SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                   Annual Report Under Section 13 or 15(d) of
             the Securities Exchange Act of 1934 for the Fiscal Year
                             Ended December 31, 2004


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


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


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


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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding  twelve months (or for such shorter period that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_   No __

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

State  Issuer's  Revenues for its most recent fiscal year:  $108,187.  Aggregate
market value of the voting and non-voting  common equity held by  non-affiliates
of registrant,  computed by reference to the average bid and asked price of such
common equity as of January 31, 2005: $1,698,658.

Number of shares outstanding as of January 31, 2005: 60,590,506

Documents incorporated by reference:  No _X_

<PAGE>

PART I.
ITEM 1        DESCRIPTION OF BUSINESS

ORGANIZATION AND CHARTER

LaserLock  Technologies,  Inc. (the "Company" or  "LaserLock")  is a corporation
formed under the laws of Nevada on November 10, 1999. The Company's 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, the  stockholders of the Company approved an amendment and
restatement  of our Articles of  Incorporation,  which  increased the authorized
number of our shares of Common Stock from  40,000,000  to  250,000,000,  and the
authorized number of our 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.

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

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

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

BUSINESS OF THE COMPANY

BACKGROUND

One of the patents  used by LaserLock  Technologies,  Inc.  utilizes  technology
developed  by  its  founder,   Norman  A.  Gardner,  that  seeks  to  accomplish
non-intrusive  document  and product  authentication  in order to reduce  losses
caused by unpermitted document reproduction or by product  counterfeiting.  This
technology involves the utilization of an invisible ink which is compatible with
today's printing  machines.  The invisible ink may be used with certain printing
systems such as offset, flexographic, silkscreen, gravure, and laser. Based upon
Mr. Gardner's experience, the Company believes that the invisible ink technology
may be incorporated into existing manufacturing processes.

In additional to its initial  patent  discussed  above the Company has 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, the Company has 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 the Company 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 Company has the
option to  renewal  annually.  The  Company  plans to  develop  and  market  its
technologies  in a variety of applications in the fields of product and document


                                      -2-
<PAGE>

authentication and security.  The Company believes that the technologies it owns
or licenses will enable  businesses to reconstruct  their overall  approaches to
corporate  security - from  counterfeit  identification  to employee or customer
monitoring.  Potential  applications of the Company's 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.

An  industry  in which the Company is  pursuing  commercial  application  of its
technologies is the casino and gaming  industry.  The Company  believes that its
technologies  are  applicable  to the  industry  in a variety of ways - from the
detection of counterfeit dice, cards, and chips, to the verification of cashless
tickets from slot machines for fraud.

The  Company  also  intends to be  involved  in the  advertising  and  promotion
business as it pertains to the gaming industry.  The Company has 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.  Also, in conjunction  with Ambient we are
exploring the potential of selling advertising on lottery tickets.

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.  The Company believes
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 the Company believes these losses
have  increased  as the  counterfeiting  of labeling  and  packaging  has become
easier.

The Company believes that its document authentication  technologies are found to
be useful to  businesses  desiring  to  authenticate  a wide  variety of printed
materials and  products.  The  Company's  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 which 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.  LaserLock believes that its 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,  which
generally  leads to the  disposal of the  merchandise  or its sale as a "second"
rather than best-quality  product, and in the case of its rubbed ink technology,
no special tools are required to distinguish the counterfeit.

Other  possible  variations  of the  Company's  laser based  technology  involve
multiple color  responses  from a common laser,  visible marks of one color that
turn another color with a second laser or visible and invisible  marks that turn
into a multicolored image. These technologies  provide users with the ability to
authenticate products and detect counterfeit documents. Applications include the
authentication  of documents having intrinsic value,  such as currency,  checks,
travelers' checks,  gift certificates and event tickets,  and the authentication
of  product  labeling  and  packaging.  When  applied to  product  labeling  and
packaging,  such  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).

The Company believes that its technologies  also could 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.


                                      -3-
<PAGE>

The Company has been focused on the widespread  problem of counterfeiting in the
gaming  industry.  The Company has  incorporated its technology into traditional
gaming  accessories  such  as  playing  cards,   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  to  identify  CDs  produced  by  those
manufacturers.  The  Company  believes  that  this  technology  can  provide  CD
manufacturers  and  publishers  with a tool to  combat  the  significant  losses
sustained as a result of illegal pirating and  counterfeiting of data, music and
video discs.

MARKETING

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.  The Company intends to
generate revenues  primarily by collecting  license fees from  manufacturers who
incorporate the Company's  technologies into their  manufacturing  processes and
their products as well as the sale of inks,  and in the case of cashless  gaming
systems and lottery  tickets,  via the right to sell  advertising on the back of
cashless gaming tickets or on lottery tickets.

The Company has  identified  a number of key  markets for its  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 Company personnel or consultants to create end-user demand
and  utilization of licensee  sales forces with support from Company  personnel.
The Company has determined  that technical sale support by its personnel will be
of great importance to increasing its licensees' sales of products incorporating
the  Company's  technologies  and,  therefore,  plans  to be very  committed  to
providing such support.  The Company  anticipates  that should European sales be
made, the technical  support could  initially be handled from the United States,
and the  Company  could  eventually  open a  European  support  division  and/or
establish a sales/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 the internet makes
these   technologies  more  available,   the  Company  intends  to  maintain  an
interactive  product development and enhancement program whereby it will utilize
its research and development and marketing skills in order to constantly upgrade
and  improve  on  its  technology  with  the  combined   efforts  of  marketing,
applications engineering and research and development. The Company believes that
utilizing  these  methodologies - whereby a product is developed by the Company,
delivered to the client,  feedback is received from the client,  and the product
is changed and  enhanced  to reflect  the client  feedback - will lead to faster
development  cycles for the Company's  products.  The Company's  objective is to
concentrate  its  efforts  on  developing  market-ready  products  with the most
beneficial ratios of market potential to development time and cost.

The Company is utilizing  the  extensive  contacts of its  President,  Norman A.
Gardner, in the counterfeit prevention and detection and gaming industries in an
effort to effectuate sales.

MANUFACTURING

The  Company  does not  have  manufacturing  facilities.  The  Company  acquires
components from various  suppliers which are manufactured to its  specifications
and  reprocesses  these  components.  The  Company  intends to  subcontract  the
manufacturing of its ink technology to third-party  manufacturers.  Applications
of the Company's  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 the  Company  by a third  party.  Because  some of the
processes  that the  Company  intends  to use in its  applications  are based on
relatively common manufacturing techniques,  there appears to be no technical or
economic  reason  for the  Company to invest  its own  capital in  manufacturing
facilities at this stage.


                                      -4-
<PAGE>

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

REGULATION

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

PATENTS AND LICENSES

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  duration  of 20 years  from the date of
application depending on the jurisdiction concerned, after which time any person
is free to exploit the product or process  covered by a patent.  A person who is
the owner of a patent  has,  within  the  jurisdiction  in which  the  patent is
granted,  the  exclusive  right to exclude  others from  practicing  the subject
matter defined in the patent claims.

The  Company  intends  to extend its patent  filings  to other  countries  where
economically reasonable,  considering the expense of foreign patent applications
and the  increasing  level of activity of the  Company.  Currently,  the Company
believes that the only foreign  countries for which it will be filing for patent
protection are Europe, Australia and one or more countries in the Far East.

The  granting of a patent does not prevent a third party from seeking a judicial
determination  that the patent is invalid.  Such challenges to the validity of a
patent  are  not  uncommon  and are  occasionally  successful.  There  can be no
assurance  that a  challenge  will not be filed to one or more of the  Company's
patents,  if  granted,  and  that,  if  filed,  such  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/or cast into question
the validity of a U.S. patent.

