**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


****




**FORM
      10-KSB**


**FOR
      ANNUAL AND TRANSITION REPORTS**


**PURSUANT
      TO SECTIONS 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**


(MarkOne)





**x
      ANNUAL REPORT PURSUANT
      TO SECTION 13 OR**


**15(d)
      OF**


**THE
      SECURITIES EXCHANGE ACT OF 1934.**





**For
      the fiscal year ended December 31, 2006**





**OR**





**o
      TRANSITION REPORT
      PURSUANT TO**


**SECTION
      13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934.**




**Commission
      File No. 333-5278-NY**





**Migo
      Software, Inc.**


(Name
      of
      small business issuer in its charter)


**Delaware**
              **94-3334052****(State
                  or other jurisdiction of**
              **(I.R.S.
                  Employer Identification No.)****incorporation
                  or organization)**
 ****
              ******555
                  Twin Dolphin Drive, Suite 650****Redwood
                  City, California**
              **94065****(Address
                  of principal executive offices)**
              **(Zip
                  Code)**




**Issuer’s
      telephone number: (650) 232-2600**





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


**Securities
      registered pursuant to Section 12(g) of the Act: NONE**





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange ActYES
oNO x




Check
      whether the issuer (1) filed all reports required to befiled
      by
      Section 13 or 15(d) ofthe
      Exchange Act during the past 12 months (or for suchshorter
      period that the registrant was required to file such reports), and (2)has
      been
      subject to such filing requirements for the past 90 days. Yes x Noo





Check
      if
      there is no disclosure of delinquent filers in response to Item 405of
      Regulation S-B contained in this form, and no disclosure will be
      contained,to the
      best of registrant’s
      knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or
      anyamendment
      to this Form 10-KSB. o




**Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).YES o NO
x**





State
      issuer’s
      revenues
      for the most fiscal year (January 1, 2006- December 31, 2006)
      $345,228




State
      the
      aggregate market value ofthe
      voting
      and non-votingcommon
      equityheld
      by
      non-affiliatescomputed
      by reference to the price at which the common equity was sold, or the average
      bid and asked price of such common equity, as of a March 12, 2007: approximately
      $16,000,000. This figure has been calculated by excluding shares owned
      beneficially by directors and executive officers as a group from total
      outstanding shares solely for the purpose of this
      response.




State
      the
      number of sharesoutstanding
      of each of the issuer’s classes of common equity,
      asof
      the
      latest practicable date: 93,719,677 as of March 12, 2007.




Documents
      Incorporated by Reference: portions of the proxy statement, to be used in
      connection with the solicitation of proxies to be voted at the registrant's
      annual meeting of stockholders to be held on June 20, 2007 and to be filed
      with
      the Commission, are incorporated by reference into Part III of this Report
      on
      Form 10-KSB.




**Transitional
      Small Business Disclosure Format (check one): Yes o No x**











PART
      I.





This
      Form
      10-KSB contains forward-looking statements including, without limitation,
      statements concerning the future of the industry in which we operate, our
      product development plans, business strategy, financial estimates, continued
      acceptance of our products and dependence on significant distributors and
      customers. In some cases, you can identify forward-looking statements by
      terminology such as "may", "will", "should", "expects", "plans", "anticipates",
      "believes", "estimates", "predicts", "potential", "continues" or the negative
      of
      such terms or other comparable terminology. You should not place undue reliance
      on the forward-looking statements contained in this document. When considering
      forward-looking statements, you should keep in mind the risk factors and other
      cautionary statements made in this Annual Report on Form 10-KSB. Forward-looking
      statements, particularly those concerning anticipated events relating to the
      development and marketing of our products and the timing or magnitude of those
      events, are inherently uncertain. The risk factors discussed below and other
      considerations noted throughout this Annual Report on Form 10-KSB could cause
      our actual results to differ significantly from those contained in any
      forward-looking statements.





Although
      we believe that the expectations reflected in the forward-looking statements
      are
      reasonable, we cannot guarantee future results, levels of activity, performance,
      or achievements. We undertake no obligation to publicly update or revise any
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





As
      used
      in this report, the terms “we”, “us”, “our”, “our company” and “Migo” mean Migo
      Software, Inc. and its subsidiaries.








Migo ® is a
      registered trademark of ours. Microsoft ® ,
      Window s ® ,
      Outlook ® ,
      and
      MSN ® are all
      registered trademarks of Microsoft Corporation. Lotus Notes ® is a
      registered trademark of Lotus Development Corporation.









ITEM
      1.
      DESCRIPTION OF BUSINESS





Migo
      Software, Inc is a leading provider of mobile data and communications software.
      We are in the business of developing, acquiring and marketing software designed
      to improve the way information is personalized, secured, carried and accessed.





Our
      software is focused on the relationship between people, computers and
      information. Our flagship product, ***Migo*** ***®*** ,
      allows
      users to synchronize their personalized computing environments - including
      email, digital media, and other data and application settings - to any portable
      storage device (flash/hard disk drives, smart phones, and MP3 players). Users
      can then simply connect their Migo-synchronized devices it to any “guest”
computer and be able to access their own data and work with it as if they were
      using their own PCs. Migo leaves no trace of the user’s activities behind when
      working on the “guest” computer, ensuring that their data is safe and secure.
      When users return to their “home” computer, Migo automatically synchronizes the
      latest updates and changes back to the “home” computer. Migo unties people from
      their computers, allowing them to carry their digital lives with them wherever
      they go.




In
      December 2006, we acquired all the software titles of StompSoft, Inc., adding
      a
      wide assortment of related consumer oriented software to our product line.
      In
      September 2006 we entered into a new OEM partnership relationship with Kingston
      Technology Corporation, granting Kingston a global license to install our
      software on their line of flash memory products. Going forward, we are seeking
      additional acquisition and partnership opportunities to expand our product
      line
      and user base, worldwide.




**Our
      Current Software Product Line**




Migo
      Software products solve a number of common, significant problems for computer
      users, and offer a variety of management tools that give users control over
      the
      way their data is stored, accessed and managed. Current products
      include:




·
            ***Migo®***-
                Provides avery
                easy means for users to take their unique, personal data with them,
                without the need to bring along their laptop or link back to their
                office
                machine. Migo® allows users to easily load their entire personalized
                desktop environment, Microsoft® Outlook®, or Outlook Express® e-mail,
                Internet Explorer or Mozilla favorites, wallpaper, presentations,
                photos,
                MP3 audio files and/or various other files, and then access their
                personal
                data on any other Windows-based, “guest” computer. Migo® is designed so
                that once it has been disconnected from a “guest” computer, no trace of
                the user's computer environment or its data will be left behind on
                the
                “guest” computer.




·
            ***XP
                to Vista Easy-Sync Suite***-
                Provides a safety net and applications support for users transitioning
                their data and computing environment to a new or upgraded computer
                running
                Microsoft’s Windows Vista Operating
                System.




·
            ***Registry
                Repair***-
                Fixes some of the most vexing computer problems experienced by users,
                including system lock-ups and freezes. The software also increases
                computer speed and stability.




·
            ***PC
                BackUp***-
                Simplifies the critical computer backup process while providing a
                comprehensive disaster recovery
                tool.




·
            ***Recover
                Lost Data***-
                A
                powerful utility for recovering from mistakes by retrieving files
                that
                were lost or accidentally deleted.




·
            ***Digital
                Vault / Portable Vault***-
                A
                set of security products that allows, users to protect their data
                on their
                PCs and on their portable storage devices. Digital Vault also allows
                users
                to send and receive encrypted files that can be read only by the
                intended
                recipient with the included Digital Vault Reader.









·
            ***Digital
                File Shedder***-
                Easily and securely wipes away confidential files, system history,
                deleted
                emails and the like to maintain a user’s digital
                privacy.




·
            ***DriveWasher***-
                Wipes an entire hard drive clean of sensitive data to help prevent
                identity theft and protect privacy.




·
            ***Easy
                PC Transfer***-Simply and safely transfers contents of one PC to
                another.




**Market
      Channels**





To
      market
      our software, we currently have three major distribution channels; OEM
      partnerships, major retailers, and the sale of our software via various
      websites. We have also entered into distribution and reseller agreements to
      sell
      our products in Japan and are seeking other resellers outside the United States.
      Below is a partial list of our customers in each marketing channel:





**OEM
                Agreements**
            
            **Major
                Retailers**
            
            **E
                Commerce\Web Sites**Kingston
                Technologies
            
            Fry’s
                Electronics
            
            www.migosoftware.comSanDisk
                Corporation
            
            CompUSA
            
            www.stompsoft.comSam’s
                Club
            
            www.download.comOffice
                Depot
            
            www.U3.comMicro
                Center
            
            www.migosoftware.jpTarget
            
            www.hp.comCircuit
                City




**Future
      R&D Efforts**





Migo
      Software products are designed to make the computing experience easy, safe,
      and
      more adaptable to a user’s needs. Our ongoing
      research and development continue to focus on increasing the scope of our
      product set, and the range of applications to which they can be applied. Our
      research and development expenses totaled $1,914,997 for the twelve months
      ended
      December 31, 2006 compared with $590,291 for
      the
      nine months ended December 31, 2005, as we continued to invest heavily to create
      new versions of our Migo software technology.





**Agreement
      with Kingston Technology**





On
      September 5, 2006, we entered into a License Agreement and a Common Stock and
      Warrant Purchase Agreement with Kingston Technology Corporation ("Kingston").
      Under the License Agreement, Kingston agreed to pay us $1,850,000 for global
      marketing and distribution rights to load currently available and future product
      releases of Migo's software on Kingston's flash memory products through December
      2007. The license fee was payable $850,000 upon signing the agreement and the
      receipt of the next $1,000,000 is contingent upon Migo meeting certain mutually
      agreed upon R&D milestones by April 1, 2007. The agreement is renewable by
      Kingston for one additional year at a license fee to be agreed upon. The initial
      payment of $850,000 was received in September, 2006 and was recorded as deferred
      revenue at September 30, 2006, and will be amortized quarterly through December
      31, 2007.










Under
      the
      Common Stock and Warrant Purchase Agreement, Kingston paid $150,000 for the
      purchase of 468,750 shares of our common stock and warrants to purchase up
      to
      950,000 shares of our common stock. The warrants are exercisable at $0.35 per
      share, expire in September 2011, unless theretofore exercised and permit
      cashless exercise.





**Agreement
      with SanDisk Corporation (Formerly M SYSTEMS FLASH DISK PIONEERS
      LTD.)**





On
      March
      30, 2005, we entered into a three-year Development Agreement with Sandisk
      (formerly, M-Systems Flash Disk Pioneers, Ltd.) Pursuant to the Development
      Agreement, we granted to M-Systems and its affiliates a worldwide, transferable
      license to use and distribute our Migo products, and to use related trademarks,
      as an integrated part of M-Systems' USB flash drive product lines. Migo products
      are offered to M-Systems customers with either (i) limited functionality or
      (ii)
      full functionality for a period of 45 days, after which the end-user may
      purchase a license directly from us to continue full functionality or otherwise
      retain limited functionality. We have continued to develop software
      applications to bundle our Migo products with M-Systems USB Drives, and we
      agreed to provide first level support for Migo products to M-Systems and
      M-Systems' customers and end-users, if desired.





**Patents,
      Proprietary Technology and Other Intellectual Property**





We
      rely
      primarily on a combination of copyright, trademark and patent laws, trade
      secrets, confidentiality procedures and contractual provisions to protect our
      proprietary technology. For
      example ,
      we seek
      to avoid disclosure of our trade secrets by requiring those persons with access
      to our proprietary information to execute confidentiality agreements with us
      and
      by restricting access to our software source code. We also rely on unpatented
      proprietary know-how in developing our products, and employ various methods,
      including confidentiality agreements with employees, consultants and others,
      to
      protect our trade secrets and know-how.





Irrespective
      of the foregoing, we cannot be sure that these methods of protecting our
      proprietary technology, information and know-how will afford adequate
      protection. Patents may not be enforceable or provide us with meaningful
      protection from competitors. If a competitor were to infringe on our patents,
      the costs of enforcing our patent rights might be substantial or even
      prohibitive. Likewise, we cannot be sure that others will not independently
      develop our trade secrets and know-how or obtain access to them.





Despite
      our efforts to protect our proprietary rights, others may attempt to copy
      aspects of our products or to obtain and use information that we regard as
      proprietary. Policing unauthorized use of our products is difficult, and while
      we are unable to determine the extent to which piracy of our software products
      exists, software piracy can be expected to be a persistent problem. In addition,
      the laws of many countries do not protect our proprietary rights to as great
      an
      extent as do the laws of the United States. There can be no assurance that
      our
      means of protecting our proprietary rights will be adequate or that our
      competitors will not independently develop similar technology.





We
      expect
      that software product developers will increasingly be subject to infringement
      claims as the number of products and competitors in our industry segment grows
      and the functionality of products in different industry segments overlap. Any
      such claims, with or without merit, could be time-consuming, result in costly
      litigation, cause product shipment delays or require us to enter into royalty
      or
      licensing agreements. Such royalty or licensing agreements, if required, may
      not
      be available on terms acceptable to us or at all, which could have a material
      adverse effect upon our business, results of operations and financial
      condition.










**Governmental
      Regulation**





Our
      products are not subject to approval from the United States government, with
      the
      exception of export restrictions to certain countries. Our business operations
      do not fall under federal, state, or local environmental regulations. We do
      not
      anticipate current or future government regulation to have a material adverse
      effect on our capital expenditures, earnings, or competitive
      position.





However,
      any additional government regulation of imports or exports could adversely
      affect our international and domestic sales. The United States and various
      foreign governments have imposed controls, export license requirements and
      restrictions on the import or export of some technologies, especially encryption
      technology. From time to time, government agencies have proposed further
      regulation of encryption technology. Additional regulation of encryption
      technology could add to the expense of product development and enhancements.
      Because foreign competitors are subject to less stringent controls on the export
      of encryption technology, they may have
      a competitive advantage over us in both foreign and domestic technology
      markets.





**Employees**





As
      of
      March 15, 2007, we had 36 full-time employees, as well as a number of
      consultants who provided administrative and management services similar to
      those
      that would be provided by full and part-time employees. We have also entered
      into consulting agreements to obtain counsel and services relating to marketing,
      media relations and business development.





**History**




We
      were
      founded in May 2002 as PowerHouse Studios, Inc. ( “ PowerHouse
      Studios ” ). On
      June
      18, 2004, we acquired the 51% of First Person Software, Inc. (“First Person”)
      that we did not previously own; the transaction was effected through a merger
      of
      First Person with and into PowerHouse Acquisition, LLC (“PowerHouse
      Acquisition”), a wholly-owned subsidiary of ours, with PowerHouse Acquisition
      remaining as the surviving entity. For
      accounting and financial purposes, PowerHouse Studios is considered our
      predecessor, and we prepare and report on our financial statements, including
      those contained in this Annual Report on Form 10-KSB, on that basis. In August
      2006, we changed our name to Migo Software, Inc.





**Risk
      Factors**





You
      should consider carefully the risks described below and other information in
      this Form 10-KSB. If any of the events identified in the following risk factors
      actually occur, they could materially adversely affect our business, financial
      condition and results of operations.





WE
      HAVE A
      HISTORY OF LOSSES, AND WE EXPECT TO INCUR SIGNIFICANT LOSSES FOR AN INDEFINITE
      PERIOD OF TIME.





We
      were a
      development stage company until the quarter beginning on July 1, 2005. We have
      had limited revenues to date, and we have sustained substantial net losses
      from
      operations. There can be no assurance that we will ever generate significant
      revenues from our operating activities, or that we will achieve and sustain
      a
      profit during any future period, particularly if operations remain at current
      levels. Failure to achieve significant revenues or profitability would
      materially and adversely affect our business, our financial condition, and
      our
      results of operations. For the twelve months ended December 31, 2006, we
      incurred a net pre-tax loss of $11,465,924 and, as of December 31, 2006, had
      an
      accumulated deficit of $44,687,065. Our net losses have continued in the current
      fiscal year.











IF
      WE ARE
      UNABLE TO OBTAIN ADDITIONAL CAPITAL WHEN NEEDED, WE MAY NOT BE ABLE TO ACHIEVE
      THE OBJECTIVES OF OUR CURRENT BUSINESS STRATEGY, WHICH COULD FORCE US TO DELAY,
      CURTAIL OR ELIMINATE OUR PRODUCT AND SERVICE DEVELOPMENT PROGRAMS, WHICH WOULD
      MATERIALLY ADVERSELY AFFECT OUR BUSINESS.





We
      believe that revenues generated by the business and our current cash
      resources of approximately $3.5 million as of December 31, 2006 will be
      sufficient to fund our operations for the next 12 months. We cannot provide
      assurances that we will be able to develop our business to the point of
      generating consolidated net operating profits and positive cash flows from
      operations. If funds from these sources are not sufficient to offset operating
      expenses, we would seek to institute cost-saving measures that would not only
      reduce overhead, but also curtail operations. We cannot assure that such
      measures, if implemented, will be sufficient to offset all of our operating
      expenses. If any capital subsequently raised from sales of securities is not
      sufficient to fund the balance of our operating expenses after we implement
      cost-cutting measures, we could be forced to discontinue certain
      operations.





Any
      further issuance of additional equity securities by us to raise capital may
      be
      on terms that are detrimental to existing stockholders. In order to meet our
      capital requirements, we may continue to offer equity securities for sale,
      and
      existing stockholders may experience significant dilution. Any new equity
      securities we issue may have rights, preferences or privileges senior to those
      of existing holders of our equity securities.





FAILURE
      TO ACHIEVE MARKET ACCEPTANCE OF OUR PRODUCTS WOULD MATERIALLY ADVERSELY AFFECT
      OUR BUSINESS.





Our
      business prospects are dependent upon the market need for small, portable memory
      devices, suitable for linkage with all common computer hardware utilized by
      individual personal computer users. Our business will be subject to all the
      risks associated with introducing and marketing a new product or
      service.





BECAUSE
      OF THE IMPORTANCE OF TECHNOLOGY TO OUR BUSINESS, OUR INABILITY TO MAINTAIN
      OUR
      TECHNOLOGICAL POSITION COULD RESULT IN LOWER REVENUES AND HIGHER RESEARCH AND
      DEVELOPMENT EXPENDITURES, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR RESULTS
      OF
      OPERATIONS AND OUR ABILITY TO ACHIEVE PROFITABILITY.





Competition
      within the technology industry is characterized by several key factors,
      including the following:





1.
      Rapid
      changes in technology and customer requirements. New opportunities
      for existing and new competitors can quickly render existing technologies
      less valuable.





2.
      Relatively low barriers to entry. Startup capital requirements for software
      companies can be very small, and software distribution over the internet
      is inexpensive and easily outsourced.










3.
      Significant price competition. Direct distribution of competing products,
      particularly over the internet, may cause prices and margins to decrease
      in traditional sales channels.





4.
      Consolidations and mergers. Software companies and their individual products
      have a high rate of mergers, product line sales, and other transfers
      and consolidations; consequently, there is a tendency to have a higher
      concentration of able competitors within the industry.





