SECURITIES
      AND EXCHANGE
      COMMISSION


Washington,
      D.C.
      20549




FORM
      10-Q




(Mark
      One)


x
            QUARTERLY
                REPORT
                PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
                1934.




For
      the Quarterly Period EndedDecember 31,
      2007.




OR




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




For
      the transition period from
                                    
to
                                    .




Commission
      File Number
      0-15935




ENTERPRISE
      INFORMATICS
      INC.


(Exact
      name of registrant as specified in
      its charter)




CALIFORNIA
            
            95-3634089(State
                or other jurisdiction
                of
            
            (I.R.S.
                Employerincorporation
                or
                organization)
            
            Identification
                No.)





10052
      MESA RIDGE COURT, SUITE 100, SAN DIEGO, CA 92121


(Addressof
      principal executive offices and zip
      code)




(858)
      625-3000


(Registrants
      telephone number, including
      area code)




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.




YESxNOo




Indicate
      by check mark whether the
      registrant is a large accelerated filer, an accelerated filer, or a
      non-accelerated filer.See definition of “accelerated
      filer and large accelerated
      filer”in Rule 12b-2 of the
      Exchange Act (Check
      one):




Large
                Accelerated
                Filero
            
            Accelerated
                Filero
            
            Non-Accelerated
                Filerx




Indicate
      by check mark whether the
      registrant is a shell company (as defined in Rule 12b-2 of the Exchange
      Act).




YESoNOx




Number
      of shares of Common Stock
      outstanding atFebruary14,
      2008:58,694,730








ITEM
                1. FINANCIAL STATEMENTS AND
                SUPPLEMENTARY DATA





ENTERPRISE
      INFORMATICS INC.


CONSOLIDATED
      BALANCE
      SHEET


December
                  31,
              
              
              September 30,2007
              
              
              2007(Unaudited)ASSETSCurrent
                  assets:Cash
              
              $
              711,000
              
              
              $
              553,000Receivables,
                  net
              
              
              1,033,000
              
              
              
              746,000Other
                  current assets
              
              
              217,000
              
              
              
              204,000Total
                  current assets
              
              
              1,961,000
              
              
              
              1,503,000Property
                  and equipment,
                  net
              
              
              198,000
              
              
              
              211,000Computer
                  software,
                  net
              
              
              295,000
              
              
              
              321,000Other
                  assets
              
              
              60,000
              
              
              
              27,000Total
                  assets
              
              $
              2,514,000
              
              
              $
              2,062,000LIABILITIES
                  AND SHAREHOLDERS’
                  DEFICITCurrent
                  liabilities:Accounts
                  payable
              
              $
              389,000
              
              
              $
              338,000Series
                  F Preferred stock dividend payable
              
              
              1,323,000
              
              
              
              1,233,000Accrued
                  liabilities
              
              
              1,897,000
              
              
              
              1,465,000Lease
                  obligations– current portion
              
              
              23,000
              
              
              
              32,000Deferred
                  revenue
              
              
              2,765,000
              
              
              
              2,611,000Total
                  current liabilities
              
              
              6,397,000
              
              
              
              5,679,000Notes
                  and accrued interest
                  payable
              
              
              693,000
              
              
              
              676,000Lease
                  obligations
              
              
              52,000
              
              
              
              55,000Total
                  liabilities
              
              
              7,142,000
              
              
              
              6,410,000Shareholders’
                  deficit:Convertible
                  preferred stock,
                  243,239 remaining shares authorizedSeries
                  F - par value $1.00 per
                  share; 5,291 shares authorized, issued and
                  outstandingoutstanding
                  at December 31, 2007 and September 30, 2007
              
              
              6,790,000
              
              
              
              6,790,000Series
                  I - par value $0.01 per share; 2,450 shares authorized; 2,450
                  sharesissued
                  and outstanding at December 31, 2007 and September 30,
                  2007
              
              
              2,450,000
              
              
              
              2,450,000Common
                  stock, no par value,
                  100,000,000 shares authorized; 37,862,332 and37,503,523
                  shares outstanding at December 31, 2007 and September 30,
                  2007
              
              
              77,480,000
              
              
              
              76,495,000Common
                  stock
                  warrants
              
              
              540,000
              
              
              
              1,505,000Accumulated
                  other comprehensive
                  loss
              
              
              (522,000
              )
              
              
              (537,000
              )Accumulated
                  deficit
              
              
              (91,366,000
              )
              
              
              (91,051,000
              )Total
                  shareholders’ deficit
              
              
              (4,628,000
              )
              
              
              (4,348,000
              )Total
                  liabilities and shareholders’ deficit
              
              $
              2,514,000
              
              
              $
              2,062,000
  The
      accompanying notesare an integral part
      of these
      consolidated financial statements.


2


ENTERPRISE
      INFORMATICS INC.


CONSOLIDATED
      STATEMENTS OF
      OPERATIONS


(Unaudited)


For
                  the three months
                  endedDecember
                  31,2007
              
              
              2006Revenues:Licenses
              
              $
              640,000
              
              
              $
              390,000Services
                  and other
              
              
              1,527,000
              
              
              
              1,337,000Total
                  revenues
              
              
              2,167,000
              
              
              
              1,727,000Cost
                  of
                  revenues:Licenses
              
              
              55,000
              
              
              
              38,000Services
                  and other
              
              
              725,000
              
              
              
              591,000Total
                  cost of
                  revenues
              
              
              780,000
              
              
              
              629,000Gross
                  profit
              
              
              1,387,000
              
              
              
              1,098,000Operating
                  expenses:Research
                  and development
              
              
              433,000
              
              
              
              258,000Marketing
                  and sales
              
              
              571,000
              
              
              
              460,000General
                  and administrative
              
              
              614,000
              
              
              
              368,000Total
                  operating
                  expenses
              
              
              1,618,000
              
              
              
              1,086,000Income
                  (loss) from
                  operations
              
              
              (231,000
              )
              
              
              12,000Interest
                  and other
                  income
              
              
              3,000
              
              
              
              —Interest
                  and other
                  expense
              
              
              (88,000
              )
              
              
              (63,000
              )Net
                  loss
              
              
              (316,000
              )
              
              
              (51,000
              )Cumulative
                  preferred
                  dividends
              
              
              (66,000
              )
              
              
              (66,000
              )Net
                  loss available to common
                  shareholders
              
              $
              (382,000
              )
              
              $
              (117,000
              )Loss
                  per
                  share:Basic
                  and
                  diluted
              
              $
              (0.01
              )
              
              $
              (0.00)Weighted
                  average shares
                  outstanding:Basic
                  and
                  diluted
              
              
              37,761,000
              
              
              
              37,144,000Statement
                  of Comprehensive
                  LossNet
                  loss
              
              $
              (231,000
              )
              
              $
              (51,000
              )Other
                  Comprehensive income
                  (loss):Foreign
                  currency translation adjustment
              
              
              15,000
              
              
              
              (59,000
              )Comprehensive
                  loss
              
              $
              (216,000
              )
              
              $
              (110,000
              )
  The
      accompanying notes
      are an integral part of these consolidated financial
      statements.







3





ENTERPRISE
      INFORMATICS
      INC.


CONSOLIDATED
      STATEMENTS OF CASH
      FLOWS


(Unaudited)


For
                  the three months
                  endedDecember
                  31,2007
              
              
              2006Cash
                  flows from operating
                  activities:Net
                  loss
              
              $
              (316,000
              )
              
              $
              (51,000
              )Adjustments
                  to reconcile net loss
                  to net cash used in operating activities:Depreciation
                  and amortization
              
              
              46,000
              
              
              
              46,000Loss
                  on disposal of assets
              
              
              1,000
              
              
              
              —Unpaid
                  interest on notes payable
              
              
              60,000
              
              
              
              56,000Share-based
                  compensation
              
              
              31,000
              
              
              
              42,000Changes
                  in assets and
                  liabilities:Receivables,
                  net
              
              
              (295,000
              )
              
              
              (104,000
              )Other
                  current assets
              
              
              (17,000
              )
              
              
              37,000Accounts
                  payable
              
              
              55,000
              
              
              
              (456,000
              )Payable
                  to Spescom Ltd.
              
              
              —
              
              
              
              (359,000
              )Accrued
                  liabilities
              
              
              477,000
              
              
              
              (244,000
              )Deferred
                  revenue
              
              
              173,000
              
              
              
              2,258,000Net
                  cash provided used in
                  operating activities
              
              
              215,000
              
              
              
              1,225,000Cash
                  flows from investing
                  activities:Purchases
                  of property and
                  equipment
              
              
              (11,000
              )
              
              
              (5,000
              )Net
                  cash used in investing
                  activities
              
              
              (11,000
              )
              
              
              (5,000
              )Cash
                  flows from financing
                  activities:Debt
                  issuance
                  costs
              
              
              (30,000
              )
              
              
              —Payments
                  on capital lease
                  obligations
              
              
              (12,000
              )
              
              
              (10,000
              )Net
                  cash used by financing
                  activities
              
              
              (42,000
              )
              
              
              (10,000
              )Effect
                  of exchange rate changes on
                  cash
              
              
              (4,000
              )
              
              
              (1,000
              )Net
                  increase in
                  cash
              
              
              158,000
              
              
              
              1,209,000Cash
                  at beginning of
                  period
              
              
              553,000
              
              
              
              95,000Cash
                  at end of
                  period
              
              $
              711,000
              
              
              $
              1,304,000


See
      Note 2 for supplemental cash flow
      information.




The
      accompanying notes are an integral part of these consolidated financial
      statements.











4





ENTERPRISE
      INFORMATICS
      INC.


CONDENSED
      NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




Note
      1—Basis
      of
      Presentation




The
      accompanying consolidated financial
      statements of Enterprise Informatics Inc. (“the Company”)
      as ofDecember 31,
      2007 and for the three months endedDecember
      31, 2007 and 2006 are unaudited.
      The
      consolidated financial statements and related notes have been prepared in
      accordance with generally accepted accounting principles applicable to interim
      periods.  In the opinion of management, the consolidated financial statements
      reflect
      all adjustments, consisting only of normal recurring adjustments, necessary
      for
      a fair presentation of the consolidated financial position, operating results
      and cash flows for the periods presented.




The
      informationcontained in the following
      Condensed
      Notes to the Consolidated Financial Statements is condensed from that which
      would appear in the annual consolidated financial statements; accordingly,
      the
      consolidated financial statements included herein should be reviewed
      in conjunction with the
      consolidated financial statements and related notes thereto contained in the
      Company’s
      Annual Report on Form 10-K for the
      year ended September 30, 2007,
      as amended.  It should be
      understood that the accounting measurements atan interim date inherently
      involve
      greater reliance on estimates than at year-end.  The results of operations
      for the interim periods presented are not necessarily indicative of the results
      expected for the entire year.




Note
      2—Summary
      of Significant Accounting Policies




Principles
      of
      Consolidation




The
      consolidated financial statements
      are prepared using accounting principles generally accepted in the United States
      of America and include the accounts of the Company and its wholly-owned United
      Kingdomsubsidiary,
      Enterprise Informatics Ltd.  In April 2007, the Company changed its
      name from Spescom Software Inc. to Enterprise Informatics Inc.  In
      addition, the Company’s
      subsidiary, Enterprise Informatics
      Ltd. changed its name from Spescom Software Ltd.All
      significant intercompany balances and
      transactions have been eliminated.




Foreign
      Currency




The
      functional currency of the
      Company’s
      United Kingdom subsidiary is the
      British pound.  Assets and liabilities are translated into U.S.
      dollars at end-of-period
      exchange rates. Revenues and expenses are translated at average exchange rates
      in effect for the period. Net currency exchange gains or losses resulting from
      such translations are excluded from net income and are accumulated in a separate
      component ofshareholders’deficit
      as accumulated other
      comprehensive income (loss). Gains and losses resulting from foreign currency
      transactions, which are not significant, are included in the consolidated
      statements of operations.




Use
      of Estimates




The
      preparation of financial statements
      in conformity
      with accounting principles generally accepted in the United States of America
      requires management to make estimates and assumptions that affect the reported
      amounts of assets and liabilities and also requires 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. Actual results could differ from those
      estimates. Significant estimates made by management include
      revenue recognition estimates, the
      viability of recognizing deferred income tax assets, capitalized software costs
      and the valuation of equity instruments, and the allowance for doubtful
      accounts.  Significant changes in these estimates may have a
      material
      impact on the financial
      statements.




Revenue
      Recognition




The
      Company’s
      revenues are derived from sales of its
      document and configuration management systems that are primarily composed of
      software and services, including maintenance, training and consulting services, and
      third party
      software and hardware. The Company recognizes revenue in accordance with
      Statement of Position (“SOP”)
      97-2 “Software Revenue
      Recognition,”SOP 98-9, “Modification
      of SOP 97-2, Software
      Revenue Recognition with Respectto
      Certain Transactions”, Staff Accounting Bulletin
      (“SAB”)
      No. 101, updated by SAB’s
      103 and 104 “Update of Codification
      of Staff
      Accounting Bulletins,”and
      Emerging Issues Task Force No. 00-21 (“EITF 00-21”)
“Accounting
      for Revenue Arrangements with
      Multiple
      Deliverables.”Revenue through the Company’s
      Value Added Resellers (“VARS”)
      are net of any VAR discount in
      accordance with EITF 99-19 “Reporting Revenue Gross
      as a Principal
versus
      Net as an
      Agent.”


