LASERLOCK TECHNOLOGIES INC. |
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) |
Large accelerated filer | o | Accelerated file | o |
Non-accelerated filer | o | Smaller reporting company | þ |
(Do not check if a smaller reporting company) |
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June 30, 2014 | December 31, 2013 | |||||||
(unaudited) | (audited) | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 107,770 | $ | 1,285,973 | ||||
Accounts receivable, net of allowance of $0 at June 30, 2014 and December 31, 2013 | 58,721 | 3,573 | ||||||
Inventory | 84,283 | 34,271 | ||||||
Prepaid expenses | 184,210 | 189,474 | ||||||
TOTAL CURRENT ASSETS | 434,984 | 1,513,291 | ||||||
PROPERTY AND EQUIPMENT | ||||||||
Capital equipment, net of accumulated depreciation of $126,579 and $91,952 as of June 30, 2014 and December 31, 2013 | 109,448 | 144,074 | ||||||
OTHER ASSETS | ||||||||
Deposits | 37,197 | 37,197 | ||||||
Patents and trademarks, net of accumulated amortization of $111,948 and $105,393 as of June 30, 2014 and December 31, 2013 | 114,141 | 120,695 | ||||||
TOTAL ASSETS | $ | 695,770 | $ | 1,815,257 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 409,439 | $ | 316,784 | ||||
Accrued interest - related party | 19,763 | 16,668 | ||||||
Embedded derivative liability | 200,000 | 800,000 | ||||||
Notes payable - net of accumulated discount of $26,617 as of June 30, 2014 | 273,383 | 50,000 | ||||||
TOTAL CURRENT LIABILITIES | 902,585 | 1,183,452 | ||||||
LONG-TERM LIABILITIES | ||||||||
Warrant liability | 3,641,650 | 6,000,000 | ||||||
Accrued interest - related parties | 105,665 | 300,677 | ||||||
Senior secured convertible notes payable - related parties | 114,000 | 330,249 | ||||||
TOTAL LONG-TERM LIABILITIES | 3,861,315 | 6,630,926 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Convertible Preferred Stock, $ .001 par value; 75,000,000 shares authorized; 21,111,111 shares issued and outstanding as of June 30, 2014 and December 31, 2013 | 633,333 | 633,333 | ||||||
Common stock, $ .001 par value; 675,000,000 shares authorized; 337,374,052 shares issued and 307,578,149 outstanding at June 30, 2014 and 319,862,042 shares issued and 290,066,139 outstanding at December 31, 2013 | 337,374 | 319,862 | ||||||
Additional paid in capital | 24,630,326 | 22,938,983 | ||||||
Treasury stock, at cost (29,795,903 shares at June 30, 2014 and December 31, 2013) | (113,389 | ) | (113,389 | ) | ||||
Accumulated deficit | (29,555,774 | ) | (29,777,910 | ) | ||||
STOCKHOLDERS’ DEFICIT | (4,068,130 | ) | (5,999,121 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 695,770 | $ | 1,815,257 |
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Three Months | Three Months | Six Months | Six Months | |||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
NET REVENUES | ||||||||||||||||
Sales | $ | 65,148 | $ | - | $ | 65,148 | $ | 3,140 | ||||||||
Royalties | - | - | - | - | ||||||||||||
TOTAL NET REVENUE | 65,148 | - | 65,148 | 3,140 | ||||||||||||
COST OF SALES | 54,440 | - | 54,440 | 2,710 | ||||||||||||
GROSS PROFIT | 10,708 | - | 10,708 | 430 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
General and administrative | 180,820 | 170,699 | 305,581 | 231,859 | ||||||||||||
Legal and accounting | 178,302 | 55,651 | 310,497 | 177,580 | ||||||||||||
Patent costs | - | - | - | - | ||||||||||||
Payroll expenses (a) | 427,178 | 8,204,468 | 1,501,858 | 8,952,497 | ||||||||||||
Research and development (b) | 30,120 | 162,819 | 875,849 | 137,424 | ||||||||||||
Sales and marketing | 73,895 | 52,197 | 125,331 | 95,006 | ||||||||||||
Total operating expenses | 890,315 | 8,645,834 | 3,119,116 | 9,594,366 | ||||||||||||
LOSS BEFORE OTHER INCOME (EXPENSE) | (879,607 | ) | (8,645,834 | ) | (3,108,408 | ) | (9,593,936 | ) | ||||||||
OTHER INCOME (EXPENSE) | ||||||||||||||||
Interest income | - | 1 | - | 1 | ||||||||||||
Interest expense | (13,121 | ) | (32,978 | ) | (24,028 | ) | (74,219 | ) | ||||||||
Loss on extinguishment of debt | (82,000 | ) | (1,221,875 | ) | (82,000 | ) | (1,221,875 | ) | ||||||||
Change in fair value of warrants | 3,726,572 | (858,864 | ) | 2,836,572 | (12,780,374 | ) | ||||||||||
Change in fair value of embedded derivative liability | 900,000 | - | 600,000 | - | ||||||||||||
Fair value of warrants in excess of consideration | - | - | ||||||||||||||
for convertible preferred stock | - | - | - | (2,995,791 | ) | |||||||||||
4,531,451 | (2,113,716 | ) | 3,330,544 | (17,072,258 | ) | |||||||||||
NET INCOME (LOSS) BEFORE INCOME TAX BENEFIT | 3,651,844 | (10,759,550 | ) | 222,136 | (26,666,194 | ) | ||||||||||
