UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
(MARK ONE)
                                    FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009

                                       OR

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

FOR THE TRANSITION PERIOD FROM __________________ TO __________________

COMMISSION FILE NUMBER: 000-30587

                               SPARE BACKUP, INC.
                               ------------------
                (Name of registrant as specified in its charter)

                  DELAWARE                                  23-3030650
       ---------------------------------               -------------------
        (State or other jurisdiction                    (I.R.S. Employer
       of incorporation or organization)               Identification No.)

72757 FRED WARING DRIVE, PALM DESERT, CA                 92260
----------------------------------------               ----------
(Address of principal executive offices)               (Zip Code)

                                 (760) 779-0251
                                 --------------
              (Registrant's telephone number, including area code)

                                       N/A
                                      -----
              (Former name, former address and former fiscal year,
                          if changed since last report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

         Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (ss. 232.405 of this chapter) during the preceding 12 (or for such shorter
period that the registrant was required to submit and post such files).
Yes [ ] No [ ]

         Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer"
and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer          [ ]             Accelerated filer           [ ]
Non-accelerated filer            [ ]             Smaller reporting company   [X]
(Do not check if smaller reporting company)

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

         Indicated the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date, 110,266,146 shares
of common stock are issued and outstanding as of May 4, 2009.

<PAGE>

                                TABLE OF CONTENTS
                                                                            Page
                                                                             No.
                                                                            ----
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements. .............................................   3

Item 2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations. .......................................  23

Item 3.  Quantitative and Qualitative Disclosures About Market Risk. .......  34

Item 4T  Controls and Procedures. ..........................................  34

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings. ................................................  34

Item 1A. Risk Factors. .....................................................  34

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds. ......  35

Item 3.  Defaults Upon Senior Securities. ..................................  35

Item 4.  Submission of Matters to a Vote of Security Holders. ..............  35

Item 5.  Other Information. ................................................  35

Item 6.  Exhibits. .........................................................  36


                           OTHER PERTINENT INFORMATION

When used in this report, the terms "Spare Backup," the Company", " we", "our",
and "us" refers to Spare Backup, Inc., a Delaware corporation formerly known as
Newport International Group, Inc., and our subsidiary.

           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking
statements that are subject to known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These forward-looking
statements were based on various factors and were derived utilizing numerous
assumptions and other factors that could cause our actual results to differ
materially from those in the forward-looking statements. These factors include,
but are not limited to, our ability to raise sufficient capital to fund our
ongoing operations and satisfy our obligations as they become due, our ability
to generate any meaningful revenues, our ability to compete within our market
segment, our ability to implement our strategic initiatives, economic, political
and market conditions and fluctuations, government and industry regulation,
interest rate risk, U.S. and global competition, and other factors. Most of
these factors are difficult to predict accurately and are generally beyond our
control. You should consider the areas of risk described in connection with any
forward-looking statements that may be made herein. Readers are cautioned not to
place undue reliance on these forward-looking statements and readers should
carefully review this report in its entirety, as well as our annual report on
Form 10-K for the year ended December 31, 2008 including the risks described in
Part I. Item 1A. Risk Factors of that report. Except for our ongoing obligations
to disclose material information under the Federal securities laws, we undertake
no obligation to release publicly any revisions to any forward-looking
statements, to report events or to report the occurrence of unanticipated
events. These forward-looking statements speak only as of the date of this
report, and you should not rely on these statements without also considering the
risks and uncertainties associated with these statements and our business.

                                       -2-
<PAGE>
<TABLE>
                                SPARE BACKUP, INC. AND SUBSIDIARY
                                   CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                                                   Year ended
                                                              March 31, 2009    December 31, 2008
                         ASSETS                                 (Unaudited)           (1)
                                                              --------------    -----------------
<S>                                                            <C>                <C>
Current Assets:
  Cash ..................................................      $          -       $     18,946
  Accounts receivable ...................................            40,469            132,389
  Prepaid marketing expense .............................           324,415             97,630
                                                               ------------       ------------
     Total current assets ...............................           364,884            248,965

  Property and equipment, net of accumulated depreciation         1,062,201          1,093,732
  Other assets ..........................................           229,635             56,985
                                                               ------------       ------------

     Total Assets .......................................      $  1,656,720       $  1,399,682
                                                               ============       ============

          LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
  Overdraft liability ...................................      $    128,803     $            -
  Accounts payable and accrued expenses .................         2,678,594          2,834,230
  Accrued payroll taxes .................................           946,499            664,922
  8% Convertible promissory notes, net of debt discount
     of $21,477 and $0, respectively ....................         2,528,523          2,500,000
  10% Convertible promissory notes, net of debt discount
     of $38,867 and $74,992, respectively ...............           752,133            776,008
  Accrued interest on convertible promissory notes ......            83,281             78,338
  Derivative liabilities ................................           702,594                  -
  Deferred revenue ......................................           789,218            240,436
  Due to stockholder ....................................            15,000             15,000
                                                               ------------       ------------

     Total Current Liabilities ..........................         8,624,645          7,108,934

  8% Convertible promissory notes, net of debt discount
     of $756,770 and $59,679, respectively ..............           246,230            190,321
                                                               ------------       ------------

     Total Liabilities ..................................         8,870,875          7,299,255

Stockholders' Deficit:
  Preferred stock; $.001 par value, 5,000,000 shares
     authorized, 50,000 issued and outstanding ..........                50                 50
  Common stock; $.001 par value, 300,000,000 shares
     authorized, 108,433,626 and 105,193,730 issued and
     outstanding, respectively ..........................           108,434            105,194
  Additional paid-in capital ............................        84,663,157         82,772,427
  Accumulated deficit ...................................       (91,985,796)       (88,777,244)
                                                               ------------       ------------

     Total Stockholders' Deficit ........................        (7,214,155)        (5,899,573)
                                                               ------------       ------------

     Total Liabilities and Stockholders' Deficit ........      $  1,656,720       $  1,399,682
                                                               ============       ============

(1) Derived from Audited Financial Statements

                    See Notes to Unaudited Consolidated Financial Statements.
                                               -3-
</TABLE>
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                   For the Three Months Ended
                                                            March 31,
                                                 ------------------------------
                                                      2009             2008
                                                 -------------    -------------
                                                  (Unaudited)      (Unaudited)

Net Revenues .................................   $     455,589    $     203,060

Operating expenses:
  Research and development ...................         241,785          522,954
  Sales, general and administrative ..........       2,822,800        2,350,858
                                                 -------------    -------------

     Total operating expenses ................       3,064,585        2,873,812
                                                 -------------    -------------

     Operating loss ..........................      (2,608,996)      (2,670,752)
                                                 -------------    -------------

Other income (expense):
  Change in fair value of derivative
    liabilities ..............................        (143,503)               -
  Gain from debt settlement ..................         297,799           53,713
  Foreign currency gain ......................           6,903              582
  Interest expense ...........................        (201,664)        (787,266)
                                                 -------------    -------------
  Total other expense ........................         (40,465)        (732,971)
                                                 -------------    -------------

Net loss .....................................   $  (2,649,461)   $  (3,403,723)
                                                 =============    =============

Basic and diluted net loss per common share ..   $       (0.02)   $       (0.04)
                                                 =============    =============

Basic and diluted weighted average common
  shares outstanding .........................     106,816,011       78,553,471
                                                 =============    =============

            See Notes to Unaudited Consolidated Financial Statements.
                                       -4-
<PAGE>
<TABLE>
                                    SPARE BACKUP, INC. AND SUBSIDIARY
                                  CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
                                                                              For the Three Months Ended
                                                                                       March 31,
                                                                              --------------------------
                                                                                  2009           2008
                                                                              -----------    -----------
                                                                              (Unaudited)    (Unaudited)
<S>                                                                           <C>            <C>
Cash flows from operating activities:
Net loss ..................................................................   $(2,649,461)   $(3,403,723)
Adjustments to reconcile net loss to net cash used in operating activities:
  Change in fair value of derivative liabilities ..........................       143,503              -
  Fair value of options and warrants issued to employees ..................       379,924        585,477
  Fair value of options issued to consultants .............................        33,583         29,000
  Fair value of warrants issued to consultants ............................        59,611              -
  Amortization of debt discount ...........................................        99,307        728,154
  Amortization of prepaid marketing expense ...............................        70,166        181,238
  Fair value of common stock issued in connection with services rendered ..       112,000        280,474
  Fair value of shares of preferred stock issued in connection with
    services rendered .....................................................             -             50
  Depreciation ............................................................       234,737        199,591
  Amortization of deferred financing costs ................................        19,980              -
  Gain from debt settlement ...............................................      (297,799)       (53,713)
Changes in operating assets and liabilities
  Accounts receivable .....................................................        91,920              -
  Prepaid expenses and other current assets ...............................      (296,951)             -
  Accounts payable, accrued expenses and accrued payroll taxes ............       423,740        (63,487)
  Deferred revenues .......................................................       548,782              -
  Accrued interest on convertible promissory notes ........................        82,377         59,112
                                                                              -----------    -----------

Net cash used in operating activities .....................................      (944,581)    (1,457,827)
                                                                              -----------    -----------

Cash flows from investing activities:
  Purchases of property and equipment .....................................      (203,206)      (133,712)
                                                                              -----------    -----------

Net cash used in investing activities .....................................      (203,206)      (133,712)
                                                                              -----------    -----------

Cash flows from financing activities:
  Proceeds from issuance of convertible promissory notes ..................       803,000         50,000
  Net proceeds from issuance of common stock for cash .....................       287,500        475,000
  Net proceeds from exercise of warrants ..................................             -        494,705
  Cash overdraft ..........................................................       128,803              -
  Proceeds from exercise of stock options .................................             -         69,887
  Payments of deferred financing costs ....................................       (90,462)             -
                                                                              -----------    -----------

Net cash provided by financing activities .................................     1,128,841      1,089,592
                                                                              -----------    -----------

 Decrease in cash .........................................................       (18,946)      (501,947)

Cash at beginning of period ...............................................        18,946        527,402
                                                                              -----------    -----------

Cash at end of period .....................................................   $         -    $    25,455
                                                                              ===========    ===========


Supplemental disclosures of cash flow information:
  Cash paid during the year for interest ..................................   $         -    $         -
                                                                              ===========    ===========

  Cash paid during the year for taxes .....................................   $         -    $         -
                                                                              ===========    ===========

Supplemental schedule of non-cash financing and investing activities:

Fair value of warrants  and embedded conversion features issued in
  connection with the issuance of convertible promissory notes and
  corresponding debt discount .............................................   $   781,750    $    25,652
                                                                              ===========    ===========

Conversion of convertible promissory notes into shares of common stock ....   $    60,000    $         -
                                                                              ===========    ===========

Fair value of shares of common stock issued for payment of accrued interest   $    77,434    $    33,310
                                                                              ===========    ===========

                        See Notes to Unaudited Consolidated Financial Statements.
                                                   -5-
</TABLE>
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

Spare Backup, Inc., formerly known as Newport International Group, Inc., (the
"Company") was incorporated in Delaware in December 1999. During February 2004,
the Company acquired GrassRoots Communications, Inc. ("GrassRoots"). The Company
sells on-line backup solutions software and services to individuals, business
professionals, small office and home office companies, and small to medium sized
businesses.

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form l0-Q. Accordingly, they
do not include all the information and disclosures required for annual financial
statements. These financial statements should be read in conjunction with the
consolidated financial statements and related footnotes as of and for the year
ended December 31, 2008, included in the Annual Report filed on Form l0-K.