5




Software
      license and third party product
      revenues are recognized
      upon shipment of the product if no significant vendor obligations remain and
      collection is probable. In cases where a significant vendor obligation exists,
      revenue recognition is delayed until such obligation has been satisfied. For
      new
      software
      products where a historical
      record has not yet been demonstrated that acceptance is perfunctory, the Company
      defers recognition of revenue until acceptance has occurred.   If an
      undelivered element of the arrangement exists under the license
      arrangement,
      a portion of revenue is deferred
      based on vendor-specific objective evidence (VSOE) of the fair value of the
      undelivered element until delivery occurs.  If VSOE does not exist for all
      undelivered elements, all revenue is deferred until sufficient evidence
      exists or all elements have been
      delivered.  Annual maintenance revenues, which consist of ongoing support
      and product updates, are recognized on a straight-line basis over the term
      of
      the contract. Payments received in advance of performance of therelated
      service for maintenance
      contracts are recorded as deferred revenue. Revenues from training and
      consulting services are recognized when the services are performed and adequate
      evidence of providing such services is available. Contract revenues forlong-term
      contracts or programs requiring
      specialized systems are recognized using the percentage-of-completion method
      of
      accounting, primarily based on contract labor hours incurred to date compared
      with total estimated labor hours at completion. Provisions
      for anticipated contract losses are
      recognized at the time they become known.





Contracts
      are billed based on the terms
      of the contract. There are no retentions in billed contract receivables.
      Unbilled contract receivables relate to revenues earned but not billed at the end of
      the
      period.




The
      Company considers many factors when
      applying accounting principles generally accepted in the United States of
      America related to revenue recognition.  These factors include, but are not
      limited to:




·
            The
                actual
                contractual
                terms,
                such as payment terms, delivery dates, and pricing of the various
                product
                and service elements of a
                contract




·
            Availability
                of
                products to be delivered




·
            Time
                period over
                which services are to be
                performed




·
            Creditworthiness
                of the customer




·
            The
                complexity of
                customizations to the Company’s
                software
                required by service
                contracts




·
            The
                sales channel
                through which the sale is made (direct, VAR, distributor,
                etc.)




·
            Discounts
                given
                for each element of a
                contract




·
            Any
                commitments
                made as to
                installation or implementation of “go
                live”dates




·
            Acceptance
                criteria




Each
      of the relevant factors is analyzed
      to determine its impact, individually and collectively with other factors,
      on
      the revenue to be recognized for any particularcontract with a customer. 
Management is required
      to make judgments regarding the significance of each
      factor in applying the revenue recognition standards, as well as whether or
      not
      each factor complies with such standards.  Any misjudgment or error by
      management
      in its evaluation of the
      factors and the application of the standards, especially with respect to complex
      or new types of transactions, could have a material adverse effect on the
      Company’s
      future operating
      results.




Fair
      Value of Financial
      Instruments




Statement
      of Financial Accounting
      Standards (“SFAS”)
      No.107, “Disclosures
      About Fair Value of
      Financial Instruments”,
      requires management to disclose the estimated fair value of certain assets
      and
      liabilities defined by SFAS No. 107 as cash or acontractual obligation
      that both conveys
      to one entity a right to receive cash or other financial instruments from
      another entity, and imposes on the other entity the obligation to deliver cash
      or other financial instruments to the first entity. AtDecember
      31, 2007 and September 30,
      2007,
      management believes that the carrying
      amounts of cash and cash equivalents, short-term investments, accounts
      receivable and accounts payable, and accrued expenses approximate fair value
      because of the short maturity of these financial instruments.
      The Company
      believes that the carrying value of its loans approximate their fair values
      based on current market rates of interest.




6


Concentration
      of Credit
      Risk




The
      Company provides products and
      services to customers in a variety of industries worldwide,
      including
      local governments, petrochemicals, utilities, manufacturing and transportation.
      Concentration of credit risk with respect to trade receivables is limited due
      to
      the geographic and industry dispersion of the Company’s
      customer base. The Company has not
      experienced significant credit losses on its customer accounts.EntergyOperations,
      Inc.andNuclear
      Fuel Services, Inc.each accounted for 19%andAker
      KvaernerBusinessPartnerASaccounted
      for12%of
      trade accounts receivableatDecember
      31, 2007 as compared toEMWD
      and ConstellationEnergy Group, which accounted
      for15%and
      13%,
      respectively, of trade accounts
      receivable at September 30, 2007.




A
      small number of customers have
      typically accounted for a
      large percentage of the Company’s
      annual revenues.Entergy Operations, Inc.andAker
      KvaernerBusiness Partner ASaccounted
      for13%
      and 10%, respectively, of revenuesfor
      thethreemonths
      endedDecember 31,
      2007, while Constellation
      Energyand
      JEAaccounted for 17%
      and 14%,
      respectively,of revenuesfor
      thethreemonths
      endedDecember 31,
      2006.  The Company’s
      reliance on relatively few customers
      could have a material adverse effect on the results of its operations on a
      quarterly basis.




Property
      and
      Equipment




Property
      and equipment is recorded at
      cost and depreciated using the straight-line method over useful lives of two
      to
      seven years. Leasehold improvements are amortized on a straight-line basis
      over
      the shorter of their useful life or the term of the related
      lease.
      Expenditures for ordinary repairs and maintenance are expensed as incurred
      while
      major additions and improvements are capitalized.





Software
      Development
      Costs




Software
      development costs are
      capitalized when technologicalfeasibility and marketability
      of the
      related product have been established. Software development costs incurred
      solely in connection with a specific contract are charged to cost of revenues.
      Capitalized software development costs are amortized on a product-by-product
      basis, beginning when the
      product is available for general release to customers. Annual amortization
      expense is calculated using the greater of the ratio of each product’s
      current gross revenues to the total of
      current and expected gross revenues
      or the straight-line method over the
      estimated useful life of three to five years. Therewasno
      software development cost capitalized
      for the three monthperiodsendedDecember
      31, 2007and
      2006, whileamortization
      expense totaled $26,000 foreach ofthose
      periods. As ofDecember 31,
      2007 and September 30, 2007,
      the balance of software development
      capitalized totaled $513,000 for both dates, with related accumulated
      amortization of $218,000
      and $192,000,
      respectively.




Long-lived
      Assets




The
      Companyassesses potential impairments
      to its
      long-lived assets when there is evidence that events or changes in circumstances
      have made recovery of the assets’carrying
      value unlikely. An impairment
      loss would be recognized when the sum of the expected future netcash
      flows is less than the carrying
      amount of the asset.




Share-Based
      Payments




The
      Company recognizes share-based
      compensation expense as required by the Financial Accounting Standards Board
      (FASB) under the Statement of Financial Accounting StandardsNo.123 (revised 2007),
“Share-Based
      Payments”(FAS 123R).  The Company
      adopted the provisions of FAS 123R on October 1, 2005, the first day of the
      Company’s
      fiscal year 2006. Share-based
      compensation cost is measured at the date of grant using the Black-Scholes
      option-pricing model, based on
      the estimated fair value of the award, and is recognized as expense over the
      employee’s
      requisite service period. The
      determination of the fair value of share-based payments on the date of grant
      using an option-pricingmodel
      is affected by our
      stock price as well as stock volatility over the term of the awards, actual
      and
      projected employee stock option exercise behaviors, risk-free interest rate
      and
      expected dividends. The Company has no awards with market or
      performance
      conditions. The valuation provisions
      of FAS 123R apply to new awards and to awards outstanding on October 1, 2005
      and
      subsequently modified or cancelled.





In
      April 2007, the Company’s
      shareholders approved the adoptionof the Company’s2007
      Stock Incentive Plan (the “2007
      Plan”).  The 2007 Plan is
      administered by either the Board of Directors or a committee designated by
      the
      Board to oversee the plan.  The total number of authorized shares under the
      2007 Plan was 7,500,000.   As of December 31, 2007and
      September 30, 2007, options to purchase
      1,691,000and 1,692,250shares,
      respectively,were outstanding under
      the 2007 Plan.  The option
      vesting period under the 2007 Plan is determined by the


7


Board
      of Directors or a Stock Option
      Committee and usually
      provides that 25% of the options granted can be exercised immediately from
      the
      date of grant, and thereafter, those options vest and become exercisable in
      additional cumulative annual installments of 25% commencing on the first
      anniversary of thedate
      of grant. Options granted are
      generally due to expire upon the sooner of ten years from date of grant, the
      date of termination of services for cause by the Company, twelve months after
      termination of services due to death or disability, 90 days aftertermination
      of services due to
      retirement in accordance with the Company’s
      retirement policy, or three months
      after termination of services other than for cause by the Company or due to
      death, disability or retirement.  The option exercise price is
      equalto
      the fair market value of the common
      stock on the date of grant.  Options granted to employees under the 2007
      Plan may be either incentive stock options or nonqualified options. Options
      granted to non-employee directors under the 2007 Plan may only be nonqualifiedoptions.




In
      April1996, the Company adopted
      its 1996 Stock
      Incentive Plan (the “1996
      Plan”).  The 1996 Plan
      is administered by either the Board of Directors or a committee designated
      by
      the Board to oversee the plan.  The total number of authorized shares under the
      1996 Plan was
      7,425,000.  As of December 31, 2007and September 30, 2007,options
      to purchase 4,064,250and 4,075,750shares,
      respectively,were outstandingunder
      the 1996
      Plan.The 1996
      Plan expired as of March 31, 2006 and thereforeno further grants are
      available from the
      1996 Plan.





The
      option vesting period under the 1996
      Plan was determined by the Board of Directors or a Stock Option Committee and
      usually provides that 25% of the options granted can be exercised 90 days
      from thedate of grant, and
      thereafter, those options vest and become exercisable in additional cumulative
      annual installments of 25% commencing on the first anniversary of the date
      of
      grant. Options granted under the 1996 Plan are generally due to expire upon
      thesooner
      of ten years from date of grant,
      thirty days after termination of services other than by reason of convenience
      of
      the Company, three months after disability, or one year after the date of the
      option holder’s
      death. The exercise price for such
      options
      is equal to the fair market value of
      the common stock on the date of grant.  Options granted to employees under
      the 1996 Plan were either incentive stock options or nonqualified options and
      only nonqualified options were granted to nonemployee
      directors.




The
      fair value of each option grant is
      estimated on the date of grant using the Black-Scholes option-pricing model
      with
      the following weighted average assumptions used for grants:





For
                the three months endedSeptember
                30,2007
            
            
            2006Dividend
                Yield
            
            
            0
            %
            
            
            0
            %Expected
                Volatility
            
            
            399
            %
            
            
            370
            %Risk
                free interest rate
            
            
            4.1
            %
            
            
            4.6
            %Expected
                lives
            
            10
                yrs
            
            
            10
                yrs





8


The
      weighted-average estimated fair
      value of employee stock options granted during the three
      months endedDecember 31,
      2007 andDecember 31,
      2006 using the Black-Scholes model
      were as follows:




For
                  the three months endedDecember
                  31,2007
              
              
              2006Research
                  and development
              
              $
              2,000
              
              
              $
              2,000Marketing
                  and sales
              
              
              10,000
              
              
              
              13,000General
                  and administrative
              
              
              19,000
              
              
              
              27,000Share-based
                  compensation
              
              $
              31,000
              
              
              $
              42,000 A
          summary of option
          activity under the2007
          Plan and
          the1996
          Plan as ofDecember
          31,
          2007, and changes
          during thethreemonths
          then ended is
          presented below:
 Weighted-Weighted-
                    
                    
                    AverageAverage
                    
                    
                    Remaining
                    
                    
                    AggregateExercise
                    
                    
                    Contractual
                    
                    
                    IntrinsicOptions
                    
                    Shares
                    
                    
                    Price
                    
                    
                    Term
                    
                    
                    ValueOutstanding
                        Options at October 1, 2007
                    
                    
                    5,768,000
                    
                    
                    $
                    0.235Granted
                    
                    
                    —
                    
                    
                    
                    —Exercised
                    
                    
                    —
                    
                    
                    
                    —Forfeited
                        or expired
                    
                    
                    (13,000
                    )
                    
                    
                    0.304Outstanding
                        at December 31, 2007
                    
                    
                    5,755,000
                    
                    
                    $
                    0.235
                    
                    
                    
                    6.8
                    
                    
                    $
                    -Exercisable
                        at December 31, 2007
                    
                    
                    3,949,000
                    
                    
                    $
                    0.279
                    
                    
                    
                    5.8
                    
                    
                    $
                    -
 There
            were no options
            granted orexercised
            during thethreemonths
            endedDecember
            31,
            2007.
 9
   Income
          Taxes




We
      adopted FASB Intrepretation No. 48 (“Fin 48”), “Accounting for
      Uncertainty in Income Taxes,” on October 1, 2007, which did not materially
      impact our consolidated results of operations or financial
      position.  No unrecognized tax benefits were recorded as of the date
      of adoption.  As a result of the implementation of Fin 48, we did not
      recognize any liability for unrecognized tax benefits.  There are no
      unrecognized tax benefits included in the balance sheet that would, if
      recognized, affect the effective tax rate.