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.

Additionally,  the  Company has  licensed  its "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

The Company has been  involved in research  and  development  ("R&D")  since its
inception  and intends to continue its R&D  activities,  funds  permitting.  The
Company hopes 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, 2004,  the
Company incurred costs of $780,470 on R&D. For the year ended December 31, 2004,
the Company  incurred  costs of $310,615  (of which  $187,400  represents  costs


                                      -5-
<PAGE>

associated  with the  granting  of non  employee  stock  options) on R&D. At the
current time, the Company expects to spend in cash between  $100,000 to $300,000
in R&D during the course of the 2005 fiscal year.

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

PRODUCT DEVELOPMENT

To date,  the  Company has made only very  limited  sales of its  products.  The
Company has completed  independent  testing and  commercial  trials with several
manufacturers.

The Company also has developed what it believes to be a proprietary trade secret
enabling it to offer its clients the ability to change the  combination  lock on
its  lasers  to  prevent  any  breach of  security  by  counterfeiters.  This is
accomplished by changing the reaction between the Company's uniquely  formulated
code markings in its products,  and the laser which works to read such markings.
The changes are made via direct  interaction  by the Company  with the client to
make slight  modifications to the Company's  products.  Management believes that
the Company is the only company offering such a protection to its 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 the Company  believes 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 the Company
believes  these  losses have  increased  as the  counterfeiting  of labeling and
packaging has become easier.

Other possible variations of the Company's  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,  gift certificates and event tickets,
and the  authentication  of product  labeling  and  packaging.  When  applied to
product  labels  and  packaging,   such  technologies  can  be  used  to  detect
counterfeit   products  whose  labels  and  packaging   would  not  contain  the
authenticating  marks  invisibly  printed  on the  packaging  or  labels  of the
legitimate  product,  as well as to combat product  diversion (i.e., the sale of
legitimate   products   through   unauthorized   distribution   channels  or  in
unauthorized markets).

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

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


                                      -6-
<PAGE>

COMPETITION

In the area of  document  and  product  authentication  and  serialization,  the
Company  is  aware  of other  competing  technologies,  both  covert  and  overt
surface-marking techniques, requiring decoding elements or analytical methods to
reveal  the  relevant  information.  These  technologies  are  offered  by other
companies for the same anti-counterfeiting and anti-diversion purposes for which
the Company  markets  its covert  technologies.  These  include,  among  others,
biological  DNA codes,  microtaggants,  thermochronic,  UV and infrared inks, as
well as encryption, 2D symbology and laser engraving. The Company is aware of at
least  twenty-five  companies  which will be competing with it in these markets.
However, the Company believes that it has proprietary technologies which provide
a unique and  cost-effective  solution to the problem of counterfeiting and gray
marketing.  The Company is aware of a limited  number of  competitors  which are
attempting  similar  approaches  to  addressing  the  same  problems  which  the
Company's  products address.  Other indirect  competitors are marketing products
utilizing the hologram and "copy void"  technologies.  The  hologram,  which has
been incorporated into credit cards to foil counterfeiting, is considerably more
costly  than the  Company's  technology.  Copy void  technologies  are  security
devices  which have been  developed  to  indicate  whether a  document  has been
photocopied.

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

EMPLOYEES

The Company  currently  has a five-year  employment  agreement in place with its
President and CEO,  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
the Company's net income (before taxes) exceeds $350,000. In connection with his
employment agreement,  the Board granted an option to Mr. Gardner to purchase up
to 2,000,000  shares of the  Company's  Common Stock at an option price equal to
the last sale price at which the  Company's  shares were sold on the date of the
grant.  The option vests as follows:  500,000  shares vest on December 31, 2003;
250,000  shares vest on the date that is one year from the effective date of the
employment agreement; 250,000 shares vest on the date that is two years from the
effective date of the employment agreement; 500,000 shares vest on the date that
is three years from the effective date of the employment agreement;  and 500,000
shares  vest on the  date  that is four  years  from the  effective  date of the
employment  agreement.  In addition,  in April 2004,  Mr. Gardner was granted an
option to purchase  2,500,000  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.

If and when the  Company  hires full time  employees  other  than the  Company's
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 the Company makes available. The Company
has one part-time employee, its secretary.

INDEPENDENT CONTRACTORS

The Company has consulting  contracts with two key  independent  contractors who
are being compensated via consulting fees and stock options.

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


                                      -7-
<PAGE>

board of directors of ImallInc,  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, the Company extended an offer to Howard Goldberg to serve in
a consulting capacity as the Company's Chief Operating Officer.  Pursuant to the
terms of the engagement  letter,  Mr. Goldberg will perform the services for the
Company  customarily  performed by a chief  operating  officer of a business and
will devote  substantial  time and effort with respect to the development of the
Company  for a term of 12 months,  subject to the  ability to extend the term of
the engagement by mutual agreement.  This contract has been extended to June 30,
2006.  He is not an employee of the Company.  Effective as of September 1, 2003,
Mr.  Goldberg  has  received  compensation  of  $12,500  per  month,  which base
compensation will continue 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 the Company's Common Stock
representing  approximately  7.5% of the fully  diluted  shares of the Company's
Common  Stock  outstanding  as of October 8, 2003.  The  purchase  price for the
shares issuable upon the exercise of Mr.  Goldberg's  option is $0.07 per 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 the Company  beginning  September 1, 2003 and (3) the
balance of the options  will vest upon the  achievement  (as  determined  by the
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,  the Board in its sole  discretion  will
determine whether such objectives have been achieved. In April 2004 Mr. Goldberg
was granted an option to purchase an additional  1,700,000  shares at a purchase
price of $.06 per share.  The option expires in March 2014 and vests in 27 equal
monthly installments beginning in April 2004.

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.

The Company entered into a consulting  agreement with Harvey Goldberg to perform
services for the Company 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 shares
of common stock 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 shares at a


                                      -8-
<PAGE>

purchase price of $.06 per share. This option expires in March 2014 and vests in
27 monthly installments beginning in April 2004.

The Company has also entered into contracts or agreements with other consultants
to provide R & D, Distribution, Sales and Marketing services.



                                      -9-
<PAGE>

RISK FACTORS

                 STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

ABSENCE OF TRADING MARKET

There is no active trading market for the Company's 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

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

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

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


                                      -10-
<PAGE>

NEED FOR SUBSEQUENT FUNDING; NO ASSURANCE OF FUTURE OFFERING

In order to finance expansion of our business  operations,  to attempt to patent
our technologies, and to implement our business plans, we may need to raise more
capital. Our ability to continue in business and effectively implement our plans
may depend upon our ability to raise  additional  funds.  There is no  assurance
that additional funding, if required,  will be obtainable in amounts or on terms
favorable  or  acceptable  to the  Company.  The capital  resources  required to
develop each new product are significant.  The Company believes combined cash on
hand and cash generated from future operations will provide the Company with the
financing  required to conduct its business at least through mid 2005, but there
is no  guarantee  that the  Company  is correct or that it will be able to raise
additional  capital,  if required.  The Company completed an offshore  placement
raising  approximately  $1,400,000  in 2003 and a Reg D and  offshore  placement
raising approximately $960,000 in 2004.

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.

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.


                                      -11-
<PAGE>

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
materially adverse effect upon our operations.

TECHNOLOGY STAFFING

We anticipate that staffing will represent one of our largest expenses.  We will
compete with other copy  security  prevention  technologies  in  attracting  and
retaining  qualified 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,  the Company 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.

