U.S.
Securities and Exchange Commission


Washington,
DC 20549





Form
10K/A




x   ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURIES EXCHANGE ACT OF
1934





For
the Fiscal Year Ended:December 31,
2007






Commission
File Number 000-07693





SoftNet Technology
Corporation


(Exact
name of  issuer as specified in its charter)








Nevada
              
              000-07693
              
              74-3035831(State
      of Incorporation)
              
              (Commission
      File Number)
              
              (IRS
      Employer
                Identification
      Number)





Woodbridge
Corporate Plaza


33 Wood
Avenue, South


Iselin,New Jersey08830


(Address
of principal executive offices) (Zip Code)





(908)
212-1780


(Registrant's
telephone number, including area code)








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




Yes x     No o





APPLICABLE
ONLY TO CORPORATE ISSUERS




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of December 31, 2007:





As
of January 9, 2009, there were outstanding : 152,401,704 shares of Class A
Common Stock, $0.001 par value.





Transitional
Small Business Disclosure Format (check one);




Yes o     No x















TABLE OF CONTENTS








PART IITEM 1.   Description of Business
                    3ITEM 2.   Description of Property
                    5ITEM 3.   Legal Proceedings
                    5ITEM 4.   Submission of Matters to Vote of Securities
      Holders
                    5PART IIITEM 5.    Market for Common Equity and Related
      Stockholder Matters
                    6ITEM 6.    Management's Discussion and Analysis
      or Plan of Operations
                    8ITEM 7.    Financial
    Statements
                    9ITEM
      8.    Changes in and Disagreements with Accountants onAccounting
      and Financial Disclosure
                    28ITEM 8A.  Controls and Procedures
                    28Item8A(T).    Management
      Report
                    28ITEM 8B.  Other Information
                    29PART IIIITEM
      9.    Directors, Executive Officers, Promoters, and
      ControlPersons;
      Compliance with Section 16(a) of the Exchange Act
                    29ITEM 10.  Executive Compensation
                    30ITEM 11.  Security Ownership of Certain Beneficial Owners
      and Management
                    35ITEM 12.  Certain Relationships and Related
      Transactions
                    37ITEM 13.  Exhibits
                    37ITEM 14.  Principal Accountant Fees and
      Services
                    38SIGNATURES
                    39




























1
 Table of Contents




EXPLANATORY
NOTE





This
Annual Report on Form 10-K and the documents incorporated herein by reference
contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about our industry, management beliefs, and assumptions made by
management. Words such as “anticipates,” “expects,” “intends,”
“plans,”  ”believes,” “seeks,” “estimates,” variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements.





Unless
otherwise noted, references in this Form 10-K to “STTC” the “Company,” “we,”
“our” or “us” means Softnet Technology Corp. a Neveda
corporation.





FORWARD
LOOKING STATEMENTS





There are
statements in this registration statement that are not historical facts. These
“forward-looking statements” can be identified by use of terminology such as
“believe,” “hope,” “may,” “anticipate,” “should,” “intend,” “plan,” “will,”
“expect,” “estimate,” “project,” “positioned,” “strategy” and similar
expressions. You should be aware that these forward-looking statements are
subject to risks and uncertainties that are beyond our control.  For a
discussion of these risks, you should read this entire Registration Statement
carefully.  Although management believes that the assumptions underlying
the forward looking statements included in this Registration Statement are
reasonable, they do not guarantee our future performance, and actual results
could differ from those contemplated by these forward looking statements. The
assumptions used for purposes of the forward-looking statements specified in the
following information represent estimates of future events and are subject to
uncertainty as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements.  In the light of
these risks and uncertainties, there can be no assurance that the results and
events contemplated by the forward-looking statements contained in this
Registration Statement will in fact transpire. You are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of their
dates. We do not undertake any obligation to update or revise any
forward-looking statements.
















2
 Table of Contents




PART I





Item 1.       Business





Corporate History and
Background:




The
publicly held entity that is today Softnet Technology Corporation (the Company
or "SoftNet"), was founded in March, 1971 as International Mercantile
Corporation (International Mercantile), organized under the laws of the State of
Missouri.  On July 22, 2004, The Company changed its name to Softnet
Technology Corp.





On
October 31, 2005, the Company entered into a Plan and Agreement of
Reorganization with Inspara, Inc., a Delaware corporation (Inspara). Under the
original terms of the Agreement, Inspara was to merge with and into the Company,
with the transaction closing no later than November 29, 2005. On December 1,
2005, the Company and Inspara agreed to extend the closing date of the Merger to
December 15, 2005. The Company and Inspara subsequently agreed to extend the
closing date of the merger to January 18, 2006.





On or
about January 11, 2006, the Company entered into a certain Plan and Agreement of
Reorganization (the Agreement) with Inspara. The Company previously entered into
a Plan and Agreement of Reorganization with Inspara, Inc. on October 31, 2005,
which was terminated on January 11, 2006. Under the terms of the Agreement
InSpara would merge with and into the Company. The closing took place on January
18, 2006 effective, January 1, 2006. Pursuant to the Agreement: (i) certain key
employees of InSpara have entered into employment agreements with the Company;
(ii) all registration rights held by stockholders of InSpara, if any, shall be
terminated; and (iii) InSpara shall have 291,000 shares of its Class B Common
Stock issued and outstanding. Under the Agreement, the stockholders of InSpara
received, pro rata, a total of 49,999,998 shares of Softnet's Common Stock. The
Acquisition Shares are not registered shares and will only be free trading upon
a filing of a Registration Statement for the Acquisition Shares, or an exemption
from the registration thereof. Prior to the execution of the Agreement, there
were no material relationships between (i) InSpara or any of its affiliates, or
any officer or director of InSpara, and (ii) the Company or any of its
affiliates, or any officer or director of the Company. The Company filed the
Articles of Merger with the Secretary of State of the State of Nevada. The
Company recognized $4,320,760 of goodwill in this transaction and has impaired
the entire amount as of December 31, 2007.





In June
of 2006, to achieve economies of scale and centralized organizational and
operational continuity, the Company performed a merger rollup whereby its
subsidiaries were rolled up and into SoftNet.  Accordingly, beginning in
the second quarter of 2006, the Company no longer had any wholly owned
subsidiaries and was one operating unit.





The
Company entered into a merger agreement with PeriNet Technologies LLC (Perinet),
a Pennsylvania based information technology firm, Inc. in September 2006
effective July 1, 2006. Under the merger agreement PeriNet was to merge into the
Company. Under the terms of the merger, the Company is to pay a total of
$300,000 in cash over a period of 180 days, and issue restricted Class A, Common
Stock of the Company with a maximum value of $2,100,000, $1,000,000 of which is
guaranteed and the remaining being vested based on future performance.  The
shares will be valued based on the average share price of the stock the month
preceding the vesting period. The Company in this transaction acquired $171,057
of assets and $376,098 in liabilities. Based on the initial payout of $100,000
and $1,000,000 of stock the difference of $1,305,851 was recognized as goodwill.
However the entire goodwill amount of $1,305,851 was impaired in the current
year.





At
December 31, 2007 there were 5,000,000 shares of Series A Preferred Stock, par
value $1.00 authorized and 4,840,000 shares issued and outstanding. The Series A
Preferred Stock was issued to members of the senior management team and key
employees, primarily for recruitment and retention purposes. The terms of the
Series A Preferred Stock requires that any employee holding such shares must be
employed at the time of vesting. the shares vest as follows: 50% upon a three
(3)  consecutive months in which the Company records revenues equal to an
annualized revenue run rate of $10,000,000, 75% upon a three (3) months in which
the Company records revenues equal to an  annualized run rate of 
$15,000,000, an additional 12.5% of the preferred shares vests upon three (3)
consecutive months in which the Company records revenues equal to an annualized
run rate of  $17,500,000 and the preferred shares fully vest upon three (3)
consecutive months in which the Company records revenues equal to an annualized
run rate of $20,000,000. Except in the case of a change of control of the
Company the Series A Preferred Stock will not vest until the Company achieves a
$10,000,000 annualized revenue run for three (3) consecutive months,  The
Series A Preferred Stock will automatically vest upon any change in management
or  control of the Corporation. Each shares of the Series A Preferred Stock
carries voting rights equal to 200 shares of the Company’s Class A Common Stock
and each share of the Series A Preferred Stock converts into 50 shares of Class
A Common stock.





As of
December 31, 2007, there were 500,000,000 shares of Class A Common Stock
authorized, and 457,715,202 shares issued, of which 150,000,000 shares were
being held in escrow and as collateral for a contemplated loan, of the Company's
Class A common stock with a par value of $.001. In 2007, the company cancelled
150,000,000 escrowed shares for the unfunded loan.







3
 Table of Contents




In
February 2003, the Company, upon the approval of a board resolution, increased
the authorized limit of the Class B common shares to 5,000,000. Subsequent to
this board resolution, the Company cancelled the outstanding 1,142,858 shares
and issued the entire 5,000,000 shares to two of its officers. As at December
31, 2007, 1,500,000 of the Class B shares were converted to Class A common
shares and 3,500,000 remain issued and outstanding.





At
December 31, 2007, there were 1,304,000 shares of Series B Common Stock issued
and outstanding. During 2007, 2,196,000 shares of Series B Common Stock were
converted to Class A Common Stock.





On
November 9, 2007, the Company filed Form 14C with the Securities & Exchange
Commission in connection with a 1 for 10 reverse split of its common stock. It
is anticipated that the reverse split will be executed by the Company in April
2008.





CURRENT BUSINESS
OPERATIONS:





SoftNet
Technology Corp. currently offers specialized, high-end Information Technology
consulting services and solutions to enterprise and service providers, with the
objective of helping its clients maximize the business value and cost
effectiveness of their investments in IT infrastructure. SoftNet focuses in
providing technology infrastructure services with specific capabilities in
Information Security, Information Storage, Networking, Network Management,
Systems Integration and Application Delivery Solutions.





The
Company provides the customer with a full range of expert consulting and
recruiting services helping its customers plan, deploy, secure, and manage IT
services and infrastructures enabling them to meet their short and long term
business objectives.





SoftNet
utilizes a proven business model in the planning and executing of these
services, which are administered by its experienced team of industry-qualified
professionals. The Company prides itself in providing high quality consulting
services, highly trained professionals, focused on providing client solutions
and executing projects on time and within budget. SoftNet's solutions provide
service capabilities that address key aspects of the customer's technology
infrastructure.





SoftNet's
approach uses a business model that features an industry-unique methodology, a
professional staff recruiting model, and engineering operation
model.





SoftNet
targets three primary vertical sectors into which it markets its services:
national and international commercial enterprises, telecommunication service
providers and governmental agencies and organizations. It selects companies and
organizations for which technology is an important element of the customer’s
business model. In its commercial enterprise sector, SoftNet targets financial
services firms, life science companies and technology manufacturing enterprises.
The Company believes that these large, technology intensive customers present
the best opportunity to develop long-term relationships.





SoftNet
is led by a seasoned executive team, with more than 25 years of senior
managerial experience for technology leaders including several publicly-held
companies such as USWeb, Predictive Systems and Claremont Technology Group Inc.
as well as a number of high growth privately-held IT service firms including
Paranet, Greenwich Technology Partners Inc. and Gray Peak in establishing and
operating professional services businesses, with a specialty in the total
network life cycle business. Collectively, they were part of the management
teams for companies, including that were acquired in excess of $3.7 billion,
$450 million and $100 million, respectively; and for an IPO with a valuation of
$1.5 billion. Management's extensive skill sets and experience across a broad
cross-section of industries, with IT related services including global
networking, e-commerce, database development, ITIL solutions, storage solutions,
application delivery services, desk-top support security systems, and
telecommunication services.




Towards
establishing a position of leadership in providing professional network
services, SoftNet's approach includes: establishing a track record of success,
and strengthening current client relationships. Another facet of the strategy
includes maintaining a dedicated engineer and employee base through promotion of
a Company culture that fosters an absolute dedication to its clients and the
delivery of solution-oriented services. The strategy also includes developing a
presence in the major networking hub markets while attracting and retaining the
highest quality engineers, and maintaining its technical expertise.





SoftNet
leverages its expertise in understanding complex networks and systems software
to develop frameworks for certain repetitive network-related tasks, including
network monitoring, performance monitoring, security intrusion monitoring, and
information storage. These frameworks are designed as "virtual consulting
tools," provided in conjunction with consulting services, and are positioned to
improve quality through a knowledge-base approach to services. The Company's
frameworks and services provide information required for the increasingly
complex, day-to-day operation of networks, while reducing the required
technological expertise and experience of the Company’s personnel.







4
 Table of Contents




SoftNet
offers its services on a long- or short-term basis across all phases of the
technology life cycle. As a result, the Company's services are particularly well
suited to clients having immediate business networking needs, as well as those
customers who traditionally outsource or out-task all or a portion of their
network infrastructure or operations. The caliber and experience of SoftNet's
employees, the frameworks within which services are delivered, the Company's
industry-proven delivery methodology, and employee reputation enable SoftNet to
compete in an environment of constantly changing technical requirements.
Softnet's highly skilled engineering staff is certified in the design,
integration, and implementation of industry-popular hardware and software
products focused on storage, security, application delivery and network
operations/infrastructure management.





SoftNet
Technology Corp. provides its clients with a structured approach, ensuring
consistent methodology and an understanding of the firm's business requirements.
All findings, recommendations, and architectural issues are provided to the
client with specific recommendations for targeted solutions, alternate vendor
and product capabilities, staffing issues, and the integration of these
recommendations within the client's operation.





Item 2.       Properties





Softnet
Technology's corporate office was located at
Woodbridge Corporate Plaza, 485 Route 1 South, Building C, Iselin, New
Jersey with about 3,500 square feet of space. The term of our lease was for this
space began in September 2006 and expires in  May 2008.  We pay
monthly rent for this space of approximately $7,000.





