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 ~~March~~June 3130, 2013; 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 registrant as specified in its charter)

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

177875 ~~State~~SW 40th Street, Suite 224

~~New York~~Miami, ~~New~~Florida ~~York 10004~~33155-3510

(Address of principal executive offices, including zip code)

~~646~~954-~~214~~278-~~1234~~ 8037

(Issuer’s telephone number, including area code)

	17 State Street, New York, NY 10004
(Former name, former address and former fiscal year, if changed since last report)

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 xo No ox

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 Regulation 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 xo No ox

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 ~~May~~September 2013, 2013, there were 19,986,471 shares of registrant’s common stock, par value $0.001 per share outstanding.

INDEX PAGE

		PAGE
PART I -- FINANCIAL INFORMATION
Item 1	Financial Statements
	Condensed Consolidated Balance Sheets March 31, 2013 (Unaudited) and December 31, 2012 (Audited)	2
	Condensed Consolidated Balance Sheets June 30, 2013 (Unaudited) and December 31, 2012 (Audited)	2
	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012	3
	Unaudited Condensed Consolidated Statements of Operations for the six and three months ended June 30, 2013 and 2012	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1415
Item 4	Controls and Procedures	1819

	PART II -- OTHER INFORMATION
Item 1	Legal Proceedings	1819
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	1920
Item 3	Defaults upon Senior Securities	1920
Item 4	Mine Safety Disclosures	1920
Item 5	Other Information	1920
Item 6	Exhibits	2021

SIGNATURES 2122

IDO SECURITY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
	March 31,			December 31,
	2013			2012
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	18,107		$	125,982
Inventories		178,485			183,721
Prepaid expenses and other current assets		29,731			33,830
Total current assets		226,323			343,533
Property and equipment, net		11,599			46,303
Total assets	$	237,922		$	389,836
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	6,683,193		$	6,081,105
Bank line of credit		15,377			-
Convertible promissory notes (net of discount of $34,260 and $49,141)		2,127,482			2,112,601
Redeemable Series A Cumulative Convertible Preferred Stock (net of discount of $1,082,277 and $1,556,297)		12,864,460			12,390,440
Warrant liability		400,000			400,000
Loans payable - related parties		161,376			159,480
Total current liabilities		22,251,888			21,143,626
NON-CURRENT LIABILITIES
Convertible promissory notes (net of discount of $3,760,466 and $4,006,776)		2,198,101			1,951,791
Redeemable Series A Cumulative Convertible Preferred Stock (net of discount of $179,952 and $226,506)		193,760			147,206
Accrued severance pay		-			26,250
Notes payable		169,500			69,500
Total liabilities		24,813,249			23,338,373
COMMITMENT AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY
Preferred Stock 6,600 shares authorized; none outstanding		-			-
Common stock, $.001 par value; 20,000,000 shares authorized, 19,986,471 shares issued and outstanding		19,986			19,986
Additional paid-in capital		27,624,231			27,624,231
Deferred compensation expense		(398,109	)		(696,691	)
Accumulated other comprehensive loss		(331	)		(331	)
Accumulated deficit		(51,821,104	)		(49,895,732	)
Total stockholders' deficiency		(24,575,327	)		(22,948,537	)
Total liabilities and stockholders' deficiency	$	237,922		$	389,836
See Notes to Condensed Consolidated Financial Statements.

IDO SECURITY INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	311		$	125,982
Inventories		178,485			183,721
Prepaid expenses and other current assets		-			33,830

Total current assets		178,796			343,533

Property and equipment, net		23			46,303

Total assets	$	178,819		$	389,836

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	6,974,574		$	6,081,105
Bank line of credit		15,377			-
Convertible promissory notes
(net of discount of $19,213 and $49,141)		2,142,529			2,112,601
Redeemable Series A Cumulative Convertible Preferred Stock
(net of discount of $838,457 and $1,556,297)		13,481,992			12,390,440
Loans payable - related parties		161,376			159,480
Warrant liability		400,000			400,000

Total current liabilities		23,175,848			21,143,626

NON-CURRENT LIABILITIES
Convertible promissory notes
(net of discount of $3,499,773 and $4,006,776)		2,458,794			1,951,791
Notes payable		339,500			69,500
Redeemable Series A Cumulative Convertible Preferred Stock
(net of discount of $0 and $226,506)		-			147,206
Accrued severance pay		-			26,250

Total liabilities		25,974,142			23,338,373

COMMITMENT AND CONTINGENCIES

STOCKHOLDERS’ DEFICIENCY
Preferred Stock
6,600 shares authorized; none outstanding		-			-
Common stock, $.001 par value;
20,000,000 shares authorized,
19,986,471 issued and outstanding		19,986			19,986
Additional paid-in capital		27,624,231			27,624,231
Deferred compensation expense		(99,527	)		(696,691	)
Accumulated other comprehensive loss		(331	)		(331	)
Accumulated deficit		(53,339,682	)		(49,895,732	)

Total stockholders’ deficiency		(25,795,323	)		(22,948,537	)

Total liabilities and stockholders’ deficiency	$	178,819		$	389,836

See Notes to Condensed Consolidated Financial Statements.

IDO SECURITY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2013			2012
	(Unaudited)			(Unaudited)
Revenues	$	15,043		$	204,564
Cost of sales		136,757			115,853
Gross loss		(121,714	)		88,711
Operating expenses
Research and development expenses		53,202			50,562
Selling and general and administrative expenses		760,888			401,449
Total operating expenses		814,090			452,011
Loss from operations		(935,804	)		(363,300	)
Interest expense (including amortization of debt and preferred stock discounts, accretion of convertible promissory notes and dividends)		(967,686	)		(1,022,019	)
Gain on extinguishment of debt		-			2,926,717
Foreign currency translation		(21,882	)		(4,797	)
Net (loss) income	$	(1,925,372	)	$	1,536,601
Basic and diluted (loss) income per share	$	(0.10	)	$	0.09
Weighted average number of shares outstanding
Basic and diluted		19,986,471			17,548,057
See Notes to Condensed Consolidated Financial Statements.

IDO SECURITY INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Six Months			Six Months			Three Months			Three Months
	Ended			Ended			Ended			Ended
	June 30,			June 30,			June 30,			June 30,
	2013			2012			2013			2012
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)


Revenues	$	15,043		$	285,480		$	-		$	80,916

Cost of sales		256,757			191,385			120,000			75,532

Gross (loss) profit		(241,714	)		94,095			(120,000	)		5,384

Operating expenses
Research and development expenses		53,202			100,188			-			49,626
Selling and general and administrative expenses		677,050			785,056			214,744			383,607
Stock based compensation - selling and general and administrative		597,163			-			298,581			-

Total operating expenses		1,327,415			885,244			513,325			433,233

Loss from operations		(1,569,129	)		(791,149	)		(633,325	)		(427,849	)

Interest expense (including amortization of debt and preferred stock discounts,
accretion of convertible promissory notes and dividends)		(1,852,939	)		(2,161,988	)		(885,253	)		(1,139,969	)
Gain on extinguishment of debt		-			2,926,717			-			-
Foreign currency translation		(21,882	)		(5,427	)		-			(630	)

Net loss	$	(3,443,950	)	$	(31,847	)		(1,518,578	)		(1,568,448	)

Basic and diluted loss per share	$	(0.17	)	$	0.00		$	(0.08	)	$	(0.09	)

Weighted average number of shares outstanding
Basic and diluted		19,986,471			17,548,057			19,986,471			17,548,057

See Notes to Condensed Consolidated Financial Statements.

IDO SECURITY INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2013			2012
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(1,925,372	)	$	1,536,601
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		2,717			3,523
Amortization of note discount		703,295			811,468
Accretion of interest on notes payable		169,751			124,901
Stock based compensation		298,582			-
Interest and exhange rate differences		1,896			-
Gain on extinguishment of debt		-			(2,926,717	)
Loss on disposal and abandonment of property and equipment		31,087			-
(Decrease) increase in net liability for severance pay		(26,250	)		2,636
Increase (decrease) in cash attributable to changes in operating assets and liabilities
Inventory		5,236			65,990
Prepaid expenses and other current assets		4,099			20,533
Accounts payable		100,347			(5,745	)
Accrued expenses and other current liabilities		410,460			91,728
Net cash used in operating activities		(224,152	)		(275,082	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property and equipment		900			-
Purchases of property and equipment		-			(1,792	)
Net cash provided by (used in) investing activities		900			(1,792	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		100,000			-
Proceeds from bank line of credit		15,377			-
Proceeds from loans payable - related parties		-			1,023
Proceeds from issuance of convertible notes and preferred stock		-			176,500
Proceeds from loan payable		-			110,782
Net cash provided by financing activities		115,377			288,305
(DECREASE) INCREASE IN CASH		(107,875	)		11,431
CASH - BEGINNING OF PERIOD		125,982			43,726
CASH - END OF PERIOD	$	18,107		$	55,157
Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	-
See Notes to Condensed Consolidated Financial Statements.

