date that is one year from the effective date
                  of the
                  employment agreement; 250,000 common shares vest on the date that
                  is two
                  years from the effective date of the employment agreement; 500,000
                  common
                  shares vest on the date that is three years from the effective
                  date of the
                  employment agreement; and 500,000 common shares vest on the date
                  that is
                  four years from the effective date of the employment agreement.
                  On
                  December 13, 2005, our board of directors approved an amendment
                  to this
                  option to reduce the option price to the last sale price at which
                  our
                  common shares were sold on December 13, 2005 ($.03), extend the
                  expiration
                  date to December 13, 2015 and provide for vesting of the common
                  shares
                  subject to the option in 36 equal monthly installments beginning
                  December
                  15, 2005. Also on December 13, 2005, our board of directors approved
                  an
                  amendment to two options granted to Mr. Gardner on January 1, 2001
                  and
                  January 2, 2001, respectively, to purchase an aggregate of 500,000
                  common
                  shares pursuant to our original stock option plan in order to make
                  the
                  option price, term and vesting provisions identical to those of
                  the
                  amended 2,000,000 share option granted to Mr. Gardner in connection
                  with
                  his employment agreement. In addition, in April 2004, Mr. Gardner
                  was
                  granted an option to purchase 2,500,000 common shares at an exercise
                  price
                  of $.06. The option expires in June 2009 and vests in 27 equal
                  monthly
                  installments from April 2004 to June 2006. Pursuant to a resolution
                  passed
                  our board of directors, on April 21, 2005, Mr. Gardner was granted
                  options
                  to purchase 450,000 common shares at the last sale price at which
                  our
                  common shares were sold on April 21, 2005 ($.075). The option expires
                  April 21, 2010 and was exercisable immediately. Our board granted
                  Mr.
                  Gardner 3,000,000 common shares in consideration for services provided
                  to
                  us on December 15, 2005.
 
 (2)
              Company
                  car, insurance, repairs and
                  expenses.
 
 (3)
              The
                  above does not include the 3,000,000 shares of common stock approved
                  by
                  the Board on December 15, 2005 and issued to Mr. Gardner on January
                  3,
                  2006. At the time of its approval by the Board, these shares had
                  a fair
                  market value of between $90,000 and $105,000 at the time of
                  issuance.
 
 (4)
              Includes
                  $45,000 that was unpaid and accrued as of December 31,
                  2005.





(a)
            (b)
            (c)
            (d)
            (e)Name
            Number
                of Securities UnderlyingOptions/SARs Granted (#)
            %
                of Total Options/SARsGranted to Employees inFiscal
                Year
            Exercise
                or Base Price($/Sh)
            Expiration
                DateNorman
                A. Gardner
              President
                & CEO
            450,000(1)
            81.8%
            $0.075/Sh
            April
                21, 2010




(1)
              This
                  amount does not include the option exercisable into 2,500,000 shares
                  of
                  the company that was repriced on December 13, 2005








21


Number
                of Securities to be issued upon exercise of outstanding options,
                warrants
                and rights
              (a)
            Weighted
                average exercise priceof outstanding options,warrants and
                rights
              (b)
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Equity
                compensation plans approved by security holders
            14,006,662
                (1)
            .05
            3,993,338
                (1)Equity
                compensation plans not approved by security holders
            3,814,632
                (2)
            .19
            --Total
            17,821,294
            .08
            3,993,338




(1)
              The
                  stockholders approved the LaserLock Technologies, Inc. 2003 Stock
                  Option
                  Plan at the special meeting of stockholders on December 17,
                  2003.
 
 (2)
              These
                  options were granted by the company to certain consultants and
                  advisors
                  upon approval from the Board of
                  Directors.


COMPENSATION
      OF DIRECTORS




Each
      director, with the exception of Norman A. Gardner (see table above for a
      description of Mr. Gardner's compensation), receives a one-time option grant
      to
      purchase 250,000 shares of our common stock at the per share market price in
      effect on the grant date. Messrs. Prevot and Goldfinger were each granted
      options to purchase 250,000 shares of common stock at the market price on
      December 17, 2003 On January 6, 2005, Messrs. Prevot and Goldfinger were each
      granted options to purchase 250,000 shares of common stock at the market price.
      On December 22, 2005 Mr. Prevot was granted options to purchase 250,000 shares
      of common stock at the market price.




EMPLOYMENT
      CONTRACTS




We
      currently have a five-year employment agreement in place with our president
      and
      chief executive officer, Norman A. Gardner, dated November 5, 2003. Pursuant
      to
      the terms of the employment agreement, Mr. Gardner is entitled to receive (a)
      $150,000 annual base salary payable in semi-monthly installments for each of
      the
      first two 12-month periods and (b) $180,000 annual base salary payable in
      semi-monthly installments for each of the last three 12-month periods. In
      addition to his base salary, Mr. Gardner is eligible to receive a bonus not
      to
      exceed $125,000 in any year during the five-year employment period within which
      our net income (before taxes) exceeds $350,000. In connection with his
      employment agreement, our board of directors granted an option to Mr. Gardner
      to
      purchase up to 2,000,000 shares of our common stock, or common shares, at an
      option price equal to the last sale price at which our common shares were sold
      on the date of the grant ($.20). The option originally vested as follows:
      500,000 common shares vest on December 31, 2003; 250,000 common shares vest
      on
      the date that is one year from the effective date of the employment agreement;
      250,000 common shares vest on the date that is two years from the effective
      date
      of the employment agreement; 500,000 common shares vest on the date that is
      three years from the effective date of the employment agreement; and 500,000
      common shares vest on the date that is four years from the effective date of
      the
      employment agreement. On December 13, 2005, our board of directors approved
      an
      amendment to this option to reduce the option price to the last sale price
      at
      which our common shares were sold on December 13, 2005 ($.03), extend the
      expiration date to December 13, 2015 and provide for vesting of the common
      shares subject to the option in 36 equal monthly installments beginning December
      15, 2005. Also on December 13, 2005, our board of directors approved an
      amendment to two options granted to Mr. Gardner on January 1, 2001 and January
      2, 2001, respectively, to purchase an aggregate of 500,000 common shares
      pursuant to our original stock option plan in order to make the option price,
      term and vesting provisions identical to those of the amended 2,000,000 share
      option granted to Mr. Gardner in connection with his employment agreement.
      In
      addition, in April 2004, Mr. Gardner was granted an option to purchase 2,500,000
      common shares at an exercise price of $.06. The option expires in June 2009
      and
      vests in 27 equal monthly installments from April 2004 to June 2006. Pursuant
      to
      a resolution passed our board of directors, on April 21, 2005, Mr. Gardner
      was
      granted options to purchase 450,000 common shares at the last sale price at
      which our common shares were sold on April 21, 2005 ($.075). The option expires
      April 21, 2010 and was exercisable immediately. On January 3, 2006, pursuant
      to
      resolutions passed by the Board on December 15, 2005, we granted Mr. Gardner
      3,000,000 common shares in consideration for services provided to us.




22


OPTION
      REPRICING





On
      December 13, 2005, our board of directors approved an amendment to Mr. Gardner’s
      option to reduce the option price to the last sale price at which our common
      shares were sold on December 13, 2005 ($.03), extend the expiration date to
      December 13, 2015 and provide for vesting of the common shares subject to the
      option in 36 equal monthly installments beginning December 15, 2005. Also on
      December 13, 2005, the Board approved an amendment to two options granted to
      Mr.
      Gardner on January 1, 2001 and January 2, 2001, respectively, to purchase an
      aggregate of 500,000 common shares pursuant to our original stock option plan
      in
      order to make the option price, term and vesting provisions identical to those
      of the amended 2,000,000 share option granted to Mr. Gardner in connection
      with
      his employment agreement.





**ITEM
      11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS**




The
      following table sets forth certain information known to us regarding the
      beneficial ownership of our common stock as of December 31, 2005, by (i) each
      of
      our directors, (ii) each of our executive officers, (iii) all directors and
      executive officers as a group, and (iv) each person known to us to be the
      beneficial owner of more than 5% of our outstanding shares of common stock.