In the opinion of management, all adjustments (consisting of normal recurring
items) necessary to present fairly the Company's financial position as of March
31, 2009, and the results of operations and cash flows for the three months
ending March 31, 2009 has been included. The results of operations for the three
months ended March 31, 2009 are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Annual
Report filed on Form l0-K as filed with the Securities and Exchange Commission
for the year ended December 31, 2008.

The accompanying unaudited consolidated financial statements have been prepared
on a going concern basis. The Company has generated minimal revenue since its
inception on June 12, 2002 and has incurred net losses of approximately $2.6
million during the three months ended March 31, 2009. The Company's ability to
continue as a going concern is dependent upon its ability to obtain the
necessary financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due, and to generate profitable
operations in the future. Management plans to continue to provide for its
capital requirements by issuing additional equity securities and debt. The
outcome of these matters cannot be predicted at this time and there are no
assurances that if achieved, the Company will have sufficient funds to execute
its business plan or generate positive operating results.

These matters, among others, raise substantial doubt about the ability of the
Company to continue as a going concern. These financial statements do not
include any adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to continue as a
going concern.

The accompanying consolidated financial statements include the accounts of Spare
Backup and its wholly-owned subsidiary. All material inter-company balances and
transactions have been eliminated in consolidation.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Significant estimates made by management
include, but are not limited to share-based payments and useful life of property
and equipment. Actual results may differ from these estimates.

                                       -6-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

EARNINGS PER SHARE

Basic earnings per share is calculated by dividing income available to
stockholders by the weighted-average number of common shares outstanding for
each period. Diluted earnings per share is computed using the weighted-average
number of common and dilutive common share equivalents outstanding during the
period. Dilutive common share equivalents consist of shares issuable upon the
exercise of stock options and warrants (calculated using the reverse treasury
stock method). The outstanding options, warrants and shares equivalent issuable
pursuant to embedded conversion features amounted to 90,533,587 and 53,077,226
at March 31, 2009 and 2008, respectively. The outstanding options, warrants and
shares equivalent issuable pursuant to embedded conversion features and warrants
at March 31, 2009 and 2008 are excluded from the loss per share computation for
that period due to their antidilutive effect.

RISKS AND UNCERTAINTIES

The Company maintains its cash and cash equivalent accounts in financial
institutions. Accounts at these institutions are insured by the Federal Deposit
Insurance Corporation ("FDIC") up to $250,000. At March 31, 2009, the Company
had not reached bank balances exceeding the FDIC insurance limit. To reduce its
risk associated with the failure of such financial institutions, the Company
evaluates at least annually the rating of the financial institutions in which it
holds deposits.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, accrued expenses, notes payable, deferred revenue
and due to stockholder approximate their estimated fair values due to the
short-term maturities of those financial instruments.

RECLASSIFICATION

Certain amounts in the 2008 consolidated financial statements have been
reclassified to conform to the 2009 presentation. Such reclassifications had no
effect on the reported net loss.

ACCOUNTS RECEIVABLE

The Company has a policy of reserving for uncollectible accounts based on its
best estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to
determine whether an allowance is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account
may be in doubt. Account balances deemed to be uncollectible are charged to the
bad debt expense after all means of collection have been exhausted and the
potential for recovery is considered remote. At March 31, 2009, management has
determined that an allowance is not necessary.

PROPERTY AND EQUIPMENT

Property and equipment, which primarily consists of office equipment and
computer software, are recorded at cost and are depreciated on a straight-line
basis over their estimated useful lives of three to five years. Maintenance and
repairs are charged to expense as incurred. Significant renewals and betterments
are capitalized. At the retirement or other disposition of property and
equipment, the cost and accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in other income (expense) in the
accompanying statements of operations.

                                       -7-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

SOFTWARE DEVELOPMENT COSTS

Costs incurred in the research and development of software products are expensed
as incurred until technological feasibility has been established. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO
BE SOLD, LEASED OR OTHERWISE MARKETED. The Company believes that the current
process for developing software is essentially completed concurrently with the
establishment of technological feasibility. Accordingly, no software development
costs have been capitalized as of March 31, 2009. Instead, such amounts are
included in the statement of operations under the caption "Research and
development".

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," The Company
periodically reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. The Company recognizes an impairment loss when the sum of
expected undiscounted future cash flows is less than the carrying amount of the
asset. The amount of impairment is measured as the difference between the
asset's estimated fair value and its book value. The Company did not consider it
necessary to record any impairment charges during the three months ended March
31, 2009.

SHARE-BASED PAYMENTS

In December 2004, the FASB issued SFAS No. 123(R), "Share-Based Payment," which
replaces SFAS No. 123 and supersedes APB Opinion No. 25. Under SFAS No. 123(R),
companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees are
required to provide services. Share-based compensation arrangements include
stock options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. In March 2005, the SEC
issued Staff Accounting Bulletin No. 107, or "SAB 107". SAB 107 expresses views
of the staff regarding the interaction between SFAS No. 123(R) and certain SEC
rules and regulations and provides the staff's views regarding the valuation of
share-based payment arrangements for public companies. SFAS No. 123(R) permits
public companies to adopt its requirements using one of two methods. On April
14, 2005, the SEC adopted a new rule amending the compliance dates for SFAS
123(R). Companies may elect to apply this statement either prospectively, or on
a modified version of retrospective application under which financial statements
for prior periods are adjusted on a basis consistent with the pro forma
disclosures required for those periods under SFAS 123. Effective January 1,
2006, the Company has fully adopted the provisions of SFAS No. 123(R) and
related interpretations as provided by SAB 107. As such, compensation cost is
measured on the date of grant as the fair value of the share-based payments.
Such compensation amounts, if any, are amortized over the respective vesting
periods of the option grant. The Company applies this statement prospectively.

FOREIGN CURRENCY TRANSACTIONS

The Company periodically engages in transactions in countries outside the United
States which may result in foreign currency transaction gains or losses. Gains
and losses resulting from foreign currency transactions are recognized as
foreign currency gain (loss) in the statement of operations of the period
incurred.

                                       -8-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

REVENUE RECOGNITION

The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial
Statements". The Company records revenue when persuasive evidence of an
arrangement exists, on-line back-up services have been rendered, the sales price
to the customer is fixed or determinable, and collectability is reasonably
assured.

The Company has collected annual fees related to online back-up services. Online
back up service fees received in advance or collected up front are reflected as
deferred revenue on the accompanying balance sheet. Deferred revenue as of March
31, 2009 and December 31, 2008 amounted to $789,218 and $240,436, respectively,
and will be recognized as revenue over the respective subscription period.

Revenue consists of the gross value of billings to clients. The Company reports
this revenue gross in accordance with EITF 99-19 because it is responsible for
fulfillment of the service, has substantial latitude in setting price and
assumes the credit risk for the entire amount of the sale, and it is responsible
for the payment of all obligations incurred for sales marketing and commissions.

RECENT ACCOUNTING PRONOUNCEMENTS

On January 1, 2008, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS 157").
SFAS 157 defines fair value as used in numerous accounting pronouncements,
establishes a framework for measuring fair value and expands disclosure of fair
value measurements. In February 2008, the Financial Accounting Standards Board
("FASB") issued FASB Staff Position, "FSP FAS 157-2--Effective Date of FASB
Statement No. 157" ("FSP 157-2"), which delays the effective date of SFAS 157
for one year for certain nonfinancial assets and nonfinancial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). Excluded from the scope of
SFAS 157 are certain leasing transactions accounted for under SFAS No. 13,
"Accounting for Leases." The exclusion does not apply to fair value measurements
of assets and liabilities recorded as a result of a lease transaction but
measured pursuant to other pronouncements within the scope of SFAS 157. The
Company does not expect that the adoption of the provisions of FSP 157-2 will
have a material impact on its financial position, cash flows or results of
operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities ("SFAS 161"). This statement requires
companies to provide enhanced disclosures about (a) how and why they use
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under Statement 133 and its related interpretations, and (c)
how derivative instruments and related hedged items affect a company's financial
position, financial performance, and cash flows. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008. The Company will adopt the new disclosure requirements on or
before the required effective date and thus will provide additional disclosures
in its financial statements when adopted.

In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life
of Intangible Assets (FSP 142-3) was issued. This standard amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Early adoption is prohibited. The
Company does not expect that the adoption of this provision will have a material
impact on its financial position, cash flows or results of operations.

                                       -9-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In May 2008, the FASB issued FAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles" which identifies the sources of accounting principles and
the framework for selecting the principles to be used in the preparation of
financial statements in conformity with generally accepted accounting principles
(GAAP) in the United States (the GAAP hierarchy). This statement is effective 60
days following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity
With Generally Accepted Accounting Principles". The Company does not expect that
the adoption of this pronouncement will have a significant impact on its
financial condition, results of operations and cash flows.

In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.

In June 2008, the FASB issued FASB Staff Position EITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the
computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
03-6-1 would have a material effect on our financial position and results of
operations if adopted.

In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4 and FIN
46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interests in Variable Interest Entities. The document
increases disclosure requirements for public companies and is effective for
reporting periods (interim and annual) that end after December 15, 2008. This
FSP amends FASB Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, to require public entities
to provide additional disclosures about transfers of financial assets. It also
amends FASB Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities, to require public enterprises, including sponsors
that have a variable interest in a variable interest entity, to provide
additional disclosures about their involvement with variable interest entities.
The Company does not expect that the adoption of this pronouncement will have a
significant impact on its financial condition, results of operations and cash
flows.

In January 2009, the FASB issued FSP EITF 99-20-1, "Amendments to the Impairment
Guidance of EITF Issue No. 99 "Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial Assets".
FSP EITF 99-20-1 changes the impairment model included within EITF 99-20 to be
more consistent with the impairment model of SFAS No. 115. FSP EITF 99-20-1
achieves this by amending the impairment model in EITF 99-20 to remove its
exclusive reliance on "market participant" estimates of future cash flows used
in determining fair value. Changing the cash flows used to analyze
other-than-temporary impairment from the "market participant" view to a holder's
estimate of whether there has been a "probable" adverse change in estimated cash

                                      -10-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

flows allows companies to apply reasonable judgment in assessing whether an
other-than-temporary impairment has occurred. The adoption of FSP EITF 99-20-1
did not have a material impact on our consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or
other standards-setting bodies that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.

NOTE 3 - PREPAID MARKETING EXPENSE

Prepaid marketing expense reflects the marketing and sales commissions paid to
sales agents for the 1 year prepaid subscriptions related to the Company's
online back-up services. The prepaid marketing expense is being amortized over
the term of the respective subscription sold in accordance with SAB 104 whereby
incremental direct cost are recognized in earnings in the same pattern as
revenue is recognized. During the three months ended March 31, 2009 and 2008,
amortization of prepaid marketing amounted to $70,166 and $181,238, respectively
and was recorded as sales, general and administrative expense in the
accompanying statement of operations. On March 31, 2009, and December 31, 2008,
prepaid marketing amounted to $324,415 and $97,630.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                                      March 31,     December 31,
                                   Estimated life       2009            2008
                                   --------------   ------------    ------------

Computer and office equipment ..   3 to 5 years     $  2,819,853    $ 2,616,646

Leasehold improvements .........      5 years            202,298        202,298
                                                    ------------    -----------
                                                       3,022,151      2,818,944

Less: Accumulated depreciation .                      (1,959,950)    (1,725,212)
                                                    ------------    -----------
                                                    $  1,062,201    $ 1,093,732
                                                    ============    ===========

Depreciation expense amounted to $234,737 and $199,591 for the three months
ended March 31, 2009 and 2008, respectively.

