UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x
        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008


OR

o
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to _________


Commission File No.: 0-22693

IFTH Acquisition Corp.(f/k/a InfoTech USA, Inc.)

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
        11-2889809
(I.R.S. Employer
Identification No.)


1690 South Congress Avenue, Suite 200

Delray Beach, Florida 33445

(Address, including zip code, of registrants principal executive offices)

Registrants telephone number, including area code:(561) 805-8000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days                   xYesoNo



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

Large Accelerated Filer
        
        Accelerated FileroNon-Accelerated Filero
        
        Smaller Reporting Companyx


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


As of August 9, 2008, 5,146,398 shares of our common stock were outstanding.









IFTH Acquisition Corp.

Table of Contents

Item
        PagePart I
        Financial Information
        1Item 1   Consolidated Condensed Financial Statements
        1Item 2   Managements Discussion and Analysis of Financial Condition and Results of Operations
        9Item 3   Quantitative and Qualitative Disclosures About Market Risk
        12Item 4   Controls and Procedures
        12Part II
        Other Information
        13Item 1A   Risk Factors
        13Item 6   Exhibits
        13Signature
        14Exhibits
        15




1







Part I
        Financial Information




Item 1
        Consolidated Condensed Financial Statements


IFTH Acquisition Corp. and Subsidiaries

Consolidated Condensed Balance Sheets

(in thousands, except par value)



June 30, 2008
        
        September 30, 2007(unaudited)
        
        (Note 1)AssetsCurrent assetsCash and cash equivalents
        
        $
        1,124
        
        $
        405Accounts receivable, net of allowance for doubtfulaccounts of $53 and $115
        
        
        3
        
        
        1,477Inventories
        
        
        
        
        
        106Marketable equity securities, available for sale
        
        
        345
        
        
        418Miscellaneous receivables
        
        
        
        
        
        25Other current assets
        
        
        6
        
        
        35Total current assets
        
        
        1,478
        
        
        2,466Equipment and improvements, net
        
        
        
        
        
        89Other assets
        
        
        
        
        
        30Total assets
        
        $
        1,478
        
        $
        2,585Liabilities and Stockholders EquityCurrent liabilities:Line of credit  Wells Fargo
        
        $
        
        
        $
        2Amounts due to stockholder
        
        
        8
        
        
        105Accounts payable
        
        
        
        
        
        550Accrued expenses and other liabilities
        
        
        166
        
        
        569Total liabilities
        
        
        174
        
        
        1,226Commitments and contingenciesStockholders equity:Preferred shares:Authorized 5,000 shares, no par value; none issued
        
        
        
        
        
        Common shares:Authorized 80,000 shares, $.01 par value; 6,007and 5,907 shares issued; 5,146 and 5,046 sharesoutstanding
        
        
        60
        
        
        59Additional paid-in capital
        
        
        7,081
        
        
        6,854Accumulated deficit
        
        
        (4,619
        )
        
        (4,408
        )Accumulated other comprehensive loss
        
        
        (300
        )
        
        (228
        )Treasury stock, 861 shares, carried at cost
        
        
        (918
        )
        
        (918
        )Total stockholders equity
        
        
        1,304
        
        
        1,359Total liabilities and stockholders equity
        
        $
        1,478
        
        $
        2,585




See the accompanying notes to consolidated condensed financial statements.



1







IFTH Acquisition Corp. and Subsidiaries

Consolidated Condensed Statements of Operations

(in thousands, except per share data)

(unaudited)



For the three months ended
        
        
        For the nine months endedJune 30,
        
        
        June 30,2008
        
        
        2007
        
        
        
        2008
        
        
        2007Continuing Operations:General and administrative expense
        
        $
        (102
        )
        $
        (243
        )
        
        $
        (574
        )
        $
        (707
        )Interest income
        
        
        3
        
        
        36
        
        
        
        10
        
        
        117Loss from continuing operations
        
        
        (99
        )
        
        (207
        )
        
        
        (564
        )
        
        (590
        )Discontinued Operations:(Loss) income from discontinued operations
        
        
        −
        
        
        43
        
        
        
        (274
        )
        
        228Gain on sale of discontinued operations
        
        
        −
        
        
        −
        
        
        
        627
        
        
        −Income from discontinued operations
        
        
        −
        
        
        43
        
        
        
        353
        
        
        228Net loss
        
        $
        (99
        )
        $
        (164
        )
        
        $
        (211
        )
        $
        (362
        )Continuing operations loss per common share
        
        $
        (0.02
        )
        $
        (0.04
        )
        
        $
        (0.11
        )
        $
        (0.12
        ) basic and dilutedDiscontinued operations income per common share
        
        $
        −
        
        $
        0.01
        
        
        $
        0.07
        
        $
        0.05 basic and dilutedNet loss per common share  basic and diluted
        
        $
        (0.02
        )
        $
        (0.03
        )
        
        $
        (0.04
        )
        $
        (0.07
        )Weighted average number of common shares outstanding:Basic and diluted
        
        
        5,146
        
        
        5,046
        
        
        
        5,104
        
        
        5,004Comprehensive lossNet loss
        
        $
        (99
        )
        $
        (164
        )
        
        $
        (211
        )
        $
        (362
        )Other comprehensive loss:Unrealized gain (loss) on marketable securities available for sale
        
        
        46
        
        
        (29
        )
        
        
        (72
        )
        
        (29
        )Comprehensive loss
        
        $
        (53
        )
        $
        (193
        )
        
        $
        (283
        )
        $
        (391
        )




See the accompanying notes to consolidated condensed financial statements.



