**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**





[
                X
                ]
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE FISCAL YEAR ENDED  JULY 31,
                2007





[ 
                   ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE TRANSITION PERIOD FROM ________ TO
                ________





Commission
      file number 000-30151




**Proginet
      Corporation**


(Name
      of
      small business issuer in its charter)





Delaware
              (State
                or other jurisdiction of incorporation or organization)
            
            11-3264929
              (I.R.S.
                Employer Identification No.)200
                Garden City Plaza, Garden City, New York
              (Address
                of principal executive offices)
            
            11530
              (Zip
                Code)





Issuer's
      telephone number   (516) 535-3600





Securities
      registered under Section 12(b) of the Exchange Act:





Title
                of each class
            Name
                of each exchange on which registeredNone
            None





Securities
      registered under Section 12(g) of the Exchange Act:


Common
      Stock


(Title
      of
      class)


Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. ___





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 ___





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





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





Yes
      ___       No _X_





The
      issuer’s revenues for its most recent fiscal year were $9,377,254.





The
      aggregate market value of the voting stock (based on the closing price of such
      stock on the OTC Bulletin Board) held by non-affiliates of the issuer as
      of  September 14, 2007 was approximately $24,280,000.  All
      officers and directors of the issuer have been deemed, solely for the purpose
      of
      the foregoing calculation, to be “affiliates” of the issuer.





There
      were 14,626,355 shares of Common Stock outstanding at September 14,
      2007.





Documents
      Incorporated by Reference: The information required by Part III of this Form
      10-KSB is incorporated by reference from the Proxy Statement for the 2007 Annual
      Meeting of Stockholders.





Transitional
      Small Business Disclosure Format:





Yes
      ___       No _X_










**TABLE
      OF CONTENTS**





Page**Part
                I**Item
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            8Item
                3.
            Legal
                Proceedings
            8Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            8**Part
                II**Item
                5.
            Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity Securities
            9Item
                6.
            Management's
                Discussion and Analysis or Plan of Operation
            10Item
                7.
            Financial
                Statements
            15Item
                8.
            Changes
                in and Disagreements With Accountants on Accounting and Financial
                Disclosure
            34Item
                8A.
            Controls
                and Procedures
            34Item
                8B.
            Other
                Information
            34**Part
                III**Item
                9.
            Directors,  Executive
                Officers,  Promoters and Control Persons; Compliance with
                Section 16(a) of the Exchange Act.
            35Item
                10.
            Executive
                Compensation
            35Item
                11.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            35Item
                12.
            Certain
                Relationships and Related Transactions and Director
                Independence
            35Item
                13.
            Exhibits
            36Item
                14.
            Principal
                Accountant Fees and Services
            37Signatures
            37











i





**Part
      I**




**Item
                1.**
            **Description
                of Business**




Proginet
      Corporation ("Proginet" or the "the Company") is a security software company
      focused on critical aspects of data security and identity security, addressing
      the security and protection of data while it is both in motion and at
      rest.  The benefits of Proginet's solutions enable companies to
      securely automate, schedule, and audit the transfer of data between all types
      of
      computers, both internal and external to the company, and to secure, control,
      and manage enterprise user communities and their access to corporate resources
      and information assets – all while facilitating the corporate requirement to
      satisfy regulatory mandates.  The Company maintains a philosophy of
      internally developing products, coupled with the acquisition of key technology,
      the integration of the two, and the establishment of a network of strategic
      alliances with key technology partners. The Company sells its products in North
      America through its direct sales force and value-added resellers (“VARs”) and
      internationally through a global network of distributors.  The Company
      also sells its products through Original Equipment Manufacturer (OEM) partners
      in the United States and Europe.




Proginet's
      global customer base currently spans more than 20 countries and includes many
      Global 2000 companies.  The company is headquartered in Garden City,
      N.Y., with offices in Toronto, Canada, and is publicly traded under the symbol
      (OTCBB:PRGF).  For more information, visit
      www.proginet.com




**General
      Development of the
      Business**




Proginet
      was incorporated in New York in 1986 as the Teleprocessing Connection, Inc.
      and
      changed its name in 1990 to Proginet Corporation.  In 1994, Proginet
      incorporated in Delaware, then became a public company by listing on the
      Vancouver Stock Exchange (which
      subsequently merged with the Canadian TSX exchange) in 1995. In
      2002 the Company delisted from the Canadian TSX exchange and listed on the
      U.S.
      OTC Bulletin Board under the symbol PRGF.  While the Company's major
      product offerings are the result of internal development of software, Proginet
      has supplemented its offerings by completing five acquisitions between 1994
      and
      2005, including product acquisitions from Novell, Microsoft, KnowledgNet,
      SureFire and Blockade.




**Products**




This
      section provides a brief overview of the principal products marketed by
      Proginet.  Proginet has designed its products with an emphasis on
      security, reliability, scalability, ease of deployment and use, and strong
      ROI.  Proginet’s goal is to provide its customers with the ability to
      secure and control information assets as data is transferred, and achieve
      corporate objectives, while satisfying regulatory compliance mandates and
      driving corporate efficiency.




*Product
      Category: Data Security & Movement*




Proginet’s
      advanced managed file transfer (MFT) technology allows users to send information
      over extended corporate networks and over the Internet, confident that no one
      other than the intended recipient can read or receive the
      information.  Proginet’s advanced MFT software is in use at some of
      the largest corporations in the world.  The Company's flagship
      solution, CyberFusion Integration Suite (CFI)TM, was introduced to the market in
      July 2005 to satisfy the B2B data transfer requirements of global enterprises,
      in addition to satisfying the enterprise data transfer needs already addressed
      by Proginet's other MFT solutions.




Proginet
      believes that CFI positions the company for continued, rapid
      growth.  Accelerating market globalization, major advances in
      technology, and increased levels of security risk, have dramatically increased
      the importance of MFT. In fact, managed file transfer has become a critical
      element of data integration and application integration for major
      enterprises.




The
      enterprise need for more advanced MFT capabilities is compelling and driven
      by
      many factors. The most significant drivers include:




·
            Integration
                Requirements


·
            Security


·
            Regulatory
                Compliance Mandates


·
            Control
                & Management


·
            Open
                Standards


·
            Efficiency










1





CFI
      has
      been developed specifically to address these key drivers. The following section
      provides a high-level overview of CFI and its components:




**CyberFusion
      Integration Suite**TM: CFI is a totally integrated advanced managed file
      transfer solution that provides a single point of control for all file-transfer
      activity inside and outside an extended enterprise. A multi-platform solution
      that serves the mainframe world and all major distributed platforms, CFI enables
      organizations to conduct all enterprise file transfer securely and efficiently
      with internal departments, suppliers, business partners, and customers, and
      to
      integrate with a broad range of B2B applications in support of end-to-end
      processing.




From
      a
      conceptual level, CFI is comprised of four major integrated components, as
      detailed below:





**CFI
      Command Center:**The Command Center provides a single point of control
      to manage all enterprise file transfers – inside and outside the enterprise, and
      across all platforms. The Command Center's Web-based interface provides a single
      view of all file transfer activity, including server management, user profiles,
      alerts, status reporting, and audit logging. The Command Center easily monitors
      the incoming and outbound file transfers of a company and the company's business
      partners.





**CFI
      Platform Server:** Platform Server's core strength is handling
      multi-platform transfers. The Platform Server provides total security and
      control for every file entering or leaving the enterprise, regardless of
      platform. Platform Server's peer-to-peer architecture, enterprise-level
      automation, and high-volume file-transfer capabilities enable seamless
      integration with other enterprise applications to deliver true end-to-end
      processing.





**CFI
      Internet Server:**Internet Server enables organizations to exchange
      information securely over the Internet – with complete control. Internet Server
      is ideal for integrating with trading partners and for building secure trading
      partner networks; the only requirement for trading partners is a standard Web
      browser (no client software is required).





**CFI
      Commerce Server**: Commerce Server is a fully-featured electronic data
      interchange (EDI) integration solution for B2B data exchange and is appropriate
      for a range of vertical industries including healthcare, retail, manufacturing,
      and financial services. Commerce Server supports EDI, the standard data format
      for exchanging business data, and provides full transaction mapping,
      transformation, and auditing functionality. In conjunction with CFI's Internet
      Server, Commerce Server supports Internet EDI, enabling organizations to
      transition from, and eliminate, value-added networks (VANs) and lease lines,
      and
      high associated costs. Companies using Commerce Server for Internet EDI can
      integrate suppliers and trading partners seamlessly over the Internet, with
      zero
      transaction cost.`








*Product
      Category: Identity & Access Management*




Enterprises
      face many challenges when it comes to managing passwords and the user identity
      lifecycle. The challenges begin right from the start, when a new user requires
      access to an application, and continues through to the end of that lifecycle,
      when the user leaves the organization and needs to be deprovisioned (removed)
      to
      prevent further access.




Proginet’s
      identity and access management solutions secure and protect corporate resources
      and provide centralized management and control of enterprise users.




Proginet
      has been providing password management solutions to major enterprises for more
      than a decade. In early 2005, Proginet further solidified its position in this
      marketplace by acquiring the assets of Blockade Corporation, a Canadian security
      software vendor. The core technologies acquired from Blockade have since been
      incorporated into Proginet's portfolio of security software products and
      rebranded under the names SecurForceTM and SecurAccessTM. Expanding its portfolio
      of security software products has enabled Proginet to offer the following
      enterprise solutions:




·
            Password
                Management


·
            Identity
                Management


·
            Access
                Management


·
            User
                Provisioning


·
            Two-factor
                Authentication








2





The
      following section provides an overview of Proginet products that fall under
      the
      category of identity and access management:




**SecurPass**®**:**
      SecurPass is
      a security software solution for enterprise password management. SecurPass
      protects data within the enterprise – locking out unauthorized users – and
      integrates the enterprise's disparate platforms so that users can access all
      of
      their business applications using a single password. SecurPass comprises two
      modules that can be deployed either together or separately in an organization
      to
      achieve password synchronization and/or reset functionality.




**SecurPass:Reset:**
      Proginet's security module for self-service, password reset, SecurPass:Reset
      enables users to reset their own passwords in real time, eliminating expensive
      calls to the organization's help desk. A Web-based, self-service utility,
      SecurPass:Reset prompts users through the reset process – quickly, effortlessly,
      and efficiently.




**SecurPass:Sync:**SecurPass:Sync is a security module for synchronizing user passwords
      across multiple platforms; users only have to remember a single password to
      access all of their critical business applications. This minimizes the potential
      for password exposure and mitigates security risk for the
      organization.









**SecurForce**TM**:**
      SecurForce, from Proginet, is a comprehensive software suite that provides
      provisioning and user life-cycle management for the large or extended
      enterprise. SecurForce delegates and automates many of the identity management
      processes commonly implemented by large enterprises – and does so across the
      entire user life cycle.




The
      SecurForce Suite is comprised of the SelfServ, SyncServ, and IdentiServ modules.
      The modules work independently for specific usage or can be combined to form
      a
      comprehensive, enterprise-wide identity management system.




**IdentiServ:**
      This role-based provisioning and delegation module allows a system administrator
      to delegate the process of authenticating, provisioning and deprovisioning
      users
      to persons within the company who have been authorised to act as user-identity
      authorities for the various internal systems.




**SelfServ:**
      The self-service password reset and registration module automates the password
      reassignment process, enabling users to easily reset their own passwords without
      placing expensive and time consuming calls to the help desk. This slashes
      help-desk costs related to password management and tremendously improves
      operational efficiencies and overall productivity. Users can also register
      accounts, associate accounts, and maintain their own identity
      details.




**SyncServ:**
      The identity and password synchronization module reduces the number of passwords
      a user needs to one – regardless of the number of platforms or applications the
      user is authorized to access. User-password changes propagate across all systems
      automatically and systems are securely synchronized in real-time.




**SecurAccess**TM**:**
      SecurAccess is a single sign-on solution for the enterprise that enables users
      to access corporate resources and applications using a single, secure password.
      A centralized enterprise access control and management
      solution,  SecurAccess takes advantage of the power of the IBM z/OS
      Enterprise Server system to effectively solve the organization’s security and
      access challenges. With SecurAccess, users have access to enterprise
      applications on any server authorized to their profile; they can access these
      applications seamlessly and in complete compliance with enterprise security
      policies.