Our
      policy is to recognize interest and/or penalties related to income tax matters
      in income tax expense.  We had no accrual for interest or penalties on
      our consolidated balance sheets at December 31, 2007 and at September 30, 2007,
      and we have not recognized interest and/or penalties in the consolidated
      statement of operations for the three months ended December 31,
      2007.




At
      October 1, 2007, we had net deferred
      tax assets of $12,865,000.  The tax assets are primarily composed of
      federal and state tax net operating loss carryforwards, capitalized research
      and
      development costs, depreciation and amortization and deferred
      revenue.  Due to uncertainties surrounding our ability to generate
      future taxable income to realize these assets, a full valuation allowance has
      been established to offset our net deferred asset.  On October 10,
      2007 Spescom Ltd. sold its majority interest in the Company to ERP2 Holdings,
      LLC. Prior to the ownership change the net operating loss carryforwards were
      $31,442,000 and $4,833,000 for federal and state tax purposes,
      respectively.  Due to the change in ownership, under Internal Revenue
      Code Section 382 and similar California rules, these net operating loss
      carryforwards are limited and have been reduced to $10,985,000 and
      $4,368,000 for federal and state tax purposes, respectively.  The
      deferred tax assets relating to the net operating loss carryforwards and
      associated valuation allowance were reduced by $6,982,000 to $3,990,000.




Net
      Income (Loss) per Common
      Share




Basic
      net income (loss) per common share
      is computed as net income (loss) divided by the weighted average number of
      common shares outstanding during the year. Diluted net income (loss) per common
      share is computed as net
      income (loss) divided by the weighted average number of common shares and
      potential common shares, using the treasury stock method, outstanding during
      the
      year and assumes conversion into common stock at the beginning of each period
      of
      all outstanding
      shares of convertible preferred
      stock, stock options, warrants and other potential common stock. Computations
      of
      diluted net income (loss) per share do not give effect to individual potential
      common stock for any period in which their inclusion would
      be anti-dilutive.


































10


Statements
      of Cash
      Flows




The
      following table provides
      supplemental cash flow information: For
                  the three months endedDecember
                  31,2007
              
              
              2006Supplemental
                  cash flow information:Interest
                  paid
              
              $
              3,000
              
              
              $
              28,000Non-cash
                  financing and investing activities:Accrued
                  preferred stock dividends
              
              $
              66,000
              
              
              $
              66,000$
              66,000
              
              
              $
              66,000
  Note
      3—Certain
      Transactions Involving ERP2
      Holdings, LLC




Sale
      of Spescom
      Ltd.’sInterests
      in the
      Companyto
      ERP2 Holdings,
      LLC




On
      October 10, 2007, pursuant to a
      Securities Purchase Agreement, dated as of September
      30, 2007,
      between Spescom Ltd, and its wholly owned subsidiary SpescomLtdUK
      (collectively, “Spescom”),
      on the one hand, and ERP2
      Holdings, LLC
      (“ERP2”),
      on the other hand, the parties
      thereto consummated the sale by Spescom to ERP2, for aggregate consideration
      of
      $2,500,000, of all shares of the capital stock held by Spescom, two demand
      notes
      payable to Spescom,
      and certain contract rights and
      other interests held by Spescom in connection with its ownership of such shares
      and notes (the “Transaction”).The shares of capital
      stock
      sold to ERP2 consist of 15,650,471 shares of the Company’s
      common stock and 5,291 shares of the Company’s
      Series FConvertiblePreferred
      Stock.(SeeNote
      7—Convertible
      Preferred Stock).As
      a result of the sale, ERP2 acquired
      all rights of Spescom Ltd. with respect to allaccruedand
      unpaiddividends(together
      with interest) on such shares
      of Series F Convertible Preferred Stock.Pursuant
      toa term sheet entered
      into on January 14,
      2008 between the Company and ERP2, the Companydeclared a dividend payable
      toERP2
      which was paid through the issuance
      of 20,832,498shares of
      common stockof the
      Company, in
      satisfaction of allaccrued
      and unpaid
      dividends (together with interest)as
      of January 21, 2008on the shares of the
      Company’s
      Series F Convertible Preferred Stock
      held by ERP2 (SeeNote
      11—Subsequent
      Events).





Extension
      of Demand
      Notes




On
      October 22, 2007, the Company and ERP2entered
      into a letter agreement by which
      ERP2 agreed to forbear from seeking repayment ofthetwo
      demand notes payable to it prior toDecember 21, 2007 and
      the
      Company, in exchange,
      agreedtopaya
      forbearancefee
      of $25,000 to ERP2.  The
      forbearance fee of $25,000
      wasexpensed over the two
      month forbearance
      period.Each
      of the demand notes sold to ERP2 in
      the Transaction bears interest atthe
      rate of 10% per annum andiscollateralized
      by a security interest in
      respect of all of the
      Company’s
      assets.Under a term sheet entered
      into on January 14, 2008 between the Company and ERP2 andamendments to the demand
      noteseffectedon
      January 31, 2008, the maturity dates
      of the demands notes were extended to January 31, 2010andERP2agreednot
      to call such notes following an
      event of default, prior to September 30, 2008.(SeeNote
      11—Subsequent
      Events).




The
      balance of the demandnotes
      and accrued interest payable at
      December 31, 2007 and September 30, 2007were as follows:




December
                  31,
              
              
              September 30,2007
              
              
              2007Notes
                  and accrued interest payable to ERP2 Holdings, LLC
              
              $
              693,000
              
              
              $
              -Notes
                  and accrued interest payable to Spescom Ltd.
              
              
              -
              
              
              
              676,000$
              693,000
              
              
              $
              676,000


11


Note4—Receivables




A
      summary of receivables and allowance
      for doubtful accounts as ofDecember 31,
      2007 and September 30,2007are
      as follows:




December
                  31,
              
              
              September
                  30,2007
              
              
              2007Receivables
                  consist of:Receivables
              
              $
              1,041,000
              
              
              $
              753,000Unbilled
                  receivables
              
              
              2,000
              
              
              
              -1,043,000
              
              
              
              753,000Less:  allowance
                  for doubtful accounts
              
              
              (10,000
              )
              
              
              (7,000
              )$
              1,033,000
              
              
              $
              746,000




Note5—Reconciliation
      of Net Income (Loss) and
      Shares Used in Per Share Computations:




For
                  the three months endedDecember
                  31,2007
              
              
              2006Net
                  income (loss) available for common shareholders
              
              $
              (382,000
              )
              
              $
              (117,000
              )Earnings
                  (Loss) per share:Basic
                  and diluted
              
              $
              (0.01
              )
              
              $
              -Weighted
                  average shares outstanding:Basic
                  and diluted
              
              
              37,761,000
              
              
              
              37,144,000
  Basic
      net income (loss) per share is
      computed using the weighted average number of common shares outstanding during
      the period.  Contingently issued shares are included
      in the
      computation of basic net income (loss) per share when the related conditions
      are
      satisfied.  Diluted net income (loss) per share is computed using the
      weighted average number of common shares and potentially dilutive
      securities
      outstanding during the period. 
Potentially dilutive securities consist of contingently issued shares, the
      common shares issuable upon conversion of preferred stock or convertible debt
      and shares issuable upon the exercise of stock options and common stock
      warrants.  Potentially dilutive
      securities are excluded from the computation if their effect is
      anti-dilutive.




As
      ofDecember 31,
      2007, a total of5,755,000
      stock options,2,702,000
      common stock warrantsand, 5,291 and 2,450
      shares of Series F
      and Series I Convertible
      Preferred Stock, respectively,were excluded from the
      diluted net
      income (loss) per share calculation for the three months endedDecember 31,
      2007, as their effect would be
      anti-dilutive. As ofDecember 31,
      2006, a total of4,375,000
      stock options,6,727,000
      common stock warrants and, 5,291
      and 2,450 shares of Series F and Series I Convertible Preferred Stock,
      respectively, were excluded from the diluted net income (loss) per share
      calculation for the three months endedDecember 31,
      2006,as
      their effect would be
      anti-dilutive.



















12


Note6—Segment
      and Geographic
      Information




The
      Company has one business segment,
      which consists of the development and sale of a suite of integrated document,
      configuration and records management software
      products.   Revenues by customer location and identifiable assets
      from continuing operations are as follows:


For
                  the three months endedDecember
                  31,2007
              
              
              2006United
                  States
              
              $
              1,283,000
              
              
              $
              1,243,000Europe,
                  primarily United Kingdom
              
              
              801,000
              
              
              
              433,000Other
                  International
              
              
              83,000
              
              
              
              51,000$
              2,167,000
              
              
              $
              1,727,000December
                  31,
              
              
              September
                  30,2007
              
              
              2006Identifiable
                  assets from continuing perations:United
                  States
              
              $
              1,926,000
              
              
              $
              2,564,000Europe,
                  United Kingdom
              
              
              588,000
              
              
              
              407,000$
              2,514,000
              
              
              $
              2,971,000
 Note7—Convertible
      Preferred
      Stock




Series
      I Convertible Preferred
      Stock




On
      March 10, 2006,
      the Company completed a privateplacement
      issuing 2,450
      shares of SeriesI Convertible
      Preferred
      Stock (“SeriesI
      Preferred
      Stock”)
      and warrants, expiring March 10, 2009, to purchase 925,926 shares of common
      stock at $0.27 per share in exchange for cash $500,000 and 1,950 shares of
      theCompany’s
      SeriesH Convertible
      Preferred
      Stock, which have been cancelled. Expenses relating to the transaction totaled
      $98,000 primarily relating to legal and accounting fees. In accordance with
      EITF
      00-27 “Application
      of Issue
      No. 98-5 to Certain Convertible
      Instruments,”the
      Company calculated, using the Black—Scholes
      method, the
      intrinsic value of the convertible instruments issued and determined that there
      was a deemed preferred dividend equal to the gross proceeds received of
      $500,000.  Pursuant to the
      terms of the
      financing, the Company filed a registration statement on April 7, 2006 for
      the
      common shares issuable under the Series I Preferred Stock and related warrants,
      which became effective on July 10, 2006.





Each
      share of Series I Preferred Stockis convertible into a
      number of shares of common stock determined by dividing $1,000 by the conversion
      price per share in effect at the time of conversion, provided that a holder
      of
      Series I Preferred Stock may at any given time convert only that number
      ofshares
      of Series I Preferred Stock so
      that, upon conversion, the aggregate beneficial ownership of the
      Company’s
      common stock of such holder and all
      persons affiliated with such holder is not more than 9.99% of the
      Company’s
      common stock then outstanding.The conversion price
      per
      share is equal to 85% of the market price (the volume-weighted average price
      of
      the Company’s
      common stock during the five
      immediately preceding trading days, subject to adjustment), provided that in
      no
      event shall the conversionprice
      exceed a ceiling price of $0.21
      per share, or be less than a floor price of $0.0725 per
      share.





Each
      holder of Series I Preferred
      Stock is entitled to a liquidation preference equal to the greater of (i) $1,000
      per share plus declared but unpaid dividends per share and
      (ii) the amount
      such holder would be entitled to receive had such holder’s
      shares been converted into shares of
      common stock immediately prior to the distribution in accordance with the terms
      of the Series I Preferred Stock.  Commencing
      on the issuance date of the Series I
      Preferred Stock, the Series I Preferred Stock is entitled to receive dividends
      of 6.75% of the stated value of $1,000 per share per annum, only payable until
      the registration statement for the common stock underlyingthe
      Series I Preferred Stock is declared
      effective by the Securities and Exchange Commission.  That
      registration statement was declared effective by the Securities and Exchange
      Commission on July 10, 2006.On
      October26,
      2007, as payment of the $55,000in accrued dividends
      owed
      to theholders ofSeries
      I Preferred
      Stock, the
      Companyissued
      358,809 sharesofthe
      Company’s
      common stock based on avalueof
      $0.15 per share.





Series F
      Convertible 5% PreferredStock




On
      September 30, 2003, the Company
      issued 5,291 shares of SeriesF Convertible Preferred
      Stock (the
“SeriesF
      Preferred Stock”) with a stated value
      of $1,000 per
      share in consideration of the cancellation of $5,291,000 of its debt owed to
      SpescomLtd. and its
      subsidiary (See Note 3 - Certain Transactions Involving ERP2 Holdings,
      LLC).  The Series F Preferred Stock is convertible into the
      Company’s
      common stock at a stated conversion
      price of $0.45 per share, subject to certain anti-dilution
      provisions.  As a result of certain equity transactions
      bythe Company,under
      the anti-dilution provisionsthe
      conversion price has been adjusted
      to $0.39 per shareas of
      December 31, 2007.Upon
      conversion of the Series F
      Preferred Stock




13


at
      the $0.39 per share conversion price,
      13,566,667 shares of the Company’s
      common stock is issuable
      basedon
      the stated value of the Series F
      Preferred Stock.  In addition, uponsuch conversion, allunpaid
      accrued dividends and interest
      thereon related to the Series F Preferred Stock as of such datewould be converted in
      theCompany’s
      common stock at the$0.39 per share conversion
      price. Under a term
      sheetdated
      January 14, 2008 between the
      Company andERP2,
      adividendwasdeclared
      bythe Company and 20,832,498
      shares of the
      common stock was subsequently issued to ERP2 as payment of all accrued and
      unpaid dividend
      and interest owed totaling $1,302,000 through January 21, 2008.(See
      Note11—Subsequent
      Events).Conversion
      of the Series F Preferred
      Stock may occur at the option of the holder until September 30, 2008. 
On that date, any
      outstanding Series F Preferred Stock not previously converted will be
      converted automaticallyat
      the then conversion price.