2









IFTH Acquisition Corp. and Subsidiaries

Consolidated Condensed Statement of Stockholders Equity

(in thousands)

(unaudited)

Common Stock
        
        
        AdditionalPaid-in
        
        
        Accumulated
        
        
        AccumulatedOtherComprehensive
        
        
        Treasury Stock
        
        
        TotalStockholdersNumber
        
        
        Amount
        
        
        Capital
        
        
        Deficit
        
        
        Loss
        
        
        Number
        
        
        Amount
        
        
        EquityBalance, October 1, 2007
        
        5,907
        
        
        $        59
        
        
        $   6,854
        
        
        $    (4,408)
        
        
        $    (228)
        
        
        861
        
        
        $    (918)
        
        
        $      1,359Share-based compensation
        
        
        
        
        
        
        
        134
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        134Unrealized loss on marketablesecurities
        
        
        
        
        
        
        
        
        
        
        
        
        
        (72)
        
        
        
        
        
        
        
        
        (72
        )Contributed intercompany debt
        
        
        
        
        
        
        
        94
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        94Share issuance
        
        100
        
        
        1
        
        
        (1)
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        Net loss
        
        
        
        
        
        
        
        
        
        
        (211)
        
        
        
        
        
        
        
        
        
        
        
        (211
        )Balance, June 30, 2008
        
        6,007
        
        
        $       60
        
        
        $   7,081
        
        
        $  (4,619)
        
        
        $      (300)
        
        
        861
        
        
        $      (918)
        
        
        $      1,304




See the accompanying notes to consolidated condensed financial statements.







3







IFTH Acquisition Corp. and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(in thousands)

(unaudited)

For the nine months endedJune 30,2008
        
        
        2007Cash flows from operating activitiesContinuing operationsNet loss
        
        $
        (564
        )
        $
        (590
        )Adjustments to reconcile net loss to net cash provided by (used in)operating activities:Share-based compensation
        
        
        134
        
        
        38Loss on sale of marketable securities
        
        
        
        
        
        11Changes in operating assets and liabilitiesDecrease in accounts receivable
        
        
        1,404
        
        
        146Decrease (increase) in inventories
        
        
        106
        
        
        67Increase in other current assets and miscellaneous receivables
        
        
        --
        
        
        (208
        )Decrease (increase) in other assets
        
        
        6
        
        
        --Decrease in accounts payable and accrued expenses and other liabilities
        
        
        (980
        )
        
        (112
        )Cash provided by (used in)continuing operations
        
        
        106
        
        
        (648)Discontinuing operationsNet income
        
        
        353
        
        
        228Adjustments to reconcile net income to net cash used in (provided by)operating activities:Depreciation and amortization in discontinued operations
        
        
        5
        
        
        20Gain on sale of discontinued operations
        
        
        (627
        )
        
        Cash (used in) provided by discontinued operations
        
        
        (269
        )
        
        248Net cash used in operating activities
        
        
        (163
        )
        
        (400
        )Cash flows from investing activitiesProceeds from sale of discontinued operations
        
        
        887
        
        
        Proceeds from sale of marketable securities
        
        
        
        
        
        189Capital expenditures
        
        
        
        
        
        (1
        )Net cash provided by investing activities
        
        
        887
        
        
        188Cash flows from financing activitiesNet (payments) borrowings on Wells Fargo line of credit
        
        
        (2
        )
        
        (9
        )Net proceeds from issuance of common stock
        
        
        
        
        
        1Net (payments) borrowings from stockholder
        
        
        (3
        )
        
        4Net cash (used in) provided by financing activities
        
        
        (5
        )
        
        (4
        )Net increase (decrease) in cash and cash equivalents
        
        
        719
        
        
        (216
        )Cash and cash equivalents  beginning of period
        
        
        405
        
        
        372Cash and cash equivalents  end of period
        
        $
        1,124
        
        $
        156Non-cash financing activity:Contributed intercompany debt
        
        $
        94
        
        $
        




See the accompanying notes to consolidated condensed financial statements.

4









IFTH Acquisition Corp. and Subsidiaries

Notes to Consolidated Condensed Financial Statements

(in thousands, except per share data)

(unaudited)

1.
        Basis of Presentation


In the opinion of management, the accompanying consolidated condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of IFTH Acquisition Corp. (IFTH) and its wholly-owned subsidiaries (collectively, the Company) as ofJune 30, 2008, their results of operations for the three and nine months ended June 30, 2008 and 2007, changes in stockholders equity for the nine months ended June 30, 2008 and cash flows for the nine months ended June 30, 2008 and 2007. Information included in the consolidated condensed balance sheet as of September 30, 2007 has been derived from the audited consolidated balance sheet included in the Companys Annual Report on Form 10-K for the year ended September 30, 2007 (the
10-K) previously filed with the Securities and Exchange Commission (the SEC). Pursuant to the rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these consolidated condensed financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and the other information in the 10-K.