NOTE 5 - OTHER ASSETS

In connection with the issuance of 8% 18-month convertible promissory notes, the
Company paid cash commissions of approximately $38,000 and issued 150,000 five
year common stock purchase warrants to its placement agent at an exercise price
of $0.20 per share valued at approximately $21,000 (using the black scholes
model) in December 2008. Between January 2009 and March 2009, the Company paid
cash commissions of approximately $90,000 and issued 602,250 five year common
stock purchase warrants to its placement agent at an exercise price of $0.20 per
share valued at approximately $102,000 (using the black scholes model). The
commissions paid to a placement agent have been classified as other assets and
will be amortized over the maturity date of the convertible notes.

Amortization of other assets- deferred financing costs amounted to approximately
$20,000 and $0 for the three months ended March 31, 2009 and 2008, respectively,
and is included in interest expense.

                                      -11-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 6 - CONVERTIBLE PROMISSORY NOTES - CURRENT

Convertible promissory notes consist of the following as of:

                                                       March 31,    December 31,
                                                         2009           2008
                                                     ------------   ------------
8% Convertible promissory notes, bearing interest
at 8% per annum, maturing between August 2009 and
February 2010. Interest payable commencing the
quarter ended December 31, 2007, payable within
thirty (30) days of the end of the quarter.
Interest may be paid in cash or common stock at
the option of the Company. Interest paid in common
stock will be calculated at ninety percent (90%)
of the average closing price for the common stock
for the five (5) trading days preceding the
interest payment date. The promissory notes are
convertible at any time at the option of the
holder, into shares of common stock at a effective
conversion rate ranging from $0.16 and $0.25. ....   $  2,550,000   $ 2,500,000

Less: unamortized discount .......................        (21,477)           (-)
                                                     ------------   -----------
Convertible promissory notes-short-term ..........   $  2,528,523   $ 2,500,000
                                                     ============   ===========

During the three months ended March 31, 2009, the Company classified $50,000 8%
convertible promissory note from long-term to short-term along with the debt
discount of $21,477.

10% Convertible promissory notes, bearing interest
at 10% per annum, maturing three to twelve months
from the date of closing. Interest payable
commencing the quarter ended September 30, 2008,
payable within thirty (30) days of the end of the
quarter. Interest may be paid in cash or common
stock at the option of the Company. Interest paid
in common stock will be calculated at the volume
weighted average price for the common stock for
the ten (10) trading days preceding the interest
payment date. The promissory notes are convertible
at any time at the option of the holder, into
shares of common stock at a rate ranging from
$0.16 to $0.25. ..................................   $    791,000   $   851,000

Less:  unamortized discount ......................        (38,867)      (74,992)
                                                     ------------   -----------
Convertible promissory notes-short-term ..........   $    752,133   $   776,008
                                                     ============   ===========

On November 14, 2007, the Company issued convertible promissory notes totaling
$2,500,000. In connection with the issuance of these notes payable, the Company
granted 5,000,000 warrants to investors exercisable at a price of $0.50 per
share for a period of three years. These promissory notes are convertible at
$0.50 per share of common stock. In the event the Company issues any shares of
its common stock at an exercise price or conversion price per share less than
$0.50 per share while these notes remain outstanding, then the exercise price of
the warrants issued pursuant to the subsequent financing will reset to such
lower price. The Company recognized a total debt discount of approximately
$2,500,000 in connection with the issuance of these 8% convertible promissory
notes.

                                      -12-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 6 - CONVERTIBLE PROMISSORY NOTES - CURRENT (continued)

The Company may cause conversion of the 8% convertible promissory notes and any
accrued but unpaid interest into its common stock prior to maturity on written
notice to holders provided (i) it has completed one or more financings in which
it has received gross proceeds of $4,000,000 or more, and (ii) a registration
statement is in effect with the Securities Exchange Commission covering resale
of the shares of common stock underlying the notes and warrants.

In February 2008, the Company reduced the exercise price of warrants to purchase
an aggregate of 5,000,000 shares of common stock to $0.33 per share in
connection with the 8% convertible promissory notes issued in November 2007. In
February 2008, the Company issued 1,060,606 shares of common stock for net
proceeds of approximately $0.33 per share or $350,000 in connection with the
exercise of such stock warrants. Accordingly, in connection with the 8%
convertible promissory notes issued during 2007, the exercise price of the
warrants issued and the conversion price per share pursuant to the subsequent
financing was reset to such lower price or $0.33 per share.

In February 2008, the Company issued a convertible promissory note amounting to
$50,000. In connection with the issuance of this note payable, the Company
granted 25,000 warrants to an investor exercisable at a price of $0.50 per share
for a period of three years. The note payable bears 8% interest per annum and
matures in February 2010. This promissory note is convertible at $0.33 per share
of common stock. In the event the Company issues any shares of its common stock
at an exercise price or conversion price per share less than $0.33 per share
following the closing of the 8% Convertible Promissory Notes, then the exercise
price of the warrants issued pursuant to the subsequent financing will reset to
such lower price. The Company recognized a total debt discount of approximately
$26,000 in connection with the issuance of these 8% convertible debentures. In
connection with the recent private placement in third quarter of fiscal 2008 the
conversion price per share pursuant to the subsequent financing will reset to
such lower price or $0.16 per share and the Company issued an additional 131,250
warrants which resulted in an additional debt discount of approximately $24,000.

In April 2008, the Company issued 75,757 shares in connection with the
conversion of an 8% convertible promissory note principal amount of $25,000. The
fair value of such shares issued amounted to approximately $25,000 or $0.33 per
share.

In August 2008 the Company entered into a note extension agreement with the
holder of a $2,500,000 principal amount 8% convertible subordinated promissory
debenture whereby the due date of that note was extended from November 14, 2008
to August 14, 2009. Additionally, based on this agreement, the current
conversion price and exercise price of warrants related to this note has been
reset to $0.25.

In connection with the 10% Convertible Subordinated Promissory Debentures issued
in July 2008, the exercise price of the warrants issued and the conversion price
per share of the 8% convertible promissory notes pursuant to the subsequent
financing was reset to such lower price or $0.25 per share.

In August 2008, the Company issued 1,800,000 shares in connection with the
conversion of 8% convertible promissory notes. The fair value of such shares
issued amounted to approximately $450,000 or at the effective conversion price
of $0.25 per share.

Between February 14, 2008 and June 6, 2008, the Company sold an aggregate of
$1,571,000 principal amount 10% Convertible Senior Unsecured Promissory
Debentures (the "10% Debentures") to accredited investors and issued those
investors five year common stock purchase warrants to purchase 5,236,665 shares
of its common exercisable at a price of approximately $0.309 per share. The

                                      -13-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 6 - CONVERTIBLE PROMISSORY NOTES - CURRENT (continued)

Company received gross proceeds of $1,571,000. In connection with the recent
private placement in third quarter of fiscal 2008, the Company issued an
additional 2,423,113 warrants to these investors, the exercise price of the
warrants issued were reset to $0.20 per share and the conversion price per share
of these 10% Convertible Senior Unsecured Promissory Debentures pursuant to the
subsequent financing was reset to such lower price or $0.16 per share.

The 10% Debentures bear interest at 10% per annum and the principal and all
accrued interest is due three months from the closing date with the exception of
one 10% debenture amounting to $60,000 which matures twelve months from the date
of closing. The principal and accrued but unpaid interest is convertible at the
option of the holder into shares of the Company's common stock at a conversion
price of $0.30 per share, subject to proportional adjustment in the event of
stock splits, stock dividends, or similar corporate events. In the event the
Company issues any shares of its common stock at an exercise price or conversion
price per share less than $0.30 per share within fifteen (15) months following
the closing of these 10% convertible promissory notes, then the exercise price
or conversion price, as the case may be, of these notes and warrants shall be
reset to such lower price with no floor. The Company recognized a total debt
discount of $1,571,000 in connection with the issuance of these 10% convertible
promissory notes. These promissory notes are convertible at $0.30 per share of
common stock.

The holders are entitled to convert all or any portion of the principal amount
of the 10% Debenture and accrued but unpaid interest into securities that the
Company may offer in a subsequent financing of $5,000,000 or more. In the event
the 10% Debentures have not been converted into the securities offered in such
subsequent financing because the financing has not closed prior to the due date
of the debentures, the Company is required to redeem 1/12th of the principal
amount of the 10% Debentures every month beginning on August 1, 2008 at a
redemption price equal to the face value of the debentures plus accrued but
unpaid interest. At the option of the holders the redemption price is payable in
cash or shares of our common stock valued at 90% of the VWAP (as that term is
defined in the 10% Debenture). The Company has reassessed at March 31, 2009, the
number of authorized but unissued shares and taking into consideration the
floorless feature in connection with this redemption provision and has concluded
that the Company has sufficient authorized shares to satisfy the maximum number
of equivalent shares that could be settled in stocks.

The 10% Debentures are senior in right of payment to all of the Company's
existing indebtedness. In the event the 10% Debentures are not converted or
redeemed prior to maturity and the Company issued new debt which is senior to
the 10% Debentures, the Company is required to immediately redeem the 10%
Debentures for 110% of the face value plus accrued but unpaid interest. The
Company has agreed not to issue any senior debt prior to maturity except as part
of the aforedescribed subsequent financing.

Under the terms of the Securities Purchase Agreement with the investors, the
Company agreed to file a registration statement with the SEC covering the shares
of its common stock underlying the 10% Debentures and the warrants so as to
permit the public resale thereof. Should the Company complete any additional
financings prior to the filing of such registration statement, the Company
agreed to offer the same registration rights granted those purchasers to the
purchasers of the 10% Debentures to the extent more favorable to the 10%
Debenture holders. In connection with the transaction, the holder of a
$2,500,000 principal amount 8% convertible subordinated promissory note due in
August 2009 entered into a Subordination Agreement whereby that debt was
subordinated to the 10% Debentures.

                                      -14-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 6 - CONVERTIBLE PROMISSORY NOTES - CURRENT (continued)

In September 2008, $691,000 principal amount of the 10% Convertible Senior
Unsecured Promissory Debentures have already become due. The Company has not
redeemed the required monthly redemption beginning in September 2008. Between
October 2008 and January 2009, the Company entered into a note extension
agreements with the holders of $496,000 principal amount 10% Convertible Senior
Unsecured promissory debentures whereby the due dates of those notes were
extended from September 2008 to maturity dates between August 2009 and September
2009. Additionally, based on these agreements, the current conversion price has
been reset to $0.16 and exercise price of warrants related to this note has been
reset to $0.20. As of March 31, 2009, the Company has approximately $230,000
principal amount of the 10% notes that are past due.

In June 2008, the Company sold a $100,000 principal amount 10% Convertible
Subordinated Promissory Debentures to an accredited investor and issued the
investor five year common stock purchase warrants to purchase 400,000 shares of
its common at an exercise price of $0.25. The Company received gross proceeds of
$100,000. The principal and accrued but unpaid interest is convertible at the
option of the holder into shares of the Company's common stock at a fixed
conversion price of $0.25 per share. The principal and all accrued interest is
due in July 2009.

In July 2008, the Company sold an aggregate of $87,500 principal amount 10%
Convertible Subordinated Promissory Debentures to accredited investors and
issued those investors five year common stock purchase warrants to purchase
350,000 shares of its common at an exercise price of $0.25. The principal and
accrued but unpaid interest is convertible at the option of the holder into
shares of our common stock at a fixed conversion price of $0.25 per share. The
Company received gross proceeds of $87,500. The principal and all accrued
interest is due in July 2009. Between August 2008 and October 2008, the Company
paid $62,500 of these 10% Convertible Subordinated Promissory Debentures.

In June 2008, the Company issued 2,733,333 shares in connection with the
conversion of 10% Convertible Senior Unsecured promissory notes with an
aggregate principal amount of $820,000. The fair value of such shares issued
amounted to approximately $820,000 or $0.30 per share.

