IDO Security (IDOI) 10-Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

MARK ONE

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period ended June 30, 2008; or

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: 0-51170

IDO SECURITY INC.

(Exact name of small business issuer as specified in its charter)

Nevada	38-3762886
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

17 State Street

New York, New York 10004

(Address of principal executive offices, including zip code)

646-214-1234    

(Issuer's telephone number, including area code)

Indicate by check mark whether the registrant (1) 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   x    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 filer o  Non-accelerated filer o  (Do not check if a smaller reporting company) Smaller reporting company x

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

As of August 14, 2008, there were 42,985,018 shares of registrant’s common stock, par value $0.001 per share outstanding.

INDEX PAGE

		PAGE
PART I -- FINANCIAL INFORMATION
Item 1	Financial Statements	1
	Condensed Consolidated Balance Sheets June 30, 2008 (Unaudited) and December 31, 2007 (Audited)	1
	Unaudited Condensed Consolidated Statements of Operations for the six and three months ended June 30, 2008 and 2007	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the six and three months ended June 30, 2008 and 2007	3
	Notes to Unaudited Condensed Consolidated Financial Statements	4
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 4T	Controls and Procedures	13
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	13
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3	Defaults upon Senior Securities	14
Item 4	Submission of Matters to a Vote of Security Holders	14
Item 5	Other Information	14
Item 6	Exhibits	15
SIGNATURES		16

IDO SECURITY INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
FOR THE PERIODS INDICATED
	June 30,			December 31,
ASSETS	2008			2007
CURRENT ASSETS	(Unaudited)
Cash and  cash equivalents	$	42,545		$	353,701
Due from escrow agent		-			1,150,000
Inventory		330,184			177,037
Prepaid expenses and other current assets		54,464			75,678
Total current assets		427,193			1,756,416
Property and equipment, net		33,297			52,192
Goodwill		1,955,002			1,955,002
Deferred financing costs, net		788,505			718,106
Total assets	$	3,203,997		$	4,481,716
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	1,348,541		$	516,962
Convertible promissory notes
(net of discount of $2,858,850 and $855,758)		1,173,343			2,256,563
Notes payable - other		202,000			-
Loan payable, related party		44,826			44,826
Total current liabilities		2,768,710			2,818,351
NON-CURRENT LIABILITIES
Convertible promissory notes
(net of discount of $691,382 and $2,642,522)		756,975			-
Accrued severance pay		188,377			155,681
Total  liabilities		3,714,062			2,974,032
STOCKHOLDERS' EQUITY
Preferred Stock
20,000,000 shares authorized; none outstanding		-			-
Common stock, $.001 par value;
100,000,000 shares authorized; 42,732,198 and 34,361,250
issued and outstanding, respectively		42,732			34,361
Additional paid-in capital		18,489,396			16,431,941
Stock subscription receivable		(25	)		(25	)
Accumulated other comprehensive loss		(331	)		(331	)
Deferred stock based compenation		(77,657	)		-
Deficit accumulated during the development stage		(18,964,180	)		(14,958,262	)
Total stockholders' equity		(510,065	)		1,507,684
Total liabilities and stockholders' equity	$	3,203,997		$	4,481,716
See Notes to Consolidated Financial Statements.

1

IDO SECURITY INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
							January 23,
	Six Months			Six Months			2004 (Date of			Three Months			Three Months
	Ended			Ended			Inception) to			Ended			Ended
	June 30,			June 30,			June 30,			June 30,			June 30,
	2008			2007			2008			2008			2007
	(UNAUDITED)			(UNAUDITED)			(UNAUDITED)			(UNAUDITED)			(UNAUDITED)
Revenues	$	33,684		$	-		$	82,779		$	33,684		$	-
Cost of sales		11,408			-			118,595			11,408			-
Gross profit (loss)		22,276			-			(35,816	)		22,276			-
Operating expenses
Research and development costs		219,291			99,161			498,468			106,633			72,155
Selling, general and administrative expenses		1,462,597			312,309			2,637,795			829,474			230,314
Stock based compensation - selling, general and administrative		566,185			1,456,077			5,945,288			(42,462	)		1,456,077
Total operating expenses		2,248,073			1,867,547			9,081,551			893,645			1,758,546
Loss from operations		(2,225,797	)		(1,867,547	)		(9,117,367	)		(871,369	)		(1,758,546	)
Interest expense		(311,837	)		(201,066	)		(896,838	)		(68,432	)		(168,753	)
Interest income		1,803			1,537			5,098			177			1,537
Amortization of debt discount		(1,081,068	)		(1,642,679	)		(7,986,239	)		(692,130	)		(1,486,974	)
Amortization of beneficial conversion feature		(167,103	)		(327,966	)		(620,096	)		(110,020	)		(323,177	)
Amortization of deferred finance costs		(221,916	)		(92,182	)		(348,738	)		(123,098	)		(68,759	)
Net loss		(4,005,918	)		(4,129,903	)		(18,964,180	)		(1,864,872	)		(3,804,672	)
Other comprehensive loss
Foreign currency translation adjustment		0			0			(331	)		0			0
Comprehensive loss for the period	$	(4,005,918	)	$	(4,129,903	)	$	(18,964,511	)	$	(1,864,872	)	$	(3,804,672	)
Basic and diluted loss per share:	$	(0.10	)	$	(0.13	)				$	(0.04	)	$	(0.12	)
Weighted average number of shares outstanding
Basic and diluted		40,654,711			31,581,547						42,731,868			32,330,769
See Notes to Consolidated Financial Statements.