IDO SECURITY INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2013			2012
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,443,950	)	$	(31,847	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		2,777			6,455
Amortization of note discount		1,311,819			1,734,857
Amortization of beneficial conversion feature of convertible debt		-			-
Accretion of interest on notes payable		353,035			259,759
Stock based compensation		597,163			-
Interest and exhange rate differences		1,896			-
Gain on extinguishment of debt		-			(2,926,717	)
Loss on disposal and abandonment of property and equipment		42,603			-
Decrease in net liability for severance pay		(26,250	)		1,376
Increase (decrease) in cash attributable to changes in operating assets and liabilities
Accounts receivable		-			(7,127	)
Inventory		5,236			106,934
Prepaid expenses and other current assets		33,830			26,035
Accounts payable		161,843			440,952
Accrued expenses and other current liabilities		548,050			(244,210	)

Net cash used in operating activities		(411,948	)		(633,533	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of property and equipment		900			-
Purchases of property and equipment		-			(2,635	)

Net cash provided by (used in) investing activities		900			(2,635	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		270,000			-
Proceeds from loan payable - bank		15,377			149,757
Proceeds from issuance of convertible notes and preferred stock		-			541,870
Repayment of loans payable - related parties		-			(932	)

Net cash provided by financing activities		285,377			690,695

(DECREASE) INCREASE IN CASH		(125,671	)		54,527

CASH - BEGINNING OF PERIOD		125,982			43,726

CASH - END OF PERIOD	$	311		$	98,253

Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	-

See Notes to Condensed Consolidated Financial Statements.

IDO SECURITY INC. AND SUBSIDIARY

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed 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 8-03 of 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 ~~three~~six months ended ~~March~~June 3130, 2013, are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. These unaudited condensed 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-K for the year ended December 31, 2012, 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 ~~March~~June 3130, 2013, the Company had not achieved profitable operations, had accumulated losses of $5153.83 million (since inception), a working capital deficiency of $2223 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 equity capital. The Company needs to raise significant funds on an immediate basis in order to continue to meet its liquidity needs, realize its business plan and maintain operations. The Company’s current cash resources are not sufficient to support its operations as presently conducted or permit it to take advantage of business opportunities that may arise. 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 operations from the net proceeds from the private placements of its convertible securities. From December 2007 through ~~March~~June 2013, the Company received net proceeds of approximately $7.46 million from the proceeds of the private placement to certain accredited investors of its Secured Convertible Promissory Notes, Convertible Preferred Stock and Bridge Loans.

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.

Effective April 2013, the Company’s subsidiary IDO Security Ltd. (“IDO Ltd.”), terminated all commercial activities in Israel. All employees have been terminated and office premises have been closed. The cessation of activities by IDO Ltd. is a result of the litigation outcome discussed in Note 11. Product manufacturing and sales and marketing have been outsourced to a third party on a non-exclusive basis.

NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.

NOTE 3 - NET ~~INCOME (~~LOSS) PER SHARE

Basic ~~income (~~ loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted ~~income (~~loss) per share gives 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 ~~income (~~loss) per share, as their effect would be anti-dilutive:

	~~Shares of Common Stock~~	Shares of Common Stock
	~~Issuable upon Conversion/Exercise~~	Issuable upon Conversion/Exercise
	~~as of~~	as of
	March 31,
		June 30,
	~~2013~~	2013	~~2012~~	2012
Warrants	~~4,014,477~~		144,~~059~~014,477		15,084
Convertible notes	~~20,837~~		1821,~~680~~044		19,684
Stock options	~~667~~		~~1,130~~667		1,130
Convertible preferred stock	~~37,249~~		3037,~~346~~454		32,665

NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS

Substantially all of the Company’s financial instruments, consisting primarily of cash and cash equivalents, accounts payable and accrued expenses, other current liabilities and certain convertible notes, are carried at, or approximate, fair value because of their short-term nature or because they carry market rates of interest.

NOTE 5 – INVENTORIES

Inventories, consisting of completed devices, devices partially completed and components are valued at the lower of cost determined by the moving-average basis or market. The value of the inventories is adjusted for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

Inventories at ~~March~~June 3130, 2013 consisted of components totaling $63,426 and partially completed and completed devices totaling $115,059. Inventories at December 31, 2012 consisted of components totaling $60,667 and partially completed and completed devices totaling $123,054.

NOTE 6 – BANK LINE OF CREDIT

During the ~~three~~six months ended ~~March~~June 3130, 2013, one of the banks of IDO Ltd. in Israel honored credit card payment obligations to vendors. At ~~March~~June 3130, 2013, the Company owed the bank $15, 377.

NOTE 7 – NOTES PAYABLE

In November 2012, the Company issued a note to a 2008 Investor in the aggregate amount of $69,500. The note bore ~~bears~~ interest at the rate of 2.5% and was is due at the earlier of (i) April 1, 2014 or (ii) the receipt by the Company of the amount of a Threshold New Transaction (as defined).

In March 2013, the Company issued a note to a 2008 Investor in the aggregate amount of $100,000. The note bore ~~bears~~ interest at the rate of 2.5% and was is due at the earlier of (i) April 1, 2014 or (ii) the receipt by the Company of the amount of a Threshold New Transaction (as defined).

At March 31, 2013 and December 31, 2012, notes payable amounted to $169,500 and $69,500, respectively.

In April 2013, the Company issued a note to a 2008 Investor in the aggregate amount of $50,000. The note bears interest at the rate of 2.5% and is due at the earlier of (i) April 1, 2014 or (ii) the receipt by the Company of the amount of a Threshold New Transaction (as defined).

In April ~~May~~ 2013, the Company issued a note to a 2008 Investor in the aggregate amount of $~~120~~50,000. The note ~~bears~~ bore interest at the rate of 2.5% and iswas due at the earlier of (i) ~~May~~April 81, 2014 or (ii) the receipt by the Company of the amount of a Threshold New Transaction (as defined).

In May 2013, the Company issued a note to a 2008 Investor in the aggregate amount of $120,000. The note bore interest at the rate of 2.5% and was due at the earlier of (i) May 8, 2014 or (ii) the receipt by the Company of the amount of a Threshold New Transaction (as defined).

All of the notes are secured by substantially all of the assets of the Company. At June 30, 2013 and December 31, 2012, notes payable amounted to $339,500 and $69,500, respectively.

On July 1, 2013, the Company refinanced these notes through the issuance of 10% secured convertible promissory notes (“2013 Notes”). See Note 8(v) for more details.

In September 2013, the Company issued notes to two 2008 Investors in the aggregate amount of $30,200. The notes bear interest at the rate of 2.5% and are due at the earlier of (i) September 10, 2014 and September 12, 2014 or (ii) the receipt by the Company of the amount of a Threshold New Transaction (as defined). The notes are secured by substantially all of the assets of the Company.

NOTE 8 - PRIVATE PLACEMENT OF CONVERTIBLE PROMISSORY NOTES

Convertible promissory notes consist of the following:

	March 31, 2013			December 31, 2012
	June 30, 2013			December 31, 2012
	(Unaudited)
2008 Notes - secured and convertible - see (i) below	$	1,956,945		$	1,956,945
December 2008 Notes - secured and convertible – see (ii) below		815,062			815,062
2009 - 2011 Notes - secured and convertible - see (iii) below		4,010,579			4,010,579
2012 Notes - secured and convertible - see (iv) below		1,337,723			1,337,723
Total		8,120,309			8,120,309
Less: Discount		(3,~~794~~518,~~726~~986	)		(4,055,917	)
		4,325,583			4,064,392
		4,601,323			4,064,392
Less: Current Portion		(2,~~127~~142,~~482~~529	)		(2,112,601	)
Total	$	2,~~198~~458,~~101~~794		$	1,951,791

(i) 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 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 between the Company and the 2008 Investors.

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 1,802 post-split shares of the Company’s Common Stock at an adjusted per share price of $450. The warrants include a ‘cashless exercise’ provision.

The 2008 Notes were originally convertible into shares of Common Stock at the holder’s option at any time at an initial conversion price of $3,000 per post-split 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 2008 Notes accrues at the rate of 10% per annum and is payable upon a required monthly repayment or upon maturity, whichever occurs first, and will continue to accrue until the 2008 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 was 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~~Commencing ~~2008~~on ~~Notes~~the ~~were~~fourth ~~originally~~month ~~scheduled~~anniversary ~~to mature in December 2009 and were extended several times to December 31, 2011. The non-payment~~ of the ~~outstanding~~issuance ~~balance~~ of ~~these~~the ~~notes upon~~2008 ~~maturity~~Notes and on ~~December~~ ~~31,~~the ~~2011~~same ~~constituted~~day anof ~~Event~~each ofmonth ~~Default~~thereafter ~~under~~until the ~~transaction~~principal ~~documents~~amount ~~with~~of the 2008 ~~Investors. The~~Notes ~~pertinent~~has ~~documents~~been ~~provide~~paid ~~that~~in ~~any action by the investors upon such default (i.e.~~full, ~~acceleration of~~ the ~~debt~~Company ~~and~~was ~~other~~required ~~remedies)~~to ~~can~~prepay ~~only be initiated by the holders of 65~~5% ~~or more~~ of the ~~outstanding~~aggregate principal amount of the ~~notes,~~2008 ~~representing~~Notes ~~the~~originally ~~requisite Majority in Interest under the transaction documents. Such action had not been commenced by the note holders. In April 2012~~issued, ~~the~~together ~~requisite~~with ~~Majority in Interest waived~~ all ~~existing~~accrued ~~Events~~interest ofdue ~~Default~~and ~~through~~payable ~~June~~on ~~30, 2012. In May 2012,~~ the ~~requisite~~entire ~~Majority~~outstanding inamount ~~Interest~~up ~~agreed~~ to ~~certain~~such ~~modifications~~repayment ofdate ~~the~~(each ~~terms~~such ofdate, ~~the~~a ~~2008~~“Scheduled ~~Notes~~Payment ~~(see (vi~~Date”) ~~Modification of Debt)~~.