**SecurAccess**TM**with VASCO**®**Tokens:**
      Two-factor authentication is gaining popularity within organizations and has
      been adopted by a number of major consumer-facing financial institutions. Seen
      as a viable, and indeed desirable, method of improving password strength and
      overall security, two-factor authentication combines something you have (a
      physical device) – with something you know (a password). Proginet's SecurAccess
      combines with VASCO Digipass® tokens to deliver true,
      two-factor authentication, enabling secure user access to corporate resources
      and applications.







*Product
      Category: Legacy Solutions*





Proginet
      maintains a portfolio of legacy products that are used at leading corporations
      worldwide. These products include file transfer and middleware solutions that
      have significant positive impact on Proginet's revenue stream, but are no longer
      actively promoted in the marketplace. Existing customers of these products
      receive technical support from Proginet.










3





**Strategy**




Data
      breaches represent one of the most critical problems that companies must
      address.  However, the accelerating growth of the global economy
      demands that more and more data be shared among business
      partners.  Thus the security and control of data as it moves within
      and between companies remains as one of the highest IT priorities throughout
      the
      world.  It is more imperative than ever to control, track, and audit
      all of the information leaving and entering an enterprise every
      day.




Product
      Strategy:Proginet’s product strategy
      continues
      to be to develop and market enterprise security software solutions that are
      standards-based, forward-looking and interoperable, and capable of meeting
      or
      exceeding the market's evolving requirements in terms of datamovement,security
      and regulatory compliance. TheCompany's
      core technologies are integral
      to an enterprise's overall business processand promote secure,
      controlled data security and movement and identity and access
      management.  Proginet implements its strategy by investing in a highly
      qualified research and development team that produces and brings to market
      unique and creative products, as well as establishing partnerships to acquire
      components and expertise in complementary technologies geared to the security
      software requirements of large, medium and small enterprises.




Proginet
      provides secure enterprise software to many diversified industries worldwide
      with technology that includes advanced security and management features to
      ensure secure access and control over enterprise systems and data. Proginet’s
      technology provides comprehensive features and capabilities to ensure compliance
      with laws, regulations, and mandates, as well as standards appropriate for
      these
      industries – generating cost effective, efficient, scalable, reliable and secure
      infrastructures to move, manage, protect and secure the typical enterprise's
      most important asset – its data.




The
      driving force behind Proginet’s strategy is the absolute dedication and
      commitment to fully utilize Proginet’s expertise, background, and core
      competencies in the critical area of security related to data movement and
      control.  These competencies have resulted in Proginet’s product
      development architecture, which is focused on critical aspects of data
      security.  This development architecture is an evolutionary approach
      to integrate all of the methods of data communications under one comprehensive
      data security and control umbrella.  The core product under which this
      development is taking place is the Cyberfusion Integration (CFI)
      Suite.




CFI
      is an
      end-to-end, advanced managed file transfer (MFT) solution that tightly
      integrates all enterprise file-transfer activity, both inside and outside the
      enterprise – enabling the organization to achieve total control, security, and
      efficiency with all file-based business activity. CFI's value proposition is
      underpinned by the fundamental concepts of: single point of control, total
      security, total auditability, guaranteed delivery, end-to-end process
      automation, and transfers inside and outside the extended
      enterprise.




One
      of
      the key components of the CFI Suite is the CFI Command Center, a central control
      capability that serves as the central hub for the synchronization and
      coordination of all activities of the other CFI components that are deployed
      on
      network servers throughout the enterprise.  A key product development
      strategy is to incorporate more types of data flows under the umbrella of the
      Command Center.  To that end, last year Proginet introduced the CFI
      Commerce Server, which provides the capability to incorporate and control all
      EDI based files within the CFI Suite.  This year Proginet will be
      introducing the CFI Attachment Manager to provide a superior method of handling
      email attachments to solve the growing problems of attachment size and space
      requirements in email systems.  But by incorporating this component
      within CFI, customers will also benefit from all of the control, security,
      and
      auditing capabilities which are already a part of the CFI suite.




Proginet's
      CFI technology follows a logically designed “road map” and provides a master
      control system to secure and protect access to, and movement of, enterprise
      data
– anywhere, anytime and anyhow – with industry standards for compliance and
      control.  CFI also complies with Service Oriented Architecture (SOA)
      standards, which allows for CFI to be utilized as set of integrated services
      within the SOA structure of any sized corporation.  As more and more
      companies adopt an SOA architecture, this will serve as a strong differentiator
      between CFI and other products.




For
      clients looking to adopt our technology enterprise-wide, Proginet provides
      a
      logical and orderly migration path – an evolutionary approach – to building and
      managing a total infrastructure for data movement. We also define the deployment
      strategies and phases of deployment required to achieve a secure
      data-integration environment.




Identity
      management systems represent a growing market, albeit one that is more and
      more
      dominated by very large vendors.  It appears that the roadmap of
      companies such as IBM, Sun, HP, and Microsoft is to embed identity management
      and provisioning functionality as an integral part of their operating
      systems.  As this becomes a reality, there will be a substantially
      smaller potential for standalone solutions.  Large vendor offerings
      take a tremendous amount of effort to install and
      maintain.  Multi-year, multi-million dollar implementations
      (reminiscent of SAP) seem to be the norm.







4





Proginet
      continues to have success in this marketplace with clients that want to achieve
      security, efficiency, and cost savings without the significant overhead
      associated with these major-vendor solutions. Our standalone solutions offer
      measurable ROI and are expected to offer substantial market opportunity for
      the
      next few years, and probably longer; Proginet intends to continue the pursuit
      of
      this market.




Proginet's
      principal identity-management offering is SecurForce. SecurForce is a well
      engineered and well architected package which can be sold successfully
      domestically, but may have even greater potential in the European and South
      American marketplace. In addition, there is still a large opportunity for
      SecurForce among companies with large mainframe or iSeries focus.




Market
      Strategy: Proginet's market strategy is dependent on the Company's
      successful development and deployment of the product development
      architecture.  With success in research and development, the strategy
      is then driven by three major components of the strategic plan: sales,
      alliances, and acquisitions.  A significant aspect of the market
      strategy recognizes the importance of understanding that the needs of the
      marketplace are fluid and dynamic. The emphasis, the order of priority, and
      the
      commitment of resources, must be adjusted to maximize performance and capitalize
      on the most significant opportunities.




The
      sales
      component emphasizes the need to develop more aggressive and creative sales
      and
      marketing programs.  Every aspect of Proginet's sales process has been
      improved from the perspective of lead generation, lead qualification, product
      evaluation, and the closing of business.  The sales strategy is
      specifically focused on increasing the average size of deals and reducing the
      average length of the sales process.




The
      acquisition strategy is focused on the acquisition of products and/or companies
      that satisfy Proginet's core acquisition objectives. These include either the
      acquisition of a customer and revenue base in Proginet's existing technology
      market, or the acquisition of complementary technologies that expand Proginet's
      offerings to our target markets.




Proginet
      will continue to establish domestic alliances with VARS, distributors, and
      major
      system integrators.  With a focus of leveraging the expertise of these
      firms in their respective vertical markets, Proginet is strengthening its
      ability to penetrate these markets.  In 2007 significant inroads were
      made with government and healthcare opportunities in this
      manner.  Proginet’s dedicated alliance group will continue to forge
      alliances to open up other verticals.  This is anticipated to be a
      significant source of revenue in the future.





**Sales
      and
      Marketing**




Proginet’s
      sales strategy is comprised of three sales models: direct sales in North
      America; indirect sales through distribution partners and VARs in over 23
      countries around the world and in the United States; and strategic alliances
      with partners who integrate Proginet’s technology with their technology and sell
      the combined product(s).  This last model is commonly referred to as
      OEM.




The
      direct sales model includes a direct telemarketing and sales force comprised
      of
      Proginet employees.  The direct sales model covers the entire sales
      cycle from lead generation through a proof-of-concept (POC) evaluation process,
      to the signing of a software license agreement.  Proginet estimates
      that the “typical” sales cycle averages about 90 days for smaller sales, and up
      to 150 days or more for larger sales, and that the company closes the sale
      in
      approximately thirty five (35) percent of POC’s started.




The
      indirect sales model is built on the premise that presence and knowledge in
      local markets is paramount to establishing necessary business relationships
      and
      closing sales.  Distributor partnerships are established in local
      markets and Proginet commits significant resources to train and support them
      to
      sell Proginet software in their countries.  The distributors’ role is
      to act as agents, make the marketplace aware of Proginet’s technology and
      explain how the technology can be used in their business
      environments.  Proginet supports the distributors with assistance and
      support, customer installations, and training whenever
      necessary.  Distributors are typically compensated at a commission
      rate of 40% to 50% of the license revenue generated based upon their level
      of
      effort, resources assigned, and commitment to closing sales.  In
      addition, Proginet’s VAR relationships leverage the sales and marketing
      facilities of these entities to promote Proginet products through the VAR
      networks.  Similar to a distributor partnership, VARs are trained
      extensively in Proginet’s software, however customer support and maintenance is
      generally preformed by Proginet.  As such, VARs are compensated at a
      commission rate of 25% to 40% of the license revenue generated.




The
      OEM
      sales model is based on the ability of an outside software company with
      complementary technology to sell, install and support Proginet’s
      technology.  These OEMs incorporate Proginet’s technology to provide
      services to other customers.  The OEM arrangements include a
      commission structure similar to distributors and also include specific fixed
      pricing for the number of “users” the product is licensed for.







5





All
      of
      Proginet’s sales are dependent on visibility in the marketplace and the market's
      acceptance of Proginet’s products.  As such, the relationships with
      technology partners such as IBM, Microsoft, HP and others, as well as with
      industry analysts, most notably Gartner, gives Proginet greater visibility,
      which will continue to benefit both the direct and indirect sales
      model.  Such visibility is often provided via coverage on these
      companies' Web sites, and in reports published by them. In both models, while
      there is no contractual obligation for Web site or other coverage, such
      visibility provides leads and references to prospective customers who could
      benefit from Proginet’s products and their integration into our partner’s
      technology.  The Company, however, does not maintain statistics on the
      amount of revenues attributable to such leads.




Proginet’s
      marketing strategy is centered on communicating the Company’s product solutions
      and overall value proposition to the marketplace.  It is focused on
      two primary categories:  targeted vertical marketing and marketing
      communications.





Targeted
      vertical marketing identifies specific vertical markets where Proginet’s
      products are most beneficial to create the greatest number of opportunities
      and
      then develops positioning, programs and materials to reach these customers
      and
      support sales activities.





Marketing
      communications is a comprehensive program to deliver Proginet’s message to
      identified audiences.  These methods include developing industry
      analyst relationships, press coverage, trade show attendance, industry
      conference participation, targeted e-mail and direct mail campaigns, and
      communication through our corporate Web site.




Proginet's
      Web site plays a critical role in our sales lead generation program. In early
      2006, the company engaged in a focused search engine optimization (SEO)
      initiative, enhancing the structure, content, and positioning of our corporate
      Web site in line with recognized SEO best practices. These SEO efforts have
      significantly improved both the volume and quality of leads received, and will
      continue to be a key strategic focus in our marketing efforts. Proginet is
      committed to further investment in the performance of our Web site, and in
      its
      promotion through search engines.




**Customers**




Proginet
      has established a worldwide customer base of companies or organizations in
      more
      than 20 countries. These customers are engaged in financial services, insurance,
      healthcare, telecommunications, government, and many other vertical
      industries.  No one customer represented 10% or more of Proginet’s
      revenues during each of the past two fiscal years.




**Suppliers**




Proginet
      is not reliant on any particular supplier for any of its operating
      needs.  Any products required can be purchased from a number of
      sources.


























6





**Competition**




The
      enterprise software space in which Proginet operates is highly
      competitive.  Many of our competitors, including IBM, Computer
      Associates, Sterling Commerce (an AT&T company), Tumbleweed, and Axway have
      longer operating histories, larger customer bases, greater brand recognition
      and
      significantly greater financial, marketing and other
      resources.  Certain of our competitors may devote greater resources to
      marketing and promotional campaigns, adopt more aggressive pricing policies
      and
      devote substantially more resources to Web site and systems
      development.  If our competitors are able to offer products and
      services on more favorable terms, we may experience reduced operating margins,
      loss of market share and a diminished brand franchise.  We cannot
      assure shareholders or other parties that we will compete successfully against
      our current and future competitors. Competitive pressures created by any one
      of
      our competitors, or by our competitors collectively, could have a material
      adverse effect on our business, prospects, financial condition, and results
      of
      operations.