In December 2008, the Company issued 156,250 shares in connection with the
conversion of 10% Convertible Senior Unsecured promissory notes with an
aggregate principal amount of $25,000. The fair value of such shares issued
amounted to approximately $25,000 or $0.16 per share.

In March 2009, the Company issued 375,000 shares in connection with the
conversion of 10% Convertible Senior Unsecured promissory notes with an
aggregate principal amount of $60,000. The fair value of such shares issued
amounted to approximately $60,000 or $0.16 per share.

Total amortization of debt discounts for the convertible promissory notes -
current amounted to approximately $36,000 and $727,000 for the three months
ended March 31, 2009 and 2008, respectively, and is included in interest
expense.

                                      -15-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 7 - DERIVATIVE LIABILITIES

At its June 25, 2008 meeting, the Financial Accounting Standards Board ratified
the consensus reached by the Emerging Issues Task Force Issue 07-5 Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock
(EITF 07-5). The adoption of EITF 07-5's requirements will affect accounting for
convertible instruments and warrants with provisions that protect holders from
declines in the stock price ("round-down" provisions). Warrants with such
provisions will no longer be recorded in equity. The Issue is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. Earlier application by an entity
that has previously adopted an alternative accounting policy is not permitted.

Instruments with round-down protection are not considered indexed to a company's
own stock under EITF 07-5, because neither the occurrence of a sale of common
stock by the company at market nor the issuance of another equity-linked
instrument with a lower strike price is an input to the fair value of a
fixed-for-fixed option on equity shares. The appendix to the Consensus contains
an example (example 8) of warrants with round-down provisions that concludes
they are not indexed to the company's owned stock. A round-down provision may be
viewed by some as a form of guarantee provided to the holder of the instrument,
which is inconsistent with equity classification.

EITF 07-5 guidance is to be applied to outstanding instruments as of the
beginning of the fiscal year in which the Issue is applied. The cumulative
effect of the change in accounting principle shall be recognized as an
adjustment to the opening balance of retained earnings (or other appropriate
components of equity) for that fiscal year, presented separately. The
cumulative-effect adjustment is the difference between the amounts recognized in
the statement of financial position before initial application of this Issue and
the amounts recognized in the statement of financial position at initial
application of this Issue. The amounts recognized in the statement of financial
position as a result of the initial application of this Issue shall be
determined based on the amounts that would have been recognized if the guidance
in this Issue had been applied from the issuance date of the instrument.

Since the Company did not previously account for warrants with round-down
provisions as a liability in previously issued financial statements earlier
application of EITF 07-5 is not permitted.

The Company recorded a cumulative effect of a change in accounting principle as
of January 1, 2009 in the amount of the estimated fair value of such warrants
and embedded conversion features and will record future changes in fair value in
results of operations. Based on fair value computations of estimated fair value,
using a $0.18 closing stock price on December 31, 2008 there would be a
cumulative effect of approximately $559,000 as of January 1, 2009, which would
be recorded as a credit to derivative liability and debit to accumulated
deficit.

The variation in fair value of the derivative liabilities between measurement
dates amounted to an increase of approximately $144,000 during the three months
ended March 31, 2009. The increase/decrease in fair value of the derivative
liabilities has been recognized as other expense/income.

                                      -16-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 8 - CONVERTIBLE PROMISSORY NOTES - LONG TERM

Convertible promissory notes consist of the following as of:

                                                       March 31,    December 31,
                                                         2009           2008
                                                     ------------   ------------
8% Convertible promissory notes, bearing interest
at 8% per annum, maturing between February 2010
and September 2010. The promissory notes are
convertible at any time at the option of the
holder, into shares of common stock at a effective
conversion rate of $0.16. ........................   $  1,003,000   $   250,000

Less: unamortized discount .......................       (756,770)      (59,679)
                                                     ------------   -----------
Convertible promissory notes-long term ...........   $    246,230   $   190,321
                                                     ============   ===========

In December 2008, the Company issued 8% 18-month convertible promissory notes
amounting to $200,000. In connection with the issuance of these convertible
notes payable, the Company granted 1,250,000 warrants to investors exercisable
at a price of $0.20 per share for a period of two years. The note payable bears
8% interest per annum. The principal and any unpaid accrued interest thereon
shall be due and payable on the date which is 18 months from the date of
issuance. This promissory note is convertible at $0.16 per share of common
stock. The Company recognized a total debt discount of approximately $39,000 in
connection with the issuance of these 8% convertible notes. In addition, the
Company paid cash commissions of approximately $38,000 and issued 150,000 five
year common stock purchase warrants to its placement agent at an exercise price
of $0.20 per share valued at approximately $21,000 (using the black scholes
model) which has been classified as other assets and will be amortized over the
maturity date of the convertible notes.

Between January 2009 and March 2009, the Company issued 8% 18-month convertible
promissory notes amounting to $803,000. In connection with the issuance of these
convertible notes payable, the Company granted 5,018,750 warrants to investors
exercisable at a price of $0.20 per share for a period of two years. The note
payable bears 8% interest per annum. The principal and any unpaid accrued
interest thereon shall be due and payable on the date which is 18 months from
the date of issuance. This promissory note is convertible at $0.16 per share of
common stock. The Company recognized a total debt discount of approximately
$781,750 in connection with the issuance of these 8% convertible notes. In
addition, the Company paid cash commissions of approximately $90,000 and issued
602,250 five year common stock purchase warrants to its placement agent at an
exercise price of $0.20 per share valued at approximately $102,000 (using the
black scholes model) which has been classified as other assets and will be
amortized over the maturity date of the convertible notes.

Total amortization of debt discounts for the convertible promissory notes - long
term amounted to approximately $63,000 and $1,000 for the three months ended
March 31, 2009 and 2008, respectively, and is included in interest expense.

NOTE 9 - STOCKHOLDERS' DEFICIT

On August 15, 2008, the Company obtained through a vote of majority of its
shareholders the approval to increase the authorized common shares from
150,000,000 to 300,000,000 shares of common stock at $0.001 par value and
approval for a 1-for-10 reverse stock split of its issued and outstanding common
stock.

                                      -17-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 9 - STOCKHOLDERS' DEFICIT (continued)

The Company filed a Certificate of Amendment to its certificate of incorporation
increasing the number of authorized shares of its common stock to 300,000,000
shares. Additionally, the stockholders granted the Company's Board of Directors
the authority to decide within six months from the date of the special meeting
to implement a reverse stock split, set the timing for such split, and select a
ratio for the reverse split up to a maximum of a one for ten (1:10). The Company
did not implement a reverse stock split during the six months period.

ISSUANCE OF COMMON STOCK PURSUANT TO THE PAYMENT OF INTEREST ON THE CONVERTIBLE
DEBT

In January 2009, the Company issued 489,896 shares in connection with the
payment of accrued interest as of December 31, 2008 of the 8% and 10%
convertible promissory notes. The fair value of such shares issued amounted to
approximately $77,000 or $0.16 per share.

ISSUANCE OF COMMON STOCK PURSUANT TO SERVICES PERFORMED

In January 2009, the Company granted 400,000 restricted shares of common stock
in connection with an investor relations agreement. The Company valued these
common shares at the fair market value on the date of grant at $0.22 per share
or $88,000 and has been recognized as stock based investor relations expense.

In March 2009, the Company issued 100,000 restricted shares of common stock for
investor relations services. The Company valued these common shares at the fair
market value on the date of grant at $0.24 per share or $24,000 and has been
recognized as stock based investor relation expense.

ISSUANCE OF COMMON STOCK PURSUANT TO CONVERSION OF CONVERTIBLE PROMISSORY NOTES

In March 2009, the Company issued 375,000 shares in connection with the
conversion of 10% Convertible Senior Unsecured promissory notes with a principal
amount of $60,000. The fair value of such shares issued amounted to
approximately $60,000 or $0.16 per share.

ISSUANCE OF COMMON STOCK PURSUANT TO PRIVATE PLACEMENTS

Between January 2009 and March 2009, the Company issued in aggregate 1,875,000
shares pursuant to a private placement which generated gross proceeds of
approximately $300,000. In connection with this private placement, the Company
issued 1,875,000 warrants exercisable at a price of $0.20 per share. The
warrants expire three years from the date of grant. In connection with these
private placements, the Company paid commissions to its placement agent of
approximately $12,500 in cash.

NOTE 10 - STOCK OPTIONS AND WARRANTS

WARRANTS

During the three months ended March 31, 2009, the Company granted a three-year
warrant to purchase 993,528 shares of common stock to a consultant in connection
with a general business and marketing advisory agreement. These warrants are
exercisable at $0.20 per share. The Company valued these options utilizing the
Black-Scholes options pricing model ranging at $0.06 per share or approximately
$60,000 and recorded a stock-based consulting expense for the three months ended
March 31, 2009.

Between January 2009 and March 2009, the Company granted a three-year warrant to
purchase 1,875,000 shares of common stock to investors in connection with
private placements. These warrants are exercisable at $0.20 per share.

                                      -18-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 10 - STOCK OPTIONS AND WARRANTS (continued)

Between January 2009 and March 2009, the Company issued 8% 18-month Convertible
promissory notes amounting to $803,000. In connection with the issuance of these
convertible notes payable, the Company granted 5,018,750 two year common stock
purchase warrants to investors at an exercise price of $0.20 per share. In
addition, the Company paid commission and issued 602,250 five year common stock
purchase warrants to its placement agent at an exercise price of $0.20 per share
valued at approximately $102,000 (using the black scholes model) which has been
included in other assets.

Stock warrant activity for the three months ended March 31, 2009 is summarized
as follows:

                                               Three months ended March 31, 2009
                                               ---------------------------------
                                                 Number of    Weighted Average
                                                 Warrants      Exercise Price
                                                ----------    ----------------

Balance at beginning of year ..............     38,970,879        $   0.38
Granted ...................................      8,489,528            0.20
Exercised .................................              -               -
Expired ...................................              -               -
                                                ----------        --------
Balance at end of period ..................     47,460,407        $   0.38
                                                ==========        ========

Warrants exercisable at end of period .....     47,460,407        $   0.38
                                                ==========        ========

Weighted average fair value of
warrants granted for the period ...........                       $   0.20

STOCK OPTIONS

In 2002, the Company adopted the 2002 Stock Plan under which stock awards or
options to acquire shares of the Company's common stock may be granted to
employees and non-employees of the Company. The Company has authorized
12,000,000 shares of the Company's common stock for grant under the 2002 Plan.
The 2002 Plan is administered by the Board of Directors and permits the issuance
of options for the purchase of up to the number of available shares outstanding.
Options granted under the 2002 Plan vest in accordance with the terms
established by the Company's stock option committee and generally terminates ten
years after the date of issuance.

In February 2009, the Company entered into a 1 year marketing agreement with
Cydcor Inc. whereby Cydcor will market the Company's services and perform
marketing campaigns as it may determine from time to time. Cydcor will be paid
in a commission basis on all customer orders that has an authorization for
customer payment received via the efforts of Cydcor. In addition, Cydcor will
receive volume bonuses based on total number of sales generated in any given
calendar month. In addition, the Company granted 250,000 three-year stock
options to purchase common stock to Cydcor. The Company valued these options
utilizing the Black-Scholes options pricing model at $0.09 per share or
approximately $23,000 and recorded marketing expense for the three months ended
March 31, 2009.

                                      -19-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 10 - STOCK OPTIONS AND WARRANTS (continued)

In February 2009, the Company issued in aggregate 700,000 five-year stock
options to purchase common stock for legal services with a vesting period of 12
months. The Company valued these options utilizing the Black-Scholes options
pricing model at $0.24 per share or approximately $133,000. For the three months
ended March 31, 2009, total stock-based legal expense charged to operations
amounted to approximately $11,000. At March 31, 2009, there was approximately
$122,000 of total unrecognized legal expense related to non-vested option-based
compensation arrangements.