The 2008 Notes were originally scheduled to mature in December 2009 and were extended several times to December 31, 2011. The non-payment of the outstanding balance of these notes upon maturity on December 31, 2011 constituted an Event of Default under the transaction documents with the 2008 Investors. The pertinent documents provide that any action by the investors upon such default (i.e., acceleration of the debt and other remedies) can only be initiated by the holders of 65% or more of the outstanding principal amount of the notes, representing the requisite Majority in Interest under the transaction documents. Such action had not been commenced by the note holders. In April 2012, the requisite Majority in Interest waived all existing Events of Default through June 30, 2012. In May 2012, the requisite Majority in Interest agreed to certain modifications of the terms of the 2008 Notes (see (vii) Modification of Debt).

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.

The Company undertook to file a registration statement by a prescribed period 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. The Company has not filed the Registration Statement and accordingly, the Company owed to the holders of these notes 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. At December 31, 2012, the Company owed to the holders of these notes $516,137 in liquidated damages. The non-payment of liquidated damages constitutes an Event of Default under the 2008 Notes. The pertinent documents provide that any action by the investors upon such default (i.e., acceleration of the debt and other remedies) can only be initiated by the holders of 65% or more of the outstanding principal amount of the notes. Such action has not been commenced by the note holders. The Company does not currently intend to file such registration statement as the shares issuable upon conversion of the 2008 Notes and/or the 2008 Investor Warrants are eligible to be resold under Rule 144.

There were no payments of principal or interest in 2013

(ii) Secured Convertible Promissory Note and Series A Convertible Preferred Stock (“Series A Preferred”)

Pursuant to an offering dated October 31, 2008 (the “December 2008 Private Placement”) to the holders of the 2008 Notes, on December 17, 2008, the Company realized net proceeds of $548,474, after the payment of offering related fees and expenses of $19,250, from a private placement of $1,066,540 in principal amount of 10% Secured Convertible Promissory Notes due April 20, 2010 (“collectively the “December 2008 Notes”) and 8.9 post-split shares of Series A Preferred. In addition, the Company issued to the investors warrants (the “Warrants”; together with the December 2008 Notes and the Series A Preferred, the “Purchased Securities”) to purchase in the aggregate up to 2,370 post-split shares of the Company’s Common Stock at a per share exercise price equal to $750 exercisable through October 31, 2013. The warrants include a ‘cashless exercise’ provision.

The December 2008 Notes are convertible into shares of Common Stock at the holder’s option at any time at an initial conversion price of $450 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 December 2008 Notes accrues at the rate of 10% per annum and is payable upon a required repayment (discussed below) or upon maturity, whichever occurs first, and will continue to accrue until the December 2008 Notes are fully converted and/or paid in full.

Commencing on April 30, 2009, and thereafter on the last day of each subsequent calendar month until the principal amount of the December 2008 Notes has been paid in full, the Company is required to prepay 8.33% of the aggregate principal amount of the December 2008 Notes originally issued, together with all accrued interest due and payable on the entire outstanding amount up to such repayment date. The amount may be paid, at the Company’s election, either in (i) cash, at 110% of the principal amount due and 100% of all other amounts due or (ii) shares of Common Stock as defined; provided, that, if such monthly amount is to be paid with shares of Common Stock, it will be automatically deferred unless the holder gives notice to the Company at least five (5) days before a repayment date that the holder will accept payment of such monthly amount in the form of Common Stock.

The Company’s obligations under the December 2008 Notes are secured by a security interest in substantially all of its assets pursuant to a prior Security Agreement dated as of December 24, 2007 between it and the purchasers of the 2008 Notes.

Holders of the Purchased Securities are subject to certain limitations on their rights to convert the securities. The principal limitation is that the holder may not, with certain limited exceptions, convert into a number of shares that would, together with other shares held by the holder, exceed 4.99% or 9.99% of the then outstanding shares of the Company after such conversion and/or exercise.

The December 2008 Notes were originally scheduled to mature on April 30, 2010 and were extended several times to December 31, 2011. The non-payment of the outstanding balance of these notes upon maturity on December 31, 2011 constituted an Event of Default under the transaction documents. The pertinent documents provide that any action by the investors upon such default (i.e., acceleration of the debt and other remedies) can only be initiated by the holders of 65% or more of the outstanding principal amount of the notes, representing the requisite Majority in Interest under the transaction documents. Such action had not been commenced by the note holders. In April 2012, the requisite Majority in Interest waived all existing Events of Default through June 30, 2012. In May 2012, the requisite Majority in Interest agreed to certain modifications of the terms of the 2008 Notes (see (vivii) Modification of Debt).

There were no payments of principal or interest in 2013.

(iii) 2009 - 2011 Notes and Series A Preferred

In April 2009, the holders of the 2008 Notes and the December 2008 Notes consented to the placement of 10% secured convertible promissory notes, Series A Preferred and warrants, all on the substantive terms identical to those prevailing with respect to the December 2008 Private Placement discussed at further length in Note 7(ii) above.

·● In 2009, the Company raised net proceeds of $1,332,500 from the private placement to certain holders of the December 2008. The Company issued $1,432,500 in principal amount of 2009 Notes and 11.9 post-split shares of Series A Preferred. In connection with such investment, the Company issued to the holders of the 2009 Notes, five-year warrants to purchase in the aggregate up to 3,183 post-split shares of the Company’s common stock at per share exercise price equal to $750.

●

In 2010, the Company raised net proceeds of $318,940 from the private placement to certain holders of the December 2008 Notes. The Company issued $318,940 in principal amount of 2010 Notes and 2.7 post-split shares of Series A Preferred. In connection with such investment, the Company issued to the holders of the 2010 Notes, five- year warrants to purchase in the aggregate up to 709 post-split shares of the Company’s common stock at per share exercise price equal to $750.

●

In 2011, the Company raised net proceeds of $2,359,134 which includes $1,456,880 of rolled over notes payable and accrued interest in addition to $902,254 of new invested capital, from four holders of the December 2008 Notes. The Company issued $2,359,134 in principal amount of 2011 Notes and 19.7 post-split shares of Series A Preferred. In connection with such investments, the Company issued to the holders of the 2011 Notes, five year warrants to purchase in the aggregate up to 5,242 post-split shares of the Company’s Common Stock at per share exercise price equal to $750.

The warrants include a ‘cashless exercise’ provision.

Commencing on the six month anniversary date of the various notes, and on the same day of each subsequent calendar month thereafter until the principal amount of the various notes has been paid in full, the Company is required to prepay 8.33% of the aggregate principal amount of the various notes originally issued, together with all accrued interest due and payable on the entire outstanding amount up to such repayment date.

~~The~~Commencing ~~various~~on ~~notes~~the ~~were~~six ~~scheduled~~month toanniversary ~~mature~~date ~~at various dates and were extended to December 31, 2011. The non-payment~~ of the ~~outstanding~~various ~~balance of a significant portion of these~~ notes, ~~upon~~and ~~maturity~~ on ~~December~~the ~~31,~~same ~~2011~~day ~~constituted an Event~~ of ~~Default~~each ~~under~~subsequent ~~the~~calendar ~~transaction~~month ~~documents. The~~thereafter ~~pertinent~~until ~~documents provide that any action by~~ the ~~investors~~principal ~~upon~~amount ~~such default (i.e., acceleration~~ of the ~~debt~~various ~~and~~notes ~~other~~has ~~remedies)~~been ~~can~~paid ~~only~~in befull, ~~initiated by~~ the ~~holders~~Company ofis ~~65%~~required orto ~~more~~prepay 8.33% of the ~~outstanding~~aggregate principal amount of the various notes. ~~Such~~originally ~~action had not been commenced by the note holders. In April 2012~~issued, ~~the~~together ~~requisite~~with ~~Majority in Interest waived~~ all ~~existing~~accrued ~~Events~~interest ofdue ~~Default~~and ~~through~~payable ~~June~~on ~~30, 2012. In May 2012,~~ the ~~requisite~~entire ~~Majority~~outstanding inamount ~~Interest~~up ~~agreed~~ to ~~certain~~such ~~modifications~~repayment ~~of the terms of the various notes (see (vi) Modification of Debt)~~date.