The
Company previously has an Atlanta office, located at 1000 Holcomb Woods Parkway,
Building 100,Suite 114 in Roswell, GA is approximately 2,000 square feet and
houses the Company's technology infrastructure services.





The
Company closed its sales offices in Dallas, Texas located at 3010 LBJ Freeway,
Suite 1200 and in Santa Fe, New Mexico in 2007. It also closed its sales and
service office in Newtown, Pennsylvania at 12 Penns Trail,  Suite 115 in
January, 2008.





Item 3.       Legal
Proceedings





There no
legal proceedings in 2007. Subsequent to December 31, 2007 the Company received
a Summons related to an outstanding loan assumed by the Company in the
acquisition of PeriNet Technologies LLC in 2006. There is no dispute over the
Company’s assumption of the loan and the Company intends to respond to the
complaint as required. There are other minor pending disputes over amounts due
to vendors which the Company believes will be satisfactorily
resolved.





While
SoftNet is not directly involved, Mr. Kevin Holt pled guilty to conspiracy to
violate law arising out of dissemination of false information to investors of
Inspara Networking Technologies. Mr. Holt has been cooperating with authorities
in connection with a Federal investigation and the conspiracy to which he pled
guilty ended in or about April 2005 as a result of his voluntary reporting of
the offense prior to its discovery by law enforcement officials. The offense
does not involve SoftNet Technology Corporation. As a result, Mr. Holt
voluntarily resigned his position of Chairman of the Board and Chief Executive
Officer as of November 16, 2006. He currently is employed as Chief Operating
officer of the Company.





In 2007,
the Company settled a dispute over an outstanding payable due to a vendor
through agreement that provided  a reduction of  the amount due and a
installment payment schedule.




In 2008,
the Company received summons and complaints from two separate parties related
the PeriNet acquisition. The first complaint filed is related to an outstanding
loan assumed by SoftNet as part of the PeriNet acquisition. The second complaint
addresses several issues including a loan which is in dispute and the issuance
of certain additional shares to be issued in connection with reset provisions of
the acquisition. The Company will respond and vigorously defend its actions in
both these pending suits.





Item 4.       Submission of Matters to
Vote of Security Holders





None.





5
 Table of Contents




PART II





Item 5.       Market for Company's Common
Stock and Related Stockholder Matters





Market For
Securities





The
Company's common stock is listed for quotation on the OTC Electronic Bulletin
Board under the symbol "STTC". The market for such shares is limited and no
assurance can be given that a significant trading market for SoftNet's common
stock will develop or, if developed, will be sustained. However, there is, on
average, approximately 500,000 shares traded on a daily bases providing for some
liquidity for the publicly traded shares.





The
following table sets forth the range of the high and low closing bid prices of
the Company's common stock during each of the calendar quarters identified
below. These bid prices were obtained from the National Quotation Bureau, Inc.
and NASDAQ Trading & Market Services and do not necessarily reflect actual
transactions, retail markups, markdowns or commissions. The transactions include
inter-dealer transactions. The Company's management believes that the following
data is anecdotal and may bear no relation to the true value of SoftNet's common
stock or the range of prices that would prevail in a fluid market.





2006
                      High
                      Low1st
      Quarter
                      $0.110
                      $0.0722nd
      Quarter
                      $0.080
                      $0.0313rd
      Quarter
                      $0.085
                      $0.0264th
      Quarter
                      $0.050
                      $0.022





2007
                    High
                    Low1st
      Quarter
                    $0.04
                    $0.0242nd
      Quarter
                    $0.025
                    $0.0093rd
      Quarter
                    $0.009
                    $0.00614th
      Quarter
                    $0.21
                    $0.0052





We may
never pay any dividends to our shareholders. We have not declared any dividends
for the years ended December 31,  2005, 2006 or 2007. Our Board of
Directors does not intend to distribute dividends in the near future. The
declaration, payment and amount of any future dividends will be made at the
discretion of the Board of Directors, and will depend upon, among other things,
the results of our operations, cash flows and financial condition, operating and
capital requirements, and other factors as the Board of Directors considers
relevant. There is no assurance that future dividends will be paid, and if
dividends are paid, there is no assurance with respect to the amount of any such
dividend.





We are
authorized to issue three classes of securities:


1.
            500,000,000
      shares of Class A common stock;


2.
            5,000,000
      shares of Class B common stock; and


3.
            10,000,000
      shares of Preferred Stock, 5,000,000 of which have been designated as
      Series A and 5,000,000 have been designated as Series B, subject to the
      approval by the requisite vote of our shareholders and the effectiveness
      of the filing with the Nevada Secretary of State of articles to authorize
      10,000,000 shares of preferred stock and the subsequent designation by the
      Board of Directors of 5,000,000 shares as Series A and 5,000,000 shares of
      Series B.





The
following is a summary of certain provisions of our capital stock, certificate
of incorporation and bylaws.





Class
A Common Stock





As of the
date of this prospectus, there are 457,715,202 shares of Class A common stock
outstanding, which are held of record by approximately 5,000
stockholders.





The
holders of common stock are entitled to one vote per share on all matters to be
voted upon by the stockholders.  Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably dividends, if any, as may be declared from time to
time by the Board of Directors out of funds legally available for that
purpose.  In the event of our liquidation, dissolution, or winding up, the
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior distribution rights of
preferred





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stock, if
any, then outstanding.  The common stock has no preemptive or conversion
rights or other subscription rights.  There are no redemption or sinking
fund provisions applicable to the common stock.





Class
B Common Stock





As of the
date of this prospectus, there are 2,104,000 shares of Class B common stock
outstanding, which are held of record by approximately two stockholders. 
Shares of Class B common stock are each convertible into 50 shares of Class A
common stock and are each entitled to 200 votes per share.





Preferred
Stock





Series
A Preferred Stock




Subject
to the approval by the requisite vote of our shareholders and the effectiveness
of the filing with the Nevada Secretary of State of articles to authorize
10,000,000 shares of preferred stock and the subsequent designation by the Board
of Directors of 5,000,000 shares as Series A, as of the date of this prospectus,
there are 5,000,000 shares of Series A preferred stock authorized, 4,740,000 of
which are issued or outstanding.  The Series A preferred stock has a
conversion rate of 50 shares of Class A common stock for each one share of
Series A preferred stock, which shall conditionally vest, and voting rights of
200 votes for each one share of Series A preferred stock.  The vesting of
the conversion rights of the Series A preferred stock is that holders of the
Series A preferred stock shall be permitted to, but are not required to,
convert, pro rata, up to: (a) 50% of the Series A preferred stock held by such
holder at such time as our actual gross annual revenue run rate, based on three
consecutive months of results, reaches $10,000,000; (b) an additional 25% of the
Series A preferred stock held by such holder at such time as our actual gross
annual revenue run rate, based on three consecutive months of results, reaches
$15,000,000; (c) an additional 12.5% of the Series A preferred stock held by
such holder at such time as our actual gross annual revenue run rate, based on
three consecutive months of results, reaches $17,5000,000; and (d) an additional
12.5% of the Series A preferred stock held by such holder at such time as our
actual gross annual revenue run rate, based on three consecutive months of
results, reaches $20,000,000.  Additionally, vesting of the conversion
rights of the Series A preferred stock shall occur immediately upon any change
in management or control of the company, including any change as the result of
any sale, merger, or restructuring.





Series
B Preferred Stock





Subject
to the approval by the requisite vote of our shareholders and the effectiveness
of the filing with the Nevada Secretary of State of articles to authorize
10,000,000 shares of preferred stock and the subsequent designation by the Board
of Directors of 5,000,000 shares as Series B, as of the date of this prospectus,
there are 5,000,000 shares of Series B preferred stock authorized, none of which
are issued or outstanding.





Our Board
of Directors will be authorized to fix and determine from time to time before
issuance the relative rights and preferences of the shares of Series B preferred
stock and the restrictions or qualifications thereof, including, without
limiting the generality of the foregoing, the following: (1) the dividend rate
and the date or dates on which such dividends will be payable; (2) the amount or
amounts to be received by the holders in the event of voluntary or involuntary
dissolution or liquidation of the corporation; (3) the price or prices at which
shares may be redeemed, if any, and any terms, conditions, limitations upon such
redemptions; (4) the sinking fund provisions, if any, for redemption or purchase
of shares; and (5) the terms and conditions, if any, on which shares may be
converted at the election of the holders thereof into shares of other capital
stock, or of other series of serial preferred stock, of the
corporation.





Warrants





We have a
total of 11,632,860 warrants outstanding as follows:





The
Selling Stockholders collectively hold 550,000 Class A warrants with an exercise
price of $0.03 per share of common stock and 550,000 Class B warrants with an
exercise price of $0.06 per share of common stock.  Both warrants are
exercisable for seven years from the final closing date of the note
offering.





JPC
Capital Partners, Inc. holds a five year warrant to purchase 5,266,430 shares of
common stock at an exercise price of $0.03 per share and a five year warrant to
purchase 5,266,430 shares of common stock at an exercise price of $0.06 per
share.





7
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Item 6.       MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





INTRODUCTION AND FORWARD
LOOKING STATEMENTS




This
document contains forward-looking statements which may involve known and unknown
risks, uncertainties and other factors that may cause SoftNet Technology
Corporation's (SoftNet) actual results and performance in future periods to be
materially different from any future results or performance suggested by these
statements. SoftNet cautions investors not to place undue reliance on
forward-looking statements, which speak only to management's expectations on
this date.





Certain
statements contained herein, constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the Act). Such
forward-looking statements are identified by words such as intends, anticipates,
hopes and expects, among others, and include, without limitation, statements
regarding the Company's plan of business operations, anticipated revenues,
related expenditures, and the results of any business transactions. Factors that
could cause actual results to differ materially include, among others, the
following: acceptability of the Company's services in the market place, general
economic conditions, political and economic conditions in the United States and
abroad, and competition.





The
following discussion and analysis highlights the financial position and results
of operations of SoftNet as of and for the year ended December 31, 2007 compared
to as of and for the year ended December 31, 2006.





The
Company anticipates that its sources of liquidity will come from the drawn down
of the second the balance of $733,333.33 on its 8% Secured Convertible Note. The
first traunche of which was drawn in June 2007 in the amount of $366,666.67 to
cover the funding of corporate expenses, including working capital needs, legal
and accounting and filing fees, as well as Sarbanes-Oxley compliance. The
Company anticipates that these funds will to be available to it in a series of
fundings starting in the second quarter of 2008.





On or
about December 31, 2005, the Solutions Technology, Inc., a wholly owned
subsidiary of the Company, entered into a certain Stock Purchase Agreement.
Under the terms of the Agreement the Company has agreed sell its wholly owned
subsidiary, Solutions Technology, Inc., for the total purchase price of $100,000
in cash, of which $50,000 was paid in connection with the execution of the
Agreement and the remaining $50,000 was paid on or before March 1, 2006. On
February 9, 2006, the Company completed the execution of the
divestiture.





The
Company entered into a merger agreement with PeriNet Technologies LLC (Perinet),
a Pennsylvania based information technology firm, Inc. in September 2006
effective July 1, 2006. Under the merger agreement the Company acquired the
assets and assumed certain liabilities of Perinet. The Company paid a total of
$300,000 in cash over a period of 180 days, and issue restricted Class A
 Common Stock of the Company with a maximum value of $2,100,000, $1,000,000
of which was guaranteed and the remainder vested based on quarterly revenue
performance. The shares were valued based on the average share price of the
stock the month preceding the vesting period. The Company in this transaction
acquired $171,057 of assets and $376,098 in liabilities. Based on the initial
payout of $100,000 and $1,000,000 of stock the difference of $1,305,851 was
recognized as goodwill. However the entire goodwill amount of $1,305,851 was
impaired in the year ended December 31, 2006.  The Perinet merger agreement
provided that when any shares issued pursuant to the agreement are eligible to
come off of any Rule 144 restriction (i.e.  the one year
anniversary of the issuance of the stock, the Free Trading Date”), the number of
shares shall be reset so that the value of the shares on the Free Trading Date
shall not be less than 75% of the value on the date of issuance. The Company
will issue these additional shares to the sellers upon the completion of the 1
for 10 reverse split.





2007 COMPARISON WITH
2006





Revenues
for 2006 were $6,213,304 as compared to $8,650,231 for 2007, a 39.2% increase in
2007. The Company's revenue growth was the result of its entering into new
engagements with existing customers and soliciting engagements with new
customers. This growth was partially offset by the Company’s withdrawal from the
equipment reseller business in mid 2007. The largest contributor to the
Company’s revenue growth is SoftNet’s technology infrastructure services
practice with a specialty in storage. The Company’s largest client is a storage
device manufacturer for which the Company provides installation and
configuration services to end-user customers.   Other sources of
revenue growth include the introduction of the Company’s Application Delivery
practice. While Application Delivery was not significant in terms of initial
revenues, the practice did provide new customers and some revenues during the
fourth quarter of 2007. These additional revenue sources accounted for
substantially all of the total increase for 2007.





Cost of
revenue for 2006 was $4,268,703 compared to $6,778,606 for 2007. The increase in
cost of revenues in 2007 relates to a change in the presentation of certain
service related compensation costs which were reflected in operating expenses in
2006. The increase in cost of revenue was also the result of SoftNet’s hiring
additional technology service professionals to complete engagements with its
information technology service clients and certain costs of equipment resold by
the Company in 2007. These costs of revenue accounted for the entire total for
2007.





8
 Table of Contents




The gross
margin in 2006, was 30.1%. The gross margin in 2007 was 24%. This decline is
attributable to certain engagements with lower gross margins with new customers
in 2007 as part of the Company’s expansion efforts. In addition, the increased
mix of equipment resale business generated by the Perinet acquisition and the
SMB business had a negative effect on its gross margin in 2007. This was the
primary reason behind the Company’s decision to exit the resale equipment
business in late 2007.





