UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 
 FORM
10-K
  (Mark
One)
  þ
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
      the fiscal year ended December 31,
      2008
 
 or
  o
                TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
      the transition period from __________________ to
      _____________________Commission
      file number:
000-28457
 
 SECURED
      FINANCIAL NETWORK, INC.(Exact
      name of registrant as specified in its
charter)
 
 Nevada
                  86-0955239(State
      or other jurisdiction of incorporation or organization)
                  (I.R.S.
      Employer Identification
No.)
 
 1180
      SW 36 Avenue, Suite 204, Pompano Beach, Florida
                  33069(Address
      of principal executive offices)
                  (Zip
      Code)
 
 Registrant's
      telephone number, including area code:
                  954-376-5611
 
 Securities
registered under Section 12(b) of the Act:
 
 Title
      of each class
                Name
      of each exchange on which registeredNone
                Not
      applicable
 
 Securities
registered under Section 12(g) of the Act:
 
 Common
      Stock, par value $0.001 per share(Title
      of class)
 
 
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 o Yes    
þ No
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
 o Yes    
þ No
 
 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.
 þ Yes    
o
No
  1
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
 o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company:
 
 Large
      accelerated filer
                            o
                            Accelerated
      filer
                            oNon-accelerated
      filer
                            o
                            Smaller
      reporting company
                            þ(Do
      not check if smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)
 o
Yes     þ No
 
 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked prices of such common equity, as of the last
business day of the registrant's most recently completed second fiscal quarter.
$420,000 on June 30, 2008.
 
 Indicated
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date.  50,650,020 shares of common
stock are issued and outstanding as of April 10, 2009.
 
 DOCUMENTS
INCORPORATED BY REFERENCE
 
 List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933.  The listed documents should be
clearly described for identification purposes (e.g., annual report to security
holders for fiscal year ended December 24, 1980).  None.
      2
  TABLE
OF CONTENTS
 
 Page
      No.Part
      IItem
      1.
                                                                                                                    Business.
                                                                                                                    5Item
      1A.
                                                                                                                    Risk
      Factors
                                                                                                                    7Item
      1B.
                                                                                                                    Unresolved
      Staff Comments.
                                                                                                                    9Item
      2.
                                                                                                                    Properties.
                                                                                                                    9Item
      3.
                                                                                                                    Legal
      Proceedings.
                                                                                                                    9Item
      4.
                                                                                                                    Submission
      of Matters to a Vote of Security Holders.
                                                                                                                    9Part
      IIItem
      5.
                                                                                                                    Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
                                                                                                                    9Item
      6.
                                                                                                                    Selected
      Financial Data.
                                                                                                                    11Item
      7.
                                                                                                                    Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation.
                                                                                                                    11Item
      7A.
                                                                                                                    Quantative
      and Qualitative Disclosures About Market Risk.
                                                                                                                    15Item
      8.
                                                                                                                    Financial
      Statements and Supplementary Data.
                                                                                                                    15Item
      9.
                                                                                                                    Changes
      In and Disagreements With Accountants on Accounting and Financial
      Disclosure.
                                                                                                                    15Item
      9A.(T)
                                                                                                                    Controls
      and Procedures.
                                                                                                                    16Item
      9B.
                                                                                                                    Other
      Information.
                                                                                                                    16Part
      IIIItem
      10.
                                                                                                                    Directors,
      Executive Officers and Corporate Governance.
                                                                                                                    17Item
      11.
                                                                                                                    Executive
      Compensation.
                                                                                                                    19Item
      12.
                                                                                                                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.
                                                                                                                    20Item
      13.
                                                                                                                    Certain
      Relationships and Related Transactions, and Director
      Independence.
                                                                                                                    21Item
      14.
                                                                                                                    Principal
      Accountant Fees and Services.
                                                                                                                    21Part
      IVItem
      15.
                                                                                                                    Exhibits,
      Financial Statement Schedules.
                                                                                                                    22
 
 
  3
  CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
 
 Certain statements in this report
contain or may contain forward-looking statements that are subject to known and
unknown risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various factors and
were derived utilizing numerous assumptions and other factors that could cause
our actual results to differ materially from those in the forward-looking
statements.  These factors include, but are not limited to, our
ability to implement our business plan and generate revenues, our ability to
raise sufficient capital to fund our operations and pay our obligations as they
become due, economic, political and market conditions and fluctuations,
government and industry regulation, U.S. and global competition, and other
factors.  Most of these factors are difficult to predict accurately
and are generally beyond our control. You should consider the areas of risk
described in connection with any forward-looking statements that may be made
herein. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report.
Readers should carefully review this in its entirety, including but not limited
to our financial statements and the notes thereto. Except for our ongoing
obligations to disclose material information under the Federal securities laws,
we undertake no obligation to release publicly any revisions to any
forward-looking statements, to report events or to report the occurrence of
unanticipated events.
 
 Unless
specifically set forth to the contrary, when used in this report the terms
“Secured Financial", "we"", "our", the "Company" and similar terms refer to
Secured Financial Network, Inc , a Nevada corporation and its wholly-owned
subsidiary Virtual Payment Solutions, Inc., a Florida corporation.  In
addition, when used herein and unless specifically set forth to the contrary,
“2008” refers to the year ended December 31, 2008 and “2007” refers to the year
ended December 31, 2007.  The information which appears on our website
at www.virtualpaymentsolutions.com is not part of this report.
 
  
    4
  PART
I
 
 ITEM
      1.
              BUSINESS.
 
 Overview
 
 We are a
valued added provider of payment transaction processing platforms and equipment
marketed to and utilized by traditional “brick and mortar”, and Internet
e-commerce merchants and those using mobile or wireless devices to conduct
business. We operate through our wholly owned subsidiary Virtual Payment
Solutions, Inc. (VPS)  Our Company websites are www.securedfinancialnetwork.com
and www.virtualpaymentsolutions.com.
 
 VPS
markets its products and services through the branded name RedFin
Network.  These products and services today include:
 
 Blue Bamboo H-25 Wireless all-in-one
transaction terminal
 Blue Bamboo P-25 printer and printer
card swipe device
 Blue Bamboo Blue Box table pay
restaurant solution
 Blue Bamboo PCI Compliant and Visa
certified Payment Gateway
 RedFin Sidebar Quickbooks
interface
 
 All of
the transaction products are integrated with the Payment Gateway, which connects
merchants utilizing IP based terminals and wireless devices using Bluetooth,
Ethernet, and GPRS to acquiring processors and banks for approval or denial of
credit and debit card charges.
 
 The
RedFin Payment Gateway is a customized credit/debit card processing platform
serving as the connection between the customer at point-of-sale to the financial
networks for the acceptance of card payment by merchants.  Most card
transactions worldwide are processed by third party providers in compliance with
financial institutions.  The Payment Gateway processes all credit card
types which include Visa, MasterCard, American Express, Discover, JCB, and EBT
through transaction terminals, virtual terminals, and wireless mobile
devices.  The Payment Gateway received its PCI/DSS Compliance in
October 2008 and is listed on the Visa’s approved Payment Gateway list as of
March 2009.
 
 The
PCI/DSS Standard was developed by the major credit card associations as a
guideline to help organizations that process card payments prevent credit card
fraud, cracking and various other security vulnerabilities and threats. A
company processing, storing, or transmitting payment card data must be PCI
compliant or risk losing their ability to process credit card payments and being
audited and/or fined. Merchants and payment card service providers must validate
their compliance periodically.
 
 The Blue
Bamboo Products and Payment Gateway is marketed through
non-exclusive  reseller agreements with ISO’S (Independent Sales
Organizations) and VAR’s (Value Added Resellers) selling products and merchant
services to end customers throughout the U.S.  Revenue is generated
from  sales of  terminal products, by monthly data plans
required to operate wireless products, licensing fees for software and per
transaction fees charged for each transaction passing through the Payment
Gateway to end acquiring processors such as Vital, Global all First Data
Networks, PaymentTech, Heartland, Valutec and others already integrated with the
Payment Gateway.    All Internet merchants, certain brick
and mortar merchants using IP based transaction terminals, and mobile wireless
transaction devices require a gateway to pass transactions from their customer’s
use of a payment form to the acquiring bank/processor.
 
 The
Payment Gateway can also be re-branded for other large associations requiring
their own name recognition by the ISO/Merchant customer
base.  Currently we private label the Payment Gateway for our
customers Sure Gate, Blackstone Merchant Services, Diversified Check Solutions,
and Versatile Pay.
  The
Payment Gateway has incorporated a shopping cart emulator, which allows Internet
merchants currently using other competitive Payment Gateway’s to integrate
with the RedFin Network in a quick and efficient manner without disruption of
their business.  The shopping cart emulator has integrated the top 120
carts currently used by Internet merchants.
 
 VPS has
developed a Windows based software for its Blue Bamboo P-25 printer and
card-swiper for use with PC’s allowing for processing of credit/debit card,
check, ACH, Check21 transactions.  It has also developed the RedFin
Sidebar allowing merchants to directly interface the RedFin Payment Gateway with
QuickBooks.
 
 The
Company will continue its objective to keep a low cost efficient overhead by
outsourcing warehousing and terminal products
handling  non-exclusively  to Paragon Services, Inc. located
in Georgia ( www.paragonservices.net) and  JR’s POS Depot located in South Florida ( www.jrsposdepot.com)  all trusted names in the payment products distribution
marketplace.  In addition, all Level 1 and 2
customer service related questions have also been outsourced to CardWare
International with a 24/7 response to customer trouble tickets within 15
minutes.
   5
  ITEM
      1.
                BUSINESS. -
      continued
  Principal
Suppliers
 
 The
Company entered into Exclusive Agreement for the distribution of all products
manufactured by Blue Bamboo in the US and  Chase Peabody for the
distribution of its Checknique double-sided check scanner to
the  Merchant Processing Industry as of March 1,
2009.  Under the terms of the agreement with Blue Bamboo, the Company
was appointed exclusive reseller in the U.S. and a non-exclusive reseller in
Canada for Blue Bamboo’s H50 POS terminals and its P25 and P25-M printers for a
term expiring in January 31, 2014.
 
 Sales
and Marketing
 
 The
Company has displayed and marketed its various products and services at the ETA
(Electronic Transaction Association), the6Western Acquirers Show, and Southeast
Acquirers Show during 2008.   As a result of our marketing, the
Company has signed on 40  ISO’s (Independent Sales Organizations) to
resell its products and services nationwide. The Company has launched a
year-long promotional campaign in The GreenSheet, the most widely read
publication in the processing industry, in cooperation with Blue Bamboo creating
further market awareness of our products and services.  The Company
intends to continue to present its products in as many venues as it can within
the constraints of available funds.  It will continue to aggressively
solicit and grow its numbers of IOS and VAR resellers in the US during
2009.
 
 Under its
Agreement Blue Bamboo and Chase Peabody will forward all sales leads generated
by their websites and advertising in the US.
 
 Intellectual
Property
 
 The
Company maintains the rights to it’s names and website addresses. We may seek to
protect our intellectual property through copyrights, trademarks, patents, trade
secrets, confidentiality provisions in our customer, supplier, potential
investors, and strategic relationship agreements, nondisclosure agreements with
third parties, and invention assignment agreements with our employees and
contractors, although we do not execute such agreements in every case. Our
protection efforts may prove to be unsuccessful, and unauthorized parties may
copy or infringe upon aspects of our technology, services or other intellectual
property rights. In addition, these parties may develop similar technology
independently. Existing trade secret, copyright and trademark laws offer only
limited protection and may not be available in every country in which we will
offer our services.
 
 As with
phone numbers, we do not have and cannot acquire any property rights in an
Internet address.  The regulation of domain names in the United States
and in other countries is also subject to change.  Regulatory bodies
could establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. As a result, we
might not be able to maintain our domain names or obtain comparable domain
names, which could harm our business.
 
 The
Company also maintains its right to the Envoii Payment System that it bought in
2006.  As of March 2009 the Company has designed and built its RedFin
Sidebar that allows for the direct interface for QuickBooks with the RedFin
Payment Gateway.  RedFin will sell this product as a software license.
It has also designed and built its windows based software for use with the P-25
card printer and card swiper. This product will be sold for use for PC based
transaction processing.
 
 Competition
 
 The
Company faces significant competition in the marketplace from payment gateways
in operation for the past 10 years such as Authorized.net, a company recently
acquired by Cybersource for nearly $700 million.  Authorized
represents transaction volume from approximately 190,000 Internet
merchants.   Additional gateway competitors include EFS Net,
Secure Pay, LinkPoint and others.  The Company is positioning itself
in a niche market providing high volume merchants a very competitive pricing
model per transaction, excellent gateway technology, superior customer service,
and features not available from other gateway’s such as merchant terminal
integration, ACH, and recurring billing, to name a few. Currently, the are in
excess of 5 million Internet merchants with nearly 5000 new ones opening on a
daily basis requiring a shopping cart and payment gateway. (Statistics gathered
from SIC Code Info and the Green Sheet, an industry trade source).
 
 The
marketplace for wireless merchant terminals is comprised of approximately six
major players, including Verifone, Way Systems, and Nurit.  The
Company believes it will be successful in marketing the Blue Bamboo wireless
merchant terminal product line based on its cost to end users.  It is
nearly 40% less than the competitor’s product’s, which do not include features
such as Pin Debit and Check Guarantee/Verification.  The terminals
come ready to use out of the box because of its integration with the RedFin
Network Gateway.  There are approximately 2.3 mobile merchants in the
US with less than 10% of them having a wireless payment method installed.
(Statistics gathered from SIC Code info and Green Sheet)
  Most of
our competitors are well-established companies and have substantially greater
financial resources than we have.  There are no assurances we will
ever effectively compete in our target market.
   6
 ITEM
      1.
                  BUSINESS. -
      continued
  Employees
  As of
April 10, 2009 the Company had 5 employees.
 
 History
of the Company
 
 Secured
Financial Network, Inc. (originally Loughran/Go Corporation prior to name change
to 12 To 20 Plus, Inc.), was incorporated in April 26, 1996.
 
 On
November 22, 2004, 12 To 20 Plus, Inc. entered into a share exchange agreement
with Secured Financial Network, Inc. pursuant to which an aggregate of
14,737,343 shares of the Company’s common stock, were issued, representing 94%
of the 15,693,478 shares of common stock outstanding after the closing. For
accounting purposes, the transaction is reflected as if 12 To 20 Plus, Inc. was
acquired by Secured Financial Network Inc. with the business of Secured
Financial Network Inc. being the successor entity. The acquisition was accounted
for as a recapitalization of the predecessor entity Secured Financial
Network, Inc. with the management of the predecessor entity Secured Financial
Network, Inc. controlling and operating the Company after the acquisition date.
The consolidated financial statements presented primarily represent the
operations of Secured Financial Network, Inc. from its inception date, November
10, 2004, to the share exchange date. In addition, the capital structure of
Secured Financial Network, Inc. has been recapitalized to account for the equity
structure subsequent to the acquisition as if Secured Financial Network, Inc.
had been the issuer of the common stock for all periods presented.
 
 On
January 11, 2005 the Company changed its name to Secured Financial Network, Inc.
(“the Company”). From January 2005 until December 2005 the Company engaged in
investment of capital to fund short-term transactions of close-out or distressed
container sized products.
 
 In
October 2007, we formed a wholly owned subsidiary, Virtual Payment Solutions,
Inc., a Florida corporation  ("VPS"). All payment processing and
Payment Gateway business is performed within our VPS subsidiary.
   ITEM
      1A.
              RISK
      FACTORS
 
 An
investment in our common stock involves a significant degree of risk. You should
not invest in our common stock unless you can afford to lose your entire
investment. You should consider carefully the following risk factors and other
information in this annual report before deciding to invest in our common
stock.  If any of the following risks and uncertainties develop into
actual events, our business, financial condition or results of operations could
be materially adversely affected and you could lose your entire investment in
our company.
 
 We have not operated profitably
since inception, and there are no assurances we will ever generate revenues or
profits.
 