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 (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.


                                      -12-
<PAGE>

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. ("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, the
Company  has a  working  relationship  with  NoCopi,  and has  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 the shares of Common  Stock  outstanding  as of December  31, 2004
(approximately  48,951,313  shares,  or  80.8%)  were  issued on the date of the
Company's inception or later and are considered  "restricted  securities." These
shares may be publicly  resold in  compliance  with Rule 144  adopted  under the
Securities  Act of 1933,  as amended.  Rule 144  provides,  in part,  that after
holding  restricted  securities  for a  period  of one (1)  year  non-affiliated
shareholders (affiliates include officers, directors, and ten percent or greater
shareholders) may sell, during any three months, in a brokerage transaction,  or
to a market  maker,  an amount  equal to the greater of one percent  (1%) of the
Company's  outstanding  Common Stock, or the average weekly trading  volume,  if
any, in the Common Stock during 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 the Company's  outstanding  Common Stock.  Rule 144 also
provides that after holding restricted securities for a period of two (2) years,
affiliates of the Company may sell every third month in a brokerage transaction,
or to a market maker,  an amount equal to the greater of one percent (1%) of the
Company's  outstanding  Common Stock, or the average weekly trading  volume,  if
any, in the Common Stock during 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
the Company's securities purchased hereunder.  Certain of the outstanding shares
were to be eligible for sale pursuant to Rule 144 as of November 2000.

DEPENDENCE ON KEY PERSONNEL

We will be dependent on our current  management for the foreseeable  future. The
loss of the  services  of any  member of these  persons  would  have a  material
adverse effect on our operations and prospects. Our success will be dependent to
a substantial  degree on our Chief  Executive  Officer and President,  Norman A.
Gardner. Mr. Gardner's continued  involvement is particularly critical to us. In
the event Mr. Gardner were 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.


                                      -13-
<PAGE>

INDEMNIFICATION

The Company's By-Laws include  provisions that indemnify any director or officer
made a party to any action,  suit or proceeding  for negligence or misconduct in
the  performance of his duties made in good faith, by reason of the fact that he
is or was a director,  officer or employee of the  Company,  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,  the Company spends $3,500 per month on its
directors  and officers  liability  insurance  for a policy which has a limit of
$1,000,000.  The Company is considering canceling this policy if it is unable to
increase revenues or raise capital during 2005.

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.

RISKS ASSOCIATED WITH THE COMPANY'S ABILITY TO CONTINUE AS A GOING CONCERN

The Company has no operating history,  has limited sales, has incurred operating
losses  since  inception  and  requires   additional  capital  to  continue  its
operations  and to  implement  its  business  plans.  The  Company's  certifying
accountants  have issued a going concern  qualification  in their report for the
year ended  December  31,  2004.  Although  the Company  intends to raise money,
implement sales, and become profitable,  if the Company fails to achieve any one
of these goals,  then it is unlikely  that the Company will be  successful,  and


                                      -14-
<PAGE>

very likely that the Company will become  insolvent or otherwise forced to close
its doors. If this occurs, it will have a material adverse effect on the Company
and any results of operations.

LACK OF DIVERSIFICATION

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

ITEM 2.       DESCRIPTION OF PROPERTY

The Company's 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.  The
Company pays no rent for the use of this space.

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

ITEM 3.       LEGAL PROCEEDINGS

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

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

Not applicable


                                      -15-

<PAGE>

PART II

ITEM 5.        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

The Company's  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, 2004 and December 31, 2003. These quotations  reflect  inter-dealer
prices,  without retail mark-up,  markdown or  commissions,  and may not reflect
actual transactions.

                     2004                     High              Low
               ------------------           --------         --------
               Fourth Quarter                 0.10             0.05
               Third Quarter                  0.05             0.13
               Second Quarter                 0.17             0.09
               First Quarter                  0.44             0.16

                     2003
               ------------------
               Fourth Quarter                 0.21             0.13
               Third Quarter                  0.31             0.15
               Second Quarter                 0.23             0.11
               First Quarter                  0.25             0.08


HOLDERS

As of December 31, 2004, we had 130  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.



                                      -16-
<PAGE>

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.

This discussion and analysis  contains,  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.  The  Company  does not  undertake  to
publicly update or revise its  forward-looking  statements even if experience or
future changes make it clear that any projected  results  (expressed or implied)
will not be realized.



                                      -17-
<PAGE>

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.  Beginning 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 and receive  royalty  payments,  and
sells to the same  companies inks 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 of 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,  Bourgogone et Grasset,  and Paul Son) and CoPAG U.S.A. Inc.
and these agreements are still in effect. 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., a
media and marketing  company,  in February  2004.  The agreement was extended by
mutual consent in September 2004 through September 2007. Although no advertising
sales have been consummated,  Ambient Planet has informed the Company that it is
not unusual for a new  advertising  media,  such as slot ticket,  to take a long
time to be implemented and that they remain  optimistic  about the potential for
advertising  sales.  Ambient and the Company are also  currently  exploring  the
potential of selling advertising on lottery tickets.

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 that 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.  However in order to fully implement our strategy, it may be
necessary for us to raise  additional  capital.  There can be no assurances that
such  capital will be available  and, if  available,  or that we will be able to
secure such capital on acceptable terms.

RESULTS OF  OPERATIONS  FOR THE YEAR ENDED  DECEMBER 31, 2004 AS COMPARED TO THE
YEAR ENDED DECEMBER 31, 2003

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.


                                      -18-
<PAGE>

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,  2004,  the  Company  had sales and  royalties
revenues of  $108,187,  as compared to $62,121 for the year ending  December 31,
2003. The increase  results  primarily from increased  revenues of approximately
$46,066 from the sale of pigments  and related  royalty fees from the use of our
casino chip security systems in several new gaming casinos.

The Company's general and administrative  costs aggregated $376,634 for the year
ended  December 31, 2004 as compared to $350,839 for the year ended December 31,
2003, an increase of $25,795.  The significant  variances  between 2004 and 2003
were as follows:  The current year  included  increased  expenses  from 2003 for
salaries  and  related  payroll  costs of  approximately  $26,000 as a result of
additional staff hours worked by part time staff and use of a part time in house
counsel for part of the year, consulting fees increased by approximately $23,500
resulting from the use of a financial  consultant and the non cash cost granting
non-employee stock options increased by $72,500.  These increases were partially
offset by a reduction of amortization  expense of $112,000  relating to the 2001
acquisition of EDS Marketing, Inc.

The Company's sales and marketing costs  aggregated  $684,044 for the year ended
December 31, 2004 as compared to $528,431  for the year ended  December 31, 2003
and   increase  of  $155,613.   This   increase   results   form   increases  in
marketing-related  non-employee  stock  options  of $61,900 as a result of stock
options  granted to marketing  consultants  and for consulting  fees of $110,700
relating to attempts to increase  our  marketing  focus,  partially  offset by a
decrease in travel, entertainment and trade show expenses.

The Company's research and development costs aggregated  approximately  $310,615
for the year ended  December  31, 2004 as compared to $93,977 for the year ended
December  31,  2003,  an increase of  $216,638.  This  increase is the result of
non-employee  stock options of $187,400 granted to technology  consultants,  and
increased costs of development supplies of approximately $25,400.

The Company's legal and accounting costs aggregated  approximately  $149,322 for
the year ended  December  31, 2004 as  compared  to $172,891  for the year ended
December 31, 2003, a decrease of $23,569.  This  decrease  relates  primarily to
lower costs incurred for outside legal counsel.