23




Shares
                Beneficially OwnedTitle
                of Class
            Name
                and Address of Beneficial Owner
            Amount
                of Shares Held
            Percentage
                Owned (1)Common
            Californian
                Securities S.A.
              60
                West Randolph Street, Suite 200
              Chicago,
                Il 60601
            18,933,736
            31.25%Common
            Pacific
                Continental Securities
              Nominees
                Limited
              111
                Cannon Street
              London
                EC4N5AR, England
            17,795,903
            29.37%Common
            Norman
                A. Gardner
              837
                Lindy Lane
              Bala
                Cynwyd, PA 19004
            7,844,302
                (2)
            11.82%Common
            Howard
                Goldberg
              117
                Cheltenham Ave.
              Linwood,
                NJ 08221
            5,204,810
                (3), (5)
            7.94%Common
            Michael
                J. Prevot
              12920
                Atherton Ct.
              Los
                Altos Hills, CA 94022
            467,339
                (4)
            0.77%Common
            All
                Directors and Officers as a Group
            8,311,614(2)(4)(5)
            12.46%




(1)
              Percentage
                  of ownership is based on 60,590,506 shares of common stock issued
                  and
                  outstanding as of December 31,
                  2005.
 
 (2)
                Includes
                    2,787,963 shares issuable upon the exercise of stock options
                    exercisable
                    within 60 days and 3,000,000 shares issuable on January 3, 2006
                    for
                    services rendered.
 
 (3)
              Includes
                  4,954,810 shares issuable upon the exercise of stock options exercisable
                  within 60 days.
 
 (4)
              Includes
                  354,167 shares issuable upon the exercise of a stock option exercisable
                  within 60 days. Does not include 19,034 owned by Sandra Prevot,
                  his wife,
                  as to which he disclaims beneficial interest.
 
 (5)
              Does
                  not include 1,000,000 shares resulting from Mr. Goldberg’s exercise of a
                  warrant on March 13, 2006 received in connection with the purchase
                  of
                  $100,000 of 10% senior secured convertible promissory
                  notes.
 **ITEM
        12.**  **CERTAIN
        RELATIONSHIPS AND RELATED TRANSACTIONS**




TRANSACTIONS
      WITH MANAGEMENT AND OTHERS




In
      April
      and June of 2004, pursuant to a Regulation S Stock Purchase agreement dated
      March 10, 2004, in a private placement transaction, without registration under
      the Securities Act of 1933, as amended, in reliance upon exemptions provided
      by
      Regulations S promulgated under the Securities Act, California Securities,
      S.A.
      purchased from us an aggregate of 14,500,000 shares of our common stock, for
      an
      aggregate purchase price of approximately $713,235. At the time of such sale
      and
      issuance, California Securities, S.A. was known to us to own of record or
      beneficially more than five percent of our common stock.




We
      recently commenced a private placement of up to $800,000 principal amount of
      10%
      senior secured convertible promissory notes due twelve months from the date
      of
      issue to certain of our shareholders and other accredited investors. The notes
      are secured by a first priority lien on all of LaserLock’s tangible and
      intangible personal property pursuant to a security agreement among LaserLock
      and the purchasers. In connection with the private placement, on March 13,
      2006,
      a note in the principal amount of $100,000 was issued to Howard Goldberg. We
      issued a warrant exercisable into 1,000,000 shares to Mr. Goldberg and Mr.
      Goldberg joined the security agreement as a secured party. At the time of such
      sale and issuance, Mr. Goldberg was known to us to own of record or beneficially
      more than five percent of our common stock.




There
      have been no other material transactions, series of similar transactions, or
      currently proposed transactions, to which we were or are 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 us to own of record or beneficially
      more
      than five percent of the our common stock, or any member of the immediate family
      of any of the foregoing persons, had a material interest.




24


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




EXHIBITS





3.1  Amended
      and Restated Articles of Incorporation of the Company dated December 17, 2003
      (filed with the Company's Annual Report on Form 10-KSB on March 30, 2004 and
      incorporated herein by reference).





3.2  Amended
      and Restated Bylaws of the Company dated December 17, 2003 (filed with the
      Company's Annual Report on Form 10-KSB on March 30, 2004 and incorporated herein
      by reference).





10.1  Employment
      Agreement by and between the Company and Norman Gardner dated November 5, 2003
      (filed with the Company's Annual Report on Form 10-KSB on March 30, 2004 and
      incorporated herein by reference).





10.2  Engagement
      Agreement by and between the Company and Howard Goldberg dated October 8, 2003
      (filed with the Company's Annual Report on Form 10-KSB on March 30, 2004 and
      incorporated herein by reference)





10.3  Engagement
      Agreement by and between the Company and Harvey Goldberg dated October 29,
      2003
      (filed with the Company's Annual Report on Form 10-KSB on March 30, 2004 and
      incorporated herein by reference)





10.4  License
      Agreement by and between The Bud Jones Company, Inc. and Bourgogne et Grasset
      and the Company dated October 15, 2001 (filed with the Company's Annual Report
      on Form 10-KSB on March 30, 2004 and incorporated herein by
      reference).





10.5  Marketing
      and Supply Agreement between Translucent Technologies, LLC and the Company
      dated
      October 2002 (filed with the Company's Annual Report on Form 10-KSB on March
      30,
      2004 and incorporated herein by reference).





10.6  License
      Agreements regarding the use of the Company's technology with playing cards
      between the Company and CoPAG U.S.A. Inc., dated November 1, 2003 (each
      filed with the Company's Annual Report on Form 10-KSB on March 30, 2004 and
      incorporated herein by reference).





10.7  Advertising
      and Promotions Agreement, dated June 17, 2003 by and between the Company and
      GMR
      Marketing, Inc. (filed with the Company's Quarterly Report on Form 10-QSB on
      November 14, 2003 and incorporated herein by reference).





10.8  Stock
      Loan Agreement by and among Norman Gardner, Californian Securities, SA and
      Pacific Continental Securities (UK) Nominees Limited and the Company (filed
      with
      the Company's Quarterly Report on Form 10-QSB on November 14, 2003 and
      incorporated herein by reference





10.9  Regulations
      S Stock Purchase Agreement, dated May 2, 2003, by and between the Company and
      Californian Securities, S.A. (filed with the Company's Quarterly Report on
      Form
      10-QSB on August 14, 2003 and incorporated herein by reference).





10.10  Bridge
      Loan Commitment Letter, dated May 2, 2003 from LaRoch Limited to the Company
      (filed with the Company's Quarterly Report on Form 10-QSB on August 14, 2003
      and
      incorporated herein by reference).





10.11  Demand
      Promissory Note dated May 2, 2003 from the Company, as Maker, to LaRoch Limited,
      as Payee (filed with the Company's Quarterly Report on Form 10-QSB on August
      14,
      2003 and incorporated herein by reference).





10.12  Amendment
      to Regulation S Stock Purchase Agreement by and between the Company and
      Californian Securities, S.A., dated October 15, 2003 (filed with the Company's
      Quarterly Report on Form 10-QSB on November 14, 2003 and incorporated herein
      by
      reference).





25


10.13  License
      Agreement by and between NoCopi Technologies, Inc. and LL Security Products,
      Inc. dated September 20, 2001 (filed with the Company's Annual Report on Form
      10-KSB on March 30, 2004 and incorporated herein by reference).





10.14  Regulations
      S Stock Purchase Agreement, dated March 10, 2004, by and between the Company
      and
      California Securities, S.A. (filed with the Company's Quarterly Report on Form
      10-QSB on May 17, 2004 and incorporated herein by reference).





10.15  Senior
      Secured Convertible Note and Warrant Purchase Agreement, dated February 13,
      2006, among the Company and Nob Hill Capital Partners, L.P. (Filed on the
      Company’s Form 8-K on February 17, 2006 and incorporated herein by
      reference).





10.16  Schedule
      of Purchasers who have entered into the Senior Secured Convertible Note and
      Warrant Purchase Agreement filed on Form 8-K on February 17, 2006 and
      incorporated herein by reference.