 Our
operations have never been profitable, and it is expected that we will continue
to incur operating losses in the near future.  In October 2007, we
commenced our current operations with our subsidiary Virtual Payment Solutions,
Inc. and since then we have reported minimal, but growing
revenues.  For fiscal 2007 we reported a net loss of
$1,676,894.  During fiscal 2007 cash used in operations was $261,481,
and at December 31, 2007 we had a working capital deficit of $3,896,294 and an
accumulated deficit of $6,485,142.  For fiscal 2008 our net loss was
$1,291,851.  During fiscal 2008 cash used in operations was $600,761,
and at December 31, 2008 we had working capital deficit of $4,029,163 and an
accumulated deficit of $7,776,993.  There is no assurance that we will
be able to fully implement our business model, generate any future revenues or
operate profitably in the future. Our failure to generate substantial revenues
and achieve profitable operations in future periods will adversely affect our
ability to continue as a going concern.  If we should be unable to
continue as a going concern, you could lose all of your investment in our
company.
 
 We
will need additional financing which we may not be able to obtain on acceptable
terms.  If we cannot raise additional capital as needed, our ability
to execute our business plan and grow our company will be in
jeopardy.
 
 Capital
is needed not only to fund our ongoing operations and to pay our existing
obligations, but capital is also necessary for the effective implementation of
our business plan.  Our future capital requirements, however, depend
on a number of factors, including our ability to internally grow our revenues,
manage our business and control our expenses.  On December 31, 2008,
we had cash on hand of $3,706 which we believe will be insufficient to fund our
existing operating expenses for the next 12 months.  In addition, we
have approximately $4,114,146 of debt which is either past due or which will
become due in 2009 and we do not have the funds
to pay these obligations.  We will need to raise additional capital to
fund the future growth of our company, including continued investment in growing
our customer base and our development of new promotional campaigns as well as
product development.  We do not have any firm commitments to provide
capital and we anticipate that we will have certain difficulties raising capital
given the size of our company and the current uncertainties in the capital
markets.  Accordingly, we cannot assure you that additional working
capital will be available to us upon terms acceptable to us.  If we do
not raise funds as needed, our ability to continue to implement our business
model is in jeopardy and we may never be able to achieve profitable
operations.  In that event, our ability to continue as a going concern
is in jeopardy and you could lose all of your investment in our
company.
  
 7
 ITEM
      1A.
                RISK FACTORS-
      continued
  Our
auditors have raised substantial doubts about our ability to continue as a going
concern.
 
 The
report of our independent registered public accounting firm on our financial
statements at December 31, 2008 raises substantial doubts about our ability to
continue as a going concern based our losses since inception.Our financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. As described above, we believe our current working capital is
insufficient to sustain our current operations for the next 12 months and we
will need to raise additional working capital for marketing expenses as well as
product development in order to continue to implement our business
model.  If our estimates as to the insufficiency of these funds is
correct, in addition to raising capital to fund the continued implementation of
our business model we will also need to raise funds to pay our operating
expenses.  If such funds are not available to us as needed, we may be
forced to curtail our growth plans and our ability to grow our company will be
in jeopardy.  In such event, we may not be able to continue as a going
concern.
 
 Our
primary assets serve as collateral under a line of credit.  If we
should default on this obligation, the holder could foreclose on our assets and
we would be unable to continue our business and operations.
 
 We have
granted the lender under the line of credit a security interest in the stock of
our Virtual Payment Solutions, Inc. subsidiary and all of its
assets.  These assets represent substantially all of our
operations.  If we should default under the repayment provisions of
this obligation, the lender could seek to foreclose on these assets in an effort
to seek repayment under the obligation. If the lender was successful, we would
be unable to conduct our business as it is presently conducted and our ability
to generate revenue and fund our ongoing operations would be materially
adversely affected.   In such an event we would be forced to
cease operations.
 
 We
have approximately $1,410,000 principal amount in debt that we have not repaid
and which is in default.
 
 As of
December 31, 2008 the Company is in default on certain of its debt obligations,
specifically 13 Container Notes debt in the principal amount of $1,410,000
together with unpaid interest due and accruing in the amount of $817,760 as of
December 31, 2008.While there are currently no legal proceedings against the
Company, and the notes are unsecured, these note holders  have the
legal right to initiate proceedings in an effort to collect these
amounts.  In that event, we would incur legal fees in defending these
actions and our management would be required to devote time to the litigation
which would distract from our operations.
  We
are materially reliant on the Reseller Agreement with Blue Bamboo.
 
 Under the
terms of the Reseller Agreement with Blue Bamboo we are required to make minimum
monthly purchases of merchandise from that company.  In addition, we
are required to pay 50% of the cost of the equipment prior to the monthly
shipment and the balance within 30 days of delivery of the merchandise to a U.S.
port.  Because resale of the Blue Bamboo products represents
substantially all of our revenue, presently we are materially dependent upon our
relationship with Blue Bamboo.  While we currently have complied with
all minimum purchase requirements, should we fail to make these minimum monthly
purchases, or otherwise comply with the terms of the agreement, Blue Bamboo has
the right to terminate or materially modify the agreement.  Unless we
were able to immediately replace Blue Bamboo with another supplier, of which
there are no assurances, any termination or modification of the agreement could
result in a substantial decrease in our revenues which would adversely impact
our ability to continue as a going concern.
 
 Because our operating history is
limited and the revenue and income potential of our business and markets are
unproven, we cannot predict whether we will meet internal or external
expectations of future performance.
 
 We
believe that our future success depends on our ability to develop revenue from
our operations, of which we have a very limited history.  Accordingly,
our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies with a limited operating
history.  These risks include our ability to:
 
 •
              attract
      customers to our products and
services;
 •
              increase
      awareness of our brand and attempt to build customer
    loyalty;
 •
              maintain
      and develop new, strategic
relationships;
 •
              derive
      revenue from our customers from premium based
  services;
 •
                respond
      effectively to competitive pressures and address the effects of strategic
      relationships or corporate combinations among our competitors;
      and
 •
                attract
      and retain qualified management and
employees.
  Our
future success and our ability to generate revenues depend on our ability to
successfully deal with these risks, expenses and difficulties. There are no
assurances we will be able to successfully overcome any of these
risks.
   8
 ITEM
      1A.
                RISK FACTORS-
      continued
  Our common stock is currently quoted
on the OTC Bulletin Board, but trading in this security is limited, and trading
in this security is, or could be, subject to the penny stock
rules.
 
 Currently,
our common stock is quoted on the OTC Bulletin Board.  The market for
our Company’s stock is limited and there are no assurances that an active market
for our stock will be available.  Additionally, securities which trade
at less than $5.00 per share, such as our securities, are considered a “penny
stock,” and subject to the requirements of Rule 15g-9 under the Securities
Exchange Act of 1934 (the “Exchange Act”).  Under this rule,
broker/dealers who recommend low-priced securities to persons other than
established customers and accredited investors must satisfy special sales
practice requirements.  SEC regulations also require additional
disclosure in connection with any trades involving a “penny stock,” including
the delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and its associated risks. These requirements
would severely limit the liquidity of our securities in the secondary market
because few broker or dealers are likely to undertake these compliance
activities.
 
  ITEM
      1B.
              UNRESOLVED
      STAFF COMMENTS.
 
 Not applicable to a smaller reporting
company.
 
 
 ITEM
      2.
              PROPERTIES.
 
 Our
principal executive offices are located in approximately 1,000 square feet of
office space that we lease from an unrelated third party for approximately
$2,255.00 per month under a lease agreement expiring in October
2010.
   ITEM
      3.
              LEGAL
      PROCEEDINGS.
  We were
not a party to any legal proceedings during the reporting period, and we know of
no legal proceedings pending or threatened or judgments entered against any
director or officer of the Company in his or her capacity as such.
   ITEM
      4.
              SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
  None.
   PART
II
 
 ITEM
      5.
              MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED MATTERS AND ISSUER PURCHASES OF
      EQUITY SECURITIES.
  Our
common stock is quoted on the OTC Bulletin Board under the symbol “SFNL.” The
following table shows the high and low closing prices for our common stock for
each quarter in the last two fiscal years as reported by the OTC Bulletin Board.
We consider our stock to be “thinly traded” and any reported sale prices may not
be a true market-based valuation of the stock. Some of the quotations from the
OTC Bulletin Board set forth below may reflect inter-dealer prices, without
retail mark-up, markdown or commission and may not represent actual
transactions.
 
 January
      1, 2008 to December 31, 2008 (OTC Bulletin Board)
                        
                        High
                        
                        
                        LowFirst
      quarter
                        
                        $
                        0.06
                        
                        
                        $
                        0.01Second
      quarter
                        
                        
                        0.04
                        
                        
                        
                        0.01Third
      quarter
                        
                        
                        0.05
                        
                        
                        
                        0.01Fourth
      quarter
                        
                        
                        0.07
                        
                        
                        
                        0.02
   9
 ITEM
      5.
                MARKET FOR
      REGISTRANT'S COMMON EQUITY, RELATED MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES.-
      continued
  January
      1, 2007 to December 31, 2007 (OTC Bulletin Board)
                        
                        High
                        
                        
                        LowFirst
      quarter
                        
                        $
                        0.12
                        
                        
                        $
                        0.04Second
      quarter
                        
                        
                        0.11
                        
                        
                        
                        0.01Third
      quarter
                        
                        
                        0.10
                        
                        
                        
                        0.02Fourth
      quarter
                        
                        
                        0.12
                        
                        
                        
                        0.03
  On April
13, 2008 the last sale price of our common stock as reported on the OTC Bulletin
Board was $0.082 per share.  As of April 10, 2009 we had 50,650,020
shares of common stock outstanding, held by approximately 240
shareholders.
 
 Dividend
policy
 
 We have
not paid any cash dividends since our inception and do not contemplate paying
dividends in the foreseeable future. It is anticipated that earnings, if any,
will be retained to retire debt and for the operation of the business.Under Nevada law, we are
prohibited from paying dividends if the distribution would result in our company
not being able to pay its debts as they become due in the usual course of
business, or if our total assets would be less than the sum of our total
liabilities plus the amount that would be needed were to be dissolved at the
time of distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
 
 Securities Authorized for Issuance
Under Equity Compensation Plans.The following provides information
concerning compensation plans under which our equity securities are authorized
for issuance as of December 31, 2008:
  (a)
                          
                          (b)
                          
                          (c)Plan
      Category
                          
                          Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                          
                          Weighted-average
      exercise price of outstanding options, warrants and rights
                          
                          Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))Equity
      compensation plans approved by security holders
                          
                          
                          --
                          
                          --
                          
                          
                          --Equity
      compensation plans not approved by security holders
                          
                          
                          --
                          
                          --
                          
                          
                          5,626,095(1)Total
                          
                          
                          
                          
                          
                          
                          
                          5,626,095(1)
  (1)
Represents shares available for issuance under our 2004 EMPLOYEES/CONSULTANTS
COMMON STOCK COMPENSATION PLAN (the “Plan”).
  The Plan
was established on August 3, 2004, effective August 3, 2004, to amend and
restate the Company's 2003 Employees/Consultants Stock Compensation Plan, to
offer directors, officers and selected key employees, advisors and consultants
an opportunity to acquire a proprietary interest in the success of the Company
to receive compensation, or to increase such interest, by purchasing Shares of
the Company's common stock.  We have reserved up to 10,000,000 shares of
our common stock for issuance under the Plan.  The Plan provides both
for the direct award or sale of Shares and for the grant of Options to purchase
Shares.  Options granted under the Plan may include non-statutory options,
as well as ISOs intended to qualify under section 422 of the Code.
  The Plan
is intended to comply in all respects with Rule 16.3 (or its successor) under
the Exchange Act and shall be construed accordingly.
 
 Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
 
 None.
 
  10
 ITEM
      5.
                  MARKET FOR
      REGISTRANT'S COMMON EQUITY, RELATED MATTERS AND ISSUER PURCHASES OF EQUITY
      SECURITIES.-
      continued
  Recent
Sales of Unregistered Securities
  On
October 1, 2008, the Company issued 500,000 shares of its common stock valued at
$15,000 to Jeffrey Schultz, the Company’s CEO, as compensation in accordance
with his Employment Agreement.
 
 On
October 1, 2008, the Company issued 250,000 shares of its common stock valued at
$7,500 to Jeffrey Schultz, the Company’s CEO, as compensation for serving as a
director in 2007.
 
 On
October 1, 2008, the Company issued 100,000 shares of its common stock valued at
$3,000 to David Rappa, the President of the Company’s Virtual Payment Solutions,
Inc. subsidiary, in accordance with his Employment Agreement.
 
 On
October 1, 2008, the Company issued 649,132 shares of its common stock to
Commercial Holding, AG in payment of accrued interest in the amount of $16,228
on the Company’s line of credit through September 30, 2008.
 
 On
December 10, 2008 the Company issued 2,000,000 shares of stock, along with
1,000,000 warrants convertible at $.10 for three years to Commercial Holding, AG
as additional consideration for extending the Company’s line of credit an
additional $200,000.  These securities were valued at
$147,987.
 
 On
December 31, 2008 the Company issued 2,000,000 to Keystone Equity Partners in
exchange for an outstanding $50,000 convertible note. The 2,000,000 shares
completely satisfied the note.
 
 The
recipients in each of the foregoing transactions were accredited investors and
the issuances were exempt from registration under the Securities Act of 1933 in
reliance on exemptions provided by Seton 4(2) of that act.
 
  ITEM 6.
              SELECTED FINANCIAL
      DATA.
 
 Not
applicable to a smaller reporting company.
 
  ITEM
      7.
              MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION
  The
following discussion is intended to provide an analysis of the Company’s
financial condition and results of operation and should be read in conjunction
with the Company’s financial statements and the notes thereto set forth herein.
The matters discussed in this section that are not historical or current facts
deal with potential future circumstances and developments. The Company’s actual
results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below.
 
 Overview
 
 Secured
Financial Network, Inc. is a valued added provider of payment transaction
processing platforms and equipment marketed to and utilized by traditional
“brick and mortar”, and Internet e-commerce merchants and those using mobile or
wireless devices to conduct business. We operate through our wholly owned
subsidiary Virtual Payment Solutions, Inc. (VPS)
 
 The
Company generates revenues from the sale of the Blue Bamboo wireless terminals,
its recurring monthly data plans and sales of its RedFin Gateway transaction
platform.
 
 The
Company significantly increased its sales in 2008 as a result of securing a
credit line and utilizing these funds to generate revenues by purchasing more
terminals.
 
 The
Company has not yet achieved the ability to sustain its operations solely
through its sales and as a result we will need additional funding to maintain
and grow our operations. Management anticipates achieving a “cash-flow-positive”
status in 2009.
 
 Funding
our operations has, and continues to be, our biggest challenge. However, as our
sales grow and our products achieve greater exposure in the industry, we
anticipate that our ability to raise funds based on our achievements will become
easier.
   11
 ITEM
      7.
                MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION-
      continued
  Going
Concern
 
 Our
financial statements have been prepared on the basis that we will operate as a
going concern, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business.  We have incurred net
losses each year since inception and have relied on the sale of our securities
from time to time and loans from third parties to fund our
operations.  These recurring operating losses have led our independent
registered public accounting firm Sherb & Co, LLP to include a statement in
its audit report relating to ours audited consolidated financial statements for
the years ended December 31, 2008 and 2007 expressing substantial doubt about
our ability to continue as a going concern.  Our ability to continue
as a going concern is dependent upon our ability
to obtain the necessary financing to meet our obligations and repay our
liabilities when they become due and to generate profitable operations in the
future.  We plan to continue to provide for our capital requirements
through the sale of equity securities, however, we have no firm commitments from
any third party to provide this financing and we cannot assure you we will be
successful in raising working capital as needed.  There are no
assurances that we will have sufficient funds to execute our business plan, pay
our obligations as they become due or generate positive operating
results.
 