We
      believe that the key criteria considered by potential purchasers of our products
      are substantially as they have been reported in previous years, including:
      the
      operational advantages and cost savings provided by our products; product
      quality and capability; product price and the terms on which the product is
      licensed; ease of integration of the product with the purchaser’s existing
      systems; ease of product installation and use; quality of support and product
      documentation; and the deep expertise and experience of our
      company.  Additionally, Proginet solutions have critical and needed
      functionality for all companies required to address the extensive regulatory
      requirements that have been imposed over the past several years, including
      HIPAA, Sarbanes Oxley, and GLBA, as well as more recent serious security and
      privacy concerns.




**Proprietary
      Rights**




Proginet
      does not possess any patents.  Proginet relies on a combination of
      trademark, copyright and trade secret laws to protect its proprietary
      rights.  Proginet has registered, filed to register, or trademarked
      the names CyberFusion, CyberFusion Integration Suite (CFI), SecurForce,
      SecurPass, and SecurAccess in the United States. These trademarks are considered
      significant in the protection of the Company's technology.  The
      Company believes that its source code and its product designs are best protected
      by the Company’s Employee Confidential Information and Non-Competition
      Agreements entered into with each of its employees.




**Government
      Regulation**




Proginet
      has received authorization from the United States Commerce Department to export
      strong encryption that will ensure the security of critical business information
      transferred worldwide via the Internet.  Other than this
      authorization, the Company is not subject to direct regulation by any government
      agency, other than regulations applicable to businesses in general.




**Employees**




As
      of
      July 31, 2007, Proginet had fifty two full-time salaried employees and two
      consultants on retainer.  The Company believes its relations with its
      employees are satisfactory.




**Research
      and Development Activities**




Proginet's
      investments in new technology development has and will continue to be a most
      significant factor in the Company's success.  Proginet's expenditures
      for development are accounted for as research and development expense and
      capitalized software development expenditures.  A more thorough
      explanation of capitalized software and its financial treatment can be found
      in
      the Company's financial statements and the associated footnotes.





In
      2007,
      the company incurred research and development expense of
      $168,222****and incurred capitalized software development
      expenditures of $937,857.  In 2006 the Company incurred $101,495 in
      research and development expenses and $876,077 in capitalized software
      expenditures.  It is the sum of these two costs that represents the
      investment in new technology offered to the marketplace.








7





**Item
                2.**
            **Description
                of
                Property**




Proginet
      maintains its headquarters at 200 Garden City Plaza, Garden City, New York,
      11530 where most employees are located.  This lease expires May 2013
      with current monthly rent payments of approximately $22,000.  Proginet
      also maintains a satellite office at 21 St. Clair Avenue East, Suite 301,
      Toronto, Ontario.  This lease expires in May 2010 with current monthly
      payments of approximately $4,000.




**Item
                3.**
            **Legal
                Proceedings**




There
      are
      no material pending legal proceedings.




**Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders**




None.















































8





**Part
      II**




**Item
                5.**
            **Market
                for Common Equity and Related Stockholder Matters and Small Business
                Issuer Purchases of Equity
                Securities**




In
      September 2000, Proginet common stock began trading on the OTC Bulletin Board
      (“OTC-BB”) under the symbol PRGF.OB. The following table shows the high and low
      bid information, in U.S. dollars, of Proginet’s common stock on the OTC-BB for
      each quarter within the last two fiscal years:




Quarter
                Ended
            
            High
            
            LowJuly
                31, 2007
            
            $1.70
            
            $1.13April
                30, 2007
            
            $1.25
            
            $1.01January
                31, 2007
            
            $1.14
            
            $0.66October
                31, 2006
            
            $1.26
            
            $0.70July
                31, 2006
            
            $1.25
            
            $0.70April
                30, 2006
            
            $0.95
            
            $0.62January
                31, 2006
            
            $0.90
            
            $0.33October
                31, 2005
            
            $0.50
            
            $0.31




**Holders**




Proginet’s
      stock is held by approximately one hundred sixty-five holders of
      record.




**Dividends**




Proginet
      has not paid dividends and does not anticipate paying dividends in the
      foreseeable future.  The Board of Directors intends to retain
      earnings, if any, to finance growth.  Accordingly, any payment of
      dividends by Proginet in the future will depend upon the need for working
      capital and the financial condition of the Company at the time.




**Securities
      authorized for issuance under equity compensation plan**







**Equity
      Compensation Plan Information**





(a)
            
            
            (b)
            
            
            (c)Number
                of securities to be issued upon exercise of outstanding options,
                warrants,
                and rights
            
            
            Weighted-average
                exercise price of outstanding options, warrants, and
                rights
            
            
            Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflect in column
                (a))Equity
                compensation plans approved by security holders
            
            
            2,623,700
            
            
            $
            .75
            
            
            
            53,812Equity
                compensation plans not approved by security holders
            
            
            -
            
            
            
            -
            
            
            
            -Total
            
            
            2,623,700
            
            
            $
            .75
            
            
            
            53,812











9




**Item
                6.**
            **Management's
                Discussion and Analysis or Plan of
                Operation**




**General**




You
      should read the following discussion in conjunction with our financial
      statements and the notes thereto included elsewhere herein.  Certain
      statements under the captions “Description of Business”, “Management's
      Discussion and Analysis or Plan of Operation” and elsewhere in this Form 10-KSB
      contain “forward-looking statements” within the meaning of the Securities
      Exchange Act of 1934.  Words such as “may”, “should”, “could”,
“believe”, “expect”, “anticipate”, “estimate”, “intend”, “strategy”, “likely”
and similar expressions are intended to identify forward-looking statements
      about the Company’s future plans, objectives, performance, intentions and
      expectations.  Such forward-looking statements are subject to a number
      of known and unknown risks, uncertainties and other factors which may cause
      the
      Company's actual results of operations and future financial condition to differ
      materially from those expressed or implied in or by any such forward-looking
      statements.  Such factors include factors that may be beyond the
      Company’s control and include, among others, the following:  general
      economic and business conditions, competition from existing and potential
      competitors and availability of qualified personnel.




The
      Company cautions that the foregoing list of important factors is not exclusive.
      The Company does not undertake to update any forward-looking statements
      contained herein or that may be made from time to time by or on behalf of the
      Company.





**Use
      of Estimates and Critical Accounting Policies**




In
      preparing our financial statements,
      we make estimates, assumptions and judgments that can have a significant impact
      on our revenues, income from operations, and net income, as well as on the
      value
      of certain assets on our balance sheet. We believe that there are several
      accounting policies that are critical to an understanding of our historical
      and
      future performance, as these policies affect the reported amounts of revenues,
      expenses, and significant estimates and judgments applied by management. While
      there are a number of accounting policies, methods and estimates affecting
      our
      financial statements, areas that are particularly significant include revenue
      recognition and capitalized software development costs. These policies are
      described in detail below. In addition, please refer to Note 1 to the
      accompanying financial statements for further discussion of our accounting
      policies.




In
      addition to the estimates and
      assumptions that we use to prepare our historical financial statements, we
      monitor our sales pipeline in order to estimate the timing and amount of future
      revenues. If we are unable to properly estimate the timing and amount of
      revenues, our future operations could be significantly impacted. Our sales
      pipeline may not consistently relate to revenues in a particular period, as
      the
      data upon which the assumptions and estimates were made by management may
      change. For example, information technology spending trends may cause customers
      to delay and reduce purchasing decisions. Accordingly, it may be harder to
      close
      contracts with customers, the size of the transactions may decrease, and many
      of
      our license contracts are pushed to the very end of the quarter, making it
      difficult for us to forecast revenues for the quarter, and adjust spending
      to
      respond to variations in revenue growth during the quarter, all of which may
      adversely affect our business, financial condition and results of
      operations.




**Revenue
      Recognition**




We
      recognize revenue in accordance with
      Statement of Position, or SOP, 97-2, “Software Revenue Recognition,” and SOP
      98-9, “Modification of SOP 97-2, Software Revenue Recognition, with Respect to
      Certain Transactions.” We recognize software license revenues when all of the
      following criteria are met: persuasive evidence of an arrangement exists, the
      fee is fixed or determinable, collectibility is probable, delivery of the
      product has occurred and the customer has accepted the product (including the
      expiration of an acceptance period) if the terms of the contract include an
      acceptance requirement. In instances when any of the criteria are not met,
      we
      will either defer recognition of the software license revenue until the criteria
      are met or we will recognize the software license revenue on a ratable basis,
      as
      required by SOPs 97-2 and 98-9.  We generally utilize written
      contracts as the means to establish the terms and conditions by which our
      products, support and services are sold to our customers.





We
      consider a non-cancelable agreement
      signed by us and the customer to be evidence of an arrangement. Delivery is
      considered to occur when media containing the licensed programs is provided
      to a
      common carrier, or the customer is given electronic access to the licensed
      software. Our typical end user license agreements do not contain acceptance
      clauses. We consider the fee to be fixed or determinable if the fee is not
      subject to refund or adjustment. If the fee is not fixed or determinable, we
      recognize revenue as the amounts become due and payable. Probability of
      collection is based upon our assessment of the customer’s financial condition
      through review of its current financial statements or credit reports. Collection
      is deemed probable if we expect that the customer will be able to pay amounts
      under the arrangement as payments become due. For follow-on sales to existing
      customers, prior payment history is also used to evaluate probability of
      collection. If we determine that collection is not probable, we defer the
      revenue and recognize the revenue upon cash collection.








10





Our
      revenues are derived from direct
      sales executives, distributors and OEM partners.  Commission expense
      is recorded at the time of sale. Commission rates to direct sales people are
      based on a graduating scale, ranging from 5% to 15% of the sale, dependent
      upon
      the revenue volume generated by the sales executive. Distributors are typically
      compensated at a commission rate of 40% to 50% of the license revenue generated
      based upon their level of effort, resources assigned and products
      sold.  The OEM arrangements include a commission structure similar to
      distributors and also may include specific fixed pricing for the number of
      “users” the product is licensed for.Revenues from sales through
      distributors
      are recorded at the gross amount charged based on the economic risks and ongoing
      product support responsibilities we assume.





When
      our software licenses contain
      multiple elements, we allocate revenue to each element based on the relative
      fair values of the elements. Multiple element arrangements generally include
      post-contract support (PCS or support), software products and, in some cases,
      service. Revenue from multiple-element arrangements is allocated to undelivered
      elements of the arrangement, such as PCS, based on the relative fair values
      of
      the elements specific to us. Our determination of fair value of each element
      in
      multi-element arrangements is based on vendor-specific objective evidence,
      which
      is generally determined by sales of the same element or service to third parties
      or by reference to a renewal rate specified in the related
      arrangement.





Where
      vendor-specific objective evidence
      of fair value exists for all undelivered elements, but evidence does not exist
      for one or more delivered elements, we account for the delivered elements in
      accordance with the “Residual Method” prescribed by SOP 98-9. Under the residual
      method, the fair value of the undelivered elements is deferred and the remaining
      portion of the arrangement fee is recognized as revenue. In most cases, the
      bundled multiple elements include PCS and the software product. In such cases,
      when vendor-specific objective evidence of fair value exists for all of the
      undelivered elements (most commonly PCS), the residual amount is recognized
      as
      revenue and the PCS is recognized ratably over the PCS term, which is typically
      12 months.





A
      customer typically prepays maintenance
      revenues for the first 12 months and the related maintenance revenues are
      recognized ratably monthly over the term of the maintenance contract, which
      is
      generally 12 months. Maintenance contracts include the right to unspecified
      upgrades on a when-and-if available basis and ongoing
      support.





Deferred
      revenues include amounts
      received from customers for which revenue has not yet been recognized that
      generally results from deferred maintenance, consulting or training services
      not
      yet rendered and license revenue deferred until all requirements under SOP
      97-2
      are met. Revenue is recognized upon delivery of our products, as services are
      rendered, or as other requirements requiring deferral under SOP 97-2 are
      satisfied.





Based
      on our interpretation of SOP 97-2
      and SOP 98-9, we believe that our current sales contract terms and business
      arrangements have been properly reported.  However, the American
      Institute of Certified Public Accountants and its Software Revenue Recognition
      Task Force continue to issue interpretations and guidance for applying the
      relevant standards to a wide range of sales contract terms and business
      arrangements that are prevalent in the software industry.  Also, the
      SEC has issued Staff Accounting Bulletin No. 104, “Revenue Recognition in
      Financial Statements,” which provides guidance related to revenue recognition
      based on interpretations and practices followed by the SEC.  Future
      interpretations of existing accounting standards or changes in our business
      practices could result in future changes in our revenue accounting policies
      that
      could have a material adverse effect on our business, financial condition and
      results of operations.