10.17  Senior
      Secured Convertible Promissory Note, dated February 17, 2006, by the Company
      in
      favor of Nob Hill Capital Partners, L.P. in the amount of $100,000 (Filed on
      Form 8-K on February 17, 2006 and incorporated herein by
      reference).





10.18  Schedule
      of Payees who have entered into a senior secured convertible promissory note
      substantially identical to the Senior Secured Convertible Promissory Note filed
      on Form 8-K on February 17, 2006 and incorporated herein by
      reference.





10.19  Warrant,
      issued by the Company in favor of Nob Hill Capital Partners, L.P., dated
      February 13, 2006 (Filed on Form 8-K on February 17, 2006 and incorporated
      herein by reference).





10.20  Schedule
      of Holders to whom the Company has issued a warrant substantially identical
      to
      the Warrant filed on Form 8-K on February 17, 2006 and incorporated herein
      by
      reference.





10.21  Security
      Agreement, dated February 13, 2006, by and between the Company and Nob Hill
      Capital Partners, L.P. (Filed on Form 8-K on February 17, 2006 and incorporated
      herein by reference).





10.22  Schedule
      of Secured Parties who have entered into a security agreement substantially
      identical to the Security Agreement filed on Form 8-K on February 17, 2006
      and
      incorporated herein by reference.





10.23  Grant
      of
      3,000,000 shares of the Company to Norman A. Gardner on January 3,2006 in
      consideration for services provided to the Company (Filed on Form 8-K on January
      18, 2006 and incorporated herein by reference).





10.24  Non-binding
      letter of intent, entered into on January 10, 2006, pursuant to which the
      Company will acquire a minimum of 95% of the shares of ExaqtWorld S.A.R.L.
      (Filed on Form 8-K on January 11, 2006 and incorporated herein by
      reference).





17.1  Director
      resignation letter from Joel A. Pinsky, dated December 23, 2003 (filed with
      the
      Company's Annual Report on Form 10-KSB on March 30, 2004 and incorporated herein
      by reference).





17.2  Director
      resignation of Julius Goldfinger, dated September 30, 2005 (Filed on Form 8-K
      on
      October 3, 2005 and incorporated herein by reference).





31.1  Certification
      of Chief Executive Officer and principal financial officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002 (filed herewith).





32.1  Certification
      of Chief Executive Officer and principal financial officer pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (filed herewith).





99.1  LaserLock
      Technologies, Inc. 2003 Stock Option Plan adopted on December 19, 2003 (filed
      with the Company's Annual Report on Form 10-KSB on March 30, 2004 and
      incorporated herein by reference).





26


**ITEM
      14.**  **PRINCIPAL
      ACCOUNTANT FEES AND SERVICES**




As
      of
      October 10, 2002, we have retained the public accounting firm of Morison Cogen
      LLP (formerly Cogen Sklar, LLP), whose principal business address is 150
      Monument Rd., Suite 500, Bala Cynwyd, PA 19004, to perform our annual audit
      for
      inclusion in our report in Form 10-KSB, and perform SAS 100 reviews of quarterly
      information in connection with Form 10-QSB filings.




AUDIT
      FEES




During
      fiscal 2005 and 2004, the aggregate fees billed for professional services
      rendered by our principal accountant for the audit of our annual financial
      statements and review of our quarterly financial statements was $38,500 and
      $35,335.




AUDIT-RELATED
      FEES




During
      fiscal 2005 and 2004, our principal accountant did not render assurance and
      related services reasonably related to the performance of the audit or review
      of
      financial statements.




TAX
      FEES




During
      fiscal 2005 and 2004, the aggregate fees billed for professional services
      rendered by our principal accountant for tax compliance, tax advice and tax
      planning was $3,500 and $4,165.




ALL
      OTHER
      FEES




During
      fiscal 2005 and 2004, there were no fees billed for products and services
      provided by the principal accountant other than those set forth above.




AUDIT
      COMMITTEE APPROVAL




We
      do not
      presently have a designated audit committee. All of the services listed above
      were approved by Norman A. Gardner, our chief executive officer.







27


SIGNATURES





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act, as amended,
      the registrant caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.







LASERLOCK
                TECHNOLOGIES, INC.By:/s/
                Norman Gardner
              Norman
                Gardner, President and CEO
              Date:
                March 30, 2006LASERLOCK
                TECHNOLOGIES, INC. AND SUBSIDIARIES
              (A
                DEVELOPMENT STAGE COMPANY)
              DECEMBER
                31, 2005 AND 2004







28




LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 
 Consolidated
        Financial Statements
 
 December
        31, 2005 and
        2004
 
 
 
 
  
 
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 
  
 
 CONTENTS
 
 PAGEREPORT
                    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                
                
                1CONSOLIDATED
                    BALANCE SHEETS
                
                
                2CONSOLIDATED
                    STATEMENTS OF OPERATIONS
                
                
                3CONSOLIDATED
                    STATEMENTS OF STOCKHOLDERS' DEFICIT
                
                
                4-6CONSOLIDATED
                    STATEMENTS OF CASH FLOWS
                
                
                7-8NOTES
                    TO CONSOLIDATED FINANCIAL STATEMENTS
                
                
                9-18
 
 
 
 REPORT
        OF
        INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 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, 2005 and 2004 ,
        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, 2005. 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 audits. The Company's financial statements as of
        and for
        the year ended December 31, 2001, and for the period November 10, 1999 (date
        of
        inception) through December 31, 2001 were audited by other auditors whose
        report, dated March 26, 2002, on those statements included an explanatory
        paragraph that described the substantial doubt about the Company's ability
        to
        continue as a going concern. The financial statements for the period November
        10, 1999 (date of inception) through December 31, 2001 reflect total revenues
        and net loss of $11,803 and $1,474,241, respectively, of the related totals.
        The
        other auditors' report has been furnished to us, and our opinion, insofar
        as it
        relates to the amounts included for such prior period, is based solely on
        the
        report of such other auditors.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Oversight Board (United States). Those standards require that we plan and
        perform the audits to obtain reasonable assurance about whether the 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, based on our audits and the report of other auditors, the consolidated
        financial statements referred to above present fairly, in all material respects,
        the consolidated financial position of LaserLock Technologies, Inc. and
        Subsidiaries (a development stage company) as of December 31, 2005 and 2004 and the
        consolidated 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,
        2005, in conformity with accounting principles generally accepted in the
        United
        States.
 
 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. The consolidated financial statements do not include any adjustments
        that might result from the outcome of this uncertainty.
 
 
 
 /s/
        MORISON COGEN LLP
 
 Bala
        Cynwyd, Pennsylvania
 March
        28,
        2006
 
 
 1
 
  LaserLock
        Technologies, Inc. and Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Balance Sheets
 December
        31, 2005 and
        2004
 
 December
                    31,
                
                December
                    31,2005
                
                2004ASSETSCURRENT
                    ASSETSCash
                    and cash equivalents
                
                $
                6,705
                
                $
                676,593Receivables
                
                
                21,778
                
                
                27,942Inventory
                
                
                58,820
                
                
                20,423Prepaid
                    expenses
                
                
                -
                
                
                9,812TOTAL
                    CURRENT ASSETS
                
                
                87,303
                
                
                734,770PROPERTY
                    AND EQUIPMENT, NetCapital
                    equipment
                
                
                32,604
                
                
                29,381Less
                    accumulated depreciation
                
                
                13,203
                
                
                7,96519,401
                
                
                21,416Patent
                    costs, net of accumulated amoritization of$16,234
                    and $8,366 as of December 31, 2005and
                    2004, respectively
                
                
                132,189
                
                
                80,297TOTAL
                    ASSETS
                
                $
                238,893
                
                $
                836,483LIABILITIES
                    AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
                    LIABILITIESAccounts
                    payable and accrued expenses
                