 Results
of Operation for Year Ended December 31, 2008 Compared
to Year Ended December 31, 2007
 
 The
Company generates revenues from the sale of the Blue Bamboo wireless terminals,
its recurring monthly data plans and sales of its RedFin Gateway transaction
platform.  Revenues for 2008 increased approximately $173,000, or
approximately 319% from 2007.  The increase reflects the Company’s
ability to execute its business plan in 2008 made possible by the funds made
available to us via our credit line. These funds were not available in
2007.
  Our cost
of goods sold includes the payment processing terminals we sell as well as the
recurring expenses to maintain the service to the terminals. Our cost of goods
also includes the monthly licensing fees associated with maintaining and
operating our payment gateway.  In 2008 our cost of goods sold as a
percentage of revenue was approximately 100% as compared to approximately 39% in
2007.  The increase in our cost of goods sold in 2008 as compared to
2007 reflects the Company’s use of its Payment Gateway to generate revenues in
2008 compared to no Gateway revenue in 2007. The Company pays a recurring
minimum $10,000 monthly fee to its Payment Gateway provider Blue Bamboo. The
Company’s Gateway business was in the development stage in 2007 and the Gateway
fees were not included in cost of sales. As sales were generated by the Gateway
in 2008, the monthly Gateway fees were included in our cost of sales to
accurately reflect the costs of the revenues associated with the Payment
Gateway.  As our sales increase the amount of this monthly fee will be
amortize over a greater revenue number which should result in a return to a
gross profit in 2009, although we are unable at this time to predict the
percentage.
  Total
operating expenses for 2008 decreased approximately $682,000, or approximately
35%, from 2007, and included increases in:
 
 •
              administrative
      expenses, which includes rent, salaries and general overhead costs
      increased approximately $181,000, or approximately 52%, in 2008 as
      compared to 2007. An increase in staffing and administrative support in
      2008 to enable our increased sales effort accounted for the majority of
      these expenses.  We anticipate that administrative expenses in
      2009 will continue to grow but at as lesser percentage of sales than seen
      in 2008.
  •
              professional
      and consulting fees, which includes sales and marketing consultants as
      well as investor relations services increased approximately $52,000, or
      approximately 35%, in 2008 as compared to 2007.  We anticipate
      that professional and consulting fees  in 2009 will not
      significantly increase with the exception of investor relations services.
      The Company engaged a new investor relations firm in November of 2008 at
      an expense of $5,000 per month, and
 
 •
              derivative
      and liquating expense of approximately $33,000 related to our secured
      convertible notes which reflects the conversion of certain of those
      notes.
 
 These increases were offset by
decreases in:
 
 •
              bad
      debt expense of $76,490,
 
 •
              depreciation
      and amortization of approximately $58,000 in 2008 from 2007 which reflects
      a decrease in amortization expense of approximately $58,000 related to
      deferred financing expenses offset by a slight increase in
      depreciation,
 
 •
              asset
      impairment expense of $400,000 related to our Envoii System licensing
      agreement, and
 
 •
              interest
      expense of approximately $413,000 which reflects the satisfaction of
      certain outstanding debt during
2008.
 
 We
reported other income of $263,520 in 2007 which represented the sale of our
All-In-Mall asset as well as the elimination of $188,500 worth of debt owed to
note holders of our previous container business. There was no comparable
transaction in 2008.
 
 Net loss
for 2008 was ($1,291,851) compared to a net loss of ($1,676,894) for 2007. The
decrease in loss was primarily attributable to both the reduction in derivative
and liquidating liabilities associated with our convertible debt taken during
2008 compared to 2007 and the increase in sales and the associated
profits.
 
 Although
the Company expects to generate increased revenues in 2009, due to sales of its
wireless terminals and gateway transaction revenue, the Company expects to
continue to incur losses at least through the first half of 2009, and there can
be no assurance that the Company will achieve or maintain profitability,
generate revenue or sustain future growth.
   12
 ITEM
      7.
                MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION-
      continued
  Liquidity
and Capital Resources
  Liquidity
is the ability of a company to generate adequate amounts of cash to meet the
company's needs for cash.  At December 31, 2008 we had cash on hand of
$3,706 and working capital deficit of $4,029,163 as compared to cash on hand of
$15,041 and a working capital deficit of $3,896,294 at December 31,
2007.
 
 The
Company had total assets of $242,117 at December 31, 2008, compared to $70,811
at December 31, 2007. This overall increase in total assets is due to increases
in both our inventory and accounts receivable as well as approximately $140,000
in deferred financing fees attributable to our line of credit extension with
Commercial Holding, AG which is described later in this section.  The
Company had total liabilities of $ 4,114,146 at  2008, compared to
$3,934,669 at 2007.
 
 At
December 31, 2008 our current assets increased approximately $46,600 from
December 31, 2007 and included increases in accounts receivable $51,074 and
inventory $20,579 which were offset by decreases in cash ($11,335), employee
cash advances to Mr. Schultz for travel and similar expenses to be incurred on
our behalf ($8,710) and prepaid expenses ($5,000).  Our customary
terms offered our customers are payment prior to shipment. Most of our sales
transactions are pre-paid by credit card or ACH. The inventory increase in 2008
reflects increased purchases of terminal products and accessories related to our
increased sales.
 
 At
December 31, 2008 our current liabilities increased approximately $179,000 from
December 31, 2007, and included increases in accounts payable ($84,944), notes
payable ($65,000), accrued expenses ($189,392) and our line of credit ($577,584)
offset by decreases in derivative and liquidating liabilities $387,443 and
secured convertible notes, net ($350,000).
 
 At
December 31, 2008, we had $1,475,000 of notes payable which includes $65,000
principal amount of 10% notes which due between September and December
2009.  We have not paid the interest as due under these notes which
totals $825,352 at December 31, 2008.
 
 In 2005
we issued short term notes, averaging 90 days, with a specific rate of return to
acquire funds to invest in high yield activities which we refer to as container
financing notes.   At December 31, 2008 there is $1,410,000
principal amount due together with unpaid interest due and accruing in the
amount of $817,760 on these notes, all of which are in default and accruing
interest at 18% per annum.
 
 Between
September 2006 and October 2006 we sold an aggregate of $597,500 principal
amount secured convertible notes which were due between September 2007 and
October 2007.  The notes are convertible into shares of our common
stock as described in greater detail in Note 4 to the Notes to Consolidated
Financial Statements appearing elsewhere in this report which is generally the
lesser of 60% of the market value of our stock or $0.10 per share.  We
were obligated to file a registration statement with the Securities and Exchange
Commission to register the shares of common stock underlying these notes and the
warrants we issued the investor in the transaction.  We have not filed
this registration statement and are liable for liquidated damages which are $
558,748 at December 31, 2008.  At December 31, 2008 we owed $297,500
principal amount of convertible notes.  In February 2009 the Company
negotiated an amendment to the terms of the original notes. The significant
terms of the amendment were as follows:
 
 ·
              Principal
      amount is to be $352,232
 ·
              Maturity
      date is December 31, 2009,
 ·
              Note
      carries 7% per annum interest rate
 ·
              The
      lender immediately converted $40,000 of principal into 1,025,641 shares of
      our common stock thereby reducing the principal to
  $312,232
 ·
              Conversion
      rights are frozen until July 1, 2009,
and
 ·
              If
      we should default under the terms of the amendment, the original note
      terms then apply
 
 Finally,
at December 31, 2008 our balance sheet reflects $577,584 due under a line of
credit.  In April 2008 we entered into a Credit and Loan Agreement
with Commercial Holding, AG pursuant to which we were extended a $500,000 line
of credit which we secured by the stock of our subsidiary, Virtual Payment
Solutions, Inc., and all of that company’s assets.   Upon the
granting of this line of credit we issued Commercial Holdings, AG 2,000,000
shares of our common stock together with  five-year warrants to
purchase an additional 1,000,000 shares of our common stock with an exercise
price of $0.25 per share.  In December 2008 the agreement was amended
to increase the maximum amount available under the facility to
$700,000.  As consideration for this amendment we issued Commercial
Holding, AG 2,000,000 shares of our common stock together
with  five-year warrants to purchase an additional 1,000,000 shares of
our common stock with an exercise price of $0.10 per share  Interest
on the outstanding amount is 10% per annum, payable monthly.  We have
used the proceeds for general working capital.
 
 We do not
have any commitments for capital expenditures.  Our sources of cash
are the availability of funds under our line of credit and cash on
hand.  As described elsewhere herein, we do not have sufficient funds
to pay our outstanding debt obligations which are approximately $4,114,146 and
we will need approximately $250,000 of additional working capital to fund our
ongoing operations.  In addition, in the event we should fail to pay
the interest under the line of credit which would result in an event of default,
or if any other events
should occur which would otherwise result in an event of default under the
agreement, the amounts due under the credit line would become immediately due
and payable.  If we were unable to pay these amounts, the lender could
seek to foreclose on the assets of our subsidiary which represents substantially
all of our operations.
   13
 ITEM
      7.
                  MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION-
      continued
  Liquidity and Capital
Resources-
continued
  We have
no current agreements, arrangements, or understanding for such needed capital
and there are no assurances we will be successful in raising the funds as
necessary.  We face a number of obstacles in our attempts to raise
capital, including our limited revenues, losses from operations, existing debt
levels and past due nature of these obligations, the terms of the line of credit
and secured convertible notes, illiquidity of the capital markets in general and
the generally illiquid nature of our common stock among others.  In
the event we do not receive approximately $100,000 by June 2009, we may have to
reduce or curtail certain operations.  If we do not raise capital as
necessary it is unlikely we will be able to continue as a going concern in which
event stockholders could lose their entire investment in our
company.
 
 Off
Balance Sheet Arrangements
 
 We have
not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
stockholder's equity or that are not reflected in our condensed consolidated
financial statements. Furthermore, we do not have any retained or contingent
interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity. We do not have any
variable interest in any unconsolidated entity that provides financing,
liquidity, market risk or credit support to us or engages in leasing or hedging
services with us.
  Critical
Accounting Policies
 The
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the U.S.  The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate our estimates, including those related to inventories, and
intangible assets.  We base our estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that may not be readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
 
 We
believe the following critical accounting policies affect our more significant
judgments and estimates used in the preparation of our consolidated financial
statements.
 
 Stock-Based
Compensation
 
 The
computation of the expense associated with stock-based compensation requires the
use of a valuation model.  SFAS 123(R) is a new and very complex
accounting standard, the application of which requires significant judgment and
the use of estimates, particularly surrounding Black-Scholes assumptions such as
stock price volatility, expected option lives, and expected option forfeiture
rates, to value equity-based compensation.  The Company currently uses
a Black-Scholes option pricing model to calculate the fair value of its stock
options.  The Company primarily uses historical data to determine the
assumptions to be used in the Black-Scholes model and has no reason to believe
that future data is likely to differ materially from historical
data.  However, changes in the assumptions to reflect future stock
price volatility and future stock award exercise experience could result in a
change in the assumptions used to value awards in the future and may result in a
material change to the fair value calculation of stock-based
awards.  SFAS 123(R) requires the recognition of the fair value of
stock compensation in net income.  Although every effort is made to
ensure the accuracy of our estimates and assumptions, significant unanticipated
changes in those estimates, interpretations and assumptions may result in
recording stock option expense that may materially impact our financial
statements for each respective reporting period.
 
 Derivative
Liabilities
  The
Company accounts for its liquidated damages and embedded conversion features and
free standing warrants pursuant to Emerging Issue Task Force (EITF) Issue No.
00-19, "Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company's Own Stock" and SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, which requires a
periodic valuation of their fair value and a corresponding recognition of
liabilities associated with such derivatives.  The recognition of
derivative liabilities related to the issuance of shares of common stock is
applied first to the proceeds of such issuance, at the date of issuance, and the
excess of derivative liabilities over the proceeds is recognized as other
expense in the accompanying consolidated financial statements.  The
recognition of derivative liabilities related to the issuance of convertible
debt is applied first to the proceeds of such issuance as a debt discount, at
the date of issuance, and the excess of derivative liabilities over the proceeds
is recognized as other expense in the accompanying consolidated financial
statements.  Any subsequent increase or decrease in the fair value of
the derivative liabilities, which are measured at the balance sheet date, are
recognized as other expense or other income, respectively.
  Income
Tax Recognition of Deferred Tax Items
 
 We
recognize deferred tax assets and liabilities based on the differences between
the financial statement carrying amounts and the tax basis of assets and
liabilities.  Significant management judgment is required in
determining our deferred tax assets and liabilities. Management makes an
assessment of the likelihood that our deferred tax assets will be recovered from
future taxable income, and to an amount that it believes is more likely than not
to be realized.  As of December 31, 2008 we are fully reserved for our
deferred tax assets.
   14
 ITEM
      7.
                  MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATION-
      continued
  Fair
Value Measurements
 
 In
September 2006, the FASB issued SFAS No. 157.  SFAS No. 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. This Statement applies under other accounting pronouncements that
require or permit fair value measurements, the Financial Accounting Standards
Board having previously concluded in those accounting pronouncements that fair
value is a relevant measurement attribute. Accordingly, this Statement does not
require any new fair value measurements. As a result of the undercapitalized
nature of our Company, we are not able to fairly value our debts
recorded.
  Recent
Accounting Pronouncements
 
 FASB
141(revised 2007) – Business Combinations
  In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
Combinations. This Statement replaces FASB Statement No. 141, Business
Combinations. This Statement retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement
141 called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. This Statement defines
the acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This Statement’s scope is broader than that of
Statement 141, which applied only to business combinations in which control was
obtained by transferring consideration. By applying the same method of
accounting—the acquisition method—to all transactions and other events in which
one entity obtains control over one or more other businesses, this Statement
improves the comparability of the information about business combinations
provided in financial reports.
  This
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces Statement 141’s cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
values.
  This
Statement applies to all transactions or other events in which an entity (the
acquirer) obtains control of one or more businesses (the acquiree), including
those sometimes referred to as “true mergers” or “mergers of equals” and
combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously used
the pooling-of-interests method of accounting for some business combinations. It
does not apply to: (a) The formation of a joint venture, (b) The acquisition of
an asset or a group of assets that does not constitute a business, (c) A
combination between entities or businesses under common control, (d) A
combination between not-for-profit organizations or the acquisition of a
for-profit business by a not-for-profit organization.
  This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Management believes this Statement will have no impact on the
financial statements of the Company once adopted, unless any contemplated
acquisitions occur in the near future.
  All other
new accounting pronouncements have deemed not relevant, as a result the adoption
of these other new accounting pronouncement is not expected to have any impact
once adopted.
   ITEM
      7A.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
 
 Not applicable to a smaller reporting
company.
 ITEM
      8.
                FINANCIAL
      STATEMENTS AND SUPPLEMENTARY
DATA.
  Our
consolidated financial statements are contained in pages F-1 through F-18,
which appear at the end of this annual report.
 
  ITEM
      9.
                CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.
  None.
 
 15
  ITEM
      9A(T).
              CONTROLS
      AND PROCEDURES.
 
 Disclosure Controls and
Procedures.We maintain "disclosure controls and procedures"
as such term is defined in Rule 13a-15(e) under the Exchange Act.  In
designing and evaluating our disclosure controls and procedures, our management
recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the
objectives of disclosure controls and procedures are
met.  Additionally, in designing disclosure controls and procedures,
our management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible disclosure controls and
procedures.  The design of any disclosure controls and procedures also
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.
 
 Under the
supervision and with the participation of our senior management, consisting of
Jeffrey Schultz, our Principal Executive Officer and Michael Fasci, our
Chief Financial Officer, we conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures as of the end of
the period covered by this report (the “Evaluation Date”). Based on this
evaluation, our Principal Executive Officer and Chief Financial Officer
concluded, as of the Evaluation Date, that our disclosure controls and
procedures are effective such that the information relating to us required to be
disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms, and (ii) is accumulated and communicated to our
management, including our Principal Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.
  Management’s Annual Report on
Internal Control Over Financial Reporting. Our
management is responsible for establishing and maintaining an adequate system of
internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)).  Our internal control over financial reporting is a
process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes of accounting principles generally accepted in the United
States.  Because of its inherent limitations, internal control over
financial reporting may not prevent or detect
misstatements.  Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives.  In evaluating the effectiveness of our internal control
over financial reporting, our management used the criteria set forth by
Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in
Internal Control-Integrated Framework.  Based on this evaluation, our
management concluded that, as of December 31, 2008, our internal control over
financial reporting was not effective based on those criteria.  The
following material weaknesses were identified from our evaluation:
  Due to
the small size and limited financial resources, the Company’s CFO and PEO are
the only individuals involved in the accounting and financial reporting.
Furthermore, our CEO performs his duties in Florida while our PEO performs his
in Massachusetts. As a result, there is no segregation of duties within the
accounting function, leaving all aspects of financial reporting and physical
control of cash in the hands of the same individual, our
CFO.  Usually, this lack of segregation of duties represents a
material weakness; however, to remedy the matter, the Company plans to hire
additional in-house accounting personnel in Florida as we expect sales in the
short-term to reach levels where it is warranted. This will allow our CFO to
spend more time performing high end accounting duties and make better use of his
time. The PEO and CFO (who also comprise the Board of Directors) examine and
approve all cash transactions. We will continue to periodically review our
disclosure controls and procedures and internal control over financial reporting
and make modifications from time to time considered necessary or
desirable.
  This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.
  Changes in Internal Control over
Financial Reporting. There were no changes in our internal control over
financial reporting that occurred during the last fiscal quarter of the period
covered by this report that have materially affected or are reasonably likely to
materially affect our internal control over financial reporting.
 
