PROSPECTUS

                          [LOGO]INTELLI-CHECK(R), INC.

                        1,100,000 Shares of Common Stock
                                 $8.00 per share

     We are offering 1,100,000 shares of our common stock. Our common stock
trades on the American Stock Exchange under the symbol "IDN". On October 2, 2003
the last reported sale price of our common stock was $8.72 per share.


     The net proceeds from this offering are estimated to be $7,740,000 based
upon a public offering price of $8.00 per share and after deducting the
underwriting discounts and commissions and estimated offering expenses payable
by us. We plan to use the net proceeds for general corporate purposes, including
purchase of equipment, product development, sales and marketing, consultant fees
and working capital.


     Please see "Risk Factors" beginning on page 4 to read about certain factors
you should consider before buying shares of our common stock.

                              --------------------


     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                              --------------------

                                       Per Share                     Total
-------------------------------------------------------------------------------
Public offering price:                   $8.00                  $ 8,800,000
-------------------------------------------------------------------------------
Underwriting discounts
     and commissions:                    $ .64                  $   704,000
-------------------------------------------------------------------------------
Proceeds to Intelli-Check
     before estimated expenses           $7.36                  $ 8,096,000
-------------------------------------------------------------------------------


     Proceeds to Intelli-Check of $ 8,096,000 is calculated before estimated
offering expenses of $ 356,000 which would result in net proceeds to
Intelli-Check of approximately $ 7,740,000. We have granted the underwriter a
45-day option to purchase up to an additional 165,000 shares of common stock to
cover over-allotments. The underwriter is offering the shares on a firm
commitment basis. The underwriter expects to deliver the shares of common stock
to purchasers on October 8, 2003.


     We have agreed to sell to the underwriter warrants to purchase up to an
additional 110,000 shares of our common stock.

                            The Shemano Group [LOGO]
                    This prospectus is dated October 2, 2003




                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----


PROSPECTUS SUMMARY.............................................................2

RISK FACTORS...................................................................4

FORWARD-LOOKING STATEMENTS....................................................10

THE COMPANY...................................................................12

USE OF PROCEEDS...............................................................18

PRICE RANGE OF COMMON STOCK...................................................19

DILUTION .....................................................................19

DESCRIPTION OF CAPITAL STOCK..................................................20

UNDERWRITING..................................................................21

LEGAL MATTERS.................................................................24

EXPERTS.......................................................................24

ADDITIONAL INFORMATION AND INFORMATION INCORPORATED BY REFERENCE..............25

RECENT DEVELOPMENTS...........................................................26

APPENDIX I- FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2002..................27

APPENDIX II- FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 2003.....................87


     You should rely only on information contained in or incorporated by
reference into this prospectus. We have not authorized anyone to provide you
with information different from that contained in or incorporated by reference
into this prospectus. We are offering to sell, and seeking offers to buy, shares
of our common stock only in jurisdictions where offers and sales are permitted.
The information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of any
sale of our common stock. Updated information can be obtained as described under
"Additional Information and Information Incorporated by Reference."

     All references to "we," "us," "our," "Intelli-Check" or "the Company" in
this prospectus mean Intelli-Check, Inc.

     Intelli-Check and the names of our systems and software are tradenames or
trademarks of Intelli-Check. This prospectus also contains trademarks and
tradenames of other companies.




                               PROSPECTUS SUMMARY

     You should read the following summary, together with the more detailed
information regarding our company and the common stock being sold in this
offering, including "Risk Factors" and our financial statements and notes to
those statements appearing in this prospectus and incorporated by reference in
this prospectus.

                                   Our Company

     We have developed and are currently marketing systems and software which
incorporate document verification technologies to assist federal, state and
local governments, law enforcement agencies, merchants and others in detecting
and thus assisting in the prevention of, the use of fraudulent driver licenses
and state issued non-driver and military identification cards, all three
referred to in this prospectus as identification cards. Our systems and software
enable the reading, analyzing and validation of encoded information contained on
a majority of identification cards.



                                  The Offering

Common stock offered by us             1,100,000 shares

Common stock to be outstanding         10,057,739 shares. Our outstanding shares
after this offering                    do not include:

                                       o    110,000 shares reserved for
                                            issuance upon exercise of the
                                            underwriter's warrants;
                                       o    128,061 shares reserved for
                                            conversion of warrants outstanding;
                                       o    1,694,866 shares reserved for
                                            issuance upon exercise of options
                                            granted under our stock option
                                            plans, of which 1,273,131 are
                                            currently exercisable;
                                       o    313,509 shares reserved for
                                            issuance upon exercise of options
                                            available for future grants under
                                            our stock option plans;
                                       o    1,064,425 shares reserved for
                                            issuance upon exercise of non-plan
                                            options granted, of which 741,925
                                            are currently exercisable;
                                       o    454,545 shares issuable upon
                                            conversion of outstanding preferred
                                            stock (subject to adjustment for
                                            anti-dilution protection);
                                       o    682,470 shares reserved for
                                            issuance under a rights offering
                                            commenced in March 2001; and
                                       o    165,000 shares reserved for
                                            issuance in this offering to cover
                                            over-allotments, if any, by the
                                            underwriters.



                                        2


Use of proceeds                         We intend to use the net proceeds of
                                        this offering for general corporate
                                        purposes, including purchase of
                                        equipment, product development, sales
                                        and marketing, consultant fees and
                                        working capital.

Risk factors                            Investing in our common stock involves a
                                        high degree of risk . You should
                                        carefully review and consider the
                                        disclosure under "Risk Factors"
                                        beginning on page 4.

AMEX symbol                             IDN

                                Other Information

     We were originally incorporated in New York in October 1994. In August
1999, we changed our state of incorporation to Delaware. Our principal executive
offices are located at 246 Crossways Park West, Woodbury, New York 11797. Our
telephone number is (516) 992-1900. Our website address is www.intellicheck.com.
The information contained in our website is not part of this prospectus.


                                       3



                                  RISK FACTORS

     You should carefully consider the factors described below and other
information contained in, or incorporated by reference in, this prospectus
before making an investment in our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties not presently known to us, may also impair our business
operations. If any of the following risks actually occurs, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment. You should also refer to other
information set forth in this prospectus, or incorporated by reference herein,
including our financial statements and the related notes.

                   Risks Related to Our Business and Industry

We have incurred losses since inception and losses may continue, which could
result in a decline in the value of our securities and a loss of your
investment.

     We sustained net losses of $5,550,234 and $4,070,239 for the fiscal year
ended December 31, 2002 and six months ended June 30, 2003, respectively. We
expect to incur additional expenditures in line with the sales growth of our
business. We cannot assure you that we will achieve operating profits in the
future.

We may be unable to meet our future capital requirements.

     Our capital requirements have been and will continue to be significant. We
anticipate that the proceeds from this offering, together with our currently
available cash, will be sufficient to meet our anticipated working capital and
capital expenditure requirements for at least 18 months following the date of
this prospectus. Should we be unsuccessful in completing this offering, we would
be required to raise additional capital within 12 months. In the event we are
unable to raise additional capital, we plan to implement cost saving measures to
sustain business activities on a reduced level. Unplanned acquisition and
development opportunities and other contingencies may arise, which could require
us to raise additional capital. If we raise additional capital through the sale
of equity, including preferred stock, or convertible debt securities, the
percentage ownership of our then existing stockholders will be diluted.

     We currently do not have a credit facility or any commitments for
additional financing. We cannot be certain that additional financing, should it
be needed, will be available when and to the extent required. If adequate funds
are not available on acceptable terms, we may be unable to fund our expansion,
develop or enhance our products or respond to competitive pressures. Such
limitation could have a material adverse effect on our business, financial
condition and results of operations.

For those markets which require hardware platforms, we rely on third party
equipment manufacturers to provide hardware platforms, and we are currently
lacking a relationship with a manufacturer for our next generation hardware
platform.


                                       4



We are substantially dependent on the ability of a manufacturer to provide an
adequate supply of our IDC-1400 and next generation hardware platforms on a
timely basis and on favorable terms. The current supplier of our IDC-1400
hardware platform for our ID-Check(R) System is Hand Held Products Inc., or HHP,
formerly known as Welch Allyn, Inc. In the event that we do not purchase the
remaining units under our current open purchase order, HHP has advised us that
they will cease production of the IDC-1400 in August 2003. However, we are
currently in further discussions with HHP to extend this. We are currently in
discussions with HHP and other hardware manufacturers regarding the production
of the next generation hardware platform, which we will use as our new ID-Check
platform. Any disruption in establishing our arrangements with a manufacturer or
unsatisfactory performance by a manufacturer could have an adverse effect on our
operations.


We may not be able to keep up with rapid technological change. Advances in
hardware technology before we sell our existing inventory could cause us to take
an adjustment against inventory.

     Our market is characterized by frequent new product announcements and rapid
advancements in hardware technology. Significant technological change could
render our existing technology obsolete. If we are unable to successfully
respond to these developments or do not respond in a cost-effective way, our
business, financial condition and results of operations will be materially
adversely affected. Furthermore, our inventory consists primarily of ID-Check
System terminals that run our patented software on the IDC-1400 hardware
platform. We periodically evaluate the current market value of our inventory,
taking into account any technological obsolescence that may occur due to
advances in hardware technology and the acceptance of the product in the
marketplace. We determined that an inventory reserve of $800,000 was an
appropriate adjustment to our results of operations for the period ended June
30, 2003. Should we determine in a future period that an adjustment to market
value of the inventory is necessary, we would record such adjustment at that
time, which could have a material adverse effect on our results of operations.

Our proprietary software relies on reference data provided by government and
quasi-government agencies. If these governmental and quasi-government agencies
were to stop sharing data with us, the utility of our proprietary software would
be diminished in those jurisdictions and our business would be damaged.

     Currently, 46 states, 7 Canadian provinces and the District of Columbia
which conform to the guidelines established by certain organizations responsible
for implementing industry standards cooperate with us by providing sample
identification cards so that we may modify the ID-Check System terminal and
other software products to read and analyze the encoded information found on
identification cards. We cannot assure you that each of these jurisdictions will
continue to cooperate with us. In the event that one or more of these
jurisdictions do not continue to provide this reference data, the utility of our
proprietary software may be diminished in those jurisdictions.

Future government regulation restricting the capture of information
electronically stored on identification cards could adversely affect our
business.


                                       5


     Our proprietary software products are designed to read and capture
information from identification cards. Currently, those customers located in New
Hampshire, North Carolina and Texas are legally restricted from using this
information for their own use without customer consent. Because issues of
personal privacy continue to be a major topic of public policy debate, it is
possible that in the future additional customers in these and other
jurisdictions may be restricted from capturing this information. Therefore, the
implementation of unfavorable regulations or unfavorable interpretations of
existing regulations by courts or regulatory bodies could require us to incur
significant compliance costs, cause the development of the affected markets to
become impractical and otherwise adversely affect our business, financial
condition and results of operations.

Our refocused business strategy exposes us to long sales and implementation
cycles for our products.

     Our target customers in the commercial fraud protection, access control and
age verification markets include large retailers and government agencies, which
typically require longer sales and implementation cycles for our products than
do our potential customer base solely interested in age verification, such as
restaurant, bar and convenience store operators. The longer sales and
implementation cycles for larger retail companies continue to have an adverse
impact on the timing of realizing our revenues. In addition, budgetary
constraints and economic slowdowns may also continue to delay purchasing
decisions by these prospective customers. These initiatives have costs
associated with them, and we cannot assure you that they ultimately will prove
successful or result in an increase to our revenues or profitability.

     In addition, the loss or significant reduction in government spending by
government entities could materially limit our ability to obtain government
contracts. These limitations, if significant, could also have a material adverse
effect on our business, financial condition and results of operations. In
addition, we will need to develop additional strategic relationships with large
government contractors in order to successfully compete for government
contracts. Our inability to develop these strategic relationships may limit our
ability to implement our business strategy.

The market for our systems and software is evolving and its growth is uncertain.

     Demand and market acceptance for recently introduced and existing systems
and software, and sales from such systems and software, are subject to a high
level of uncertainty and risk. Our business may suffer if the market develops
more slowly than anticipated and does not sustain market acceptance.

Failure to manage our operations if they expand could impair our future growth.

     If we are able to expand our operations, particularly through multiple
sales to large retailers and government agencies in the document verification
market, the expansion will place significant strain on our management, financial
controls, operating systems, personnel and other resources. Our ability to
manage future growth, should it occur, will depend to a large extent upon
several factors, including our ability to do the following:


                                       6


     o    build and train our sales force;

     o    establish and maintain relationships with distributors;

     o    develop customer support systems;

     o    develop expanded internal management and financial controls adequate
          to keep pace with growth in personnel and sales, if they occur; and

     o    manage the use of third-party manufacturers and suppliers.

If we are able to grow our business but do not manage our growth successfully,
we may experience increased operating expenses, loss of customers, distributors
or suppliers and declining or slowed growth of revenues.

We are subject to risks associated with product failure and technological flaws.

     Products as complex as those offered by us may contain undetected errors or
result in failures when first introduced or when new versions are released.
Despite vigorous product testing efforts and testing by current and potential
customers, it is possible that errors will be found in a new product or
enhancement after commencement of commercial shipments. The occurrence of
product defects or errors could result in adverse publicity, delay in product
introduction, diversion of resources to remedy defects, loss of or a delay in
market acceptance or claims by customers against us, or could cause us to incur
additional costs, any of which could adversely affect our business.

Our failure to protect our proprietary technology may impair our competitive
position.

     We continue to allocate significant resources to develop new and innovative
technologies which we utilize in our products and systems. We consider such
allocation to be fundamental to our continued success as such success depends,
to a significant degree, upon our ability to provide products and systems that
provide superior functionality and performance compared to those of our
competitors. Accordingly, we must protect our technology from unauthorized use.
This is done by processes aimed at identifying and seeking appropriate
protection for newly developed intellectual property, i.e., patents, trade
secrets, copyrights and trademarks, as well as policies aimed at identifying
unauthorized use of such property in the marketplace. These processes include:

     o    contractual arrangements providing for non-disclosure of proprietary
          information;

     o    maintaining and enforcing issued patents and filing patent
          applications on innovative solutions to commercially important
          problems;

     o    protecting our trade secrets;

     o    protecting our copyrights and trademarks by registration and other
          appropriate means;

     o    establishing internal processes for identifying and appropriately
          protecting new and innovative technologies; and


                                       7


     o    establishing practices for identifying unauthorized use of our
          intellectual property.

     While we actively protect our intellectual property, it does not follow
that others will not intentionally or innocently use such intellectual property.
Accordingly, at times we may be required to bring legal proceedings to preclude
such unauthorized use. We are mindful that such measures can be costly and
timing consuming and we undertake such measures only as a last resort.

     These polices and practices with respect to our intellectual property
rights do not prevent our competitors from independently developing products
similar or superior to our products and technologies. It merely protects our
property rights - rights created as a result of our allocating significant
portions of our technical and monetary resources. Further, an inability or
failure to protect this property could have a material adverse effect on our
future business and financial condition.

If our future products incorporate technologies that infringe the proprietary
rights of third parties, and we do not secure licenses from them, we could be
liable for substantial damages.

     We are not aware that our current products infringe the intellectual
property rights of any third parties. We also are not aware of any third party
intellectual property rights that may hamper our ability to provide future
products and services. However, we recognize that the development of our
services or products may require that we acquire intellectual property licenses
from third parties so as to avoid infringement of those parties' intellectual
property rights. These licenses may not be available at all or may only be
available on terms that are not commercially reasonable. We recognize that third
parties could make infringement claims against us which, whether or not they are
upheld, could have a negative impact on our business and financial condition,
by:

     o    consuming substantial time and financial resources;

     o    diverting the attention of management from growing our business and
          managing operations; and

     o    disrupting product sales and shipments.

     If any third party prevails in an action against us for infringement of its
proprietary rights, we could be required to pay damages and either enter into
costly licensing arrangements or redesign our products so as to exclude any
infringing use. As a result, we would incur substantial costs, delays in product
development, sales and shipments, our revenues may decline substantially and we
may not be able to achieve the minimum, necessary growth for our continued
success.

Failure to attract and retain management and other personnel may damage our
operations and financial results and cause our stock price to decline.

     We depend to a significant degree on the skills, experience and efforts of
our executive officers and other key management, technical, finance, sales and
other personnel. Our failure to attract, integrate, motivate and retain existing


                                       8


or additional personnel could disrupt or otherwise harm our operations and
financial results. Although we have employment agreements with each of Frank
Mandelbaum, our Chairman and Chief Executive Officer, and Edwin Winiarz, our
Senior Vice President - Treasurer and Chief Financial Officer, securing their
employment until December 31, 2004, we do not carry key man life insurance
policies covering any employees. The loss of services of certain of our key
employees, an inability to attract or retain qualified personnel in the future,
or delays in hiring additional personnel could delay the development of our
business and could have a material adverse effect on our business, financial
condition and results of operations.

Changes in accounting standards or our accounting policy relating to stock-based
compensation may negatively affect our operating results.

     We currently are not required to record stock-based compensation charges if
the employee's stock option exercise price equals or exceeds the deemed fair
value of our common stock at the date of grant and the award has not been
modified. However, several companies have recently elected to change their
accounting policies and begun to record the fair value of stock options as an
expense. In addition, we understand that discussions of potential changes to
applicable accounting standards are ongoing. If the standards for accounting for
stock-based compensation change, or if we elect to change our accounting policy,
then the amount of our operating expenses could increase and our operating
results could be adversely affected.


                          Risks Related to the Offering

Our share price may be volatile and could decline substantially

     The market price of our common stock, like the price of shares of
technology companies generally, has been and may continue to be volatile. From
January 1, 2002 to July 31, 2003, the closing bid price of our common stock has
varied from a high of $19.45 to a low of $2.10 per share, as reported on the
American Stock Exchange. Many factors may cause the market price for our common
stock to decline following this offering, including:

o    shortfalls in revenues, cash flows or continued losses from operations;

o    conversions of preferred stock into common stock;

o    delays in development or roll-out of any of our products;

o    announcements by one or more competitors of new product acquisitions or
     technological innovations; and

o    unfavorable outcomes from outstanding litigation.

In addition, the stock market experiences extreme fluctuations in price and
volume that particularly affect the market prices of shares of emerging
technology companies, such as ours. These price and volume fluctuations are
often unrelated or disproportionate to the operating performance of the affected


                                       9


companies. Because of this volatility, we may fail to meet the expectations of
our shareholders or of securities analysts, and our stock price could decline as
a result. Declines in our stock price for any reason, as well as broad-based
market fluctuations or fluctuations related to our financial results or other
developments, may adversely affect your ability to sell your shares at a price
equal to or above the price at which you purchased them. Decreases in the price
of our common stock may also lead to de-listing of our common stock.

Future sales of a large number of shares of our common stock may cause our stock
price to decline.

     At August 5, 2003, 8,957,739 shares of our common stock were issued and
outstanding. Upon completion of this offering and assuming the conversion of all
of the shares of our Series A Preferred Stock and exercise of all outstanding
warrants and exercisable options but not including the exercise of any rights
outstanding that were declared as dividends to stockholders in March 2001, there
would be 12,655,401 shares issued and outstanding. Of these shares, 7,465,571
shares are presently eligible for resale without restriction, and all 1,100,000
shares being registered under this prospectus will be transferable without
restriction under the Securities Act of 1933, as amended, after the effective
date of the registration statement of which this prospectus is a part. Another
1,492,168 shares are eligible for resale subject to the restrictions on volume,
manner of sale and other conditions of Rule 144 promulgated under the Securities
Act of 1933, as amended. Sales of large amounts of these shares in the public
market could depress the market price of our common stock and impair our ability
to raise capital through offerings of our equity securities.

                      Risks Related to Arthur Andersen LLP

The absence of Arthur Andersen LLP's consent to the use of its opinion may
limit the remedies available to purchasers of securities pursuant to this
prospectus.

     Our inability to obtain Arthur Andersen LLP's consent to the use of its
opinion for our financial statements for the 2001 year and the absence of a
signed opinion may limit the remedies available to you since your claims against
Arthur Andersen LLP under the Securities Act of 1933, as amended, based on these
financial statements may be limited. Moreover, even if claims against Arthur
Andersen LLP are permitted, Arthur Andersen LLP may not have the financial
resources to satisfy any judgment. In addition, notwithstanding that we have not
filed the written consent of Arthur Andersen, LLP, our directors and officers
may still be able to establish a due diligence defense to any claim relating to
those financial statements on the basis that they were made on the authority of
our expert which could limit your ability to assert a claim against them.

                           FORWARD-LOOKING STATEMENTS

     This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. We intend the forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements in these sections. All statements regarding our expected financial
position and operating results, our business strategy and our plans are


                                       10


forward-looking statements. These statements can sometimes be identified by our
use of words such as "may," "anticipate," "expect," "intend," "estimate" or
similar expressions. Our expectations in any forward-looking statements may not
turn out to be correct. Our actual results could be materially different from
those discussed in or implied by these statements, and you may consider these
differences important to your investment decision. Important factors that could
cause our actual results to be materially different include those discussed
under "Risk Factors." You should not place undue reliance on the forward-looking
statements, which speak only as of the date the statements were made.

     We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors described
in the preceding pages, as well as any cautionary language in this prospectus,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our
forward-looking statements. Before you invest in our common stock, you should be
aware that the occurrence of the events described in these risk factors and
elsewhere in this prospectus could materially and adversely affect our business,
operating results and financial condition.





                                       11



                                   THE COMPANY

General

     We have developed and are currently marketing an advanced document
verification system to enable a user to detect altered and tampered
identification cards and to address problems such as:

          Commercial Fraud - which may lead to economic losses to merchants from
          check cashing, debit and credit card and other types of fraud such as
          identity theft which principally utilizes fraudulent identification
          cards as proof of identity;

          Unauthorized Access - by verifying identification, our systems and
          software are designed to increase security and deter terrorism at
          airports, shipping ports, rail and bus terminals, military
          installations, high profile buildings and infrastructure where
          security is a concern; and

          Underage Access to Age Restricted Products and Services - by verifying
          identification, our systems and software are designed to determine the
          customer's age and validity of the identification card to detect and
          prevent the use of fraudulent identification for the purchase of
          alcohol, tobacco and other age-restricted products and services and to
          reduce the risk to the retailer of substantial monetary fines,
          criminal penalties and the potential for license revocation for the
          sale of age-restricted products to minors.

Our Products and Services

     Our advanced document verification technology contained in our ID-Check
unit reads in one swipe or scan the encoded data contained on U.S. and Canadian
identification cards that, in most instances, comply with the standards of the
American Association of Motor Vehicle Administrators (AAMVA), the American
National Standards Institute (ANSI) and the International Standards Organization
(ISO).

     The product we have designed and developed, the IDC-1400, is based on our
patented ID-Check (TM) technology. Our recently introduced product, IDN-DLL, is
a software only application which can be used with a customer's existing
hardware, or with minimal additional hardware components, included in
Point-Of-Sale (POS) terminals for multi-lane retailers such as grocery and
mass-retail stores. Currently, we have entered into six (6) license agreements
executed with third parties for integration and sub-licensing of this
application.

     We believe the ID-Check solution is the most advanced, reliable and
effective technology, which provides users with an easy, reliable, and
cost-effective method of document and age verification. We have received
encoding formats from most jurisdictions that conform to AAMVA standards. This
information, combined with our patented technology, enables our ID-Check
software to read, decode and process the information electronically stored on


                                       12


identification cards. As jurisdictions make changes to their identification
cards, we believe our software, together with our programmable terminal, can be
adapted to these changes.

     Our C-Link software works in conjunction with the ID-Check terminal where
permitted by law. It allows the user to instantly view data for further
verification and archives it into a personal computer. C-Link can be used on a
stand alone personal computer or network environment. It contains features such
as alerts, watch lists, and recurring entry.

     ID-Check terminals do not require a connection to a central database to
operate, thus negating privacy concerns. Our terminals have the ability to
operate add-on peripherals such as printers, bar code scanners, fingerprint
readers and other devices. Additionally, our terminals can communicate with
personal computers, which could enhance the functionality of the terminals and
potentially create the opportunity for sales of other software products by us.

     The ID-Check process is quick, simple and easy to use. After matching the
photograph on the identification card to the person presenting the document for
identification, the user simply swipes the identification card through the
ID-Check terminal if the card has a magnetic stripe or scans it if it has a bar
code. The terminal quickly determines if the document:

          o    is valid;

          o    has been altered or tampered with;

          o    has expired; or

          o    has a date of birth equal to or greater than the legal age to
               purchase age restricted products, such as alcohol and tobacco, in
               the retailer's location.

Then, the terminal will automatically:

          o    respond to the user by displaying the results in words on the
               terminal's screen;

          o    save information that is permissible by law to the terminal's own
               memory;

          o    print a record of the transaction including the results on a roll
               of paper similar to that used in cash registers, if an optional
               printer has been installed; and

          o    send the results to a personal computer which has Microsoft
               Windows 95/98/ME/NT/2000/XP for permanent storage when used in
               conjunction with our software, which simplifies record keeping by
               downloading comprehensive ID-Check due diligence data into a
               personal computer. This provides a merchant with secure back-up
               files that include individual and cumulative transaction records,
               where permitted by law.


                                       13


Strategy

     Our objective is to be a leading provider of identity verification
technology systems and software in the age verification, commercial fraud
protection and access control markets. Key elements of our strategy are as
follows:

     Expand Marketing Relationships with Trade Associations and Public Interest
Groups. We have entered into marketing agreements with The American Association
of Airport Executives (AAAE), the largest professional organization for airports
in the world, Credit Union National Association (CUNA), the premier trade
association for credit unions, and Mothers Against Drunk Driving (MADD), one of
the highest profile public interest groups, to market our systems and software
to their members. We intend to continue to expand our relationships with trade
associations and public interest groups that can help expand our customer base.

     Develop Additional Strategic Alliances with Providers of Security
Solutions. We have entered into strategic alliances with Bioscrypt Inc., Identix
Corporation, Ultra-Scan Inc., biometric companies; E-Certify, an information
security company; Lenel Systems International, a provider of integrated security
solutions; and Northrop Grumman Mission Systems, an integrator in the defense
industry, to utilize our systems and software as the proposed or potential
enrollment application for their technologies and to jointly market these
security applications. We believe these relationships have broadened our
marketing reach through their sales efforts and we intend to develop additional
strategic alliances with additional providers of security solutions.

     Strengthen Sales and Marketing Efforts. We intend to capitalize on the
growth in demand for age and document verification by continuing to market and
support our systems and software. We have recently re-organized our sales and
marketing staff to better reach our targeted markets by dividing the United
States territory into three regions covered by a regional sales manager and by
appointing a director of strategic business development to concentrate on
developing partnerships and licensing arrangements, and a director of corporate
and government sales to concentrate on major commercial and government accounts.

     Enter into Additional Licensing Agreements. We intend to continue to
license our software for use with a customer's system. We are currently
licensing our IDN-DLL and C-Link software products for Windows and Windows CE
platforms. Our software is intended to be used with a compatible hardware input
device. We have entered into six (6) licensing agreements to date.

     Protect Intellectual Property. We intend to strongly protect our
intellectual property portfolio in order to preserve value and obtain favorable
settlements where warranted. For example, in February 2003, we filed suit
against CardCom, Inc. d/b/a CardCom Technology, Inc. claiming that CardCom had
infringed one of our patents. Subsequently, we entered into a patent licensing
agreement with CardCom effective March 2003 which provides for a non-exclusive
three year license in connection with the manufacture, use and sale of CardCom's
age verification products in the United States and Canada. We also recently
filed a patent infringement lawsuit against Tricom Card Technologies, Inc. in
July 2003.


                                       14


Our Revenue Sources

     We derive our revenue from the following sources:

o    Sales of our systems by our own direct sales force and marketing partners;

o    Royalties and licensing fees from licensing our patented technology to
     third parties;

o    Revenue sharing and marketing arrangements through strategic alliances and
     partnerships; and

o    Sale of software upgrades and extended maintenance programs.

Our Target Markets

     The target markets of our systems and software include those for Commercial
Fraud Protection, Access Control and Age Verification:

            o   Commercial fraud protection

            -  Banks and other financial institutions
            -  Credit unions
            -  Credit card issuers
            -  Check cashing services
            -  Pharmacies
            -  Auto dealerships and rental car agencies
            -  Casino cage operations
            -  Mass merchandisers and retailers
            -  Hospitals and health plans
            -  Lodging Industry

            o   Access control

            -  Airports and airlines
            -  Departments of Motor Vehicles
            -  Prisons
            -  Law enforcement agencies
            -  Notable buildings
            -  Court houses
            -  Nuclear facilities
            -  Oil refineries and storage facilities
            -  Military establishments
            -  U.S. Post Office
            -  Department of Homeland Security
            -  Bus, rail and port facilities

            o   Age verification market

            -  Bars and night clubs
            -  Convenience stores


                                       15


            -  Grocery chains
            -  Restaurants
            -  Stadiums and arenas
            -  Casinos and gaming establishments
            -  Sellers of sexually explicit material
            -  Firearm dealers

Current Customers

     We have generated revenues from our customers from the sale of systems,
licensing of software and sale of software upgrades. The following
representative customers are using our systems and software for commercial fraud
protection:

          o    MGM Grand
          o    Caesar's Palace
          o    Foxwoods Resorts and Casino
          o    Comerica Bank
          o    The Cooperative Bank

     The following representative customers are using our systems and software
for access control:

          o    JFK Airport in New York, O'Hare International Airport in Chicago
               and Reagan National Airport in Washington D.C.
          o    American Stock Exchange
          o    Fort Sam Houston and Fort Hood
          o    New York, Vermont and Delaware Department of Motor Vehicles
          o    Port Authority of New York and New Jersey

     The following representative customers are using our systems and software
for age verification:

          o    U.S. Smokeless Tobacco, Co.
          o    Sunoco
          o    Darden Restaurants
          o    Houston's Restaurants
          o    Anton Airfoods, Inc.

Intellectual Property

     In January 1999, the U.S. Patent and Trademark Office granted us a patent
on our ID-Check software technology. In October 2002, we were granted another
patent relating to our document authentication and age verification technology.
At present, we have another patent application pending in the U.S. Patent and
Trademark Office. These patents cover commercially important aspects of our
capabilities relating to the authentication of a document, such as a driver's
license, along with the verification of the age of an individual associated with
that document. Upon our acquisition of the assets of IdentiScan, we also
received equitable ownership and sole ownership rights to intellectual property,


                                       16


including other patents and patent applications relating to age verification
technology.

     We have also been granted multiple copyrights in the United States, which
are effective in Canada and in other major industrial countries. In addition,
the copyright protection covers software source codes and supporting graphics
relating to the operation of ID-Check and other software products. We also have
several trademarks relating to our company, its product names and logos.

     In connection with the sales or licensing of our intellectual property, we
have entered into an agreement with Mr. Kevin Messina, our former Senior
Executive President and Chief Technology Officer, under which we will pay
royalties equal to 0.005% of gross sales from $2,000,000 to $52,000,000 and
0.0025% of gross sales, in excess of $52,000,000.





                                       17



                                 USE OF PROCEEDS


     We estimate that we will receive net proceeds from the sale of 1,100,000
shares of our common stock in this offering of approximately $7,740,000,
based upon a public offering price of $8.00 per share and after deducting the
underwriting discount and estimated offering expenses payable by us. If the
underwriter's over-allotment option is exercised in full we estimate that net
proceeds will be $8,881,400.


     We expect to use the net proceeds from this offering for general corporate
purposes, including purchase of equipment, product development, sales and
marketing, consultant fees and working capital. We intend to purchase equipment
for transactions in which we receive a transaction fee for purchasing hardware
and bundling it with our software to provide an identity verification product. A
portion of the proceeds will be used for product development, which encompasses
both hardware and software development. We anticipate using some of the proceeds
for sales and marketing and a portion of the proceeds will also be used for
consultant fees for government lobbyists. Pending our use of the net proceeds of
this offering, we intend to invest the net proceeds in short-term,
investment-grade, investment-bearing securities.

     The allocation of the net proceeds from this offering set forth above
represents our best estimate based upon our currently proposed plans and
assumptions relating to our operations and certain assumptions regarding general
economic conditions. If any of these factors change, we may find it necessary or
advisable to reallocate some of the proceeds within the above-described
categories or to use portions for other purposes.

     We anticipate that the net proceeds of this offering, together with
projected revenues from our operations, will be sufficient to fund our
operations and capital requirements for at least 18 months following this
offering. We cannot assure you, however, that such funds will not be expended
earlier due to unanticipated changes in economic conditions or other
circumstances that we cannot foresee. In the event our plans change or our
assumptions change or prove to be inaccurate, we could be required to seek
additional financing sooner than currently anticipated. We also expect that,
when the opportunity arises, we may acquire or invest in complementary
businesses, products or technologies. We have no present understandings,
commitments or agreements with respect to any material acquisition or
investment.




                                       18



                                    DILUTION

     Dilution represents the difference between the amount per share paid by
purchasers of common stock in the offering and the net tangible book value per
share of common stock immediately after the offering. Our tangible book value
was approximately $592,777 at June 30, 2003, or $.07 per share. After
adjusting for the receipt of the net proceeds of the sale of 1,100,000 shares of
common stock in the offering at $8.00 per share, the pro forma book value at
June 30, 2003 would be approximately $8,332,777, or $.83 per share. As the table
below shows, this would represent an immediate dilution of $7.17 per share to
investors in the offering, based on the difference between pro forma book value
and the offering price.

Offering price per share                                           $ 8.00
Net tangible book value per share before the offering              $  .07
Increase in net tangible book value per share attributable
to the offering                                                    $  .76
Pro forma net tangible book value per share after the offering     $  .83
                                                                   ------
Dilution to investors in the offering, per share                   $ 7.17
                                                                   ======


     The foregoing table excludes 2,579,662 shares of common stock issuable
pursuant to currently exercisable outstanding options and warrants and issuable
upon conversion of outstanding preferred stock which are expected to be
outstanding after the consummation of this offering. If all options, warrants
and preferred Stock outstanding as of June 30, 2003, were included above, the
pro forma net tangible book value per share at June 30, 2003, after giving
effect to this offering, would have been $.66 and the dilution to new investors
would have been $7.34.




                                       19



                          DESCRIPTION OF CAPITAL STOCK

     Our authorized capital stock consists of 20,000,000 shares of common stock,
par value $0.001 per share, and 1,000,000 shares of preferred stock, par value
$0.01 per share, of which 30,000 shares are designated as Series A 8%
Convertible Redeemable Preferred Stock. As of August 5, 2003, there were
8,957,739 outstanding shares of common stock, and 30,000 outstanding shares of
Series A 8% Convertible Preferred Stock. Below is a summary description of the
material provisions of our capital stock.

Common Stock

     We are authorized to issue 20,000,000 shares of common stock. All the
issued and outstanding shares of common stock are validly issued, fully paid and
non-assessable. Each outstanding share of common stock has one vote on all
matters requiring a vote of the shareholders. There is no right to cumulative
voting. In the event of a voluntary or involuntary liquidation, all shareholders
are entitled to a pro rata distribution after payment of liabilities and after
provision has been made for each class of stock, having preference over the
common stock. The holders of the common stock have no preemptive rights with
respect to our offerings of shares of our common stock. Holders of common stock
are entitled to dividends if, as and when declared by the Board out of the funds
legally available therefor. It is our present intention to retain earnings, if
any, for use in our business. Dividends are, therefore, unlikely in the
foreseeable future.

Series A 8% Convertible Redeemable Preferred Stock

     In March 2003, the Board of Directors adopted a resolution issuing a series
of preferred stock, par value $0.01 per share, consisting of 30,000 shares
designated as Series A 8% Convertible Redeemable Preferred Stock, convertible,
at the option of the holder, into 454,545 shares of common stock based on a
conversion price of $6.60 per share. Each holder of Series A 8% Convertible
Redeemable Preferred Stock is entitled to the number of votes equal to the
number of shares of common stock into which such shares could be converted. The
holders of Series A 8% Convertible Redeemable Preferred Stock are entitled to
receive dividends at a rate of $8.00 per share per annum, which are fully
cumulative, senior and prior to common stock, pari-passu with any additional
series of preferred stock which may in the future be issued and designated as
ranking equal with the Series A 8% Convertible Redeemable Preferred Stock and
junior to any additional series of preferred stock which may in the future be
issued and designated as ranking senior to the Series A 8% Convertible
Redeemable Preferred Stock. The dividends on the Series A 8% Convertible
Redeemable Preferred Stock accrue from the date of issuance of each share and
are payable on September 30 and March 31 of each year commencing on September
30, 2003. In addition, holders of the Series A 8% Convertible Redeemable
Preferred Stock are entitled to a liquidation value of $100 per share plus an
amount equal to the cash value $100 per share of the dividends accrued and
unpaid thereon in the event of a liquidation, dissolution or winding up. The
company must redeem all of the Convertible Redeemable Preferred Stock
outstanding on March 27, 2008 at a redemption price of $100 per share.


                                       20



                                  UNDERWRITING

     Subject to the terms and conditions of the underwriting agreement between
us and The Shemano Group, Inc., the underwriter of this offering, a form of
which agreement is filed as an exhibit to the registration statement of
which this prospectus forms a part, we have agreed to sell to the underwriter,
and the underwriter has agreed to purchase all of the 1,100,000 shares of our
common stock offered in this offering.


     The underwriting agreement is subject to a number of terms and conditions
and provides that the underwriter must buy all of the shares if it buys any of
them.


     The underwriter has advised us that it proposes to offer the shares as set
forth on the cover page of this prospectus, which includes the underwriting
discounts and commissions indicated there, and that it will initially allow
concessions not in excess of $.38 per share, of which not in excess of $.15 per
share may be reallowed to other dealers who are members of the NASD. After the
public offering, concessions to dealer terms may be changed by the underwriter.

     The underwriter has advised us that it does not intend to confirm sales of
the shares to any account over which it exercises discretionary authority in an
aggregate amount in excess of five (5%) percent of the total securities offered
hereby.