For the three months ended March 31, 2009, the Company granted 2,630,000
five-year stock options to purchase common stock to employees (including
1,150,000 options granted to the Company's Chief Executive Officer and two
directors of the Company) at exercise prices ranging from $0.18 to $0.19 per
share. For the three months ended March 31, 2009 and 2008, total stock-based
compensation charged to operations for option-based arrangements amounted to
approximately $380,000 and $585,000, respectively. At March 31, 2009, there was
approximately $387,000 of total unrecognized compensation expense related to
non-vested option-based compensation arrangements under the Plan.

Stock option activity for the three months ended March 31, 2009 is summarized as
follows:

                                               Three months ended March 31, 2009
                                               ---------------------------------
                                                 Number of    Weighted Average
                                                  Options      Exercise Price
                                                ----------    ----------------

Balance at beginning of year ..............     19,041,930        $   0.29
Granted ...................................      3,580,000            0.20
Exercised .................................              -               -
Expired ...................................        (35,000)           0.30
                                                ----------        --------
Balance at end of period ..................     22,586,930        $   0.27
                                                ==========        ========

Options exercisable at end of period ......     20,018,598        $   0.28
                                                ==========        ========

Weighted average fair value of
options granted for the period ............                       $   0.19

The fair value of stock options granted was estimated at the date of grant using
the Black-Scholes options pricing model. The Company used the following
assumptions for determining the fair value of options granted under the
Black-Scholes option pricing model:

                                                    March 31,
                                           --------------------------
                                               2009          2008
                                           -----------    -----------
         Expected volatility ..........     75% - 111%     70% - 81%
         Expected term ................     3-5 Years       5 Years
         Risk-free interest rate ......    1.40%-1.88%    2.36%-3.00%
         Expected dividend yield ......         0%            0%

                                      -20-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 11 - COMMITMENTS AND CONTINGENCIES

LITIGATION

The Company is a party to litigation in Cole County, Missouri, Case No.
07AC-CC01045, which was filed on November 15, 2007 by a lessor related to an
aircraft lease agreement entered into by the Company in July 2007. This lawsuit
arose out of the early termination of the aircraft lease agreement by the
Company. In January 2009, the Company formally settled for $100,000 payable in
five equal monthly installments. The Company has an outstanding balance of
approximately $398,000 which has been included in accounts payable prior to this
settlement. The Company has recognized a gain from debt settlement of
approximately $298,000 for the three months ended March 31, 2009. The Company
made settlement payments for a total amount of $40,000 between February 2009 and
March 2009.

NOTE 12 - RELATED PARTY TRANSACTIONS

The Company made rental payments for property owned by the Chief Executive
Officer of the Company for the three months ended March 31, 2009 and 2008
amounting $7,500 and $7,500, respectively, which approximated fair rental value.
The rental property was used for temporary employee housing for the three months
ended March 31, 2009 and 2008.

NOTE 13 - ACCRUED PAYROLL TAXES

As of March 31, 2009, the Company recorded a liability related to unpaid payroll
taxes for the period from May 16, 2008 to March 31, 2009 for approximately
$946,000 and since that date through April 30, 2009 the amount has increased to
$1,066,000. This amount has been included in accrued expenses in the
accompanying consolidated financial statements.

NOTE 14 - SEGMENTS

During the three months ended March 31, 2009 and 2008, the Company operated in
one segment. The percentages of sales by geographic region for the three months
ended March 31, 2009 and 2008 were approximately:

                                    2009      2008
                                    ----      ----

         United States .......       19%       24%
         Europe ..............       81%       76%

NOTE 15 - SUBSEQUENT EVENTS

Between April 1, 2009 and May 7, 2009, the Company issued in aggregate 1,318,750
common shares pursuant to a private placement which generated gross proceeds of
approximately $211,000. In connection with this private placement, the Company
issued 1,318,750 warrants exercisable at a price of $0.20 per share. The
warrants expire three years from the date of grant. The Company will pay a
finder's fee $1,500 in connection with this private placement.

In April 2009, the Company entered into a note extension agreement with a holder
of $200,000 principal amount 10% convertible unsecured promissory debenture
whereby the due date of this note was extended from September 2008 to maturity
date of January 2010. Additionally, based on this agreement, the current
conversion price has been reset to $0.16 and exercise price of warrants related
to this note has been reset to $0.20.

                                      -21-
<PAGE>

                        SPARE BACKUP, INC. AND SUBSIDIARY
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2009

NOTE 15 - SUBSEQUENT EVENTS (continued)

In April 2009, the Company entered into note extension agreements with four
holders of an aggregate principal amount of $136,000 10% convertible unsecured
promissory debenture whereby the due dates of these notes were extended from
August 2009 to maturity date of January 2010. Additionally, based on this
agreement, the current conversion price has been reset to $0.20 and exercise
price of warrants related to these notes have been reset to $0.20.

In April 2009, the Company issued 354,134 shares in connection with the payment
of accrued interest as of March 31, 2009 of approximately $71,000 on the 8% and
10% convertible promissory notes. The fair value of such shares issued amounted
to approximately $71,000 or $0.20 per share.

In April 2009, the Company issued 100,000 restricted shares of common stock for
investor relations services. The Company valued these common shares at the fair
market value on the date of grant at $0.22 per share or $22,000 and has been
recognized as stock based consulting expense.

On April 24, 2009, the Company issued in aggregate 60,000 shares of common stock
to three employees of the Company for services rendered. The fair value of such
shares amounted to approximately $11,000 and has been recognized as stock based
compensation expense.

In April 2009, the Company issued in aggregate 300,000 five-year stock options
to purchase common stock to certain employees of the Company. The Company valued
these options utilizing the Black-Scholes options pricing model ranging from
$0.14 to $0.17 per share or approximately $45,000.

Between April 1, 2009 and May 7, 2009, the Company issued in aggregate 8%
18-month convertible promissory notes amounting to $190,000. In connection with
the issuance of these convertible notes payable the Company granted 1,187,500
warrants to investors exercisable at a price of $0.20 per share for a period of
two years. In addition, the Company paid cash commissions plus incidental
expenses of approximately $20,500 and granted 142,500 five year common stock
purchase warrants to its placement agent at an exercise price of $0.20.

Between April 1, 2009 and May 7, 2009, the Company issued in aggregate 8%
18-month convertible promissory notes amounting to $135,000. In connection with
the issuance of these convertible notes payable the Company granted 843,750
warrants to investors exercisable at a price of $0.20 per share for a period of
two years. There were no commissions on this issuance.

In May 2009, the Company entered into a financial representative agreement with
a broker-dealer this is a member of FINRA to act as the Company's exclusive
agent on a best efforts basis in the sale of its securities and to provide
advisory services related to mergers and acquisitions. The Company paid a non
refundable retainer of $45,000 and issued the firm 500,000 five-year warrant to
purchase common stock at an exercise price of $0.01 as compensation for
services. Additionally, the Company will pay a commission and other fees based
upon the gross cash proceeds which may be received by the Company from the sale
of its securities. Mr. Robert Binkelle, a member of the Company's Board of
Directors, is an employee of this firm.

                                      -22-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

OVERVIEW

         Our flagship product is Spare Backup, a fully-automated remote backup
solution designed and developed especially for the small office or home
environment which automatically and efficiently backs up all data on selected
laptop or desktop computers. As a result, we believe small companies can ensure
file safety in PCs and laptops for backup and retrieval. We launched our Spare
Back-up service and software product version 1.0 in March 2005 and we are
currently offering version 5.0 of the product. Our Spare Switch software which
enables users to complete the transfer of personal files from one personal
computer (PC) to another via a high speed Internet connection. We focus on
owners and executives of businesses that use technology to support their
businesses, but do not have an IT (information technology) department, as well
as consumers who desire to secure the redundancy of available files and
documents vital to the continuity of their operations, business, or personal
information. Our concept is to develop a suite of complementary products and
services which are designed for use by technical and non-technical users
featuring a user interface that can cross both sets of users. Our software has
unique characteristics of additional coding that enables easy to scale
infrastructure and support elements which we believe provides a competitive
advantage over other providers whose products require large investments in
hardware, as well as professional installation, training and support.

         We recently expanded our partnership with DSG International. With the
new offerings, we launched in fourth quarter of fiscal 2008 our 1 year pre-paid
subscription in 169 PC World stores. The product is being positioned at the
service counter called "The Tech Guys", next to the computers and hard drives,
whereby consumers and store employee can frequently be reminded of the service.
The roll out began in November 2008. Additionally, in March 2009, we have
entered into an agreement with DSG International to offer Spare Room(R) version
incorporated in its Spare Backup(R) subscription service in PC World store
locations throughout the UK and in its upcoming launch in Curry's stores. On
November 19, 2008, we have agreed to a two-year extension regarding our online
Backup Agreement of February 2007. We have provided DSGI with the right to
acquire additional warrants equal to five percent (5%) of Spare Backup's
currently outstanding common stock at an exercise price of $0.30 per share
provided DSGI meets certain monthly sales targets which start on an average of
20,000 units per month over a 6-month period. Warrants will not be issued if
DSGI does not meet the targets. Currently, DSGI has not met its target.

         During the three months ended March 31, 2009, we spent significant
resources, both financial and management time, in implementing our distribution
model and broadening our partnership relationships the accomplishment of these
goals. These costs included approximately $552,000 (including sales commissions
of $145,000) for sales and marketing advertising and non cash business
development expenses as well as approximately $210,000 of travel and travel
related expenses, and approximately $195,000 of costs associated with technology
service which includes engineering development, software and hardware related to
the ongoing provision of our services. During the first quarter of fiscal 2009
we also spent approximately $242,000 on research and development. The research
and development expenses were primarily related to compensation expenses paid to
our software engineers, employees and consultants in conjunction with the
development or enhancement of our products.

         Going forward in fiscal 2009 we are now seeing results from our DSGI
launch, as we are seeing significant monthly increases in our subscription
revenue business. In the second quarter of fiscal 2009, we are launching in the
Curry's chain of stores, and we plan on launching in other countries by third
quarter of fiscal 2009. Curry's is one of the companies operated by DSGI.

                                      -23-
<PAGE>

         We are also spending significant time with our new partner Cydcor,
which has over 3,000 door to door sales people starting to sell our SMB
products. In February 2009, we entered into a 1 year marketing agreement with
Cydcor Inc. whereby Cydcor will market our services and perform marketing
campaigns as it may determine from time to time. We paid Cydcor a one-time
marketing fee of $75,000 and Cydcor will be paid in a commission basis on all
customer orders that has an authorization for customer payment received via the
efforts of Cydcor. In addition, Cydcor will receive volume bonuses based on
total number of sales generated in any given calendar month.

         Subject to the availability of sufficient working capital, while it is
likely we will continue to expend research and development costs during fiscal
2009, we also anticipate that our sales and marketing and related expenses such
as sales commissions will be higher compared to 2008 levels, including with
respect to our ongoing relationships with DSG International and our new partner
Cydcor as our sales increase.