The
      software industry is highly competitive and we expect competition to intensify
      in the future. The industry is characterized by rapidly changing technologies
      and customer demands for newer and better products. Our competitors could
      develop products and technologies that could render our products and
      technologies obsolete. Many of our competitors have considerably greater
      resources, including financial and scientific personnel, marketing and sales
      capacity, established distribution networks, significant goodwill and global
      name recognition. As a result, these competitors may be in a better position
      than us to respond quickly to, or to significantly influence, rapid
      technological change and consumer demand.





Continuing
      changes in technology and industry standards could render our products
      unmarketable or obsolete. The markets for our products change rapidly because
      of
      technological innovation, changes in customer requirements, declining prices,
      and evolving industry standards. New products and
      technologies often render existing technology-orientated products, services
      or
      infrastructure obsolete, too costly or otherwise unmarketable. Our success
      depends on our ability to introduce innovations in our products and services,
      integrate new technologies into current products, and develop new products
      and
      services, all on a timely basis. There is no guaranty that we will be successful
      in achieving these goals, or that we will do so in a manner sufficiently timely
      to ensure that we are able to compete successfully for customers and market
      share. In addition, if we fail to incorporate the features, performance criteria
      and security standards in our products and services that customers require,
      market acceptance of our products may not materialize, or may be significantly
      delayed, and our revenues will level off or decline as a
      consequence.





Technological
      advances also require us, on a continuing basis, to commit substantial resources
      to acquiring and applying new technologies for use in our products and services.
      Product development requires substantial lead time for engineering and testing.
      If we do not commit resources to developing and selling products incorporating
      new technologies at the rate demanded by our markets, our products and services
      may be rendered obsolete, revenues could suffer, and we may not achieve
      profitability. Even if we do develop new or enhanced products and services,
      we
      cannot assure that these products will gain acceptance in the marketplace.
      Failure of any of these products and services could adversely affect revenues
      and prevent us from achieving profitability.





The
      competitive factors described above may have a material adverse effect on our
      future operating results, including reduced profit margins and loss of market
      share. Accordingly, there can be no assurance that we will be successful in
      our
      ability to enhance current products and develop and introduce future products
      that will achieve market acceptance. Our future is largely dependent on the
      development of new products including our enhancements and new applications.
      These products and services are in varying stages of development, and there can
      be no assurance that the development of these products and services will be
      successfully or timely completed.










AS
      WE
      RELY ON THIRD PARTIES TO BUNDLE OUR SOFTWARE FOR SALE TO END USERS, OUR BUSINESS
      MAY SUFFER IF OUR PARTNERS FAIL TO DELIVER THEIR PRODUCTS IN A RELIABLE, TIMELY
      AND COST-EFFICIENT MANNER.





Some
      of
      our software is currently bundled on flash drives marketed by our partners.
      Any
      termination or significant disruption in these relationships, or any material
      adverse change in the financial condition of one of these partners, would have
      a
      material adverse effect on our financial condition and results of operations.
      Although we believe that our relationships with our partners are


stable
      and positive, there can be no assurance that these relationships will continue
      or that these partners will continue to be in a position to manufacture products
      for us in a timely and cost efficient manner. Although we are attempting to
      reduce the adverse impact that problems with these partners could cause by
      developing relationships with other partners, there is no assurance that we
      will
      be able to replace these partners should a disruption in the relationship
      occur.





There
      can
      also be no assurance that third party partners will continue to produce products
      in the future that retain their current level of market acceptance, that the
      products will continue to be available in adequate quantities or that third
      party products will not contain defects or errors. We may experience lost
      revenues due to a third party's delay in correcting defects, delay in getting
      an
      adequate supply of their products to the market, or from any decline in a third
      party product's market share.





OUR
      COMMON STOCK PRICE IS SUBJECT TO SIGNIFICANT VOLATILITY, WHICH COULD RESULT
      IN
      LOSSES FOR INVESTORS.





The
      market price of our Common Stock, like the price of shares of technology
      companies generally, has been and may continue to be volatile. Within the last
      two years, the closing price of our Common Stock has varied from a high of
      $3.20
      to a low of $.10 per share. The closing price of the Common Stock on March
      6,
      2007, was $0.25. If our future operating results are below the expectations
      of
      stock market analysts and investors, our stock price may decline. Public
      announcements of our financial results and business developments may have a
      significant impact on the market price of our Common Stock. For example, each
      of
      the following could have the effect of temporarily or permanently reducing
      the
      market price of our Common Stock:





-
      shortfalls in revenues or cash flows from operations;





-
      failure
      to attain and maintain profitability;





-
      failure
      to maintain the qualification for the Common Stock to trade on the
      NASD
      Over-the-Counter Bulletin Board ("OTC Bulletin Board");





-
      delays
      in development or roll-out of our products and services; or




-
      failure
      to maintain our competitive position, whether as a result of our failure
      to deliver new and innovative products in response to marketplace demands
      or new p roduct introductions,
      acquisitions or technological innovations
      by one or more competitors of ours.





In
      addition, the stock market experiences extreme fluctuations in price and volume
      that particularly affect the market prices of shares of emerging and technology
      companies, such as us. These price and volume fluctuations are often unrelated
      or disproportionate to the operating performance of the affected companies.
      Because of this volatility, we may fail to meet the expectations of our
      stockholders or of securities analysts, and the price of our Common Stock could
      decline as a result.









As
      our
      stock is traded on the OTC Bulletin Board, investors may find it more difficult
      to dispose of or obtain accurate quotations as to the market value of our
      securities. In addition, we are subject to a rule promulgated by the Securities
      and Exchange Commission that, if we fail to meet criteria set forth in such
      rule, various practice requirements are imposed on broker-dealers who sell
      securities governed by the rule to persons other than established customers
      and
      accredited investors. For these types of transactions, the broker-dealer must
      make a special suitability determination for the purchaser and have received
      the
      purchaser's written consent to the transactions prior to purchase. Consequently,
      the rule may deter broker-dealers from recommending or purchasing our Common
      Stock, which may further affect the liquidity of our Common Stock. Our failure
      to be listed on an exchange or NASDAQ makes trading our shares more difficult
      for investors. It may also make it more difficult for us to raise additional
      capital. Further, we may also incur additional costs under state blue sky laws
      in connection with any sales of our securities.





LEGAL
      AND
      REGULATORY DEVELOPMENTS REGARDING PRODUCT APPROVAL OR IMPORTS AND EXPORTS COULD
      INCREASE OUR COSTS OR ADVERSELY AFFECT OUR COMPETITIVE POSITION, WHICH COULD
      HAVE ADVERSE CONSEQUENCES FOR OUR BUSINESS.





Currently,
      our products are not subject to approval from the United States government,
      with
      the exception of export restrictions to certain countries. Our business
      operations do not fall under federal, state, or local environmental regulations.
      We do not anticipate current or future government regulation to have a material
      adverse effect on our capital expenditures, earnings, or competitive
      position.





Any
      additional government regulation of imports or exports, however, could adversely
      affect our international and domestic sales. The United States and various
      foreign governments have imposed controls, export license requirements and
      restrictions on the import or export of some technologies, especially encryption
      technology. From time to time, government agencies have proposed further
      regulation of encryption technology. Additional regulation of encryption
      technology could add to the expense of product development and enhancements.
      Because foreign competitors are subject to less stringent controls on the export
      of encryption technology, they may have a competitive advantage over us in
      both
      foreign and domestic technology markets.





AS
      OUR
      PROPRIETARY INTELLECTUAL PROPERTY RIGHTS ARE MATERIAL TO OUR SUCCESS,
      MISAPPROPRIATION OF THOSE RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS
      RELATED TO INTELLECTUAL PROPERTY COULD MATERIALLY ADVERSELY IMPACT OUR FINANCIAL
      CONDITION AND OPERATIONS.





We
      rely
      primarily on a combination of copyright, trademark and patent laws, trade
      secrets, confidentiality procedures and contractual provisions to protect our
      proprietary technology. In addition, we seek to avoid disclosure of our trade
      secrets by requiring those persons with access to our proprietary information
      to
      execute confidentiality agreements with us and by restricting access to our
      software source code. We also rely on unpatented proprietary know-how in
      developing our products, and employ various other methods to protect our trade
      secrets and know-how.





Irrespective
      of the foregoing, we cannot be sure that these methods of protecting our
      proprietary technology, information and know-how will afford complete
      protection. Patents may not be enforceable or provide us with meaningful
      protection from competitors. If a competitor were to infringe on our patents,
      the costs of enforcing our patent rights might be substantial or even
      prohibitive. Likewise, we cannot be sure that others will not independently
      develop our trade secrets and know-how or obtain access to them.










Despite
      our efforts to protect our proprietary rights, unauthorized parties may attempt
      to copy aspects of our products or to obtain and use information that we regard
      as proprietary. Policing unauthorized use of our products is difficult, and
      while we are unable to determine the extent to which piracy of our software
      products exists, software piracy can be expected to be a persistent problem.
      In
      addition, the laws of many countries do not protect our proprietary rights
      to as
      great an extent as do the laws of the United States. There can be no assurance
      that our means of protecting our proprietary rights will be adequate or that
      our
      competitors will not independently develop similar technology.





We
      expect
      that software product developers will increasingly be subject to infringement
      claims as the number of products and competitors in our industry segment grows
      and the functionality of products in different industry segments overlap. Any
      such claims, with or without merit, could be time-consuming, result in costly
      litigation, cause product shipment delays or require us to enter into royalty
      or
      licensing agreements. Such royalty or licensing agreements, if required, may
      not
      be available on terms acceptable to us or at all, which could have a material
      adverse effect upon our business, operating results and financial
      condition.




SINCE
      WE
      MAY SEEK TO ACCELERATE THE GROWTH OF OUR BUSINESS THROUGH ACQUISITIONS, THE
      FAILURE TO ACHIEVE THE DESIRED RESULTS OR THE COMPLETION OF AN ACQUISITION
      ON
      UNFAVORABLE TERMS COULD HAVE AN ADVERSE IMPACT ON US.




We
      may be
      exposed to risks associated with acquisitions, including integration risks
      and
      risks associated with methods of financing, the impact of accounting treatment
      and the possibility that the corporate information provided by the acquired
      enterprise, including financial data, proves to be inaccurate or unreliable.
      There is no guaranty that any acquisition will enhance our business or value
      of
      our stock.





FAILURE
      OF OUR ACQUISITION OF THE STOMPSOFT BUSINESS TO ACHIEVE ITS POTENTIAL BENEFITS
      COULD HARM OUR BUSINESS AND OPERATING RESULTS.





We
      recently closed our acquisition of substantially all of the business and assets
      of StompSoft. We will not achieve the anticipated benefits of this acquisition
      unless we are successful in combining our operations and marketing efforts.
      Integration could be a time consuming and expensive process and could result
      in
      disruption of our operations and revenues if not completed in a timely and
      efficient manner.





There
      may
      be substantial difficulties, costs and delays involved in integrating StompSoft
      into our business. These could include:





-
      problems with compatibility of business cultures;





-
      customer perception of an adverse change in service standards, business focus
      or
      product and service offerings;





-
      costs
      and inefficiencies in delivering products and services to our customers;





-
      problems in successfully coordinating our research and development efforts;









-
      difficulty in integrating sales, support and product marketing;





-
      costs
      and delays in implementing common systems and procedures, including financial
      accounting systems; and





-
      the
      inability to retain and integrate key management, research and development,
      technical sales and customer support personnel.





Further,
      we cannot assure you that we will realize any of the anticipated benefits and
      synergies of the acquisition. Any one or all of the factors identified above
      could cause increased operating costs, lower than anticipated financial
      performance, or the loss of customers, employees or business partners. The
      failure to integrate the StompSoft business successfully would have a material
      adverse effect on our business, financial condition and results of
      operations.





FAILURE
      TO RETAIN KEY EMPLOYEES COULD DIMINISH THE ANTICIPATED BENEFITS OF THE
      ACQUISITION.





The
      success of the acquisition of the business of StompSoft will depend in part
      on
      the retention of personnel critical to the business and operations of the
      acquired company due to, for example, their technical skills or management
      expertise. Some of the StompSoft employees may not want to continue to work
      for
      us after the acquisition. In addition, competitors may seek to recruit employees
      during the integration. If we are unable to retain personnel critical to our
      successful integration and future operation of the StompSoft business, we could
      face disruptions in our operations, loss of existing customers, loss of key
      information, expertise or know-how, and unanticipated additional recruitment
      and
      training costs. In addition, the loss of key personnel could diminish the
      anticipated benefits of the acquisition.





THE
      MARKET PRICE OF OUR COMMON STOCK MAY DECLINE AS A RESULT OF THE
      ACQUISITION.





The
      market price of our common stock may decline as a result of the StompSoft acquisition
      if:





-
      the
      integration of the StompSoft business into ours is not as successful as
      anticipated





-
      we do
      not achieve or are perceived not to have achieved the expected benefits
      of the acquisition as rapidly or to the extent anticipated by financial
      or industry analysts or investors





-
      the
      effect of the acquisition on our financial results is not consistent with
      the
      expectations of financial or industry analysts or investors.





The
      market price of our common stock could also decline as a result of unforeseen
      factors related to the acquisition or other factors described in this
      section.





IT
      WILL
      BE DIFFICULT TO DRAW CONCLUSIONS ABOUT OUR FUTURE PERFORMANCE BASED ON OUR
      PAST
      PERFORMANCE DUE TO THE ACQUISITION OF THE STOMPSOFT BUSINESS.





Our
      historical results may not be indicative of future performance as a result
      of
      the significant changes to our business that will result from the acquisition
      of
      the StompSoft business. Quarterly results may also be skewed in the near future
      as a result of the assimilation of the StompSoft business into ours. Revenues
      in
      any given quarter are not indicative of revenues in any future period because
      of
      these and other factors and, accordingly, we believe that certain
      period-to-period comparisons of our results of operations will not necessarily
      be meaningful and should not be relied upon as indicators of future
      performance.











ITEM
      2.
      DESCRIPTION OF PROPERTY





Our executive office and principal place
      of
      business is in office space located at
      555
      Twin Dolphin Drive, Suite 650, Redwood
      City, California  where we
      occupy approximately 10,270 square feet. We have a four year lease for the
      Redwood City location
      which will expire in March 2009. The annual
      rent for this property is approximately $220,000. In addition, we rent space
      in
      Irvine, California, and expect that our annual rental in Irvine, Ca. will be
      approximately $65,600 in 2007.





ITEM
      3.
      LEGAL PROCEEDINGS




On
      December 20, 2005, two former employees of ours made a demand for
      arbitration with JAMS, San Francisco alleging that each claimant is entitled
      to
      severance pay following their resignations in February 2005. The
      claimants were employed by us as part of the 2004 acquisition of First Person
      Software, Inc.  In October 2006, the arbitrator ruled in favor of the
      plaintiffs, and we have accrued a $424,000 liability as a result of this matter
      for the year ended December 31, 2006.





We
      are
      not aware of any additional pending litigation as of March 15,
      2007.




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





Not
      applicable.





PART
      II.





ITEM
      5.
      MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER
      PURCHASES OF EQUITY SECURITIES





Since
      February 1, 2005, our Common Stock has traded on the NASD Over-the-Counter
      Bulletin Board ( “ OTC
      Bulletin Board ” ).
      We
      trade under the symbol “ MIGO.OB” .  Prior
      to February
      1, 2005, our Common Stock was traded on the Pink Sheets. The OTC Bulletin Board
      is a regulated service that displays real-time quotes, last sale prices and
      volume information in over-the-counter securities. Our stock traded under the
      symbol "PWHT" until August 14, 2006, at which time, our trading symbol was
      changed to "MIGO.OB" in conjunction with our name change.





The
      following table sets forth the quarterly high and low sales prices of the Common
      Stock for the calendar years 2006 and 2005. Such prices represent prices between
      dealers and do not include retail mark-ups, mark-downs or
      commissions and may not represent actual transactions.


2006
              
              HIGH
              
              LOW
              
              2005
              
              HIGH
              
              LOWFirst
                  Quarter
              
              $
              0.67
              
              $
              0.40
              
              First
                Quarter
              
              $
              3.20
              
              $
              1.00Second
                  Quarter
              
              $
              0.66
              
              $
              0.25
              
              Second
                Quarter
              
              $
              2.45
              
              $
              0.90Third
                  Quarter
              
              $
              0.25
              
              $
              0.11
              
              Third
                Quarter
              
              $
              1.00
              
              $
              0.47Fourth
                  Quarter
              
              $
              0.19
              
              $
              0.10
              
              Fourth
                Quarter
              
              $
              1.19
              
              $
              0.57





The
      market price of the Common Stock, like the price of shares of technology
      companies generally, has been and may continue to be volatile. If our
      future operating results are below the expectations of stock market analysts
      and
      investors, our stock price may decline. Public announcements of our financial
      results and business developments may have a significant impact on the market
      price of our Common Stock. For example, each of the following could have the
      effect of temporarily or permanently reducing the market price of our Common
      Stock:





·
            shortfalls
                in revenues or cash flows from
                operations;





·
            failure
                to attain and maintain
                profitability;





·
            failure
                to maintain the qualification for our Common Stock to trade on the
                OTC
                Bulletin Board;





·
            delays
                in development or roll-out of our products and services;
                and





·
            failure
                to maintain our competitive position, whether as a result of our
                failure
                to deliver new and innovative products in response to marketplace
                demands
                or new product introductions, acquisitions or technological innovations
                by
                one or more competitors of ours.





In
      addition, the stock market often experiences extreme fluctuations in price
      and
      volume that particularly affect the market prices of shares of emerging and
      technology companies, such as ours. These price and volume fluctuations are
      often unrelated or disproportionate to the operating performance of the affected
      companies. Because of this volatility, we may fail to meet the expectations
      of
      our shareholders or of securities analysts and our
      Common Stock price could decline as a result.









Common
      Stock Holders





As
      of
      March 15, 2007, there were approximately 850 holders of record of our Common
      Stock. We
      believe that
      additional beneficial owners of Common Stock hold shares in street
      names.





Dividends





We
      have
      not declared any cash dividends on our Common Stock. The declaration and payment
      of dividends is within the discretion of our
      Board
      of Directors and will depend, among other factors, on results of operations,
      capital requirements and general business conditions. At the present time, our
      anticipated working capital requirements are such that we intend to follow
      a
      policy of retaining earnings, if any, in order to finance the development of
      its
      business. Accordingly, we do not anticipate or contemplate paying dividends
      in
      the foreseeable future.





The
      following information is presented as of December 31, 2006:





EQUITY
      COMPENSATION PLAN INFORMATION





Number
                of securities to be issued upon exercise of outstanding options,
                warrants,
                and rights
              (a)
            
            Weighted-average
                exercise price of outstanding options, warrants, and rights
              (b)
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in column
                (a))
              (c)Equity
                compensation plansapproved
                by security holders
            
            
            17,505,000
            
            $
            0.28
            
            
            2,495,000Equity
                compensation plans notapproved
                by security holders
            
            
            27,358,351
            
            $
            0.29
            
            
            N/ATotal
            
            
            44,863,351
            
            $
            0.29
            
            
            2,495,000




The
      shares shown as being issuable under equity compensation plans not approved
      by
      our security holders include the warrants granted to our investors in various
      private placements completed in 2004-2006 and the warrants issued to persons
      who
      provided services to us.