     We have granted to the underwriter an option which expires 45 days after
the date of this prospectus, exercisable as provided in the underwriting
agreement, to purchase up to an additional 165,000 shares of our common stock at
the public offering price set forth on the cover page of this prospectus, less
underwriting discounts and commissions which option may be exercised only for
the purpose of covering over-allotments, if any. If the underwriter exercises
its over-allotment in full, the total price to the public would be $1,320,000,
the total underwriting discounts and commissions would be $105,600, and the
total proceeds (before payment of the expenses of this offering) to our company
would be $1,214,400.

     The underwriting agreement provides that we will reimburse the underwriter
for its expenses on a non-accountable basis in the amount equal to 2.5% of the
gross proceeds of this offering, of which $30,000 has been paid to date, and the
balance of which shall be paid on the closing of this offering. We have also
agreed to pay all expenses in connection with qualifying the shares offered
under the laws of such states as the underwriter may designate, including
expenses of counsel retained for such purposes by the underwriter. We estimate
the expenses of this offering to be $356,000, or $429,000 if the underwriter's
over-allotment option is completely exercised.

     The underwriting agreement provides for reciprocal indemnification between
us and the underwriter against certain liabilities in connection with the
registration statement, including liabilities under the Securities Act of 1933,
as amended.

     At the closing of this offering, we will sell to the underwriter or its
designees at an aggregate purchase price of $110, warrants to purchase up to an
aggregate of 110,000 shares of our common stock. Each warrant represents the
right to purchase one share of common stock for a period of four years
commencing one year from the effective date of this offering. The exercise price
of the warrants is 120% of the price at which our shares of common stock are
sold pursuant to this offering. The warrants contain a cashless exercise
provision and provisions that protect their holders against dilution by
adjustment of the exercise price and number of shares issuable upon exercise on
the occurrence of specific events, including stock dividends or other changes in
the number of our outstanding shares. No holder of these warrants will possess
any rights as a stockholder unless the warrant is exercised. The warrants may
not be sold, transferred, assigned or hypothecated for a period of one year from
the effective date of this offering, except to officers or partners (but not
directors) of the underwriter and members of the selling group and/or their
officers or partners. During the exercise period, the holders of the
underwriter's warrants will have the opportunity to profit from a rise in the
market price of the common stock, which will dilute the interests of our
stockholders. We expect that the underwriter's warrants will be exercised when
we would, in all likelihood, be able to obtain any capital needed on terms more
favorable than those provided by the underwriter's warrants. Any profit realized
by the underwriter on the sale of the underwriter's warrants or the underlying
shares of common stock may be deemed additional underwriting compensation.



                                       21



     We have agreed to include the underwriter's warrants and the shares of
common stock underlying the underwriter's warrants in any appropriate
registration statement which is filed by us under the Securities Act of 1933, as
amended, during the seven years following the date of this prospectus.


     The exercise of the underwriter's over-allotment option will not result in
an increase in the number of shares of common stock underlying the underwriter's
warrants or in the granting of any additional warrants to the underwriter.

     The underwriter may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, penalty bids and "passive" market making in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the shares of common stock or warrants in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the underwriter to reclaim a selling concession from a syndicate member
when the shares of common stock or warrants originally sold by such syndicate
member are purchased in a syndicate covering transaction to cover syndicate
short positions. In "passive" market making, market makers in the securities who
are underwriters or prospective underwriters may, subject to certain
limitations, make bids for or purchases of the securities until the time, if
any, at which a stabilizing bid is made. These stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
common stock to be higher than they would otherwise be in the absence of these
transactions. These transactions may be effected on the AMEX or otherwise and,
if commenced, may be discontinued at any time.

     In connection with the offering, the underwriter may make short sales of
our shares and may purchase our shares on the open market to cover positions
created by short sales. Short sales involve the sale by the underwriter of a
greater number of shares than they are required to purchase in the offering.
"Covered" short sales are sales made in an amount not greater than the
underwriter's over-allotment option to purchase additional shares in the
offering. The underwriter may close out any covered short position by either
exercising its over-allotment option or purchasing shares in the open market. In
determining the source of shares to close out the covered short position, the
underwriter will consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which it may purchase
shares through the over-allotment option. "Naked" short sales are sales in
excess of the over-allotment option. The underwriter must close out any naked
short position by purchasing shares in the open market. A naked short position
is more likely to be created if the underwriter is concerned that there might be
downward pressure on the price of the shares in the open market after pricing
that could adversely affect investors who purchase in the offering. Similar to
other purchase transactions, the underwriter's purchases to cover the short
sales may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of our
common stock. As a result, the price of our common stock may be higher than the
price that might otherwise exist in the open market.

     Our common stock is listed on the American Stock Exchange under the symbol
"IDN". We plan to file an application to have the shares of common stock that we
are selling in this public offering listed on the American Stock Exchange.


                                       22




     Howard Davis, Senior Vice President of The Shemano Group, Inc., is a
director and securityholder of our company. Mr. Davis beneficially owns
approximately 1% of our outstanding common stock on a fully-diluted basis,
assuming he exercises all of his outstanding stock options. The Shemano Group,
Inc. and its affiliates may provide us with investment banking, financial
advisory, or commercial banking services in the future, for which they each may
receive customary compensation. There are currently no arrangements or
understandings with respect to any investment banking, financial advisory, or
commercial banking services to be provided by the underwriter and its affiliates
in the future. If any arrangements or understandings are entered into in the
future, the details of such would be subject to the mutual agreement of the
parties at that time.






                                       23



                                  LEGAL MATTERS

     The validity of the issuance of the securities offered hereby will be
passed upon for us by Loeb & Loeb LLP, New York, New York. Certain legal matters
in connection with the offering will be passed upon by the underwriter by Blank
Rome LLP, New York, New York.

                                     EXPERTS

     The financial statements of Intelli-Check, Inc. at December 31, 2002, and
for the year then ended, have been audited by Grant Thornton LLP, independent
certified public accountants, and at December 31, 2001 and for the years ended
December 31, 2001 and December 31, 2000, by Arthur Andersen LLP, independent
auditors; as indicated in their reports thereon. These financial statements are
incorporated by reference herein and in the Registration Statement, and are
included in reliance upon such reports given on the authority of such firms as
experts in accounting and auditing. After reasonable efforts, we have been
unable to obtain the consent of Arthur Andersen LLP to the incorporation by
reference in the Registration Statement of which this prospectus is a part of
Arthur Andersen LLP's reports of its audits of our financial statements at
December 31, 2001 and for the two years in the period ended December 31, 2001.
Under these circumstances, under Rule 437(a) under the Securities Act of 1933,
as amended, we may file the Registration Statement without Arthur Andersen LLP's
consent. In the absence of Arthur Andersen LLP's consent, persons acquiring
shares of our common stock pursuant to this prospectus will be unable to assert
a claim against Arthur Andersen LLP under Section 11(a) of the Securities Act of
1933, as amended, in the event of any untrue statement of material fact or any
material omission in the financial statements audited by Arthur Andersen LLP or
in its reports with respect thereto.



                                       24



        ADDITIONAL INFORMATION AND INFORMATION INCORPORATED BY REFERENCE

     We are subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended, and file reports, proxy statements
and other information with the SEC. Our SEC filings are available to the public
over the Internet at the SEC's website at http://www.sec.gov. You may also read
and copy any document we file with the SEC at the SEC's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of its Public Reference
Room. We incorporate by reference into this prospectus the information contained
in the documents listed below that we have filed with the SEC and which is
considered to be a part of this prospectus:

-Our annual report on Form 10-K and amended annual report on Form 10-K/A for the
year ended December 31, 2002, which contains audited financial statements for
the most recent fiscal year for which we have filed audited financial
statements;

-Our quarterly reports on Form 10-Q for the quarters ended March 31 and June 30,
2003, as filed with the SEC; and


-Our current reports on Form 8-K dated and filed on the following dates:
April 8, 2003, July 2, 2003, August 19, 2003, and August 28, 2003.


     This prospectus is accompanied by a copy of our latest annual report on
Form 10-K, as amended and latest quarterly report on Form 10-Q. The
information in this prospectus should be read together with the information and
financial statements (including notes thereto) that appear in the Form 10-K, as
amended and the documents delivered with this prospectus. This prospectus
incorporates documents by reference that are not delivered with this prospectus.
These documents are available without charge, upon written or oral request by
any person to whom this prospectus has been delivered, from the Secretary,
Intelli-Check, Inc., 246 Crossways Park West, Woodbury, NY 11797, (516) 992-1900
or by e-mail at our website, www.intellicheck.com.

     Any statement contained in a document incorporated by reference herein is
modified or superceded for all purposes to the extent that a statement contained
in this prospectus modifies or replaces such statement.



                                       25



                               RECENT DEVELOPMENTS

     Certain material developments with respect to us have occurred since the
end of the latest fiscal year for which certified financial statements were
included in the latest Form 10-K, as amended, Forms 10-Q, and Forms 8-K filed
with the SEC on EDGAR and incorporated by reference. A list of such Forms 8-K
are set forth above under Additional Information and Information Incorporated by
Reference.





                                       26




                                   APPENDIX I


                                   FORM 10-K/A
                                Amendment No. 2
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE
                                  ACT OF 1934

                  For the fiscal year ended December 31, 2002

                                       OR

  [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
                              EXCHANGE ACT OF 1934

      For the transition period from ________________ to ________________
                         Commission File No. 001-15465

                              Intelli-Check, Inc.
          (Name of small business issuer as specified in its charter)

        Delaware                                                 11-3234779
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

   246 Crossways Park West, Woodbury, New York               11797
   (address of principal executive offices)                (Zip Code)
Issuer's Telephone number, including area code:          (516) 992-1900

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

          Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, $.001 par value
                         -----------------------------
                                (Title of Class)

Check whether Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter  period
that the Issuer was required to file such reports),  and (2) has been subject to
such filing requirements for the past 90 days.

                            Yes  X       No
                                ---          ---

Check if disclosure of delinquent  filers pursuant to item 405 of Regulation S-B
is not  contained  herein,  and  will  not be  contained,  to  the  best  of the
Registrant's   knowledge  in   definitive   proxy  or   information   statements
incorporated by reference in Part III of this form 10-K or any amendment to this
Form 10-K.

State the aggregate market value of the voting stock held by  non-affiliates  of
the Issuer: $ 31,509,073 (based upon the closing price of Issuer's Common Stock,
$.001 par value, as of June 30, 2002).

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.

Common Stock, $.001 Par Value                           8,875,302
------------------------------                           ---------
     (Title of Class)                          (No. of Shares Outstanding
                                                  at March 26, 2003)

DOCUMENTS INCORPORATED BY REFERENCE: NONE


                                     PART I

Item (a)  Business
          --------
     (a) General Development of Business. We were originally incorporated in the
state of New York in 1994. In August 1999, we reincorporated in Delaware.

     During the period from  September  1996 until  September  1999, we sold our
securities in private  placements exempt from registration  under the Securities
Act of 1933, as amended.

     In November 1999, we sold, in an initial public offering,  1,000,000 shares
of  common  stock at an  initial  offering  price of $7.50  per  share.  The net
proceeds that we received  from the public  offering  amounted to  approximately
$5,915,000.

     In December 1999, the underwriter of the initial public offering  exercised
its  over-allotment  option to purchase  150,000 common shares from us for $7.50
per share. The net proceeds received by us amounted to approximately $992,000.

     In fiscal year 2000,  options to acquire  66,000 shares of common stock and
warrants to acquire  1,115,084 shares were exercised.  The net proceeds received
by us from these transactions was $3,426,374.

     In fiscal year 2001,  options to acquire  166,500  shares of common  stock,
warrants to acquire 378,084 shares of common stock and rights to acquire 180,198
shares of common  stock were  exercised.  The net  proceeds  received by us from
these transactions was $3,231,174.

     In fiscal year 2002,  options to acquire  273,700  shares of common  stock,
warrants to acquire  1,250 shares of common stock and rights to acquire  107,396
shares of common  stock were  exercised.  The net  proceeds  received by us from
these transactions was $1,742,466.

     Recent Developments
     -------------------
     In March 2001, we declared a dividend  distribution of one non-transferable
right to purchase one share of our common stock for every ten outstanding shares
of common stock  continuously held from the record date to the date of exercise.
The rights were also distributed to holders of vested stock options and warrants
and were  originally due to expire on October 4, 2002. At that time, we extended
the expiration  date until April 4, 2003 and we further  extended the expiration
date until December 31, 2003.

On March 27, 2003, pursuant to a Securities  Purchase Agreement,  we sold 30,000
shares of our Series A 8% Convertible  Preferred Stock, par value $.01 per share
for $3,000,000 before expenses to Gryphon Master Fund, L.P. Each preferred share
entitles the holder to receive dividends of 8% per annum and is convertible into
15.1515 shares of our common stock. Additionally,  each share of Preferred Stock
will receive one (1) 5 year warrant to purchase  3.787875 shares of common stock
at a price of  $6.78.  The  total  amount  of  shares  that may be  issued  upon
conversion  and the  exercising of the warrants are 454,545 and 113,636  shares,
respectively.  Dividend  payments  of  $120,000  are due  semi-annually  in cash
beginning  September 30, 2003. In connection with this financing,  we paid agent
fees of $150,000,  plus legal fees estimated to be approximately $55,000. Shares
of Preferred Stock will be convertible at the option of Gryphon Master Fund, L.P
at any time  prior to  redemption.  We may  redeem  any or all of the  Preferred
Shares at any time  after one year from the  closing  date at a cash  redemption
price of $100 per share,  providing  the volume  weighted  average  price of our
Common Stock for any 20 out of 30  consecutive  trading days exceeds  $13.20 per
share.  We must  redeem  all of the  Preferred  Stock  outstanding  on the fifth
anniversary  of the closing date at a redemption  price,  in cash,  equal to the
purchase price of the Preferred Stock.

     In addition,  we entered into a Registration  Rights Agreement with respect
to the common stock underlying the Preferred Shares and the warrants pursuant to
which we will file a  registration  statement for the common stock no later than
30 days from the closing date of the sale of the preferred shares.

     (b) Business of Issuer

     (1) Principal Products
         ------------------
     Our  company  was formed to  develop,  manufacture  and market an  advanced
document  verification  system to enable a user to detect  altered,  tampered or
fake IDs to:
                                       2


     (i) reduce  check  cashing,  credit  card and other  types of fraud such as
     identity  theft,  the fastest growing crime in America,  which  principally
     utilizes fake driver licenses as proof of identity;

     (ii) increase  security and deter  terrorism at airports,  shipping  ports,
     rail and bus terminals, military installations,  high profile buildings and
     other sites where security is a concern;

     (iii)  determine  the  customer's  age and validity of the ID to detect and
     prevent the use of fraudulent  identification  for the purchase of alcohol,
     tobacco  and other  age-restricted  products  and to reduce the risk to the
     retailer of  substantial  monetary  fines,  criminal  penalties and license
     revocation for the sale of age-restricted products to minors.

     Our advanced  document  verification  software,  which we have  licensed to
third  parties and is  contained in our ID- Check unit  (terminal)  reads in one
swipe or scan the encoded data contained on U.S. and Canadian  driver  licenses,
state  issued  identification  cards  and  military  IDs  that  comply  with the
standards of the American Association of Motor Vehicle  Administrators  (AAMVA),
the American National Standards Institute (ANSI) and the International Standards
Organization (ISO).

     Our terminal or licensed  software helps  merchants  prevent  economic loss
resulting from identity  theft,  which is the fastest  growing crime in America.
The availability of high-tech fake ID's exposes retailers to many forms of fraud
utilizing fake ID's, which our unit has the capability of helping to detect.

     The  terminal  or the  licensed  software  are  effective  tools to enhance
security  and deter  terrorism  at airports  and other  sites where  security is
increasing.  The terminals have been installed in over a dozen major airports to
verify the identity of employees and prevent  access to secure areas.  One major
airport recently reordered  terminals.  Since the tragic events of September 11,
2001, there has been increased  interest in our technology to control access and
to help deter the threat of terrorism.

     Additionally,  in an effort to combat the problems of underage drinking and
smoking,  the federal  government  and many states and Canadian  provinces  have
enacted laws requiring  businesses that sell  age-restricted  products to verify
the ID of  potential  customers  to  determine  that  they are of  legal  age to
purchase these products.  These laws impose stringent  penalties for violations.
In addition,  many states and local  governments have set up undercover  "sting"
operations to detect violations.

     The product we have  designed and  developed,  the IDC-1400 is based on our
patented  ID-Check  technology.  ID-Check  provides  businesses with a reliable,
simple and  cost-effective  way to reduce  economic  loss  supported  by fake or
altered  driver  licenses  and to  verify  age and  reduce  the  risk of  severe
penalties for  non-compliance  with laws pertaining to age restricted  products.
Effective July 9, 2003, our  manufacturer  will  discontinue  manufacturing  the
IDC-1400  terminal  and has  introduced  a new  model to  replace  the  existing
IDC-1400.  We  are in  discussions  with  our  manufacturer  as  well  as  other
manufacturers to select a new platform to run our patented software.

     On  December  18,  2001,  we acquired  substantially  all the assets of The
IDentiScan  Company,  LLC,  a  provider  of  age  verification  terminals.   The
IDentiScan  products are targeted to the age  verification  market and they have
broadened our product line to better penetrate that market.  IDentiScan has been
selected to be the exclusive  provider of age verification  terminals to Sunoco,
Inc.

     Our new product,  IDN-DLL, is a software application designed to supplement
our existing products by replicating the features of ID-Check using a customer's
existing hardware (or with minimal additional hardware  components)  included in
Point-Of-Sale  (POS)  terminals  for  multi-lane  retailers  such as grocery and
mass-retail stores. Currently, we have five (5) license agreements executed with
third parties for integration and sub-licensing of this application.

     Driver license

     The driver license is the most widely used form of government  issued photo
identification.   We  believe   the  driver   license  has  become  a  de  facto
identification card. In addition to its primary function,  the driver license is

                                       3


used to verify  identity for social  services,  firearm  sales,  check  cashing,
credit  card use and other  applications.  There are  approximately  228,000,000
driver  licenses in circulation in the U.S. and Canada.  Our technology can read
the data encoded on all licenses that comply with the AAMVA/ANSI/ISO  standards,
which we  believe  is over  175,000,000  of those  issued at the  current  time.
Currently,  forty-six  States,  the  District of  Columbia,  and seven  Canadian
Provinces encode their licenses.  The number of readable  licenses will continue
to grow as the remaining  four States and six Canadian  Provinces  that have not
yet encoded their license begin to encode and  jurisdictions  that have recently
begun to encode complete their rotations.

     Non-driver identification card

     Although many people do not have a driver license,  many jurisdictions that
use American  Association  of Motor  Vehicle  Administrators  (AAMVA)  compliant
driver  licenses  offer  other  identification  cards that may  contain  encoded
information.   These  identification  cards,  as  well  as  military  ID's,  are
fundamentally identical to driver licenses. Because driver licenses are the most
widely used form of legally acceptable government  documentation,  we will refer
to all these types of legally acceptable governmental  identification  documents
as "driver licenses." Our ID-Check software is equally capable of performing its
function with all of these types of government identification.

     The use of false identification

     The high-tech  revolution has created a major problem for those who rely on
identification documents. In an age where scanners, computers and color printers
are commonplace,  fake ID's of the highest quality are easily  obtainable from a
number of locations  including  college  campuses and from thousands of sites on
the Internet.  These fakes appear so real,  even law  enforcement  agencies have
encountered  difficulty  distinguishing  them  from  legally  issued  documents.
Additionally,  these high-tech devices have the ability to easily alter properly
issued ID's.  Therefore,  anyone can gain access to a false  identity that gives
them the ability, in a commercial transaction, to present fake and stolen credit
cards or  checks  that are  supported  by  false  identification.  Additionally,
starting with only a fraudulent  driver  license,  an individual  may be able to
create multiple  identities,  commit fraud, buy age restricted  products such as
alcohol and tobacco while  underage,  evade law  enforcement and engage in other
criminal activities, such as:

     (i)    committing identity theft;

     (ii)   improperly boarding airplanes;

     (iii)  committing credit card, debit card and check cashing fraud;

     (iv)   unlawfully obtaining welfare or other government benefits;

     (v)    committing refund fraud,

     (vi)   committing pharmacy fraud, including false narcotic prescriptions,

     (vii)  gaining  entrance  to   high   profile   buildings   and   sensitive
            infrastructures, such as nuclear facilities;

     (viii) illegally purchasing firearms;

     (ix)   purchasing age restricted products such as alcohol and tobacco while
            under age;

     (x)    committing  employee  fraud,  including  employee  theft and payroll
            theft;

     (xi)   engaging in medical fraud.

Given the ease with which  identification can be falsified,  simply looking at a
driver  license may not be  sufficient  to verify age or identity and  determine
whether or not it is fraudulent. Since merchants are facing significant economic
losses due to these  frauds,  what is needed is a document  verification  system
which can accurately read the electronically  stored  information.  We possess a
patented  software  application  technology that provides an analysis of all the
data  contained on these  documents  by reading and  comparing  the  information
encoded on the tracks of the magnetic  stripe or bar code on the driver  license
against known standards.

                                       4

Underage Use of Alcohol and Tobacco Products and the Need for Age Verification

Overview

     Underage  access to  age-restricted  products,  like  alcohol and  tobacco,
remains a major societal problem.

     (i)  According to Connecticut Clearinghouse,  approximately 10.6 million or
          51.2% of high school  students in the United  States of America  drink
          alcoholic  beverages at least once  weekly,  with 86%  purchasing  the
          alcohol themselves;

     (ii) The Office of Drug Control  Policy  reported  that  approximately  9.5
          million drinkers of alcoholic  beverages in 1996 were between the ages
          of 12 and 20,  according to the U.S.  Department of Justice  Office of
          Juvenile Justice and Delinquency Prevention;

     (iii)The  Insurance  Institute  for Highway  Safety has said that, in 1997,
          26% of 16-20  year-olds  fatally  injured in motor vehicle crashes had
          high blood alcohol concentrations;

     (iv) According to the Journal of  Adolescent  Health,  approximately  3,000
          minors begin smoking regularly every day;

     (v)  Join Together  Online's Fact Finder  reports that underage  youths can
          purchase cigarettes successfully 70%- 80% of the time over the counter
          and 90%-100% of the time through vending machines; and

     (vi) Join Together  also reports that each year  merchants  illegally  sell
          minors 947 million  packs of cigarettes  and 26 million  containers of
          chewing tobacco worth $1.26 billion;

     (vii)A study by the National  Center on Addiction  and  Substance  Abuse at
          Columbia  University  (CASA) found that 5 million high schoolers binge
          drink at least  once a week.  It was also  stated in the  report  that
          children under 21 drink 25% of the alcohol consumed in the U.S.

To combat  this  problem,  most  states  have  enacted  laws which  provide  for
substantial penalties for businesses that sell tobacco and alcohol to minors.

     Regulation of retailers of tobacco products

     New federal  regulations  have been enacted that place a greater  burden on
retailers to prevent the sale of tobacco products to minors. Clerks are required
to check the photo ID of anyone trying to purchase  tobacco products who appears
to be under the age of 27.

     Regulation of retailers of alcoholic beverages

     The  retailer of alcoholic  products who sells to an underage  person could
face  potential  fines,  suspension  of its license and the  potential  outright
revocation of its license to sell alcoholic beverages.  Additionally,  in states
where  enacted,  dram shop laws allow a person  who is injured by any  obviously
intoxicated  person to file a claim for relief for fault  against any person who
knowingly sells alcoholic beverages to a person under 21 years of age.

     As a result of law enforcement efforts and regulatory penalties, we believe
retailers  that  sell  alcohol  and  tobacco,  such as liquor  stores,  bars and
convenience  stores, are facing increasing pressure to accurately verify the age
of their customers.

     ID-Check Solution and Benefits

     We  believe  the  ID-Check  solution  is the most  advanced,  reliable  and
effective  technology,   which  provides  users  with  an  easy,  reliable,  and
cost-effective  method  of  document  and age  verification.  We  have  received
encoding formats from most jurisdictions  that conform to AAMVA standards.  This
information,  combined  with  our  patented  technology,  enables  the  ID-Check
software to read,  decode and process the information  electronically  stored on
driver  licenses.   As  jurisdictions  and  AAMVA  change  their  documents  and
guidelines,  we believe our software,  together with our programmable  terminal,
can be adapted to these changes.

                                       5

     ID-Check  terminals  do not require a connection  to a central  database to
operate  thus  negating  privacy  concerns.  Our  terminals  have the ability to
operate add-on  peripherals  such as printers,  bar code  scanners,  fingerprint
readers and other  devices.  Additionally,  our terminals can  communicate  with
personal  computers,  which could enhance the functionality of the terminals and
potentially create the opportunity for sales of other software products by us.

     The ID-Check  process is quick,  simple and easy to use. After matching the
(driver  license)   photograph  to  the  person   presenting  the  document  for
identification,  the user simply swipes the driver license  through the ID-Check
terminal if the card has a magnetic stripe or scans it if it has a bar code. The
terminal quickly determines if the document:

          (i)  is valid;

          (ii) has been altered or tampered with;

          (iii) has expired; and

          (iv) has a date of birth  equal to or  greater  than the  legal age to
               purchase age restricted products, such as alcohol and tobacco, in
               the retailer's location.

Then, the terminal will automatically:

          (i)  respond  to the user by  displaying  the  results in words on the
               terminal's screen;

          (ii) save information that is permissible by law to the terminal's own
               memory;

          (iii)print a record of the  transaction  including  the  results  on a
               roll of  paper  similar  to that  used in cash  registers,  if an
               optional printer has been installed; and

          (iv) send the  results  to a  personal  computer  which has  Microsoft
               Windows  95/98/ME/NT/2000/XP  ("PC") for  permanent  storage when
               used in  conjunction  with our Q-Link or C-Link  software,  which
               simplifies record keeping by downloading  comprehensive  ID-Check
               due  diligence  data into a PC.  This  provides a  merchant  with
               secure  back-up  files that  include  individual  and  cumulative
               transaction records, where permitted by law.

     (2) Marketing and Distribution
         --------------------------
     Our objective has been to become the leading  developer and  distributor of
document and age verification products. To date, our marketing efforts have been
through  direct sales by our sales and  marketing  personnel,  participation  in
trade shows, through resellers and OEM agreements. We had formulated our initial
marketing  plan  with the  intention  of  having  distributors  sell  sufficient
terminals  per month to  generate  enough  revenue  to keep us at break  even or
slightly  profitable while its direct sales force concentrated on large accounts
where we knew the sales  cycle was quite  long and  extended.  We have  recently
signed  agreements to market our products through well known public interest and
trade  associations  in an effort to upgrade our  distributor  network.  We have
entered into a marketing  agreement with Mothers Against Drunk Driving (MADD) to
market our products for age-verification to sellers of alcoholic  beverages.  We
also signed an agreement  with the American  Association  of Airport  Executives
(AAAE),  the most  prominent  aviation  trade group in the world,  to market our
document  verification  technology  to the  Aviation  Industry.  We are actively
pursuing additional well known organizations to expand our distributor channels.

     We  generate  revenues  from the sale or lease of ID-Check  and  IDentiScan
terminals,  the sale of software upgrades,  the sale of software maintenance and
hardware warranty  programs,  the sale of C-Link software and from the licensing
of our patented software to third parties.

     Our patented  ID-Check  software is installed in a self-contained  terminal
similar to those commonly used as credit card terminals,  which we market to the
government,   airlines,   airports,   high  profile   buildings   and  sensitive
infrastructure,  mass  merchandisers,  grocery,  convenience  store and pharmacy
chains,  casinos,  banks and resellers of age restricted products.  The ID-Check
unit has a suggested  retail price of approximately  $2,500,  which includes our
Q-Link  software  and  upgrades  for the  first  year  after  purchase.  We have

                                       6


developed a comprehensive marketing plan to build customer awareness and develop
brand  recognition in target markets.  We promote the advantages and ease of use
of the ID-Check terminal through:

     (i)  endorsement  by  nationally  known  public  interest  groups and trade
          associations;
     (ii) trade publications;
     (iii) trade shows;
     (iv) conventions and seminars;
     (v)  direct mail; and
     (vi) our website.

     As we gain market acceptance of the ID-Check terminal, we intend to develop
and market other related software applications.

     Distribution strategy

     In October 1999, we hired a vice  president of sales.  In December 2000, we
hired a director of corporate  sales.  In January  2002,  we hired a director of
sales for the Southern  Region of the U.S. In June 2002,  we hired a director of
sales for the Western Region of the U.S.

     Our initial target markets

Our initial target markets for the ID-Check terminal are:

     (i)  airports, airlines, bus, port and rail terminals;
     (ii) banks and credit unions;
     (iii) credit card issuers;
     (iv) mass merchandisers;
     (v)  convenience stores;
     (vi) grocery and pharmacy chains;
     (vii) casinos;
     (viii) bars and night clubs; and
     (ix) resellers of age restricted products.

     Some of the reasons why we have targeted these markets are:

     (a)  The Airlines are required by FAA regulations to verify the identity of
          passengers over 18 years of age. The form of identification is usually
          a valid  driver  license or other form of legally  acceptable  picture
          identifica- tion in order to board any airliner domestically; and

     (b)  Banks  are  facing  increased  losses  from  fraudulent   transactions
          involving  identity theft and  additionally are required to verify the
          identity of new accounts under provisions of the Patriot Act.

     (c)  Mass  merchandisers  and credit  card  issuers,  who are  facing  huge
          economic losses through the use of fraudulent  credit cards and stolen
          or forged checks, could use our technology to verify that the customer
          who pays by check or credit  card and  presents  a driver  license  as
          proof of identity to support a  transaction  has presented a valid one
          prior to processing the transaction.

     Distributors and independent sales organizations

     Management  estimates  there are  thousands  of  businesses  referred to as
distributors or independent  sales  organizations  (ISO's),  which specialize in
marketing equipment to "mom and pop" establishments. We believe that this is the
most cost  effective  way of reaching the smaller  retailers.  As such,  we will
continue to actively enter into sales agreements with  distributors and ISO's to
distribute our product. We have changed the requirements to become a reseller to
be more selective and are in the process of revamping our distributor network to
provide for a more knowledgeable and effective reseller.

                                       7


     Upgrade Capability

     Our software requires periodic updates as states and provinces that did not
previously  conform to AAMVA  standards begin to store  electronically  readable
information  on their  driver  licenses  and as states and  provinces  adjust or
modify the format of their  electronically  stored information.  The technology,
which can be used to  instantly  upgrade  the  terminal  by simply  scanning  an
encrypted  upgrade card through the ID-Check terminal or downloading it from our
website  through a P.C. are included in the purchase  price of the ID-Check unit
for the first year after  purchase.  We have begun to sell upgrade  packages for
the period  commencing  after the first year of purchase.  Because each terminal
has a unique  serial  number,  the  upgrade  will only work with that  terminal,
making  unauthorized  copying valueless.  We have also developed a secure way of
delivering upgrades through the Internet.

     C-Link Software

     We  have  developed  our  C-Link  software,  which  was  introduced  to the
marketplace in 2001 and is continually being enhanced with new features. C-Link,
when used in conjunction with our ID-check terminal,  has the ability to collect
transaction   information   read   and   stored   by  the   ID-Check   terminal,
instantaneously  display it in real time for enhanced security purposes and save
it to a PC hard drive for permanent storage.  Once saved, the information can be
utilized to prevent potential  economic loss to the user and can also be used to
easily search, analyze and generate  demographics,  statistics and mailing lists
for existing  customers  where permitted by law. It has the ability to build and
maintain watch lists, detect a recurring entry and signal the user when an alert
is triggered.

     Additional Target Customers

     In addition to the target  markets prior stated,  others that could benefit
by using the ID-Check terminal to prevent fraudulent  transactions  supported by
the use of a fake  driver  license as proof of  identity  or for access  control
include:

     (i)  car rental agencies;
     (ii) hotels and motels;
     (iii) stadiums and arenas;
     (iv) check cashing services;
     (v)  oil refineries and nuclear facilities;
     (vi) court houses; and
     (vii) law enforcement agencies.

Products in Development

     We have developed prototypes of the following products:

     MAVE In 1998, we built two  prototypes of a hand-held  portable  version of
our  ID-Check  terminal  specifically  designed  for  law  enforcement.  We have
trademarked this product as MAVE for Mobile Age Verification and Enforcement. We
are currently  testing other Windows based handheld  products that could operate
our  software  for  applications  in the  hospitality  industry as well as other
industries.

     IDN-DCD In 2002,  we built  several  prototypes  of a data  capture  device
containing a customized  imager/scanner and a three track magnetic stripe reader
that are capable of reading all encoded data on encoded driver  licenses so that
our IDN-DLL can be utilized with the customer's computer system.

     (3) Competition
         -----------
     Unless a device can read, decode and analyze all of the information legally
permitted to be analyzed which is electronically stored on a driver license, the
user may not obtain accurate and reliable  confirmation that a driver license is
valid  and has not been  altered  or  tampered  with.  We are  aware of  several
companies,  including  Legal  Age,  Card  Com and ID Logix  that  are  currently
offering  products  that  electronically  read and  calculate  age from a driver
license.  We have tested and  compared  some of these  products to ID-Check  and
believe that our product is superior in quality and functionality. Some of these
products are based on types of equipment which have limited functionality. Those

                                       8


units that cannot read  barcodes are at a  significant  disadvantage  because 31
States and two Canadian  Provinces  currently  utilize  barcodes to encode their
driver  licenses in addition to all U.S.  military ID's and  uniformed  services
cards.  This number is  expected  to  continue to increase  within the next year
based upon  current  available  information.  In  addition,  some of these other
products  cannot connect to a PC or use a printer.  We also believe that some of
these  products  may  infringe on our patent.  We recently  instituted a lawsuit
claiming patent infringement against CardCom.

     There are also products  being marketed  which are  essentially  electronic
calendars  designed to assist the retailer in calculating  the age of the person
presenting a driver license. These devices,  however, cannot determine whether a
driver license is valid or has been altered.

     A very small number of laminate  verifiers are currently  used to determine
the validity of the laminate on a driver license.  However,  laminate  verifiers
are fragile, not reliable and we believe can only be used in New York State.

     (4) Supplier
         --------
     We had engaged  Hand Held  Products,  Inc.  (HHP)  formerly  known as Welch
Allyn,  Inc., a leading  privately-held  manufacturer  of medical  equipment and
barcode readers and scanners,  to provide a programmable terminal to operate our
patented ID-Check  software.  We have placed orders for 7,000 terminals of which
we have  received  4,000,  which  contain a  three-track  magnetic  reader and a
scanner/imager,  which is an  advanced  form of  barcode  scanner.  We have paid
$600,000  as a deposit  to secure  the  purchase  of the  remaining  units.  HHP
informed us that effective July 9, 2003,  they have  discontinued  manufacturing
this model and we are in  discussions  with them and other  manufacturers  as to
which platform we will select to run our patented software. The current terminal
is fully capable of running our patented  software since it utilizes a state-of-
the-art imager/scanner and magnetic stripe reader. However, we have reserved the
$600,000 deposit because we have not yet determined whether we will purchase the
remaining  units  or  select  a  new  hardware  platform  to  run  our  patented
technology.

     If we are unable to secure a manufacturer  for our terminal on satisfactory
terms to us,  there may be an  adverse  effect  on our  results  of  operations.
However,  as a result of our licensing of our  technology,  such effect could be
reduced as we would be less dependent on our supplier for sales.

     In connection  with the  acquisition  of certain  assets of the  IDentiScan
Company, LLC, we have also engaged another manufacturer, Accu-Time Systems, Inc.
to provide for the manufacturing of our IDentiScan line of products.

     (5) Intellectual Property
         ---------------------
     In  January  1999,  we  were  issued  a  patent  on our  ID-Check  software
technology.  In  October  2002,  we  received  from the U.S.  Patent  Office the
issuance of our continuation  patent No. 6,462,416 B1. We have also been granted
multiple  copyrights  in the United  States,  which are  effective in Canada and
other major industrial countries.  The patent covers a specific process relating
to ID-Check,  including age verification from a driver license. In addition, the
copyright  protection  covers  software  source  codes and  supporting  graphics
relating to the operation of ID-Check and other software products.  We have also
received  several  trademarks  relating to our company,  its product names,  and
logos.

     Upon  the  acquisition  of the  assets  of  IDentiScan,  we  received  sole
ownership  rights  to  intellectual   property   relating  to  age  verification
technology.  Specifically,  Intelli-Check acquired ownership of U.S. Patent Nos.
6,523,741  and  6,148,091and  its Canadian  counterpart,  Canadian  Patent.  No.
2,242,205.  These patents are entitled "Apparatus for Controlling the Rental and
Sale of Age-Controlled  Merchandise and for Controlling Access to Age-Controlled
Services."  In  addition,  Intelli-Check  also  acquired  all  right,  title and
interest to any and all patents  resulting from pending U.K. patent  application
No.  103275.4  relating to the  foregoing  patented  technology  as well as sole
rights to IDentiScan's trademarks, copyrights and trade secrets.

     We also rely on proprietary knowledge and employ various methods, including
confidentiality  agreements,  to protect our software codes, concepts, ideas and
documentation of our proprietary technology.

     Under an agreement with Mr. Kevin Messina, our former Senior Executive V.P.
and Chief  Technology  Officer,  we will pay royalties  equal to 0.005% of gross
sales from  $2,000,000  to  $52,000,000  and 0.0025% of gross sales in excess of
$52,000,000.

                                       9

     (6) Employees
         ---------
     As of March  26,  2003,  we had  twenty-five  full-time  employees  and one
part-time  employee,  including  four who are engaged in  executive  management,
thirteen  in  information  technology,  six in sales  and  marketing  and  three
administrative  staff. We believe our relations with our employees are generally
good and we have no collective bargaining agreements with any labor unions.

Item 2. Description of Property
        -----------------------
     Our executive offices are currently located in Woodbury, New York, where we
occupy  approximately  9,700  square  feet of leased  space  pursuant to a lease
expiring on  December  31,  2010.  In March  2002,  we signed a 2-year  lease in
Connecticut  to operate our IDentiScan  division,  which expires March 31, 2004.
Payments under these leases were $80,538 for 2000,  $210,882 for 2001,  $242,083
for 2002, and will be $2,113,236 for the remaining years of the leases.

Item 3. Legal Proceedings
        -----------------
     We are presently involved in three lawsuits.