**Capitalized
      Software Development Costs**




We
      capitalize our software development costs when the projects under development
      reach technological feasibility as defined by Financial Accounting Standard
      (“FAS”) No. 86, and amortize these costs over the products’ estimated useful
      lives. Under FAS No. 86, we evaluate our capitalized software costs at each
      balance sheet date to determine if the unamortized balance related to any given
      product exceeds the estimated net realizable value of that
      product.  Any such excess is written off through accelerated
      amortization in the quarter it is identified.  Determining net
      realizable value as defined by FAS No. 86 requires that we estimate future
      cash
      flows to be generated by the products and use judgment in quantifying the
      appropriate amount to write off, if any.  Actual cash flows and
      amounts realized from the software products could differ from our
      estimates.  Also, any future changes to our product portfolio could
      result in significant research and development expenses related to software
      asset write-offs.











11





**Goodwill,
      Other Intangible Assets and Other Long-Lived Assets**





The
      Company performs an evaluation of whether goodwill is impaired annually or
      when
      events occur or circumstances change that would more likely than not reduce
      the
      fair value of the asset below its carrying amount. Fair value is determined
      using market comparables for similar businesses or forecasts of discounted
      future cash flows. The Company also reviews other intangible assets, which
      are
      all currently amortized over their respective estimated lives, and other
      long-lived assets when indication of potential impairment exists, such as a
      significant reduction in cash flows associated with the assets, significant
      changes in the manner or our use of the assets or the strategy for our overall
      business and significant negative industry or economic trends. In addition,
      in
      all cases of an impairment review, we will re-evaluate the remaining useful
      life
      of the asset and modify it, as appropriate. Should the fair value of the
      Company's long-lived assets decline because of reduced operating performance,
      market declines, or other indicators of impairment, a charge to operations
      for
      impairment may be necessary.





**Results
      of Operations**




**Fiscal
      Periods Ended July 31, 2007 and July 31, 2006**





Total
      revenues for the year ended July 31, 2007 amounted to $9,377,254, representing
      an increase of $879,187, or 10.3% compared to revenues of $8,498,067 for the
      year ended July 31, 2006.





Software
      license revenues for the year ended July 31, 2007 amounted to $3,441,518
      representing an increase of $1,075,966, or 45.5%, compared to software license
      revenues of $2,365,552 for the year ended July 31, 2006.  Software
      license revenue is sold directly through domestic sales executives, indirectly
      through distributors and VARs and through OEM partners. Direct sales, indirect
      sales and OEM sales amounted to $2,102,478, $1,256,622 and $82,418 for the
      year
      ended July 31, 2007, respectively,  compared to $1,665,537, $442,359
      and $257,656 for the year ended July 31, 2006, respectively.  The
      increase in software license revenues is primarily due to an increase in the
      dollar value of the individual license agreements for the advance managed file
      transfer technology, especially with larger organizations, both domestically
      and
      internationally.





Software
      maintenance fees and other increased by $104,843, or 1.9% to $5,771,786 compared
      to such fees in fiscal 2006 of $5,666,943. The increase in software maintenance
      fees and other is primarily due to an increase in software license revenues
      offset by maintenance contract cancellations of acquired legacy software
      solutions.  While these legacy solutions still contribute to the
      Company’s maintenance revenue base, they are no longer actively promoted in the
      marketplace.





Fees
      for
      professional services for the year ended July 31, 2007 amounted to $163,950
      compared to fees for professional services of $465,572 for the year ended July
      31, 2006, representing a decrease of $301,622 or 64.8%. The decrease in
      professional service fees revenue is primarily due to the completion of
      professional service engagements for the acquired Blockade Systems Corp.
      customers and a decline in services rendered to our OEM partner
      customers.





**Operating
      Expenses**





Operating
      expenses increased to $8,511,209 from $7,899,160 for year ended July 31, 2007
      and July 31, 2006 respectively, an increase of $612,049 or 7.7%. The increase
      in
      operating expenses is primarily a result of the following
      fluctuations:





Cost
      of
      software licenses (which primarily includes amortization of capitalized software
      costs) for the year ended July 31, 2007 amounted to $1,630,696, representing
      a
      decrease of $186,913 or 10.3%, compared to cost of software licenses of
      $1,817,609 for the year ended July 31, 2006.  The decrease in cost of
      software licenses is primarily due to the full amortization of certain purchased
      software costs from the prior year periods and a cumulative adjustment of
      $47,296 for correcting certain amortization provisions relating to product
      enhancements and the allocation of costs carried over from the original
      CyberFusion product.





Cost
      of
      maintenance fees and other (which principally consists of technical support
      payroll) for the year ended July 31, 2007 amounted to $1,191,865, representing
      a
      decrease of $39,169 or 3.2%, compared to cost of maintenance fees and other
      of
      $1,231,034 for the year ended July 31, 2006. The decrease in cost of maintenance
      fees and other is due to a decrease in the allocation of employee related costs
      for technical services as such costs are being allocated to the research and
      development of the Company’s future products and to the sales
      organization.





Commissions
      amounted to $1,261,814 for the year ended July 31, 2007 compared to commissions
      of $959,895 for the year ended July 31, 2006, representing an increase of
      $301,919 or 31.5%. The increase in commission expense is directly related to
      the
      increase in direct and international distributor software sales for the year
      ended July 31, 2007.








12





Research
      and development amounted to $168,222 for the year ended July 31, 2007 compared
      to $101,495, representing an increase of $66,727 or 65.7% for the year ended
      July 31, 2007. The increase in research and development expenses is attributable
      to increased resources allocated to the product development and testing
      activities of the Company’s new products.




Selling
      and marketing expense for the year ended July 31, 2007 amounted to $1,776,408
      representing an increase of $280,396 or 18.7%, compared to selling and marketing
      expense of $1,496,012 for the year ended July 31, 2006. The increase in selling
      and marketing is primarily due to an increase in technical employee and employee
      related costs of $141,688 utilized in the sales cycle process, increased costs
      of $99,902 for public relations communications, retention of an industry
      analysts for additional research services and an increase of $38,142 in customer
      and distributor visitations by the sales organization.




General
      and administrative expense for the year ended July 31, 2007 amounted to
      $2,439,057, representing an increase of $276,188 or 12.8% compared to $2,162,869
      in general and administrative expense for the year ended July 31, 2006. The
      increase in general and administrative expense is partially due to a $48,959
      increase in Board of Director fees, a $50,486 increase in employee profit
      sharing and management discretionary compensation expense as defined Fiscal
      2007
      financial targets were met, a $52,524 increase in professional fees primarily
      relating to tender offer costs and other corporate matters, a $80,234 increase
      in additional employee headcount from the establishment of a strategic alliance
      and investor relations department and a $31,647 increase for other investor
      relations initiatives such as conferences and direct mailings.




The
      Company reported a net income of $936,852 for 2007 compared to a net income
      of
      $584,564 for 2006.






**LIQUIDITY
      AND CAPITAL RESOURCES**




At
      July
      31, 2007, the Company had a cash balance of $3,439,988.




Operating
      activities provided cash of $1,891,898 for the fiscal year ended July 31,
      2007.  This resulted primarily from a net income of $936,852 and
      non-cash charges for depreciation and amortization of $1,629,999 offset by
      a
      decrease in deferred revenue of $167,999 caused by a decrease in advanced
      billing cash collections and an increase in trade accounts receivable due to
      the
      increase in software sales and licenses.





Investing
      activities used cash of $980,918 for the fiscal year ended July 31, 2007,
      primarily for costs associated with the development of the Company’s software
      products.





Financing
      activities provided cash of $27,488 primarily from the exercise of 34,300 stock
      options and 100,000 warrants.





The
      Company has available a line of credit of $1,000,000. The interest rate is
      variable based on the bank’s prime rate. The line of credit is collateralized by
      accounts receivable of the Company and expires September 24, 2007, at which
      time
      the Company intends to renew this line of credit.  As of July 31,
      2007, the Company has not borrowed against this line of credit.





The
      Company believes that its present cash, the cash generated from operations
      and
      amounts available under its present line of credit agreements will be sufficient
      to meet its cash needs for at least the next twelve months.























13





The
      following table lists the Company’s cash contractual obligations as of July 31,
      2007:





Payments
                Due by PeriodContractual
                Obligations:
            
            Total
            
            
            Less
                than 1 year
            
            
            1-3
                years
            
            
            3-5
                years
            
            
            More
                than 5 yearsOperating
                Lease Obligations (1)
            
            $
            1,858,284
            
            
            $
            318,694
            
            
            $
            658,443
            
            
            $
            613,227
            
            
            $
            267,920





(1)
      The
      Company leases office space in Garden City, New York and Toronto, Ontario and
      leases certain computer equipment for technical support efforts and
      administrative purposes.





**Recent
      Accounting Pronouncements**




In
      February 2007, the FASB issued Statement of Financial Accounting Standard No.
      159, *The Fair Value Option for Financial Assets and Financial
      Liabilities* (“FAS 159”). FAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value that are not
      currently required to be measured at fair value and establishes presentation
      and
      disclosure requirements designed to facilitate comparisons between entities
      that
      choose different measurement attributes for similar types of assets and
      liabilities. Unrealized gains and losses on items for which the fair value
      option has been elected are reported in earnings. FAS 159 is effective for
      fiscal years beginning after November 15, 2007.  The Company has
      determined that the adoption of FAS 159 will not have a material impact on
      the
      Financial Statements.





In
      September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*
      (“FAS 157”).  FAS 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value
      measurement.  This statement shall be effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      within those fiscal years. Earlier application is encouraged, provided that
      the
      reporting entity has not yet issued financial statements for that fiscal year,
      including any financial statements for an interim period within that fiscal
      year. The provisions of this statement should be applied prospectively as of
      the
      beginning of the fiscal year in which this statement is initially applied,
      except in some circumstances where the statement shall be applied
      retrospectively. The Company is currently evaluating the impact, if any, that
      the adoption of FAS 157 will have on the Company’s Financial
      Statements.





The
      Financial Accounting Standards Board (FASB) issued interpretation no. 48,
*Accounting for Uncertainty in Income Taxes- an interpretation of FASB
      Statement No. 109*(FIN 48). FIN 48 clarifies the accounting for uncertainty
      in income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement No. 109, *Accounting for Income Taxes*(SFAS 109).
      This Interpretation prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return. This Interpretation also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006.  The
      Company has determined that the adoption of FIN 48 will not have a material
      impact on the Financial Statements.























14





**Item
                7.**
            **Financial
                Statements**





PageReport
                of Independent Registered Public Accounting Firm
            16Balance
                Sheets as of July 31, 2007 and 2006
            17Statements
                of Income for the years ended July 31, 2007 and 2006
            18Statements
                of Stockholders’ Equity for the years ended July 31, 2007 and
                2006
            19Statements
                of Cash Flows for the years ended July 31, 2007 and 2006
            20Notes
                to Financial Statements
            21


















































15





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**











Board
      of
      Directors and Stockholders


**Proginet
      Corporation**








We
      have
      audited the accompanying balance sheets of Proginet Corporation as of July
      31,
      2007 and 2006, and the related statements of income, stockholders’ equity and
      cash flows for the years then ended.  These financial statements are
      the responsibility of the Company’s management.  Our responsibility is
      to express an opinion on these financial statements based on our
      audits.




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




In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Proginet Corporation as of July
      31,
      2007 and 2006, and the results of its operations and its cash flows for the
      years then ended in conformity with accounting principles generally accepted
      in
      the United States of America.