         Our sales, general and administrative expenses remain high.
Notwithstanding that approximately $890,000 of our selling, general and
administrative expenses for the three months ended March 31, 2009 are non-cash
expenses, our net revenues are not sufficient to pay our operating costs and we
have historically relied upon the sale of debt and equity securities to fund our
business. During the three months ended March 31, 2009 we raised net proceeds of
approximately $1,090,500 in working capital through the issuance of long term
notes and the sale of common stock. We paid cash commissions of approximately
$90,000 and issued 602,250 five year common stock purchase warrants to our
placement agent in connection with the issuance of long term notes. Subsequent
to March 31, 2009, we have raised approximately $211,000 from the sale of our
common stock, and borrowed an aggregate of $325,000 under an 18 month note
whereby we paid cash commissions plus incidental expenses of approximately
$20,500 and granted 142,500 five year common stock purchase warrants to our
placement agent in connection with the long term notes.

         Perhaps the greatest challenge facing our company for the remainder of
fiscal 2009 is our ability to satisfy our continuing capital needs. We will need
to raise significant additional capital during 2009 to fund our operating
expenses until such time, if ever, that our revenues are sufficient. In addition
to funding our operating expenses, we need capital to pay various debt
obligations totaling approximately $3,341,000 which are either current past due
or which are due in the next 12 months. Currently, there are $230,000 principal
amount of the 10% notes which have already become due in September 2008 and
February 2009, $611,000 principal amount of the 8% and 10% notes which becomes
due between July 2009 and February 2010, and $2,500,000 of the 8% notes of short
term debts becomes due in August 2009. The Company has not redeemed the required
monthly redemption beginning in September 2008 in connection with the 10%
Convertible Senior Unsecured promissory notes amounting to $230,000.
Additionally, there are $1,328,000 principal amount of the 8% long term notes
which becomes due between June 2010 and November 2010.

         Under the terms of various of the short-term notes in the aggregate
principal amount of $2,500,000, we have the right to force a conversion of those
obligations into equity providing that we have registered the shares of common
stock issuable upon such conversions prior to the maturity dates of the notes.
We have not filed the requisite registration statement and unless we are
successful in extending the maturity dates of these obligations it is not likely
we will be able to avail our company of this opportunity before the notes become
due.

         In addition to these debt obligations, at March 31, 2009, we owe
approximately $946,000 of unpaid payroll taxes and we have accrued an additional
approximate $120,000 through April 30, 2009.

                                      -24-
<PAGE>

         We do not have sufficient cash to repay these obligations or past-due
taxes and there are no assurances that the holders of our short-term debt will
convert prior to the due dates of the obligations. We are also a defendant in a
number of lawsuits, as discussed in our Annual Report on Form 10-K for the year
ended December 31, 2008, in which the various plaintiffs are seeking an
aggregate of approximately $1,040,000 in addition to pre-judgment interest and
court costs. While we are hopeful that we will prevail in some or all of these
pending suits, if we are found liable in any of these actions, in addition to
the attorney's fees we are incurring, we will be required to pay the various
plaintiffs substantial sums.

         In May 2009, we entered into a financial representative agreement with
a broker-dealer and member of FINRA whereby we engaged that firm to assist us in
a best efforts private offering of our securities as well as providing advisory
services to us in connection with potential mergers or acquisitions. A member of
our Board of Directors is an employee of this firm. Under the terms of the
agreement, we paid the firm a non refundable retainer of $45,000 and issued it
500,000 five-year warrant to purchase common stock at an exercise price of $0.01
as compensation for services. If the firm is successful in assisting us in a
capital raise, we agreed to pay that firm certain additional fees based upon the
proceeds we might received from an offering.

         We do not have any firm commitments for this additional capital and
while we have been successful in raising capital in prior years, the current
uncertainties, however, in the capital markets which may adversely impact our
ability to continue to raise capital during 2009. Although we are optimistic
that we will be able to raise additional capital, we are unable at this time,
however, to predict the ultimate amount of proceeds we may receive or the timing
of those funds. If we are not successful in raising the necessary capital, even
if we are successful in extending the due dates of the short-term obligations we
may be forced to curtail some or all of our operations and take certain steps to
reduce our operating expenses which could adversely impact our ability to expand
our business. As described elsewhere herein, there are no assurances we will be
able to continue as a going concern in which event you would lose your entire
investment in our company.

GOING CONCERN

         We have generated minimal revenue since our inception on September 12,
2002, and have incurred net losses of approximately $92 million since inception
through March 31, 2009. Our current operations are not an adequate source of
cash to fund our current operations and we have relied on funds raised from the
sale of our securities to provide sufficient cash to operate our business. The
report of our independent registered public accounting firm on our financial
statements for the year ended December 31, 2008 contains an explanatory
paragraph regarding our ability to continue as a going concern based upon our
net losses and cash used in operations. Our ability to continue as a going
concern is dependent upon our ability to obtain the necessary financing to meet
our obligations and repay our liabilities when they become due and to generate
profitable operations in the future. We have no firm commitments from any third
party to provide this financing and we can offer no assurances that we will be
successful in raising working capital as needed particularly in the current
economic climate. If we are unable to raise capital as needed, it is possible
that we would be required to cease operations. The financial statements included
in this report do not include any adjustments to reflect future adverse effects
on the recoverability and classification of assets or amounts and classification
of liabilities that may result if we are not successful.

CRITICAL ACCOUNTING POLICIES

         A summary of significant accounting policies is included in Note 2 to
the unaudited consolidated financial statements included elsewhere in this
quarterly report. We believe that the application of these policies on a
consistent basis enables our company to provide useful and reliable financial
information about the company's operating results and financial condition.

                                      -25-
<PAGE>

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.

         Effective January 1, 2006, we adopted the provisions of SFAS No.
123(R), "Share-Based Payments," under the modified prospective method. SFAS No.
123(R) eliminates accounting for share-based compensation transactions using the
intrinsic value method prescribed under APB Opinion No. 25, "Accounting for
Stock Issued to Employees," and requires instead that such transactions be
accounted for using a fair-value-based method. Under the modified prospective
method, we are required to recognize compensation cost for share-based payments
to employees based on their grant-date fair value from the beginning of the
fiscal period in which the recognition provisions are first applied. For periods
prior to adoption, the financial statements are unchanged, and the pro forma
disclosures previously required by SFAS No. 123, as amended by SFAS No. 148,
will continue to be required under SFAS No. 123(R) to the extent those amounts
differ from those in the Consolidated Statement of Operations.

         The Company follows the guidance of the Securities and Exchange
Commission's Staff Accounting Bulletin No. 104, "Revenue Recognition in
Financial Statements". The Company records revenue when persuasive evidence of
an arrangement exists, on-line back-up services have been rendered, the sales
price to the customer is fixed or determinable, and collectability is reasonably
assured.

         The Company has collected annual fees related to online back-up
services. Online back up service fees received in advance or collected up front
are reflected as deferred revenue on the accompanying balance sheet. Deferred
revenue as of March 31, 2009 and December 31, 2008 amounted to $789,218 and
$240,436, respectively, and will be recognized as revenue over the respective
subscription period.

         Revenue consists of the gross value of billings to clients. The Company
reports this revenue gross in accordance with EITF 99-19 because it is
responsible for fulfillment of the service, has substantial latitude in setting
price and assumes the credit risk for the entire amount of the sale, and it is
responsible for the payment of all obligations incurred for sales marketing and
commissions.

RECENT ACCOUNTING PRONOUNCEMENTS

         On January 1, 2008, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements"
("SFAS 157"). SFAS 157 defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value and expands
disclosure of fair value measurements. In February 2008, the Financial
Accounting Standards Board ("FASB") issued FASB Staff Position, "FSP FAS
157-2--Effective Date of FASB Statement No. 157" ("FSP 157-2"), which delays the
effective date of SFAS 157 for one year for certain nonfinancial assets and
nonfinancial liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually).
Excluded from the scope of SFAS 157 are certain leasing transactions accounted
for under SFAS No. 13, "Accounting for Leases." The exclusion does not apply to
fair value measurements of assets and liabilities recorded as a result of a
lease transaction but measured pursuant to other pronouncements within the scope
of SFAS 157. The Company does not expect that the adoption of the provisions of
FSP 157-2 will have a material impact on its financial position, cash flows or
results of operations.

                                      -26-
<PAGE>

         In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities ("SFAS 161"). This statement
requires companies to provide enhanced disclosures about (a) how and why they
use derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under Statement 133 and its related interpretations, and
(c) how derivative instruments and related hedged items affect a company's
financial position, financial performance, and cash flows. SFAS 161 is effective
for financial statements issued for fiscal years and interim periods beginning
after November 15, 2008. The Company will adopt the new disclosure requirements
on or before the required effective date and thus will provide additional
disclosures in its financial statements when adopted.

         In April 2008, FASB Staff Position No. 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3) was issued. This standard amends
the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset
under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Early adoption
is prohibited. The Company does not expect that the adoption of this provision
will have a material impact on its financial position, cash flows or results of
operations.

         In May 2008, the FASB issued FAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles" which identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) in the United States (the GAAP hierarchy). This
statement is effective 60 days following the SEC's approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of
Present Fairly in Conformity With Generally Accepted Accounting Principles". The
Company does not expect that the adoption of this pronouncement will have a
significant impact on its financial condition, results of operations and cash
flows.

         In May 2008, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-and
interpretation of FASB Statement No. 60". SFAS No. 163 clarifies how Statement
60 applies to financial guarantee insurance contracts, including the recognition
and measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.

         In June 2008, the FASB issued FASB Staff Position EITF 03-6-1,
Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities, ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the
computation of earnings per share under the two-class method as described in
FASB Statement of Financial Accounting Standards No. 128, "Earnings per Share."
FSP EITF 03-6-1 is effective for financial statements issued for fiscal years
beginning on or after December 15, 2008 and earlier adoption is prohibited. We
are not required to adopt FSP EITF 03-6-1; neither do we believe that FSP EITF
03-6-1 would have material effect on our financial position and results of
operations if adopted.

         In December 2008, the FASB issued FASB Staff Position (FSP) FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities (Enterprises) about Transfers of
Financial Assets and Interests in Variable Interest Entities. The document
increases disclosure requirements for public companies and is effective for
reporting periods (interim and annual) that end after December 15, 2008. This
FSP amends FASB Statement No. 140, Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities, to require public entities
to provide additional disclosures about transfers of financial assets. It also

                                      -27-
<PAGE>

amends FASB Interpretation No. 46 (revised December 2003), Consolidation of
Variable Interest Entities, to require public enterprises, including sponsors
that have a variable interest in a variable interest entity, to provide
additional disclosures about their involvement with variable interest entities.
The Company does not expect that the adoption of this pronouncement will have a
significant impact on its financial condition, results of operations and cash
flows.

         In January 2009, the FASB issued FSP EITF 99-20-1, "Amendments to the
Impairment Guidance of EITF Issue No.99 "Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets". FSP EITF 99-20-1 changes the impairment model included within
EITF 99-20 to be more consistent with the impairment model of SFAS No. 115. FSP
EITF 99-20-1 achieves this by amending the impairment model in EITF 99-20 to
remove its exclusive reliance on "market participant" estimates of future cash
flows used in determining fair value. Changing the cash flows used to analyze
other-than-temporary impairment from the "market participant" view to a holder's
estimate of whether there has been a "probable" adverse change in estimated cash
flows allows companies to apply reasonable judgment in assessing whether an
other-than-temporary impairment has occurred. The adoption of FSP EITF 99-20-1
did not have a material impact on our consolidated financial statements.