Operating
expenses for 2006 were $ 9,741,335 as compared to $3,455,625 in 2007. The
decrease between the adjusted 2006 operating expense and the 2007 operating
expense was the result of the elimination of certain operating expenses incurred
in 2006 related to the divestiture of SoftNet GmbH and the acquisition and
associated administrative costs of PeriNet, Inspara and Indigo. Management
conservatively impaired all of its intangible assets as of December 31, 2006
which was recorded in the 2006 operating expenses including depreciation,
amortization and impairment charges increased approximately $4.2 million due to
the impairment of goodwill for Inspara, the impairment for the remaining Indigo
goodwill and the entire PeriNet goodwill. None of these operating expenses for
the impairment of intangible assets were recurring in 2007.





Net
Interest Expense was $39,465 for 2006 compared to $49,973 in 2007. In addition
to net interest expense incurred by the Company, the Company also factors
certain receivables, the cost of which is reflected in Operating Expenses.
Factoring costs in 2006 were $231,954 and $358,429 in 2007. The increase in
factoring costs is due to the increase in the factoring of substantially all of
the Company’s receivables in 2007. The overall increase in both interest and
factoring costs in 2007 is the direct result of the Company’s growth in revenues
and the need to finance the related Accounts Receivable.





Gain on
sale of subsidiaries was $513,903 in 2006 and $69,626 in 2007. In 2006, the
Company divested itself of its German-based subsidiary, SoftNet GmbH. In 2007
the Company sold Indigo Technology Services which primarily conducted the
Company’s small business support services.





LIQUIDITY AND CAPITAL
RESOURCES





At
December 31, 2007, the Company had a net working capital deficit of $1,833,524
compared to a net working capital deficit of $658,000 in 2006. This increase in
the working capital deficit was attributable to the Company’s operating loss of
$1,388,415, net of impairment of goodwill in 2007.





The
Company used $516,564 in operating activities for continuing operations in 2006
compared to $435,423 used in 2007. This change was attributable in large part to
the decrease in net loss from 2006 to 2007.





The
Company had cash provided by investing activities of $412,667 compared to cash
provided of $586,659 in 2006. This change was attributable to $666,019 in stock
issuance to cancel debt to related parties versus in 2006 versus the proceeds of
$366,667 from the first draw on the Company’s 8% convertible note in
2007.





In
pursuing its business strategy, the Company may require additional cash for
operating and investing activities. The Company expects future cash requirements
to be funded from operating cash flow and cash flow from financing
activities.





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. The Company has suffered recurring losses from
operations and at December 31, 2007 and 2006 had working capital deficits as
noted above. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.





Item 7.       Financial
Statements.





All
financial information required by this Item is attached hereto beginning on Page
9.

















9
 Table of Contents








SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES








INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006




Page(s)Report of Independent Registered Public Accounting
      Firm
                11Balance Sheets as of December 31, 2007
                12Statements
      of Operations for the Years EndedDecember
      31, 2007 and 2006
                13Statement
      of Changes in Stockholders' Equity (Deficit)for
      the Years Ended December 31, 2007 and 2006
                14Statements
      of Cash Flows for the Years EndedDecember
      31, 2007 and 2006
                15-16Notes to Consolidated Financial
    Statements
                17-27


































10
 Table of Contents




Larry O'Donnell,
      CPA, P.C.Telephone
      (303)745-4545
              Fax
      (303)369-9384
              e-mail 
      larryodonnelcpa@msn.com
              www.larryodonnellcpa.com
            2228
      South Fraser Street
              Unit
      1
              Aurora,
      Colorado 80014











Report of Independent Registered Public Accounting
Firm






To the
Board of Directors


SoftNet
Technology Corporation


Iselin,
New Jersey





I have
audited the accompanying consolidated balance sheet of SoftNet Technology
Corporation, as of December 31, 2007, and the related consolidated statements of
operations, stockholders' (deficit), and cash flows for the year then
ended.  These financial statements are the responsibility of the Company’s
management.  My responsibility is to express an opinion on these financial
statements based on my audit.





I
conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that I
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  I believe that my
audit provides a reasonable basis for my opinion.





In my
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of SoftNet Technology Corporation as
of December 31, 2007, and the results of its operations and cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.




The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 17 to the financial
statements, the Company: had substantial losses and negative cash flow from
operations in 2007 , which significantly reduced stockholders' equity and
resulted in substantial retained deficits and working capital deficits at
December 31, 2007; and will require additional funding to cover substantial
expected negative cash flows in 2008.  These matters raise substantial
doubt about the Company's ability to continue as a going concern. 
Management's plan in regard to these matters is also described in Note 11. 
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.








Larry
O'Donnell, CPA, P.C.




April 10,
2008







11
 Table of Contents




SOFTNET
      TECHNOLOGY CORP. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETDECEMBER
      31, 2007ASSETSCurrent
      Assets:Cash
      and cash equivalents
                                                                                  
                                                                                  $
                                                                                  2,381Accounts
      receivable-Net of allowance for doubtful accounts of
    $25,000
                                                                                  
                                                                                  
                                                                                  333,933Current
      portion of notes receivable
                                                                                  
                                                                                  
                                                                                  36,800Total
      Current Assets
                                                                                  
                                                                                  
                                                                                  373,114Fixed
      assets, net of depreciation
                                                                                  
                                                                                  
                                                                                  77,518Deposits
                                                                                  
                                                                                  
                                                                                  21,100TOTAL
      ASSETS
                                                                                  
                                                                                  $
                                                                                  471,732LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)LIABILITIESCurrent
      Liabilities:Accounts
      payable and accrued expenses
                                                                                  
                                                                                  $
                                                                                  1,360,658Due
      to related parties
                                                                                  
                                                                                  
                                                                                  246,000Notes
      payable
                                                                                  
                                                                                  
                                                                                  599,980Total
      Current Liabilities
                                                                                  
                                                                                  
                                                                                  2,206,638Total
      Liabilities
                                                                                  
                                                                                  
                                                                                  2,206,638STOCKHOLDERS'
      EQUITY (DEFICIT)Preferred
      Stock, Series A, $1.00 Par Value; 5,000,000 sharesauthorized,
      0 shares issued and outstanding
                                                                                  
                                                                                  
                                                                                  -Preferred
      Stock, Series B, $.001 Par Value; 5,000,000 sharesauthorized,
      and 4,740,000 shares issued and outstanding
                                                                                  
                                                                                  
                                                                                  4,740Common
      Stock, Class A, $.001  Par Value; 500,000,000shares
      authorized, 457,715,202 shares issued and outstanding ,
                                                                                  
                                                                                  
                                                                                  457,715Common
      Stock, Class B, $.001  5,000,000 shares authorizedand
      3,500,000 shares issued and outstanding
                                                                                  
                                                                                  
                                                                                  1,306Warrants
                                                                                  
                                                                                  
                                                                                  618,059Additional
      paid-in capital
                                                                                  
                                                                                  
                                                                                  30,448,070Accumulated
      other comprehensive income (loss)
                                                                                  
                                                                                  
                                                                                  65,498Deficit
                                                                                  
                                                                                  
                                                                                  (33,330,294
                                                                                  )Total Stockholders' Equity
      (Deficit)
                                                                                  
                                                                                  
                                                                                  (1,734,906
                                                                                  )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                                                                                  
                                                                                  $
                                                                                  471,732











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




12
 Table of Contents




SOFTNET
      TECHNOLOGY CORP. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONSFOR
      THE YEAR ENDED DECEMBER 31, 2007 AND 2006DECEMBER
      31,2007
                                                
                                                
                                                2006OPERATING
      REVENUESRevenue
                                                
                                                $
                                                8,650,232
                                                
                                                
                                                $
                                                6,213,304COST
      OF SALES
                                                
                                                
                                                6,602,674
                                                
                                                
                                                
                                                4,341,703GROSS
      PROFIT
                                                
                                                
                                                2,047,557
                                                
                                                
                                                
                                                1,871,601OPERATING
      EXPENSESProfessional fees and compensation expenses
                                                
                                                
                                                2,465,927
                                                
                                                
                                                
                                                2,150,993Advertising and marketing expenses
                                                
                                                
                                                31,489
                                                
                                                
                                                
                                                97,351General and administrative expenses
                                                
                                                
                                                926,209
                                                
                                                
                                                
                                                1,735,124Depreciation, amortization and impairment
                                                
                                                
                                                32,000
                                                
                                                
                                                
                                                5,684,867Total Operating Expenses
                                                
                                                
                                                3,455,625
                                                
                                                
                                                
                                                9,668,335LOSS
      BEFORE OTHER (EXPENSE)
                                                
                                                
                                                (1,408,068
                                                )
                                                
                                                
                                                (7,796,734
                                                )OTHER
      INCOME (EXPENSE)Interest
      Income
                                                
                                                
                                                5,000
                                                
                                                
                                                
                                                12,001Interest expense
                                                
                                                
                                                (54,973
                                                )
                                                
                                                
                                                (51,466
                                                )Impairment of assets-Goodwill and Note Receivable
                                                
                                                
                                                (404,500
                                                )
                                                
                                                
                                                -0-Total Other Income (Expense)
                                                
                                                
                                                (454,473
                                                )
                                                
                                                
                                                (39,465
                                                )NET
      LOSS FROM CONTINUING OPERATIONS
                                                
                                                
                                                (1,862,541
                                                )
                                                
                                                
                                                (7,836,199
                                                )DISCONTINUED
      OPERATIONSGain
      (loss) from disposal or sale of subsidiary
                                                
                                                
                                                69,626
                                                
                                                
                                                
                                                513,903Total
      Discontinued Operations
                                                
                                                
                                                69,626
                                                
                                                
                                                
                                                513,903NET
      LOSS BEFORE PROVISION FOR INCOME TAXES
                                                
                                                
                                                (1,792,915
                                                )
                                                
                                                
                                                (7,322,295
                                                )Provision
      for Income Taxes
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (11,804
                                                )NET
      LOSS APPLICABLE TO COMMON SHARES
                                                
                                                $
                                                (1,792,915
                                                )
                                                
                                                $
                                                (7,334,099
                                                )NET
      LOSS PER BASIC AND DILUTED SHARES
                                                
                                                $
                                                (0.004
                                                )
                                                
                                                $
                                                (0.018
                                                )From continuing operations
                                                
                                                $
                                                (0.004
                                                )
                                                
                                                $
                                                (0.019
                                                )From discontinued operations
                                                
                                                $
                                                0.000
                                                
                                                
                                                $
                                                0.001From sale of subsidiary
                                                
                                                $
                                                0.000
                                                
                                                
                                                $
                                                0.001WEIGHTED
      AVERAGE NUMBER OF COMMONSHARES
      OUTSTANDING
                                                
                                                
                                                403,541,536
                                                
                                                
                                                
                                                405,175,562














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


13
 Table of Contents




SOFTNET
      TECHNOLOGY CORP., AND SUBSIDIARIESCONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS'
    (DEFICIT)FOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 2006Collateral
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        AccumulatedOtherPreferred Stock B
                                        
                                        
                                        Common Stock Class A
                                        
                                        
                                        Common Stock Class B
                                        
                                        
                                        for
      Note
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        IncomeDescription
                                        
                                        Shares
                                        
                                        
                                        Amount
                                        
                                        
                                        Shares
                                        
                                        
                                        Amount
                                        
                                        
                                        Shares
                                        
                                        
                                        Amount
                                        
                                        
                                        Payable
                                        
                                        
                                        Warrants
                                        
                                        
                                        APIC
                                        
                                        
                                        (Loss)
                                        
                                        
                                        Deficit
                                        
                                        
                                        TotalBalance
      December 31, 2005
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        
                                        339,619,692
                                        
                                        
                                        $
                                        339,619
                                        
                                        
                                        
                                        4,000,000
                                        
                                        
                                        $
                                        4,000
                                        
                                        
                                        $
                                        (900,000
                                        )
                                        
                                        $
                                        -
                                        
                                        
                                        
                                        23,012,160
                                        
                                        
                                        $
                                        65,498
                                        
                                        
                                        $
                                        (24,203,280
                                        )
                                        
                                        
                                        (1,677,930
                                        )Shares
      issued for Acquisition
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        63,999,998
                                        
                                        
                                        
                                        64,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        6,412,849
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        6,507,277Shares
      Issed for Services
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        20,952,656
                                        
                                        
                                        
                                        20,953
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,347,893
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        1,368,846Reclassifications
      of warrants
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        618,059
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        618,059Conversion
      of Class B sharesto
      Class A shares
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        35,000,000
                                        
                                        
                                        
                                        35,000
                                        
                                        
                                        
                                        (500,000
                                        )
                                        
                                        
                                        (500
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (500
                                        )Shares
      issued for cash
                                        
                                        
                                        4,740,000
                                        
                                        
                                        
                                        4,740
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        4,740Net
      loss for the year
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (7,334,100
                                        )
                                        
                                        
                                        (7,334,100
                                        )Balance
      December 31, 2006
                                        
                                        
                                        4,740,000
                                        
                                        
                                        $
                                        4,740
                                        
                                        
                                        
                                        459,572,346
                                        
                                        
                                        $
                                        459,572
                                        
                                        
                                        
                                        3,500,000
                                        
                                        
                                        $
                                        (3,500
                                        )
                                        
                                        $
                                        (900,000
                                        )
                                        
                                        $
                                        618,059
                                        
                                        
                                        $
                                        30,772,902
                                        
                                        
                                        $
                                        65,498
                                        
                                        
                                        
                                        (31,537,380
                                        )
                                        
                                        
                                        (520,109
                                        )Shares
      issued for Acquisition
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        38,500,000
                                        
