**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 June 30, 2007


Commission
      file number 0-24001









**WHERIFY
      WIRELESS, INC.**


(Name
      of
      small business issuer in its charter)




**Delaware**
            
            **76-0552098**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer
              Identification
                No.)




**901
      Mariners Island Blvd.** **,
      Suite** **300**


**San
      Mateo** **,
      California** **94404**


**Tel:
      (650)** **524-3000**


(Address,
      including zip code, and telephone number, including area code, of registrant’s
      principal executive offices)







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




Securities
      registered pursuant to Section 12(g) of the Act:




**Common
      Stock, $.01 Par Value**


Title
      of
      Each Class




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





Check
      whether the issuer (1) has filed all reports to be filed by Section 13 or 15(d)
      of the Exchange Act during the past 12 months (or for such shorter period that
      the registrant was required to file such reports), and (2) has been subject
      to
      such filing requirements for the past 90 days. Yes x  No
o




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. ྑ




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




The
      issuer’s revenues for the fiscal year ended June 30, 2007 were
      $884,710





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. (See definition of affiliate in Rule
      12b-2 of the Exchange Act.) The aggregate market value of the voting and
      non-voting common equity on September 28, 2007 was approximately $9,839,833,
      based on the closing price of such stock of $0.115 per share on such
      date.




State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. Number of shares Common Stock, $.01 par
      value, outstanding as of September 28, 2007 was 75,289,793.




Transitional
      Small Business Disclosure format (Check one): Yes  o   No x







**PART
      I**




**Items
      1 and 2. Description of Business and Properties.**




**INFORMATION
      REGARDING FORWARD-LOOKING STATEMENTS**




In
      addition to historical information, this report contains predictions, estimates
      and other forward-looking statements that relate to future events or our future
      financial performance. These statements involve known and unknown risks,
      uncertainties and other factors that may cause our actual results, levels of
      activity, performance or achievements to be materially different from any future
      results, levels of activity, performance or achievements expressed or implied
      by
      the forward-looking statements. These risks and other factors include those
      listed under “Risk Factors” and elsewhere in this report, and some of which we
      may not know. In some cases, you can identify forward-looking statements by
      terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of
      these terms or other comparable terminology.




Forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      that
      may cause our actual results, performance or achievements to be materially
      different from any future results, performances or achievements expressed or
      implied by the forward-looking statements. We discuss many of these risks in
      this report in greater detail under the heading “Risk Factors.” Given these
      uncertainties, you should not place undue reliance on these forward-looking
      statements. Also, forward-looking statements represent our management’s beliefs
      and assumptions only as of the date of this report. You should read this report
      and the documents that we reference in this report and have filed as exhibits
      to
      the report completely and with the understanding that our actual future results
      may be materially different from what we expect.




Except
      as
      required by law, we assume no obligation to update these forward-looking
      statements publicly, or to update the reasons actual results could differ
      materially from those anticipated in these forward-looking statements, even
      if
      new information becomes available in the future. References in this annual
      report to “we,” “us,” “or,” “the company,” or “Wherify” refer to Wherify
      Wireless, Inc., a Delaware corporation, and its subsidiaries, unless the
      content requires otherwise.




**General**




Wherify
      Wireless, Inc. (“Wherify” or the “Company”) is a pioneering developer of
      patented wireless location products and services for family safety and business
      communications. Our portfolio of intellectual property includes our proprietary
      integration of the US Government’s Global Positioning System (GPS) and wireless
      communication technologies; our patented back-end location service; the
      WherifoneTM GPS locator phone which provides real-time location information and
      lets families with pre-teens, seniors, or those with special medical needs,
      stay
      connected and in contact with each other **** Our
      name,
      Wherify Wireless, reflects our mission and objective: verify the location of
      loved ones or possessions of value through wireless technology.




On
      April
      14, 2004, Wherify (formerly known as IQ Biometrix, Inc.), a
      transitory wholly owned special purpose acquisition subsidiary of Wherify,
      and Wherify California, Inc., a California corporation (formerly known as
      Wherify Wireless, Inc.) (“Wherify California”) entered into an Agreement and
      Plan of Merger pursuant to which the  transitory wholly owned
      subsidiary merged with and into Wherify California, with Wherify California
      surviving as a wholly owned subsidiary of Wherify. Both Wherify and Wherify
      California received stockholder approval for the merger at special meetings
      held
      on July 19, 2005, and the merger was closed on July 21, 2005. Subsequent to
      the merger, Wherify (which was then known as “IQ Biometrix, Inc.”) changed its
      name to “Wherify Wireless, Inc.”, and shortly thereafter Wherify California
      (which was then known as “Wherify Wireless, Inc.”) changed its name to “Wherify
      California, Inc.” Wherify was originally the result of a merger of JVWeb, Inc.,
      a Delaware corporation, and IQ Biometrix California, Inc., a California
      corporation. JVWeb was incorporated on October 28, 1997. Wherify California
      was
      incorporated in and has been in existence since March of 1998, and was
      founded to develop products and services to compete in the wireless
      location-based services (“WLBS”) market.




**DESCRIPTION
      OF OUR WIRELESS LOCATION PRODUCTS BUSINESS**




**General**




We
      have
      developed a comprehensive, end-to-end location system, which includes both
      the
      Wherifone (cell phone) utilizing a proprietary Location Service Center (“LSC”)
      for communications with the Wherifone. Our tested and proven location system
      enables subscribers to obtain accurate location information for loved-ones
      or
      valuable property directly through the Internet or over any phone, 24
      hours-a-day, seven days a week. Two-way voice communications enabled in the
      hand
      held unit will allow direct voice communication between the subscriber and a
      loved one or care giver.




2




Our
      product combines the power of enhanced GPS and tri-band GSM technologies. This
      product allows a remote user to not only “ping” the device to receive location
      information, but also to make a call to the device to speak directly with the
      device user. In addition, the device user can make direct calls through the
      device and also call 911 in case of emergency.




We
      can
      provide location and tracking information in real-time to customers using the
      product for both routine and emergency situations through Wherify’s 24x7
      Location Service Center and carrier-class automatic call distribution equipment
      that is connected to existing telephony and internet infrastructures. Following
      purchase and service activation, a subscriber may determine the locations of
      the
      product either by telephoning a toll-free number or through the
      Internet.




The
      Location Service Center and automatic call distribution equipment are fully
      equipped with an off-the-shelf database, computer and telephony call
      distribution and credit card billing application software. Subscriber telephony
      and Internet communications are routed through our-proprietary, carrier-class,
      and application-specific interface software.




Our
      product addresses the children’s, Alzheimer’s patients, seniors, disabled, and
      teenager markets. Following purchase and service activation, a subscriber may
      determine the locations of the product either by telephoning a toll-free number
      or through the Internet. Our hardware products are essentially enablers of
      our
      location service system. We expect that the majority of our gross margin after
      subscriber buildup will come from recurring service revenues. Our handheld
      unit
      retails for approximately $99.95 in the domestic market. Monthly recurring
      service revenues will vary based upon the selected monthly rate plans. We expect
      that standard rate plans will range from $14.95 to $64.95 per month.




We
      believe our GSM/ GPS cell phone (“Wherifone”), allows us to further penetrate
      the international market. This product is in production, has passed all three
      international GSM Industry certifications (PCS Type Certification Review Board,
      Full Type Approval, and Global Certification Forum) and has passed several
      international mobile operators final network approvals. **** For
      our
      next generation products, we plan to partner with strategic “market makers” who
      would work together with us to market and distribute specific products through
      their channels.




Additionally,
      we expect that the Wherifone will allow for global expansion. We intend to
      distribute this product through international carriers.




**Industry
      Overview**




The
                wireless location-based services market is a relatively new industry.
                Following is a brief description of some of its
                characteristics:·
            Prices
                of enabling “location” technologies (GPS, wireless connectivity, Internet)
                and products are falling while their capabilities are
                increasing;·
            Availability
                and deployment of higher speed wireless data networks (GPRS, EDGE,
                WCDMA)
                and products are emerging;·
            The
                Internet has provided the ability to host application services eliminating
                the technical infrastructure and management expense;·
            Network
                operators and wireless carriers are seeking new, higher margin services
                to
                offset declining voice access revenues; and·
            Consumer
                awareness and interest is increasing in personal location safety,
                vehicle
                tracking, roadside safety and anti-theft
                services.




**Our
      Strategy for Location Based Services Business**




Our
      objective is to be the leading provider of wireless location services by
      pioneering the convergence of state-of-the-art enhanced global positioning,
      wireless communications and other propriety software that empowers people and
      businesses to locate loved-ones or personal property and bring location
      information to cellular and GPS devices.




As
      Wherify has shown with the launch of the Wherifone, there is a need for a
      sophisticated software platform to control the integration of location
      information from a GPS or cellular device and the applications required by
      today’s businesses and safety conscience consumers. Our future business entails
      not only selling the Wherifone but also licensing additional devices and
      applications requiring location, to utilize our Location Based Services
      platform.




3




The Wherifone
      is positioned as a children’s first cell phone, with the location features that
      a parent needs to keep tabs on their 6-14 year old child. We believe the
      adult demographic segments offering the greatest opportunities are Alzheimer’s
      patients, seniors (65+ years of age), and active adults and teens. One primary
      application is for “active adults”: those people who participate in recreational
      activities (such as boating, jogging, hiking, camping) that could put them
      at
      risk of getting lost, being injured or becoming a victim of a violent crime.
      Other potential users include working women, teens, and challenged adults.




**Forge
      Strategic Relationships**




Establishing
      and building United States and international partnerships, licensing agreements
      for our Location Based Services platform, and carrier relationships utilizing
      our technologies will facilitate efficient entry into new markets. Forging
      strategic partnerships including co-branding, distribution and marketing with
      telecommunication companies, wireless carriers, national retailers, major
      consumer brand companies and mass media will align our sales and marketing
      efforts with established sales channels. Our locators were originally designed
      by Flextronics, Inc., and subsequently have been updated with the latest GPS
      chipset and radio module technology. Jabil Circuit, Inc. is currently
      manufacturing the product. Jabil Circuit is a respected tier one worldwide
      contract manufacturer.




**Leverage
      First Mover Advantage**




We
      believe we are the first company to successfully design and develop a low-cost,
      GSM/GPS cellular phone for the consumer and business markets using existing
      wireless and GPS “chip” sets, networks and technologies. We believe that
      leveraging existing third-party, contract manufacturing, application software
      packages and data/call center infrastructures will minimize our costs and
      time-to-market.




**Wireless
      Location Segment Products and Services**




We
      have
      developed a comprehensive, miniaturized, end-to-end personal location system,
      which includes both a hand held locator (hardware) and a proprietary Location
      Service Center (software). Our tested and proven technology will enable people
      to obtain accurate location information for loved-ones or valuable property
      directly through the Internet or over any phone, 24 hours-a-day, seven days
      a
      week. Having developed the first phone with enhanced GPS with GSM technology,
      we
      plan to leverage our experience with this technology and license our
      location-based services (LBS) software platform for a wide variety of cellular
      devices and cellular applications that require location to complete their
      product offering. We believe our LBS software platform will be the first to
      serve the GSM/GPS location marketplace. By facilitating a wide range of devices
      and applications we believe we are in an excellent position to benefit from
      the
      emerging location-based services marketplace around the world. Our LBS platform
      potentially could provide location information to a wide range of devices
      connected through the worldwide GSM networks to Wherify’s Location Service
      Center. The searching party will be given the user’s exact location through the
      Internet via a map interface on Wherify’s web site or via one of our business
      partner’s applications.





Wherify’s
      proprietary Location Service Center provides the complete array of back-end
      services to subscribers and business partners’ applications. Using the Wherifone
      as an example of a device using the Wherify LBS platform and the family finder
      as the application we can examine how the location information is provided
      to
      the client. The user experience begins with the selection of a service plan
      and
      activation of service. Customers then begin by establishing their personal
      pass
      code and configuring their Wherifone (for example by programming the five
      one-touch dialing buttons for out-bound calling). A subscriber can have more
      than one product included on his or her account, and can set up individual
      profiles for each product.




The
      subscriber initiates requests for information on their product’s location
      through the Internet via Wherify’s web site Wherify’s Location Service Center
      (“LSC”) automatically contacts the product via the local cellular communications
      infrastructure, requesting the product’s location. The Wherifone utilizes
      GSM/GPRS technology and transmits on a GSM network. The Wherifone locator
      utilizes tri-band GSM technology.




The
      product’s GPS electronics, utilizing advanced “weak signal server-enhanced”
technology, will provide rapid location identification. With this technology,
      the most current satellite data (“Ephemeris data”) is delivered to the product
      during the request for location. This greatly enhances GPS performance in
      less-than-ideal circumstances (i.e. urban canyons, deep building interiors,
      and
      other difficult areas), enabling the product to get a location from GPS
      satellites ten times faster (10 seconds versus 100 seconds) than with Standard
      GPS. The cellular tower ID is also used to augment the location information
      provided.




Having
      determined its location, the product then communicates the location information
      to the Location Service Center. The location information is then passed to
      the
      subscriber via the Internet (with a map and closest street address) or over
      the
      phone (via live operator). In most cases, the entire process takes less than
      60
      seconds. A copy of the event is stored in the customer’s files.




4




The
      accuracy of the location information provided by Wherify products will be within
      a few feet in optimum conditions, significantly better than that required by
      FCC
      (accuracy to be within a radius of 150 feet 67% of the time).




In
      addition to these basic location reporting capabilities, the Location Service
      Center also offers several additional features to subscribers:





*Breadcrumbing.* The
      subscriber is able to get a report on a series of location events through
“breadcrumbing.” With this feature, the user can determine the location history
      of the user. Parents may want to use this feature to confirm the whereabouts
      of
      their child if he or she is in the care of a guardian and has several
      appointments throughout the day. To utilize this feature, the subscriber
      predetermines the number of locations he or she wishes to track, as well as
      the
      desired time interval between locations (i.e. Identify a total of 12 locations,
      one every 15 minutes). Once all locations are identified, a report will be
      automatically issued. The subscriber can then request a mapping of the desired
      locations.





*Temporary
      Guardians* .
      Through
      the Location Service Center, subscribers can set-up a “temporary guardian”, who
      will have access to location features only (no account management functions).
      Parents may want to use this feature when their child is visiting a relative
      and
      they want that person to be able to determine the child’s location.




**Technology**




Our
      wireless products are wireless location technology-independent. Consequently,
      whether the various wireless operators choose to use GPS, AOA, TDOA, adaptive
      antenna arrays or multipath fingerprint location systems, Wherify’s product and
      Location Service Center is equally effective. Our current product design
      utilizes tri-band GSM telephony chip sets and can be adapted in the future
      to
      the then prevalent wireless technology, be it 2.5G or 3G. The product’s GPS
      electronics, utilizing advanced “weak signal server-enhanced” technology will
      provide rapid location identification.




Each
      product is programmed with a unique I.D. number and uses standard cellular
      frequencies to communicate its location. The product is also programmed with
      a
      unique subscriber I.D. number. This allows the owner to subscribe to the service
      needed.




We
      have
      developed a “carrier-class” architecture and facility to create and manage our
      proprietary Location Service Center (reliable to 99.999%). The Local Service
      Center runs on redundant off-the-shelf servers. This enables cost-efficient
      expansion, without the need for application code changes.




**Sales**




Our
      Wherifone product retails for less than $100.00 in the domestic market, with
      monthly service plans ranging from $14.95 to $64.95. We intend to use several
      different sales channels for our products.




*Direct
      Sales Channel* .
      We
      continue to sell the Wherifone both directly and through our retail sales
      partners in the USA and through our international business
      partners.




*Retail
      Sales Channel* .
      To
      achieve our volume and awareness goals, our sales efforts are focused on gaining
      distribution through national consumer stores and various security companies,
      as
      well as regional and local retailers. Wherify intends that the Wherifone product
      line will be distributed through retail stores such as our nationwide
      distribution agreements with Toys R Us **** and
      Sharper Image.




*Business
      Development Sales Channel* .
      To
      build market share and profitability, we are working directly with international
      business partners. We believe these broad distribution channels, along with
      the
      retail and the direct-to-consumer channels, will create opportunities for us
      to
      pursue a diverse range of consumers globally.




Within
      our business-to-business channel, we also plan to target several vertical
      markets, such as the security market and the cellular carrier’s subscriber base.
      Security service firms, such as ADT, have an established base of consumers
      with
      heightened security concerns. We intend to leverage their customer base for
      increased market share.





**Manufacturing**




Presently,
      we outsource all assembly, testing and supply chain functions in order to reduce
      fixed overhead and personnel costs, thus providing flexibility in meeting market
      demand and to recognize economies of scale that a larger organization can
      provide. We contracted with Flextronics for the design and certain
      pre-production services of our Wherifone product line. We have contracted with
      Jabil Circuits, Inc. for the manufacturing of our current Wherifone product
      line. As of September 28, 2007 we have received approximately 22,000 units
      of
      our current GSM Wherifone product from the manufacturer, and we expect to have
      received a total of approximately 30,000 units of our current GSM Wherifone
      product from the manufacturer by the end of November 2007. Our manufacturer
      requires a letter of credit for the full amount of the goods prior to the
      commencement of any additional manufacturing. ****




5




**Competition**




The
      wireless location-based services market is a relatively new and immature
      industry, and we expect it to become highly competitive. There are substantial
      barriers to entry, but competition from existing competitors and new market
      entrants will intensify in the future. Current and potential competitors in
      our
      markets include, but are not limited to the following: uLocate Communications,
      Autodesk, and WaveMarket on the LBS platform side and, Verizon, FireFly and
      Disney on the phone side. All of these companies are focused on the CDMA
      technology.




We
      believe that we hold a distinct competitive advantage over all identified
      potential direct competitors. In addition to its smaller size and superior
      performance and features, only the Wherifone is designed to have enhanced GPS
      with GPS/GPSR technology with a very small form factor. Additionally, the
      accuracy of the technology is estimated to be 1-20 meters. The competing
      technology in GSM is estimated to give 100-300 meter accuracy **.** The
      Wherifone is also designed to control the outbound call of the user which is
      expected to give the company an advantage to other technologies.




**Inventory,
      Raw Materials, Right of Return and Seasonality**




We
      expect
      to carry reasonable amounts of inventory in distribution centers in order to
      meet customer delivery requirements in a manner consistent with industry
      standards. The terms of each strategic partner relationship will determine
      the
      payment terms that we will receive from our customers. These will likely vary
      by
      customer.




Energy
      necessary for the out-sourced manufacturing facilities consists of electricity,
      natural gas and gasoline, all of which are currently in generally adequate
      supply. The facilities contain automation and, therefore, require a reliable
      source of electrical power. Labor is generally available in reasonable proximity
      to the manufacturing facilities. Difficulties in obtaining any of the
      aforementioned items could affect our results. Our manufacturer requires
      adequate supplies of a large number of components. If sufficient supplies of
      these components are not available, we may not be able to manufacture a
      sufficient number of the Wherifone product to meet expected demand which could
      have a significantly adverse affect on our business.




We
      permit
      returns under certain limited circumstances, generally pursuant to warranties
      which we believe will be similar to current industry practice.




The
      wireless communications industry typically experiences increased sales in the
      fourth calendar quarter and lower sales in the first calendar quarter of each
      year. For example, sales of wireless handsets, two-way radios and related
      products increase during the year-end holiday season. We believe that it is
      likely that we will experience a similar seasonality in the demand for the
      Wherifone product.




**Intellectual
      Property**




We
      rely
      on a combination of copyright, trademark, trade secret and other intellectual
      property laws, nondisclosure agreements and other protective measures to protect
      our proprietary rights in our wireless location products business. Our first
      patent in this business segment was approved by the United States Patent Office
      on December 7, 1998, and was issued on May 18, 1999. Additional patents have
      been issued on March 26, 2002 and May 14, 2002. Other patents, filed in June
      2003 and March 2005, are pending as of June 30, 2007. We rely on third-party
      licensors and other vendors for patented hardware and/or software license rights
      in technology that are incorporated into and are necessary for the operation
      and
      functionality of our products.





On
      January 5, 2007, Westport Office Park, LLC (“Westport”), filed an Entry of
      Stipulation and Agreement allowing entry of a stipulated judgment ("Judgment")
      against Wherify Wireless, Inc, a California Corporation (“Wherify California”),
      in the Superior Court of California for San Mateo County.  The judgment
      extinguished Wherify California's right to possession of certain leased premises
      that Wherify California occupied as its principal offices in favor of Westport,
      and awarded Westport approximately $1.1 million for then-outstanding amounts
      due
      and owing under the terms of the lease and certain other owed amounts.  On
      January 17, 2007, Wherify California vacated the leased premises.




On
      March
      20, 2007, Westport obtained a writ of execution to enforce the judgment against
      the assets of Wherify California in the amount of $1,405,485.75.  On March
      30, 2007, Westport recorded a judgment lien with the United States Patent and
      Trademark Office on two patents held in name of Wherify California.  The
      specific patents are U.S. Patent Application 11/126,827 and U.S. Design Patent
      D526985. One appropriate means to remove a judgment lien is to pay the amount
      due the creditor. The Company has not, however, determined whether the lien
      was
      properly recorded and is still exploring legal options.




6





In
      addition, Westport recently undertook efforts to enforce its judgment against
      the assets of Wherify Delaware. Wherify Delaware is vigorously resisting these
      efforts. Specifically, Westport served a writ of execution on account funds
      that
      Wherify Delaware maintained at Wells Fargo Bank. On application by Wherify
      Delaware, the Superior Court recently ruled that the Westport judgment is
      limited to Wherify California only. In response to this ruling, Wherify Delaware
      filed a third party claim, which is scheduled for hearing on November 26, 2007,
      to obtain the return of the Wells Fargo accounts funds.




**GENERAL**




**Facilities**




Wherify’s
      headquarters is located in approximately 7,000 square feet in one facility
      in
      San Mateo, California under a sublease which expires in May 2008. Our
      headquarters houses all of our employees. Our lease payments are $13,790 per
      month. In management’s opinion, the leased premises are adequately
      insured.




**Working
      Capital**




As
      of
      June 30, 2007, we had cash and cash equivalents of approximately $2.1 million,
      inventory of approximately $2.3 million, other current assets of approximately
      $0.5 million and current liabilities of approximately $12.7 million, excluding
      the non-cash portion of fair value of derivatives of approximately $3.5 million,
      and approximately $3.1 million in past due rent obligations to our former
      landlord. We also had a liability related to the non-current payable portion
      of
      the convertible debenture of approximately $2.9 million. As of October 15,
      2007, we had cash and cash equivalents of approximately $.5 million and
      restricted certificates of deposit of approximately $9,071.




On
      March
      15, 2006, we filed a registration statement with the Securities and Exchange
      Commission (File No. 333-132461) to register 16.8 million shares of our common
      stock to be sold by us in a direct offering, on July 18, 2006 we were notified
      that this direct offering was effective, and on November 2, 2006 we announced
      that the direct offering was closed and that approximately 16.6 million shares
      had been sold raising approximately $4.2 million.




On
      February 22, 2007, we sold a $1.2 million 10% Senior Convertible Promissory
      Note
      which was convertible into 12,000,000 shares. In connection with the issuance
      of
      the Note we issued warrants to purchase 6,000,000 shares of common stock at
      $.10
      per share.




On
      April
      11, 2007 and April 18, 2007 we sold an aggregate of 7,500 shares of Series
      A
      Convertible Preferred Stock convertible into 60,000,000 shares of common stock.
      In connection with this transaction we granted warrants to purchase 6,000,000
      shares of common stock at an exercise price of $0.15 per share. As a result
      of
      these financings Wherify received net proceeds of approximately $5.27 million.




On
      August
      1, 2007 and August 31, 2007 we sold an aggregate of 1,129 shares of Series
      B
      Convertible Adjustable Preferred Stock which is convertible into 7,056,250
      shares of common stock. In connection with this transaction we granted warrants
      to purchase 2,469,688 shares of common stock at an exercise of a minimum of
      $0.16 to a maximum of $0.20 at the conversion. As of October 15,
      2007 none of these warrants had been converted. As a result of
      these financings Wherify received net proceeds of approximately
      $856,000.




We
      intend
      to pursue various sources of public and private financing, including our current
      direct issuance of common stock, to provide us greater flexibility and certainty
      with respect to our financing needs.




**Research
      and Development**




The
      Company incurred engineering and development costs including the cost of
      preparing manufacturing processes up to the prototype production efforts and
      prior to demonstrating technical feasibility totaling $0.1 million and $1.5
      million for fiscal years 2007 and 2006, respectively as such expenses are
      included in the Statement of Operations.





7




**Employees**




As
      of
      September 28, 2007, we employed 19 people, of whom 4 were employed in
      engineering and information technology, 2 in manufacturing, 5 in general
      administrative and finance, 3 in sales, 2 executives, 2 consultants and 1 in
      investor relations Of the 19 employed, 3 are part-time consultants and 16 are
      full-time employees. Our employees are not represented by a labor union.




8




**RISK
      FACTORS**




**RISKS
      RELATED TO WHERIFY’S BUSINESS**




Wherify’s
      business is subject to numerous risks and uncertainties, including risks and
      uncertainties relating to our limited operating history; liquidity; incurrence
      of net losses; lengthy development, manufacturing and sales cycles; competition;
      product related risks; and other risks as discussed below. The following
      important factors, among others, could cause actual results to differ materially
      from those contained in forward-looking statements made in this report or
      presented elsewhere by management from time to time.




***We
      Require Additional Capital In Order to Successfully Operate Our Business Which
      We May Not Be Able to Obtain.***




We
      require additional capital in order to successfully operate our business.
      Significant additional funding will be required throughout 2007 and 2008
      to continue operations. There is no guarantee that we will be able to
      obtain future funding or if we do obtain future funds they will be adequate
      to continue our operations.




***Current
      and Future Creditor Claims May Negatively Affect Our Ability to Run Our Business
      Successfully***




As
      of
      October 15, 2007 we had approximately $14 million in substantially past due
      debt
      and other obligations. Current and future actions of our creditors to collect
      these monies could negatively affect our ability to run our business. For
      example, one creditor has obtained a judgment against the Company’s California
      subsidiary, Wherify California, Inc. for approximately $1.4 million and has
      attached a further lien against certain of our patents that are themselves
      already the subject of prior liens including those issued in connection with
      our
      agreements with Cornell Capital Partners. In addition, this creditor recently
      undertook efforts to enforce its judgment against the assets of Wherify
      Delaware. Wherify Delaware is vigorously resisting these efforts. This creditor
      also served a writ of execution on account funds that Wherify Delaware
      maintained at Wells Fargo Bank. On application by Wherify Delaware, the Superior
      Court recently ruled that this creditor judgment is limited to Wherify
      California only. In response to this ruling, Wherify Delaware filed a third
      party claim, which is scheduled for hearing on November 26, 2007, to obtain
      the
      return of the Wells Fargo accounts funds.