LIQUIDITY AND CAPITAL RESOURCES

Our cash balance at December  31, 2004 of $676,593  was  $133,671  less than the
$810,264 as of  December  31,  2003.  Working  capital at December  31, 2004 was
$678,942,  representing  a decrease in working  capital of $25,019 from December
31, 2003. This decrease in cash and working  capital relates  principally to the
proceeds from the issuance of common stock of $933,481  pursuant to Regulation D
and Regulation S offerings,  reduced by the cash portion of our net loss for the
year ended December 31, 2004.

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


                                      -19-
<PAGE>

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.

On March 10, 2004, we began seeking to raise up to  approximately  $2 million in
capital  through  the  issuance  of  additional  shares of our  common  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.

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 $100,000 and
$300,000 in cash on our research and  development  program for fiscal 2005.  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.

We have plans to increase the number of employees and/or independent contractors
we employ at this time contingent  upon our ability to have sufficient  funds to
achieve our goals.  We intend to license or use third parties to manufacture all
of our  products,  and do not  believe  that we  will be  making  any  plant  or
equipment purchases during the coming year.

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.

OFF BALANCE SHEET ARRANGEMENTS

As of  December  31,  2004,  the  Company  did not  have any  off-balance  sheet
arrangements as defined in Item 303(c) of Regulation S-B.


ITEM 7.       FINANCIAL STATEMENTS

The  consolidated  financial  statements are included  within Item 13(a) of this
report at pages F-1 through F-19.


                                      -20-
<PAGE>

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, 2004, 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  Exchange  Act 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

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

The  position(s)  held by each  officer and director of the Company are shown on
the  following  table.  Directors  Norman A.  Gardner and Michael J. Prevot were
first elected in November 1999. Messrs Gardner, Prevot were all re-elected along
with the election of Mr. Julius  Goldfinger to the Board at the special  meeting
of stockholders held on December 17, 2003. All directors will serve for one year
or until the next  annual  meeting  of the  Company's  shareholders  and until a
successor is elected and has qualified.


                                      -21-
<PAGE>

          Name            Age                        Position
  --------------------   ----        ------------------------------------------
  Norman A. Gardner       62         CEO and Chairman of the Board of Directors
  Michael J. Prevot       48         Director
  Julius Goldfinger       75         Director


NORMAN A. GARDNER

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

MICHAEL J. PREVOT

Michael  Prevot has been a Sales  Consultant and a Director of the Company since
inception.  From 1985 to 1999,  Mr. Prevot served as President of Vista Security
Papers, a San Francisco based company that sells security  products.  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. Mr.
Prevot  dedicates  10 to 20  percent  of his time  performing  his tasks for the
Company.  These tasks include  approaching  potential  clients and arranging for
sales meetings and presentations.

JULIUS GOLDFINGER

Mr.  Goldfinger  has  more  than 40  years  of  experience  in  venture  capital
investing,  corporate  finance,  securities  analysis and portfolio  management,
including  structuring,  restructuring and financing of mergers and acquisitions
for small to medium-sized  companies.  In addition to Mr. Goldfinger's financial
experience,  he  currently  serves  as  Chairman  and CEO of  Milestone  Musical
Memories,  Inc., a start-up music  company.  From February 1974 to January 1981,
Mr.  Goldfinger was in charge of The Venture  Capital Group at the Bankers Trust
Company where he was responsible for the restructuring, refinancing and eventual
sale, merger or liquidation of the entire venture capital portfolio,  consisting
of holdings in more than 60 companies,  of the Bankers Trust Company,  completed
in 1981.

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, we believe  that  during
fiscal year 2003 our directors, officers and ten percent or greater stockholders
complied  with all filing  requirements  under Section 16(a) of the Exchange Act
except for two Forms 4 for Norman A. Gardner,  an executive officer and director
of the Company,  with respect to an aggregate of three transactions,  which were
filed late.

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.


                                      -22-
<PAGE>

ITEM 10.      EXECUTIVE COMPENSATION

The  following  table sets forth the  compensation  paid  during the fiscal year
ended December 31, 2004, 2003 and 2002 to the Company's Chief Executive Officer.
No other person received  compensation  equal to or exceeding $100,000 in fiscal
2004,  2003 and 2002 and no bonuses were awarded  during  fiscal 2004,  2003 and
2002.

<TABLE>
<CAPTION>
                                                          Other     Restricted  Securities              All
                                                         Annual       Stock     Underlying    LTIP      Other
      Name and                                           Compen-     Award(s)  Options/SAR   Payouts   Compen-
 Principal Position     Year    Salary ($)   Bonus ($)  sation ($)     ($)          (#)        ($)     sation($)
--------------------   ------  ------------  ---------------------- ---------  ------------ --------  ---------
<S>                     <C>     <C>               <C>   <C>     <C>       <C>    <C>            <C>       <C>
Norman A. Gardner(1)    2004    $150,000          --    $27,400 (2)       --     2,500,000      --        --
President & CEO         2003     128,750          --     21,400 (2)       --     2,000,000      --        --
                        2002     105,000          --     15,600 (2)       --            --      --        --
</TABLE>

(1)   The Company currently has a five-year  employment  agreement in place with
      its President and CEO, 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 the  Company's net income
      (before  taxes)  exceeds  $350,000.  In  connection  with  his  employment
      agreement,  the Board  granted an option to Mr.  Gardner to purchase up to
      2,000,000 shares of the Company's Common Stock at an option price equal to
      the last sale price at which the  Company  shares were sold on the date of
      the grant.  The option vests as follows:  500,000  shares vest on December
      31,  2003;  250,000  shares  vest on the date  that is one  year  from the
      effective  date of the  employment  agreement;  250,000 shares vest on the
      date  that  is two  years  from  the  effective  date  of  the  employment
      agreement;  500,000  shares  vest on the date that is three years from the
      effective date of the employment agreement; and 500,000 shares vest on the
      date  that  is four  years  from  the  effective  date  of the  employment
      agreement.

      In April 2004,  the  Company  granted to Mr.  Gardner  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.

(2)   Company car, insurance, repairs and expenses.

<TABLE>
<CAPTION>
                                    Option/SAR Grants in Last Fiscal Year
---------------------------------------------------------------------------------------------------------------
                                              Individual Grants
---------------------------------------------------------------------------------------------------------------
        (a)                     (b)                            (c)                     (d)             (e)
                        Number of Securities         % of Total Options/ SARs      Exercise or
                       Underlying Options/SARs    Granted to Employees in Fiscal   Base Price      Expiration
        Name                Granted (#)                       Year                   ($/Sh)            Date
-------------------    -----------------------    ------------------------------   -----------    -------------
<S>                          <C>                              <C>                   <C>                <C>
Norman A. Gardner,           2,500,000                        100%                  $0.06/Sh      June 30, 2009
President and CEO
</TABLE>


                                   -23-
<PAGE>

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 the Company's  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.

EMPLOYMENT CONTRACTS

The Company  currently  has a five-year  employment  agreement in place with its
President and CEO,  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
the Company's net income (before taxes) exceeds $350,000. In connection with his
employment agreement,  the Board granted an option to Mr. Gardner to purchase up
to 2,000,000  shares of the  Company's  Common Stock at an option price equal to
the last sale  price at which the  Company  shares  were sold on the date of the
grant.  The option vests as follows:  500,000  shares vest on December 31, 2003;
250,000  shares vest on the date that is one year from the effective date of the
employment agreement; 250,000 shares vest on the date that is two years from the
effective date of the employment agreement; 500,000 shares vest on the date that
is three years from the effective date of the employment agreement;  and 500,000
shares  vest on the  date  that is four  years  from the  effective  date of the
employment agreement.


