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EX-32.2 - EXHIBIT 32.2 - VerifyMe, Inc.ex32-2.htm
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EX-32.1 - EXHIBIT 32.1 - VerifyMe, Inc.ex32-1.htm

 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2013
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from to
 
Commission file number 0-31927
 
 
LASERLOCK TECHNOLOGIES, INC.
 
(Exact Name of Registrant as Specified in Its Charter)
             
 
Nevada
     
23-3023677
 
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer Identification No.)
 
 
3112 M Street NW, Washington, DC
     
20007
 
(Address of Principal Executive
Offices)
 
(Zip Code)
 
 
202-400-3700
 
  (Registrant’s Telephone
Number, Including Area Code)
 
837 Lindy Lane
Bala Cynwyd, PA 19004
(Former Name, Former Address and Former Fiscal year, if Changed Since Last Report)
 
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 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days). Yes þ No o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated file
o
Non-accelerated filer
o
Smaller reporting company 
þ
(Do not check if a smaller reporting company) 
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 258,091,442 shares of common stock outstanding at August 12, 2013.
 
 
 

 

 
 
 
 

 

 
 
 
LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
 
CONTENTS

               
PAGE
                 
CONDENSED CONSOLIDATED BALANCE SHEETS
   
1
                 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   
2
                 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
   
3 - 8
                 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
9 - 10
                 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   
11 - 24
 
 
 

 


LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
June 30, 2013 and December 31, 2012
             
   
June 30, 2013
   
December 31, 2012
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
             
CURRENT ASSETS
           
Cash and cash equivalents
  $ 2,871,840     $ 2,994,350  
Accounts receivable, net of allowance of $0 at June 30, 2013 and December 31, 2012
    6,613       3,473  
Inventory
    39,434       19,980  
Prepaid expenses
    469,737       750,000  
                 
TOTAL CURRENT ASSETS
    3,387,624       3,767,803  
                 
PROPERTY AND EQUIPMENT
               
Capital equipment
    236,026       34,964  
Less accumulated depreciation
    57,326       32,624  
      178,700       2,340  
                 
OTHER ASSETS
               
Deposits
    37,197       -  
Patents and Trademark, net of accumulated amortization of $98,839 and $92,302 as of June 30, 2013 and December 31, 2012
    127,249       311,832  
      164,446       311,832  
                 
TOTAL ASSETS
  $ 3,730,770     $ 4,081,975  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
                 
CURRENT LIABILITIES
               
Accounts payable and accrued expenses
  $ 381,977     $ 660,493  
Accrued interest
    14,667       97,563  
Notes payable
    50,000       200,000  
                 
TOTAL CURRENT LIABILITIES
    446,644       958,056  
                 
LONG-TERM LIABILITIES
               
Embedded derivative liability
    1,000,000       -  
Warrant liability
    18,176,165       2,400,000  
Accrued interest
    865,174       975,559  
Senior secured convertible notes payable
    550,249       775,249  
Convertible notes payable
    98,000       140,000  
Notes payable, net of discount of $11,154 and $13,632 as of June 30, 2013 and December 31, 2012
    699,846       697,368  
                 
TOTAL LONG-TERM LIABILITIES
    21,389,434       4,988,176  
                 
CONTINGENCIES
               
                 
STOCKHOLDERS DEFICIT
               
 
               
Convertible Preferred Stock, $ .001 par value; 75,000,000 shares authorized; 33,333,333 shares issued and outstanding as of June 30, 2013 and no shares issed and outstanding at December 31, 2012
    1,000,000       -  
                 
Common stock, $ .001 par value; 675,000,000 shares authorized; 275,665,122 shares issued and 245,869,220 outstanding at June 30, 2013 and 248,244,012 shares issued and 218,448,109 outstanding at December 31, 2012
    275,665       248,244  
                 
Additional paid in capital
    20,785,654       11,387,929  
                 
Treasury stock, at cost (29,795,903 shares at June 30, 2013 and December 31, 2012)
    (113,389 )     (113,389 )
                 
Deficit accumulated during the development stage
    (40,053,238 )     (13,387,041 )
                 
STOCKHOLDERS’ DEFICIT
    (18,105,308 )     (1,864,257 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
  $ 3,730,770     $ 4,081,975  
 
See the accompanying notes to these condensed consolidated financial statements.
 