The
      Series F Preferred Stock is
      entitled to a liquidation preference equal to $1,000 per share, plus accrued
      but
      unpaid dividends per share
      and interest on all accrued but unpaid dividends.  The Series F
      Preferred Stock is also entitled to receive dividends of 5% of the stated value
      of $1,000 per share per annum, payable on a quarterly basis in cash or common
      stock (valued onthe
      basis of the average
      per share market value on the 30 trading days immediately prior to the date
      on
      which such dividend is declared by the Board of Directors).  Unpaid
      dividends accrue interest at the rate of 8% per annum.EachholderofsharesofSeries
      F PreferredStockis
      entitled to the number of votes equal
      to the number of shares of common stockissuable upon conversion
      of
      suchholder’s
      shares ofSeries F
      Preferred Stockon all matters
      submitted to the vote of the holders
      of common stock, and shall vote as a class with the holders of common
      stock.  In a change of control, merger or sale, the Series F Preferred
      Stock holders would preserve their conversion rights and would be
      entitledto
      the same number and amount of shares
      immediately prior to such transaction.




Note8—Expiration
      of
      Warrants




On
      November 3, 2007,warrantstopurchase
      1,000,000 shares of the
      Company’scommon
      stock at $0.40 per
      sharethat
      were issued in 1994 to a public
      relations firmexpired
      unexercised.  In addition, on November 4, 2007,warrantsto
      purchase 3,025,000shares of the Company’s
      common stock at $0.44 per sharethat were issued in
      connection with a financing by the Company in 1994also expired unexercised.  The
      original fair value of thesewarrantstotaling
      $965,000was reclassifiedfrom
      common stock warrantsto
      common stock upon
      expiration.





Note9—Recent
      Pronouncements




In
      September 2006, the
      FASB issued FAS157,
“Fair
      ValueMeasurements.”FAS 157
      defines
      fair value, established a framework for measuring fair value in generally
      accepted accounting principles (GAAP) and expands disclosures about fair value
      measurements. FAS 157iseffective
      for financial
      statements issued for fiscal
      years
      beginning after November 15, 2007. TheCompany
      has not
      determined the impact, if any,the
      adoption of FAS 157
      will have on its financial position and results of operations.




In
      February 2007, the FASB issued
      Statement of Financial Accounting Standards (“SFAS”)
      No.159, “The
      Fair Value Option for Financial
      Assets and Financial Liabilities - Including an amendment of FASB Statement
      No.115”(“SFAS
      159”). SFAS 159 expands the
      use of fair
      value accounting but does not affect existing standardswhich
      require assets or liabilities to be
      carried at fair value. Under SFAS 159, a company may elect to use fair value
      to
      measure accounts and loans receivable, available-for-sale and held-to-maturity
      securities, equity method investments, accounts payable,guarantees and issued
      debt. Other
      eligible items include firm commitments for financial instruments that otherwise
      would not be recognized at inception and non-cash warranty obligations where
      a
      warrantor is permitted to pay a third party to provide the warranty
      goods or services. If the use of
      fair value is elected, any upfront costs and fees related to the item must
      be
      recognized in earnings and cannot be deferred, e.g., debt issue costs. The
      fair
      value election is irrevocable and generally made on an instrument-by-instrument
      basis, even if a
      company has similar instruments that it elects not to measure based on fair
      value. At the adoption date, unrealized gains and losses on existing items
      for
      which fair value has been elected are reported as a cumulativeadjustment
      to beginning retained
      earnings. Subsequent to the adoption of SFAS 159, changes in fair value are
      recognized in earnings. SFAS 159 is effective for fiscal years beginning after
      November 15, 2007. The Company has not determined the impact, if
      any,the
      adoption of SFAS 159 will have on
      its financial position and results of operations.





In
      December 2007, the FASB issued FASB
      Statement No. 141 (revised 2007), Business Combinations.  Statement 141 (R)improves
      reporting by
      creating greater consistency in the accounting and
      financial
      reporting of business combinations, resulting in more complete, comparable,
      andrelevantinformation
      for investors and other
      users of financial statements. The new standard requires the acquiring entity
      in
      a business combination to
      recognize all (and only) the assets acquired and liabilities assumed in the
      transactions; establishes the acquisition-date fair value as the measurement
      objective for all assets acquired and liabilities assumed; and requires the
      acquirer to disclose
      to investors and other users all of
      the information they need to evaluate and understand the nature and
      financial effect
      of the business combination.The FASB Statement No.
      141 (R) will be
      effective for fiscal years beginning after December 15, 2008.The Company has not determined
      the
      impact, if any,the
      adoption ofFASB Statement 141(R)will
      have on its financial position and
      results of operations.


14


In
      December 2007, the FASB also issued
      FASB Statement 160, Noncontrolling Interests in Consolidated Financial Statements.
      Statement 160
      improves the relevance, comparability, and transparency of financial information
      provided to investors by requiring all entities to report noncontrolling
      (minority) interests in subsidiaries as equity in the consolidatedfinancial
      statements.  Statement 160 eliminates the diversity that currently
      exists in accounting for transactions between an entity and noncontrolling
      interests by requiringthatthey
      be treated as equity
      transactions.  Statement 160 will also be effective for fiscal years beginning
      after
      December 15, 2008.The Company has not determined
      the
      impact, if any,the
      adoption ofFASB Statement 160will
      have on its financial position and
      results of operations.




Note10—Contingencies





Upon
      the termination ofthe Company’s
      officeleasein
      the United Kingdom on March 14, 2006,
      the Company moved into new office facilities.The landlordof
      the old officehas claimed that the
      Company owes
      certain dilapidation payments under the lease.  The Company has
      disputed such claims and
      believes there will be no material effect once resolved.




Note11—Subsequent
      Events





Issuance
      ofCommon Stock Warrant,Declaration
      of Series F Convertible
      Preferred Stock Dividend Payable in Common Stock,Issuance
      of New Promissory Note
      andAmendmentsto
      Existing Demand
      Notes




On
      January 14, 2008, the Company entered
      into a term sheet (the “Term Sheet”)
      for a financing transaction with ERP2Holdings,
      LLC (“ERP2”),
      and in consideration for
      ERP2’s
      execution of the Term Sheet, the
      Company issued to ERP2 a
      warrant for the purchase of shares of the Company’s
      common stock.  In addition,
      in accordance with the term sheet, the board of directors of the Company
      declared on such date a dividend, payable to ERP2 in shares of common stock,
      on
      the shares
      of the Company’s
      Series F Convertible Preferred Stock
      held by ERP2.On
      January 31, 2008 pursuant to the Term Sheet,the
      Companyissued
      apromissorynote
      forup to$1,500,000andsigned
      amendments to the existing demand
      notesheld by
      ERP2.The foregoingtransactions
      are described
      in greater detail in this Note 11 below.




The
      warrant issued under the Term
      Sheetby
      the Company to ERP2 isexercisable
      for 17,175,971 shares ofCommon Stock ata
      per share exercise price of
      $0.08 fora 10-year term and contains
      certain “cashless
      exercise”and anti-dilution
      provisions.TheCompany
      calculated, using
      theBlack-Scholesmethod,
      afair value of  $1,202,000  for
      the warrant as of January 14, 2008. Based on fair value allocations
      the debt
      discount is$439,000
      and will be amortizedover
      thetwo-year termof
      the extended demandnotes.




On
      January 21, 2008 the dividend declaredby
      theboard of directors of
      the Companyin accordance with the
      Term
      Sheetwas
      paid to ERP2 in the amount of
      20,832,498shares of common
      stock, in satisfaction of
      theaccrued and unpaid
      dividendsowed(together
      with interest)totaling $1,301,000on
      the shares of the Company’s
      Series F Convertible Preferred Stock
      held by ERP2.As
      ofFebruary1,2008,ERP2,
      by virtue of its ownership of common
      stock,Series F ConvertiblePreferred Stockand
      the warrant to purchase 17,175,971
      shares of commonstock,wasthe
      beneficial owner of 69,220,705
      shares or 75.7% of the common stock of the Company.




Pursuant
      to the Term Sheet, on January 31, 2008 the Company issued to ERP2 a secured
      promissory note (the “New Note”) in the principal amount of up to $1,500,000
      with a maturity date of January 31, 2010.  The disbursement of
      $300,000 of such principal amount occurred upon execution of the
      note.  Disbursement of the remaining $1,200,000 of such amount is
      subject to completion of all actions required to be completed by the Company
      in
      order to effectuate a 1000-to-1 reverse split of the Company’s common stock and
      the deregistration of the Company’s common stock under the Securities Exchange
      Act of 1934.  Events of default under the New Note include, among
      others, any failure of the Company to complete such actions by April 30,
      2008.The New Note
      bears interest at 10% per annum (plus, upon the occurrence and continuation
      of
      an event of default, an additional 3% per annum), payable quarterly in arrears
      in cash, or, at the Company’s option, in kind, capitalized as additional
      principal.  The New Note contains certain affirmative and negative
      covenants, including a covenant that the Company’s consolidated EBITDA (as
      defined in the New Note) for each of certain periods of four consecutive fiscal
      quarters will meet or exceed the applicable minimum amount set forth in the
      New
      Note. As of February 1, 2008, the aggregate amount of principal and interest
      outstanding under the New Note was $300,000.





In
      addition, pursuant to the Term Sheet, on January 31, 2008 the Company and ERP2
      entered into amendments to the two existing secured demand notes in the original
      principal amounts of $400,000 and $500,000 held by ERP2 (the “Old Notes”) that
      provide, among other things, for (A) the extension of the maturity dates of
      such
      notes until January 31, 2010 and (B) a right of ERP2 to accelerate the
      indebtedness represented by such notes upon an event of default under the New
      Notes, provided that no such acceleration may occur prior to September 30,
      2008.  The Old Notes, as amended, bear interest at 10% per annum,
      payable upon maturity, provided that, in the event any payment due under either
      of such notes is not made within 15 days of its due date, the interest on such
      overdue amount will increase to 13% per annum. As of February 1, 2008, the
      aggregate amount of principal and interest outstanding under the Old Notes
      was
      $699,000.


15


The
      New
      Notes and the Old Notes, as amended, are secured by all of the Company’s assets
      pursuant to amendments and restatements of the security agreement and pledge
      agreement by which the Company’s obligations under the Old Notes were secured
      previously.  Such amended and restated security agreement, among other
      things, (i) provides for a security interest in favor of ERP2 in respect of
      all
      personal property of the Company and (ii) obligates the Company to deliver
      the
      source code of its software products into escrow pursuant to an escrow agreement
      reasonably satisfactory to ERP2 within 30 days after January 31, 2008 and,
      subject to certain conditions, to effect one or more updates to the source
      code
      so escrowed.  Such amended and restated pledge agreement, among other
      things, provides for a security interest in favor of ERP2 in respect of the
      Company’s interest in its United Kingdom subsidiaries, Enterprise Informatics
      International Ltd. and Enterprise Informatics Ltd.





The
      Company is obligated under the New Note, on or prior to the date of the
      above-referenced $1,200,000 disbursement, to issue to ERP2 warrants for the
      purchase of the number of shares of common stock equal to the greater of (i)
      26,735,508 shares of common stock and (ii) 20% of the fully diluted outstanding
      common stock as of the date of such issuance.  Such warrants will have
      a per share exercise price of $0.08 and a 10-year term, and contain certain
      “cashless exercise” and anti-dilution provisions.





The
      New
      Note provides for entry by the Company and ERP2 into one or more agreements
      pursuant to which designees of ERP2 will provide management consulting,
      strategic and financial advisory services to the Company during the period
      that
      any indebtedness is outstanding under the New Note or the Old Notes, in exchange
      for fees paid by the Company of up to $60,000 per quarter.  In
      addition, the Company is obligated to pay (i) a $75,000 closing fee, which
      includes up to $25,000 of fees and expenses that the Company is required to
      reimburse to ERP2 pursuant to the letter agreement between the Company and
      ERP2
      dated October 22, 2007 and (ii) certain fees and expenses incurred by ERP2
      in
      connection with the transactions described above.


16


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




Forward-Looking
      Statements




This
      report contains forward-looking
      statements within the meaning of Section 27A of the Securities Act of 1933
      and Section 21E of the Securities Exchange Act of 1934. These
      forward-looking statements are subject to certain risks and uncertainties
      that could
      cause actual results to differ materially from historical results or anticipated
      results, including those set forth under “Certain Factors That
      MayAffect Future
      Results”below and elsewhere
      in, or incorporated by reference
      into, this
      report.