2

IDO SECURITY INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
							January 23,
	Six Months			Six Months			2004 (Date of
	Ended			Ended			Inception) to
	June 30,			June 30,			June 30,
	2008			2007			2008
	(UNAUDITED)			(UNAUDITED)			(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(4,005,918	)	$	(4,129,903	)	$	(18,964,180	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		227,529			133,832			360,719
Amortization of note discount		1,081,068			1,642,679			7,986,239
Amortization of beneficial conversion feature of convertible debt		167,103			327,966			620,096
Accretion of interest on notes payable		5,475			185,771			515,317
Stock based compensation		566,185			1,456,077			5,945,288
Loss on sale of property and equipment		22,415			-			22,415
Increase in net liability for severance pay		32,696			18,197			37,574
Increase (decrease) in cash attributable to changes in assets and liabilities
Inventory		(153,147	)		(110	)		(137,765	)
Prepaid expenses and other current assets		21,214			(5,478	)		(41,620	)
Accounts payable		37,741						78,365
Accrued expenses and other current liabilities		793,838			18,930			977,504
Net cash used in operating activities		(1,203,801	)		(352,039	)		(2,600,048	)
CASH FLOWS FROM  INVESTING ACTIVITIES
Acquisition of IDO Security Ltd., net of cash acquired of $19,974		-			(950,171	)		(950,171	)
Deferred acquisition costs		-			-			(55,550	)
Proceeds from sale of property and equipment		1,006			-			1,006
Purchases of property and equipment		(10,139	)		(2,959	)		(51,517	)
Net cash used in investing activities		(9,133	)		(953,130	)		(1,056,232	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common shares		-			-			123,125
Stock subscription receivable		-			36,475			(25	)
Proceeds from issuance of secured convertible notes		750,000			3,000,000			5,975,000
Due from escrow agent		1,150,000			-			-
Payments of deferred finance costs		(170,455	)		(325,000	)		(724,558	)
Proceeds from related party loans		-			12,735			44,541
Proceeds from short-term debt		202,000			47,738			228,896
Repayment of notes payable		(1,029,767	)		-			(1,009,767	)
Repayment of short-term debt		-			(985,794	)		(938,056	)
Net cash provided by financing activities		901,778			1,786,154			3,699,156
Effect of foreign currency translation on cash		-			-			(331	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(311,156	)		480,985			42,545
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR		353,701			7,484			-
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	42,545		$	488,469		$	42,545
Supplemental disclosures of cash flow information:
Cash paid for interest	$	49,266		$	-
Non-cash activities
Issuance of common stock and warrants relating
to convertible promissory notes	$	1,538,471		$	3,624,623
Issuance of common stock for cashless exercise of warrants	$	8,341		$	-
See Notes to Consolidated Financial Statements.

3

IDO SECURITY INC.

(formerly The Medical Exchange, Inc.)

(A development stage company)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 -  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of  IDO Security Inc. (hereinafter, “IDO” or the “Company”) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with Rule 8.03of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2008, are not necessarily indicative of the results that may be expected for the year ending December 31, 2008. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2007, as filed with the Securities and Exchange Commission.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. At June 30, 2008, the Company had not achieved profitable operations, had accumulated losses of $19 million (since inception), a working capital deficiency of $2.34 million and expects to incur further losses in the development of its business. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations or management's ability to find sources of additional equity capital. The Company needs to raise additional funds on an immediate basis in order to continue to meet its liquidity needs and realize its business plan and maintain operations. Management of the Company is continuing its efforts to secure funds through equity and/or debt instruments for its operations. Presently, the Company does not have any financing commitment from any person, and there can be no assurance that additional capital will be available to the Company on commercially acceptable terms or at all.

The Company has been funding its operating from February to September 2007 from the net proceeds of approximately $2.675 million from the private placement of its short-term convertible debentures. In October 2007, the Company raised net proceeds of $223,000 from the private placement of its 90 day promissory notes. In December 2007 and January 2008, the Company received net proceeds of approximately $1 million from the proceeds of the private placement its two-year 10% Secured Convertible Promissory Notes, after the payment of offering related fees and expenses and after the repayment of short-term debentures and bridge loans that came due. Additionally, between April and July 2008, the Company received from two previous investors and one stockholder, gross loan proceeds totaling $414,500, which are discussed below in Note 5.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing a business plan or that the successful implementation of a business plan will actually improve the Company's operating results.

4

NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements,” (“SFAS 157”) which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair value measurements, but it does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. SFAS 157 could impact how fair values are determined and assigned to assets and liabilities in any future acquisition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company does not expect SFAS 159 to have a material effect on the Company’s consolidated results of operations or financial position.

In December 2007, the FASB issued FAS 141(R), "Business Combinations - a replacement of FASB Statement No. 141", which significantly changes the principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective prospectively, except for certain retrospective adjustments to deferred tax balances, for fiscal years beginning after December 15, 2008. This statement will be effective for the Company beginning in fiscal 2009. The Company is currently evaluating FAS 141(R), and has not yet determined the impact if any, FAS 141(R) will have on its consolidated results of operations or financial position. 

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“FAS 161”). FAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. The objective of the guidance is to provide users of financial statements with an enhanced understanding of how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. FAS 161 is effective for fiscal years beginning after November 15, 2008. Management is currently evaluating the impact FAS 161 will have on the Company’s consolidated financial statements, but it currently does not expect the effect to be material.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States (commonly referred to as the GAAP hierarchy). The statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company is currently evaluating the potential impact, if any, the adoption of SFAS No. 162 will have on its financial position, results of operations, cash flows, and disclosures.

In May 2008, FASB issued FSP Accounting Principles Board No. 14−1 Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (“FSP APB 14−1”).  FSP APB 14−1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion (including partial cash settlement) to separately account for the liability and equity components of the instrument in a manner that reflects the issuer's non−convertible debt borrowing rate when interest cost is recognized in subsequent periods.  FSP APB 14−1 is effective for us beginning after January 1, 2009.  The Company is  evaluating the effect of adopting FSP APB 14−1 on its financial statements.