 ITEM
      9B.
                OTHER
      INFORMATION.
 
 None.
 
 16
  PART
III
 
 ITEM 10.
                  DIRECTORS, EXECUTIVE OFFICERS
      AND CORPORATE
GOVERNANCE.
  The
following table sets forth the names and ages of the directors and executive
officers of the Company through the date of this Report, as well as the current
officers and directors; the principal officers and positions with the Company
held by each person and the date such person became a director or executive
officer of the Company. Each serves until the next annual meeting of the
stockholders.
  Names
      of Current Executive Officers and Directors
                    Age
                    Position
                    Date
      of AppointmentJeffrey
      L. Schultz
                    58
                    Director
      / CEO / President
                    January
      19, 2005Michael
      Fasci
                    50
                    Director
      / CFO *
                    January
      19, 2006
  *Appointed
CFO August 1, 2006
 
 Jeffrey
L. SchultzisPresident/CEO/Director,
58, most recently served as Vice President of Sales and Marketing for InteleTech
Corporation from January through November of 2004. From July of 2002 until
December of 2003 Mr. Schultz acted as a consultant to various companies involved
in the plastic printing and card issuance industries. From February of 2001
until July of 2002 Mr. Schultz was Director of Business Development for
Continental Plastic Card Co. coordinating the financial and sales restructuring
of the company and setting in motion a business plan for 2002, which made
Continental Plastic profitable. Continental Plastic was in the top 10 plastic
card printers in the USA. Prior to 2001 Mr. Schultz was the President of
Strategic Funding, Inc. that since its inception in 1996, had been instrumental
in providing consulting to various private and public companies and raised in
excess of $20 million in capital. From 1990 until 1996 Mr. Schultz was the
founder, an officer, and director of Aqua Care Systems, Inc., a manufacture of
residential, commercial, industrial, and wastewater treatment plants. Aqua Care
Systems became a public company in October 1993 after a successful NASDAQ
offering. Mr. Schultz graduated with a B.A. Degree from Wayne State University
in Detroit, Michigan in 1972. A copy of Mr. Schultz’s employment agreement
is filed as an exhibit to this filing.
 
 Michael
E. Fasci Sr. EA, 50, is the founder, president, and CEO of Process Engineering
Services, Inc., which has its principal executive offices located in East
Freetown, MA. Process Engineering Services, Inc. designs and manufactures
pollution recovery equipment primarily for the manufacturing industry with
clients worldwide. In 1997, Mr. Fasci qualified for, and currently maintains
Enrolled Agent status with the Internal Revenue Service. He also has developed a
financial consulting and tax practice that serves primarily corporate clients.
Mr. Fasci also currently owns and manages a number of other small businesses.
Mr. Fasci has previously served on the Board of Directors of other publicly
traded companies. He has successfully served in capacities including Chairman,
President, CFO, and Audit Committee Chairman. A copy of Michael Fasci’s
employment agreement was filed with the 3Q08 10-QSB as an exhibit and is hereto
referenced.
 
 No
current director, person nominated to become a director, executive officer,
promoter or control person of the Company has, within the past five
years:
 
 ·
                had
      any bankruptcy petition filed by or against any business or which such
      person was a general partner or executive officer either at the time of
      the bankruptcy or within two years prior to that
  time;
 
 ·
                been
      convicted in a criminal proceeding or been subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offenses);
 
 ·
                been
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or
 
 ·
                been
      found by a court of competent jurisdiction (in a civil action), the SEC,
      or the Commodity Futures Trading Commission to have violated a federal or
      state securities or commodities law, and the judgment has not been
      reversed, suspended or vacated.
 
 Director
Fees
 
 We
currently pay director fees to our directors, and may compensate outside
directors at a reasonable fee to be determined for meetings attended
..
 
 In 2008
Mr. Schultz and Mr. Fasci each received 250,000 shares for their services as
directors in 2007 valued in the amount of $2,500 and $7,500 respectively. No
compensation has been paid to either Mr. Schultz or Mr. Fasci for their services
as Directors in 2008.
   17
 ITEM
      10.
                    DIRECTORS, EXECUTIVE
      OFFICERS AND CORPORATE GOVERNANCE.-
      continued
  Code
of Ethics
 
 In
December 2008 we adopted a Code of Business Conduct and Ethics which applies to
our officers, directors, employees and consultants.  This Code
outlines the broad principles of ethical business conduct we adopted, covering
subject areas such as:
 
 •           compliance
with applicable laws and regulations,
 •           handling
of books and records,
 •           public
disclosure reporting,
 •           insider
trading,
 •           discrimination
and harassment,
 •           health
and safety,
 •           conflicts
of interest,
 •           competition
and fair dealing, and
 •           protection
of company assets.
 
 A copy of our Code of Business Conduct
and Ethics is filed as an exhibit to this report.  In addition, we
will provide a copy, without charge, to any person desiring a copy of the Code
of Business Conduct and Ethics, by written request to us at our principal
offices at 1180 SW 36th Avenue,
Suite 204, Pompano Beach, FL 33069 Attention: Corporate Secretary.
 
 Committees
of the Board of Directors
 
 Our Board
of Directors has not yet established an Audit Committee, a Compensation
Committee or a Nominating Committee, or any committee performing a similar
function.  The functions of those committees are being undertaken by
the entire board as a whole.  Because we have no independent
directors, our Board of Directors believes that the establishment of committees
of the Board would not provide any benefits to our company and could be
considered more form than substance.
 
 We do not
have a policy regarding the consideration of any director candidates which may
be recommended by our stockholders, including the minimum qualifications for
director candidates, nor has our Board of Directors established a process for
identifying and evaluating director nominees.  We have not adopted a
policy regarding the handling of any potential recommendation of director
candidates by our stockholders, including the procedures to be
followed.  Our Board has not considered or adopted any of these
policies as we have never received a recommendation from any stockholder for any
candidate to serve on our Board of Directors.  Given the early stage
operations of our company and our lack of directors and officers insurance
coverage, we do not anticipate that any of our stockholders will make such a
recommendation in the near future.  While there have been no
nominations of additional directors proposed, in the event such a proposal is
made, all members of our Board will participate in the consideration of director
nominees.
 
 Mr.
Michael Fasci, who also serves as the Company's CFO, is an “audit committee
financial expert” within the meaning of Item 401(e) of Regulation
S-K.  In general, an “audit committee financial expert” is an
individual member of the audit committee or Board of Directors who:
 
 •
              understands
      generally accepted accounting principles and financial
      statements,
 •
              is
      able to assess the general application of such principles in connection
      with accounting for estimates, accruals and
  reserves,
 •
              has
      experience preparing, auditing, analyzing or evaluating financial
      statements comparable to the breadth and complexity to our financial
      statements,
 •
              understands
      internal controls over financial reporting,
and
 •
              understands
      audit committee functions.
 
 Our
securities are not quoted on an exchange that has requirements that a majority
of our Board members be independent and we are not currently otherwise subject
to any law, rule or regulation requiring that all or any portion of our Board of
Directors include “independent” directors, nor are we required to establish or
maintain an Audit Committee or other committee of our Board of
Directors.  In the future we may seek to expand our Board of Directors
to include additional independent directors which include one or more
individuals who would qualify as an audit committee financial
expert.  However, we have no immediate plans to expand our Board and
there are no assurances we will ever do so.
  
 18
 
 ITEM
      11.
              EXECUTIVE
      COMPENSATION.
 
 The
following table summarizes all compensation recorded by us in each of the last
two completed fiscal years for our principal executive officer, each other
executive officer serving as such whose annual compensation exceeded $100,000
and up to two additional individuals for whom disclosure would have been made in
this table but for the fact that the individual was not serving as an executive
officer of our company at December 31, 2008. The value attributable to any
option awards is computed in accordance with FAS 123R.
 
 SUMMARY COMPENSATION TABLEName
      and principal position
                                            
                                            Year
                                            
                                            Salary
                                              ($)
                                            
                                            
                                            Bonus
                                              ($)
                                            
                                            
                                            Stock
                                              Awards
                                              ($)
                                            
                                            
                                            Option
                                              Awards
                                              ($)
                                            
                                            
                                            Nonequity
      incentive plan compen-sation ($)
                                            
                                            
                                            Non-qualified
      deferred compensation earnings ($)
                                            
                                            
                                            All
                                              other
      compen-sation
                                              ($)
                                            
                                            
                                            Total
                                              ($)(a)
                                            
                                            (b)
                                            
                                            (c)
                                            
                                            
                                            (d)
                                            
                                            
                                            (e)
                                            
                                            
                                            (f)
                                            
                                            
                                            (g)
                                            
                                            
                                            (h)
                                            
                                            
                                            (i)
                                            
                                            
                                            (j)Jeffrey
      L. Schultz (1)
                                            
                                            2008
                                            
                                            
                                            130,000
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            22,500
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            152,5002007
                                            
                                            
                                            120,000
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            35,000
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            155,000Michael
      E. Fasci (2)
                                            
                                            2008
                                            
                                            
                                            80,000
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            7,500
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            87,5002007
                                            
                                            
                                            72,000
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            10,000
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            0
                                            
                                            
                                            
                                            82,000
 
 (1)           Mr.
Schultz has served as our Chief Executive Officer since the Company’s inception
in January of 2005. During fiscal 2007 and 2008 we granted Mr. Schultz
Restricted Company stock awards in accordance with his employment agreement.
Salary due Mr. Schultz for fiscal year 2007 in the amount of $88,000 is unpaid
and is included in our liabilities at December 31, 2008.
 
 (2)           Mr.
Fasci has served as our Chief Financial Officer since August 1, 2006. During
fiscal 2007 and 2008 we granted Mr. Fasci Restricted Company stock awards in
accordance with his employment agreement.
 
 Employment
Agreements and narrative regarding executive compensation
 
 On
October 1, 2008 we entered into a one year Employment Agreement with Mr. Jeffrey
Schultz to serve as our President and Chief Executive Officer.  Under
the terms of the agreement as compensation for his services we pay Mr. Schultz
an annual salary of $130,000.  We also issued him 500,000 shares of
our common stock valued at $15,000 and he is entitled to a monthly car allowance
of $300.00.  He is also entitled to receive medical, dental and
ophthalmic benefits for Mr. Schultz and his family upon the same basis as may be
made available to our other employees as well as four weeks of paid
vacation.  We may terminate the agreement for cause, or in the event
of his death or disability.  In the event we should terminate Mr.
Schultz for any reason other than for cause during the term of the agreement we
are obligated to pay him 12 months salary, benefits and car allowance as a
severance.  Should we terminate the agreement for cause, should he
terminate the agreement for any reason or in the event of his disability, he is
not entitled to any severance benefits.  In the event of his death
during the term of the agreement, his estate is to receive two months severance
benefits and the cash value of any unused vacation.  The agreement
contains customary confidentiality, non-circumvention and invention assignment
clauses.
  On August
1, 2008 we entered into an Employment Agreement with Mr. Michael Fasci to serve
as our Chief Financial Officer.  Under the terms of the one year
agreement, as compensation for his services we pay Mr. Fasci an annual salary of
$80,000.  We also issued him 500,000 shares of our common stock valued
at $5,000 and he is entitled to a monthly car allowance of
$300.00.  He is also entitled to receive medical, dental and
ophthalmic benefits for Mr. Fasci and his family upon the same basis as may be
made available to our other employees as well as four weeks of paid
vacation.  We may terminate the agreement for cause, or in the event
of his death or disability.  In the event we should terminate Mr.
Fasci for any reason other than for cause during the term of the agreement we
are obligated to pay him three months salary, benefits and car allowance as a
severance.  Should we terminate the agreement for cause, should he
terminate the agreement for any reason or in the event of his disability, he is
not entitled to any severance benefits.  In the event of his death
during the term of the agreement, his estate is to receive two months severance
benefits and the cash value of any unused vacation.  The agreement
contains customary confidentiality, non-circumvention and invention assignment
clauses.
  The
amount of compensation paid to Messrs. Schultz and Fasci, and the terms of the
agreements, were negotiated with the Board of Director of which they were the
sole two members of the Board of Directors at the time the agreements were
finalized and executed.  Accordingly, they each had a significant
influence in the terms thereof.
 
 At
December 31, 2008 we owed Mr. Schultz $88,000 in accrued but unpaid compensation
pursuant to the terms of these employment agreements.
  On
October 1, 2008 our subsidiary, Virtual Payment Systems, Inc., entered into a
one year Employment Agreement with Mr. David Rappa to serve as its
President.  Under the terms of the agreement automatically extends for
successive one year periods as compensation for his services we pay Mr. Rappa an
annual base salary of $81,000, we issued him 100,000 shares of our common stock
valued at $3,000.00, and he receives a monthly car allowance of
$300.00.  In addition, Mr. Rappa is entitled to receive a commission
equal to (i) 5% of the gross profit on all equipment and software sales, and
(ii) a commission ranging from 2.5% to 3.5% on all Gateway revenue after the
first $100,000.  Mr. Rappa is entitled to two weeks annual paid
vacation and to participation in benefit programs we offer our other
employees.  We may terminate his employment for cause, if Mr. Rappa
terminates the agreement or in the event of his death or
disability.  If we terminate the agreement for cause or in the event
of his disability he is not entitled to any severance benefits.  If
the agreement terminates upon his death, we are obligated to pay his estate two
months salary. If we terminate the agreement without cause we are obligated to
pay him three months compensation as a severance benefit. The agreement contains
customary confidentiality, non-circumvention and invention assignment
clauses.
 
 19
 ITEM
      11.
                  EXECUTIVE
      COMPENSATION. -
      continued
  Outstanding
Equity Awards at Fiscal Year End
 
 The
following table provides information concerning unexercised options, stock that
has not vested and equity incentive plan awards for each named executive officer
outstanding as of the date hereof:
 
 OPTION
      AWARDS
                                                  
                                                  STOCK
      AWARDSName
                                                  
                                                  Number
      of securities underlying unexercised options
                                                    (#)
      exercisable
                                                  
                                                  
                                                  Number
      of securities underlying unexercised options
                                                    (#)
      unexercisable
                                                  
                                                  
                                                  Equity
      incentive plan awards: Number of securities underlying unexercised
      unearned options
                                                    (#)
                                                  
                                                  Option
      exercise price
                                                    ($)
                                                  
                                                  Option
      expiration date
                                                  
                                                  Number
      of shares or units of stock that have not vested (#)
                                                  
                                                  
                                                  Market
      value of shares or units of stock that have not vested ($)
                                                  
                                                  
                                                  Equity
      incentive plan awards: number of unearned shares, units or other rights
      that have not vested (#)
                                                  
                                                  
                                                  Equity
      incentive plan awards: market or payout value of unearned shares, units or
      other rights that have not vested (#)(a)
                                                  
                                                  (b)
                                                  
                                                  
                                                  (c)
                                                  
                                                  
                                                  (d)
                                                  
                                                  (e)
                                                  
                                                  (f)
                                                  
                                                  (g)
                                                  
                                                  
                                                  (h)
                                                  
                                                  
                                                  (i)
                                                  
                                                  
                                                  (j)Jeffrey
      L. Schultz
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  00
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0Michael
      E. Fasci
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  00
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
                                                  
                                                  
                                                  
                                                  0
 
 Compliance
with Section 16(a) of the Exchange Act
 
 Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to us
under Rule 16a-3(d) of the Securities Exchange Act during fiscal 2008 and Forms
5 and amendments thereto furnished to us with respect to fiscal 2008, as well as
any written representation from a reporting person that no Form 5 is required,
we are not aware that any officer, director or 10% or greater stockholder failed
to file on a timely basis, as disclosed in the aforementioned Forms, reports
required by Section 16(a) of the Securities Exchange Act during fiscal 2008,
except as follows:
 
 •
              Mr.
      Schultz failed to timely file two Form 4s reporting two
      transactions.
  These
delinquent reports have subsequently been filed.
  ITEM
      12.
                SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
 
 At April
10, 2009 we had 50,650,020  shares of common stock issued and
outstanding.  The following table sets forth information known to us
as of March 25, 2009 relating to the beneficial ownership of shares of our
common stock by:
 
 ▪
              each
      person who is known by us to be the beneficial owner of more than 5% of
      our outstanding common stock;
 ▪
              each
      director;
 ▪
              each
      named executive officer; and
 ▪
              all
      named executive officers and directors as a
  group.
  Unless
otherwise indicated, the business address of each person listed is in care of
the Company at 1180 SW 36th Avenue,
Suite 204, Pompano Beach, FL 33069.  The percentages in the table have
been calculated on the basis of treating as outstanding for a particular person,
all shares of our common stock outstanding on that date and all shares of our
common stock issuable to that holder in the
event of exercise of outstanding options, warrants, rights or conversion
privileges owned by that person at that date which are exercisable within 60
days of that date. Except as otherwise indicated, the persons listed below have
sole voting and investment power with respect to all shares of our common stock
owned by them, except to the extent that power may be shared with a
spouse.
  20
  ITEM
      12.
                  SECURITY OWNERSHIP
      OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
      MATTERS-
      continued
 Name
      of Beneficial Owner
                      
                      Amount
      and Nature of Beneficial Ownership (1)
                      
                      
                      Percentage
      of ClassJeffrey
      L. Schultz
                      
                      
                      6,565,950
                      
                      
                      
                      13.2
                      %Michael
      E. Fasci (2)
                      
                      
                      2,946,666
                      
                      
                      
                      5.9
                      %Commercial
      Holding, AG
                        325
      Main Street, Suite 240
                        Lexington,
      KY 40507
                      
                      
                      4,649,132
                      
                      
                      
                      9.4
                      %The
      Melanie S. Altholtz Irrevocable Trust
                        9803
      Sweetwater Ave.
                        Bradenton,
      FL 34202
                      
                      
                      6,333,333
                      
                      
                      
                      12.8
                      %HEB,
      LLC
                        2225
      E. Randol Mill Road, Suite 305
                        Arlington,
      TX 76011
                      
                      
                      4,715,950
                      
                      
                      
                      9.5
                      %All
      officers and directors as a group (two persons)
                      
                      
                      9,512616
                      
                      
                      
                      19.2
                      %
 
 (1)           
Beneficial ownership has been determined in accordance with Rule 13d-3 under the
Exchange Act and unless otherwise noted, such person has sole voting,
investment, and dispositive power.
 