-1-
 

 


LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
For the Three and Six Months Ended June 30, 2013 and 2012
And for the Period November 10, 1999 (Date of Inception) to June 30, 2013
                               
         
Three Months
   
Three Months
   
Six Months
   
Six Months
 
   
Cumulative
   
Ended
   
Ended
   
Ended
   
Ended
 
   
Since
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
Inception
   
2013
   
2012
   
2013
   
2012
 
                               
NET REVENUES
                             
Sales
  $ 464,295     $ -     $ -     $ 3,140     $ 3,740  
Royalties
    645,180       -       -       -       10,000  
                                         
TOTAL NET REVENUE
    1,109,475       -       -       3,140       13,740  
                                         
COST OF SALES
    431,741       -       -       2,710       2,036  
                                         
GROSS PROFIT
    677,734       -       -       430       11,704  
                                         
OPERATING EXPENSES
                                       
General and administrative
    1,812,367       170,699       35,297       269,008       70,987  
Legal and accounting
    1,706,874       55,651       79,462       168,088       169,809  
Patent costs
    65,000       -       -       -       -  
Payroll expenses (a)
    12,153,779       8,204,468       -       8,740,797       -  
Research and development
    1,179,767       162,819       2,123       311,975       3,380  
Sales and marketing
    5,124,233       52,197       51,954       104,501       100,262  
Total operating expenses
    22,042,020       8,645,834       168,836       9,594,369       344,438  
                                         
LOSS BEFORE OTHER INCOME
    (21,364,286 )     (8,645,834 )     (168,836 )     (9,593,939 )     (332,734 )
                                         
OTHER INCOME (EXPENSE)
                                       
Interest income
    63,665       1       1       1       1  
Interest expense
    (2,264,651 )     (32,978 )     (80,251 )     (74,219 )     (151,958 )
Loss on extinguishment of debt
    (1,221,875 )     (1,221,875 )     -       (1,221,875 )     -  
Change in fair value of warrants
    (12,780,374 )     (858,864 )             (12,780,374 )     -  
Fair value of warrants in excess of consideration for convertible preferred stock
    (2,995,791 )     -       -       (2,995,791 )     -  
Gain on debt forgiveness
    340,352       -       -       -       -  
Gain on disposition of assets
    4,722       -       -       -       -  
      (18,853,952 )     (2,113,716 )     (80,250 )     (17,072,258 )     (151,957 )
                                         
LOSS BEFORE INCOME TAX BENEFIT
    (40,218,238 )     (10,759,550 )     (249,086 )     (26,666,197 )     (484,691 )
                                         
INCOME TAX BENEFIT
    (165,000 )     -       -       -       -  
                                         
NET LOSS
    (40,053,238 )   $ (10,759,550 )     (249,086 )     (26,666,197 )     (484,691 )
                                         
Less: Deemed dividend distribution
    (1,000,000 )     -       -       (1,000,000 )     -  
                                         
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
  $ (41,053,238 )   $ (10,759,550 )   $ (249,086 )   $ (27,666,197 )   $ (484,691 )
                                         
BASIC AND DILUTED NET LOSS PER COMMON SHARE
          $ (0.04 )   $ (0.00 )   $ (0.11 )   $ (0.00 )
                                         
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
            240,935,887       145,144,603       233,374,035       145,144,603  
 
(a) - includes share based compensation of $8,987,750 cumulative, $7,939,629 for the three months ended June 30,2013, $8,272,227 for the six months ended June 30, 2013 and $0 for the three and six months ended June 30, 2012
 
See the accompanying notes to these condensed consolidated financial statements.
 