     A lawsuit  was filed as a class  action on  October  18,  2001 on behalf of
short-sellers of our stock, who allegedly suffered losses because of the rise in
the price of our stock, in the United States District Court for New Jersey.  The
class action suit was amended in November 2001 and is now an individual  action.
The complaint alleges  violations of the Securities and Exchange Act of 1934. On
July 26, 2002,  we filed a motion to dismiss the lawsuit.  Our motion to dismiss
has been fully briefed by both sides and is awaiting the Court's  decision.  The
Company believes the suit is without merit.

     A demand for  arbitration was brought by Early Bird Capital Inc. in January
2002,  seeking  issuance of warrants with  registration  rights  pursuant to the
terms of a Financial  Advisory  and  Investment  Banking  Agreement  dated as of
August 20, 2000. The  arbitration  took place in December 2002 and January 2003,
and both sides have  completed  presenting  their cases.  Early Bird Capital has
demanded a monetary judgment in the amount of $968,000, which, if awarded, would
have a material adverse effect on us. We believe we have presented a meritorious
defense; however, there can be no assurance that we will prevail.

     On  February  19,  2003,  we filed a summons  and  complaint  upon  CardCom
Technology, Inc. for its infringement on our patent. Under Federal rules, absent
an extension of time, the CardCom answer is due on or before April 1, 2003.

     We are not aware of any  infringement  by our products or technology on the
proprietary rights of others.

     Other than as set forth above,  we are not currently  involved in any legal
or regulatory  proceeding,  or arbitration,  the outcome of which is expected to
have a material adverse effect on our business.

Item 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------
     During the fourth  quarter of our fiscal year ended December 31, 2002 there
were no matters submitted to a vote of security holders.

                                       10

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
        ---------------------------------------------------------------------
     (a) Our Common Stock is traded on the  American  Stock  Exchange  under the
symbol "IDN." The following  table  indicates high and low sales  quotations for
the periods indicated based upon information supplied by AMEX.



     2001                                    Low                     High
     ----                                    ---                     ----
                                                               
     First Quarter                           $3.70                   $11.625
     Second Quarter                          $4.50                   $10.60
     Third Quarter                           $7.40                   $14.75
     Fourth Quarter                         $10.20                   $19.45

     2002
     ----
     First Quarter                          $11.30                   $18.19
     Second Quarter                          $4.85                   $15.75
     Third Quarter                           $2.10                    $5.90
     Fourth Quarter                          $2.90                    $9.87

     2003
     ----
     January                                 $6.35                    $8.44
     February                                $5.80                    $7.66

     (b) Number of Holders of Common  Stock.  The number of holders of record of
our Common  Stock on March 26, 2003 was 67,  which does not  include  individual
participants in security position listings.

     (c)  Dividends.  There were no cash  dividends or other cash  distributions
made by us during the fiscal  year ended  December  31,  2002.  Future  dividend
policy  will be  determined  by our Board of  Directors  based on our  earnings,
financial condition, capital requirements and other then existing conditions. It
is anticipated that cash dividends will not be paid to the holders of our common
stock in the foreseeable future.

     (d) Recent Sales of Unregistered Securities. In November 1999, we completed
our initial public offering from which we received net proceeds of approximately
$5,915,000.  In December 1999 the  underwriters  of our initial public  offering
exercised the over allotment option to purchase an additional  150,000 shares of
our  common  stock  from which we  received  net  proceeds  of  $992,000.  After
repayment  of the Notes we issued in August  and  September  1999,  we  invested
approximately   $5,000,000  in  short  term  financial   instruments   and  used
approximately  $607,000 to make additional deposits on terminals and for general
working capital purposes.

     In addition, we sold the following  unregistered  securities in reliance on
the exemption  provided by Section 4(2) and Regulation 506 of the Securities Act
as transactions not involving a public offering:

     In September 1996, we sold a total of 87,500 shares of our common stock for
$175,000.  Paul Cohen and Eric  Cohen,  the father and uncle of our  co-founder,
Todd Cohen,  purchased  62,500  shares and 15,000  shares,  respectively.  Gregg
Messina, the brother of our co-founder,  Kevin Messina, purchased 10,000 shares.
In connection with the issuance, (i) each shareholder represented to us that, by
virtue of his investment acumen,  business  experience or independent  financial
and tax advice,  he had the  capability  of  evaluating  the risks and merits in
investing  in the  shares,  (ii) each  shareholder  represented  that the shares
acquired cannot be sold without registration under the Securities Act, except in
reliance upon an exemption  therefrom and (iii) we did not engage in any general
solicitation  or  advertisement  for  the  issuance.  The  shareholders  further
represented  their  intention to acquire the securities for investment  only and
not with a view to the distribution thereof. Appropriate legends were affixed to

                                       11

the  stock  certificates  issued  in such  transactions.  Each  shareholder  had
adequate  access  to  sufficient  information  about  us  to  make  an  informed
investment  decision.  The  issuance and sale of these  securities  were made in
reliance on the exemption  provided by Section 4(2) of the Securities  Act, as a
transaction not involving any public offering.

     In October  1996, we issued a total of 41,385 shares of our common stock to
satisfy loans in the aggregate amount of $82,770.  Paul Cohen, the father of our
co-founder,  Todd  Cohen,  accepted  28,885  shares in  repayment  of $57,770 of
indebtedness and William Glasgow,  who has been, since September 1996,  employed
by us and is currently Vice President of our Product,  Management and Operations
Department, accepted 12,500 shares in repayment of $25,000 of indebtedness. Also
in  October  1996,  we issued a total of 22,500  shares of our  common  stock in
repayment  of  $45,000  owed to our former  attorneys,  Post & Heymann  LLP.  In
connection with the issuance,  (i) each  shareholder  represented to us that, by
virtue of his investment acumen,  business  experience or independent  financial
and tax advice,  he had the  capability  of  evaluating  the risks and merits in
investing  in the  shares,  (ii) each  shareholder  represented  that the shares
acquired cannot be sold without registration under the Securities Act, except in
reliance upon an exemption  therefrom and (iii) the registrant did not engage in
any general  solicitation or  advertisement  for the issuance.  The shareholders
further  represented  their  intention to acquire the  securities for investment
only and not with a view to the distribution  thereof.  Appropriate legends were
affixed to the stock certificates issued in such transactions.  Each shareholder
had  adequate  access to  sufficient  information  about the  Company to make an
informed  investment  decision.  The issuance and sale of these  securities were
made in reliance on the  exemption  provided by Section  4(2) of the  Securities
Act, as a transaction not involving any public  offering.  The issuance and sale
of these  securities were made in reliance on the exemption  provided by Section
4(2) of the Securities Act, as a transaction not involving any public offering.

     In December 1996 and January 1997,  Frank  Mandelbaum,  our chief executive
officer,  made loans totaling  $142,000 with interest at 10% with maturity in 90
days. He subsequently extended the notes on several occasions. In November 1997,
as part of the private  placement  discussed below, we issued to Mr.  Mandelbaum
71,000 shares of our common stock and warrants to purchase  71,000 shares of our
common  stock at an  exercise  price  of $3.00  per  share in  exchange  for Mr.
Mandelbaum's  forgiveness  of his loan to us of $142,000.  Mr.  Mandelbaum is an
accredited  investor,  as that term is defined in Regulation D promulgated under
the Securities  Act. The securities  issued to Mr.  Mandelbaum  contain a legend
stating that the securities  acquired cannot be sold without  registration under
the Securities Act, except in reliance upon an exemption therefrom. As the chief
executive officer, Mr. Mandelbaum had adequate access to sufficient  information
about us to make an informed investment decision.  The Company did not engage in
any general  solicitation or  advertisement  for the issuance.  The issuance and
sale of these  securities  were made in  reliance on the  exemption  provided by
Section 4(2) of the  Securities  Act, as a transaction  not involving any public
offering.

     In January  1997, we entered into a Note  Purchase  Agreement  with the New
York State  Science and  Technology  Foundation,  which  became The Empire State
Development  Corporation  on  February  1, 2000,  pursuant  to which we issued a
Convertible  Promissory  Note in the amount of  $250,000.  The  Foundation  also
agreed to invest an additional  $250,000  through the purchase of 125,000 shares
of Series A convertible  preferred stock based upon our raising a certain amount
of additional capital.  The note bore interest at 8% per annum. In January 1998,
we exercised  our right to redeem the  convertible  promissory  note held by the
Foundation  for  125,000  shares of Series A  convertible  preferred  stock.  In
addition,  the  Foundation  purchased an additional  125,000  shares of Series A
convertible  stock for  $250,000.  In July 1999,  the  Foundation  exercised its
conversion  rights and received  250,000  shares of common stock in exchange for
its preferred stock.

     The Empire State  Development  Corporation  formerly  known as the New York
State Science and Technology Foundation subscribed to 100,000 units for $200,000
in the  private  placement  of  September  1998,  discussed  below,  which units
consisted of one share of common stock and one warrant to acquire an  additional
share at $3.00 per share.  In April 1999,  we  adjusted  the  exercise  price of
warrants  issued to the  Foundation  from $3.00 to $2.00 if exercised  within 30
days of the adjustment.  In May 1999, the Foundation  exercised such warrant and
we issued  100,000  shares of our common  stock and a new  warrant  to  purchase
100,000  shares of our common  stock at an  exercise  price of $3.00,  which was
exercised in February 2001.

     In connection with the issuance of securities to the New York State Science
and Technology Foundation now known as the Empire State Development Corporation,
(i) the  Foundation  represented  to us that it and/or its officers or employees
were experienced in evaluating and investing in newly-organized, high-technology
companies  such as Intelli-  Check,  (ii) the  Foundation  represented  that the
shares  acquired cannot be sold without  registration  under the Securities Act,

                                       12


except in reliance  upon an exemption  therefrom  and (iii) we did not engage in
any general solicitation or advertisement for the issuance.  Appropriate legends
were  affixed  to the  stock  certificates  issued  in  such  transactions.  The
Foundation  had adequate  access to sufficient  information  about us to make an
informed  investment  decision.  The issuance and sale of these  securities were
made in reliance on the  exemption  provided by Section  4(2) of the  Securities
Act, as a transaction not involving any public offering.

     In  February  1997,  we  issued  12,000  shares  of  our  common  stock  to
Blanchfield  King Kober, our former  accountants,  in payment of accounting fees
totaling  $24,000.  In June 1999,  we issued an  additional  9,000 shares of our
common stock to  Blanchfield  King Kober in payment of accounting  fees totaling
$36,000. We believe that these accountants have such knowledge and experience in
financial and business  matters that they were capable of evaluating  the merits
and risks of the  investment.  The shares issued to the  shareholders  contain a
legend  stating that the shares  acquired  cannot be sold  without  registration
under the  Securities  Act,  except in  reliance  upon an  exemption  therefrom.
Because of their  relationship  with us, the shareholders had adequate access to
sufficient  information about us to make an informed investment decision. We did
not engage in any general  solicitation or advertisement  for the issuance.  The
issuance  and sale of these  securities  were made in reliance on the  exemption
provided by Section 4(2) of the Securities  Act, as a transaction  not involving
any public offering.

     In May 1997 and June 1997,  we sold 315,000  units to 8  purchasers,  which
units  consisted  of one share of common  stock and one  warrant  to  acquire an
additional  share at $3.00 per share  originally set to expire in June 1999 in a
private placement with respect to which Jesup & Lamont Securities Corp. acted as
placement  agent.  The  placement  agent  received a commission of $45,500 and a
non-accountable  expense  allowance  of $20,000 in  connection  with the private
placement.  Net  proceeds to us were  $550,849.  Of the amount  raised,  $75,000
represented payment from one of our directors for 37,500 units. Our company also
issued to the placement  agent  non-redeemable  warrants to purchase 7,500 units
for $2.25 per unit,  which  includes  one share of common  stock and an attached
warrant to purchase an additional  share of common stock at $3.00 per share.  In
connection with the issuance, (i) each shareholder represented to us that he was
either  an  accredited  investor,  as  that  term is  defined  in  Regulation  D
promulgated  under the Securities  Act, and/or that he and such other persons as
he found it necessary or advisable to consult,  have  sufficient  knowledge  and
experience  in  business  and  financial  matters to  evaluate  the risks of the
investment  and to make an informed  investment  decision with respect  thereto,
(ii) each shareholder  represented  that the securities  acquired cannot be sold
without  registration  under the  Securities  Act,  except in  reliance  upon an
exemption  therefrom and (iii) we did not engage in any general  solicitation or
advertisement  for the issuance.  The  shareholders  further  represented  their
intention to acquire the securities  for investment  only and not with a view to
the  distribution  thereof.  Appropriate  legends  were  affixed  to  the  stock
certificates  and warrants  issued in such  transactions.  Each  shareholder had
adequate  access  to  sufficient  information  about  us  to  make  an  informed
investment  decision.  The  issuance and sale of these  securities  were made in
reliance on the exemption  provided by Section 4(2) of the Securities  Act, as a
transaction not involving any public offering.

     In November  1997, we sold in a private  placement a total of 558,500 units
to 15  purchasers,  which units  consisted  of one share of common stock and one
warrant to  acquire an  additional  share at $3.00 per share  originally  set to
expire in November  1999. Our company  received net proceeds of $1,117,000  from
this offering. In connection with the issuance, (i) each shareholder represented
to us that he was  either an  accredited  investor,  as that term is  defined in
Regulation D promulgated under the Securities Act, and/or that he and such other
persons as he found it  necessary  or  advisable  to  consult,  have  sufficient
knowledge and experience in business and financial matters to evaluate the risks
of the  investment  and to make an informed  investment  decision  with  respect
thereto,  (ii) each shareholder  represented that the securities acquired cannot
be sold without  registration  under the Securities Act, except in reliance upon
an exemption  therefrom and (iii) we did not engage in any general  solicitation
or advertisement for the issuance.  The shareholders  further  represented their
intention to acquire the securities  for investment  only and not with a view to
the  distribution  thereof.  Appropriate  legends  were  affixed  to  the  stock
certificates  and warrants  issued in such  transactions.  Each  shareholder had
adequate  access  to  sufficient  information  about  us  to  make  an  informed
investment  decision.  The  issuance and sale of these  securities  were made in
reliance on the exemption  provided by Section 4(2) of the Securities  Act, as a
transaction not involving any public offering.

     In July 1998,  we commenced a private  placement of 500,000  units at $6.00
per unit. These units consisted of two shares of common stock at $3.00 per share
and one warrant to acquire an additional  share at $5.00 per share  expiring two
years from the date of the closing.  In connection  with this offering,  we sold
31,000  units and  received  proceeds  of  $186,000.  Due to  market  conditions
prevailing at that time for raising  capital,  we rescinded the offering and all
the  subscribers  agreed to  re-subscribe  under the terms of the September 1998
offering.

                                       13


     In September  1998, we commenced a private  placement of 1,000,000 units at
$2.00 per  unit.  These  units  consisted  of one share of common  stock and one
warrant to acquire an  additional  share at $3.00 per share.  The  offering  was
extended to January 17, 1999. We sold 273,000 units to 4 purchasers and received
$546,000 as a result of the  offering,  of which $30,000 was received in January
1999. In connection with the issuance,  (i) each  shareholder  represented to us
that he was either an accredited investor, as that term is defined in Regulation
D promulgated under the Securities Act, and/or that he and such other persons as
he found it necessary or advisable to consult,  have  sufficient  knowledge  and
experience  in  business  and  financial  matters to  evaluate  the risks of the
investment  and to make an informed  investment  decision with respect  thereto,
(ii) each shareholder  represented  that the securities  acquired cannot be sold
without  registration  under the  Securities  Act,  except in  reliance  upon an
exemption  therefrom and (iii) we did not engage in any general  solicitation or
advertisement  for the issuance.  The  shareholders  further  represented  their
intention to acquire the securities  for investment  only and not with a view to
the  distribution  thereof.  Appropriate  legends  were  affixed  to  the  stock
certificates  and warrants  issued in such  transactions.  Each  shareholder had
adequate  access  to  sufficient  information  about  us  to  make  an  informed
investment  decision.  The  issuance and sale of these  securities  were made in
reliance on the exemption  provided by Section 4(2) of the Securities  Act, as a
transaction not involving any public offering.

     In February 1999, we extended the expiration  date for the warrants  issued
in May 1997, June 1997 and November 1997 until June 30, 2000.

     In March 1999,  we commenced a private  placement and sold 259,600 units to
17  purchasers at $2.00 per unit.  These units  consisted of one share of common
stock and one  warrant  to acquire an  additional  share at $3.00 per share.  We
received $489,200 as a result of the offering prior to June 30, 1999 and $30,000
in  August,  1999.  In  connection  with  the  issuance,  (i)  each  shareholder
represented  to us that he was either an  accredited  investor,  as that term is
defined in Regulation D promulgated under the Securities Act, and/or that he and
such other  persons as he found it  necessary  or  advisable  to  consult,  have
sufficient  knowledge  and  experience  in  business  and  financial  matters to
evaluate the risks of the investment and to make an informed investment decision
with respect  thereto,  (ii) each  shareholder  represented  that the securities
acquired cannot be sold without registration under the Securities Act, except in
reliance upon an exemption  therefrom and (iii) we did not engage in any general
solicitation  or  advertisement  for  the  issuance.  The  shareholders  further
represented  their  intention to acquire the securities for investment  only and
not with a view to the distribution thereof. Appropriate legends were affixed to
the  stock  certificates  and  warrants  issued  in  such   transactions.   Each
shareholder  had adequate access to sufficient  information  about us to make an
informed  investment  decision.  The issuance and sale of these  securities were
made in reliance on the  exemption  provided by Section  4(2) of the  Securities
Act, as a transaction not involving any public offering.

     In May 1999, we issued 10,000 shares of our common stock to Allan Binder in
exchange for the termination of a royalty  agreement.  Mr. Binder is an attorney
and served as a consultant.  Because of his relationship with us, Mr. Binder had
adequate  access  to  sufficient  information  about  us  to  make  an  informed
investment  decision.  We  believe  that  Mr.  Binder  had  such  knowledge  and
experience in financial  and business  matters that he was capable of evaluating
the merits and risks of the investment.  The shares issued to Mr. Binder contain
a legend stating that the shares  acquired  cannot be sold without  registration
under the Securities Act, except in reliance upon an exemption therefrom. We did
not engage in any general  solicitation or advertisement  for the issuance.  The
issuance  and sale of these  securities  were made in reliance on the  exemption
provided by Section 4(2) of the Securities  Act, as a transaction  not involving
any public offering.

     In May 1999,  we issued to Frank  Mandelbaum  75,000  shares of our  common
stock and warrants to purchase  75,000 shares at an exercise  price of $3.00 per
share,  which was exercised in October 2001 and we issued to Kevin Messina 5,063
shares of our common stock and warrants to purchase  5,063 shares at an exercise
price of $3.00 per share, which expired in October 2001. These issuances reduced
Mr.  Mandelbaum's  deferred  compensation by $150,000 and Mr. Messina's deferred
compensation by $10,126. In addition,  we issued to Mr. Messina 69,937 shares of
our common stock and warrants to purchase  69,937  shares of our common stock at
an exercise  price of $3.00 per share in  exchange  for the  termination  of Mr.
Messina's  reversion  rights for certain  software.  These  warrants  expired in
October 2001. In June 1999, all remaining deferred compensation and interest due
to Mr. Mandelbaum,  Mr. Messina and Todd Cohen was eliminated by the issuance of
options to purchase 375,000,  207,000 and 110,000 shares,  respectively,  of our
common  stock.   Mr.   Mandelbaum's   deferred   compensation   was  reduced  by
approximately  $380,000,  Mr.  Messina's  deferred  compensation  was reduced by
approximately  $210,000 and Mr.  Cohen's  deferred  compensation  was reduced by
approximately  $110,000.  Mr. Mandelbaum is an accredited investor, as that term
is defined in Regulation D promulgated under the Securities Act. In addition, we
believe that each of these members of senior  management  had such knowledge and
experience  in  financial  and  business  matters  that  they  were  capable  of
evaluating the merits and risks of the investment.  The securities issued to the
shareholders contain a legend stating that the warrants,  options and underlying

                                       14


shares cannot be sold without  registration  under the Securities Act, except in
reliance upon an exemption therefrom.  As members of senior management,  Messrs.
Mandelbaum,  Messina and Cohen had  adequate  access to  sufficient  information
about the Company to make an informed investment decision.  We did not engage in
any general  solicitation or  advertisement  for the issuance.  The issuance and
sale of these  securities  were made in  reliance on the  exemption  provided by
Section 4(2) of the  Securities  Act, as a transaction  not involving any public
offering.

     In June 1999,  we agreed to terminate  the  supplier  agreement we had with
Hazeltine (formerly Marconi Aerospace Systems, Inc.), for which we issued 75,000
shares of our common  stock to  Hazeltine  in payment  of  outstanding  invoices
totaling  $220,000,  and we  received  all  units  of  ID-Check  which  had been
manufactured, all samples, designs, drawings, software, molds and any other item
related to  ID-Check.  In  connection  with the  issuance,  (i) the  shareholder
represented to us that it was an accredited investor, as that term is defined in
Regulation D promulgated  under the  Securities  Act, and that it had sufficient
knowledge and experience in business and financial matters to evaluate the risks
of the  investment  and to make an informed  investment  decision  with  respect
thereto, (ii) the shareholder represented that the securities acquired cannot be
sold without  registration  under the Securities Act, except in reliance upon an
exemption  therefrom and (iii) we did not engage in any general  solicitation or
advertisement  for  the  issuance.   The  shareholder  further  represented  its
intention to acquire the securities  for investment  only and not with a view to
the  distribution  thereof.  Appropriate  legends  were  affixed  to  the  stock
certificates issued in such transaction.  The shareholder had adequate access to
sufficient  information about us to make an informed  investment  decision.  The
issuance  and sale of these  securities  were made in reliance on the  exemption
provided by Section 4(2) of the Securities  Act, as a transaction  not involving
any public offering.

     In August and September  1999 we placed  $1,200,000  of secured  promissory
notes with interest at 10%. These notes have warrants attached to purchase 2,500
shares  for each  principal  amount of $50,000  at $3.00 per share  expiring  in
August 2002 of securities by us and can be redeemed by us at $.01 per warrant at
any time  that our  stock  has a public  market  price of $6.00 per share for 20
consecutive  days.  The notes  mature on the sooner of July 31, 2000 or the date
that we receive  gross  proceeds  from a public  offering of our  securities  of
$6,000,000.  In connection with the issuance, (i) each noteholder represented to
us that he was  either  an  accredited  investor,  as that  term is  defined  in
Regulation D promulgated under the Securities Act, and/or that he and such other
persons as he found it  necessary  or  advisable  to  consult,  have  sufficient
knowledge and experience in business and financial matters to evaluate the risks
of the  investment  and to make an informed  investment  decision  with  respect
thereto,  (ii)  each  noteholder   represented  that  the  notes,  warrants  and
underlying shares cannot be sold without  registration under the Securities Act,
except in reliance  upon an exemption  therefrom  and (iii) we did not engage in
any general  solicitation  or  advertisement  for the issuance.  The noteholders
further  represented  their  intention to acquire the  securities for investment
only and not with a view to the distribution  thereof.  Appropriate legends were
affixed to the notes and warrants issued in such  transactions.  Each noteholder
had  adequate  access to  sufficient  information  about us to make an  informed
investment  decision.  The  issuance and sale of these  securities  were made in
reliance on the exemption  provided by Section 4(2) of the Securities  Act, as a
transaction not involving any public offering.

     In December  2000, we granted  25,000 stock options to Korey Kay & Partners
Inc.,  our  advertising  firm,  for services to be  performed,  of which all are
exercisable at $10.00. In December 2000, 3,599 of these stock options vested for
services  performed  which  services  were valued at $14,398.  During 2001,  210
additional  stock  options  vested for services  performed  which  services were
valued at $842. We do not expect to utilize their services in the future and the
remaining unvested stock options were expired as of December 31, 2002. The stock
options  were issued  pursuant to our 1998 Stock  Option Plan in reliance on the
exemption  provided by Section 4(2) of the Securities  Act, as a transaction not
involving  any public  offering.  The  agreement  for the option grant  contains
restrictions on transfer of the options by the Optionee.  The shares  underlying
the  options  are  registered  pursuant to an  effective  Form S-8  registration
statement.  We believe that Korey Kay, as the Company's  advertising  firm,  had
such knowledge and experience,  in financial and business  matters,  that it was
capable of evaluating the merits and risks of an investment and adequate  access
to sufficient information about us to make an informed investment decision.

     During 2000, we received $3,223,874 from the exercise of 1,115,084 warrants
previously  issued.  Except for the  underwriter  warrants,  all of the  warrant
holders  received  these  warrants  from  their  participation  in  our  private
placement of stock and debt financing prior to its initial public  offering.  In
connection with the issuance, (i) each warrantholder  represented to us that, by
virtue of his investment acumen,  business  experience or independent  financial

                                       15

and tax advice,  he had the  capability  of  evaluating  the risks and merits in
investing in the shares,  (ii) each  warrantholder  represented  that the shares
acquired cannot be sold without registration under the Securities Act, except in
reliance upon an exemption  therefrom and (iii) we did not engage in any general
solicitation  or  advertisement  for the issuance.  The  warrantholders  further
represented  their  intention to acquire the securities for investment  only and
not with a view to the distribution thereof. Appropriate legends were affixed to
the stock  certificates  issued in such  transactions.  Each  warrantholder  had
adequate  access  to  sufficient  information  about  us  to  make  an  informed
investment  decision.  The  issuance and sale of these  securities  were made in
reliance on the exemption  provided by Section 4(2) of the Securities  Act, as a
transaction not involving any public  offering.  Of these warrants,  71,000 were
exercised by an Executive  Officer of  Intelli-Check  and 37,500  warrants  were
exercised  by a Director of  Intelli-Check.  Each of the  Executive  Officer and
Director who exercised their warrants is an accredited  investor as that term is
defined in Regulation D promulgated  under the Securities  Act. In addition,  we
believe  that  each of  these  persons  had such  knowledge  and  experience  in
financial and business  matters that they were capable of evaluating  the merits
and risks of the investment. The securities issued to the shareholders contain a
legend  stating that the warrants and  underlying  shares cannot be sold without
registration  under the  Securities  Act,  except in reliance  upon an exemption
therefrom.  As a member of senior  management  and a director of  Intelli-Check,
such persons had adequate access to sufficient  information  about us to make an
informed investment  decision.  We did not engage in any general solicitation or
advertisement  for the issuance.  The issuance and sale of these securities were
made in reliance on the  exemption  provided by Section  4(2) of the  Securities
Act, as a  transaction  not  involving  any public  offering.  In addition,  the
underwriters  of our initial  public  offering  exercised  90,000  warrants.  We
believe that the  underwriter had such knowledge and experience in financial and
business  matters that it was capable of evaluating  the merits and risks of the
investment.  We did not engage in any general  solicitation or advertisement for
the issuance.  The  underwriter  had adequate  access to sufficient  information
about us to make an informed investment decision. The issuance and sale of these
securities  were made in reliance on the  exemption  provided by Section 4(2) of
the Securities Act, as a transaction not involving any public offer.

     In March 2001, we declared a dividend  distribution of one non-transferable
right to purchase one share of our common stock for every 10 outstanding  shares
of common stock  continuously held from the record date to the date of exercise,
as well as common stock  underlying  vested stock options and warrants,  held of
record on March 30,  2001,  at an  exercise  price of $8.50.  The rights were to
expire on October 4, 2002,  which was one year after the  effective  date of the
registration  statement  related to the shares of common  stock  underlying  the
rights. On October 1, 2002, the company extended the expiration date until April
4, 2003 and further extended them until December 31, 2003. If certain conditions
are met, we have the right to redeem the outstanding  rights for $.01 per right.
As of March 26, 2003,  these  conditions were not met. We have reserved  970,076
shares of common stock for future  issuance  under this rights  offering.  As of
December  31,  2002,  287,594 of these  rights  were  exercised  and we received
$2,444,549 before expenses.

     In March 2001,  we extended the  expiration  date of its warrants that were
due to expire on various dates through June 30, 2001,  until September 30, 2001.
In September  2001, we further  extended the  expiration of these warrants until
October 31,  2001.  During  2001,  we received  $1,058,175  from the exercise of
352,725  remaining  warrants.  Of these  warrants,  75,000 were  exercised by an
Executive Officer of Intelli-Check.  In addition, 36,250 warrants were converted
into  25,329  shares  of  our  common  stock  utilizing  the  cashless  exercise
provision.  During 2002, we received $3,750 from the exercise of 1,250 warrants.
As of December 31, 2002,  there  remained  underwriter  warrants  outstanding to
purchase  10,000  shares of the Company's  common stock at an exercise  price of
$8.40.

     In March  2001,  our Board of  Directors  authorized,  subject  to  certain
business and market  conditions,  the purchase of up to $1,000,000 of our common
stock.  During 2001, we purchased 10,000 shares totaling  approximately  $53,000
and subsequently  retired these shares.  During 2002, we purchased an additional
10,000 shares  totaling  approximately  $70,000 and  subsequently  retired these
shares.

     During  2001,  we received  $775,150  from the  exercise  of 166,500  stock
options.  During 2002,  we also  received  $825,850 from the exercise of 273,700
stock options.

     On March 27, 2003,  pursuant to a Securities  Purchase  Agreement,  we sold
30,000 shares of our Series A 8% Convertible Preferred Stock, par value $.01 per
share for $3,000,000 before expenses to Gryphon Master Fund, L.P. Each preferred
share  entitles  the  holder  to  receive  dividends  of 8%  per  annum  and  is
convertible into 15.1515 shares of our common stock. Additionally, each share of
Preferred  Stock will  receive one (1) five year  warrant to  purchase  3.787875
shares of common stock at a price of $6.78.  The total amount of shares that may
be issued upon  conversion  and the  exercising  of the warrants are 454,545 and

                                       16

113,636  shares,  respectively.  The Company must redeem all of the  Preferred S
tock  outstanding  on the fifth  anniversary of the closing date at a redemption
price, in cash, equal to the purchase price of the Preferred Stock.

Item 6.  Selected Financial Data
         -----------------------
     The  following   selected  financial  data  presented  under  the  captions
"Statement of Operations Data" and "Balance Sheet Data" as of the end of each of
the years in the five years  ended  December  31,  2002,  are  derived  from the
financial statements of Intelli-Check,  Inc. The financial statements for fiscal
years ended  December 31, 1998 through  December 31, 2001 were audited by Arthur
Andersen LLP,  independent public  accountants and the financial  statements for
the fiscal year ended December 31, 2002 have been audited by Grant Thornton, LLP
independent certified public accountants.  The selected financial data should be
read in conjunction  with the financial  statements as of December 31, 2002, the
accompanying  notes and the report of independent  public  accountants  thereon,
which are included elsewhere in this Form 10-K.


                                                                Years Ended December 31,
                                                    1998       1999        2000        2001        2002
                                                    ----       ----        ----        ----        ----
                                                                     (In thousands)
                                                                                   
Statement of Operations Data:

Revenue                                            $    86    $    29     $   343     $   886     $ 1,139
Loss from operations                                (1,442)    (2,263)     (3,379)     (4,090)     (5,936)
Net Loss                                            (1,504)    (2,299)     (3,133)     (3,963)     (5,550)
Net loss per common share - basic and diluted        (0.36)     (0.45)      (0.47)      (0.52)      (0.64)
Common shares used in computing per
       share amounts - basic and diluted             4,208      5,080       6,648       7,911       8,686

                                                                    As of December 31
                                                    1998       1999        2000        2001        2002
                                                    ----       ----        ----        ----        ----
                                                                     (In thousands)
Balance sheet data:
Cash and cash equivalents                             160       6,381       4,092       4,061       1,911
Working capital (deficit)                            (925)      6,038       5,920       5,303       2,634
Total assets                                          451       7,208       7,940       8,423       5,415
Stockholders equity (deficit)                        (658)      6,325       6,633       7,030       3,873


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        ------------------------------------------------------------------------
        of Operations
        -------------
(a)     Overview

     Our  company  was formed in 1994 to  address a growing  need for a reliable
document and age verification  system to detect  fraudulent  driver licenses and
other widely accepted forms of government-issued  identification  documents. Our
sales  through  September  30, 2000 had been minimal  since  through 1998 we had
previously  produced  only a limited  pre-  production  run of our  product  for
testing and market  acceptance.  In late 1999,  we received a limited  number of
ID-Check  terminals,  which were then  available for sale.  Shortly  thereafter,
these  terminals were returned to the  manufacturer to be upgraded to contain an
advanced  imager/scanner,  which  allows  our  software  to  currently  read the
encoding on over 50 jurisdictions as opposed to 32 jurisdictions on the original
scanner.  During the fourth quarter of 2000, we experienced a material  increase
in sales as a result of product  availability  and  establishing  marketing  and
distributor agreements with resellers.  During 2001 and 2002, sales were limited
due to the refocus of our marketing  efforts towards the larger customers in the
retail market, in which the sales cycle normally requires an extended time frame
involving  multiple  meetings,  presentations and a test period,  which has been
further  extended by the rapid  slowing of the economy,  whereby  decisions  for
capital  expenditures have been delayed.  However,  after the tragic events that
occurred  on  September  11,  2001,  there has been a  significant  increase  in
awareness  and demand for our  technology to help improve  security  across many
industries,  including  airlines,  high profile buildings and facilities.  Since
inception,  we have  incurred  significant  losses and  negative  cash flow from
operating activities,  and as of December 31, 2002 we had an accumulated deficit
of $18,186,176. We will continue to fund operating and capital expenditures from
proceeds  that we received  from our  initial  public  offering  ("IPO") and our
recent  issuance  of  convertible  preferred  stock as well as the  exercise  of

                                       17

warrants,  options and rights.  In view of the  rapidly  evolving  nature of our
business and our limited  operating  history,  we believe that  period-to-period
comparisons of revenues and operating results are not necessarily meaningful and
should not be relied upon as indications of future performance.

     Our  initial   marketing   focus  was   targeted   towards   retailers   of
age-restricted  products  such as alcohol and  tobacco.  Because of our products
enhanced  ability to verify the validity of military ID's,  driver  licenses and
state  issued ID cards,  containing  either  magnetic  stripes or bar codes that
conform to AAMVA/ANSI/ISO  standards, we have refocused our marketing efforts to
address the markets being  affected by the cost to industry of "Identity  Theft"
and the need for enhanced  security.  As a result of our ID-Check product having
the ability to verify the encoded formats of the documents  described  above, we
have  already  sold our  ID-Check  unit to some of the largest  companies in the
gaming  industry,  a state port authority,  military  establishments,  airports,
nuclear power plants, high profile buildings and have completed successful tests
of our technology in one of the largest mass  merchandisers in the United States
and a large quasi-government  department. We currently have our product in tests
with  some  large  public  companies.  In  addition,  we  have  recently  signed
agreements  with some high profile  organizations  which will promote the use of
our  technology and our products,  such as Mothers  Against Drunk Driving (MADD)
and the American Association of Airport Executives (AAAE).

     (b) Results of Operations

     Comparison of the year ended  December 31, 2002 to the year ended  December
31, 2001.

     The Company sells its product  directly through its sales force and through
distributors.  Revenue from direct sales of the Company's  product is recognized
upon shipment to the customer. The Company's product requires continuing service
or  post  contract  customer  support  and  performance  by  the  Company,   and
accordingly  a portion of the revenue  based on its fair value is  deferred  and
recognized  ratably  over the period in which the future  service,  support  and
performance are provided,  which is generally one year. Currently,  with respect
to sales to  distributors,  the  Company  does not  have  enough  experience  to
identify  the fair value of each  element and the full amount of the revenue and
related gross margin is deferred and recognized ratably over the one-year period
in which the future service, support and performance are provided.

     Revenues  increased  $252,679 from $885,908 for the year ended December 31,
2001 to $1,138,587  recorded for the year ended December 31, 2002.  Revenues for
the period ended  December 31, 2002 consisted of revenues from  distributors  of
$464,463 and revenues from direct sales to customers of $674,124.  Sales,  which
represent  shipments of products and  contracted  services,  increased  34% from
$989,692  to  $1,326,829  for the  years  ended  December  31,  2001  and  2002,
respectively,  primarily  as a result  of the  inclusion  of  IDentiScan,  which
continues to focus on the age verification  market. The refocus of our marketing
efforts for Intelli-Check's patented technology to the document verification and
access control  markets,  which consists of the larger  retailers and government
agencies,  in which the sales cycle  requires an extended  time frame  involving
multiple  meetings,  presentations  and a test  period,  continues to impact our
sales. In addition, during 2001 and continuing in 2002, the sales cycle has been
further extended by the rapid slowing of the economy, resulting in decisions for
capital  expenditures being delayed.  Certain tests, recent marketing agreements
and legislative  efforts from the government to enhance security are expected to
result in increased sales opportunities.

     Operating  expenses,  which consist of selling,  general and administrative
and research and development  expenses,  increased 46.2% from $4,497,322 for the
year ended December 31, 2001 to $6,573,129 for the year ended December 31, 2002.
Selling  expenses,  which  consist  primarily of salaries and related  costs for
marketing, increased 51.2% from $950,774 for the year ended December 31, 2001 to
$1,437,509  for the year ended  December  31, 2002  primarily  due to  increased
salary costs,  commissions  and related  expenses from hiring  additional  sales
personnel  totaling  approximately  $224,000,  increased  travel and  convention
expenses of approximately $112,000, increased advertising and marketing expenses
of  approximately  $31,000 and hiring  professional  consultants  to promote our
product totaling approximately  $103,000.  General and administrative  expenses,
which  consist  primarily  of salaries and related  costs for general  corporate
functions,  including executive,  accounting,  facilities and fees for legal and
professional  services,  increased  43.9%  from  $2,332,150  for the year  ended
December 31, 2001 to $3,355,549 for the year ended December 31, 2002,  primarily
as a result of increased salary costs and related expenses from salary increases
and the  hiring of  additional  personnel  relating  to the  acquisition  of the
IDentiScan assets in December 2001 of approximately $131,000, increased fees for
investment relations consultants of approximately $705,000 primarily relating to
the recognized  non-cash expense of the granting of options to this group, which
was 78% of this increase, increases in depreciation and amortization expenses of
approximately  $325,000  from  additional  purchases of  equipment  and acquired
intangible  assets from the  acquisition of  IDentiScan,  increases in insurance
costs of  approximately  $27,000 due to  increases  in premiums  and higher rent
expense of  approximately  $34,000 due to rent  escalations and additional space
from the  acquisition  of  IDentiScan  partially  offset by lower legal costs of
approximately  $131,000  due to the settling of certain  lawsuits.  Research and
development expenses,  which consist primarily of salaries and related costs for
the  development  of our  products,  amounted to  $1,214,398  for the year ended
December 31, 2001 compared to $1,180,071  for the year ended  December 31, 2002,
has not  materially  changed.  During  the 4th  quarter of 2002,  we  recorded a
reserve on inventory  deposit of $600,000,  which represents the deposit we paid
                                       18

the  manufacturer on an open purchase order due to the uncertainty of whether or
not  we  will  complete  the  order  to  purchase   additional  units  from  our
manufacturer  or to  fulfill  future  orders  from  a new  platform  once  it is
selected.  As the Company experiences sales growth, we expect that we will incur
additional  operating expenses to support this growth.  Research and development
expenses may increase as we integrate  additional products and technologies with
our patented ID-Check technology.