Effective December 31, 2007, as approved by the stockholders of IFTH at a special meeting held December 27, 2007, we closed the transactions contemplated by the Asset Purchase and Sale Agreement (Purchase Agreement), dated November 13, 2007 between IFTH and Corporate Technologies LLC (Corporate Technologies), selling substantially all of our Operating Assets.

Under the terms of the Agreement, we ceased our operations and, pursuant to an interim services agreement and an administrative services agreement entered into in connection with the Purchase Agreement, Corporate Technologies assisted us in the collection of our accounts receivable and in the sale of our remaining inventory. We retained our cash at the time of the closing of the Purchase Agreement, the cash received from the collection of accounts receivable and the sale of inventory, and the proceeds from the sale and plan to utilize these funds to seek to acquire an operating business unrelated to the business sold to Corporate Technologies.

Pursuant to the Purchase Agreement, Corporate Technologies delivered $800 to IFTH in cash, less a $25 holdback that was pending receipt of certain tax clearance letters, which was received in January 2008 following receipt of such letters. Corporate Technologies also delivered $200 to Wells Fargo Bank, National Association, as escrow agent, to be held in escrow. The Purchase Agreement provided for the escrow amount to be held in escrow for a period of three months following the closing pending the reduction in real property rental expenses. As we were able to reduce the monetary amounts of the operating lease commitments that were assumed by the buyer, incremental amounts of the $200 held in escrow were to be paid to us. As of June 30, 2008, $67 was paid as full settlement of the escrow.

Since the completion of the sale, the Company has not engaged in any operations and the business has been dormant. Other than paying the Companys outstanding liabilities, liquidating its remaining inventory and collecting the Companys outstanding receivables, managements primary purpose at this time is to locate and acquire an attractive operating business seeking to become publicly traded through a reverse merger.

Management believes that the Company is an attractive acquisition vehicle due to its status as a reporting public company and will continue to file all required reports with the SEC. The business transactions being pursued at this time are likely to result in a significant issuance of shares which may result in substantial dilution to the Companys present stockholders.

In connection with the sale of our assets to Corporate Technologies, our stockholders also approved an amendment pursuant to which we changed our name to IFTH Acquisition Corp., effective as of 11:59 pm on December 31, 2007. Additionally, pursuant to the Purchase Agreement, our wholly-owned



5







subsidiaries changed their names from InfoTech USA, Inc. to IFTH NJ Sub, Inc. and from Information Technology Services, Inc. to IFTH NY Sub, Inc.



Following the sale of our Operating Assets on December 31, 2007, Mr. Jonathan McKeage remained President, CEO and Director and became Vice President of Corporate Development for Applied Digital Solutions, Inc. (Applied Digital), as well as of VeriChip Corporation (VeriChip), Applied Digitals minority-owned subsidiary. In connection with this change in responsibilities, Mr. McKeage was put on the payroll of VeriChip. Beginning January 1, 2008, VeriChip was reimbursed by us in the amount of $7,000 per month for Mr. McKeages services related to finding a suitable acquisition target for us, which payments ceased upon Mr. McKeages resignation on July 2, 2008.

On March 21, 2008, our Vice President, Chief Financial Officer, Secretary, and Treasurer, J. Robert Patterson resigned and on July 2, 2008 our President, Chief Executive Officer and Director, Mr. McKeage resigned. Three of our directors, Mr. Patterson, Charles L. Doherty and Jeffrey S. Cobb, resigned on July 22, 2008 and on July 23, 2008 Michael E. Krawitz and Kay E. Langsford were appointed as directors. On March 11, 2008, Michael J. Feder was appointed as our Acting Chief Financial Officer.

On August 1, 2008, Digital Angel Corporation (formerly Applied Digital) sold 2,570,000 shares of our common stock to Blue Moon Energy Partners LLC. The shares represent 49.9% of our outstanding common stock and the entire interest of Digital Angel Corporation.

The consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or for the full year ending September 30, 2008.

2.
        Principles of Consolidation


The financial statements include the accounts of IFTH Acquisition Corp. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

3.
        Net Income (Loss) Per Common Share


As further explained in Note 1 to the Companys audited financial statements included in the 10-K previously filed with the SEC, the Company presents basic net income (loss) per common share and, if appropriate, diluted net income per common share in accordance with the provisions of Statement of Financial Accounting Standards No. 128, Earnings per Share.