-2-
 

 


LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
For the Period November 10, 1999 (Date of Inception) to June 30, 2013
 
   
Convertible
                                 
Deficit
       
   
Preferred
   
Common
                     
Accumulated
       
   
Stock
   
Stock
   
Deferred
   
Additional
         
During the
       
   
Number of
         
Number of
         
Consulting
   
Paid-In
   
Treasury
   
Development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Fees
   
Capital
   
Stock
   
Stage
   
Total
 
                                                       
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  

See the accompanying notes to these condensed consolidated financial statements.
 
-3-
 

 

 
LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)
For the Period November 10, 1999 (Date of Inception) to June 30, 2013
 
   
Convertible
                                 
Deficit
       
   
Preferred
   
Common
                     
Accumulated
       
   
Stock
   
Stock
   
Deferred
   
Additional
         
During the
       
   
Number of
         
Number of
         
Consulting
   
Paid-In
   
Treasury
   
Development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Fees
   
Capital
   
Stock
   
Stage
   
Total
 
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 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 in exchange 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  
                                                                         
Stock issuance costs
    -       -       -       -       -       (25,000 )     -       -       (25,000 )
Fair value of non-employee stock options
    -       -       -       -       -       493,600       -       -       493,600  
Issuance of shares of common stock
    -       -       18,600,000       18,600       -       939,881       -       -       958,481  
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  
 
See the accompanying notes to these condensed consolidated financial statements.
 
-4-
 

 

 
LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)
For the Period November 10, 1999 (Date of Inception) to June 30, 2013

   
Convertible
                                 
Deficit
       
   
Preferred
   
Common
                     
Accumulated
       
   
Stock
   
Stock
   
Deferred
   
Additional
         
During the
       
   
Number of
         
Number of
         
Consulting
   
Paid-In
   
Treasury
   
Development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Fees
   
Capital
   
Stock
   
Stage
   
Total
 
Fair value of non-employee stock options
    -       -       -       -       -       286,762       -       -       286,762  
Issuance of shares of common stock
    -       -       3,000,000       3,000       -       102,000       -       -       105,000  
Net loss for the year ended December 31, 2005
    -       -       -       -       -       -       -       (1,266,811 )     (1,266,811 )
                                                                         
Balance at December 31, 2005
    -       -       63,590,506       63,590       -       6,292,447       -       (6,450,431 )     (94,394 )
                                                                         
Fair value of non-employee stock options
    -       -       -       -       -       215,463       -       -       215,463  
Fair value of employee stock options
    -       -       -       -       -       135,098       -       -       135,098  
Fair value of warrants issued for deferred finance charges
    -       -       -       -       -       392,376       -       -       392,376  
Exercise of warrants
    -       -       5,550,000       5,550       -       49,950       -       -       55,500  
Exercise of options
    -       -       4,300,000       4,300       -       (3,870 )     -       -       430  
Shares retired upon cancellation of consulting agreements
    -       -       (1,200,000 )     (1,200 )     -       1,080       -       -       (120 )
Issuance of shares for services
    -       -       1,200,000       1,200       -       53,800       -       -       55,000  
Net loss for the year ended December 31, 2006
    -       -       -       -       -       -       -       (1,607,017 )     (1,607,017 )
                                                                         
Balance at December 31, 2006
    -       -       73,440,506       73,440       -       7,136,344       -       (8,057,448 )     (847,664 )
                                                                         
Fair value of non-employee stock options
    -       -       -       -       -       47,692       -       -       47,692  
Fair value of employee stock options
    -       -       -       -       -       67,651       -       -       67,651  
Recognition of beneficial conversion feature
    -       -       -       -       -       375,000       -       -       375,000  
Net loss for the year ended December 31, 2007
    -       -       -       -       -       -       -       (1,117,334 )     (1,117,334 )
                                                                         
Balance at December 31, 2007
    -       -       73,440,506       73,440       -       7,626,687       -       (9,174,782 )     (1,474,655 )
 
See the accompanying notes to these condensed consolidated financial statements.
 