***Even
      Though The Existing Arrangements With Cornell Have Been Amended, There Is Still
      High Risk Relative To These Arrangements.***




There
      is
      approximately $4.8 million in principal amount outstanding on the Cornell
      Convertible Debentures, which are secured by all the assets of the Company.
      If
      Wherify fails to generate adequate revenue and profits, or raise additional
      capital, of which there is no assurance, the interest and principal payments
      under the Cornell Debentures will not be able to be repaid on a timely basis
      and
      a failure to do so could result in Cornell foreclosing on all of the Company’s
      assets.




Currently,
      due to recent amendments, there is a moratorium on cash payment obligations,
      which expires in December 2007. Thereafter, the Company is obligated to pay
      monthly debt service as follows:




·
            interest
                monthly in arrears at the rate of 8% per annum on the outstanding
                balance;
                and·
            monthly
                repayments of principal of
                $200,000.




In
      addition, Cornell, through the conversion feature of its $4.8 million aggregate
      principal amount of the Cornell Facility at $0.25 per share and an additional
      7
      million shares issuable upon exercise of warrants owned by Cornell with an
      exercise price of $0.25 per share, beneficially owns approximately 27 million
      shares, which, if converted, would represent approximately 26 %
      ownership of Wherify’s common stock. If Cornell converts some or all of their
      shares it would dilute the ownership of current stockholders.




***We
      Are The Product Of A Merger Of Two Development Stage Companies, Have Limited
      Revenues And Have A Limited Operating History On Which To Evaluate Our Potential
      For Future Success.***




On
      July
      21, 2005, we completed a reverse triangular merger with Wherify California.
      At
      the time of the merger, and currently, Wherify and Wherify California have
      only
      limited operating histories upon which you can evaluate our business and
      prospects. You must consider the risks and uncertainties frequently encountered
      by companies in situations such as ours, including but not limited to the
      ability to grow and prosper and finance such growth. If we are unsuccessful
      in
      addressing these risks and uncertainties, our business, results of operations
      and financial condition will be materially and adversely affected.




9




To
      date,
      sales of our products have been very limited. Our limited operating
      experience in the wireless location-based services market makes it difficult
      to
      evaluate our business. We have never achieved profitability, and we
      may not achieve profitability in the future. The uncertainty of our ability
      to
      execute on our business plan and the uncertainties regarding the acceptance
      of our products or our competition increase the risk that our value
      may decline.




***We
      Currently Lack Liquidity and Have Limited Revenues and Had Going-Concern
      Qualifications in Our Most Recent Audit Reports***




As
      of
      June 30, 2007, we had cash and cash equivalents of approximately $2.1 million,
      inventory of approximately $2.3 million, other current assets of approximately
      $0.5 million and current liabilities of approximately $12.7 million, excluding
      the non-cash portion of fair value of derivatives of approximately $3.5 million,
      and approximately $3.1 million in past due rent obligations to our former
      landlord. We also had a liability related to the non-current payable portion
      of
      the convertible debenture of approximately $2.9 million. As of October 15,
      2007, we had cash and cash equivalents of approximately $.5 million. There
      is a
      going concern qualification in Wherify’s audit reports for the respective fiscal
      years ended June 30, 2007, 2006 and 2005. Substantially all of our cash has
      been
      raised through capital raising transactions rather than operations. As we have
      limited revenues, we will need to raise additional working capital in the near
      future. There is no assurance that we will be able to raise additional working
      capital at all or on terms favorable to us. If we are unable to raise additional
      working capital, we will need to reduce our costs, which may require us to
      reduce operations, personnel and overhead, or discontinue
      operations.




***We
      Need To Raise Substantial Additional Capital, Which May Result In Substantial
      Dilution To Existing Stockholders.***




In
      order
      to manufacture, distribute and sell our products and to execute on our business
      plan, we need substantial additional capital. We are currently considering
      possible sources of this additional capital, including raising capital through
      the issuance of equity securities. Although the exact amount we intend to raise
      has not yet been determined, we are contemplating an amount expected to be
      approximately $16 to 21 million. There can be no assurance that we will be
      able
      to raise sufficient additional capital at all or on terms favorable to our
      stockholders or us. If we issue equity securities in order to raise additional
      capital in the amounts currently contemplated, the stockholders will experience
      immediate and substantial dilution in their ownership percentage of the combined
      company. In addition, to raise the capital we need, we may need to issue
      additional shares at a discount to the then current market price. If the terms
      of such financing are unfavorable to us or our stockholders, the stockholders
      may experience substantial dilution in the net tangible book value of their
      stock. In addition, any new equity securities may have rights, preferences
      or
      privileges senior to those of existing holders of common stock. For example
      in
      recent months we have conducted the following financings;: (1) on February
      22,
      2007, we sold a $1.2 million 10% Senior Convertible Promissory Note which was
      convertible into 12,000,000 shares. In connection with the issuance of the
      Note
      we issued warrants to purchase 6,000,000 shares of common stock at $.10 per
      share; (2) on April 11, 2007 and April 18, 2007 we sold an aggregate of 7,500
      shares of Series A Convertible Preferred Stock which is convertible into
      60,000,000 shares of common stock. In connection with this transaction we
      granted warrants to purchase 6,000,000 shares of common stock at an exercise
      price of $0.15 per share; (3) on August 1, 2007 and August 31, 2007 we sold
      an
      aggregate of 1,129 shares of Series B Convertible Adjustable Preferred Stock
      which is convertible into 7,056,250 shares of common stock. In connection with
      this transaction we granted warrants to purchase 2,469,688 shares of common
      stock at an exercise price of a minimum of $0.16 per share to a maximum of
      $0.20
      per share at the conversion. If the holder of the note and the holders of our
      preferred stock were to convert all of their preferred shares into common stock
      it would result in an increase to our outstanding stock of 79,056,250 shares,
      or
      a change of beneficial ownership of 53%, causing substantial dilution to our
      current common stock stockholders.




If
      we
      cannot raise funds on acceptable terms, we may not be able to develop or enhance
      our products, take advantage of future opportunities or respond to competitive
      pressures or unanticipated requirements all of which could have a material
      adverse effect on us.




***We
      May Encounter Manufacturing Problems During the Production
      Process.***




We
      have
      discontinued manufacturing all of our other products. The manufacture of our
      Wherifone TM product
      involves complex and precise processes, which we have subcontracted to another
      company. Any significant problems in manufacturing, assembling or testing of
      this product could delay the sales of the Wherifone TM product
      and have an adverse impact on our business and prospects. The willingness of
      manufacturers to make the product or lack of availability of manufacturing
      capacity may have an adverse impact on our ability to go to market, and as
      a
      result we may not be able to grow our business as we expect, and our ability
      to
      compete could be harmed, adversely affecting our business and
      prospects.




10




***Our
      Software Products Are Complex And May Contain Unknown Defects That Could Result
      In Numerous Adverse Consequences.***




Complex
      software products such as those associated with our Wherifone TM product
      often contain latent errors or defects, particularly when first introduced,
      or
      when new versions or enhancements are released. We have experienced errors
      and
      defects in our most recent release of the software associated with our
      Wherifone TM product,
      but do not believe these errors will have a material negative effect on the
      functionality of the Wherifone TM product.
      However, there can be no assurance that, despite testing, additional defects
      and
      errors will not be found in the current version, or in any new versions or
      enhancements of this software, any of which could result in damage to our
      reputation, the loss of sales, a diversion of our product development resources,
      and/or a delay in market acceptance, and thereby materially adversely affecting
      our business, operating results and financial condition. Furthermore, there
      can
      be no assurance that our products will meet all of the expectations and demands
      of our customers. The failure of our products to perform to customer
      expectations could give rise to warranty claims. Any of these claims, even
      if
      not meritorious, could result in costly litigation or divert management’s
      attention and resources. Any product liability insurance that we may carry
      could
      be insufficient to protect us from all liability that may be imposed under
      any
      asserted claims.




***We
      Depend On Our Key Personnel To Manage Our Business Effectively In A Rapidly
      Changing Market. If We Are Unable To Retain Our Key Employees or Fail to Attract
      and Retain Additional Personnel, Our Business, Financial Condition And Results
      Of Operations Could Be Harmed.***




Our
      future success depends to a significant degree on the skills, efforts and
      continued services of our executive officers and other key engineering,
      operations, sales, marketing and support personnel who have critical industry
      experience and relationships ***.*** If
      we
      were to lose the services of one or more of our key executive officers and
      senior management members, we may not be able to grow our business as we expect,
      and our ability to compete could be harmed, adversely affecting our business
      and
      prospects. Competition for these individuals is intense and there can be no
      assurance that we can attract, assimilate, or retain necessary personnel in
      the
      future.




***Fluctuations
      In Our Business And Operating Results May Materially And Adversely Affect The
      Trading Price Of Our Common Stock***




We
      expect
      that our operating results will fluctuate in the future due to a number of
      factors many of which are outside of our control ***.*** These
      factors include the following:




·
            Overall
                demand for our products;




·
            Our
                ability to attract new customers at a steady
                rate;




·
            The
                rate at which we or our competitors introduce new products, the rate
                at
                which these products acquire market acceptance, and the cost required
                to
                develop these products;




·
            Technical
                defects in our products that could delay product shipments or increase
                the
                costs of introducing new products;




·
            Changes
                in the pricing of our products or those of our
                competitors;




·
            The
                amount and timing of capital expenditures and other costs relating
                to the
                expansion of our operations;




·
            Costs
                relating to our marketing programs and our business in general;
                and




·
            General
                economic conditions.




Any
      of
      the foregoing factors may cause our operating expenses to be disproportionately
      high or cause our revenue and operating results to fluctuate causing our
      business, financial condition and operating results to be adversely
      affected ***.*** In
      addition, to respond to changes in our competitive environment, we may
      occasionally make certain decisions from which we may benefit in the long
      run ***.*** However,
      in the short run, such decisions could materially and adversely affect our
      quarterly results of operations and financial condition ***.*** Due
      to
      all of the foregoing factors, in some future quarter our operating results
      may
      fall below our expectations and those of our stockholders ***.*** In
      such
      event, the trading price of our common stock could be materially adversely
      affected ***.*** Further,
      we believe that period-to-period comparisons of our financial results may not
      be
      very meaningful ***.*** Accordingly,
      you should not conclude that such comparisons indicate future
      performance.




11




***Our
      Markets Are Highly Competitive, And Our Failure To Compete Successfully Would
      Limit Our Ability To Sell Our Products, Attract And Retain Customers And Grow
      Our Business.***




Competition
      in the wireless location services market is intense ***.*** In
      addition, the adoption of new technology in the communications industry likely
      will intensify the competition for improved wireless location
      technologies ***.*** The
      wireless location services market has historically been dominated by large
      companies, such as Siemens AG and LoJack Corporation ***.*** In
      addition, a number of other companies such as Verizon, Mattel, Digital Angel
      Corporation and WebTech Wireless Inc. ****** have
      either announced plans for new products or have commenced selling products
      that
      are similar to our wireless location products, and new competitors are emerging
      to compete with Wherify’s wireless location services products ***.*** Due
      to
      the rapidly evolving markets in which we compete, additional competitors with
      significant market presence and financial resources may enter those markets,
      thereby further intensifying competition ***.*** All
      competitors in the wireless location services market rely on retail distributors
      to sell their products to consumers ***.*** Additional
      competitors in this market may limit the availability or interest of retail
      distributors to carry our wireless location services product and launch it
      into
      the market ***.*** These
      issues may have an adverse impact on our ability to go to market, and as a
      result we may not be able to grow our business as we expect, and our ability
      to
      compete could be harmed, adversely affecting our business and
      prospects.




***Our
      Wireless Location Product And Technology Are New And May Not Be Accepted In
      The
      Market.***




We
      have
      had only a limited release of one of our planned wireless locator products
      in
      the market ***.*** There
      can
      be no assurances that consumer demand will meet, or even approach, our
      expectations ***.*** In
      addition, our pricing and marketing strategies may not be successful ***.*** Lack
      of
      customer demand, a change in marketing strategy and changes to our pricing
      models could dramatically alter our financial results.




***Standards
      In Wireless Communications Industry Are In Flux, And If We Are Unable To Comply
      With These Industry Standards, Our Business Will Be
      Harmed.***




Standards
      in the wireless communications industry are evolving ***.*** The
      emergence and broad adoption of new industry standards could require us to
      redesign our products ***.*** If
      we are
      unable to design our products to comply with these new standards, our products
      would become obsolete and consumers would instead purchase other
      standard-compliant products ***.*** As
      a
      result, our business could be harmed, and our financial condition and results
      of
      operations could be adversely affected.




***Changes
      In The Government Regulation Of Our Wireless Location Product Or Wireless
      Carriers Could Harm Our Business.***




Our
      products, wireless carriers and other members of the communications industry
      are
      subject to domestic government regulation by the Federal Communications
      Commission (the FCC) and international regulatory bodies ***.*** These
      regulatory bodies could enact regulations which affect our products or the
      service providers which distribute our products, such as limiting the scope
      of
      the service providers’ market, capping fees for services provided by them or
      imposing communication technology standards which impact our
      products.




***If
      Our Wireless Locator Products Fail To Achieve Broad Market Acceptance, Our
      Business Results Will Be Harmed.***




We
      have
      recently begun selling our wireless location products for use by direct purchase
      consumers or for resale by distributors ***.*** If
      Wherify’s products are not widely accepted by the market, our business results
      could be harmed ***.*** Factors
      that may affect the market acceptance of our location products include price,
      reliability, performance, technological innovation/enhancements, network
      coverage, ease of use, and availability.




If
      we
      fail to perform adequately on the basis of each of these factors versus
      competing products and technologies, our business results could be
      harmed.




***We
      Currently Depend Upon One Manufacturer For Our Principal Product And If We
      Encounters Problems With This Manufacturer There Is No Assurance That We Could
      Obtain Products From Other Manufacturers Without Significant Disruptions To
      Our
      Business.***




Our
      principal product is manufactured to our specifications by Jabil Circuit Inc.
      If
      we encounter problems or disagreements with Jabil it would hinder our ability
      to
      fill orders for our products and could substantially harm our business.
      Currently we are past due on our obligations to Jabil of approximately $0.8
      million and Jabil suggested that they be prepaid to continue to manufacture
      and
      deliver our product to us. We are in the final negotiations to transfer the
      $0.8
      million liability to a new manufacturer in exchange for the rights to build
      future Wherifones. There is no assurance that we can do so without undue cost,
      expense and delay if we encounter problems with Jabil or the new manufacturer
      in
      the process.




12




***We
      Expect To Rely Heavily On A Few Customers.***




Our
      revenues in the next several years could be heavily dependent on contracts
      with
      a limited number of major market makers in each business segment. The loss
      of,
      or a significant reduction in, orders from these major customers could have
      a
      material adverse effect on our financial condition and results of
      operations.




***Fluctuations
      In Operating Results Could Adversely Affect The Market Price Of Our Common
      Stock.***




Our
      revenues and operating results are likely to fluctuate significantly in the
      future. The timing of order placement, size of orders and satisfaction of
      contractual customer acceptance criteria, as well as order delays or deferrals
      and shipment delays and deferrals, may cause material fluctuations in
      revenue.




Delays
      or
      deferrals in purchasing decisions may increase as we develop new or enhanced
      products. The current and anticipated dependence on a small number of customers
      increases the revenue impact of each customer’s actions relative to these
      factors. Our expense levels in the future will be based, in large part, on
      our
      expectations regarding future revenue, and as a result net income for any
      quarterly period in which material orders are delayed could vary
      significantly.




Because
      of these and other factors, investors should not rely on quarter-to-quarter
      comparisons of our results of operations, our results of operations or the
      pro
      forma financial information as an indication of future performance. It is
      possible that, in future periods, results of operations will differ from the
      estimates of public market analysts and investors. Such a discrepancy could
      cause the market price of our common stock to decline
      significantly.




***Delays,
      Disruptions Or Quality Control Problems In Manufacturing Could Result In Delays
      In Shipments Of Products To Customers And Could Adversely Affect Our
      Business.***




We
      might
      experience delays, disruptions or quality control problems in the manufacturing
      operations of our subcontractors. As a result, we could incur additional costs
      that would adversely affect gross margins, and product shipments to our
      customers could be delayed beyond the shipment schedules requested by our
      customers, which would negatively affect our revenues, competitive position
      and
      reputation. Furthermore, even if we are able to timely deliver products to
      our
      customers, we may be unable to recognize revenue based on our revenue
      recognition policies. Any disruptions in the future could adversely affect
      the
      combined company’s revenues, gross margins and results of operations. We may
      experience manufacturing delays and reduced manufacturing yields upon
      introducing new products to our manufacturing lines or when integrating acquired
      products.




***Rapid
      Technological Change In Our Market Could Cause Our Products To Become Obsolete
      Or Require Us To Redesign Our Products.***




We
      expect
      that our markets will be characterized by rapid technological change, frequent
      new product introductions and enhancements, uncertain product life cycles,
      changing customer demands and evolving industry standards, any of which can
      render existing products obsolete. We believe that our future success will
      depend in large part on our ability to develop a new location based
      services platform in a timely manner and on a cost effective basis. As a result
      of the complexities inherent in our product, major new products and product
      enhancements can require long development and testing periods, which may result
      in significant delays in the general availability of new releases or significant
      problems in the implementation of new releases. In addition, if we or our
      competitors announce or introduce new products our current or prospective
      customers may defer or cancel purchases of our products, which could materially
      adversely affect our business, operating results and financial condition. Our
      failure to develop successfully, on a timely and cost effective basis, new
      products or new product enhancements that respond to technological change,
      evolving industry standards or customer requirements would have a material
      adverse affect on our business, operating results and financial
      condition.




**RISKS
      RELATED TO WHERIFY’S INTELLECTUAL PROPERTY**




***Our
      Success Depends On Our Ability To Protect Our Intellectual
      Property.***




Our
      future success depends upon our proprietary technology. We protect our
      proprietary information through the use of patent, copyright, trademark, trade
      secret laws, confidentiality procedures and contractual provisions.
      Notwithstanding our efforts to protect our proprietary technology, policing
      unauthorized use or copying of our proprietary information is difficult,
      unauthorized use or copying occurs from time to time, and litigation to enforce
      intellectual property rights could result in significant costs and diversion
      of
      resources. Any patents we obtain in the future may be circumvented, challenged,
      invalidated or designed around by other companies. Despite our efforts, we
      may
      be unable to prevent third parties from infringing upon or misappropriating
      our
      intellectual property.




13




Moreover,
      the laws of some foreign jurisdictions do not afford the same degree of
      protection to our proprietary rights as do the laws of the United States, and
      effective trademark, copyright, and trade secret protection may not be available
      in every country in which our products are distributed. Furthermore, our
      competitors may independently develop similar technology that substantially
      limits the value of our intellectual property. Our inability to adequately
      protect our intellectual property for these or other reasons, could materially
      and adversely affect our business, financial condition and operating
      results.




In
      addition, third parties may at some point claim certain aspects of our business
      infringe their intellectual property rights. While we are not currently subject
      to nor are aware of any such claim, any future claim (with or without merit)
      could result in one or more of the following:




·
            Significant
                litigation costs;




·
            Diversion
                of resources, including the attention of
                management;




·
            Our
                agreement to pay certain royalty and/or licensing fees;
                and




·
            Cessation
                of our rights to use, market, or distribute such
                technology.




Any
      of
      these developments could materially and adversely affect our business, results
      of operations and financial condition. In the future, we may also need to file
      lawsuits to enforce our intellectual property rights, to protect our trade
      secrets, or to determine the validity and scope of the proprietary rights of
      others. Whether successful or unsuccessful, such litigation could result in
      substantial costs and diversion of resources. Such costs and diversion could
      materially and adversely affect our business, results of operations and
      financial condition.




***We
      Could Become Subject To Litigation Regarding Intellectual Property Rights,
      Which
      Could Seriously Harm Our Business And Require Us To Incur Significant
      Costs.***




In
      recent
      years, there has been significant litigation in the United States involving
      patents and other intellectual property rights. Any parties asserting that
      our
      products infringe upon their proprietary rights would force us to defend
      ourselves and possibly our customers or manufacturers against the alleged
      infringement. These claims and any resulting lawsuit, if successful, could
      subject us to significant liability for damages and invalidation of proprietary
      rights. These lawsuits, regardless of their merits, would likely be
      time-consuming and expensive to resolve and would divert management time and
      attention. Any potential intellectual property litigation also could force
      us to
      do one or more of the following:




·
            Stop
                selling, incorporating or using our products that use the challenged
                intellectual property;




·
            Obtain
                from the owner of the infringed intellectual property right a license
                to
                sell or use the relevant technology, which license may not be available
                on
                reasonable terms, or at all; or




·
            Redesign
                those products that use such
                technology.




If
      we are
      forced to take any of the foregoing actions, our business and prospects may
      be
      seriously harmed.




**RISKS
      RELATED TO CORPORATE AND STOCK MATTERS**




***Our
      Authorized Preferred Stock Exposes Stockholders To Certain
      Risks.***




Our
      Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
      of “blank check” preferred stock. On April 11, 2007 and April 18, 2007 we sold
      an aggregate of 7,500 shares of Series A Convertible Preferred Stock and on
      August 1, 2007 and August 31, 2007 we sold an aggregate of 1,129 shares of
      Series B Convertible Adjustable Preferred Stock, which still leaves substantial
      amounts of authorized shares of preferred stock available for future issuance.
      “Blank check” preferred stock allows the Board of Directors to divide the
      preferred stock into series, to designate each series, to fix and determine
      separately for each series any one or more relative rights and preferences
      and
      to issue shares of any series without further stockholder approval. Preferred
      stock authorized in series allows our Board of Directors to hinder or discourage
      an attempt to gain control of us by a merger, tender offer at a control premium
      price, proxy contest or otherwise. Consequently, the preferred stock could
      entrench our management. In addition, the market price of our Common Stock
      could
      be materially and adversely affected by the existence of the preferred
      stock.




14




***Our
      Common Stock Has A Limited And Volatile Trading
      History.***




Our
      common stock is quoted in the United States on the Over-the-Counter Electronic
      Bulletin Board (OTCBB). The number of shares traded daily has been extremely
      limited and the prices at which the Common Stock has traded has fluctuated
      widely. During the fiscal year ended June 30, 2007 the closing price reported
      on
      the OTCBB for our common stock ranged from a high of $0.48 to a low of $0.10
      There can be no assurance as to the volume amount of or the prices at which
      the
      Common Stock will trade in the future, although they may continue to fluctuate
      in volume and price significantly. Prices and trading volume for the Common
      Stock will be determined in the marketplace and may be influenced by many
      factors, including the following:




·
            The
                depth and liquidity of the markets for the Common
                Stock;




·
            Investor
                perception of us and the industry in which we operate;
                and




·
            General
                economic and market conditions.




***We
      Have The Obligation To Issue Additional Shares Of Common Stock In The Future,
      And Such Future Issuance May Materially Adversely Affect
      Stockholders.***




Wherify
      has various obligations to issue additional shares of common stock in the future
      upon exercise or conversion of several of its securities, including the
      following as of September 28, 2007:




·
            Options
                to purchase approximately 8,640,018 million shares of Common Stock
                and




·
            Warrants
                and convertible debentures to purchase or acquire approximately 42,716,345
                million shares of Common Stock.




·
            Series
                A Convertible Preferred Stock convertible into 60,000,000 shares
                of common
                stock.




·
            Series
                B Convertible Adjustable Preferred Stock convertible into 7,056,250
                shares
                of common stock.




·
            Senior
                Convertible Note convertible into 12,000,000 shares of common
                stock.




The
      options, warrants, note and convertible debentures described above permit the
      holders acquire shares of common stock at specified prices. These prices may
      be
      less than the then current market price of our common stock. Any shares of
      common stock issued pursuant to these options, warrants or convertible
      debentures would further dilute the percentage ownership of existing
      stockholders. The terms on which we could obtain additional capital during
      the
      life of these options, warrants or convertible debentures may be adversely
      affected because of such potential dilution. Finally, we may issue additional
      shares in the future other than as listed above. There are no preemptive rights
      in connection with the issuance of Common Stock. Thus, the percentage ownership
      of existing stockholders may be diluted if we issue additional shares in the
      future. Future issuances of additional shares could cause immediate and
      substantial dilution to the net tangible book value of shares of common stock
      issued and outstanding immediately before such transaction. Any future decrease
      in the net tangible book value of such issued and outstanding shares could
      materially and adversely affect the market value of these shares.




***The
      Trading Price Of Our Common Stock Entails Additional Regulatory Requirements,
      Which May Negatively Affect Such Trading Price.***




We
      are
      currently subject to the “penny stock” rules promulgated under the Securities
      Exchange Act. During the period(s) that our stock trades below $5.00 per share,
      as it currently does, trading in our common stock is subject to the requirements
      of the “penny stock” rules. These rules require additional disclosure by broker
      dealers in connection with any trades generally involving any non-NASDAQ equity
      security that has a market price of less than $5.00 per share, subject to
      certain exceptions. Such rules require the delivery, before any “penny stock”
transaction, of a disclosure schedule explaining the penny stock market and
      the
      risks associated therewith, and impose various sales practice requirements
      on
      broker dealers who sell penny stocks to persons other than established customers
      and accredited investors (generally institutions). For these types of
      transactions, the broker-dealer must determine the suitability of the penny
      stock for the purchaser and receive the purchaser’s written consent to the
      transaction before sale. The additional burdens imposed upon broker dealers
      by
      such requirements may discourage broker-dealers from effecting transactions
      in
      our common stock affected. As a consequence, the market liquidity of Wherify’s
      common stock could be severely limited by these regulatory
      requirements.




15




***Stockholders
      Should Have No Expectation Of Any Dividends.***




The
      holders of our common stock are entitled to receive dividends when, as and
      if
      declared by the board of directors out of funds legally available therefore.
      To
      date, we have not declared nor paid any cash dividends. The board of directors
      does not intend to declare any dividends in the foreseeable future, but instead
      intends to retain all earnings, if any, for use in our business
      operations.




**Item
      3. Legal Proceedings.**




***Valpak
      Direct Marketing Systems, Inc. v. Wherify Wireless,
      Inc.***




On
      August
      3, 2007, Valpak Direct Marketing Systems, Inc, a Delaware Corporation, entered
      a
      judgment for $127,578 against Wherify Wireless, Inc. a Delaware corporation,
      in
      the United States, Superior Court of San Mateo County. This judgment was entered
      based upon sister-state judgment previously entered in the State of Florida
      Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida
      on May 29, 2007.