     Interest expense decreased from $8,336 for the year ended December 31, 2001
to $4,878  for the year ended  December  31,  2002 as we have paid down  certain
capital leases which had higher interest rates.

     Interest  income  decreased  from $135,860 for the year ended  December 31,
2001 to $53,871 for the year ended  December  31,  2002,  which is a result of a
decrease in our cash and cash  equivalents  available for  investment  and lower
interest rates in effect during this period.

     Other  income  for the year  ended  December  31,  2002  totaling  $336,344
resulted  from a  settlement  of certain  obligations  under a Master  Licensing
agreement between the Company and Sensormatic Electronics Corporation, which was
due to expire on March 31, 2002.  We received  $412,000 and incurred  $75,656 in
refurbishment costs for previously customized terminals during the quarter ended
March 31, 2002.

     We have incurred net losses to date;  therefore we have paid nominal income
taxes.

     As a  result  of the  factors  noted  above,  our net loss  increased  from
$3,962,931,  which  included  $327,727 of non-cash  expenses  for the year ended
December 31, 2001 to  $5,550,234  for the year ended  December  31, 2002,  which
included $1,773,131 of non-cash expenses,  accounting for 91% of the increase in
our net loss.

     Comparison of the year ended  December 31, 2001 to the year ended  December
31, 2000.

     The Company sells its product  directly through its sales force and through
distributors.  Revenue from direct sales of the Company's  product is recognized
upon shipment to the customer. The Company's product requires continuing service
or  post  contract  customer  support  and  performance  by  the  Company,   and
accordingly  a portion of the revenue  based on its fair value is  deferred  and
recognized  ratably  over the period in which the future  service,  support  and
performance are provided,  which is generally one year. Currently,  with respect
to sales to  distributors,  the  Company  does not  have  enough  experience  to
identify  the fair value of each  element and the full amount of the revenue and
related gross margin is deferred and recognized ratably over the one-year period
in which the future service, support and performance are provided.

     Revenues  increased by $542,929 from  $342,979  recorded for the year ended
December  31, 2000 to $885,908  recorded  for the year ended  December 31, 2001.
Revenues from  distributors  totaled $721,930 and revenues from direct customers
totaled $163,978. Revenues for the year ended December 31, 2000 included initial
sales of a  limited  number of  ID-Check  terminals  prior to the  return of our
inventory of these  terminals to the  manufacturer  for upgrading.  Sales of our
enhanced  product  began in the  later  part of the  third  quarter  of 2000 and
primarily  consisted of the initial  order under the  marketing  agreement  with
Sensormatic  Electronics  Corporation.  Sales of approximately  $585,000 for the
year  ended  December  31,  2001 were  limited by the  refocus of our  marketing
efforts  towards the larger  customers  within the retail  market,  in which the
sales  cycle  normally  requires  an  extended  time  frame  involving  multiple
meetings,  presentations  and a test period,  which has been further extended by
the  rapid   slowing  of  the  economy,   resulting  in  decisions  for  capital
expenditures being delayed. In addition, the roll-out of Sensormatic's sales and
marketing  initiatives,  which were to begin in April  2001 never  materialized.
Since  Sensormatic  has met all its  obligations  under the original  agreement,
which was modified in January 2002, the agreement, which was scheduled to expire
on March 31, 2002,  was, by mutual consent,  not renewed.  We have also begun to
market to various  government and state  agencies,  which have long sales cycles
including extended test periods.

     Operating  expenses,  which consist of selling,  general and administrative
and research and development  expenses,  increased 27.6% from $3,523,357 for the
year ended December 31, 2000 to $4,497,322 for the year ended December 31, 2001.
Selling  expenses,  which  consist  primarily of salaries and related  costs for
marketing,  increased 6.8% from $890,453 for the year ended December 31, 2000 to
$950,774  for the year ended  December  31, 2001  primarily  due to increases in
expenses  attributable  to the hiring of a Director of Corporate  sales totaling
approximately  $100,000,  increased travel expenses of approximately $67,000 and
hiring  professional  consultants to promote our product totaling  approximately
$229,000  offset by the reduction of  advertising  expenses  totaling  $293,000.
General and  administrative  expenses,  which consist  primarily of salaries and
related costs for general corporate functions, including executive,  accounting,
facilities and fees for legal and  professional  services,  increased 46.6% from
$1,590,896 for the year ended December 31, 2000 to $2,332,150 for the year ended

                                       19


December  31,  2001,  primarily  as a result of an increase  in rent  expense of
approximately   $99,000  as  we  moved  to  a  larger   facility  and  increased
professional   fees  for  accounting  and   investment   relations   counsel  of
approximately   $169,000,   increased  legal  fees  of  approximately  $244,000,
resulting  from the  defense of our patent  and other law  suits,  increases  in
depreciation  expenses from additional  purchases of equipment of  approximately
$28,000,  increases in  insurance  costs of $27,000 and  refurbishment  costs on
inventory  of  $100,000.   Research  and  development  expenses,  which  consist
primarily of salaries and related  costs for the  development  of our  products,
increased  16.5%  from  $1,042,008  for the  year  ended  December  31,  2000 to
$1,214,398  for the year ended  December  31, 2001.  This  increase is primarily
attributable  to net  increases  in  salaries  and related  expenses  and hiring
additional  programmers totaling $188,000. We expect that expenses will continue
to increase in line with increases in the sales and growth of the business as we
may increase expenditures for advertising, brand promotion, public relations and
other marketing activities. We expect that we will incur incremental general and
administrative expenses as we grow the business in line with the sales growth of
the business. Research and development expenses may also increase as we complete
and introduce additional products based upon our patented ID-Check technology.


     Interest  expense  decreased  from $14,863 for the year ended  December 31,
2000 to $8,336 for the year ended December 31, 2001 as we have paid down certain
capital leases which had higher interest rates than those currently prevailing.

     Interest  income  decreased  from $261,181 for the year ended  December 31,
2000 to $135,860 for the year ended  December  31, 2001,  which is a result of a
decrease in our cash and cash  equivalents  available for  investment  and lower
interest rates in effect during this period.

     We have incurred net losses to date; therefore, we have paid nominal taxes.

     As a  result  of the  factors  noted  above,  our net loss  increased  from
$3,132,772 for the year ended December 31, 2000 to $3,962,931 for the year ended
December 31, 2001.

Critical Accounting Policies and the Use of Estimates
- -----------------------------------------------------

     The  preparation of our financial  statements in conformity with accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the amounts reported in
our financial  statements and  accompanying  notes.  Actual results could differ
materially from those estimates.

     We believe that there are several accounting  policies that are critical to
understanding the Company's historical and future performance, as these policies
affect the reported amounts of revenue and the more significant  areas involving
management's  judgments and estimates.  These  significant  accounting  policies
relate to revenue  recognition,  valuation  of  inventory  and  commitments  and
contingencies.  These policies,  and the Company's  procedures  related to these
policies, are described in detail below.

A.      Revenue Recognition

     We  sell  our  products  directly  through  our  sales  force  and  through
distributors.  Revenue  from  direct  sales of our  product is  recognized  upon
shipment  to the  customer.  Our  product  requires  continuing  service or post
contract  customer  support and  performance by us, and accordingly a portion of
the revenue is deferred based on its fair value and recognized  ratably over the
period in which the future service,  support and performance are provided, which
is generally  one year.  Currently,  with respect to sales to  distributors  and
sales of our IDentiScan  products,  we do not have enough experience to identify
the fair value of each  element  and the full  amount of the revenue and related
gross margin is deferred  and  recognized  ratably  over the one-year  period in
which the future service, support and performance are provided.

     During the third  quarter of fiscal 2002, we began  recognizing  sales from
the licensing of our  technology to customers.  Our licensing  products  require
continuing  service or post contract customer support and performance by us, and
accordingly  a portion of the  revenue is  deferred  based on its fair value and
recognized  ratably  over the period in which the future  service,  support  and
performance are provided, which is generally one year.


                                       20


B.      Inventory Valuation

     Our inventory  consists  primarily of its ID-Check  terminals  that run our
patented software.  The inventory was originally received December 1999. Shortly
thereafter, it was returned to the manufacturer for upgrade and became available
for sale in the fourth  quarter of 2000.  We  periodically  evaluate the current
market  value  of  our   inventory,   taking  into  account  any   technological
obsolescence  that may occur  due to  changes  in  hardware  technology  and the
acceptance  of the product in the  marketplace.  Even though we have had limited
sales to date, we believe that a sufficient  market exists to sell (with margin)
the current  inventory as well as the remaining  units  required to be purchased
from our manufacturer for which we have paid a deposit of $600,000.  The current
terminal,  for which this  deposit  was paid,  is fully  capable of running  our
patented software as it utilizes a state-of-the-art  imager/scanner and magnetic
stripe reader.  However, since our policy is to periodically evaluate the market
value  of the  inventory,  should  we  determine  in a  future  period  that  an
adjustment is  necessary,  we would record such  adjustment at that time,  which
could have a material effect on our results of operations. We are in discussions
with our current  manufacturer  as well as other  manufacturers  to select a new
platform to run our patented  software.  However,  during the fourth  quarter of
2002, we reserved 100% of this deposit due to the  uncertainty of whether or not
we will place the order to purchase the additional  units from the  manufacturer
under the open purchase  order or purchase units to fulfill future orders from a
new platform once it is selected.

C.      Commitments and Contingencies

     We are currently  involved in certain legal proceedings as discussed in the
"Commitments and Contingencies"  note in the Notes to the Financial  Statements.
We do not believe these legal proceedings will have a material adverse effect on
our financial position,  results of operations or cash flows.  However,  were an
unfavorable  ruling to occur,  there exists the possibility of a material impact
on the operating results of that period.

     The above listing is not intended to be a comprehensive  list of all of our
accounting  policies.  In many cases,  the accounting  treatment of a particular
transaction  is   specifically   dictated  by  generally   accepted   accounting
principles,  with no need for management's judgment in their application.  There
are  also  areas in which  management's  judgment  in  selecting  any  available
alternative  would not produce a materially  different  result.  See our audited
financial  statements  and notes  thereto which begin on page F-1 of this Annual
Report on Form 10-K which  contain  accounting  policies  and other  disclosures
required by generally accepted accounting principles.

     (c) Quarterly Results and Seasonality

     The  following  table  sets  forth  unaudited  financial  data  for each of
Intelli-Check's last eight fiscal quarters.


                                             Year Ended December 31, 2001              Year Ended December 31, 2002
                                             ----------------------------              ----------------------------
                                        First     Second    Third      Fourth    First     Second    Third       Fourth
                                        Quarter   Quarter   Quarter    Quarter   Quarter   Quarter   Quarter   Quarter(2)
                                        -------   -------   -------    -------   -------   -------   -------   ----------
                                                                      (Dollars in thousands)
                                                                                       
Income Statement Data:
  Revenues                              $   205   $   270   $   280   $   131    $   254   $   287   $   232   $    366

  Gross profit                               87       129       126        65        124       171       126        216
  Loss from operations                     (930)     (920)     (937)   (1,303)    (1,772)   (1,346)   (1,234)    (1,584)
  Net loss                                 (879)     (883)     (913)   (1,288)    (1,424)   (1,332)   (1,224)    (1,570)
  Net loss per share attributable to
  Common shareholders:
    Basic and diluted                     (0.12)    (0.11)    (0.12)    (0.16)(1)  (0.17)    (0.15)    (0.14)     (0.18)

     (1) Basic  earnings per share for fiscal 2001 in total exceeds by $0.01 the
     sum of the applicable amount for each of the quarters of fiscal 2001 due to
     the impact of stock  issuances  on the  weighted  average  number of shares
     outstanding.

     (2) During the fourth quarter,  a reserve on inventory  deposit of $600,000
     was recorded.

We have not experienced seasonality in our sales volume or operating expenses.

                                       21

     (d) Liquidity and Capital Resources

     Prior to our IPO, which became  effective on November 18, 1999, we financed
our operations  primarily  through several private  placements of stock and debt
financings. We used the net proceeds of these financings for the primary purpose
of funding working capital and general  corporate  purposes and for the purchase
of hardware terminals.  As a result of our IPO and the underwriters  exercise of
their  over  allotment  option,  we  received  approximately  $6,907,000  in net
proceeds after deducting underwriters commissions and offering expenses.  During
2000, we received $3,426,374 from the issuance of common stock from the exercise
of warrants and stock options.  During 2001 and 2002, we received $3,231,174 and
$1,742,466, respectively, from the issuance of common stock from the exercise of
warrants,  stock  options and rights.  In March 2003,  we received  net proceeds
before legal expenses of $2,850,000,  from the issuance of Convertible Preferred
Stock.  We funded the  purchase  of  hardware  terminals  for resale and working
capital primarily from these proceeds. We will continue to use these proceeds to
fund working capital.

     Cash used in operating  activities  for the year ended December 31, 2002 of
$3,771,132 resulted primarily from the net loss of $5,550,234 and an increase in
other current assets of $502,890 primarily resulting from a $400,000 deposit for
future  purchases  of  inventory,  which was  partially  offset by a decrease in
inventory  of  $365,849,  amortization  of deferred  compensation  of  $713,051,
depreciation  and  amortization of $451,581,  a reserve on inventory  deposit of
$600,000 and an increase of deferred revenue of $197,347. Cash used in operating
activities for the year ended December 31, 2001 of $2,966,437 resulted primarily
from the net loss of $3,962,931, a net decrease in deferred revenues of $344,381
which was  partially  offset by an  increase  in  accounts  payable  and accrued
expenses of $426,651, a decrease in inventory of $367,650, and a net decrease in
other current assets of $164,758  primarily  consisting of the related  deferred
costs of revenues and increased by deposits of $200,000 for future  purchases of
inventory.  The increase in accounts  payable and accrued  expenses for 2001 was
attributable  to certain large invoices  received  toward the end of 2001.  Cash
used in investing  activities  was $29,187 for the year ended  December 31, 2002
and  $193,824 for the year ended  December 31, 2001.  Net cash used in investing
activities  for both periods  consisted  primarily of capital  expenditures  for
computer  equipment  and  furniture  and  fixtures.  Cash  provided by financing
activities  was  $1,649,663  for the year ended December 31, 2002 and $3,129,807
for the year ended  December 31, 2001 and was primarily  related to the exercise
of outstanding warrants, stock options and rights.

     In March 2001, we declared a dividend  distribution of one non-transferable
right to purchase one share of our common stock for every 10 outstanding  shares
of common stock  continuously held from the record date to the date of exercise,
as well as common stock  underlying  vested stock options and warrants,  held of
record on March 30, 2001, at an exercise price of $8.50.  The rights were due to
expire on October 4, 2002,  which was one year after the  effective  date of the
registration  statement  related to the shares of common  stock  underlying  the
rights. We extended the expiration date until April 4, 2003 and further extended
the rights until December 31, 2003. We have the right to redeem the  outstanding
rights for $.01 per right  under  certain  conditions,  which were not met as of
March 26,  2003.  We have  reserved  970,076  shares of common  stock for future
issuance  under this rights  offering.  As of  December  31,  2002,  we received
$2,444,549 before expenses from the exercise of 287,594 of these rights.

     During the year ended  December  31,  2002,  we  received  net  proceeds of
$829,600 from the exercise of 1,250 warrants and 273,700 options. As of December
31, 2002, there remained  warrants  outstanding to purchase 10,000 shares of the
Company's common stock as an exercise price of $8.40.

     In March  2001,  our Board of  Directors  authorized,  subject  to  certain
business and market  conditions,  the purchase of up to $1,000,000 of our common
stock.   As  of  December  31,  2002,  we  purchased   20,000  shares   totaling
approximately  $123,000 and subsequently  retired these shares. We do not expect
to purchase additional shares unless certain conditions warrant it.

     On March 27, 2003,  pursuant to a Securities  Purchase  Agreement,  we sold
30,000 shares of our Series A 8% Convertible Preferred Stock, par value $.01 per
share for $3,000,000 before expenses to Gryphon Master Fund, L.P. Each preferred
share  entitles  the  holder  to  receive  dividends  of 8%  per  annum  and  is
convertible into 15.1515 shares of our common stock. Additionally, each share of
Preferred  Stock will  receive one (1) five year  warrant to  purchase  3.787875
shares of common stock at a price of $6.78.  The total amount of shares that may

                                       22


be issued upon  conversion  and the  exercising  of the warrants are 454,545 and
113,636 shares, respectively. The Company must redeem all of the Preferred Stock
outstanding on the fifth  anniversary of the closing date at a redemption price,
in cash, equal to the purchase price of the Preferred Stock.

     Our  operating   expenses  for  2003  are  projected  to  be  approximately
$5,900,000  compared to the reported expenses of approximately  $6.6 million for
2002,  which  included  non-cash  expenses of  approximately  $1.8 million.  The
projected  decrease  is  primarily  related  to the  reduction  of the  non-cash
expenses  relating to the reserve on  inventory  deposit  recorded in 2002.  For
2002, the Company's cash expense burn rate was approximately  $400,000 per month
and we expect that it will not materially  change for 2003, except for potential
dividend  payment due under the March 2003  financing.  We currently  anticipate
that our available cash in hand, cash resources from expected  revenues from the
sale of the units in inventory,  cash  resources  collected from the issuance of
Convertible  Preferred Stock combined with the expected  exercise of the options
by our option holders will be sufficient to meet our anticipated working capital
and capital expenditure  requirements for at least the next twelve months. These
requirements  are  expected  to  include  the  purchase  of  inventory,  product
development, sales and marketing, working capital requirements and other general
corporate purposes.  We may need to raise additional funds,  however, to respond
to  business  contingencies  which  may  include  the  need to fund  more  rapid
expansion,  fund additional marketing expenditures,  develop new markets for our
ID-Check   technology,   enhance  our  operating   infrastructure,   respond  to
competitive  pressures,   or  acquire  complementary   businesses  or  necessary
technologies.

                                       23

Below is a table, which presents our contractual  obligations and commitments at
December 31, 2002:


                             Payments Due by Period

------------------------------------------------------------------------------------------------------------
      Contractual Obligations            Total       Less than     1-3 years    4-5 years  After 5 years
                                                     One Year
                                                                               
------------------------------------------------------------------------------------------------------------
Capital Lease Obligations                   $19,999      $19,572           $427      --         --
------------------------------------------------------------------------------------------------------------
Operating Leases                          2,123,329      255,617        741,800    $540,886   $585,026
------------------------------------------------------------------------------------------------------------
Purchase commitments (1)                          0       --             --          --         --
------------------------------------------------------------------------------------------------------------
Employment contracts                        839,000      463,800        375,200      --         --
------------------------------------------------------------------------------------------------------------
Total Contractual Cash Obligation        $2,992,420     $746,458     $1,120,050    $540,886   $585,026
------------------------------------------------------------------------------------------------------------
     (1) We paid the manufacturer  $600,000 through April 1, 2002, as an advance
inventory  deposit  towards  the  open  purchase  order of  approximately  2,850
ID-Check units.

     (e) Net Operating Loss Carry Forwards

     As of December  31,  2002,  we had a net  operating  loss carry  forward of
approximately  $16,000,000,  which  expires  beginning  in the  year  2013.  The
issuance  of  equity  securities  in  the  future,  together  with  our  earlier
financings  and our IPO,  could  result in an ownership  change and,  thus could
limit  our use of our prior  net  operating  losses.  If we  achieve  profitable
operations,  any significant  limitation on the utilization of our net operating
losses would have the effect of  increasing  our tax  liability and reducing net
income and available cash reserves.  We are unable to determine the availability
of these  net-  operating  losses  since this  availability  is  dependent  upon
profitable operations, which we have not achieved in prior periods; therefore we
have recorded a full valuation  allowance for the benefit from the net-operating
losses.

Forward Looking Statements

     The foregoing contains certain forward-looking  statements. Due to the fact
that our business is characterized by rapidly changing technology,  high capital
requirements  and an  influx of new  companies  trying to  respond  to  enhanced
security  needs as a result of current  events,  actual results and outcomes may
differ  materially from any such forward looking  statements and, in general are
difficult to forecast.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

        None

Item 8. Financial Statements
        --------------------
     Financial Statements are attached hereto following page F-1.

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         -----------------------------------------------------------------------
         Financial Disclosure
         --------------------
     Grant Thornton LLP has been selected as our independent  public accountants
for the current year and examined our  financial  statements  for the year ended
December 31, 2002. On June 6, 2002,  Arthur Andersen LLP was dismissed and Grant
Thornton  was  engaged as our  principal  independent  public  accountants.  The
decision to change  accountants  was approved by the Board of Directors upon the
recommendation  of the Audit  Committee.  The reports of Arthur Andersen LLP for
the years ended  December 31, 2000 and 2001 did not contain any adverse  opinion
or disclaimer of opinion, nor were they qualified as to uncertainty, audit scope
or accounting  principles.  During our fiscal years ended  December 31, 2000 and
2001 and the  subsequent  interim  period  through  June 6, 2002,  there were no
disagreements with Arthur Andersen LLP on any matter of accounting principles or
practices,  financial  statement  disclosure,  or auditing  scope or procedures,
which disagreements, if not resolved to the satisfaction of Arthur Andersen LLP,
would  have  caused  them to make  reference  thereto  in their  reports  on the
financial statements for those years.

                                       24

                                    PART III

Item 10. Directors and Executive Officers of the Company
         -----------------------------------------------
     As of March 26, 2003, the Company's  directors and executive  officers were
as follows:



                               Position With the Company
     Name and Age              And Principal Occupation                                   Held Office Since
------------------------        -------------------------                                  -----------------
                                                                                        
Frank Mandelbaum,    69        Chairman, Chief Executive Officer and Director                    1996

Edwin Winiarz,       45        Senior Executive Vice President, Treasurer, Chief                 1999
                               Financial Officer and Director

W. Robert Holloway,  63        Senior Executive Vice President, Sales                            1999

Russell T. Embry,    39        Senior Vice President and Chief Technology Officer                2001

Evelyn Berezin,      77        Director                                                          1999

Charles McQuinn,     62        Director                                                          1999

Jeffrey Levy,        61        Director                                                          1999

Howard Davis,        47        Director                                                          2000

Arthur L. Money,     63        Director                                                          2003

Business Experience

     Frank  Mandelbaum  has  served  as our  Chairman  of the  Board  and  Chief
Executive  Officer since July 1, 1996. He also served as Chief Financial Officer
until September 1999. From January 1995 through May 1997, Mr.  Mandelbaum served
as a consultant  providing  strategic and financial  advice to Pharmerica,  Inc.
(formerly Capstone Pharmacy Services,  Inc.), a publicly held company.  Prior to
January 1995, Mr. Mandelbaum was Chairman of the Board,  Chief Executive Officer
and Chief Financial Officer of Pharmerica,  Inc. From July 1994 through December
1995,  Mr.  Mandelbaum  served  as  Director  and  Chairman  of  the  Audit  and
Compensation  Committees of Medical  Technology  Systems,  Inc., also a publicly
held company.  From November 1991 through January 1995, Mr. Mandelbaum served as
Director of the Council of Nursing Home  Suppliers,  a  Washington,  D.C.  based
lobbying  organization.  From 1974 to date, Mr.  Mandelbaum has been Chairman of
the Board and  President  of J.R.D.  Sales,  Inc.,  a privately  held  financial
consulting  company.  As required by his employment  agreement,  Mr.  Mandelbaum
devotes substantially all his business time and attention to our business.

     Edwin Winiarz was elected Senior  Executive Vice President in July 2000 and
a director in August 1999 and became  Executive  Vice  President,  Treasurer and
Chief Financial  Officer on September 7, 1999. From July 1994 until August 1999,
Mr. Winiarz was Treasurer and Chief Financial  Officer of Triangle Service Inc.,
a privately held national service company. From November 1990 through July 1994,
Mr.  Winiarz  served as Vice President  Finance/Controller  of Pharmerica,  Inc.
(formerly  Capstone  Pharmacy  Services,  Inc.).  From March 1986 until November
1990, Mr. Winiarz was a manager with the accounting firm of Laventhal & Horwath.
Mr.  Winiarz is a certified  public  accountant  and holds an MBA in  management
information systems from Pace University.

     Russell T. Embry was elected  Senior Vice  President  and Chief  Technology
Officer in July 2001 and was Vice President,  Information Technology, since July
1999. From January 1998 to July 1999, Mr. Embry was Lead Software  Engineer with
RTS Wireless.  From April 1995 to January 1998, he served as Principal  Engineer
at GEC-Marconi  Hazeltine  Corporation.  From August 1994 through April 1995, he
was a staff software engineer at Periphonics Corporation. From September 1989 to

                                       25


August 1994, Mr. Embry served as Senior Software Engineer at MESC/Nav-Com.  From
July  1985  through  September  1989,  he was a  software  engineer  at  Grumman
Aerospace.  Mr.  Embry holds a B.S. in Computer  Science from Stony Brook and an
M.S. in Computer Science from Polytechnic University, Farmingdale.

     W. Robert Holloway was elected Senior Executive Vice President in July 2000
and was Vice President, Sales from October 1999 to July 2000. From April 1999 to
October 1999, Mr. Holloway was Director of Sales for The IdentiScan Company LLC.
In February and March 1999, Mr.  Holloway  worked as an independent  consultant.
From August 1996 to January  1999,  Mr.  Holloway was Global  Sales  Manager for
Welch  Allyn,  Inc.  From  October  1994 to July  1996,  Mr.  Holloway  was Vice
President and Sales Manager of Bowne & Company of New York.  Mr.  Holloway holds
an AB in economics  from Columbia  University  and an MBA in finance from Boston
University.

     Evelyn Berezin was elected a director in August 1999.  She has been,  since
October  1987,  an  independent   management   consultant  to  technology  based
companies.  From July 1980 to  September  1987,  Ms.  Berezin was  President  of
Greenhouse Management Company, a venture capital fund dedicated to investment in
early-phase  high-technology  companies. Ms. Berezin holds an AB in Physics from
New York  University and has held an Atomic Energy  Commission  Fellowship.  Ms.
Berezin  has  served on the  boards of a number  of public  companies  including
Bionova Corp., Cigna Corp.,  Datapoint Corp., Koppers Company,  Inc. and Genetic
Systems Inc., as well as more than fourteen private technology-based companies.

     Howard Davis was  appointed a  non-voting  advisor to the Board in December
1999 and elected a director in March 2000.  He has been,  since 1997,  Executive
Vice  President  of  GunnAllen   Financial  Inc.,  where  he  is  the  executive
responsible for the investment  banking and finance division.  From 1990 to 1997
Mr. Davis was President and Chief  Executive  Officer of Kensington  Securities,
Inc. In 1997,  Kensington  and  GunnAllen  joined  together.  Mr. Davis has also
served as President of Wentworth Securities, Inc. from 1988 to 1990 and prior to
that as  President  of Numero Uno  Franchise  Corporation.  He has  attended the
University of Southern California,  California State University,  Northridge and
Kent State University where he majored in Finance and Accounting.

     Jeffrey Levy was elected a director in December  1999.  He has been,  since
February  1977  President  and Chief  Executive  Officer of  LeaseLinc,  Inc., a
third-party  equipment  leasing company and lease  brokerage.  Prior to 1977 Mr.
Levy served as President  and Chief  Executive  Officer of American  Land Cycle,
Inc. and Goose Creek Land Cycle, LLC, arboreal waste recycling companies. During
that time he also served as Chief Operating  Officer of ICC  Technologies,  Inc.
and AWK Consulting Engineers,  Inc. Mr. Levy has had a distinguished career as a
member of the  United  States  Air Force  from  which he retired as a colonel in
1988.  He serves as a board member of the Northern  Virginia  Chapter of Mothers
Against  Drunk  Driving,  the  Washington  Regional  Alcohol  Program,  the Zero
Tolerance  Coalition and the National Drunk and Drugged Driving Prevention Month
Coalition  and is a member of the  Virginia  Attorney  General's  Task  Force on
Drinking  by  College  Students  and  MADD's  National  Commission  on  Underage
Drinking. Mr. Levy holds a BS in International  Relations from the United States
Air Force  Academy,  a  graduate  degree in  Economics  from the  University  of
Stockholm and an MBA from Marymount University.

     Charles  McQuinn was elected a director in August 1999. He has been,  since
1997, an independent product development/marketing  consultant to Internet based
companies.  Mr.  McQuinn has also served as CEO of The McQuinn  Group,  Inc.,  a
system integration and institutional  marketing  company,  from November 1998 to
the present.  From 1995 to 1997,  Mr. McQuinn was President of DTN West, a fixed
income price quote company with products for banks and governments. From 1990 to
1995, Mr. McQuinn was President of Bonneville  Market  Information,  an equities
price quote  company with  products for traders and brokers.  From 1985 to 1990,
Mr. McQuinn was President of Bonneville  Telecommunications Company, a satellite
video and data company.  Prior to 1985,  he was with  Burroughs  Corporation  in
various product development/marketing/management  positions. Mr. McQuinn holds a
BS in marketing from Ball State University and an MBA in management from Central
Michigan University.

     Arthur L. Money was  elected a director  in February  2003.  Mr.  Money was
confirmed  by the Senate and served as the  Assistant  Secretary  of Defense for
Command, Control, Communications and Intelligence from 1999 to 2001 and was also
the Chief  Information  Officer for the  Department  of Defense  from 1998 until
2001. He prior served as the Senior Civilian  Official,  Office of the Assistant
Secretary of Defense,  from 1998 to 1999 and was earlier confirmed by the Senate
as  Assistant  Secretary  of  the  Air  Force  for  Research,   Development  and
Acquisition  and was their Chief  Information  Officer,  from 1996 to 1998.  Mr.

                                       26


Money currently serves as a member of the advisory board of several corporations
including  the  Boeing  Company  (NYSE:  BA).  He also  serves  on the  Board of
Directors of numerous companies including Silicon Graphics, Inc. (NYSE: SGI) and
CACI  International  (NYSE:  CAI)  and  has  been  recognized  for  his  vision,
leadership and  commitment to excellence in systems and process  re-engineering.
Mr. Money,  who holds a Master of Science Degree in Mechanical  Engineering from
the  University  of Santa Clara  (Calif.)  and a Bachelor  of Science  Degree in
Mechanical  Engineering  from San Jose (Calif.) State  University also currently
serves on several U.S. Government Boards and Panels such as NIMA Advisory Board,
Defense Science Board, US Air Force AC2ISR Center Advisory Board and the US Navy
"DSAP"  Special  Advisory  Panel.  Prior  to his  government  service,  he had a
distinguished  business  career  having  served  as  President  of ESL  Inc.,  a
subsidiary of TRW, Inc., from 1990 to 1994 prior to its  consolidation  with its
Avionics and Surveillance Group when he became Vice President and Deputy General
Manager of the Group.

     Directors  serve for  staggered  terms of 3 years and hold office until the
next annual meeting, following the conclusion of their term, of stockholders and
the election  and  qualification  of their  successors.  Executive  officers are
elected by and serve at the discretion of the board of directors.

Board Committees

     The board of directors has  established a compensation  committee  which is
currently  comprised  of Mr.  Levy,  chairman,  Mr.  Davis  and Mr.  Money.  The
compensation  committee reviews and determines the compensation for all officers
and directors of our company and reviews general policy matters  relating to the
compensation  and benefits of all  employees.  The  compensation  committee also
administers the stock option plans.

     The  board  of  directors  has  established  an  audit  committee  which is
currently  comprised of Mr. Davis,  chairman,  Mr. McQuinn and Ms. Berezin.  The
audit committee  recommends to the board of directors the annual engagement of a
firm of independent accountants and reviews with the independent accountants the
scope  and  results  of  audits,  our  internal  accounting  controls  and audit
practices  and  professional   services   rendered  to  us  by  our  independent
accountants.

     The board of directors has  established a corporate  governance  committee,
which is comprised  of Mr.  McQuinn,  chairman,  Ms.  Berezin and Mr. Levy.  The
corporate  governance committee reviews our internal policies and procedures and
by-laws and acts as our nominating committee for the Board of Directors.

     The  technology  oversight  committee  was  eliminated  in July  2002.  The
technology   oversight   committee   assisted   management  in  planning  future
development  of  products  and  services   within  the  framework  of  consumer,
regulatory and competitive  environments.  This committee also monitored actions
taken to protect our intellectual  property and recommended  appropriate actions
in furtherance of that protection.

Compliance with Section 16(a) of the Exchange Act

     The  Securities  and Exchange  Commission has adopted rules relating to the
filing of ownership reports under Section 16 (a) of the Securities  Exchange Act
of  1934.  One such  rule  requires  disclosure  of  filings,  which  under  the
Commission's  rules,  are not deemed to be timely.  During  the  review,  it was
determined  that  although  Paul  Cohen did not file  timely his sales of shares
during the month of  September,  such failure was  remedied by the  reporting of
those sales in October and all other transactions were timely filed thereafter.

                                       27

Item 11.  Executive Compensation
          ----------------------
     The  following  table sets forth  compensation  paid to executive  officers
whose  compensation  was in excess of $100,000 for any of the three fiscal years
ended December 31, 2002. No other executive  officers  received total salary and
bonus compensation in excess of $100,000 during any of such fiscal years.

                           SUMMARY COMPENSATION TABLE



                                                                         Annual          Long-Term
                                                                      Compensation       Compensation
                                                                                         Securities
                                                                                         Underlying
Name and Principal Position                           Year(s)          *Salary ($)       Options/SARS (#)
----------------------------                           ------           -----------       ----------------
                                                                                
Frank Mandelbaum                                        2002             225,000         350,000
Chairman & CEO                                          2001             204,808
                                                        2000             150,000         --

Edwin Winiarz                                           2002             135,000
Senior Executive Vice President                         2001             128,333         75,000
Chief Financial Officer                                 2000             125,000         25,000

W. Robert Holloway                                      2002             115,000
Senior Executive Vice President                         2001             115,000
Sales                                                   2000             115,000         --

Russell T. Embry                                        2002             150,000         12,500
Senior Vice President                                   2001             133,750         --
Chief Technology Officer                                2000             104,052         25,000

Kevin Messina                                           2001              52,500
Former Senior Executive Vice President                  2000             150,000         --
Former Chief Technology Officer

*Salaries include all deferred salaries paid and accrued.


     The options  shown above were granted  under the 1998,  1999 and 2001 Stock
Option Plans as well as outside these plans and are exercisable as follows:  (1)
for Frank  Mandelbaum at $12.10 per share;  (2) for Edwin Winiarz 25,000 options
at an exercise  price of $10.75 and 75,000 options at an exercise price of $8.04
exercisable  on September 7, 2006 and (3) Russell T. Embry 25,000  options at an
exercise price of $8.75 and 12,500  options at an exercise  price of $3.82.  All
options expire five years after the date of vesting.

     Messrs.  Mandelbaum and Messina had Employment Agreements expiring December
31,  2001,  which  provided  for base annual  salaries of  $225,000,  subject to
specified conditions.  Because of our limited resources,  Messrs. Mandelbaum and
Messina  had from  time to time  agreed  to defer  the  receipt  of  substantial
portions of their salaries.  In May 1999, Mr.  Mandelbaum's  deferred salary was
reduced by $150,000 by the issuance to him of 75,000  shares of our common stock
and warrants entitling him to purchase an additional 75,000 shares of our common
stock at a price of $3.00 per  share at any time  prior to May 3,  2001.  In May
1999, Mr. Messina's  deferred salary was reduced by $10,126 through the issuance
to him of 5,063 shares of our common stock and warrants to purchase 5,063 shares
of our common stock at a purchase  price of $3.00 per share at any time prior to
May 3,  2001.  As of  June  30,  1999,  Mr.  Mandelbaum's  deferred  salary  was
approximately  $375,000  and Mr.  Messina's  deferred  salary was  approximately
$200,000.  In June 1999, Mr. Messina  received,  in lieu of all deferred salary,

                                    28

options to purchase 207,000 shares of common stock at an exercise price of $3.00
per share  which  were  exercised  in 2002.  Also in June 1999,  Mr.  Mandelbaum
received, in lieu of all deferred salary,  options to purchase 375,000 shares of
common stock at an exercise price of $3.00 per share.

     Mr. Kevin Messina  resigned as Senior  Executive  Vice  President and Chief
Technology Officer in May 2001.

     All the options  granted in exchange for deferred  salary expire five years
after the date of grant.