 (2)           The
number of shares beneficially owned by Mr. Fasci includes:
 
 •
              2,166,666
      shares of common stock held by Mr.
Fasci,
 •
              780,000
      shares of common stock held of record by Process Engineering Services,
      Inc., Inc., a company owned by Mr. Fasci and over which he holds voting
      and dispositive control,
 •
              Process
      Engineering Services, Inc. also own 200,000 warrants exercisable at $0.10
      and another 200,000 warrants exercisable at $0.50. These warrants expire
      March 1, 2010.
 
 ITEM
      13.
                CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.
 
 None.
 
 Director
independence
 
 Neither
of our directors is “independent” within the meaning of FINRA Marketplace Rule
4200
   ITEM
      14.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.
 Sherb
& Co., LLP served as our independent registered public accounting firm for
2008 and 2007.  The following table shows the fees that were billed
for the audit and other services provided by such firm for 2008 and
2007.
 2008
                                    
                                    
                                    2007Audit
      Fees
                                    
                                    $
                                    30,500
                                    
                                    
                                    $
                                    30,500Audit-Related
      Fees
                                    
                                    
                                    0
                                    
                                    
                                    
                                    2,700Tax
      Fees
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0All
      Other Fees
                                    
                                    
                                    0
                                    
                                    
                                    
                                    0Total
                                    
                                    $
                                    30,500
                                    
                                    
                                    $
                                    33,200
 Audit Fees — This category
includes the audit of our annual financial statements, review of financial
statements included in our Form 10-QSB and Form 10-Q Quarterly Reports and
services that are normally provided by the independent auditors in connection
with engagements for those fiscal years. This category also includes advice on
audit and accounting matters that arose during, or as a result of, the audit or
the review of interim financial statements.
 21
 ITEM
      14.
                  PRINCIPAL ACCOUNTANT
      FEES AND SERVICES.-
      continued
  Audit-Related Fees — This
category consists of assurance and related services by the independent auditors
that are reasonably related to the performance of the audit or review of our
financial statements and are not reported above under “Audit Fees.” The services
for the fees disclosed under this category include consultation regarding our
correspondence with the SEC and other accounting consulting.
 
 Tax Fees — This category
consists of professional services rendered by our independent auditors for tax
compliance and tax advice. The services for the fees disclosed under this
category include tax return preparation and technical tax advice.
 
 All Other Fees — This
category consists of fees for other miscellaneous items.
  Our Board
of Directors has adopted a procedure for pre-approval of all fees charged by the
our independent auditors.  Under the procedure, the Board approves the
engagement letter with respect to audit, tax and review
services.  Other fees are subject to pre-approval by the Board, or, in
the period between meetings, by a designated member of Board.  Any
such approval by the designated member is disclosed to the entire Board at the
next meeting.  The audit and tax fees paid to the auditors with
respect to 2008 were pre-approved by the entire Board of
Directors.
 
 PART IV
 ITEM
      15.
                EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES.
 The
following documents are filed as a part of this report or are incorporated by
reference to previous filings, if so indicated:
 
 Exhibit
    No.
                                                              Description of
      Exhibit3.1
                                                              Certificate
      of Incorporation (1)3.2
                                                              Certificate
      of Amendment to the Certificate of Incorporation (1)3.3
                                                              Bylaws
      (1)10.1
                                                              Jeffrey
      Schultz Employment Agreement *10.2
                                                              David
      Rappa Employment Agreement *10.3
                                                              2004
      Employees/Consultants Common Stock Compensation Plan
(2)10.4
                                                              Michael
      Fasci Employment Agreement (3)10.5
                                                              Commercial
      Holding AG - $200,000 Line of Credit Extension Agreement Dated
      12/10/08*10.6
                                                              The
      Nutmeg Group LLC - Shares for Accumulated Interest Agreement dated
      12/31/08*10.7
                                                              The
      Nutmeg Group LLC - Convertible Note Amendment dated
    2/27/2009*10.8
                                                              National
      Financial Communications Consulting Agreement and Option Agreement dated
      11/25/08 *10.9
                                                              [INTENTIONALLY
      OMITTED] (4)10.10
                                                              Coneca
      Properties LLC Office Lease (5)10.11
                                                              Commercial
      Holding AG – Credit & Loan Agreement Dated 4/7/08
  (6)10.12
                                                              Commercial
      Holding AG – Security Agreement Dated 4/7/08 (6)14.1
                                                              Code
      of Ethics *31.1
                                                              Certificate
      of Principal Executive Officer as Required by Rule
      13a-14(a)/15d-14 *31.2
                                                              Certificate
      of Chief Financial Officer as Required by Rule 13a-14(a)/15d-14
      *32.1
                                                              Certificate
      of Principal Executive Officer as Required by Rule 13a-14(b) and Rule 15d-
      14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of
      the United States Code *32.2
                                                              Certificate
      of Principal Executive Officer as Required by Rule 13a-14(b) and Rule 15d-
      14(b) (17 CFR 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18 of
      the United States Code
*
 
 *           Filed
herewith.
 
 (1)
                                  Incorporated
      by reference to the Form 10SB12G - SEC File No. 000-28457 as filed on
      December 10, 1999.(2)
                                  Incorporated
      by reference to the Form S-8 - SEC File No. 333-118027 filed on
      August 9, 2004.(3)
                                  Incorporated
      by reference to the Quarterly Report on Form 10-Q for the period ended
      September 30, 2008.(4)
                                  [INTENTIONALLY
      OMITTED](5)
                                  Incorporated
      by reference to the Quarterly Report on Form 10-QSB
      for the period ended September 30, 2007.(6)
                                  Incorporated
      by reference to the Quarterly Report on Form 10-Q for
      the period ended March 30,
2008.
 22
 SIGNATURES
  In
accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant
caused this report, as amended, to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
 SECURED
      FINANCIAL NETWORK, INC.Date: April
      14, 2009
                By:
                /s/ Jeffrey
      L. SchultzJeffrey
      L. SchultzTitle: President
      and Chief Executive Officer
 
 Date:
      April 14, 2009
                By:
                /s/ Michael
      FasciMichael
      FasciTitle: Chief
      Financial Officer
   Pursuant
to the requirements of the Securities Exchange Act of 1934, the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated have signed this Report, as amended.
  Date: April
      14, 2009
                By:
                /s/ Jeffrey
      L. SchultzJeffrey
      L. SchultzTitle: Director,
      President, Chief Executive Officer, principal financial
      officer
 
 Date: April
      14, 2009
                By:
                /s/ Michael
      E. FasciMichael
      E. FasciTitle: Director,
      Chief Financial Officer, principal financial and accounting
      officer
     23
     Secured
Financial Network, Inc.
 CONTENTS
  PageREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - SHERB & CO,
      LLP
                F-2CONSOLIDATED
      FINANCIAL STATEMENTSConsolidated
      Balance Sheets
                F-3Consolidated
      Statements of Operations
                F-4Consolidated
      Statements of Stockholders’ Deficit
                F-5Consolidated
      Statements of Cash Flows
                F-6NOTES
      TO THE CONSOLIDATED FINANCIAL STATEMENTS
                F-7
      to F-18
    
 
 
  F-1
  Report
of Independent Registered Public Accounting Firm
 
 Board of
Directors and Stockholders
 Secured
Financial Network, Inc.
 
 We have
audited the accompanying consolidated balance sheets of Secured Financial
Network, Inc. as of December 31,   2008 and 2007 and the related
consolidated statements of operations, stockholders’ deficit, and cash flows for
each of the years ended December 31, 2008 and 2007. These financial statements
are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 2008 and 2007, and the results of its operations and cash flows
for each of the years ended December 31, 2008 and 2007, in conformity with
generally accepted accounting principles in the United States.
 
 The
accompanying consolidated financial statements have been prepared assuming that
Secured Financial Network, Inc. will continue as a going concern.  As
more fully described in Note 2, the Company has incurred recurring operating
losses and will have to obtain additional capital to sustain
operations.  These conditions raise substantial doubt about the
Company’s ability to continue as a going concern.  Management’s plans
in regard to these matters are also described in Note 2.  The
financial statements do not include any adjustments to reflect the possible
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.
  /s/ Sherb & Co., LLP
 SHERB
& CO, LLP
 Certified
Public Accountants
 
 New York,
New York
 April 13,
2009
    F-2






SECURED
      FINANCIAL NETWORK, INC.CONSOLIDATED
      BALANCE SHEETSASSETSDecember
      31,
                                        
                                        
                                        December
      31,2008
                                        
                                        
                                        2007CURRENT
      ASSETSCash
                                        
                                        $
                                        3,706
                                        
                                        
                                        $
                                        15,041Accounts
      Receivable
                                        
                                        
                                        51,074
                                        
                                        
                                        
                                        -Employee
      Advances
                                        
                                        
                                        623
                                        
                                        
                                        
                                        9,333Inventory
                                        
                                        
                                        29,579
                                        
                                        
                                        
                                        9,000Prepaid
      Expenses
                                        
                                        
                                        -
                                        
                                        
                                        
                                        5,000Total
      Current Assets
                                        
                                        
                                        84,983
                                        
                                        
                                        
                                        38,375FURNITURE
      AND EQUIPMENT (NET)
                                        
                                        
                                        12,241
                                        
                                        
                                        
                                        5,666OTHER
      ASSETSRefundable
      Deposits
                                        
                                        
                                        5,170
                                        
                                        
                                        
                                        25,170Investments
      Held for Sale
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,600Deferred
      Financing Fees
                                        
                                        
                                        139,724
                                        
                                        
                                        
                                        -Total
      Other Assets
                                        
                                        
                                        144,894
                                        
                                        
                                        
                                        26,770TOTAL
      ASSETS
                                        
                                        $
                                        242,117
                                        
                                        
                                        $
                                        70,811LIABILITIES AND STOCKHOLDERS'
      DEFICITCURRENT
      LIABILITIESAccounts
      Payable
                                        
                                        $
                                        176,288
                                        
                                        
                                        $
                                        91,344Notes
      Payable
                                        
                                        
                                        1,475,000
                                        
                                        
                                        
                                        1,410,000Accrued
      Expenses
                                        
                                        
                                        1,029,026
                                        
                                        
                                        
                                        839,634Derivative
      and Liquidating Liabilities
                                        
                                        
                                        558,748
                                        
                                        
                                        
                                        946,191Line
      of Credit
                                        
                                        
                                        577,584
                                        
                                        
                                        
                                        -Secured
      Convertible Notes
                                        
                                        
                                        297,500
                                        
                                        
                                        
                                        647,500Total
      Current Liabilities
                                        
                                        
                                        4,114,146
                                        
                                        
                                        
                                        3,934,669LONG
      TERM DEBT
                                        
                                        
                                        
                                        
                                        
                                        
                                        65,000STOCKHOLDERS'
      DEFICITCommon
      Stock authorized is 100,000,000shares
      at $0.001 par value.  Issued andoutstanding
      on December 31, 2008 is 49,624,379and
      December 31, 2007 is 38,675,247 shares.
                                        
                                        
                                        49,624
                                        
                                        
                                        
                                        38,675Additional
      Paid in Capital
                                        
                                        
                                        3,855,341
                                        
                                        
                                        
                                        2,517,610Accumulated
      Deficit
                                        
                                        
                                        (7,776,993
                                        )
                                        
                                        
                                        (6,485,142
                                        )Total
      Stockholders' Deficit
                                        
                                        
                                        (3,872,028
                                        )
                                        
                                        
                                        (3,928,858
                                        )TOTAL
      LIABILITIES ANDSTOCKHOLDERS'
      DEFICIT
                                        
                                        $
                                        242,117
                                        
                                        
                                        $
                                        70,811The
      accompanying notes are an integral part of these consolidated
      statements






F-3




SECURED
      FINANCIAL NETWORK, INC.CONSOLIDATED
      STATEMENTS OF OPERATIONSYear
      Ended December 31,2008
                              
                              
                              2007REVENUESSales
                              
                              
                              226,751
                              
                              
                              
                              54,059Cost
      of Goods Sold
                              
                              
                              227,177
                              
                              
                              
                              21,000Gross
      Profit
                              
                              
                              (426
                              )
                              
                              
                              33,059EXPENSESAdministrative
      Expenses
                              
                              
                              528,017
                              
                              
                              
                              347,133Professional
      and Consulting
                              
                              
                              203,130
                              
                              
                              
                              150,904Bad
      Debt Expense
                              
                              
                              -
                              
                              
                              
                              76,490Depreciation
      and Amortization
                              
                              
                              3,183
                              
                              
                              
                              61,518Asset
      Impairment Expense
                              
                              
                              -
                              
                              
                              
                              400,000Derivative
      and Liquidating Expense
                              
                              
                              116,430
                              
                              
                              
                              83,313Interest
      Expense
                              
                              
                              440,664
                              
                              
                              
                              854,115Total
      Expenses
                              
                              
                              1,291,424
                              
                              
                              
                              1,973,473Net
      Loss before other income
                              
                              
                              (1,291,851
                              )
                              
                              
                              (1,940,414
                              )Other
      Income
                              
                              
                              -
                              
                              
                              
                              263,520Net
      loss before Provisionfor
      Income Taxes
                              
                              
                              (1,291,851
                              )
                              
                              
                              (1,676,894
                              )Provision
      for Income Taxes
                              
                              
                              -
                              
                              
                              
                              -NET
      LOSS
                              
                              $
                              (1,291,851
                              )
                              
                              $
                              (1,676,894
                              )Basic
      and DilutedNet
      Loss per Common Share
                              
                              $
                              (0.03
                              )
                              
                              $
                              (0.05
                              )Weighted
      Average Number of SharesCommon
      Shares Outstanding -basic
      and diluted
                              
                              
                              44,149,798
                              
                              
                              
                              34,838,414The
      accompanying notes are an integral part of these consolidated
      statements






F-4




SECURED
      FINANCIAL NETWORK, INC.CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICITYEARS
      ENDED DECEMBER 31, 2008 and 2007Common
      Stock
                              
                              
                              
                              
                              
                              
                              
                              
                              TotalPar
      value $0.001
                              
                              
                              Paid
      in
                              
                              
                              Accumulated
                              
                              
                              Stockholders'Shares
                              
                              
                              Amount
                              
                              
                              Capital
                              
                              
                              Deficit
                              
                              
                              DeficitBalance,
      December 31, 2006
                              
                              
                              31,001,581
                              
                              
                              $
                              31,002
                              
                              
                              $
                              1,425,639
                              
                              
                              $
                              (4,808,248
                              )
                              