The various notes were scheduled to mature at various dates and were extended to December 31, 2011. The non-payment of the outstanding balance of a significant portion of these notes upon maturity on December 31, 2011 constituted an Event of Default under the transaction documents. The pertinent documents provide that any action by the investors upon such default (i.e., acceleration of the debt and other remedies) can only be initiated by the holders of 65% or more of the outstanding principal amount of the notes. Such action had not been commenced by the note holders. In April 2012, the requisite Majority in Interest waived all existing Events of Default through June 30, 2012. In May 2012, the requisite Majority in Interest agreed to certain modifications of the terms of the various notes (see (vii) Modification of Debt).

There were no payments of principal or interest in 2013.

(iv) 2012 Notes and Series A Preferred

For the year ended December 31, 2012, the Company raised net proceeds $1,337,723 from holders of the December 2008 Notes and two new investors. The Company issued $1,337,723 in principal amount of 10% secured convertible promissory notes (“2012 Notes”) and 11.14 post-split shares of Series A Preferred. In connection with such investments, the Company issued five-year warrants to purchase in the aggregate up to 2,972 post-split shares of the Company’s Common Stock at per share exercise price equal to $750.The warrants include a ‘cashless exercise’ provision.

Commencing on the six month anniversary date of the 2012 Notes, and on the same day of each subsequent calendar month thereafter until the principal amount of the Notes has been paid in full, the Company is required to prepay 8.33% of the aggregate principal amount of the Notes originally issued, together with all accrued interest due and payable on the entire outstanding amount up to such repayment date. In May 2012, the requisite Majority in Interest agreed to certain modifications of the terms of the 2012 Notes (see (vivii) Modification of Debt).

There were no payments of principal or interest in 2013.

(v) ~~Priority~~2013 ofNotes ~~Payments~~and ofSeries ~~Notes~~A Preferred

On July 1, 2013, the Company refinanced debt and accrued interest totaling $506,016 (see Notes 7 and 10) through the issuance of $506,016 in principal amount of 10% secured convertible promissory notes (“2013 Notes”) and 4.22 post-split shares of Series A Preferred. In connection with such investments, the Company issued five-year warrants to purchase in the aggregate up to 1,124 post-split shares of the Company’s Common Stock at per share exercise price equal to $750. The warrants include a 'cashless exercise' provision. Principal and accrued interest are due on December 23, 2014.

(vi) Priority of Payments of Notes

In December 2011, the holders of approximately 74% of the outstanding principal amount of the Notes at that time agreed that Notes issued after December 15, 2011 (“New Notes”) shall be accorded first lien priority in the collateral (as defined) and that any repayment obligations currently owing on Notes issued on or before October 26, 2011 shall be subordinated to the repayment obligations incurred by the Company in connection with the New Notes. The consenting holders represented more than the requisite Majority in Interest required under the transaction documents for this matter, and accordingly their agreement is binding upon all note holders.

(vivii) Modification of Debt

In May 2012, the holders of approximately 73% of the outstanding principal amount of the Notes waived all Events of Default and consented to a modification of the note terms. Under the modification, effective January 1, 2012:

●

The Company may deem the maturity date of the outstanding notes (including any issued after January 1, 2012) to be December 31, 2015

●

The interest rate payable has been reduced to 2.5% per annum

●

The determination of the number of shares of Common Stock for purposes of the repayment of the Monthly Amount through the issuance of Common Stock shall be made by dividing the Monthly Amount by $0.30 (post-split), subject to further adjustment as provided in the Notes with respect to certain corporate events.

The Company accounted for the modification of the terms of the notes, as described above, as an extinguishment of debt in accordance with FASB ASC Subtopic 470-50, “Debt: Modifications and Extinguishment.” The Company deemed the terms of the modification to be substantially different and treated the Notes as extinguished and exchanged for new notes. As such, it was necessary to reflect the Notes at fair value. In addition, any remaining unamortized debt discounts were expensed.

InThe ~~accordance~~Company ~~with~~accounted ~~FASB~~for ~~ASC subtopic 820-10, “Fair Value Measurement – Overall,”~~ the ~~value~~modification of the ~~Notes~~terms ~~was determined utilizing level 3 inputs. The fair value~~ of the ~~Notes~~notes, ~~was~~as ~~determined~~described ~~based~~above, onas an ~~effective~~extinguishment ~~rate~~ of ~~return~~debt ofin ~~approximately~~accordance ~~31%,~~with ~~which~~FASB ~~approximates~~ASC ~~the~~Subtopic ~~return~~470-50, of“ aDebt: ~~high~~Modifications ~~risk~~and ~~note~~Extinguishment .” AsThe aCompany ~~result,~~deemed the ~~face~~terms ~~amount~~ of the ~~remaining~~modification ~~principal~~to ~~balance~~be ofsubstantially ~~$5,483,839~~different ~~was~~and ~~written~~treated ~~down~~the toNotes ~~its~~as ~~fair~~extinguished ~~market~~and ~~value~~exchanged offor ~~$1,566,704~~new notes. ~~This~~As ~~discount~~such, isit ~~being~~was ~~amortized~~necessary to reflect the ~~amended~~Notes ~~date~~at offair ~~maturity unless paid or converted earlier~~value. In ~~The Company recognized a gain on debt extinguishment of $2~~addition,~~926,717,~~ ~~which~~any ~~included~~remaining ~~the expensing of~~ unamortized debt discounts ~~totaling~~were ~~$990,418~~expensed.

~~(vii)~~ In ~~Maturities~~accordance with FASB ASC subtopic 820-10, “Fair Value Measurement – Overall ,” the value of ~~Convertible~~the ~~Promissory~~Notes was determined utilizing level 3 inputs. The fair value of the Notes was determined based on an effective rate of return of approximately 31%, which approximates the return of a high risk note. As a result, the face amount of the remaining principal balance of $5,483,839 was written down to its fair market value of $1,566,704. This discount is being amortized to the amended date of maturity unless paid or converted earlier. The Company recognized a gain on debt extinguishment of $2,926,717, which included the expensing of unamortized debt discounts totaling $990,418.

~~The~~(viii) ~~maturities~~Maturities onof ~~the~~Convertible ~~Notes~~Promissory ~~are $2,090,914 were payable through 2013, $70,833 payable in 2014 and $5,958,562 payable in 2015.~~Notes

The maturities on the Notes are $2,122,164 were payable through 2013, $39,583 payable in 2014 and $5,958,562 payable in 2015.

NOTE 9 - CAPITAL TRANSACTIONS

Convertible Preferred Stock

Shares of Preferred Stock have not been registered and are restricted under the securities laws and pay a dividend of 10% per annum on the stated value. So long as the Series A Preferred is outstanding, unless waived by the holders of 66 2/3% of the Series A Preferred then outstanding, the dividend rate shall increase to 15%. In addition, shares of the Series A Preferred do not vote separately as a class (but do vote on an “as-converted” to common stock basis) and have a liquidation preference equal to the stated value of the shares. Each share of Preferred Stock has a stated post-split value of $300,000 and is convertible into post-split shares of the Company’s common stock at $450 per share.

Commencing on the issuance date, and thereafter on the last day of each subsequent calendar month, the Company is required to redeem 8.33% of the aggregate outstanding stated value of the Series A Preferred until the stated value and all accrued dividends have been paid in full. Redemption payments on the Series A Preferred may be made, at the election of the Company, in cash or shares of Common Stock, in the same manner as provided above with respect to the December 2008 Notes, subject to automatic deferral in the case of payment in shares unless the holder gives notice to the Company of such holder’s agreement to accept payment in shares. As a result of the redemption provisions, the Series A Preferred was not classified as permanent equity and dividends and deemed dividends are included in interest expense.

The dividends are cumulative commencing on the issue date whether or not declared. For the six months ended June 30, 2013 and 2012, the Company declared dividends totaling $183,577 and $173,897, respectively. For the three months ended ~~March~~June 3130, 2013 and 2012, the Company declared dividends totaling $9192,~~281~~296 and $8489,~~397~~500, respectively. At ~~March~~June 3130, 2013 and December 31, 2012, dividends payable total $2,~~441~~533,~~553~~848 and $2,350,272, respectively, and are included in accounts payable and accrued liabilities. For the ~~three~~six months ended ~~March~~June 3130, 2013 and 2012, dividends and deemed dividends totaled $~~611~~1,~~855~~127,922 and $~~811~~1,~~468~~720,200, respectively. For the three months ended June 30, 2013 and 2012, dividends and deemed dividends totaled $516,067 and $899,733, respectively. Such amounts have been included in interest expense.

The non-payment of the accrued dividends and the redemption of the Series A Preferred constituted Events of Default under the Certificate of Designation. In May 2012, in connection with the note modification, the stockholders of approximately 71% of the outstanding amount of Series A Preferred agreed that effective January 1, 2012:

	●	Waived the Events of Default under the Certificate of Designation at any time prior to and through May 2012. In addition, the stockholders waived any Events of Default that may arise through December 31, 2015.