                                      -24-
<PAGE>

ITEM 11.      SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The  following  table  sets  forth  certain  information  known  to the  Company
regarding the  beneficial  ownership of Common Stock as of December 31, 2004, by
(i) each director of the Company,  (ii) each  executive  officer of the Company,
(iii) all  directors  and  executive  officers as a group,  and (iv) each person
known  to  the  Company  to be the  beneficial  owner  of  more  than  5% of its
outstanding shares of Common Stock.

                                                Shares Beneficially Owned
                                              ----------------------------
            Name (and Address of 5%             Shares          Percentage
               Beneficial Owner)                 Held            Owned (1)
      ---------------------------------       -------------     ----------
      Californian Securities S.A.             19,076,736          31.48%
      Edificio Bilbao Plaza, Suite 418
      Avenida Bilbao
      Panama City, Republic of Panama

      Pacific Continental Securities
      Nominees Limited
      111 Cannon Street
      London EC4N5AR, England                 17,795,903          29.37%

      Norman A. Gardner                        4,785,048 (2)       7.59%
      837 Lindy Lane
      Bala Cynwyd, PA 19004

      Howard Goldberg                          3,116,485 (3)       4.91%

      Michael J. Prevot                          425,000 (4)       0.70%

      Julius Goldfinger                          280,000 (5)       0.46%

      Directors and Officers as a Group        5,490,048 (6)       8.63%

(1)   Percentage  of  ownership  is based on  60,590,506  shares of Common Stock
      issued and outstanding as of December 31, 2004.

(2)   Includes  2,478,709  shares  issuable  upon the exercise of stock  options
      exercisable within 60 days.

(3)   Includes  2,866,485  shares  issuable  upon the exercise of stock  options
      exercisable within 60 days.

(4)   Includes  300,000  shares  issuable  upon the  exercise of a stock  option
      exercisable within 60 days. 60 days.

(5)   Includes  250,000  shares  issuable  upon the  exercise of a stock  option
      exercisable within 60 days.

(6)   Includes  3,028,709  shares  issuable  upon the exercise of a stock option
      exercisable within 60 days.


                                      -25-
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

<TABLE>
<CAPTION>
------------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                             Number of securities
                                                                                            remaining available for
                                Number of securities to be    Weighted average exercise      future issuance under
                                  issued upon exercise of       price of outstanding       equity compensation plans
                                   outstanding options,         options, warrants and        (excluding securities
                                    warrants and rights                rights              reflected in column (a))
                                            (a)                          (b)                           (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                    <C>                               <C>                      <C>
Equity compensation plans
approved by security holders           5,920,815 (1)                     .13                      12,079,185
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders             4,419,632                       .28                          --
------------------------------- ---------------------------- ---------------------------- ----------------------------
            Total
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>

(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.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

TRANSACTIONS WITH MANAGEMENT AND OTHERS

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


CERTAIN BUSINESS RELATIONSHIPS

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 (the "Securities Act"), in reliance
upon exemptions  provided by Regulations S promulgated under the Securities Act,
California  Securities,   S.A.  purchased  from  the  Company  an  aggregate  of
14,500,000  shares of its  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 the Company to own of record or beneficially more
than five percent of the Company's Common Stock.

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


                                      -26-
<PAGE>

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 herewith).

3.2      Amended and  Restated  Bylaws of the Company  dated  December  17, 2003
         (filed herewith).

10.1     Employment  Agreement  by and between  the  Company and Norman  Gardner
         dated November 5, 2003 (filed herewith).

10.2     Engagement  Agreement  by and between  the Company and Howard  Goldberg
         dated October 8, 2003 (filed herewith)

10.3     Engagement  Agreement  by and between  the Company and Harvey  Goldberg
         dated October 29, 2003 (filed herewith)

10.4     License  Agreement  by and  between  The Bud Jones  Company,  Inc.  and
         Bourgogne  et Grasset  and the  Company  dated  October 15, 2001 (filed
         herewith).

10.5     Marketing and Supply Agreement between  Translucent  Technologies,  LLC
         and the Company dated October 2002 (filed herewith).

10.6     License  Agreement  regarding the use of the Company's  technology with
         plastic  playing cards between the Company and CoPAG U.S.A.  Inc. dated
         November 1, 2003 (filed herewith).

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).

10.13    License  Agreement  by and between  NoCopi  Technologies,  Inc.  and LL
         Security Products, Inc. dated September 20, 2001 (filed herewith).

17.1     Director  resignation  letter from Joel A. Pinsky,  dated  December 23,
         2003 (filed herewith).

                                      -27-
<PAGE>

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 herewith).


ITEM 14.      PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

AUDIT FEES

During fiscal 2004 and 2003, 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 $35,335 and
$31,000.

AUDIT-RELATED FEES

During fiscal 2004 and 2003, 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 2004 and 2003, the aggregate fees billed for professional services
rendered by our  principal  accountant  for tax  compliance,  tax advice and tax
planning was $4,165 and $4,225.

ALL OTHER FEES

During fiscal 2004 and 2003, 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 an audit  committee.  All of the services  listed above
were approved by Norman A. Gardner, our Chief Executive Officer.



                                      -28-
<PAGE>

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  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, 2005



                                      -29-

<PAGE>


                          LASERLOCK TECHNOLOGIES, INC.
                                AND SUBSIDIARIES

                          (A DEVELOPMENT STAGE COMPANY)

                           DECEMBER 31, 2004 AND 2003


<PAGE>

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


                                 C O N T E N T S


                                                                          PAGE
                                                                          ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                     1
CONSOLIDATED BALANCE SHEETS                                                 2
CONSOLIDATED STATEMENTS OF OPERATIONS                                       3
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY                4 - 5
CONSOLIDATED STATEMENTS OF CASH FLOWS                                     6 - 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                               8 - 18


<PAGE>

                                      -2 -

             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,  2004 and 2003,  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, 2004.  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, 2004 and 2003 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, 2004, 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.  Management's  actions in regard to this matter are also  described  in
Note 2. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.


/s/ COGEN SKLAR LLP

Bala Cynwyd, Pennsylvania
March 7, 2005

                                      -1-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2004 AND 2003


                                                         2004           2003
                                                     -----------    -----------
      ASSETS

Current Assets
  Cash and cash equivalents                          $   676,593    $   810,264
  Receivables                                             27,943            994
  Inventory                                               20,423             --
  Prepaid expenses                                         9,811         10,197
                                                     -----------    -----------

  Total Current Assets                                   734,770        821,455
                                                     -----------    -----------

Property and Equipment
  Capital equipment                                       29,381          6,297
  Less accumulated depreciation                            7,965          3,275
                                                     -----------    -----------
                                                          21,416          3,022
                                                     -----------    -----------

Patent costs, net of accumulated amortization of
  $8,366 and $3,587 as of December 31, 2004
  and 2003, respectively                                  80,297         53,097
                                                     -----------    -----------

TOTAL ASSETS                                         $   836,483    $   877,574
                                                     ===========    ===========

      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Accounts payable and accrued expenses              $    43,328    $   104,994
  Deferred revenue                                        12,500         12,500
                                                     -----------    -----------

Total Current Liabilities                                 55,828        117,494
                                                     -----------    -----------


STOCKHOLDERS' EQUITY

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, 60,590,506 shares outstanding at
  December 31, 2004, and 41,990,506 shares
  outstanding at December 31, 2003                        60,590         41,990
Additional paid-in capital                             5,903,685      4,495,204
Deficit accumulated during the development stage      (5,183,620)    (3,777,114)
                                                     -----------    -----------
                                                         780,655        760,080
                                                     -----------    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $   836,483    $   877,574
                                                     ===========    ===========


   The accompanying notes are an integral part of these financial statements.