                                        
                                        
                                        38,500
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        231,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        269,500Shares
      cancelled as peragreement
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (150,000,000
                                        )
                                        
                                        
                                        (150,000
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        900,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (750,000
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Shares
      Issed for Services
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        27,142,856
                                        
                                        
                                        
                                        27,143
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        274,474
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        301,617Shares
      issued to repay debtprior
      year
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        50,000,000
                                        
                                        
                                        
                                        50,000
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (50,000
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Conversion
      of Class B sharesto
      Class A shares
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        32,500,000
                                        
                                        
                                        
                                        32,500
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (2,194
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (30,306
                                        )
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        -Net
      loss for the year
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        
                                        (1,792,915
                                        )
                                        
                                        
                                        (1,792,915
                                        )Balance
      December 31, 2007
                                        
                                        
                                        4,740,000
                                        
                                        
                                        $
                                        4,740
                                        
                                        
                                        
                                        457,715,202
                                        
                                        
                                        
                                        457,715
                                        
                                        
                                        
                                        3,500,000
                                        
                                        
                                        
                                        1,306
                                        
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        618,059
                                        
                                        
                                        $
                                        30,448,070
                                        
                                        
                                        $
                                        65,498
                                        
                                        
                                        
                                        (33,330,295
                                        )
                                        
                                        
                                        (1,734,906
                                        )


















































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


14
 Table of Contents




SOFTNET
      TECHNOLOGY CORP. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED DECEMBER 31, 2007 AND 20062007
                          
                          
                          2006CASH
      FLOW FROM OPERATING ACTIVITIESContinuing
      Operations:Net loss
                          
                          $
                          (1,792,915
                          )
                          
                          $
                          (7,334,100
                          )Adjustments to Reconcile Net (Loss) to Net Cash(used in) operating activities:Depreciation and Amortization
                          
                          
                          32,000
                          
                          
                          
                          34,631Impairment of goodwill
                          
                          
                          339,501
                          
                          
                          
                          5,623,822Common stock issued for consulting services and
    compensation
                          
                          
                          281,264
                          
                          
                          
                          1,073,206Loss on conversion of debt warrants
                          
                          
                          
                          
                          
                          
                          617,559Net cash provided received in acquisition of subsidiary
                          
                          
                          37,500
                          
                          
                          
                          40,811Changes in assets and liabilitiesDecrease in accounts receivable
                          
                          
                          36,050
                          
                          
                          
                          166,359Decrease in prepaid expenses
                          
                          
                          37,380
                          
                          
                          
                          12,515(Increase) in deposits
                          
                          
                          220
                          
                          
                          
                          (12,621
                          )Increase in bad debt reserve
                          
                          
                          25,000
                          
                          
                          
                          -(Decrease) in
      accounts payable and accrued expenses
                          
                          
                          503,577
                          
                          
                          
                          (288,784
                          )Total adjustments
                          
                          
                          1,292,492
                          
                          
                          
                          7,267,498Net
      cash (used in) Operating Activities
                          
                          
                          (500,423
                          )
                          
                          
                          (66,602
                          )CASH
      FLOWS FROM INVESTING ACTIVITIES:Continuing
      Operations:(Increase) decrease in amounts due to related parties
                          
                          
                          46,000
                          
                          
                          
                          -Proceeds from draws on line of credit
                          
                          
                          -
                          
                          
                          
                          35,543(Increase) decrease in notes receivable
                          
                          
                          65,000
                          
                          
                          
                          38,000Proceeds from note payable
                          
                          
                          366,667
                          
                          
                          
                          -Acquisition of fixed assets
                          
                          
                          -
                          
                          
                          
                          (7,345
                          )Net cash provided by (used in) investing activities
                          
                          
                          477,667
                          
                          
                          
                          66,198CASH
      FLOWS FROM FINANCING ACTIVITESContinuing
      Operations:Proceeds from common stock issuances and stock
      subscriptions
                          
                          $
                          -
                          
                          
                          $
                          5,000Net payments from issuance of notes payable - other
                          
                          
                          -
                          
                          
                          
                          -Net cash provided by financing activities
                          
                          
                          -
                          
                          
                          
                          5,000




15
 Table of Contents




NET
      INCREASE IN CASHAND CASH EQUIVALENTS
                                                    
                                                    
                                                    (22,756
                                                    )
                                                    
                                                    
                                                    4,596CASH
      AND CASH EQUIVALENTS -BEGINNING OF PERIOD
                                                    
                                                    
                                                    25,137
                                                    
                                                    
                                                    
                                                    20,541CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                                                    
                                                    $
                                                    2,381
                                                    
                                                    
                                                    $
                                                    25,137SUPPLEMENTAL
      DISCLOSURE OF CASH FLOWINFORMATION:CASH
      PAID DURING THE PERIOD FOR:Interest expense
                                                    
                                                    $
                                                    18,255
                                                    
                                                    
                                                    $
                                                    41,112SUPPLEMENTAL
      DISCLOSURE OF NONCASHACTIVITIES:Issuance of common stock for:Consulting services
                                                    
                                                    $
                                                    275,000
                                                    
                                                    
                                                    $
                                                    398,089Accounts payable
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    60,648Prepaid expenses
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    49,895Acquisition of InsPara and Perinet Technologies:Cash
      portion of purchase price paid
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    100,000Accounts
      receivable
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    
                                                    (378,320
                                                    )Fixed
      assets
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (134,400
                                                    )Deposit
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (6,759
                                                    )Other
      assets
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (49,895
                                                    )Accounts
      payable and accrued expenses
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    438,733Note
      Payable of Line of Credit
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    141,489Line
      of credit
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    60,000Goodwill
                                                    
                                                    
                                                    (339,501
                                                    )
                                                    
                                                    
                                                    (5,630,037
                                                    )Common
      stock issued
                                                    
                                                    
                                                    339,501
                                                    
                                                    
                                                    
                                                    5,500,000Cash
      acquired in acquisiiton
                                                    
                                                    $
                                                    -
                                                    
                                                    
                                                    $
                                                    40,811Impairment of goodwill
                                                    
                                                    $
                                                    339,501
                                                    
                                                    
                                                    $
                                                    1,345,224























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





16
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2007 AND 2006




NOTE
1 – ORGANIZATION AND
BASIS OF PRESENTATION





The
publicly held entity that is today Softnet Technology Corporation (the Company
or "SoftNet"), was founded in March, 1971 as International Mercantile
Corporation (International Mercantile), organized under the laws of the State of
Missouri.  On July 22, 2004, The Company changed its name to Softnet
Technology Corp.





The
Company acquired Indigo Technology Services (Indigo), a technology company based
in Atlanta, Georgia and Net Centric Solutions, Inc. in April 2005 for 9,000,000
shares of restricted Class A Common Shares of stock (6,000,000 for Indigo and
3,000,000 for Net Centric). The Company in this transaction acquired $14,170 of
accounts receivable and $58,235 in cash. The shares were valued at $.15 per
share at the time of the transaction for a value of $1,350,000. The remaining
$1,277,595 was recognized as goodwill in 2005. Management has determined that
the entire amount has been impaired as of December 31, 2007.





On
November 1, 2007 the Company sold certain assets of its division based in
Atlanta, Georgia. Assets included in the sale are furniture and fixtures,
customer lists, trademarks and trade names, vendor lists and goodwill. Excluded
are cash and all accounts and notes receivable. The assets were purchased for a
total price of $84,626. Purchase price included $37,500 and the assumption of
the $47,156 of accounts payable by the new owners.  The company will no
longer operate a subsidiary in Atlanta. Certain other conditions,
representations and warranties apply.





On
October 31, 2005, the Company entered into a Plan and Agreement of
Reorganization with Inspara, Inc., a Delaware corporation (Inspara). Under the
original terms of the Agreement, Inspara was to merge with and into the Company,
with the transaction closing no later than November 29, 2005. On December 1,
2005, the Company and Inspara agreed to extend the closing date of the Merger to
December 15, 2005. The Company and Inspara subsequently agreed to extend the
closing date of the merger to January 18, 2006.





On or
about January 11, 2006, the Company entered into a certain Plan and Agreement of
Reorganization (the Agreement) with Inspara. The Company previously entered into
a Plan and Agreement of Reorganization with Inspara, Inc. on October 31, 2005,
which was terminated on January 11, 2006. Under the terms of the Agreement
InSpara would merge with and into the Company. The closing took place on January
18, 2006 effective, January 1, 2006. Pursuant to the Agreement: (i) certain key
employees of InSpara have entered into employment agreements with the Company;
(ii) all registration rights held by stockholders of InSpara, if any, shall be
terminated; and (iii) InSpara shall have 291,000 shares of its Class B Common
Stock issued and outstanding. Under the Agreement, the stockholders of InSpara
received, pro rata, a total of 49,999,998 shares of Softnet's Common Stock. The
Acquisition Shares are not registered shares and will only be free trading upon
a filing of a Registration Statement for the Acquisition Shares, or an exemption
from the registration thereof. Prior to the execution of the Agreement, there
were no material relationships between (i) InSpara or any of its affiliates, or
any officer or director of InSpara, and (ii) the Company or any of its
affiliates, or any officer or director of the Company. The Company filed the
Articles of Merger with the Secretary of State of the State of Nevada. The
Company recognized $4,320,760 of goodwill in this transaction and has impaired
the entire amount as of December 31, 2007.





In June
of 2006, to achieve economies of scale and centralized organizational and
operational continuity, the Company performed a merger rollup whereby its
subsidiaries were rolled up and into SoftNet.  Accordingly, beginning in
the second quarter of 2006, the Company no longer had any wholly owned
subsidiaries and was one operating unit.





The
Company entered into a merger agreement with PeriNet Technologies LLC (PeriNet),
a Pennsylvania based information technology firm, Inc. in September 2006
effective July 1, 2006. Under the merger agreement PeriNet would merge into the
Company. Under the terms of the merger, the Company will pay a total of $300,000
in cash over a period of 180 days, and issue restricted Class A, Common Stock of
the Company with a maximum value of $1,350,000, $1,000,000 of which is
guaranteed and the remaining being vested based on future performance.  The
shares will be valued based on the average share price of the stock the month
preceding the vesting period. The Company in this transaction acquired $173,037
of assets and $376,098 in liabilities. Based on the initial payout of $100,000
and $1,000,000 of stock the difference of $1,303,061 was recognized as goodwill.
However the entire goodwill amount of $1,303,061 was impaired in this
year.





17
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NOTE
2 –  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES





Principles of
Consolidation





The
consolidated financial statements include the accounts of the Company and all of
its wholly owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated in consolidation.





Basis of
presentation





The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles in the United States of America ("US
GAAP").  The consolidated financial statements of the Company include the
Company and its wholly-owned subsidiaries.  All material inter-company
balances and transactions have been eliminated.





Use of
estimates





The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures.  Accordingly, actual results could differ from
those estimates.  Significant estimates in 2007 and 2006 include the
allowance for doubtful accounts, stock-based compensation, valuation of
derivative liabilities, and the useful life of property and
equipment.





Fair value of financial
instruments





The
carrying amounts reported in the balance sheet for cash, accounts receivable,
accounts payable and accrued expenses, debenture and loans payable approximate
their fair market value based on the short-term maturity of these
instruments.





Accounts
receivable





The
Company has a policy of reserving for uncollectible accounts based on its best
estimate of the amount of probable credit losses in its existing accounts
receivable.  The Company periodically reviews its accounts receivable to
determine whether an allowance is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account
may be in doubt.  Account balances deemed to be uncollectible are charged
to the allowance after all means of collection have been exhausted and the
potential for recovery is considered remote.  At December 31, 2007, the
Company has established, based on a review of its outstanding balances, an
allowance for doubtful accounts in the amount of $25,000.





Property and
equipment




Property
and equipment are carried at cost. The cost of repairs and maintenance is
expensed as incurred; major replacements and improvements are capitalized. 
When assets are retired or disposed of, the cost and accumulated depreciation
are removed from the accounts, and any resulting gains or losses are included in
income in the year of disposition.  In accordance with Statement of
Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", the Company examines the possibility of
decreases in the value of fixed assets when events or changes in circumstances
reflect the fact that their recorded value may not be
recoverable.





Impairment of long-lived
assets





In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," The Company
periodically reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. The Company recognizes an impairment loss when the sum of
expected undiscounted future cash flows is less than the carrying amount of the
asset. The





18
 Table of Contents




amount of
impairment is measured as the difference between the asset’s estimated fair
value and its book value. The Company did not consider it necessary to record
any impairment charges during the year ended December 31, 2007.





Income
taxes





The
Company accounts for income taxes under the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".  Under this method,  deferred income tax assets and
liabilities are determined based on differences  between the financial
reporting and tax bases of assets and  liabilities  and are measured
using the enacted tax rates and laws  that will be in effect  when
the  differences  are  expected  to reverse.





Had
income taxes been determined based on an effective tax rate of 37.6% consistent
with the method of SFAS 109, the Company's net losses for all periods presented
would not materially change.





Concentrations of credit
risk





The
Company maintains its cash in bank deposit accounts, which, at times, exceed
federally insured limits.  At December 31, 2007, the Company did not
reached bank balances exceeding the FDIC insurance limit.  The Company has
not experienced any losses in such accounts through December 31,
2007.





Stock-based
compensation





Effective
January 1, 2006, the Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004),Share Based
Payment  (SFAS No. 123R”). SFAS No. 123R establishes
the financial accounting and reporting standards for stock-based compensation
plans. As required by SFAS No. 123R, the Company recognized the cost
resulting from all stock-based payment transactions including shares issued
under its stock option plans in the financial statements.