In
        some cases, you can identify
        forward-looking statements by terms such as“may,”“intend,”“might,”“will,”“should,”“could,”“would,”“expect,”“believe,”“anticipate,”“estimate,”“predict,”“potential,”or
        the negative ofthese terms, and similar
        expressions are
        intended to identify forward-looking statements. When used in the following
        discussion, the words “believes,”“anticipates”and
        similar expressions are intended to
        identify forward-looking statements. Such statements
        are subject to certain risks and
        uncertainties, which could cause actual results to differ materially from
        those
        projected. Readers are cautioned not to place undue reliance on these
        forward-looking statements, which speak only as of the date hereof.
        Theforward-looking
        statements in this
        report are based upon management’s
        current expectations and belief, which
        management believes are reasonable.  These statements represent our
        estimates and assumptions only as of the date of this Quarterly Report on
        Form10-Q,
        and we undertake no obligation to
        publicly release the result of any revisions to these forward-looking
        statements, which may be made to reflect events or circumstances after the
        date
        hereof or to reflect the occurrence of unanticipated
        events.


The
      following discussion should be read in
      conjunction with the Selected Consolidated Financial Data and the Consolidated
      Financial Statements, including the Notes thereto.




OVERVIEW




The
      Company develops, markets, and
      supportseB,
      its integrated suite ofcollaborative document,
      configuration
      and records management software solutions. TheeB
      suite enables organizations in a broad
      range of industries to create, capture, store, manage, share and distribute
      critical business information regarding their customers, products, assets
      and processes in an
      efficient manner. TheeB
      suite also enables them to maintain
      complete, up-to-date information about the configuration of their products,
      assets and infrastructures so that they can achieve operational excellence
      andcompliance with
      regulatory requirements.eB
      provides the capabilities of an
      Enterprise Content Management (ECM)/Electronic Document Management (EDM) System,
      but extends these capabilities by also managing the “things”that
      the content/documents relate tosuch as products, assets
      ,
      functions, processes, requirements, projects, organizations, locations, work
      orders, etc. As a result,eB
      can be used to manage the lifecycle of
      physical items (e.g. products, equipment or assets), and the requirements (e.g.
      functional, safety,
      performance, environmental, etc.) that govern them. It enables intelligent
      relationships to be defined between these items thereby creating an
      interdependency model. As a result, the effects of any change on requirements,
      documents and items
      can be determined, and change can be
      managed to effectively ensure information integrity. In particular,eB
      enables organizations with extensive
      and complex physical infrastructures to efficiently identify, classify,
      structure, link, and manage documents, physical items, and
      requirements
      throughout their lifecycles and ensure that conformance between these is
      maintained by means of an automated change process.




Our
      revenues in the three months endedDecember 31,
      2007 increased by25%
      from the same periodin the prior fiscal year
      primarily due
      tosales of expansionsoftwarel
      icenses to existing customers in the
      United States and the United Kingdom andexpansion
      services projectsfor existing customersin
      the United
      Kingdom.   The Company’s
      license revenuefluctuates from quarter
      to quarter as
      reflected by the increase in license sales during the current
      quarter.




Our
      revenues are derived from licenses
      of our software to our customers, services that we provide under maintenance
      support contracts and our non-maintenance services,
      consisting
      primarily of design studies, system implementation and training. Of our total
      revenues for the three months endedDecember 31,
      2007, license revenues accounted for30%,
      maintenance services revenues
      accounted for 40% and
      non-maintenance services
      represented30%.Of
      our total revenues for
      the three months ended December 31, 2006, license revenues accounted for 23%,
      maintenance services revenues accounted for 44% and non-maintenance services
      represented 33%.




Many
      of our customers are located outside
      the United
      States, with foreign-originated revenues accounting for41%
      and28%
      of revenues for the three months endedDecember 31,
      2007 and 2006,
      respectively.Our
      revenue for the three months endedDecember 31,
      2007 reflecteda foreign currency gain
      of $27,000ascompared
      to last year due to the increasing
      value of the British pound to the dollar.




17


During
      the three months endedDecember 31,
      2007 our cost of revenues increased by
      26%and
      our operating expenses increased52%when
      comparedto the sameperiod
      in the prior fiscal
      year.While
      higher third party software costcontributedslightlyto
      the increase in our cost of
      revenues, the primary
      reason for the increase in cost of revenues and operating expenses was due toretentionbonuseswhich
      totaled $536,000tomanagement
      and staffin connection withthe
      purchase byERP2 Holdings,LLC’sof
      Spescom Ltd’s
      majority shareholder position in the
      Company.





AtDecember
      31, 2007, our principal
      sources of
      liquidity consisted of $711,000
      of cash, compared to $552,000
      at September 30, 2007.





CRITICAL
      ACCOUNTING POLICIES




The
      consolidated financialstatements are prepared
      in conformity
      with accounting principles generally accepted in the United States of America.
      As such, management is required to make judgments, estimates and assumptions
      that affect the reported amounts of assets and liabilities atthe
      date of the consolidated financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. The significant accounting policies which are most critical
      to
      aid in fully understanding and evaluating reported financial results
      include the
      following:




Revenue
      Recognition




The
      Company’s
      revenues are derived from sales of its
      document and configuration management systems that are primarily composed of
      software and services, and include maintenance, training and consulting
      services, and third party
      software and hardware. The Company recognizes revenue in accordance with
      Statement of Position (“SOP”)
      97-2 “Software Revenue
      Recognition,”SOP 98-9, “Modification
      of SOP 97-2, Software
      Revenue Recognition with Respect to CertainTransactions”,
      Staff Accounting Bulletin
      (“SAB”)
      No. 101, updated by SAB’s
      103 and 104 “Update of Codification
      of Staff
      Accounting Bulletins,”and
      Emerging Issues Task Force No. 00-21 (“EITF 00-21”)
“Accounting
      for Revenue Arrangements with
      Multiple Deliverables.”Revenue
      through the Company’s
      Value Added Resellers (“VARS”)
      are net of any VAR discount in
      accordance with EITF 99-19 “Reporting Revenue Gross
      as a Principal
      versus Net as an Agent.”




Software
      license and third party product
      revenues are recognized
      upon shipment of the product if no significant vendor obligations remain and
      collection is probable. In cases where a significant vendor obligation exists,
      revenue recognition is delayed until such obligation has been satisfied. For
      new
      software products
      where a historical record has not
      yet been demonstrated that acceptance is perfunctory, the Company defers
      recognition of revenue until acceptance has occurred. If an undelivered element
      of the arrangement exists under the license arrangement, a portion
      of revenue is deferred based on
      vendor-specific objective evidence (VSOE) of the fair value of the undelivered
      element until delivery occurs.  If VSOE does not exist for all undelivered
      elements, all revenue is deferred until sufficient evidence existsor
      all elements have been
      delivered.  Annual maintenance revenues, which consist of ongoing support
      and product updates, are recognized on a straight-line basis over the term
      of
      the contract. Payments received in advance of performance of the related
      service
      for maintenance contracts are recorded
      as deferred revenue. Revenues from training and consulting services are
      recognized when the services are performed and adequate evidence of providing
      such services is available. Contract revenues for long-term contracts
      or programs requiring specialized
      systems are recognized using the percentage-of-completion method of accounting,
      primarily based on contract labor hours incurred to date compared with total
      estimated labor hours at completion. Provisions for anticipated
      contract losses are recognized at
      the time they become known.




Contracts
      are billed based on the terms
      of the contract. There are no retentions in billed contract receivables.
      Unbilled contract receivables relate to revenues earned but not billed at
      the end of the
      period.




The
      Company considers many factors when
      applying accounting principles generally accepted in the United States of
      America related to revenue recognition.  These factors include, but are not
      limited to:




·
            The
                actual
                contractual terms,
                such as
                payment terms, delivery dates, and pricing of the various product
                and
                service elements of a
                contract




·
            Availability
                of
                products to be delivered




·
            Time
                period over
                which services are to be
                performed




·
            Creditworthiness
                of the customer




·
            The
                complexity of customizations to
                the Company’s
                software required by service
                contracts


18





·
            The
                sales channel
                through which the sale is made (direct, VAR, distributor,
                etc.)





·
            Discounts
                given
                for each element of a
                contract




·
            Any
                commitments
                made as to
                installation or
                implementation of “go
                live”dates




·
            Acceptance
                criteria




Each
      of the relevant factors is analyzed
      to determine its impact, individually and collectively with other factors,
      on
      the revenue to be recognized for any particular contract with a customer.  Management is
      required to make judgments regarding the significance of each factor in applying
      the revenue recognition standards, as well as whether or not each factor
      complies with such standards.  Any misjudgment or error by management
      inits
      evaluation of the factors and the
      application of the standards, especially with respect to complex or new types
      of
      transactions, could have a material adverse effect on the Company’s
      future operating
      results.




Software
      Development
      Costs




Software
      development costs are capitalized
      when
      technological feasibility and marketability of the related product have been
      established. Software development costs incurred solely in connection with
      a
      specific contract are charged to cost of revenues. Capitalized software
      costs are amortized on a
      product-by-product basis, beginning when the product is available for general
      release to customers.   Annual amortization expense is calculated
      using the greater of the ratio of each product’s
      current gross revenues to thetotal
      of current and expected gross
      revenues or the straight-line method over the estimated useful life of three
      to
      five years.





Allowance
      for Doubtful
      Accounts




The
      Company sells its products directly
      to end-users, generally requiring a significant up-front payment and remaining
      terms
      appropriate for the creditworthiness of the customer. The Company also sells
      its
      products to VARs and other software distributors generally under terms
      appropriate for the creditworthiness of the VAR or distributor. The
      Company
      retains no continuing obligations on
      sales to VARs.  Receivables from customers are generally unsecured. The
      Company continuously monitors its customer account balances and actively pursues
      collections on past due balances. The Company maintains an allowance
      for doubtful accounts which is
      comprised of a general reserve based on historical collections performance
      plus
      a specific reserve for certain known customer collections issues. If actual
      bad
      debts are greater than the reserves calculated based on historical
      trends and known customer
      issues, the Company may be required to book additional bad debt expense which
      could have a material adverse effect on our business, results of operations
      and
      financial condition for the periods in which such additional expense
      occurs.




Share-Based
      Payments




The
      Company recognizes share-based
      compensation expense as required by the Financial Accounting Standards Board
      (FASB) under the Statement of Financial Accounting Standards No.123 (revised
      2004), “Share-Based
      Payments”(FAS
      123R).  The Company adopted the provisions of FAS 123R on October 1,
      2005, the first day of the Company’s
      fiscal year 2006. Share-based
      compensation cost is measured at the date of grant using the Black-Scholes
      option-pricing model, based on the estimated
      fair value of the award, and is
      recognized as expense over the employee’s
      requisite service period. The
      determination of the fair value of share-based payments on the date of grant
      using an option-pricing model is affected by our stock price as wellas
      stock volatility over the term of the
      awards, actual and projected employee stock option exercise behaviors, risk-free
      interest rate and expected dividends. The Company has no awards with market
      or
      performance conditions. The valuation provisions of FAS123R
      apply to new awards and to awards
      outstanding on October 1, 2005 and subsequently modified or
      cancelled.





























19


RESULTS
      OF
      OPERATIONS




The
      following table sets forth the
      condensed consolidated statement of operations expressed as a percentageof total revenue for
      the
      periods indicated:


For
                  the three months endedDecember 31,2007
              
              
              2006Revenues:Licenses
              
              
              30
              %
              
              
              23
              %Services
                  and other
              
              
              70
              %
              
              
              77
              %Total
                  revenues
              
              
              100
              %
              
              
              100
              %Cost
                  of revenues:Licenses
              
              
              3
              %
              
              
              2
              %Services
                  and other
              
              
              33
              %
              
              
              34
              %Total
                  cost of revenues
              
              
              36
              %
              
              
              36
              %Gross
                  profit
              
              
              64
              %
              
              
              64
              %Operating
                  expenses:Research
                  and development
              
              
              20
              %
              
              
              15
              %Marketing
                  and sales
              
              
              26
              %
              
              
              27
              %General
                  and administrative
              
              
              28
              %
              
              
              21
              %Total
                  operating expenses
              
              
              75
              %
              
              
              63
              %Income
                  (loss) from operations
              
              
              (11
              )%
              
              
              1
              %Interest
                  and other income
              
              
              —
              
              
              
              —Interest
                  and other expense
              
              
              (4
              )%
              
              
              (4
              )%Net
                  loss
              
              
              (15
              )%
              
              
              (3
              )%Cumulative
                  preferred dividends
              
              
              (3
              )%
              
              
              (4
              )%Net
                  loss available to common shareholders
              
              
              (18
              )%
              
              
              (7
              )%
 Revenues





License
      Revenues


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeLicense
                  revenues
              
              $
              640
              
              
              $
              390
              
              
              
              64
              %Percentage
                  of total revenues
              
              
              30
              %
              
              
              23
              %
  License
      revenuesincreased
      by $250,000,
      or64%,
      to $640,000
      from $390,000
      for the three months endedDecember 31,
      2007 when compared to the same period
      a year agoprimarily due togreatersales
      of expansion software to our
      existing customers during the current quarter. The Company’s
      license revenues fluctuate from
      quarter to quarter, which is reflected by theincrease
      in license sales in the current
      quarter relative to the
      same quarter in the prior year, during which there were a few large license
      sales.