INCOME TAX BENEFIT | - | - | - | - | ||||||||||||
NET INCOME (LOSS) | 3,651,844 | (10,759,550 | ) | 222,136 | (26,666,194 | ) | ||||||||||
Less: Deemed dividend distribution | - | - | - | (1,000,000 | ) | |||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS | $ | 3,651,844 | $ | (10,759,550 | ) | $ | 222,136 | $ | (27,666,194 | ) | ||||||
NET INCOME (LOSS) PER COMMON SHARE | ||||||||||||||||
BASIC | $ | 0.01 | $ | (0.04 | ) | $ | 0.00 | $ | (0.11 | ) | ||||||
DILUTED | $ | 0.01 | $ | (0.04 | ) | $ | 0.00 | $ | (0.11 | ) | ||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||||||||||||||||
BASIC | 302,039,675 | 240,935,887 | 299,856,170 | 233,374,035 | ||||||||||||
DILUTED | 323,600,786 | 240,935,887 | 321,417,281 | 233,374,035 |
(a) | Includes share based compensation of $61,312 and $802,267 for the three and six months ended June 30, 2014 and $7,939,629 and $8,272,227 for the three and six months ended June 30, 2013. |
(b) | Includes share based compensation of $400,000 for the six months ended June 30, 2014 related to the Patent and Technology License Agreement. |
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Convertible Preferred Stock | Common Stock | Deferred | Additional | Deficit Accumulated During the | ||||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Consulting Fees | Paid-In Capital | Treasury Stock | Development Stage | Total | ||||||||||||||||||||||||||||
Balance at December 31, 2013 (audited) | 21,111,111 | $ | 633,333 | 290,066,139 | $ | 319,862 | - | 22,938,983 | $ | (113,389 | ) | (29,777,910 | ) | $ | (5,999,121 | ) | ||||||||||||||||||||
Issuance of shares of common stock for services | 6,349,206 | 6,349 | - | 393,651 | - | - | 400,000 | |||||||||||||||||||||||||||||
Cashless exercise of options | 2,714,285 | 2,714 | - | (2,714 | ) | - | - | - | ||||||||||||||||||||||||||||
Fair value of employee stock options | - | - | - | - | - | 802,267 | - | - | 802,267 | |||||||||||||||||||||||||||
Issuance of common stock for settlement of debt | 8,448,519 | 8,449 | 498,139 | 506,588 | ||||||||||||||||||||||||||||||||
Net Income for the six months ended June 30, 2014 | - | - | - | - | - | - | - | 222,136 | 222,136 | |||||||||||||||||||||||||||
Balance at June 30, 2014 (unaudited) | 21,111,111 | $ | 633,333 | 307,578,149 | $ | 337,374 | $ | - | 24,630,326 | $ | (113,389 | ) | (29,555,774 | ) | $ | (4,068,130 | ) |
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Six Months | Six Months | |||||||
Ended | Ended | |||||||
June 30, | June 30, | |||||||
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net Income (loss) | $ | 222,136 | $ | (26,666,194 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities | ||||||||
Fair value of options issued in exchange for services | 802,267 | 8,272,227 | ||||||
Accretion of discount on notes payable | - | 2,478 | ||||||
Change in fair value warrant liability | (2,836,572 | ) | 12,780,374 | |||||
Change in fair value embedded derivative liability | (600,000 | ) | - | |||||
Fair value of warrants in excess of consideration for convertible preferred stock | - | 2,995,791 | ||||||
Fair value of stock in excess of converted notes payable and accrued interest | 82,000 | 1,221,875 | ||||||
Amortization and depreciation | 41,180 | 40,749 | ||||||
Stock & warrants issued in exchange for services | 844,000 | - | ||||||
(Increase) decrease in assets | ||||||||
Accounts receivable | (55,148 | ) | (3,140 | ) | ||||
Inventory | (50,013 | ) | (19,454 | ) | ||||
Prepaid expenses | 5,263 | 280,263 | ||||||
Deposit | - | (37,197 | ) | |||||
Increase (decrease) in liabilities | ||||||||
Accounts payable and accrued expenses | 116,684 | (220,674 | ) | |||||
Net cash used in operating activities | (1,428,203 | ) | (1,352,902 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | - | (10,573 | ) | |||||
Purchase of patents and trademarks | - | (21,954 | ) | |||||
Net cash used in investing activities | - | (32,527 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of preferred stock | - | 1,000,000 | ||||||
Proceeds from issuance of common stock | - | 235,000 | ||||||
Proceeds from exercise of stock options | - | 17,919 | ||||||
Proceeds from exercise of warrants | - | 10,000 | ||||||
Proceeds from issuance of notes payable | 250,000 | - | ||||||
Net cash provided by financing activities | 250,000 | 1,262,919 | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,178,203 | ) | (122,510 | ) | ||||
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR | 1,285,973 | 2,994,350 | ||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 107,770 | $ | 2,871,840 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Cash paid during the year for: | ||||||||