BDO
      SEIDMAN, LLP








Melville,
      New York


September
      14, 2007


























16





PROGINET
      CORPORATION


Balance
      Sheets


July
      31





2007
            
            
            2006**Assets**Current
                assetsCash
            
            $
            3,439,988
            
            
            $
            2,501,520Trade
                accounts receivable, net
            
            
            1,328,326
            
            
            
            599,498Prepaid
                expenses
            
            
            77,945
            
            
            
            41,052Total
                current assets
            
            
            4,846,259
            
            
            
            3,142,070Property
                and equipment, net
            
            
            167,933
            
            
            
            197,276Capitalized
                software development costs, net
            
            
            3,105,982
            
            
            
            3,197,811Purchased
                software, net
            
            
            733,918
            
            
            
            1,034,278Customer
                relationships, net
            
            
            585,990
            
            
            
            825,810Goodwill
            
            
            135,932
            
            
            
            123,661Other
                assets
            
            
            35,870
            
            
            
            32,445$
            9,611,884
            
            
            $
            8,553,351**Liabilities
                and Stockholders’ Equity**Current
                liabilitiesAccounts
                payable and accrued expenses
            
            $
            923,617
            
            
            $
            702,830Deferred
                revenues­
            
            
            2,361,867
            
            
            
            2,570,977Deferred
                rent
            
            
            4,541
            
            
            
            -Total
                current liabilities
            
            
            3,290,025
            
            
            
            3,273,807Deferred
                revenues
            
            
            44,390
            
            
            
            3,279Deferred
                rent
            
            
            161,892
            
            
            
            161,7843,496,307
            
            
            
            3,438,870Stockholders’
                equityPreferred
                stock, $.01 par value, 10,000,000 shares authorized,
              none
                issued
            
            
            -
            
            
            
            -Common
                stock, $.001 par value, 40,000,000 shares authorized,
              15,873,913
                shares issued at July 31, 2007 and  15,739,613 at July 31,
                2006
            
            
            15,874
            
            
            
            15,740Additional
                paid-in capital
            
            
            12,851,039
            
            
            
            12,786,929Treasury
                stock 1,325,226, at cost, at July 31, 2007 and July 31,
                2006
            
            
            (606,023
            )
            
            
            (606,023
            )Accumulated
                deficit
            
            
            (6,145,313
            )
            
            
            (7,082,165
            )Total
                stockholders’ equity
            
            
            6,115,577
            
            
            
            5,114,481$
            9,611,884
            
            
            $
            8,553,351





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








17





PROGINET
      CORPORATION


Statements
      of Income





Year
                ended July 31,2007
            
            
            2006RevenuesSoftware
                licenses
            
            $
            3,441,518
            
            
            $
            2,365,552Software
                maintenance fees and other
            
            
            5,771,786
            
            
            
            5,666,943Professional
                services
            
            
            163,950
            
            
            
            465,5729,377,254
            
            
            
            8,498,067Operating
                ExpensesCosts
                of software licenses
            
            
            1,630,696
            
            
            
            1,817,609Costs
                of maintenance fees and other
            
            
            1,191,865
            
            
            
            1,231,034Costs
                of professional services
            
            
            43,147
            
            
            
            130,246Commissions
            
            
            1,261,814
            
            
            
            959,895Research
                and development
            
            
            168,222
            
            
            
            101,495Selling
                and marketing
            
            
            1,776,408
            
            
            
            1,496,012General
                and administrative
            
            
            2,439,057
            
            
            
            2,162,8698,511,209
            
            
            
            7,899,160Income
                from operations
            
            
            866,045
            
            
            
            598,907Other
                income (expense)Interest
                income
            
            
            70,807
            
            
            
            32,679Interest
                expense
            
            
            -
            
            
            
            (47,022
            )70,807
            
            
            
            (14,343
            )Income
                before income taxes
            
            
            936,852
            
            
            
            584,564Income
                tax expense
            
            
            -
            
            
            
            -Net
                income
            
            $
            936,852
            
            
            $
            584,564Basic
                and diluted income per common share
            
            $
            .06
            
            
            $
            .04Weighted
                average common shares outstanding – basic
            
            
            14,478,031
            
            
            
            14,470,436Weighted
                average common shares outstanding – diluted
            
            
            15,486,239
            
            
            
            14,987,941











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








18





PROGINET
      CORPORATION


Statements
      of Stockholders’ Equity


Years
      ended July 31, 2007 and 2006





Common
                stock
            
            
            Additional
              paid-
                in
            
            
            Treasury
            
            
            AccumulatedShares
            
            
            Amount
            
            
            capital
            
            
            stock
            
            
            deficit
            
            
            TotalBalance
                – August 1, 2005
            
            
            15,731,613
            
            
            $
            15,732
            
            
            $
            12,906,643
            
            
            $
            (531,023
            )
            
            $
            (7,666,729
            )
            
            $
            4,724,623Exercise
                of common stock options and warrants
            
            
            8,000
            
            
            
            8
            
            
            
            1,352
            
            
            
            
            
            
            
            
            
            
            
            1,360Private
                placement common stock issuance, net
            
            
            
            
            
            
            
            
            
            
            (121,066
            )
            
            
            
            
            
            
            
            
            
            
            (121,066
            )Repurchase
                of shares
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (75,000
            )
            
            
            
            
            
            
            (75,000
            )Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            584,564
            
            
            
            584,564Balance
                – July 31, 2006
            
            
            15,739,613
            
            
            
            15,740
            
            
            
            12,786,929
            
            
            
            (606,023
            )
            
            
            (7,082,165
            )
            
            
            5,114,481Exercise
                of common stock options and warrants
            
            
            134,300
            
            
            
            134
            
            
            
            27,354
            
            
            
            
            
            
            
            
            
            
            
            27,488Stock
                based compensation
            
            
            
            
            
            
            
            
            
            
            79,756
            
            
            
            
            
            
            
            
            
            
            
            79,756Private
                placement common stock issuance, net
            
            
            
            
            
            
            
            
            
            
            (43,000
            )
            
            
            
            
            
            
            
            
            
            
            (43,000
            )Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            936,852
            
            
            
            936,852Balance
                – July 31, 2007
            
            
            15,873,913
            
            
            $
            15,874
            
            
            $
            12,851,039
            
            
            $
            (606,023
            )
            
            $
            (6,145,313
            )
            
            $
            6,115,577














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








19





PROGINET
      CORPORATION


Statements
      of Cash Flows





Year
                ended July 31,2007
            
            
            2006Cash
                flows from operating activitiesNet
                income
            
            $
            936,852
            
            
            $
            584,564Adjustments
                to reconcile net income to cash provided by operating
                activitiesDepreciation
                and amortization
            
            
            1,629,999
            
            
            
            1,862,665Recovery
                provisions for bad debt allowance, net
            
            
            11,000
            
            
            
            -Stock
                based compensation
            
            
            79,756
            
            
            
            -Deferred
                revenue
            
            
            (167,999
            )
            
            
            411,183Deferred
                rent
            
            
            4,649
            
            
            
            73,414Changes
                in operating assets and liabilitiesTrade
                accounts receivable
            
            
            (739,828
            )
            
            
            12,975Prepaid
                expenses and other assets
            
            
            (40,318
            )
            
            
            7,033Accounts
                payable and accrued expenses
            
            
            177,787
            
            
            
            82,817Net
                cash provided by operating activities
            
            
            1,891,898
            
            
            
            3,034,651Cash
                flows from investing activitiesPurchase
                of net assets of Blockade Systems Corp
            
            
            (12,271
            )
            
            
            (58,327
            )Capitalized
                software development costs
            
            
            (937,857
            )
            
            
            (876,077
            )Purchase
                of property and equipment
            
            
            (30,790
            )
            
            
            (31,005
            )Net
                cash used in investing activities
            
            
            (980,918
            )
            
            
            (965,409
            )Cash
                flows from financing activitiesPrivate
                placement common stock issuance costs
            
            
            -
            
            
            
            (14,066
            )Purchase
                of treasury stock
            
            
            -
            
            
            
            (75,000
            )Proceeds
                from exercise of common stock options and warrants
            
            
            27,488
            
            
            
            1,360Principal
                payments on note payable
            
            
            -
            
            
            
            (833,332
            )Net
                cash provided by (used in) financing activities
            
            
            27,488
            
            
            
            (921,038
            )Net
                increase in cash and cash equivalents
            
            
            938,468
            
            
            
            1,148,204Cash
                at beginning of the year
            
            
            2,501,520
            
            
            
            1,353,316Cash
                at end of the year
            
            $
            3,439,988
            
            
            $
            2,501,520**Supplemental
                Disclosures of Cash Flow Information**Cash
                paid during the year for:Interest
            
            $
            -
            
            
            $
            47,022Non-cash
                financing activity:Accrued
                private placement costs
            
            $
            43,000
            
            
            $
            107,000





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








20





**PROGINET
      CORPORATION**




**NOTES
      TO FINANCIAL STATEMENTS**




**JULY
      31, 2007 AND 2006**







**(1)**
            **Nature
                of Business and Summary of Significant Accounting
                Policies**




**Nature
      of Business**


Proginet
      Corporation ("Proginet" or the "the Company") is a security software company
      focused on critical aspects of data security and identity security, addressing
      the security and protection of data while it is both in motion and at
      rest.  The benefits of Proginet's solutions enable companies to
      securely automate, schedule, and audit the transfer of data between all types
      of
      computers, both internal and external to the company, and to secure, control,
      and manage enterprise user communities and their access to corporate resources
      and information assets – all while facilitating the corporate requirement to
      satisfy regulatory mandates.  The Company maintains a philosophy of
      internally developing products, coupled with the acquisition of key technology,
      the integration of the two, and the establishment of a network of strategic
      alliances with key technology partners. The Company sells its products in North
      America through its direct sales force, VARs, and internationally through a
      global network of distributors.  The Company also sells its products
      through Original Equipment Manufacturer (OEM) partners in the United States
      and
      Europe.  The Company operates and is managed as one reportable
      segment.




**Generally
      Accepted Accounting Principles**


The
      financial statements have been prepared in accordance with accounting principles
      generally accepted in the United States of America (“US GAAP”).





**Revenue
      Recognition**


We
      recognize revenue in accordance with
      Statement of Position, or SOP, 97-2, “Software Revenue Recognition,” and SOP
      98-9, “Modification of SOP 97-2, Software Revenue Recognition, with Respect to
      Certain Transactions.” We recognize software license revenues when all of the
      following criteria are met: persuasive evidence of an arrangement exists, the
      fee is fixed or determinable, collectibility
      is probable, delivery of the
      product has occurred and the customer has accepted the product (including the
      expiration of an acceptance period) if the terms of the contract include an
      acceptance requirement. In instances when any of the criteria are not met,
      we
      will either defer recognition of the software license revenue until the criteria
      are met or we will recognize the software license revenue on a ratable basis,
      as
      required by SOPs 97-2 and 98-9.  We generally utilize written
      contracts as the means to establish the terms and conditions by which our
      products, support and services are sold to our customers.Our
      revenues are derived from direct
      sales executives, distributors and OEM partners.Revenues from sales through
      distributors
      are recorded at the gross amount charged based on the economic risks and ongoing
      product support responsibilities we assume.





We
      consider a non-cancelable agreement
      signed by us and the customer to be evidence of an arrangement. Delivery is
      considered to occur when media containing the licensed programs is provided
      to a
      common carrier, or the customer is given electronic access to the licensed
      software. Our typical end user license agreements do not contain acceptance
      clauses. We consider the fee to be fixed or determinable if the fee is not
      subject to refund or adjustment. If the fee is not fixed or determinable, we
      recognize revenue as the amounts become due and payable. Probability of
      collection is based upon our assessment of the customer’s financial condition
      through review of its current financial statements or credit reports. Collection
      is deemed probable if we expect that the customer will be able to pay amounts
      under the arrangement as payments become due. For follow-on sales to existing
      customers, prior payment history is also used to evaluate probability of
      collection. If we determine that collection is not probable, we defer the
      revenue and recognize the revenue upon cash collection.











21


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**
  When
        software licenses contain multiple elements, revenue is allocated to each
        element based on the relative fair values of the elements. Multiple element
        arrangements generally include post-contract support (PCS or support), software
        products, and in some cases, service. Revenue from multiple-element arrangements
        is allocated to undelivered elements of the arrangement, such as PCS, based
        on
        the relative fair values of the specific elements. The Company’s determination
        of fair value of each element in multi-element arrangements is based on
        vendor-specific objective evidence, which is generally
        determined
        by sales of the same element or service to third parties or by reference
        to a
        renewal rate specified in the related arrangement.




Where
      vendor-specific objective evidence
      of fair value exists for all undelivered elements, but evidence does not exist
      for one or more delivered elements, the Company accounts for the delivered
      elements in accordance with the “Residual Method” prescribed by SOP 98-9. Under
      the residual method, the fair value of the undelivered elements is deferred
      and
      the remaining portion of the arrangement fee is recognized as revenue. In most
      cases, the bundled multiple elements include PCS and the software product.
      In
      such cases, when vendor-specific objective evidence of fair value exists for
      all
      of the undelivered elements (most commonly PCS), the residual amount is
      recognized as revenue and the PCS is recognized ratably over the PCS term,
      which
      is typically 12 months.




A
      customer typically prepays maintenance
      revenues and such maintenance revenues are recognized ratably monthly over
      the
      term of the maintenance contract, which is generally 12 months. Maintenance
      contracts include the right to unspecified upgrades on a when-and-if available
      basis, and ongoing support.