Overall
      general economic conditions have
      weakened, however, we have continue to see demand for our products
      increase especially in the nuclear marketplace.The Company’s
      license revenues can fluctuate from
      quarter to quarter, based on the timing of customer orders due to the long
      sales
      cycle and changes in customers’internal
      plansof
      the rollout of software
      licenses.




Although
      the Company has historically
      generated the majority of its revenues from its direct sales force, the Company
      has also established a network of third-party VARs, system integrators and
      OEMs
      who build and sell systems
      (with components or complete systems provided by the Company) that address
      specific customer needs within various industries, including those targeted
      directly by the Company.  Sales through indirect channels, which
      includes license and maintenancerevenue, for
      the three months endedDecember 31,
      2007 amounted to $179,000,
      or 8%compared
      to $127,000,
      or7%for
      the same period in the prior
      year.  Theincrease
      in sales through indirect
      channels is primarily related to increased sales
        inEurope.




20


Asmall
      number of customers have typically
      accounted for a large percentage of the Company’s
      annual revenues.EntergyOperations,
      Inc.and Aker KvaernerBusiness
      Partner ASaccounted for13%and
      10%, respectively,of revenue for the three
      months endedDecember
      31, 2007, while Constellation
      Energy Groupand JEAaccounted
      for17% and14%,
      respectively,for the three months
      endedDecember 31,
      2006.   The
      Company’s
      reliance on relatively few customers
      could have a material adverse effect on the results of its operations on a quarterly
      basis.




Services
      and Other
      Revenues


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeServices
                  and other revenues
              
              $
              1,527
              
              
              $
              1,337
              
              
              
              14
              %Percentage
                  of total revenues
              
              
              70
              %
              
              
              77
              %
  Services
      and other revenues are
      comprised of maintenance and non-maintenance services.  Non-maintenance
      services typically relate to business process studies, implementation ofsystems and training
      which
      vary with the level of license revenues while maintenance revenue is primarily
      dependent on customers renewing their annual maintenance support
      contracts.




Services
      and other revenues increased
      $190,000,
      or14%, to
      $1,527,000from
      $1,337,000
      for the three months endedDecember 31,
      2007 compared to the same period a
      year ago. The non-maintenance portion of service revenue increased by
      $84,000,or15%,from
      $568,000
      to $652,000
      primarily due togreater sales ofexpansion
      services for existing customers
      during the
      current quarter.   Also in this quarter, maintenance revenue increased
      by $106,000,
      or14%,from
      $769,000
      to $875,000,
      primarily due to the increase in
      software license sales in fiscal year 2007.




We
      anticipate that service and other revenues
      will fluctuate
      primarily due to sales to new customers because they require more services
      that
      typically include a business process study, integration with other business
      systems and training.  In addition, service and other revenues
      will continue to fluctuate from
      quarter to quarter based on the timing of customer orders.





Cost
      of Revenues





Cost
      of License
      Revenues


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeCost
                  of license revenues
              
              $
              55
              
              
              $
              38
              
              
              
              45
              %Percentage
                  of total revenues
              
              
              3
              %
              
              
              2
              %
  Cost
      of license revenues consists of
      costs associated with reselling third-party products and amortization of capitalized
      software
      development costs.




Cost
      of license revenuesincreased
      by $17,000,
      or45%,
      from $38,000
      to $55,000
      for the three months endedDecember 31,
      2007 compared to the same period a
      year ago.Theincrease
      is primarily due to anincrease
      in the proportion of license
      revenue being attributed to third-party software products, which typically
      have
      a higher associated cost than the Company’s
      own proprietary
      software.  Theincreasein
      third-party costs resulted in
      aslightincrease
      in the gross profit percentage of
      license revenues to91%
      for the three months endedDecember 31,
      2007 as compared to90%
      for the same period a year
      ago.




We
      expect the cost of license revenues
      to fluctuate based on fluctuations in license revenues andin customer requirements
      for third-party
      software products since the cost of meeting these customer requirements have
      the
      largest impact on cost of license revenues.










21


Cost
      of Services and Other
      Revenues


(inthousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeCost
                  of services and other revenues
              
              $
              725
              
              
              $
              591
              
              
              
              23
              %Percentage
                  of total revenues
              
              
              33
              %
              
              
              34
              %
  Cost
      of services and other revenues consists primarily
      of
      personnel related costs in providing consulting services, training to customers
      and support.  It also includes costs associated with reselling third-party
      hardware and maintenance, which includes telephone support
      costs.




Cost
      of services and other revenues
      increased $134,000,
      or23%,
      from $591,000
      to $725,000
      for the three months endedDecember 31,
      2007 compared to the same period a
      year ago.  The increase was primarilydue to higher personnel
      costs related to
      a retentionbonus for
      management and staff in connection with the purchase by ERP2 Holdings, LLC
      of
      Spescom Ltd’s
      majority ownership of the Company.The higher personnel
      related costsresulted
      in a decrease in thegross profit from services
      and other revenue as a percentage of services and
      other revenues to53%
      for the three months endedDecember 31,
      2007 as compared to 56%
      for the same period a year
      ago.





We
      expect the cost of services and other
      revenues to fluctuate in absolute dollar amounts and as a percentage oftotal revenues as the
      related service revenue fluctuates.




Operating
      Expenses




Research
      and
      Development


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeResearch
                  and development expenses
              
              $
              433
              
              
              $
              258
              
              
              
              68
              %Percentage
                  of total revenues
              
              
              20
              %
              
              
              15
              %
  Research
      and development expenses
      consist of salaries and benefits for software developers as well as an
      allocation of corporate expenses, calculated on
      the basis of
      headcount, such as corporate insurance, facilities, telephone and
      other.




Research
      and development expensesincreased
      by $175,000,
      or68%,
      from $258,000
      to $433,000
      for the three months endedDecember 31,
      2007 comparedto the same period a
      year agodue to higher personnel
      costs related to a retention bonus for management and staff in connection with
      the purchase by ERP2 Holdings, LLC of Spescom Ltd’s
      majority ownership of the
      Company.  In addition, there were higher consultant feesof
      $48,000for a temporary architect/developer
      to
      work on the integration of oureB
      product with the Microsoft Office
      SharePoint Server environment.





We
      believe that continued investment in
      research and development is a critical factor in maintaining our competitive
      position and we
      expect research and development costs to remain at the current levels in
      absolute dollar amounts in the next several quarters.





Marketing
      and Sales


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeMarketing
                  & sales expenses
              
              $
              571
              
              
              $
              460
              
              
              
              24
              %Percentage
                  of total revenues
              
              
              26
              %
              
              
              27
              %
  Marketing
      and sales expenses consist of
      salaries,cost of benefits,
      sales commissions and other expenses related to the direct salesf orce, as
      well
      as allocation of overall corporate expenses, calculated on the
      basis of headcount, related to items
      such as corporate insurance, facilities, telephone and other.


22


Marketing
      and sales expensesincreased
      $111,000,
      or 24%,
      from $460,000
      to $571,000
      for the three months endedDecember 31,
      2007 compared to the same period a
      year ago.  Theincrease
      isdue primarily to higher
      personnel costs
      related to a retention bonus formanagement
      and staff in connection with
      the purchase by ERP2 Holdings, LLC of Spescom Ltd’s
      majority ownership of the
      Company.  In addition, there were higher consulting costsof $37,000associated
      with the Company’s
      efforts to improve our
      communications and
      positioning in the marketplacewhen
      compared to the same period a year
      ago.




We
      expect marketing and sales expense toincreasein
      absolute dollar amounts and as a
      percentage of total revenue in the current fiscal year.




General
      andAdministrative


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeGeneral
                  and administrative expenses
              
              $
              614
              
              
              $
              368
              
              
              
              67
              %Percentage
                  of total revenues
              
              
              28
              %
              
              
              21
              %





General
      and administrative expenses
      consist primarily of personnel costs for finance, information technology, human
      resources and general management, as well as outside professional services
      and
      an allocation of overallcorporate expenses, calculated
      on the
      basis of headcount, such as corporate insurance, facilities, telephone and
      other.




General
      and administrative expensesincreased
      by $246,000,
      or67%,
      from $368,000
      to $614,000
      for the three months endedDecember
      31, 2007 compared to the
      same period a
      year ago.The
      increase is due primarily to higher
      personnel costs related to a retention bonus for management and staff in
      connection with the purchase by ERP2 Holdings, LLC of Spescom Ltd’s
      majority ownership of the Company. In addition,
      there were
      higher legal and professional feesof
      $49,000as
      a result of ERP2 Holdings, LLC's
      purchase.





Weexpect
      that general and administrative
      expenses will remain relatively constant in absolute
      dollars.







Interest
      and Other
      Expense


(in
      thousands)


For
                    the three months endedDecember
                    31,2007
                
                
                2006
                
                
                ChangeInterest
                    & other expense
                
                $
                88,000
                
                
                $
                63,000
                
                
                
                40
                %Percentage
                    of total revenue
                
                
                -4
                %
                
                
                -4
                %
  Interest
        expense and other expense
        consists primarily of fixed interest obligations on our outstandingdebt toERP2
        Holdings, LLCas well asamortization
        of debt issuance cost andinterest paid on capital
        lease obligations.Interest
        expense was$88,000 and $63,000,
        respectively,forthethree
        month periods endedDecember 31,
        2007 andDecember 31,
        2006.The
        increasein interest expenserelated
        primarily todebt issuance costsof
        $25,000in
        connection withthe extensionin
        October 2007of thedemand
        notesheld
        byERP2 Holding,LLC.





Cumulative
      Preferred
      Dividends


(in
      thousands)


For
                  the three months endedDecember
                  31,2007
              
              
              2006
              
              
              ChangeDeemed
                  preferred dividends
              
              $
              66,000
              
              
              $
              66,000
              
              
              
              0
              %Percentage
                  of total revenue
              
              
              -3
              %
              
              
              -4
              %
  23
 The
      outstanding Series F Convertible
      Preferred Stock was entitled to receive dividends of 5% of the stated value
      of
      $1,000 per share p er
      annum, payable on a quarterly basis
      in cash or common stock (valued on the basis of the average per share marketvalue on the 30 trading
      days immediately prior to the date on which such dividend is declared by the
      Board of Directors).  Cumulative preferred dividends earned for both three
      month periods endedDecember 31,
      2007 andDecember 31,
      2006 were $66,000.Unpaiddividends
      accrue interest at the rate of
      8% per annum.  As ofDecember 31,
      2007, unpaid dividends and accrued
      interest amounted to $1,124,000
      and $199,000,
      respectively.In January
      2008, the Company issued
      20,832,498sharesof
      common stock of the Companyin
      paymentfor
      all accrued dividends and
      interest owedbased on
      a fair value of $0.06 per share.




The
      outstanding Series I Convertible
      Preferred Stock(“Series
      I Preferred Stock”) was entitled to receive
      dividends of
      6.75% of the stated value of $1,000 pershare per annum, payable
      on a monthly
      basis in cash or common stock accrued through the July 10, 2006 effective date
      of the registration statement filed by the Company that included the common
      stock issuable under the Series I Preferred Stock.  There
      wereno
      cumulative preferred dividends earned
      for the three–monthperiodsendedDecember
      31, 2007and
      2006.Unpaid dividends
      did not accrue
      interest.  OnOctober
      26, 2007,the
      Company issued 358,809 shares of
      common stock of the Company in payment of accrueddividendstotaling
      $55,000 based on a fair value
      of $0.15 per share.




LIQUIDITY
      AND CAPITAL RESOURCES




AtDecember
      31, 2007, our principal
      sources of
      liquidity consisted of $711,000
      of cash and cash equivalents
      compared to $553,000
      at September 30, 2007.
      Our liquidity could be negatively
      impacted by a decrease in demand for our products, which are subject to rapid
      technological changes, reductions in capital expenditures by our customers
      and
      intense competition, among other factors.




ERP2
      Holdings, LLC (“ERP2’) purchased
      the two demand notes held by Spescom Ltd. (the “Old Notes”) on October 10, 2007,
      (see Note 3 – Certain Transactions Involving ERP2 Holdings, LLC).  The
      outstanding balance owed to ERP2 under the Old Notes, including interest was
      $693,000 at December 31, 2007 as compared to $676,000 owed to Spescom Ltd.
      at
      September 30, 2007.  On January 31, 2008,the Company and
      ERP2 entered into amendments to the Old Notes that provide, among other things,
      for (A) the extension of the maturity dates of such notes until January 31,
      2010
      and (B) a right of ERP2 to accelerate the indebtedness represented by such
      notes
      upon an event of default under the New Note (as defined in the following
      paragraph), provided that no such acceleration may occur prior to September
      30,
      2008.  The Old Notes, as amended, bear interest at 10% per annum,
      payable upon maturity, provided that, in the event any payment due under either
      of such notes is not made within 15 days of its due date, the interest on such
      overdue amount will increase to 13% per annum.