ITEM
      6. MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION





The
      following information should be read in conjunction with the consolidated
      financial statements and the notes thereto contained elsewhere in this Annual
      Report on Form 10-KSB. This Annual Report on Form 10-KSB, and in particular
      this
      Item 6, “ Management ’ s
      Discussion and Analysis or Plan of Operation, ” may
      contain forward-looking statements regarding future events or our future performance.
      These future events and future performance involve certain risks and
      uncertainties, which we have described in this Annual Report on Form 10-KSB
      under this Item 6 and “ Risk
      Factors ”
in
      Part
      I, Item 1. Actual
      events or our actual future results may differ materially from any
      forward-looking statements due to those risks and uncertainties. We assume
      no
      obligation to update these forward-looking statements to reflect actual results
      or changes in factors or assumptions affecting our forward-looking statements.
      This analysis is not intended to serve as a basis for projection of future
      events.





We
      are in
      the business of developing, acquiring and marketing software and infrastructure
      technologies designed to improve the way information is personalized, secured,
      carried and accessed.




Trends




We
        acquired the business of StompSoft, Inc. in December 2006 to augment our
        revenue
        streams and to diversify our product lines. We continue to seek to develop
        other
        software applications to further expand our product lines. In order to attain
        profitability, we will need these efforts to be successful and to control
        our
        costs of operations. We cannot assure you that we will be able to attain
        profitability in the near future or at all.




Critical
      Accounting Policies





In
      accordance with SEC guidance, those material accounting policies that we believe
      are the most critical to an investor’s understanding of our financial results
      and condition are discussed below.




Our
      significant accounting policies are more fully described in Note 2 to our
      consolidated financial statements. Certain of these policies are particularly
      important to the portrayal of our financial position and results of operations
      and require the application of significant judgment by our management to
      determine the appropriate assumptions to be used in the determination of certain
      estimates.





Revenue
      Recognition





We
      recognize revenue in accordance with Statement of Accounting Position (“SOP”)
      97-2, *Software
      Revenue Recognition* ,
      as
      amended, and SEC Staff Accounting Bulletin (“SAB”) No. 104, *Revenue
      Recognition* .
      We sell
      software licenses in several ways, including but not limited to pre-loading
      the
      software on different types of memory devices for trial, and by making trial
      versions available by download from our website, and until recently by selling
      hardware devices with our software pre-loaded for use. We license our software
      products on a perpetual basis. Revenue is recognized from the sale of software
      licenses only when persuasive evidence of an arrangement exists, the product
      has
      been delivered, the fee is fixed or determinable and collection of the resulting
      receivable is reasonably assured.





Revenue
      from direct sale contracts is recognized based on the terms of the agreement,
      after the product has been delivered, and collection of the resulting receivable
      is reasonably assured. Revenue from distributors is recognized when the product
      has been sold to third party customers.





On
        September 5, 2006, we entered into a License Agreement with Kingston Technology
        Corporation ("Kingston"). Under the License Agreement, Kingston is to pay
        us
        $1,850,000 for global marketing and distribution rights to load currently
        available and future product releases of Migo's software on Kingston's flash
        memory products through December 2007. The license fee is payable $850,000
        upon
        signing the agreement and the receipt of the next $1,000,000 is contingent
        upon
        Migo meeting certain mutually agreed upon R&D milestones by April 1, 2007.
        The agreement is renewable by Kingston for one additional year at a license
        fee
        to be agreed upon. The initial payment of $850,000 was received in September,
        2006 and has been recorded as deferred revenue at September 30, 2006, and
        will
        be amortized monthly, on an evenly basis, beginning October 2006 through
        December 2007.




Inventories





Inventories
      are valued at the lower of cost or market and are accounted for on the first-in,
      first-out basis. As of December 31, 2006, our inventory was valued at
      $66,951.





Impairment
      of Long-Lived Assets





Property,
      equipment, intangible and certain other long-lived assets are amortized over
      their useful lives. Useful lives are based on management’s estimates of the
      period that the assets will generate revenues. Long-lived assets are written
      down to fair value whenever events or changes indicate that the carrying amount
      of an asset may not be recoverable. Our policy is to review the recoverability
      of all long-lived assets at a minimum of once per year and record an impairment
      loss when the fair value of the assets does not exceed the carrying amount
      of
      the asset.










*Stock-Based
      Compensation*




In
      December 2004, the FASB issued SFAS No. 123R, *Share
      Based Payment* SFAS
      No.
      123R establishes the accounting for grants of stock options and other
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. It also addresses transactions in which an entity incurs liabilities
      in exchange for goods or services that are based on the fair value of the
      entity’s equity instruments or that may be settled by the issuance of those
      equity instruments. SFAS No. 123R (1) revises SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      (2)
      supersedes Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and (3)
      establishes fair value as the measurement objective for share-based payment
      transactions. The Company adopted SFAS 123R effective as of January 1, 2005
      in
      accordance with the standard’s early adoption provisions. Prior to January 1,
      2005, the Company’s Board of Directors had not approved the granting of any
      stock options. As such, the Company decided to follow the provisions of SFAS
      No.
      123R on a prospective basis, and for the fiscal year ended December 31, 2005
      and
      for the year ended December 31, 2006, the Company recorded $810,591 and
      $4,862,609 of compensation expense related to the granting of stock options
      to
      employees.




**Results** **of** **Operations**





*Note-
      On January 9, 2006, our Board of Directors determined to change our fiscal
      year
      end to December 31 from March 31. Accordingly, the accompanying Management’s
      Discussion and Analysis compares the nine month period from April 1, 2005
      through December 31, 2005 to the twelve month period ended December 31,
      2006.*




Twelve
      months ended December 31, 2006 and Nine months ended December 31, 2005





We
      had
      revenues of $345,228 for the twelve months ended December 31, 2006, of which
      $175,228 resulted from revenues from our M-Systems contract and online sales
      of
      our software, and $170,000 was recognized from our contract with Kingston
      Technology Company. For the nine months ended December 31, 2005, we had revenues
      of $194,199.





Our
      cost
      of goods sold was $606,958 for the twelve months ended December 31, 2006, which
      includes costs of amortization of software technology of $564,680. For the
      nine
      months ended December 31, 2005, the costs of goods sold was $555,059, and
      included amortization of the software technology of $423,485 and write-downs
      of
      $12,183 for existing inventory.










For
      the
      twelve months ended December 31, 2006, sales and marketing expenses totaled
      $1,106,528, compared with $771,175 for the nine months ended December 31, 2005,
      as we refocused our sales efforts on securing OEM partners, such as Kingston
      Technology Company and M-Systems, and eliminated all of our consumer directed
      advertising expenses. General and administrative costs totaled $7,296,900,
      which
      included a non-cash expense of $4,862,609 related to expensing stock options
      for
      the twelve months ended December 31, 2006, compared to $810,591 for the nine
      months ended December 31, 2005.





Research
      and Development totaled $1,914,995 for the twelve months ended December 31,
      2006
      compared with $590,921 for the nine months ended December 31, 2005, as we
      continued to invest heavily in either new or upgraded versions of the Migo
      Software by expanding our internal R&D personnel, and by using outside
      contract engineering resources. Interest income earned on the Company’s cash
      balances for the twelve months ended December 31, 2006 was $257,772, compared
      with Interest expense of $296,251 for the nine months ended December 31, 2005,
      which included a non cash charge to interest expense of $1,889,768 related
      to a
      beneficial conversion feature in our then outstanding bridge loan. Our warrant
      liability expense resulted from our equity private placements in September
      and
      December 2005, and March 2006 which required us to mark our warrant liability
      to
      market. Other (income) expense totaled $227,937 for the nine months ended
      December 31, 2005 primarily related to the settlement of various lawsuits
      compared with $1,310,079 for the twelve months ended December 31, 2006 which
      expenses resulted primarily from the issuance of Common Stock (Penalty Shares)
      to our investors in our September and December 2005, and March 2006 private
      placements due to our inability to effect a registration of their shares within
      the proscribed time frames agreed to in our agreements with them.




Liquidity
      and Capital Resources





At
      December 31, 2006, we had working capital of $1,959,668 as compared to working
      capital of $3,055,929 at December 31, 2005. During the twelve months ended
      December 31, 2006, net cash used in operations was $4,794,435. For the twelve
      months ended December 31, 2006, non cash charges totaled $7,471,946 which
      consisted principally of stock option related expenses of $4,862,609, stock
      registration penalties of $1,494,050 and depreciation and amortization expense
      of $1,099,845, which all contributed to the Net Loss of $11,466,723. During
      the
      nine months ended December 31, 2005, net cash used in operations was $3,198,717
      and consisted principally of a net loss of $5,288,933, offset by non cash
      components of net loss, including stock-based compensation and services of
      $1,345,344, and depreciation and amortization expense of $427,924.





Recent
      and Expected Losses





From
      inception, we have never been profitable and have sustained substantial net
      losses from operations. There can be no assurance that we will ever generate
      sufficient revenues from our operating activities, or that we will achieve
      and
      sustain a profit during any future period, particularly if operations remain
      at
      current levels. Failure to achieve significant revenues or profitability would
      materially and adversely affect our business, financial condition, and results
      of operations. For the nine months ended December 31, 2005, we incurred a net
      pre-tax loss of $5,288,933, and for the twelve months ended December 31, 2006,
      we incurred a net pre-tax loss of $11,465,924, including $7,471,946 of non
      cash
      charges.





Satisfaction
      of Current and Future Capital Requirements





Management
      estimates that expected revenues and the current funds available and on-hand
      will be adequate to fund operations throughout 2007. No assurance can be given
      that we will be able to satisfy all of our capital requirements in the
      long-term. We cannot provide assurances that we will be able to develop our
      business to the point of generating consolidated net operating profits and
      cash
      flows from operations. If funds from these sources are not sufficient to offset
      operating expenses, we plan to institute cost-saving measures that will not
      only
      reduce overhead, but also curtail operations in certain business segments.
      We
      cannot assure that such measures, if implemented, will be sufficient to offset
      all of our operating expenses. If the capital raised from sales of securities
      is
      not sufficient to fund the balance of our operating expenses after we implement
      these cost-cutting measures, we may be forced to discontinue certain operations
      or may be unable to continue as a going concern.










Further,
      our issuance of equity securities to raise capital may be on terms that are
      detrimental to existing stockholders. In order to meet our capital requirements,
      we may continue to offer equity securities for sale, and stockholders will
      experience additional dilution. Any new equity securities we issue may have
      rights, preferences or privileges senior to those of existing holders of our
      Common Stock.




**RECENTLY
        ISSUED ACCOUNTING STANDARDS**
 
 In
        February 2006, the FASB issued SFAS No. 155, “ *Accounting
        for Certain Hybrid Financial Instruments — An Amendment of FASB Statements
        No. 133 and 140* ”.
        SFAS
        No. 155 (1) permits fair value measurement for any hybrid financial
        instrument that contains an embedded derivative that otherwise would require
        bifurcation, (2) clarifies that interest-only strips and principal-only
        strips are not subject to the requirements of SFAS No. 133, “ *Accounting
        for Derivative Instruments and Hedging Activities* ”,
        (3) establishes a requirement to evaluate interests in securitized
        financial assets to identify interests that are freestanding derivatives
        or that
        are hybrid financial instruments that contain an embedded derivative requiring
        bifurcation, (4) clarifies that concentrations of credit risk in the form
        of subordination are not embedded derivatives, and (5) amends SFAS
        No. 140, “ *Accounting
        for Transfers and Servicing of Financial Assets and Extinguishments of
        Liabilities — A Replacement of FASB Statement No. 125* ”
to
        eliminate the prohibition on a qualifying special-purpose entity from holding
        a
        derivative financial instrument that pertains to a beneficial interest other
        than another derivative financial instrument. SFAS No. 155 is effective for
        all financial instruments acquired or issued for fiscal years beginning after
        September 15, 2006. We do not expect the adoption of SFAS No. 155 to
        have a material impact on our Consolidated Financial Statements.
 
 In
        June 2006, the FASB ratified the consensus reached on Emerging Issues Task
        Force (“EITF”) Issue No. 06-3, “ *How
        Taxes Collected from Customers and Remitted to Governmental Authorities Should
        Be Presented in the Income Statement (That Is, Gross Versus Net
        Presentation)* ”.
        The
        scope of EITF Issue No. 06-3 includes any transaction-based tax assessed by
        a governmental authority that is imposed concurrent with or subsequent to
        a
        revenue-producing transaction between a seller and a customer. The scope
        does
        not include taxes that are based on gross receipts or total revenues imposed
        during the inventory procurement process. Gross versus net income statement
        classification of that tax is an accounting policy decision and a voluntary
        change would be considered a change in accounting policy requiring the
        application of SFAS No. 154, “ *Accounting
        Changes and Error Corrections* ”.
        The
        following disclosures will be required for taxes within the scope of this
        issue
        that are significant in amount: (1) the accounting policy elected for these
        taxes and (2) the amounts of the taxes reflected gross (as revenue) in the
        income statement on an interim and annual basis for all periods presented.
        The
        EITF Issue No. 06-3 ratified consensus is effective for interim and annual
        periods beginning after December 15, 2006. We do not expect the adoption of
        EITF Issue No. 06-3 to have a material impact on our Consolidated Financial
        Statements.
 
 In
        July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48,
“ *Accounting
        for Uncertainty in*
 *Income
        Taxes — An Interpretation of FASB Statement No. 109* ”.
        FIN
        No. 48 clarifies the accounting for uncertainty in income taxes recognized
        in financial statements in accordance with SFAS No. 109, “ *Accounting
        for Income Taxes* ”.
        FIN
        No. 48 prescribes a recognition threshold and measurement attribute for the
        financial statement recognition and measurement of a tax position taken or
        expected to be taken in a tax return and provides guidance on derecognition,
        classification, interest and penalties, accounting in interim periods,
        disclosure, and transition. Under FIN No. 48, the evaluation of a tax position
        is a two-step process. The first step is a recognition process where we are
        required to determine whether it is more likely than not that a tax position
        will be sustained upon examination, including resolution of any related appeals
        or litigation processes, based on the technical merits of the position. In
        evaluating whether a tax position has met the more-likely-than-not recognition
        threshold, it is presumed that the position will be examined by the appropriate
        taxing authority that has full knowledge of all relevant information. The
        second
        step is a measurement process whereby a tax position that meets the
        more-likely-than-not recognition threshold is calculated to determine the
        amount
        of benefit to recognize in the financial statements. FIN No. 48 also
        requires new tabular reconciliation of the total amounts of unrecognized
        tax
        benefits at the beginning and end of the reporting period. The provisions
        of FIN
        No. 48 are effective for fiscal years beginning after December 15,
        2006. As such, we are required to adopt it in our first quarter of fiscal
        year
        2008. Any changes to our income taxes due to the adoption of FIN No. 48 are
        treated as the cumulative effect of a change in accounting principle. We
        are
        evaluating what impact the adoption of FIN No. 48 will have on our
        Consolidated Financial Statements.
 
 In
        September 2006, the SEC issued SAB No. 108, “ *Financial
        Statements — Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements* ”.
        SAB
        No. 108 provides guidance on how prior year misstatements should be taken
        into consideration when quantifying misstatements in current year financial
        statements for purposes of determining whether the current year’s financial
        statements are materially misstated. The impact of correcting all misstatements,
        including both the carryover and reversing effects of prior year misstatements,
        must be quantified on the current year financial statements. When a current
        year
        misstatement has been quantified, SAB No. 99, “ *Financial
        Statements -*  *Materiality* ”
should
        be applied to determine whether the misstatement is material and should result
        in an adjustment to the financial statements. SAB No. 108 also discusses
        the implications of misstatements uncovered upon the application of SAB No.
        108
        in situations when a registrant has historically been using either the iron
        curtain approach or the rollover approach as described in the SAB. Registrants
        electing not to restate prior periods should reflect the effects of initially
        applying the guidance in Topic 1N in their annual financial statements covering
        the first fiscal year ending after November 15, 2006. After reviewing the
        impact of SAB 108, we concluded that it did not have a material effect on
        the
        Company.
  In
        September 2006, the FASB issued SFAS No. 157, “ *Fair
        Value Measurements* ”.
        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. Fair value refers to the price that would be received
        to sell an asset or paid to transfer a liability in an orderly transaction
        between market participants in the market in which the reporting entity
        transacts. SFAS No. 157 establishes a fair value hierarchy that prioritizes
        the information used to develop those assumptions. Fair value measurements
        would
        be separately disclosed by level within the fair value hierarchy. The provisions
        of SFAS No. 157 are effective for financial statements issued for fiscal
        years beginning after November 15, 2007, and interim periods within those
        fiscal years. We do not expect the adoption of SFAS No. 157 to have a
        material impact on our Consolidated Financial Statements.
  In
        October 2006, the FASB issued FSP FAS No. 123(R)-5. FSP FAS
        No. 123(R)-5 addresses whether a modification of an instrument in
        connection with an equity restructuring should be considered a modification
        for
        purposes of applying FSP FAS No. 123(R)-1, “ *Classification
        and Measurement of Freestanding Financial Instruments Originally Issued in
        Exchange for Employee Services under FASB Statement
        No. 123(R)* ”.
        If
        (1) there is no increase in fair value of the award or the anti-dilution
        provision is not added to the terms of the award in contemplation of an equity
        restructuring, and (2) all holders of the same class of equity instruments
        are treated in the same manner, no change in recognition or measurement will
        result for instruments that were originally issued as employee compensation
        and
        then modified in connection with an equity restructuring that occurs when
        the
        holders are no longer employees. The provisions in FSP FAS No. 123(R)-5 are
        effective for the first reporting period beginning after October 10, 2006.
        We do not expect the adoption of FSP FAS No. 123(R)-5 to have a material
        impact
        on our Consolidated Financial Statements.


**Off-Balance
        Sheet Arrangements**
  An
        off-balance sheet arrangement is any transaction, agreement or other contractual
        arrangement involving an unconsolidated entity under which a company has
        (1)
        made guarantees, (2) a retained or a contingent interest in transferred assets,
        (3) an obligation under derivative instruments classified as equity or (4)
        any
        obligation arising out of a material variable interest in an unconsolidated
        entity that provides financing, liquidity, market risk or credit risk support
        to
        the company, or that engages in leasing, hedging or research and development
        arrangements with the company.
  We
        have
        no arrangements of the types described above that we believe may have a material
        current or future affect on our financial condition, liquidity or results
        of
        operations. Certain guarantees that we do not expect to have a material current
        or future effect on our financial condition, liquidity or resulted operations
        are disclosed in Note 11 to our consolidated financial
        statements.











ITEM
      7.
      FINANCIAL STATEMENTS





**INDEX
      TO FINANCIAL STATEMENTS**


PAGE**Report
                  of Independent Registered Public Accounting Firm**
              
              F-2**Consolidated
                  Balance Sheets** - As of December 31, 2005 and December 31,
                  2006
              
              F-3**Consolidated
                  Statements of Operations** -For the Nine Months Ended December 31,
                  2005, and the year ended December 31, 2006
              
              F-4**Consolidated
                  Statements of Stockholders’ Equity (Deficit)** - For the Nine
                  Months Ended December 31, 2005 and the year ended December 31,
                  2006
              
              F-5**Consolidated
                  Statements of Cash Flows** - For the Nine Months Ended December 31,
                  2005 and the year ended December 31, 2006
              
              F-6**Notes
                  to the Consolidated Financial Statements**
              
              F-7









**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**




Board
      of
      Directors and Stockholders of


Migo
      Software, Inc.