                              $
                              (3,351,607
                              )Equity
      Issued for Cash
                              
                              
                              3,000,000
                              
                              
                              
                              3,000
                              
                              
                              
                              147,000
                              
                              
                              
                              
                              
                              
                              
                              150,000Equity
      Issued for Services
                              
                              
                              2,216,666
                              
                              
                              
                              2,216
                              
                              
                              
                              127,784
                              
                              
                              
                              
                              
                              
                              
                              130,000Equity
      Issued to Retire Debt and Interest
                              
                              
                              2,457,000
                              
                              
                              
                              2,457
                              
                              
                              
                              817,187
                              
                              
                              
                              
                              
                              
                              
                              819,644Net
      (Loss)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (1,676,894
                              )
                              
                              
                              (1,676,894
                              )Balance,
      December 31, 2007
                              
                              
                              38,675,247
                              
                              
                              
                              38,675
                              
                              
                              
                              2,517,609
                              
                              
                              
                              (6,485,142
                              )
                              
                              
                              (3,928,858
                              )Equity
      Issued for Interest
                              
                              
                              4,000,000
                              
                              
                              
                              4,000
                              
                              
                              
                              203,371
                              
                              
                              
                              
                              
                              
                              
                              207,371Equity
      Issued for Services
                              
                              
                              2,600,000
                              
                              
                              
                              2,600
                              
                              
                              
                              131,959
                              
                              
                              
                              
                              
                              
                              
                              134,559Equity
      Issued to Retire Debt and Interest
                              
                              
                              4,349,132
                              
                              
                              
                              4,349
                              
                              
                              
                              498,529
                              
                              
                              
                              
                              
                              
                              
                              502,878Reduction
      in Derivative Liability
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              503,873
                              
                              
                              
                              
                              
                              
                              
                              503,873Net
      (Loss)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (1,291,851
                              )
                              
                              
                              (1,291,851
                              )Balance,
      December 31, 2008
                              
                              
                              49,624,379
                              
                              
                              $
                              49,624
                              
                              
                              $
                              3,855,341
                              
                              
                              $
                              (7,776,993
                              )
                              
                              $
                              (3,872,027
                              )The
      accompanying notes are an integral part of these consolidated
      statements






F-5




SECURED
      FINANCIAL NETWORK, INC.CONSOLIDATED
      STATEMENTS OF CASH FLOWSYear
      Ended December 31,2008
                              
                              
                              2007Cash
      Flows From Operating Activities:Net
      Loss
                              
                              $
                              (1,291,851
                              )
                              
                              $
                              (1,676,894
                              )Adjustments
      to Net Loss:Equity
      for Services
                              
                              
                              134,559
                              
                              
                              
                              80,000Equity
      for Interest
                              
                              
                              217,372
                              
                              
                              
                              -Derivative
      and Liquidating Income
                              
                              
                              116,430
                              
                              
                              
                              83,313Amortization
      of Debt Discount and Finance Fees
                              
                              
                              3,150
                              
                              
                              
                              584,354Depreciation
      and Amortization
                              
                              
                              3,183
                              
                              
                              
                              2,138Impairment
      of Long Lived Asset
                              
                              
                              -
                              
                              
                              
                              400,000Adjustments
      to Reconcile Net Loss toNet
      Cash (Used) by Operating Activities:Changes
      in Assets and Liabilities:Prepaid
      Expense
                              
                              
                              5,000
                              
                              
                              
                              13,500Employee
      Advances
                              
                              
                              8,710
                              
                              
                              
                              3,071Inventory
                              
                              
                              (20,579
                              )
                              
                              
                              (9,000
                              )Investor
      Accrued Interest
                              
                              
                              -
                              
                              
                              
                              118,277Accrued
      Interest
                              
                              
                              216,033
                              
                              
                              
                              57,007Accrued
      Expenses
                              
                              
                              (26,640
                              )
                              
                              
                              25,720Accounts
      Receivable
                              
                              
                              (51,074
                              )
                              
                              
                              -Accounts
      Payable
                              
                              
                              84,945
                              
                              
                              
                              57,033Net
      Cash (Used) by Operating Activities
                              
                              
                              (600,761
                              )
                              
                              
                              (261,481
                              )Cash
      Flows From Investing Activities:Security
      Deposits
                              
                              
                              20,000
                              
                              
                              
                              (25,170
                              )Investment
      Held for Sale
                              
                              
                              1,600
                              
                              
                              
                              2,800Loan
      Receivable
                              
                              
                              -
                              
                              
                              
                              2,000Purchase
      of Equipment
                              
                              
                              (9,757
                              )
                              
                              
                              (5,238
                              )Net
      Cash (Used) Provided by Investing Activities
                              
                              
                              11,843
                              
                              
                              
                              (25,608
                              )Cash
      Flows From Financing Activities:Long
      Term Debt
                              
                              
                              -
                              
                              
                              
                              65,000Convertible
      Note
                              
                              
                              -
                              
                              
                              
                              50,000Line
      of Credit
                              
                              
                              577,584
                              
                              
                              
                              -Investor
      Profit Participation
                              
                              
                              -
                              
                              
                              
                              (41,356
                              )Proceeds
      from the sale of Common Stock
                              
                              
                              -
                              
                              
                              
                              150,000Net
      Cash Provided by Financing Activities
                              
                              
                              577,584
                              
                              
                              
                              223,644Net
      Change in Cash
                              
                              
                              (11,335
                              )
                              
                              
                              (63,445
                              )Cash
      and Cash Equivalents - Beginning
                              
                              
                              15,041
                              
                              
                              
                              78,486Cash
      and Cash Equivalents - Ending
                              
                              $
                              3,706
                              
                              
                              $
                              15,041Supplemental
      Cash Flow Disclosures:Taxes
                              
                              $
                              -
                              
                              
                              $
                              -Interest
                              
                              $
                              440,664
                              
                              
                              $
                              -Non-Cash
      Financing Transactions:Shares
      Issued for Services
                              
                              $
                              131,959
                              
                              
                              $
                              130,000Conversion
      of Indebtedness for Equity
                              
                              $
                              406,563
                              
                              
                              $
                              819,644Satisfaction
      of derivative liability
                              
                              $
                              503,873
                              
                              
                              $
                              -The
      accompanying notes are an integral part of these consolidated
      statements






F-6
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007




NOTE
1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES





Nature
of Business and History of Company





Secured
Financial Network, Inc. (originally Loughran/Go Corporation prior to name change
to 12 To 20 Plus, Inc.), was incorporated in April 26, 1996 and changed its name
to Secured Financial Network, Inc. (“the Company”) on January 11, 2005. From
January 2005 until December 2005 the Company engaged in investment of capital to
fund short-term transactions of close-out or distressed container sized
products.  From mid-2006, the Company restructured its focus entirely to
payment processing and build out of compliant Payment Gateway connecting
merchants to processors and transaction acquiring banks.




On
November 22, 2004, 12 To 20 Plus, Inc. entered into a share exchange agreement
with Secured Financial Network, Inc. pursuant to which an aggregate of
14,737,343 shares of the Company’s common stock, were issued, representing 94%
of the 15,693,478 shares of common stock outstanding after the closing. For
accounting purposes, the transaction is reflected as if 12 To 20 Plus, Inc. was
acquired by Secured Financial Network Inc. with the business of Secured
Financial Network Inc. being the successor entity. The acquisition was accounted
for as a recapitalization of the predecessor entity Secured Financial Network,
Inc. with the management of the predecessor entity Secured Financial Network,
Inc. controlling and operating the Company after the acquisition date. The
consolidated financial statements presented primarily represent the operations
of Secured Financial Network, Inc. from its inception date, November 10, 2004,
to the share exchange date. In addition, the capital structure of Secured
Financial Network, Inc. has been recapitalized to account for the equity
structure subsequent to the acquisition as if Secured Financial Network, Inc.
had been the issuer of the common stock for all periods presented.





Going
Concern





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time. The Company has incurred losses
since inception and has negative cash flows from operations. For the years ended
December 31, 2008 and 2007, the Company has incurred net losses of $1,291,851
and $1,676,894 respectively, a substantial portion of the debt is in default and
has a stockholders’ deficit of $3,872,028 as of December 31, 2008. The future of
the Company is dependent upon its ability to obtain additional equity and/or
debt financing and upon future successful development and marketing of the
Company’s products and services. Management is pursuing various sources of
equity and debt financing but cannot assure that the Company will be able to
secure such financing or obtain financing on terms beneficial to the Company.
Failure to secure such financing may result in the Company’s inability to
continue as a going concern and the impairment of the recorded long-lived
assets.





These
consolidated financial statements do not include any adjustments relating to the
recoverability and classifications of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.





Consolidation





The
accompanying consolidated financial statements of Secured Financial Network,
Inc., a Nevada corporation (the "Company"), include the accounts of the Company
and its wholly owned subsidiary, Virtual Payment Solutions, Inc, a Florida
Corporation ("VPS"). The Company created VPS in September of
2007.  All significant inter-company accounts and transactions are
eliminated in consolidation.





Reclassifications





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





Cash
and Cash Equivalents





For
purposes of the statement of cash flows, the Company considers cash and cash
equivalents to include all stable, highly liquid investments with maturities of
three months or less.




F-7
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007
  NOTE 1 - DESCRIPTION OF
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
continued




Accounts
Receivable and Revenue Recognition





Accounts
Receivable




The
Company estimates an allowance for doubtful accounts, sales returns and
allowances based on historical trends and other criteria.  At December
31, 2008 and 2007, there were no allowances on trade receivables from product
sales.  No bad debt expense was incurred in 2008 and 2007 as well on
product sales.





The
Company recognizes revenues associated with the sale of its products at the time
of delivery to customers.





Inventory





Inventories,
which are finished goods, are stated at the lower of cost (first-in, first-out
method) or market. A provision for excess or obsolete inventory is recorded at
the time the determination is made.





Furniture
and Equipment





Furniture
and equipment are stated at cost. When such assets are retired or otherwise
disposed of, the asset and related accumulated depreciation accounts are
relieved of the applicable amounts. Gains or losses from retirements or sales
are credited or charged to income.





The
Company depreciates its property and equipment under the straight-line method as
follows:




Furniture
            5
      yearsOffice
      equipment
            5
      years




Long
Lived Assets





In August
2001, SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived
Assets,” was issued establishing new rules and clarifying implementation issues
with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of,” by allowing a probability weighted cash
flow estimation approach to measure the impairment loss of a long-lived asset.
The statement also established new standards for accounting for discontinued
operations. Transactions that qualify for reporting in discontinued operations
include the disposal of a component of an entity’s operations that comprises
operations and cash flow that can be clearly distinguished, operationally and
for financial reporting purposes, from the rest of the entity. The Company
believes that, at December 31, 2007, an impairment existed as it related to it’s
$385,000 Envoii License Asset and $15,000 pre-paid License Fee and as such has
taken an impairment charge of $400,000.




Stock-Based Employee
Compensation





The
Company adopted SFAS No. 123R, “Share Based Payments.” SFAS No. 123R
requires companies to expense the value of employee stock options and similar
awards and applies to all outstanding and vested stock-based
awards.





In
computing the impact, the fair value of each option is estimated on the date of
grant based on the Black-Scholes options-pricing model utilizing certain
assumptions for a risk free interest rate; volatility; and expected remaining
lives of the awards. The assumptions used in calculating the fair value of
share-based payment awards represent management’s best estimates, but these
estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and the Company uses different
assumptions, the Company’s stock-based compensation expense could be materially
different in the future. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those shares expected to
vest. In estimating the Company’s forfeiture rate, the Company analyzed its
historical forfeiture rate, the remaining lives of unvested options, and the
amount of vested options as a percentage of total options outstanding. If the
Company’s actual forfeiture rate is materially different from its estimate, or
if the Company reevaluates the forfeiture rate in the future, the stock-based
compensation expense could be significantly different from what we have recorded
in the current period. The impact of applying SFAS No. 123R approximated
$134,559 and $130,000 in compensation expense during the year ended December 31,
2008 and 2007, respectively.  Such amount is included general and
administrative expenses on the statement of operations.





Business
and Credit Concentration





The
Company purchases its products for resale from two suppliers. As of December 31,
2008, the Company’s outstanding balance to these two suppliers was $100,068.30.
The loss of one or both of these suppliers could have a material adverse effect
upon its business for a short-term period of time.




F-8
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007
  NOTE 1 - DESCRIPTION OF
BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-
continued




Income
Taxes





The
Company accounts for its income taxes under the provisions of Statement of
Financial Accounting Standards 109 (“SFAS 109”). The method of accounting for
income taxes under SFAS 109 is an asset and liability method. The asset and
liability method requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between tax bases and financial reporting
bases of other assets and liabilities.





Net
Loss Per Share





The
Company adopted the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 128, “Earnings Per Share” (“EPS”) that established standards for
the computation, presentation and disclosure of earnings per share, replacing
the presentation of Primary EPS with a presentation of Basic EPS. The Company
does not have any quantifiable common stock equivalents outstanding as the
warrants attributed to the convertible debt are priced and calculated only upon
conversion of the related convertible debt. Once such convertible debt may be
converted and the number of warrants are determined, we will determine if the
inclusion of such warrants would be anti-dilutive, if so, such warrants would be
excluded from the computation of earnings per share.




Accounting
Estimates





Management
uses estimates and assumptions in preparing the Company’s consolidated financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that were used. The
reserves on the Company’s related party receivables could change in the near
future.





Fair
Value of Financial Instruments





Pursuant
to SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” the
Company is required to estimate the fair value of all financial instruments
included on its balance sheet as of December 31, 2008. The Company considers the
carrying value of accounts receivable, accounts payable and accrued expenses in
the consolidated financial statements to approximate their face value. The
Company has not made an evaluation of the fair value of the recorded notes
payable, derivative and liquidating liabilities on the secured convertible
notes, largely as a result of the undercapitalization of the
Company.





Recent
Accounting Pronouncements




FASB
141(revised 2007) – Business Combinations




In
December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business
Combinations. This Statement replaces FASB Statement No. 141, Business
Combinations. This Statement retains the fundamental requirements in
Statement 141 that the acquisition method of accounting (which Statement
141 called the purchase method) be used for all business combinations and for an
acquirer to be identified for each business combination. This Statement defines
the acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This Statement’s scope is broader than that of
Statement 141, which applied only to business combinations in which control was
obtained by transferring consideration. By applying the same method of
accounting—the acquisition method—to all transactions and other events in which
one entity obtains control over one or more other businesses, this Statement
improves the comparability of the information about business combinations
provided in financial reports.




This
Statement requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces Statement 141’s cost-allocation
process, which required the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair
values.




This
Statement applies to all transactions or other events in which an entity (the
acquirer) obtains control of one or more businesses (the acquiree), including
those sometimes referred to as “true mergers” or “mergers of equals” and
combinations achieved without the transfer of consideration, for example, by
contract alone or through the lapse of minority veto rights. This Statement
applies to all business entities, including mutual entities that previously used
the pooling-of-interests method of accounting for some business combinations. It
does not apply to: (a) The formation of a joint venture, (b) The acquisition of
an asset or a group of assets that does not constitute a business, (c) A
combination between entities or businesses under common control, (d) A
combination between not-for-profit organizations or the acquisition of a
for-profit business by a not-for-profit organization.




This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. An entity may not apply it
before that date. Management believes this Statement will have no impact on the
financial statements of the Company once adopted, unless any contemplated
acquisitions occur in the near future.




All other
new accounting pronouncements have deemed not relevant, as a result the adoption
of these other new accounting pronouncement is not expected to have any impact
once adopted.





F-9
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007


NOTE 2
- FURNITURE AND EQUIPMENT





Furniture
and equipment consisted of the following:




Year
      Ending December 31,Description
                    2008
                    
                    
                    2007Office
      furniture and equipment
                    
                    $
                    18,949
                    
                    
                    $
                    9,191Less:
      accumulated depreciation
                    
                    
                    (6,708
                    )
                    
                    
                    (3,524
                    )Property
      and equipment, net
                    
                    $
                    12,241
                    
                    
                    $
                    5,666




Depreciation
expense charged to operations totaled $3,183 and $2,138 in 2008 and 2007,
respectively.