                
                333,287
                
                
                43,328Deferred
                    revenue
                
                
                -
                
                
                12,500TOTAL
                    CURRENT LIABILITIES
                
                
                333,287
                
                
                55,828TOTAL
                    LIABILITIES
                
                
                333,287
                
                
                55,828STOCKHOLDERS'
                    EQUITY (DEFICIT)Preferred
                    Stock, $ .001 par value; 75,000,000 shares authorized;no
                    shares issued and outstanding
                
                
                -
                
                
                -Common
                    stock, $ .001 par value; 250,000,000 shares authorized;63,590,506
                    shares oustanding at December 31, 2005and
                    60,590,506 at December 31, 2004
                
                
                63,590
                
                
                60,590Additional
                    paid in capital
                
                
                6,292,447
                
                
                5,903,685Deficit
                    accumulated during the development stage
                
                
                (6,450,431
                )
                
                (5,183,620
                )STOCKHOLDERS'
                    EQUITY (DEFICIT)
                
                
                (94,394
                )
                
                780,655TOTAL
                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                
                $
                238,893
                
                $
                836,483
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 2
  LaserLock
        Technologies, Inc. and Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Statements of Operations
 For
        the
        Years Ended December
        31, 2005 and
        2004
 And
        for
        the Period November 10, 1999 (Date of Inception) to December
        31, 2005
 
 
 Cumulative
                
                Year
                    Ended
                
                Year
                    EndedSince
                
                December
                    31,
                
                December
                    31,Inception
                
                2005
                
                2004REVENUESSales
                
                $
                181,293
                
                $
                56,923
                
                $
                54,765Royalties
                
                
                336,275
                
                
                152,235
                
                
                53,422TOTAL
                    REVENUE
                
                
                517,568
                
                
                209,158
                
                
                108,187COSTS
                    AND EXPENSESResearch
                    and development
                
                
                929,022
                
                
                148,552
                
                
                310,615Patent
                    costs
                
                
                56,364
                
                
                5,375
                
                
                -Legal
                    and Accounting
                
                
                698,183
                
                
                124,437
                
                
                149,322Sales
                    and Marketing
                
                
                3,361,378
                
                
                809,667
                
                
                684,044General
                    and administrative
                
                
                2,122,457
                
                
                393,314
                
                
                376,634Total
                    costs and expense
                
                
                7,167,404
                
                
                1,481,345
                
                
                1,520,615LOSS
                    BEFORE OTHER INCOME
                
                
                (6,649,836
                )
                
                (1,272,187
                )
                
                (1,412,428
                )OTHER
                    INCOME (EXPENSE)Interest
                    income
                
                
                58,953
                
                
                5,376
                
                
                5,922Interest
                    expense
                
                
                (29,270
                )
                
                -
                
                
                -Gain
                    on disposition of assets
                
                
                4,722
                
                
                -
                
                
                -34,405
                
                
                5,376
                
                
                5,922LOSS
                    BEFORE INCOME TAX BENEFIT
                
                
                (6,615,431
                )
                
                (1,266,811
                )
                
                (1,406,506
                )INCOME
                    TAX BENEFIT
                
                
                (165,000
                )
                
                -
                
                
                -NET
                    LOSS
                
                $
                (6,450,431
                )
                $
                (1,266,811
                )
                $
                (1,406,506
                )BASIC
                    AND DILUTED NET LOSS PERCOMMON
                    SHARE
                
                
                
                
                $
                (0.02
                )
                $
                (0.03
                )BASIC
                    AND DILUTED WEIGHTED AVERAGECOMMON
                    SHARES OUTSTANDING
                
                
                
                
                
                60,598,725
                
                
                53,447,828
 
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 
 
 3
 
  LaserLock
        Technologies, Inc. and Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Statements of Changes in Stockholders’ Equity
 For
        the
        Years Ended December
        31, 2005 and
        2004
 And
        for
        the Period November 10, 1999 (Date of Inception) to December
        31, 2005
 
 Common
                    Stock
                
                
                
                Additional
                
                Deficit
                    Accumulated During theNumber
                    ofShares
                
                Amount
                
                ConsultingFees
                
                Paid-inCapital
                
                DevelopmentStage
                
                TotalIssuance
                    of initial 4,278,000 shares on November 10, 1999
                
                
                4,278,000
                
                $
                4,278
                
                $
                --
                
                $
                16,595
                
                $
                --
                
                $
                20,873Issuance
                    of shares of common stock in exchange for services
                
                
                1,232,000
                
                
                1,232
                
                
                --
                
                
                35,728
                
                
                --
                
                
                36,960Issuance
                    of shares of common stock
                
                
                2,090,000
                
                
                2,090
                
                
                --
                
                
                60,610
                
                
                --
                
                
                62,700Stock
                    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
                )
                
                52,730Issuance
                    of shares of common stock
                
                
                5,449,999
                
                
                5,450
                
                
                --
                
                
                921,050
                
                
                --
                
                
                926,500Issuance
                    of shares of common stock in exchange for services
                
                
                240,000
                
                
                240
                
                
                (40,80
                )
                
                40,560
                
                
                --
                
                
                --Stock
                    issuance costs
                
                
                --
                
                
                --
                
                
                --
                
                
                (16,335
                )
                
                --
                
                
                (16,335
                )Fair
                    value of non-employee stock options grants
                
                
                --
                
                
                --
                
                
                --
                
                
                50,350
                
                
                --
                
                
                50,350Amortization
                    of deferred consulting fees
                
                
                --
                
                
                --
                
                
                20,117
                
                
                --
                
                
                --
                
                
                20,117Net
                    loss
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                (367,829
                )
                
                (367,829
                )Balance,
                    December 31, 2000
                
                
                13,289,999
                
                
                13,290
                
                
                (20,68
                )
                
                1,094,868
                
                
                (421,942
                )
                
                665,533Issuance
                    of shares of common stock
                
                
                217,500
                
                
                218
                
                
                --
                
                
                77,723
                
                
                --
                
                
                77,941Issuance
                    of shares of common stock and stock options for acquisition of
                    subsidiary
                
                
                2,000,000
                
                
                2,000
                
                
                --
                
                
                736,000
                
                
                --
                
                
                738,000Issuance
                    of stock options
                
                
                --
                
                
                --
                
                
                --
                
                
                15,000
                
                
                --
                
                
                15,000Exercise
                    of options
                
                
                1,450,368
                
                
                1,450
                
                
                --
                
                
                230,609
                
                
                .
                
                
                232,059Fair
                    value of non-employee stock options
                
                
                --
                
                
                --
                
                
                --
                
                
                323,250
                
                
                --
                
                
                323,250Amortization
                    of deferred consulting fees
                
                
                --
                
                
                --
                
                
                20,683
                
                
                --
                
                
                --
                
                
                20,683Net
                    loss
                
                
                --
                
                
                --
                
                
                --
                
                
                --
                
                
                (1,052,29
                )
                
                (1,052,29
                )Balance,
                    December 31, 2001
                
                
                16,957,867
                
                
                16,958
                
                
                --
                
                
                2,477,450
                
                
                (1,474,24
                )
                
                1,020,167
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 4
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Statements of Changes in Stockholders’ Equity (Continued)
 For
        the
        Years Ended December
        31, 2005 and
        2004
 And
        for
        the Period November 10, 1999 (Date of Inception) to December
        31, 2005
  Common
                    Stock
                
                
                
                Additional
                
                Deficit
                    Accumulated During theNumber
                      ofShares
                
                Amount
                
                ConsultingFees
                
                Paid-InCapital
                
                DevelopmentStage
                
                TotalIssuance
                    of shares of common stock
                
                
                3,376,875
                
                
                3,377
                
                
                -
                
                
                687,223
                
                
                -
                
                
                690,600Fair
                    value of non-employee stock options
                
                
                -
                
                
                -
                
                
                -
                
                
                94,000
                
                
                -
                
                
                94,000Salary
                    due to shareholder contributed capital
                
                
                -
                
                
                -
                
                
                -
                
                
                15,000
                
                
                -
                
                
                15,000Return
                      of shares of common stock related to purchase price
                      adjustment
                
                
                (1,000,000
                )
                