We
      have
      audited the accompanying consolidated balance sheets of Migo Software, Inc.
      (the
      "Company") as of December 31, 2006  and
      2005,
      and the related consolidated statements of operations, stockholders' equity
      (deficit), and cash flows for the year ended December 31, 2006 and the nine
      months ended December 31, 2005. These consolidated financial statements are
      the responsibility of the Company's management. Our responsibility is to express
      an opinion on these consolidated financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audits to obtain reasonable assurance about whether the
      financial statements are free of material misstatement. The Company is not
      required to have, nor were we engaged to perform, an audit of its internal
      control over financial reporting. Our audits included consideration of internal
      control over financial reporting as a basis for designing audit procedures
      that
      are appropriate in the circumstances, but not for the purpose of expressing
      an
      opinion on the effectiveness of the Company's internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of Migo Software,
      Inc. at December 31, 2006 and 2005, and the consolidated results of its
      operations and its cash flows for the year ended December 31, 2006 and the
      nine
      months ended December 31, 2005, in conformity with accounting principles
      generally accepted in the United States of America.




(Signed
      Hein & Associates, LLP)


Irvine,
      California


March
      26,
      2007







***MIGO
      SOFTWARE, INC.***


**CONSOLIDATED
      BALANCE SHEETS**


**DECEMBER
      31, 2006 AND 2005**




**December
                31,**
              **2006**
            
            **December
                31,**
              **2005****ASSETS*****Current
                Assets:***Cash
                and cash equivalents
            
            $
            304,635
            
            $
            2,510,704Short-term
                investments
            
            
            3,154,794
            
            
            2,875,000Accounts
                receivable
            
            
            18,672
            
            
            25,368Inventory
            
            
            66,951
            
            
            15,755Other
                current assets
            
            
            36,243
            
            
            82,983Total
                current assets
            
            
            3,581,295
            
            
            5,509,810PROPERTY
                AND EQUIPMENT, net of accumulated depreciation of $15,395 and
                $7,924
            
            
            35,968
            
            
            7,923OTHER
                ASSETS:Goodwill
            
            
            1,396,864
            
            
            —Intangible
                assets, net
            
            
            4,250,421
            
            
            1,965,101Other
                assets
            
            
            135,000
            
            
            39,475**TOTAL
                ASSETS**
            
            $
            9,399,548
            
            $
            7,522,309**LIABILITIES
                AND STOCKHOLDERS’ EQUITY (DEFICIT)*****Current
                Liabilities:***Accounts
                payable
            
            $
            322,621
            
            $
            1,104,157Accrued
                compensation
            
            
            188,947
            
            
            78,084Accrued
                liabilities
            
            
            424,000
            
            
            1,271,640Capitalized
                lease obligations
            
            
            6,059
            
            
            —Deferred
                revenue
            
            
            680,000
            
            
            —Total
                current liabilities
            
            
            1,621,627
            
            
            2,453,881***Non-current
                liabilities:***Warrant
                liability
            
            
            —
            
            
            3,882,672Total
                Liabilities
            
            
            1,621,627
            
            
            6,336,553Commitments
                and contingencies (Notes 8 and 11)**Temporary
                Equity,**Common Stock, 27,879,700 shares issued and
                outstanding
            
            
            —
            
            
            5,908,036**Stockholders’
                Equity (Deficit):**Junior
                A Preferred stock, $.0001 par value; 5,000,000 shares
                 authorized, 782,375 and 790,250 shares issued and outstanding;
                preference upon liquidation of$2,600,000
            
            
            78
            
            
            79Common
                stock, $.0001 par value; 200,000,000 shares authorized;
                93,721,542 and 26,598,180 and shares issued and
                outstanding
            
            
            9,372
            
            
            2,660Additional
                paid in capital in excess of par value
            
            
            52,841,936
            
            
            29,344,416Deferred
                Compensation Expense
            
            
            —
            
            
            (462,694
            )Treasury
                Stock
            
            
            (386,400
            )
            
            (386,400
            )Accumulated
                Deficit
            
            
            (44,687,065
            )
            
            (33,220,341
            )**Total
                stockholders’ equity (deficit)**
            
            
            7,777,921
            
            
            (4,722,280
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)**
            
            $
            9,399,548
            
            $
            7,522,309




See
      accompanying notes to consolidated financial statements.


F-3




***MIGO
      SOFTWARE, INC.***


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**YEAR
      ENDED DECEMBER 31, 2006 AND NINE MONTHS ENDED DECEMBER 31,
      2005**





Twelve
                Months ended
            
            Nine
                Months endedDecember
                31, 2006
            
            December
                31, 2005**Revenues**
            
            $
            345,228
            
            $
            194,199Cost
                of Sales
            
            
            606,958
            
            
            555,059Gross
                Profit (Loss)
            
            
            (261,730
            )
            
            (360,860
            )Operating
                ExpensesResearch
                and development
            
            
            1,914,997
            
            
            590,291Sales
                and marketing
            
            
            1,106,528
            
            
            771,175General
                and administrative
            
            
            7,296,900
            
            
            3,192,783Total
                operating expenses
            
            
            10,318,425
            
            
            4,554,249Non-operating
                ExpensesInterest,
                net
            
            
            (257,772
            )
            
            296,257Decrease
                in warrant liability
            
            
            (166,538
            )
            
            (151,164
            )Other
                (income) expense
            
            
            1,310,079
            
            
            227,937Total
                non-operating expenses
            
            
            885,769
            
            
            373,024Loss
                Before Income Taxes
            
            
            (11,465,924
            )
            
            (5,288,133
            )Provision
                for Income Taxes
            
            
            800
            
            
            800**Net
                Loss**
            
            $
            (11,466,724
            )
            $
            (5,288,933
            )Deemed
                and Regular Dividend
            
            
            -
            
            
            (368,704
            )Net
                Loss Attributable to Holders of common shares
            
            $
            (11,466,724
            )
            
            (5,657,637
            )Basic
                and Diluted net loss attributable to commonstockholders
                per share
            
            $
            (0.18
            )
            $
            (0.31
            )Weighted
                Average Shares OutstandingBasic
                and Diluted
            
            
            65,502,826
            
            
            18,201,612




See
      accompanying notes to consolidated financial statements.




F-4




***MIGO
      SOFTWARE, INC.***


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)**


**FOR
      THE YEAR ENDED DECEMBER 31, 2006 AND THE NINE MONTHS ENDED DECEMBER 31,
      2005**




**Junior
                A**
            
            
            
            
            
            
            
            **Additional****Common
                Stock**
            
            **Preferred**
            
            **Senior
                A Preferred**
            
            **Treasury**
            
            **Paid-In**
            
            **Deferred**
            
            **Accumulated****Shares**
            
            **Amounts**
            
            **Shares**
            
            **Amounts**
            
            **Shares**
            
            **Amounts**
            
            **Stock**
            
            **Capital**
            
            **Compensation**
            
            **Deficit**
            
            **Total****Balance,**March 31, 2005
            
            
            3,864,364
            
            $
            387
            
            
            795,250
            
            $
            80
            
            
            3,723,832
            
            $
            372
            
            $
            (183,600
            )
            $
            28,613,909
            
            $
            —
            
            $
            (27,562,704
            )
            $
            868,444Issuance
                of Common Stock for services
            
            
            194,858
            
            
            19
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            166,729
            
            
            
            
            
            
            
            
            166,748Issuance
                of warrants for services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            245,699
            
            
            
            
            
            
            
            
            245,699Dividends
                on Senior A Preferred Stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            194,895
            
            
            20
            
            
            
            
            
            630,254
            
            
            
            
            
            (368,704
            )
            
            261,570Conversion
                of Senior A Preferred and Junior A Preferred Stock to Common
                Stock
            
            
            20,738,958
            
            
            2,074
            
            
            (5,000
            )
            
            (1
            )
            
            (3,918,727
            )
            
            (392
            )
            
            
            
            
            (1,681
            )
            
            
            
            
            
            
            
            —Payment
                of equity financing costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,176,749
            )
            
            
            
            
            
            
            
            (2,176,749
            )Beneficial
                conversion and interest costs associated with Bridge and Convertible
                Debt
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            294,444
            
            
            
            
            
            
            
            
            294,444Stock
                options exercised
            
            
            1,020,000
            
            
            102
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            176,298
            
            
            
            
            
            
            
            
            176,400Repurchase
                of Common Stock
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (202,800
            )
            
            
            
            
            
            
            
            
            
            
            (202,800
            )Restricted
                Common Stock issued
            
            
            780,000
            
            
            78
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            584,922
            
            
            (585,000
            )
            
            
            
            
            —Amortization
                of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            122,306
            
            
            
            
            
            122,306Stock-based
                compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            810,591
            
            
            
            
            
            
            
            
            810,591Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (5,288,933
            )
            
            (5,288,933
            )**Balance,**December 31, 2005
            
            
            26,598,180
            
            
            2,660
            
            
            790,250
            
            
            79
            
            
            —
            
            
            —
            
            
            (386,400
            )
            
            29,344,416
            
            
            (462,694
            )
            
            (33,220,341
            )
            
            (4,722,280
            )Reclassification
                of warrant liability and temporary equity
            
            
            40,301,575
            
            
            4,030
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            13,842,110
            
            
            
            
            
            
            
            
            13,846,140Payment
                of equity financing costs
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (415,568
            )
            
            
            
            
            
            
            
            (415,568
            )Common
                stock and warrants issued for cash
            
            
            468,750
            
            
            47
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            149,953
            
            
            
            
            
            
            
            
            150,000Restricted
                Common Stock issued
            
            
            100,000
            
            
            10
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            64,990
            
            
            (65,000
            )
            
            
            
            
            —Common
                Stock issued in connection with StompSoft asset
                acquisition
            
            
            20,600,000
            
            
            2,060
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,499,940
            
            
            
            
            
            
            
            
            3,502,000Common
                stock issued for registration penalties
            
            
            5,645,162
            
            
            564
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,493,486
            
            
            
            
            
            
            
            
            1,494,050Amortization
                of stock-based compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            527,694
            
            
            
            
            
            527,694Stock-based
                compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,862,609
            
            
            
            
            
            
            
            
            4,862,609Conversion
                of Junior A Preferred Stock to Common Stock
            
            
            7,875
            
            
            1
            
            
            (7,875
            )
            
            (1
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            —Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11,466,724
            )
            
            (11,466,724
            )**Balance,**December 31, 2006
            
            
            93,721,542
            
            $
            9,372
            
            
            782,375
            
            $
            78
            
            
            —
            
            $
            —
            
            $
            (386,400
            )
            $
            52,841,936
            
            $
            —
            
            $
            (44,687,065
            )
            $
            7,777,921




See
      accompanying notes to consolidated financial statements.





F-5




***MIGO
      SOFTWARE, INC.***


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Year
      Ended December 31, 2006 and Nine Months Ended December 31,
      2005**




**Nine
                Months****Year
                Ended**
            
            **Ended****December 31,
                2006**
            
            **December
                31, 2005**Cash
                Flows from Operating Activities:Net
                loss
            
            $
            (11,466,724
            )
            $
            (5,288,933
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Common
                stock and options issued for services
            
            
            —
            
            
            412,447Inventory
                write-downs
            
            
            15,442
            
            
            12,183Stock
                registration penalties
            
            
            1,494,050
            
            
            —Depreciation
                and amortization
            
            
            572,151
            
            
            427,924Amortization
                of deferred compensation
            
            
            527,694
            
            
            122,306Interest
                expense relating to amortization of debt discount and beneficial
                conversion
            
            
            —
            
            
            294,444Remeasurement
                of warrants to fair value
            
            
            (166,538
            )
            
            (151,164
            )Stock
                based compensation
            
            
            4,862,609
            
            
            810,591Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            6,696
            
            
            9,043Inventory
            
            
            313
            
            
            58,126Other
                current assets
            
            
            46,740
            
            
            (41,683
            )Other
                assets
            
            
            (95,525
            )
            
            500Accounts
                payable
            
            
            (781,536
            )
            
            (73,610
            )Accrued
                compensation
            
            
            110,863
            
            
            24,638Accrued
                liabilities
            
            
            (600,670
            )
            
            184,471Deferred
                revenue
            
            
            680,000
            
            
            —Net
                cash used in operating activities
            
            
            (4,794,435
            )
            
            (3,198,717
            )Cash
                Flows from Investing Activities:Purchases
                of available-for-sale investments
            
            
            (1,850,000
            )
            
            (3,725,640
            )Proceeds
                from sale of available-for-sale investments
            
            
            1,570,206
            
            
            850,640StompSoft
                asset acquisition
            
            
            (835,756
            )
            
            —Purchase
                of equipment
            
            
            (5,516
            )
            
            —Net
                cash used in investing activities
            
            
            (1,121,066
            )
            
            (2,875,000
            )Cash
                Flows from Financing Activities:Proceeds
                from convertible notes
            
            
            —
            
            
            1,000,000Repayment
                of convertible notes
            
            
            —
            
            
            (116,667
            )Payments
                upon rescission of common stock
            
            
            —
            
            
            (26,400
            )Payment
                of equity financing costs
            
            
            (415,568
            )
            
            (408,241
            )Proceeds
                from sale of common stock
            
            
            4,125,000
            
            
            7,712,000Net
                cash provided by financing activities
            
            
            3,709,432
            
            
            8,160,692NET
                (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
            
            
            (2,206,069
            )
            
            2,086,975CASH
                AND CASH EQUIVALENTS, Beginning of period
            
            
            2,510,704
            
            
            423,729CASH
                AND CASH EQUIVALENTS, End of period
            
            $
            304,635
            
            $
            2,510,704**Non-cash
                investing and financing activity:**Issuance
                of shares for dividends
            
            $
            —
            
            $
            630,254Issuance
                of common stock in connection with the conversion of debt
            
            
            —
            
            
            883,333Issuance
                of common stock in connection with the StompSoft asset
                acquisition
            
            
            3,502,000
            
            
            —Warrants
                issued in settlement of accrued liabilities
            
            
            246,970
            
            
            —**Supplemental
                disclosure of cash paid for :**Interest
            
            
            —
            
            
            —Income
                Taxes
            
            
            800
            
            
            800




See
      accompanying notes to consolidated financial statements.




F-6


***MIGO
      SOFTWARE, INC.***


***NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS***





1.  ****O****RGANIZATION
      AND****N****ATURE
      OF****O****PERATIONS****




Migo
      Software, Inc. (“the Company”) was incorporated under the laws of the State of
      Delaware on May 16, 2002 as PowerHouse Studios, Inc. On May 19, 2003, the
      Company completed a combination with Agate Technologies, Inc. (“Agate”) and
      conducted a 1-for-122 reverse split of the Agate common stock. All share and
      per-share amounts have been retroactively adjusted to reflect the split.
      Concurrent with this transaction, the Company amended its Articles of
      Incorporation changing its name to Powerhouse Technologies Group, Inc. The
      Company’s name was changed to “Migo Software, Inc.” in August 2006.




On
      January 9, 2006, the Board of Directors of the Company determined to change
      the
      Company’s fiscal year end to December 31 from March 31. Accordingly, the
      accompanying Consolidated Statements of Operations includes the nine month
      fiscal year from April 1, 2005 through December 31, 2005 and the twelve month
      fiscal year from January 1 2006 through December 31, 2006.




The
      Company has limited operating history and limited revenues. Located in Redwood
      City, California, the Company is in the business of developing, acquiring and
      marketing computing software and infrastructure technologies designed to improve
      the way mobile information is personalized, secured, carried and accessed.
      The
      Company’s corporate website is www.migosoftware.com. As further discussed
      in Note 3, the Company acquired substantially all of the assets of StompSoft,
      Inc. (“StompSoft”) on December 27, 2006. StompSoft is a manufacturer of backup,
      system utility and online security/privacy software located in Irvine,
      California.




2.  ****S****UMMARY
      OF****S****IGNIFICANT****A****CCOUNTING****P****OLICIES****




*Basis
      of Presentation* - The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States (“US GAAP”), which
      contemplate continuation of the Company as a going concern. However, the Company
      is subject to the risks and uncertainties associated with a new business, has
      limited sources of revenue, and has incurred significant losses from operations.
      These matters raise doubt about the Company’s ability to continue as a going
      concern. From inception, the Company has never been profitable and has sustained
      substantial net losses from operations. There can be no assurance that it will
      ever generate sufficient revenues from its operating activities, or that it
      will
      achieve and sustain a profit during any future period, particularly if
      operations remain at current levels. Management estimates that the current
      funds
      available and on-hand along with expected revenues for 2007 will be adequate
      to
      fund operations throughout 2007.





*Principles
      of Consolidation* - The
      consolidated financial statements include the accounts of the Company and its
      subsidiaries, PowerHouse Acquisition LLC and PowerHouse Studios, Inc. All
      significant inter-company accounts and transactions have been eliminated in
      consolidation.




*Use
      of Estimates* - The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements, and the reported amounts of revenues
      and
      expenses during the reported periods. Management bases its estimates and
      assumptions on historical experience and on various other assumptions that
      it
      believes are reasonable under the circumstances. Actual results could differ
      from those estimates. Significant estimates include the valuation of acquired
      goodwill and intangible assets, and revenue recognition.




*Cash,
      Cash Equivalents* - The
      Company considers temporary liquid investments with an original maturity of
      three months or less to be cash equivalents.




F-7




*Inventory* ** -
      Inventory is valued at the lower of cost or market with cost determined by
      the
      first-in, first-out method. At December 31, 2006 inventory consisted of
      primarily of packaging material for our retail software. Although the Company
      is
      principally in the business of developing software, to support sales of software
      licenses it may at times purchase hardware and resell it with its software
      pre-installed. As a result, the Company may be exposed to a number of factors
      that could result in portions of its inventory becoming either obsolete or
      in
      excess of anticipated usage. These factors include, but are not limited to,
      technological changes in its markets, competitive pressures in products and
      prices, and the introduction of new product lines. The Company regularly
      evaluates its ability to realize the value of its software and hardware
      inventory based on a combination of factors, including historical usage rates,
      forecasted sales, product life cycles, and market acceptance of new products.
      When inventory that is obsolete or in excess of anticipated usage is identified,
      it is written down to realizable salvage value or an inventory valuation reserve
      is established. For the year ended December 31, 2006, and the nine months ended
      December 31, 2005, the Company recorded an expense related to the write-down
      of
      the Company’s inventory to its realizable value of $15,442 and $12,183,
      respectively.




*Property
      and Equipment* -
      Property and equipment are stated at cost. Depreciation is computed using the
      straight-line method over estimated useful lives of three to five years.
      Leasehold improvements are amortized over the shorter of the lease term or
      the
      estimated useful life. The Company capitalizes costs associated with acquiring
      and installing software to be used for internal purposes.