On
      July
      24, 2007, in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas
      County, Florida, Civil Division, a final judgment was rendered on July 24,
      2007
      that plaintiff - Valpak Direct Marketing Systems, Inc., 8605 Largo Lakes Dr.
      Largo, Florida 33773, shall recover from defendant - Wherify Wireless, Inc.
      the
      sum of $116,840 on principal plus $10,199 in prejudgment interest, for a total
      sum of $127,039 that shall bear interest at the rate of 7% per year. Valpak
      Direct Marketing Systems declined settlement discussions after July 24, 2007.
      On
      September 13, 2007 a writ of execution was issued in the Superior Court of
      California, San Mateo County for judgment settlement. On September 17, 2007
      Valpak Direct Marketing Systems levied the Bank of America lockbox account
      of
      Wherify Wireless and received $58,406.




***Golin/Harris
      International, Inc. v. Wherify Wireless, Inc*** *.*




On
      August
      20,2007, Golin/Harris International, a Virginia Corporation, filed suit against
      Wherify Wireless, Inc. a Delaware corporation, in the United States District
      Court, Los Angeles Superior Court - Central District of California. The
      complaint sought approximately $193,435 together with court awarded interest
      thereon for failure by Wherify Wireless, Inc. to pay services rendered by
      plaintiff. There is a case management conference for November 20, 2007 in this
      matter. Settlement discussions continue.




***CDW
      Corporation, Inc. v. Wherify Wireless, Inc.***




On
      June
      20, 2007, CDW Corporation , Inc, an Illinois Corporation, filed suit against
      Wherify Wireless, Inc., a Delaware Corporation, in the United States Circuit
      Court of Cook County Illinois, Municipal Department, First District of Illinois.
      The complaint sought approximately $26,413 plus interest and costs in accordance
      with the Illinois Statute for computer hardware sold to Wherify Wireless, Inc.
      On September 28, 2007 Wherify Wireless and CDW Corporation entered into a
      negotiated settlement out of court wherein Wherify will pay the settlement
      amount in monthly installments through September 2008.




***Robert
      Half International v. Wherify Wireless, Inc.***





On
      May
      18, 2007, Robert Half International filed suit against Wherify Wireless, Inc.
      a
      Delaware Corporation, in the United States Superior Court, State of California,
      San Mateo County. The Complaint was for money due for services delivered in
      the
      amount of $21,250, plus cost of $352. On October 12, 2007, Robert Half
      International and Wherify reached a settlement and mutual release wherein
      Wherify will pay Robert Half International the settlement amount in monthly
      installments through August 15, 2008.




***Hirose
      Electric USA, Inc. v. Wherify Wireless, Inc.***




On
      May
      14, 2007, Hirose Electric USA, Inc. a Corporation filed suit against Wherify
      Wireless, Inc. a Delaware Corporation, in the United States Superior Court,
      State of California, San Mateo County. The Complaint was for money due for
      goods
      sold and delivered in the amount of $62,800, plus interest on said amount at
      the
      rate of ten percent (10%) per annum from June 1, 2006; and attorney’s fees in
      the sum of $1,000 pursuant to the provisions of Section 1717.5. of the Civil
      Code. The Company is reviewing its option in this matter.





16




***Fixture
      Hardware Company v. Wherify Wireless, Inc.***




On
      June
      19, 2007, Fixture Hardware Company, an Illinois Corporation, filed suit against
      Wherify Wireless, Inc. a Delaware Corporation, in the United States District
      Court, Northern District of Illinois, for non-payment by Wherify Wireless Inc.
      in the amount of $239,188.




On
      August
      8, 2007, at the prove-up hearing, the Court’s judgment was entered in favor of
      the Plaintiff, Fixture Hardware Company in the amount of $239,188. On October
      12, 2007, Fixture Hardware Co. and Wherify reached a settlement and mutual
      release wherein Wherify will pay Furniture Hardware Co. the settlement amount
      in
      monthly installments through September, 2008.





***Lariviere,
      et al. v. I.Q. Biometrix, Inc., a Delaware Corporation, et
      al.***




On
      August
      5, 2005, plaintiffs Sylvie Lariviere, Robert Rios, Toni Lange, Fernand Beland,
      Frederic Serre and Roland Vroye, filed their first amended complaint against
      I.Q. Biometrix, Inc., a Delaware corporation, in Fresno County Superior Court,
      State of California. Plaintiffs' complaint alleges causes of action for breach
      of contract and fraud for a failure to issue stock options pursuant to an
      alleged oral and/or written agreement. The complaint seeks to recover damages,
      including punitive damages, and/or an award of stock options. On October 25,
      2005, Wherify demurred on behalf of itself, Greg Micek and William Scigliano
      and
      on January 4, 2005, the demurrer was sustained on several grounds, an amended
      complaint was filed, and the parties subsequently began discovery. A stipulated
      settlement agreement was entered into on November 5, 2007, where the parties
      have agreed to dismiss the lawsuit and each party pay their respective legal
      cost in the matter.





***Westport
      Office Park, LLC v. Wherify Wireless, Inc, a California
      Corporation***




On
      January 5, 2007, Westport Office Park, LLC (“Westport”), filed an Entry of
      Stipulation and Agreement allowing entry of a stipulated judgment ("Judgment")
      against Wherify Wireless, Inc, a California Corporation (“Wherify California”),
      in the Superior Court of California for San Mateo County.  The judgment
      extinguished Wherify California's right to possession of certain leased premises
      that Wherify California occupied as its principal offices in favor of Westport,
      and awarded Westport approximately $1.1 million for then-outstanding amounts
      due
      and owing under the terms of the lease and certain other owed amounts.  On
      January 17, 2007, Wherify California vacated the leased premises.




On
      March
      20, 2007, Westport obtained a writ of execution to enforce the judgment against
      the assets of Wherify California in the amount of $1,405,485.75.  On March
      30, 2007, Westport recorded a judgment lien with the United States Patent and
      Trademark Office on two patents held in name of Wherify California.  The
      specific patents are U.S. Patent Application 11/126,827 and U.S. Design Patent
      D526985. One appropriate means to remove a
      judgment lien is to pay the amount due the creditor. The Company has not,
      however, determined whether the lien was properly recorded and is still
      exploring legal options.





In
      addition, Westport recently undertook efforts to enforce its judgment against
      the assets of Wherify Delaware. Wherify Delaware is vigorously resisting these
      efforts. Specifically, Westport served a writ of execution on account funds
      that
      Wherify Delaware maintained at Wells Fargo Bank. On application by Wherify
      Delaware, the Superior Court recently ruled that the Westport judgment is
      limited to Wherify California only. In respo nse
      to
      this ruling, Wherify Delaware filed a third party claim, which is scheduled
      for
      hearing on November 26, 2007, to obtain the return of the Wells Fargo accounts
      funds.





***Baystar
      Capital II, L.P. v*** **** ***Wherify
      Wireless, Inc. et al***




On
      March
      2, 2007 Baystar Capital II , L.P. (“Baystar”) filed suit against Wherify
      Wireless, Inc. in Marin County Superior Court, State of California. Plaintiff
      alleges various causes of action relating to an alleged breach of a stock
      purchase agreement entered between the parties in early 2005. Plaintiff
      essentially sought damages arising from an alleged failure to provide stock
      certificates by an agreed upon date. The parties entered into a final and
      binding agreement on or about May 4, 2007.




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




None.




17


**Part
      II**





**Item
      5. Market for the Registrant’s Common Equity, Related Stockholder Matters and
      Small Business Issuer Purchases of Equity Securities.**




**PRICE
      OF COMMON STOCK**


Our
      common stock is traded on the Over-the Counter Bulletin Board under the symbol
      “WFYW”.OB. As of September 28, 2007 we had approximately 431 holders of record
      of record. Presented below is the high and low bid information of our common
      stock for the periods indicated. The source of the following information is
      in
      MSN Money. These quotations reflect inter-dealer prices, without retail mark-up,
      mark-down or commission and may not represent actual transactions.




**Common
                Stock****High**
            
            **Low****Fiscal
                Year Ending June 30, 2007**First
                Quarter
            
            $
            0.45
            
            $
            0.35Second
                Quarter
            
            $
            0.27
            
            $
            0.21Third
                Quarter
            
            $
            0.19
            
            $
            0.14Fourth
                Quarter
            
            $
            0.21
            
            $
            0.17**Fiscal
                Year Ending June 30, 2006**First
                Quarter
            
            $
            6.14
            
            $
            2.94Second
                Quarter
            
            $
            3.34
            
            $
            1.55Third
                Quarter
            
            $
            2.27
            
            $
            1.40Fourth
                Quarter
            
            $
            2.02
            
            $
            0.65**Fiscal
                Year Ending June 30, 2005**First
                Quarter
            
            $
            5.04
            
            $
            2.44Second
                Quarter
            
            $
            6.05
            
            $
            1.64Third
                Quarter
            
            $
            6.35
            
            $
            3.60Fourth
                Quarter
            
            $
            4.90
            
            $
            2.97




On
      September 28, 2007, the last price of our common stock as reported on the Over-
      the Counter Bulletin Board was $0.12 per share. Wherify has never paid
      dividends, and we have no intentions of paying cash dividends in the foreseeable
      future.





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





The
      following discussion and analysis of financial condition and results of
      operations should be read in conjunction with our financial statements and
      related notes included elsewhere in this report. The discussion contains
      forward-looking statements that involve risks, uncertainties and assumptions.
      Our actual results could differ materially from those anticipated in the
      forward-looking statements as a result of certain factors discussed in “Risk
      Factors” and elsewhere in this report.





Wherify’s
      auditor included a going concern paragraph in its audit report on Wherify’s
      financial statements for each of last two fiscal years. Wherify’s auditor has
      reported that Wherify has suffered net operating losses in the last two fiscal
      years and has a significant capital deficit that raises substantial doubt about
      its ability to continue as a going concern.





**Introduction**





On
      July
      21, 2005, Wherify California, Inc. a California corporation (formerly known
      as
      Wherify Wireless, Inc.)(“Wherify California”) was merged with a special purpose
      subsidiary of Wherify (formerly known as IQ Biometrix, Inc.). As a result of
      the
      merger, Wherify California became a wholly owned subsidiary of Wherify.
      Accordingly, our business operations include the business operations of both
      Wherify California and Wherify, although as discussed below, the former business
      operations of Wherify, consisting primarily the sale of FACES software and
      related services to law enforcement agencies and the security industry is not
      expected to constitute a significant part of the on-going business operations
      of
      the combined company. Following is a summary of topics covered in this
“Management Discussion and Analysis of Financial Conditions and Results of
      Operation”.





A.
            Section
                1 entitled “Merger” provides a general discussion regarding the
                merger.




18






B.
            Section
                2 entitled “Management’s Discussion and Analysis of Financial Condition
                and Results of Operations” provides a discussion and analysis of financial
                condition and results of operation of Wherify for the fiscal years
                ending
                June 30, 2007 and 2006.





C.
            Section
                3 entitled “General” includes a discussion of certain accounting policies
                and other matters of general
                applicability.





**1.**
            **Merger**





As
      noted
      above, on July 21, 2005, Wherify California was merged with a
      transitory special purpose subsidiary of Wherify and as a result Wherify
      California became a wholly owned subsidiary of Wherify. Upon the completion
      of
      the merger, shareholders of Wherify California received 4.8021 shares of Wherify
      common stock for each share of Wherify California common or preferred stock,
      and
      Wherify California stock options were assumed by Wherify and converted into
      options to acquire a number of shares of Wherify common stock equal to the
      number of shares of Wherify California common stock underlying each such option
      multiplied by the exchange ratio of 4.8021. As a result, Wherify issued or
      reserved for the future issuance an aggregate of approximately 46 million shares
      of its common stock in consideration for all the outstanding shares, options
      and
      warrants issued by Wherify California, which represented approximately 78.8
      % of
      the total number of shares of Wherify common stock calculated on a fully-diluted
      basis. Also subsequent to the merger, Wherify changed its name from “IQ
      Biometrix, Inc.” to “Wherify Wireless, Inc.” and shortly thereafter Wherify
      California changed its name from “Wherify Wireless, Inc.” to “Wherify
      California, Inc.”





The
      merger was treated as a reverse merger acquisition, pursuant to which Wherify
      California was treated as the acquirer of Wherify for financial reporting
      purposes. Consequently, following the consummation of the merger, the historical
      financial statements of Wherify California serve as the principal historical
      financial statements of the combined company.





Under
      applicable accounting rules, the purchase price of the acquisition (which is
      determined on the percentage of the combined company held by the pre-merger
      Wherify stockholders and the stock price of the combined company) is allocated
      to identifiable tangible and intangible assets, and then the excess of the
      purchase price over the amounts allocated to those assets is allocated to
      goodwill. During the quarter December 31, 2005, Wherify, with the assistance
      of
      a third party, completed the purchase price allocation and concluded that the
      value of the identifiable assets was $2.2 million and the total amount of
      goodwill was $67.5 million. Following the finalization of the purchase price
      allocation, Wherify concluded that the implied fair value of goodwill was $3.2
      million resulting in an indicated impairment of $64.3 million, which was
      recorded by Wherify in the quarter ended September 30, 2005. As of June 30,
      2006, we concluded that annual test of goodwill for impairment. As a result
      we
      determined that the carrying value of the goodwill at June 30, 2006 had become
      impaired and the remaining balance was written-off.





Our
      principal business activity consists primarily of the development and sale
      of
      wireless location products and services. The former business of Wherify,
      consisting primarily of the sale of security software and services, including
      facial composite software, to law enforcement agencies and the security
      industry, is not a significant part of the ongoing business operations of the
      combined company. Accordingly, historical financial information relating to
      the
      former business of Wherify is expected to have an only minimal significance
      to
      the future business of the combined company.





**2.**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations**





***A.***
            ***General***





Wherify
      Wireless, Inc. (“Wherify” or the “Company”) is a pioneering developer of
      patented wireless location products and services for family safety and business
      communications. Our portfolio of intellectual property includes our proprietary
      integration of the US Government’s Global Positioning System (GPS) and wireless
      communication technologies; our patented back-end location service; the
      WherifoneTM GPS locator phone which provides real-time location information and
      lets families with pre-teens, seniors, or those with special medical needs,
      stay
      connected and in contact with each other **** Our
      name,
      Wherify Wireless, reflects our mission and objective: verify the location of
      loved ones or possessions of value through wireless technology.





Wherify’s
      cost of revenues currently consists of actual manufacturing costs.





General
      and administrative expense includes general administrative, manufacturing,
      research and development, sales and marketing expenses. General administrative
      expense consists primarily of salaries and related expenses for executive,
      finance, accounting information technology, facilities and human resources
      personnel. Research and development expense consists primarily of salaries
      and
      related personnel expenses related to the design, development, testing and
      enhancement of products. Currently we are focusing attention on further
      development of our Wherifone product. Sales and marketing expenses consists
      primarily of salaries, commissions and related expenses for personnel engaged
      in
      marketing, sales and customer support, as well as costs associated with
      promotional activities and related travel expenses.





19




***B.***
            ***Liquidity
                and Capital Resources***




Wherify
      has incurred operating losses from continuing operations, excluding goodwill
      and
      intangibles impairment, of approximately$17.1 million for the fiscal year ended
      June 30, 2007 and $12.3 million for fiscal year ended June 30, 2006. For the
      fiscal year ended June 30, 2007 the net losses from operations, excluding
      goodwill and intangibles impairment, were $17.1 million and $12.3 million during
      the comparable fiscal year ended June 30, 2006. Net cash used for operating
      activities during the fiscal years ended June 30, 2007 and 2006 was $10.0
      million and $12.2 million, respectively. We have accumulated deficit of $153.7
      million as of June 30, 2007. These conditions, among others, raise questions
      about our ability to fund our cash requirements from operations in the future
      or
      to continue operations as a going-concern.





As
      of
      June 30, 2007, Wherify had cash and cash equivalents of approximately $2.1
      million, restricted cash of $9,071 being utilized to cover letters of credit
      for
      a supplier, net receivables in the amount of $0.1 million, and other non-current
      assets for $1.0 million. Wherify’s net cash provided by investing activities was
      mainly from the decrease in restricted certificates of deposit in the amount
      of
      $1.3 million.





We
      have
      financed our operations through private offerings of our common stock, preferred
      stock, and debt borrowings.





On
      March
      15, 2006, we filed a registration statement with the Securities and Exchange
      Commission (File No. 333-132461) to register 16.8 million shares of our common
      stock to be sold by us in a direct offering, on July 18, 2006 we were notified
      that this direct offering was effective, and on November 2, 2006 we announced
      that the direct offering was closed and that approximately 16.6 million shares
      had been sold raising approximately $4.2 million.





On
      February 22, 2007, we sold a $1.2 million 10% Senior Convertible Promissory
      Note
      which was convertible into 12,000,000 shares. In connection with the issuance
      of
      the Note we issued warrants to purchase 6,000,000 shares of common stock at
      $0.10 per share.




On
      April
      11, 2007 and April 18, 2007 we sold an aggregate of 7,500 shares of Series
      A
      Convertible Preferred Stock convertible into 60,000,000 shares of common stock.
      In connection with this transaction we granted warrants to purchase 6,000,000
      shares of common stock at a minimum exercise price of $0.16; but not greater
      than $0.20 at the conversion which, as of October 15, 2007, has not occurred.
      As
      a result of these financings Wherify received net proceeds of approximately
      $5.2
      million.




On
      August
      1, 2007 and August 31, 2007 we sold an aggregate of 1,129 shares of Series
      B
      Convertible Adjustable Preferred Stock which is convertible into 7,056,250
      shares of common stock. In connection with this transaction we granted warrants
      to purchase 2,469,688 shares of common stock at a minimum exercise price of
      $0.16; but not greater than $0.20 at the conversion which, as of October 15,
      2007, has not accused. As a result of these financings Wherify received net
      proceeds of approximately $857,000.




We
      intend
      to pursue various sources of public and private financing to provide us greater
      flexibility and certainty with respect to our financing needs.




Net
      cash
      used in operating activities was $10.0 million, mainly from changes in operating
      assets caused by: increases in accounts payable and accrued charges totaling
      $4.7 million, deferred revenue of $0.1 million; offset by operating losses
      of
      $17.1 million, increased inventory balance by $2.2 million, increased accounts
      receivable by $0.1, increased prepaid and other assets of $0.1 million; offset
      by depreciation charge by $2.6 million.





In
      order
      for the Company to continue operations and to properly execute the business
      model it has on hand, the Company has to raise money very quickly in order
      to
      cover its expenses and its obligations to creditors.





Wherify
      currently does not have any credit facility available to it. Wherify has
      financed its operations to date primarily through the issuance of shares of
      common and preferred stock and convertible debentures. There is going concern
      in
      auditors’ reports for the fiscal year ended June 30, 2007 and 2006. We continue
      in the process of locating financing sources to meet our financial needs and
      to
      provide a greater flexibility and certainty to our financing needs. Adequate
      funds may not be available on terms acceptable to us. If additional funds are
      raised through the issuance equity securities, we will need to amend our
      certificate of incorporation and increase the number of authorized shares of
      common stock. If funding is insufficient at any time in the future, we may
      be
      unable to continue the development of our products or services, take advantage
      of business opportunities or respond to competitive pressures, any of which
      could have material adverse effect on our financial position, results of
      operations and cash flows, or we may be unable to continue operations.





20


We
      do not
      have material capital leases or material commitments for capital expenditures
      but we have anticipated payments to note holders and contractual arrangements
      made to vendors and third parties for payments of services that are substantial
      thus impacting our cash position severely.





We
      expect
      operating losses and negative operating cash flows to continue for at least
      the
      next-nine to twelve months on the assumption that we continue our business
      plan
      to successfully sell our Wherifone product in both North America and
      internationally during the calendar year 2008. During October 2006, we launched
      our Wherifone product in the various markets are contingent on a number of
      factors, including establishing the distribution agreement in that country
      or
      territory with a qualified distributor, singing-up carrier to support the
      subsequent subscribers using our patented GPS-enabled locator services,
      arranging to produce adequate numbers of Wherifone through or contract
      manufacturer, and the market’s general acceptance of our Wherifone in a highly
      competitive and evolving market place for GPS-enabled locator services,
      including through cell phone-like devices. During this time leading up to new
      product launches we expect our operating costs to increase because of expected
      new product launch expenses not previously incurred that are related to new
      product brand development, marketing and other promotional activities; targeted
      increases in personnel to support our critical new development launch
      activities; the expansion of our billing and collections infrastructure and
      customer support services concurrent with our growth in new product sales and
      subscriber sign-ups, strategic relationship development with our distributors
      and resellers and the working capital requirements needed to initially fill
      out
      our Wherifone product pipeline from our contract manufacturer to our final
      customers.





During
      October 2006, we entered to an agreement with Toys R US on product and related
      subscriber services.





As
      of
      June 30, 2007, Wherify had a cash and cash equivalents totaling $2.1 million.
      As
      of October 15, **** 2007 **,** we
      had
      cash and cash equivalents of approximately $0.5 million **.** We
      believe that our cash balance will be adequate to continue our current business
      plan into November 2007.





We
      require additional capital in order to successfully operate our business.
      Significant additional funding will be required throughout 2007 and 2008 to
      continue operations. There is no guarantee that we will be able to obtain
      future funding or if we do obtain future funds they will be adequate to
      continue our operations.




**Results
      of Operations**





*Year
      Ended June 30, 2007 Compared to Year Ended June 30, 2006*




Net
      revenues for the year ended June 30, 2007 were $884,710 and were primarily
      generated by Wherifone and related products of $704,202 and $180,508 for FACES.
      Net revenues for year ended June 30, 2006 was $154,936 and were primarily
      generated by the sales of FACES products.





Operating
      expenses for the year ended June 30, 2007 were $14.5 million versus $81.5
      million for the year ended June 30, 2006. The decrease in expenses was primarily
      due to decrease in the goodwill impairment by $67.5 million and intangible
      impairment by $1.5 million recorded during the year ended June 30,
      2006.





Engineering
      and development expenses were $0.1 million for June 30, 2007 versus $1.5 million
      for year ended June 30, 2006. The decrease in expenses in the year ended 2007
      was primarily a result of costs associated with the product development and
      preparation for the product launch of WherifoneTM in
      the
      year ended 2006.





General
      and administrative expenses for the year ended June 30, 2007 was $10.8 million
      compared to $8.6 million June 30, 2006. The increases in expenses were caused
      by
      the following:





a)
            Increased
                customer service expenses by $0.4 million;b)
            Increased
                marketing expenses by $1.8 million;





c)
            Increased
                sales salaries, marketing and government filing expenses related
                to the
                product launch ofWherifoneTMin
                North America by $0.7 million, and;d)
            Inventory
                adjustment of approximately $1.4 million.


Amortization
      and depreciation increased by $1.7 million due to the amortization of deferred
      financing costs related to the debt financing.





The
      change in fair value of derivatives were $1.6 million from prior year due mainly
      to the initial charge for the fair value of derivatives expense recognition
      related to the liability associated with the conversion provision of the
      convertible debentures and warrants issued during March 2006, plus the affect
      of
      the measurement of the change in fair value of such issuances as of the period
      ended June 30, 2007, in accordance with SFAS No. 133 “Accounting for Derivatives
      Instruments and Hedging Activities”.





21


Interest
      and other expense increased by approximately $1.5 million from the prior year
      period amount primarily due to costs and interest charges related to secured
      debentures of $5.0 million issued in March 2006 and for the Notes Payable issued
      in February and June 2006 for an aggregate total of $2.0 million. Interest
      expense accrued on the $2.0 million loan to-date is $257,260.





**3.**
            **General**





***A.***
            ***Critical
                Accounting Policies***





***Long-Lived
      Intangible Assets***





The
      Company accounts for long-lived assets under SFAS No. 144, “Accounting for the
      Impairment or Disposal of Long-Lived Assets” which requires the Company to
      review for impairment of long-lived assets whenever events or changes in
      circumstances indicate that the carrying amount of an asset might not be
      recoverable. When such an event occurs, management determines whether there
      has
      been impairment by comparing the anticipated undiscounted future net cash flows
      to the related asset’s carrying value. If an asset is considered impaired, the
      asset is written down to fair value, which is determined based on discounted
      cash flows or appraised value, depending on the nature of the
      asset.





Long-lived
      intangible assets consist of acquired customer lists and acquired software
      and
      software intellectual property, and development of new software products and
      enhancements to existing software products. Until technological feasibility
      is
      established, costs associated with software development, including costs
      associated with the acquisition of intellectual property relating to software
      development is expensed as incurred. After technological feasibility is
      established computer software costs that are then incurred are capitalized
      in
      accordance with the provisions of SFAS No. 86 “Accounting for the Costs of
      Computer Software to be Sold, Leased or Otherwise Marketed”. Amortization of
      these capitalized costs is provided using the greater of the ratio of revenues
      generated in the period over total future revenues of the product, or the
      straight-line method over the estimated market life of the related products,
      generally three years, commencing when the product becomes generally available
      to customers. For the *Software
      Revenue Recognition* .
      Revenue
      is recognized when persuasive evidence of an fiscal year ended June 30, 2007,
      technical feasibility and consumer availability had not yet been established
      for
      the Company’s product.





***Revenue
      Recognition***





Wherify
      adopted revenue recognition policies to comply with the guidance of Staff
      Accounting Bulletin (“SAB”) No. 104, *Revenue
      Recognition* ,
      SAB
      Topic 13, *Revenue
      Recognition,* FASB’s
      Emerging Issues Task Force (“EITF”) Issue -00-21, *Revenue
      Arrangements With Multiple Deliverables* ,
      and
      AICPA Statement of Position (“SOP”) 97-2, arrangement exists, the delivery and
      acceptance of the equipment has occurred or services have been
      rendered, the price is fixed or determinable, and the collectibility of payment
      is reasonably assured. The application of this guidance requires management
      to
      exercise judgment in evaluating these factors in light of the terms and
      conditions of its customer contracts and other existing facts and circumstances
      to determine appropriate revenue recognition. Application of 97-2 requires
      determining whether a software arrangement includes multiple elements, and
      if
      so, whether vendor -specific objective evidence (VSOE) of fair value exists
      for
      those elements. Change to the elements in a software arrangement, the ability
      to
      identify VSOE for those elements, the fair value of the respective elements,
      and
      changes in a product’s estimated life cycle, could materially impact the amount
      of earned and unearned revenue, Judgment is also required to assess whether
      future releases of certain software represent new products or upgrades and
      enhancements to existing products. Applications of EITF 00-21 requires
      determining whether a revenue arrangements includes multiple revenue-generating
      activities, such as product sale and services, and if so whether allocation
      of
      the arrangement’s consideration is required to more than one unit of
      accounting.