                (1,000
                )
                
                -
                
                
                (353,000
                )
                
                -
                
                
                (354,000
                )Net
                    loss
                
                
                -
                
                
                -
                
                
                
                
                
                -
                
                
                (1,195,753
                )
                
                (1,195,753
                )Balance,
                    December 31, 2002
                
                
                19,334,742
                
                
                19,335
                
                
                -
                
                
                2,920,673
                
                
                (2,669,994
                )
                
                270,014Issuance
                    of shares of common stock
                
                
                22,512,764
                
                
                22,512
                
                
                -
                
                
                1,387,109
                
                
                -
                
                
                1,409,621Fair
                    value of non-employee stock options
                
                
                -
                
                
                -
                
                
                -
                
                
                213,300
                
                
                
                
                
                213,300Issuance
                    of shares of common stock in exchange for services
                
                
                143,000
                
                
                143
                
                
                -
                
                
                23,857
                
                
                
                
                
                24,000Stock
                    issuance costs
                
                
                -
                
                
                -
                
                
                -
                
                
                (49,735
                )
                
                
                
                
                (49,735
                )Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,107,120
                )
                
                (1,107,120
                )Balance,
                    December 31, 2003
                
                
                41,990,506
                
                
                41,990
                
                
                -
                
                
                4,495,204
                
                
                (3,777,114
                )
                
                760,080Stock
                    issuance costs
                
                
                -
                
                
                -
                
                
                -
                
                
                (25,000
                )
                
                -
                
                
                (25,000
                )Fair
                    value of non-employee stock options
                
                
                -
                
                
                -
                
                
                -
                
                
                493,600
                
                
                -
                
                
                493,600Issuance
                    of shares of common stock
                
                
                18,600,000
                
                
                18,600
                
                
                -
                
                
                939,881
                
                
                -
                
                
                958,481Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,406,506
                )
                
                (1,406,506
                )Balance,
                    December 31, 2004
                
                
                60,590,506
                
                
                60,590
                
                
                -
                
                
                5,903,685
                
                
                (5,183,620
                )
                
                780,655
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 5
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Statements of Changes in Stockholders’ Equity (Continued)
 For
        the
        Years Ended December
        31, 2005 and
        2004
 And
        for
        the Period November 10, 1999 (Date of Inception) to December
        31, 2005
 CommonStock
                
                
                
                Additional
                
                Deficit
                    Accumulated During theNumber
                      ofShares
                
                Amount
                
                ConsultingFees
                
                Paid-InCapital
                
                DevelopmentStage
                
                TotalFair
                    value of non-employee stock options
                
                
                -
                
                
                -
                
                
                -
                
                
                286,762
                
                
                -
                
                
                286,762Issuance
                    of shares of common stock
                
                
                3,000,000
                
                
                3,000
                
                
                
                
                
                102,000
                
                
                
                
                
                105,000Net
                    loss for the year ended December 31, 2005
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (1,266,811
                )
                
                (1,266,811
                )Balance
                    at December 31, 2005
                
                
                63,590,506
                
                $
                63,590
                
                $
                -
                
                $
                6,292,447
                
                $
                (6,450,431
                )
                $
                (94,394
                )
 
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
 6
 LaserLock
        Technologies, Inc. and Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Statements of Cash Flows
 For
        the
        Years Ended December
        31, 2005 and
        2004
 And
        for
        the Period November 10, 1999 (Date of Inception) to December
        31, 2005
  Cumulative
                
                Year
                    Ended
                
                Year
                    EndedSince
                
                December
                    31,
                
                December
                    31,Inception
                
                2005
                
                2004CASH
                    FLOWS FROM OPERATING ACTIVITIESNet
                    loss
                
                $
                (6,450,431
                )
                $
                (1,266,811
                )
                $
                (1,406,506
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activitiesFair
                    value of options issued in exchange for services
                
                
                1,461,262
                
                
                286,762
                
                
                493,600Salary
                    due to stockholder contributed to capital
                
                
                15,000
                
                
                -
                
                
                -Amortization
                    and depreciation
                
                
                434,567
                
                
                13,105
                
                
                9,469Gain
                    on disposition of assets
                
                
                (4,722
                )
                
                -
                
                
                -Stock
                    issued in exchange for services
                
                
                165,960
                
                
                105,000
                
                
                -Financing
                    expenses paid directly from stock proceeds
                
                
                5,270
                
                
                -
                
                
                -Amortization
                    of deferred consulting fees
                
                
                40,800
                
                
                -
                
                
                -(Increase)
                    decrease in assetsReceivables
                
                
                (21,778
                )
                
                6,164
                
                
                (26,949
                )Inventory
                
                
                (58,820
                )
                
                (38,397
                )
                
                (20,423
                )Prepaid
                    expenses
                
                
                -
                
                
                9,812
                
                
                386Increase
                    (decrease) in liabilitiesAccounts
                    payable and accrued expenses
                
                
                333,286
                
                
                289,958
                
                
                (61,666
                )Deferred
                    revenue
                
                
                -
                
                
                (12,500
                )
                
                -Net
                    cash used in operating activities
                
                
                (4,079,606
                )
                
                (606,907
                )
                
                (1,012,089
                )CASH
                    FLOWS FROM INVESTING ACTIVITIESPurchase
                    of property and equipment
                
                
                (35,749
                )
                
                (3,220
                )
                
                (23,084
                )Purchase
                    of intangibles
                
                
                (20,000
                )
                
                -
                
                
                -Purchase
                    of patent costs
                
                
                (148,424
                )
                
                (59,761
                )
                
                (31,979
                )Proceeds
                    from sale of assets
                
                
                6,738
                
                
                -
                
                
                -Net
                    cash used in investing activities
                
                
                (197,435
                )
                
                (62,981
                )
                
                (55,063
                )CASH
                    FLOWS FROM FINANCING ACTIVITIESProceeds
                    from issuance of common stock
                
                
                4,091,447
                
                
                -
                
                
                958,481Proceeds
                    from exercise of stock options
                
                
                232,059
                
                
                -
                
                
                -Proceeds
                    from issuance of stock options
                
                
                15,000
                
                
                -
                
                
                -Proceeds
                    from short-term borrowings
                
                
                50,000
                
                
                -
                
                
                -Stock
                    issuance costs
                
                
                (104,760
                )
                
                -
                
                
                (25,000
                )Net
                    cash used in financing activities
                
                
                4,283,746
                
                
                -
                
                
                933,481NET
                    DECREASE IN CASH ANDCASH
                    EQUIVALENTS
                
                
                6,705
                
                
                (669,888
                )
                
                (133,671
                )CASH
                    AND CASH EQUIVALENTS - BEGINNING OF PERIOD
                
                
                -
                
                
                676,593
                
                
                810,264CASH
                    AND CASH EQUIVALENTS - END OF PERIOD
                
                $
                6,705
                
                $
                6,705
                
                $
                676,593
  The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 7
  LaserLock
        Technologies, Inc. and Subsidiaries
 (A
        Development Stage Company)
 Consolidated
        Statements of Cash Flows (Continued)
 For
        the
        Years Ended December
        31, 2005 and
        2004
 And
        for
        the Period November 10, 1999 (Date of Inception) to December
        31, 2005
 
 Cumulative
                  
                  Year
                      Ended
                  
                  Year
                      EndedSince
                  
                  December
                      31,
                  
                  December
                      31,Inception
                  
                  2005
                  
                  2004SUPPLEMENTAL
                      DISCLOSURE OF NON-CASHINVESTING
                      AND FINANCING ACTIVITIES:Cash
                      paid during the year for:Interest
                  
                  $
                  29,270
                  
                  $
                  -
                  
                  $
                  -Income
                      taxes
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Return
                      of shares of common stock related topurchase
                      price adjustmentCommon
                      stock
                  
                  
                  (1,000
                  )
                  
                  -
                  
                  
                  -Additional
                      paid-in capital
                  
                  
                  (353,000
                  )
                  
                  -
                  
                  
                  -Intangible
                      assets
                  
                  $
                  (354,000
                  )
                  $
                  -
                  
                  $
                  -Issuance
                      of common stock and stock optionsfor
                      acquisition of subsidiary
                  
                  $
                  738,000
                  
                  $
                  -
                  
                  $
                  -Common
                      stock sales proceeds appliedto
                      debt and financing expenses repayment
                  
                  $
                  55,270
                  
                  $
                  -
                  
                  $
                  -
 
 
 The
        accompanying notes are an integral part of these consolidated financial
        statements.
 