5

In June 2008, FASB ratified EITF Issue No. 08-4, Transition Guidance for Conforming Changes to Issue No. 98-5 (“EITF No. 08-4”).  Per EITF No. 08-4, conforming changes made to EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, that result from EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, and SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, shall be effective for us beginning after January 1, 2009.  The Company is  evaluating the effect of adopting FSP APB 14−1 on its financial statements.

NOTE 3 - NET LOSS PER SHARE

Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share give effect to dilutive convertible securities, options, warrants and other potential common stock outstanding during the period, only in periods in which such effect is dilutive. The following securities have been excluded from the calculation of net loss per share, as their effect would be anti-dilutive:

	Shares of Common Stock
	Issuable upon Conversion/Exercise
	of as
	June 30
	2008		2007
Warrants		7,448,866		11,421,000
Options		3,490,000		1,650,000
Convertible notes		5,480,550		1,911,463

NOTE 4 – GOODWILL

Goodwill consists of the excess of cost over net assets acquired of its subsidiary, IDO Security Ltd. on March 8, 2007. Under the provisions of SFAS no. 142, "Goodwill and Other Intangible Assets", goodwill is not amortized, but is tested at least annually for impairment, or if circumstances change that will more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company performed its impairment test during the quarter ended March 31, 2008 and determined that there was no impairment.

NOTE 5 - PRIVATE PLACEMENT OF DEBT SECURITIES

(i) Promissory Notes

On October 11, 2007, the Company raised gross proceeds of $250,000 from the private placement to institutional investors of its 90 day Promissory Notes (collectively, the “October 2007 Notes”). The loan was advanced pursuant to a Subscription Agreement, dated as of October 11, 2007 (the “Subscription Agreement”), between the Company and the investors. Pursuant to the Subscription Agreement, the Company issued to the investors the October 2007 Notes, originally scheduled to mature on January 11, 2008, in the aggregate principal amount of $265,957.  The effective annual interest rate of the October 2007 notes is 25%. In connection with the issuance of these notes, the Company issued to the investors five-year warrants  to purchase up to 265,957 shares of the Company’s Common Stock at a per share exercise price of $1.77. In connection with their investment, the investors also received an aggregate of 25,000 restricted shares of the Company’s Common Stock.

Out of the gross proceeds received, the Company paid a due diligence fee of $25,000 and other offering related fees and expenses totaling $2,500.

6

For financial reporting purposes, the Company recorded a discount of $177,019 to reflect the value of the warrants and shares. The discount was amortized to the date of maturity.

Upon maturity in January 2008, principal balances including accreted interest totaling $138,390 were re-invested in the Company's private placement of its two-year 10% secured convertible promissory notes discussed below and the remaining balance of $122,092 was repaid.

 (ii) 10% Secured Convertible Promissory Notes

Between December 5, 2007 and January 24, 2008, the Company raised gross proceeds of $5,404,550 from the private placement  to certain accredited institutional and individual investors (the “2008 Investors”) of its two-year 10% Secured Convertible Promissory Notes (collectively, the “2008 Notes”, each a  “ 2008 Note”). Of such amount, $3,916,160 was raised in December 2007 and $1,564,390 was raised in January 2008.  The transactions were effected pursuant to a Subscription Agreement, dated as of December 5, 2007 (the “2008 Subscription Agreement”), between the Company and the 2008 Investors.  The Company received net proceeds of $1 million from the proceeds of the 2008 Notes, after the payment of offering related fees and expenses and after the repayment of bridge loans that that came due in November 2007. All of the holders of the 2007 Notes and the October 2007 Notes participated in the private placement and the gross proceeds raised include amounts the Company owed to these investors in the approximate amount of $2.6 million that were offset against such investors’ respective purchases of the 2008 Notes.

In connection with the issuance of the 2008 Notes, the Company issued to the 2008 Investors, warrants (the “2008 Investor Warrants”) to purchase up to 5,404,550 shares of the Company’s Common Stock, of which warrants for 2,702,275 shares are exercisable at a per share exercise price of $2.00 and warrants for 2,702,275 shares are exercisable at a per share exercise price of $3.00.

The 2008 Notes have a term of two years and are convertible into shares of Common Stock at the holder's option at any time at an initial conversion price of $1.00 per share (the “Fixed Conversion Price”), subject to adjustment in the event of certain capital adjustments or similar transactions, such as a stock split or merger and as further described below. Interest on the Notes accrues at the rate of 10% per annum and is payable upon conversion, a required repayment or upon maturity, whichever occurs first, and will continue to accrue until the Notes are fully converted and/or paid in full.

Commencing on the fourth month anniversary of the issuance of the 2008 Notes and on the same day of each month thereafter until the principal amount of the 2008 Notes has been paid in full, the Company is required to prepay 5% of the aggregate principal amount of the 2008 Notes originally issued, together with all accrued interest due and payable on the entire outstanding amount up to such repayment date (each such date, a "Scheduled Payment Date"). The amount may be paid either in (i) cash, at 110% of the principal amount due and 100% of all other amounts due or (ii) shares of Common Stock at a rate equal to the lower of (A) the Fixed Conversion Price or (B) 75% of the average of the closing bid price of the Common Stock for the ten trading days ending on the trading day immediately preceding the Scheduled Payment Date, provided that at the time of payment there is then in effect an effective Registration Statement (as defined below) or the shares so issued can be resold under Rule 144 promulgated under the Securities Act of 1933, as amended. In addition, provided the Registration Statement is effective, the Company may prepay the amounts outstanding on the 2008 Notes by giving advance notice and paying an amount equal to 115% of the sum of (x) the principal being prepaid plus (y) the accrued interest thereon. Holders will continue to have the right to convert their 2008 Notes prior to the actual prepayment. In July 2008, two investors converted a total of $125,000 of the principal of the 2008 Notes into 125,000 shares of the Company's Common Stock. In addition in July and August 2008, the Company issued a total of 127,820 shares in respect of the principal amounts due on the first four scheduled payments, accrued and unpaid interest due as of such date and liquidated damages.  As of the filing of this Quarterly Report on Form 10-Q, the Company has  not made any other payments in respect of the amounts due on the first four  monthly Scheduled Payment Dates. The Company is in discussions with the lead 2008 Investors in an effort to resolve these matters. The continuing non-payment of these amounts constitutes an Event of Default under the transaction documents with the 2008 Investors.