Interest | $ | - | $ | 13,896 | ||||
Income taxes | $ | - | $ | - | ||||
Fair value of stock issued for conversion of notes payable and accrued interest | $ | 424,588 | $ | 668,125 | ||||
Accretion of discount on preferred stock as deemed dividend distribution | $ | - | $ | 1,000,000 | ||||
Fair value of beneficial conversion feature | $ | - | $ | 1,000,000 | ||||
Fair value of warrants issued as debt discount | $ | 34,222 | $ | - |
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LaserLock Technologies Inc., together with its wholly-owned subsidiary, LL Security Products, Inc., is referred to as the “Company.” LaserLock Technologies Inc. was incorporated in the State of Nevada on November 10, 1999. The Company is based in Washington, D.C. And is publicly traded on the OTC Market under the ticker symbol “LLTI”. A high-tech solutions company in the field of authenticating people and products, LaserLock offers state-of-the-art solutions to combat identity fraud and counterfeiting utilizing multi-factor authentication and a suite of security pigments for governments, health care providers, the gaming industry, the financial services industry and high-end retailers.
The Company’s digital solution is a multi-platform (iOS and Android) strong authentication solution that integrates biometrics and geo-location tagging. The solution completely eliminates passwords and the inherently weak security they provide. The solution also removes the user complexity associated with having to manage many complex passwords. The solution can be delivered either as a high availability cloud service, managed by LaserLock, or as licensed software product for operation on the client’s premises.
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Convertible Notes Payable
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Three Months Ended June 30, 2014 | Six Months Ended June 30, 2014 | |||||||
Numerator | ||||||||
Net income | $ | 3,651,844 | $ | 222,136 | ||||
Denominator | ||||||||
Basic: Weighted-average common shares outstanding during the period | 302,039,675 | 299,856,170 | ||||||
Add: dilutive effect of warrants | 450,000 | 450,000 | ||||||
dilutive effect of conversion of preferred stock | 21,111,111 | 21,111,111 | ||||||
Diluted | 323,600,786 | 321,417,281 | ||||||
Net Income Per Share | ||||||||
Basic | $ | 0.01 | $ | 0.00 | ||||
Diluted | $ | 0.01 | $ | 0.00 |
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Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Derivative liability related to fair value of beneficial conversion feature | $ | - | $ | 200,000 | $ | -- | $ | 200,000 | ||||||||
Derivative liability related to fair value of warrants | - | - | 3,641,650 | 3,641,650 | ||||||||||||
Total | $ | - | $ | 200,000 | $ | 3,641,650 | $ | 3,841,650 |
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Total | ||||
Balance at January 1, 2014 | $ | 6,000,000 | ||
Additional Warrants issued January 2014 | 444,000 | |||
Additional Warrants issued June 2014 | 34,222 | |||
Change in fair value of derivative liabilities | (2,836,572 | ) | ||
Balance at June 30, 2014 | $ | 3,641,650 |
Closing trade price of Common Stock | $ | 0.04 |
Series A Preferred Stock Conversion Price | $ | 0.03 |
Intrinsic value of conversion option per share | $ | 0.01 |
June 30, 2014 | |||
Annual Dividend Yield | 0.0% | ||
Expected Life (Years) | 3.5 – 4.51 | ||
Risk-Free Interest Rate | 1.67% | ||
Expected Volatility | 237.8% -244.3% |
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Option/Warrant Shares | Exercise Price | Weighted Average Exercise Price | ||||||||||
Outstanding, December 31, 2013 | 111,516,665 | $ | 0.01 to 0.20 | 0.09 | ||||||||
Granted | 1,000,000 | 0.10 | 0.001 | |||||||||
Exercised | 6,349,209 | 0.10 | 0.01 | |||||||||
Expired/Returned | (700,000 | ) | .07 - .20 | - | ||||||||
Outstanding, June 30, 2014 | 118,165,874 | $0.01 to $.20 | $ | 0.10 | ||||||||
Exercisable, June 30, 2014 | 118,165,874 | $0.01 to $.20 | $ | 0.10 | ||||||||
Weighted Average Remaining Life, Exercisable, June 30, 2014 (years) | 6.3 |
Option/Warrant Shares | Exercise Price | Weighted Average Exercise | ||||||||||
Outstanding, December 31, 2013 | 59,866,667 | $ | .05 to .15 | 0.05 | ||||||||
Granted | 6,000,000 | 0.05 | 0.01 | |||||||||
Exercised | (12,000,000 | ) | 0.05 | 0.01 | ||||||||
Expired/Returned | - | - | - | |||||||||
Outstanding, June 30, 2014 | 53,866,667 | $0.05 to $0.15 | $ | 0.05 | ||||||||