*Goodwill* - Goodwill
      represents the excess of acquisition costs over the fair value of tangible
      net
      assets and identifiable intangible assets of businesses acquired. Goodwill
      and
      certain other intangible assets deemed to have indefinite lives are not
      amortized. Intangible assets determined to have definite lives are amortized
      over their useful lives. Goodwill and indefinite lived intangible assets are
      subject to impairment testing annually as of December 31, or whenever events
      or
      changes in circumstances indicate that the carrying amount may not be fully
      recoverable, using the guidance and criteria described in Statement of Financial
      Accounting Standards No. 142, *Goodwill
      and Other Intangible Assets.* This
      testing compares carrying values to fair values and, when appropriate, the
      carrying value of these assets is reduced to fair value.




*Other
      Intangible Assets* - Other
      intangible assets include software technology assets (acquired as part of the
      First Person Software acquisition in 2004) and intangible assets acquired from
      StompSoft as described in Note 3. Intangible assets are stated at cost.
      Amortization of software technology assets is computed using the revenue or
      straight-line method, whichever is greater, over an estimated useful life of
      five years. Intangible assets acquired from StompSoft have a weighted average
      useful life of approximately 6.5 years. Amortization of such StompSoft
      intangible assets is computed using the straight-line method over the following
      estimated useful lives:


Existing
                  Product/Unpatented Technology
              4
                  yearsTrademarks/Trade
                  Names
              10
                  yearsCustomer
                  relationships
              10
                  yearsNon-Compete
                  agreement
              2
                  years




*Impairment
      of Long-Lived Assets* -
      Property, equipment, intangible and certain other long-lived assets are
      depreciated or amortized over their useful lives. Useful lives are based on
      management’s estimates of the period that the assets will generate revenues.
      Long-lived assets are written down to fair value whenever events or changes
      indicate that the carrying amount of an asset may not be recoverable. The
      Company’s policy is to review the recoverability of all long-lived assets at a
      minimum of once per year and record an impairment loss when the fair value
      of
      the assets does not exceed the carrying amount of the asset.




F-8





*Revenue
      Recognition* - The
      Company recognizes revenue in accordance with Statement of Accounting Position
      (“SOP”) 97-2, *Software
      Revenue Recognition* ,
      as
      amended, and Staff Accounting Bulletin (“SAB”) No. 104, *Revenue
      Recognition* .




The
      Company recognizes revenue from sales through the Company's website after the
      30
      day return period has lapsed. The Company’s software products are licensed on a
      perpetual basis. Revenue from the sale of software licenses is recognized only
      when persuasive evidence of an arrangement exists, the product has been
      delivered, the fee is fixed or determinable and collection of the resulting
      receivable is reasonably assured. For sales over the Internet, the Company
      uses
      a credit card authorization as evidence of an arrangement.




Revenue
      from direct sale contracts of the Company’s products to commercial users is
      recognized based on the terms of the agreement, after the product has been
      delivered, and collection of the resulting receivable is reasonably assured.
      Revenue from distributors is recognized when the product has been sold to third
      party customers.




We
      evaluate the recognition of revenue based on the criteria set forth in
      SOP 97-2, *Software
      Revenue Recognition* ,
      as
      amended by SOP 98-9, *Modification
      of SOP 97-2, Software Revenue Recognition, With Respect to Certain
      Transactions* and
      SAB
      No. 101, *Revenue
      Recognition in Financial Statements* ,
      as
      revised by SAB No. 104, *“Revenue
      Recognition”.* We
      evaluate revenue recognition using the following basic criteria and recognize
      revenue when all four of the following criteria are met:




·
            Evidence
                of an arrangement: Evidence of an agreement with the customer that
                reflects the terms and conditions to deliver products must be present
                in
                order to recognize revenue.





·
            Delivery:
                Delivery is considered to occur when the products are shipped and
                risk of
                loss and reward have been transferred to the customer.For
                sales over the Internet, the Company uses a credit card authorization
                as
                evidence of an arrangement.





·
            Fixed
                or determinable fee: If a portion of the arrangement fee is not fixed
                or
                determinable, the Company recognizes that amount as revenue when
                the amount becomes fixed or
                determinable.





·
            Collection
                is deemed probable: At the time of the transaction, the Company conducts
                a
                credit review of each customer involved in a significant transaction
                to
                determine the creditworthiness of the customer. Collection is deemed
                probable if the Company expects the customer to be able to pay amounts
                under the arrangement as those amounts become due. If the Company
                determines that collection is not probable, it recognizes revenue
                when
                collection becomes probable (generally upon cash
                collection).




Determining
      whether and when some of these criteria have been satisfied often involves
      assumptions and judgments that can have a significant impact on the timing
      and
      amount of revenue reported. For example, for multiple element arrangements,
      the
      Company must make assumptions and judgments in order to: (1) determine
      whether and when each element has been delivered; (2) determine whether
      undelivered products or services are essential to the functionality of the
      delivered products and services; (3) determine whether vendor-specific
      objective evidence of fair value (“VSOE”) exists for each undelivered element;
      and (4) allocate the total price among the various elements the Company
      must deliver. Changes to any of these assumptions or judgments, or changes
      to
      the elements in a software arrangement, could cause a material increase or
      decrease in the amount of revenue reported in a particular period.




F-9





*Product
      Revenue* *:* Product
      revenue, including sales to retailers, resellers and distributors (“channel
      partners”), is recognized when the above criteria are met. The Company reduces
      product revenue for estimated future returns, price protection, and other
      offerings, which may occur with our customers and channel partners.





*Shipping
      and Handling* *:* In
      accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-10, *Accounting
      for Shipping and Handling Fees and Costs* ,
      the
      Company recognizes amounts billed to customers for shipping and handling as
      revenue. Additionally, shipping and handling costs incurred by the Company
      are
      included in cost of goods sold.





*OEM
      Software Licenses* *:* The
      Company licenses software rights to manufacturers of products in related
      industries (for example, flash drives or other computer accessories) to include
      certain of its products with the manufacturer’s product. The Company calls
      these combined products “OEM bundles”. These OEM bundles generally require
      either the customer to pay an upfront nonrefundable fee, as in the case of
      Kingston Technology Company, or the Company receives a fee once the consumer
      uses our product, and elects to purchase it over the internet, generally the
      Company’s agreement with Sandisk.





*Sales
      Returns and Allowances and Bad Debt Reserves* - The
      Company estimates potential future product returns, price protection and stock-balancing
      programs related to current-period product revenue. The
      Company analyzes
      historical returns, current sell-through of distributor and retailer inventory
      of its products, current trends in the software market and the overall economy,
      changes in customer demand and acceptance of its products and other related
      factors when evaluating the adequacy of the sales returns and price protection
      allowances. In addition, the
      Company monitors
      the volume of sales to its channel partners and their inventories as substantial
      overstocking in the distribution channel could result in high returns or higher
      price protection costs in subsequent periods. Similarly, significant judgment
      is
      required to estimate the Company's allowance for doubtful accounts in any
      accounting period. The
      Company analyzes
      customer concentrations, customer credit-worthiness, current economic trends,
      and historical experience when evaluating the adequacy of the allowance for
      doubtful accounts. At December 31, 2006 and 2005, management believed that
      all
      accounts receivable were collectible.





*Advertising
      Costs* - The
      Company generally expenses advertising costs as incurred. Cooperative advertising with
      the Company's channel partners is accrued when revenue is recognized and
      such amounts are included in marketing and sales expense if there is a separate
      identifiable benefit for which t he
      Company can
      reasonably estimate the fair value of the benefit identified. Otherwise, they
      are recognized as a reduction of net revenue. The
      Company then
      reimburses the channel partner when qualifying claims are submitted.





*Software
      Development Costs* -
      Research and development costs, which consist primarily of software development
      costs, are expensed as incurred, and totaled $1,914,997 and $590,291 for the
      year and nine months ending December 31, 2006 and 2005, respectively.
      SFAS No. 86, *Accounting
      for the Cost of Computer Software to be Sold, Leased, or Otherwise
      Marketed* ,
      provides for the capitalization of certain software development costs incurred
      after technological feasibility of the software is established or for
      development costs that have alternative future uses. Under t he
      Company’s current
      practice of developing new products, the technological feasibility of the
      underlying software is not established until substantially all product
      development is complete, which generally includes the development of a working
      model. The software development costs that have been capitalized to date have
      been insignificant.




*Basic
      and Diluted Loss Per Share* - In
      accordance with the Financial Accounting Standards Board’s (“FASB”) SFAS No.
      128, *Earnings
      Per Share* ,
      the
      basic loss per common share, which excludes dilution, is computed by dividing
      the net loss available to common shareholders by the weighted average number
      of
      common shares outstanding. Diluted loss per common share reflects the potential
      dilution that could occur if all potential common shares had been issued and
      if
      the additional common shares were dilutive. As a result of net losses for all
      period presented, there is no difference between basic and diluted loss per
      share of Common Stock. Potential shares of common stock to be issued upon the
      exercise of all stock options and warrants amounted to 44,418,351 shares as
      of
      December 31, 2006 and 28,607,413 shares as of December 31, 2005.




F-10




*Comprehensive
      Loss* -
      Comprehensive loss is comprised of net loss and other comprehensive income
      (loss). Other comprehensive income (loss) includes certain changes in
      stockholders’ equity that are excluded from net loss, such as unrealized gains
      and losses on marketable securities and currency translation adjustments.
      Comprehensive income (loss) for the year ended December 31, 2006 and for the
      nine months ended December 31, 2005 equals net loss.




*Stock-Based
      Compensation* - In
      December 2004, the FASB issued SFAS No. 123R, *Share
      Based Payment.* SFAS
      No.
      123R establishes the accounting for grants of stock options and other
      transactions in which an entity exchanges its equity instruments for goods
      or
      services. It also addresses transactions in which an entity incurs liabilities
      in exchange for goods or services that are based on the fair value of the
      entity’s equity instruments or that may be settled by the issuance of those
      equity instruments. SFAS No. 123R (1) revises SFAS No. 123, *Accounting
      for Stock-Based Compensation* ,
      (2)
      supersedes Accounting Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and (3)
      establishes fair value as the measurement objective for share-based payment
      transactions. The Company adopted SFAS 123R effective January 1, 2005 in
      accordance with the standard’s early adoption provisions. Prior to January 1,
      2005, the Company’s Board of Directors had not approved the granting of any
      stock options. As such, the Company decided to follow the provisions of SFAS
      No.
      123R on a prospective basis, and for the year ended December 31, 2006 and for
      the nine months ended December 31, 2005, the Company recorded $4,862,609 and
      $810,591, respectively, of compensation expense related to the granting of
      stock
      options to employees.




*Fair
      Value of Financial Instruments* - The
      estimated fair values for financial instruments under SFAS No. 107, *Disclosures
      about Fair Value of Financial Instruments* ,
      are
      determined at discrete points in time based on relevant market information.
      These estimates involve uncertainties and cannot be determined with precision.
      For certain of the Company’s financial instruments, including certain assets,
      accounts payable, and accrued liabilities the carrying amounts approximate
      fair
      value due to their maturities.





*Concentrations
      of Credit Risk* - Credit
      risk represents the accounting loss that would be recognized at the reporting
      date if counter parties failed completely to perform as contracted. The
      Company’s product revenues are concentrated in the software industry, which is
      highly competitive and rapidly changing. Significant technological changes
      in
      the industry or customer requirements, or the emergence of competitive products
      with new capabilities or technologies, could adversely affect operating results.
      Concentrations of credit risk (whether on or off balance sheet) that arise
      from
      financial instruments exist for groups of customers or counter parties when
      they
      have similar economic characteristics that would cause their ability to meet
      contractual obligations to be similarly affected by changes in economic or
      other
      conditions described below.





Financial
      instruments that subject the Company to credit risk consist of cash balances
      maintained in excess of federal depository insurance limits and accounts
      receivable, which have no collateral or security. The Company maintains its
      cash
      balances with high credit quality financial institutions. At times, cash
      deposits may be in excess of Federal Deposit Insurance Corporation’s limits. To
      date, the Company has not experienced any such losses and believes it is not
      exposed to any significant credit risk with respect to its cash
      balances.





*Financial
      Instruments* - The
      Company’s financial instruments consist primarily of cash and cash equivalents and
      auction rate securities. These balances, as presented in the consolidated
      financial statements at December 3 1,
      2006
      and 2005, approximate their fair value.





*Short-term
      Investments* - The Company’s
      short-term investments consist primarily of Auction Rate  Securities, or ARS,
      which represent funds available for current operations. In accordance with
      SFAS,
      No. 115, *Accounting
      for Certain Investments in Debt and Equity Securities,* these
      short-term investments are classified as available-for-sale and are carried
      at
      cost or par value, which approximates the fair market value. These securities
      have stated maturities beyond three months but are priced and traded as
      short-term instruments.




F-11





*Income
      Taxes* - The
      Company accounts for income taxes using the asset and liability method, as
      set forth in
      SFAS No. 109, *Accounting
      for Income Taxes* ,
      wherein
      deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between financial statement carrying
      amounts of existing assets and liabilities and their respective tax bases.
      Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which the temporary
      differences are expected to be recovered or settled. Reserves against deferred
      tax assets are provided when management cannot conclude that realization of
      such
      assets is probable.




*Recently
      Issued Accounting Pronouncements* In
      February 2006, the FASB issued SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments,* which
      amends SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* and
      SFAS
      No. 140, *Accounting
      or the Impairment or Disposal of Long-Lived Assets* .
      Specifically, SFAS No. 155 amends SFAS No. 133 to permit fair value
      remeasurement for any hybrid financial instrument with an embedded derivative
      that otherwise would require bifurcation, provided the whole instrument is
      accounted for on a fair value basis. Additionally, SFAS No. 155 amends SFAS
      No.
      140 to allow a qualifying special purpose entity to hold a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument. SFAS No. 155 applies to all financial instruments acquired
      or issued after the beginning of an entity’s first fiscal year that begins after
      September 15, 2006, with early application allowed. The adoption of SFAS No.
      155
      is not expected to have a material impact on the Company’s results of operations
      or financial position.




In
      July
      2006, the FASB issued FASB Interpretation (“FIN”) No. 48, *Accounting
      for Uncertainty in Income Taxes - an Interpretation of FASB Statement
      109* .
      FIN 48
      clarifies the accounting for uncertainty in income taxes recognized in an
      enterprise’s financial statements in accordance with FASB Statement No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      prescribes a comprehensive model for recognizing, measuring, presenting and
      disclosing in the financial statements tax positions taken or expected to be
      taken on a tax return. FIN 48 is effective for fiscal years beginning after
      December 15, 2006. If there are changes in net assets as a result of application
      of FIN 48, these will be accounted for as an adjustment of retained earnings.
      The Company has not yet determined the financial statement impact of adopting
      FIN 48.




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (
      SFAS
      157). SFAS 157 defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles (GAAP), and expands
      disclosures about fair value measurements. This statement does not require
      any
      new fair value measurements; however, the standard will impact how other fair
      value based GAAP is applied. SFAS 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      within those fiscal years with early adoption encouraged. The Company is
      currently assessing the impact this statement will have on its financial
      statements and results of operations.




3.  ****S****TOMPSOFT****A****CQUISITION****




On
      December 27, 2006, Migo entered into an Asset Purchase Agreement with StompSoft
      under which Migo acquired substantially all of the assets of StompSoft, 600,000
      shares to StompSoft's Advisors, including its entire line of software
      titles and its retail web store located at www.stompsoft.com. Prior to the
      acquisition, StompSoft was a privately owned manufacturer of backup, system
      utility and online security/privacy software. StompSoft is located in Irvine,
      California.





In
      consideration for the $4,296,000 acquisition, Migo paid to StompSoft $650,000
      in
      cash, issued 20,000,000 shares of Migo common stock to StompSoft, 600,000 shares
      to StompSoft's advisors and paid certain expenses incurred by StompSoft in
      connection with the acquisition. The Migo common stock was valued using the
      average closing price of Migo common stock for the four days prior to the
      acquisition.




F-12







The
      acquisition was accounted for under the purchase method of accounting in
      accordance with generally accepted accounting principles. Under this method,
      tangible and identifiable intangible assets acquired and liabilities assumed
      are
      recorded at their estimated fair values. The excess of the purchase price,
      plus
      estimated fees and expenses related to the acquisition, over the fair value
      of
      net assets acquired is recorded as goodwill.





The
      following tables summarize the total consideration and the preliminary purchase
      price allocation as of December 27, 2006:





**Total
                Consideration:**Cash
            
            $
            650,000Common
                stock
            
            
            3,400,000Liabilities
                assumed
            
            
            6,0594,056,059Transaction
                costs
            
            
            287,756Total
                purchase price
            
            $
            4,343,815




**Purchase
                Price Allocation:**Working
                capital
            
            $
            66,951Net
                Fixed Assets
            
            
            30,000Existing
                Product/Unpatented Technology
            
            
            900,000Trademarks/Trade
                names
            
            
            700,000Customer
                relationships
            
            
            1,200,000Non-Compete
                agreement
            
            
            50,000Goodwill,
                including assembled workforce
            
            
            1,396,864$
            4,343,815




The
      allocation of the purchase price is based upon estimates of the fair value
      of
      the assets acquired and liabilities assumed in the acquisition. The total
      purchase price has been allocated to the assets acquired and liabilities assumed
      based on management’s best estimate of fair value, with the excess cost over net
      tangible and identifiable intangible assets acquired being allocated to
      goodwill. The estimated fair values of certain intangible assets have been
      determined by management with the assistance of a third-party valuation
      firm.




The
      pro
      forma unaudited results of operations, assuming that the StompSoft acquisition
      occurred as of January 1, 2005, are as follows for the years ended December
      31,
      2006 and 2005:




Twelve
                Months ended 12/31/2006
            
            Twelve
                Months ended 12/31/2005Revenues
            
            $
            3,414,261
            
            $
            3,607,453Net
                Loss
            
            $
            (12,685,699
            )
            $
            (8,458,933
            )Net
                Loss Attributable to Holders of Common Shares
            
            $
            (12,685,699
            )
            $
            (9,027,225
            )Basic
                and Diluted Net Loss Attributable to Common Stockholders per
                Share
            
            $
            (0.15
            )
            $
            (0.25
            )Weighted
                Average Shares Outstanding, Basic and Diluted
            
            
            85,877,073
            
            
            35,974,350




F-13




The
      unaudited pro forma results of operations above are not intended to represent
      or
      be indicative of operations of the Company that would have been reported had
      the
      StompSoft acquisition been completed as of the beginning of the periods
      presented, and should not be taken as representative of any future consolidated
      results of operations of the Company. The unaudited pro forma results of
      operations do not reflect any operating efficiencies or cost savings that may
      be
      achieved with respect to the combined operations.




For
      purposes of the unaudited pro forma results of operations, the historical
      results of the Company and StompSoft have been combined with pro forma
      adjustments for amortization of intangible assets and share-based compensation
      expense associated with stock options issued to the former Chief Executive
      Officer of StompSoft.