On August 14, 2008, the Company received from two of the 2008 Investors who hold notes in the principal amount of $350,000, notices advising the Company that the company is in default and demanding immediate payment of principal, accrued interest and all other amounts owing to them.  The Company intends on contacting these 2008 Investors in an effort to resolve this situation.

7

The Investor Warrants are exercisable through the fifth anniversary of the effective date of the Registration Statement. Holders of the Investor Warrants are entitled to exercise their warrants on a cashless basis following the first anniversary of issuance if the Registration Statement is not in effect at the time of exercise.

The conversion price of the 2008 Notes and the exercise price of the Investor Warrants are subject to adjustment. Under the agreements with the holders of 2008 Notes, the Company agreed that if the Company made certain sales of its Common Stock (or securities convertible into Common Stock) to any third party at per share conversion price or exercise price less than the conversion price of the 2008 Notes and/or the exercise price of the 2008 Investor Warrants, adjustments would be made to the conversion price of the then unconverted Notes and to the exercise price of the then unexercised Investor Warrants. The above adjustments do not apply to certain specified transactions, such as the exercise of outstanding options, warrants, or convertible securities, the issuance of securities pursuant to a Company option plans or a non-employee director option plan, or the issuance of options to the Company's directors, officers, and employees, and advisors or consultants, and transactions with strategic investors.

To secure the Company’s obligations to the 2008 Investors, the Company granted a security interest in substantially all of its assets, including without limitation, its intellectual property. The security interest terminates upon payment or satisfaction of all of Company’s obligations under the 2008 Notes.

For financial reporting purposes, the Company recorded a discount of $4,141,838 ($3,006,128 in 2007) to reflect the value of the 2008 Investor Warrants issued and in accordance with EITF No. 00-27, an additional discount of $658,219 ($493,804 in 2007) to reflect the beneficial conversion feature of the 2008 Notes. The discounts are being amortized to the date of maturity unless converted earlier.

The Company incurred finder's fees of  $540,455 ($391,616 in 2007), other offering related fees and expenses totaling $25,000 in 2007 and issued five-year warrants to purchase up to 1,080,930 shares (783,332 shares in 2007) of Common Stock at a per share exercise price of $1. The shares underlying these warrants will not be included in the Registration Statement.

The Company undertook to file by February 22, 2008, a registration statement under the Securities Act of 1933, as amended (the “Registration Statement”) with respect to the resale of the Common Stock underlying the 2008 Notes and 2008 Investor Warrants and to use reasonable efforts to cause such registration statement to be declared effective by April 22, 2008 or, in case of a full review of such registration statement, by May 22, 2008. If (i) the Registration Statement is not timely filed or declared effective or, if following effectiveness, the Registration Statement cease to be effective without being succeeded within 20  business days by an effective replacement for a period of time which shall exceed 45 days per year, the Investors are entitled receive an amount equal to two percent (2%) of the aggregate principal amount of the Notes remaining unconverted and purchase price of shares issued upon conversion of the 2008 Notes and exercise of the 2008 Investor Warrants for each thirty (30) days (or part thereof), payable in cash or shares (so long as such shares can be resold under Rule 144), at the Company’s option. As of the date of the filing of this Quarterly Report on Form 10-Q, the Company has not filed the Registration Statement. Accordingly, the Company owes to the holders of these notes, as of June 30, 2008 approximately $540,000 in liquidated damages in respect of the delay in the filing of the Registration Statement beyond the time frame specified in the agreements with such holders. In July 2008, we issued to an investor 24,600 shares of Common Stock in respect of liquidated damages of $24,600. The continuing non-payment of liquidated damages constitutes an Event of Default under the 2008 Notes. The Company is in discussions with the lead 2008 Investors in an effort to resolve the issue of the payment of the liquidated damages.

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(iii) Promissory Notes

On each of April 29, May 29 and June 17, 2008, the Company received  90 day loans from one of the 2008 Investors in the principal amount of $14,000, $42,500 and $45,700, respectively. These advances were originally evidenced by notes payable on the 90th day of issuance, with interest accruing at a per annum rate of 10%. As of July 30, 2008, the outstanding principal and then accrued interest were consolidated into one promissory note, in the total principal amount of $113,400, representing an original issue discount of approximately 18%. This note is payable at the earlier of  (i) the date the Company consummates a financing where it raise minimum gross proceeds of $2 million or (ii) January 14, 2009.

 From April through July 2008, the Company received from another 2008 Investors and a separate stockholder, loans totaling $312,300. These loans are evidenced by two promissory notes issued by the Company on July 30, 2008, in the aggregate principal amount of $350,000 (the “Notes”), reflecting an original issue discount of approximately 9%. The notes also become due at the earlier to occur of (i) the date the Company consummates a financing where it raises minimum gross proceeds of $2 million or (ii) January 14, 2009. Out of the gross proceeds received, the Company paid offering related fees and expenses totaling $47,500.

These proceeds from the above loans were used for general corporate purposes.