 8
 
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 ***Nature
        of the Business***
 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 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 wholly-owned subsidiaries, LL Security Products,
        Inc.
        and EDS Marketing, Inc. All inter-company transactions have been eliminated
        in
        consolidation.
 
 ***Use
        of Estimates***
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities 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.
 
 ***Comprehensive
        Income***
 The
        company follows the Statement of Financial Accounting Standard (“SFAS”) No. 130,
“Reporting Comprehensive Income.” Comprehensive income is a more inclusive
        financial reporting methodology that includes disclosure of certain financial
        information that historically has not been recognized in the calculation
        of net
        income. Since the Company has no items of other comprehensive income,
        comprehensive income (loss) is equal to net income (loss).
 
 ***Fair
        Value of Financial Instruments***
 The
        Company’s financial instruments consist of cash, receivables and accounts
        payable. The carrying values of cash, receivables and accounts payable
        approximate fair value, because of their short maturities.
 
 ***Concentration
        of Credit Risk Involving Cash***
 The
        Company has deposits with a financial institution which at times exceed Federal
        Depository Insurance limits. This financial institution has a strong credit
        rating and management believes that credit risk related to these deposits
        is
        minimal.
 
 ***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.
 
 ***Receivables***
 The
        company considers the receivables to be fully collectible; accordingly, no
        allowance for doubtful accounts is required. If amounts become uncollectible,
        they will be charged to operations when that determination is made.
 
 ***Inventory***
 Inventory
        principally consists of penlights and pigments and is stated at the lower
        cost
        (determined by the first-in, first-out method) or market.
 
 
 9
  LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)**
 
 ***Property
        and Equipment***
 Capital
        equipment is stated at cost. Depreciation is computed using applicable methods
        over the estimated useful lives of the assets, principally five to seven
        years.
        Maintenance and repairs of property are charged to operations, and major
        improvements area capitalized. Upon retirement, sale, or other disposition
        of
        property and equipment, the costs and accumulated depreciation are eliminated
        from the accounts, and any resulting gain or loss is included in operations.
        Depreciation for 2005 and
        2004 was
        $ 5,237 and
        $ 4,691 .
 
 ***Patents***
 Patents
        are capitalized and amortized over an estimated useful life of 17 years.
        Patent
        amortization expense for 2005 and
        2004 was
        $ 7,868 and
        $ 4,779 .
 
 ***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.
 
 ***Income
        Taxes***
 The
        Company follows SFAS No. 109, “Accounting for Income Taxes,” which requires an
        asset and liability approach to financial accounting and reporting for income
        taxes. Deferred income tax assets and liabilities are computed annually for
        temporary differences between the financial statements and tax bases of assets
        and liabilities that will result in taxable or deductible amounts in the
        future
        based on enacted tax laws and rates applicable to the periods in which the
        differences are expected to affect taxable income. Valuation allowances are
        established when necessary to reduce deferred tax assets to the amount expected
        to be realized. Income tax expense is the tax payable or refundable for the
        period plus or minus the change during the period in deferred tax assets
        and
        liabilities.
 
 ***Loss
        Per Share***
 The
        Company follows SFAS No. 128, “Earnings Per Share” resulting in the presentation
        of basic and diluted earnings per share. Because the Company reported a net
        loss
        in 2005 and
        2004 ,
        common
        stock equivalents, including stock options and warrants were anti-dilutive;
        therefore, the amounts reported for basic and dilutive loss per share were
        the
        same.
 
 ***Stock-Based
        Compensation***
 The
        Company currently 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 for 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 accounts for stock-based
        compensation under APB Opinion No. 25, under which the Company has recognized
        no
        compensation expense for employee granted options.
  10
  LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 ***Stock-Based
        Compensation (Continued)***
 
 Had
        compensation cost for the Company’s stock option plan been determined 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 2005 and 2004 net loss and net loss
        per common share would have been increased to the pro forma amounts indicated
        below. In 2005 and 2004, the fair value amounts were estimated using the
        Black-Scholes options pricing model with the following assumptions: no dividend
        yield, expected volatility of 60%, risk-free interest rate of 3% to 5% and
        expected option life of five to ten years.
 
 2005
                
                2004Net
                    loss:As
                    reported
                
                $
                1,266,811
                
                $
                1,406,506Pro
                    forma
                
                $
                1,467,222
                
                $
                1,551,106Net
                    loss per common share basic and diluted:As
                    reported
                
                $
                0.02
                
                $
                0.03Pro
                    forma
                
                $
                0.02
                
                $
                0.03
 
 In
        December 2004, the FASB issued SFAS No. 123 (revised 2004) (SFAS No. 123R), *Share-Based
        Payment* ,
        which
        addresses the accounting for share-based payment transactions in which an
        enterprise receives employee services in exchange for (a) equity instruments
        of
        the enterprise or (b) liabilities that are based on the fair value of the
        enterprise’s equity instruments or that may be settled by the issuance of such
        equity instruments. SFAS No. 123R eliminates the ability to account for
        share-based compensation transactions using the intrinsic value method under
        APB
        Opinion No. 25, and requires instead that such transactions be accounted
        for
        using a fair-value-based method. In January 2005, the SEC issued SAB No.
        107,
        which provides supplemental implementation guidance for SFAS No. 123R. SFAS
        No.
        123R will be effective for the Company beginning in the first quarter of
        its
        fiscal 2006. The Company’s assessment of the estimated stock-based compensation
        expense is affected by the Company’s stock price as well as assumptions
        regarding a number of complex variables and the related tax impact. These
        variables include, but are not limited to, the Company’s stock price,
        volatility, and employee stock option exercise behaviors and the related
        tax
        impact. The Company will recognize stock-based compensation expense on all
        awards on a straight-line basis over the requisite service period using the
        modified prospective method. Although the adoption of SFAS No. 123R is expected
        to have a material effect on the Company’s results of operations, future changes
        to various assumptions used to determine the fair value of awards issued
        or the
        amount and type of equity awards granted create uncertainty as to whether
        future
        stock-based compensation expense will be similar to the historical SFAS No.
        123
        pro forma expense.
 
 ***Research
        and Development Costs***
 Research
        and development costs are expensed when incurred. Total amount expensed for 2005 and
        2004 was
        $ 148,552 and
        $310,615 respectively.
 
  11
 
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        2 - GOING CONCERN**
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. The Company has incurred
        significant losses and experienced negative cash flow during the development
        stage. These conditions raise 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 out of this
        uncertainty.
 
 The
        Company is in the development stage at December
        31, 2005 .
        Successful completion of the Company’s development program and, ultimately the
        attainment of profitable operations is depending upon future events, including
        obtaining adequate financing to fulfill its development activities and achieving
        a level of sales adequate to support the Company’s cost structure. However,
        there can be no assurances that the Company will be able to secure additional
        equity investment or archive an adequate sales level.
 
 
 **NOTE
        3 - INCOME TAXES**
 
 Under
        the
        provisions of SFAS No. 109, “Accounting for Income Taxes,” an entity recognizes
        deferred tax assets and liabilities for future tax consequences or events
        that
        have been previously recognized in the Company’s consolidated financial
        statements or tax returns. The measurement of deferred tax assets and
        liabilities is based on provisions of the enacted tax law. The effects of
        future
        changes in tax laws or rates are not anticipated.
 
 Deferred
        tax liabilities would arise principally from intangible assets in the
        consolidated financial statements as compared to the tax treatment of such
        costs
        (these assets have no tax basis).
 