-5-
 

 

 
LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)
For the Period November 10, 1999 (Date of Inception) to June 30, 2013

   
Convertible
                                 
Deficit
       
   
Preferred
   
Common
                     
Accumulated
       
   
Stock
   
Stock
   
Deferred
   
Additional
         
During the
       
   
Number of
         
Number of
         
Consulting
   
Paid-In
   
Treasury
   
Development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Fees
   
Capital
   
Stock
   
Stage
   
Total
 
Fair value of non-employee stock options
    -       -       -       -       -       28,752       -       -       28,752  
Fair value of employee stock options
    -       -       -       -       -       19,720       -       -       19,720  
Fair value of warrants issued in conjunction with debt financing
    -       -       -       -       -       25,000       -       -       25,000  
Net loss for the year ended December  31, 2008
    -       -       -       -       -       -       -       (931,338 )     (931,338 )
                                                                         
Balance at December 31, 2008
    -       -       73,440,506       73,440       -       7,700,159       -       (10,106,120 )     (2,332,521 )
                                                                         
Fair value of non-employee stock options
    -       -       -       -       -       1,524       -       -       1,524  
Fair value of warrants issued in conjunction with debt financing
    -       -       -       -       -       15,450       -       -       15,450  
Issuance of shares for services
    -       -       7,200,000       7,200       -       40,500       -       -       47,700  
Shares issued for conversion of notes payable
    -       -       48,750,000       48,750       -       263,291       -       -       312,041  
Net loss for the year ended December  31, 2009
    -       -       -       -       -       -       -       (694,910 )     (694,910 )
                                                                         
Balance at December 31, 2009
    -       -       129,390,506       129,390       -       8,020,924       -       (10,801,030 )     (2,650,716 )
                                                                         
Fair value of non-employee stock options
    -       -       -       -       -       364       -       -       364  
Fair value of warrants issued in conjunction with debt financing
    -       -       -       -       -       20,143       -       -       20,143  
Issuance of shares for services
    -       -       25,950,000       25,950       -       182,650       -       -       208,600  
Net loss for the year ended Decemberr 31, 2010
    -       -       -       -       -       -       -       (721,841 )     (721,841 )
                                                                         
Balance at December 31, 2010
    -       -       155,340,506       155,340       -       8,224,081       -       (11,522,871 )     (3,143,450 )
 
See the accompanying notes to these condensed consolidated financial statements.
 
-6-
 

 


LaserLock Technologies, Inc. and Subsidiary
 (A Development Stage Enterprise)
 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (Continued)
For the Period November 10, 1999 (Date of Inception) to June 30, 2013

   
Convertible
                                 
Deficit
       
   
Preferred
   
Common
                     
Accumulated
       
   
Stock
   
Stock
   
Deferred
   
Additional
         
During the
       
   
Number of
         
Number of
         
Consulting
   
Paid-In
   
Treasury
   
Development
       
   
Shares
   
Amount
   
Shares
   
Amount
   
Fees
   
Capital
   
Stock
   
Stage
   
Total
 
Issuance of shares for services
    -       -       1,000,000       1,000       -       29,000       -       -       30,000  
Contribution of common stock from related parties
    -       -       (12,000,000 )     -       -       95,594       (95,594 )     -       -  
Purchase of common stock for treasury
    -       -       (17,795,903 )     -       -       -       (17,795 )     -       (17,795 )
Sale of common stock
    -       -       15,500,000       15,500       -       384,500       -       -       400,000  
Issuance of shares for stock issuance costs
    -       -       2,100,000       2,100       -       (2,100 )     -       -       -  
Stock issuance costs
    -       -       -       -       -       (40,000 )     -       -       (40,000 )
Exercise of options
    -       -       1,000,000       1,000       -       9,000       -       -       10,000  
Fair value of warrants issued in conjunction with debt financing
    -       -       -       -       -       21,275       -       -       21,275  
Fair value of employee stock options
    -       -       -       -       -       47,658       -       -       47,658  
Fair value of non-employee stock options