NOTE 6 - CAPITAL TRANSACTIONS

Authorized Shares

On November 15, 2007, Company’s Board of Directors and the majority of Company’s stockholders authorized an increase the number of shares of Common Stock from 50 million to 100 million. The increase became effective in March 2008.

Stock Issuances

In April 2008, the Company issued 30,000 shares of common stock to a consultant for services to be rendered through December 31, 2009.

Warrants

On February 14, 2008, a total of 19,514,250 warrants issued in connection with the private placement of convertible debt were converted into 8,340,948 of the Company's Common Stock under the cashless exercise provision.

Options

In April 2008, the Company issued stock options to each of two employees of the Company's subsidiary for the purchase of up to 100,000 shares of the Company’s Common Stock. The options are exercisable over five years from issuance at $1 per share and vested upon issuance.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION

We urge you to read the following discussion in conjunction with our condensed consolidated financial statements and the notes thereto included elsewhere herein.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q, we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. These forward-looking statements are based upon our current expectations, estimates and projections about our business and our industry, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as “if,” “may,” “might,” “will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” and other similar terms. These forward-looking statements include, among other things, projections of our future financial performance and our anticipated growth, descriptions of our strategies, our product and market development plans, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.

We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including but not limited to the risks and uncertainties discussed in our other filings with the SEC, including the risk factors section of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the Securities and Exchange Commission on April 15, 2008. We undertake no obligation to revise or update any forward-looking statement for any reason.

OVERVIEW

IDO Security Inc. is engaged in the design, development and marketing of devices for the homeland security and loss prevention markets that are intended for use in security screening procedures to detect metallic objects concealed on or in footwear, ankles and feet through the use of electro-magnetic fields. These devices were designed specifically for applications in the security screening to complement the current methods for the detection of metallic items during security screenings and at security checkpoints in venues such as airports, prisons, schools, stadiums and other public locations requiring individual security screening. Our common stock trades on the OTC Bulletin Board under the symbol IDOI.

IDO Security Inc. (formerly knows as “The Medical Exchange Inc.”) was incorporated in the State of Nevada on January 23, 2004. On July 25, 2006, we, IDO Security Ltd. (“IDO Ltd.”) and IDO Ltd.’s Selling Shareholders entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which we purchased, in March 2007, all of the issued and outstanding share capital of IDO Ltd. (the “Acquisition Transaction”). Following the Acquisition Transaction, IDO Ltd. became a wholly-owned subsidiary of the Company and Med Ex adopted the business of IDO Ltd. In June 2007, the Company changed its name to “IDO Security Inc.”

We have designed and developed a security screening device containing proprietary technology known as the MagShoe. The MagShoe creates specific electro-magnetic fields that can intelligently detect the presence of metallic objects inside a person’s footwear, as well as next to or above the ankles, while ignoring those metal objects that are normally found inside shoes. The proprietary software included in the MagShoe provides for the collation and delivery of the screening data to the operator for immediate analysis. The MagShoe obviates the need to remove the footwear being inspected.

A patent has been issued to us by the United States Patent and Trademark Office in November 2005 covering various aspects of the unique technology contained in the MagShoe and there is one patent application pending in Israel. In January 2006, the MagShoe was approved for use by the Department for Transport in the United Kingdom, after fields trials were conducted for the Home Office’s Police Scientific Development Branch. In addition, we have been certified by the International Organization for Standardization (“ISO”) under ISO 9001:2000 compliance for the design, development and manufacture of electronic, electro-optic and electro-mechanical systems.

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We believe that the market for security and inspection products will continue to be positively impacted by the threat of terrorist activities and by new government regulations and appropriations for security and inspection products and procedures. We anticipate that the promulgation of new governmental regulation and standards will establish performance baselines against which we will be able to direct certain of our continued research and development spending and market our products to customers, worldwide. In addition, we believe that the increasing awareness of security, in general, will bring increased awareness of available products and methods, such as ours, for anti-crime and loss prevention fields. In fact, based on an article published by TRIPSO.com, Los Angeles International Airport is utilizing, on a test basis, a footwear screening device, dubbed the “PassPort”, designed to detect the presence of explosives that might be used in a shoe bomb. The device takes samples from hands, torso and feet, possibly without the need for passengers to remove their footwear. Unlike the MagShoe, however, the device does not test for or detect metals that can and have been used as weapons. Accordingly, we believe that this deficiency in the device will not allow security personnel to dispense with the need for passengers to remove their footwear.  According to this same source, last year the TSA tested a shoe scanning device, manufactured by General Electric, at the Orlando International Airport, although the device did not meet the TSA’s minimum detection standards and was discontinued later in the year.

Subject to raising additional working capital, we intend to pursue our business plan over the next twelve months with respect to product development and enhancement and field testing, as well as initial marketing efforts. We currently have 10 full time employees and consultants. We have been expanding our contact base and are aggressively seeking collaborative arrangements worldwide for our MagShoe product. In May 2008, we selected a leading contract manufacturer for high volume production of MagShoe and in June 2008, we announced the availability of an elite network of industry leading distributors and systems integrators for the MagShoe device which, together with the high volume production capabilities that we established in the second quarter of 2008, significantly strengthens our infrastructure to commercially manufacture and distribute the MagShoe device. In July 2008, we announced our entry into a collaborative relationship with Bryant Integrated Technologies, a leading security and consulting firm, to lead our product distribution efforts in the United States, and with Hwan Technology and Trade Co., one of China’s largest distributors of walk-through metal detectors, to lead our distribution efforts in China. Shortly thereafter, we announced our initial sale of the MagShoe Unit (through Bryant) in the United States to a leading commercial cruise line which intends to use the MagShoe device to significantly reduce passenger waiting lines while improving security. We will, however, need to raise additional working capital to accelerate our sales, marketing, manufacturing and customer service activities. We presently do not have the capital resources to undertake any of these steps.  Subject to raising additional capital resources, we expect to make substantial investments in equipment and to acquire inventory to facilitate the expansion of pilot projects and to accelerate commercialization efforts.