Deferred
      revenues include amounts
      received from customers for which revenue has not yet been recognized that
      generally results from deferred maintenance, consulting or training services
      not
      yet rendered and license revenue deferred until all requirements under SOP
      97-2
      are met. Deferred revenue is recognized upon delivery of our products, as
      services are rendered, or as other requirements requiring deferral under SOP
      97-2 are satisfied.





**Commission
      Expense**


Commission
      expense is recorded at the
      time of sale. Commission rates to direct sales people are based on a graduating
      scale, ranging from 5% to 15% of the sale, dependent upon the revenue volume
      generated by the sales executive. Distributors are typically compensated at
      a
      commission rate of 40% to 50% and VARs are compensated at a commission rate
      of
      25% to 40% of the license revenue generated. The rates vary based upon their
      level of effort, resources assigned and products sold. The OEM arrangements
      include a commission structure similar to distributors and also may include
      specific fixed pricing for the number of “users” the product is licensed
      for.





**Accounts
      Receivable**


The
      Company continually reviews accounts for collectibility and establishes an
      allowance for doubtful accounts.  As of July 31, 2007 and 2006, there
      was an allowance for doubtful accounts of $5,000 and $16,000, respectively.
      On a
      periodic basis, the Company evaluates its accounts receivable and establishes
      an
      allowance for doubtful accounts, when deemed necessary, based on its history
      of
      past write-offs and collections and current credit conditions.




**Property
      and Equipment**


Property
      and equipment are stated at cost, less accumulated depreciation and
      amortization. Depreciation is provided using a straight-line method over the
      assets’ useful lives, ranging from three to five years.  Leasehold
      improvements are amortized over the lesser of the economic life of the asset,
      which is generally seven years, or the lease term.  Property and
      equipment is retired from the balance sheet when fully depreciated.




**Income
      Taxes**


Deferred
      tax assets and liabilities are recognized for the future tax consequences
      attributable to differences between the tax bases of assets and liabilities
      and
      their financial reporting amounts based on enacted tax laws and statutory tax
      rates expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled.  The effect on
      deferred taxes of a change in tax rates is recognized in income in the period
      that includes the enactment date.  Valuation allowances are
      established when necessary to reduce deferred tax assets to the amount more
      likely than not to be realized.












22


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**


**Fair
      Value of Financial Instruments**


The
      fair
      values of the Company’s financial instruments, consisting of cash, trade
      accounts receivable, accounts payable and accrued expenses, and deferred
      revenues approximate their carrying values in the financial statements because
      of the short-term maturity of these instruments.




**Goodwill,
      Other Intangible Assets and Other Long-Lived Assets**


The
      Company performs an evaluation of whether goodwill is impaired annually or
      when
      events occur or circumstances change that would more likely than not reduce
      the
      fair value of the asset below its carrying amount. Fair value is determined
      using market comparables for similar businesses or forecasts of discounted
      future cash flows. The Company also reviews other intangible assets, which
      are
      all currently amortized over their respective estimated lives, and other
      long-lived assets when indication of potential impairment exists, such as a
      significant reduction in cash flows associated with the assets, significant
      changes in the manner or our use of the assets or the strategy for our overall
      business and significant negative industry or economic trends. In addition,
      in
      all cases of an impairment review, we will re-evaluate the remaining useful
      life
      of the asset and modify it, as appropriate. Should the fair value of the
      Company's long-lived assets decline because of reduced operating performance,
      market declines, or other indicators of impairment, a charge to operations
      for
      impairment may be necessary.





**Research
      and Development Costs and Capitalized Software Development
      Costs**


Research
      and development costs consist of salaries and other costs related to the
      development and enhancement of computer software programs.  Software
      development costs are capitalized upon the establishment of product
      technological feasibility until the product is available for general release
      to
      the public.  The establishment of technological feasibility and the
      ongoing assessment of recoverability of capitalized software development costs
      require considerable judgment by management with respect to certain factors
      including, but not limited to, the timing of technological feasibility,
      anticipated future gross revenues, estimated economic life and changes in
      software and hardware technologies.  Software development costs not
      capitalized are expensed as research and development.





Amortization
      of capitalized software development costs is provided on a product-by-product
      basis at the greater of the amount computed using the ratio of current gross
      revenues for a product to the total of current and anticipated future gross
      revenues or the straight-line method over the remaining estimated economic
      life
      of the product.




Amortization
      commences once a product becomes available for sale to
      customers.  Generally, an original estimated economic life of five
      years is assigned to capitalized software development costs. Amortization
      expense charged to operations was $1,029,686 and $1,152,128 in fiscal 2007
      and
      2006, respectively.  Capitalized software development costs were net
      of accumulated amortization of $8,516,699 and $7,487,013 at July 31, 2007 and
      2006, respectively.  Estimated amortization expense for the succeeding
      five years is $1,025,850 in fiscal 2008, $811,274 in fiscal 2009, $587,044
      in
      fiscal 2010, $444,690 in fiscal 2011, and $228,269 in fiscal
      2012.   Capitalized software development costs are retired from
      the balance sheet when fully amortized.



























23


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**


**Income
      Per Share**


Income
      per common share (“EPS”) is computed by dividing net income by the weighted
      average number of common shares outstanding and diluted EPS reflects the
      potential dilution that could occur if securities or other contracts to issue
      common stock were exercised or converted into common stock or resulted in the
      issuance of common stock.


The
      following table sets forth the computation of basic and diluted income per
      share:





Year
                ended July 31,2007
            
            
            2006NumeratorNet
                income
            
            $
            936,852
            
            
            $
            584,564DenominatorWeighted
                average number  of common shares (basic)
            
            
            14,478,031
            
            
            
            14,470,436Effect
                of dilutive securities:Stock
                options
            
            
            988,654
            
            
            
            455,768Warrants
            
            
            19,554
            
            
            
            61,7371,008,208
            
            
            
            517,505Weighted
                average number  of common shares (diluted)
            
            
            15,486,239
            
            
            
            14,987,941Basic
                and diluted income per share
            
            $
            .06
            
            
            $
            .04





Potential
      common shares of 1,003,467 and 1,289,875 at July 31, 2007 and 2006,
      respectively, issueable upon exercise of stock options and warrants are excluded
      in computing basic and diluted net income per share for fiscal 2007 and 2006,
      as
      their effects would be anti-dilutive.





**Stock
      Options and Stock Based Compensation**


Effective
      August 1, 2006, Proginet adopted the provisions of Statement of Financial
      Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS
      No.123R) requiring that compensation cost relating to share-based payment
      transactions be recognized in the financial statements. The cost is measured
      at
      the grant date, based on the calculated fair value of the award, and is
      recognized as an expense over the employee’s requisite service period (generally
      the vesting period of the equity award). Prior to August 1, 2006, Proginet
      accounted for share-based compensation to employees in accordance with
      Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
      Employees” (APB No. 25), and related interpretations. Proginet also followed the
      disclosure requirements of Statement of Financial Accounting Standards No.
      123,
“Accounting for Stock-Based Compensation”, as amended by Statement of Financial
      Accounting Standards No. 148, “Accounting for Stock-Based
      Compensation-Transition and Disclosure”. Because the Company previously adopted
      the pro forma disclosure provisions of SFAS 123, it will recognize compensation
      cost relating to the unvested portion of awards granted prior to the date of
      adoption, using the same estimate of the grant-date fair value and the same
      attribution method used to determine the pro forma disclosures under SFAS 123,
      except that forfeitures rates will be estimated for all options, as required
      by
      SFAS 123R. The cumulative effect of applying the forfeiture rates is not
      material. Proginet adopted SFAS No. 123R using the modified prospective method
      and, accordingly, financial statement amounts for prior periods presented in
      this Form 10-KSB have not been restated to reflect the fair value method of
      recognizing compensation cost relating to stock options.





There
      was
      $7,500 of compensation cost related to non-qualified stock options recognized
      in
      general and administrative expense for the year ended July 31, 2007 relating
      to
      stock options granted prior to August 1, 2006. There is no additional
      compensation cost related to non-qualified stock options as all outstanding
      options granted prior to August 1, 2006 were vested as of October 31, 2006
      and
      no additional options were granted in Fiscal 2007.  No income tax
      benefit was recognized for the year ended July 31, 2007.





Under
      APB
      No. 25 there was no compensation cost recognized for our stock options awarded
      in the year ended July 31, 2006 as these stock options had an exercise price
      equal to the market value of the underlying stock at the grant date. The
      following table sets forth pro forma information as if compensation cost had
      been determined consistent with the requirements of SFAS No. 123.










24


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**


2006Net
                income as reported
            
            $
            584,564Deduct:
                Stock-based employee   compensation expense determined
                under fair value based method for all options
            
            
            (434,590
            )Net
                income as adjusted
            
            $
            149,974Net
                income per share:Basic
                and diluted-as reported
            
            $
            .04Basic
                and diluted-as adjusted
            
            $
            .01





The
      per share weighted average fair
      value of stock options granted during fiscal 2006 was $.62, on the date of
      grant
      using the Black-Scholes option-pricing model with the following weighted average
      assumptions: expected dividend yield of 0%; risk free interest rate of 3.99%
      ,
      expected stock volatility of 116% (based primarily on the Company’s historical
      stock prices), and an expected option life of approximately five
      years.  These assumptions are used for these calculations only and
      they do not necessarily represent an indication of management’s expectations of
      future developments.




**Use
      of Estimates**


The
      preparation of financial statements in conformity with US GAAP requires
      management to make estimates and assumptions that affect the reported amounts
      of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements, and the reported amounts of revenues
      and
      expenses during the reporting period.  Actual results could differ
      from those estimates.




**Statement
      of Cash Flows and Liquidity**


The
      Company considers all highly liquid debt instruments with a maturity of three
      months or less at the time of purchase to be cash equivalents.  There
      were no cash equivalents at July 31, 2007 and at July 31, 2006.  There
      were no income taxes paid during the years ended July 31, 2007 and
      2006.




**Recent
      Accounting Pronouncements**


In
      February 2007, the FASB issued Statement of Financial Accounting Standard No.
      159, *The Fair Value Option for Financial Assets and Financial
      Liabilities* (“FAS 159”). FAS 159 permits entities to choose to measure many
      financial instruments and certain other items at fair value that are not
      currently required to be measured at fair value and establishes presentation
      and
      disclosure requirements designed to facilitate comparisons between entities
      that
      choose different measurement attributes for similar types of assets and
      liabilities. Unrealized gains and losses on items for which the fair value
      option has been elected are reported in earnings. FAS 159 is effective for
      fiscal years beginning after November 15, 2007.  The Company has
      determined that the adoption of FAS 159 will not have a material impact on
      the
      Financial Statements.





In
      September 2006, the FASB issued SFAS No. 157, *Fair Value Measurements*
      (“FAS 157”).  FAS 157 defines fair value, establishes a framework for
      measuring fair value, and expands disclosures about fair value
      measurement.  This statement shall be effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      within those fiscal years. Earlier application is encouraged, provided that
      the
      reporting entity has not yet issued financial statements for that fiscal year,
      including any financial statements for an interim period within that fiscal
      year. The provisions of this statement should be applied prospectively as of
      the
      beginning of the fiscal year in which this statement is initially applied,
      except in some circumstances where the statement shall be applied
      retrospectively. The Company is currently evaluating the impact, if any, that
      the adoption of FAS 157 will have on the Company’s Financial
      Statements.











25


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**


The
      Financial Accounting Standards Board (FASB) issued interpretation no. 48,
*Accounting for Uncertainty in Income Taxes- an interpretation of FASB
      Statement No. 109*(FIN 48). FIN 48 clarifies the accounting for uncertainty
      in income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement No. 109, *Accounting for Income Taxes*(SFAS 109).
      This Interpretation prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return. This Interpretation also provides
      guidance on derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure, and transition. FIN 48 is effective for fiscal
      years beginning after December 15, 2006.   The
      Company has determined that the adoption of FIN 48 will not have a material
      impact on the Financial Statements.








**Reclassifications**


Certain
      prior year’s balances have been reclassified to conform to the current year’s
      presentation.