At June 30, 2008 and 2007, the Company had options and warrants outstanding for the purchase of shares of common stock upon exercise as follows:



June 30,2008
        2007Employee stock options
        3,975
        3,975Warrants (exercisable at $.5775 per share)
        300
        300Totals
        4,275
        4,275




The assumed exercise of the employee stock options and warrants outstanding at June 30, 2008 and 2007, and the application of the treasury stock method, had no impact on the basic weighted average number of common shares outstanding and, accordingly, had no effect on net loss per common share for each of the three months ended June 30, 2008 and 2007. The application of the treasury stock method had no impact of the basic weighted average number of common shares outstanding because the average price of the Companys stock for the three months ended June 30, 2008 and 2007 did not exceed the strike price of any of the options outstanding. The assumed exercise of the employee stock options and warrants outstanding had no effect on net loss per common share for each of the three and nine months ended June 30, 2008 and 2007. Additionally, any effect of the above conversions would have been
anti-dilutive due to the effects on the net loss.



4.
        Stock-Based Compensation


In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123(R), Accounting for Stock-Based Compensation. (SFAS 123(R)) which establishes standards of accounting for transactions in which an entity exchanges its equity



6







instruments for goods or services. SFAS 123(R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment arrangements including stock options and compensatory employee stock purchase plans. SFAS 123(R) requires that the fair value of such equity instruments be measured based on the fair value of the instruments on the date they are granted and that an estimate of the portion of the fair value that will vest be recognized in the financial statements as an expense over the period during which the employees are required to provide services in exchange for the equity instruments.



The Company adopted SFAS 123(R) effective October 1, 2005 and selected the Black-Scholes method of valuation for share-based compensation. The Company elected the modified prospective application transition method which required that the provisions of SFAS 123(R) be applied going forward from the date of adoption to new share-based payments, and to all unvested stock options outstanding at the beginning of the first quarter of adoption of SFAS 123(R). All outstanding stock options were fully vested as of October 1, 2005, the date of the adoption of SFAS 123(R), and the Company did not grant any stock options during either the three and nine months ended June 30, 2008 or 2007. Accordingly, the Company did not recognize any compensation expense related to stock options in either period.

In January 2006, the Company granted its chairman of the board and its chief executive officer 100 shares of restricted stock each. The restricted stock vested 50% on the first anniversary of the date of grant and the remaining 50% vested on the second anniversary of the date of grant. The Company determined the value of the restricted stock to be $100 based on the closing price of its stock on the date of grant. The value of the restricted stock was amortized as compensation expense over the vesting period. Compensation expense of $0 and $13 was recorded in connection with the restricted stock in the three and nine months ended in June 30, 2008, respectively, and $12 and $38 was recorded in the three and nine months ended June 30, 2007, respectively. To calculate the excess tax benefits available as of the date of adoption for use in offsetting future tax shortfalls, the Company followed
the alternative transition method discussed in Financial Accounting Standards Board Staff Position No. 123(R)  3.

In March 2008, the Company memorialized the extension of the exercise date of the 925 stock options held by its members of the board. During the three and nine months ended June 30, 2008, compensation expense of $0 and $121, respectively, was recorded in connection with the options.



A summary of option activity under the plans as of June 30, 2008 and changes during the period is presented below:



StockOptions
        
        WeightedAverageExercisePrice
        
        WeightedAverageContractualTerm
        
        AggregateIntrinsicValueOutstanding October 1, 2007
        3,975
        
        $        0.38
        
        3.4Granted
        −
        
        −
        
        −Exercised
        −
        
        −
        
        −Forfeited or Expired
        −
        
        −
        
        −Outstanding at June 30, 2008
        3,975
        
        $        0.38
        
        2.7
        
        $             45Exercisable at June 30, 2008
        3,975
        
        $        0.38
        
        2.7
        
        $             45




* The intrinsic value of a stock option is the amount by which the fair value of the underlying stock exceeds the exercise price of the option. The fair value of IFTHs stock was $0.30 at June 30, 2008 based upon its closing price on the OTC.

During the nine months ended June 30, 2008 and 2007, there were no options exercised. Accordingly, there was no aggregate intrinsic value of options exercised during the nine months ended June 30, 2008 and 2007.

As of June 30, 2008 and 2007, there was $0 and $38, respectively, of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the



7







Companys plans. The total fair value of shares vested during the nine months ended June 30, 2008 was $13.

During the nine months ended June 30, 2008 and 2007, there were no options exercised. Accordingly, there was no cash received from option exercises under any share-based payment arrangements for each of the three and nine months ended June 30, 2008 and 2007.

5.
        Related Party Transactions


On January 20, 2006, Mr. McKeage was appointed our Chief Executive Officer, President and Director. From 2004 until that time, Mr. McKeage was Vice President of Business Development of our then parent company, Applied Digital, as well as of Digital Angel Corporation, Applied Digitals then majority-owned subsidiary. Following the sale of our Operating Assets, which became effective on December 31, 2007, Mr. McKeage remained President and Director and became Vice President of Corporate Development for Applied Digital, as well as of VeriChip, Applied Digitals minority-owned subsidiary. In conjunction with Mr. McKeages change in responsibilities, he was taken off the Companys payroll and was put on the payroll of VeriChip. Beginning January 1, 2008, VeriChip was reimbursed by the Company in the amount of $7,000 per month for Mr. McKeages
services related to finding a suitable acquisition target for the Company, which payments ceased upon Mr. McKeages resignation on July 2, 2008.