	●	To eliminate the 10% dividend on their holdings.

	●	They further agreed that the determination of the number of shares of Common Stock for purposes of the payment of the Monthly Amount through the issuance of Common Stock shall be made by dividing the Monthly Amount by $0.30 (post-split), subject to further adjustment as provided in the Notes with respect to certain corporate events.

The maturities on the Series A Preferred Stock are $13,946,737 that were payable through 2013 and $373,712 payable in 2014.

11On July 1, 2013, the Company issued 4.22 post-split shares of Series A Preferred as part of the refinancing of debt and accrued interest described above (see Note 8(v)).

Warrants

On July 1, 2013, the Company issued five-year warrants to purchase in the aggregate up to 1,124 post-split shares of the Company’s Common Stock at per share exercise price equal to $750 as part of the refinancing of debt and accrued interest described above (see Note 8(v)).

Derivative Liabilities

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, “Derivatives and Hedging.”

The Company issued warrants, Series A Preferred and Notes under various private placements. On October 22, 2012, the Company issued Common Stock for the conversion of Series A Preferred and Notes. Due to these issuances, the Company did not have enough available shares of authorized Common Stock to issue to the various security holders had all of the convertible securities been converted and/or exercised. As a result, the value of the warrants has to be recognized as a liability. In addition, the Company evaluated the conversion terms of the Notes and Series A Preferred to determine if such terms gave rise to embedded derivatives that would need to be accounted for separately. The Company determined that the lack of authorized shares to satisfy the conversion requirements if all of the securities were converted resulted in the conversion features being embedded derivatives that must be bifurcated and recorded as derivative liabilities. In addition, the Company would be required to revalue the derivative liabilities at the end of each reporting period with the change in value reported on the statement of operations. The Company did not account for these derivative liabilities in its financial statements as it was determined to not be material.

On November 8, 2012, the Company issued a warrant to purchase 4 million shares of Common Stock that contained a put option. As defined in the warrant, the warrant holder has the right to put the warrant back to the Company if the Company does not file a proxy statement (as defined) on or before May 6, 2013 ifto increase the ~~Company~~number ~~does~~of ~~not~~shares ~~file~~of its aauthorized common stock. As of May 6, 2013, such proxy statement ~~(as~~was ~~defined).~~not filed. The warrant holder is entitled to receive the greater of (i) the difference between the exercise price of the warrants of $0.30 and the 20-day average price of the Company’s Common Stock for the period preceding May 6, 2013 and (ii) $0.10 per share. The put option created a derivative liability which the Company valued at $0.10 per share as the Company’s stock price was below the strike price and has declined further since issuance. At both ~~March~~June 3130, 2013 and December 31, 2012, the value of the warrant liability was $400,000.

Deferred Compensation and Stock Based Compensation

As discussed above, a warrant to purchase 4 million shares of Common Stock, valued at $895,745, was issued on November 8, 2012 as partial consideration for a nine-month advisory agreement. The value of the warrant was recognized as deferred compensation and is being amortized over the term of the agreement. At ~~March~~June 3130, 2013 and December 31, 2012, the unamortized balance of deferred compensation was $~~398~~99,~~109~~527 and $696,691, respectively. For the six and three months ended ~~March~~June 3130, 2013, the Company recognized stock compensation expense of $597,163 and $298,~~582~~581, respectively, and such expense is included in selling and general and administrative expenses.

NOTE 10 – RELATED PARTY TRANSACTIONS

At March 31, 2013 and December 31, 2012, loans payable to related parties amounted to $161,376 and $159,480, respectively. Transactions were as follows:

IDO Ltd. received non-interest bearing advances from a 2008 Investor (as defined in Note 8(i)). The advances are due on demand. At December31, 2012 and 2011, the Company owed $38,821 and $35,833, respectively.

In November 2012, IDO Ltd. borrowed $75,000 under a loan agreement with the same 2008 Investor. The loan bears interest at the rate of 10%per annum and is secured by the inventory held by IDO Ltd. The principal and accrued interest are due on demand. At both March 31, 2013 and December 31, 2012, the Company owed principal of $75,000. Accrued interest owed at March 31, 2013 and December 31, 2012 was $2,729 and $833, respectively. Interest expense incurred for the three months ended March 31, 2013 was $1,896.

The Company received working capital loans from certain non-management affiliated stockholders of IDO Ltd. Amounts owed on the loans aggregated to $44,826 at both March 31, 2013 and December 31, 2012.

NOTE 11 10 – ~~COMMITMENT~~RELATED &PARTY ~~CONTINGENCIES~~ TRANSACTIONS

At June 30, 2013 and December 31, 2012, loans payable to related parties amounted to $161,376 and $159,480, respectively. Transactions were as follows:

IDO Ltd. received non-interest bearing advances from a 2008 Investor (as defined in Note 8(i)). The advances are due on demand. At both June 30, 2013 and December 31, 2012, the Company owed $38,821.

In November 2012, IDO Ltd. borrowed $75,000 under a loan agreement with the same 2008 Investor. The loan bears interest at the rate of 10% per annum and is secured by the inventory held by IDO Ltd. The principal and accrued interest are due on demand. At both June 30, 2013 and December 31, 2012, the Company owed principal of $75,000. Accrued interest owed at June 30, 2013 and December 31, 2012 was $2,729 and $833, respectively.

The Company received working capital loans from certain non-management affiliated stockholders of IDO Ltd. Amounts owed on the loans aggregated to $44,826 at both June 30, 2013 and December 31, 2012.

On July 1, 2013, the Company refinanced these loans through the issuance of the 2013 Notes. See Note 8(v) for more details.

NOTE 11 – COMMITMENT AND CONTINGENCIES

Lawsuits

(i) As the Company previously disclosed, in November 2012, the Tel-Aviv District Labor Court (the “District Court”) ruled in favor of Mr. Gil Stiss (“Stiss”), a former officer/director of IDO Ltd., in the lawsuit brought by Stiss against IDO Ltd. In the lawsuit which Stiss commenced in October 2009 against IDO Ltd. and a former director and the then General Manager of IDO Ltd., and which was first disclosed in the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2009, Stiss sought the payment of amounts purportedly due and payable to him under his employment agreement with IDO Ltd. Stiss was awarded judgment in the approximate amount of 1,475,000 in New Israeli Shekels (ILS), with interest and cost of living index adjustments computed from May 10, 2009 (“Judgment”). Stiss’ suit against the then officers/directors of IDO Ltd. was dismissed. The Company was not a party to the lawsuit.

On December 20, 2012, IDO Ltd. filed a motion with the District Court to stay execution of the Judgment pending appeal and, on December 23, 2012, IDO Ltd. filed its appeal (the “Appeal”) of the Judgment with the National Labor Court (“National Court”). On January 13, 2013, the District Court partially accepted the motion to stay execution of the Judgment in excess of ILS 500,000 provided that, IDO Ltd. paid the amount of ILS 500,000 into the District Court by February 15, 2013. IDO Ltd. elected to not make such payment. On January 17, 2013, IDO Ltd. filed a follow-up motion with the National Court to stay execution of the Judgment pending appeal. On March 5, 2013 the National Court dismissed the motion to stay execution of the Judgment. In March 2013, Stiss moved to collect on the judgment and in connection therewith, has obtained liens on assets and bank accounts of IDO Ltd. As of the filing of this report, the Company estimates that the total amount due under the Judgment, including interest and living costs adjustments amounts as well as collection costs are approximately ILS 2,000,000, which is equivalent to approximately $~~548~~552,000 at ~~March~~June 3130, 2013 and $549,000 at the time of the filing of this report. Contacts with Stiss respecting a resolution and settlement of the matter are ongoing. No assurance can be provided that any successful resolution is possible or will in fact be reached. A reserve for lawsuit in the amount of $548,000 and $470,000 has been accrued at ~~March~~June 3130, 2013 and December 31, 2012, respectively.

As of the date of this report, the Appeal of the Judgment with the National Court is pending and no assurances can be provided as to the ultimate disposition of the Appeal. In April 2013, Stiss filed a motion to dismiss the Appeal as IDO Ltd. has not complied with the Judgment (payment of amounts due). On August 8, 2013, the National Court rejected Stiss’ motion, provided that IDO Ltd. paid into the National Court ILS 7,500, which is equivalent to approximately $2,100 at the time of the filing of this report by August 29, 2013, to cover anticipated court costs of Stiss. Such amount was paid into the court by the specified date.

In light of the foregoing, in April 2013, IDO Ltd. has terminated all commercial activities in Israel. All employees have been terminated and office premises have been closed. There is no substantial activity currently being undertaken by IDO Ltd. For the three months ended March 31, 2013, IDO Ltd. disposed of or abandoned most of its property and equipment and recognized a loss of $31,087, which is included in selling and general and administrative expenses.13

In light of the foregoing, in April 2013, IDO Ltd. terminated all commercial activities in Israel. All employees have been terminated and office premises have been closed. There is no substantial activity currently being undertaken by IDO Ltd. and IDO Ltd. disposed of or abandoned most of its property and equipment. For the six and three months ended June 30, 2013, the Company recognized a loss of $42,604 and $11,517, respectively, which is included in selling and general and administrative expenses.