Wherify
      has two types of revenue: hardware revenue and subscription revenue and consists
      of shipped customer orders and completed services. Hardware revenue is
      recognized at the later of shipment date or upon satisfying contractual
      requirements or obligations under the sales contract, whichever is later.
      Subscription revenue is recognized at completion of performance. Prior to
      September 2006, the Company recognized revenues primarily from the sale of
      FACES
      software and subscription. Starting in September 2006 recognized revenues are
      primarily from the sale of wireless location devices and services. Revenues
      are
      also offset with a reserve for any price refunds and consumer rebates consistent
      with the EITF Issue 01-09. *Accounting
      for Consideration Given by a Vendor to a Customer* ,
      as
      appropriate.





Hardware
      sales currently consist principally or revenues from the sale of GPS-enabled
      wireless location devices, primarily Wherify’s handsets plus accessories to new
      subscribers and to agents and other third-party distributors. The revenue and
      related expenses associated with the sale of wireless handsets and accessories
      through our indirect sales channels are recognized when the products from the
      sales channels are recognized when the products are delivered and accepted
      by
      the agent or third party distributor, as this is considered to be a separate
      earnings process from the sale of wireless services and the probability of
      collection is likely. Shipping and handling costs for wireless handsets sold
      to
      agents and to other third-party distributors are classified a s costs of
      equipment sales.




22





Subscription
      revenues are earned by providing to Wherify’s wireless GPS-enable location
      services network (activation revenue) and for usage of its wireless
      telecommunications system enhanced GPS-enabled locates (airtime revenue).
      Activation revenue from postpaid subscribers is billed either in advance or
      arrears and recognized ratably over the service period. Airtime revenue,
      including locates, call time, roaming revenue and long-distance revenue, is
      billed in arrears based on minutes of use and is recognized when the service
      is
      rendered. Prepaid airtime sold to subscribers and revenue collected from pay-in
      advance subscribers is recorded as deferred revenue prior to the commencement
      of
      services, and revenue is recognized when airtime is used or expires. Activation
      and airtime services provided are billed throughout the month according to
      the
      bill cycle in which a particular subscriber is placed. As a result of bill
      cycle
      cut-off times, the Company is required to make estimates for service
      revenues earned but not yet billed at the end of each month, and or advanced
      billings. Estimates for activation revenues are based upon the most current
      bill
      cycle revenues. Estimates for airtime revenues are based upon historical minutes
      of use.





The
      Company launched its North American wireless location services in October 2006.
      The Company’s North American subscribers’ rate plan include a feature whereby a
      subscriber’s monthly usage is automatically charged at the most advantageous
      rate plan then in effect for the minutes used. For prepaid plans, the Company
      defers revenue based on an estimate of the portion of unused minutes expected
      to
      be utilized prior to expiration. As the Company lacks historical subscriber
      usage patterns for its specialized services, the Company must apply judgment
      to
      estimate the number of unused minutes to be utilized, as well as those which
      are
      likely to expire or be forfeited. No deferral of revenue is recorded for the
      minutes expected to expire or to be forfeited, as no future performance is
      expected to be required by the Company, nor is there any obligation to refund
      or
      redeem for the value expired minutes. The balance of the deferred phone sales
      and activation fees as of December 31, 2006 and June 30, 2007 was $169,000
      and
      $76,852 respectively, and has been included in deferred revenue in the
      consolidated balance sheets. When available, revenues for enhanced services
      and
      optional features would be recognized as earned. Service revenues also include
      billings to our subscribers for Universal Service fund (USF) and other
      regulatory fees.





The
      Company has determined that the sale of wireless services through its direct
      sales channels with an accompanying handset constitutes a revenue arrangement
      with multiple deliverables in accordance with EITF No.00-21, *Accounting
      for Revenue Arrangements With Multiple Deliverables* .
      The
      Company accounts for these arrangements as separate units of accounting,
      including the wireless service and handset. Arrangement consideration received
      for the handset is recognized as equipment sales when the handset is delivered
      and accepted by the subscriber. Arrangement consideration received for the
      wireless service is recognized a service revenues when earned. As the
      non-refundable, up-front activation fee charged to the subscriber does not
      meet
      the criteria as a separate unit of accounting, the Company allocates the
      additional arrangement consideration received from the activation fee to the
      handset (then delivered item) to the extent that the aggregate handset and
      activation fee proceeds do not exceed the fair value of the handset. Any
      activation fees not allocated to the handset would be deferred upon activation
      and recognized as service revenue on a straight-line basis over the expected
      customer relationship period. The Company determined that the sale of wireless
      services through direct channels (agents) does not constitute a revenue
      arrangement with multiple deliverables. For indirect channel sales, the Company
      continues to defer non-refundable, up-front activation fees and costs to the
      extent of the related revenues in accordance with SAB No. 104, *Revenue
      Recognition* .
      These
      deferred fees and costs are amortized on a straight-line basis over the
      estimated customer relationship period, the contract period.





***Stock
      Based Compensation***





Prior
      to
      January 1, 2006, the Company accounted for stock based compensation under
      Statement of Financial Accounting Standards No. 123 Accounting for Stock-Based
      Compensation (“FAS 123”). As permitted under this standard, compensation cost
      was recognized using the intrinsic value method described in Accounting
      Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB
      25”). Effective January 1, 2006, the Company has adopted Statement of Financial
      Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“FAS 123R”)
      and applied the provisions of the Securities and Exchange Commission Staff
      Accounting Bulletin No. 107 using the modified-prospective transition method.
      Prior periods were not restated to reflect the impact of adopting the new
      standard. As a result of the adoption of FAS 123R, stock-based compensation
      expense recognized during the six months ended June 30, 2006 includes
      compensation expense for all share-based payments granted on or prior to, but
      not yet vested as of January 1, 2006, based on the grant date fair value
      estimated in accordance with the original provisions of FAS 123, and
      compensation cost for all share-based payments granted on or subsequent to
      January 1, 2006, based on the grant date fair vale estimated in accordance
      with
      the provisions of FAS 123R. . See
      Note
      15 for the Company option activities during the years ended June 30, 2007 and
      2006.




23




***Derivative
      Financial Instruments***





The
      Company does not use derivative instruments to hedge exposures to cash flow,
      market, or foreign currency risks. The Company evaluates all of it financial
      instruments to determine if such instruments are derivatives or contain features
      that qualify as embedded derivatives. For derivative financial instruments
      that are accounted for as liabilities, the derivative instrument is initially
      recorded at its fair value and is then re-valued at each reporting date, with
      changes in the fair value reported as charges or credits to income. For
      option-based derivative financial instruments, the Company uses the
      Black-Scholes Option-pricing Model to value the derivative instruments at
      inception and subsequent valuation dates. The classification of derivative
      instruments, including whether such instruments should be recorded as
      liabilities or as equity, is re-assessed at the end of each reporting period.
      Derivative instrument liabilities are classified in the balance sheet as current
      or non-current based on whether or not net-cash settlement of the derivative
      instrument could be required within 12 months of the balance sheet
      date.





***B.***
            ***Quantitative
                and Qualitative Disclosures About Market
                Risk***





Not
      applicable.





***C.***
            ***Off-Balance
                Sheet Arrangements***





We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that are material to our investors.




**Item
      7. Financial Statements and Supplementary Data.**




The
      financial statements required to be filed pursuant to this Item 7 are appended
      to this Annual Report on Form 10-KSB and incorporated by reference herein.




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




None.




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





We
      maintain disclosure controls and procedures that are designed to ensure that
      information required to be disclosed in our Exchange Act reports is recorded,
      processed, summarized, and reported within the time periods specified in the
      Securities and Exchange Commission’s rules and forms, and that such information
      is accumulated and communicated to our management, including our Chief Executive
      Officer and Chief Accounting Officer, as appropriate, to allow timely decisions
      regarding required disclosure based on the definition of “disclosure controls
      and procedures” in Rule 13a-15(e). In designing and evaluating the disclosure
      controls and procedures, our management recognized that any controls and
      procedures, no matter how well designed and operated, can provide only
      reasonable assurance of achieving the desired control objectives, and management
      necessarily was required to apply its judgment in evaluating the cost-benefit
      relationship of possible controls and procedures.





At
      the
      end of the period covered by this Annual Report on Form 10-KSB, we carried
      out
      an evaluation, under the supervision and with the participation of our
      management, including our Chief Executive Officer and Chief Accounting Officer,
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures. Based on the foregoing, our Chief Executive Officer and our Chief
      Accounting Officer concluded that our disclosure controls and procedures were
      not effective to ensure that all material information required to be disclosed
      in this Annual Report on Form 10-KSB has been made known to them in a timely
      fashion. In connection with the completion of its audit of, and the issuance
      of
      its report on, our financial statements for the year ended June 30, 2007, Malone
      & Bailey, PC identified deficiencies that existed in the design or operation
      of our internal control over financial reporting that it considers to be
“material weaknesses.” The Public Company Accounting Oversight Board has defined
      a material weakness as a “significant deficiency or combination of significant
      deficiencies that results in more than a remote likelihood that a material
      misstatement of the annual or interim financial statements will not be prevented
      or detected.”





The
      deficiencies in our internal control related to inventory observation, expense
      recognition, derivative instruments valuation and disclosure control
      deficiencies related to transactions involving stock-based compensation and
      income taxes. These deficiencies have been disclosed to our Board of Directors
      and Audit Committee Members. Additional effort is needed to fully remedy these
      deficiencies and we are continuing our efforts to improve and strengthen our
      control processes and procedures. We are in the process of improving our
      internal control over financial reporting in an effort to remediate these
      deficiencies by improving supervision and increasing training of our accounting
      staff with respect to generally accepted accounting principles, providing
      additional training to our management regarding use of estimates in accordance
      with generally accepted accounting principles, increasing the use of contract
      accounting assistance, adding additional accounting personnel to assist in
      inventory and financial instrument valuations, and increasing the frequency
      of
      internal financial statement review.




24





**Item
      8B. Other Information.**





On
      October 11 2007, the holders of Wherify Series A Convertible Preferred Stock
      gained the right to designate and elect three members to Wherify’s Board of
      Directors pursuant to the terms of the Certificate of Designation of Series
      A
      Convertible Preferred Stock previously filed with the Securities and Exchange
      Commission. The right was triggered because Wherify did not consummate a
      financing resulting in gross proceeds to Wherify of $5,000,000 based on an
      issue, conversion or exercise price of at least $0.20 per share within six
      months after the original issuance date of the Series A Convertible Preferred
      Stock.





O n
      October
      15, 2004, Venture Corporation Limited, a Singapore corporation ("Venture"),
      filed suit against Wherify California, in the United States District Court,
      Central District of California. The complaint sought approximately $5 million
      in
      damages for breach of contract, fraud and common counts alleging that Wherify
      California failed to pay certain amounts owed for the manufacture of the
      children's model personal locater ("CM1"). Wherify California answered Venture's
      complaint on November 16, 2004 and filed a cross-complaint alleging that Venture
      failed to timely deliver conforming goods. A court trial concluded on November
      4, 2005, and on December 27, 2005 the District Court's judgment awarding Venture
      approximately $1.7 million in damages (including costs) was entered. On January
      26, 2006, a Notice of Appeal was filed with the United States Court of Appeals
      for the Ninth Circuit. Venture has commenced collection procedures.  On
      March 20, 2007, Venture filed a motion to dismiss the appeal; Wherify California
      filed an opposition to the motion to dismiss on April 2, 2007, and the court
      denied the motion. On November 7, 2007 the court  dismissed the appeal by
      stipulation with both sides agreeing to an allocation of attorney’s fees and
      costs.


25


**PART
      III**




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




**Directors
      and Executive Officers**




The
      following table sets forth the names, ages and positions of our directors and
      executive officers: ****




**Name**
            
            **Age**
            
            **Position**Vincent
                Sheeran
            
            49
            
            Director
                and Chief Executive OfficerTimothy
                J. Neher (3)
            
            41
            
            Chairman
                of the BoardWade
                R. Fenn (2)
            
            49
            
            DirectorW.
                Douglas Hajjar
            
            60
            
            DirectorDaniel
                McKelvey (1)(2)
            
            41
            
            Director


(1)
            Our
                Audit Committee consists of Mr.. McKelvey (Chairman).




(2)
            Our
                Compensation Committee consists of Messrs. McKelvey and
                Fenn.




(3)
            .Mr.
                Neher’s employment agreement with the company ended in November 2007 and
                will not be renewed.






Each
      Director will hold office until the next annual meeting of Stockholders and
      until his successor has been elected and qualified.




***Vincent
      D. Sheeran*** ,
      has
      served as the Company’s Chief Executive Officer and Director since June 2007. ** From
      April 2002 to May 2006 Mr. Sheeran served as the President and Chief Executive
      Officer of UltraLink, Inc. where he was responsible for transforming the
      business into a well respected HRO with a growing number of services. Mr.
      Sheeran also orchestrated the successful sale of the company to Barring Private
      Equity of India. Prior to UltraLink, Mr. Sheeran worked at Epicor Software
      from
      June 1995 to September 2001 as the Senior Vice President of Worldwide Sales,
      where he was responsible for profit and loss for all international regions
      and
      directed the company’s overall sales efforts. During this period, Mr. Sheeran
      also held other senior positions at Epicor, including Senior Vice President,
      Marketing. Prior to Epicor, he held senior executive positions at several other
      growing technology firms, including Software Plus, Inc., Tesseract, and
      McCormack and Dodge. Mr. Sheeran holds a B.S in Management and Management
      Sciences from the University of South Carolina.





***Timothy
      J. Neher*** ,
      the
      former Chief Executive Officer of Wherify, founded Wherify California, Inc.,
      a
      California corporation, in 1998 after more than a decade of experience
      developing and marketing new consumer products. He served as Chief Executive
      Officer of Wherify California from 1998 to July 2005. He served as Chief
      Executive Officer and a Director of the Company from July 2005 until February
      2007 and as Chairman of the Board until November 2007. Prior to launching
      Wherify California, Mr. Neher served as the Vice President of Marketing and
      Sales for CTH Consumer Plastic, Inc. where he worked from 1992 to 1998. From
      1988 to 1992, Mr. Neher was Vice President of Operations for Windy City
      Product Development. Mr. Neher’s employment agreement with the company ended in
      November 2007 and will not be renewed.




***Wade
      R. Fenn*** has
      served as a Director of the Company since July 2005. He has over two decades
      of
      retail electronics experience. From 1980-2002, he worked at Best Buy Co., Inc.
      in a number of positions, most recently as President of Entertainment and
      Strategic Business Development of Best Buy Co., Inc. Mr. Fenn joined Best
      Buy in 1980. Prior to serving as President of Entertainment and Strategic
      Business Development, Mr. Fenn held the position of Executive Vice
      President—Marketing, where he was responsible for all marketing, merchandising,
      advertising, and inventory teams. After receiving his degree in economics and
      history from Williams College in 1980, Mr. Fenn joined Best Buy as a sales
      person and served in various operating roles, including Senior Vice President
      Retail, Vice President Sales, district manager and store manager. Mr. Fenn
      currently is the President of Navvo, a start-up company, which is developing
      several voice applications for the consumer market. Mr. Fenn is also the
      managing partner of Retail Masters, a consulting company.




***W.
      Douglas Hajjar*** has
      served as a Director of the Company since November 2005. Mr. Hajjar served
      as chairman of Wherify California from 1998 until July 21, 2005. Mr. Hajjar
      previously served as Chairman of Control Data Corporation and Vice Chairman
      of
      Cadence Design Systems, Inc. Mr. Hajjar served as Chairman and CEO of Valid
      Logic for 5 years, Chairman and CEO of Telesis Systems for 2 years, and CFO
      and
      COO of GenRad for 5 years. Mr. Hajjar received a Bachelor Degree from
      Boston College in 1968.




26




***Daniel
      McKelvey*** has
      served as a director of the Company since August 2006, and had previously served
      as a director of the Company from March 2004 until July 2005. Mr. McKelvey
      has served as a co-founder and Managing Partner of Forté Partners, LLC. Forté
Partners is a merchant banking firm based in San Francisco that focuses on
      investments in software, wireless communications, and broadband networking.
      He
      serves as a general partner of three partnership funds of the firm.
      Mr. McKelvey has also been an active entrepreneur, co-founding Forté
Capital LLC based in New York, an asset management firm with over $400 million
      under management providing advisory services to small institutions and high
      net
      worth individuals. Mr. McKelvey served in the Capital Markets Practice for
      Accenture, formally Andersen Consulting, both in New York and San Francisco.
      He
      has extensive expertise in enterprise software, networking, and financial
      services. Mr. McKelvey was responsible for the strategic planning,
      development, and implementation of various equity and fixed income portfolio
      management, investment control, trading, settlement control, and risk management
      systems. Clients included The Capital Group, Goldman Sachs, and Donaldson Lufkin
      and Jenrette. Mr. McKelvey holds a B.S. cum laude in mathematics and
      computer science from the University of New Hampshire.




**CORPORATE
      GOVERNANCE**




The
      Company operates within a comprehensive plan of corporate governance for the
      purpose of defining responsibilities, setting high standards of professional
      and
      personal conduct and assuring compliance with such responsibilities and
      standards. In July 2002, Congress passed the Sarbanes-Oxley Act of 2002, which,
      among other things, establishes, or provides the basis for, a number of new
      corporate governance standards and disclosure requirements. The Company
      regularly monitors developments in the area of corporate governance.




**Board
      of Directors**




The
      Board
      of Directors consists of directors who are elected by the Company’s
      Stockholders, and is the ultimate decision-making body of the Company except
      with respect to those matters reserved to the Stockholders. The Board of
      Directors acts as an advisor and counselor to senior management and ultimately
      monitors its performance. These functions of the Board of Directors are
      fulfilled by the presence of directors who have a substantive knowledge of
      the
      Company’s business.




Our
      board
      of directors currently consists of the following five members: Vincent Sheeran,
      Timothy Neher (Mr. Neher’s employment agreement with the company ended in
      November 2007 and will not be renewed.), Douglas Hajjar, Wade R. Fenn and Daniel
      McKelvey. Mr. Fenn is an independent director as defined by the applicable
      American Stock Exchange rules. **** There
      are
      no family relationships among any of our current directors and executive
      officers. The number of authorized members of our board of directors is
      determined by resolution of our board of directors. In accordance with the
      terms
      of our amended certificate of incorporation, the number of our board of
      directors is currently set at six members.




Our
      amended and restated bylaws provide that the authorized number of directors
      may
      be changed only by resolution of our board of directors. Our board of directors
      has designated an audit committee and a compensation committee, and may
      establish other committees as it deems necessary or appropriate.




**Committees
      of the Board of Directors**




The
      Board
      of Directors has two standing committees: an Audit Committee and the
      Compensation Committee.




***Audit
      Committee***




Our
      audit
      committee consists of Mr. Daniel McKelvey (Chairman). Mr. McKelvey joined
      the Board on August 19, 2006, meets the financial literacy requirements of
      applicable SEC and American Stock Exchange rules, and the Board has determined
      that Mr. McKelvey is an “audit committee financial expert” as defined in
      Item 401(e) of Regulation S-K. Mr. McKelvey is not “independent” as that
      term is defined in applicable SEC and American Stock Exchange rules because
      of
      compensation paid to him as a consultant to the Company during the prior three
      years. Both our independent auditors and our internal financial personnel will
      regularly meet privately with and will have unrestricted access to our audit
      committee. Our audit committee operates pursuant to a written charter. Our
      audit
      committee charter is available on our website at
      www.wherifywireless.com.




27




***Compensation
      Committee***




The
      members of the Compensation Committee are Mr. Wade Fenn (Chairman), and Mr.
      McKelvey. The Board has determined that Mr. Fenn is independent within the
      meaning of applicable American Stock Exchange rules. The Compensation Committee
      of the Board of Directors reviews and recommends to the Board the compensation
      and benefits of all executive officers of the Company, including the chief
      executive officer, administers the Company’s stock option plan, and establishes
      and reviews general policies relating to the compensation and benefits of the
      Company’s employees and performs such other functions regarding compensations as
      the Board may delegate. Our Compensation Committee operates pursuant to a
      written charter. Our compensation committee charter is available on our website
      at www.wherifywireless.com.




***Nominating
      Committee***




The
      Company does not have a standing nominating committee. Due to the small size
      of
      its Board, the Company does not foresee the need to establish a separate
      nominating committee. The full Board is responsible for evaluating and
      recommending individuals for election or reelection to the Board, including
      those recommendations submitted by Stockholders. Currently, the independent
      director of the Board (within the meaning of applicable American Stock Exchange
      rules) is Mr. Fenn.




**SECTION
      16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE**




Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
      executive officers and directors, and persons who own more than 10% of the
      Company’s Common Stock to file reports of ownership on Form 3 and changes in
      ownership on Form 4 or Form 5 with the Securities and Exchange Commission (the
      “SEC”). Such executive officers, directors and 10% Stockholders are also
      required by SEC rules to furnish the Company with copies of all Section 16(a)
      forms they file. Based solely on information provided to Wherify, Wherify
      believes that during the last fiscal year, the following reports required by
      Section 16(a) of the Exchange Act to be filed by its Directors and executive
      officers were not timely filed: **** (i) **** Mr.
      Hajjar did not timely file a Form 4 covering 4 transactions, where he received
      stock in lieu of cash compensation, (ii) Mr. McKelvey did not timely file a
      Form
      4 covering 3 transactions, where he received stock in lieu of cash compensation,
      (iii) Mr. Fenn did not timely file a Form 4 covering 3 transactions, where
      he
      received stock in lieu of cash compensation, (iv) Mr. Scigliano did not timely
      file a Form 4 covering 2 transactions, where he received stock in lieu of cash
      compensation, (v) Dr. Morris did not timely file a Form 3 or Form 4 covering
      3
      transactions, where he received stock in lieu of cash compensation, (vi) Mr.
      Neher did not timely file a Form 4 covering 1 transaction, where he received
      stock in lieu of cash compensation, and Mr. Sheeran filed a late Form 4 covering
      one transaction. All Directors intend to file Form 3 or Form 4s covering all
      applicable transactions as soon as practicable.




28




**Item
      10. Executive Compensation.**




**EXECUTIVE
      COMPENSATION AND CERTAIN TRANSACTIONS**




**Executive
      Compensation**




The
      table
      below summarizes the total compensation paid to or earned by each of the named
      executive officers for the fiscal year ended June 30, 2007:.




N**ame
                and Principal Position**
            
            
            **Fiscal**
              **Year**
            
            
            **Salary
                ($)**
            
            
            **Bonus
                ($)**
            
            
            **Stock
                Awards ($)(a)**
            
            
            **Option
                Awards ($) (a)**
            
            
            
            
            
            **Non-Equity
                Incentive**
              **Plan
                Compensation**
              **($)**
            
            
            **Nonqualified
                Deferred**
              **Compensation**
              **Earnings**
            
            
            **All**
              **Other
                Compensation**
            
            
            **Total
                ($)**Vincent
                Sheeran, Director and Chief Executive Officer(b)
            
            
            2007
            
            $
            15,385
            
            
            ___
            
            
            ___
            
            $
            638,345
            
            
            (g
            )
            
            ___
            
            
            ___
            
            
            ___
            
            $
            695,385Timothy
                J. Neher, Former Chief Executive Officer(c)
            
            
            2007
            
            $
            200,000
            
            
            ___
            
            
            ___
            
            
            ___
            
            
            
            
            
            ___
            
            
            ___
            
            $
            24,000(h
            )
            $
            224,000Mark
                Gitter, Former Chief Financial Officer(d)
            
            
            2007
            
            $
            131,364
            
            
            ___
            
            
            ___
            
            
            ___
            
            
            
            
            
            ___
            
            
            ___
            
            
            ___
            
            $
            131,364Gerald
                Parrick, Former President(e)
            
            
            2007
            
            $
            183,069
            
            
            ___
            
            
            ___
            
            
            ___
            
            
            
            
            
            ___
            
            
            ___
            
            
            ___
            
            $
            183,069William
                B. Scigliano, former President of the Government
                Relations(f)
            
            
            2007
            
            $
            166,058
            
            $
            130,000
            
            $
            145,000
            
            
            ___
            
            
            
            
            
            ___
            
            
            ___
            
            $
            30,000(i
            )
            $
            471,058




(a)
            Amounts
                are calculated in accordance with the provisions of Statement of
                Financial
                Accounting Standards (“SFAS”) No. 123R “Share-based
                Payment.”




(b)
            Mr.
                Sheeran began serving as Chief Executive Officer of the Company on
                June 6,
                2007.




(c)
            Mr.
                Neher ceased to serve as Chief Executive Officer of the Company on
                February 28, 2007. Mr. Neher's employment with the company ended
                in
                November 2007 and will not be
                renewed.




29




(d)
            Mr. Gitter
                resigned as the Company’s Chief Financial Officer and Treasurer on March
                12, 2007.




(e)
            Mr.
                Parrick resigned as the Company’s President on May 11,
                2007.




(f)
            Mr.
                Scigliano resigned as the Company’s President of Government Services
                Division on June 27, 2007.




(g)
            On
                a June 6, 2007 Mr. Sheeran was granted an option to purchase 4,000,000
                shares of Wherify common stock. The option vests over four years
                at a rate
                of 1/48 per month, expires on June 6, 2117 , and has an exercise
                price of
                $0.16.




(h)
            Includes
                $24,000 automobile allowance.




(i)
            Includes
                $30,000 automobile and housing
                allowance.




***Employment
      Agreement with Vincent Sheeran***




Wherify
      entered into an employment agreement with Mr. Sheeran, dated June 6, 2007.
      Pursuant to the agreement, Mr. Sheeran is paid an annual base salary of
      $200,000, $2,000 per month for living expenses and will be eligible to receive
      a
      bonus equal to 100% of his annual salary for meeting certain milestones. Wherify
      has the option to pay up to 50% of any bonus earned by Mr. Sheeran in Wherify’s
      common stock. In addition, Mr. Sheeran was granted an option to purchase
      4,000,000 shares of Wherify common stock. The option vests over four years
      at a
      rate of 1/48 per month and has an exercise price of $0.16. Mr. Sheeran is
      entitled to all Wherify benefits including medical and dental.




The
      agreement also provides that in the event Mr. Sheeran is terminated without
      cause or good reason he will be entitled to one year severance payable in either
      (i) a lump sum with no continued benefits or stock vesting or (ii) a 12 month
      payout of annual salary, benefits and continued vesting of stock options. All
      vested options must be exercised within 90 days after termination or
      resignation.