                                      -2-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
   AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2004


                                    Cumulative      Year Ended      Year Ended
                                      Since         December 31,    December 31,
                                    Inception          2004            2003
                                   ------------    ------------    ------------
REVENUES
  Sales                            $    124,370    $     54,765    $     23,488
  Royalties                             184,040          53,422          38,633
                                   ------------    ------------    ------------
      Total revenues                    308,410         108,187          62,121
                                   ------------    ------------    ------------

COSTS AND EXPENSES
  Research and development              780,470         310,615          93,977
  Patent costs                           50,989              --              --
  Legal and accounting                  573,746         149,322         172,891
  Sales and marketing                 2,551,711         684,044         528,431
  General and administrative          1,729,143         376,634         350,839
                                   ------------    ------------    ------------
      Total costs and expenses        5,686,059       1,520,615       1,146,138
                                   ------------    ------------    ------------

LOSS BEFORE OTHER INCOME             (5,377,649)     (1,412,428)     (1,084,017)
                                   ------------    ------------    ------------

OTHER INCOME (EXPENSE)
  Interest income                        53,577           5,922           1,445
  Interest expense                      (29,270)             --         (29,270)
  Gain on disposition of assets           4,722              --           4,722
                                   ------------    ------------    ------------
                                         29,029           5,922         (23,103)
                                   ------------    ------------    ------------

LOSS BEFORE INCOME TAX BENEFIT       (5,348,620)     (1,406,506)     (1,107,120)

INCOME TAX BENEFIT                     (165,000)             --              --
                                   ------------    ------------    ------------

NET LOSS                           $ (5,183,620)   $ (1,406,506)   $ (1,107,120)
                                   ============    ============    ============

BASIC AND DILUTED NET LOSS PER
  COMMON SHARE                                     $      (0.03)   $      (0.04)
                                                   ============    ============

BASIC AND DILUTED WEIGHTED AVERAGE
  COMMON SHARES OUTSTANDING                          53,447,828      28,156,475
                                                   ============    ============


   The accompanying notes are an integral part of these financial statements.

                                      -3-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
    FOR THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                 Common Stock                                      Accumulated
                                         -------------------------                  Additional      During the
                                           Number of                  Consulting      Paid-In      Development
                                            Shares        Amount         Fees         Capital         Stage          Total
                                         -----------   -----------   -----------    -----------    -----------    -----------
<S>                                        <C>         <C>           <C>            <C>            <C>            <C>
Issuance of initial 4,278,000 shares
  on November 10, 1999                     4,278,000   $     4,278   $        --    $    16,595    $        --    $    20,873
Issuance of shares of common stock in
  exchange for services                    1,232,000         1,232            --         35,728             --         36,960
Issuance of shares of common stock         2,090,000         2,090            --         60,610             --         62,700
Stock issuance costs                              --            --            --        (13,690)            --        (13,690)
Net loss                                          --            --            --             --        (54,113)       (54,113)
                                         -----------   -----------   -----------    -----------    -----------    -----------

Balance, December 31, 1999                 7,600,000         7,600            --         99,243        (54,113)        52,730

Issuance of shares of common stock         5,449,999         5,450            --        921,050             --        926,500
Issuance of shares of common stock in
  exchange for services                      240,000           240       (40,800)        40,560             --             --
Stock issuance costs                              --            --            --        (16,335)            --        (16,335)
Fair value of non-employee stock
  options grants                                  --            --            --         50,350             --         50,350
Amortization of deferred consulting
  fees                                            --            --        20,117             --             --         20,117
Net loss                                          --            --            --             --       (367,829)      (367,829)
                                         -----------   -----------   -----------    -----------    -----------    -----------

Balance, December 31, 2000                13,289,999        13,290       (20,683)     1,094,868       (421,942)       665,533

Issuance of shares of common stock           217,500           218            --         77,723             --         77,941
Issuance of shares of common stock and
  stock options for acquisition of
  subsidiary                               2,000,000         2,000            --        736,000             --        738,000
Issuance of stock options                         --            --            --         15,000             --         15,000
Exercise of options                        1,450,368         1,450            --        230,609             --        232,059
Fair value of non-employee stock
  options                                         --            --            --        323,250             --        323,250
Amortization of deferred consulting
  fees                                            --            --        20,683             --             --         20,683
Net loss                                          --            --            --             --     (1,052,299)    (1,052,299)
                                         -----------   -----------   -----------    -----------    -----------    -----------

Balance, December 31, 2001                16,957,867        16,958            --      2,477,450     (1,474,241)     1,020,167
                                         -----------   -----------   -----------    -----------    -----------    -----------
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      -4-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
    FOR THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                 Common Stock                                      Accumulated
                                         -------------------------                  Additional      During the
                                           Number of                  Consulting      Paid-In      Development
                                            Shares        Amount         Fees         Capital         Stage          Total
                                         -----------   -----------   -----------    -----------    -----------    -----------
<S>                                        <C>         <C>            <C>          <C>           <C>            <C>
Balance, December 31, 2001                16,957,867    $    16,958    $     --   $ 2,477,450    $(1,474,241)   $ 1,020,167

Issuance of shares of common stock         3,376,875          3,377          --       687,223             --        690,600
Fair value of non-employee stock
  options                                         --             --          --        94,000             --         94,000
Salary due to shareholder contributed
  to capital                                      --             --          --        15,000             --         15,000
Return 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)       270,014

Issuance of shares of common stock        22,512,764         22,512          --     1,387,109             --      1,409,621
Fair value of non-employee stock
  options                                         --             --          --       213,300             --        213,300
Issuance of shares of common stock for
  services                                   143,000            143          --        23,857             --         24,000
Stock 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)       760,080

Issuance of shares of common stock        18,600,000         18,600          --       939,881             --        958,481
Fair value of non-employee stock
  options                                         --             --          --       493,600             --        493,600
Stock issuance costs                              --             --          --       (25,000)            --        (25,000)
Net loss                                          --             --          --            --     (1,406,506)    (1,406,506)
                                         -----------    -----------    --------   -----------    -----------    -----------

Balance, December 31, 2004                60,590,506    $    60,590    $     --   $ 5,903,685    $(5,183,620)   $   780,655
                                         ===========    ===========    ========   ===========    ===========    ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      -5-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
   AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                              Cumulative      Year Ended     Year Ended
                                                                 Since       December 31,    December 31,
                                                              Inception          2004           2003
                                                              -----------    -----------    -----------
<S>                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                    $(5,183,620)   $(1,406,506)   $(1,107,120)
  Adjustments to reconcile net loss to net cash
    flows used in operating activities
      Fair value of options issued in exchange for services     1,174,500        493,600        213,300
      Salary due to stockholder contributed to capital             15,000             --             --
      Amortization and depreciation                               421,462          9,469        119,700
      Gain on disposition of assets                                (4,722)            --         (4,722)
      Stock issued in exchange for services                        60,960             --         24,000
      Financing expenses paid directly from stock proceeds          5,270             --          5,270
      Amortization of deferred consulting fees                     40,800             --             --
      (Increase) decrease in assets
        Receivables                                               (27,943)       (26,949)        26,364
        Inventory                                                 (20,423)       (20,423)
        Prepaid expenses                                           (9,811)           386          1,053
      Increase (decrease) in liabilities
        Accounts payable and accrued expenses                      43,329        (61,666)        68,258
        Deferred revenue                                           12,500             --         12,500
                                                              -----------    -----------    -----------