Effective March 11, 2013, we and a third party engaged in the distribution, operation and maintenance of medical devices entered into a representation and manufacturing agreement pursuant to which the third party has been granted non-exclusive manufacturing rights of Company products and will also be granted the right to assist the Company in the management of sales, marketing and distribution of our products. While no assurance can be provided, we believe that the manufacturing activities formerly conducted by IDO Ltd. can be satisfactorily performed by such third party.

(ii) On July 23, 2012, a complaint was filed in the San Diego Superior Court against the Company, certain officers and directors, and other unrelated companies, alleging violations of California restrictions on unsolicited commercial e-mails. Under the relevant California statute, violators are subject to pay damages of up to $1,000 for each spam email to each recipient. The plaintiff alleges he received 19 spam emails relating to the Company. The plaintiff dismissed ishis ~~also~~second ~~seeking~~cause ~~preliminary~~of ~~injunction~~action ~~against~~for violations of the ~~defendants~~Consumer Legal Remedies Act and is no longer seeking a preliminary injunction.

On September 24, 2012, the Company filed its answer denying the allegations and asserted affirmative defenses and ~~the Company's officers and directors named~~ in ~~the~~response ~~Complaint filed~~ to a ~~separate~~ motion to quash service onof ~~September 24~~process, ~~2012.~~on OnNovember ~~October 9~~30, 2012, the ~~plaintiff~~court ~~filed~~dismissed ~~a demurrer to~~ the ~~answer. Decisions on the plaintiff'~~Company’s ~~demurrer and the~~ officers' and directors' who ~~motion~~were tonamed ~~quash~~in ~~are~~the ~~pending~~Complaint. We believe that this lawsuit, as it applies to the Company, ~~its officers and directors,~~ is baseless and we intend to vigorously defend our rights.

Representation and Manufacturing Agreement

As discussed above, the Company signed a representation and management agreement. In consideration for all services rendered, the Company agreed to pay a monthly fee of $40,000 commencing January 1, 2013.

Employment Agreement

On June 5, 2013, the Company appointed Magdiel Rodriguez as its Chief Executive Officer. Effective September 16, 2013, the Company and Mr. Rodriguez entered into an Employment Agreement (the “Employment Agreement”) relating to Mr. Magdiel’s remuneration. Pursuant to the Employment Agreement, Mr. Rodriguez will receive an annual base salary of $100,000, the payment of which is being deferred until such time as our financial condition permits us to make payments thereon. In addition, subject to his continued employment and subject further to the increase in the number of our authorized and unissued shares of Common Stock, in the event of Change in Control (as defined in the Employment Agreement) Mr. Rodriguez will be entitled to 3.5 million shares of our common stock (the “Shares”). In the event the employment of Mr. Rodriguez is terminated for any reason other than cause, then he is entitled to receive the Shares.

NOTE 12 – SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date of this filing.

1314

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-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission. We undertake no obligation to revise or update any forward-looking statement for any reason.

Company Overview

IDO Security Inc. (“we”, “IDO” or the “Company”) is engaged in the design, development and marketing of a shoe scanning device (SSD) for the homeland security and loss prevention markets 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, high security places and other public locations requiring individual security screening. Our common stock trades on the OTC Bulletin Board under the symbol IDOI.

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. 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.

We have designed and developed a security screening device containing proprietary and patented 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. 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. Our technology is designed to distinguish between a person’s left and right shoe, analyzing anomalies for each foot but also for both together, and provides comparative screening results. The technology allows for both the detection and assessment of possible threats from the shoe and ankle area posed by foreign metal objects based upon the analysis of the detected metal material(s) and their location in shoes. The MagShoe™ device has been designed to integrate into and complement current security screening arrays and systems. The new G3 generation MagShoe is portable and, depending on the model, weighs 48 kilograms (and can scan up to 18 inches from the base of the passenger'’s footwear) and 33 kilograms (and scans up to 8 inches from the base of the passenger'’s footwear) and can be deployed quickly by existing security personnel, who can integrate the MagShoe into their current security routine. The subject being screened places his feet on the device in the designated areas for each foot and in three- to six seconds, depending on the model, the scan is completed. An audio-visual signal alerts the operator of the results of the check and provides a read-out on the control panel in an easily readable format.

1415

MagShoetm fills a critical void in today’s detectors by extending screening to the lower body and feet. MagShoeTM’s “shoes-on” design maximizes security, thoroughness and accuracy while eliminating the need to remove shoes for increased convenience and safety. The MagShoeTM is neither invasive nor harmful to the body as some of the other screening devices currently use in the marketplace. Ideal for security and loss prevention at virtually any facility, MagShoeTM is currently in use at international airports, cruise lines, government agencies and more.

The MagShoe™ has been deployed and is in operation in various countries including Israel, China, Spain, Poland, The Czech Republic, Australia, the Philippines and Germany. Subject to raising additional capital, we expect to actively pursue certain Requests for Proposals (RFP) and Requests for Information (RFI) for footwear scanners that we are beginning to receive from sources in various countries. We believe that these RFPs further validate the need for a footwear scanning device similar to the MagShoe™. In ~~addition, in~~ January 2006, the MagShoe™ was approved for use by the Department for Transport in the United Kingdom, after field 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. In December of 2008, we received our certification from the Underwriter’s Laboratory (UL) in the United States, which signifies that the MagShoe™ is safe for sale in the United States.

Worldwide, we believe that there are in excess of 1,200,000 walk through metal detectors (WTMD) installed in various high security locations and that detection devices, such as the MagShoe™, are a necessary part of any security measures in place in those installations as well as other areas where there are no walk through metal detectors. The MagShoe™ acts as a complementary device to any and all walk through metal detectors, insuring that all who pass through have no metallic weapons in the area that the metal detectors are inherently weak.

Current Operational Highlights

Effective April 2013, our subsidiary IDO Ltd. has terminated all commercial activities in Israel. All employees have been terminated and office premises have been closed. The cessation of activities by IDO Ltd. is a result of the litigation outcome discussed in Item 1 of Part II in this Quarterly Report on Form 10-Q.

In order to maintain orderly operations, we and a third party who is engaged in the distribution, operation and maintenance of medical devices, have entered, as of April 15, 2013, into a representation and manufacturing agreement pursuant to which the third party has been granted non -exclusive manufacturing rights of our products as well as the right to assist us in the management of sales, marketing and distribution of our products. While no assurance can be provided, subject to raising additional capital, we believe that the manufacturing activities formerly conducted by IDO Ltd. can be satisfactorily performed by such third party.

If a resolution or settlement is not reached with respect to the litigation discussed in Item 1 of Part II in this Quarterly Report on Form 10-Q , no assurance can be provided that the proposed restructure of our activities will not be legally challenged and, if so challenged, no assurance can be provided that such challenge will not succeed.

15Under the agreement with such third party, we undertook to remit to it $40,000 on a monthly basis in respect of the costs of manufacturing and marketing. While we have remitted the required amounts in respect of the period from January through March, our inability to raise the capital needed to remit these amounts has prevented us from making timely payments on the subsequent period.

Subject to raising the needed funds, our goal is to incorporate our SSD proprietary technology as a complementary technology to the existing walk through metal detectors (WTMD), thereby augmenting the security equipment and procedures currently used throughout the world. We are also exploring options of integrating our technology with other non-metallic based detection systems.16

~~However~~In addition, on June 13, 2013, we ~~will~~entered ~~need~~into toa ~~raise~~letter ~~additional~~of ~~funds~~intent onwith anDuos ~~immediate~~Technologies ~~basis~~Inc. in(“Duos”), ~~order~~a toFlorida-based ~~further~~company ~~explore~~providing ~~these~~intelligent ~~options~~video surveillance systems as well as physical security information management solutions, respecting a share exchange transaction. The letter of intent contemplates that, subject to ~~meet~~the satisfaction of certain conditions, we issue shares of our common stock equal to a majority of the total outstanding shares of our common stock as of consummation of the contemplated share exchange to the current shareholders of Duos. The letter of intent is subject to various contingencies, including the finalization and entering into of a set of definitive legal agreements relating to the contemplated share exchange on~~-going~~ ~~operating~~or ~~requirements~~before September 30, 2013, the raising of additional capital by us, as well as satisfaction following due diligence investigations of each of ourselves and Duos. As definitive agreements were not entered into within 30 days of the execution of the letter of intent, either party is entitled to ~~realize~~terminate ~~our~~the ~~business~~letter ~~plan~~of intent.

The lack of operating capital and the difficulty we encountered in raising working capital to consummate the contemplated transaction prevented us from working to close the transaction. We continue in our efforts to try and raise the funds needed to close on the transaction as well as to maintain our ongoing operations.