**(2)**
            **Acquisition**





On
      January 10, 2005, the Company entered into and closed an Asset Purchase
      Agreement (the “Agreement”) between the Company and Blockade Systems Corp.
      ("Blockade"), a privately-held Canadian identity management software
      corporation. Pursuant to the Agreement, Proginet acquired certain assets and
      the
      business of Blockade and assumed certain Blockade liabilities, for a cash
      purchase price of $2,389,643. The assets acquired by Proginet include
      complimentary intellectual property, customer contracts, equipment and other
      tangible personal property.  The Agreement also provides for
      contingent payments to Blockade, payable annually over three years following
      the
      acquisition, upon the acquired Blockade business meeting certain revenue
      thresholds, including up to a maximum contingent payment of $1,300,000 in
      aggregate for meeting either software or maintenance revenue thresholds and
      a
      50% contingent payment for net revenues generated from annual sales of identity
      management tokens, as defined in the Agreement.





In
      accordance with SFAS No. 141, “Business Combinations,” the acquisition has been
      accounted for under the purchase method of accounting. The total purchase price
      was allocated to the net tangible assets and intangible assets acquired based
      on
      estimates of fair value at the date of acquisition. The allocation of the total
      purchase price to the acquired technology and other intangible assets, including
      maintenance contracts, was based on management’s best estimate. The Company
      recorded $12,271 and $58,327 for the years ended July 31, 2007 and July 31,
      2006, respectively, for contingent payments to Blockade which were recorded
      as
      additional goodwill.  To date, the Company allocated $135,932 of the
      total purchase price to goodwill, which is amortizable over fifteen years for
      income tax purposes.







**(3)**
            **Purchased
                Software and Customer
                Relationships**




Purchased
      software and customer relationships include software and customer relationships
      purchased in connection with the Blockade acquisition for an original cost
      of
      $1,501,774 and $1,199,078, respectively.  Purchased software is net of
      accumulated amortization of $767,856 and $467,496 at July 31, 2007 and July
      31,
      2006, respectively. Customer relationships are net of accumulated amortization
      of $613,088 and $373,268 at July 31, 2007 and July 31, 2006,
      respectively.  Purchased software and customer relationships are being
      amortized over a period of five years. Amortization expense charged to
      operations for purchased software is $300,360 and $382,744 for the years ended
      July 31, 2007 and 2006, respectively. Amortization expense charged to operations
      for customer relationships is $239,820 for the years ended July 31, 2007 and
      2006. Software purchased in fiscal 2001 was fully amortized in the first quarter
      of fiscal 2006. Estimated amortization expense for customer relationships and
      purchased software for the succeeding four years is $239,820 and $300,360 for
      fiscal 2007, 2008, 2009 per year, $106,350 and $133,198 for fiscal 2010,
      respectively.














26


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**


**(4)**
            **Property
                and Equipment**




Property
      and equipment consist of the following at July 31:




**2007**
            
            
            **2006**Computer
                and other equipment
            
            $
            131,087
            
            
            $
            367,270Furniture
                and fixtures
            
            
            154,963
            
            
            
            154,963Leasehold
                improvements
            
            
            52,938
            
            
            
            121,966338,988
            
            
            
            644,199Less
                accumulated depreciation and amortization
            
            
            (171,055
            )
            
            
            (446,923
            )$
            167,933
            
            
            $
            197,276




Depreciation
      and amortization expense for the years ended July 31, 2007 and 2006 was $60,132
      and $87,662, respectively.  Property and equipment are retired from
      the balance sheet when fully depreciated.




**(5)**
            **Note
                Payable**





In
      connection with the acquisition of Blockade Systems Corp., the Company entered
      into a Promissory Note (the “Note”) on January 10, 2005 for $1,000,000 with a
      bank.  The Note was payable in 35 monthly installments of $27,775
      commencing February 10, 2005 with the balance of $27,779 due on February 10,
      2008. The Note bore interest at 1⁄2% above the Bank’s prime rate per annum and was
      collateralized by the accounts receivable and certain intellectual property
      of
      the Company. The amounts due under the Note would have become due and payable
      immediately upon the occurrence of customary events of default and also required
      the Company to maintain a “Minimum Debt Service Coverage Ratio”, as defined, on
      an annual basis.  The Company fully paid the Note on May 26,
      2006.





**(6)**
            **Credit
                Lines**




On
      October 4, 2006, the Company increased its line of credit with a bank from
      $550,000 to $1,000,000. The interest rate is variable based on the bank’s prime
      rate. The line of credit is collateralized by accounts receivable of the Company
      and expires September 24, 2007, at which time the Company intends to renew
      this
      line of credit.  As of July 31, 2007, the Company has not borrowed
      against this line of credit.















27


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**
  
 **(7)**
            **Income
                Taxes**




There
      was
      no current or deferred tax expense (benefit) recorded for the year ended July
      31, 2007 and 2006.  The following is a reconciliation of the tax
      provision with the amount obtained by applying the statutory U.S. Federal income
      tax rate to the income before income taxes:




**2007**
            
            
            **2006**Federal
                tax expense at statutory rate
            
            $
            317,000
            
            
            $
            200,000State
                tax expense at statutory rate
            
            
            54,000
            
            
            
            34,000Increases
                (reductions) in taxes due to:Nondeductible
                expenses
            
            
            6,000
            
            
            
            4,000Change
                in valuation allowance
            
            
            (377,000
            )
            
            
            (238,000
            )Income
                tax provision
            
            $
            -
            
            
            $
            -





At
      July
      31, 2007, the Company had available Federal NOL carry forwards amounting to
      approximately $5,538,000 and research and development tax credit carry forwards
      of approximately $332,000, which expire in fiscal years 2017 through
      2024.  Under current tax law, utilization of net operating losses will
      be restricted if an ownership change were to occur.  In addition,
      their use is limited to future earnings of the Company.




At
      July
      31, 2007, the Company had available federal net operating loss (NOL)
      carryforwards expiring in the following fiscal years:








Year
                ending July 31,
            
            Amount2017
            
            $
            652,0002018
            
            
            3,427,0002020
            
            
            645,0002023
            
            
            517,0002024
            
            
            297,000Total
                NOL carryforward
            
            $
            5,538,000























































28


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**




**2007**
            
            
            **2006**Deferred
                tax assetsNet
                operating loss carryforward
            
            $
            2,203,000
            
            
            $
            2,480,000Deferred
                revenue
            
            
            957,000
            
            
            
            1,024,000Bad
                debt
            
            
            2,000
            
            
            
            6,000Purchased
                software
            
            
            476,000
            
            
            
            572,000Property
                and equipment
            
            
            22,000
            
            
            
            14,000Research
                and development carryforward
            
            
            330,000
            
            
            
            332,000Stock
                based compensation
            
            
            32,000
            
            
            
            -Unbilled
                rent
            
            
            66,000
            
            
            
            64,000Gross
                deferred tax asset
            
            
            4,088,000
            
            
            
            4,492,000Valuation
                allowance
            
            
            (2,843,000
            )
            
            
            (3,220,000
            )Deferred
                tax asset
            
            
            1,245,000
            
            
            
            1,272,000Deferred
                tax liabilitiesCapitalized
                software development costs
            
            
            1,236,000
            
            
            
            1,272,000Accounts
                receivable
            
            
            1,000
            
            
            
            -Other
            
            
            8,000
            
            
            
            -Deferred
                tax liability
            
            
            1,245,000
            
            
            
            1,272,000Net
                deferred tax liability
            
            $
            -
            
            
            $
            -







At
      July
      31, 2007 and 2006, the Company has provided a valuation allowance against its
      net deferred tax assets as the Company does not believe realization is more
      likely than not in light of the Company’s operating results in recent years,
      however it is reasonably possible these estimates may change.






















29


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**
  
 **(8)**
            **Stock
                Purchase Warrants**




In
      the
      first quarter of fiscal 2000, Proginet entered into an agreement with Mallory
      Factor Inc. (“MFI”) for certain strategic corporate consulting services, which
      was terminated in fiscal 2001.  The terms of the agreement provided
      for granting of up to 500,000 warrants exercisable at a price of $.54 per share
      depending upon achievement of pre-determined goals.  The first 150,000
      warrants vested upon regulatory approval of the agreement and the next 100,000
      vested upon Proginet’s stock price reaching $1.25.  The next 250,000
      would have vested, if and only if, two criteria were satisfied: (i) Proginet’s
      achievement of a listing on the United States OTC:BB and (ii) Proginet’s stock
      price reaching established thresholds.




On
      December 28, 2001, the Company amended the warrant agreement.  The
      amendment required the exchange of the remaining 250,000 unvested warrants
      (the
“original warrants”), exercisable at $.54 per share for 125,000 fully vested
      warrants (the “exchanged warrants”) exercisable at $.22, which represented the
      fair market value of the Company’s common stock on the date of the amendment. On
      September 16, 2004, warrants to purchase 50,000 and 25,000 shares of common
      stock were exercised at a price of $.54 and $.22, respectively.  On
      September 22, 2004, warrants to purchase 100,000 shares of common stock were
      exercised at a price of $.54.  On January 21, 2005, warrants to
      purchase 100,000 shares of common stock were exercised at a price of $0.54
      per
      share.  On December 28, 2006, warrants to purchase 100,000 shares of
      common stock were exercised at a price of $0.22 per share. There are no
      remaining warrants outstanding.




**(9)**
            **Stock
                Option Plans**




Under
      the
      1997 Stock Option Plan and 1995 Equity Incentive Plan (the “prior Plans”), as
      amended, the Company had reserved an aggregate of 2,000,000 shares of common
      stock for grants to employees, directors and consultants.  In June
      2000, the Board of Directors authorized the increase of the number of shares
      reserved under the 1997 Stock Option Plan to 2,500,000.  In October
      2000, the Board of Directors approved the 2000 Stock Option Plan (the “2000
      Plan”) which limits the aggregate number of shares available under the 2000 Plan
      and the prior Plans to 2,500,000. At the Company’s Annual Stockholders’ Meeting
      on November 14, 2000, the stockholders approved the 2000 Plan and the increase
      in the number of shares reserved under the prior Plans, up to an aggregate
      of
      2,500,000. At the Company’s Annual Stockholder’s Meeting on November 22, 2005,
      the stockholders approved a 500,000 share increase in the number of shares
      reserved under the 2000 Plan, up to an aggregate of 3,000,000.  Grants
      under the 2000 Plan can be in the form of qualified or non-qualified stock
      options.  Qualified stock options (which are intended to qualify as
      incentive stock options under Section 422A of the United States Internal Revenue
      Code) may be awarded only to employees of the Company and must have an exercise
      price of not less than 100% of the fair market value of the Company’s common
      stock on the grant date (110% for qualified options granted to any 10% or
      greater stockholder of the Company).  The 2000 Plan provides that a
      committee selected by the Board of Directors of the Company will administer
      the
      2000 Plan and have full authority to determine the identity of the recipients
      of
      the options and the number of shares subject to each option.  The term
      of any option may be fixed by the committee but in no event shall exceed 10
      years from the date of grant.












30


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**




**Shares
                subject to option**
            
            **Exercise
                price per share**
            
            **Weighted
                average exercise price**Outstanding
                at August 1, 2005
            
            2,151,000
            
            $0.16
                - $1.85
            
            $0.77Granted
            
            602,000
            
            $0.75
            
            $0.75Exercised
            
            (8,000)
            
            $0.17
            
            $0.17Forfeited
            
            (55,000)
            
            $0.37
                - $1.50
            
            $1.26Outstanding
                at July 31, 2006
            
            2,690,000
            
            $0.16-$1.85
            
            $0.76Granted
            
            -
            
            -
            
            -Exercised
            
            (34,300)
            
            $0.16
            
            $0.16Forfeited
            
            (32,000)
            
            $1.50
            
            $1.50Outstanding
                at July 31, 2007
            
            2,623,700
            
            $0.16-$1.85
            
            $0.75








The
      following table summarizes information about employee stock options outstanding
      and exercisable at July 31, 2007:




**Options
                  outstanding and exercisable**Exercise
                  prices
              
              Number
                  outstanding at
                July
                  31, 2007
              
              Weighted
                  – average remaining contractual life (years)
              
              Weighted
                  -average exercise price
              
              Aggregate
                  Intrinsic Value$0.16
                  - $0.37
              
              478,200
              
              5
              
              $ 
                   0.26$0.43
                  - $0.68
              
              611,000
              
              3
              
              0.63$0.71
                  - $1.85
              
              1,534,500
              
              6
              
              0.962,623,700
              
              6
              
              $  
                  0.75
              
              $     1,850,853


All
      options have been granted with exercise prices at the market price of the stock
      at the date of the grant.