     The  following  table  summarizes  options  granted  during  the year ended
December 31, 2002 to the named executive officers:


                                                                                       Potential Realizable Value
                                              Individual Grants                                    At
----------------------------------------------------------------------------------------------------------------------
                            Number of       % of Total Options                          Assumed Annual Rates of
                                                                                              Stock Price
                            Securities          Granted To                            Appreciation for Option Term
                        Underlying Options     Employees In     Exercise   Expiration
----------------------------------------------------------------------------------------------------------------------
                                                   2002
         Name                Granted           Fiscal Year        Price       Date           5%               10%
----------------------------------------------------------------------------------------------------------------------
                                                                                         

Russell T. Embry              12,500               3.1%           $  3.82         10/31/07       $13,192      $29,152
----------------------------------------------------------------------------------------------------------------------
Frank Mandelbaum             350,000              80.1%           $ 12.10         02/01/07    $1,170,052   $2,585,510
----------------------------------------------------------------------------------------------------------------------

     The following  table  summarizes  unexercised  options  granted through the
year-end December 31, 2002 to the named executive officers:


                                                 Aggregate                                  Value Of Unexercised
                              No. of Shares    Dollar Value        No. of Securities            In-the-Money
                              Received Upon    Received Upon    Underlying Unexercised        Options At Fiscal
            Name                 Exercise        Exercise         Options / Warrants          Year End 12/31/02
----------------------------------------------------------------------------------------------------------------------
                                                              Exercisable Unexercisable  Exercisable  Unexercisable
                                                                                            
Frank Mandelbaum
Chairman & CEO                                                 700,000      150,000      $1,950,000
----------------------------------------------------------------------------------------------------------------------
Ed Winiarz
Senior Executive VP
 CFO                                                            60,000        75,000       $66,500
----------------------------------------------------------------------------------------------------------------------
W. Robert Holloway
Senior Executive VP
Sales                                                           20,000        30,000
----------------------------------------------------------------------------------------------------------------------
Russell T. Embry
Senior VP & CTO                                                 76,500        6,250       $19,250       $19,250
----------------------------------------------------------------------------------------------------------------------

     Pursuant to their  employment  agreements,  Messrs.  Mandelbaum and Messina
each received a grant in August 1999 of options to purchase 75,000 shares of our
common stock at a purchase price of $3.00 per share. Mr.  Mandelbaum has options
to purchase  50,000  shares of common stock,  which are  currently  exercisable.
Options to purchase  25,000  shares of our common  stock became  exercisable  on
January 1, 2002.  The options  expire  five years from the date of grant.  Kevin
Messina  exercised  50,000  options on October 5, 2001 and  options to  purchase
25,000 shares for Mr. Messina expired as a result of his resignation. During the
years ended December 31, 2001 and December 31, 2002, we granted  employees other
than the executive  officers  named above options to purchase  32,750 shares and
150,500 shares respectively, of common stock under the 1998, 1999 and 2001 Stock
Option Plans and non plan.

     The amounts  shown as potential  realizable  value  represent  hypothetical
gains that could be achieved for the respective  options if exercised at the end
of the option  term.  The 5% and 10% assumed  annual rates of  compounded  stock
price  appreciation  are  mandated  by  rules  of the  Securities  and  Exchange
Commission  and do not represent our estimate or projection of our future common
stock prices.  These amounts  represent certain assumed rates of appreciation in

                                       29


the value of our common  stock from the fair market  value on the date of grant.
Actual  gains,  if any, on stock option  exercises  are  dependent on the future
performance of the common stock and overall stock market conditions. The amounts
reflected in the table may not necessarily be achieved.

Compensation of Non-Employee Directors
---------------------------------------
     Non-employee  directors  receive a fee of $500 for attending board meetings
and $250 for attendance at such meetings telephonically. They also receive a fee
of $300 for each  committee  meeting  held on a date  other than that of a board
meeting  and are  reimbursed  for  expenses  incurred  in  connection  with  the
performance  of  their   respective   duties  as  directors.   In  August  1999,
non-employee  directors,  Messrs.  Paul Cohen and McQuinn and Ms. Berezin,  each
received a grant of a non-  qualified  stock  option to purchase an aggregate of
45,000  shares of our  common  stock  upon their  election  as a director  at an
exercise  price of $3.00 per share.  Of these options,  15,000 were  immediately
exercisable  and an additional  15,000 became  exercisable  in July 2000 and the
remaining 15,000 became exercisable in July 2001. On December 13, 1999, Mr. Levy
and Mr. Davis were each granted  non-qualified options to purchase 15,000 shares
of our common  stock at an exercise  price of $11.625,  the fair market value on
the date of grant. These options were immediately  exercisable.  In addition, in
July 2000 they were each granted  non-qualified options to purchase an aggregate
of 30,000  shares of our common  stock for  serving as a director at an exercise
price of $8.25 per share. Of these options,  15,000 were immediately exercisable
and 15,000 were  exercisable  in July 2001. In July 2001,  Mr. Davis was granted
non-qualified  options  to  purchase  15,000  shares of our  common  stock at an
exercise price of $10.15 exercisable on the date of our next annual meeting.  In
addition,  Mr.  McQuinn was  granted  non-qualified  options to purchase  30,000
shares of our common  stock at an exercise  price of $10.15.  Of these  options,
15,000 are  exercisable  in 2002 and the balance are  exercisable in 2003 on the
date of our annual meeting during these years. In July 2002, Ms. Berezin and Mr.
Cohen were granted non-qualified options to purchase 45,000 shares of our common
stock for  serving as a director  at an  exercise  price of $2.80 per share.  Of
these options,  15,000 were immediately  exercisable  with an additional  15,000
becoming  exercisable on each of the next two anniversaries of the date of grant
provided that they remain as Directors.

     During  2001,  Mr.  Davis  exercised  15,000  of  his  options  and  earned
compensation of $138,300,  Mr. McQuinn exercised 1,000 of his options and earned
compensation  of $6,800 and Ms. Berezin  exercised 500 of her options and earned
compensation of $3,938.  During 2002, Mr. Davis exercised 200 of his options and
earned  compensation of $2,320.  Options  granted to non-employee  directors are
exercisable  only  during the  non-employee  director's  term and  automatically
expire on the date his or her service terminates.  Mr. Paul Cohen had previously
been granted  options to purchase  30,000 shares of common stock  exercisable at
$3.00 per share.  Mr. Cohen also received an option to purchase 50,000 shares of
common  stock  exercisable  at $3.00 per  share in  connection  with a  one-year
consulting  agreement dated November 1, 1997 which was exercised during 2002. As
a result of Mr.  Paul  Cohen's  resignation  on  February  3,  2003,  all of his
remaining vested options expire 90 days from his resignation.

     During 2003,  Mr.  Arthur Money was appointed to the Board of Directors and
was granted  non-qualified options to purchase 45,000 shares of our common stock
for  serving as a director  at an  exercise  price of $6.40 per share.  Of these
options,  15,000 were immediately exercisable with an additional 15,000 becoming
exercisable  on each of the next two of our annual  meetings  provided that they
remain as Directors.  Mr. Money also received an option to purchase 1,500 shares
of  common  stock  exercisable  at  $6.22  per  share  in  connection  with  his
appointment to the compensation committee on March 17, 2003. Prior to becoming a
Director,  he received on November 7, 2001an option to purchase 10,000 shares of
common  stock  exercisable  at  $15.13  in  connection  with  providing  certain
consulting services.  In addition,  on March 17, 2003, Mr. Levy received options
to purchase  1,000  shares of common  stock  exercisable  at $6.40 per share for
being appointed the Chairman of the compensation committee.

     In  addition,  non-employee  directors  who are members of a committee  are
entitled  to  receive  grants  of stock  options  for  each  year  served.  Each
chairperson  of a committee  receives  options to purchase  2,500  shares of our
common stock, while a committee member receives options to purchase 1,500 shares
of our common  stock.  In March  2000,  July  2000,  July 2001 and July 2002 the
following non-qualified options were granted to committee chairpersons:


Name              Committee                            Number of Options
-----              ---------                            -----------------
                                       March 2000      July 2000       July 2001       July 2002
                                       ----------      ---------       ---------       ---------
                                                                         
Ms. Berezin     Audit                   2,500           2,500           2,500           2,500
Mr. McQuinn     Corporate Governance    2,500           2,500           2,500           2,500
Mr. Levy        Technology Oversight    2,500           2,500           2,500           -----
Mr. Davis       Compensation                            2,500           2,500           2,500

                                       30


The following non-qualified options were granted to committee members:

Name            Committee(s)                            Number of Options
-----            -----------                             -----------------
                                        March 2000      July 2000       July 2001       July 2002
                                        ----------      ---------       ---------       ---------
Mr. Cohen       Compensation, Audit     3,000           1,500           1,500           1,500
Ms. Berezin     Corporate Governance,
                Technology Oversight    3,000           3,000           3,000           1,500
Mr. McQuinn     Audit, Technology
                Oversight               3,000           3,000           3,000           1,500
Mr. Levy        Corporate Governance,
                Compensation                            3,000           3,000           3,000
Mr. Davis       Audit                   1,500           1,500           1,500           1,500


     These options are exercisable at $12.125 for options granted in March 2000,
$8.75 for options granted in July 2000,  $10.15 for options granted in July 2001
and $2.80 for options granted in July 2002, the fair market value on the date of
grant, are immediately  exercisable during the committee members term and expire
five years from date of grant.

Employment   Contracts,   Termination   of  Employment   and   Change-in-Control
--------------------------------------------------------------------------------
Arrangements
-------------
     Effective January 1, 1999, Mr. Mandelbaum and Mr. Messina each entered into
a three-year  employment  agreement with  Intelli-Check.  Each of the agreements
provided for a base salary of $225,000.  However, until such time as we received
payment for gross sales of at least  $1,000,000,  which  occurred in April 2001,
the  salaries  were capped at $150,000.  The  agreements  also  provided for the
payment of a bonus if our sales  exceed  $2,000,000  in the previous  year.  The
bonus would have been in the amount of $50,000 plus 1% of the amount of sales in
excess of  $2,000,000  in each year.  In  addition,  for each fiscal year ending
during the term of the employment agreements, we were obligated to grant to each
of the  executives  an option to purchase  the  greater of 25,000  shares of our
common stock at fair market  value on the date of grant or 10,000  shares of our
common stock at fair market value on the date of grant for each full $250,000 by
which  pre-tax  profits  for each year  exceeded  pre-tax  profits for the prior
fiscal year.  However,  we were not required to grant  options to purchase  more
than  150,000  shares of our common  stock with  respect to any one fiscal year.
During the terms of their agreements, no bonuses were earned.

     On May 7, 2001,  our board of directors  accepted the  resignation of Kevin
Messina.  Accordingly,  all of the obligations  under the employment  agreement,
including the payment of salary and incentives, ceased as of this date.

     On February 1, 2002, we entered into a new three-year  employment  contract
with its Chairman and Chief Executive  Officer,  effective  January 1, 2002. The
agreement  provides  for an annual  base salary of  $250,000.  In  addition,  we
granted  to the  Chairman  and Chief  Executive  Officer  an option to  purchase
350,000  shares  of common  stock,  of which  125,000  options  are  immediately
exercisable at $12.10 per share and 225,000 options become exercisable at a rate
of 75,000 per year on December 31, 2002, 2003 and 2004.

     If there  shall  occur a change of  control,  as defined in the  employment
agreement, the employee may terminate his employment at any time and be entitled
to  receive  a payment  equal to 2.99  times his  average  annual  compensation,
including  bonuses,  during the three years  preceding the date of  termination,
payable in cash to the extent of three  months  salary and the balance in shares
of our common stock based on a valuation of $2.00 per share. Included within the
definition  of change of  control  is the first day on which a  majority  of the
directors  of the  company do not  consist  of  individuals  recommended  by Mr.
Mandelbaum and one outside director.

     We had entered into a two-year employment agreement with Mr. Winiarz, which
became effective on September 7, 1999. The agreement  provided for a base salary
of $125,000.  In addition,  we granted Mr. Winiarz an option to purchase  50,000
shares of common stock, of which 30,000 options were immediately  exercisable at
$5.00 per share and 20,000  options  became  exercisable on September 7, 2000 at
$5.00 per share.

                                       31

     On September 7, 2001, we renewed the employment agreement with Mr. Winiarz.
The agreement,  which expires  December 31, 2004,  provides for a base salary of
$135,000 with annual  increases of 5% per annum. In addition,  we granted 75,000
stock  options at an exercise  price of $8.04  vesting on September 7, 2006 with
earlier vesting incentives.

     We entered into a two-year  employment  agreement with Mr. Holloway,  which
became  effective on October 25, 1999. The agreement  provides for a base salary
of $115,000.  In addition,  we granted Mr. Holloway an option to purchase 50,000
shares  of  common  stock  at  $7.50  per  share,  of which  20,000  shares  are
immediately  exercisable  and 5,000 shares  become  exercisable  for each 10,000
sales of ID-Check products sold that exceed 10,000. The maximum options that can
be earned in any calendar year may not exceed 100,000.  Any options earned above
the initial  50,000  options  will be at fair market value on the date of grant.
Upon  the  expiration  of  this  agreement,  we  renewed  the  agreement  for an
additional two years under the same terms and conditions.

     Under the terms of the agreements,  each of the executives has the right to
receive his  compensation in the form of shares of common stock valued at 50% of
the  closing  bid  price of our  shares  of  common  stock as of the date of the
employee's  election,  which is to be made at the beginning of each quarter.  In
addition,  each of the  employment  agreements  requires the executive to devote
substantially   all  his  time  and  efforts  to  our   business   and  contains
non-competition  and nondisclosure  covenants of the officer for the term of his
employment and for a period of two years thereafter.  Each employment  agreement
provides that we may terminate the agreement for cause.

Item 12.  Security  Ownership of Certain  Beneficial  Owners and  Management and
          ----------------------------------------------------------------------
          Related Stockholder Matters
          ---------------------------


                                        Equity Compensation Plan Information

                              Number of Securities     Weighted average
                               to be issued upon      exercise price of     Number of securities remaining available
                                  exercise of            outstanding            for future issuance under equity
                              outstanding options,    options, warrants     compensation plans (excluding securities
Plan Category                 warrants and rights         and rights                 reflected in column a)
                                      (a)                    (b)                              (c)
----------------------------- ----------------------- --------------------- -------------------------------------------
                                                                                     

----------------------------- ----------------------- --------------------- -------------------------------------------
Equity compensation plans
approved by security
holders                               1,318,866              $7.96                            281,934
----------------------------- ----------------------- --------------------- -------------------------------------------
Equity compensation plans
not approved by security
holders                               1,015,000              $7.59                              -0-
----------------------------- ----------------------- --------------------- -------------------------------------------
Total
----------------------------- ----------------------- --------------------- -------------------------------------------

     The following table sets forth, as of December 31, 2002 certain information
regarding  beneficial  ownership of Intelli-Check's  common stock by each person
who is known by us to  beneficially  own more than 5% of our common  stock.  The
table also identifies the stock ownership of each of our directors,  each of our
officers,  and all  directors  and  officers  as a group.  Except  as  otherwise
indicated,  the stockholders listed in the table have sole voting and investment
powers with respect to the shares indicated.

     Unless otherwise  indicated,  the address for each of the named individuals
is c/o Intelli-Check, Inc., 246 Crossways Park West, Woodbury, NY 11797-2015.

     Shares of common stock which an  individual or group has a right to acquire
within 60 days pursuant to the exercise or  conversion  of options,  warrants or
other similar convertible or derivative  securities are deemed to be outstanding
for the purpose of computing  the  percentage  ownership of such  individual  or
group,  but are not deemed to be  outstanding  for the purpose of computing  the
percentage ownership of any other person shown in the table.

                                       32

The applicable  percentage of ownership is based on 8,875,302 shares outstanding
as of December 31, 2002.


----------------------------------------------------------------------------------------------
         Name                                       Shares Beneficially Owned         Percent
----------------------------------------------------------------------------------------------
                                                                                 
Frank Mandelbaum                                            1,327,400                  13.72
----------------------------------------------------------------------------------------------
Edwin Winiarz                                                 63,500                    *
----------------------------------------------------------------------------------------------
W. Robert Holloway                                            24,200                    *
----------------------------------------------------------------------------------------------
Russell T. Embry                                              71,250                    *
----------------------------------------------------------------------------------------------
Paul Cohen                                                   171,200                   1.91
----------------------------------------------------------------------------------------------
Evelyn Berezin                                                84,550                    *
----------------------------------------------------------------------------------------------
Charles McQuinn                                               84,600                    *
----------------------------------------------------------------------------------------------
Jeffrey Levy                                                  68,250                    *
----------------------------------------------------------------------------------------------
Howard Davis                                                  64,800                    *
----------------------------------------------------------------------------------------------
Todd Cohen                                                    940,800                  10.37
----------------------------------------------------------------------------------------------
Empire State Development***, formerly New York
State Science and Technology Foundation                       605,000                   6.42
----------------------------------------------------------------------------------------------
All Executive Officers & Directors as a group (10 persons)  1,959,750                  20.67
----------------------------------------------------------------------------------------------

* Indicates beneficial ownership of less than one percent of the total outstanding common stock.
** The person who exercises the voting power is the CFO who, at the present time, is Frances A. Walton.

     The amounts shown for Mr. Mandelbaum do not include 24,900 shares and 2,490
rights  held by Mr.  Mandelbaum's  wife,  for  which  Mr.  Mandelbaum  disclaims
beneficial ownership.

     The amounts shown for Mr. Paul Cohen do not include 50,500 shares and 5,050
rights held by Mr.  Cohen's wife and  daughter,  for which Mr.  Cohen  disclaims
beneficial ownership.

     Mr. Todd Cohen's address is P.O. Box 20054,  Huntington  Station,  New York
11746.

     Due to recent legislation,  all assets of the New York State Small Business
Technology Investment Fund, which were located in the New York State Science and
Technology  Foundation,  were transferred to The Urban  Development  Corporation
d/b/a Empire State Development.  The Commissioner of Empire State Development is
Charles  A.  Gargano.  The  members  of the Board of  Directors  are  Charles A.
Gargano,  J. Patrick Barrett,  Charles E. Dorkey,  III, David Feinberg,  Anthony
Gioia,  Deborah  Weight and Elizabeth  McCaul.  The address for that fund is 633
Third Avenue, New York, NY 10017.

     The amounts shown in the table above for the following  persons include the
right to acquire the number of shares shown  pursuant to  currently  exercisable
stock options, and/or warrants and/or rights at the exercise price shown:



Name                                              Number of Shares            Exercise Price
---------------------------------------------------------------------------------------------------
                                                                            
Frank Mandelbaum                                      500,000                      $3.00
                                                      200,000                     $12.10
                                                      102,100                      $8.50
---------------------------------------------------------------------------------------------------
Edwin Winiarz                                          35,000                      $5.00
                                                       25,000                     $10.75
                                                        3,500                      $8.50
---------------------------------------------------------------------------------------------------
Russell T. Embry                                       20,000                      $7.50
                                                       20,000                     $11.625
                                                       25,000                      $8.75
                                                        5,250                      $8.50
                                                        6,250                      $3.82
---------------------------------------------------------------------------------------------------

                                       33

---------------------------------------------------------------------------------------------------
Name                                              Number of Shares            Exercise Price
---------------------------------------------------------------------------------------------------
W. Robert Holloway                                     20,000                      $7.50
                                                        2,200                      $8.50
---------------------------------------------------------------------------------------------------
Paul Cohen                                            60,000                       $3.00
                                                       3,000                      $12.125
                                                       1,500                       $8.75
                                                       1,500                      $10.15
                                                      11,200                       $8.50
                                                      16,500                       $2.80
---------------------------------------------------------------------------------------------------
Evelyn Berezin                                        44,500                       $3.00
                                                       5,500                      $12.125
                                                       5,500                       $8.75
                                                       5,500                      $10.15
                                                       4,050                       $8.50
                                                      19,000                       $2.80
---------------------------------------------------------------------------------------------------
Charles McQuinn                                       44,000                       $3.00
                                                       5,500                      $12.125
                                                       5,500                       $8.75
                                                       5,500                      $10.15
                                                       4,100                       $8.50
                                                       4,000                       $2.80
---------------------------------------------------------------------------------------------------
Jeffrey Levy                                          15,000                      $11.625
                                                       2,500                      $12.125
                                                       1,500                       $8.00
                                                      35,500                       $8.75
                                                       5,500                      $10.15
                                                       3,950                       $8.50
---------------------------------------------------------------------------------------------------
Howard Davis                                          15,000                      $11.625
                                                       2,500                       $8.000
                                                       1,500                      $12.125
                                                      14,800                       $8.75
                                                      18,000                      $10.15
                                                       3,800                       $8.50
                                                       4,000                       $2.80
---------------------------------------------------------------------------------------------------
Arthur L. Money                                       10,000                      $15.13
                                                      15,000                       $6.40
---------------------------------------------------------------------------------------------------
Todd Cohen                                           110,000                       $3.00
                                                      86,000                       $8.50
---------------------------------------------------------------------------------------------------


Item 13. Certain Relationships and Related Transactions
         ----------------------------------------------
     In  October  1994,   Messrs.   Todd  Cohen  and  Kevin  Messina  co-founded
Intelli-Check  and each  purchased  975,000  shares of common stock for $975. In
April 1998,  Mr. Todd Cohen  resigned as an officer of our company for  personal
reasons and in August 1999,  he completed  his term as a director.  In May 2001,
Mr. Messina resigned as an officer of our company to pursue other  opportunities
and in July 2001, he completed his term as a director.

     In June 1996, Mr. Messina's company, K.M. Software, assigned two copyrights
covering certain software employed by ID-Check and a patent application covering
the ID-Check  technology to  Intelli-Check  for an agreement to pay $98,151 plus
interest. The agreement also gave K.M. Software, or its successor,  the right to
reclaim the rights to the  copyrights  and the patent  under  certain  specified
conditions.  In May 1999, the prior agreement was superseded and in exchange Mr.
Messina  received  69,937  shares of our common  stock and  warrants to purchase
69,937 shares of our common stock,  at $3.00 per share,  exercisable at any time
prior to May 3,  2001.  The May  1999  agreement  provides  for the  payment  by

                                       34


Intelli-Check  of royalties  equal to 0.005% of gross sales from  $2,000,000  to
$52,000,000  and 0.0025% of gross sales in excess of  $52,000,000.  Also, in May
1999, Mr. Messina's  deferred salary was reduced by $10,126 through the issuance
to him of 5,063 shares of our common stock and warrants to purchase 5,063 shares
of our common stock at a purchase  price of $3.00 per share at any time prior to
May 3, 2001.  In June 1999,  the balance of Mr.  Messina's  deferred  salary was
reduced to zero by the  issuance  of options to purchase  207,000  shares of our
common  stock at a  purchase  price of $3.00 per share at any time prior to June
30, 2004.

     In June 1996, Frank Mandelbaum, Intelli-Check's Chief Executive Officer and
Chairman of the Board of Directors, purchased 950,000 shares of common stock for
$50,000.  From  time  to  time  since  then,  Mr.  Mandelbaum  loaned  money  to
Intelli-Check  totaling $142,000. In November 1997, Mr. Mandelbaum converted his
outstanding  loans  into  71,000  shares of our  common  stock and  warrants  to
purchase  71,000  shares  of our  common  stock at  $3.00  per  share,  which he
exercised on December 31, 2000. In May 1999, Mr.  Mandelbaum's  deferred  salary
was reduced by  $150,000  through  the  issuance to him of 75,000  shares of our
common  stock and  warrants to purchase  75,000  shares of our common stock at a
purchase price of $3.00 per share, which were exercised in October 2001. In June
1999, Mr.  Mandelbaum's  deferred  salary was reduced to zero by the issuance of
options to purchase  375,000  shares of our common stock at an exercise price of
$3.00 per share at any time prior to June 30, 2004.

     In March 1997,  one of our  directors,  Paul Cohen  purchased  37,500 units
consisting  of one  share  of  common  stock  and one  warrant  to  purchase  an
additional  share  at $3.00  per  share in  connection  with one of our  private
placements,  for  $75,000.  He exercised  the  warrants in December  2000 and we
received net  proceeds of  $112,500.  In November  1997,  Mr. Cohen  received an
option to purchase 50,000 shares of common stock  exercisable at $3.00 per share
in  connection  with a one-year  consulting  agreement  which was  exercised  in
November 2002 and we received $150,000.  Also in November 1997, Mr. Cohen's wife
purchased  25,000 units  consisting of one share of common stock and one warrant
to purchase an additional share of common stock for $3.00 in connection with one
of our private  placements  for $50,000.  Mrs.  Cohen  exercised  the warrant in
December 2000 and we received net proceeds of $75,000. In August 1999, Mr. Cohen
purchased  one unit in  connection  with our last  private  placement.  The unit
consisted of a promissory note having a principal amount of $50,000,  which bore
interest at the annual rate of 10% and a warrant to purchase 2,500 shares of our
common stock for $3.00 per share which  expired  during 2002.  The principal was
repaid by us to Mr. Cohen in November 1999.

     In June 1999,  all  deferred  compensation  due to Todd  Cohen,  our former
President  and director,  was  eliminated by the issuance of options to purchase
110,000  shares of common  stock at an exercise  price of $3.00 per share at any
time prior to June 30, 2004.

Item 14. Controls and Procedures
         -----------------------
         Internal Controls.
         -----------------
     We maintain a system of internal  controls  designed to provide  reasonable
assurance that: (i)  transactions  are executed in accordance with  management's
general or specific  authorization;  (ii) transactions are recorded as necessary
to permit  preparation  of financial  statements  in conformity  with  generally
accepted accounting principles, and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance  with  management's  general or
specific  authorization;  and (iv) the  recorded  accountability  for  assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

     Under  the  supervision  and  with  the  participation  of our  management,
including  our Chief  Executive  Officer and Chief  Financial  Officer,  we have
evaluated  the  effectiveness  of the design and  operation  of the our internal
controls and procedures.  Such evaluation was conducted within the 90 days prior
to the date of filing of this report.  There have been no significant changes in
our internal controls or in other factors that could significantly  affect these
controls subsequent to the date of such evaluation.

     Disclosure Controls and Procedures
     ----------------------------------
     We maintain  disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) that are designed (i) to collect the information we are
required to  disclose in the reports we file with the SEC,  and (ii) to process,
summarize and disclose this information within the time periods specified in the

                                       35

rules of the SEC.  Under  the  supervision  and  with the  participation  of our
management,  including our Chief Executive Officer and Chief Financial  Officer,
we  have  evaluated  the  effectiveness  of  the  design  and  operation  of our
disclosure controls and procedures.  Such evaluation was conducted within the 90
days prior to the date of filing of this report.  Based on such evaluation,  our
Chief Executive and Chief Financial Officer have concluded that these procedures
are effective.


Item 15. Principal Accountant Fees and Services
         --------------------------------------
     During  fiscal year ended  December 31, 2001 until  September 6, 2002,  our
principal independent auditor was Arthur Andersen LLP. Thereafter, our principal
independent  auditor was Grant  Thornton LLP. The services of each were provided
in the following category and amount:



                        Arthur Andersen LLP                       Grant Thornton LLP
                          2001        2002                       2001            2002
                          ----        ----                       ----            ----
                                                                    
Audit Fees:             $63,500      $4,500     Audit Fee:         0            $56,000
Other Services:         $22,420         0       Other Services:    0                  0




                                    PART IV

Item 16. Exhibits and Reports on Form 8-K
         --------------------------------

     (a)  Exhibits. See index of exhibits annexed hereto.
          --------

     (b)  Reports on Form 8-K.
          -------------------

     On  September 6, 2002,  the Company  filed a report on Form 8-K to disclose
Changes in Registrant's Certified Public Accountants from Arthur Andersen LLP to
Grant Thornton LLP.

                                       36

EXHIBIT INDEX

Exhibit No.     Description
------------     -----------

1     Form of Underwriting Agreement (1)
3.1   Certificate of Incorporation of the Company (1)
3.2   By-laws of the Company (1)
3.3   Certificate of Designation of Preferred Stock of Intelli-Check, Inc.(7)
4.1   Specimen Stock Certificate (2)
4.2   Form of Underwriters' Warrant Agreement (1)
4.3   Warrant to Gryphon Master Fund LLP (7)
10.1  1998 Stock Option Plan (1) *
10.2  Employment Agreement between Frank Mandelbaum and the Company, dated as of
      January 1, 1999 (1) *
10.3  Employment Agreement  between Kevin  Messina and the Company,  dated as of
      January 1, 1999 (1)*
10.4  Employment  Agreement between Edwin  Winiarz and the Company,  dated as of
      July 21, 1999 (1) *
10.5  Agreement of  Lease  between  the  Company  and  Industrial  and  Research
      Associates, dated as of October 15, 2000 (5)
10.6  1999 Stock Option Plan (1) *
10.7  Development and Supply Agreement  between the Company and Welch Allyn Data
      Collection Inc., dated July 9, 1999 (1)
10.8  Agreement between the Company and Northern  Leasing Systems Inc., dated as
      of August 13, 1999 (1)
10.9  Employment Agreement  between the Company  and W. Robert  Holloway,  dated
      October 25, 1999 (1) *
10.10 Agreement between the Company and Kevin  Messina,  individually  and d/b/a
      K.M. Software Development, dated as of May 3, 1999 (1) *
10.11 Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check, Inc.
      effective November 15, 2000 (5)
10.12 2001 Stock Option Plan (4)
10.13 Employment Agreement  between Edwin  Winiarz and the Company,  dated as of
      September 7, 2001*
10.14 Employment Agreement between Frank Mandelbaum and the Company, dated as of
      February 1, 2002* (6)
10.15 Memorandum of Understanding between AAMVAnet, Inc. and Intelli-Check, Inc.
      effective January 29, 2002 (6)
10.16 Securities  Purchase  Agreement  between  Intelli-Check,  Inc. and Gryphon
      Master Fund dated March 27, 2003.(7)
10.17 Registration  Rights  Agreement  between  Intelli-Check,  Inc. and Gryphon
      Master Fund dated March 27, 2003.(7)
21    List of Subsidiaries (1)
23    Consent of Grant Thornton LLP (7)
99.1  Certifications of Chief Executive Officer (7)
99.2  Certifications of Chief Financial Officer (7)
--------------------------------------------------------------
*   Denotes a management contract or compensatory plan, contract or arrangement.


     (1)  Incorporated by reference to Registration Statement on Form Sb-2 (File
          No. 333-87797) filed September 24, 1999.
     (2)  Incorporated  by  reference  to  Amendment  No. 1 to the  Registration
          Statement filed November 1, 1999.
     (3)  Incorporated  by  reference  to  Amendment  No. 2 to the  Registration
          Statement filed November 15, 1999.
     (4)  Incorporated by reference to Registrant's  Proxy Statement on Schedule
          14A filed May 31, 2001.
     (5)  Incorporated by reference  to Registrant's  Annual Report on Form 10-K
          filed March 29, 2001
     (6)  Incorporated by reference to  Registrant's  Annual Report on Form 10-K
          filed March 29, 2002.
     (7)  Incorporated by reference to  Registrant's  Annual Report on Form 10-K
          filed March 31, 2003.

                                       37




                                   SIGNATURES
                                   ----------
     Pursuant  to the  requirements  of Section  13 or 15 (d) of the  Securities
Exchange Act of 1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Date:   June 16, 2003                  INTELLI-CHECK, INC.

                                        By:  /s/ Frank Mandelbaum
                                             --------------------
                                        Frank Mandelbaum
                                        Chairman, Chief Executive Officer
                                        and Director


                                       38


                                  Certification
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



     I, Frank Mandelbaum, certify that:

1. I have reviewed this Form 10-K of Intelli-Check, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 12a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     (c) presented in this annual report our conclusions about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:    June 16, 2003


                                     /s/ Frank Mandelbaum
                                     ----------------------------------
                                     Name:    Frank Mandelbaum
                                     Title:   Chief Executive Officer


                                       39



                                 Certification
           Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



     I, Edwin Winiarz, certify that:

1. I have reviewed this Form 10-K of Intelli-Check, Inc.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made,  not  misleading  with  respect to the period  covered by this annual
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included  in this annual  report,  fairly  present in all  material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 12a-14 and 15d-14) for the registrant and we have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
material  information  relating to the  registrant,  including its  consolidated
subsidiaries, is made known to us by others within those entities,  particularly
during the period in which this annual report is being prepared;

     (b) evaluated the effectiveness of the registrant's disclosure controls and
procedures  as of a date  within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

     (c) presented in this annual report our conclusions about the effectiveness
of the  disclosure  controls and  procedures  based on our  evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     (a) all  significant  deficiencies  in the design or  operation of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     (b) any fraud,  whether or not material,  that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:   June 16, 2003


                                         /s/ Edwin Winiarz
                                         __________________________________
                                         Name:   Edwin Winiarz
                                         Title:  Chief Financial Officer


                                       40

                                 Certification
           Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


     Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350,  Chapter 63 of Title 18,  United States Code),  each of
the undersigned  officers of  Intelli-Check,  Inc. (the "Company"),  does hereby
certify, to such officer's knowledge, that:

     The Annual Report on Form 10-K for the year ended  December 31, 2002 of the
Company fully  complies with the  requirements  of Section 13(a) or 15(d) of the
Securities  Exchange  Act of 1934 and  information  contained  in the Form  10-K
fairly presents,  in all material respects,  the financial condition and results
of operations of the Company.

                                          /s/ Frank Mandelbaum
Dated:  March 27, 2003                    ___________________________________
                                          Name:   Frank Mandelbaum
                                          Title:  Chief Executive Officer


                                          /s/ Edwin Winiarz
Dated:  March 27, 2003                    ___________________________________
                                          Name:   Edwin Winiarz
                                          Title:  Chief Financial Officer


     The foregoing  certification  is being furnished solely pursuant to Section
906 of the  Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18,  United  States  Code) and is not being filed as part of
the Form 10-K or as a separate disclosure document.

                                       41


                                     INDEX




                                                                        Page


REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                    F-1 - F-2


FINANCIAL STATEMENTS:

Balance Sheets as of December 31, 2001 and 2002                           F-3


Statements of Operations for the Years Ended December 31, 2000,
2001 and 2002                                                             F-4


Statements of Stockholders' Equity for the Years Ended December
31, 2000, 2001 and 2002                                                   F-5


Statements of Cash Flows for the Years Ended December 31, 2000,
2001 and 2002                                                             F-6


NOTES TO FINANCIAL STATEMENTS                                         F-7 - F-19





REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
Intelli-Check, Inc.



We have audited the  accompanying  balance  sheet of  Intelli-Check,  Inc. as of
December 31,  2002,  and the related  statements  of  operations,  stockholders'
equity and cash flows for the year then ended.  These  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these  financial  statements  based on our  audit.  The  financial
statements  of  Intelli-Check,  Inc. as of  December  31, 2001 and for the years
ended  December 31, 2001 and 2000 were audited by other auditors who have ceased
operations  and whose  report  dated  March 6, 2002,  expressed  an  unqualified
opinion on those statements.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of  Intelli-Check,  Inc. as of
December 31, 2002,  and the results of its operations and its cash flows for the
year then ended in conformity with accounting  principles  generally accepted in
the United States of America.


/s/ Grant Thornton, LLP

New York, New York
March 3, 2003
(except with  respect to the matters
discussed in Note 10, as to which the date is
March 27, 2003)




                                       F-1



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Intelli-Check, Inc.:

We have  audited  the  accompanying  balance  sheets of  Intelli-Check,  Inc. (a
Delaware  corporation)  as of  December  31,  2001  and  2000,  and the  related
statements of  operations,  stockholders'  equity and cash flows for each of the
three years in the period ended December 31, 2001.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements referred to the above present fairly,
in all material respects,  the financial  position of Intelli-Check,  Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended  December 31, 2001 in conformity
with accounting principles generally accepted in the United States.

                                                 /s/Arthur Andersen LLP

New York, New York
March 6, 2002

This  Report  of  Independent  Certified  Public  Accountants  is  a  copy  of a
previously  issued  Arthur  Andersen  LLP  ("Andersen")  report and has not been
reissued by Andersen. The inclusion of this previously issued Andersen report is
pursuant to the "Temporary  Final Rule and Final Rule;  Requirements  for Arthur
Andersen  LLP  Auditing  Clients,"  issued by the U.S.  Securities  and Exchange
Commission  in March 2002.  Note that this  previously  issued  Andersen  report
includes  references  to certain  fiscal  years,  which are not  required  to be
presented in the accompanying financial statements as of and for the fiscal year
ended December 31, 2002.



                                      F-2


INTELLI-CHECK, INC.

BALANCE SHEETS
DECEMBER 31, 2001 and 2002


                                     ASSETS
                                     ------
                                                                                    2001           2002
                                                                                ------------   ------------
                                                                                         
CURRENT ASSETS:
    Cash and cash equivalents                                                   $  4,061,235   $  1,910,579
    Accounts receivable                                                               25,536         93,530
    Inventory                                                                      2,168,688      1,802,839
    Other current assets                                                             370,880        273,770
                                                                                ------------   ------------
                 Total current assets                                              6,626,339      4,080,718

CERTIFICATE OF DEPOSIT, restricted (Note 9)                                          268,494        273,317

PROPERTY AND EQUIPMENT, net (Note 3)                                                 466,576        324,112

ACQUIRED SOFTWARE, net (Notes 4 and 8)                                               426,806        211,806

GOODWILL (Notes 4 and 8)                                                             181,447        181,447

PATENT COSTS, net (Notes 4 and 8)                                                    289,425        260,215

OTHER INTANGIBLES, net (Notes 4 and 8)                                               164,132         83,299
                                                                                ------------   ------------
                 Total assets                                                   $  8,423,219   $  5,414,914
                                                                                ============   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
CURRENT LIABILITIES:
    Accounts payable                                                            $    254,171   $    298,635
    Accrued expenses (Note 5)                                                        842,501        771,405
    Current portion of deferred revenue                                              200,953        357,059
    Current portion of capital lease obligations (Note 9)                             25,421         19,572
                                                                                ------------   ------------
                 Total current liabilities                                         1,323,046      1,446,671
                                                                                ------------   ------------
CAPITAL LEASE OBLIGATIONS (Note 9)                                                    17,317            427
                                                                                ------------   ------------
DEFERRED REVENUE AND OTHER LIABILITIES                                                53,324         94,565
                                                                                ------------   ------------
COMMITMENTS AND CONTINGENCIES (Note 9)

STOCKHOLDERS' EQUITY:
    Series A Convertible Preferred Stock - $.01 par value; 1,000,000 shares
       authorized; 0 shares issued and outstanding                                         -              -
    Common stock - $.001 par value; 20,000,000 shares authorized; 8,470,762 and
       8,875,302 shares issued and outstanding as of 2001 and 2002, respectively       8,470          8,874
    Deferred compensation                                                           (189,000)      (348,476)
    Additional paid-in capital                                                    19,331,004     22,399,029
    Accumulated deficit                                                          (12,120,942)   (18,186,176)
                                                                                ------------   ------------
                 Total stockholders' equity                                        7,029,532      3,873,251
                                                                                ------------   ------------
                 Total liabilities and stockholders' equity                     $  8,423,219   $  5,414,914
                                                                                ============   ============

The accompanying notes are an integral part of these statements.