NOTE 3
- LICENSE AGREEMENT





In
November 2006, as amended in February 2007, the Company acquired for $385,000 an
exclusive license agreement to provide e-commerce transaction processing through
a proprietary ‘bank-grade’ electronic-vault and electronic-wallet based payment
processing system (the “Envoii System”).





In
addition, $15,000 was prepaid as an annual maintenance fee with regard to this
electronic payment processing system, upon the purchase of the license
agreement. Once such system is placed in service, the annual maintenance fee
will be amortized over one year.





We
currently anticipate the Envoii System to be placed in service by November 1,
2009 depending upon our ability to secure needed financing, of which no
assurances are given.





We have
recorded a full reserve of $400,000 against the license and prepaid maintenance
fees, as we are currently unable to predict any reliable cash flow from the
implementation of the Envoii System. This license agreement is for a two-year
term, with an additional automatic twelve-month renewal, unless either party
terminates such agreement for any reason.





In
addition to the consideration paid for the purchase of such license agreement,
royalties are required to be paid at $0.20 per transaction or 20% of the gross
transaction, whichever is less,excluding micropayment transactions. The Company has guaranteed minimum
royalties to be paid in the amount of $50,000 in year three starting November 1,
2009, $100,000 for year four and $250,000 for each year thereafter in order to
keep exclusivity terms under this license agreement.





Accrued
Liabilities





Accrued
liabilities consisted of the following:




Year
      Ending December 31,2008
                    
                    
                    2007Accrued
      Other
                    
                    $
                    689
                    
                    
                    $
                    600Interest
                    
                    $
                    862,885
                    
                    
                    $
                    646,942Payroll
                    
                    $
                    103,000
                    
                    
                    $
                    127,000Payroll
      Taxes (a)
                    
                    $
                    62,452
                    
                    
                    $
                    65,092Total
                    
                    $
                    1,029,026
                    
                    
                    $
                    839,634





(a)
$51,122 of such payroll taxes are delinquent and are in arrears and are a result
of the failure to remit such payroll taxes in 2005. The Company is currently in
the process to settle such taxes due.







NOTE 4
- NOTES PAYABLE and NOTES RECEIVABLE





Investor Notes
Payable





During
2005 the Company issued seventeen (17) short-term notes (average 90-days) with a
specific rate of return to acquire funds to invest in high yield activities
(e.g. Container financing/investment). As of December 31, 2007, the Company’s
short-term notes payable
relating to its previous container financing business total $1,410,000. The
Company has also accrued $817,760 interest on these notes. All seventeen Notes
are in default and are accruing interest at the rate of 18% per
annum.




F-10
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007





NOTE 4 - NOTES
PAYABLE and NOTES RECEIVABLE-
continued




During
February 2007, the Company offered to the holders of its container financing
notes the option to convert into equity. In February the Company exchanged
$819,644 worth of principal, accrued interest, and profit participation debt
into 2,460,000 shares if its restricted common stock, 2,460,000 warrants
exercisable at $.10, and 2,460,000 warrants exercisable at $.50.





Promissory
Notes





On June
11, 2007 the Company entered into a promissory note for $50,000. Terms are 180
days at 14% interest with interest to be paid quarterly. Lender has the option
to convert principal into 2,000,000 shares of Company stock. Interest will still
be payable. The note continues to accrue interest at 14% per annum with interest
to be paid quarterly. The Company is in default on its note payments. The lender
has not exercised their right to convert to common shares of the
Company.





During
the fourth quarter of  2007 the Company entered into three promissory
notes totaling $65,000. Terms are for 24 months at 10% interest per annum with
interest to be paid quarterly. These notes mature between September and December
31, 2009.





Secured Convertible Notes
Payable




During
September and October 2006, (“Funding” dates) we issued in a private offering,
$597,500 aggregate principal amount of secured convertible notes (“Convertible
Notes”) with $400,000 due September 26, 2007, $100,000 due October 30, 2007, and
$ 97,500 due October 31, 2007.





The
Convertible Notes, bear interest at 10% per annum, are convertible as follows:
at any time, 90 days after funding is complete, but prior to repayment of all
amounts due as provided under the Convertible Notes, all or any portion of the
principal amount of the note shall be convertible at the option of the lender
into fully paid and non-assessable shares of the Company’s common stock. The
number of common shares of the Company that a Convertible Note holder (“Lender”)
shall be entitled to receive upon conversion shall be equal to the number
attained by dividing the principal, including accrued interest, pursuant to the
Convertible Note by the conversion price. The conversion price is the lesser of
$.10 per share, or one of the following times 60%:





a)
            the
      closing bid price for common stock on the trading day one day prior to a
      Lender’s notice of conversion, orb)
            the
      average closing bid price for common stock on the five trading days
      immediately prior to a Lender’s notice of conversion, or if registration
      statement is not effective on the 180 day anniversary of the Funding (“c”
      & “d” not otherwise applying),c)
            the
      closing bid price for common stock on the 180 day anniversary of the
      Funding, ord)
            the
      average closing bid price for common stock on the five trading days
      immediately prior to the 180 anniversary date of the
    Funding.





The
Lender shall not be entitled to convert, if such conversion would result in
beneficial ownership by the Lender and its affiliates of more than 9.99% of the
outstanding shares of common stock of the Company on such exercise or conversion
date, including:




(i) the
number of shares of common stock beneficially owned by the Lender and its
affiliates, and




(ii) the
number of shares of common stock issuable upon the exercise of the warrant
and/or options and/or conversion.





The
Convertible Notes and related agreements provide, among other things, for the
following as to each Convertible Note:





The
Company may elect to make principal and interest payments in freely tradable
shares in lieu of cash. The Company’s right to make such payment in shares in
lieu of cash can only be made if the volume weighted average price of the
Company’s common stock has been trading at a price of $0.25 or above per share
for 10 consecutive days prior to the date of the payment date and the average
daily trading volume is at least 15 times the number of shares to be so issued
as payment.





At any
time 90 days after funding is complete, but subject to customary equity
conditions, the Company may at any time, upon 30 days written notice, prepay all
of the outstanding Convertible Notes on a pro-rata basis at 110% of the
outstanding principal balance only after the Convertible Note has amortized one
year.





As
security for the repayment of all liabilities arising under the Convertible
Note, the Company granted to Lender a security interest in and a lien on
5,975,000 shares of common stock, issued with a restricted legend, hereafter
referred to as the “Collateral”. The Lender has the right to sell or hypothecate
such Collateral, to the extent permitted under applicable securities laws.
However, the Lender shall not sell more than 10% of the average daily volume in
any week. Such Collateral in 2008 was released to the lender for either converting
a portion of such Convertible Note to equity and/or the payment of accrued
interest. As of December 31, 2008 there is no Collateral.




F-11
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007
 
 NOTE 4 - NOTES
PAYABLE and NOTES RECEIVABLE-
continued





If the
Company raises money at a lower price than the Lender has purchased the shares,
upon conversion of such Convertible Note, then the Company will re-price the
Lender’s shares and warrants to that price. The Lender has the right of first
refusal of any financing for eighteen (18) months after the Funding. The Lender
will be notified prior to any other financing and have an option to respond with
competitive financing terms upon notification. The Company will not raise any
capital below 10 cents per share.




Notwithstanding
anything herein to the contrary, the Company will be allowed to raise additional
capital to complete its $1.5 million contemplated fund-raising.




The
Company shall file a Registration Statement with the U.S. Securities and
Exchange Commission (“the Commission”) in order to register the common shares
issuable upon conversion of the Convertible Note within sixty (60) calendar days
after the Funding Date (the “Filing Date”), and use its best efforts to cause,
such registration statement, to be declared effective not later than one hundred
and twenty (120) calendar days after the Funding Date (the “Effective Date”).
The Company will register not less than a number of shares of common stock in
the aforedescribed registration statement that is equal to 175% of the common
shares issuable upon conversion of all of the Collateral, and 100% of the
warrant shares issuable upon exercise of the warrants (collectively the
“Registrable Securities”). The Registrable Securities shall be reserved and set
aside exclusively for the benefit of the Lender, and not issued, employed or
reserved for anyone other than the Lender. The Registration Statement will
immediately be amended or additional registration statements will be immediately
filed by the Company as necessary to register additional shares of common stock
to allow the public resale of all common stock included in and issuable by
virtue of the Registrable Securities. Except with the written consent of the
Lender, or as described on Schedule 11.1, no securities of the Company other
than the Registrable Securities will be included in the Registration Statement.
It shall be deemed a Non-Registration Event if, at any time after the date the
Registration Statement is declared effective by the Commission, the Company has
registered for unrestricted resale on behalf of the Lenders fewer than 125% of
the amount of common shares issuable upon full conversion of all sums due
hereunder and 100% of the warrant shares issuable upon exercise of the
warrants.





The
Company and the Lender agree that the Lender upon conversion of the Convertible
Notes to common shares will suffer damages if the Registration Statement is not
filed by the Filing Date and not declared effective by the Commission by the
Effective Date, and it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, if (A) the Registration Statement is not
filed on or before the Filing Date, (B) is not declared effective on or before
the Effective Date, (C) due to the action or inaction of the Company, the
Registration Statement is not declared effective within 3 business days after
receipt by the Company or its attorneys of a written or oral communication from
the Commission that the Registration Statement will not be reviewed or that the
Commission has no further comments, (D) if the registration statement is not
filed within 60 days after written request of the Lender, or is not declared
effective within 120 days after such written request, or (E) any registration
statement is filed and declared effective but shall thereafter cease to be
effective without being succeeded within 15 business days by an effective
replacement or amended registration statement or for a period of time which
shall exceed 30 days in the aggregate per year (defined as a period of 365 days
commencing on the Actual Effective Date (each such event referred to in clauses
(A) through (E) herein as a “Non-Registration Event”), then the Company shall
deliver to the Lender of Registrable Securities, as liquidated damages
(“Liquidated Damages”), an amount equal to 5% for each 30 days or part thereof
of the face amount hereof. Liquidated Damages payable in connection with a
Non-Registration Event described in clause (B) above shall accrue from the
180th
calendar day after the Closing Date. The Company must pay the Liquidated Damages
in cash, except that the Lender may elect that such Liquidated Damages to be
paid with shares of common stock with such shares valued at sixty percent (60%)
of the Conversion Price in effect on each thirtieth day or sooner date upon
which Liquidated Damages have accrued. The Liquidated Damages must be paid
within 10 days after the end of each thirty (30) day period or shorter part
thereof for which Liquidated Damages are payable. In the event a Registration
Statement is filed by the Filing Date but is withdrawn prior to being declared
effective by the Commission, then such Registration Statement will be deemed to
have not been filed. All oral or written comments received from the Commission
relating to the Registration Statement must be adequately responded to within 30
days in connection with the initial filing of the Registration Statement and
within 10 business days in connection with amendments to the Registration
Statement after receipt of such comments from the Commission. Failure to timely
respond to Commission comments is a Non-Registration Event for which Liquidated
Damages shall accrue and be payable by the Maker to the Lenders of Registrable
Securities at the same rate set forth above. Notwithstanding the foregoing, the
Company shall not be liable to the Lender under Section 11.4 for any events or
delays occurring as a consequence of the acts or omissions of the Lender
contrary to the obligations undertaken by Lender in this Agreement.





Liquidated
Damages will neither accrue nor be payable pursuant to Section 11.4 nor will a
Non-Registration Event be deemed to have occurred for times during which
Registrable Securities are transferable by the Lender of Registrable Securities
pursuant to Rule 144(k) under the Securities Act of 1933, as
amended.






F-12
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007
 
 NOTE 4 - NOTES
PAYABLE and NOTES RECEIVABLE-
continued


In
addition to any other rights available to Lender, if the Company fails to
deliver to Lender unlegended shares as required pursuant to the Agreement,
within seven (7) business days after the unlegended shares delivery date and the
Lender purchases (in an open market transaction or otherwise) shares of common
stock to deliver in satisfaction of a sale by Lender of the shares of common
stock which the
Lender was entitled to receive from the Company (a “Buy-In”), then the Company
shall pay in cash to the Lender (in addition to any remedies available to or
elected by the Lender) the amount by which (A) the Lender’s total purchase price
(including brokerage commissions, if any) for the shares of common stock so
purchased exceeds (B) the aggregate purchase price of the shares of common stock
delivered to the Company for reissuance as unlegended shares together with
interest thereon at a rate of 15% per annum, accruing until such amount and any
accrued interest thereon is paid in full (which amount shall be paid as
liquidated damages and not as a penalty). For example, if Lender purchases
shares of common stock having a total purchase price of $11,000 to cover a
Buy-In with respect to $10,000 of purchase price of shares of common stock
delivered to the Company for reissuance as unlegended shares, the Company shall
be required to pay the Lender $1,000, plus interest. The Lender shall provide
the Company written notice indicating the amounts payable to the Lender in
respect of the Buy-In.





The
Company shall pay to Lender, at Closing, a fixed non-accountable allowance to
cover due diligence expenses of $1,500, plus 1.25% of the total amount invested
pursuant to each Closing. At the election of the Lender, or its designees, any
or all of the foregoing compensation and expense allowances can be taken in
kind, pursuant to the same terms and conditions as that of an investment herein,
for a like amount. Of the amounts advanced by the Lender to the Company, 10%
will be paid directly to Brass Bulls, Corp. on the Company’s behalf, as a
finder’s fee. This will be the Company’s expense and thus reduce the amount
otherwise payable to the Company. The Company has recorded $62,875 of fees
attributed to this financing, as deferred financing fees and will be expensed
ratably over the term of the Convertible Notes. There was $3,495 of amortization
recorded for the year ended December 31, 2006, attributed to these deferred
financing fees. The balance was expensed in 2007.




The
Lender or its designee, shall also be entitled to a commission of 5% of any and
all amounts received, directly or indirectly, by the Company and/or its
principals as a consequence of a merger, license or any other similar
arrangement or remuneration as a consequence of the efforts of the Lender or its
designee or agent.





In
connection with the issuance of the Convertible Notes, the Company issued 5-year
warrants to purchase an amount of Company stock up to a limit of 30% of the
principal amount of the note. The exercise price of the warrants is equal to
300% of the conversion price of the Convertible Note.





The
Company recognized a debt discount of $ 540,039 at the date of issuance of the
Convertible Notes. The debt discount of $540,039 is comprised of $69,605 for the
detachable warrants and $470,434 for the beneficial conversion features of the
Convertible Notes. The beneficial conversion features were recorded in
accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-27, Application
of Issue No. 98-5 to Certain Convertible Instruments and EITF Issue No. 98-5,
Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios”. The debt discount is recognized over
the term of the Convertible Notes of one year. There was $65,065 of amortization
recorded for the year ended December 31, 2006, attributed to this debt discount.
The balance was expensed in 2007.





Notes
Receivable





On August
31, 2007 the Company sold its interest in the “All In Mall” to Goldmill
Productions, LLC (“Goldmill”) for the sum of $75,000. Payments were to be made
in 24 monthly payments of $3,125 beginning no later than December 1, 2007.
Goldmill is currently in default on said payments to the Company. As a result of
the note being in default the Company has recorded a full reserve of $75,000.
The Company has not received any of the scheduled payments as of March 31,
2009.





During
2008, $300,000 of the related Convertible Note  and accrued interest
was retired via the issuance of 1,500,000 shares of common stock and the release
of 3,000,000 shares held in escrow for the Lender. In addition in 2008, another
$96,314 of accrued interest on the Convertible Notes was satisfied with
2,975,000 shares of common stock held as Collateral for the Lender.





Line of
Credit





During
April 2008, the Company entered into a $500,000 line of credit with Commercial
Holding, AG and amended in December 2008 to increase such line of credit to
$700,000. Terms of the line of credit include interest payable at the rate of
10% per annum and repayment of principal by December 31, 2009, as amended. As
part of the agreement dated April 29, 2008, Commercial Holding, AG agreed to
assume $172,700 worth of notes previously owed by the Company to another
creditor. This amount represents all of the borrowings by the Company from this
other creditor in 2008. As additional consideration to Commercial Holding AG for
entering into the line of credit, the Company agreed to immediately issue to
Commercial Holding AG 2,000,000 shares of Rule 144 restricted Company stock and
a warrant to purchase 1,000,000 shares of common stock, exercisable for 5 years
at $.25 per share. Such equity issuances have been valued at $59,284 and
expensed as interest in 2008, as the original maturity date of the original line
of credit was December 2008. As consideration for the December 2008 amendment to
the line of credit another 2,000,000 shares of common stock and a warrant to
purchase 1,000,000 shares of common stock, exercisable for 5 years at $.25 per
share were issued. Interest expense of $8,263 was recorded and attributed to the
December 2008 equity issuances in 2008, with another $139,724 recorded as
deferred financing costs to be amortized through December 2009. As of December
31, 2008 there remains $109,186 of unused credit line.