4.
            **O****THER****I****NTANGIBLE****A****SSETS**




Other
      intangible assets, which resulted from the December, 2006 StompSoft acquisition
      and the First Person acquisition completed in June 2004, consist of the
      following as of December 31, 2006 and 2005:




Cost
            
            AccumulatedAmortization
            
            NetDecember
                31, 2006:Software
                technology asset
            
            $
            2,822,337
            
            $
            1,421,916
            
            $
            1,400,421Existing
                Product/Unpatented Technology
            
            
            900,000
            
            
            -
            
            
            900,000Trademarks/Trade
                Names
            
            
            700,000
            
            
            -
            
            
            700,000Customer
                relationships
            
            
            1,200,000
            
            
            -
            
            
            1,200,000Non-Compete
                Agreement
            
            
            50,000
            
            
            -
            
            
            50,000$
            5,672,337
            
            $
            1,421,916
            
            $
            4,250,421December
                31, 2005:Software
                technology asset
            
            $
            2,822,337
            
            $
            857,236
            
            $
            1,965,101




Amortization
      expense related to other intangible assets amounted to $564,680 for the year
      ended December 31, 2006 and $423,485 for the nine months ended December 31,
      2005.




The
      expected future annual amortization expense of intangible assets is as follows:




For
                the year ended December 31,2007
            
            $
            1,004,4692008
            
            
            1,004,4692009
            
            
            686,4832010
            
            
            415,0002011
            
            
            190,000Thereafter
            
            
            950,000$
            4,250,421




F-14




5.
            **D****EBT**




In
      June
      and August 2005, the Company entered into several Secured Convertible Promissory
      Notes (“Notes”) with certain parties (“Payees”) providing for an aggregate of
      $1,000,000 principal amount of loans to the Company. Principal amounts owing
      under the Notes bore interest at a fixed rate of 12% per annum. The Notes were
      due and payable on the earlier of (i) August 31, 2005 or (ii) the date of
      closing of the issuance of securities of the Company to one or more investors
      for cash in a new transaction following the date of issuance of these Notes
      (“New Financing”).





Payees
      had the right to convert the Payee’s Note into the securities issued in the New
      Financing. In the event a Payee elected to convert such Payee’s Note in
      connection with the New Financing, the principal amount of such Notes plus
      accrued and unpaid interest were convertible at a conversion price equal to
      seventy five percent (75%) of the price paid by investors for the securities
      issuable by the Company in the New Financing. The securities issued upon
      conversion included warrants containing the same terms as those received by
      investors in the New Financing (“Investor Warrants”).





As
      more
      fully described in Note 8, the Company completed a private placement on
      September 26, 2005, which represented a New Financing as defined in the Notes.
      Holders of Notes with an aggregate principal balance of $883,333 elected to
      convert their Notes into the securities issued in the New Financing, and the
      balance of the Notes, with an aggregate principal balance of $116,667, were
      repaid from the proceeds of the New Financing.





As
      a
      result of the private placement transactions, the Company recorded discounts
      to
      the Notes related to the 75% conversion price to New Financing as a beneficial
      conversion effect. These discounts, amounting to $294,444, were limited to
      the
      total proceeds received, and were amortized to interest expense.





As
      a
      result of the conversion of, or repayment of, the Company’s Convertible
      Promissory Notes, the Company had no debt outstanding as of December 31, 2006
      other than certain capitalized lease obligations, amounting to $6,059 at
      December 31, 2006, assumed in connection with the StompSoft acquisition
      described in Note 3.





6.
            **A****CCRUED****L****IABILITIES**




Accrued
      liabilities consist of the following at December 31, 2006 and 2005:




2006
            
            2005Settlements
                payable
            
            $
            424,000
            
            $
            345,000Options
                to be issued
            
            
            -
            
            
            246,971Accrued
                operating expenses
            
            
            -
            
            
            679,669$
            424,000
            
            $
            1,271,640





F-15




7.
            **I****NCOME****T****AXES**




For
      both
      the year ended December 31, 2006 and the nine months ended December 31, 2005,
      income tax expense amounted to $800, representing minimum California franchise
      taxes. There has been no provision for U.S. federal income taxes in any periods
      presented as the Company has incurred operating losses.




A
      reconciliation of income taxes at the statutory federal income tax rate to
      net
      income taxes included in the accompanying statements of operations for the
      year
      ended December 31, 2006 and the nine months ended December 31, 2005 is as
      follows:




2006
            
            2005Statutory
                U.S. federal rate
            
            
            34.0%
            
            
            34.0%State
                income taxes, net of federal effect
            
            
            4.9%
            
            
            5.2%Interest
                related to debt discount and beneficial conversion
            
            
            
            
            
            (1.9%)Decrease
                in warrant liability
            
            
            0.5%
            
            
            1.0%Stock
                option expense
            
            
            (1.4%)
            
            
            (3.0%)Stock
                registration penalty
            
            
            (4.4%)Other
            
            
            (0.1%)
            
            
            (0.1%)Valuation
                allowance
            
            
            (33.5%)
            
            
            (35.2%)Effective
                Tax Rate
            
            
            -
                %
            
            
            -
                %




Deferred
      income taxes reflect the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes. Significant components of the
      Company’s deferred tax assets as of December 31, 2006 and December 31, 2005 are
      as follows:




2006
            
            2005Net
                operating losses
            
            $
            10,095,000
            
            $
            7,705,000Stock option
              expense
            
            
            1,744,000
            
            
            -Other,
                primarily accrued expenses
            
            
            225,000
            
            
            14,00012,064,000
            
            
            7,719,000Less:
                Valuation allowance
            
            
            (12,064,000
            )
            
            (7,719,000
            )$
            -
            
            $
            -




Realization
      of deferred tax assets is dependent upon future earnings, if any, the timing
      and
      amount of which are uncertain. Accordingly, the net deferred tax assets have
      been fully offset by a valuation allowance. The valuation allowance increased
      by
      $4.345 million during the year ended December 31, 2006 and $1.875 million during
      the nine months ended December 31, 2005.




As
      of
      December 31, 2006, the Company had net operating loss carryforwards for federal
      income tax purposes of approximately $25.6 million, which expire in the years
      2020 through 2027. The Company also had net operating loss carryforwards for
      state income tax purposes of approximately $23.6 million, expiring in the years
      2011 through 2017.




F-16




Utilization
      of the Company’s net operating loss and tax credit carryforwards may be subject
      to a substantial annual limitation due to the ownership change limitations
      provided by the Internal Revenue Code and similar state provisions. Such an
      annual limitation could result in the expiration or elimination of the net
      operating loss and tax credit carryforwards before utilization.




8.
            **S****TOCKHOLDERS’****E****QUITY**




*Common
      Stock* - On
      September 5, 2006, the Company completed an equity investment from Kingston
      Technology Corporation (Kingston). On that date, Kingston purchase $150,000
      of
      Common Stock totaling 468,750 shares and received warrants to purchase 950,000
      shares of Common Stock exercisable at $0.35 per share. The warrants contain
      a
      call provision in favor of the Company at a price of $0.01 per share if the
      stock price should exceed $2.00 per share and permit cashless exercise at any
      time. No placement fee was paid in conjunction with the investment by Kingston.
      The Company simultaneously entered into a License Agreement with Kingston,
      under
      which, Kingston paid $1,850,000 for global marketing and distribution rights
      to
      load currently available and future product releases of Migo’s software on
      Kingston’s flash memory products through December 2007. $850,000 of the license
      fee was paid upon signing the agreement and the payment of the next $1,000,000
      is contingent upon Migo meeting certain mutually agreed upon R&D milestones
      by April 1, 2007. The agreement is renewable by Kingston for one additional
      year
      at a license fee to be agreed upon.




On
      September 26, 2005, the Company completed a private placement (the “September
      2005 Placement”) with certain investors of the Company’s common stock, par value
      $0.0001 per share, (the “Common Stock”) and issued a total of 19,910,950 shares
      of Common Stock and warrants (the “Warrants”) to purchase a total of 10,900,400
      shares of the Company’s Common Stock. The shares of Common Stock were sold at
      $0.32 per unit, each unit consisting of one share of Common Stock and a warrant
      to purchase one-half of one share of Common Stock. The aggregate offering price
      was $6,045,000 and the aggregate placement fee was $191,360 and warrants to
      purchase 1,278,490 shares of Common Stock. Fifty percent (50%) of all Warrants
      issued were exercisable at $0.40 per share, and the remaining fifty percent
      (50%) were exercisable at $0.48 per share. After taking into account an
      anti-dilution adjustment as a result of the December 2005 placement described
      below and the StompSoft purchase, all of the Warrants are exercisable, as of
      March 15, 2007, at $.23 per share. All Warrants expire after three years, unless
      theretofore exercised, contain a call provision in favor of the Company at
      a
      price of $.01 if the stock price should exceed $2.00 per share, and permit
      cashless exercise only if there is no registration statement in effect after
      one
      year. The proceeds of the private placement included $883,333 of principal
      and
      $23,765 of accrued interest converted into Common Stock from short-term bridge
      financing obtained by the Company earlier in the fiscal year. The conversion
      resulted in the issuance of a total of 3,779,700 shares of Common Stock at
      $0.24
      per share.




The
      September 2005 Placement was effected through Common Stock and Warrant Purchase
      Agreements, dated as of September 26, 2005, by and among the Company and the
      private placement investors who are named therein. As a condition to the
      transaction, all of the Company’s Series A Senior Preferred Convertible Stock
      (the “Senior A Stock”) was converted into 20,632,952 Common Stock at a
      conversion ratio of 5.3685 shares of Common Stock for each share of Senior
      A
      Stock, and a Warrant Exchange Agreement, dated as of September 26, 2005, was
      entered into with Middlebury Capital LLC under which the holders of warrants
      to
      purchase 264,725 shares at $3.06 per share exchanged their warrants for new
      warrants for 700,000 shares at $.40 per share. In addition, the Company executed
      a Registration Rights Agreement, dated as of September 26, 2005, with the
      private placement investors, wherein the Company agreed to register under the
      Securities Act of 1933, as amended (the “Securities Act”) the shares of Common
      Stock acquired in the private placement and the shares issuable upon exercise
      of
      the Warrants issued in the private placement.




F-17




The
      proceeds of the September 2005 Placement were used for working capital and
      general corporate purposes, including $120,904 applied to the repayment of
      the
      balance of the convertible notes that were not converted to common stock as
      part
      of the transaction.




On
      December 23, 2005, the Company completed a follow-on private placement (the
      “December 2005 Placement”) with certain investors of its Common Stock and
      investor warrants to purchase a total of 7,968,750 shares of the Company’s
      Common Stock. The securities were sold at $.32 per unit, each unit consisting
      of
      one share of Common Stock and warrants to purchase one-half of one share of
      Common Stock. The aggregate offering price was $2,550,000, and the placement
      fee
      was paid in the form of Placement Agent Warrants to purchase 796,875 shares
      of
      Common Stock. The investor warrants and placement agent warrants issued in
      connection with the December 2005 Placement were originally exercisable at
      $.40
      per share ( since
      reset to $.23 per share), expire
      on September 26, 2008, unless theretofore exercised, contain a call provision
      in
      favor of the Company at a price of $.01 per share if the stock price should
      exceed $2.00 per share and permit cashless exercise at any time. The private
      placement was effected through Common Stock and Warrant Purchase Agreements,
      dated as December 23, 2005, with the private placement investors.




On
      March
      17, 2006, the Company completed a second follow-on private placement (the “March
      2006 Placement”) to the September 2005 Placement and the December 2005 Placement
      under which the investors purchased a total of 12,421,875 shares of the
      Company’s Common Stock and warrants to purchase 6,210,938 shares of Common
      Stock. The securities were sold at $0.32 per unit, each unit consisting of
      one
      share of Common Stock and a warrant to purchase one-half of one share of Common
      Stock, originally exercisable at $0.40 per share, and since reset to $.23 per
      share. The aggregate offering price was $3,975,000. The investor warrants issued
      in connection with the March 2006 Placement expire on September 26, 2008, unless
      theretofore exercised, contain a call provision in favor of the Company at
      a
      price of $0.01 per share if the stock price should exceed $2.00 per share and
      permit cashless exercise at any time. C. E. Unterberg Towbin, LLC was paid
      a
      placement fee of $397,500 in connection with this transaction. The private
      placement was effected through Common Stock and Warrant Purchase Agreements
      by
      and among the Company and the private placement investors.





The
      holders of the Common Shares acquired via the September 2005, December 2005
      and
      March 2006 private placements have registration rights that require the Company
      to file and have declared effective a registration statement with the SEC to
      register the resale of the Common Stock and the Common Stock issuable upon
      exercise of warrants. In the event the Company was unable to cause the
      registration to be effective within 90 to 120 days from the date of issuance
      for
      the Common Shares acquired via the September and December 2005 private
      placements, the Company would be penalized. The penalty accrued at a rate of
      3%
      per month of the original amount invested, up to a maximum of 30%, at which
      point the holders of the Common Shares acquired in the private placements have
      the right to put the stock and warrants back to the Company for full redemption.
      Pursuant to the terms of the Registration Rights Agreement, during the first
      90
      days in which the penalty is earned, the penalty is payable either in cash
      or in
      shares of common stock, at the Company’s election. After that 90-day period
      expires, the penalty must be paid in cash. However, in April 2006, the holders
      of the Common Shares acquired via the September, and December 2005 and the
      March
      2006 private placements waived their right to ever put the stock and warrant
      back to the Company for full redemption, and also gave the Company the right
      to
      pay any penalty, in either cash or common stock, at the Company’s option. During
      the year ended December 31, 2006, the Company issued 5,642,672 shares of Common
      Stock in payment of penalties relating to the private placements described
      above. The related expense, amounting to $1,494,050, is included in other
      non-operating expense in the accompanying Statement of Operations.





Under
      EITF 00-19, the ability to register stock, or keep the registration effective,
      is deemed to be outside of the Company’s control. Accordingly, the Company
      treated the issuance of the Common Stock as mezzanine equity and the warrant
      value as a liability as the Registration Statement was not declared effective
      by
      the Securities and Exchange Commission (“SEC”) until September 1, 2006 (for the
      September 2005 and December 2005 Placements) and November 9, 2006 (for the
      March
      2006 Placement). The Company calculated the total fair market value of the
      warrants based on the Black-Scholes model, which was recorded as a discount
      to
      the Common Stock and an accrued warrant liability in the consolidated balance
      sheet, and the warrant liability is marked to market at the end of each quarter.
      During the year ended December 31, 2006 and the nine months ended December
      31,
      2005, the Company recorded $166,538 and $151,164, respectively, as other income
      for the adjustment of the warrant liabilities to market.




F-18




The
      warrant liabilities and temporary equity were reclassified to permanent equity
      at the time that the related Registration Statements were declared effective
      by
      the SEC.




*Common
      Stock Issued in Connection with the StompSoft Acquisition* - In
      December 2006, the Company issued a total of 20,600,000 shares of Common stock
      in connection with the Company’s acquisition of substantially all of the assets
      of StompSoft (Note 3). The shares issued consisted of 20,000,000 shares to
      StompSoft and 600,000 shares to three principals of GCMI Securities, Inc.,
      who
      performed services for StompSoft in connection with the
      acquisition.




*Common
      Stock Issued for Compensation and Consulting Services* - For
      the nine months ended December 31, 2005, the Company issued 194,858 shares
      of
      Common Stock and options to purchase 350,000 shares of Common Stock for
      services and recorded $412,447 of compensations expense. For the year ended
      December 31, 2006, the Company did not issue any shares of Common Stock for
      services and thus recorded no compensation expense for stock
      issued.





On
      September 26, 2005, the Company entered into a Settlement Agreement with The
      Wall Street Group (“WSG”) and Wall Street Consultants, Inc. (“WSC”). Under the
      Settlement Agreement, the Company paid WSG $328,000 and issued to WSC a
      five-year option to purchase up to 350,000 shares of the Company’s common stock
      at $0.60 per share. The option agreement also grants to WSC certain piggyback
      registration rights.





In
      December 2005, 1,020,000 options held by Mr. Mashinsky, a director of the
      Company, were modified to become fully vested as of December 28, 2005, and
      subsequently exercised in full, through the application of the cashless exercise
      provision in the stock option agreement and the application of $150,000 of
      consulting income due to Mr. Mashinsky during 2006. As a result, the Company
      recorded compensation expense of $490,585 for the period ended December 31,
      2005.




Conversion
      of Series A Junior Preferred Stock into Common Stock




During
      the fiscal year ended December 31, 2006, holders of 8,500 shares of
      Series A Junior Convertible Preferred Stock (the “ Junior A
      Preferred Stock ”)
      converted their shares into Common Stock, pursuant to their respective
      agreements.




Dividends





For
      the
      nine months ended December 31, 2005, the Company issued 194,895 shares of Senior
      A Preferred Stock
      as
      payment in kind of dividends on its Senior A Preferred Stock.




9.
            **S****TOCK****O****PTIONS****A****ND****W****ARRANTS**




*Stock
      Option Plan* - On
      December 8, 2004, the Board of Directors adopted and the stockholders approved
      the 2004 Omnibus Stock Incentive Plan (the “Stock Incentive Plan”) and reserved
      1,125,000 shares for grant under the Stock Incentive Plan. In connection with
      the September 2005 Placement, the Company increased the number of shares
      authorized for issuance under the Stock Incentive Plan to 9,375,000 shares
      and
      the number of shares available for issuance under the Stock Incentive Plan
      was
      increased to 20,000,000 shares upon approval of the Company’s Board of Directors
      and Stockholders in June 2006. The Company may issue stock options,
      restricted stock, or stock bonuses under the Stock Incentive Plan to employees,
      directors and consultants. Stock options granted under the Stock Incentive
      Plan
      may be granted at prices not less than the fair market value at the date of
      grant for incentive stock options.




F-19




Stock
      options granted under the Stock Incentive Plan generally vest over 18 to 36
      months of continuous service and have a contractual term of ten years. The
      fair
      value of each stock option is estimated using the Black-Scholes model. Expected
      volatility is based on management’s estimate using the historical stock
      performance of similar software companies, the expected term of the options
      is
      determined using the “simplified” method described in SEC Staff Accounting
      Bulletin No. 107, and the risk-free interest rate is based on the implied yield
      of U.S. Treasury zero-coupon bonds with a term comparable to the expected option
      term.




Following
      is a summary of the assumptions used in the Black-Scholes model for the year
      ended December 31, 2006 and the nine months ended December 31, 2005
      :





2006
            
            2005Range
                of expected volatility
            151%
                  - 159%
            
            151%
                - 159%Weighted
                average expected volatility
            153%
            
            153%Range
                of risk-free interest rate
            2.98%
                  - 4.33%
            
            2.98%
                - 4.33%Weighted
                average risk-free interest rate
            4.13%
            
            3.48%Expected
                life in years
            6.0
            
            6.0Dividend
                yield
            0.0%
            
            0.0%




Compensation
      expense relating to stock options recognized for the year ended December 31,
      2006 and the nine months ended December 31, 2005 was $4,862,609 and $810,591,
      respectively, representing the fair value of options granted, amortized on
      a
      straight-line basis over the vesting period. The weighted average grant date
      fair value of options granted was $0.33 per share for the twelve months
      ended December 31, 2006, and $0.49 per share for the nine months ended December
      31, 2005




A
      summary
      of option activity under the Stock Incentive Plan for the year ended December
      31, 2006 and the nine months ended December 31, 2005 is as follows:




Weighted
                AverageOption
                Shares
            
            Exercise
                Price per Share
            
            Contractual
                Life Remaining, in YearsOutstanding
                at March 31, 2005
            
            
            845,000
            
            $
            1.02
            
            
            9.39Granted
            
            
            5,840,000
            
            
            0.31Exercised
            
            
            (1,020,000
            )
            
            0.32Forfeited
                or expired
            
            
            (685,000
            )
            
            0.98Outstanding
                at December 31, 2005
            
            
            4,980,000
            
            
            0.34
            
            
            9.65Granted
            
            
            12,580,000
            
            
            0.22Exercised
            
            
            -Forfeited
                or expired
            
            
            (
                55,000
            )
            
            1.15Outstanding
                at December 31, 2006
            
            
            17,505,000
            
            $
            0.28
            
            
            9.23Exercisable
                at December 31, 2006
            
            
            12,978,333
            
            $
            0.28
            
            
            9.23




F-20




Option
      shares exercisable at December 31, 2006 had no aggregate intrinsic value.