In
      addition, the agreement provides that in the event of a change of control,
      all
      stock options shall immediately vest.




The
      Agreement also provides that Mr. Sheeran is entitled to one seat on Wherify’s
      Board of Directors.




***Employment
      Agreement with Timothy Neher***




In
      November 2002, Wherify California, Inc., a California corporation (“Wherify
      California”) entered into an employment agreement with Timothy Neher pursuant to
      which Mr. Neher agreed to serve as the President and Chief Executive
      Officer of Wherify California until November 2007 at an annual base salary
      of
      $200,000 (as adjusted pursuant to the agreement). In addition, in November
      2002,
      Wherify California granted Mr. Neher an option to purchase 1,200,525 shares
      of its common stock at an exercise price of $0.34 per share. In addition to
      the
      compensation described above, Wherify California also agreed to award
      Mr. Neher additional cash bonuses, in the event Wherify California achieved
      certain milestones as described in the employment agreement. Mr. Neher is
      also entitled to participate in any and all employee benefit plan hereafter
      established for Wherify California employees and is entitled to an automobile
      allowance of $2,000 per month. Wherify has agreed to assume this agreement
      from
      Wherify California.




Under
      the
      terms of the employment agreement, Mr. Neher is entitled to the following
      severance benefits:




·
            If
                Mr. Neher’s employment is terminated other than for “Cause” (as
                defined in the agreement), or if he resigns as a result of a “Constructive
                Termination” then Mr. Neher is entitled, in exchange for a release of
                all claims, a lump sum severance payment equal to 12 months base
                salary,
                as then determined, plus 50% of his prior year’s bonus, if any.
                Additionally, Mr. Neher will receive accelerated vesting with respect
                to 240,105 shares purchasable upon exercise of the option granted
                to him
                by Wherify California.




On
      February 28, 2007, the Board transitioned Mr. Neher from the office of Chief
      Executive Officer and President of the Company to Chairman of the Board of
      Directors. This transition did not trigger severance benefits pursuant to the
      terms of the agreement. Mr. Neher’s employment with the Company ended in
      November 2007 and will not be renewed.




***Settlement
      Agreement with William Scigliano***




On
      June
      27, 2007 the Company and Mr. Scigliano entered into a Separation Agreement,
      effective June 27, 2007. Pursuant to the agreement, Mr. Scigliano was paid
      $130,000 and issued 763,158 shares of Wherify’s common stock (the “Common
      Stock”). Mr. Scigliano will be locked-up from selling any shares of the Common
      Stock for 90 days (the “Initial Lock-up Period”). After the Initial Lock-up
      Period, Mr. Scigliano will be subject to an additional three-month lock-up
      period (the “Second Lock-up Period”) where he will be permitted to sell up to
      one-third of the Common Stock in each month of the Second Lock-up Period.




30


Mr.
      Scigliano is limited by the Agreement to only sell an amount of the Common
      Stock
      up to a Market Value of $145,000 (defined as the price received for shares
      of
      the Common Stock upon their sale by Mr. Scigliano). In the event Mr. Scigliano
      sells $145,000 Market Value of Common Stock and holds unsold shares of Common
      Stock, he is obligated to return the excess shares to Wherify. If after the
      Second Lock-up Period Mr. Scigliano sells all of the Common Stock for a Market
      Value of less than $145,000, Wherify is obligated to issue additional shares
      of
      common stock to Mr. Scigliano to compensate for the difference between $145,000
      and the Market Value Mr. Scigliano received for his shares of Common Stock.
      The
      amount of shares issued to compensate the difference will be determined by
      using
      the closing price of Wherify’s common stock on the expiration of the Second
      Lock-up Period.




**OUTSTANDING
      EQUITY AWARDS AT FISCAL YEAR-END**





**Option
                Awards**
            
            **Stock
                Awards****Name**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              
              **(#)**
              
              **Exercisable**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Options**
              
              **(#)**
              
              **Unexercisable**
            
            **Equity**
              **Incentive**
              **Plan Awards:**
              **Number
                of**
              **Securities**
              **Underlying**
              **Unexercised**
              **Unearned**
              **Options**
              
              **(#)**
            
            **Option**
              **Exercise**
              **Price**
              **($)**
            
            **Option**
              **Expiration**
              **Date**
            
            **Number of**
              **Shares
                or**
              **Units
                of**
              **Stock That**
              **Have
                Not**
              **Vested
                (#)**
            
            **Market**
              **Value of**
              **Shares or**
              **Units
                of**
              **Stock That**
              **Have
                Not**
              **Vested**
              
              **($)**
            
            **Equity Incentive**
              **Plan
                Awards:**
              **Number
                of**
              **Unearned**
              **Shares,
                Units**
              
              **or
                Other**
              
              **Rights
                That**
              **Have
                Not**
              **Vested
                (#)**
            
            **Equity**
              **Incentive**
              **Plan Awards:**
              **Market
                or**
              **Payout
                Value**
              **of
                Unearned**
              **Shares,
                Units**
              **or
                Other**
              **Rights
                That**
              **Have
                Not**
              **Vested**Vincent
                Sheeran, Director and Chief Executive Officer(a)
            
            
            83,333
            
            
            3,916,667
            
            
            
            
            $
            0.16
            
            
            6/6/2017Timothy
                Neher, Former CEO(b)
            
            
            1,200,525
            
            
            
            
            
            
            
            $
            0.34
            
            
            11/14/2012Timothy
                Neher, Former CEO(b)
            
            
            292,531
            
            
            50,223
            
            
            
            
            $
            0.34
            
            
            2/17/2014Gerald
                Parrick, Former President(c)
            
            
            314,471
            
            
            165,739
            
            
            
            
            $
            0.31
            
            
            11/29/2014William
                Scigliano, Former President of Governmental Services(d)
            
            
            150,000
            
            
            
            
            
            
            
            $
            2.00
            
            
            8/1/2007William
                Scigliano, Former President of Governmental Services(d)
            
            
            50,000
            
            
            
            
            
            
            
            $
            4.40
            
            
            4/1/2008William
                Scigliano, Former President of Governmental Services(d)
            
            
            50,000
            
            
            
            
            
            
            
            $
            6.00
            
            
            3/1/2009William
                Scigliano, Former President of Governmental Services(d)
            
            
            46,007
            
            
            78,993
            
            
            
            
            $
            1.21
            
            
            1/16/2016




31




(a)
            Mr.
                Sheeran began serving as Chief Executive Officer of the Company on
                June 6,
                2007.




(b)
            Mr.
                Neher ceased to serve as Chief Executive Officer of the Company on
                February 28, 2007. Mr. Neher’s employment agreement with the Company ended
                November 2007 and will not be
                renewed.




(c)
            Mr.
                Parrick resigned as the Company’s President on May 11, 2007.




(d)
            Mr.
                Scigliano resigned as the Company’s President of Government Services
                Division on June 27, 2007.




**Compensation
      of Directors**




The
      table
      below summaries the compensation paid by the Company to our Directors for the
      fiscal year ended June 30, 2007:




Name
            
            Fees
                Earned
              or
              Paid
                in Cash
              ($)
            
            Stock
              Awards
              ($)(a)
            
            Option
              Awards
              ($)
                (a)
            
            Non-Equity
                Incentive Plan Compensation
              ($)
            
            Nonqualified
                Deferred Compensation Earnings
            
            All
              Other
                Compensation
              ($)
            
            Total
              ($)Doug
                Hajjar(b)
            
            $
            90,000
            
            $
            190,000
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            $
            280,000Dr.
                Neil Morris(c)
            
            $
            36,000
            
            $
            33,000
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            $
            69,000Daniel
                McKelvey(d)
            
            $
            19,000
            
            $
            21,000
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            $
            40,000Wade
                Fenn(e)
            
            $
            15,500
            
            $
            26,500
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            $
            42,000William
                Scigliano(f)
            
            
            —
            
            $
            15,000
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            $
            15,000Timothy
                Neher(g)
            
            
            —
            
            $
            15,000
            
            
            
            
            
            —
            
            
            —
            
            
            
            
            $
            15,000




(a)
      Represents fair value as of June 30, 2007 under SFAS 123R.




(b)
      Mr.
      Doug Hajjar was compensated in cash totaling $90,000 and was granted shares
      in
      lieu of $190,000 totaling 1,075,270 shares.




(c)
      Dr.
      Neil Morris was compensated in cash totaling $36,000 and was granted shares
      in
      lieu of $33,000 totaling 116,250 shares.




(d)
      Mr.
      Daniel McKelvey was compensated in cash totaling $19,000 and was granted shares
      in lieu of $21,000 totaling 123,750 shares.




(e)
      Mr.
      Wade Fenn was compensated in cash totaling $15,500 and was granted shares in
      lieu of $26,500 totaling 203,750 shares.




(f)
      Mr.
      William Scigliano was granted shares in lieu of $15,000 totaling 93,750
      shares.




32




(g)
      Mr.
      Timothy Neher was granted shares in lieu of $15,000 totaling 93,750
      shares.




Upon
      appointment and their acceptance to serve on our Board, each new non-employee
      director is issued a non-statutory stock option (the “Option”) pursuant to the
      Company’s stock option plan to purchase 50,000 shares of Common Stock of the
      Company (“Shares”) at a purchase price equal to the current fair market value of
      such Shares as determined by the Board. The Option vests in equal monthly
      increments over four years so long as the non-employee director remains a member
      of the Board. Upon serving on the Board for one year and upon being appointed
      for another term, the non-employee director will receive additional options
      for
      10,000 shares which will vest ratably over 12 months. The non-employee director
      will receive additional options for 10,000 shares for each one year term of
      service with the Board thereafter.




In
      addition to the equity compensation described above, we pay each of our
      non-employee directors $3,000 per calendar quarter in which they serve on the
      Board plus an additional $2,000 per meeting for each of the first five meetings
      per year and $500 per scheduled monthly teleconference meeting they attend.
      In
      addition, we reimburse our directors for their reasonable out-of-pocket expenses
      incurred in attending meetings of our Board or committees thereof.




***Consulting
      Agreement with Douglas Hajjar***




Effective
      January 1, 2004, Wherify California entered into a Consulting Agreement (the
      “Initial Consulting Agreement”) with Douglas Hajjar, which was subsequently
      assumed by Wherify in connection with the merger of Wherify with Wherify
      California on July 21, 2005. Under the terms of the Initial Consulting
      Agreement, Mr. Hajjar acted as a financial advisor to the Company and the
      Company paid Mr. Hajjar a consulting fee of $10,000 per month.




In
      accordance with the terms of the Initial Consulting Agreement, in 2004 Wherify
      California issued to Mr. Hajjar an option to purchase 100,000 shares of
      Wherify California common stock (equivalent to approximately 481,000 shares
      of
      Wherify common stock) at the then fair market value. The options vest ratably
      on
      a monthly basis over a 36 month period commencing on the date of the agreement,
      but cease to vest upon termination of the agreement. All options granted
      pursuant to the Initial Consulting Agreement vest immediately upon a Change
      in
      Control.




The
      Initial Consulting Agreement also provided that upon a Change of Control during
      the term of the agreement, or within six months thereafter, in which the
      acquiring person or entity is introduced to the company by Mr. Hajjar, the
      company would pay Mr. Hajjar an acquisition fee equal to 2% of the
      aggregate consideration paid to the company’s stockholders in such transaction.




On
      January 13, 2006, Wherify and Mr. Hajjar entered into a new Consulting
      Agreement which supersedes and replaces the Initial Consulting Agreement entered
      into effective January 1, 2004. Under the new Consulting Agreement,
      Mr. Hajjar continues to be paid a fee of $10,000 per month for his
      assistance as a financial adviser to the Company and is entitled to
      reimbursement for out-of-pocket costs and indemnification for damages arising
      out of his services. However, he is no longer entitled to a fee in connection
      with a Change in Control transaction. The agreement is terminable by either
      party on 30 days’ notice.




Also
      on
      January 13, 2006, Wherify entered into a letter agreement with Mr. Hajjar
      setting forth certain terms of his services as a Director and Co-Chairman.
      Under
      this agreement, Mr. Hajjar agreed to direct and coordinate the Board’s
      oversight of the business and operations of the Company and the activities
      and
      performance of senior management, and to assist senior management in developing
      strategic plans for the Company and with fund raising and financing activities.
      Pursuant to the agreement, on January 13, 2006 the Company granted to
      Mr. Hajjar an option to purchase 125,000 shares of common stock at an
      exercise price equal to the closing sales price of $1.70 per share. The option
      vests in equal monthly increments over four years so long as Mr. Hajjar
      remains on the Board. The agreement further provides that for each additional
      year Mr. Hajjar serves on the Board he will receive an additional option
      for 12,500 shares of common stock with an exercise price equal to the closing
      sales price on the grant date and which vests ratably monthly over 12 months.
      Mr. Hajjar is also entitled under this agreement to a cash payment of
      $5,000 per month during which he serves on the Board.




33




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





**SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT**




The
      following tables set forth information as of September 11, 2007 regarding the
      beneficial ownership of common stock by (i) each Stockholder who is known by
      Wherify to own beneficially in excess of 5% of Wherify’s outstanding common
      stock; (ii) each director; (ii) the Company’s Chief Executive Officer and the
      two most highly compensated executive officers (the “Named Executive Officers”);
      and (iv) the executive officers and directors as a group.




Beneficial
      ownership is determined in accordance with the rules of the SEC. In computing
      the number of shares beneficially owned by a person or a group and the
      percentage ownership of that person or group, shares of our common stock
      issuable currently or within 60 days of September 11, 2007, upon exercise of
      options or warrants or by conversion of preferred stock or convertible
      debentures held by that person or group is deemed outstanding. These shares,
      however, are not deemed outstanding for computing the percentage ownership
      of
      any other person. Except as indicated by footnote, and subject to community
      property laws where applicable, the stockholders named in the table below have
      sole voting and investment power with respect to all shares of common stock
      shown as beneficially owned by them. Percentage ownership is based on 75,289,793
      shares of common stock outstanding as of September 11, 2007, together with
      applicable options, warrants, preferred stock and convertible debentures for
      each stockholder. Unless otherwise indicated, the address of the following
      Stockholders is c/o Wherify Wireless, Inc. 901 Mariners Island Blvd, Suite
      300,
      San Mateo, CA 94404.




***Security
      Ownership of Certain Beneficial Owners(a)***




**Shares
                Beneficially Owned****Name
                and Title**
            
            **Number**
            
            **Percent**Vincent
                Sheeran, Director and Chief Executive Officer
            
            
            416,665(a
            )
            
            *Timothy
                J. Neher, Former CEO
            
            
            10,206,525(b
            )
            
            13.3
            %Douglas
                Hajjar, Director
            
            
            4,282,929(c
            )
            
            5.7
            %Dr.
                Neil Morris, Director
            
            
            216,250(d
            )
            
            *Wade
                Fenn, Director
            
            
            398,352(e
            )
            
            *Daniel
                McKelvey, Director
            
            
            248,750(f
            )
            
            *William
                Scigliano, Former Director
            
            
            1,261,908(g
            )
            
            1.7
            %Matthew
                Neher
            
            
            322,641(h
            )
            
            *Gerald
                Parrick, Former President
            
            
            359,157(i
            )
            
            *All
                officers and directors as a group
            
            
            17,969,189
            
            
            22.9
            %**Five
                Percent Beneficial Holders of Common Stock**GPS
                Associates, LLC.
              90
                Park Avenue-31stFloor
              New
                York, NY 10016
            
            
            84,705,625(j
            )
            
            52.9
            %Laidlaw
                & Company (UK) Ltd.
              90
                Park Avenue-31stFloor
              New
                York, NY 10016
            
            
            84,705,625(j
            )
            
            52.9
            %Cornell
                Capital Partners, LP
              101
                Hudson Street, Suite 3700
              Jersey
                City, NJ 07303
            
            
            3,954,290(k
            )
            
            4.99
                (k
            )




34




*  Does
      not
      exceed 1% of the referenced class of securities.




(a)
            All
                shares issuable pursuant to stock options that are, or will become,
                exercisable within 60 days of September 11,
                2007.




(b)
            Includes
                1,524,951 shares issuable pursuant to stock options that are, or
                will
                become, exercisable within 60 days of September 11,
                200.




(c)
            Includes
                57,639 shares issuable pursuant to stock options and 500,000 to warrants
                that are, or will become, exercisable within 60 days of September
                11,
                2007.




(d)
            Includes
                100,000 shares issuable pursuant to warrants that are, or will become,
                exercisable within 60 days of September 11,
                2007.




(e)
            Includes
                72,571 shares issuable pursuant to stock options and 50,000 to warrants
                that are, or will become, exercisable within 60 days of September
                11,
                2007.




(f)
            Includes
                125,000 shares issuable pursuant to warrants that are, or will become,
                exercisable within 60 days of September 11,
                2007.




(g)
            Includes
                375,000 shares issuable pursuant to stock options that are, or will
                become, exercisable within 60 days of September 11,
                2007.




(h)
            Includes
                135,960 shares issuable pursuant to stock options that are, or will
                become, exercisable within 60 days of September 11,
                2007.




(i)
            All
                shares issuable pursuant to stock options that are, or will become,
                exercisable within 60 days of September 11,
                2007.




(j)
            Includes
                60,000,000 shares issuable to GPS Associates, LLC (GPS) upon conversion
                of
                Series A Preferred Stock, 12,000,000 shares issuable to GPS upon
                conversion of a convertible note, 3,000,000 shares issuable to GPS
                upon
                exercise of warrants, and 9,705,625 shares issuable to Laidlaw upon
                exercise of warrants. The Manager of GPS is GPS Management Company
                LLC
                (“GPS Management”). The Managing Members of GPS Management are Theodore V.
                Fowler, Hugh S. Regan, and Rob Bonaventura, each of whom are employees
                of
                Laidlaw & Company (UK) Ltd.
                (“Laidlaw”).




(k)
            As
                of September 11, 2007, Cornell Capital Partners beneficial ownership
                of
                Wherify common stock (including its ownership of 276,595 shares acquired
                as a commitment fee, its right to acquire up to 20 million shares
                upon
                conversion of convertible debentures, and its right to acquire up
                to
                7,000,000 shares upon exercise of warrants) was 4.99% taking into
                consideration the 4.99% ownership limitation contained in the convertible
                debentures and warrants. Without taking into consideration this 4.99%
                ownership limitation, which is waivable by Cornell Capital Partners
                on 65
                days notice, Cornell Capital Partner’s beneficial ownership would be
                approximately 24.2%.




EQUITY
      COMPENSATION PLAN INFORMATION




**Plan
                Category**
            
            **Number
                of Securities to Be Issued Upon Exercise of Outstanding Options,
                Warrants
                and Rights (A)**
            
            **Weighted-Average
                Exercise Price of Outstanding Options, Warrants and Rights
                (B)**
            
            **Number
                of Securities Remaining Available for Future Issuance Under Equity
                Compensation Plans (Excluding Securities Reflected in
                Column (A))**
              **(C)**Equity
                compensation plans approved by security holders
            
            
            8,640,018(1
            )
            $
            0.44
            
            
            4,488,953(2
            )Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            8,640,018
            
            $
            0.44
            
            
            4,488,953







(1)
            Of
                these securities, 5,511,047 options, 325,000] options and 2,803,971
                options were issued and outstanding as of June 30, 2007 pursuant
                to the
                2004 Stock Plan, the 2001 Stock Plan and the 1999 Stock Option Plan,
                respectively.




(2)
            Of
                these securities, 4,488,953 options, 0 options, and 0 options were
                available for issuance as of June 30, 2007 pursuant to the 2004 Stock
                Plan, the 2001 Stock Plan and the 1999 Stock Option Plan,
                respectively.




35




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




**CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS**




We
      employed Mr. William Hajjar as our Director of Enterprise Sales. He held
      this position in Wherify California since May 2003. On November 15, 2005
      Mr. W. Douglas Hajjar was appointed to the Board of Directors and further
      was appointed to serve as the co-Chairman of the Board of Directors. William
      Hajjar is the son of our Director Mr. W. Douglas Hajjar. In Fiscal 2007,
      Mr. William Hajjar was compensated $120,000. As of September 2007 Mr.
      William Hajjar was no longer with the Company.




We
      employ
      Mr. Matthew Neher as our Vice President of Business Development. He held
      this position in Wherify California since May 1999. Mr. Matthew Neher is
      the brother of our Chairman of the Board Mr. Timothy J. Neher. In Fiscal
      2007, Mr. Matthew Neher was compensated $175,090.




On
      January 13, 2006, Wherify and Mr. W. Douglas Hajjar entered into a
      Consulting Agreement. Under the Consulting Agreement, Mr. Hajjar continues
      to be paid a fee of $10,000 per month for his assistance as a financial adviser
      to the Company and is entitled to reimbursement for out-of-pocket costs and
      indemnification for damages arising out of his services. The agreement is
      terminable by either party on 30 days’ notice.




**Conflict
      of Interest Policy**




We
      believe that all transactions with affiliates described above were made on
      terms
      no less favorable to us than could have been obtained from unaffiliated third
      parties. Our policy is to require that a majority of the independent and
      disinterested non-employee directors on the Board approve all transactions
      between Wherify and its officers, directors, principal Stockholders and their
      affiliates. Such transactions will continue to be on terms no less favorable
      to
      us than we could obtain from unaffiliated third parties.




All
      transactions between us and our officers, directors, principal Stockholders
      and
      their affiliates will be approved by a majority of the Board, including a
      majority of the independent and disinterested non-employee directors, or, if
      required by law, a majority of disinterested Stockholders and will continue
      to
      be on terms no less favorable to us than could be obtained from unaffiliated
      third parties.




36






**Item
      13. Exhibits**




**(A)**
            **Documents
                Filed as Part of This
                Report**




***(I)***
            ***Consolidated
                Financial Statements:***




**WHERIFY
      WIRELESS, INC.**


Report
                  of Independent Registered Public Accounting Firm
              F-1Consolidated
                  Balance Sheet as of June 30, 2007
              F-2Consolidated
                  Statements of Operations - Years ended June 30, 2007 and
                  2006
              F-3Consolidated
                  Statement of Stockholders’ Deficit - Years Ended June 30, 2007 and
                  2006
              F-4Consolidated
                  Statements of Cash Flows - Years’ Ended June 30, 2007 and
                  2006
              F-
                  5Notes
                  to Financial Statements
              F-6




***(II)***
            ***Financial
                Statement Schedules:***




None.




( ***III)
      Index of Exhibits:***




(a)
      The
      following Exhibits are filed herewith unless otherwise indicated:




**Exhibit**
              **No.**
            
            **Description**2.1
            
            Agreement
                and Plan of Merger dated as of April 14, 2004, by and among IQ
                Biometrix, Inc., Wherify Acquisition, Inc. and Wherify Wireless,
                Inc. is
                incorporated by reference from Appendix A to the joint proxy
                statement/prospectus which is part of the Registration Statement
                on Form
                S-4/A filed on June 30, 2005.2.2
            
            Amendment
                No. 1 to Agreement and Plan of Merger dated as of August 13, 2004 by
                and among IQ Biometrix, Inc., Wherify Acquisition, Inc. and Wherify
                Wireless, Inc. is incorporated by reference from Appendix B to the
                Joint
                Proxy Statement/Prospectus which is part of the Registration Statement
                on
                Form S-4/A filed on June 30, 2005.2.3
            
            Amendment
                No. 2 to Agreement and Plan of Merger dated as of December 7, 2004 by
                and among IQ Biometrix, Inc., Wherify Acquisition, Inc. and Wherify
                Wireless, Inc. is incorporated by reference from Appendix C to the
                joint
                proxy statement/prospectus which is part of the Registration Statement
                on
                Form S-4/A filed on June 30, 2005.2.4
            
            Amendment
                No. 3 to Agreement and Plan of Merger dated as of January 13, 2005 by
                and among IQ Biometrix, Inc., Wherify Acquisition, Inc. and Wherify
                Wireless, Inc. is incorporated by reference from Appendix D to the
                joint
                proxy statement/prospectus which is part of the Registration Statement
                on
                Form S-4/A filed on June 30, 2005.2.5
            
            Amendment
                No. 4 to Agreement and Plan of Merger dated as of April 18, 2005 by
                and among IQ Biometrix, Inc., Wherify Acquisition, Inc. and Wherify
                Wireless, Inc. is incorporated by reference from Appendix E to the
                joint
                proxy statement/prospectus which is part of the Registration Statement
                on
                Form S-4/A filed on June 30,
                2005.




37






**Exhibit**
              **No.**
            
            **Description**3.1
            
            Bylaws
                are incorporated herein by reference from Wherify’s Registration Statement
                on Form SB-2 (SEC File No. 333-41635) filed December 29,
                1997.3.2
            
            Amended
                and Restated Certificate of Incorporation of Wherify Wireless, Inc.
                is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 (SEC File No. 333-124027) as filed March 16,
                2006.3.3
            
            Certificate
                of Amendment of Amended and Restated Certificate of Incorporation
                of
                Wherify Wireless, Inc. +3.4
            
            Certificate
                of Correction of Wherify Wireless, Inc. +3.5
            
            Certificate
                of Designation of Series A Convertible Preferred Stock filed with
                the
                Delaware Secretary of State on April 11, 2007 is hereby incorporated
                by
                reference from Wherify’s Current Report on Form 8-K filed April 12,
                2007.3.6
            
            Certificate
                of Designation of Series B Convertible Adjustable Preferred Stock
                dated
                July 31, 2007 is hereby incorporated by reference from Wherify’s Current
                Report on Form 8-K filed August 7, 2007.4.1
            
            Specimen
                Common Stock Certificate is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 (SEC File No. 333-122710)
                filed September 13, 2005.10.01
            
            Asset
                Purchase Agreement dated February 11, 2003 by and between Special
                Equity IV, L.P. and Wherify is incorporated herein by reference from
                Wherify’s Quarterly Report on Form 10-QSB filed with the SEC on
                February 19, 2003.10.02
            
            Stock
                Purchase Agreement dated February 11, 2003 by and between Special
                Equity IV, L.P. and Wherify is incorporated herein by reference from
                Wherify’s Quarterly Report on Form 10-QSB filed with the SEC on
                February 19, 2003.10.03
            
            Warrant
                to Purchase Common Stock dated February 11, 2003 between Wherify and
                Special Equity IV, L.P. is incorporated herein by reference from
                Wherify’s
                Quarterly Report on Form 10-QSB filed with the SEC on February 19,
                2003.10.04
            
            Memorandum
                of Agreement regarding stock options dated August 1, 2002 by and
                between Wherify and William Scigliano is incorporated herein by reference
                from Wherify’s Annual Report on Form 10-KSB filed with the SEC on
                October 15, 2002.10.05
            
            Memorandum
                of Agreement regarding stock options dated August 1, 2002 by and
                between Wherify and Greg J. Micek is incorporated herein by reference
                from
                Wherify’s Annual Report on Form 10-KSB filed with the SEC on
                October 15, 2002.10.06
            
            Form
                of Warrant to Purchase Common Stock Issued to holders dated May 28,
                2003 is incorporated herein by reference from Wherify’s Registration
                Statement on Form SB-2 (SEC File No. 333-107570) filed August 1,
                2003.