Exercisable, June 30, 2014 | 45,366,667 | $0.05 to $0.15 | $ | 0.06 | ||||||||
Weighted Average Remaining Life, Exercisable, June 30, 2014 (years) | 9.1 |
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2014 | $ | 36,468 | ||
2015 | 74,637 | |||
2016 | 31,605 | |||
$ | 142,710 |
On August 11, 2014 the Company was notified by the United States Patent and Trademark Office that a third independent patent for it's state-of-the-art SecureLight+ technology had been allowed.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
On June 10, 2014, the Company issued a note payable for $250,000 to an accredited investor, which included warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.10 per share. The warrant expires in five years and may be exercised on a cashless basis. The warrants were valued at $39,650 using the Black-Scholes option pricing model. See Note 6 of the consolidated financial statements for more information about the value of the warrants. The note payable and the associated warrants were issued pursuant to the private offering exemption from federal securities registration provided under Section 4(a)(2) of the Securities Act. |
3.1 | Amended and Restated Articles of Incorporation of LaserLock Technologies Inc. dated December 17, 2003 (filed as an exhibit to the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2004 and incorporated herein by reference). |
3.2 | Certificate of Amendment to Amended and Restated Articles of Incorporation of LaserLock Technologies Inc., dated as of November 29, 2012 (filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2013 and incorporated herein by reference). |
3.3 | Amended Certificate of Designation of Series A Preferred Stock, dated as of January 31, 2013 (filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2013 and incorporated herein by reference). |
3.4 | Certificate of Amendment to Amended and Restated Articles of Incorporation of LaserLock Technologies Inc., dated as of May 23, 2013 (filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 30, 2013 and incorporated herein by reference). |
3.5 | Amended and Restated Bylaws of LaserLock Technologies Inc. dated December 17, 2003 (filed as an exhibit to the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2004 and incorporated herein by reference). |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
101.INS XBRL Instance Document* | |
101.SCH XBRL Taxonomy Extension Schema Document* | |
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEF XBRL Taxonomy Extension Definition Linkbase Document* | |
101.LAB XBRL Taxonomy Extension Label Linkbase Document* | |
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document* | |
*Included herewith. |
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Date: August 19, 2014 | By: | /s/ Neil Alpert | |
Neil Alpert | |||
Chief Executive Officer |
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3.1 | Amended and Restated Articles of Incorporation of LaserLock Technologies Inc. dated December 17, 2003 (filed as an exhibit to the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2004 and incorporated herein by reference). |
3.2 | Certificate of Amendment to Amended and Restated Articles of Incorporation of LaserLock Technologies Inc., dated as of November 29, 2012 (filed as an exhibit to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 1, 2013 and incorporated herein by reference). |
3.3 | Amended Certificate of Designation of Series A Preferred Stock, dated as of January 31, 2013 (filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 6, 2013 and incorporated herein by reference). |
3.4 | Certificate of Amendment to Amended and Restated Articles of Incorporation of LaserLock Technologies Inc., dated as of May 23, 2013 (filed as an exhibit to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 30, 2013 and incorporated herein by reference). |
3.5 | Amended and Restated Bylaws of LaserLock Technologies Inc. dated December 17, 2003 (filed as an exhibit to the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission on March 30, 2004 and incorporated herein by reference). |
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.* |
101.INSXBRL Instance Document* | |
101.SCHXBRL Taxonomy Extension Schema Document* | |
101.CALXBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEFXBRL Taxonomy Extension Definition Linkbase Document* | |
101.LABXBRL Taxonomy Extension Label Linkbase Document* | |
101.PREXBRL Taxonomy Extension Presentation Linkbase Document* | |
*Included herewith. |
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