Prior to
January 1, 2006, the Company accounted for stock-based employee compensation
plans (including shares issued under its stock option plans) in accordance with
APB Opinion No. 25 and followed the pro forma net income, pro forma income
per share, and stock-based compensation plan disclosure requirements set forth
in the Statement of Financial Accounting Standards No. 123,Accounting for
Stock-Based Compensation  (SFAS No. 123”).  For the
year ended December 31, 2007, the Company did not grant any stock
options.





Non-Employee Stock Based
Compensation





The cost
of stock based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task Force
Issue (EITF”) 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”
(EITF 96-18”).





Common stock purchase
warrants





The
Company accounts for common stock purchase warrants in accordance with the
provisions of Emerging Issues Tack Force Issue (EITF”) issue No. 00-19
Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” (EITF 00-19”).  Based on the provisions
of EITF 00-19, the Company classifies as equity any contracts that (i) require
physical settlement or net-share settlement, or (ii) gives the company a choice
of net-cash settlement or settlement in its own shares (physical settlement or
net-share settlement).  The Company classifies as assets or liabilities any
contracts that (i) require net-cash settlement (including a requirement to net
cash settle the contract if an event occurs and if that event is outside the
control of the company), or (ii) give the counterparty a choice of net-cash
settlement or settlement in shares (physical settlement or net-share
settlement).





19
 Table of Contents




Cash and Cash
Equivalents





The
Company maintains cash accounts in commercial banks. Total cash deposits are
secured by the Federal Deposit Insurance Corporation (FDIC) up to a limit of
$100,000 per company. The Company considers all highly liquid debt instruments
and other short-term investments with an initial maturity of three months or
less to be cash equivalents.





Fixed
Assets





Fixed
assets are stated at cost. Depreciation is computed using the straight-line
method over the estimated useful life of the assets.




Furniture and
      fixtures
              5 to 
      7 YearsOffice
      equipment
              3 to 5
    YearsComputer Software
      and Equipment
              3
  Years
  Income
Taxes





Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates.





Segment
Information





The
Company follows the provisions of SFAS No. 131,Disclosures about
Segments of an Enterprise and Related Information   . This standard
requires that companies disclose operating segments based on the manner in which
management disaggregates the Company in making internal operating
decisions.





Advertising





Costs of
advertising and marketing are expensed as incurred. Advertising and marketing
costs were $53,335 and $5,943 for the years ended December 31, 2006 and 2007,
respectively.





Software Development
Costs





Internal
use software costs are recorded in accordance with Statement of Position (SOP)
No. 98-1,"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use"   .  Qualifying costs incurred during the
application development stage, which consist primarily of outside services are
capitalized and amortized over the estimated useful life of the asset. All other
costs are expensed as incurred. The Company has determined that all costs for
the six months ended December 31, 2007 and 2005 do not relate to the application
development stage and therefore have expensed these costs as they were
incurred.





Reclassifications





Certain
amounts for the year ended December 31, 2006 have been reclassified to conform
to the presentation of the December 31, 2007 amounts. Reclassification includes
approximately $1.7 million of general and administrative salaries and wages that
has been reclassified to cost of sales in 2006.





The
reclassifications have no effect on net income for the year ended December 31,
2006.





Earnings (Loss) Per Share of
Common Stock





Historical
net income (loss) per common share is computed using the weighted average number
of common shares outstanding. Diluted earnings per share (EPS) includes
additional dilution from common stock equivalents, such as stock issuable
pursuant to the exercise of stock options and warrants. Common stock equivalents
are not included in the computation of diluted earnings per share when the
Company reports a loss because to do so would be antidilutive for the periods
presented.


20
 Table of Contents




The
following is a reconciliation of the computation for basic and diluted
EPS:




December
      31,
                                  
                                  
                                  December
      31,2007
                                  
                                  
                                  2006Net
      Loss
                                  
                                  $
                                  (1,727,915
                                  )
                                  
                                  $
                                  (7,334,099
                                  )Weighted-average
      common shares outstanding (Basic)
                                  
                                  
                                  403,541,536
                                  
                                  
                                  
                                  405,175,562Weighted-average
      common stock equivalents:Stock options
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Warrants
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Weighted-average
      common shares outstanding (Diluted)
                                  
                                  
                                  403,541,536
                                  
                                  
                                  
                                  405,175,562




Options
and warrants outstanding to purchase stock were not included in the computation
of diluted EPS because inclusion would have been anti-dilutive.





NOTE
3 –  RECENT
ACCOUNTING PRONOUCEMENTS





In July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation of
FASB Statement No. 109." This interpretation provides guidance for recognizing
and measuring uncertain tax positions, as defined in SFAS No. 109, "Accounting
for Income Taxes." FIN No. 48 prescribes a threshold condition that a tax
position must meet for any of the benefit of an uncertain tax position to be
recognized in the financial statements. Guidance is also provided regarding
de-recognition, classification, and disclosure of uncertain tax positions. FIN
No. 48 is effective for fiscal years beginning after December 15, 2006. The
Company does not expect that this interpretation will have a material impact on
its financial position, results of operations, or cash flows.





In
September 2006, the FASB issued Statement of Financial Accounting Standards No.
157, Fair Value Measurements” (FAS 157”). This Statement defines fair value as
used in numerous accounting pronouncements, establishes a framework for
measuring fair value in generally accepted accounting principles and expands
disclosure related to the use of fair value measures in financial statements.
The Statement is to be effective for the Company’s financial statements issued
in 2008; however, earlier application is encouraged. The Company is currently
evaluating the timing of adoption and the impact that adoption might have on its
financial position or results of operations.





In
September 2006, the SEC issued Staff Accounting Bulletin No. 108,Considering the Effects
of Prior Year Misstatements when quantifying Misstatements in Current Year
Financial Statements  (SAB 108”). SAB 108 requires
companies to evaluate the materiality of identified unadjusted errors on each
financial statement and related financial statement disclosure using both the
rollover approach and the iron curtain approach, as those terms are defined in
SAB 108. The rollover approach quantifies misstatements based on the amount
of the error in the current year financial statement, whereas the iron curtain
approach quantifies misstatements based on the effects of correcting the
misstatement existing in the balance sheet at the end of the current year,
irrespective of the misstatement’s year(s) of origin. Financial statements would
require adjustment when either approach results in quantifying a misstatement
that is material. Correcting prior year financial statements for immaterial
errors would not require previously filed reports to be amended. If a Company
determines that an adjustment to prior year financial statements is required
upon adoption of SAB 108 and does not elect to restate its previous
financial statements, then it must recognize the cumulative effect of applying
SAB 108 in fiscal 2006 beginning balances of the affected assets and
liabilities with a corresponding adjustment to the fiscal 2006 opening balance
in retained earnings. SAB 108 is effective for interim periods of the first
fiscal year ending after November 15, 2006. The adoption of SAB 108
did not have an impact on the Company’s consolidated financial
statements.





In
December 2006, FASB Staff Position No. EITF 00-19-2,Accounting for
Registration Payment Arrangements,”  was issued. The FSP
specifies that the contingent obligation to make future payments or otherwise
transfer consideration under a




21
 Table of Contents




registration
payment arrangement, whether issued as a separate agreement or included as a
provision of a financial instrument or other agreement, should be separately
recognized and measured in accordance with SFAS No. 5,Accounting for
Contingencies.”  The Company believes that its current
accounting is consistent with the FSP.





In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option
for Financial Assets and Financial Liabilities, Including an Amendment of FASB
Statement No. 115” , under which entities will now be permitted to
measure many financial instruments and certain other assets and liabilities at
fair value on an instrument-by-instrument basis. This Statement is effective as
of the beginning of an entity’s first fiscal year that begins after
November 15, 2007. Early adoption is permitted as of the beginning of a
fiscal year that begins on or before November 15, 2007, provided the entity
also elects to apply the provisions of SFAS 157. The Company is currently
assessing the impact, if any, the adoption of SFAS 159 will have on its
financial statements.





In May
2007, the FASB issued FASB Staff Position No. FIN 48-1,Definition of Settlement
in FASB Interpretation No. 48   (the FSP”). The FSP provides
guidance about how an enterprise should determine whether a tax position is
effectively settled for the purpose of recognizing previously unrecognized tax
benefits. Under the FSP, a tax position could be effectively settled on
completion of examination by a taxing authority if the entity does not intend to
appeal or litigate the result and it is remote that the taxing authority would
examine or re-examine the tax position. The Company does not expect that this
interpretation will have a material impact on its financial position, results of
operations, or cash flows.





In
December 2007, the FASB issued SFAS No. 141(R),Business
Combinations,”  which replaces SFAS No. 141,Business
Combinations,”   which, among other things, establishes principles
and requirements for how an acquirer entity recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed
(including intangibles) and any noncontrolling interests in the acquired entity.
SFAS No. 141(R) applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. We are currently evaluating
what impact our adoption of SFAS No. 141(R) will have on our financial
statements.





In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51.”
  SFAS No. 160 amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also amends certain of ARB 51’s
consolidation procedures for consistency with the requirements of SFAS
No. 141(R). SFAS No. 160 is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008.
We are currently evaluating what impact our adoption of SFAS No. 160 will
have on our financial statements.





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





NOTE
4 –  ACCOUNTS
RECEIVABLE





The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated credit risk by performing credit checks
and actively pursuing past due accounts. An allowance for doubtful accounts of
$25,000 has been established at December 31, 2007.





NOTE
5 –  FIXED
ASSETS





Fixed
assets consist of the following at December 31, 2007:





Computer
      equipment
                            
                            $
                            75,016Furniture
      and fixtures
                            
                            
                            30,397Software
                            
                            
                            30,000135,413( 57,894
                            )Total
                            
                            $
                            77,518




Depreciation
expense was $31,606 and $32,000 for the years ended December 31, 2006 and
2007.




22
 Table of Contents




NOTE
6 –  NOTES
PAYABLE - BANK





In the
acquisition of PeriNet the company acquired a line of credit agreement with a
bank. The line bears interest of the floating interest rate of 1.5% per year in
excess of the Wall Street Prime Rate and provides for a maximum borrowing of
$100,000. The line of credit is in the process of being assigned to the company
and had a balance at acquisition of $60,000 and at year end of
$95,543.





NOTE
7 –  NOTES
PAYABLE





As part
of the PeriNet acquisition as of July 1, 2006 the company is responsible for a
Promissory Note previously obtained by PeriNet. The original amount due at the
time of the acquisition was $136,489. The note carries an annual interest rate
of 4% and payments of $4,556.04 are paid and the end of every quarter until June
30, 2015.





NOTE
8 –  RELATED
PARTY TRANSACTIONS





Amounts
due to related parties at December 31, 2007 were $200,000 and consists of the
advance from Jim Farinella, a former director of the company.





The
Company note payable to the related company bears no interest at December 31,
2007.





NOTE
9 –  ACQUISITIONS





On
October 31, 2005, the Company entered into a Plan and Agreement of
Reorganization with Inspara, Inc., a Delaware corporation (Inspara). Under the
terms of the Agreement, Inspara will merge with and into the Company (the
Merger). The Merger was scheduled to close no later than November 29, 2005. At
the closing, Inspara was to exchange all of its common stock for approximately
40,909,091 shares of common stock of the Company and receive 291,000 shares of
the Company's Class B common stock. The Company and Inspara on November 4, 2005,
extended the due date to December 15, 2005, without revising any of the terms of
the transaction. The transaction did not close on December 15, 2005, and the
Company and Inspara entered into an Amended Plan and Agreement of Reorganization
as of January 1, 2006, whereby the number of shares Inspara is to receive was
increased to approximately 50,000,000 and established a new closing date of
January 18, 2006.  Under this agreement, the stockholders of InsPara
received, pro rata, after adjustments for fractional shares and rounding, a
total of 49,999,998 shares of common stock of the Company. In the acquisition,
the Company incurred $4,320,760 of goodwill. The Company has impaired all of
this goodwill as of December 31, 2007.





The
Company entered into a merger agreement with PeriNet Technologies LLC (Perinet),
a Pennsylvania based information technology firm, Inc. in September 2006
effective July 1, 2006. Under the merger agreement PeriNet would merge into the
Company. Under the terms of the merger, the Company will pay a total of $300,000
in cash over a period of 180 days, and issue restricted Class A, Common Stock of
the Company with a maximum value of $2,100,000, $1,000,000 of which is
guaranteed and remaining being vested based on future performance.  The
shares will be valued based on the average share price of the stock the month
preceding the vesting period. The Company in this transaction acquired $171,057
of assets and $376,098 in liabilities. Based on the initial payout of $100,000
and $1,000,000 of stock the difference of $1,305,851 was recognized as goodwill.
Due to the fact Perinet audited financial opinion was a going concern, the
entire goodwill amount of $1,305,851 has been impaired in the current
year.





NOTE
10 –  STOCKHOLDERS' EQUITY
(DEFICIT)





Preferred
Stock





At
December 31, 2007, there are 5,000,000 shares of Series A Preferred Stock, par
value $.001 authorized and 5,000,000 shares issued and outstanding. On November
13, 2006, in accordance with an approved  Board Resolution, the Company
issued 5,000,000 of the Series A Preferred Stock to the Management of the
Company which will vest only upon attainment of certain financial milestones
and, once vested, can be converted into 250,000,000 shares of restricted Class A
Common Stock.





Additionally,
the Company authorized 5,000,000 shares of Series B Preferred Stock, par value
$.001. As of December 31, 2005, the Company has 0 shares issued and outstanding.
282,703 shares were issued to Mercatus Partners, Ltd. in connection with an
amended loan agreement. These shares were issued when the Company cancelled the
66,666,667 shares of Class A Common Stock that were issued as collateral to the
original loan agreement. The amended loan agreement was terminated by the
Company and all 282,703 shares have been cancelled of record. As of December 31,
2007 certificates representing 117,885 have been surrendered to the
Company.