RESULTS OF OPERATIONS

COMPARISON OF THE SIX AND THREE MONTHS ENDED JUNE 30, 2008 TO THE SIX AND THREE MONTHS ENDED JUNE 30, 2007

All references to financial results prior to the date of the Acquisition Transaction (e.g., March 8, 2007) shall mean and refer to the financial results of IDO Ltd. All references to results following the date of the Acquisition Transaction shall mean and refer to the financial results of the IDO Security Inc. and its consolidated subsidiary, IDO Ltd.

Revenues and costs of goods sold – Revenues for each of the six and three months ended June 30, 2008 were $33,684, all of which were derived from sales of our MagShoe device. No revenues were recorded during the 2007 periods.  Costs of goods sold were $11,408 for the six months and three months ended June 30, 2008. The gross margin of 66% in the period was achieved primarily as a result of a limited number of units being sold outside of the normal distribution channels. Management does not anticipate that these high gross margins are sustainable for the foreseeable future.

Research and development   - Research and development expense consist primarily of expenses incurred in designing, developing and field testing our products. These expenses consist primarily of salaries and related expenses for personnel, contract design and testing services, supplies used and consulting and license fees paid to third parties. We incurred research and development expenses for the six and three months ended June 30, 2008 in the amount of $219,291 and $106,633, respectively, compared to $99,161 and $72,155 for the corresponding periods in 2007. The increase in research and development expenses during the 2008 periods is principally attributable to the intensified research and design and development activities following the Acquisition Transaction.

Selling, general and administrative expenses - Selling, general and administrative expenses primarily consist of salaries, consulting and other professional fees, and other costs related to administrative functions.  The 2008 periods also include liquidated damages attributable to the delay by us in the filing of a registration statement as required under certain investment agreements. Liquidating damages amounted to approximately $540,000 and  $324,000 for the six and three months ended June 30, 2008.  We incurred selling, general and administrative expenses for the six and three months ended June 30, 2008 of $1,462,597 and $829,474, respectively, compared to $312,309 and $230,314 for the corresponding periods in 2007. The increase in selling, general and administrative expenses during the 2008 periods is principally attributable to the charge for the liquidated damages as well intensified activities following the Acquisition Transaction.

Stock Based Compensation Between June 2007 and April 2008, we granted stock options to employees and consultants initially valued at $7.6 million. The value of these options is being amortized over the vesting periods of each grant. The value of options granted to consultants are periodically remeasured until such options vest.  Stock based compensation expense for the six months ended June 30, 2008 totaled $566,185. For the three months ended June 30, 2008, stock based compensation was negative $42,462 as a result of the remeasurement of unvested options granted to consultants, as well as the forfeiture of certain options originally estimated to vest. For each of the six and three months ended June 30, 2007, the stock based compensation charge totaled $1,456,077.  Stock-based compensation is non-cash and, therefore, has no impact on cash flow or liquidity.

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Interest expense - Interest expense for the six and three months ended June 30, 2008 were $311,837 and $68,432, respectively, compared to $201,066 and $168,753 for the corresponding periods in 2007. Interest expense relates primarily to the placement of our convertible promissory notes.

Amortization - During the six and three months ended June 30, 2008, we recorded amortization of $1,470,087 and $925,248, respectively, compared to $2,062,827 and $1,878,910 for the corresponding periods in 2007. Amortization costs for the 2008 periods relate to the debt discount, beneficial conversion feature and deferred finance costs incurred in connection with the placement of our convertible promissory notes, which were issued in 2008 and 2007. These costs are amortized to the date of maturity of the debt unless converted earlier.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2008, we had a cash balance of $42,545 compared to $353,701 at December 31, 2007.

Cash used in operating activities was $1,203,801 for the six months ended June 30, 2008. The decrease in cash was primarily attributable to funding the loss for the period.

Cash used in investing activities was $9,133 for the six months ended June 30, 2008 primarily attributable to the addition of property and equipment.

Cash provided by financing activities was $901,778 for the six months ended June 30, 2008.  We received proceeds of $1,900,000 from the issuance of the Notes and in connection therewith, we incurred financing costs of $160,455. In addition, we repaid outstanding promissory notes totaling $1,029,767. We also received proceeds totaling $202,000 in short-term financing from certain shareholders and investors of the Company.  We incurred financing costs of $10,000.

To date we have financed our operations primarily from the sale of our securities. Our recent financings are discussed below.