In
      addition to the amendments to the Old Notes, on January 31, 2008 the Company
      issued to ERP2 a secured promissory note (the “New Note”) in the principal
      amount of up to $1,500,000 with a maturity date of January 31,
      2010.  The disbursement of $300,000 of such principal amount occurred
      on January 31, 2008.  Disbursement of the remaining $1,200,000 of such
      amount is subject to completion of all actions required to be completed by
      the
      Company in order to effectuate a 1000-to-1 reverse split of the Company’s common
      stock and the deregistration of the Company’s common stock under the Securities
      Exchange Act of 1934.  Events of default under the New Note include,
      among others, any failure of the Company to complete such actions by April
      30,
      2008.The New Note
      bears interest at 10% per annum (plus, upon the occurrence and continuation
      of
      an event of default, an additional 3% per annum ), payable quarterly in arrears
      in cash, or, at the Company’s option, in kind, capitalized as additional
      principal.  The New Note contains certain affirmative and negative
      covenants, including a covenant that the Company’s consolidated EBITDA (as
      defined in the New Note) for each of certain periods of four consecutive fiscal
      quarters will meet or exceed the applicable minimum amount set forth in the
      New
      Note.





Cash
      provided by operating activities
      was $185,000
      during thethreemonths
      endedDecember 31,
      2007related
      totheincrease
      in accountspayable,accrued
      liabilities, and deferred revenueof
      $705,000,
      and offset byour net loss for the
      current quarter of
      $316,000,andreductions
      in accountsreceivableof
      $295,000and
      other asset of
      $17,000.The
      operating loss was adjusted for non-cash activities of $138,000
      comprised primarily of
      $46,000
      in depreciation and amortization,
      $31,000
      for theFAS 123Rperiod
      chargeforemployee
      stock options, $60,000
      in unpaid interest on notes
      payable, and $1,000
      ingain on disposal of
      assets.Cash
      provided byoperating activitieswas$1,225,000
      during thethreemonths
      endedDecember 31,
      2006relatedtotheincrease
      indeferred revenue of $2,258,000primarily due to payment
      of
      $2,000,000 relating to a large license and development transaction with Aveva
      Solutions Limitedin
      October 2006,
      offset by reductions in accounts
      payable of $456,000, in a payable to Spescom Ltd. of $359,000 and in accrued
      liabilities of $244,000, and by a net loss during the quarter of
      $51,000.  The operating loss was adjusted for non-cash activities of
      $144,000 comprised
      primarily of $46,000 in depreciation and amortization, $42,000 for FAS 123R
      period charge for employee stock options, and $56,000 in unpaid interest on
      notes payable.





Cash
      used in investing activities was
      $11,000and
      $5,000for thethreemonthperiodsendedDecember
      31, 2007and
      2006, respectively, in each casefor
      purchases of property and equipmentconsistingprimarilyofcomputer
      equipment and internally used
      software.








24


Cash
      used in financing activities was
      $42,000for
      thethreemonths
      endedDecember 31,
      2007with $30,000 in legal
      costsrelated
      to new note issued toERP2 Holdings,LLC.


The
      balance of $12,000 was forpayments
      on capital lease
      obligations.Cash used in financing
      activities was $10,000 for the three monthsended
      December 31, 2006 for payments on
      capital lease obligations.





The
      Company believes its capital
      requirements will continue to vary greatly from quarter to quarter, depending
      on, among
      other things, capital expenditures, fluctuations in its operating results,
      financing activities, and investments and third party products and receivables
      management.  Thefuture liquidityof
      the Companywilldepend
      on its receipt from ERP2 of the
      remaining $1,200,000 of the maximum principal amount under theNew Noteandonthe
      Company’sability
      to generate new system sales of
      itseB
      product suite in the near
      term,
      which, in either
      casecannot
      be assured.Management
      believes that the
      Company’s
      current cash and receivables and cash
      that may be generated from operations and received from ERP2 pursuant tothe New Note,
      will be sufficient tomeet its short-term needs
      for working
      capital for at least the next year.  However,ifthe
      Companyweretofail
      tomaintain compliance with
      the covenants
      under the New Noteor
      otherwise default under the New Noteand ERP2weretocallthe
      New Note, the Companycouldlacksufficient
      fundsto
      continue operations in the absence ofafurther
      financing.  Future equity
      financings, if available to the Company, would be dilutive to the existing
      holders of the
      Company’s
      common stock.  Future
      debt financing, if
      available to the Company,would
      likely involve
      restrictive covenantsand
      other termsadverse to the
      Company.





Off-Balance
      Sheet Arrangements




AtDecember
      31, 2007 and September 30,
      2007,
      we did not have any relationships
      with
      unconsolidated entities or financial partnerships, including entities often
      referred to as structured finance or special purpose entities that would have
      been established for the purpose of facilitating off-balance sheetarrangements
      or other contractually
      narrow or limited purposes. Therefore, we are not materially exposed to any
      financing, liquidity, market or credit risk that could arise if we were engaged
      in such relationships.




Inflation




The
      Company believes that inflation has not had a
      material effect on
      its operations to date. Although the Company enters into fixed-price contracts,
      management does not believe that inflation will have an adverse material impact
      on its operations for the foreseeable future, as the Company
      takes into account expected
      inflation in its contract proposals and is generally able to project its costs
      based on forecasted contract requirements.




Contractual
      Obligations and Commercial Commitments




The
      following summarizes our contractual
      obligations and other
      commitments atDecember
      31, 2007, and the effect
      such obligations could have on our liquidity and cash flow in future
      periods:


Amount
                  of Commitment Expiring by PeriodTotal
              
              
              LessThan
              
              
              
              1-3
              
              
              
              3-5
              
              
              Over
                  51
                  Year
              
              
              Years
              
              
              Years
              
              
              YearsNotes
                  and Accounts Payable toERP2
                  Holdings, LLC
              
              $
              693,000
              
              
              
              —
              
              
              $
              693,000
              
              
              
              —
              
              
              
              —Lease
                  commitments – Operating Leases
              
              
              1,069,000
              
              
              
              254,000
              
              
              
              524,000
              
              
              $
              291,000
              
              
              
              —Lease
                  commitments – Capital Leases
              
              
              96,000
              
              
              
              31,000
              
              
              
              37,000
              
              
              
              28,000
              
              
              
              —Total
              
              $
              1,858,000
              
              
              $
              285,000
              
              
              $
              1,254,000
              
              
              $
              319,000
              
              
              
              —


ITEM
      3. QUANTITATIVE AND QUALITATIVE
      DISCLOSURES ABOUT MARKET RISK




Interest
      Rate Risk




The
      Company’s
      exposure to market rate risk
      for changes in
      interest rates relates primarily to the Company’s
      investment portfolio.  The
      Company does not use derivative financial instruments in its investment
      portfolio. The Company places its investment with high quality issuers
      and follows internally developed
      guidelines to limit the amount of credit exposure to any one issuer.
      Additionally, in an attempt to limit interest rate risk, the Company follows
      guidelines to limit the average and longest single maturity dates. The
      Company
      is adverse to principal loss and
      ensures the safety and preservation of its invested funds by limiting default,
      market and reinvestment risk. As ofDecember 31,
      2007 and September 30, 2007,
      the Company did not have any
      investments in money market accounts.




25


Foreign
      Currency Exchange Risk




The
      Company’s
      geographic markets
      are primarily in the United States and Europe, with some sales in other parts
      of
      the world. For the three months endedDecember
      31, 2007,
      revenues
      recorded in the United States were59%
      of total revenues,
      while revenues from Europe and other locations were41%
      of total revenues.
      This compares to72%
      and28%
      for the same period a
      year ago.




Revenues
      from our United Kingdom
      subsidiary can fluctuate from quarter to quarter based on the timing of customer
      orders.  The
      increase in revenue forthe
      threemonths endedDecember
      31, 2007 versus the same
      period in the
      prior year was increased by a foreign currency gain of $27,000
      due to a weaker dollar value
      compared to the British pound.  Changes in foreign currency
      rates, the
      condition of local economies, and the general volatility of software markets
      may
      result in a higher or lower proportion of foreign revenues in the future.
      Although the Company’s
      operating and pricing strategies take
      into
      account changes in exchange rates over
      time, future fluctuations in the value of foreign currencies may have a material
      adverse effect on the Company’s
      business, operating results and
      financial condition.





ITEM
      4. CONTROLS AND
      PROCEDURES




The
      Company carried out an evaluation
      under the
      supervision and with the participation of the Company’s
      management, including the
      Company’s
      Chief Executive Officer and Chief
      Financial Officer, of the effectiveness of the design and operation of the
      Company’s
      disclosurecontrols
      and procedures as ofDecember 31,
      2007 pursuant to Exchange Act
      Rule 13a-15. Based upon that evaluation, we have concluded that as ofDecember 31,
      2007, the Company’s
      disclosure controls and procedures are
      effective in ensuring that information required to be disclosed
      by the Company in
      the reports that it files or submits under the Securities Exchange Act 1934
      is
      (i) recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission’s
      rules andforms
      and (ii) accumulated and
      communicated to the Company’s
      management, including the
      Company’s
      Chief Executive Officer and Chief
      Financial Officer, as appropriate to allow timely decisions regarding required
      disclosure.




During
      the last fiscal
      quarter,there was no change
      in the Company’s
      internal control over financial
      reporting that has materially affected, or is reasonably likely to materially
      affect, the Company’s
      internal control over financial
      reporting.




PART
      II. OTHER
      INFORMATION




ITEM
      1—LEGAL
      PROCEEDINGS




The
      Company is involved from time to
      time in litigation arising in the normal course of business. Management believes
      that any liability with respect to such routine litigation, individually or
      in
      the aggregate, is not likely to be material to the Company’s
      consolidated financial position or
      results of operations.





ITEM
      1A–RISK
      FACTORS





The
      Company will be controlled by ERP2 Holdings, LLC as long as it is entitled
      to a
      majority of the votes eligible to be cast in the election of
      directors.





As
      of
      February 1, 2008, ERP2 Holdings, LLC ("ERP2"), by virtue of its ownership of
      common stock and Series F Preferred Stock, was entitled to 52,044,734, or
      70%, of the total number of votes eligible to be cast in the election of
      directors.  ERP2 therefore currently has the ability to elect a
      majority of the Company’s board of directors and to remove the entire board of
      directors, with or without cause, without calling a special meeting.  Moreover, even if the percentage
      of the voting power of the voting securities of the Company held by ERP2 were
      to
      drop below 50%, it is likely that ERP2 would have sufficient votes to
      retain control of the Company.  As a result, ERP2 will likely continue to
      control all matters affecting the Company, including but not limited
      to:





·
            the
                composition of the Company’s board of directors and, through it, any
                determination with respect to the Company’s business direction and
                policies, including the appointment and removal of
                officers;


·
            the
                allocation of business opportunities that may be suitable for the
                Company
                and ERP2 ;


·
            any
                determinations with respect to mergers or other business combinations
                or
                extraordinary transactions;


·
            the
                Company’s acquisition or disposition of assets;
                and


·
            the
                Company’s financing.


·
            ERP2
                is not prohibited from selling a controlling interest in us to a
                third
                party.





26


The
      Company's indebtedness to ERP2 Holdings, LLC is secured by all the
      Company's assets, and the Company may become insolvent if repayment of such
      debt is due prior to the Company’s ability to obtain funds to repay such debt or
      if the Company fails to restructure such debt.





At
      February 1, 2008, the Company owed,
      including accrued but unpaid interest, an aggregate amount of $999,000 to ERP2
      Holdings, LLC ("ERP2") under three promissory notes, each with a maturity
      date of January 31, 2010.  Of such amount, $300,000 was owed under a
      promissory note issued to ERP2 on January 31, 2008 (the “New Note”) and $699,000
      was owed under two promissory notes acquired by ERP2 from Spescom Ltd. in
      October 2007 and amended concurrently with issuance of the New Note (the “Old
      Notes”).  Interest accrues on
      such debt at an
      annual interest rate of 10%, and such debt is secured by a security interest
      in
      favor of ERP2 on all of the Company’s assets.





The
      New
      Note provides for a maximum principal amount of $1,500,000, of which $300,000
      was disbursed concurrently with its issuance.  Disbursement of the
      remaining $1,200,000 of such amount is subject to completion of all actions
      required to be completed by the Company in order to effectuate a 1000-to-1
      reverse split of the Company’s common stock and the deregistration of the
      Company’s common stock under the Securities Exchange Act of
      1934.  Events of default under the New Note include, among others, any
      failure of the Company to complete such actions by April 30,
      2008.  ERP2 is entitled to accelerate the indebtedness represented by
      the New Note and the Old Notes upon any event of default under the New Note,
      provided that no such acceleration of the indebtedness represented by the Old
      Notes may occur prior to September 30, 2008.





If
      the
      Company is unable to generate sufficient cash flow
      from its operations, secure funds from the capital markets or lenders or
      restructure its debt to ERP2 prior to the time that the debt under the New
      Note
      and the Old Notes becomes due, the Company will become insolvent.





Financing
      to fund the Company’s future capital requirements may not be available on
      favorable terms or at all.