23
 Table of Contents




The
Company had issued 2,000,000 shares of the Class B Preferred Stock in accordance
with a March 24, 2004 Investment Exchange Agreement (the Agreement) with Cross
Capital Fund, LLC. (Cross Capital). The Company entered into the Agreement that
provides for Cross Capital to make an equity investment in the Company and the
Company will receive from Cross Capital an Investor Membership Interest in an
aggregate amount equal to $2,000,000 over the next twelve months (March 2005).
The 2,000,000 shares were issued in exchange for the Investor Membership
Interest. The Company had originally recorded the $2,000,000 as a subscription
receivable on the consolidated balance sheet at December 31, 2004. The Preferred
shares convert to the Company's Class A Common Shares as set forth in the
agreement. Cross Capital never funded the Company in accordance with the terms
of the agreement, The Company's legal counsel and Cross Capital had several
discussions regarding this agreement and the Company made several attempts to
receive the 2,000,000 shares of Class B Preferred Stock back from Cross Capital
and terminate their agreement. Since the agreement was terminated, the Company
cancelled those certificates and reversed the transaction.





Class
A Common Stock





As of
December 31, 2007, there were 500,000,000 shares authorized, and 459,572,346
shares issued and outstanding, of the Company's Class A common stock with a par
value of $.001.





Class
B Common Stock





On or
about August 3, 2006, James Farinella, converted 500,000 shares of Class B
Common Stock of the Company into 25,000,000 shares of Class A Common Stock of
the Company.   Following the conversion Mr. Farinella holds 1,500,000
shares of Class B Common Stock and Mr. Facciani owns 2,000,000 shares of Class B
Common Stock.





As of
December 30, 2006, there were 5,000,000 shares authorized, and 3,500,000 shares
issued and outstanding of the Company's Class B common stock with a par value of
$.001.  Of the 5,000,000 shares authorized and issued to the then officers
of the Company, James Farinella and David Facciani, 200,000 shares were
converted into Class A common shares in June 2005 and 800,000 shares were
converted in December 2005 and 500,000 were converted in December
2006.





Treasury
Stock





In
January 2003, the Company instituted a buy back program of its own stock. For
the year ended ended December 31, 2005 and year ended December 31, 2004, the
Company bought back no additional shares of its common stock and placed it in
its treasury. For the year ended December 31, 2003, the Company bought back
281,400 shares of its common stock and placed it in its treasury. The Company
has accounted for its treasury stock utilizing the cost method, and such, the
$37,338 at March 31, 2005 represented the cost value of the treasury shares
acquired by the Company. These shares during the quarter ended June 30, 2005
have been retired.





Stock
Options





As of
January 1, 2000, STI adopted a stock option plan under which 20,000,000 shares
of common stock are available for issuance with respect to awards granted to
officers, management, consultants, and any other key employees of STI.  The
options were to be exercised at not less than 85% of the fair market value of
the shares on the date of grant.  The options were to expire after 10 years
from the date of grant.  The options were to be exercisable immediately
when granted and are were subject to restrictions on transfer, repurchase and
right of first refusal. When in 2002, STI was acquired by the Company, these
options were cancelled and replaced with identical options of the Company. The
Company did not record any compensation expense for the granting of options in
the year ended ended December 31, 2007 and 2005.





Warrants





Effective
June 30, 2006, the Company converted the $500,000 debt (see Note 6) in exchange
for 20,000,000 warrants to purchase Class A Common Stock at an exercise price of
$0.035 per share. The warrants expire April 30, 2007. The value of the warrants
using the Black-Scholes method is $618,059 and is reflected on the consolidated
balance sheet. The difference of $49,374 represents a loss on conversion of the
debt to warrants and is reflected in the consolidated statements of operations
of the year ended December 31, 2006. The Black-Scholes assumptions utilized were
as follows: expected life in years – 2 years; annualized volatility – 125%; and
discount rate – 5%.




24
 Table of Contents




Options
                                          
                                          Weighted
      Average
                                            Exercise
      PriceOptions
      outstanding at December 31, 2004
                                          
                                          
                                          9,400,000
                                          
                                          
                                          $
                                          .0025Granted
      during the year
                                          
                                          
                                          0
                                          
                                          
                                          
                                          .0025Surrendered,
      forfeited or expired
                                          
                                          
                                          0
                                          
                                          
                                          
                                          -Exercised
                                          
                                          
                                          0
                                          
                                          
                                          
                                          .0025Options
      outstanding at December 31, 2005
                                          
                                          
                                          9,400,000
                                          
                                          
                                          
                                          .0025Options
      outstanding at December 31, 2006
                                          
                                          
                                          9,400,000
                                          
                                          
                                          
                                          .0025Granted
      during the year
                                          
                                          
                                          500,000
                                          
                                          
                                          
                                          .0025Surrendered,
      forfeited or expired
                                          
                                          
                                          (500,000
                                          )
                                          
                                          
                                          .0025ExercisedOptions
      outstanding at December 31, 2007
                                          
                                          
                                          9,400,000
                                          
                                          
                                          $
                                          .0025





Exercisable
options outstanding, and the related weighted average exercise price at December
31, 2007 and 2005 were 9,400,000 and 9,400,000, and $0.0025 and $.0025,
respectively.





The
following tabulation summarizes certain information concerning outstanding and
exercisable options at December 31, 2007 and 2005.





2007
                              
                              
                              2006Outstanding
      options:Number
      outstanding
                              
                              $
                              9,400,000
                              
                              
                              $
                              9,400,000Weighted
      average exercise price
                              
                              
                              .0025
                              
                              
                              
                              .0025Weighted
      average remainingcontractual
      life in years
                              
                              
                              5.50
                              
                              
                              
                              4.50Exercisable
      options:Number
      outstanding
                              
                              $
                              9,400,000
                              
                              
                              $
                              9,400,000Weighted
      average exercise price
                              
                              
                              .0025
                              
                              
                              
                              .0025





If the
Company had elected to recognize compensation based on the fair value of the
options granted at the grant date, net loss and loss per share would have been
increased to the following pro forma amounts shown below:





NOTE
11 –  NOTES
RECEIVABLE





The
Company sold a business segment in July 2004 for $300,000.  The Company has
received $100,000 of this balance in the quarter ended December 31, 2005 and the
remaining $200,000 in the quarter ended March 31, 2006.





Indigo
entered into a loan agreement with Pearlnet LLC, an Atlanta, Georgia based
limited liability company on March 1, 2005. Indigo lent Pearlnet LLC, $165,000,
which was to be repaid in two annual installments of $25,000, and the remaining
$115,000 in the third year. Interest was payable to Indigo at the rate of .007
percent compounded daily. In May 2006, the Company renegotiated this note with
Pearlnet after receiving a payment of $2,000 to bring the total of the note to
$163,000. The $163,000 will be paid in monthly installments ranging between
$3,000 and $20,000 through March 2007. In addition, interest will be paid at the
rate of $1,000 per month through March 2007. The amount outstanding as of
December 31, 2007 is $127,000.





NOTE
12 –  PROVISION
FOR INCOME TAXES





Deferred
income taxes will be determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company's assets and liabilities.  Deferred income taxes will be measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company's consolidated tax return.  Deferred
tax





25
 Table of Contents




assets
and liabilities are recognized based on anticipated future tax consequences
attributable to differences between financial statement carrying amounts of
assets and liabilities and their respective tax bases.





At
December 31, 2007, deferred tax assets approximated the following:





Net
      operating loss carryforwards
                          
                          $
                          12,332,000Less: 
      valuation allowance
                          
                          
                          (12,232,000
                          )$
                          -0-





At
December 31, 2007, the Company had accumulated deficits approximating
$33,330,294 available to offset future taxable income through 2025.  The
Company established valuation allowances equal to the full amount of the
deferred tax assets due to the uncertainty of the utilization of the operating
losses in future periods.





A
reconciliation of the Company's effective tax rate as a percentage of income
before taxes and federal statutory rate for the years ended December 31, 2007
and 2006 is summarized as follows:





2007
                                
                                
                                2006Federal
      statutory rate
                                
                                
                                (34.0
                                )%
                                
                                
                                (34.0
                                )%State
      income taxes, net of federal benefits
                                
                                
                                4.0
                                
                                
                                
                                4.0Valuation
      allowance
                                
                                
                                30.0
                                
                                
                                
                                30.00
                                %
                                
                                
                                0
                                %





NOTE
13 –  COMMITMENTS





Effective
June 30, 2006 (see Note 6), the Company entered into an agreement to convert
$530,000 in notes payable in exchange for 5,000,000 shares of Class A Common
Stock. The Company has not issued these shares yet, however the debt has been
cancelled in anticipation of the shares being issued in the fourth fiscal
quarter of 2006.





As noted
in these consolidated financial statements, the Company has divested itself from
SoftNet International. In accordance with the agreement, the Company is to be
returned 5,000,000 shares of its common stock. The Company has already reflected
this as discontinued operations.





NOTE
14 –  CANCELLATION OF SHARES HELD
FOR NOTE PAYABLE





On
December 22, 2006 the company was granted a court order canceling the original
issuance of 150,000,000 shares of stock being held as collateral for a prior
note payable. In January 2007 the shares were cancelled and returned to the
company. The shares held for collateral were valued at $900,000 and recorded as
equity on the balance sheet as an offset to additional paid in capital. The
shares are to be retired and allocated to the authorized, un-issued
account.





NOTE
15 –  NOTES
PAYABLE – BANK





In the
acquisition of PeriNet the company acquired a line of credit agreement with a
bank. The line bears interest of the floating interest rate of 1.5% per year in
excess of the Wall Street Prime Rate and provides for a maximum borrowing of
$100,000. The line of credit is in the had a balance at acquisition of $60,000
and at quarter end of $96,856. During the current quarter the former
shareholders of PeriNet paid the line of credit in full. The company currently
is responsible for the amount formerly due to the bank now to the former
shareholders. Currently the company pays an annual interest rate of
10%.





In June
2007, the Company entered into an agreement with three companies to borrow
$366,667 with the ability to borrow up to$1.5 million based on certain
conditions being met. The loans carry an interest rate of 8% and is due to
mature and be paid in its entirely on June 26, 2008. Interest is payable on
October 1, 2007 and quarterly thereafter up to the maturity date. The loans have
a conversion option into the Company's common stock. The conversion price of the
stock shall be the lesser of (i) the Initial Market Price of the stock at the
time of the loan or (ii) Fifty-five percent (55%)  of the average of the
three lowest intra-day trading prices during the twenty trading days immediately
prior to the Conversion date.  In addition the Company will issue one Class
A warrant and one class B warrant will be issued for each two dollars loaned to
the company. The per warrant share




26
 Table of Contents




exercise
price to acquire a warrant share upon exercise of Class A warrant shall be $0.03
and the exercise price of Class B warrant shall be $0.06. Both Class A and Class
B warrant shall be expire seven years after the closing date.





NOTE
16 –  SALEOF
DIVISION





On
November 1, 2007 the Company sold certain assets of its division based in
Atlanta, Georgia. Assets included in the sale are furniture and fixtures,
customer lists, trademarks and trade names, vendor lists and goodwill. Excluded
are cash and all accounts and notes receivable. The assets were purchased for a
total price of $84,626. Purchase price included $37,500 and the assumption of
the $47,156 of accounts payable by the new owners.  The company will no
longer operate a subsidiary in Atlanta. Certain other conditions,
representations and warranties apply.





NOTE
17 –  GOING
CONCERN





As shown
in the accompanying consolidated financial statements the Company has incurred
significant recurring losses of $7,334,100 and $1,792,914 for the year ended
December 31, 2006 and 2007, and has a working capital deficiency of $1,084,369
as of December 31, 2007.  The Company in January 2006 acquired InsPara and
in September 2006 acquired PeriNet, and the full impact of these acquisitions
will impact operations later on next year. There is no guarantee that the
Company will be able to raise enough capital or generate revenues to sustain its
operations.  These conditions raise substantial doubt about the Company's
ability to continue as a going concern for a reasonable period.





Management
believes that the Company's capital requirements will depend on many factors
including the success of the Company's January 2006 acquisition of InsPara and
September 2006 acquisition of PeriNet. The Company's ability to continue as a
going concern for a reasonable period following its merger with InsPara and
PeriNet is also dependent upon management's ability to raise additional interim
capital and, ultimately, achieve profitable operations.  There can be no
assurance that management will be able to raise sufficient capital, under terms
satisfactory to the Company, if at all.





The
consolidated financial statements do not include any adjustments relating to the
carrying amounts of recorded assets or the carrying amounts and classification
of recorded liabilities that may be required should the Company be unable to
continue as a going concern.



















27
 Table of Contents




Item 8.       Changes In and Disagreements
with Accountants on Accounting and Financial Disclosure





There are
no disagreements with the current auditors.  There has been a change of
auditor. Currently engaged by the Company is Larry O'Donnell, CPA, P.C., 2228
South Fraser Street, Unit I, Aurora, Colorado.





Previously,
the Company had engaged Bagell, Josephs & Company, LLC located in Gibbsboro,
New Jersey to serve as the Company’s auditing firm.





Item 8A.     CONTROLS
AND PROCEDURES





(a)     Evaluation  of  Disclosure  Controls  and  Procedures




The  Company's  Chief  Executive  Officer  after
evaluating  the  effectiveness  of  the  Company's  controls  and
procedures (as defined  in the Securities Act of 1934 Rule 13a -15(e)
and 15d- 15 (e) of the date of the year ended December 31, 2007  on
Form 10-K (the "Evaluation Date"), have concluded that as of the Evaluation
Date, the Company's
disclosure  controls  and  procedures were
adequate and effective to ensure that
material  information  relating  to  it  would  be  made  known
to it by others, particularly during the period in which this yearly report on
Form 10-K was being  made.