F-13
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007




NOTE 5
- DERVATIVE AND LIQUIDATING LIABILITES





During
the year ended 2007, the Company recognized derivative liabilities in the amount
of $776,816 pursuant to EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to and Potentially Settled in a Company’s Own Stock and
$169,375 of liquidating damages liabilities pursuant to Financial Accounting
Standards Board Staff Position - FSP No. EITF 00-19-2, Accounting for
Registration Payment Arrangements, all attributed to the terms of the
Convertible Notes. A derivative liability was required to be recorded
fundamentally due to the nature of the conversion terms, provide that the
Company could potentially be in the position of delivering more shares than the
Company has authorized to issue for the satisfaction of the conversion of the
Convertible Notes and the exercise of the related warrants. Due to the nature of
calculating the amount of warrants to issue and the exercise price, the Company
is in the position of issuing another 10% more shares over the shares issued for
the conversion of the Convertible Notes.





The
Liquidating Damages liability relates to the recognition of an expense for the
anticipated failure by the Company to comply with certain registration rights
held by the holders of the Convertible Notes and obtain an effective
registration of the required shares issuable upon conversion of the Convertible
Notes and the exercise of related the warrants, described earlier. We have
recorded the maximum anticipated penalties to be incurred for the failure to
register the required common shares potentially issuable for the conversion of
the Convertible Notes and the exercise of the warrants, through September 26,
2007, the maturity date of the first installment of such Convertible Notes. The
penalty calculated was based on 5% of the outstanding Convertible Notes,
commencing on 180 days from the date of such Convertible Note agreements
executed, through September 26, 2007. An expense has been recorded for the
increase in the derivative liability during the year in the amount of $83,313 as
a cost of maintaining such debt arrangements, as the terms of such debt
arrangements are overly burdensome. There are no maximum penalty terms for the
failure to obtain an effective Registration.





During
2008, $300,000 of the related convertible debt and accrued interest was retired
via the issuance of 4,500,000 shares of common stock. As a result of the
satisfaction of such convertible debt the attributed portion of such derivative
liability of $503,873 was recorded as a contribution to paid in
capital.




The fair
value of the total derivative liabilities recorded of $558,748 as of December
31, 2008 is comprised of two components, one component of the liability
estimated of $474,415 attributed to the Convertible Notes conversion factor of
60% of market, but not more than $0.10 and another component of the liability
estimated to be $84,333, attributed the warrants exercise price to be 300% of
the conversion price, once fixed. The estimated derivative liabilities recorded
were computed utilizing the Black Scholes model, with the following assumptions
for the three Convertible Note agreements executed as follows;





Convertible
      Note into Shares
                      
                      
                      Exercise
      of WarrantsMarket
      Price of Stock
                      
                      $
                      0.055
                      
                      
                      $
                      0.055Exercise
      Price
                      
                      $
                      0.033
                      
                      
                      $
                      0.033Term
                      
                      Half
      Year
                      
                      
                      4.5
      YearsVolatility
                      
                      
                      372
                      %
                      
                      
                      372
                      %Risk
      Free Rate
                      
                      
                      1.72
                      %
                      
                      
                      1.72
                      %Number
      of Shares Assumed Issuable
                      
                      
                      9,015,152
                      
                      
                      
                      901,515







NOTE 6
- EQUITY TRANSACTIONS





Common
Stock





On
November 22, 2004, 12 To 20 Plus, Inc. entered into a share exchange agreement
with Secured Financial Network, Inc. pursuant to which an aggregate of
14,737,343 shares of the Company’s common stock were issued, representing 94% of
the 15,693,478 shares of common stock outstanding after the closing. For
accounting purposes, the transaction is reflected as if the 12 To 20 Plus, Inc.
was acquired by Secured Financial Network Inc. with the business of Secured
Financial Network Inc. being the successor entity. The acquisition was accounted
for as a recapitalization of the predecessor entity Secured Financial Network,
Inc. with the management of the predecessor entity Secured Financial Network,
Inc. controlling and operating the Company after the acquisition date. The
financial statements presented primarily represent the operations of Secured
Financial Network, Inc. from its inception date, November 10, 2004, to the share
exchange date. In addition, the capital structure of Secured Financial Network,
Inc. has been recapitalized to account for the equity structure subsequent to
the acquisition as if Secured Financial Network, Inc. had been the issuer of the
common stock for all periods presented.





The
Company has authorized 100,000,000 shares of common stock with a par value of
$0.001 per share.




In 2004,
the Company created an employees and consultants stock plan, called “2004
Employees/Consultants Common Stock Compensation Plan” (the “Plan”). The plan is
authorized to issue up to 10,000,000 shares of common stock to employees and
consultants.




F-14
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007





NOTE 6 - EQUITY
TRANSACTIONS-
continued




During
2007, the following equity transactions occurred:





During
the past two years we sold the following securities under the Securities Act of
1933, as amended (the “Securities Act”) based upon the limited number of
offerees, their relationship to the Company, the number of shares of securities
offered, the size of the offering, and the number of such
offerings.





In 2007,
the Company sold 3,000,000 shares of common stock for cash totaling of $150,000
at share prices ranging from $0.05 to $0.09.





In 2007,
the Company issued 2,460,000 shares of its common stock to retire debt totaling
$819,644. The 2,460,000 shares, 2,460,000 five year warrants exercisable at $.10
and 2,460,000 five year warrants exercisable at $.50 were issued to 13 Container
Note Holders in exchange for their notes payable and associated interest due
them from the Company.





In 2007,
the Company issued 1,866,666 shares of its common stock in exchange for $80,000
of services and accrued compensation at share prices ranging from $0.02 to
$0.07.





On June
11, 2007 the Company entered into a promissory note in the amount of $50,000.
The principal of this note is convertible, at the option of the note holder into
2,000,000 shares of the Company’s common stock and was issued 350,000 shares of
common stock with this debt issuance. The combination of the debt discount and
the beneficial conversion rights was valued at $50,000 and expensed





During
2008, the following equity transactions occurred:




In 2008,
the Company issued 4,349,132 shares of its common stock to retire debt totaling
$512,878. 3,500,000 shares were issued to convertible note holders, 200,000
shares were issued to a supplier, and 649,132 shares were issued to Commercial
Holding AG for accrued interest on our credit line. Another 5,975,000 of shares
of common stock held in escrow as Collateral were released to the convertible
note holders.





In 2008,
the Company issued 2,600,000 shares of its common stock in exchange for $63,000
of services.





In 2008,
the company issued 4,000,000 shares of it’s common stock in exchange for
$140,000 in interest expenses.





On
November 25, 2008, the Company entered into a service agreement
whereby  options to purchase 2,000,000 shares of Company stock at the
price of $.05 were issued for such services. This value of this option was
expensed in 2008 in the amount of $ 71,559.





A summary
of the activity of options issued for the years ended December 31, 2008
and  2007 is as follows:





Weighted
      AverageStock
      Options
                  
                  
                  Exercise
      PriceOutstanding
                  
                  
                  Exercisable
                  
                  
                  Outstanding
                  
                  
                  ExercisableBalance
      – December 31, 2006
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -Granted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Canceled
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Balance
      – December 31, 2007
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Granted
                  
                  
                  2,000,000
                  
                  
                  
                  2,000,000
                  
                  
                  
                  .10
                  
                  
                  $
                  .10Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Canceled
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Balance
      – December 31, 2008
                  
                  
                  2,000,000
                  
                  
                  
                  2,000,000
                  
                  
                  $
                  .10
                  
                  
                  $
                  .10





Information,
at date of issuance, regarding stock option grants for the year ended December
31, 2008:





Options
                        
                        
                        Weighted
                          Average
                          Exercise Price
                        
                        
                        Weighted
                          Average
                          Fair
                          ValueYear
      ended December 31, 2008:Exercise
      price exceeds market price
                        
                        
                        2,000,000
                        
                        
                        $
                        .10
                        
                        
                        $
                        .036Exercise
      price equals market price
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -Exercise
      price is less than market price
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        -




F-15
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007
 
 NOTE 6 - EQUITY
TRANSACTIONS-
continued


The
following table summarizes information about stock options outstanding and
exercisable at December 31, 2008:





Number
                    Outstanding
                  
                  
                  Weighted-
                    Average
                    Remaining
                    Life
      in
                    Years
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Number
                    ExercisableRange
      of exercise prices:$.10
                  
                  
                  
                  2,000,000
                  
                  
                  
                  4.92
                  
                  
                  $
                  .10
                  
                  
                  
                  2,000,000





These
options issued in 2008 were fully vested and expensed in 2008.





A summary
of the activity of warrants issued for the years ended December 31, 2008 and
2007 is as follows:





Weighted
      AverageWarrants
                      
                      
                      Exercise
      PriceOutstanding
                      
                      
                      Exercisable
                      
                      
                      Outstanding
                      
                      
                      ExercisableBalance
      – December 31, 2006
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      $
                      -
                      
                      
                      $
                      -Granted
                      
                      
                      6,205,000
                      
                      
                      
                      6,205,000
                      
                      
                      
                      .26
                      
                      
                      
                      .26Exercised
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Canceled
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Balance
      – December 31, 2007
                      
                      
                      6,205,000
                      
                      
                      
                      6,205,000
                      
                      
                      
                      .26
                      
                      
                      
                      .26Granted
                      
                      
                      2,000,000
                      
                      
                      
                      2,000,000
                      
                      
                      
                      .18
                      
                      
                      
                      .18Exercised
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Canceled
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Balance
      – December 31, 2008
                      
                      
                      8,205,000
                      
                      
                      
                      8,205,000
                      
                      
                      $
                      .24
                      
                      
                      $
                      .24





Information,
at date of issuance, regarding warrant grants for the year ended December 31,
2008:





Warrants
                    
                    
                    Weighted
                      Average
                      Exercise Price
                    
                    
                    Weighted
                      Average
                      Fair
                      ValueYear
      ended December 31, 2008:Exercise
      price exceeds market price
                    
                    
                    2,000,000
                    
                    
                    $
                    .18
                    
                    
                    $
                    .03Exercise
      price equals market price
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Exercise
      price is less than market price
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -





The
following table summarizes information about stock warrants outstanding and
exercisable at December 31, 2008:





Number
                    Outstanding
                  
                  
                  Weighted-
                    Average
                    Remaining
                    Life
      in
                    Years
                  
                  
                  Weighted
                    Average
                    Exercise
                    Price
                  
                  
                  Number
                    ExercisableRange
      of exercise prices:$.05
      to $.09
                  
                  
                  
                  285,000
                  
                  
                  
                  1.89
                  
                  
                  $
                  .05
                  
                  
                  
                  285,000$.10
      to $.49
                  
                  
                  
                  5,460,000
                  
                  
                  
                  1.167
                  
                  
                  
                  .14
                  
                  
                  
                  5,460,000$.50
                  
                  
                  
                  2,460,000
                  
                  
                  
                  1.167
                  
                  
                  
                  .50
                  
                  
                  
                  2,460,000





At
December 31, 2008, there remains $139,724 of unamortized expense yet to be
recorded related to all warrants outstanding.





F-16
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007


NOTE 7
- INCOME TAXES





The
provisions for income taxes for the year ended December 31, 2008 and 2007
consisted of the following:




Year
      EndedDecember
      31, 2008
                        
                        
                        December
      31, 2007Income
      tax attributable to:Federal
                        
                        
                        (452,000
                        )
                        
                        
                        (587,000
                        )State
      tax benefits
                        
                        
                        (64,000
                        )
                        
                        
                        (84,000
                        )Permanent
      Differences – Beneficial conversion
                          features,
      equity based compensation, derivative expense
                        
                        
                        190,000
                        
                        
                        
                        355,000Change
      in valuation allowance
                        
                        
                        326,000
                        
                        
                        
                        316,000Net
      amount
                        
                        $
                        -
                        
                        
                        $
                        -





The
cumulative tax effect at the expected rate of 40% of significant items
comprising our net federal and state deferred tax amount is as
follows:




December
      31, 2008
                                        
                                        
                                        December
      31, 2007Deferred
      tax asset attributable to:Net
      operating loss carryover
                                        
                                        $
                                        2,052,000
                                        
                                        
                                        $
                                        1,726,000Intangible
      write-off
                                        
                                        
                                        160,000
                                        
                                        
                                        
                                        160,000Accounts
      receivable allowance
                                        
                                        
                                        30,000
                                        
                                        
                                        
                                        30,000Net
      deferred tax asset
                                        
                                        $
                                        2,242,000
                                        
                                        
                                        $
                                        1,916,000Valuation
      allowance
                                        
                                        
                                        (2,242,000
                                        )
                                        
                                        
                                        (1,916,000
                                        )Net
      deferred asset
                                        
                                        $
                                        -0-
                                        
                                        
                                        $
                                        -0-




At
December 31, 2008, we had an unused net operating loss carryover approximating
$5,600,000 that is available to offset future taxable income; it expires
beginning in 2023 through 2028. In accordance with Section 382 of the Internal
Revenue Code of 1986, as amended, a change in equity ownership of greater than
50% of the Company within a three year period can result in an annual limitation
on the Company’s ability to utilize its NOL carryforwards that were created
during tax periods prior to the change in ownership. The Company has not
performed such an evaluation to determine whether the net operating loss
carryforwards have been limited, but we believe the net operating loss
carryforwards prior to the merger on January 11, 2005 approximating $800,000 are
limited to the extent they are virtually not usable.




The
valuation of the deferred tax asset increased by approximately $326,000 for
2008, while the temporary differences increased by $190,000.




Due to
net operating losses and the uncertainty of realization, no tax benefit has been
recognized for operating losses. The Company’s ability to utilize its net
operating loss carry forwards is uncertain and thus a valuation reserve has been
provided against the Company’s net deferred tax assets.





The
Company has not filed its federal or state income tax returns for several years
due to its limited financial resources.








NOTE 8
- RELATED PARTY TRANSACTIONS





Michael
Fasci received 500,000 shares of Rule 144 restricted Company stock valued at
$5,000 related to his employment agreement, with a base salary of $80,000 per
year, effective August 1, 2008. Mr. Fasci also received 250,000 shares of Rule
144 restricted Company stock valued at $2,500 related to his service as a
director in 2007.





David
Rappa received 100,000 shares of Rule 144 restricted Company stock valued at
$3,000 related to his employment agreement, with a base salary of $81,000,
effective September 1, 2008. Such employment agreement also requires the payment
of commissions on gross profit ranging from 1% to 13%, depending on the
origination of sales generated. Nexus, Inc. received 200,000 shares of Rule 144
restricted Company stock valued at $4,000 related to the settlement of debt.
Nexus, Inc. is owned by Mr. Rappa.




Jeffery
Schultz received 500,000 shares of Rule 144 restricted Company stock valued at
$15,000 related to his employment agreement, with a base salary of $130,000 per
year effective October 1, 2008. Mr. Schultz also received 250,000 shares of Rule
144 restricted Company stock valued at $7,500 related to his service as a
director in 2007.




F-17
 SECURED
FINANCIAL NETWORK, INC.
 NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
 YEARS
ENDED DECEMBER 31, 2008 and 2007


NOTE 9
- LEASE COMMITMENTS





The
Company currently leases its office space with a 36-month term lease expiring at
October 31, 2010 at a rate of $2,255 per month.




The
Company incurred rent expense of $24,979 and $4,212, for the years ended
December 31, 2008 and 2007, respectively.








NOTE
10 - SUBSEQUENT EVENTS





On
February 27, 2009 The Nutmeg Group, LLC amended the terms of its $297,500
convertible note with the Company. A copy of the amendment can be found in the
exhibits section of this Form 10-K.





On March
24. 2009 The Securities and Exchange Commission sought and was granted emergency
relief against The Nutmeg Group LLC, a convertible note holder of the Company.
Further information can be found at
http://www.sec.gov/litigation/litreleases/2009/lr20972.htm.




On March
24, 2009, the Company entered into a five year Reseller Agreement with our major
supplier. This Reseller Agreement has minimum monthly purchase
requirements.






















F-18