  Net cash used in operating activities                        (3,472,698)    (1,012,089)      (641,397)
                                                              -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                              (32,529)       (23,084)            --
  Purchase of intangibles                                         (20,000)            --             --
  Purchase of patent costs                                        (88,663)       (31,979)       (32,286)
  Proceeds from sale of assets                                      6,737             --          6,737
                                                              -----------    -----------    -----------

Net cash used in investing activities                            (134,455)       (55,063)       (25,549)
                                                              -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of common stock                        4,091,447        958,481      1,354,352
  Proceeds from exercise of stock options                         232,059             --             --
  Proceeds from issuance of stock options                          15,000             --             --
  Proceeds from short-term borrowings                              50,000             --         50,000
  Stock issuance costs                                           (104,760)       (25,000)       (49,735)
                                                              -----------    -----------    -----------

Net cash provided by financing activities                       4,283,746        933,481      1,354,617
                                                              -----------    -----------    -----------

NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                                676,593       (133,671)       687,671

CASH AND CASH EQUIVALENTS -
  BEGINNING OF PERIOD                                                  --        810,264        122,593
                                                              -----------    -----------    -----------

CASH AND CASH EQUIVALENTS -
  END OF PERIOD                                               $   676,593    $   676,593    $   810,264
                                                              ===========    ===========    ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      -6-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
   AND THE PERIOD NOVEMBER 10, 1999 (DATE OF INCEPTION) TO DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                  Cumulative   Year Ended    Year Ended
                                                    Since      December 31, December 31,
                                                  Inception       2004          2003
                                                  ---------     --------     ---------
<S>                                               <C>           <C>          <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES:
    Return of shares of common stock related to
      purchase price adjustment
        Common stock                              $  (1,000)    $     --     $      --
        Additional paid-in capital                 (353,000)          --            --
                                                  ---------     --------     ---------

        Intangible assets                         $(354,000)    $     --     $      --
                                                  =========     ========     =========

    Issuance of common stock and stock options
      for acquisition of subsidiary               $ 738,000     $     --     $      --
                                                  =========     ========     =========

    Common stock sales proceeds applied
      to debt and financing expenses repayment    $  55,270     $     --     $  55,270
                                                  =========     ========     =========
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                      -7-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of 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  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.


                                      -8-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory

Inventory  principally  consists of penlights  and pigments and is stated at the
lower of cost (determined by the first-in, first-out method) or market.

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 are 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 2004 and 2003 was $4,690 and $2,519.

Patents

Patents are capitalized and amortized over an estimated useful life of 17 years.
Patent amortization expense for 2004 and 2003 was $4,779 and $2,565.

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  statement 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 2004 and 2003, 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.

Research and Development Costs

Research and development costs are expensed when incurred. Total amount expensed
for 2004 and 2003 was $310,615 and $93,977, respectively.


                                      -9-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements

In  December  2004,  the FASB  revised  SFAS 123,  "Accounting  for  Stock-Based
Compensation"  to require  all  companies  to expense the fair value of employee
stock options. SFAS 123R is effective for the first period ending after December
15, 2005 for a small business issuer.

The  following  recently  issued  accounting  pronouncements  are  currently not
applicable to the Company.

In January  2003,  subsequently  revised  December  2003,  the FASB  issued FASB
Interpretation No. 46R ("FIN 46R"),  Consolidation of Variable Interest Entities
- An  Interpretation  of AARB N. 51. FIN 46R  requires  that if any entity has a
controlling  financial  interest  in a variable  interest  entity,  the  assets,
liabilities and results of activities of the variable  interest entity should be
included  in the  consolidated  financial  statements  of the  entity.  FIN  46R
provisions  are  effective for all  arrangements  entered into after January 31,
2003.  FIN 46R provisions are required to be adopted for the first period ending
after December 15, 2004 for a small business issuer.

FAS 150,  Accounting for Certain Financial  Instruments with  Characteristics of
both Liabilities and Equity,  requires financial instruments within its scope to
be classified as liabilities (or assets in some circumstances). The Statement is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise  effective at the beginning of the first interim period  beginning
after  June 15,  2003,  except  for  certain  mandatorily  redeemable  financial
instruments.  It is to be implemented  by reporting the  cumulative  effect of a
change in an accounting  principle for financial  instruments created before the
issuance  date of the  Statement  and still  existing  at the  beginning  of the
interim period of adoption.  Restatement is not permitted. The effective date of
certain provisions of Statement 150 for certain mandatorily redeemable financial
instruments  has  been  deferred  by FSP  FAS  150-3.  Under  the  FSP,  certain
mandatorily redeemable shares are subject to the provisions of Statement 150 for
the first fiscal period  beginning  after December 15, 2004.  Other  mandatorily
redeemable shares are deferred indefinitely but may be subject to classification
or  disclosure  provisions  of the  Statement.  A table  indicating  the revised
effective  dates  of  Statement  150  for  particular   kinds  of  entities  and
instruments is available on the FASB website.


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 outcome of this uncertainty.

The  Company  is in the  development  stage at  December  31,  2004.  Successful
completion of the Company's development program and, ultimately,  the attainment
of profitable  operations is dependent 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.


                                      -10-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


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,  2004,  the  Company  has a net  operating  loss  ("NOL")  that
approximates  $3,525,000.  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:

                                                 2004         2003
                                              ---------    ---------

              Current                         $      --    $      --
              Deferred                          381,000      323,000
              Change in valuation allowance    (381,000)    (323,000)
                                              ---------    ---------

                                              $      --    $      --
                                              =========    =========

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

                                             2004                   2003
                                     -------------------    -------------------
                                       Amount      %          Amount      %
                                     ---------    ------    ---------    ------
U.S. federal income tax benefit at
  Federal statutory rate             $(492,000)      (35)   $(387,000)      (35)
State tax, net of federal tax effect   (91,000)       (6)     (71,000)       (6)
Non-deductible options                 202,000        14       88,000         8
Non-deductible amortization                 --        --       47,000         4
Change in valuation allowance          381,000        27      323,000        29
                                     ---------    ------    ---------    ------
                                     $      --        --    $      --        --
                                     =========    ======    =========    ======


                                      -11-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 3 - INCOME TAXES (Continued)

The primary  components  of the  Company's  2004 and 2003  deferred  tax assets,
liabilities and the related valuation allowance are as follows:

                                                         2004           2003
                                                     -----------    -----------

         Deferred tax asset for NOL carry forwards   $ 1,463,000    $ 1,082,000
         Deferred tax liability for intangibles         (160,000)      (160,000)
         Valuation allowance                          (1,303,000)      (922,000)
                                                     -----------    -----------

                                                     $        --    $        --
                                                     ===========    ===========

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
authorized  number  of shares  of  preferred  stock  from  10,000,000  shares 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.

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.

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 the approval of the  stockholders,
superceded 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").


                                      -12-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 5 - STOCK OPTION PLAN (Continued)

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 grant (or 110% of the fair market value in the case of a grantee holding
more than 10% of the  outstanding  stock of the  Company).  The  aggregate  fair
market  value  (determined  at the  time of the  grant)  of stock  for  which an
employee may exercise  Incentive  Stock  Options  under all plans of the company
shall not exceed  $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.

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.