As
      of
      December 31, 2006, there was approximately $1,386,856 of total unrecognized
      compensation expense related to non-exercisable options granted for
      6,151,667 option shares at a weighted average grant date fair value of $0.23
      per
      share, which is expected to be recognized over a weighted average period of
      2.34
      years. The Company has an available pool of options for issuance of 20,000,000
      shares. As of December 31, 2006, there were 2,495,000 available for grant.
      During the year ended December 31, 2006, the Company issued options at exercise
      prices ranging from $0.15 to $0.40 per share. Options issued during the nine
      months ended December 31, 2005 had exercise prices ranging from $0.25 to $1.15
      per share.




**Common
      Stock Warrants**




Following is a summary of warrants outstanding as of December 31,
      2006:


**Number
                  of Warrants****Types
                  of Warrants**
              
              **Outstanding**
              
              **Exercise
                  Price**Warrants
                  to Junior A Preferred Holders
              
              
              270,507
              
              $
              3.83Warrants
                  to Senior A Preferred Holders
              
              
              1,220,233
              
              $
              0.40Warrants
                  Issued to Investors in the September 2005 Private
                  Placement
              
              
              10,900,400
              
              $
              0.23Warrants
                  Issued to Investors in the December 2005 Private Placement
              
              
              3,984,375
              
              $
              0.23Warrants
                  Issued to Investors in the March 2006 Private Placement
              
              
              6,210,938
              
              $
              0.23Warrants
                  Issued to Placement Agents
              
              
              2,843,924
              
              $
              0.40Warrants
                  Issued to Kingston
              
              
              950,000
              
              $
              0.35Warrants
                  Issued for services
              
              
              500,000
              
              $
              0.3226,880,377





The
      weighted average exercise price of all outstanding warrants is equal to $0.43
      at
      December 31, 2006.





10.
            **R****ELATED****P****ARTY****T****RANSACTIONS**




*Advances
      from Officer and Accrued Compensation* - During
      the nine months ended December 31, 2005, the Company repaid $23,500 in accrued
      wages to certain officers and other employees.




*Investments
      by Directors* -
      In
      September 2005, Governing Dynamics Investments, LLC, an institutional purchaser
      owned and controlled by Alex Mashinsky, a Director of the Company, invested
      $700,000 for the purchase of 2,187,500 shares of Common Stock and warrants
      to
      purchase 1,093,750 of Common Stock in the September 2005 Placement referenced
      above. This investment was made simultaneously with Mr. Mashinsky’s election to
      the board of directors. Governing Dynamics Investments, LLC also participated
      in
      the March 2006 private placement described in Note 8 with an investment of
      $400,000 of units including 1,250,000 shares of Common Stock and warrants to
      purchase 625,000 shares of Common Stock.




F-21




*Exercise
      of Stock Options by Directors* -
      During
      the nine months ended December 31, 2005, 1,020,000 options held by Mr.
      Mashinsky, a director of the Company, were modified to become fully vested
      as of
      December 28, 2005, and subsequently exercised in full, through the application
      of the cashless exercise provision in the stock option agreement and the
      application of $150,000 of consulting income due to Mr. Mashinsky during 2006.
      As a result, the Company recorded compensation expense of $490,585 for the
      period ended December 31, 2005.




11.
            **C****OMMITMENTS****AND****C****ONTINGENCIES**




*Agreement
      with M-Systems* - On
      March 30, 2005, the Company entered into a three-year development agreement
      with
      M-Systems Flash Disk Pioneers Ltd., an Israeli company (“ M-Systems ”),
      since
      acquired by SanDisk Corporation. Pursuant to the agreement, the Company granted
      to M-Systems and its affiliates a worldwide, transferable license to use and
      distribute the Company’s Migo products, and to use related trademarks, as an
      integrated part of M-Systems’ USB drive product lines. The Company’s Migo
      products are offered to M-Systems customers with either (i) limited
      functionality or (ii) full functionality for a period of 45 days, after
      which the end-user may purchase a license directly from the Company to continue
      full functionality or otherwise retain limited functionality. If a M-Systems
      customer purchases a M-Systems product that has integrated a limited functioning
      Migo product, the Company will receive a fixed amount of cash per unit sold.
      If
      a M-Systems customer purchases a M-Systems product that has integrated a fully
      functioning Migo product from the Company, M-Systems will receive a fixed
      percentage of cash from the sale of each unit sold. The
      Company agreed to provide first level support for its Migo products to M-Systems
      and M-Systems’ customers and end-users.




*Agreement
        with Kingston Technology Corporation* - On
        September 5, 2006, we entered into a License Agreement with Kingston Technology
        Corporation ("Kingston"). Under the License Agreement, Kingston is to pay
        us
        $1,850,000 for global marketing and distribution rights to load currently
        available and future product releases of Migo's software on Kingston's flash
        memory products through December 2007. The license fee is payable $850,000
        upon
        signing the agreement and the receipt of the next $1,000,000 is contingent
        upon
        Migo meeting certain mutually agreed upon R&D milestones by April 1, 2007.
        The agreement is renewable by Kingston for one additional year at a license
        fee
        to be agreed upon. The initial payment of $850,000 was received in September,
        2006 and has been recorded as deferred revenue at September 30, 2006, and
        is
        being amortized monthly, on an evenly basis, beginning October 2006 through
        December 2007.




We
        acquired the business of StompSoft, Inc. in December 2006 to augment our
        revenue
        streams and to diversify our product lines. We continue to seek to develop
        other
        software applications to further expand our product lines. In order to attain
        profitability, we will need these efforts to be successful and to control
        our
        costs of operations. We cannot assure you that we will be able to attain
        profitability in the near future or at all. ****




*Lease
      Agreement* - In
      December 2004, the Company entered into a 48-month lease agreement with a third
      party for 10,270 square feet of office space located in Redwood City,
      California. The agreement commenced March 1, 2005 and requires monthly
      lease payments of $14,891, which escalate to $19,513 through February 28,
      2009.




Future
      minimum lease payments under the Company’s operating leases in Redwood
      City, as of December 31, 2006, are as follows:





2007
            
            $
            226,9672008
            
            $
            214,1302009
            
            $
            39,026$
            488,120




Total
      rent expense for the year ended December 31, 2006 was $236,995 and f or
      the
      nine months ended December 31, 2005, total rent expense was $132,510. The
      Company currently subleases space in Irvine, CA through April 30, 2007, for
      approximately $8,700 per month. The Company is searching for new space in the
      Irvine area, but has not committed to any new space as of March 20,
      2007.




*Litigation* -On
      December 20, 2005, two former employees of the Company made a demand for
      arbitration with JAMS, San Francisco alleging that each claimant is entitled
      to
      severance pay following their resignations from the Company in
      February 2005. The claimants were employed by the Company as part of
      the 2004 acquisition of First Person Software, Inc. In October 2006, the
      arbitrator ruled in favor of the plaintiffs, and the Company has
      accrued a $424,000 liability as a result of this matter for the year ended
      December 31, 2006. ****




In
      the
      normal course of business, the Company is subject to various claims and
      litigation matters none of which in management’s opinion will have a material
      effect on financial results.




F-22




The
      Company is not aware of any additional litigation as of March 15,
      2007.




*Employment/Consulting
      Contracts*





The
      Company entered into an Agreement with Kent Heyman under which Mr. Heyman
      originally became Executive Chairman of the Company’s Board of Directors as of
      September 26, 2005. As of January 9, 2006, Mr. Heyman became the Chief Executive
      Officer of the Company. The initial term of the Agreement is from September
      1,
      2005 until August 31, 2006, subject to renewal thereafter. Mr. Heyman has been
      granted options to purchase 2,700,000 shares of the Company’s common stock
      vesting over an 18-month period, and receives an annual salary of $225,000
      per
      year. In connection with the Agreement, the Company issued to Mr. Heyman 300,000
      shares of restricted common stock, which vested on January 1, 2007.





The
      Company has entered into an Employment Agreement with Jay Elliot as of September
      26, 2005, under which Mr. Elliot was designated to serve as President and Chief
      Executive Officer of the Company. In January 2006, the parties agreed to modify
      Mr. Elliot’s position with the Company, and he became Chief Strategy Officer and
      Co-chairman of the Board. Under the provisions of Mr. Elliot’s employment
      agreement, Mr. Elliot is entitled to a base salary of $200,000 per year with
      an
      annual bonus of up to $150,000 per year. In addition, Mr. Elliot has been
      granted options to purchase 2,700,000 shares of common stock with vesting over
      three years. In connection with the Employment Agreement, the Company issued
      to
      Mr. Elliot 300,000 shares of restricted common stock which vested on January
      1,
      2007. Mr. Elliot is also entitled to participate in the Company’s benefit plans
      available to other executives. The Employment Agreement provides that employment
      is terminable upon 30 days notice from either party. Under his Employment
      Agreement, Mr. Elliot is entitled to severance compensation equal to one year’s
      base salary if his employment is terminated by the Company without cause, or
      by
      Mr. Elliot for good reason. Additionally, 100% of Mr. Elliot’s stock options
      will vest if his employment is terminated by the Company without cause or by
      Mr.
      Elliot for good reason.





The
      Company entered into an Agreement with Alex Mashinsky under which Mr. Mashinsky
      became Vice Chairman of the Board as of September 26, 2005. The initial term
      of
      the Agreement is for one year, subject to renewal thereafter. Under the
      Agreement, Mr. Mashinsky is to provide consulting services to the Company and
      receive compensation at the rate of $200,000 per year. Mr. Mashinsky was granted
      options to purchase 1,020,000 shares of common stock, originally vesting over
      an
      18-month period. As of December 31, 2005, Mr. Mashinsky had exercised all his
      options on a cashless net exercise basis and in consideration for the consulting
      fees that would have been due to Mr. Mashinsky during 2006. In connection with
      the Agreement, the Company issued to Mr. Mashinsky 180,000 shares of restricted
      common stock, which vested on January 1, 2007.





The
      Company entered into an Agreement with Richard Liebman under which Mr. Liebman
      initially served as the interim Chief Financial Officer of the Company beginning
      September 26, 2005. As of January 1, 2006, Mr. Liebman became the Chief
      Financial Officer. Mr. Liebman is to receive base compensation at the rate
      of
      $180,000 per year. Mr. Liebman has been granted options to purchase a total
      of
      750,000 shares vesting over a three year period. In connection with the
      Agreement, the Company issued to Mr. Liebman 100,000 shares of restricted common
      stock, which vested on January 1, 2007.




*Guarantees*




In
      November 2002, the FASB issued FIN No. 45, *Guarantor’s
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantee of Indebtedness of Others* .
      The
      Company has determined that certain agreements; described below, fall within
      the
      scope of FIN 45.




Under
      its
      bylaws, the Company has agreed to indemnify its officers and directors for
      certain events or occurrences arising as a result of the officer or director’s
      serving in such capacity. The Company has a directors and officers liability
      insurance policy that limits the Company’s exposure and enables it to recover a
      portion of any future amounts paid resulting from the indemnification of its
      officers and directors. In addition, the Company enters into indemnification
      agreements with other parties in the ordinary course of business. In some cases,
      the Company has obtained liability insurance providing coverage that limits
      its
      exposure for these other indemnified matters. The Company has not incurred
      material costs to defend lawsuits or settle claims related to these
      indemnification agreements. The Company believes the estimated fair value of
      these indemnification agreements is minimal and has not recorded a liability
      for
      these agreements as of December 31, 2006.




F-23




ITEM
      8.
      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE





Not
      Applicable


ITEM
      8A.  CONTROLS
      AND PROCEDURES




Evaluation
      of Disclosure Controls and Procedures




As
      of the
      end of the period covered by this report, under the supervision and with the
      participation of our management, including our chief executive officer (“CEO”)
      and chief financial officer (“CFO”), we evaluated the design and operation of
      our disclosure controls and procedures (as defined in Rules 13a-15(e) and
      15d-15(e) of the Securities Exchange Act of 1934, as amended, or the “Exchange
      Act”). Based on this evaluation, our management, including our CEO and CFO, has
      concluded that our disclosure controls and procedures are designed, and are
      effective, to give reasonable assurance that the information we are required
      to
      disclose is recorded, processed, summarized and reported within the time periods
      specified in the SEC’s rules and forms.   Based upon this evaluation,
      the CEO and CFO concluded that our disclosure controls and procedures are
      effective in providing reasonable assurance that information required to be
      disclosed in our reports filed with or submitted to the SEC under the Exchange
      Act is accumulated and communicated to management, including the CEO and CFO,
      as
      appropriate to allow timely decisions regarding required
      disclosure.




Changes
      in Internal Controls.




There
      were no changes in our internal control over financial reporting that occurred
      during the fourth quarter of our year ended December 31, 2006, that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.




ITEM
      8B.  OTHER
      INFORMATION




None







PART
      III




ITEM
      9.
      DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS; COMPLIANCE WITH
      SECTION 16(a) OF THE EXCHANGE ACT





The
      names
      of the members of our Board of Directors, Executive Officers, and other persons
      who make a significant contribution to our business, as well as biographical
      information for those persons as of March 15, 2007, are set forth
      below:




NAME
            
            AGE
            
            POSITIONS
                AND OFFICES HELD
            
            SINCEKent
                Heyman
            
            51
            
            Chief
                Executive Officer,
            
            September
                2005Co-Chairman
                of the Board of DirectorsJay
                Elliot
            
            67
            
            Chief
                Strategy Officer
            
            May
                2002Co-Chairman
                of the Board of DirectorsAlex
                Mashinsky
            
            41
            
            Director,
            
            September
                2005Vice
                Chairman of the Board of DirectorsMel
                Lavitt
            
            69
            
            Director
            
            May
                2006Malcolm
                Elvey
            
            65
            
            Director
            
            May
                2006Timothy
                Wallace
            
            49
            
            Director
            
            May
                2006Greg
                Osborn
            
            42
            
            Director
            
            June
                2005Richard
                Liebman
            
            51
            
            Chief
                Financial Officer
            
            September
                2005Robert
                Halligan
            
            49
            
            Sr.
                Vice President, Sales and Marketing
            
            December
                2006Syed
                Aamer Azam
            
            40
            
            Sr.
                Vice President, Development
            
            January
                2005









Kent
      Heyman





Kent
      Heyman joined our board of directors as executive chairman in September 2005
      and
      became Chief Executive Officer in January 2006. Mr. Heyman served on the board
      of directors of Knova Software, Inc. (a software company formerly ServiceWare
      Technologies, Inc.) from February 2002 until its acquisition in March 2007,
      and
      served as its president and chief executive officer from September 2001 until
      the consummation of the merger with Kanisa in February 2005. From June 1996
      to
      December 2000, he served as senior vice president at Mpower Communications,
      a
      facilities-based communications provider. Prior to his tenure at Mpower, Mr.
      Heyman served as litigation department chairman and lead trial counsel for
      Dowling Magarian Aaron and Heyman, a law firm in Fresno, California. Mr. Heyman
      earned a doctor of law (J.D.) degree from the University of the Pacific’s
      McGeorge School of Law, and received a bachelor’s degree from California State
      University, Fresno. Mr. Heyman also serves on the Board of Directors of TechTerm
      Global, Inc., a public company (Nasdaq: TEAM)





Mr.
      Heyman was elected to the Board pursuant to the terms of the Common Stock and
      Warrant Purchase Agreements entered into in connection with the September 2005
      Placement.




Jay
      Elliot





Jay
      Elliot was elected to serve as our Chief Strategy Officer in January 2006 and
      has served as the Chairman or Co-Chairman of the Board since May 2002. As a
      founder of the Company, Mr. Elliot served as our Chief Executive
      Officer from May 2002 until January 2006. From February to December 2001, Mr.
      Elliot was the Chief Executive Officer of New Health Systems, a network
      technology company connecting physicians and vendors to patients and affiliated
      hospitals.





Mr.
      Elliot has over 30 years operating experience with corporations including IBM,
      Intel and Apple Computers. From 1980 to 1986, Mr. Elliot served as the Executive
      Vice-President of Apple Computers and served as the Chief Operating Officer
      of
      the Macintosh division.




Alex
      Mashinsky





Alex
      Mashinsky has been the Managing Partner of VenturiFX, an early stage venture
      capital firm since December 2000 and for the last five years, has been the
      managing member of Governing Dynamics Investments, LLC, a venture capital firm.
      Mr. Mashinsky founded several companies including Qlimo in 2002, Qwireless
      in
      2001, Clematises in 2000, and Arbinet in 1996, where he served as its CEO until
      January 2000 and is currently on the Board of Directors. Mr. Mashinsky was
      elected to the Board pursuant to the terms of the Common Stock and Warrant
      Purchase Agreements entered into in connection with the September 2005
      Placement.










Mel
      S.
      Lavitt





Mel
      Lavitt joined our board of directors in May 2006. Mr. Lavitt has been a managing
      director at the investment banking firm of C.E. Unterberg, Towbin (or its
      predecessor) since August 1992 and is currently serving as vice chairman and
      managing director. From June 1987 until August 1992, Mr. Lavitt was president
      of
      Lavitt Management, a business consulting firm. From 1978 until June 1987, Mr.
      Lavitt served as an administrative managing director for the investment banking
      firm of L.F. Rothschild, Unterberg, Towbin, Inc. Mr. Lavitt is also a director
      of Jabil Circuit, Inc. and St. Bernard Software.





Malcolm
      Elvey


Malcolm
        Elvey serves as managing partner of Collaborative Capital, a venture capital
        fund focused on early-stage technology companies, established in 1999. Mr.
        Elvey
        is also director and serves as Chairman of the Audit Committee of The Children's
        Place Retail Stores, Inc. From 2004 to 2006, Mr. Elvey served as the chief
        executive officer of Qlimo, a New York ground transportation company. Mr.
        Elvey
        is a Chartered Accountant and M.B.A.