The
      Company issued to ERP2 Holdings, LLC ("ERP2") on January 31, 2008 a promissory
      note in the maximum principal amount of $1,500,000, of which $300,000 was
      disbursed on the date of issuance and, as discussed above,
      $1,200,000 is subject to disbursement only upon satisfaction of certain
      conditions.  The Company, however, may need
      financing
      in the future in addition to any further funding received from ERP2 under such
      promissory note, and such financing may not be available on favorable terms
      or
      at all from any source.





The
      Company believes its capital requirements will vary greatly from quarter to
      quarter, depending on, among other things, capital expenditures, fluctuations
      in
      its operating results,
      financing activities, and investments and third party products and receivables
      management.  The Company’s future liquidity will depend on financing from
      ERP2 and its ability to generate new system sales of itseB product suite in
      the near
      term, which cannot be assured.  Failure to generate sufficient system sales
      to meet the Company’s cash flow needs can be expected to have a material adverse
      effect on the Company’s business, results of operations, and financial
      condition.  Management believes that the Company’s current cash and
      receivables, as well as additional cash that may be generated from operations
      and received from ERP2 under the above-referenced promissory note, will be
      sufficient to meet its short-term needs for working capital.  However, the
      Company may not be able to obtain sufficient orders to enable the Company to
      achieve a sustained break-even level of cash flow, which would be necessary
      to
      continue operations in the absence of further financing.  Future
      equity financings would be dilutive to the existing holders of the Company’s
      common stock.  Future debt financings could involve restrictive
      covenants.  Moreover, the Company may not be able to attract equity or debt
      financing at all.





The
      Company has issued a promissory note
      to ERP2 Holdings, LLC that contemplates the consummation of a 1000-to-1 reverse
      split of the Company’s
      common stock; in the event the
      reverse split is
      consummated, (i) certain shareholders will receive a cash payment inexchange for someor all of
      their common shares; (ii) the trading liquidity of the common shares could
      be
      adversely effected;  (iii) the total market capitalization of the
      common shares
      after the reverse stock split may be lower than the total market capitalization
      before thereversestock
      split; (iv) the market price of the common shares may become subject to greater
      declines on a percentage basis; and (v) some shareholders
      may
      consequently own “odd
      lots”requiring higher
      transaction costs to sell.





The
      Company has issued to ERP2 Holdings, LLC ("ERP2") a promissory note in the
      maximum principal amount of $1,500,000, of which $1,200,000 is subject to
      disbursement only upon completion of all actions
      required to be completed by the Company in order to effectuate a 1000-to-1
      reverse split of the Company’s common stock (as well as the subsequent
      deregistration of the Company’s common stock under the Securities Exchange Act
      of 1934).  In the event the Company fails to complete such actions
      prior to April 30, 2008, an event of default will exist under the promissory
      note.  ERP2 possesses sufficient voting power to ensure the requisite
      shareholder approval of such reverse stock split.


27





In
      the
      event the reverse split contemplated by the promissory note is consummated,
      each
      shareholder will be entitled to receive that number of post-split common shares calculated by dividing
      their pre-split common share holdings by 1,000 and rounding down to the nearest
      whole number.  If the total number of pre-split common shares that a
      shareholder holds is not evenly divisible by 1,000, the shareholder will receive
      cash equal to the fraction of a post-split common share that the shareholder
      otherwise would have been entitled to receive, multiplied by a value determined
      by the Company’s board of directors to represent the approximate market value of
      1,000 common shares prior to consummation of the split.





Consummation
      of the reverse stock split would
      reduce the number
      of issued and outstanding shares of the Company’s
      common stock by a factor of
      one-thousand.  Such reduction could lead to reduced trading volume of
      and a smaller number of market makers for the common shares, therebyadversely
      affecting the trading
      liquidity of the common shares.





In
      the event the reverse stock split is
      consummated, there can be no assurances that the market price of the
      Company’s
      common shares after the reverse stock
      split will increase in proportionto the reduction in the
      number of common
      shares issued and outstanding before the reverse stock split.  For
      example, based on the closing price on the OTC Bulletin Board of the
      Company’s
      common shares on February1,
      2008 of $0.02per
      share, if the reversestock split is consummated,
      there can be
      no assurances that the post-split market price of the Company’s
      common shares would be at least
      $20.00per
      share.  Accordingly, the
      total market capitalization of the Company’s
      common shares after the proposed
      reverse stock split may be
      lower than the total market capitalization before the proposed reverse stock
      split.  Furthermore, if the reverse stock split is consummated and the
      market price of the Company’s
      common shares subsequently declines,
      the percentage decline
      may be greater than would occur in
      the absence of the reverse split.





In
      the event the reverse stock split is
      consummated, some shareholders may consequently own less than 100 shares of
      the
      Company’s
      common stock.  A purchase or
      sale of less than 100 shares (an “odd
      lot”transaction) may result
      in incrementally
      higher trading costs through certain brokers. Therefore, those shareholders
      who own less than 100 common shares following the reverse stock split may be
      required to pay higher transaction costsif
      they should determine to sell their
      shares.





The
      Company has issued a promissory note to ERP2 Holdings, LLC that contemplates
      the
      deregistration of the Company’s common stock under the Securities Exchange Act
      of 1934; in the event the deregistration is consummated, (i) the
      Company  will no longer make public filings under the Securities
      Exchange Act of 1934 and (ii) the Company’s common stock will no longer be
      eligible for trading on the OTC Bulletin Board, and there may
      cease to be any public market for the Company’s common stock.





The
      Company has issued to ERP2 Holdings, LLC ("ERP2") a promissory note in the
      maximum principal amount of $1,500,000, of which $1,200,000 is subject to
      disbursement only upon completion of all actions required to be completed by
      the
      Company in order to effectuate the deregistration of the Company’s common stock
      under the Securities Exchange Act of 1934 (the “Exchange Act”) (as well as a
      1000-to-1 reverse split of the Company’s common stock, contemplated to occur
      prior to such deregistration).  In the event the Company fails to
      complete such actions prior to April 30, 2008, an event of default will exist
      under the promissory note.





In
      the
      event the deregistration contemplated by the promissory note is consummated,
      the
      Company will no longer be subject to public reporting requirements under the
      Exchange Act, including any requirements to file annual reports on Form 10-K,
      quarterly reports on Form 10-Q, or current reports on Form
      8-K.  Consequently, following any such deregistration, there will not
      be made available to the public current financial or other information
      concerning the Company, except such information, if any, as the Company may
      choose to voluntarily disclose or be required to disclose pursuant to applicable
      legal requirements.





Although
      the Company anticipates that, immediately following any such deregistration,
      its
      common stock will be quoted in the Pink Sheets, there can be no assurances
      that
      such quotation of the Company’s common stock will occur or continue for any
      period of time.  Rule 15c2-11 under Exchange Act requires brokers to
      obtain certain information and assess its reliability before publishing
      quotations for securities that are not registered under the Exchange
      Act.  As indicated above, following deregistration, the Company will
      be under no obligation to make public filings under the Exchange Act, and any
      information that the Company makes available to the public may not include
      all
      of the information that a broker would need to have available in order to
      publish quotations of the Company’s common stock under Rule
      15c2-11.  Accordingly, quotations for the Company’s common stock in
      the Pink Sheets may cease to be published if brokers determine that the
      available information about the Company is no longer current.  In that
      case, there would be no public market for the Company’s common stock, and
      stockholders may be unable to sell shares of the Company’s common
      stock.





Conversion
      of the Company’s preferred stock would result in significant dilution to
      existing shareholders.





In
      a
      private placement completed in March 2006, the Company issued, in addition
      to certain warrants, shares of new Series I Convertible Preferred Stock,
      which upon conversion into common stock would result in substantial dilution
      to
      common shareholders. The number of shares of the Company’s common stock into
      which the shares of Series I Preferred Stock may be converted varies based
      on
      a volume-weighted measure of the market price of the common stock. The range
      is
      from 11,666,667 common shares, if the market price measure were to be at least
      $0.25 at the time of all conversions, up to 33,793,104 common shares, if the
      market price measure were to be no greater than $0.08 at the time of all
      conversions.




28


On
      September 30, 2003, the Company issued 5,291 shares of Series F
      Preferred Stock with a stated value of $1,000 per share in consideration of
      the
      cancellation of $5,291,000 of certain debt.  The Series F Preferred
      Stock is convertible into the Company’s common stock at a stated conversion
      price of $0.45 per share, subject to certain anti-dilution
      provisions.  As a result of these anti-dilution provisions and the
      issuance of the Series I Convertible Preferred Stock, the conversion price
      has
      been adjusted to $0.39 per share. Upon conversion of the Series F Preferred
      Stock at the $0.34 per share conversion price, 15,561,765 shares of the
      Company’s common stock is issuable based on the stated value of the Series F
      Preferred Stock.  In addition, upon such conversion, shares of the
      Company’s common stock are issuable based on any unpaid accrued dividends
      and interest thereon related to the Series F Preferred Stock as of such date.
      As
      of February 14, 2008, there were no such unpaid accrued dividends and interest
      owed.  Conversion of the Series F Preferred Stock may occur at the option
      of the holder until September 30, 2008.  On that date, any outstanding
      Series F Preferred Stock not previously converted will be converted
      automatically.  Conversion of the Series F Preferred Stock will result
      in substantial dilution to common shareholders.





Future
      sales of common stock by the Company’s shareholders, including investors in
      future offerings and ERP2 Holdings, LLC, could adversely affect the Company’s
      stock price.





ERP2
      Holdings, LLC (“ERP2”), as of February 1, 2008 holds 69,220,705shares of the Company’s
      common stock on a fully diluted basis.  In addition, as detailed
      below, ERP2 is anticipated to become entitled to receive warrants with a per
      share exercise price of $0.08 for the purchase of the number of shares of common
      stock equal to the greater of (A) 26,735,508 shares of common stock and (B)
      20%
      of the fully diluted outstanding common stock as of the date of issuance of
      such
      warrants.  If ERP2, from time to time in the future, sells the shares
      of common stock that it holds or may acquire, the Company’s stock price may be
      adversely affected.





In
      connection with the Series I Convertible Preferred Stock private placement
      completed in March 2006, the Company filed a registration statement for the
      common stock of the Company issuable upon conversion of such preferred
      stock.  The registration statement was declared effective by the Securities
      and Exchange Commission on July 10, 2006.  Any sales of these shares
      of common stock or shares of the Company’s common stock issued in any future
      offering could cause a decline in the price of the Company’s
      stock.





The
      exercise of outstanding options and warrants and warrants that are
      anticipated to be issued to ERP2 Holding, LLC, would result in dilution of
      the Company’s stock.





As
      of
      February 1, 2008, the Company had outstanding stock options to purchase
      approximately 5,755,250 shares of common stock and warrants to purchase
      approximately 19,877,823 shares of common stock including a warrant to purchase
      17,175,971 shares of common stock at a per share exercise price of $0.08 issued
      to ERP2 Holdings, LLC ("ERP2").   If such options and warrants
      are exercised for all or a substantial number of the shares of common stock
      issuable thereunder, shareholders could suffer significant
      dilution.





The
      Company has issued to ERP2 a
      promissory note in the maximum principal amount of $1,500,000, of which
      $1,200,000 is subject to disbursement only upon completion of all actions
      required to be completed by the Company in order to effectuate a
      1000-to-1 reverse split of
      the Company’s
      common stock and the deregistration of
      common stock under the Securities Exchange Act of 1934.  The
      promissory note provides that, no later than the date of such disbursement
      of
      $1,200,000, the Company will issue to ERP2warrants
      with a per share exercise
      price of $0.08
      for the purchase of the number of shares of common stock equal to the greater
      of
      (i) 26,735,508 shares of common stock and (ii) 20% of the fully diluted
      outstanding common stock as of the date of such issuance.  In
      theevent
      such warrants are issued and
      subsequently exercised for all or a substantial number of the shares of common
      stock issuable thereunder, shareholders could suffer significant
      dilution.




























29


ITEM
      6—EXHIBITS




10.1
            
            Letter
                agreement between Enterprise
                Informatics Inc. and ERP2 Holdings, LLC, dated October 22, 2007
                (incorporated by reference to Exhibit 10.1 to the Form
                8-Kfiled on October
                26,
                2007).31.1
            
            Certification
                by the Chief
                Executive Officer Pursuant to Rule
                13a-14(a)/15d-14(a)
                under the Securities Exchange Act of 1934 as adopted pursuant to
                Section
                302 of the Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                by the Chief
                Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under theSecurities
                Exchange
                Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley
                Act
                of 2002.32.1
            
            Certification
                by the Chief
                Executive Officer and the Chief Financial Officer Pursuant to 18
                U.S.C.
                Section 1350, as adopted pursuant toSection 906
                of the Sarbanes-Oxley
                Act of 2002.























































































































30























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.




Signature
            Title
            Date/s/
                Alan
                Kiraly
            Director
                and Chief Executive
                Officer
            February14,  2008Alan
                Kiraly
            (Principal
                Executive
                Officer)/s/
                John W.
                Low
            Chief
                Financial Officer and
                Secretary
            February14,
                2008John
                W. Low
            (Principal
                Financial and
                Accounting Officer)








31