         Other accounting standards that have been issued or proposed by the
FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the consolidated
financial statements upon adoption.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 2008

NET REVENUES

         Our net revenues increased substantially during the three months ended
March 31, 2009 as compared to the three months ended March 31, 2008. These
increases in revenues reflects the increased in subscriptions and the offering
of our 1 year prepaid subscriptions primarily attributable to the establishment
of an international partner relationship with DSG. For the three months ended
March 31, 2009, approximately 81% of our total net revenues were primarily
attributable to the establishment of an international partner relationship with
DSG International focusing in Europe. During the three months ended March 31,
2009, we have recognized earned revenues of approximately $181,000 from our 1
year prepaid subscriptions sold in fiscal 2008 and first quarter of fiscal 2009.
We did not have comparable revenues during the three months ended March 31,
2008. Unearned/deferred revenue as of March 31, 2009 amounted to $789,218 and
will be recognized as revenue over the respective service period. Although we
realized net revenues related to the DSG International relationship, a
significant portion of such net revenues was not received by us whereby certain
percentage of such revenues generated from DSG International partner
relationship were paid as sales commissions amounting to approximately $145,000
during the three months ended March 31, 2009.

TOTAL OPERATING EXPENSES

         Our total operating expenses for the three months ended March 31, 2009
increased approximately 7% from the three months ended March 31, 2008. Our
operating expenses included expenses related to research and development and
sales, general and administrative expenses. Below provide certain information
regarding our operating expenses:

Research and development

         Research and development expenses consist primarily of compensation
expenses paid to our software engineers, employees and consultants in
conjunction with the development or enhancement of our products. We spent
$241,785 on research and development expenses for the three months ended March
31, 2009 as compared to $522,954 for the three months ended March 31, 2008.

                                      -28-
<PAGE>

Research and development expenses represented approximately 8% of our total
operating expenses for the three months ended March 31, 2009 and 18% for same
period in 2008. Our research and development expenses for the three months ended
March 31, 2009 include costs associated to compensation expenses paid to our
software engineers, employees and consultants in conjunction with the
development or enhancement of our products.

         The decrease in our research and development expenses when compared to
the comparable period in 2008 is primarily attributable to decreased use of
consultants for research and development of our product as we have finished
developing our core product and also decrease in non-cash expenses of $134,000
which represents the fair value of stock issued to a key employee in lieu of
cash compensation during the three months ended March 31, 2008. Subject to the
availability of sufficient working capital, we anticipate that we will continue
to incur research and development expenses in future periods as a result of the
addition of new features, the launch of new versions of our products and the
expansion of our engineering staff, however we are not able at this time to
quantify the amount of such expenditures.

Sales, General, and Administrative Expenses

         For the three months ended March 31, 2009, our selling, general and
administrative expenses were $2,822,800 as compared to $2,350,858 for same
period in 2008, an increase of $471,942, or approximately 20%. Sales, general
and administrative expenses represented approximately 92% and 82%, respectively,
of our total operating expenses for the three months ended March 31, 2009 and
2008.

         The following table provide certain information on the approximate
amounts of components of our sales, general and administrative expenses for each
of the periods:

                                                THREE MONTHS ENDED
                                                     MARCH 31,
                                              ----------------------
                                                 2009         2008
                                              ---------    ---------
         Sales, marketing, advertising
           and business development .....     $ 762,000    $ 351,000
         Employee related costs .........     $ 744,000    $ 653,000
         Technology service .............     $ 195,000    $ 197,000
         Non-cash expenses ..............     $ 675,000    $ 838,000
         General overhead expenses ......     $ 447,000    $ 312,000

         o The sales and marketing and advertising and business development
expenses increased approximately 117% during the three months ended March 31,
2009 to approximately $762,000 from approximately $351,000 during the same
period in 2008. Sales and marketing, advertising and business development
expenses which includes sales commissions and costs associated with the various
marketing programs discussed earlier as well as travel and travel related
expenses associated with our efforts to further develop and broaden our OEM
partner base. The increase in sales and marketing, advertising and business
development expenses was primarily attributable to an increase in sales
commissions to DSG International based upon a percentage of the revenue volume
generated via their efforts. The increase in sales commissions reflects the
increase in revenues during the three months ended March 31, 2009. In addition,
we have prepaid Cydcor, our new partner, a one time marketing fee of $75,000 of
which approximately $50,000 has already been amortized as marketing expense.
This increase is also attributable to an increase in business development
expense. During first quarter of fiscal 2009, we issued 500,000 shares to
consultants for public relations services valued at approximately $112,000. We
presently anticipate that travel expenses for the remainder of fiscal 2009 will
be relatively constant or slightly higher from fiscal 2008 as it could vary
depending upon our expansion in Europe. We anticipate that we will continue to
incur sales, marketing, and commission expenses which are calculated based upon
a percentage of the revenue volume generated from DSG International partner
relationship and Cydcor during the remainder of fiscal 2009, we are not able to
quantify the amount of such expenses,

                                      -29-
<PAGE>

         o Employee related costs which includes salaries and employee costs,
recruiting expenses, 401k contributions and stock based compensation increased
approximately 14% during the three months ended March 31, 2009 to approximately
$744,000 from approximately $653,000 during the same period in 2008. This
increase is attributable to regular annual increases in compensation levels of
certain of our employees. Subject to the availability of sufficient working
capital, we anticipate that we will hire additional software engineers and other
staff to support our projected growth. Our offices are in a geographic location
which is not tech heavy and we face competition in hiring qualified employees
and consultants. Our experience has been that in order to recruit qualified
employees we are required to pay recruiting expenses and offer relocation
packages. If we are able to hire the personnel we presently deem necessary, our
selling, general and administrative expenses will increase although we are
presently unable to quantify the amount of projected increase,

         o Technology service which includes engineering development, software
and hardware related to the ongoing provision of our services. Technology
service slightly decreased by $2,000, or approximately 1% to $195,000 during the
three months ended March 31, 2009 from $197,000 for the same period in 2008. We
anticipate that these costs will be relatively constant during the remainder of
2009 from fiscal 2008 levels and that as we increase the number of paid
subscribers our cost per customer for delivering service will be reduced as we
spread the expense over a greater number of subscribers, and

         o Non-cash expense which includes option expense associated with
options granted to our executive officers and other employees during the three
months ended March 31, 2009 and 2008 ($380,000 and $585,000, respectively),
depreciation ($235,000 and $200,000, respectively) and stock based consulting
fees ($60,000 and $53,000, respectively).

         During the three months ended March 31, 2009 and 2008 we recorded
non-cash expenses of approximately $235,000 and $200,000, respectively, related
to depreciation expenses. The increase is primarily attributable to the purchase
of computer equipment and software for the continued expansion of our
technological infrastructures as our subscribers increased,

         Options expense consists of the fair value of options issued to
Executive officers and employees. During the three months ended March 31, 2009
and 2008 we recorded non-cash expenses of $379,924 and $585,477, respectively,
related to stock-based compensation expense, of which approximately $177,000 was
related to options granted to our CEO and $90,000 to our Directors during the
first quarter of 2009. Under SFAS No. 123(R), which was effective January 1,
2006, companies are now required to measure the compensation costs of
share-based compensation arrangements based on the grant date fair value and
recognize the costs in the financial statements over the period during which
employees are required to provide services. This decrease is primarily
attributable to the decrease in fair values (utilizing the Black Scholes model)
at grant dates during the three months ended March 31, 2009 as compared to same
period in 2008,

         During the three months ended March 31, 2009 and 2008, we issued stock,
options and warrants to consultants as compensation for business advisory,
marketing and public relations services to us. During the three months ended
March 31, 2009 and 2008 we recorded non-cash expenses of $59,611 and $53,000,
respectively, related to stock-based consulting expense. This represented a
slight increase of $6,611, or approximately 12%, from the three months ended
March 31, 2008,

         o Other general overhead expense includes rent, insurance, legal and
accounting fees, utilities, and other general operating expenses. The increase
in general overhead expense for three months ended March 31, 2009 is primarily
attributable to increase in other professional fee and accounting fees due to
increase accounting related services of approximately $59,000 and increase rent
of approximately $36,000.

                                      -30-
<PAGE>

TOTAL OTHER EXPENSES

         Our total other expenses, net for the three months ended March 31, 2009
decreased $692,506, or approximately 94%, from the same period in 2008. The
non-cash component of our total other expenses for the three months ended March
31, 2009 was approximately $263,000 as compared to $728,000 for the same period
in 2008, a decrease of approximately 64%. The decrease in total other expenses
was primarily attributable to the following:

CHANGE IN FAIR VALUE OF DERIVATIVE LIABILITIES AND DERIVATIVE LIABILITIES
EXPENSE

         Change in fair value of derivative liabilities and derivative
liabilities expense consist of income or expense associated with the change in
the fair value of derivative liabilities as a result of the application of EITF
Issue No. 07-5 to our financial statements. The variation in fair value of the
derivative liabilities between measurement dates amounted to an increase of
approximately $144,000 during the three months ended March 31, 2009. The
increase/decrease in fair value of the derivative liabilities has been
recognized as other expense/income. We did not have a comparable other expense
during the same period in 2008 due to the adoption of EITF 07-5 was effective
for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years.

         The adoption of EITF 07-5's requirements will affect accounting for
convertible instruments and warrants with provisions that protect holders from
declines in the stock price ("round-down" provisions). Warrants with such
provisions will no longer be recorded in equity. Instruments with round-down
protection are not considered indexed to a company's own stock under EITF 07-5,
because neither the occurrence of a sale of common stock by the company at
market nor the issuance of another equity-linked instrument with a lower strike
price is an input to the fair value of a fixed-for-fixed option on equity
shares.

         So long as convertible instruments and warrants with round-down
provisions that protect holders from declines in the stock price remain
outstanding we will recognize other income or expense in future periods based
upon the fluctuation of the market price of our common stock. This non-cash
income or expense is reasonably anticipated to materially affect our net loss or
net income in future periods. We are, however, unable to estimate the amount of
such income/expense in future periods as the income/expense is partly based on
the market price of our common stock at the end of a future measurement date. In
addition, in the future if we issue securities which are classified as
derivatives we will incur expense and income items in future periods. Investors
are cautioned to consider the impact of this non-cash accounting treatment on
our financial statements.

GAIN FROM DEBT SETTLEMENT

         We were a party to litigation filed on November 15, 2007 by a lessor
related to an aircraft lease agreement entered into by the Company in July 2007.
In January 2009, we formally settled for $100,000 payable in five equal monthly
installments. We have an outstanding balance of approximately $398,000 which has
been included in accounts payable prior to this settlement. We have recognized a
gain from debt settlement of approximately $298,000 for the three months ended
March 31, 2009. We made settlement payments for a total amount of $40,000
between February 2009 and March 2009.

FOREIGN CURRENCY GAIN

         Under the terms of our agreement with DSG International we are required
to make certain payments in British Pound Sterling. Foreign currency gain of
$6,903 and $582, respectively, for the three months ended March 31, 2009 and
2008.

                                      -31-
<PAGE>

INTEREST EXPENSE

         Interest expense consists primarily of interest recognized in
connection with the amortization of debt discount, amortization of deferred
financing cost and interest on our convertible promissory notes. The decrease in
interest expense during the three months ended March 31, 2009 when compared to
the same period in 2008 is primarily attributable to the amortization of the
debt discount amounting to approximately $728,000 associated with the 8%
Convertible Subordinated Promissory Debenture.