(b)     Changes  in  Internal  Controls




There
were no significant changes in the Company's internal controls or in other
factors  that  could  significantly affect the
Company's disclosure controls and procedures  subsequent  to
the Evaluation Date, nor any significant deficiencies
or  material  weaknesses  in  such  disclosure
controls and procedures requiring corrective  actions.





Item 8A(T). MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING.





Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the (i) effectiveness and efficiency of operations, (ii) reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, and (iii)
compliance with applicable laws and regulations.  Our internal
controls framework is based on the criteria set forth in the Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





The
Company's board of directors were advised by Bagell, Josephs & Company, LLC,
the Company's prior independent registered public accounting firm, that during
their performance of audit procedures 2006 Bagell, Josephs & Company, L.L.C.
identified a material weakness as defined in Public Company Accounting Oversight
Board Standard No. 2 in the Company's internal control over financial
reporting.





This
deficiency consisted primarily of inadequate staffing and supervision that could
lead to the untimely identification and resolution of accounting and disclosure
matters and failure to perform timely and effective reviews. However, the size
of the Company prevents us from being able to employ sufficient resources to
enable us to have adequate segregation of duties within our internal control
system. Management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.  The
company in 2007 has begun to correct these deficiencies. The Company hired a new
third party consultant to assist with the quarterly and yearly filing
process. In addition two new board members were added of which one has financial
experience to advise the board. The Company has also consolidated its accounting
department to the corporate offices in Iselin, New Jersey.





Management’s
assessment of the effectiveness of the  issuer’s internal control over
financial reporting is as of the year ended December 31, 2007. We believe that
internal control over financial reporting is effective. We have not identified
any, current material weaknesses considering the nature and extent of our
current operations and any risks or errors in financial reporting under current
operations.





This
annual report does not include an attestation report of the company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by the Company’s registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management’s report in this annual report.




28
 Table of Contents


CHANGES
IN INTERNAL CONTROL OVER FINANCIAL REPORTING.





There was
no change in our internal control over financial reporting that occurred during
the fiscal quarter ended December 31, 2007, that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





Item 8B.    Other Information





None.








PART III




Item 9.       Directors and Executive
Officers of the Company





Our
directors and officers as of the date of this prospectus are as
follows:





Name
                Age
                PositionJames
      Booth
                56
                Director,
      Chief Executive Officer, President,Secretary,
      TreasurerKevin
      Holt
                53
                Director,
      Chief Operating OfficerDarren
      Tietsworth
                49
                DirectorDennis
      Goett
                58
                DirectorKevin
      W. Remley
                45
                Director





James Booth, Director, Chief
Executive Officer, President, Secretary, Treasurer.  From
August 2000 through March 2005, Mr. Booth worked in Human Resources for Cingular
Wireless/Bell South Wireless Data.  He was Vice President of Inspara
Networking Technologies, Inc. from March 2005 through April 2005.  From May
2005 through June 2006, Mr. Booth worked in Human Resources for Cingular
Wireless.  He became our Senior Vice President of Operations in July 2006
and our Chief Executive Officer and President in November 2006.











29
 Table of Contents




Kevin Holt, Director, Chief Operating
Officer.  Mr. Holt was Chief Executive Officer of InsPara
Network Technology, Inc. from March 2002 through January 2006.  Mr. Holt
joined us as our President and Chief Operating Officer in January 2006,
transitioned to our Chairman and Chief Executive Officer in August 2006, and
became our Chief Operating Officer in September 2006.  In November 2006,
Mr. Holt plead guilty to a one-count federal charge of conspiracy to commit mail
and wire fraud for falsifying and inflating company financial data and
deliberately misleading investors while serving as the Chief Executive Officer
of InsPara Network Technology, Inc.  The authorities were informed of the
unlawful conduct by Mr. Holt.  Mr. Holt’s sentencing is
pending.





Darren Tietsworth,
Director.  From August 1998 through June 2004, Mr.
Tietsworth was a Senior Director of Hewlett-Packard, IT Products and
Solutions.  From June 2004 and continuing through the present, Mr.
Tietsworth was Territory Sales Manager of Hewlett-Packard, IT Products and
Solutions.  Mr. Tietsworth joined us in August 2007.





Dennis Goett,
Director.  From February 1998 and continuing through the
present, Mr. Goett has been the President of Crossroads Strategy Group, Inc., a
business consulting firm.  Mr. Goett has been the CEO and President of
Specialty Pallets, LLC, a manufacturer and distributor of corrugated fiberboard
pallets from March 2003 through the present.  From February 2005 and
continuing through the present, he was CEO and CFO of BroadBand Bridge, LLC, an
educational and training media company.  He was CFO of Optimal Life
Networks, Inc., a digital publisher of health related information and programs,
from April 2007 through the present.  Mr. Goett joined us a director in
April 2007.





Kevin W. Remley,
Director.  From December 2000 through September 2003, Mr.
Remley was the President of ePierce Solutions, Inc., a business consulting
firm.  From October 2003 through April 2007, Mr. Remley was the President
of SummitQuest, a business consulting firm.  Mr. Remley joined us as a
director in May 2007.





Board of Directors
Committees and Other Information





All 
Directors  hold office until the next annual  meeting of 
stockholders  and until their  successors  have been duly 
elected  and  qualified.  Officers  are appointed by and
serve at the discretion of the Board of Directors.





The Board
of Directors currently has no committees. As and when required by law, it
will  establish an Audit  Committee  and a 
Compensation  Committee.  The Audit Committee will oversee the actions
taken by our independent  auditors and review our internal  financial
and accounting  controls and policies.  The Compensation Committee
will be responsible  for  determining  salaries,  incentives
and other forms of  compensation  for our  officers, 
employees and  consultants  and will administer our incentive 
compensation and benefit plans,  subject to full board approval.  The
Audit Committee Charter and the Compensation Committee Charter are attached
hereto as Exhibit to this filing.  The functions of the Audit Committee
and  the  Compensation  Committee  are  currently 
performed  by  the  Board  of Directors.





Director
Compensation





Our 
Directors  do not receive  cash for their  services.  The
Company  does not provide   additional  
compensation  for  committee   participation  or 
special assignments  of the Board of Directors,  but may enter into
separate  consulting agreements with individual directors at
times.





Item 10.      Executive
Compensation





Summary
Compensation Table





Set forth
below is a summary of compensation for our principal executive officer and our
two most highly compensated officers other than our principal executive officer
(collectively, the named executive officers”) for our last two fiscal
years.  There have been no annuity, pension or retirement benefits ever
paid to our officers, directors or employees.




With the
exception of reimbursement of expenses incurred by our named executive officers
during the scope of their employment and unless expressly stated otherwise in a
footnote below, none of the named executive officers received other
compensation, perquisites and/or personal benefits in excess of
$10,000.


30
 Table of Contents





Name
      and
                                      Principal
                                      Position
                                    Year
                                    
                                    Salary
                                      ($)
                                    
                                    
                                    Bonus
                                      ($)
                                    
                                    
                                    Stock
                                      Awards
                                      ($)
                                    
                                    
                                    Option
                                      Awards
                                      ($)
                                    
                                    
                                    Non-Equity
                                      Incentive
      Plan
                                      Compensation
                                      ($)
                                    
                                    
                                    All
      Other
                                      Compen
                                      sation
                                      ($)
                                    
                                    
                                    Total
                                      ($)James
      Booth,CEO,
      President,Secretary,
      Treasurer(Principal
      ExecutiveOfficer
      and PrincipalAccounting
      andFinancial
      Officer)
                                    2007
                                    
                                    $
                                    144,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    600
                                    
                                    
                                    $
                                    19,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    163,0002006
                                    
                                    $
                                    144,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    600
                                    
                                    
                                    $
                                    19,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    163,000Kevin
      Holt, COO
                                    2006
                                    
                                    $
                                    200,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    125,000
                                    
                                    
                                    $
                                    19,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    344,0002006
                                    
                                    $
                                    200,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    701,400
                                    
                                    
                                    $
                                    19,000
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    0
                                    
                                    
                                    $
                                    901,400





Grants
of Plan-Based Awards





We did
not grant any plan-based awards during this fiscal year ended December 31,
2007





Outstanding
Equity Awards at Fiscal Year-End





The
following table sets forth information for the named executive officers
regarding the number of shares and underlying shares both exercisable and
unexercisable stock options, as well as the exercise prices and expiration dates
thereof, as of December 31, 2007.








31
 Table of Contents


Option
      Awards
                          Stock
      AwardsName
                          Number
      of
                            securities
                            Underlying
                            Unexercised
                            Options
      (#)
                            Exercisable
                          Number
      of
                            Securities
                            Underlying
                            Unexercised
                            Options
      (#)
                            Unexercisable
                          Equity
                            Incentive
                            Plan
                            Awards:
                            Number
      of
                            Securities
                            Underlying
                            Unexercised
                            Unearned
                            Options
      (#)
                          Option
                            Exercise
                            Price
      ($)
                          Option
                            Expiration
                            Date
                          Number
      of
                            Shares
      or
                            Units
      of
                            Stock
      that
                            have
      not
                            vested
      (#)
                          Market
                            Value
      of
                            Shares
      or
                            Units
      of
                            Stock
      that
                            have
      not
                            vested
      ($)
                          Equity
                            Incentive
                            Plan
      Awards:
                            Number
      of
                            Unearned
                            Shares,
                            Units
      or
                            other
      rights
                            that
      have
                            not
      vested (#)
                          Equity
                            Incentive
                            Plan
      Awards
                            Market
      or
                            Payout
      Value
                            of
      Unearned
                            Shares,
                            Units
      of
                            other
      rights
                            that
      have
                            not
      vested ($)James
      Booth,CEO,
      President,Secretary,Treasurer(PrincipalExecutiveOfficer
      andPrincipalAccountingand
      FinancialOfficer)
                          500,000
                          -0-
                          -0-
                          $0.038
                          10/30/16
                          600,000[1]
                          $750,000[2]
                          -0-
                          -0-Kevin
      Holt, COO
                          500,000
                          -0-
                          -0-
                          $0.038
                          10/30/16
                          12,782,199
                          $319,555[2]
                          -0-
                          -0-








_______________________


[1]   Consists of 600,000 shares of
Series A preferred stock convertible into 30,000,000 shares of Class A common
stock, subject to the approval by the requisite vote of our shareholders and the
effectiveness of the filing with the Nevada Secretary of State of articles to
authorize 10,000,000 shares of preferred stock and the subsequent designation by
the Board of Directors of 5,000,000 shares as Series A.


[2]   Calculated by using the closing
price of our common stock on the OTC: BB on December 29, 2006 which was
$0.025.





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Employment
Agreements





On
January 1, 2007, we entered into an Amended and Restated Employment Agreement
with our Chief Operating Officer, Kevin Holt which has a three-year term
beginning January 18, 2006 with automatic one-year renewals unless either party
elects to terminate upon 30 days notice prior to the end or any term.  The
agreement provides Mr. Holt with an annual base salary of $200,000 with annual
upward revisions of not less than 4%, a quarterly grant of common stock worth
$50,000 for 12 consecutive quarters, three weeks paid vacation, and
participation in our health and other benefit plans.  There are no
severance provisions in the agreement.





Benefit
and Compensatory Plans





On
September 12, 2006, our Board of Directors authorized 5,000,000 shares of Series
A preferred stock to be issued to our management, subject to the approval by the
requisite vote of our stockholders and the effectiveness of the filing with the
Nevada Secretary of State of the our Articles to authorize 10,000,000 shares of
preferred stock and the subsequent filing of a Certificate of Designation by the
Board of Directors.  A total of 4,740,000 shares of Series A preferred
stock have been issued.  Ownership of the Series A shares vests only upon
attainment of certain financial milestones and, once vested, cumulatively can be
converted into 250,000,000 shares of restricted Class A common stock.  See
Description of Capital Stock— Preferred Stock—Series A Preferred
Stock.”





Stock
Option/Stock Issuance Plan





An
Amended and Restated 2006 Stock Option/ Stock Issuance Plan (the 2006 Plan”) was
authorized by the majority shareholders.  Following is a description of the
2006 Plan.





General





On
December 22, 2006, our Board of Directors adopted our 2006 Plan and directed
that it be presented to the stockholders for their approval and
adoption.





The 2006
Plan provides for the issuance of up to 50,000,000 shares of our Class A Common
Stock and 5,000,000 shares of our Class B Common Stock to our directors,
officers, employees and consultants in the form of stock options and shares of
common stock.





Our Board
of Directors will initially administer the 2006 Plan, except that the Board may,
at its discretion, establish a committee comprised of two or more members of the
Board or two or more other persons to administer the 2006 Plan (the Plan
Administrator”).





The 2006
Plan has two separate components: the option grant program and the stock
issuance program.  To date, no shares of common stock or stock options have
been issued pursuant to the 2006 Plan.





Option Grant
Program





Incentive
stock options (those stock options that qualify under Section 422 of the
Internal Revenue Code of 1986 (the Code”) may be granted to any individual who
is, at the time of the grant, our employee.  Non-qualified stock options
(those options that do not qualify under Section 422 of the Code) may be granted
to employees and other people, including our directors and
officers.





Grants
under the option grant program may be structured as installment options which
become exercisable for vested shares over the optionee’s period of service or as
immediately exercisable options for unvested shares which will be subject to
repurchase by us, at the option exercise price paid per share, upon the
optionee’s termination of service prior to vesting in those shares.  All
option grants must have an exercise price not less than 100% of the fair market
value of the option shares on the grant date.





Each
option is to have a maximum term of ten years, subject to earlier termination in
the event the optionee leaves our service.  The optionee will have up to a
three month period following termination of service (for reasons other than
death or disability) in which to exercise the option.  This period will be
extended to 12 months if the optionee’s service terminates by reason of
disability, and in the event of the optionee’s death, the personal
representative of the optionee’s estate (or the person inheriting the option)
will have up to a 12 month period following the optionee’s death in which to
exercise the option.