If and when consummated, the contemplated transaction would result in a change of control and fundamental restructuring of our company and business, including not only our board of directors and operating officers, but also our business operations and strategic direction. No assurance can be provided that even if we are successful in raising the needed capital, Duos would be interested in completing the contemplated transaction.

The lack of operating funds has greatly hindered our ability to actively market our products as well as take advantage of various opportunities. We need to raise additional funds on an immediate basis in order to further explore these options as well as to meet our on-going operating requirements and to realize our business plan.

RESULTS OF OPERATIONS

COMPARISON OF THE SIX AND THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2013 TO THE SIX AND THREE MONTHS ENDED ~~MARCH~~JUNE 3130, 2012

Revenues and costs of goods sold – ~~Revenues~~No revenues were recorded for the three months ended ~~March~~June 3130, 2013. ~~were~~Revenues ~~$15~~for the six months ended June 30,~~043~~ ~~compared~~2013 towere $~~204~~15,~~564~~043. Revenues for the ~~corresponding~~six ~~periods~~and inthree months ended June 30, 2012 were $285,480 and $80,916, respectively. All revenues were derived from sales of our MagShoe™ device. Costs of goods sold during each of the six and three months ended ~~March~~June 3130, 2013 were $~~136~~256,757 and $120,000, respectively, as compared to $~~115~~191,~~853~~385 and $75,532 for the corresponding ~~period~~periods in 2012.

The decrease in revenues during each of the six and three months ended ~~March~~June 3130, 2013 compared to the corresponding periods ~~nine month period~~ in 2012 is primarily attributable to the substantial decrease in the number of MagShoe™ devices delivered to customers worldwide. The Company had a gross loss in 2013 due to fixed manufacturing overhead.

Research and development expenses - Research and development expenses consist primarily of expenses incurred in designing, developing and field testing the MagShoe™ device. 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 ~~three~~six months ended ~~March~~June 3130, 2013 of $53,202. ~~respectively,~~No ~~compared~~research toand ~~$50,562~~development expenses were recorded for the ~~corresponding~~three ~~period~~months inended ~~2012.~~June ~~The~~30, ~~increase~~2013. inWe incurred research and development expenses ~~during~~of $100,188 and $49,626, respectively, for the six and three months ended ~~March~~June 3130, ~~2013~~2012. asThe ~~compared~~decrease toin ~~the~~research ~~corresponding~~and ~~period~~development inexpenses ~~2012~~ is principally attributable to ~~expenses~~ ~~incurred~~the completion inof ~~connection~~the ~~with~~new ~~the~~product ~~exploration~~design ofand ~~options~~modifications ~~relating~~and ~~to incorporating~~the ~~our~~shutdown ~~technology~~of ~~into~~the aoperations ~~walk-through~~of ~~metal~~our ~~detector~~subsidiary IDO Ltd.

Selling, general and administrative expenses - Selling, general and administrative expenses primarily consist of salaries/fees and other related costs for personnel in marketing, sales, executive and other administrative functions and consultants. Other significant costs include professional fees for legal, accounting and other services. We incurred selling, general and administrative expenses for the six and three months ended ~~March~~June 3130, 2013 of $~~760~~677,~~888~~050 and $214,744, respectively, compared to $785,056 and $~~401~~383,~~449~~607, respectively, for the corresponding ~~period~~periods in 2012. The ~~increase~~decrease in selling, and general and administrative expenses during the six and three months ended ~~March~~June 3130, 2013 compared to the corresponding ~~period~~periods in 2012 is principally attributable to ~~increased~~decreased ~~payroll~~sales, ~~costs~~marketing ~~(including~~and ~~severance)~~management ~~relating to the shutdown of~~ operations ofresulting, ~~IDO~~in ~~Ltd.~~part, ~~and~~from ~~stock~~the ~~compensation~~shutdown of ~~$298,582 relating to~~ the ~~issuance~~operations of ~~shares~~our insubsidiary ~~November~~IDO ~~2012 for a nine-month consulting agreement~~Ltd.

Interest expense- Interest expense for the three months ended March 31, 2013 was $94,640 compared to $85,650 in the corresponding period in 2012. Interest expense relates primarily to the placement of our convertible promissory notes.17

~~Amortizations~~Interest ~~–– The~~expense- ~~amortizations~~Interest ~~are~~expense ~~included~~for inthe ~~interest~~six ~~expense~~and inthree ~~the~~months ~~statement~~ended ofJune ~~operations. In~~30, 2013, wewas ~~recorded~~$188,085 ~~amortization~~and of $~~261~~93,~~191~~445, respectively, compared to $~~124~~167,~~901~~372 inand ~~2012.~~$81,722 ~~Amortization~~in ~~represents~~ the ~~accretion~~corresponding ofperiod ~~interest~~in ~~relating~~2012. toInterest ~~the~~expense ~~write-down~~relates toprimarily ~~fair value of extinguished debt as well as amortization related~~ to the ~~debt discount incurred in connection with the~~ placement of our convertible promissory notes. ~~These~~Interest ~~costs~~expense ~~are~~increased ~~amortized~~in to2013 ~~the~~as ~~date~~there ofwas ~~maturity~~more ofdebt ~~the~~outstanding ~~debt~~in ~~unless~~2013 ~~converted~~than ~~earlier~~in 2012.

Amortizations — The amortizations are included in interest expense in the statement of operations. During the six and three months ended June 30, 2013, we recorded amortization of $536,931 and $275,740 compared to $283,416 and $158,515 for the corresponding periods in 2012. Amortization represents the accretion of interest relating to the write-down to fair value of extinguished debt as well as amortization related to the debt discount incurred in connection with the placement of our convertible promissory notes. These costs are amortized to the date of maturity of the debt unless converted earlier.

Gain on extinguishment of debt – In May 2012, the holders of approximately 73% of the outstanding principal amount of the Notes agreed to waive all existing defaults and consented to a modification of the terms of the Notes. We accounted for the modification of the terms as an extinguishment of debt. In accordance with FASB ASC subtopic 470-50, the face amount of the remaining balance of $5,483,839 was written down to its fair market value of $1,566,704. We recognized a gain on debt extinguishment of $2,926,717, which included the expensing of unamortized debt discounts totaling $990,418. The reduction to the fair market value will be accreted to interest expense through the new maturity date of December 31, 2015, the date consented to by the waiving note holders.

16 Preferred stock dividends– In connection with our financing arrangements we have issued Series A Preferred Stock. The shares accrue a dividend of 10% per annum. Effective January 1, 2012, a majority of the Series A Preferred stockholders eliminated their dividends. The dividends are cumulative commencing on the issue date whether or not declared. For financial reporting purposes, we recorded a discount to reflect the difference in the amount of proceeds allocable to the Series A Preferred Stock in the offering based on relative fair values and the stated value. The discounts were being amortized as deemed dividends on preferred stock to the date of maturity unless converted earlier. Commencing on July 1, 2009, the Series A Preferred Stock is now being classified as a liability. As such, all dividends accrued and/or paid and any accretions are now classified as part of interest expense and are no longer classified as preferred stock dividends and deemed dividends. For the six and three months ended June 30, 2013, dividends and deemed dividends totaled $1,127,923 and $516,068, respectively. For the six and three months ended June 30, 2012, dividends and deemed dividends totaled $1,711,200 and $899,732, respectively.

~~Preferred~~Net loss ~~stock dividends~~– InFor ~~connection~~the ~~with~~six ~~our~~and ~~financing~~three ~~arrangements~~months weended ~~have~~June ~~issued Series A Preferred Stock. The shares accrue a dividend of 10% per annum. Effective January 1~~30, ~~2012~~2013, ~~a majority of the Series A Preferred stockholders eliminated their dividends. The dividends are cumulative commencing on the issue date whether or not declared. For financial reporting purposes,~~ we ~~recorded~~had a ~~discount~~net toloss ~~reflect the difference in the amount~~ of ~~proceeds~~$3,443,950 ~~allocable to the Series A Preferred Stock in the offering based on relative fair values~~ and ~~the stated value. The discounts were being amortized as deemed dividends on preferred stock to the date of maturity unless converted earlier. Commencing on July~~ $1,518,578, ~~2009~~respectively, ~~the~~compared ~~Series~~to ~~A Preferred Stock is now being classified as~~ a ~~liability.~~net Asloss ~~such, all dividends accrued and/or paid and any accretions are now classified as part~~ of ~~interest expense and are no longer classified as preferred stock dividends and deemed dividends. For the three months ended March~~ $31,847 ~~2013~~ and ~~2012, dividends and deemed dividends totaled~~ $~~611~~1,~~855 and $811~~568,~~468,~~448 ~~respectively~~for ~~and~~the ~~such~~corresponding ~~amounts~~periods ~~are~~in ~~included~~2012, infor ~~interest~~the reasons ~~expense~~stated above.

Net (loss) income – In 2013, we had a net loss of $1,925,372 compared to net income of $1,536,601 in 2012, for the reasons stated above.