10.07
            
            10%
                Secured Convertible Debenture dated May 28, 2003 between Wherify and
                John J. Micek, Jr. is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 (SEC File No. 333-107570) filed
                August 1, 2003.10.08
            
            10%
                Secured Convertible Debenture dated May 28, 2003 between Wherify and
                Neil Morris is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 (SEC File No. 333-107570) filed
                August 1, 2003.10.09
            
            10%
                Secured Convertible Debenture dated May 28, 2003 between Wherify and
                Elisa Micek and Forte Capital Partners, LLC is incorporated herein
                by
                reference from Wherify’s Registration Statement on Form SB-2 (SEC File No.
                333-107570) filed August 1,
                2003.




38




**Exhibit**
              **No.**
            
            **Description**10.10
            
            10%
                Secured Promissory Note between Wherify and Network Storage Systems,
                Inc.
                dated May 4, 2003 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 (SEC File No. 333-107570) filed
                August 1, 2003.10.11
            
            Security
                Agreement between Wherify the Lenders dated May 4, 2003 is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 (SEC File No. 333-107570) filed August 1,
                2003.10.12
            
            6%
                Secured Convertible Debenture dated September 18, 2003 between
                Wherify and Platinum Partners Value Arbitrage Fund is incorporated
                herein
                by reference from Wherify’s Annual Report on Form 10-KSB filed
                October 14, 2003.10.13
            
            6%
                Secured Convertible Debenture dated September 18, 2003 between
                Wherify and Platinum Partners Global Macro Fund, LP is incorporated
                herein
                by reference from Wherify’s Annual Report on Form 10-KSB filed
                October 14, 2003.10.14
            
            Warrant
                to Purchase Common Stock Issued to Platinum Partners Value Arbitrage
                Fund,
                LP 2003 is incorporated herein by reference from Wherify’s Annual Report
                on Form 10-KSB filed October 14, 2003.10.15
            
            Warrant
                to Purchase Common Stock Issued to Platinum Partners Global Macro
                Fund, LP
                2003 is incorporated herein by reference from Wherify’s Annual Report on
                Form 10-KSB filed October 14, 2003.10.16
            
            6%
                Secured Convertible Debenture dated October 30, 2003 between Wherify
                and William Ritger is incorporated herein by reference from Wherify’s
                Annual Report on Form 10-QSB filed November 14, 2003.10.17
            
            6%
                Secured Convertible Debenture dated October 8, 2003 between Wherify
                and Jacob Engel is incorporated herein by reference from Wherify’s Annual
                Report on Form 10-QSB filed November 14, 2003.10.18
            
            Warrant
                to Purchase Common Stock Issued to William Ritger is incorporated
                herein
                by reference from Wherify’s Annual Report on Form 10-QSB filed November
                14, 2003.10.19
            
            Warrant
                to Purchase Common Stock Issued to Jacob Engel is incorporated herein
                by
                reference from Wherify’s Annual Report on Form 10-QSB filed November 14,
                2003.10.20
            
            Amendment
                to Employment Agreement between Wherify and William B. Scigliano
                dated
                April 13, 2004 is incorporated herein by reference from Wherify’s
                Annual Report on Form 10-KSB filed October 1,
                2004.10.21
            
            Consulting
                Agreement between Wherify and Daniel P. McKelvey dated August 1, 2003
                is incorporated herein by reference from Wherify’s Annual Report on Form
                10-KSB filed October 1, 2004.10.22
            
            Warrant
                to Purchase Common Stock Issued to Daniel McKelvey dated August 2003
                incorporated by reference from Wherify’s Registration Statement on Form
                SB-2/A (SEC File No. 333-122710) filed on April 11,
                2005.10.23
            
            6%
                Secured Convertible Debenture dated August 18, 2004 between Wherify
                and John Micek, Jr. and Forte Capital Partners, LLC is incorporated
                herein
                by reference from Wherify’s Annual Report on Form 10-KSB filed
                October 1, 2004.10.24
            
            Warrant
                to Purchase Common Stock Issued to Forte Capital Partners, LLC dated July
                2004 is incorporated herein by reference from Wherify’s Annual Report on
                Form 10-KSB filed October 1,
                2004.




39





**Exhibit**
              **No.**
            
            **Description**10.25
            
            Warrant
                to Purchase Common Stock Issued to John Micek, Jr. dated July 2004
                is
                incorporated herein by reference from Wherify’s Annual Report on Form
                10-KSB filed October 1, 2004.10.26
            
            Amendment
                to Consulting Agreement between Wherify and Daniel McKelvey dated
                August 1, 2004 is incorporated herein by reference from Wherify’s
                Annual Report on Form 10-KSB filed October 1,
                2004.10.27
            
            Warrant
                to Purchase Common Stock issued to Forte Capital Partners, LLC dated
                August 17, 2004 is incorporated herein by reference from Wherify’s
                Annual Report on Form 10-KSB filed October 1,
                2004.10.28
            
            Warrant
                to Purchase Common Stock issued to John Micek, Jr. dated August 17,
                2004 is incorporated herein by reference from Wherify’s Annual Report on
                Form 10-KSB filed October 1, 2004.10.29
            
            Warrant
                to Purchase Common Stock issued to Forte Capital Partners, LLC dated
                October 13, 2004 incorporated by reference from Wherify’s
                Registration Statement on Form SB-2/A (SEC File No. 333-122710) filed
                on
                April 11, 2005.10.30
            
            Purchase
                and Registration Rights Agreement dated January 11, 2005 is
                incorporated herein by reference from Wherify’s Current Report on Form 8-K
                filed January 11, 2005.10.31
            
            Amendment
                to Consulting Agreement Between Wherify and Liviakis Financial
                Communications, Inc. dated January 1, 2005 is incorporated herein by
                reference from Wherify’s Quarterly Report on Form 10-QSB (SEC File No.
                000.24001) filed February 10, 2005.10.32
            
            2005
                Consultant Compensation plan is hereby incorporated by reference
                from
                Wherify’s Registration Statement on Form S-8 (SEC File No. 333-123145)
                filed March 4, 2005.10.33
            
            Consulting
                Agreement with Alpine Capital Partners dated January 2004 is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 filed March 28, 2005.10.34
            
            5%
                Convertible Debenture issued to Austin Lewis dated January 10, 2005
                is incorporated herein by reference from Wherify’s Registration Statement
                on Form SB-2 filed March 28, 2005.10.35
            
            Warrant
                to Purchase Common Stock Issued to Austin Lewis dated January 10,
                2005 is incorporated herein by reference from Wherify’s Registration
                Statement on Form SB-2 filed March 28, 2005.10.36
            
            5%
                Convertible Debenture issued to Briarwood Investments dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.37
            
            Warrant
                to Purchase Common Stock Issued to Briarwood Investments dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.38
            
            5%
                Convertible Debenture issued to Enable Capital Partners dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.39
            
            Warrant
                to Purchase Common Stock Issued to Enable Capital Partners dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.40
            
            5%
                Convertible Debenture issued to Forte Capital Partners LLC dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.41
            
            Warrant
                to Purchase Common Stock Issued to Forte Capital Partners LLC dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.42
            
            5%
                Convertible Debenture issued to Meadowbrook Opportunity Fund dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.




40







**Exhibit**
              **No.**
            
            **Description**10.43
            
            Warrant
                to Purchase Common Stock Issued to Meadowbrook Opportunity Fund dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.44
            
            5%
                Convertible Debenture issued to Ron Nash dated January 10, 2005 is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 filed March 28, 2005.10.45
            
            Warrant
                to Purchase Common Stock Issued to Ron Nash dated January 10, 2005 is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 filed March 28, 2005.10.46
            
            5%
                Convertible Debenture issued to Nite Capital dated January 10, 2005
                is incorporated herein by reference from Wherify’s Registration Statement
                on Form SB-2 filed March 28, 2005.10.47
            
            Warrant
                to Purchase Common Stock Issued to Nite Capital dated January 10,
                2005 is incorporated herein by reference from Wherify’s Registration
                Statement on Form SB-2 filed March 28, 2005.10.48
            
            5%
                Convertible Debenture issued to Schottenfeld Group LLC dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.49
            
            Warrant
                to Purchase Common Stock Issued to Schottenfeld Group LLC dated
                January 10, 2005 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed March 28,
                2005.10.50
            
            5%
                Convertible Debenture issued to Special Situations Private Equity
                Fund,
                L.P. dated January 10, 2005 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed March 28,
                2005.10.51
            
            Warrant
                to Purchase Common Stock Issued to Special Situations Private Equity
                Fund,
                L.P. dated January 10, 2005 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed March 28,
                2005.10.52
            
            5%
                Convertible Debenture issued to Special Situations Technology Fund,
                L.P.
                dated January 10, 2005 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed March 28,
                2005.10.53
            
            Warrant
                to Purchase Common Stock Issued to Special Situations Technology
                Fund,
                L.P. dated January 10, 2005 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed March 28,
                2005.10.54
            
            5%
                Convertible Debenture issued to Special Situations Technology Fund
                II,
                L.P. dated January 10, 2005 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed March 28,
                2005.10.55
            
            Consulting
                Agreement with Alpine Capital Partners dated January 2004 is
                incorporated by reference from Wherify’s Registration Statement on Form
                SB-2/A filed on April 11, 2005.10.56
            
            5%
                Convertible Debenture issued to Austin Lewis dated January 10, 2005
                is incorporated by reference from Wherify’s Registration Statement on Form
                SB-2/A filed on April 11, 2005.10.57
            
            Employment
                Agreement between Timothy Neher and Wherify Wireless, Inc. dated
                as of
                November 14, 2002 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed September 9,
                2005.10.58
            
            Second
                Amendment to Employment Agreement between William B. Scigliano dated
                May 19, 2005 is incorporated herein by reference from the Joint Proxy
                Statement/Prospectus on Form S-4/A filed on June 30,
                2005.10.59
            
            Employment
                Agreement between Gerald Parrick and Wherify dated as of July 21,
                2005 is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2/A filed on September 9, 2005.10.60
            
            EMS
                Agreement between Wherify and CalComp Electronics Public Company
                Limited
                dated as of January 7, 2005 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed September 9,
                2005.10.61
            
            Lease
                between Westport Joint Venture and World Tracking Technologies, Inc.
                dated
                as of September 3, 1999 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 filed September 9,
                2005.




41




**Exhibit**
              **No.**
            
            **Description**10.62
            
            IQ
                Biometrix, Inc. 2004 Stock Plan is incorporated herein by reference
                from
                Wherify’s joint proxy statement/prospectus on Form S-4/A as filed on
                June 30, 2005.10.63
            
            Amended
                and Restated 1999 Stock Option Plan of Wherify Wireless, Inc. is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 filed September 9, 2005.10.64
            
            2004
                Consultant Compensation plan is hereby incorporated by reference
                from
                Wherify’s Registration Statement on Form S-8 filed February 18,
                2004.10.65
            
            Amendment
                to the 2004 Consultant Compensation plan is hereby incorporated by
                reference from Wherify’s Registration Statement on Form S-8 filed
                October 13, 2004.10.66
            
            2005
                Consultant Compensation plan is hereby incorporated by reference
                from
                Wherify’s Registration Statement on Form S-8 filed March 4,
                2005.10.67
            
            International
                Supply And Distribution Agreement between Wherify and American Network
                Computadores incorporated by reference from Wherify’s Annual Report on
                Form 10-KSB filed October  13, 2005.10.68
            
            Consulting
                Agreement between Wherify and W. Douglas Hajjar dated January 12,
                2006 is incorporated herein by reference from Wherify’s Registration
                Statement on Form SB-2 as filed March 16, 2006.10.69
            
            Letter
                Agreement between Wherify and W. Douglas Hajjar dated January 13,
                2006 is incorporated herein by reference from Wherify’s Registration
                Statement on Form SB-2 as filed March 16, 2006.10.70
            
            Employment
                Agreement with Mark E. Gitter dated January 24, 2006 is incorporated
                herein by reference from Wherify’s Registration Statement on Form SB-2 as
                filed March 16, 2006.10.71
            
            Promissory
                Note between Wherify and Stephen J. Luczo dated February 22, 2006 is
                incorporated herein by reference from Wherify’s Registration Statement on
                Form SB-2 as filed March 16, 2006.10.72
            
            Placement
                Agent Agreement between Wherify and Newbridge Securities Corporation
                dated
                March 10, 2006 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 as filed March 16,
                2006.10.73
            
            Investment
                Agreement dated as of February 9, 2006 between Wherify and Dutchess
                Private Equities Fund, L.P. is incorporated herein by reference from
                Wherify’s Current Report on Form 8-K filed February 9,
                2006.10.74
            
            Securities
                Purchase Agreement between Wherify and Cornell Capital Partners,
                LP dated
                March 10, 2006 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 as filed March 16,
                2006.10.75
            
            Standby
                Equity Distribution Agreement between Wherify and Cornell Capital
                Partners, LP dated March 10, 2006 is incorporated herein by reference
                from Wherify’s Registration Statement on Form SB-2 as filed March 16,
                2006.10.76
            
            Investor
                Registration Rights Agreement between Wherify and Cornell Capital
                Partners, LP dated March 10, 2006 is incorporated herein by reference
                from Wherify’s Registration Statement on Form SB-2 as filed March 16,
                2006.10.77
            
            Security
                Agreement between Wherify and Cornell Capital Partners, LP dated
                March 10, 2006 is incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 as filed March 16,
                2006.10.78
            
            Secured
                Convertible Debenture between Wherify and Cornell Capital Partners,
                LP
                dated March 10, 2006 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 as filed March 16,
                2006.10.79
            
            Secured
                Convertible Debenture between Wherify and Cornell Capital Partners,
                LP
                dated March 14, 2006 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 as filed March 16,
                2006.




42




**Exhibit**
              **No.**
            
            **Description**10.80
            
            Pledge
                and Escrow Agreement among Wherify, Cornell Capital Partners, LP
                and David
                Gonzalez, Esq. dated March 10, 2006 is incorporated herein by
                reference from Wherify’s Registration Statement on Form SB-2 as filed
                March 16, 2006.




10.81
            
            Warrant
                to Purchase Common Stock (No. CCP-001) issued to Cornell Capital
                Partners,
                LP dated March 10, 2006 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 as filed March 16,
                2006.10.82
            
            Warrant
                to Purchase Common Stock (No. CCP-002) issued to Cornell Capital
                Partners,
                LP dated March 10, 2006 is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 as filed March 16,
                2006.10.83
            
            Amendment
                to Secured Convertible Debentures between Wherify and Cornell Capital
                Partners dated April 21, 2006 is incorporated herein by reference
                from Wherify’s Registration Statement on Form SB-2 as filed April 24,
                2006.10.84
            
            Letter
                Agreement between Wherify and Michael D. Dingman, Jr. dated March 27,
                2006 is incorporated herein by reference from Wherify’s Registration
                Statement on Form SB-2 as filed April 24, 2006.10.85
            
            Form
                of Subscription Agreement is incorporated herein by reference from
                Wherify’s Registration Statement on Form SB-2 as filed April 24,
                2006.10.86
            
            Master
                Purchase/Reseller Agreement dated March 22, 2006 between Wherify and
                Siemens AG, Communications, Wireless Module is hereby incorporated
                by
                reference to Wherify’s Quarterly Report on Form 10-QSB filed on
                May 15, 2006.10.87
            
            Promissory
                Note issued by Wherify to Stephen  J. Luczo dated June 16, 2006
                is incorporated herein by reference from Wherify’s Registration Statement
                on Form SB-2 as filed July 5, 2006.10.88
            
            Amendment
                to 2004 Stock Option Plan dated October 27, 2006 is hereby incorporated
                by
                reference from Wherify’s Current Report on Form 8-K filed November 2,
                2006.10.89
            
            Cornell
                Capital Partners Agreement Letter dated November 1, 2006 between
                Wherify
                and Cornell Capital Partners, LP is hereby incorporated by reference
                from
                Wherify’s Current Report on Form 8-K filed November 21,
                2006.10.90
            
            Letter
                from Cornell Capital Partners, dated December 29, 2006 is incorporated
                herein by reference from Wherify’s Quarterly Report on Form 10-QSB filed
                with the SEC on February 27, 2007.10.91
            
            Stipulation
                and Agreement between Wherify and Westport Office Park,
                LLC.+10.92
            
            Letter
                Agreement dated February 2, 2007 between Wherify and Cornell Capital
                Partners, LP.+10.93
            
            10%
                Senior Convertible Promissory Note and Loan Agreement between Wherify
                and
                GPS Associates, LLC dated February 22, 2007+10.94
            
            Securities
                Purchase and Option Agreement dated February 22, 2007 between Wherify
                and
                GPS Associates, LLC.+10.95
            
            Warrant
                to purchase Common Stock (No. BW-1) issued to GPS Associates, LLC
                dated
                February 22, 2007.+10.96
            
            Warrant
                to purchase Common Stock issued to Laidlaw & Company (UK) Ltd. dated
                February 22, 2007.+10.97
            
            Sublease
                Agreement dated April 18, 2007 between Wherify and Sling Media is
                hereby
                incorporated by reference from Wherify’s Current Report on Form 8-K filed
                April 23, 2007.10.98
            
            Offer
                Letter dated June 6, 2007 between Wherify and Vincent D.
                Sheeran.+10.99
            
            Separation
                Agreement dated June 27, 2007 between Wherify and William Scigliano.+




43




**Exhibit**
              **No.**
            
            **Description**10.100
            
            Form
                of Subscription Agreement entered into between Wherify and the Investors
                in connection with the offering of Series B Convertible Adjustable
                Preferred Stock.+10.101
            
            Form
                of Registration Rights Agreement entered into between Wherify and
                the
                Investors in connection with the offering of Series B Convertible
                Adjustable Preferred Stock.+10.102
            
            Form
                of Warrant to purchase Common Stock issued to Investors in connection
                with
                the offering of Series B Convertible Adjustable Preferred Stock.+




10.103
            
            Offer
                Letter dated August 13, 2007 between Wherify and Jacqueline
                Nevilles.+14.1
            
            Code
                of Business Conduct and Ethics is incorporated herein by reference
                from
                Wherify’s Registration Statement on Form SB-2 filed September 13,
                2005.21.1
            
            Company’s
                subsidiaries are incorporated herein by reference from Wherify’s
                Registration Statement on Form SB-2 filed September 9,
                2005.31.1
            
            Chief
                Executive Officer Certification of Periodic Financial Report Pursuant
                to
                Section 302 of the Sarbanes-Oxley Act of 2002.+31.2
            
            Certification
                of Periodic Financial Report Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.+32.1
            
            Chief
                Executive Officer Certification  Pursuant to 18 U.S.C. Section 1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.+32.2
            
            Chief
                Financial Officer Certification  Pursuant to 18 U.S.C. Section 1350,
                as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.+




+
      Filed
      herewith.




44


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





Malone
      and Bailey, PC, Certified Public Accountants, are Wherify’s independent auditors
      engaged to examine the financial statements of Wherify for the fiscal years
      ended June 30, 2007 and June 30, 2006. Malone and Bailey, P.C. has performed
      the
      following services and has been paid the following fees for these fiscal
      years.




**Fees
      to Independent Auditors for Fiscal Years 2007 and 2006**




The
      following table shows the fees billed to Wherify for the audit and other
      services provided by Malone & Bailey, PC for fiscal 2007 and
      2006.




**Fiscal**
              **2007**
            
            **Fiscal**
              **2006**Audit
                fees(1)
            
            $
            186,082
            
            $
            148,000Audit-related
                fees
            
            $
            0
            
            $
            0Tax
                fees
            
            $
            0
            
            $
            0All
                other fees
            
            $
            0
            
            $
            0







(1)
            Audit
                fees represent fees for professional services provided in connection
                with
                the audit of our financial statements and review of our quarterly
                financial statements and audit services provided in connection with
                other
                statutory or regulatory filings.




All
      audit
      related services, tax services and other services are and were pre-approved
      by
      Wherify’s Board of Directors and/or the Audit Committee, which concluded that
      the provision of such services by Malone & Bailey, PC was compatible with
      the maintenance of that firm’s independence in the conduct of its auditing
      functions.




45





**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors


Wherify
      Wireless, Inc.


San
      Mateo, California





We
      have
      audited the accompanying consolidated balance sheet of Wherify Wireless, Inc.
      as
      of June 30, 2007 and the related consolidated statements of operations,
      stockholders’ deficit, and cash flows for the two years then ended. These
      financial statements are the responsibility of Wherify’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audit.





We
      conducted our audit in accordance with standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating 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 Wherify as of June 30, 2007 and
      the
      results of its operations and its cash flows for the two years then ended in
      conformity with accounting principles generally accepted in the United States
      of
      America.





The
      accompanying financial statements have been prepared assuming that Wherify
      will
      continue as a going concern. As discussed in Note 2 to the financial statements,
      Wherify has suffered recurring losses from operations and has a working capital
      deficiency, which raises substantial doubt about its ability to continue as
      a
      going concern. Management’s plans regarding these matters also are described in
      Note 2. The financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.








/s/
      Malone & Bailey, PC





Malone
      & Bailey, PC


www.malone-bailey.com


Houston,
      Texas




October
        31, 2007


F-1





**WHERIFY
      WIRELESS, INC.**


**CONSOLIDATED
      BALANCE SHEET**


**As
      of June 30, 2007**




**ASSETS****Current
                Assets:**Cash
                and cash equivalents
            
            $
            2,056,580Restricted
                cash
            
            
            9,071Accounts
                receivable, net of allowance for bad debt
            
            
            109,864Inventory
            
            
            2,260,991Prepaid
                expenses
            
            
            93,476Security
                deposit
            
            
            336,190Total
                current assets
            
            
            4,866,172Intangible
                assets, net of accumulated amortization
            
            
            15,809Property
                and equipment, net of accumulated amortization of
                $1,439,831
            
            
            271,550Other
                non-current assets
            
            
            973,024**Total
                Assets**
            
            $
            6,126,555**LIABILITIES
                AND STOCKHOLDERS' DEFICIT****Current
                Liabilities:**Accounts
                payable
            
            $
            7,063,554Accounts
                payable - related party
            
            
            3,105,750Accrued
                liabilities
            
            
            3,528,072Deferred
                revenues
            
            
            76,852Notes
                payable - related parties
            
            
            2,000,000Convertible
                notes
            
            
            2,872,665Fair
                value of derivatives
            
            
            3,525,896Total
                current liabilities
            
            
            22,172,789Commitments
                and contingencies
            
            
            -**Stockholders
                Deficit:**Preferred
                stock, $0.01 par value 10,000,000 shares authorized;7,500
                shares issued and outstanding
            
            
            75Common
                stock, $0.01 par value 200,000,000 shares authorized;75,225,277
                shares outstanding
            
            
            752,253Additional
                paid-in capital
            
            
            136,859,523Accumulated
                deficit
            
            
            (153,658,085
            )Total
                stockholders' deficit
            
            
            (16,046,234
            )**Total
                liabilities and stockholders' deficit**
            
            $
            6,126,555




*See
      accompanying notes to consolidated financial statements.*




F-2


**WHERIFY
      WIRELESS, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**Years
      Ended June 30, 2007 and 2006**


**2007**
              
              **2006****Revenues**
              
              $
              884,710
              
              $
              154,936**Cost
                  of revenues**
              
              
              **390,337**
              
              
              **18,696****Gross
                  profit**
              
              
              **494,373**
              
              
              **136,240****Operating
                  expenses:**Goodwill
                  impairment
              
              
              -
              
              
              67,530,022Intangible
                  impairment
              
              
              -
              
              
              1,470,492Engineering
                  and development
              
              
              127,480
              
              
              1,546,033General
                  and administrative
              
              
              10,824,734
              
              
              8,620,040Rent
                  expense
              
              
              980,101
              
              
              1,410,294Amortization
                  and depreciation
              
              
              2,593,962
              
              
              888,548Loss
                  from disposal of fixed assets
              
              
              21,948
              
              
              -**Total
                  operating expenses**
              
              
              **14,548,225**
              
              
              **81,465,429****Operating
                  Loss**
              
              
              **(14,053,852**
              **)**
              
              **(81,329,189**
              **)****Other
                  income (expense):**Derivative
                  gain (loss)
              
              
              (833,661
              )
              
              745,823Interest
                  and other expense
              
              
              (2,255,977
              )
              
              (744,735
              )Interest
                  and other income
              
              
              24,151
              
              
              69,345**Net
                  loss from continuing operations**
              
              
              **(17,119,339**
              **)**
              
              **(81,258,756**
              **)****Loss
                  from operations of discontinued segment**
              
              
              **-**
              
              
              **(85,860**
              **)****Net
                  loss**
              
              
              **(17,119,339**
              **)**
              
              **(81,344,616**
              **)**Less:
                  deemed dividend - beneficial conversion feature
              
              
              (4,800,000
              )
              
              -**Net
                  loss attributable to common stock shareholders**
              
              $
              (21,919,339
              )
              $
              (81,344,616
              )Basic
                  and diluted net loss per share from continuing operations
              
              $
              (0.25
              )
              $
              (1.81
              )Basic
                  and diluted net loss per share from discontinuing
                  operations
              
              
              -
              
              
              (0.00
              )Basic
                  and diluted net loss per share attributable to common
                  shareholders
              
              
              (0.32
              )
              
              (1.81
              )Weighted
                  average number of shares outstanding - basic and diluted
              
              
              68,057,059
              
              
              44,927,748


*See
      accompanying notes to consolidated financial statements.*




F-3




**WHERIFY
      WIRELESS, INC.**


**CONSOLIDATED
      STATEMENT OF STOCKHOLDERS’ DEFICIT**


**Years
      Ended June 30, 2007 and 2006**





**Preferred
                Stock**
            
            **Commo
                n Sto ck**
            
            **Additional**
            
            **Deferred****Paid-in**
            
            **Stock-based**
            
            **Retained****Shares**
            
            **Par**
            
            **Shares**
            
            **Par**
            
            **Capital**
            
            **Comp.**
            
            **Deficit**
            
            **To
                tal****Balances
                - June 30, 2005**
            
            
            **27,270,09
                8**
            
            
            **48,454,432**
            
            
            **14,697,913**
            
            
            **146,979**
            
            
            **1,877,174**
            
            
            **(713,592**
            **)**
            
            **(55,194,130**
            **)**
            
            **(5,429,137**
            **)**Conversion
                of preferred inconnection
                with Merger
            
            
            (27,270,098
            )
            