 At December
        31, 2005 ,
        the
        Company has a net operating loss (“NOL”) that approximates $4,486,000.
        Consequently, the Company had NOL carry forwards available for federal income
        tax purposes, which begin to expire in 2019. Deferred tax assets would arise
        from the recognition of anticipated utilization of these net operating losses
        to
        offset future taxable income.
 
 Finally,
        valuation allowances are provided against both deferred tax assets and
        liabilities in assessing the likelihood of ultimate realization of the deferred
        tax consequence or benefit.
 
 The
        income tax benefit (provision) consists of the following:
  Year
                    Ended
                
                Year
                    EndedDecember
                    31,
                
                December
                    31,2005
                
                2004Current
                
                $
                -
                
                $
                -Deferred
                
                
                407,000
                
                
                381,000Valuation
                    allowance
                
                
                (407,000
                )
                
                (381,000
                )$
                -
                
                $
                -
 
  12
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        3 - INCOME TAXES (Continued)**
 
 
 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 tax provisions.
 2005
                
                2004Amount
                
                %
                
                Amount
                
                %U.S
                    federal income tax benefit atFederal
                    statutory rate
                
                $
                (443,000
                )
                
                (35
                )
                $
                (492,000
                )
                
                (35
                )State
                    tax, net of federal tax effect
                
                
                (82,000
                )
                
                (7
                )
                
                (91,000
                )
                
                (6
                )Non-deductible
                    options
                
                
                118,000
                
                
                9
                
                
                202,000
                
                
                14Non-deductible
                    amortization
                
                
                -
                
                
                -
                
                
                -
                
                
                -Change
                    in valuation allowance
                
                
                407,000
                
                
                33
                
                
                381,000
                
                
                27$
                -
                
                
                -
                
                $
                -
                
                
                -
 
 The
        primary components of the Company’s 2005 and
        2004 deferred
        tax assets, liabilities and the related valuation allowances are as
        follows:
 
 December
                      31,
                  
                  December
                      31,2005
                  
                  2004Deferred
                      tax asset for NOL carryforwards
                  
                  $
                  1,865,000
                  
                  $
                  1,458,000Deferred
                      tax liability for intangibles
                  
                  
                  (165,000
                  )
                  
                  (165,000
                  )Valuation
                      allowance
                  
                  
                  (1,700,000
                  )
                  
                  (1,293,000
                  )$
                  -
                  
                  $
                  -
 Management
        has determined that the realization of the net deferred tax asset is not
        assured
        and has created a valuation allowance for the entire amount of such
        benefits.
 
 
 **NOTE
        4 - COMMON STOCK**
 
 On
        December 17, 2003, the stockholders approved an amendment to the Company’s
        articles of incorporation to increase the authorized numbers of shares of
        common
        stock from 40,000,000 shares to 250,000,000 shares and to increase the number
        of
        authorized number of shares of preferred stock from 10,000,000 to 75,000,000
        shares.
 
 During
        2003, the Company sold 22,512,764 shares of its common stock for a total
        of
        $1,409,621 in connection with a private placement with investors located
        outside
        the United States, pursuant to an exemption from registration afforded by
        Regulation S of the Securities Act of 1933. During 2003, the Company issued
        143,000 shares of its common stock for services valued at $24,000.
 
 
 13
 
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        4 - COMMON STOCK (Continued)**
 
 During
        the quarter ended June 30, 2004, the Company sold 14,500,000 shares of its
        common stock for a total of $687,481, net of offering costs of $25,000, in
        connection with a private placement with investors located outside the United
        States, pursuant to an exemption from registration afforded by Regulation
        S of
        the Securities Act of 1933.
 
 Also
        during the quarter ended June 30, 2004, the Company sold 4,100,000 shares
        of its
        common stock for a total of $246,000 in connection with a private placement
        pursuant to an exemption from registration afforded by Regulation D of the
        Securities Act of 1933.
 
 During
        the quarter ended December 31, 2005 the Company issued the Chairman of the
        Board
        3,000,000 shares for his past services to the Company. The shares were valued
        at
        $105,000, the fair market value at the date of issuance.
 
 **NOTE
        5 - STOCK OPTION PLAN**
 
 During
        1999, the Board of Directors (“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, pursuant to which it is authorized
        to
        grant options to purchase up to 1.5 million shares of common stock. On December
        17, 2003, the Board, with approval of the stockholders, superseded this plan
        and
        created the 2003 Stock Option Plan (the “Plan”). Under the Plan the Company is
        authorized to grant options to purchase up to 18,000,000 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
        is administered by a committee of the Board of Directors (“Stock Option
        Committee”) which determines 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 the 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 plan of the company
        shall not exceed $1,000,000 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 prices, duration, transferability and limitations on
        exercise.
 
 On
        November 5, 2003, the Company entered into a five-year employment agreement
        with
        its President. The agreement provides for the issuance of Incentive Stock
        Options to purchase 2,000,000 shares of common stock at $0.20 per share expiring
        in December 2008. The options vest as follows: 500,000 shares on December
        31,
        2003; 250,000 shares on November 5, 2004 and 2005; and 500,000 shares on
        November 5, 2006 and 2007.
 
 On
        December 13, 2005, the Company repriced the Incentive Stock Options to purchase
        2,000,000 shares of common stock at $.03, the fair market value as of December
        13, 2005. The options are to vest in 36 equal monthly amounts beginning December
        15, 2005 and will expire December 13, 2015. In conjunction with this repricing
        the Company repriced an additional 500,000 options for the President. The
        500,000 options have the same vesting schedule and expiration date as the
        2,000,000 options.
 
 
 14
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        5 - STOCK OPTION PLAN (Continued)**
 
 
 In
        April
        2004, the Company granted, to its President, options to purchase 2,500,000
        shares of its common stock at an exercise price of $0.06 per share, expiring
        in
        June 2009, and vesting in equal monthly installments commencing April 2004
        through June 2006.
 
 On
        January 6, 2005, the Company granted, to two board of directors who are not
        officers of the Company, options for each to purchase 250,000 shares of common
        stock at an exercise price of $0.09 per share (fair market value), expiring
        in
        January 2010.
 
 On
        April
        21, 2005, the Company granted to the president of the Company, options to
        purchase 450,000 shares of common stock at an exercise price of $0.17 per
        share
        (fair market value), expiring in April 2010.
 
 On
        December 13, 2005, the Company granted an employee of the Company, options
        to
        purchase 100,000 shares of common stock at an exercise price of $.03 (fair
        market value), vesting over 36 months beginning on December 15, 2005, expiring
        December 13, 2015.
 
 A
        summary
        of incentive stock option transactions for employees during 2005 and
        2004 are as
        follows:
 
 Exercise
                    PriceOption
                
                Vested
                
                Per
                    CommonShares
                
                Shares
                
                Share
                    RangeBalance,
                    December 31, 2003
                
                
                2,795,000
                
                
                1,275,000
                
                
                $.17
                    to $.28Granted/vested
                    during the year
                
                
                2,500,000
                
                
                833,333
                
                
                0.06Exercised
                    during the year
                
                
                -
                
                
                -
                
                
                -Balance,
                    December 31, 2004
                
                
                5,295,000
                
                
                2,108,333
                
                
                -Granted/vested
                    during the year
                
                
                1,300,000
                
                
                1,990,833
                
                
                .03
                    to .09Expired
                    during the year
                
                
                (25,000
                )
                
                (25,000
                )
                
                0.17Exercised
                    during the year
                
                
                -
                
                
                -
                
                
                -Balance,
                    December 31, 2005
                
                
                6,570,000
                
                
                4,074,166
                
                
                $.03
                      to $.28
 
 Information
        with respect to incentive stock options outstanding and incentive stock options
        exercisable at December
        31, 2005 is as
        follows:
  Incentive
                    Stock Options
                    OutstandingWeighted
                    AverageNumber
                    Outstanding
                
                
                
                Exercise
                    Price ofRange
                    of
                
                Currently
                    Exercisable
                
                Weighted
                    Average Remaining
                
                Options
                    CurrentlyExercise
                    Prices
                
                at
                    December 31, 2005
                
                Contractual
                    Life
                
                Exercisable$.03
                    to $.28
                
                4,074,166
                
                2.8
                    years
                
                $0.11
 
 
 15
  LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        5 - STOCK OPTION PLAN (Continued)**
 
 In
        addition to options granted to employees under the Plan, the Company issued
        non-statutory stock options pursuant to contractual agreements to non-employees.
        Options granted under the agreements are expensed when the related service
        or
        product is provided.
 