A summary of incentive stock option  transactions  for employees during 2004 and
2003 are as follows:

                                                                 Exercise Price
                                          Option      Vested       Per Common
                                          Shares      Shares       Share Range
                                         ---------   ---------   --------------

      Balance, December 31, 2002           525,000     525,000   $0.17 to $0.28
      Granted/vested during the year     2,250,000     750,000             0.20
      Exercised during the year                 --          --               --
                                         ---------   ---------   --------------

      Balance, December 31, 2003         2,775,000   1,275,000   $0.17 to $0.28

      Granted / vested during the year   2,500,000     833,333             0.06
      Exercised during the year                 --          --               --
                                         ---------   ---------   --------------

      Balance, December 31, 2004         5,275,000   2,108,333   $0.06 to $0.28
                                         =========   =========   ==============


                                      -13-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 5 - STOCK OPTION PLAN (Continued)

Information  with respect to incentive  stock options  outstanding and incentive
stock options exercisable at December 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                     Incentive Stock Options Outstanding
                  ----------------------------------------------------------------------
                                                                        Weighted Average
                   Number Outstanding                                  Exercise Price of
   Range of       Currently Exercisable   Weighted Average Remaining   Options Currently
Exercise Prices   at December 31, 2004        Contractual Life             Exercisable
---------------   ---------------------   --------------------------   -----------------
<S>                     <C>                      <C>                          <C>
$0.06 to $0.28          2,108,333                3.4 years                    $0.16
</TABLE>

The Company  accounts for  stock-based  compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation," which for employee stock options
permits  the use of  intrinsic  value  method  described  in APB opinion No. 25,
Accounting  for Stock Issued to Employees,  and requires the Company to disclose
the pro forma effects 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  will  continue to account for
stock-based  compensation  under APB Opinion No. 25, under which the Company has
recognized no compensation expense for employee granted options.

Had compensation  cost for the Company's stock option plan been determined based
on the fair value of the Company's common stock at the dates of awards under the
fair value method of SFAS No. 123, the Company's  2003 net loss and net loss per
common share would have been increased to the pro forma amounts indicated below.
In 2004 and 2003 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 approximately 3% to 5%
and expected option life of five years.

                                                           2004          2003
                                                        ----------   ----------

         Net loss:
         As reported                                    $1,406,506   $1,107,120
         Pro froma                                      $1,551,106   $1,181,820

         Net loss per common share basic and diluted:
         As reported                                    $     0.03   $     0.04
         Pro forma                                      $     0.03   $     0.04



                                      -14-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


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
2004 and 2003 are as follows:

                                                                  Exercise Price
                                       Option         Vested        Per Common
                                       Shares         Shares        Share Range
                                    -----------    -----------    --------------

   Balance, December 31, 2002         3,894,632      2,369,632    $0.16 to $0.75
   Granted/vested during the year     3,756,662      3,172,566      0.07 to 0.39
   Exercised during the year                 --             --                --
                                    -----------    -----------    --------------

   Balance, December 31, 2003         7,651,294      5,542,198     0.07 to $0.39

   Granted/vested during the year     4,050,000      3,116,934      0.06 to 0.20
   Expired during the year           (1,500,000)    (1,500,000)             0.28
   Exercised during the year                 --             --                --
                                    -----------    -----------    --------------

   Balance, December 31, 2004        10,201,294      7,159,132    $0.06 to $0.75
                                    ===========    ===========    ==============

Total expense  recognized by the Company during 2004 and 2003 for  non-statutory
stock options  granted during the years was $493,600 and $200,800.  The 2004 and
2003 fair value amounts of the 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 two to ten years.

Information  with  respect  to  non-statutory   stock  options  outstanding  and
exercisable at December 31, 2004 is as follows:

<TABLE>
<CAPTION>
                                        Non-Employee Options Outstanding
                  -----------------------------------------------------------------------
                                                                         Weighted Average
                    Number Outstanding                                  Exercise Price of
   Range of       Currently Exercisable   Weighted Average Remaining    Options Currently
Exercise Prices   at December 31, 2003         Contractual Life             Exercisable
---------------   ---------------------   ---------------------------   -----------------
<S>                     <C>                      <C>                           <C>
$0.06 to $0.75          7,159,132                3.6 years                     $0.13
</TABLE>


                                   -15-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


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 the recognition of additional  expense in 2004
of $-0- and in 2003 of $12,500.

In conjunction with a 2002 contractual agreement, the Company granted options to
a customer.  The number of options to be granted are  contingent  upon the gross
amount of product  sales during each of 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 Employees 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, 2004, the  contingencies  of this contract have not been met and no
options have been granted.


NOTE 6 - RELATED PARTY TRANSACTIONS

The Company  leased its sales office located in Los Angeles,  California  from a
company owned by officers and minority  stockholders  of LaserLock.  This office
was closed during  February 2003. The Company did not incur expenses  associated
with the Los Angeles, California office for 2003.

On November 5, 2003, the Company entered into a five-year  employment  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.

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.

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 $10,547  and $5,972  were  incurred  during the years  ended
December 31, 2004 and 2003.


NOTE 7 - COMMITMENTS

The Company has entered into certain commission  agreements.  Under the terms of
the contracts,  expiring on various dates, the  representatives  are entitled to
commissions  based on certain  percentage of sales, as defined in the agreements
which may be renewed  annually.  The commissions  from sales will be expensed as
sales are generated.


                                      -16-
<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 8 - LICENSING AGREEMENT

The Company has entered into licensing  agreements with two companies located in
the United States  ("Licensees") which grants each Licensee the exclusive rights
to use the  company's  technology  in the gaming  industry  and to  manufactured
products or components in the UK licensee's territory.  The Licensee's territory
is the world.

In consideration of the rights granted to the Licensees under the agreement, the
Licensees  agree  to  pay  to the  Company  royalties  in  accordance  with  the
agreement.  The  minimum,  annual  royalty  fee of $40,000  shall be paid by the
Licensee  to the  company by way of four  quarterly  payments  of  $10,000.  The
Company  received the minimum  payments in 2004 and 2003.  The agreements are is
for  one  year  and  may be  automatically  renewed  from  year  to  year by the
Licensees. The license agreements were renewed in 2004.


NOTE 9 - PATENTS

The   Company   has  four   issued   patents   and  one   patent   pending   for
anti-counterfeiting technology.


NOTE 10 - INTANGIBLE ASSETS

In 2001, the Company made an acquisition  and assigned the purchase price to the
intangible assets and lives to the intangible assets as follows:

                                            Value          Life
                                           --------     ---------

        Employment contracts               $100,000     24 months
        Four marketing agreements           300,000     24 months
        Slot machine tickets agreement      358,000     36 months
                                          ---------
                                          $ 758,000
                                          =========

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

On  November 1, 2002,  one million  shares of the  original  two million  shares
issued in the EDS  acquisition  were  returned to the Company as the result of a
purchase price adjustment.  The returned shares were canceled upon receipt.  The
shares were valued at the  original  price per share at the time of  acquisition
($0.35 per share) and the carrying value of the intangible assets was reduced by
$354,000,  leaving a carrying  value of $114,617,  which was amortized  over the
following 13 months. The reduction in the purchase price of $354,000 resulted in
a deferred tax expense of $145,000 and a credit to operations for the year ended
December 31, 2002.

Amortization expense totaled $-0- in 2004 and $114,617 in 2003.


                                      -17-

<PAGE>

                  LASERLOCK TECHNOLOGIES, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003


NOTE 11 - MAJOR CUSTOMER

During 2004 and 2003,  the Company  earned a substantial  portion of its revenue
from two customers and one  customer.  During 2004 and 2003,  revenue from those
customers aggregated $76,785 and $16,406. At December 31, 2004 and 2003, amounts
due from those customers included in trade accounts  receivable were $25,065 and
$-0-.


NOTE 12 - SUBSEQUENT EVENTS

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, expiring in January 2010.



                                      -18-