            (48,454,432
            )
            
            27,270,098
            
            
            272,701
            
            
            48,181,731
            
            
            
            
            
            
            
            
            -Issuance
                of shares in connectionwith
                Merger
            
            
            
            
            
            
            
            
            10,396,883
            
            
            103,968
            
            
            69,254,055
            
            
            
            
            
            
            
            
            69,358,023Shares
                issued for exercise ofoptions
                / warrants
            
            
            
            
            
            
            
            
            416,961
            
            
            4,170
            
            
            404,262
            
            
            
            
            
            
            
            
            408,432Shares
                issued for conversion ofdebts
            
            
            
            
            
            
            
            
            50,000
            
            
            500
            
            
            224,500
            
            
            
            
            
            
            
            
            225,000Shares
                issued for services
            
            
            
            
            
            
            
            
            478,687
            
            
            4,787
            
            
            846,072
            
            
            
            
            
            
            
            
            850,859Shares
                issued for cash
            
            
            
            
            
            
            
            
            1,990,971
            
            
            19,910
            
            
            3,762,529
            
            
            
            
            
            
            
            
            3,782,439Amortization
                of deferredcompensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (613,088
            )
            
            713,592
            
            
            
            
            
            100,504SFAS123
                (R) stock-basedcompensation
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            654,199
            
            
            
            
            
            
            
            
            654,199Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -
            
            
            (81,344,616
            )
            
            (81,344,616
            )**Balances
                - June 3 0 , 20 0 6**
            
            
            **-**
            
            
            **-**
            
            
            **55,301,513**
            
            
            **553
                ,015**
            
            
            **124,591,434**
            
            
            **-**
            
            
            **(136,538,746**
            **)**
            
            **(11,394,297**
            **)**Shares
                issued for cash - commonstock
            
            
            
            
            
            
            
            
            16,627,420
            
            
            166,274
            
            
            3,878,348
            
            
            
            
            
            
            
            
            4,044,622Shares
                issued for cash -preferred
                stock
            
            
            7,500
            
            
            75
            
            
            
            
            
            
            
            
            5,219,925
            
            
            
            
            
            
            
            
            5,220,000Shares
                issued for services
            
            
            
            
            
            
            
            
            3,296,344
            
            
            32,964
            
            
            657,052
            
            
            
            
            
            
            
            
            690,016Option
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            444,627
            
            
            
            
            
            
            
            
            444,627Warrant
                expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            868,137
            
            
            
            
            
            
            
            
            868,137Benefical
                conversion feature
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,200,000
            
            
            
            
            
            
            
            
            1,200,000Net
                Loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (17,119,339
            )
            
            (17,119,339
            )**Balances
                - June 3 0 , 20 0 7**
            
            
            **7,50
                0**
            
            
            **75**
            
            
            **75,225,277**
            
            
            **752
                ,2 53**
            
            
            **136,859,523**
            
            
            **-**
            
            
            **(153,658,085**
            **)**
            
            **(16,046,234**
            **)**




*See
      accompanying notes to consolidated financial statements*




F-4


**WHERIFY
      WIRELESS, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**Years
      Ended June 20, 2007 and 2006**


**2007**
              
              **2006****Cash
                  Flows from Operating Activities:****Net
                  loss**
              
              $
              (17,119,339
              )
              $
              (81,344,616
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Bad
                  debt expense
              
              
              8,217
              
              
              -Loss
                  on disposition of assets
              
              
              21,948
              
              
              -Depreciation
                  and amortization
              
              
              2,593,962
              
              
              1,271,596Impairment
                  of goodwill and intangible assets
              
              
              -
              
              
              69,000,514Shares
                  issued for services
              
              
              690,016
              
              
              1,605,562Loss
                  (gain) from derivatives
              
              
              833,661
              
              
              (745,823
              )Option
                  and warrant expenses
              
              
              571,763
              
              
              450,769Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (107,948
              )
              
              9,810Inventory
              
              
              (2,179,850
              )
              
              (73,548
              )Prepaid
                  expenses and other current assets
              
              
              (27,286
              )
              
              9,710Other
                  assets
              
              
              (40,000
              )
              
              (270,169
              )Accounts
                  payable
              
              
              2,142,188
              
              
              (537,652
              )Accrued
                  liabilities
              
              
              2,534,520
              
              
              (1,543,675
              )Deferred
                  revenues
              
              
              76,852
              
              
              -**Net
                  Cash Used in Operating Activities**
              
              
              **(10,001,296**
              **)**
              
              **(12,167,522**
              **)****Cash
                  Flows from Investing Activities:**Proceeds
                  from sales of certificates of deposit
              
              
              1,268,943
              
              
              1,171,287Purchases
                  of property, plant and equipment
              
              
              (21,412
              )
              
              (338,003
              )Proceeds
                  from disposition of property, plant and equipment
              
              
              8,000
              
              
              -**Net
                  Cash Provided by Investing Activities**
              
              
              **1,255,531**
              
              
              **833,284****Cash
                  Flows from Financing Activities:**Proceeds
                  from sale of preferred stock, net of offering costs
              
              
              5,220,000
              
              
              -Proceeds
                  from sale of common stock, net of offering costs
              
              
              4,044,622
              
              
              3,782,439Proceeds
                  from related party notes
              
              
              175,000
              
              
              2,000,000Payments
                  on related party notes
              
              
              (175,000
              )
              
              -Proceeds
                  from convertible debenture, net of offering costs
              
              
              1,013,000
              
              
              4,585,000Proceeds
                  from exercise of warrants and options
              
              
              -
              
              
              408,432Payment
                  on notes payable
              
              
              -
              
              
              (125,000
              )**Net
                  Cash Provided by Financing Activities**
              
              
              **10,277,622**
              
              
              **10,650,871****Change
                  in Cash and Cash Equivalents**
              
              
              **1,531,858**
              
              
              **(683,367**
              **)****Cash
                  and Cash Equivalents - Beginning Period**
              
              
              **524,722**
              
              
              **1,208,089****Cash
                  and Cash Equivalents - End of Period**
              
              $
              2,056,580
              
              $
              524,722**Supplemental
                  Disclosures:**Interest
                  expense paid
              
              $
              14,268
              
              $
              112,847Income
                  taxes paid
              
              
              -
              
              
              -**Non-cash
                  Investing and Financing Activities:**Issuance
                  of common stock for conversion of debt
              
              $
              -
              
              $
              225,000Shares
                  issued related to the Merger
              
              
              -
              
              
              69,358,023Warrants
                  issued to placement agent as offering costs
              
              
              741,001
              
              
              -Discount
                  on preferred stock financing - beneficial conversion
                  feature
              
              
              4,800,000
              
              
              -Disposition
                  of fixed assets
              
              
              78,462
              
              
              -




*See
      accompanying notes to consolidated financial statements.*




F-5




**WHERIFY
      WIRELESS, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**Note
      1** - **Summary of Significant Accounting Policies**





***Nature
      of Business***





Wherify
      Wireless, Inc is a pioneering developer of patented wireless location products
      and services for family and communications, and law enforcement and security
      technology solutions. Our portfolio of intellectual property includes our
      proprietary integration of the US Government’s Global Positioning System (GPS)
      and wireless communications technologies; our patented back-end location
      information and lets families with pre-teens, seniors, or those with special
      medical needs, stay connected and in contact with each other. Our name, Wherify
      Wireless, reflects our mission and objective: verify the location of loved
      ones
      or possessions of value through wireless technology.





***Principles
      of Consolidation***





The
      consolidated financial statements have been prepared on the accrual basis of
      accounting under accounting principles generally accepted in the United States.
      All significant inter-company balances and transactions have been eliminated
      in
      consolidation.





***Reclassifications***





Certain
      amounts in the consolidated financial statements of the prior year have been
      reclassified to conform to the presentation of the current year for comparative
      purposes.





***Use
      of Estimates***





In
      accordance with accounting principles generally accepted in the United States
      of
      America, management utilizes certain estimates and assumptions that affect
      the
      reported amounts of assets and liabilities at the date of the financial
      statements and reported amounts of revenues and expenses during the reporting
      period. Actual results could differ from those estimates.





***Concentration
      of Credit Risk***





Financial
      instruments that potentially subject Wherify to concentration of credit risk
      consist primarily of trade receivables. In the normal course of business,
      Wherify provides credit terms to its customers. Accordingly, Wherify performs
      ongoing credit evaluations of its customers and maintains allowances for
      possible losses, which, when realized, have been within the range of
      management's expectations. Wherify maintains cash in bank deposits accounts,
      which, at times, may exceed federally insured limits. Wherify has not
      experienced any losses in such accounts and Wherify does not believe it is
      exposed to any significant credit risk on cash and cash
      equivalents.





***Cash
      and Cash Equivalents***





For
      purposes of the statement of cash flows, Wherify considers all highly liquid
      investments purchased with an original maturity of three months or less to
      be
      cash equivalents. At June 30, 2007, Wherify did not hold any cash
      equivalents.





***Allowance
      for Doubtful Accounts***





Wherify
      estimates losses for uncollectible trade receivables based on the aging of
      the
      accounts receivable and the evaluation of the likelihood of success in
      collecting the receivable. As of June 30, 2007, Wherify has determined the
      allowance for doubtful accounts to be $8,217.





***Inventories***





Inventories
      are valued at the lower of cost (determined on a first-in, first-out method)
      or
      market. Wherify records provisions to write down its inventory for estimated
      obsolescence or unmarketable inventory equal to the difference between cost
      of
      the inventory and its estimated market value based on assumptions about future
      market demand and market conditions. If future demand or market conditions
      are
      less favorable than currently expected additional inventory provisions may
      be
      required.




F-6




***Office
      Equipment***





Office
      equipment is stated at cost less accumulated depreciation. Depreciation is
      computed using straight-line method over the estimated useful lives of the
      respective assets, 3 years for office and computer equipment, 3 to 5 years
      for
      test equipment, 7 years for furniture and fixtures, and shorter of the economic
      lives or the lease terms for leasehold improvements. When assets are disposed
      of, the cost and related accumulated depreciation are removed from the accounts
      and resulting gains and losses are included in other income or loss. Maintenance
      and repairs are charged to expense.





***Long-Lived
      Intangible Assets***





Wherify
      accounts for long-lived assets under SFAS No. 144, “Accounting for the
      Impairment or Disposal of Long-Lived Assets” which requires Wherify to review
      for impairment of long-lived assets whenever events or changes in circumstances
      indicate that the carrying amount of an asset might not be recoverable. When
      such an event occurs, management determines whether there has been impairment
      by
      comparing the anticipated undiscounted future net cash flows to the related
      asset’s carrying value. If an asset is considered impaired, the asset is written
      down to fair value, which is determined based on discounted cash flows or
      appraised value, depending on the nature of the asset.





Long-lived
      intangible assets consist of acquired customer lists and acquired software
      and
      software intellectual property, and development of new software products and
      enhancements to existing software products. Until technological feasibility
      is
      established, costs associated with software development, including costs
      associated with the acquisition of intellectual property relating to software
      development is expensed as incurred. After technological feasibility is
      established computer software costs that are then incurred are capitalized
      in
      accordance with the provisions of SFAS No. 86 “Accounting for the Costs of
      Computer Software to be Sold, Leased or Otherwise Marketed”. Amortization of
      these capitalized costs is provided using the greater of the ratio of revenues
      generated in the period over total future revenues of the product, or the
      straight-line method over the estimated market life of the related products,
      generally three years, commencing when the product becomes generally available
      to customers. For the *Software
      Revenue Recognition* .
      Revenue
      is recognized when persuasive evidence of a fiscal year ended June 30, 2007,
      technical feasibility and consumer availability had not yet been established
      for
      Wherify’s product.





***Revenue
      Recognition***





Wherify
      adopted revenue recognition policies to comply with the guidance of Staff
      Accounting Bulletin No. 104, *Revenue
      Recognition* ,
      SAB
      Topic 13, *Revenue
      Recognition,* FASB’s
      Emerging Issues Task Force Issue -00-21, *Revenue
      Arrangements With Multiple Deliverables* ,
      and
      AICPA Statement of Position 97-2, arrangement exists, the delivery and
      acceptance of the equipment has occurred or services have been
      rendered, the price is fixed or determinable, and the collectibility of payment
      is reasonably assured. The application of this guidance requires management
      to
      exercise judgment in evaluating these factors in light of the terms and
      conditions of its customer contracts and other existing facts and circumstances
      to determine appropriate revenue recognition. Application of 97-2 requires
      determining whether a software arrangement includes multiple elements, and
      if
      so, whether vendor -specific objective evidence (VSOE) of fair value exists
      for
      those elements. Change to the elements in a software arrangement, the ability
      to
      identify VSOE for those elements, the fair value of the respective elements,
      and
      changes in a product’s estimated life cycle, could materially impact the amount
      of earned and unearned revenue, Judgment is also required to assess whether
      future releases of certain software represent new products or upgrades and
      enhancements to existing products. Applications of EITF 00-21 requires
      determining whether a revenue arrangements includes multiple revenue-generating
      activities, such as product sale and services, and if so whether allocation
      of
      the arrangement’s consideration is required to more than one unit of
      accounting.





Wherify
      has two types of revenue: hardware revenue and subscription revenue and consists
      of shipped customer orders and completed services. Hardware revenue is
      recognized at the later of shipment date or upon satisfying contractual
      requirements or obligations under the sales contract, whichever is later.
      Subscription revenue is recognized at completion of performance. Prior to
      September 2006, the Company recognized revenues primarily from the sale of
      FACES
      software and subscription. Starting in September 2006 recognized revenues are
      primarily from the sale of wireless location devices and services. Revenues
      are
      also offset with a reserve for any price refunds and consumer rebates consistent
      with the EITF Issue 01-09. *Accounting
      for Consideration Given by a Vendor to a Customer* ,
      as
      appropriate.





Hardware
      sales currently consist principally or revenues from the sale of GPS-enabled
      wireless location devices, primarily Wherify’s handsets plus accessories to new
      subscribers and to agents and other third-party distributors. The revenue and
      related expenses associated with the sale of wireless handsets and accessories
      through our indirect sales channels are recognized when the products from the
      sales channels are recognized when the products are delivered and accepted
      by
      the agent or third party distributor, as this is considered to be a separate
      earnings process from the sale of wireless services and the probability of
      collection is likely. Shipping and handling costs for wireless handsets sold
      to
      agents and to other third-party distributors are classified a s costs of
      equipment sales.




F-7





Subscription
      revenues are earned by providing to Wherify’s wireless GPS-enable location
      services network (activation revenue) and for usage of its wireless
      telecommunications system enhanced GPS-enabled locates (airtime revenue).
      Activation revenue from postpaid subscribers is billed either in advance or
      arrears and recognized ratably over the service period. Airtime revenue,
      including locates, call time, roaming revenue and long-distance revenue, is
      billed in arrears based on minutes of use and is recognized when the service
      is
      rendered. Prepaid airtime sold to subscribers and revenue collected from pay-in
      advance subscribers is recorded as deferred revenue prior to the commencement
      of
      services, and revenue is recognized when airtime is used or expires. Activation
      and airtime services provided are billed throughout the month according to
      the
      bill cycle in which a particular subscriber is placed. As a result of bill
      cycle
      cut-off times, Wherify is required to make estimates for service revenues
      earned but not yet billed at the end of each month, and or advanced billings.
      Estimates for activation revenues are based upon the most current bill cycle
      revenues. Estimates for airtime revenues are based upon historical minutes
      of
      use.





Wherify
      launched its North American wireless location services in October 2006.
      Wherify’s North American subscribers’ rate plan include a feature whereby a
      subscriber’s monthly usage is automatically charged at the most advantageous
      rate plan then in effect for the minutes used. For prepaid plans, Wherify defers
      revenue based on an estimate of the portion of unused minutes expected to be
      utilized prior to expiration. As Wherify lacks historical subscriber usage
      patterns for its specialized services, Wherify must apply judgment to estimate
      the number of unused minutes to be utilized, as well as those which are likely
      to expire or be forfeited. No deferral of revenue is recorded for the minutes
      expected to expire or to be forfeited, as no future performance is expected
      to
      be required by Wherify, nor is there any obligation to refund or redeem for
      the
      value expired minutes. The balance of the deferred phone sales and activation
      fees as of June 30, 2007 and 2006 was $169,000 and $76,852 respectively, and
      has
      been included in deferred revenue in the consolidated balance sheets. When
      available, revenues for enhanced services and optional features would be
      recognized as earned. Service revenues also include billings to our subscribers
      for Universal Service fund (USF) and other regulatory fees.





Wherify
      has determined that the sale of wireless services through its direct sales
      channels with an accompanying handset constitutes a revenue arrangement with
      multiple deliverables in accordance with EITF No.00-21, *Accounting
      for Revenue Arrangements With Multiple Deliverables* .
      Wherify
      accounts for these arrangements as separate units of accounting, including
      the
      wireless service and handset. Arrangement consideration received for the handset
      is recognized as equipment sales when the handset is delivered and accepted
      by
      the subscriber. Arrangement consideration received for the wireless service
      is
      recognized a service revenues when earned. As the non-refundable, up-front
      activation fee charged to the subscriber does not meet the criteria as a
      separate unit of accounting, Wherify allocates the additional arrangement
      consideration received from the activation fee to the handset (then delivered
      item) to the extent that the aggregate handset and activation fee proceeds
      do
      not exceed the fair value of the handset. Any activation fees not allocated
      to
      the handset would be deferred upon activation and recognized as service revenue
      on a straight-line basis over the expected customer relationship period. Wherify
      determined that the sale of wireless services through direct channels (agents)
      does not constitute a revenue arrangement with multiple deliverables. For
      indirect channel sales, Wherify continues to defer non-refundable, up-front
      activation fees and costs to the extent of the related revenues in accordance
      with SAB No. 104, *Revenue
      Recognition* .
      These
      deferred fees and costs are amortized on a straight-line basis over the
      estimated customer relationship period, the contract period.





***Income
      Taxes***





Wherify
      uses the asset and liability method of accounting for income taxes. Deferred
      tax
      assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial statement carrying amount
      of
      existing assets and liabilities and their respective tax bases. Wherify records
      a valuation allowance to reduce the deferred tax assets to the amount that
      is
      more likely than not to be realized.





***Loss
      Per Common Share***





Basic
      net
      loss per common share is computed using the weighted average number of common
      shares outstanding. Diluted net loss per common share is computed by dividing
      the net loss, adjusted on an “as if converted” basis, by the weighted average
      number of common shares outstanding plus potential dilutive securities. For
      fiscal 2007 and 2006, potential dilutive securities had an anti-dilutive effect
      and were not included in the calculation of diluted net loss per common
      share.





***Stock
      Based Compensation***





Prior
      to
      January 1, 2006, Wherify accounted for stock based compensation under Statement
      of Financial Accounting Standards No. 123 Accounting for Stock-Based
      Compensation. As permitted under this standard, compensation cost was recognized
      using the intrinsic value method described in Accounting Principles Board
      Opinion No. 25, Accounting for Stock Issued to Employees. Effective January
      1,
      2006, Wherify has adopted Statement of Financial Accounting Standards No. 123
      (Revised 2004), Share-Based Payment and applied the provisions of the Securities
      and Exchange Commission Staff Accounting Bulletin No. 107 using the
      modified-prospective transition method. Prior periods were not restated to
      reflect the impact of adopting the new standard. As a result of the adoption
      of
      FAS 123R, stock-based compensation expense recognized during the six months
      ended June 30, 2006 includes compensation expense for all share-based payments
      granted on or prior to, but not yet vested as of January 1, 2006, based on
      the
      grant date fair value estimated in accordance with the original provisions
      of
      FAS 123, and compensation cost for all share-based payments granted on or
      subsequent to January 1, 2006, based on the grant date fair vale estimated
      in
      accordance with the provisions of FAS 123R. . See
      Note
      15 for Wherify’s option activities during the years ended June 30, 2007 and
      2006.





F-8




***Derivative
      Financial Instruments***





Wherify
      does not use derivative instruments to hedge exposures to cash flow, market,
      or
      foreign currency risks. Wherify evaluates all of it financial instruments to
      determine if such instruments are derivatives or contain features that qualify
      as embedded derivatives. For derivative financial instruments that are
      accounted for as liabilities, the derivative instrument is initially recorded
      at
      its fair value and is then re-valued at each reporting date, with changes in
      the
      fair value reported as charges or credits to income. For option-based derivative
      financial instruments, Wherify uses the Black-Scholes Option-pricing Model
      to
      value the derivative instruments at inception and subsequent valuation dates.
      The classification of derivative instruments, including whether such instruments
      should be recorded as liabilities or as equity, is re-assessed at the end of
      each reporting period. Derivative instrument liabilities are classified in
      the
      balance sheet as current or non-current based on whether or not net-cash
      settlement of the derivative instrument could be required within 12 months
      of
      the balance sheet date.





***Recently
      Issued Accounting Pronouncements***





Wherify
      does not expect the adoption of any recently issued accounting pronouncements
      to
      have a significant impact on Wherify's results of operations, financial position
      or cash flows.








**Note
      2** **-** **Going
      Concern**





Wherify’s
      financial statements have been prepared on a going concern basis, which
      contemplates the realization of assets and settlement of liabilities and
      commitments in the normal course of business for the foreseeable future. Since
      inception, Wherify has accumulated losses aggregating to $153,658,085 and has
      insufficient working capital to meet operating needs for the next twelve months
      as of June 30, 2007, all of which raise substantial doubt about Wherify’s
      ability to continue as a going concern.





Management’s
      plans for Wherify’s continued existence include selling additional stock or
      borrowing additional funds to pay overhead expenses while proceeding with its
      current business plan to launch and market its new GPS enabled wireless location
      products.





Wherify’s
      future success is dependent upon its ability to achieve profitable operations,
      generate cash from operating activities and obtain additional financing. There
      is no assurance that Wherify will be able to generate sufficient cash from
      operations, sell additional shares of common stock or borrow additional
      funds.





Wherify’s
      inability to obtain additional cash could have a material adverse effect on
      its
      financial position, results of operations and its ability to continue in
      existence. The consolidated financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.




**Note
      3 - Business Combinations**





On
      July
      21, 2005, Wherify Acquisition, Inc. merged with Wherify Wireless California,
      Inc. (“Wherify California”). Pursuant to the terms of the Agreement and Plan of
      Merger, Wherify issued 41,893,797 shares of common stock in exchange for all
      of
      the outstanding common and preferred shares of Wherify California.





For
      accounting purposes, the merger has been treated as reverse acquisition of
      Wherify by Wherify California. Accordingly, the financial results presented
      for
      all periods prior to the merger date are those of Wherify California. Wherify
      California equity structure has been restated to adopt the equity structure
      of
      Wherify. As such, historic share amounts have been revised to reflect the impact
      of the merger share exchange ratio (4.8021 shares of Wherify common stock for
      each share of Wherify California common stock). As of the merger date, the
      financial statements include the combined operating results, assets and
      liabilities of Wherify and Wherify California. The former business operations
      of
      Wherify, consisting primarily of the sale of FACES software and related services
      to law enforcement agencies and security industry, is not expected to constitute
      a significant part of the ongoing business of the combined company.




F-9





The
      aggregate purchase price of the business combination was $70,213,189, which
      was
      calculated by multiplying the total outstanding shares of Wherify of 12,339,750
      shares (including shares issuable pursuant to outstanding warrant and option
      contracts) by the closing price on the date of the merger of $5.69.





The
      following table summarizes the estimated fair values of the assets of Wherify
      California acquired and the liabilities that it assumed from Wherify on the
      date
      of the acquisition.


Current
                  assets
              
              $
              1,131,654Fixed
                  assets
              
              
              1,968Goodwill
              
              
              67,530,022Intangible
                  assets
              
              
              2,193,000Total
                  assets acquired
              
              
              70,856,644Accounts
                  payable
              
              
              (383,266
              )Accrued
                  expense
              
              
              (60,189
              )Convertible
                  debt
              
              
              (200,000
              )Total
                  liabilities assumed
              
              
              (643,455
              )Net
                  assets acquired
              
              $
              70,213,189


The
      intangible assets of $2,193,000 relate primarily to customer lists, which will
      be amortized on a straight-line basis over their estimated useful life of 3
      years. None of the amount allocated to goodwill is expected to be deductible
      for
      tax purposes.





See
      Note
      5 and Note 6 for the impairment of Goodwill and Intangible,
      respectively.




**Note
      4** **-** **Inventory**





At
      June
      30, 2007, inventory consists of:




Raw
                  material
              
              $
              160,424Work
                  in process
              
              
              1,200,000Finished
                  goods
              
              
              900,567Total
              
              $
              2,260,991





**Note
      5** **-** **Goodwill**





Wherify
      periodically reviews its goodwill, as acquired as a result of the merger with
      Wherify Acquisition, Inc. With Wherify California in July 2005 for impairment
      and in accordance with the SFAS No. 142 “Goodwill and Other Intangible Assets”
annually tests its goodwill for impairment. If the estimated fair value of
      the
      reporting unit is deemed to be less than the carrying value of the reporting
      unit’s met assets, the difference is recorded in the Statement of Operations as
      an expense. For purposes of evaluating Wherify’s Goodwill, the operating unit is
      defined as Wherify’s Government Services division.





With
      the
      assistance of a third party, during the first quarter of fiscal 2006, Wherify
      concluded that the implicit fair market value of the goodwill was $3,222,000
      as
      of September 2005. Therefore, an impairment of $64,308,022 was recorded during
      the quarter ended September 2005. When estimating the fair market value, Wherify
      used an income approach that was based on pro-forma financial projections for
      fiscal years 2006 through 2007, discounted at a rate of 29.2%, the calculations
      of the projections and the discount rate includes numerous assumptions made
      by
      management. If actual results of operations are worse than projected of
      Wherify’s market outlook changes, Wherify could have additional impairments of
      goodwill and identified intangible assets in future periods, which, in turn,
      could have a material adverse effect on Wherify’s results of operations. As of
      June 30, 2006, Wherify determined that the carrying value of goodwill has become
      fully impaired. As a result of this assessment, management has written off
      the
      full carrying value of goodwill based on numerous factors, including the lack
      of
      pro-forma projected sale to date and the uncertainty of future performance
      over
      the remaining period of the updated pro forma financial projections for the
      fiscal year 2007, discounted at a rate of 54.6 % after taking into
      consideration, among other factors, that volatility of Wherify’s common stock
      and Wherify’s recent market capitalization.