                                      F-3


INTELLI-CHECK, INC.

STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002


                                                                     2000                2001                2002
                                                                     ----                ----
                                                                                              

REVENUE                                                        $     342,979        $     885,908      $   1,138,587

COST OF REVENUE                                                      198,712              479,041            501,429
                                                               -------------        -------------      -------------
                 Gross profit                                        144,267              406,867            637,158
                                                               -------------        -------------      -------------
OPERATING EXPENSES:
    Selling                                                          890,453              950,774          1,437,509
    General and administrative                                     1,590,896            2,332,150          3,355,549
    Research and development                                       1,042,008            1,214,398          1,180,071
    Reserve on inventory deposit (Notes 2 and 9)                           -                    -            600,000
                                                               -------------        -------------      -------------
                 Total operating expenses                          3,523,357            4,497,322          6,573,129
                                                               -------------        -------------      -------------
                 Loss from operations                             (3,379,090)          (4,090,455)        (5,935,971)

OTHER INCOME (EXPENSE):
    Interest income                                                  261,181              135,860             53,871
    Interest expense                                                 (14,863)              (8,336)            (4,878)
    Other income (Note 9)                                                  -                    -            336,744
                                                               -------------        -------------      -------------
                                                                     246,318              127,524            385,737
                                                               -------------        -------------      -------------
                 Net loss                                      $  (3,132,772)       $  (3,962,931)     $  (5,550,234)
                                                               =============        =============      =============
PER SHARE INFORMATION:
       Net loss                                                $  (3,132,772)       $  (3,962,931)     $  (5,550,234)
       Dividend on warrant modification                                    -             (140,000)                 -
                                                               -------------        -------------      -------------
       Net loss attributable to common shareholders            $  (3,132,772)      $   (4,102,931)    $   (5,550,234)
                                                               =============        =============      =============
    Net loss per common share -
       Basic and diluted                                       $       (0.47)      $        (0.52)    $        (0.64)
                                                               =============        =============      =============
    Weighted average common shares used in computing
    per share amounts-
       Basic and diluted                                           6,648,191            7,910,913          8,685,656
                                                               =============        =============      =============

The accompanying notes are an integral part of these statements.

                                           F-4

INTELLI-CHECK, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002



                                                                          Additional
                                                  Common Stock             Paid-in         Deferred    Accumulated
                                              Shares         Amount        Capital       Compensation    Deficit          Total
                                              ------         ------        -------       ------------    -------          -----
                                                                                                      
BALANCE, December 31, 1999                    6,515,152      $ 6,515     $10,121,771       $    -      $(3,803,239)     $6,325,047

  Exercise of warrants                        1,115,084        1,115       3,222,759            -                -       3,223,874
  Exercise of stock options                      66,000           66         202,434            -                -         202,500
  Issuance of stock options in settlement
   of accounts payable                                -            -          14,398            -                -          14,398
    Net loss                                          -            -               -            -       (3,132,772)     (3,132,772)
                                             ----------     --------     -----------       ----------  ------------     -----------

BALANCE, December 31, 2000                    7,696,236      $ 7,696     $13,561,362       $    -      $(6,936,011)     $6,633,047

  Exercise of warrants                          378,084          379       1,057,796            -                -       1,058,175
  Exercise of options                           166,500          165         774,985            -                -         775,150
  Distributions of Rights Dividends                   -            -       1,082,000            -       (1,082,000)              -
  Effect on extension of expiration of
   warrants                                           -            -         140,000            -         (140,000)              -
  Issuance of common stock for exercise
   of rights                                    180,198          180       1,397,669            -                -       1,397,849
  Purchase and retirement of common stock       (10,000)         (10)        (52,590)           -                -         (52,600)
  Issuance of stock options in settlement
   of accounts payable                                -            -             842            -                -             842
  Issuance of common stock for the
   acquisition of certain assets                 59,744           60         979,940            -                -         980,000
  Recognition of Deferred Compensation                -            -         389,000        (389,000)            -               -
  Amortization of Deferred Compensation               -            -               -         200,000             -         200,000
    Net loss                                          -            -               -               -     (3,962,931)    (3,962,931)
                                             ----------     --------     -----------       ----------  ------------     -----------
BALANCE, December 31, 2001                    8,470,762       $8,470     $19,331,004       $ (189,000) $(12,120,942)    $7,029,532

Exercise of warrants                              1,250            1           3,749                -             -          3,750
Exercise of options                             273,700          274         825,576                -             -        825,850
Effect on extension of expiration of
 options                                              -            -           8,500                -             -          8,500
Effect on extension of expiration of
 rights dividend                                      -            -         515,000                -      (515,000)             -
Issuance of common stock for exercise of
 rights                                         107,396          107         912,759                -             -        912,866
Purchase and retirement of common stock         (10,000)         (10)        (70,054)               -             -        (70,064)
Issuance of additional common stock for
 prior year's acquisition of certain assets      32,194           32             (32)               -             -              -
Recognition of Deferred Compensation                  -            -       1,469,327       (1,469,327)            -              -
Amortization of Deferred Compensation                 -            -               -          713,051             -        713,051
Valuation adjustment of Deferred Compensation         -            -        (596,800)         596,800             -              -
Net loss                                              -            -               -                -    (5,550,234)    (5,550,234)
                                             ----------     --------     -----------       ----------  ------------     -----------
BALANCE, December 31, 2002                    8,875,302       $8,874     $22,399,029       $ (348,476) $(18,186,176)    $3,873,251
                                             ==========     ========     ===========       ==========  ============     ==========

The accompanying notes are an integral part of these statements.

                                      F-5

INTELLI-CHECK, INC.

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002


                                                                                         2000             2001              2002
                                                                                         ----             ----              ----
                                                                                                          
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                    $     (3,132,772) $    (3,962,931) $     (5,550,234)
    Adjustments to reconcile net loss to net cash used in operating activities-
          Depreciation and amortization                                                   90,115          126,885           451,580
          Noncash expense                                                                 14,398              842             8,500
          Noncash compensation                                                                 -          200,000           713,051
          Reserve on inventory deposit                                                         -                -           600,000
          Changes in assets and liabilities-
              (Increase) in certificate of deposit, restricted                          (250,000)         (18,494)           (4,823)
              (Increase) decrease (increase) in accounts receivable                      (30,475)          19,259           (67,994)
              (Increase) decrease in inventory                                        (2,349,729)         367,650           365,849
              (Increase) decrease (increase) in other current assets                    (211,525)         164,758          (502,890)
              Decrease in other assets                                                     8,766                -                 -
              (Decrease) Increase in accounts payable and accrued expenses              (137,941)         426,651            18,482
              Increase (decrease) increase in deferred revenue                           545,334         (344,381)          197,347
              Increase in other liabilities                                                    -           53,324                 -
                                                                                ----------------  ---------------  ----------------
                    Net cash used in operating activities                             (5,453,829)      (2,966,437)       (3,771,132)
                                                                                ----------------  ---------------  ----------------
CASH FLOWS FROM INVESTING activities:
    Purchases of property and equipment                                                 (223,511)        (140,877)          (29,187)
    Cash paid for acquisition expenses                                                         -          (52,947)                -
                                                                                ----------------  ---------------  ----------------
                    Net cash used in investing activities                               (223,511)        (193,824)          (29,187)
                                                                                ----------------  ---------------  ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of common stock                                         3,426,374        3,231,174         1,742,466
    Repayment of capital lease obligations                                               (37,893)         (48,767)          (22,739)
    Treasury stock purchased                                                                   -          (52,600)          (70,064)
                                                                                ----------------  ---------------  ----------------
                    Net cash provided by financing activities                          3,388,481        3,129,807         1,649,663
                                                                                ----------------  ---------------  ----------------
                    Net decrease in cash and cash equivalents                         (2,288,859)         (30,454)       (2,150,656)

CASH AND CASH EQUIVALENTS, beginning of year                                           6,380,548        4,091,689         4,061,235
                                                                                ----------------  ---------------  ----------------
CASH AND CASH EQUIVALENTS, end of year                                          $      4,091,689  $     4,061,235  $      1,910,579
                                                                                ================  ===============  ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
       Cash paid during the year for interest                                   $         14,863  $         8,336  $          4,878
                                                                                ================  ===============  ================
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
    Stock options issued for services rendered                                  $              -  $       389,000  $      1,469,327
    Common stock issued to purchase certain assets in acquisition                              -          980,000                 -
    Capital lease obligations incurred                                                    54,125                -                 -



The accompanying notes are an integral part of these statements.

                                      F-6

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

The accompanying notes are an integral part of these statements.

1.      NATURE OF BUSINESS
        ------------------
Intelli-Check,  Inc. (the "Company") was originally  incorporated in New York in
October 1994 and later  reincorporated  in Delaware in December 1999 to develop,
manufacture  and market an  advanced  document  verification  system to enable a
retailer to help prevent economic loss through various frauds,  such as Identity
theft, which utilizes fake ID's as support for these  transactions,  to increase
security and deter terrorism at airports, military installations and other sites
where  security  is a  concern  and  to  determine  whether  purchasers  of  age
restricted  products meet the minimum age  requirements for the sale. This helps
reduce  the  risk  to the  retailer  of  substantial  monetary  fines,  criminal
penalties  and license  revocation  for the sale of  age-restricted  products to
minors.

The Company has developed and patented the innovative  software  technology that
is  included  in the  advanced  document  verification  system  terminal  called
"ID-Check." The ID-Check  terminal,  in which the Company's patented software is
loaded,  was  designed  to  offer  convenient  and  reliable  document  and  age
verification.  ID-Check  reads,  analyzes and  displays the encoded  information
contained  on driver  licenses  and other  forms of accepted  government  issued
identification  where  permitted by law. In addition,  the ID-Check  terminal is
capable  of being  upgraded  to  accommodate  changes  made by the  governmental
issuers of driver licenses and ID cards. The ID-Check  terminal requires a quick
swipe or scan of the driver license or ID card by the user;  displays a "valid",
"expired",  "tampered" or other customized  display;  and creates a record where
permitted  by law of  transactions  to protect the merchant  against  fraudulent
transactions, unauthorized access and as proof that the retailer has used proper
due diligence in the sale of age restricted products.

During 2001 and 2002, the Company  developed  additional  software products that
utilize its patented  software  technology.  C- Link runs on a personal computer
and was created to work in  conjunction  with the ID-Check  unit that allows the
retailer to instantly view the data for further  verification,  analyze data and
generate  various reports where permitted by law. The Company also has developed
software that can be integrated onto a Windows  platform that will enable a user
of the software to perform all the functions of the ID-Check terminal.

Additionally,  in  December  2001,  the  Company  acquired  the  assets  of  the
IDentiScan Company, LLC ("IDentiScan"), which has developed a product that helps
determine  whether a purchaser of age restricted  products meets the minimum age
requirements for sale in a less sophisticated method than the Company's ID-Check
terminal.

Since inception,  the Company has incurred  significant losses and negative cash
flow  from  operating  activities,  and  as of  December  31,  2002  we  had  an
accumulated  deficit of  $18,186,176.  Subsequent to the balance sheet date, the
Company received  financing  totaling $3 million,  see footnote 10. We currently
anticipate  that  our  available  cash in hand,  cash  resources  from  expected
revenues from the sale of the units in inventory,  cash resources collected from
the Company's  financing as noted above,  combined with the expected exercise of
the options by our option  holders will be  sufficient  to meet our  anticipated
working  capital  and  capital  expenditure  requirements  for at least the next
twelve months.

2.      SIGNIFICANT ACCOUNTING POLICIES
        -------------------------------
Cash and Cash Equivalents
--------------------------
Cash and cash  equivalents  include  cash and  highly  liquid  investments  with
original maturities of three months or less when purchased.

Inventory
----------
Inventory is stated at the lower of cost or market and cost is determined  using
the first-in,  first-out  method.  Inventory is primarily  comprised of finished
goods.

Inventory Valuation
--------------------
The Company's  inventory  consists  primarily of its ID-Check terminals that run
its patented  software.  The inventory was  originally  received  December 1999.
Shortly  thereafter,  it was returned to the manufacturer for upgrade and became
available  for sale in the fourth  quarter  of 2000.  The  Company  periodically
evaluates  the current  market value of its  inventory,  taking into account any
technological  obsolescence that may occur due to changes in hardware technology
and the  acceptance of the product in the  marketplace.  Even though the Company
has had limited sales to date,  it believes  that a sufficient  market exists to
sell with margin the current  inventory as well as the remaining  units required
to be purchased from its  manufacturer  for which the Company has paid a deposit
of $600,000.  The current  terminal,  for which this deposit was paid,  is fully
capable  of  running  the  Company's  patented  software  since  it  utilizes  a

                                      F-7

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

state-of-the-art  imager/scanner and magnetic stripe reader.  However, since our
policy is to periodically evaluate the market value of the inventory, should the
Company  determine  in a future  period that an  adjustment  is  necessary,  the
Company would record such  adjustment at that time,  which could have a material
effect on the Company's  results of  operations.  The Company is in  discussions
with its current  manufacturer  as well as other  manufacturers  to select a new
platform to run its patented  software.  However,  as of December 31, 2002,  the
Company  reserved 100% of this deposit due to the  uncertainty of whether or not
the  Company  will place the order to  purchase  the  additional  units from its
manufacturer  under the open purchase  order or purchase units to fulfill future
orders from a new platform once it is selected.

Long-Lived Assets and Impairment of Long-Lived Assets
------------------------------------------------------
The  Company's  long-lived  assets  include  property  and  equipment,  acquired
software, patents, goodwill and other intangibles.

As of January 1, 2002 the Company has adopted SFAS No. 142  "Goodwill  and Other
Intangible  Assets".  Under SFAS No. 142,  goodwill and  intangible  assets with
indefinite  lives are no longer  amortized  but are  reviewed  annually (or more
frequently if impairment indicators arise) for impairment.  Separable intangible
assets  that  are not  deemed  to have  indefinite  lives  will  continue  to be
amortized  over their useful lives (but with no maximum  life).  Pursuant to the
adoption of SFAS No.  142,  the Company has  evaluated  its  goodwill  and other
intangibles  to identify  additional  separately  identifiable  intangibles;  no
adjustment was warranted.  Intangible assets that will continue to be classified
as goodwill will no longer be amortized.  This provision had no material  impact
on the Company's  results of operations.  Upon adoption of SFAS No. 142, as well
as at  December  31,  2002,  the Company  performed  an  impairment  test of its
goodwill and determined that no impairment of the recorded goodwill existed.

As of January 1, 2002,  the Company  adopted SFAS No. 144,  "Accounting  for the
Impairment or Disposal of  Long-lived  Assets"  which  supersedes  SFAS No. 121,
"Accounting  for the Impairment or Disposal of Long-lived  Assets to be Disposed
Of". SFAS No. 144 requires  that  identifiable  intangible  assets  that are not
deemed to have indefinite lives will be reviewed for impairment  whenever events
or changes in circumstances indicate that the carrying amounts of the assets may
be impaired.  Furthermore,  these assets are evaluated for continuing  value and
proper  useful lives by  comparison to  undiscounted  expected  future cash flow
projections. The Company has determined that no impairment exists as of December
31, 2002. The adoption of SFAS No. 144 had no effect on the Company.

Property and Equipment
-----------------------
Property  and  equipment  are  recorded at cost and are  depreciated  over their
estimated  useful lives  ranging from two to ten-years  using the  straight-line
basis.  Equipment  held under  capital  leases and  leasehold  improvements  are
amortized utilizing the straight-line  method over the lesser of the term of the
lease or estimated useful life of the asset.

Intangible Assets
------------------
Patent  costs,  primarily  consisting  of legal costs and  allocated  costs as a
result of certain assets  acquired from  IDentiScan  (see note 8), are amortized
over a period between 10 and 17 years using the straight-line  method.  Acquired
Software is being  amortized  over a period of 2 years  using the  straight-line
method.  Other  intangibles,  consisting  of  a  covenant  not  to  compete  and
copyrights are amortized over a period of 2 and 3 years,  respectively using the
straight-line method.

Costs of Computer Software Developed or Obtained for Internal Use
------------------------------------------------------------------
The Company  accounts  for certain  software  costs under  Statement of Position
98-1,  "Accounting for the Costs of Computer Software  Developed or Obtained for
Internal Use" ("SOP 98-1"),  which  provides  guidance for  determining  whether
computer  software is  internal-use  software and guidance on accounting for the
proceeds of computer software originally  developed or obtained for internal use
and  then  subsequently  sold  to the  public.  It  also  provides  guidance  on
capitalization of the costs incurred for computer software developed or obtained
for internal use.

Capitalized Software Development Costs
---------------------------------------
SFAS No. 86,  "Accounting for the Costs of Computer  Software to Be Sold, Leased
or Otherwise  Marketed,"  specifies that costs incurred internally in creating a
computer  software product shall be charged to expense when incurred as research
and development  until  technological  feasibility has been  established for the
product.  Software  production costs for computer software that is to be used as
an integral part of a product or process shall not be capitalized until both (a)
technological  feasibility  has been  established  for the  software and (b) all

                                      F-8

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

research and development  activities for the other  components of the product or
process have been completed.  The Company has not capitalized any software costs
for the years ended December 31, 2000, 2001 and 2002.

Revenue Recognition
--------------------
The  Company  sells its  products  directly  through its sales force and through
distributors.  Revenue from direct sales of the Company's  product is recognized
upon shipment to the customer. The Company's products require continuing service
or  post  contract  customer  support  and  performance  by  the  Company,   and
accordingly  a portion of the  revenue is  deferred  based on its fair value and
recognized  ratably  over the period in which the future  service,  support  and
performance are provided,  which is generally one year. Currently,  with respect
to sales to distributors  and sales of the Company's  IDentiScan  products,  the
Company  does not have  enough  experience  to  identify  the fair value of each
element and the full amount of the revenue and related  gross margin is deferred
and  recognized  ratably over the one-year  period in which the future  service,
support and performance are provided.

During  2002,  the  Company  recognized  sales from  licensing  of its  patented
software to  customers.  The Company's  licensed  software  requires  continuing
service or post contract  customer  support and performance by the Company,  and
accordingly  a portion of the  revenue is  deferred  based on its fair value and
recognized  ratably  over the period in which the future  service,  support  and
performance are provided, which is generally one year.

Research and Development Costs
-------------------------------
Research and development costs are charged to expense as incurred.

Income Taxes
-------------
The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes."  Deferred tax assets and  liabilities  are  recognized for the estimated
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts  of  existing  assets  and  liabilities  and  their
respective tax bases and net operating loss  carryforwards.  Deferred tax assets
and  liabilities are measured using expected tax rates in effect for the year in
which those temporary  differences are expected to be recovered or settled.  The
Company has recorded a full valuation  allowance for its net deferred tax assets
as of December 31, 2002, due to the  uncertainty of the  realizability  of those
assets.

Fair Value of Financial Instruments
------------------------------------
The Company adheres to the provisions of SFAS No. 107,  "Disclosures  about Fair
Value of Financial  Instruments." This  pronouncement  requires that the Company
calculate the fair value of financial  instruments  and include this  additional
information  in the  notes  to  financial  statements  when  the  fair  value is
different than the book value of those  financial  instruments.  At December 31,
2002, the carrying value of all financial  instruments  approximated fair value,
due to their short-term nature.

Business Concentrations and Credit Risk
----------------------------------------
Financial  instruments,  which subject the Company to  concentrations  of credit
risk, consist primarily of cash and cash equivalents. The Company maintains cash
between two financial institutions. The Company performs periodic evaluations of
the relative credit standing of these institutions.

The  Company has had  limited  sales due to the  downturn of the economy and the
refocus of its marketing  efforts to a number of clients which are  concentrated
in  the  United  States  of  America.   The  Company   performs  ongoing  credit
evaluations, generally does not require collateral, and establishes an allowance
for  doubtful  accounts  based  upon  factors  surrounding  the  credit  risk of
customers, historical trends and other information.

The Company  currently  has one  supplier  for the  production  of its  ID-check
products and one supplier for the  production of its  IDentiScan  products (Note
9). The  Company  does not  maintain a  manufacturing  facility  of its own and,
accordingly,  is dependent on maintaining its existing production relationships.
Further, should the Company's relationship with its supplier not be renewed,  it
may not be able to find an  alternative,  comparable  supplier  on  satisfactory
terms to the  Company,  and  therefore,  there may be an  adverse  effect on the
Company's results of operations.  However, as a result of the Company commencing
the  licensing  of its  technology,  such effect could be reduced as the Company
would be less dependent on its manufacturer for sales.

                                       F-9

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

Net Loss Attributable to Common Shareholders
---------------------------------------------
The Company  computes net loss per common share in accordance with SFAS No. 128,
"Earnings Per Share".  Under the  provisions of SFAS No. 128, basic net loss per
common  share  ("Basic  EPS") is computed by dividing  net loss by the  weighted
average number of common shares  outstanding.  Diluted net loss per common share
("Diluted EPS") is computed by dividing net loss by the weighted  average number
of common shares and dilutive common share  equivalents then  outstanding.  SFAS
No. 128 requires the  presentation of both Basic EPS and Diluted EPS on the face
of the  statements of  operations.  Diluted EPS for the years ended December 31,
2000,  2001 and 2002,  does not include the impact of stock options and warrants
then outstanding, as the effect of their inclusion would be antidilutive.

The following table  summarizes the equivalent  number of common shares assuming
the related  securities that were  outstanding as of December 31, 2000, 2001 and
2002 had been converted:


                                    2000             2001              2002
                                    ----             ----              ----
                                                        

 Stock options                      1,768,560         1,946,041        2,333,866
 Warrants                             596,475            17,500           10,000
                              ---------------   ---------------  ---------------
         Total
                                    2,365,035         1,963,541        2,343,866
                              ===============   ===============  ===============

Stock-Based Compensation
-------------------------
At December 31, 2002, the Company has stock based compensation  plans, which are
described  more fully in Note 7. As permitted  by the SFAS No. 123,  "Accounting
for Stock Based Compensation", the Company accounts for stock-based compensation
arrangements   with  employees  in  accordance  with  provisions  of  Accounting
Principles  Board  ("APB")  Opinion  No.  25  "Accounting  for  Stock  Issued to
Employees".  Compensation expense for stock options issued to employees is based
on the difference on the date of grant,  between the fair value of the Company's
stock and the exercise price of the option. No stock based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the  underlying  common stock at the
date  of  grant.  The  Company  accounts  for  equity   instruments   issued  to
non-employees  in  accordance  with the  provisions of SFAS No. 123 and Emerging
Issues Task Force ("EITF") Issue No. 96-18,  "Accounting for Equity  Instruments
That Are Issued to Other Than  Employees for Acquiring,  or in Conjunction  With
Selling, or in Conjunction With Selling Goods or Services".  All transactions in
which goods or  services  are the  consideration  received  for the  issuance of
equity   instruments   are  accounted  for  based  on  the  fair  value  of  the
consideration  received  or the fair  value  of the  equity  instrument  issued,
whichever is more reliably measurable.

The following table illustrates the effect on net loss and loss per share if the
company  had applied the fair value  recognition  provisions  of SFAS No. 123 to
employees stock based compensation:


                                                        Year Ended             Year Ended            Year Ended
                                                       December 31,           December 31,          December 31,
                                                       ------------           ------------          ------------
                                                           2000                   2001                  2002
                                                       ------------           ------------          ------------
                                                                                           
Net loss, as reported                                  $ (3,132,772)         $ (4,102,931)          $ (5,550,234)

Add:
Total stock based employee compensation expense
determined under fair value based method for all
awards                                                     (944,779)           (1,402,154)            (2,196,369)
                                                       ------------           ------------          ------------
Net loss, pro forma                                    $ (4,077,551)         $ (5,505,085)          $ (7,746,603)

Basic and diluted loss per share, as reported          $      (0.47)         $      (0.52)          $      (0.64)

Basic and diluted loss per share, pro forma            $      (0.61)         $      (0.70)          $      (0.89)


Comprehensive Loss
-------------------
The  Company's  comprehensive  net loss is  equal to its net loss for the  years
ended December 31, 2000, 2001 and 2002.

                                      F-10

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

Segment Information
--------------------
The  Company  adheres to the  provisions  of SFAS No.  131,  "Disclosures  About
Segments of an Enterprise and Related  Information." This statement  establishes
standards  for the way public  business  enterprises  report  information  about
operating  segments  in annual  financial  statements  and  requires  that those
enterprises  report selected  information about operating  segments in financial
statements  issued to  shareholders.  Management has determined that it does not
have any separately reportable business segments.

Use of Estimates
-----------------
The  preparation  of the  Company's  financial  statements  in  conformity  with
accounting  principles  generally  accepted  in the  United  States  of  America
requires  management to make estimates and  assumptions  that affect the amounts
reported in the Company's  financial  statements and accompanying  notes. Actual
results could differ materially from those estimates.

Recently Issued Accounting Pronouncements
------------------------------------------
In June 2002, the FASB issued  Statement 146,  "Accounting for Costs  Associated
with Exit or Disposal Activities". This statement requires entities to recognize
costs associated with exit or disposal  activities when liabilities are incurred
rather than when the entity  commits to an exit or disposal  plan,  as currently
required.  Examples of costs covered by this guidance include one-time  employee
termination  benefits,  costs to terminate  contracts other than capital leases,
costs to consolidate facilities or relocate employees, and certain other exit or
disposal  activities.  This  statement is effective  for fiscal years  beginning
after  December 31, 2002,  and will impact any exit or disposal  activities  the
Company initiates after that date.

In November 2002, the Emerging Issues Task Force reached a consensus  opinion on
EITF 00-21,  "Revenue  Arrangements with Multiple  Deliverables."  The consensus
provides that revenue arrangements with multiple  deliverables should be divided
into separate units of accounting if certain criteria are met. The consideration
for the  arrangement  should be allocated to the  separate  units of  accounting
based on their relative fair values, with different provisions if the fair value
of all deliverables are not known or if the fair value is contingent on delivery
of specified items or performance  conditions.  Applicable  revenue  recognition
criteria  should be considered  separately for each separate unit of accounting.
EITF 00-21 is effective for revenue  arrangements entered into in fiscal periods
beginning  after June 15, 2003.  The Company  believes that the adoption of EITF
00-21 on its financial statements will be immaterial.

In December  2002,  the FASB issued  Statement 148 (SFAS 148),  "Accounting  for
Stock-Based  Compensation  Transition  and  Disclosure:  an  amendment  of  FASB
Statement  123 (SFAS  123)",  to provide  alternative  transition  methods for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee compensation.  In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require  prominent  disclosures  in annual  financial  statements
about the method of accounting for stock-based employee compensation and the pro
forma  effect on reported  results of applying  the fair value based  method for
entities that use the intrinsic value method of accounting. The pro forma effect
disclosures  are also  required to be  prominently  disclosed in interim  period
financial  statements.  This statement is effective for financial statements for
fiscal  years ending after  December  15, 2002 and is  effective  for  financial
reports containing  condensed financial statements for interim periods beginning
after December 15, 2002, with earlier  application  permitted.  The Company does
not plan a change to the fair value based method of accounting  for  stock-based
employee  compensation and has included the disclosure  requirements of SFAS 148
in the accompanying financial statements.

In November 2002, FASB Interpretation 45, "Guarantor's Accounting and Disclosure
Requirements for Guarantees,  Including  Indirect  Guarantees of Indebtedness of
Others"  (FIN 45),  was  issued.  FIN 45  requires a  guarantor  entity,  at the
inception  of  a  guarantee  covered  by  the  measurement   provisions  of  the
interpretation,  to  record a  liability  for the fair  value of the  obligation
undertaken in issuing the  guarantee.  The Company  previously  did not record a
liability  when  guaranteeing  obligations  unless it became  probable  that the
Company would have to perform under the guarantee.  FIN 45 applies prospectively
to guarantees  the Company  issues or modifies  subsequent to December 31, 2002,
but has certain disclosure requirements effective for interim and annual periods
ending after  December 15, 2002.  The Company has not yet determined the effects
of  FIN  45 on  its  financial  statements.  The  Company  determines  that  the
disclosure  provisions  do  not  have a  material  impact  on  the  accompanying
financial statements.

Reclassifications
------------------
Certain prior year amounts have been reclassified to conform to the current year
presentation.
                                      F-11

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

3.      PROPERTY AND EQUIPMENT
        ----------------------
Property and  equipment  are  comprised of the following as of December 31, 2001
and 2002:


                                                       2001              2002
                                                       ----              ----
                                                              
        Computer equipment                        $    508,044      $    481,640
        Furniture and fixtures                         152,251           155,589
        Leasehold improvements                         143,253           143,253
        Office equipment                                40,412            47,552
                                                  ------------      ------------
                                                       843,960           828,034

Less- Accumulated depreciation and amortization       (377,384)         (503,922)
                                                  ------------      ------------
                                                  $    466,576      $    324,112
                                                  ============      ============


Depreciation  expense  for the years  ended  December  31,  2000,  2001 and 2002
amounted to $83,908, $112,044, and $126,537 respectively.

4.       INTANGIBLE ASSETS
         -----------------
The following  summarize the carrying  amounts of intangible  assets and related
amortization:


                                                    As of December 31, 2002
                                                    -----------------------
                                             Gross Carrying          Accumulated
                                                Amount              Amortization
                                             --------------         ------------
                                                                
Amortized intangible assets
    Software                                   $430,000               $218,194
    Patents                                     335,661                 75,446
    Other
        Covenant not to compete                 150,000                 78,125
        Copy Rights                              17,500                  6,076
                                               --------               --------
        Total                                  $933,161               $377,841
                                               ========               ========
Unamortized intangible assets
    Goodwill                                   $181,477               $     -
                                               ========               ========

Amortization  expense for years ended  December  31, 2000,  2001,  and 2002 were
$6,207, $14,841 and $325,043, respectively.

Estimated amortization expense:
    For year ended December 31, 2003        $ 318,724
    For year ended December 31, 2004        $  34,800
    For year ended December 31, 2005        $  29,209
    For year ended December 31, 2006        $  29,209
    For year ended December 31, 2007        $  29,209

5.  ACCRUED EXPENSES

Accrued  expenses  are  comprised  of the  following as of December 31, 2001 and
2002:


                                                      2001             2002
                                                      ----             ----
                                                            
        Professional fees                       $    474,245      $    563,294
        Payroll                                       97,500           120,536
        Rent                                          30,784            27,363
        Other                                        239,972            60,212
                                                ------------      ------------
                                                $    842,501      $    771,405
                                                ============      ============

                                      F-12

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

6.       INCOME TAXES
         ------------
Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the  Company's  deferred  tax assets for  federal and state  income  taxes as of
December 31, 2001 and 2002 are as follows:


                                                   2001                2002
                                                   ----                ----
                                                             
Deferred tax assets, net:
    Net operating loss carryforwards           $ 4,662,652         $ 6,502,540
    Depreciation                                   (20,000)            (20,000)
    Reserves                                         5,000             240,000
    Less- Valuation allowance                   (4,647,652)         (6,722,540)
                                               -----------         -----------
              Deferred tax assets, net         $         -         $         -
                                               ============        ===========

Realization  of deferred tax assets is dependent upon future  earnings,  if any.
The Company has  recorded a full  valuation  allowance  against its deferred tax
assets  since  management  believes  that it is more  likely than not that these
assets will not be realized in the near future.

As of December 31,2002, the Company had net operating loss carryforwards (NOL's)
for federal income tax purposes of  approximately  $16 million.  There can be no
assurance  that the Company will  realize the benefit of the NOL's.  The federal
NOL's are available to offset future taxable income and expire from 2018 through
2022 if not  utilized.  Under Section 382 of the Internal  Revenue  Code,  these
NOL's may be limited due to ownership changes.

The effective tax rate for the years ended  December 31, 2000,  2001 and 2002 is
different from the tax benefit that would result from applying the statutory tax
rates mainly due to the valuation allowance that has been recognized.

7.      STOCKHOLDERS' EQUITY
        --------------------
Series A Convertible Preferred Stock
-------------------------------------

In January 1997,  the Board of Directors  authorized  the creation of a class of
Series A  Convertible  Preferred  Stock  with a par value of $.01.  The Series A
Convertible Preferred Stock is convertible into an equal number of common shares
at the holder's option, subject to adjustment for anti-dilution.  The holders of
Series A Convertible Preferred Stock are entitled to receive dividends as and if
declared by the Board of Directors.  In the event of  liquidation or dissolution
of the Company, the holders of Series A Convertible Preferred Stock are entitled
to receive all accrued dividends,  if applicable,  plus the liquidation price of
$1.00 per share.  As of December  31, 2001 and 2002,  there were no  outstanding
shares of Series A Convertible Preferred Stock.

Common Stock, Warrants and Rights
----------------------------------
In February  1999, the Company  extended the  expiration  dates for the warrants
issued on May 26,  1997 and  November  30,  1997 until June 30, 2000 and further
extended the warrants to December 31, 2000.  The Company did not record a charge
for the adjustment to the terms of the warrants,  as the amount was  immaterial.
All of the warrants were exercised prior to their expiration.

In April 1999, the Company  adjusted the exercise price of a warrant to purchase
common stock of the Company  issued to an investor,  in a previous  common stock
private  placement,  from $3.00 to $2.00. The adjustment was contingent upon the
investor  exercising  the warrants  within  thirty days of the  adjustment.  The
Company did not record a charge for the adjustment to the terms of the warrants,
as the amount was  immaterial as the exercise  price of the warrant was equal or
above the fair market  value of the  Company's  common  stock on the date of the
adjustment.  The  investor  exercised  this  warrant in May 1999 at the adjusted
exercise price and the Company received total proceeds of $200,000. In addition,
the investor  received a new warrant to purchase 100,000 shares of the Company's
common  stock at an exercise  price of $3.00 per share,  which was  exercised in
February  2001.  The new warrant has been issued with an exercise price that was
equal or above the fair market value of the  Company's  common stock on the date
of grant.

In  March  2001,   the  Company   declared  a  dividend   distribution   of  one
non-transferable  right to purchase one share of the Company's  common stock for
every 10 outstanding shares of common stock continuous held from the record date
to the date of exercise, as well as common stock underlying vested stock options

                                      F-13

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

and warrants,  held of record on March 30, 2001, at an exercise  price of $8.50.
The rights,  which were due to expire on October 4, 2002,  were  extended by the
Company  on  October  1, 2002 until  April 4, 2003 and  further  extended  until
December 31, 2003. Under certain conditions, the Company has the right to redeem
the  outstanding  rights for $.01 per right.  Such conditions were not met as of
March 3, 2003.  The Company  reserved  970,076 shares of common stock for future
issuance under this rights offering.  The Company has recorded the fair value of
the rights of $1,082,000 as a dividend  during the quarter ended March 31, 2001,
which was calculated using the Black-Scholes valuation method and recorded as an
increase in additional  paid-in capital and a reduction in accumulated  deficit.
As of December 31, 2002,  287,594 of these rights were exercised and the Company
received $2,444,549 before expenses of $133,834.

In March 2001,  the Company  extended the  expiration  date of its warrants that
were due to expire on various dates through June 30, 2001,  until  September 30,
2001.  During the three months ended March 31,  2001,  the Company  recorded the
$85,000  difference  between the fair value of the warrants prior and subsequent
to this extension as a dividend. In September 2001, the Company further extended
the expiration of these warrants until October 31, 2001 and recorded the $55,000
difference  between the fair value of the warrants  prior and subsequent to this
extension as a dividend during the three months ended September 30, 2001.  These
dividends  were  calculated  using the  Black-Scholes  valuation  method and are
included in net loss attributable to common shareholders.

In March 2001, the Board of Directors  authorized,  subject to certain  business
and market conditions,  the purchase of up to $1,000,000 of our common stock. As
of December 31,  2001,  the Company  purchased  10,000  shares of the  Company's
common stock for  approximately  $53,000 and subsequently  retired those shares.
During June 2002, the Company  purchased  10,000 shares  totaling  approximately
$70,000 and subsequently retired those shares.

As discussed above, on October 1, 2002, the Company extended until April 4, 2003
all unexercised  rights under its rights  offering,  which were due to expire on
October 4, 2002 and were further  extended  until  December 31, 2003.  Each non-
transferable  right  entitles  the  stockholder  to purchase one share of common
stock at an exercise price of $8.50.  The Company recorded the fair value of the
rights  extension  of  $515,000  during  the  forth  quarter  of 2002  using the
Black-Scholes  valuation  method  and  recorded  as an  increase  in  additional
paid-in-capital and a reduction in accumulated deficit.

As of December 31, 2002, there remained warrants  outstanding to purchase 10,000
shares of the Company's common stock at an exercise price of $8.40 per share.

All warrants  have been issued with an exercise  price that is equal to or above
the fair market value of the Company's common stock on the date of grant.

Stock Options
- -------------
In order to retain and attract qualified  personnel necessary for the success of
the  Company,  the Company  adopted a Stock  Option Plan (the "1998 Stock Option
Plan") covering up to 400,000 of the Company's common shares,  pursuant to which
officers,  directors,  key employees and consultants to the Company are eligible
to  receive  incentive  stock  options  and  nonqualified  stock  options.   The
Compensation  Committee  of the Board of  Directors  administers  the 1998 Stock
Option  Plan and  determines  the  terms  and  conditions  of  options  granted,
including the exercise price. The 1998 Stock Option Plan provides that all stock
options  will  expire  within  ten years of the date of grant.  Incentive  stock
options  granted under the 1998 Stock Option Plan must be granted at an exercise
price that is not less than the fair market value per share at the date of grant
and the  exercise  price must not be less than 110% of the fair market value per
share at the date of grant for  grants to  persons  owning  more than 10% of the
voting  stock  of  the  Company.  The  1998  Stock  Option  Plan  also  entitles
nonemployee  directors  to  receive  grants of  non-qualified  stock  options as
approved by the Board of Directors.