Timothy
      Wallace





Timothy
      Wallace joined our board of directors in May 2006. Mr. Wallace currently is
      the
      chairman and chief executive officer of Full Tilt Solutions, a
      business-to-business software company, which he joined in January 2000. Prior
      to
      Full Tilt, Mr. Wallace was the president and chief executive officer of Xerox
      Connect, a network integration technology company from May 1998 through December
      1999. From 1996 until May 1998, Mr. Wallace was the president of XLConnect
      Solutions, which he founded. Xerox acquired XLConnect in May 1998. From 1991
      to
      1996, Mr. Wallace was the vice president of professional services of The Future
      Now. Mr. Wallace received a Bachelor of Science degree in business
      administration from Indiana University of Pennsylvania and a master’s degree in
      business administration from Miami University of Ohio. Mr.
      Wallace also serves on the Board of Directors, and is Chairman of the Audit
      Committee, of Medecison, a public company (Nasdaq: MEDE).





Greg
      Osborn





Greg
      Osborn was elected to our Board of Directors in June 2005. Mr. Osborn has served
      as the Managing Partner of IndiGo Ventures LLC, a merchant banking and financial
      advisory firm, since June 1999. Indigo Securities, LLC (formerly known as
      Middlebury Capital), an entity under joint control with IndiGo Ventures LLC,
      has
      provided investment banking services to us within the last 2 years. Mr. Osborn
      holds a B.S. in Finance and Economics from Ramapo College of New Jersey. Mr.
      Osborn also serves on the Boards of Directors of iCurie Inc. a public company,
      and ideavillage.com, a private company. He also serves on the Board of Directors
      of Children of Bellevue, and on the corporate advisory board of Advance
      Nanotech, Inc.











Richard
      Liebman





Richard
      Liebman joined us in September 2005. Before that, he served as President of
      Liebman Capital from March 2003. From January 2002 until March 2003, he served
      as Chief Financial Officer of ServiceWare Technologies, Inc., a publicly held
      software company. From October 1998 until January 2001, Mr. Liebman was chief
      financial officer of eCal Corporation, a provider of Internet-based calendar
      services. Mr. Liebman’s investment banking experience includes serving as a
      senior vice president of both Oppenheimer & Co. and Pennsylvania Merchant
      Group, as well as being a Principal with L.F. Rothschild, Unterberg Towbin.
      Mr.
      Liebman received his Bachelor of Arts degree in economics from Brown University
      and his Masters in Business Administration from Columbia Business School.





Robert
      Halligan





Robert
      Halligan joined us in December 2006. Prior
      to
      joining Migo, Mr. Halligan served as Vice President of Global Marketing for
      Sonic Solutions beginning in July 2003, a digital media software company,
      focused on product and channel strategies, specifically working to align Sonic’s
      distribution around a fully coordinated multi-channel strategy centered on
      upgrading the company’s substantial OEM installed base. Beginning in July 1998,
      he occupied the position of Senior Vice president of Worldwide Marketing for
      The
      Learning Company /Broderbund Software, where he was responsible for developing
      business strategies, marketing requirements and company-wide execution for
      all
      corporate, brand and channel marketing.  During the course of his career he
      has held management positions with companies such as Palladium Software, IMSI,
      and Symantec Corporation.  Mr. Halligan graduated with a BA from St Mary’s
      College of California.




Syed
      Aamer Azam





Syed
      Aamer Azam joined us in January 2005 as Vice President, Development. From April
      2001 to January 2005, Mr. Azam was Senior Vice President Engineering for
      Clickmarks, Inc. From December 1999 to April 2001, he was CTO and Vice President
      Engineering for Wordwalla, Inc. Mr. Azam holds a Masters degree from Princeton
      University in computational physics, and has a Bachelors degree from the
      California Institute of Technology.





None
      of
      our executive officers or directors is related to any other executive officer
      or
      to any of our directors.  Our executive officers are elected annually by
      our board of directors and serve until their successors are duly elected and
      qualified.









Audit
      Committee Financial Expert





Our
      Audit
      Committee financial expert is Timothy Wallace, as that term is defined in
      Item 401(e)(2) of Regulation S-B.





Audit
      Committee





Our
      Audit
      Committee is composed of Timothy Wallace, Chairman, Malcolm Elvey and Greg
      Osborn, in accordance with Section 3(2)(58)(A) of the Exchange Act.





Stockholder
      Recommendation of Board Nominees





We
      have
      not made any material changes to the procedures by which security holders may
      recommend nominees to our board of directors.





Code
      of
      Ethics





We
      have
      adopted a Corporate Code of Conduct and Ethics (the “Code of Ethics”) that
      applies to our principal executive officer, principal financial officer,
      principal accounting officer or controller, or persons performing similar
      functions, as well as to other directors, officers and employees of ours. The
      Code of Ethics is posted on our website ( www.migo.com )
      and is
      available in print free of charge to any shareholder who requests a copy.
      Interested parties may address a written request for a printed copy of the
      Code
      of Ethics to our Chief Financial Officer, Richard Liebman, 555 Twin Dolphin
      Drive, Suite 650, Redwood City, California 94065. We intend to satisfy the
      disclosure requirement regarding any amendment to, or a waiver of, a provision
      of the Code of Ethics for our principal executive officer, principal financial
      officer, principal accounting officer or controller or persons performing
      similar functions by posting such information on our website.





Section
      16(a) Beneficial Ownership Reporting Compliance





Section
      16(a) of the Exchange Act requires our directors and executive officers, and
      persons who own more than 10% of our equity securities, to file initial reports
      of ownership and reports of changes in ownership with the Securities and
      Exchange Commission.  Such persons are required by the Exchange Act to
      furnish us with copies of all Section 16(a) forms they file.





The
      following beneficial ownership reports were filed late during 2006:  Each
      of Malcolm Elvey and Mel Lavitt filed his initial report on Form 3 less than
      one
      week late and a Form 4 to report the grant of options two days late; Each
      of Gregory Osborn and Timothy Wallace filed a Form 4 to report the grant of
      options two days late; Alex Mashinsky filed Form 4’s less than one month late on
      four occasions and filed a Form 5 as of the end of 2005 less than one month
      late; Richard Liebman filed a Form 4 to report the grant of restricted stock
      one
      day late; and each of Robert Halligan and Michael Hummell filed his initial
      report on Form 3 less than ten days late.







ITEM
      10.
      EXECUTIVE COMPENSATION




The
      information required by this Item is incorporated herein by reference to the
      data under the heading “EXECUTIVE COMPENSATION” in the Proxy Statement to be
      used in connection with the solicitation of proxies for the Company’s annual
      meeting of Stockholders to be held June 20, 2007, which Proxy Statement is
      to be
      filed with the Commission.




Item
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS




The
      information required by this Item is incorporated herein by reference to the
      data under the heading “VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF” in the
      Proxy Statement to be used in connection with the solicitation of proxies for
      the Company’s annual meeting of Stockholders to be held June 20, 2007, which
      Proxy Statement is to be filed with the Commission.




Item
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED
                TRANSACTIONS




The
      information required by this Item is incorporated herein by reference to the
      data under the heading “RELATED PARTY TRANSACTIONS” in the Proxy Statement to be
      used in connection with the solicitation of proxies for the Company’s annual
      meeting of Stockholders to be held June 20, 2007, which Proxy Statement is
      to be
      filed with the Commission.









**ITEM
      13. EXHIBITS**




2.1
      Agreement and Plan of Merger, dated as of May 28, 2004, by and among the
      Company, PowerHouse Acquisition, First Person, Christopher Neumann, David Brett
      Levine and Karl Jacob, acting solely as stockholder representative, hereby
      incorporated by reference from the Company’s Current Report on Form 8-K filed on
      July 6, 2004.




2.2
      Asset
      Purchase Agreement dated as of December 27, 2006, by and between Migo Software,
      Inc. and StompSoft, Inc.,  hereby incorporated by reference from Exhibit
      2.1 to the Company’s Current Report on Form 8-K filed with the Commission on
      January 3, 2007.




3.1
      Amended and Restated Certificate Articles of Incorporation hereby incorporated
      by reference from the Company’s Quarterly Report on Form 10-QSB for the quarter
      ended June 30, 2006, filed with the Commission on August 10, 2006.




3.2
      Company’s Bylaws, hereby incorporated by reference from the Company’s Annual
      Report on Form 10-KSB filed with the Commission on July 14, 2004.




3.3
      Text
      of amended provision of the Company’s Bylaws, hereby incorporated by reference
      from the Company’s Current Report on Form 8-K filed with the Commission on
      September 27, 2005.




4.1
      Common Stock Purchase Warrant, dated as of April 23, 2004, hereby incorporated
      by reference from the Company’s Registration Statement on Form SB-2 filed with
      the Commission on August 13, 2004.




4.2
      Common Stock Purchase Warrant, dated as of August 13, 2004, hereby incorporated
      by reference from the Company’s Registration Statement on Form SB-2 filed with
      the Commission on August 13, 2004.




4.3
      Certificate of Designations, Preferences and Rights of Series A Senior
      Convertible Preferred Stock, hereby incorporated by reference from the Company’s
      Quarterly Report on Form 10-QSB filed on September 13, 2004.




4.4
      Certificate of Designations, Preferences and Rights of Series A Junior
      Convertible Preferred Stock, hereby incorporated by reference from the Company’s
      Quarterly Report on Form 10-QSB filed on September 13, 2004.




4.5
      Amendment to Certificate of Designations, Preferences and Rights of Series
      A
      Convertible Preferred Stock, hereby incorporated by reference from the Company’s
      Current Report on Form 8-K filed with the Commission on September 27, 2005.




4.6
      Form
      of Investor Warrant dated as of September 26, 2005, hereby incorporated by
      reference from the Company’s Quarterly Report on Form 10-QSB for the quarter
      ended September 30, 2005, filed with the Commission on December 14, 2005.









4.7
      Form
      of Investor Warrant dated as of December 23, 2005, hereby incorporated by
      reference from the Company’s Current Report on Form 8-K filed with the
      Commission on December 28, 2005.




4.8
      Placement Agent Warrant dated September 26, 2005, hereby incorporated by
      reference from the Company’s Registration Statement on Form SB-2 (Commission
      File No. 333-131177) filed with the Commission on June 15, 2006.




4.9
      Placement Agent Warrant dated December 23, 2005, hereby incorporated by
      reference from the Company’s Registration Statement on Form SB-2 (Commission
      File No. 333-131177) filed with the Commission on June 15, 2006.




4.10
      Warrant issued to LBI Group, Inc., hereby incorporated by reference from the
      Company’s Current Report on Form 8-K filed with the Commission on March 21,
      2006. 4.11 Form of Investor Warrant dated as of March 17, 2006, hereby
      incorporated by reference from the Company’s Current Report on Form 8-K filed
      with the Commission on March 21, 2006.




4.11
      Registration Rights Agreement dated as of December 27, 2006, among Migo
      Software, Inc., StompSoft, Inc. and certain other individuals,  hereby
      incorporated by reference from Exhibit 4.1 to the Company’s Current Report on
      Form 8-K filed with the Commission on January 3, 2007.




10.1+
      Development Agreement, dated March 30, 2005, between the Company and M-Systems
      Flash Disk Pioneers Ltd, hereby incorporated by reference to Exhibit 10.1 of
      the
      Annual Report on Form 10-KSB filed with the SEC on July 28, 2005.




10.2
      2004
      Omnibus Stock Incentive Plan, hereby incorporated by reference to Exhibit 3.1
      the Quarterly Report on Form 10-QSB/A filed with the SEC on February 22, 2005.




10.3
      Series A Senior Units Purchase Agreement, dated as of April 23, 2004, hereby
      incorporated by reference from the Company’s Registration Statement on Form SB-2
      filed with the Commission on August 13, 2004.




10.4
      Series A Senior Units Purchase Agreement, dated August 13, 2004, as of April
      23,
      2004, hereby incorporated by reference from the Company’s Registration Statement
      on Form SB-2/A filed with the Commission on August 13, 2004.




10.5
      Form
      of Common Stock and Warrant Purchase Agreement dated as of September 26, 2005,
      hereby incorporated by reference from the Company’s Quarterly Report on Form
      10-QSB for the quarter ended September 30, 2005, filed with the Commission
      on
      December 14, 2005.




10.6
      Form
      of Common Stock and Warrant Purchase Agreement dated as of December 23, 2005,
      hereby incorporated by reference from the Company’s Current Report on Form 8-K
      filed with the Commission on December 28, 2005.









10.7
      Registration Rights Agreement dated as of September 21, 2005, hereby
      incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-QSB
      filed with the Commission on December 14, 2005.




10.8
      Employment Agreement dated May 10, 2006, between the Company and Kent Heyman,
      hereby incorporated by reference to Exhibit 10.5 of the Quarterly Report on
      Form
      10-QSB filed with the Commission on May 15, 2006.




10.9
      Employment Agreement dated September 26, 2005, between the Company and Jay
      Elliot, hereby incorporated by reference to Exhibit 10.5 of the Quarterly Report
      on Form 10-QSB filed with the Commission on December 14, 2005.




10.10
      Agreement dated September 26, 2005, between the Company and Alex Mashinsky,
      hereby incorporated by reference to Exhibit 10.6 of the Quarterly Report on
      Form
      10-QSB filed with the Commission on December 14, 2005.




10.11
      Employment Agreement dated May 10, 2006, between the Company and Richard
      Liebman, hereby incorporated by reference to Exhibit 10.6 of the Quarterly
      Report on Form 10-QSB filed with the Commission on May 15, 2006.




10.12
      Settlement Agreement dated September 26, 2005, between the Company, The Wall
      Street Group, Inc. and Wall Street Consultants, Inc., hereby incorporated by
      reference to Exhibit 10.8 of the Quarterly Report on Form 10-QSB filed with
      the
      Commission on December 14, 2005.




10.13
      Registration Rights Agreement dated as of December 23, 2005, hereby incorporated
      by reference to Exhibit 99.3 of the Current Report on Form 8-K filed with the
      Commission on December 28, 2005.




10.14
      Common Stock and Warrant Purchase Agreement with LBI Group, Inc. dated as of
      March 10, 2006, hereby incorporated by reference from Exhibit 99.1 to the
      Company’s Current Report on Form 8-K filed with the Commission on March 21,
      2006.




10.15
      Registration Rights Agreement with LBI Group, Inc. dated as of March 10, 2006,
      hereby incorporated by reference from Exhibit 99.3 to the Company’s Current
      Report on Form 8-K filed with the Commission on March 21, 2006.




10.17
      Common Stock and Warrant Purchase Agreement dated March 17, 2006, hereby
      incorporated by reference from Exhibit 99.5 to the Company’s Current Report on
      Form 8-K filed with the Commission on March 21, 2006.




10.18
      License Agreement dated September 5, 2006 between the Company and Kingston
      Technology Corporation, hereby incorporated by reference from the Company’s
      Registration Statement on Form SB-2 filed with the Commission on September
      19,
      2006.









10.19
      Common Stock and Warrant Purchase Agreement dated September 5, 2006 between
      the
      Company and Kingston Technology Corporation, hereby incorporated by reference
      from the Company’s Registration Statement on Form SB-2 filed with the Commission
      on September 19, 2006.




10.20
      Employment Agreement effective as of December 27, 2006, between Migo Software,
      Inc. and Michael Hummell, hereby incorporated by reference from Exhibit 10.1
      to
      the Company’s Current Report on Form 8-K filed with the Commission on January 3,
      2007.




10.21
      Stock Pledge Agreement dated as of December 27, 2006, between Migo Software,
      Inc. and StompSoft, Inc., hereby incorporated by reference from Exhibit 10.2
      to
      the Company’s Current Report on Form 8-K filed with the Commission on January 3,
      2007.




21.
      List
      of subsidiaries, hereby incorporated by reference from the Company’s Annual
      Report on Form 10-KSB filed on April 21, 2006.




24
      Power
      of Attorney (included on signature page)




+
      Portions of this document have been omitted pursuant to a grant of confidential
      treatment and the document has been filed separately with the Securities and
      Exchange Commission









ITEM
      14.
      PRINCIPAL ACCOUNTANT FEES AND SERVICES




The
      following table sets forth fees for services Hein & Associates LLP (“Hein”)
      provided during the nine months ended December 31, 2005 and for the twelve
      months ended December 31, 2006.





**Nine
                Months ended December 31, 2005**
            
            **Twelve
                Months ended December 31, 2006(est.)**Audit
                fees(1)
            
            $
            187,942
            
            
            175,000Audit
                related fees
            
            $
            10,845
            
            
            -Tax
                fees
            
            $
            -
            
            
            -All
                other fees
            
            $
            -
            
            
            -Total
            
            $
            198,787
            
            $
            175,000




(1)
            Represents
                fees for professional services provided in connection with the audit
                of
                our annual financial statements and review of our quarterly financial
                statements and advice on accounting matters that arose during the
                audit.




Our
      Board
      of Directors has determined that the provision of non-audit services by Hein
      are
      compatible with maintaining their independence, and none of such services were
      pre-approved pursuant to the de minimis exception provided in
      Section 10A(i)(1)(B) of the Exchange Act.




Generally,
      the Audit Committee approves in advance audit and non-audit services to be
      provided. In accordance with Rule 2-01(c)(7) of Securities and Exchange
      Commission Regulation S-X, the Audit Committee has delegated pre-approval
      authority to the Chairman of the Audit Committee for matters which arise or
      otherwise require approval between regularly scheduled meetings of the Audit
      Committee, provided that the Chairman report such approvals to the Audit
      Committee at the next regularly scheduled meeting of the Audit
      Committee.









**Signatures**




In
      accordance with Section 13 or 15(d) of the Exchange Act, the issuer caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




MIGO
                SOFTWARE, INC.Date: March
                27, 2007
            By:/s/
                Kent Heyman
              
              Kent
                Heyman
              Chief
                Executive Officer
              (Principal
                Executive Officer)Date: March
                27, 2007
            By:/s/
                Richard Liebman
              
              Richard
                Liebman
              Chief
                Financial Officer
              (Principal
                Financial and Accounting Officer)




POWER
      OF
      ATTORNEY





Each
      person whose signature appears below hereby appoints Kent Heyman and Richard
      Liebman, and both of them, either of whom may act without the joinder of the
      other, as his true and lawful attorneys-in-fact and agent, with full power
      of
      substitution and resubstitution, for him and in his name, place and stead,
      in
      any and all capacities, to sign any and all amendments to this Annual Report
      on
      Form 10-KSB, and to file the same, with all exhibits thereto and all other
      documents in connection therewith, with the Commission, granting unto said
      attorneys-in-fact and agents full power and authority to perform each and every
      act and thing appropriate or necessary to be done, as fully and for all intents
      and purposes as he might or could do in person, hereby ratifying and confirming
      all that said attorneys-in-fact and agents or their substitute or substitutes
      may lawfully do or cause to be done by virtue hereof.




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.






Date: March
                27, 2007
            /s/
                Kent Heyman
              
              Kent
                Heyman
              Director







Date: March
                27, 2007
            /s/
                Jay Elliot
              
              Jay
                Elliot
              DirectorDate: March
                27, 2007
            /s/
                Alex Mashinsky
              
              Alex
                Mashinsky
              Director









Date: March
                27, 2007
            /s/
                Greg Osborn
              
              Greg
                Osborn
              Director








Date: March
                27, 2007
            /s/
                Malcolm Elvey
              Malcolm
                Elvey
              DirectorDate: March
                27, 2007
            /s/
                Timothy Wallace
              Timothy
                Wallace
              DirectorDate: March
                27, 2007
            /s/
                Mel Lavitt
                Mel
                Lavitt
              Director