6.
        Financing Agreements


In accordance with the terms of the agreement between the Company and Corporate Technologies that was completed on December 31, 2007, the financing arrangements with Wells Fargo Business Credit (Wells Fargo), IBM Credit, LLC (IBM) and Ingram Micro, Inc. (Ingram) were all terminated and all outstanding balances were paid in full. Accordingly, the Company had borrowings under the financing agreements with Wells Fargo, IBM and Ingram of $0 on June 30, 2008 and $2, $273 and $97, respectively, on September 30, 2007. The borrowings under the financing agreements with IBM and Ingram were included in either accounts payable or accrued expenses and other liabilities.

7.
        Subsequent Events


On July 2, 2008, Jonathan McKeage resigned from his position as President, Chief Executive Officer and a Director of the Company. Three of our directors, J. Robert Patterson, Charles L. Doherty and Jeffrey S. Cobb resigned on July 22, 2008 and the Company appointed Michael E. Krawitz and Kay E. Langsford to the board of directors on July 23, 2008.

On August 1, 2008, Digital Angel Corporation sold 2,570,000 shares of our common stock to Blue Moon Energy Partners LLC. The shares represent 49.9% of our outstanding common stock and the entire interest of Digital Angel Corporation.



8









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


This discussion should be read in conjunction with the accompanying consolidated condensed financial statements and related notes contained in Item 1 of this report as well as our Annual Report on Form 10-K for the year ended September 30, 2007. Certain statements made in this report may contain forward-looking statements. For a description of risks and uncertainties relating to such forward-looking statements, see the section entitled Forward-Looking Statements and Associated Risk later in this Item 2.

Business Description

We are a Delaware corporation incorporated in 1987. Since the sale of substantially all of our Operating Assets on December 31, 2007, as approved by our stockholders at a special meeting held December 27, 2007, we have not engaged in any operations and the business has been dormant. Other than paying our outstanding liabilities, liquidating our remaining inventory and collecting our outstanding receivables, our primary purpose at this time is to locate and acquire an attractive operating business seeking to become publicly traded through a reverse merger.

Recent Developments

On December 31, 2007, as approved by the stockholders of IFTH at a special meeting held December 27, 2007, we closed the transactions contemplated by the Asset Purchase and Sale Agreement, dated November 13, 2007 between IFTH and Corporate Technologies, selling substantially all of our operating assets.



Since the completion of the sale, the Company has not engaged in any operations and the business has been dormant. Other than paying the Companys outstanding liabilities, liquidating its remaining inventory and collecting the Companys outstanding receivables, managements primary purpose at this time is to locate and acquire an attractive operating business seeking to become publicly traded through a reverse merger.



On March 21, 2008, our Vice President, Chief Financial Officer, Secretary, and Treasurer, J. Robert Patterson resigned and on July 2, 2008 our President, Chief Executive Officer and Director, Mr. McKeage resigned. Three of our directors, Mr. Patterson, Charles L. Doherty and Jeffrey S. Cobb, resigned on July 22, 2008 and on July 23, 2008 Michael E. Krawitz and Kay E. Langsford were appointed as directors. On  March 11, 2008, Michael J. Feder was appointed our Acting Chief Financial Officer.

Forward-Looking Statements and Associated Risk

Certain statements in this report constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. We intend that such forward-looking statements be subject to the safe harbors created thereby. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Investors should consider carefully the following risk factors, in addition to the other information included and incorporated by reference in the Quarterly Report on Form 10-Q. The words believe, expect,
anticipate, intend and plan and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made.

Results of Operations

As previously stated onDecember 31, 2007, we sold substantially all of our Operating Assets and ceased operations. Our current focus is to identify and acquire an attractive operating business seeking to become publicly traded through a reverse merger.



9







Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

(in thousands unless otherwise noted)

General and administrative expense from continuing operations for the quarter ended June 30, 2008 decreased $141 or 58.0% to $102 from $243 for the same quarter last year. The general and administrative expenses from continuing operations primarily consist of the salaries and related benefits for Mr. McKeage, our chief executive officer and President, insurance expense, legal and professional fees. The decrease of $141 was primarily a result of the sale of our operating assets and ceasing operation.

Interest income from continuing operations for the quarter ended June 30, 2008 decreased $33, or 91.7% to $3 from $36 for the quarter ended June 30, 2007. The decrease was primarily due to the ceasing of interest income from Applied Digital in June 2007, when the loan to Applied Digital was fully satisfied.

For the quarter ended June 30, 2008, we had a loss from discontinued operations of nil compared to income from discontinued operations of $43 for the same quarter last year. Discontinued operations primarily consisted of all revenue, cost of sales, salaries, commissions, payroll taxes, benefits expense and rent associated with the operations that were sold to Corporate Technologies effective December 31, 2007. The loss from discontinued operations of nil in the third quarter of 2008 compared to income from discontinued operations of $43 for the third quarter of 2007 was primarily due to the transaction with Corporate Technologies.