33
 Table of Contents




To
exercise the option, the optionee must execute a stock purchase agreement and
pay the exercise price for the purchased shares.  Payment is to be made in
cash; however, the Plan Administrator may also permit the optionee to deliver a
full-recourse interest-bearing promissory note for the purchased shares payable
in one or more installments.  Provided that our shares remain publicly
traded, the exercise price may be paid in shares of common stock or,
alternatively, through the optionee’s participation in a same-day sale
program.  Under such program, the option shares are sold immediately
following the exercise of the option, and a portion of the sale proceeds is
applied to the payment of the exercise price and all applicable withholding
taxes.





In the
event we are acquired by merger or asset sale, the option shares will
immediately vest, and the option may be exercised for any or all of those vested
shares prior to the effective date of such acquisition.  However, such
accelerated vesting will not occur if our repurchase rights with respect to the
unvested option shares are assigned to the acquiring entity.  The Plan
Administrator will have the discretion to structure one or more option grants
under the Plan so that the shares subject to those options will immediately vest
in the event the optionee’s service is involuntarily terminated within 18 months
following an acquisition in which our  repurchase rights are so assigned,
and the optionee would then have a one-year period to exercise the accelerated
options for fully-vested shares.  It is anticipated that this special
vesting acceleration provision would be made available only on a limited
case-by-case basis.





The stock
purchase agreement will provide us with the right to repurchase, at the original
exercise price paid per share, any unvested shares held by the optionee at the
time of his or her termination of service.  The applicable vesting schedule
will be set forth in the Notice of Grant.  Full and immediate vesting of
all the option shares will occur upon an acquisition by merger or asset sale,
unless the repurchase right applicable to those shares is assigned to the
successor company.  One or more repurchase rights outstanding under the
Plan may be structured so that those rights will subsequently lapse (and the
option shares will immediately vest) upon an involuntary termination of the
optionee’s service within 18 months following the effective date of an
acquisition in which the repurchase rights are assigned to the successor
company.





Stock Issuance
Program





Shares of
common stock may be issued to employees and other people, including our
directors and officers.





The stock
issuance program allows eligible persons to purchase shares of common stock at
fair market value or at a discount of up to 15% of fair market value.  The
shares may be fully vested when issued or may vest over time as the recipient
provides services or as specified performance objectives are attained.  In
addition, shares of common stock may be issued as bonus awards in recognition of
services rendered, without any cash outlay required of the
recipient.





The stock
issuance component is structured as a stock purchase transaction, with the
purchase price for the shares to be paid in cash or by promissory note at the
time of issuance of the shares.  The same repurchase rights summarized
above for the Stock Purchase Agreement” under the option grant program will
apply to the purchased shares, namely, our right to repurchase, at the original
purchase price, any unvested shares held by the participant at the time of his
or her termination of service.





It is
anticipated that any issued shares will vest either immediately or in a series
of installments over the participant’s period of service.  Full and
immediate vesting of all the shares will occur upon an acquisition by merger or
asset sale, unless the repurchase right applicable to those shares is assigned
to the successor company.  The assigned repurchase rights may be structured
so that they will subsequently lapse (and the shares will immediately vest) upon
an involuntary termination of the participant’s service within 18 months
following the effective date of the acquisition.





As of the
date hereof, no options have been issued pursuant to the 2006 Plan.





Compensation
of Directors





Our
Directors do not receive any cash compensation, but are entitled to
reimbursement of their reasonable expenses incurred in attending directors’
meetings.





We have
an audit committee consisting of one of our independent directors, Dennis
Goett.  We also have a compensation committee chaired by one of our
independent directors, Darren Tietsworth, which also includes Kevin Holt. 
We do not have any nominating committee of our Board of
Directors.


34
 Table of Contents




We
consider Dennis Goett and Darren Tietsworth to be independent directors on our
board of directors as that term is defined as follows: A person other than an
officer or employee of the company or its subsidiaries or any other individual
having a relationship which, in the opinion of the company's board of directors,
would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. Mr. Goett was a consultant for the Company in
December 2007 however the board determined this did not affect his
independence.





Indemnification
of Directors and Officers





The laws
of the State of Nevada and our Bylaws provide for indemnification of our
directors for liabilities and expenses that they may incur in such
capacities.  In general, directors and officers are indemnified with
respect to actions taken in good faith in a manner reasonably believed to be in,
or not opposed to, our best interests, and with respect to any criminal action
or proceeding, actions that the indemnitee had no reasonable cause to believe
were unlawful.  We have been advised that in the opinion of the SEC,
indemnification for liabilities arising under the Securities Act is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.





Code
of Ethics





We have
adopted a code of ethics that applies to all of our executive officers,
directors and employees. Code of ethics codifies the business and ethical
principles that govern all aspects of our business. This document will be made
available in print, free of charge, to any shareholder requesting a copy in
writing from the Company. A copy of our code of ethics is filed
herein.





Item 11.       Security Ownership of
Certain Beneficial Owners and Management





The
following table sets forth certain information regarding our shares of
outstanding common stock beneficially owned as of the date of this prospectus by
(i) each of our directors and executive officers, (ii) all directors and
executive officers as a group, and (iii) each other person who is known by
us to own beneficially more than 5% of our common stock.





Beneficial
ownership is determined in accordance with the rules of the SEC and
includes voting and investment power with respect to shares.  Unless
otherwise indicated, the persons named in the table have sole voting and sole
investment control with respect to all shares beneficially owned, subject to
community property laws where applicable.  Shares of common stock subject
to options and warrants currently exercisable or convertible, or exercisable or
convertible within 60 days of the date of this prospectus, are deemed
beneficially owned and outstanding for computing the percentage of the person
holding such securities, but are not considered outstanding for computing the
percentage of any other person.






35
 Table of Contents





Name and Address of Beneficial Owners[1]
                  Amount
      and Nature of
                    Beneficial Ownership[2]
                  Percent
                    OwnershipJames
      Booth, Director, CEO, President, Secretary, Treasurer
                  31,000,000[3]
                  7.8%Kevin
      Holt, Director, COO
                  87,541,089[4]
                  20.1%Darren
      Tietsworth, Director
                  500,000[5]
                  *Dennis
      Goett, Director
                  500,000[6]
                  *Kevin
      W. Remley, Director
                  6,500,000[7]
                  1.8%All
      executive officers and directors as a group (five persons)
                  126,041,089
                  26.7%James
      M. Farinella
                    Integrated
      Capital Partners, Inc.
                    2
      North Finley Ave.
                    Basking
      Ridge, NJ 07920
                  35,499,992[8]
                  9.3%David
      Facciani
                    Madison
      Capital Corp.
                    4335
      Dean Martin Dr. #430
                    Las
      Vegas, NV   89103
                  92,301,250[9]
                  20.3%





___________________________


* 
Less than 1%.


[1]   C/o the Company’s address, 485 Route
1 South, Building C, Suite 350A, Iselin, New Jersey  08830, unless
otherwise noted.


[2]   Consists of Class A common stock
unless otherwise indicated.


[3]   Includes 500,000 options to purchase
shares of Class A common stock at $0.038 per share expiring on October 30, 2016,
and 600,000 shares of Series A preferred stock convertible into 30,000,000
shares of Class A common stock, subject to the approval by the requisite vote of
the Company’s shareholders and the effectiveness of the filing with the Nevada
Secretary of State of the Company’s articles to authorize 10,000,000 shares of
preferred stock and the subsequent designation by the Board of Directors of
5,000,000 shares as Series A.


[4]  Includes
500,000 options to purchase shares of Class A common stock at $0.038 per share
expiring on October 30, 2016 and 1,400,000 shares of Series A preferred stock
convertible into 70,000,000 shares of Class A common stock, subject to the
approval by the requisite vote of the Company’s shareholders and the
effectiveness of the filing with the Nevada Secretary of State of the Company’s
articles to authorize 10,000,000 shares of preferred stock and the subsequent
designation by the Board of Directors of 5,000,000 shares as Series
A.


[5]   Consists of 500,000 options to
purchase shares of Class A common stock at $0.038 per share expiring on October
30, 2016.


[6]   Consists of 500,000 options to
purchase shares of Class A common stock at $0.029 per share expiring on March 1,
2017.


[7]   Includes 1,000,000 options to
purchase shares of Class A common stock at $0.017 per share expiring on May 7,
2017 and 100,000 shares of Series A preferred stock convertible into 5,000,000
shares of Class A common stock, subject to the approval by the requisite vote of
the Company’s shareholders and the effectiveness of the filing with the Nevada
Secretary of State of the Company’s articles to authorize 10,000,000 shares of
preferred stock and the subsequent designation by the Board of Directors of
5,000,000 shares as Series A.


[8]  Includes
20,000,000 owned by Mr. Farinella directly and 15,499,992 owned by Integrated
Concents Inc. and Company owned by Mr. Farinella. Included in the total is
500,000 options to purchase shares of Class A common stock at $0.029 per share
expiring on March 1, 2017, and 300,000 shares of Class B common stock
convertible into 15,000,000 shares of Class A common stock.


[9]  Includes
500,000 options to purchase shares of Class A common stock at $0.029 per share
expiring on March 1, 2017, and 1,804,000 shares of Class B common stock
convertible into 90,200,000 shares of Class A common stock.


36
 Table of Contents




Brio
      Capital, L.P.[10]
                    401
      E. 34th
      Street
                    Suite
      South 33C
                    New
      York, NY  10016
                  88,535,294[11]
                  19.7%Double
      U Master Fund, L.P.[12]
                    Harbour
      Mouse Waterfront Drive
                    Road
      Town, Tortola, British Virgin Islands
                  88,535,294[11]
                  19.7%Alpha
      Capital Anstalt[13]
                    Pradafant
      7, Furstentums 9490,
                    Vaduz,
      Liechtenstein
                  118,047,059[14]
                  24.6%Osher
      Capital Partners, LLC[15]
                    5
      Sans Berry Lane
                    Spring
      Valley, NY  10977
                  29,411,765[16]
                  7.5%





Item 12.       Certain Relationships and
Related Transactions





The 
Company  has advances due to a former director for $200,000 as of December
31, 2007. The advances bears no interest rate.





No
officer,  director,  promoter,  or affiliate of Softnet has or
proposes to have any direct or  indirect  material  interest in
any asset held by SoftNet through  security  holdings, contracts,
options, or otherwise.





Item 13.       Exhibits





(a) 
(1)   EXHIBITS





The 
exhibits  required  to  be filed herewith by Item 601 of
Regulation S-B, as described  in  the  following 
index  of  exhibits,  are  incorporated herein by
reference,  as  follows:





31.1 Section 302 Certificate of Chief Executive
Officer


32.1 Section 906 Certificate of Chief Executive
Officer

















_______________________


[10]   Shaye Hirsch is the President of
Brio Capital LP and, in such capacity, may be deemed to have voting and
dispositive power over these securities.


[11]   Includes 88,235,294 shares of
Class A common stock underlying a convertible note, 150,000 Class A warrants to
purchase Class A common stock at $0.03 per share and 150,000 Class B warrants to
purchase Class A common stock at $0.06 for a period of five years.


[12]   Isaac Winehouse exercises the
sole right to vote or dispose of the securities owned by Double U Master Fund,
L.P.


[13]   Conrad Ackermann is Director of
Alpha Capital Anstalt and, in such capacity, may be deemed to have voting and
dispositive power over these securities.


[14]   Includes 117,647,059 shares of
Class A common stock underlying a convertible note, 200,000 Class A warrants to
purchase Class A common stock at $0.03 per share and 200,000 Class B warrants to
purchase Class A common stock at $0.06 for a period of five years.


[15]  Mr.
Yisroel Kluger has voting and dispositive control over securities held by Osher
Capital Partners, LLC.


[16]   Includes 29,411,765 shares of
Class A common stock underlying a convertible note, 50,000 Class A warrants to
purchase Class A common stock at $0.03 per share and 50,000 Class B warrants to
purchase Class A common stock at $0.06 for a period of five years.





37
 Table of Contents




Item 14.       Principal Accountant Fees
and Services





(1)  
Audit 
Fees





The
aggregate fees billed by the independent accountants for the last fiscal
year  for professional services for the audit of the Company's annual
financial statements  and  the  review  included in the
Company's Form 10-Q and services that  are  normally provided by the
accountants in connection with statutory and regulatory  filings 
or  engagements  for  those  fiscal  years 
were  $35,500.





(2)  
Audit-Related 
Fees





The
aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal accountants that are reasonably related to the
performance of the audit or review of the Company's financial statements and are
not  reported  under  Item  9  (e)(1)  of 
Schedule  14A  was  NIL.





(3)  
Tax 
Fees





The aggregate
fees billed in each of the last two fiscal years for professional services 
rendered  by the principal accountants for tax compliance, tax advise,
and  tax  planning  was  none.





(4)  
All  Other 
Fees





During 
the  last  two  fiscal  years  there  were 
no other fees charged by the principal  accountants  other 
than  those  disclosed  in  (1)  and  (2) 
above.





(5)  
Audit 
Committee's  Pre-approval  Policies





At the
present time, there are not sufficient directors, officers and employees
involved  with  SoftNet  to  make  any 
pre-approval policies meaningful.  Once SoftNet has elected more directors
and appointed directors and non-directors to the Audit  Committee it
will have meetings and function in a meaningful manner.





(6)  
Audit 
Hours  Incurred





The 
principal  accountants  spent  approximately  75 percent of
the total hours incurred for the audit  were spent  on  the
accounting.  The hours were about equal to the hours spent by the
Company's internal accountant.








38
 Table of Contents




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) 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.






SoftNet
Technology Corp.


(Registrant)




/s/ JAMES
BOOTH


James
Booth


President


Dated:
January 14, 2009








































39