In August 1999, the Company  adopted the 1999 Stock Option Plan (the "1999 Stock
Option Plan") covering up to 1,000,000 of the Company's common shares,  pursuant
to which officers,  directors,  key employees and consultants to the Company are
eligible to receive incentive stock options and nonqualified stock options.  The
Compensation  Committee  of the Board of  Directors  administers  the 1999 Stock
Option  Plan and  determines  the  terms  and  conditions  of  options  granted,
including the exercise price. The 1999 Stock Option Plan provides that all stock
options  will  expire  within  ten years of the date of grant.  Incentive  stock
options  granted under the 1999 Stock Option Plan must be granted at an exercise
price that is not less than the fair market value per share at the date of grant
and the  exercise  price must not be less than 110% of the fair market value per
share at the date of grant for  grants to  persons  owning  more than 10% of the
voting  stock  of  the  Company.  The  1999  Stock  Option  Plan  also  entitles
nonemployee  directors  to  receive  grants of  non-qualified  stock  options as
approved by the Board of Directors.

                                     F-14

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

At the Company's Annual Meeting held on July 11, 2001, the stockholders approved
the 2001 Stock  Option  Plan  covering  up to 500,000  of the  Company's  common
shares, pursuant to which the officers, directors, key employees and consultants
to the Company are eligible to receive  incentive stock options and nonqualified
stock options. The Compensation  Committee of the Board of Directors administers
the 2001 Stock Option Plan and  determines  the terms and  conditions of options
granted,  including the exercise price. The 2001 Stock Option Plan provides that
all stock options will expire  within ten years of the date of grant.  Incentive
stock  options  granted  under the 2001 Stock  Option Plan must be granted at an
exercise price that is not less than the fair market value per share at the date
of the  grant  and the  exercise  price  must not be less  than 110% of the fair
market  value per share at the date of the grant for  grants to  persons  owning
more than 15% of the voting  stock of the  Company.  The 2001 Stock  Option Plan
also entitles  non-employee  directors to receive grants on non-qualified  stock
options as approved by the Board of Directors.

In December  2000,  the Company  granted an option to a third-party  to purchase
25,000  shares of common stock at $10.00 per share in lieu of cash  payments for
advertising  services  rendered.   Options  on  3,599  shares  were  immediately
exercisable and 21,401 vested as advertising  services were performed.  The fair
market  value of each  option has been  estimated  at $4.00 on the date of grant
using the Black-Scholes option pricing model and is revalued at each measurement
date when services are performed.  The Company  recorded a charge of $14,398 and
$842 in the  accompanying  statement of  operations  as of December 31, 2000 and
2001,  respectively.  The Company is no longer  utilizing these services and the
remaining unvested shares have expired.

During the fourth  quarter of 2001,  the  Company  granted  options to  purchase
41,231  shares of common stock at prices  ranging from $9.22 to $16.05 per share
to  consultants  under  various  agreements.  During 2002,  the Company  granted
additional  stock options to purchase 180,176 shares of common stock at exercise
prices  ranging  from $3.97 to $12.10  per share to  consultants  under  various
agreements.  The fair market  value of each option was  estimated on the date of
grant  using  the  Black-Scholes  option  pricing  model.  Accordingly,  we have
recorded $389,000 as deferred compensation for these services as of December 31,
2001 and  $1,469,327 as of December 31, 2002. As a result of some of the granted
options having varying vesting  periods,  the Company  revalued  certain options
either as of the  vesting  date or as of  December  31,  2002 for those  options
unvested using the Black Scholes option pricing model. Accordingly,  the Company
recorded a  reduction  of the fair  value of these  options  totaling  $596,800.
During  December  31, 2001 and 2002,  the  Company  recognized  amortization  of
deferred compensation of $200,000 and $713,051, respectively.

Stock option  activity  under the 1998,  1999 and 2001 Stock Option Plans during
the periods indicated below is as follows:


                                                    Number            Weighted
                                                      Of              Average
                                                   Options         Exercise Price
                                                   -------         --------------
                                                               
Outstanding at January 1, 2000                     1,538,000          $   3.72

    Granted                                          376,560          $   9.80
    Canceled                                         (80,000)             3.00
    Exercised                                        (66,000)             3.07
                                                ------------        ----------
Outstanding at December 31, 2000                   1,768,560              4.89

    Granted                                          381,481             11.88
    Canceled                                         (37,500)             5.17
    Exercised                                       (166,500)             4.72
                                                ------------        ----------
Outstanding at December 31, 2001                   1,946,041          $   6.26

    Granted                                          693,176          $   9.86
    Canceled                                         (31,651)         $   9.27
    Exercised                                       (273,700)         $   3.02
                                                ------------        ----------
Outstanding at December 31, 2002                   2,333,866          $   7.72
                                                ============        ==========

Included  in the  option  schedule  are  1,222,000  non-plan  options, of which,
1,015,000 are outstanding.
                                      F-15

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

The  weighted-average  remaining life of the options outstanding at December 31,
2000, 2001 and 2002 is 3.87 years, 2 years, and 3.54 years respectively, and the
weighted-average  fair  value of the  options  granted  during  the  year  ended
December 31, 2000, 2001 and 2002 is $5.14, $5.14, and $6.62 respectively.

As of December  31,  2000,  2001 and 2002,  the fair market value of each option
grant has been  estimated  on the date of grant using the  Black-Scholes  option
pricing  model based upon expected  option lives of 2, 2 and 5 years;  risk free
interest rates of 6.00%,  4.50% and 4.50%;  expected  volatility of 91%, 90% and
90% and a dividend yield of 0%, 0% and 0%, respectively.

As of December 31, 2002, the Company has 1,703,738  options  exercisable  with a
weighted  average  exercise price of $6.97. As of December 31, 2002, the Company
has 281,934  options  available  for future grant under the 1998,  1999 and 2001
Stock Option Plans.

In the  opinion  of  management,  all stock  options  have been  issued  with an
exercise  price that is equal or above the fair  market  value of the  Company's
Common Stock on the date of grant.

8.   ACQUISITION

On December 18, 2001, the Company  acquired  substantially  all of the assets of
the IDentiScan Company,  LLC, which was accounted for under the purchase method.
The aggregate purchase price totaled $1,032,947 which consisted of 59,774 of the
Company's  restricted  common stock valued at $980,000  based on the fair market
value  at the  date of  acquisition  and  transaction  costs  of  $52,947,  plus
additional  incentives  upon  meeting  specific  objectives  over the next three
years. The purchase agreement provided that if after one year from closing,  the
aggregate  current  market  price of the  shares  issued at closing is less than
$750,000,  the Company will pay additional  cash or additional  common stock for
the short fall.  The Company  computed the market  value of the original  59,774
shares  issued as of  December  18,  2002 and it was  valued at  $487,457.  As a
result,  the  Company  issued  an  additional  32,194  shares  to the  owners of
IDentiScan in accordance  with the Asset Purchase  Agreement.  The allocation of
the   purchase   price  was  $430,000  to  acquired   technology,   $230,000  to
patents/trademarks,  $181,447 to goodwill, $167,500 for other intangible assets,
and $24,000 to tangible assets.  All Intangible assets except goodwill are being
amortized on a straight-line  basis of between 2-10 years,  which represents the
estimated future period to be benefited.

9.      COMMITMENTS AND CONTINGENCIES
        -----------------------------
Operating Leases
-----------------
During July 2000, the Company entered into a 10-year lease agreement for its new
office.  The lease  provides for monthly  rental  payments of $17,458  beginning
December 15, 2000 with  immaterial  annual  increases.  In connection  with this
lease, the Company provided an irrevocable unconditional letter of credit in the
amount of $250,000 as security, which will be reduced after 45 months to $34,916
for the remaining lease term. The Company has invested  $250,000 in a restricted
interest bearing certificate of deposit collateralizing the letter of credit. As
of December 31, 2002 the total amount in this account is $273,317.

In addition,  the Company has entered into various  leases for office  equipment
and office space expiring through  December 2010.  Future minimum lease payments
under these lease agreements are as follows:



Year Ending December 31:
                                   
    2003                              $      255,617
    2004                                     241,832
    2005                                     245,064
    2006                                     254,904
    2007                                     265,140
    Thereafter                               860,772
                                      --------------
                                      $    2,123,329
                                      ==============


Rent expense for the years ended  December 31, 2000,  2001 and 2002  amounted to
$120,050, $208,100 and $242,083, respectively.

                                      F-16

INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

Capital Lease Obligations
--------------------------
The Company leases computer equipment and office equipment under several capital
leases  expiring in 2004.  The asset and  liability are recorded at the lower of
the present  value of minimum  lease  payments  or the fair market  value of the
assets.

Future minimum payments under the lease agreements are as follows:

Year Ending December 31:

                                              

                2003                             $    19,572
                2004                                     427
                                                 -----------
                    Total minimum lease payments $    19,999
                                                 ===========

Royalty and License Agreements
-------------------------------
The  Company  entered  into an  agreement  with a former  officer of the Company
during 1996 to license certain software.  The agreement stipulated,  among other
provisions,  that the officer would receive  royalties  equal to a percentage of
the Company's  gross sales.  This  agreement was  terminated in May 1999 and was
superceded by a new  agreement  which calls for payment of royalties of .005% on
gross sales from  $2,000,000 to $52,000,000  and .0025% on gross sales in excess
of $52,000,000.  As of December 31, 2002, no payments were made or payable under
this agreement.

Employment Agreements
----------------------
On January 1, 1999, the Company  entered into  three-year  employment  contracts
with both its Chairman and Chief Executive Officer and its Senior Executive Vice
President and Chief Technology  Officer.  Each of the agreements  provided for a
base salary of $225,000 subject to certain conditions and the payment of a bonus
if the Company's  sales exceed  $2,000,000 in the previous year. The bonus would
have been in the amount of  $50,000  plus 1% of the amount of sales in excess of
$2,000,000  in each year.  In addition,  for each fiscal year ending  during the
term of the employment agreements, the Company was obligated to grant to each of
the  executives  an option to purchase  the  greater of 25,000  shares of common
stock at fair market value on the date of grant or 10,000 shares of common stock
at fair  market  value on the date of grant  for  each  full  $250,000  by which
pre-tax profits for each year exceeds pre-tax profits for the prior fiscal year.
However,  the Company was not  required to grant  options to purchase  more than
150,000  shares of common stock with respect to any one fiscal year.  During the
terms of their agreements, no bonuses were earned.

On May 7, 2001,  the Board of Directors  accepted the  resignation of its Senior
Vice President and Chief Technical Officer.  Accordingly, all of the obligations
under  the  employment   agreement,   including  the  payment  of  salaries  and
incentives, ceased as of this date.

On  February  1,  2002 the  Company  entered  into a new  three-year  employment
contract with its Chairman and Chief Executive  Officer,  the agreement provides
for an annual base salary of  $250,000.  In  addition,  the Company  granted the
Chairman and Chief  Executive  Officer an option to purchase  350,000  shares of
common  stock  exercisable  at $12.10  per share of which  125,000  options  are
immediately  exercisable  and 225,000  options  become  exercisable at a rate of
75,000 per year at December 31, 2002, 2003 and 2004.

In June 1999, the Chairman and Chief Executive Officer  converted  approximately
$380,000 in deferred  salary and  interest  into  375,000  options to purchase a
share of common stock at an exercise  price of $3.00,  expiring in June 2004. In
addition,  the Company's  Senior  Executive Vice President and Chief  Technology
Officer  converted  approximately  $210,000 in deferred salary and interest into
207,000  options to purchase a share of common stock at $3.00,  expiring in June
2004.  Furthermore,  the  Company's  former  President  converted  approximately
$110,000 in deferred  salary and  interest  into  110,000  options to purchase a
share of common stock at $3.00, expiring in June 2004.

In July 1999, the Company entered into a two-year employment  agreement with its
Senior  Executive  Vice  President  and Chief  Financial  Officer,  which became
effective  on  September 7, 1999.  The  agreement  provided for a base salary of
$125,000. In addition, the Company granted the Chief Financial Officer an option
to  purchase  50,000  shares of  common  stock,  of which  30,000  options  were
immediately exercisable at $5.00 per share and 20,000 options became exercisable
on September 7, 2000 at $5.00 per share.

On September 7, 2001, the Company renewed the employment agreement of its Senior
Executive  Vice President and Chief  Financial  Officer.  The  agreement,  which
expires  December 31, 2004,  provides for a base salary of $135,000  with annual

                                      F-17


INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

increases of 5%. In addition,  the Company  granted  75,000 stock  options at an
exercise  price of $8.04  vesting  on  September  7, 2006 with  earlier  vesting
incentives.

Effective October 1999, the Company entered into a two-year employment agreement
with its Senior Executive Vice President of Sales. The agreement  provides for a
base salary of $115,000.  In addition,  the Company granted the Senior Executive
Vice  President of Sales an option to purchase  50,000 shares of common stock at
$7.50 per share,  of which 20,000 shares are  immediately  exercisable and 5,000
shares become  exercisable for each 10,000 sales of ID-Check  products sold that
exceed 10,000.  The maximum  options that can be earned in any calendar year may
not exceed 100,000.  Any options earned above the initial 50,000 options will be
at fair market  value on the date of grant.  This  agreement  was renewed for an
additional 2 years expiring October 2003 under the same terms and conditions.

Supplier Agreements
--------------------

In July 1999, and amended  November 1999 and July 2000, the Company entered into
a supplier  agreement with Hand Held Products (HHP),  formerly Welch Allyn, Inc.
The  agreement  specified  that the Company pay  approximately  $188,000 for the
development  of the  Company's  ID-check  products.  In addition,  HHP agreed to
manufacture  these  products for an initial period of two years and provides for
automatic renewal periods of one year. The Company placed an initial order for a
total of 2,000 units of which 500 units were  received as of December  31, 1999.
These units were  subsequently  returned  to the  manufacturer  to exchange  the
original scanner for a high-tech scanner,  which allows the software to read the
encoding on 51 jurisdictions  as opposed to 32 jurisdictions  that could be read
on the  original  scanner.  The  Company  received  all of its  product on these
orders.  During July 2000,  the Company  placed an additional  order to purchase
5,000 units and has received a portion of the units prior to December 31, 2000.

During 2001,  the Company agreed to provide HHP with advance  deposits  totaling
$600,000  towards the fulfillment of its obligation on its purchase  order.  The
Company  satisfied  its  obligation  and paid $200,000 in 2001 and the remaining
$400,000 in 2002.  It was further  agreed that should the Company  decide not to
purchase  the  required  units under the purchase  order,  all of the  materials
purchased by the manufacturer to secure the production of units would be shipped
to the Company and the balance of the obligation would cease. As of December 31,
2002,  the Company  reserved the deposit of $600,000 due to the  uncertainty  of
whether  or not the  Company  will  complete  this  purchase  order  and use the
materials.

In addition,  HHP has notified the Company that  effective July 9, 2003, it will
terminate the  Development  and Supply  agreement  dated July 9, 1999 due to the
discontinuation  of  manufacturing  the  IDC-1400  model,  but will  fulfill its
obligation remaining with respect to the outstanding purchase order. The Company
is in discussions with its current  manufacturer as well as other  manufacturers
to select a new platform to run its patented software.

In connection with the acquisition of certain assets of the IDentiScan  Company,
LLC, on December 17, 2001, the Company  entered into a product supply  agreement
with Accu-Time Systems,  Inc. ("ATS").  ATS agreed to manufacture the IDentiScan
line of  products  for an  initial  period of three (3) years and  provides  for
automatic renewal periods of one year.

Customer Agreement
-------------------
Effective  January 30,  2002,  the  Company  mutually  agreed  with  Sensormatic
Electronics  Corporation  not to  renew  its  non-exclusive  Master  Distributor
agreement  which  was due to  expire on March 31,  2002.  The  Company  received
$412,000 from Sensormatic Electronics  Corporation and additionally  Sensormatic
agreed to return to the Company  all units  previously  purchased  and unsold in
their  inventory as  settlement  of its  obligations  under the  agreement.  The
Company  did not assign any value to these  units.  The Company  recognized  the
income,  net of refurbishment  costs,  totaling  $336,744 and it was recorded as
other income on the Company's Statements of Operations as of December 31, 2002.

Investment Banking Relationship
--------------------------------
Effective  March 28,  2002,  the Company  entered  into an  agreement  with KPMG
Corporate  Finance LLC to act as an exclusive  financial advisor to the Company.
The fee for such services was $100,000 of which $50,000 was paid as of March 31,
2002 and the balance  paid by June 30,  2002.  This  amount was  expensed in the
second  quarter of 2002 as services were  rendered.  Should KPMG secure  funding
from a private placement of the Company's securities,  the Company will also pay
3.5% of proceeds  received  from such  funding.  In  connection  with  financing
described in note 11 below,  KPMG agreed to receive 2.0% in cash and 1% of funds
drawn in warrants.  Additionally, other fees are required to be paid as a result
of any acquisition by the Company and merger of or sale of the Company.

                                      F-18


INTELLI-CHECK, INC.

NOTES TO FINANCIAL STATEMENTS

Legal Proceedings
------------------

A  lawsuit  was  filed as a class  action  on  October  18,  2001 on  behalf  of
short-sellers of the Company's  stock, who allegedly  suffered losses because of
the rise in the price of our stock,  in the United States District Court for New
Jersey.  The  class  action  suit was  amended  in  November  2001 and is now an
individual  action.  The  complaint  alleges  violations of the  Securities  and
Exchange Act of 1934.  On July 26, 2002,  the Company  filed a motion to dismiss
the  lawsuit.  The  Company's  motion to dismiss has been fully  briefed by both
sides and is awaiting  the Court's  decision.  The Company  believes the suit is
without  merit.  The  Company did not accrue for any  potential  outcome as such
accrual can not be determined at this time.

A demand for arbitration was brought by Early Bird Capital Inc. in January 2002,
seeking issuance of warrants with registration rights pursuant to the terms of a
Financial Advisory and Investment Banking Agreement dated as of August 20, 2000.
The  arbitration  took place in December 2002 and January  2003,  and both sides
have  completed  presenting  their  cases.  Early Bird  Capital  has  demanded a
monetary  judgment in the amount of $968,000,  which,  if awarded,  would have a
material adverse effect on the Company.  The Company believes it has presented a
meritorious  defense;  however,  there can be no assurance that we will prevail.
The Company did not accrue for any potential  outcome as such accrual can not be
determined at this time.

On February 19, 2003, we filed a summons and complaint upon CardCom  Technology,
Inc.  for its  infringement  on our  patent.  Under  Federal  rules,  absent  an
extension of time, the CardCom answer is due on or before April 1, 2003.

We are not  aware of any  infringement  by our  products  or  technology  on the
proprietary rights of others.

Other than as set forth  above,  we are not  currently  involved in any legal or
regulatory proceeding, or arbitration,  the outcome of which is expected to have
a material adverse effect on our business.

10.  SUBSEQUENT EVENTS
     -----------------

On March 27, 2003, pursuant to a Securities  Purchase Agreement,  we sold 30,000
shares of our Series A 8% Convertible  Preferred Stock, par value $.01 per share
for $3,000,000 before expenses to Gryphon Master Fund, L.P. Each preferred share
entitles the holder to receive dividends of 8% per annum and is convertible into
15.1515 shares of our common stock. Additionally,  each share of Preferred Stock
will receive one (1) 5 year warrant to purchase  3.787875 shares of common stock
at a price of  $6.78.  The  total  amount  of  shares  that may be  issued  upon
conversion  and the  exercising of the warrants are 454,545 and 113,636  shares,
respectively.  Dividend  payments  of  $120,000  are due  semi-annually  in cash
beginning  September 30, 2003. In connection with this financing,  we paid agent
fees of $150,000,  plus legal fees estimated to be approximately $55,000. Shares
of Preferred Stock will be convertible at the option of Gryphon Master Fund, L.P
at any time  prior to  redemption.  We may  redeem  any or all of the  Preferred
Shares at any time  after one year from the  closing  date at a cash  redemption
price of $100 per share,  providing  the volume  weighted  average  price of our
Common Stock for any 20 out of 30  consecutive  trading days exceeds  $13.20 per
share.  We must  redeem  all of the  Preferred  Stock  outstanding  on the fifth
anniversary  of the closing date at a redemption  price,  in cash,  equal to the
purchase price of the Preferred Stock.

On March 17, 2003 the Company further  extended the expiration date of its right
offering (see Note 7) until December 31, 2003.

                                      F-19




                                  APPENDIX II

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
     AND EXCHANGE ACT OF 1934

     For the quarterly period ended June 30, 2003

                                       OR

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
     AND EXCHANGE ACT OF 1934

         For the transition period from          to

                          Commission File No. 001-15465

                               Intelli-Check, Inc.
             (Exact name of the issuer as specified in its charter)

         Delaware                                          11-3234779
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

246 Crossways Park West, Woodbury, New York 11797
(address of principal executive offices)   (Zip Code)

Issuer's Telephone number, including area code:   (516) 992-1900

Check whether Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                          Yes [X]     No [_]

Number of shares outstanding of the issuer's Common Stock:

           Class                              Outstanding at August 5, 2003
           -----                              -----------------------------

Common Stock, $.001 par value                            8,957,739





                               Intelli-Check, Inc.


                                      Index


                                                                                                
Part I                   Financial Information                                                     Page

        Item 1.  Financial Statements

                   Balance Sheets - June 30, 2003 (Unaudited)
                   and December 31, 2002                                                           1

                   Statements of Operations for the three and six months ended June 30, 2003
                   and 2002 (Unaudited)                                                            2

                   Statements of Cash Flows for the six months ended June 30, 2003
                   and 2002 (Unaudited)                                                            3

                   Statements of Stockholders' Equity for the six months ended
                   June 30, 2003 (Unaudited)                                                       4

                   Notes to Financial Statements                                                   5 - 8

        Item 2.  Management's Discussion and Analysis of Financial Condition and
                 Results of Operations                                                             9 - 15

        Item 3.  Quantitative and Qualitative Disclosures About Market Risk                        15

        Item 4.  Controls and Procedures                                                           15

Part II                  Other Information

        Item 1.  Legal Matters                                                                     15

        Item 4.  Submission of Matters to a Vote of Security Holders                               16

        Item 6.  Exhibits and Reports on Form 8-K                                                  16

                   Signatures                                                                      17

                   Exhibits

                   31. CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley
                       Act of 2002                                                                 18

                   31. CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley
                       Act of 2002                                                                 19

                   32. CEO & CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley
                       Act of 2002                                                                 20





                               Intelli-Check, Inc.

                                 Balance Sheets

                                     ASSETS



                                                                          June 30, 2003      December 31,
                                                                           (Unaudited)           2002
                                                                                       
CURRENT ASSETS:
     Cash and cash equivalents                                             $  2,187,242      $  1,910,579
     Certificate of deposit, restricted                                       1,004,686                 -
     Accounts receivable                                                         83,996            93,530
     Inventory, net                                                             878,597         1,802,839
     Other current assets                                                       209,330           273,770
                                                                           ------------      ------------
           Total current assets                                               4,363,851         4,080,718

CERTIFICATE OF DEPOSIT, restricted                                              275,515           273,317

PROPERTY AND EQUIPMENT, net                                                     268,039           324,112

ACQUIRED SOFTWARE, net                                                          104,306           211,806

GOODWILL                                                                        181,447           181,447

PATENT COSTS, net                                                               245,611           260,215


OTHER INTANGIBLES, net                                                           42,882            83,299
                                                                           ------------      ------------
           Total assets                                                    $  5,481,651      $  5,414,914
                                                                           ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                      $    614,214      $    298,635
     Accrued expenses                                                           626,523           771,405
     Litigation settlement payable                                              921,700                 -
     Deferred revenue                                                           284,982           357,059
     Current portion of capital lease obligations                                 8,781            19,572
                                                                           ------------      ------------
           Total current liabilities                                          2,456,200         1,446,671
                                                                           ------------      ------------

CAPITAL LEASE OBLIGATIONS                                                             -               427
                                                                           ------------      ------------
OTHER LIABILITIES                                                               116,270            94,565
                                                                           ------------      ------------
SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED
STOCK,
    Net of beneficial conversion feature, warrants issued and
    issuance costs - $.01 par value; 1,000,000 shares authorized;
    30,000 shares issued and outstanding                                      1,742,158                 -
                                                                           ------------      ------------
STOCKHOLDERS' EQUITY:
     Common stock - $.001 par value; 20,000,000 shares
     authorized; 8,953,314 and 8,875,302 shares issued and
     outstanding, respectively                                                    8,952             8,874
     Additional paid-in capital                                              24,916,153        22,399,029
     Deferred compensation                                                     (373,444)         (348,476)
     Accumulated deficit                                                    (23,384,638)      (18,186,176)
                                                                           ------------      ------------
           Total stockholders' equity                                         1,167,023         3,873,251
                                                                           ------------      ------------
           Total liabilities and stockholders' equity                      $  5,481,651      $  5,414,914
                                                                           ============      ============


See accompanying notes to financial statements


                                                                               1



                               Intelli-Check, Inc.

                            Statements of Operations
                                   (Unaudited)



                                             Three Months Ended June 30,      Six Months Ended June 30,
                                                 2003            2002            2003            2002
                                                 ----            ----            ----            ----
                                                                                 
REVENUE                                      $   342,191     $   287,336     $   604,325     $   541,734
COST OF REVENUE                                 (137,632)       (116,329)       (241,222)       (246,712)
INVENTORY WRITEDOWN                             (800,000)             --        (800,000)             --
                                             -----------     -----------     -----------     -----------
         Gross profit (loss)                    (595,441)        171,007        (436,897)        295,022
                                             -----------     -----------     -----------     -----------
OPERATING EXPENSES
    Selling                                      341,560         418,842         679,500         838,974
    General and administrative                   805,434         789,449       1,424,669       1,947,628
    Research and development                     318,336         308,291         621,912         630,435
                                             -----------     -----------     -----------     -----------
         Total operating expenses              1,465,330       1,516,582       2,726,081       3,417,037
                                             -----------     -----------     -----------     -----------

         Loss from operations                 (2,060,771)     (1,345,575)     (3,162,978)     (3,122,015)
                                             -----------     -----------     -----------     -----------
OTHER INCOME (EXPENSES):
    Interest income                               11,265          14,926          15,622          32,256
    Interest expense                                (475)         (1,375)         (1,153)         (2,870)
    Other (Note 5)                                    --              --        (921,730)        336,344
                                             -----------     -----------     -----------     -----------
                                                  10,790          13,551        (907,261)        365,730
                                             -----------     -----------     -----------     -----------

         Net loss                            $(2,049,981)    $(1,332,024)    $(4,070,239)    $(2,756,285)
                                             ===========     ===========     ===========     ===========

PER SHARE INFORMATION:
    Net loss per common share -

Net Loss                                     $(2,049,981)    $(1,332,024)    $(4,070,239)    $(2,756,285)
Accretion of convertible
Redeemable preferred stock costs                  65,758              --          65,758              --
Dividend on convertible
Redeemable preferred stock                        62,465              --          62,465              --
                                             -----------     -----------     -----------     -----------
Net loss attributable to common              $(2,178,204)    $(1,332,024)    $(4,198,462)    $(2,756,285)
stockholders                                 ===========     ===========     ===========     ===========

    Basic and diluted                        $      (.24)    $      (.15)    $      (.47)    $      (.32)

Common shares used in computing per
share amounts -
    Basic and diluted                          8,930,112       8,596,464       8,902,858       8,657,710


See accompanying notes to financial statements


                                                                               2


                               Intelli-Check, Inc.

                            Statements of Cash Flows
                                   (Unaudited)



                                                                        Six months ended  Six months ended
                                                                          June 30, 2003     June 30, 2002
                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                              $(4,070,239)      $(2,756,285)
Adjustments to reconcile net loss to net cash used in
     operating activities:
          Depreciation and amortization                                        220,523           197,560
          Noncash stock based compensation expense                              29,000                --
          Amortization of deferred compensation                                193,032           641,707
          Writedown of inventory                                               800,000                --
          Changes in assets and liabilities-
          Increase in certificates of deposit, restricted                   (1,006,884)           (2,746)
          Decrease (increase) in accounts receivable                             9,534           (80,064)
          Decrease in inventory                                                124,242           170,083
          Decrease (increase) in other current assets                           64,440          (467,233)
          Increase in accounts payable and accrued expenses                    108,232           152,744
          Increase in litigation settlement payable                            921,700                --
          (Decrease) increase in deferred revenue                              (50,372)          174,882
          (Decrease)  in other liabilities                                          --            (5,573)
                                                                           -----------       -----------
               Net cash used in operating activities                        (2,656,792)       (1,974,925)
                                                                           -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of property and equipment                                        (1,929)          (38,894)
                                                                           -----------       -----------

               Net cash used in investing activities                            (1,929)          (38,894)
                                                                           -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from issuance of common stock                                232,502         1,584,807
     Net proceeds from issuance of convertible redeemable
     preferred stock                                                         2,714,100                --
     Repayment of capital lease obligation                                     (11,218)          (10,262)

     Treasury stock purchased                                                       --           (70,064)
                                                                           -----------       -----------
          Net cash provided by financing activities                          2,935,384         1,504,481
                                                                           -----------       -----------
               Increase (decrease) in cash                                     276,663          (509,338)

CASH AND CASH EQUIVALENTS, beginning of period                               1,910,579         4,061,235
                                                                           -----------       -----------
CASH AND CASH EQUIVALENTS, end of period                                   $ 2,187,242       $ 3,551,897
                                                                           ===========       ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
     Cash paid during the period for interest                              $       475       $     2,870
                                                                           ===========       ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
ACTIVITIES:
    Beneficial conversion feature and warrants issued in connection
    with issuance of convertible redeemable preferred Stock                $ 1,037,700       $        --
                                                                           ===========       ===========
    Accretion of convertible redeemable preferred stock cost               $    65,758       $        --
                                                                           ===========       ===========
    Dividend payable on convertible redeemable preferred stock             $    62,465       $        --
                                                                           ===========       ===========


See accompanying notes to financial statements


                                                                               3


                               Intelli-Check, Inc.

                  Statement of Stockholders' Equity (Unaudited)
                     For the Six Months Ended June 30, 2003



                                                       Common Stock          Additional
                                                       ------------            Paid-in       Deferred      Accumulated
                                                     Shares      Amount        Capital     Compensation      Deficit       Total
                                                     ------      ------        -------     ------------      -------       -----
                                                                                                       
BALANCE, January 1, 2003                            8,875,302   $  8,874    $ 22,399,029    $ (348,476)   $(18,186,176)  $3,873,251
Effect on extension of expiring options                                           29,000                                     29,000
Exercise of stock options                              78,000         78         232,322             -               -      232,400
Exercise of rights                                         12          -             102             -               -          102
Effect on extension of expiring rights dividend             -          -       1,000,000             -      (1,000,000)           -
Warrants issued in connection with the issuance of
   convertible redeemable preferred stock                   -          -         497,700             -               -      497,700
Beneficial conversion feature embedded in
   convertible redeemable preferred stock issued                                 540,000             -               -      540,000
Amortization of deferred compensation                       -          -               -       193,032               -      193,032
Dividend on convertible redeemable preferred stock          -          -               -             -         (62,465)     (62,465)
Recognition of deferred compensation                                             232,112      (232,112)
Accretion of convertible redeemable preferred stock                                                  -         (65,758)     (65,758)
Valuation adjustment of deferred compensation               -          -         (14,112)       14,112               -            -

Net loss                                                    -          -               -             -      (4,070,239)  (4,070,239)
                                                    ---------   --------    ------------    ----------    ------------   ----------
BALANCE, June 30, 2003                              8,953,314   $  8,952    $ 24,916,153    $ (373,444)   $(23,384,638)  $1,167,023
                                                    =========   ========    ============    ==========    ============   ==========


See accompanying notes to financial statements


                                                                               4


                               Intelli-Check, Inc.

                          Notes to Financial Statements

                                   (Unaudited)

Note 1.  Basis of Presentation and Significant Accounting Policies

Basis of Presentation

     The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited interim financial statements
furnished herein include all adjustments necessary for a fair presentation of
the Company's financial position at June 30, 2003 and the results of its
operations for the six months and three months ended June 30, 2003 and 2002,
stockholders' equity for the six months ended June 30, 2003 and cash flows for
the six months ended June 30, 2003 and 2002. All such adjustments are of a
normal and recurring nature. Interim financial statements are prepared on a
basis consistent with the Company's annual financial statements. Results of
operations for the six month period ending June 30, 2003 are not necessarily
indicative of the operating results that may be expected for the year ending
December 31, 2003.

     The balance sheet as of December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and notes required by accounting principles generally accepted in the United
States of America for complete financial statements.

     For further information, refer to the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002.

     The Company anticipates that its current available cash on hand, cash
resources from expected revenues from the sale of the units in inventory,
licensing of its technology, combined with the cash expected from the exercise
of options, warrants and rights and the projected proceeds from our proposed
public offering will be sufficient to meet its anticipated working capital and
capital expenditure requirements for at least the next eighteen months. Should
the Company be unsuccessful in completing the proposed public offering, it would
be required to raise additional capital during the next 12 months. These
requirements are expected to include the purchase of additional inventory to run
its patented software, product development, sales and marketing, working capital
requirements and other general corporate purposes. Should sales of its products
fall below expectations during the next 18 months, the Company would be required
to raise additional capital to fund its operations. Should the Company need to
raise additional capital, there can be no assurances that the Company will be
successful in raising capital. The impact on the Company could be adverse if it
is not able to ship products as projected or raise capital as discussed above.
In addition, the Company may need to raise additional funds to respond to
business contingencies which may include the need to fund more rapid expansion,
fund additional marketing expenditures, develop new markets for its ID-Check
technology, enhance our operating infrastructure, respond to competitive
pressures, or acquire complementary businesses or necessary technologies. In the
event the Company is unable to raise capital, management plans to implement cost
saving measures to sustain business activities on a reduced level.

Recently Issued Accounting Standards

     In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149 ("SFAS No. 149"), "Amendment of Statement 133 on Derivative Instruments
and Hedging Activities," which amends and clarifies financial accounting and
reporting for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities under SFAS No. 133. SFAS
No. 149 is effective for contracts entered into or modified after June 30, 2003
except for the provisions that were cleared by the FASB in prior pronouncements.
The Company believes that the adoption of SFAS No. 149 will not have a material
effect on its financial position and results of operations.

     In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150 ("SFAS No. 150"), "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity." This statement establishes
standards for how an issuer classifies and measures in its statement of
financial position certain financial instruments with characteristics of both


                                                                               5


liabilities and equity. In accordance with the standard, financial instruments
that embody obligations for the issuer are required to be classified as
liabilities. This Statement is effective for financial instruments entered into
or modified after May 31, 2003. The adoption of SFAS No. 150 had no material
effect on our financial position and results of operations.

Use of Estimates

     The preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in its financial statements and accompanying notes. Actual results
could differ materially from those estimates.

Revenue Recognition

     The Company sells its products directly through its sales force and through
distributors. Revenue from direct sales of the Company's product is recognized
upon shipment to the customer. The Company's products require continuing service
or post contract customer support and performance by the Company; accordingly, a
portion of the revenue pertaining to the service and support is deferred based
on its fair value and recognized ratably over the period in which the future
service, support and performance are provided, which is generally one year.
Currently, with respect to sales to distributors and sales of the Company's
IDentiScan products, the Company does not have enough experience to identify the
fair value of each element and the full amount of the revenue and related gross
margin is deferred and recognized ratably over the one-year period in which the
future service, support and performance are provided.

     In addition, the Company recognizes sales from licensing of its patented
software to customers. The Company's licensed software requires continuing
service or post contract customer support and performance by the Company;
accordingly, a portion of the revenue is deferred based on its fair value and
recognized ratably over the period in which the future service, support and
performance are provided, which is generally one year.

     During the second quarter of fiscal 2003, the Company began receiving
royalties from licensing its technology, which are recognized as revenues in the
period it is earned.

Inventory Valuation

     The Company's inventory consists primarily of its ID-Check terminals that
run our patented software. The Company acquired such inventory in December 1999
and shortly thereafter, it was returned to the manufacturer for upgrade and
became available for sale in the fourth quarter of 2000. The Company
periodically evaluates the current market value of its inventory, taking into
account any technological obsolescence that may occur due to changes in hardware
technology and the acceptance of the product in the marketplace. Even though the
Company has had limited sales to date, it believes that a sufficient market
exists to sell (with margin) over a period of time the current inventory. The
Company has paid a deposit of $600,000 towards the purchase of the remaining
units that are available to be purchased under the outstanding purchase order
with our manufacturer. However, during the fourth quarter of 2002, the Company
reserved 100% of this deposit due to the uncertainty of whether or not it will
place this order. The current terminal is fully capable of running the Company's
patented software as it utilizes a state-of-the-art imager/scanner and magnetic
stripe reader. However, since the Company's policy is to periodically evaluate
the market value of the inventory, it was determined that an inventory reserve
of $800,000 should be taken at this time, which has impacted the Company's
results of operations for the period ended June 30, 2003. The Company is in
discussions with its current manufacturer as well as other manufacturers to
select a new platform to run its patented software. The Company may elect to
purchase units to fulfill future orders from a new platform once it is selected.

Stock-Based Compensation

     At June 30, 2003, the Company has stock based compensation plans, which are
described more fully in Note 7 to Financial Statements included in the Company's
2002 Annual Report on Form 10-K. As permitted by the SFAS No. 123, "Accounting
for Stock Based Compensation", the Company accounts for stock-based compensation
arrangements with employees in accordance with provisions of Accounting
Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to
Employees". Compensation expense for stock options issued to employees is based
on the difference on the date of grant, between the fair value of the Company's
stock and the exercise price of the option. No stock based employee compensation


                                                                               6


cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock at the
date of grant. The Company accounts for equity instruments issued to
non-employees in accordance with the provisions of SFAS No. 123 and Emerging
Issues Task Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction With
Selling Goods or Services". All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for
based on the fair value of the consideration received or the fair value of the
equity instrument issued, whichever is more reliably measurable.