Our net loss was $(99) and $(164) for the three months ended June 30, 2008 and 2007, respectively.

Nine Months Ended June 30, 2008 Compared to the Nine Months Ended June 30, 2007

(in thousands unless otherwise noted)

General and administrative expense from continuing operations for the nine months ended June 30, 2008 decreased $133 or 18.8% to $574 from $707 for the same period last year. The general and administrative expenses from continuing operations primarily consist of the salaries and related benefits for Mr. McKeage and Mr. Patterson, stock-based compensation expense, insurance expense, legal and professional fees. The decrease of $133 was primarily a result of the sale of our operating assets and ceasing operation.

Interest income from continuing operations for the nine months ended June 30, 2008 decreased $107, or 91.5% to $10 from $117 for the nine months ended June 30, 2007. The decrease was primarily due to the ceasing of interest income from Applied Digital in June 2007 when the loan was fully satisfied.

For the nine months ended June 30, 2008, we had a loss from discontinued operations of $274 compared to income from discontinued operations of $228 for the same period last year. Discontinued operations primarily consisted of all revenue, cost of sales, salaries, commissions, payroll taxes, benefits expense and rent associated with the operations that were sold to Corporate Technologies effective December 31, 2007. The loss from discontinued operations of $274 in the first nine months of 2008 compared to income from discontinued operations of $228 for the first nine months of 2007 was primarily due to a combination of much weaker operating results in the first quarter of fiscal 2008 compared to 2007 and as a result of the transaction with Corporate Technologies.

The gain on sale of discontinued operations of $627 was a result of the sale of our Operating Assets to Corporate Technologies.

Income from discontinued operations was $353 and $228 for the nine months ended June 30, 2008 and 2007, respectively.

Our net loss was $(211) and $(362) for the nine months ended June 30, 2008 and 2007, respectively.

Liquidity and Capital Resources

Our current ratio was 8.5 at June 30, 2008 and 2.0 at September 30, 2007. Working capital at June 30, 2008 was $1,304, up from $1,240 at September 30, 2007, an increase of $64.

Cash used in operating activities in the first nine months of fiscal year 2008 and 2007 was $163 and $400, respectively. The cash used in operating activities in the first nine months of 2008 was



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primarily due to a decrease in accounts payable which was largely offset by the decrease in accounts receivable. The cash used in operating activities during the first nine months of fiscal year 2007 was primarily a result of a decrease in accounts payable and increase in miscellaneous receivables, offset by a decrease in accounts receivable.

Cash provided by investing activities was $887 for the first nine months of fiscal 2008, compared to $188 for the first nine months of fiscal year 2007. Cash provided by investing activities for the first nine months of fiscal year 2008 was a result of the proceeds from the sale of assets.

Cash used in financing activities for the nine months ended June 30, 2008 was $5 compared to $4 for the nine months ended June 30, 2007. The cash used in financing activities in the nine months of 2008 was a result of payments made on our credit lines with Wells Fargo and Applied Digital. The cash provided by financing activities in fiscal year 2007 was a result of borrowings on the Wells Fargo and Applied Digital lines of credit.



In accordance with the terms of the agreement between us and Corporate Technologies that was completed on December 31, 2007, our financing arrangements with Wells Fargo Business Credit (Wells Fargo), IBM Credit, LLC (IBM) and Ingram Micro, Inc. (Ingram) were all terminated and all outstanding balances were paid in full. Accordingly, we had borrowings under the financing agreements with Wells Fargo, IBM and Ingram of $0 each on June 30, 2008 and $2, $273 and $97, respectively, on September 30, 2007. The borrowings under the financing agreements with IBM and Ingram were included in either accounts payable or accrued expenses and other liabilities.

Recent Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes  an interpretation of SFAS No. 109, Accounting for Income Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements in accordance with SFAS 109. FIN 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 returns. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of FIN 48 did not have a material effect on our financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value and establishes a framework for measuring fair value in accordance with U.S. generally accepted accounting principles (GAAP). SFAS 157 also expands the disclosures related to the fair value measurements used to value assets and liabilities. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are currently evaluating whether the adoption of SFAS 157 will have a material impact on our financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). In SFAS 141(R), the FASB retained the fundamental requirements of Statement No. 141 to account for all business combinations using the acquisition method (formerly the purchase method) and for an acquiring entity to be identified in all business combinations. However, SFAS 141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. SFAS 141(R) is effective for
annual periods beginning on or after December 15, 2008. We are currently evaluating whether the adoption of SFAS 141(R) will have a material impact on our financial statements.