31


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**
  
 **(10)**
            **Restricted
                Stock Awards**




During
      the quarter ended January 31, 2007, the Company awarded 19,417 shares of
      restricted Proginet common stock to each of 4 out of 5 of its non-employee
      directors for their services as members of the Board of
      Directors.  The restricted stock awards contain time based vesting
      provisions and vest on August 21, 2007.  Additionally, all
      restrictions on the awards will lapse upon certain situations including death
      or
      disability of the director and a change in control of the
      Company.  The awards may not be sold, assigned or transferred during
      the restriction period and are subject to a repurchase right by the Company
      should the director cease to remain a director of the Company before the
      restricted awards are vested.




The
      fair
      value of the restricted stock award at the time of grant was $1.03 per share
      and
      is being expensed on a straight line basis in general and administrative
      expenses over their vesting period, 217 days.  Total compensation
      expense recognized related to the restricted stock awards amounts to $72,258
      for
      the twelve months ended July 31, 2007.  As of July 31, 2007, there was
      $7,742 of total unrecognized compensation related to nonvested restricted stock
      awards.




A
      summary
      of the status of the Company’s restricted stock awards as of July 31, 2007 and
      changes during Fiscal 2007 is presented below:






Nonvested
                Restricted Stock Awards
            
            Shares
            
            
            Weighted-Average
                Grant-Date Fair ValueNonvested
                at August 1, 2006
            
            
            -
            
            
            
            -Granted
            
            
            77,668
            
            
            $
            1.03Vested
            
            
            -
            
            
            
            -Forfeited
            
            
            -
            
            
            
            -Nonvested
                at July 31, 2007
            
            
            77,668
            
            
            $
            1.03






























32


**PROGINET
        CORPORATION**
  **NOTES
        TO FINANCIAL STATEMENTS**
  **JULY
        31, 2007 AND 2006**
 
 **(11)**
            **Commitments
                and Contingencies**




**Leases**


The
      Company leases office space under a noncancelable operating leases expiring
      through fiscal 2013 and certain computer equipment for technical support efforts
      and administrative purposes.  The following is a schedule of future
      minimum payments, by year and in the aggregate, under noncancelable operating
      leases with initial or remaining terms of one year or more at July 31,
      2007:




Year
                ending July 31,
            
            Operating
                leases2008
            
            $
            318,6942009
            
            
            328,2072010
            
            
            330,2362011
            
            
            301,3402012
            
            
            311,887Thereafter
            
            
            267,920Total
                minimum lease payments
            
            $
            1,858,284






Rental
      expense charged to operations was $314,321 and $268,098 in the fiscal years
      ended July 31, 2007 and 2006, respectively.




**Litigation
      and Claims**


The
      Company is involved in various claims and legal actions in the ordinary course
      of business.  It is the opinion of Management that the outcome of such
      litigation will not have a material adverse effect on the Company’s financial
      condition and results of operations.




**(12)**
            **Concentration
                of Risks**




Software
      license revenues for the years ended July 31, 2007 and 2006 included sales
      in
      foreign countries of approximately $1,256,622 and $1,249,741
      respectively.  In fiscal 2007, two customers represented approximately
      35% of total software license revenue.  Included in software license
      revenues in fiscal 2006 were revenues generated under one OEM arrangement
      aggregating 11% of total software license revenues and revenues generated from
      a
      customer aggregating 16% of total software license revenues. No one customer
      represented 10% or more of total revenues in the years ended July 31, 2007
      and
      2006.




At
      July
      31, 2007, three customers amounted to approximately 61% of total trade accounts
      receivable. At July 31, 2006, one customer accounted for approximately 36%
      of
      total trade accounts receivables.




**(13)**
            **Retirement
                Plan**




The
      Company maintains a 401(k) savings plan which covers all full-time employees.
      Employees become eligible for participation in the plan after one year of
      service and attainment of age twenty-one. Under the plan, employees may
      contribute up to 100% of their salary to the plan, subject to the dollar limit
      set by law. The Company may match up to 100%, as determined by the Board of
      Directors. The Company’s contributions were $91,084 and $86,784 for the years
      ended July 31, 2007 and 2006, respectively.












33





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




None.







**Item
                8A.**
            **Controls
                and Procedures**




**Evaluation
      of disclosure controls and procedures**




(a)
            Evaluation
                of Disclosure Controls and
                Procedures




Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of
      1934), as of the end of the period covered by this Annual Report on Form
      10-KSB.  Based on that evaluation, our Chief Executive Officer and
      Chief Financial Officer concluded that our disclosure controls and procedures
      are effective to ensure that information we are required to disclose in reports
      that we file or submit under the Securities Exchange Act of 1934 (i) is
      recorded, processed, summarized and reported within the times periods specified
      in the Securities and Exchange Commission rules and forms and (ii) is
      accumulated and communicated to our management, including our Chief Executive
      Officer and Chief Financial Officer, as appropriate to allow timely decisions
      regarding required disclosure.




(b)    Changes
      in internal controls over financial reporting




There
      were no changes in our internal controls over financial reporting that occurred
      during the Company’s most recently completed fiscal quarter that has materially
      affected, or is reasonably likely to materially affect, our internal control
      over financial reporting.




**Item
                8B.**
            **Other
                Information**




None.






























34





**Part
      III**




**Item
                9.**
            **Directors,
                Executive Officers, Promoters and Control Persons; Compliance with
                Section
                16(a) of the Exchange Act**




Except
      as
      set forth below, the information called for by this Item is included under
      the
      captions “Information about Nominees”, Information about Non-Director Executive
      Officers”, “Audit Committee” and “Section 16(a) Beneficial Ownership Reporting
      Compliance” in the Proxy Statement for the Annual Meeting of Stockholders to be
      held on November 20, 2007 and is incorporated herein by reference.




Code
      of
      Ethics




The
      Company has adopted a “Code of Business Conduct and Ethics” that applies to all
      Proginet employees and members of its Board of Directors, including Proginet’s
      principal executive officer, principal financial officer, principal accounting
      officer or controller, or persons performing similar functions.  A
      copy of the Company’s Code of Business Conduct and Ethics was attached as an
      exhibit to the annual report on Form 10-KSB for the year ended July 31,
      2004.  The Company posts the Code of Business Conduct and Ethics and
      related amendments or waivers, if any, on its website at
      www.proginet.com.  Information contained on the Company’s website is
      not a part of this report.  Copies of the Company’s Code of Business
      Conduct and Ethics will be provided free of charge upon written request to
      Proginet Corporation, 200 Garden City Plaza, Garden City, New York 11530,
      Attention:  Debra A. DiMaria, CFO.




**Item
                10.**
            **Executive
                Compensation**




The
      information called for by this Item is set forth under the caption “Executive
      Compensation” in the Proxy Statement for the Annual Meeting of Stockholders to
      be held on November 20, 2007, and is incorporated herein by
      reference.




**Item
                11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters**




The
      information called for by this Item is set forth under the
      caption “Security Ownership of Certain Beneficial Owners and Management” in the
      Proxy Statement for the Annual Meeting of Stockholders to be held on November
      20, 2007 and is incorporated herein by reference.




**Item
                12.**
            **Certain
                Relationships and Related Transactions and Director
                Independence**




The
      information called for by this Item is set forth under the caption “Certain
      Relationships and Related Transactions” in the Proxy Statement for the Annual
      Meeting of Stockholders to be held on November 20, 2007 and is incorporated
      herein by reference.
































35




**Item
                13.**
            **Exhibits**




Unless
      otherwise noted, the exhibits below are incorporated by reference to the
      Company's Registration Statement on Form 10-SB/A, filed with the SEC on July
      18,
      2000:




**Exhibit
                No.**
            **Exhibit
                Name**3(i)
            Certificate
                of Incorporation3(i)(a)
            Certificate
                of Amendment of Certificate of Incorporation dated December 2,
                19963(ii)
            Amended
                and Restated Bylaws of the Registrant (II)4.3(i)
            Warrant
                Agreement dated October 22, 1999 by the Company and Mallory Factor
                (I)4.3(ii)
            Amendment
                to Warrant Agreement dated October 22, 22, 1999 between Proginet
                Corporation and Mallory Factor Inc (I)4.10
            Form
                of Specimen Stock Certificate (I)10.1
            Form
                of Employee Confidential Information and Non-Competition
                Agreement10.1
            Blockade
                Agreement dated January 10, 2005 (V)10.2
            Form
                of Confidential Information and Non-Competition Agreement For
                Consultants10.3
            Investor
                Relations Agreement with Mallory Factor Inc. dated September 22,
                199910.4
            Form
                of Software License Agreement10.5
            Form
                of Distributor Agreement10.6
            Form
                of OEM Agreement10.7
            Management
                Continuity Agreement - Kevin M. Kelly, Chief Executive Officer and
                President  (III)+10.8
            Management
                Continuity Agreement - Debra A. DiMaria, Chief Financial Officer
                and
                Corporate Secretary  (III)+10.9
            Management
                Continuity Agreement – Arne Johnson, Senior Vice President for Strategic
                Planning & Alliances (III)+10.10
            Management
                Continuity Agreement – Thomas Bauer, Chief Technology Officer
                (III)+10.11
            Management
                Continuity Agreement – Kevin Bohan, Chief Information Officer
                (III)+10.12
            Independent
                Directors Stock Option Plan, amended and restated as of February
                21, 1995
                (VI)+10.13
            1995
                Equity Incentive Plan, amended and restated as of December 5, 1995
                (VI)
                +10.14
            Form
                of Incentive Stock Option Agreement (VI) +10.16
            Consulting
                Agreement between the Registrant and Mallory Factor, Inc., dated
                September
                22, 1999 (VI)10.17
            1997
                Stock Option Plan, as amended and restated as of November 14, 2000
                (VI)+10.18
            2000
                Stock Option Plan as amended September 26, 2005 (IV)+99.1
            Code
                of Business Conduct and Ethics (III)23
            Consent
                of BDO Seidman, LLP (VII)31.1
            Rule
                13a-14(a)/15d-14(a) Certification Section 302 Certification (Chief
                Executive Officer) (VII)31.2
            Rule
                13a-14(a)/15d-14(a) Certification Section 302 Certification (Chief
                Financial Officer) (VII)32.1
            Section
                1350 Certification of Chief Executive Officer (VII)32.2
            Section
                1350 Certification of Chief Financial Officer
                (VII)





(I)
            Incorporated
                by reference to the Company’s Form SB-2 Amendment No. 1 filed with SEC on
                June 22, 2005


(II)
            Incorporated
                by reference to the Company’s Form 10-KSB filed with the SEC on September
                18, 2002


(III)
            Incorporated
                by reference to the Company’s Form 10-KSB filed with the SEC on October 3,
                2003


(IV)
            Incorporated
                by reference to the Company’s Proxy Statement dated October 3,
                2005


(V)
            Incorporated
                by reference to the Company's form 8-K filed with SEC on January
                14,
                2005


(VI)
            Incorporated
                by reference to the Company’s form 10-SB/12(g) filed with the SEC on March
                29, 2000


(VII)
            Filed
                herewith


+
            Management
                contract or compensatory plan








36





**Item
                14.**
            **Principal
                Accountant Fees and
                Services**




The
      information called for by this item is set forth under the caption “Principal
      Accountant Fees and Services” in the Proxy Statement for the Annual Meeting of
      Stockholders to be held on November 20, 2007 and is incorporated herein by
      reference.







**SIGNATURES**




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







PROGINET
                CORPORATIONBy:
            /s/Kevin
                M.
                KellyKevin
                M. KellyPresident
                and Chief Executive OfficerDate:
            September
                14, 2007





In
      accordance with the Exchange Act of 1934, this report has been signed below
      by
      the following persons on behalf of the registrant and in the capacities and
      on
      the dates indicated.





**NAME**
            
            **TITLE**
            
            **DATE***/s/*Kevin M. Kelly
              Kevin
                M. Kelly
            
            President,
                Chief Executive Officer and Director
            
            September
                14, 2007*/s/*Debra A. DiMaria
              Debra
                A. DiMaria
            
            Corporate
                Secretary and Chief Financial and Accounting Officer
            
            September
                14, 2007*/s/*John C. Daily
              John
                C. Daily
            
            Chairman
            
            September
                14, 2007*/s/*Stephen Sternbach
              Stephen
                Sternbach
            
            Director
            
            September
                14, 2007*/s/*Dr. E. Kelly Hyslop
              Dr.
                E. Kelly Hyslop
            
            Director
            
            September
                14, 2007*/s/*William Loscalzo
              William
                Loscalzo
            
            Director
            
            September
                14, 2007*/s/*George T. Hawes
              George
                T. Hawes
            
            Director
            
            September
                14, 2007







37