Between December 5, 2007 and January 24, 2008, we raised gross proceeds of $5,404,550 from the private placement  to certain accredited institutional and individual investors (the “2008 Investors”) of our two-year 10% Secured Convertible Promissory Notes (collectively, the “2008 Notes”, each a  “ 2008 Note”). The transactions were effected pursuant to a Subscription Agreement, dated as of December 5, 2007 (the “2008 Subscription Agreement”), between the Company and the 2008 Investors.  The Company received net proceeds of $1 million from the proceeds of the 2008 Notes, after the payment of offering related fees and expenses and after the repayment of bridge loans that that came due in November 2007. All of the holders of the 2007 Notes and the October 2007 Notes participated in the private placement and the gross proceeds raised include amounts the Company owed to these investors in the approximate amount of $2.7 million that were offset against such investors’ respective purchases of the 2008 Notes. Commencing on the fourth month anniversary of the issuance of the 2008 Notes and on the same day of each month thereafter until the principal amount of the 2008 Notes has been paid in full, we are required to prepay 5% of the aggregate principal amount of the 2008 Notes originally issued, together with all accrued interest due and payable up to such repayment date (each such date, a "Scheduled Payment Date."). The amount may be paid either in (i) cash, at 110% of the principal amount due and 100% of all other amounts due or (ii) shares of Common Stock at a rate equal to the lower of (A) the Fixed Conversion Price or (B) 75% of the average closing price of the Common Stock for the ten trading days ending on the trading day immediately preceding the Scheduled Payment Date, provided that at the time of payment there is then in effect an effective Registration Statement (as defined below) or the shares so issued can be resold under Rule 144 promulgated under the Securities Act of 1933, as amended (“Rule 144”). The initial payment, which was due on April 24, 2008, the first Scheduled Payment Date, was not made by us. We did not make any of these payments as of June 30, 2008; between July and August 2008 we issued 103,220 shares in payment of $103,220 of principal and interest due through July 24, 2008 to two of these investors. We are in discussion with the lead 2008 Investors in an effort to resolve these matters though no assurance can be provided that we will be successful. The continuing non-payment of these amounts constitutes an Event of Default under the transaction documents with the 2008 Investors.  On August 14, 2008, we received from two of the 2008 Investors who hold notes in the aggregate principal amount of $350,000, notices advising us that we are in default and demanding immediate payment of principal, interest and all other amounts owing to them. We intend to contact the investors in an effort to resolve this situation, though no assurance can be provided that we will be successful in reaching such resolution.

 In addition, we undertook to file, by February 22, 2008, a registration statement in respect of the resale of the 2008 Notes and the warrants that we issued in connection therewith. As of the filing of this quarterly report on Form 10-Q, we have not filed such registration statement and we do not expect to file such registration statement until following the conclusion, if any, by us of an additional capital raise. However, as we did not file such registration statement by the required filing date of February 22, 2008, we owe to the 2008 Investors, as liquidated damages, 2% of the principal amount of the 2008 Notes. We owe an additional 2% for each 30 days (or any part thereof) that such registration statement is not filed after such date. Accordingly, as of June 30, 2008, we owed approximately $540,000 to these investors as liquidated damages. The liquidated damages, are payable, by the 10th day following each 30 day period, at our option, in cash or shares that may be freely tradable under Rule 144. As of June 30, 2008, we did not make any payment in respect of the liquidated damages. in July 2008, we issued 24,600 shares to one investor in payment of liquidated damages of $24,600. The continuing non-payment of these amounts constitutes an Event of Default under the transaction documents with the 2008 Investors.

Between April 29, 2008 and July 28, 2008, we received gross loan proceeds of $414,500 from two 2008 investors and one stockholder. All of these loans are currently evidenced by notes issued by the Company on July 30 2008 in the aggregate principal gross amount of $463,400, representing a original issue discount ranging from  approximately 9% to 18%. All of these notes are scheduled to come due at the earlier to occur of (i) a financing where we raise minimum gross proceeds of $2 million or (ii) January 14, 2009. The proceeds of these loans have been used by us to meet operating expenses.

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We need to raise additional funds on an immediate basis to be able to satisfy our cash requirements over the next twelve months, including satisfying our obligations as they come due, and maintain operations as presently conducted. Product development, corporate operations and marketing expenses will continue to require additional capital. Our current revenue from operations is insufficient to cover our current operating expenses and projected expansion plans which include the repayment of the Notes. We therefore are aggressively seeking additional financing through the sale of our equity and/or debt securities. No assurance can be provided that additional capital will be available to us on commercially acceptable terms, or at all. Our auditors included a "going concern" qualification in their report for the year ended December 31, 2007. Such "going concern" qualification may make it more difficult for us to raise funds when needed. Additional equity financings may be dilutive to holders of our Common Stock.

ITEM 4T. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our acting Chief Executive Officer (and Principal Financial and Accounting Officer), to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-14(c).

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with participation of management, including our acting Chief Executive Officer (and Principal Financial and Accounting Officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our acting Chief Executive Officer (and Principal Financial and Accounting Officer) concluded that our disclosure controls and procedures were effective.

During the quarter ended June 30, 2008, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, these controls.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On May 25, 2008, a certain stockholder (the “Stockholder”) who holds 2,250,000 of our issued and outstanding shares of Common Stock (representing approximately 5.2% of our currently issued and outstanding holdings) initiated a suit against Company and an officer and director of its Subsidiary (the “Affiliate”) in the District Court in Petah Tikva, Israel, seeking the following substantive relief: (i) a court order instructing IDO to remove the restrictive legend on certain of its shares (so as to facilitate their resale on the open market) and (ii) declaratory judgment that a power of attorney which the Stockholder gave to the Affiliate in connection with the Stockholder’s purchase in June 2006 of its shares in the Company is null and void. The Stockholder, who was formerly affiliated with IDO Security Ltd. prior to the Acquisition Transaction, purchased his shares directly from the Company in June 2006 and, in connection with such purchase, gave to the Affiliate a power of attorney with respect to the disposition of his shares. In addition, the agreements under which the Stockholder’s shares were purchased contain restrictions on resale of the shares.