LIQUIDITY AND CAPITAL RESOURCES

         Liquidity is the ability of a company to generate funds to support its
current and future operations, satisfy its obligations and otherwise operate on
an ongoing basis. The following table provides certain selected balance sheet
comparisons between March 31, 2008 and December 31, 2008:
<TABLE>
<CAPTION>
                                                           MARCH 31,    DECEMBER 31,      $ OF        % OF
                                                           2009 ($)       2008 ($)       CHANGE      CHANGE
                                                         ------------   ------------   -----------   ------
<S>                                                      <C>            <C>            <C>           <C>
Working capital (deficit) ............................    (8,259,761)    (6,859,969)   (1,399,792)     -20%
Cash .................................................            -          18,946       (18,946)    -100%
Accounts receivable ............................. ....        40,469        132,389       (91,920)     -69%
Prepaid marketing expenses ...........................       324,415         97,630       226,785      100%
Total current assets .................................       364,884        248,965       115,919       47%
Property and equipment, net ..........................     1,062,201      1,093,732       (31,531)      -3%
Other assets .........................................       229,635         56,985       172,650      303%
Total assets .........................................     1,656,720      1,399,682       257,038       18%

Overdraft liability ..................................       128,803              -       128,803      100%
Accounts payable and accrued expenses ................     2,678,594      2,834,230      (155,636)      -5%
Accrued payroll taxes ................................       946,499        664,922       281,577       42%
8% convertible promissory notes, net - current portion     2,528,523      2,500,000        28,523        1%
10% convertible promissory notes, net ................       752,133        776,008       (23,875)      -3%
Accrued interest on convertible promissory notes .....        83,281         78,338         4,943        6%
Deferred revenue......................................       789,218        240,436       548,782      228%
Derivative liabilities ...............................       702,594              -       702,594      100%
Due to stockholder ...................................        15,000         15,000             -       n/a
Total current liabilities ............................     8,624,645      7,108,934     1,515,711       21%
8% convertible promissory notes, net - long term .....       246,230        190,321        55,909       29%
Total liabilities ....................................     8,870,875      7,299,255     1,571,620       22%
</TABLE>

         We have experienced losses and negative cash flows from operations
since inception and the report of our independent registered public accounting
firm on our financial statements for fiscal 2008 contains an explanatory
paragraph regarding our ability to continue as going concern. While we have
raised approximately $1,090,500 during the three months ended March 31, 2009,
our operations do not generate sufficient cash to pay our operating expenses,
especially as DSG International retains a significant portion of revenues
generated as sales commissions. Approximately $145,000 generated from DSG
International partner relationship were paid as sales commissions to that
company out of the total DSG revenues of approximately $368,000 during the three
months ended March 31, 2009.

         At March 31, 2009, we had cash on hand of $0 and a bank overdraft of
approximately $129,000. Subsequent to that date we have raised an additional
$211,000 through the sale of our common stock and borrowed an aggregate of
$325,000 under an 18 month note.

         At March 31, 2009, our working capital deficiency has increased to
$8,259,761 from $6,859,969 at December 31, 2008. This increase in our working
capital deficit is primarily attributable to an increase in our current
liabilities in the 2009 period.

                                      -32-
<PAGE>

         Our current assets increased by $115,919 from December 31, 2008 to
March 31,2009. Included in these changes is an increase of:

         o $226,785 in prepaid marketing is primarily related to prepaid sales
commissions to DSG related to the sale of annual subscriptions,

         o $128,803 in overdraft liability,

         o $281,577 in accrued payroll taxes reflecting unpaid payroll taxes for
the first quarter of fiscal 2009,

         In addition, at March 31, 2009 is approximately $946,000 of unpaid
payroll taxes, an increase from approximately $665,000 at December 31, 2008.
Subsequent thereto, this liability has risen to approximately $1,066,000 at
April 30, 2009. We do not have the funds to satisfy this liability. If we are
unable to raise the funds necessary, it is possible that we will be subject to
significant additional fines and penalties, Mr. Perle, our CEO, could be
personally subject to a 100% penalty on the amount of unpaid taxes and the
government could file liens against our company and our bank accounts until such
time as the amounts have been paid.

         o $28,523 in amounts due under 8% convertible subordinated promissory
debentures. We have a remaining debt discount of $21,477 as of March 31, 2009,

         o $4,943 of accrued interest under the 8% and 10% convertible
promissory debentures. In January 2009, we issued 489,896 shares in connection
with the payment of accrued interest as of December 31, 2008 on the 8% and 10%
convertible promissory notes.

         o $548,782 in deferred revenue for online back up service fees received
in advance or collected up front on sales of annual subscriptions,

         o $702,594 in derivative liabilities as a result of the application of
EITF Issue No. 07-5 to our financial statements,

         These increases were offset by decreases of:

         o $91,920 in accounts receivable related to DSG revenues,

         o $18,946 in cash which we used for general working capital,

         o $155,636 in accounts payable and accrued expenses. This decrease is
primarily attributable to the decrease in liability in conjunction with an
aircraft lease agreement. In January 2009, we formally settled for $100,000
payable in five equal monthly installments.

         o $23,875 in amounts due under 10% convertible promissory
notes. We have a remaining debt discount of $38,867 as of March 31, 2009,

         At March 31, 2009, our total long term liabilities increased by
$55,909. Between January 2009 and March 2009 we issued and sold new convertible
promissory note of $803,000, and recognized interest expense from amortization
of its debt discount of $63,182 during the three months ended March 31, 2009.

         During the three months ended March 31, 2009, our cash decreased by
$18,946. This decrease consisted of $1,128,841 in cash provided by financing
activities which was offset by $944,581 of cash used in operating activities and
$203,206 of cash used in investing activities.

         Net cash used in operating activities for the three months ended March
31, 2009 decreased $513,246 from the same period in 2008. The decrease in net
cash used in operating activities is primarily due to decrease in our net loss
for the period to $2,649,461, as compared to a net loss of $3,403,723 for the
same period in fiscal 2008.

                                      -33-
<PAGE>

         Net cash used in investing activities was $203,206 for the three months
ended March 31, 2009 as compared to net cash used in investing activities of
$133,712 for the same period in fiscal 2008. The increase is primarily
attributable to the purchase of computer equipment and software for the
continued expansion of our technological infrastructures as our subscribers
increased.

         Net cash provided by financing activities was $1,128,841 for the three
months ended March 31, 2009 as compared to $1,089,592 for same period in fiscal
2008. During the three months ended March 31, 2009, we received net proceeds of
$287,500 from the issuance of our common stock, and $803,000 proceeds from
issuance of convertible promissory notes. Net cash provided by financing
activities was $1,089,592 for the three months ended March 31, 2008. During
three months ended March 31, 2008, we received net proceeds of $475,000 from the
issuance of our common stock, $564,592 from the exercise of stock warrants and
options, and $50,000 proceeds from issuance of a long term convertible
promissory note.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not applicable for a smaller reporting company.

ITEM 4T. CONTROLS AND PROCEDURES.

         Evaluation of Disclosure Controls and Procedures. We maintain
"disclosure controls and procedures" as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934. In designing and evaluating our
disclosure controls and procedures, our management recognized that disclosure
controls and procedures, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of disclosure
controls and procedures are met. Additionally, in designing disclosure controls
and procedures, our management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible disclosure controls and
procedures. The design of any disclosure controls and procedures also is based
in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Based on his evaluation as of the
end of the period covered by this report, our President who also serves as our
principal financial and accounting officer, has concluded that our disclosure
controls and procedures were effective in providing reasonable assurance that
information required to be disclosed in our reports under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods prescribed by SEC rules and regulations, and that such information
is accumulated and communicated to our management, including our President to
allow timely decisions regarding required disclosure.

         Changes in Internal Control over Financial Reporting. There have been
no changes in our internal control over financial reporting during our last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         None.

ITEM 1A. RISK FACTORS.

         Risk factors describing the major risks to our business can be found
under Item 1A, "Risk Factors", in our Annual Report on Form 10-K for the year
ended December 31, 2008. There has been no material change in our risk factors
from those previously discussed in the Annual Report on Form 10-K.

                                      -34-
<PAGE>

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

         In January 2009 we issued a five year common stock purchase warrant to
purchase 993,528 shares of our common stock valued at approximately $60,000 to
an accredited investor as compensation for general business and marketing
advisory services rendered in a transaction exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of
that act.

         In April 2009, we issued 354,134 shares stock to 19 accredited
investors in connection with the payment of interest on our 8% promissory notes
and 10% convertible debentures. The fair value of such shares issued amounted to
approximately $71,000. The issuances were exempt from registration under the
Securities Act of 1933 in reliance on exemptions provided by Section 3(a)(9) of
that act.

         In April 2009 we issued 100,000 shares of our common stock valued at
$22,000 to an accredited investor as compensation for public relations services
rendered in a transaction exempt from registration under the Securities Act of
1933 in reliance on an exemption provided by Section 4(2) of that act.

         In April 2009 we issued in aggregate 60,000 shares of our common stock
valued at $11,000 to three non-accredited investor as stock based compensation
for services rendered in a transaction exempt from registration under the
Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of
that act.

         Between April 1, 2009 and May 7, 2009, we issued in aggregate 1,318,750
shares of our common stock to six purchasers and issued those purchasers three
year common stock purchase warrants to purchase 1,318,750 shares of our common
stock exercisable at a price of $0.20 per share in a private placement exempt
from registration under the Securities Act of 1933 in reliance on an exemption
provided by Section 4(2) of that act. We received gross proceeds of
approximately $211,000. We used the net proceeds for general working capital.
The recipients were accredited investors who had such knowledge and experience
in business matters that they were capable of evaluating the merits and risks of
the prospective investment in our securities. The recipients had access to
business and financial information concerning our company. We will pay Skyebanc,
Inc., an NASD member firm, a commission of $1,500.

         In May 2009 we entered into a twelve month financial representative
agreement with a FINRA firm to act as the our exclusive agent on a best efforts
basis in the sale of our securities and to provide advisory services related to
mergers and acquisitions. As compensation we issued the firm a five year common
stock purchase warrant to purchase 500,000 shares of our common stock at an
exercise price of $0.01 per share which, for accounting purposes, are valued at
approximately $83,000. The issuance of the warrant was exempt from registration
under the Securities Act of 1933 in reliance on an exemption provided by Section
4(2) of that act.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

         None.

ITEM 5.  OTHER INFORMATION.

         In April we entered into a note extension agreement with the holder of
$200,000 principal amount 10% convertible unsecured promissory debentures
whereby the due dates of those notes were extended from September 2008 to
maturity dates to January 2010. Additionally, based on this agreement, the
current conversion price has been reset to $0.16 and exercise price of warrants
related to this note has been reset to $0.20.

                                      -35-
<PAGE>

         In April we entered into a note extension agreement with four holders
of an aggregate principal amount of $136,000 10% convertible unsecured
promissory debenture whereby the due dates of those notes were extended from
August 2009 to a maturity date in January 2010. Additionally, based on these
agreements, the current conversion price has been reset to $0.20 and exercise
price of warrants related to this note has been reset to $0.20.

         In April 2009 we retained a broker-dealer and member of FINRA to act as
our exclusive agent for the purposes of selling our securities and providing
advisory services for potential mergers and acquisitions. Under the terms of the
12 month Financial Representative Agreement, we paid the firm a non-refundable
retainer of $45,000 and issued it three year warrants to purchase 500,000 shares
of our common stock with an exercise price of $0.01 per share. We are obligated
to pay the firm a commission and other fees based upon any proceeds we may
receive in financing transactions. The agreement grants the firm certain rights
of first refusal to act as lead placement agent in subsequent capital offerings
by us, and contains various covenants requiring us to take certain actions in
the event of a financing. Mr. Robert Binkelle, a member of our Board of
Directors, is an employee of this firm.

ITEM 6.  EXHIBITS.

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

31.1     Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer

31.2     Rule 13a-14(a)/ 15d-14(a) Certification of principal financial and
         accounting officer

32.1     Section 1350 Certification of Chief Executive Officer and principal
         financial and accounting officer


                                   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.

SPARE BACK UP, INC.

By: /s/ Cery B. Perle                                          May 19, 2009
    -----------------                                          ------------
    Cery B. Perle                                              Date
    President, Chief Executive Officer and Director
    (Principal  executive officer and principal financial
    and accounting officer)

                                      -36-