In February 2008, the FASB issued Staff Position No. FAS 157-1 (FSP FAS 157-1), Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement Under Statement 13 and Staff Position No. FAS 157-2 (FSP FAS 157-2), Effective Date of FASB Statement No. 157. FSP FAS 157-1 excludes Statement of Financial Accounting Standards No. 13 (SFAS 13), Accounting for Leases, as well as other accounting pronouncements that address fair value measurements on lease classification or measurement under SFAS 13 from the scope of SFAS 157. FSP FAS 157-2 delays the effective date of SFAS 157 for all nonrecurring fair value measurements of



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nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008. Both FSP FAS 157-1 and FSP FAS 157-2 are effective upon an entitys initial adoption of SFAS 157, which is the Companys first quarter of fiscal year 2009. We do not expect the adoption of FSP SFAS 157-1 to have a material impact to our consolidated results of operations and financial position.

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). FAS 161 requires enhanced disclosures about an entitys derivative and hedging activities and thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures about; (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations, and (3) how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. SFAS 161 is effective for financial statement issued for fiscal years and interim periods beginning after November 15, 2008, with early application
encouraged. Comparative disclosures for earlier periods at initial adoption is encouraged but not required. We do not expect the adoption of FAS 161 to have a material impact to our consolidated results of operations and financial position.

Item 3
        Quantitative and Qualitative Disclosures About Market Risk


We presently do not use any derivative financial instruments to hedge our exposure to adverse fluctuations in interest rates, foreign exchange rates, fluctuations in commodity prices or other market risks, nor do we invest in speculative financial instruments. Our previous borrowings under the financing agreement with Wells Fargo were at Wells Fargos prime rate plus 3%. We do not have any investments in any instruments that are sensitive to changes in the general level of U.S. interest rates.

Because we currently have no borrowings, we have concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.

Item 4
        Controls and Procedures


As of the end of the period covered by this report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures with respect to the information generated for use in our reporting system. Based upon, and as of the date of that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 are recorded, processed, summarized and reported within the time periods specified by the Commissions rules and forms.

There was no change in our internal control over financial reporting during the nine months ended June 30, 2008 that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or internal controls over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



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Part II
        Other Information




Item 1A
        Risk Factors


Ability to Identify and Consummate Transaction with Suitable Acquisition Target

While it is our primary purpose at this time to locate and acquire an attractive operating business seeking to become publicly traded through a reverse merger, there can be no assurances that such a transaction will be completed. This may result in the company being dormant for a sustained period and result in a material reduction in the net assets of the company as costs are incurred in an effort to pursue an acquisition.

Significant Minority Stockholder

Our largest stockholder, Blue Moon Energy Partners LLC (Blue Moon), owns approximately 49.9% of our outstanding shares. Additionally, our Chairman of the Board, Scott Silverman owns 50% of Blue Moon, indirectly. As a result, Blue Moon is able to exercise significant influence over the Company and be a significant factor in any proposal that is put to a vote of the shareholders which could affect major transactions we contemplate. This has the potential to delay, prevent, change or initiate a change in control, acquisition, merger or other transaction, such as acquiring an attractive operating business seeking to become publicly traded through a reverse merger.

Item 6
        Exhibits


See list of exhibits attached hereto.





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SIGNATURE

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



IFTH Acquisition Corp.By:
        /s/ Michael J. FederMichael J. FederActing Chief Financial Officer




Date:
        August 14, 2008








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EXHIBITS

ExhibitNumber
        Description3.1
        Amended and Restated Certificate of Incorporation dated April 21, 1997 (incorporated by reference to Exhibit 3.1 to the registrants Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003)3.2
        Certificate of Amendment of Certificate of Incorporation dated March 22, 2002 (incorporated by reference to Exhibit 3.2 to the registrants Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003)3.3
        Certificate of Amendment of Certificate of Incorporation dated April 9, 2004 (incorporated by reference to Exhibit 3.3 to the registrants Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003)3.4
        Certificate of Amendment of Certificate of Incorporation dated December 31, 2007 (incorporated by reference to Exhibit 3.1 to the registrants Current Report on Form 8-K filed with the Commission on January 3, 2008)3.5
        Amended and Restated By-Laws (incorporated by reference to Exhibit 3.4 to the registrants Quarterly Report on Form 10-Q filed with the Commission on May 14, 2003)4.1
        Non-Qualified Stock Option Award Granted to David A. Loppert dated January 1, 2001 (incorporated by reference to Exhibit 4.1 to the registrants Annual Report on Form 10-K filed with the Commission on December 20, 2002)10.1
        Credit and Security Agreement, dated June 29, 2004, by and among InfoTech USA, Inc., InfoTech USA, Inc., Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on July 8, 2004)10.2
        Guaranty by Corporations, dated June 29, 2004, by and among InfoTech USA, Inc., Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the Commission on July 8, 2004)10.3
        Stock Pledge Agreement, dated June 29, 2004, by and between InfoTech USA, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K filed with the Commission on July 8, 2004)10.4
        Collateral Assignment of Note, dated June 29, 2004, by and between InfoTech USA, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.4 to the registrants Current Report on Form 8-K filed with the Commission on July 8, 2004)10.5
        First Amendment and Waiver, dated as of December 24, 2004, among InfoTech USA, Inc., the registrant, Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.5 to the registrants Annual Report on Form 10-K filed with the Commission on December 29, 2004)