On July 8, 2008, the Company, through Israeli based attorneys, moved to, among other things, (i) dismiss the suit or, in the alternative, to delay proceedings pending determination of appropriate venue, (ii) transfer the matter to the District Court in Jerusalem due to a lack of jurisdiction in the present forum and (iii) summary judgment. On July 15, 2008, the court held a preliminary hearing, following which the court instructed the parties to reach a mutually acceptable resolution of the issues by August 15, 2008 (which date has been extended by mutual agreement to September 1, 2008) and, failing that, to initiate mediation proceedings. In the event that the mediation proceedings do not produce a resolution, then the Court will address the issues. We believe that we have meritorious defenses to this lawsuit and intend to aggressively defend our interests.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Commencing on April 24, 2008 and on the same day of each month thereafter until the principal amount of the 2008 Notes has been paid in full, we are required to prepay 5% of the aggregate principal amount of the 2008 Notes originally issued, together with all accrued interest due and payable up to such repayment date. The amount may be paid either in (i) cash, at 110% of the principal amount due and 100% of all other amounts due or (ii) shares of Common Stock at a rate equal to the lower of (A) the Fixed Conversion Price or (B) 75% of the average closing price of the Common Stock for the ten trading days ending on the trading day immediately preceding the Scheduled Payment Date, provided that at the time of payment there is then in effect an effective Registration Statement (as defined below) or the shares so issued can be resold under Rule 144 promulgated under the Securities Act of 1933, as amended. The initial payment, which was due on April 24, 2008, the first Scheduled Payment Date, was not made by us. We did not make any of these payments as of June 30, 2008; between July and August 2008 we issued103,220 shares representing principal and accrued interest in the aggregate amount of $103,220 representing principal and accrued interest to two of these investors. We are in discussion with the lead 2008 Investors in an effort to resolve these matters. As of the filing of this Quarterly Report on Form 10-Q, we owe to the 2008 investors principal payments and accrued interest totaling $1,083,578.

In addition, we undertook to file, by February 22, 2008, a registration statement in respect of the resale of the 2008 Notes and the warrants that we issued in connection therewith. As of the filing of this quarterly report on Form 10-Q, we have not filed such registration statement. However, as we did not file such registration statement by the required filing date of February 22, 2008, we owe to the 2008 Investors, as liquidated damages, 2% of the principal amount of the 2008 Notes. We owe an additional 2% for each 30 days (or any part thereof) that such registration statement is not filed after such date up and until July 24, 2008. Accordingly, as of June 30, 2008, we owed approximately $540,000 to these investors as liquidated damages. As of June 30, 2008, we did not make any payment in respect of the liquidated damages. As of the date of the filing of this quarterly report on Form 10-Q, we issued to an investor 24,600 shares of our Common Stock representing liquidated damages in the amount of $24,600.

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

None.

ITEM 5. OTHER INFORMATION.

(i) On August 14, 2008, we received from two of the 2008 Investors who hold notes in the aggregate principal amount of $350,000, notices advising us that we are in default and demanding immediate payment of principal, interest and all other amounts owing to them. We intend to contact the investors in an effort to resolve this situation, though no assurance can be provided that we will be successful in reaching such resolutions.

(ii) Between April 29 and June 17, 2008, we received 90 days loans from one of the 2008 Investors in the aggregate principal amount of $102,200.  These advances were originally evidenced by notes payable on the 90th day of issuance, with interest accruing at a per annum rate of 10%.  As of July 30, 2008, the outstanding principal and then accrued interest were consolidated into one promissory note, in the total principal amount of $113,400, representing an original issue discount of approximately 18%.  This note is payable at the earlier of (i) the date we consummate a financing where we raise minimum gross proceeds of $2 million of (ii) January 14, 2009.

Between April and July 2008, we received from another 2008 Investors and a separate stockholder, loans totaling $312,300.  The loans are evidenced by two promissory notes issued by us on July 30, 2008, in the aggregate principal amount of $350,000 (the “Notes”), reflecting an original issue discount of approximately 9%.  The notes also become due at the earlier to occur of (i) the date the Company consummates a financing where it raises minimum gross proceeds of $2 million or (ii) January 14, 2009.  Out of the gross proceeds received, the Company paid offering related fees and expenses totaling $47,500.

These proceeds from the above loans were used for general corporate purposes.

Under the terms of the Notes, the holder of a Note may declare the Note immediately due and payable upon the occurrence of any of the following events of default (each an “Event of Default”): (i) the Company fails to pay any installment of principal, interest or other sum due under the Note when due and such failure continues for a period of five (5) days after the due date, (ii) the Company breaches any material covenant or other term or condition of the Note in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to us from the Holder, (iii) any material representation or warranty made by the Company in the Note or in any agreement or certificate given in writing pursuant hereto or in connection therewith shall be false or misleading in any material respect as of the date made and the Closing Date, (iv) the Company makes an assignment for the benefit of creditors, or applies for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business; or such a receiver or trustee shall otherwise be appointed, (v) any money judgment, writ or similar final process shall be entered or filed against the Company or any of its property or other assets for more than $500,000, and shall remain unvacated, unbonded or unstayed for a period of forty-five (45) days, (vi) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Company and are not dismissed within 45 days of initiation, or (vii) the de-listing of the Common Stock from over the over-the-counter Bulletin Board or any other principal market or exchange for 15 consecutive trading days or notification from such market that the Company is not in compliance with the conditions for continued listing, (viii) a default by the Company under any one or more obligations in an aggregate amount in excess of $200,000 for more than 20 days after the due date unless the Company is contesting the validity of such obligation in good faith, (ix) the entry of a stop trade order (judicial or by the Securities and Exchange Commission) or principal market trading suspension that lasts for five consecutive trading days or more and (x) a default by the Company of a material term, covenant, warranty or undertaking of any other agreement to which the Company and Holders are parties, or the occurrence of a material event of default under any such other agreement which is not cured after any required notice and/or cure period.

The Notes were issued in accordance with Section 4(2) under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

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ITEM 6. EXHIBITS.

Exhibit Number	Description
4.1	Form of Promissory Note issued on July 30, 2008
31	Certification Pursuant to Rule 13a-14a of the Securities Exchange Act of 1934, as amended
32	Certification Pursuant to Section 906 of  Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATE: August 14, 2008
	IDO SECURITY INC.
	/s/ MICHAEL GOLDBERG
	MICHAEL GOLDBERG
	ACTING CHIEF EXECUTIVE OFFICER (PRINCIPAL
	EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL AND
	ACCOUNTING OFFICER) AND PRESIDENT

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