     The following table illustrates the effect on net loss and loss per share
if the Company had applied the fair value recognition provisions of SFAS No. 123
to employees stock based compensation:



----------------------------------------------------------------------------------------------------------------------------
                                               Three months ended   Three months ended  Six months ended  Six months ended
                                                  June 30, 2003       June 30, 2002       June 30, 2003    June 30, 2002
----------------------------------------------------------------------------------------------------------------------------
                                                                                                
Net loss, as reported                             ($2,049,981)         ($1,332,024)       ($4,070,239)      ($3,122,015)
----------------------------------------------------------------------------------------------------------------------------
Add:
Total stock based employee compensation
expense determined under fair value
based method for all awards                          231,950             314,921             564,369         1,773,010
                                                     -------             -------             -------         ---------
Net loss, pro forma                               ($2,281,931)         ($1,646,945)       ($4,634,608)      ($4,895,025)
                                               ----------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share, as reported        ($0.24)             ($0.15)             ($0.47)          ($0.32)
----------------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------------
Basic and diluted loss per share, pro forma          ($0.26)             ($0.19)             ($0.52)          ($0.57)
----------------------------------------------------------------------------------------------------------------------------


Reclassifications

     Certain prior period amounts have been reclassified to conform to the
current period presentation.

Note 2.  Net Loss Per Common Share

     The Company computes net loss per common share in accordance with SFAS No.
128, "Earnings Per Share". Under the provisions of SFAS No. 128, basic net loss
per common share ("Basic EPS") is computed by dividing net loss by the weighted
average number of common shares outstanding. Diluted net loss per common share
("Diluted EPS") is computed by dividing net loss by the weighted average number
of common shares and dilutive common share equivalents then outstanding. SFAS
No. 128 requires the presentation of both Basic EPS and Diluted EPS on the face
of the statements of operations. Diluted EPS for the periods ended June 30, 2003
and 2002 does not include the impact of stock options, warrants and convertible
preferred stock then outstanding, as the effect of their inclusion would be
antidilutive.

     The following table summarizes the equivalent number of common shares
assuming the related securities that were outstanding as of June 30, 2003 and
2002 had been converted:

                                                        2003        2002
                                                        ----        ----
Stock options                                         1,962,324   2,323,940
Warrants                                                128,061      10,000
Convertible redeemable preferred stock                  454,545           -
                                                      ---------   ---------
              Total                                   2,544,930   2,333,940
                                                      =========   =========

Note 3.  Convertible Redeemable Preferred Stock

     On March 27, 2003, pursuant to a Securities Purchase Agreement, the Company
sold 30,000 shares of our Series A 8% Convertible Redeemable Preferred Stock,
par value $.01 per share, for $3,000,000 before expenses to Gryphon Master Fund,
L.P. Each share of Preferred Stock entitles the holder to receive dividends of
8% per annum and is currently convertible into 15.1515 shares of our common
stock. Additionally, each share of Preferred Stock received one (1) five year
warrant to purchase 3.787875 shares of common stock at a price of $6.78. The
total amount of shares that may be issued upon conversion and the exercising of
the warrants are 454,545 and 113,636 shares, respectively. Dividend payments of


                                                                               7


$120,000 are due semi-annually in cash beginning September 30, 2003. In
connection with this financing, the Company paid agent fees of $150,000 and
issued warrants and options to purchase 8,854 shares of common stock at a price
of $6.78. The Company also paid legal fees of approximately $127,000. The
Company recorded the relative fair value of all the warrants issued in
connection with this transaction of $497,700 against the amount of the
Convertible Redeemable Preferred Stock as of March 27, 2003, which was
calculated using the Black-Scholes valuation method, as well as $540,000 of
beneficial conversion feature in accordance with EITF 00-27 and such amounts are
being accreted along with issuance cost of $285,900 over the five year period
until the mandatory redemption date of the Preferred Stock, the fifth
anniversary of closing. The Company recorded accretion of $65,758 for the period
ended June 30, 2003. Shares of Preferred Stock are convertible at the option of
Gryphon Master Fund, L.P at any time prior to redemption. The Company may redeem
any or all of the Preferred Shares at any time after one year from the closing
date at a cash redemption price of $100 per share, providing the volume weighted
average price of the Company's Common Stock for any 20 out of 30 consecutive
trading days exceeds $13.20 per share. The Company must redeem all of the
Preferred Stock outstanding on the fifth anniversary of the closing date at a
redemption price, in cash, equal to the purchase price of the Preferred Stock.

Note 4.  Rights Extension

     In March 2001, the Company declared a dividend distribution of one
non-transferable right to purchase one share of the Company's common stock for
every 10 outstanding shares of common stock that were continuously held from the
record date to the date of exercise, as well as common stock underlying vested
stock options and warrants, held of record on March 30, 2001, at an exercise
price of $8.50. The rights, which were due to expire on October 4, 2002, were
extended by the Company on October 1, 2002 until April 4, 2003 and further
extended in March 2003 until December 31, 2003. The Company recorded the fair
value of the additional rights extension of $1,000,000 during the quarter ended
March 31, 2003 using the Black-Scholes valuation method and recorded an increase
in additional paid-in-capital and a reduction in accumulated deficit.

Note 5.  Legal Matters

     A class action lawsuit was filed on October 18, 2001 on behalf of
short-sellers of the Company's stock, who allegedly suffered losses because of
the rise in the price of the Company's stock, in the United States District
Court for New Jersey. The class action suit was amended in November 2001 and
became an individual action. On July 26, 2002, the Company filed a motion to
dismiss the lawsuit. On July 30, 2003, the court granted the Company's motion to
dismiss the lawsuit. The Plaintiff has 30 days in which to file an amended
complaint pertaining to certain of the pleadings.

     On February 19, 2003, the Company filed a summons and complaint upon
CardCom Technology, Inc. alleging infringement on its patent. During June 2003,
the Company settled this case with CardCom Technology, Inc. The Company granted
CardCom a three year royalty license to use certain of the Company's patents in
connection with the manufacture, use and sale of CardCom's age verification
products in the United States and Canada. It also provides that CardCom will pay
royalties of approximately 10% on its net sales. For the quarter ended June 30,
2003, the Company received $25,229 in royalty fees pursuant to this agreement.

     On April 9, 2003, the Company received notification from the American
Arbitration Association that it had awarded Early Bird Capital $921,730 on the
settlement of their demand. The Company has filed with the New York State
Supreme Court an application for setting aside the confirmation of the award.
The Company recorded a charge of $921,730 in its Statements of Operations for
the three month period ending March 31, 2003. If the Company is unsuccessful in
its application to overturn the award, the Company would owe additional interest
on the award at an annual rate of 9% from the date of the award. The Company
secured a one year letter of credit for the full amount of the charge along with
interest totaling $1,004,686 until April 9, 2004 in the form of a certificate of
deposit.

     On August 1, 2003, the Company filed a summons and Complaint against Tricom
Card Technologies, Inc. alleging infringement on its patent seeking injunctive
and monetary relief.

Note 6.  Financing Arrangement

     On August 14, 2003, the Company filed a Form S-2 Registration Statement
with the Securities and Exchange Commission under which it proposes to offer one
million shares of the Company's common stock. There can be no assurances that
the offering will become effective.


                                                                               8


Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

   (a) Overview

     Our company was formed in 1994 to address a growing need for a reliable
document and age verification system to detect fraudulent driver licenses and
other widely accepted forms of government-issued identification documents. Our
sales through September 30, 2000 had been minimal since through 1998 we had
previously produced only a limited pre-production run of our product for testing
and market acceptance. In late 1999, we received a limited number of ID-Check
terminals, which were then available for sale. Shortly thereafter, these
terminals were returned to the manufacturer to be upgraded to contain an
advanced imager/scanner, which allowed our software to read the encoding on over
50 jurisdictions as opposed to 32 jurisdictions on the original scanner. During
the fourth quarter of 2000, we experienced a material increase in sales as a
result of product availability and establishing marketing and distributor
agreements with resellers. During 2001 and through the quarter ended June 30,
2003, sales were limited due to the refocus of our marketing efforts towards
larger customers in the retail market, in which the sales cycle normally
requires an extended time frame involving multiple meetings, presentations and a
test period, which has been further extended by the downturn in the economy,
whereby decisions for capital expenditures have been delayed. However, after the
tragic events that occurred on September 11, 2001, we believe there has been a
significant increase in awareness to help improve security across many
industries, including airlines, rail transportation and high profile buildings
and facilities, which should enhance demand for our technology. We have also
begun to market to various government and state agencies, which have long sales
cycles including extended test periods. Since inception, we have incurred
significant losses and negative cash flow from operating activities and, as of
June 30, 2003, we had an accumulated deficit of approximately $23,400,000. We
will continue to fund operating and capital expenditures from proceeds that we
received from our recent financing as well as the exercise of warrants, options
and rights. In view of the rapidly evolving nature of our business and our
limited operating history, we believe that period-to-period comparisons of
revenues and operating results are not necessarily meaningful and should not be
relied upon as indications of future performance.

     Our ID-Check's unique ability to verify the validity of military ID's,
driver licenses and state issued non-driver ID cards that contain magnetic
stripes or bar codes that conform to AAMVA/ANSI/ISO standards, enables us to
target three distinct markets. The original target market was focused on
resellers of age-restricted products, such as alcohol and tobacco, whereby the
proliferation of high-tech fake IDs exposed merchants to fines and penalties for
the inadvertent sale of these products to underage purchasers. Commercial Fraud
which includes identity theft has additionally exposed industry to economic
losses through various frauds that utilize fake IDs to support these
transactions. Our technology is designed to help prevent losses from these
frauds. The tragic events that occurred on September 11, 2001 have created
increased awareness of our technology in security applications involving access
control. As a result of its applicability in these markets, we have sold our
products to some of the largest companies in the gaming industry, a state port
authority, military establishments, airports, nuclear power plants and high
profile buildings and have successfully completed tests of our technology in one
of the largest mass merchandisers in the United States and a large
quasi-government department. We currently are testing our products with some
large public companies and in several locations in a large population State. We
have entered into strategic alliances with Bioscrypt Inc., Identix Corporation
and Ultra-Scan Inc., biometric companies; E-Certify, an information security
company; Lenel Systems International, a provider of integrated security
solutions; and Northrop Grumman Mission Systems, an integrator in the defense
industry, to utilize our systems and software as the proposed or potential
enrollment application for their technologies and to jointly market these
security applications. In addition, we have recently signed agreements with some
high profile organizations to promote the use of our technology and our
products, such as Credit Union National Association (CUNA), Mothers Against
Drunk Driving (MADD) and the American Association of Airport Executives (AAAE).
We believe these relationships have broadened our marketing reach through their
sales efforts and we intend to develop additional strategic alliances with
additional providers of security solutions.

     We have developed additional software products that utilize our patented
software technology Our C-Link(R) software product, which runs on a personal
computer and was created to work in conjunction with the ID-Check unit allows a
user to instantly view the encoded data for further verification, to analyze the
data and to generate various reports where permitted by law. We have also
developed software containing our patented technology that can be integrated
onto a Windows platform that will enable a user of the software to perform all
the functions of the ID-Check terminal. To date, we have entered into six
licensing agreements and are in discussions with additional companies to license
our software to be utilized within other existing systems. The revenue received
from such licensing agreements has not been significant through the period ended
June 30, 2003.


                                                                               9


     The foregoing contains certain forward-looking statements. Due to the fact
that we could face intense competition in a business characterized by rapidly
changing technology and high capital requirements, actual results and outcomes
may differ materially from any such forward looking statements and, in general,
are difficult to forecast.

Critical Accounting Policies and the Use of Estimates
------------------------------------------------------

     The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts reported in
our financial statements and accompanying notes. Actual results could differ
materially from those estimates.

     We believe that there are several accounting policies that are critical to
understanding our historical and future performance, as these policies affect
the reported amounts of revenue and the more significant areas involving
management's judgments and estimates. These significant accounting policies
relate to revenue recognition, valuation of inventory and commitments and
contingencies. These policies and our procedures related to these policies are
described in detail below.

A.   Revenue Recognition

     We sell our products directly through our sales force and through
distributors. Revenue from direct sales of our product is recognized upon
shipment to the customer. Our product requires continuing service or post
contract customer support and performance by us; accordingly, a portion of the
revenue pertaining to the service and support is deferred based on its fair
value and recognized ratably over the period in which the future service,
support and performance are provided, which is generally one year. Currently,
with respect to sales to distributors and sales of our IDentiScan products, we
do not have enough experience to identify the fair value of each element and the
full amount of the revenue and related gross margin is deferred and recognized
ratably over the one-year period in which the future service, support and
performance are provided.

     During the third quarter of fiscal 2002, we began recognizing sales from
the licensing of our technology to customers. Our licensing products require
continuing service or post contract customer support and performance by us;
accordingly, a portion of the revenue is deferred based on its fair value and
recognized ratably over the period in which the future service, support and
performance are provided, which is generally one year.

     During the second quarter of fiscal 2003, we began receiving royalties from
licensing our technology. We will recognize these payments as revenues in the
period it is earned.

B.   Inventory Valuation

     Our inventory consists primarily of our ID-Check terminals that run our
patented software. We acquired such inventory in December 1999 and shortly
thereafter, it was returned to the manufacturer for upgrade and became available
for sale in the fourth quarter of 2000. We periodically evaluate the current
market value of our inventory, taking into account any technological
obsolescence that may occur due to changes in hardware technology and the
acceptance of the product in the marketplace. Even though we have had limited
sales to date, we believe that a sufficient market exists to sell (with margin)
over a period of time the current inventory. We have paid a deposit of $600,000
towards the purchase of the remaining units that are available to be purchased
under the outstanding purchase order with our manufacturer. However, during the
fourth quarter of 2002, we reserved 100% of this deposit due to the uncertainty
of whether or not we will place this order. The current terminal is fully
capable of running our patented software as it utilizes a state-of-the-art
imager/scanner and magnetic stripe reader. However, since our policy is to
periodically evaluate the market value of our inventory, we have determined that
an inventory reserve of $800,000 should be taken at this time, which has
impacted our results of operations for the period ended June 30, 2003. We are in
discussions with our current manufacturer as well as other manufacturers to
select a new platform to run our patented software. We may elect to purchase
units to fulfill future orders from a new platform once it is selected.

C.   Commitments and Contingencies


                                                                              10


     We are currently involved in certain legal proceedings as discussed in the
"Commitments and Contingencies" note in the Notes to the Financial Statements
filed in our form 10-K for the year ended December 31, 2002. Other than as
described in footnote 5 above, we do not believe these legal proceedings will
have a material adverse effect on our financial position, results of operations
or cash flows.

     The above listing is not intended to be a comprehensive list of all of our
accounting policies. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles, with no need for management's judgment in their application. There
are also areas in which management's judgment in selecting any available
alternative would not produce a materially different result.

  (b) Results of Operations

                Comparison of the six months ended June 30, 2003
                     to the six months ended June 30, 2002.

     Revenues increased by $62,591 from $541,734 for the six months ended June
30, 2002 to $604,325 for the six months ended June 30, 2003. Revenues for the
period ended June 30, 2003 consisted of revenues from distributors of $169,976,
revenues from direct sales to customers of $409,120 and royalty payments of
$25,229. Shipments of products and contracted services amounted to $557,792 and
$723,701 for the periods ended June 30, 2003 and 2002, respectively. The refocus
of our marketing efforts to larger retailers and government agencies continues
to impact our sales as a result of the extended time frame involved associated
with these sales cycles. In addition, during 2001, 2002 and continuing in 2003,
the sales cycle has been further extended by the economic downturn in the
economy delaying capital expenditures decisions. We believe that based upon the
results of certain tests, recent marketing agreements and legislative efforts to
enhance security, these events will result in increased sales opportunities.

     Gross profit, excluding an inventory writedown of $800,000 in the second
quarter of 2003, would have increased by $68,081 from $295,022 for the six
months ended June 30, 2002 to $363,103 for the six months ended June 30, 2003.
Our gross profit excluding the inventory writedown of $800,000 in the second
quarter of 2003 as a percentage of revenues would have increased to 60.1% in the
six months ended June 30, 2003 from 54.5% for the six months ended June 30,
2002. Our gross profit percentage was positively impacted by an increase in
sales from licensing our patented technology at higher gross margins.

     Operating expenses, which consist of selling, general and administrative
and research and development expenses, decreased 20.2% from $3,417,037 for the
six months ended June 30, 2002 to $2,726,081 for the six months ended June 30,
2003. Selling expenses, which consist primarily of salaries and related costs
for marketing, decreased 19% from $838,974 for the six months ended June 30,
2002 to $679,500 for the six months ended June 30, 2003 primarily due to
decreased travel and convention expenses of approximately $23,000 and a
reduction of non-recurring expenses of $155,000 from the hiring of professional
consultants during the six months ended June 30, 2002 to promote our product,
which was partially offset by an increase in salaries and employee costs of
approximately $25,000. General and administrative expenses, which consist
primarily of salaries and related costs for general corporate functions,
including executive, accounting, facilities and fees for legal and professional
services, decreased 26.9% from $1,947,628 for the six months ended June 30, 2002
to $1,424,669 for the six months ended June 30, 2003, primarily as a result of a
reduction of non-recurring fees of approximately $519,000 incurred in the prior
year for the hiring of consultants primarily relating to the recognized non-cash
expense of the granting of options to this group in the prior year and a
decrease in legal and accounting fees of approximately $57,000, which was
partially offset by an increase in depreciation and amortization expenses of
approximately $23,000 and increases in insurance costs of approximately $15,000.
Research and development expenses, which consist primarily of salaries and
related costs for the development of our products, amounted to $630,435 for the
six months ended June 30, 2002 compared to $621,912 for the six months ended
June 30, 2003, which has not materially changed. We believe that we will require
additional investments in development and operating infrastructure as the
Company grows. Therefore, we expect that expenses will continue to increase in
line with increases in the growth of the business as we may increase
expenditures for advertising, brand promotion, public relations and other
marketing activities. We expect that we will incur incremental general and
administrative expenses as the business grows. Research and development expenses
may also increase as we complete and introduce additional products based upon
our patented ID-Check technology.

     Interest income decreased from $32,256 for the six months ended June 30,
2002 to $15,622 for the six months ended June 30, 2003, which is a result of a
decrease in our cash and cash equivalents available for investment and lower
interest rates in effect during this period.


                                                                              11


     Interest expense decreased from $2,870 for the six months ended June 30,
2002 to $1,153 for the six months ended June 30, 2003 as we have paid down
certain capital leases which had higher interest rates.

     Other expenses for the six months ended June 30, 2003 totaling $921,730
resulted from an arbitration decision awarding Early Bird Capital settlement on
their demand. Other income for the six months ended June 30, 2002 totaling
$336,344 resulted from a settlement of certain obligations under a Master
Licensing agreement between us and Sensormatic Electronics Corporation, which
expired on March 31, 2002. We received $412,000 and incurred $75,656 in
refurbishment costs for previously customized terminals.

     We have incurred net losses to date; therefore we have paid nominal income
taxes.

     As a result of the factors noted above, our net loss increased from
$2,756,285 for the six months ended June 30, 2002 to $4,070,239 for the six
months ended June 30, 2003.

               Comparison of the three months ended June 30, 2003
                    to the three months ended June 30, 2002.

     Revenues increased by $54,855 from $287,336 for the three months ended June
30, 2002 to $342,191 recorded for the three months ended June 30, 2003. Revenues
for the period ended June 30, 2003 consisted of revenues from distributors of
$80,234, revenues from direct sales to customers of $236,728 and royalty
payments of $25,229. Shipments of products and contracted services amounted to
$372,885 and $339,178 for the periods ended June 30, 2003 and 2002,
respectively. The refocus of our marketing efforts to larger retailers and
government agencies continues to impact our sales as a result of the extended
time frame involved associated with these sales cycles. In addition, during
2001, 2002 and continuing in 2003, the sales cycle has been further extended by
the downturn in the economy, in delaying capital expenditures decisions. We
believe that based upon the results of certain tests, recent marketing
agreements and legislative efforts to enhance security, these events will result
in increased sales opportunities.

     Gross profit, excluding an inventory writedown of $800,000 in the second
quarter of 2003, would have increased by $33,552 from $171,007 for the three
months ended June 30, 2002 to $204,559 for the three months ended June 30, 2003.
Our gross profit, excluding the inventory writedown of $800,000 in the second
quarter of 2003 as a percentage of revenues, would have amounted to 59.8% in the
three months ended June 30, 2003 compared to 59.5% for the three months ended
June 30, 2002 and remained relatively stable.

     Operating expenses, which consist of selling, general and administrative
and research and development expenses, decreased 3.4% from $1,516,582 for the
three months ended June 30, 2002 to $1,465,330 for the three months ended June
30, 2003. Selling expenses, which consist primarily of salaries and related
costs for marketing, decreased 18.5% from $418,842 for the three months ended
June 30, 2002 to $341,560 for the three months ended June 30, 2003 primarily due
to a reduction in non-recurring fees of $65,000 incurred in the prior year from
the hiring of professional consultants to promote our product. General and
administrative expenses, which consist primarily of salaries and related costs
for general corporate functions, including executive, accounting, facilities and
fees for legal and professional services amounted to $789,449 for the three
months ended June 30, 2002 compared to $805,434 for the three months ended June
30, 2003, which has not materially changed. Research and development expenses,
which consist primarily of salaries and related costs for the development and
testing of our products, amounted to $308,291 for the three months ended June
30, 2002 compared to $318,336 for the three months ended June 30, 2003, which
has not materially changed. We believe that we will require additional
investments in development and operating infrastructure as the Company grows.
Therefore, we expect that expenses will continue to increase in line with
increases in the growth of the business as we may increase expenditures for
advertising, brand promotion, public relations and other marketing activities.
We expect that we will incur incremental general and administrative expenses as
the business grows. Research and development expenses may also increase as we
complete and introduce additional products based upon our patented ID-Check
technology.

     Interest income decreased from $14,926 for the three months ended June 30,
2002 to $11,265 for the three months ended June 30, 2003, which is a result of a
decrease in our cash and cash equivalents available for investment and lower
interest rates in effect during this period.

     Interest expense decreased from $1,375 for the three months ended June 30,
2002 to $475 for the three months ended June 30, 2003 as we have paid down
certain capital leases which had higher interest rates than those currently
prevailing.


                                                                              12


     We have incurred net losses to date; therefore we have paid nominal taxes.

     As a result of the factors noted above, our net loss increased from
$1,332,024 for the three months ended June 30, 2002 to $2,049,981 for the three
months ended June 30, 2003.

(c)  Liquidity and Capital Resources

     Prior to our IPO, which became effective in November 1999, we financed our
operations primarily through several private placements of stock and debt
financings. We used the net proceeds of these financings for the primary purpose
of funding working capital and general corporate purposes and for the purchase
of hardware terminals. As a result of the net proceeds we received from our IPO
and the underwriters' exercise of their over allotment option, we received
approximately $6,907,000 in net proceeds after deducting underwriters'
commissions and offering expenses. During 2000, 2001 and 2002, we received
$8,400,014 in net proceeds from the issuance of common stock from the exercise
of warrants, rights and stock options. In March 2003, we received net proceeds
before legal expenses of $2,850,000, from the issuance of Convertible Redeemable
Preferred Stock. We funded the purchase of hardware terminals for resale and
working capital primarily from these proceeds. We will continue to use these
proceeds to fund working capital.

     Cash used in operating activities for the six months ended June 30, 2003 of
$2,656,792 was primarily attributable to the net loss of $4,070,239, an increase
in certificates of deposit, restricted of $1,006,884 resulting from the award in
the legal matter with Early Bird Capital, which was primarily offset by a
decrease of inventory of $124,242 and an inventory reserve of $800,000, an
increase in accounts payable and accrued expenses of $108,232, an increase in
litigation settlement payable of $921,700 resulting from the legal award
recorded in the first quarter of 2003, depreciation and amortization of $220,523
and amortization of deferred compensation of $193,032 from the granting of stock
options to consultants. Cash used in operating activities for the six months
ended June 30, 2002 of $1,974,925 resulted primarily from the net loss of
$2,756,285 and an increase in other current assets of $467,233 resulting
primarily from a deposit made to our manufacturer for additional inventory,
which was primarily offset by an increase in amortization of deferred
compensation of $641,707 from the granting of stock options to consultants, a
decrease in inventory of $170,083, an increase in accounts payable and accrued
expenses of $152,744 and an increase in deferred revenues of $174,882. Cash used
in investing activities was $1,929 for the six months ended June 30, 2003 and
$38,894 for the six months ended June 30, 2002. Net cash used in investing
activities consisted primarily of capital expenditures for computer equipment
and furniture and fixtures. Cash provided by financing activities was $2,935,384
for the six months ended June 30, 2003 and $1,504,481 for the six months ended
June 30, 2002 and was primarily related to the issuance of Series A 8%
Convertible Redeemable Preferred Stock and exercise of stock options for the
period ended June 30, 2003 and primarily related to the exercise of outstanding
rights and stock options for the period ended June 30, 2002.

     In March 2001, we declared a dividend distribution of one non-transferable
right to purchase one share of our common stock for every 10 outstanding shares
of common stock continuously held from the record date to the date of exercise,
as well as common stock underlying vested stock options and warrants, held of
record on March 30, 2001, at an exercise price of $8.50. The rights were due to
expire on October 4, 2002, which was one year after the effective date of the
registration statement related to the shares of common stock underlying the
rights. We extended the expiration date until April 4, 2003 and further extended
the rights until December 31, 2003. We have the right to redeem the outstanding
rights for $.01 per right under certain conditions, which were not met as of
August 14, 2003. We had reserved 970,076 shares of common stock for future
issuance under this rights offering. As of June 30, 2003, we received $2,444,651
before expenses from the exercise of 287,606 of these rights.

     In March 2001, our Board of Directors authorized, subject to certain
business and market conditions, the purchase of up to $1,000,000 of our common
stock. During 2002, we purchased 20,000 shares totaling approximately $123,000
and subsequently retired these shares. We do not expect to purchase additional
shares unless certain conditions warrant it.

     On March 27, 2003, pursuant to a Securities Purchase Agreement, we sold
30,000 shares of our Series A 8% Convertible Redeemable Preferred Stock, par
value $.01 per share, for $3,000,000 before expenses to Gryphon Master Fund,
L.P. Each share of Preferred stock entitles the holder to receive dividends of
8% per annum and is currently convertible into 15.1515 shares of our common
stock. Additionally, each share of Preferred Stock received one (1) five year
warrant to purchase 3.787875 shares of common stock at a price of $6.78. The
total amount of shares that may be issued upon conversion and the exercising of
the warrants are 454,545 and 113,636 shares, respectively. Dividend payments of


                                                                              13


$120,000 are due semi-annually in cash beginning September 30, 2003. In
connection with this financing, we paid agent fees of $150,000 and issued
warrants and options to purchase 8,854 shares of our common stock at a price of
$6.78. We also paid legal fees of approximately $127,000. We recorded the
relative fair value of all the warrants issued in connection with this
transaction of $497,700 against the amount of the Convertible Redeemable
Preferred Stock as of March 27, 2003, which was calculated using the
Black-Scholes valuation method, as well as $540,000 of beneficial conversion
feature in accordance with EITF 00-27 and such amounts are being accreted along
with issuance cost of $285,900 over the five year period until the mandatory
redemption date of the Preferred Stock, the fifth anniversary of closing. We
recorded accretion of $65,758 for the period ended June 30, 2003 as a dividend.
Shares of Preferred Stock are convertible at the option of Gryphon Master Fund,
L.P at any time prior to redemption. We may redeem any or all of the Preferred
Shares at any time after one year from the closing date at a cash redemption
price of $100 per share, providing the volume weighted average price of our
Common Stock for any 20 out of 30 consecutive trading days exceeds $13.20 per
share. We must redeem all of the Preferred Stock outstanding on the fifth
anniversary of the closing date at a redemption price, in cash, equal to the
purchase price of the Preferred Stock.

     During April 2003, we received approximately $232,000 from the exercise of
78,000 stock options.

     On August 14, 2003, we filed a Form S-2 Registration Statement with the
United States Security and Exchange Commission under which we propose to sell 1
million shares of the our common stock. Under the terms of the Underwriter's
term sheet, the Underwriter will receive 8% commission of gross proceeds of the
offering. In addition, the Underwriter will receive for its expenses on a
non-accountable basis an amount equal to 2.5% of the gross proceeds of the
offering. We expect to receive net proceeds of approximately $9,500,000 upon
successful completion of the offering. There can be no assurances that the
offering will become effective.

     We anticipate that our current available cash in hand, cash resources from
expected revenues from the sale of the units in inventory, licensing of its
technology, combined with the cash expected from the exercise of options,
warrants and rights and the projected proceeds from our proposed public offering
will be sufficient to meet our anticipated working capital and capital
expenditure requirements for at least the next eighteen months. Should we be
unsuccessful in completing the proposed public offering, we would be required to
raise additional capital during the next 12 months. These requirements are
expected to include the purchase of additional inventory to run our patented
software, product development, sales and marketing, working capital requirements
and other general corporate purposes. Should sales of our products fall below
expectations during the next 18 months, we would be required to raise additional
capital to fund our operations. Should we need to raise additional capital,
there can be no assurances that we will be successful in raising capital. The
impact on us could be adverse if it is not able to ship products as projected or
raise capital as discussed above. In addition, we may need to raise additional
funds to respond to business contingencies which may include the need to fund
more rapid expansion, fund additional marketing expenditures, develop new
markets for our ID-Check technology, enhance our operating infrastructure,
respond to competitive pressures, or acquire complementary businesses or
necessary technologies. . In the event we are unable to raise capital,
management plans to implement cost saving measures to sustain business
activities on a reduced level.

Below is a table, which presents our contractual obligations and commitments at
June 30, 2003:

                             Payments Due by Period



-----------------------------------------------------------------------------------------------------------
  Contractual Obligations                   Total       Less than    1-3 years    4-5 years  After 5 years
                                                        One Year
-----------------------------------------------------------------------------------------------------------
                                                                                 
Capital Lease Obligations                     $8,781       $8,781        --           --           --
-----------------------------------------------------------------------------------------------------------
Operating Leases                           2,013,519      258,674     $761,885     $551,486     $441,474
-----------------------------------------------------------------------------------------------------------
Purchase commitments (1)                       --           --           --           --           --
-----------------------------------------------------------------------------------------------------------
Employment contracts                         632,358      433,333      199,025        --           --
-----------------------------------------------------------------------------------------------------------
Total Contractual Cash Obligation         $2,654,658     $700,788     $960,910     $551,486     $441,474
-----------------------------------------------------------------------------------------------------------


     (1) We paid the manufacturer $600,000 through April 1, 2002, as an advance
inventory deposit towards the open purchase order of approximately 2,850
ID-Check units.


                                                                              14


(d)  Net Operating Loss Carry forwards

     As of June 30, 2003, we had a net operating loss carry forward of
approximately $19,000,000, which expires beginning in the year 2013. The
issuance of equity securities in the future, together with our recent financings
and our IPO, could result in an ownership change and, thus, could limit our use
of our prior net operating losses. If we achieve profitable operations, any
significant limitation on the utilization of our net operating losses would have
the effect of increasing our tax liability and reducing net income and available
cash reserves. We are unable to determine the availability of these
net-operating losses since this availability is dependent upon profitable
operations, which we have not achieved in prior periods.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     None

Item 4.  Controls and Procedures

     Internal Controls

     We maintain a system of internal controls designed to provide reasonable
assurance that: (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles, and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

     Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of the design and operation of the our internal
controls and procedures. Such evaluation was conducted as to the end of the
period covered by this report. There have been no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of such evaluation.

     Disclosure Controls and Procedures

     We maintain disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) that are designed (i) to collect the information we are
required to disclose in the reports we file with the SEC, and (ii) to process,
summarize and disclose this information within the time periods specified in the
rules of the SEC. Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
we have evaluated the effectiveness of the design and operation of our
disclosure controls and procedures. Such evaluation was conducted as to the end
of the period covered by this report. Based on such evaluation, our Chief
Executive and Chief Financial Officer have concluded that these procedures are
effective.

Part II  Other Information

Item 1.  Legal Proceedings

     A lawsuit was filed as a class action on October 18, 2001 on behalf of
short-sellers of the Company's stock, who allegedly suffered losses because of
the rise in the price of our stock, in the United States District Court for New
Jersey. The class action suit was amended in November 2001 and became an
individual action. On July 26, 2002, the Company filed a motion to dismiss the
lawsuit. On July 30, 2003, the court granted the Company's motion to dismiss the
lawsuit. The Plaintiff has 30 days in which to file an amended complaint
pertaining to certain of the pleadings.

     On February 19, 2003, we filed a summons and complaint upon CardCom
Technology, Inc. alleging infringement on its patent. During June 2003, we
settled with CardCom Technology, Inc. granting a three year royalty license to
use certain of our patents in connection with the manufacture, use and sale of
CardCom's age verification products in the United States and Canada. It also
provides that CardCom will pay approximately 10% royalties on its net sales. For
the quarter ended June 30, 2003 we received $25,229 in royalty fees.


                                                                              15


     On April 9, 2003, we received notification from the American Arbitration
Association that it had awarded Early Bird Capital $921,730 on the settlement of
their demand. We have filed with the New York State Supreme Court an application
for setting aside the confirmation of the award. We recorded a charge of
$921,730 in the Statements of Operations during the three month period ending
March 31, 2003. If we are unsuccessful in our appeal, we would owe additional
interest on the award at an annual rate of 9% from the date of the award. We
secured a one year letter of credit for the full amount of the charge along with
interest totaling $1,004,686 until April 9, 2004.

     On August 1, 2003, we filed a summons and Complaint against Tricom Card
Technologies, Inc. alleging infringement on its patent seeking injunctive and
monetary relief.

Item 4.  Submission of Matters to a Vote of Security Holders

     The annual meeting of stockholders was held on July 10, 2003.

     A proposal to elect two (2) directors to serve for a three-year term was
approved by the stockholders. The nominees received the following votes:

         Name                                   Votes For        Votes Withheld
         ----                                   ---------        --------------
Howard Davis (three-year term)                  8,221,458            59,250
Jeffrey Levy (three-year term)                  8,261,958            18,750

     A proposal to approve the 2003 Stock Option Plan was accepted by the
stockholders. This proposal received the following votes:

               For           Against          Abstain           Not Voted
               ---           -------          -------           ---------
            3,369,501        244,375           52,826           4,159,461

     In addition, stockholders ratified the appointment of Grant Thornton LLP as
the independent public accountants for the Company for the year ended December
31, 2003. This proposal received the following votes:

                           For          Against        Abstain
                           ---          -------        -------
                        7,715,607       100,486         10,070

Item 6.  Exhibits and Reports on Form 8-K

     (a)  The following exhibits are filed as part of the Quarterly Report on
          Form 10-Q:

             Exhibit No.      Description
             -----------      -----------

                31.           Certifications pursuant to Section 302 of the
                              Sarbanes-Oxley Act of 2002

                32.           Certification pursuant to Section 906 of the
                              Sarbanes-Oxley Act of 2002

     (b)  On April 8, 2003, we filed a report on Form 8-K to disclose the sale
          of our Series A 8% Convertible Preferred Stock.

     (c)  On July 2, 2003, we filed a report on Form 8-K to disclose the terms
          of settlement with CardCom Technology, Inc.

                                                                             16



                                   Signatures


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

Date - August 14, 2003
                                         Intelli-Check, Inc.


                                         By: /s/ Frank Mandelbaum
                                         ------------------------
                                         Frank Mandelbaum
                                         Chairman/CEO

                                         By: /s/ Edwin Winiarz
                                         ---------------------
                                         Edwin Winiarz
                                         Senior Executive Vice President,
                                         Treasurer/CFO


                                                                             17

                                                                      Exhibit 31

                                  Certification
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

        I, Frank Mandelbaum, certify that:

1.   I have reviewed this Form 10-Q of Intelli-Check, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.   Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 12a-14 and 15d-14) and we have:

        (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated Subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

        (b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

        (c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.

5.   The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

        (a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

        (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting; and

Date:    August 14, 2003



                                            /s/ Frank Mandelbaum
                                            --------------------
                                            Name:  Frank Mandelbaum
                                            Title: Chief Executive Officer

                                                                             18



                                                                      Exhibit 31

                                  Certification
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

        I, Edwin Winiarz, certify that:

1.   I have reviewed this Form 10-Q of Intelli-Check, Inc.;

2.   Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.   Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 12a-14 and 15d-14) and we have:

        (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated Subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

        (c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting.

5.   The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent function):

        (a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

        (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting; and

Date:    August 14, 2003


                                             /s/ Edwin Winiarz
                                             -----------------
                                             Name:  Edwin Winiarz
                                             Title: Chief Financial Officer


                                                                             19


                                                                     Exhibit 32

                                  Certification
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of
the undersigned officers of Intelli-Check, Inc. (the "Company"), does hereby
certify, to such officer's knowledge, that:

     The Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 of
the Company fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 and information contained in the Form 10-Q
fairly presents, in all material respects, the financial condition and results
of operations of the Company.

Dated:   August 14, 2003                   /s/ Frank Mandelbaum
                                           ------------------------------
                                           Name:  Frank Mandelbaum
                                           Title: Chief Executive Officer


Dated:   August 14, 2003                   /s/ Edwin Winiarz
                                           ------------------------------
                                           Name:  Edwin Winiarz
                                           Title: Chief Financial Officer

     The foregoing certification is being furnished solely pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code) and is not being filed as part of
the Form 10-Q or as a separate disclosure document.

     A signed original of this written statement required by Section 906, or
other document authenticating, acknowledging or otherwise adopting the signature
that appears in typed form within the electronic version of this written
statement required by Section 906, has been provided to Intelli-Check, Inc. and
will be retained by Intelli-Check, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.

                                                                             20


PROSPECTUS October 2, 2003

                          [LOGO]INTELLI-CHECK(R), INC.

                        1,100,000 Shares of Common Stock


                                 The Shemano Group         [LOGO]

================================================================================
Neither we nor any of the underwriters have authorized anyone to provide
information different from that contained in this prospectus. When you make a
decision about whether to invest in our common stock, you should not rely upon
any information other than the information in this prospectus. Neither the
delivery of this prospectus nor the sale of our common stock means that
information contained in this prospectus is correct after the date of this
prospectus. This prospectus is not an offer to sell or solicitation of an offer
to buy these shares of common stock in any circumstances under which the offer
or solicitation is unlawful.
================================================================================