LIQUIDITY AND CAPITAL RESOURCES

We need to raise additional funds on an immediate basis in order to be able to satisfy our cash requirements and fulfill our business plan over the next twelve months. Without raising additional funds on an immediate basis, whether through the issuance of our securities, licensing fees for our technology or otherwise, we will also not be able to maintain operations as presently conducted. As previously disclosed in our periodic reports, we have been actively seeking additional capital. At the present time, we have no commitments for financing and no assurance can be given that we will be able to raise capital on commercially acceptable terms or at all. Even if we raise cash to meet our immediate working capital needs, our cash needs could be heavier than anticipated in which case we could be forced to raise additional capital. Our auditors included a “going concern” qualification in their auditors’ report for the three months ended ~~March~~June 3130, 2013. Such “going concern” qualification may make it more difficult for us to raise funds when needed. Moreover, the current economic situation may further complicate our capital raising efforts.

As of ~~March~~June 3130, 2013, we had a cash balance of $~~18,107~~311 compared to $125,982 at December 31, 2012.

Cash used in operating activities was $~~224~~411,~~152~~948 for the ~~three~~six months ended ~~March~~June 3130, 2013. The decrease in cash was primarily attributable to funding the operating loss for the period.

~~Cash provided by investing activities was $900 during the three months ended March 31, 2013 and represented the proceeds from the sale of property and equipment~~18

Cash provided by investing ~~financing~~ activities was $~~115,377. We~~900 ~~received~~during ~~proceeds~~the ofsix ~~$75~~months ended June 30,~~000~~ 2013 and represented the proceeds from the ~~issuance~~sale of property ~~notes~~ and ~~$15,377~~equipment ~~was~~resulting ~~drawn~~from bythe ~~our~~termination ~~wholly-owned~~of ~~subsidiary~~operations onof ~~its~~our ~~line~~facility ofin ~~credit~~Israel.

ToCash ~~date,~~provided weby ~~have~~financing ~~financed~~activities ~~our~~was ~~operations~~$285,377. We ~~primarily~~received proceeds of $270,000 from the ~~sale~~issuance of ~~our~~notes ~~securities~~and ~~(secured convertible notes~~$15,377 ~~Series~~was Adrawn ~~Preferred~~by ~~Stock~~our ~~and~~wholly-owned ~~warrants).~~subsidiary ~~See~~on ~~Note~~its 8line inof ~~our Condensed Consolidated Financial Statements~~credit.

17To date, we have financed our operations primarily from the sale of our securities (secured convertible notes, Series A Preferred Stock and warrants). See Notes 8 and 9 in our Condensed Consolidated Financial Statements.

Between April 1 to ~~May~~September 1713, 2013, we raised $~~170~~200,~~000~~200 from the private placement to certain holders of our secured ~~convertible~~ promissory notes.

ITEM 4.

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 ~~March~~June 3130, 2013, 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.

(i) As the Company previously disclosed, in November 2012 the Tel-Aviv District Labor Court (the “District Court”) ruled in favor of Mr. Gil Stiss (“Stiss”), a former officer/director of the Company’s wholly-owned subsidiary, IDO Ltd., in the lawsuit brought by Stiss against IDO Ltd.. In the lawsuit, which Stiss commenced in October 2009 against IDO Ltd. and a former director and the then General Manager of IDO Ltd., and which was first disclosed in the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2009, Stiss sought the payment of amounts purportedly due and payable to him under his employment agreement with IDO Ltd. Stiss was awarded judgment in the approximate amount of 1,475,000 in New Israeli Shekels (ILS), which is equivalent to approximately $410,000 at the time of the filing of this report, with interest and cost of living index adjustments computed from May 10, 2009 (“Judgment”). Stiss’ suit against the then officers/directors of IDO Ltd. was dismissed. The Company was not a party to the lawsuit.

On December 20, 2012, IDO Ltd. filed a motion with the District Court to stay execution of the Judgment pending appeal and, on December 23, 2012, IDO Ltd. filed its appeal (the “Appeal”) of the Judgment with the National Labor Court (“National Court”). On January 13, 2013, the District Court partially accepted the motion to stay execution of the Judgment in excess of ILS 500,000 provided that, IDO Ltd. paid the amount of ILS 500,000 into the District Court by February 15, 2013. IDO Ltd. elected to not make such payment. On January 17, 2013, IDO Ltd. filed a follow-up motion with the National Court to stay execution of the Judgment pending appeal. On March 5, 2013, the National Court dismissed the motion to stay execution of the Judgment. In March 2013, Stiss moved to collect on the judgment and in connection therewith, has obtained liens on assets and bank accounts of IDO Ltd. As of the filing of this report, the Company estimates that the total amount due under the Judgment, including interest and living costs adjustments amounts as well as collection costs are approximately ILS 2,000,000, which is equivalent to approximately $~~548~~549,000 at the time of the filing of this report. Contacts with Stiss respecting a resolution and settlement of the matter are ongoing. No assurance can be provided that any successful resolution is possible or will in fact be reached.

1819

As of the date of this report, the Appeal of the Judgment with the National Court is pending and no assurances can be provided as to the ultimate disposition of the Appeal. In April 2013, Stiss filed a motion to dismiss the Appeal as IDO Ltd. has not complied with the Judgment (payment of amounts due). On August 8, 2013, the National Court rejected Stiss’ motion, provided that IDO ltd. paid into the National Court ILS 7,500, which is equivalent to approximately $2,100 at the time of the filing of this report, by August 29, 2013 to cover anticipated court costs of Stiss. Such amount was paid into the court by the specified date.

On April 15, 2013, we and a third party engaged in the distribution, operation and maintenance of medical devices entered into a representation and manufacturing agreement pursuant to which the third party has been granted non-exclusive manufacturing rights of Company products and will also be granted the right to assist the Company in the management of sales, marketing and distribution of our products. While no assurance can provided, we believe that the manufacturing activities formerly conducted by IDO Ltd. can be satisfactorily performed by such third party.

(ii) On July 23, 2012, a complaint was filed in the San Diego Superior Court against the Company, certain officers and directors, and other unrelated companies, alleging violations of California restrictions on unsolicited commercial e-mails. Under the relevant California statute, violators are subject to pay damages of up to $1,000 for each spam email to each recipient. The plaintiff alleges he received 19 spam emails relating to the Company. The plaintiff isdismissed ~~also~~his ~~seeking~~second ~~preliminary~~cause of ~~injunction~~action ~~against~~for violations of the ~~defendants~~Consumer Legal Remedies Act and is no longer seeking a preliminary injunction.

On September 24, 2012, the Company filed its answer denying the allegations and asserted affirmative defenses and ~~the Company's officers and directors named~~ in ~~the~~response to ~~Complaint filed~~ a ~~separate~~ motion to quash service onof ~~September 24~~process, ~~2012.~~on OnNovember ~~October 9~~30, 2012, the ~~plaintiff~~court ~~filed~~dismissed ~~a demurrer to~~ the ~~answer. Decisions on the plaintiff'~~Company’s ~~demurrer and the~~ officers' and directors' who ~~motion~~were tonamed ~~quash~~in ~~are~~the ~~pending~~Complaint.

We believe that this lawsuit, as it applies to the Company, ~~its officers and directors,~~ is baseless and we intend to vigorously defend our rights.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

No securities were sold by us during the three months ended ~~March~~June 3130, 2013 without registration under the Securities Act:

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

MINE SAFETY DISCLOSURES

None.

ITEM 5.

OTHER INFORMATION.

~~None~~On June 5, 2013, we appointed Magdiel Rodriguez as our Chief Executive Officer. Effective September 16, 2013, we and Mr. Rodriguez entered into an Employment Agreement (the "Employment Agreement") relating to Mr. Magdiel's remuneration. Pursuant to the Employment Agreement, Mr. Rodriguez will receive an annual base salary of $100,000, the payment of which is being deferred until such time as our financial condition permits us to make payments thereon. In addition, subject to his continued employment and subject further to the increase in the number of our authorized and unissued shares of Common Stock, in the event of Change in Control (as defined in the Employment Agreement) Mr. Rodriguez will be entitled to 3.5 million shares of our common stock (the "Shares"). In the event the employment of Mr. Rodriguez is terminated for any reason other than cause, then he is entitled to receive the Shares.

ITEM 6. EXHIBITS.

Exhibit Number		Description
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
101.INS*		XBRL Instance Document
101.SCH*		XBRL Taxonomy Extension Schema
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase
101.DEF*		XBRL Taxonomy Extension Definition Linkbase
101.LAB*		XBRL Taxonomy Extension Label Linkbase
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

ITEM 6.

EXHIBITS.

Exhibit Number		Description

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

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.DEF		XBRL Taxonomy Extension Definition Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

101.PRE		XBRL Taxonomy Extension Presentation Linkbase

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.

		IDO SECURITY INC.
Date: May 20, 2013		/s/ MICHAEL GOLDBERG
Date: September 16, 2013		/s/ MAGDIEL RODRIGUEZ
		MICHAEL GOLDBERG ACTING CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) AND PRESIDENT
		MAGDIEL RODRIGUEZ CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) AND PRESIDENT

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