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10.6
        Agreement for Wholesale Financing, dated June 30, 2004, by and between IBM Credit, LLC and InfoTech USA, Inc. (incorporated by reference to Exhibit 10.5 to the registrants Current Report on Form 8-K filed with the Commission on July 8, 2004)10.7
        Commercial Loan Agreement, dated June 27, 2003, between InfoTech USA, Inc. and Applied Digital Solutions, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K, dated June 27, 2003, filed with the Commission on July 11, 2003)10.8
        Term Note, dated June 27, 2004, issued by Applied Digital Solutions, Inc. in favor of InfoTech USA, Inc. (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K, dated June 27, 2004, filed with the Commission on July 11, 2004)10.9
        Stock Pledge Agreement, dated June 27, 2004, between Applied Digital Solutions, Inc. and InfoTech USA, Inc. (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K, dated June 27, 2004, filed with the Commission on July 11, 2004)10.10
        First Amendment to Loan Documents, dated June 28, 2004, by and between Applied Digital Solutions, Inc. and InfoTech USA, Inc. (incorporated by reference to Exhibit 10.6 to the registrants Current Report on Form 8-K filed with the Commission on July 8, 2004)10.11*
        1998 Incentive Stock Option Plan, as Amended (incorporated herein by reference to Exhibit 99 to the registrants definitive Proxy Statement filed with the Commission on December 27, 1999)10.12*
        1999 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit A to the registrants definitive Proxy Statement filed with the Commission on December 28, 1998)10.13*
        2001 Flexible Stock Plan (incorporated herein by reference to Exhibit B to the Companys definitive Proxy Statement filed with the Commission on February 28, 2001)10.15
        Second Amendment and Waiver, dated as of November 4, 2006, among InfoTech USA, Inc., the registrant, Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on November 7, 2006)10.16
        Office Lease Agreement, dated as of April 15, 2006, by and between Faircorp Associates, L.L.C. and InfoTech USA, Inc. (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the Commission on April 19, 2006)10.17
        Letter Agreement, dated May 13, 2006, from Ingram Micro Inc. to InfoTech USA, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on May 19, 2006)10.18
        Security Agreement, dated May 16, 2006, by and between InfoTech USA, Inc. and Ingram Micro Inc. (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the Commission on May 19, 2006)10.19
        Guaranty, dated May 16, 2006, by and between InfoTech USA, Inc. and Ingram Micro Inc. (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K filed with the Commission on May 19, 2006)10.20
        Guaranty, dated May 16, 2006, by and between Information Technology Services, Inc. and Ingram Micro Inc. (incorporated by reference to Exhibit 10.4 to the registrants Current Report on Form 8-K filed with the Commission on May 19, 2006)






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10.21
        Intercreditor and Subordination Agreement, dated May 16, 2006, by and between Ingram Micro Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.5 to the registrants Current Report on Form 8-K filed with the Commission on May 19, 2006)10.22
        Second Amendment to Loan Documents, dated June 28, 2006, by and between Applied Digital Solutions, Inc. and InfoTech USA, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on June 28, 2006)10.23*
        Summary of the salaries for the Companys named executive officers (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K/A filed with the Commission on October 4, 2006)10.24
        Summary of the directors compensation (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K/A filed with the Commission on October 4, 2006)10.25
        Third Amendment and Waiver, dated as of January 24, 2007, among InfoTech USA, Inc., the registrant, Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on January 25, 2007)10.26
        Fourth Amendment and Waiver, dated as of May 5, 2007, among InfoTech USA, Inc., the registrant, Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on May 9, 2007)10.27
        Third Amendment to Loan Documents, dated June 23, 2007, by and between Applied Digital Solutions, Inc. and InfoTech USA, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on June 26, 2007)10.28
        Fifth Amendment and Waiver, dated as of November 16, 2007, among InfoTech USA, Inc., the registrant, Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on November 17, 2007)10.29
        Satisfaction of Loan Agreement, dated as of May 15, 2007, among Applied Digital Solutions, Inc. and InfoTech USA, Inc., the registrant (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on May 15, 2007)10.30
        Consent to Satisfaction of Loan to Applied Digital Solutions, Inc. dated May 11, 2007, between Wells Fargo Business Credit, InfoTech USA, Inc., InfoTech USA, Inc. and Information Technology Services, Inc. (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the Commission on May 15, 2007)10.31
        Letter dated September 28, 2007, from Ingram Micro Inc. to InfoTech USA, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on October 4, 2007)10.32
        Asset Purchase and Sale Agreement, dated November 13, 2007, among InfoTech, InfoTech Sub, IT Sub and Corporate Technologies (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on November 15, 2007)






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10.33
        Letter Agreement dated as of November 14, 2007, among InfoTech USA, Inc., the registrant, Information Technology Services, Inc. and Wells Fargo Business Credit, Inc. (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the Commission on November 19, 2007)31.1
        Certification by Chief Executive Officer of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
        Certification by Chief Financial Officer of the registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
        Certification by Chief Executive Officer of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
        Certification by Chief Financial Officer of the registrant pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
        Management contract or compensatory plan.










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