 A
        summary
        of non-statutory stock option transactions for non-employees during 2005 and
        2004 are as
        follows:
 
 Exercise
                    PriceOption
                
                Vested
                
                Per
                    CommonShares
                
                Shares
                
                Share
                    RangeBalance,
                    December 31, 2003
                
                
                8,361,294
                
                
                6,252,198
                
                
                $.07
                      to $.40Granted/vested
                    during the year
                
                
                4,050,000
                
                
                3,116,934
                
                
                0.06
                    to .20Expired
                    during the year
                
                
                (1,500,000
                )
                
                (1,500,000
                )
                
                0.28Exercised
                    during the year
                
                
                -
                
                
                -
                
                
                -Balance,
                    December 31, 2004
                
                
                10,911,294
                
                
                7,869,132
                
                
                .06
                    to .75Granted/vested
                    during the year
                
                
                1,650,000
                
                
                2,672,489
                
                
                .03
                    to .08Expired
                    during the year
                
                
                (1,310,000
                )
                
                (1,310,000
                )
                
                0.17
                    to .35Exercised
                    during the year
                
                
                -
                
                
                -
                
                
                -Balance,
                    December 31, 2005
                
                
                11,251,294
                
                
                9,231,621
                
                
                $.03
                      to $.40
 Total
        expense recognized by the Company during 2005 and
        2004 for
        non-statutory stock options granted during the years was $286,762 and $493,600.
        The 2005 and
        2004 fair
        value amounts of non-statutory stock options were estimated using the
        Black-Scholes options pricing model with the following assumptions: no dividend
        yield, expected volatility of 60%, risk free interest rate of approximately
        3%
        to 5% and expected option life of ten years.
 
 Information
        with respect to non-statutory stock options outstanding and exercisable at December
        31, 2005 is as
        follows:
 Non-Employee
                    Options OutstandingWeighted
                    AverageNumber
                    Outstanding
                
                
                
                Exercise
                    Price ofRange
                    of
                
                Currently
                    Exercisable
                
                Weighted
                    Average Remaining
                
                Options
                    CurrentlyExercise
                    Prices
                
                at
                    December 31, 2005
                
                Contractual
                    Life
                
                Exercisable$.03
                    to $.40
                
                9,231,621
                
                5.8
                    years
                
                $0.12
 
 16
  LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
 
 **NOTE
        5 - STOCK OPTION PLAN (Continued)**
 
 Effective
        October 15, 2003, the Company replaced 2,000,000 options originally issued
        upon
        the acquisition of EDS Marketing, Inc. in December 2001. The new options
        extend
        the exercise period of 1,500,000 options until December 31, 2004 and 500,000
        options until December 2008, and reduce the exercise price from $0.35 to
        $0.28
        per share. The new options are fully exercisable on January 1, 2004. The
        issuance of the replacement options were accounted for as a variable stock
        option plan and resulted in no additional expense in 2005 of $-0-
        and in 2004 of
        $12,500.
 
 On
        December 15, 2005, the Company repriced the non-statutory stock options to
        purchase 1,000,000 shares of common stock at $.03, the fair market value
        as of
        December 13, 2005. The options are to vest in 36 equal monthly amounts beginning
        December 15, 2005 and will expire December 15, 2015.
 
 In
        conjunction with a 2002 contractual agreement, the Company granted options
        to a
        customer. The number of options to be granted is contingent upon the gross
        amount of product sales during each of the four years in the period ended
        December 31, 2006, at exercise prices ranging from $1.25 to $2.25. The
        contingent issuable options will be valued in accordance with EITF 96-18,
        “Accounting for Equity Instruments That Are Issued To Other than Employee
        For
        Acquiring, Or In Conjunction With Selling, Goods or Services,” which generally
        will be at the end of each reporting date when the amount of the product
        sales
        is known. As of December
        31, 2005 ,
        the
        contingencies of this contract have not been met and no options have been
        granted.
 
 
 **NOTE
        6 - RELATED PARTY TRANSACTIONS**
 
 On
        November 5, 2003, the Company entered into a five-year agreement with its
        President. The agreement provides for annual compensation of $150,000 for
        the
        first two years of the agreement and $180,000 for each year thereafter and
        payment of certain fringe benefits including use of an automobile. Additionally,
        the agreement provides for the issuance of Incentive Stock Options to purchase
        2,000,000 shares of common stock at $0.20 per share. The options vest as
        follows: 500,000 shares on December 31, 2003; 250,000 shares on November
        5, 2004
        and 2005 and 500,000 shares on November 5, 2006 and 2007.
 
 On
        December 13, 2005 the Company repriced the Incentive Stock Options to purchase
        2,000,000 shares of common stock at $.03. The options are to vest in 36 equal
        monthly amounts beginning December 15, 2005 and will expire December 13,
        2015.
        In conjunction with this repricing the Company repriced an additional 500,000
        options for the President. The 500,000 options have the same vesting schedule
        and expiration date as the 2,000,000 options.
 
 In
        April
        2004, the Company granted, to its President, options to purchase 2,500,000
        shares of common stock at an exercise price of $0.06 per share, expiring
        in June
        2009, and vesting in equal monthly installments commencing April 2004 through
        June 2006.
 
 On
        April
        21, 2005, the Company granted to the president of the Company, options to
        purchase 450,000 shares of common stock at an exercise price of $0.17 per
        share
        (fair market value), expiring in April 2010.
 
 The
        Company maintains its office at the home of its President. No formal lease
        agreement exists and no direct rent expense has been incurred. However, related
        occupancy costs of $4,724 and $10,547 were incurred during the years ended December
        31, 2005 and
        2004 .
 
  17
 LaserLock
        Technologies, Inc. and
        Subsidiaries
 (A
        Development Stage Company)
 Notes
        to
        Consolidated Financial Statements
 December
        31, 2005 and
        2004
 
  **NOTE
        7 - COMMITMENTS**
 
 The
        Company has entered into certain commission agreements. Under the terms of
        the
        contracts expiring various dates, the representatives are entitled to
        commissions based on certain percentage of sales, as defined in agreements
        which
        may be renewed annually. The commissions from sales will be expensed as sales
        are generated.
 
 
 **NOTE
        8 - LICENSING AGREEMENT**
 
 On
        occasion the Company enters into licensing agreements for the sale of its
        products. These agreements can either be exclusive or non-exclusive in regards
        to territories and industries.
 
 **NOTE
        9 - PATENTS**
 
 The
        Company has four issued patents and one patent pending for anti-counterfeiting
        technology.
 
 
 **NOTE
        10 - MAJOR CUSTOMER**
 
 During 2005 and
        2004 ,
        the
        Company earned a substantial portion of its revenue from three customers
        and two
        customers. During 2005 and
        2004 ,
        revenue
        from those customers aggregated $177,377 and $76,785. At December
        31, 2005 and
        2004 ,
        amounts
        due from those customers included in trade accounts receivable were $18,364
        and
        $25,065.
 
 
 **NOTE
        11 - SUBSEQUENT EVENTS**
 
 On
        January 10, 2006, the Company announced that it had signed a Letter of Intent
        to
        acquire a minimum of 95% of the shares of ExaqtWorld S.A.R.L., for 36.6%
        of the
        outstanding shares of LaserLock Technologies, Inc. The Exaqt Security System
        is
        the first fully industrialized multi-tech EAS system to be installed in the
        world.
 
 In
        March
        2006, the Company received bridge loan financing in the amount of $580,000.
        In
        addition, the company received $13,500 from the exercise of 1,350,000 warrants
        associated with the bridge loan.
 
  18