F-10




**Note
      6** **-** **Long-
      Lived Intangibles**





Wherify’s
      net intangibles balance at June 30, 2007 represented certain items, primarily
      software that was acquired as a part of the merger of Wherify Acquisition,
      Inc.
      with Wherify California as of July 21, 2005 and these intangible assets were
      deemed to have definitive lives and were amortized suing the straight-line
      method over three years, their estimated useful lives resulting in the
      amortization of $15,000 during the fiscal year 2007.





The
      following summarizes intangible assets at June 30, 2007:


Balances
                  at June 30, 2006
              
              $
              30,809Amortization
                  for the year
              
              
              (15,000
              )Balances
                  at June 30, 2007
              
              $
              15,809




**Note
      7** **-** **Other
      Non-Current Assets**





Other
      non-current assets represents capitalized financing costs incurred related
      to
      several of our debt financings that have been completed as of June 30, 2007.
      Financing costs are primarily due to legal, financial and auditor services
      incurred in negotiating the agreements and the work involved in filing the
      registration statements with the SEC. The financing cost is amortized over
      the
      life of the notes using a method that approximates the effective interest rate
      method.




**Note
      8** **-** **Accounts
      Payable - Related Party**





As
      of
      June 30, 2007, Wherify carries a liability relating to unpaid rent to its prior
      landlord, who is a related party, totaling approximately $3.1 million. Wherify
      worked out an arrangement with its prior landlord pursuant to which Wherify
      has
      begun paying back-rent as well as paying certain back-due expenses covered
      by
      the prior landlord. Under the agreement, upon achieving adequate financing,
      Wherify is required to settle its debt with the prior landlord.




**Note
      9** **-** **Accrued
      Liabilities**





Accrued
      liabilities consist of the following at June 30, 2007:


Legal
                  fees
              
              $
              137,080Interest
                  on loans
              
              
              1,035,916Suppliers
                  invoices
              
              
              1,883,106Payroll,
                  accrued vacation and payroll related expense
              
              
              297,883Other
                  accrued expenses
              
              
              174,087Total
              
              $
              3,528,072





**Note
      10** **-** **Notes
      Payable - Related Parties**





During
      February 2006, Wherify borrowed $1,000,000 from a related party to finance
      ongoing operating costs. The unsecured loan carries an interest rate of 7.5%
      per
      annum and is payable upon demand any time after August 22, 2006. On June 16,
      2006, Wherify borrowed an additional $1,000,000 from this related party and
      issued a promissory note pursuant to which Wherify agreed to pay interest on
      the
      outstanding principal amount at a rate of 15% per annum and to repay the
      outstanding principal and all accrued and unpaid interest on
      demand.




F-11





**Note
      11 - Notes Payable**





Wherify
      has financed its operations through private offerings of its common stock,
      issuance of debt and private borrowings.





On
      February 22, 2006 *,* Wherify
      borrowed $1.0 million from Stephen J. Luczo and issued to Mr. Luczo a promissory
      note that is repayable on demand at any time after August 22, 2006.





Between
      March 10, 2006 and March 14, 2006, Wherify borrowed $4.6 million (after
      deduction of fees) from the issuance of convertible debentures to Cornell
      Capital Partners, and on November 1, 2006, Wherify entered into an agreement
      that will allow for the complete buy-out of this debenture obligation to Cornell
      and the cancellation of all but 5 million warrants under these agreements if
      the
      buy-out terms are completed by January 31, 2007, as amended. On February 2,
      2007, Wherify announced a revision to the Cornell agreement wherein certain
      amendments extending and modifying the terms of the convertible debentures,
      including the cancellation of all but 7 million warrants.





On
      March
      10, 2006, Wherify entered into a Standby Equity Distribution Agreement with
      Cornell Capital Partners pursuant to which we may periodically issue and sell
      to
      Cornell Capital Partners shares of common stock for up to a total purchase
      price
      of $40 million during the period commencing on the effectiveness of the
      registration statement registering such shares and terminating 24 months
      thereafter. In late 2006, the registration statement became effective and
      approximately 16.6 million shares had been sold raising approximately $4.2
      million.





On
      June
      16, 2006, Wherify borrowed an additional $1.0 million from Stephen J. Luczo,
      originally due on September 16, 2006, and which repayment date has been extended
      by both parties.





On
      February 22, 2007, Wherify borrowed $1,200,000 under a 10% senior convertible
      promissory note This note is due on February 15, 2008, or earlier in the event
      by Wherify of a merger, business combination, or sale of substantially all
      its
      assets. This Note is convertible into common stock at $0.10 per share, or into
      certain preferred stock in connection with the option described below. Wherify
      also issued 3,000,000 five year warrants to the note holder and another
      3,000,000 five-year warrants to the placement agent at an exercise price of
      $0.10 per share. After the placement agent commission of $120,000 and other
      placement expenses, Wherify received net cash proceeds of approximately
      $1,000,000. As
      of
      June 30, 2007, $45,309 of these financing costs is being amortized over the
      expected term of the note using the effective interest method.





Wherify
      determined that the conversion feature of the note and the warrants issued
      were
      not derivative instruments pursuant to SFAS No. 133, Accounting for Derivatives,
      as amended. Under the provisions of EITF Issue 98-5, Wherify estimated that
      fair
      value of the beneficial conversion feature and warrants at the issuances of
      the
      notes using Black-Scholes option pricing model to exceed the principal vale
      of
      the note. The resulting discount of $1,200,000 is being amortized over the
      life
      of the notes using the effective interest method. The amortized amount in the
      twelve period is $58,590.





Wherify
      issued to the note holder an option to purchase up to $7,500,000 stated value
      of
      Series A Convertible Preferred Stock., exercisable at a 20% discount price
      to
      the face amount of the Preferred Stock by either full or partial exercise.
      The
      note holder exercised this option and Wherify received $6 million gross proceeds
      form this transaction. See Note 14 Preferred Stock for details.





**Note
      12** **-** **Convertible
      Debentures and Derivative Liability**





In
      March
      2006, Wherify borrowed $5,000,000 under secured convertible debentures and
      warrants. The secured convertible debentures face value is $5,000,000 and are
      convertible into 3,571,428 shares of Wherify's common stock, based upon initial
      conversion of $1.40 per share, which is subject to anti-dilution adjustments.
      The warrants are exercisable for 1,250,000 shares of Wherify's common stock
      over
      three-year period with an initial exercise price of $2.00 per share and another
      1,250,000 shares at $2.25 per share. The exercise prices of the warrants are
      subject to anti-dilution adjustments. Wherify agreed to register the resale
      of
      the shares of common stock registration rights agreement contains a liquidated
      damages provision that has been determined to be uneconomic. On August 8, 2006,
      Wherify priced its direct offering of common stock at $0.25 per share. As a
      result, the conversion price of the above outstanding, convertible debentures
      and the exercise price of the above warrants issued in March 2006 have been
      adjusted. Based on the offering price of the $0.25 per share, the debentures
      would be convertible into up to 20 million shares and the warrants would
      purchase up to 21. 2 million shares at an exercise price of $0.25 per
      share.





F-12




Wherify
      has determined that the conversion feature of the secured convertible debentures
      and the warrants issued with the secured convertible debentures are embedded
      instruments pursuant to SFAS No. 133. Accounting for Derivative Instruments
      and
      Hedging Activities, as amended. Under the provision of the EITF Issue No. 00-19,
      Accounting for Derivative Financial Instruments indexed to, and Potentially
      Settled in, a Company’s Own Stock, the accounting treatment of these derivative
      financial instruments requires that Wherify record the derivatives at their
      fair
      values as of the inception date of the note agreements and at fair value as
      of
      each subsequent balance sheet date as a liability. Any change in fair value
      recorded is recorded as a non-operating, non-option pricing model. This model
      requires the use of estimates such as the expected holding period, the expected
      future volatility of Wherify’s common stock and the risk-free interest of return
      over the holding period. These estimates directly affect the reported amounts
      of
      the derivative instrument liabilities. At June 30, 2007, Wherify estimated
      the
      fair value of the conversion feature and warrant liability was $3.5 million.
      The
      following table summarizes the accounting for the convertible notes as of June
      30, 2007.


Convertible
                  debentures due in 2009, 7% per annum
              
              $
              4,875,000Discount
                  on convertible debentures
              
              
              (2,084,667
              )Current
                  maturities on convertible debentures
              
              $
              2,790,333




Maturities
      of the convertible debentures and fair value of derivatives as of June 30,
      2007,
      are as follows:


Fiscal
                  year ended June 30, 2008
              
              $
              3,000,000Fiscal
                  year ended June 30, 2009
              
              
              1,875,000Thereafter
              
              
              -Total
                  principal payments
              
              
              4,875,000Discount
                  on derivatives at current fair value
              
              
              (1,349,104
              )Fair
                  Value of Derivatives
              
              $
              3,525,896




The
      discount on derivatives primarily represents as non-cash fair market value
      adjustments resulting from the requirements of SFAS No. 133” Accounting for
      Derivative Instruments and Hedging Activities” wherein management determined
      that the embedded conversion features in the convertible debentures and the
      associated warrants meet the derivative requirements for treatment as liability
      instruments within the meaning of EITF 00-19, as a result are accounted for
      as
      derivatives at air value, with changes in fair value recorded in
      earnings.




**Note
      13 - Commitment and Contingencies**





***Operating
      Lease Obligations***





Wherify
      leases office space under a one year operating sub-lease which began in April
      18, 2007, from Sling Media, a Delaware corporation as Sublessor. Wherify was
      required to pay a $1,000 as processing fee with advance payment for first and
      last and one additional month of the lease totaling $41,370, deposited with
      the
      Sling Media, Inc. Basic rent expense charged to operations for fiscal 2007
      and
      2006 was $997,529 and $1,410,294 respectively. Additionally, Wherify leases
      certain data center services facilities commencing March 15, 2005 for a
      recurring monthly charge of $1,280 for a term of two years.





A
      future
      minimum lease payment under the non-cancelable operating lease from July 1,
      2007
      to April 17, 2008 is $131,924.





***Legal
      Proceedings***




***Valpak
        Direct Marketing Systems, Inc. v. Wherify Wireless,
        Inc.***
  On
        August
        3, 2007, Valpak Direct Marketing Systems, Inc, a Delaware Corporation, entered
        a
        judgment for $127,578 against Wherify Wireless, Inc. a Delaware corporation,
        in
        the United States, Superior Court of San Mateo County. This judgment was
        entered
        based upon sister-state judgment previously entered in the State of Florida
        Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida
        on May 29, 2007.
  On
        July
        24, 2007, in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas
        County, Florida, Civil Division, a final judgment was rendered on July 24,
        2007
        that plaintiff - Valpak Direct Marketing Systems, Inc., 8605 Largo Lakes
        Dr.
        Largo, Florida 33773, shall recover from defendant - Wherify Wireless, Inc.
        the
        sum of $116,840 on principal plus $10,199 in prejudgment interest, for a
        total
        sum of $127,039 that shall bear interest at the rate of 7% per year. Valpak
        Direct Marketing Systems declined settlement discussions after July 24, 2007.
        On
        September 13, 2007 a writ of execution was issued in the Superior Court of
        California, San Mateo County for judgment settlement. On September 17, 2007
        Valpak Direct Marketing Systems levied the Bank of America lockbox account
        of
        Wherify Wireless and received $58,406.
  ***Golin/Harris
        International, Inc. v. Wherify Wireless, Inc*** *.*
  On
        August
        20,2007, Golin/Harris International, a Virginia Corporation, filed suit against
        Wherify Wireless, Inc. a Delaware corporation, in the United States District
        Court, Los Angeles Superior Court - Central District of California. The
        complaint sought approximately $193,435 together with court awarded interest
        thereon for failure by Wherify Wireless, Inc. to pay services rendered by
        plaintiff. There is a case management conference for November 20, 2007 in
        this
        matter. Settlement discussions continue.
  ***CDW
        Corporation, Inc. v. Wherify Wireless, Inc.***
  On
        June
        20, 2007, CDW Corporation , Inc, an Illinois Corporation, filed suit against
        Wherify Wireless, Inc., a Delaware Corporation, in the United States Circuit
        Court of Cook County Illinois, Municipal Department, First District of Illinois.
        The complaint sought approximately $26,413 plus interest and costs in accordance
        with the Illinois Statute for computer hardware sold to Wherify Wireless,
        Inc.
        On September 28, 2007 Wherify Wireless and CDW Corporation entered into a
        negotiated settlement out of court wherein Wherify will pay the settlement
        amount in monthly installments through September 2008.
  ***Robert
        Half International v. Wherify Wireless, Inc.***
 
 On
        May
        18, 2007, Robert Half International filed suit against Wherify Wireless,
        Inc. a
        Delaware Corporation, in the United States Superior Court, State of California,
        San Mateo County. The Complaint was for money due for services delivered
        in the
        amount of $21,250, plus cost of $352. On October 12, 2007, Robert Half
        International and Wherify reached a settlement and mutual release wherein
        Wherify will pay Robert Half International the settlement amount in monthly
        installments through August 15, 2008.
  ***Hirose
        Electric USA, Inc. v. Wherify Wireless, Inc.***
  On
        May
        14, 2007, Hirose Electric USA, Inc. a Corporation filed suit against Wherify
        Wireless, Inc. a Delaware Corporation, in the United States Superior Court,
        State of California, San Mateo County. The Complaint was for money due for
        goods
        sold and delivered in the amount of $62,800, plus interest on said amount
        at the
        rate of ten percent (10%) per annum from June 1, 2006; and attorney’s fees in
        the sum of $1,000 pursuant to the provisions of Section 1717.5. of the Civil
        Code. The Company is reviewing its option in this matter.
 
 F-13
  ***Fixture
        Hardware Company v. Wherify Wireless, Inc.***
  On
        June
        19, 2007, Fixture Hardware Company, an Illinois Corporation, filed suit against
        Wherify Wireless, Inc. a Delaware Corporation, in the United States District
        Court, Northern District of Illinois, for non-payment by Wherify Wireless
        Inc.
        in the amount of $239,188.
  On
        August
        8, 2007, at the prove-up hearing, the Court’s judgment was entered in favor of
        the Plaintiff, Fixture Hardware Company in the amount of $239,188. On October
        12, 2007, Fixture Hardware Co. and Wherify reached a settlement and mutual
        release wherein Wherify will pay Furniture Hardware Co. the settlement amount
        in
        monthly installments through September, 2008.
 
 ***Lariviere,
        et al. v. I.Q. Biometrix, Inc., a Delaware Corporation, et
        al.***
  On
        August
        5, 2005, plaintiffs Sylvie Lariviere, Robert Rios, Toni Lange, Fernand Beland,
        Frederic Serre and Roland Vroye, filed their first amended complaint against
        I.Q. Biometrix, Inc., a Delaware corporation, in Fresno County Superior Court,
        State of California. Plaintiffs' complaint alleges causes of action for breach
        of contract and fraud for a failure to issue stock options pursuant to an
        alleged oral and/or written agreement. The complaint seeks to recover damages,
        including punitive damages, and/or an award of stock options. On October
        25,
        2005, Wherify demurred on behalf of itself, Greg Micek and William Scigliano
        and
        on January 4, 2005, the demurrer was sustained on several grounds, an amended
        complaint was filed, and the parties subsequently began discovery. A stipulated
        settlement agreement was entered into on November 5, 2007, where the parties
        have agreed to dismiss the lawsuit and each party pay their respective legal
        cost in the matter.
 
 ***Westport
        Office Park, LLC v. Wherify Wireless, Inc, a California
        Corporation***
  On
        January 5, 2007, Westport Office Park, LLC (“Westport”), filed an Entry of
        Stipulation and Agreement allowing entry of a stipulated judgment ("Judgment")
        against Wherify Wireless, Inc, a California Corporation (“Wherify California”),
        in the Superior Court of California for San Mateo County.  The judgment
        extinguished Wherify California's right to possession of certain leased premises
        that Wherify California occupied as its principal offices in favor of Westport,
        and awarded Westport approximately $1.1 million for then-outstanding amounts
        due
        and owing under the terms of the lease and certain other owed amounts.  On
        January 17, 2007, Wherify California vacated the leased premises.
  On
        March
        20, 2007, Westport obtained a writ of execution to enforce the judgment against
        the assets of Wherify California in the amount of $1,405,485.75.  On March
        30, 2007, Westport recorded a judgment lien with the United States Patent
        and
        Trademark Office on two patents held in name of Wherify California.  The
        specific patents are U.S. Patent Application 11/126,827 and U.S. Design Patent
        D526985. One appropriate means to remove a
        judgment lien is to pay the amount due the creditor. The Company has not,
        however, determined whether the lien was properly recorded and is still
        exploring legal options.
 
 In
        addition, Westport recently undertook efforts to enforce its judgment against
        the assets of Wherify Delaware. Wherify Delaware is vigorously resisting
        these
        efforts. Specifically, Westport served a writ of execution on account funds
        that
        Wherify Delaware maintained at Wells Fargo Bank. On application by Wherify
        Delaware, the Superior Court recently ruled that the Westport judgment is
        limited to Wherify California only. In respo nse
        to
        this ruling, Wherify Delaware filed a third party claim, which is scheduled
        for
        hearing on November 26, 2007, to obtain the return of the Wells Fargo accounts
        funds.
 
 ***Baystar
        Capital II, L.P. v*** **** ***Wherify
        Wireless, Inc. et al***
  On
        March
        2, 2007 Baystar Capital II , L.P. (“Baystar”) filed suit against Wherify
        Wireless, Inc. in Marin County Superior Court, State of California. Plaintiff
        alleges various causes of action relating to an alleged breach of a stock
        purchase agreement entered between the parties in early 2005. Plaintiff
        essentially sought damages arising from an alleged failure to provide stock
        certificates by an agreed upon date. The parties entered into a final and
        binding agreement on or about May 4, 2007.




**Note
      14** **-** **Equity**





***Common
      Stock***





Approximately
      75.2 million shares of common stock were issued and outstanding as of June
      30,
      2007. At June 30, 2007, 10,273,973 shares of common stock were pledged to
      Cornell Capital Partners, LP to cover the unpaid principal owed to them in
      the
      amount of $4.9 million.





During
      the six months ended December 31, 2006, Wherify sold 16.6 million common shares
      for approximately $4.2 million. before $112,000 in direct offering
      costs.





During
      the year end June 30, 2007, Wherify issued approximately 3.3 million common
      shares to its consultants, board of directors and a formal employee for their
      services. These shares were recorded at their
      fair value of $690,000.





F-14




***Preferred
      Stock***





The
      preferred stock constitutes what is commonly referred to as “blank check”
preferred stock. “Blank check” preferred stock allows the board of directors,
      from time to time, to divide the preferred stock into series, to designate
      each
      series, to issue shares of any series, and to fix and determine separately
      for
      each series any one or more of the following relative rights and preferences:
      i)
      the rate of dividends; (ii) the price at and the terms and conditions on which
      shares may be redeemed; (iii) the amount payable upon shares in the event of
      involuntary liquidation; (iv) the amount payable upon shares in the event of
      voluntary liquidation; (v) sinking fund provisions for the redemption or
      purchase of shares; (vi) the terms and conditions pursuant to which shares
      may
      be converted if the shares of any series are issued with the privilege of
      conversion; and (vii) voting rights. Holders of preferred stock are entitled
      to
      receive dividends when and as declared by the board of directors out of any
      funds legally available therefore, may be cumulative and may have a preference
      over common stock as to the payment of such dividends. The provisions of a
      particular series, as designated by the board of directors, may include
      restrictions on the ability of the Company to purchase shares of common stock
      or
      to redeem a particular series of preferred stock. Depending upon the voting
      rights granted to any series of preferred stock, issuance thereof could result
      in a reduction in the power of the holders of common stock. In the event of
      any
      dissolution, liquidation or winding up of the Company, whether voluntary or
      involuntary, the holders of each series of the then outstanding preferred stock
      may be entitled to receive, prior to the distribution of any assets or funds
      to
      the holders of the common stock, a liquidation preference established by the
      board of directors, together with all accumulated and unpaid dividends.
      Depending upon the consideration paid for preferred stock, the liquidation
      preference of preferred stock and other matters, the issuance of preferred
      stock
      could result in a reduction in the assets available for distribution to the
      holders of the common stock in the event of liquidation of Wherify. Holders
      of
      preferred stock will not have preemptive rights to acquire any additional
      securities issued by Wherify. Once a series has been designated and shares
      of
      the series are outstanding, the rights of holders of that series may not be
      modified adversely except by a vote of at least a majority of the outstanding
      shares constituting such series.





The
      Certificate of Designation of Series A Convertible Preferred Stock creating
      the
      Preferred Stock was filed in Delaware on April 11, 2007 concurrently with the
      issuance of an option to purchase up to $7,500,000 stated value of Series A
      Convertible Preferred Stock. The option is exercisable at a 20% discount price
      to the $1,000 face amount of the Preferred Stock by either full or partial
      exercise.





During
      the forth quarter of 2007, the Company sold 7,500 shares of its Series A
      Convertible Preferred Stock for $6 million. Wherify
      incurred $780,000 of offering costs related to the sale of these preferred
      shares. These
      preferred shares are convertible into 60 million shares of Wherify’s common
      stock at $0125 per share .
      Because
      of the conversion price was less than the market price on the date of sale,
      a
      beneficial conversion feature was created under the guidance of EITF 98-5 and
      EITF 00-27. Wherify recorded $4.8 million discount as deemed dividend to the
      preferred stock on the date of issuance. Wherify has determined that the
      conversion feature of the preferred stock is not a derivative instrument
      pursuant to SFAS No. 133, Accounting for Derivatives, as amended.




**Note
      15 - Warrants and Options**





***Common
      Stock Purchase Warrants***





As
      of
      June 30, 2006, Wherify had warrants outstanding exercisable for approximately
      3.5 million shares of Wherify common stock. Following are the warrant activities
      for the year ended June 30, 2007:





·
            750,000
                warrants were granted to Wherify's board of directors for their services.
                These warrants have a term of five years and an exercise price of
                $0.20.
                Fair value of $112,000 was calculated using the Black-Scholes Model.
                Variables used in the Black-Scholes option-pricing model include
                (1)
                discount rate of 4.56%, (2) warrant life is the contractual term
                of the
                warrants (5 years), (3) expected volatility of 162.90%, and (4) zero
                expected dividends.





·
            9,000,000
                warrants were granted to a placement agent as the offering costs
                related
                to Wherify's debt and equity financing. These warrants have a term
                of five
                years and an exercise price rang from $0.10 to $0.26. Fair value
                of
                $2,047,750 was calculated using the Black-Scholes Model. Variables
                used in
                the Black-Scholes option-pricing model include (1) discount rate
                range
                from 4.56% to 4.92%, (2) warrant life is the contractual term of
                the
                warrants (5 years), (3) expected volatility range from 149.45% to
                162.90%,
                and (4) zero expected dividends.





·
            3,000,000
                warrants were granted to the investors related to Wherify's debt
                financing. These warrants have a term of five years and an exercise
                price
                of $0.26. Fair value of $740,928 was calculated using the Black-Scholes
                Model. Variables used in the Black-Scholes option-pricing model include
                (1) discount rate of 4.92%, (2) warrant life is the contractual term
                of
                the warrants (5 years), (3) expected volatility of 149.12%, and (4)
                zero
                expected dividends.





·
            2,500,000
                warrants granted to Cornell in the prior year were re-priced in February
                2007. Cornell received additional 18,750,000 warrants as the result
                of
                this transaction. In April 2007, Cornell agreed to cancel 14,250,000
                of
                its warrants and as of June 30, 2007, 7,000,000 warrants were remaining
                outstanding. These warrants have a term of three years and an exercise
                price of $0.25. Fair value of $905,198 was calculated using the
                Black-Scholes Model. Variables used in the Black-Scholes option-pricing
                model include (1) discount rate of 4.91%, (2) warrant life is the
                contractual term of the warrants (4 years), (3) expected volatility
                of
                162.38%, and (4) zero expected
                dividends.





F-15




As
      of
      June 30, 2007, Wherify had warrants outstanding exercisable for approximately
      20.7 million shares of Wherify common stock.





The
      following table summarizes stock warrant activities for the years ended June
      30,
      2007 and 2006:


**Weighted****Average****Exercise****Warrants**
              
              **Price****Outstanding
                  at June 30, 2005**
              
              
              1,370,437
              
              
              1.94**Year
                  ended June 30, 2006:**Granted
              
              
              2,500,000
              
              
              2.13Exercised
              
              
              (353,780
              )
              
              3.48Forfeited
                  and Cancelled
              
              
              (20,000
              )
              
              5.00**Outstanding
                  at June 30, 2006**
              
              
              3,496,657
              
              
              1.90**Year
                  ended June 30, 2007:**Granted
              
              
              31,500,000
              
              
              0.20Exercised
              
              
              -Forfeited
                  and Cancelled
              
              
              (14,250,000
              )
              
              0.25**Outstanding
                  at June 30, 2007**
              
              
              20,746,657
              
              
              0.45




***Common
      Stock Purchase Options***





**1999
      Stock Option Plan:**





During
      fiscal 2007 and 2006, Wherify did not issue any new options under this plan
      and
      645,622 options and 250,513 options granted in the previous year under this
      plan
      were expired and forfeited, respectively.





During
      fiscal 2006, 277,625 options under this plan were exercised by the option
      holders.





As
      of
      June 30, 2007, there were 2,803,971 options outstanding.





**2001
      Stock Option Plan:**





There
      were no activities under this plan during the fiscal 2007 and 2006. As of June
      30, 2007, there were 325,000 options outstanding and no remaining stock options
      available for grant.





**2004
      Stock Option Plan:**





During
      fiscal 2006, Wherify did not issue any new options under this plan and 110,000
      options granted in the previous year under this plan were expired and
      forfeited.





During
      fiscal 2007, Wherify issued 4,150,000 options to purchase its common stock
      to
      its employees under this plan. These options are for a term of ten years, have
      exercise price range from $0.16 to $1.70 and vest over three years. Fair value
      of $663,135 was calculated using the Black-Scholes Model. Variables used in
      the
      Black-Scholes option-pricing model during the year include (1) discount rate
      of
      4.89% to 4.94%, (2) option life is the expected term of the options, (3)
      expected volatility of 126.87% to 298.89%, and (4) zero expected
      dividends.





F-16




1,085,520
      options granted in the previous year under this plan were expired and forfeited
      during fiscal 2007.





As
      of
      June 30, 2007, there were 5,511,047 options outstanding.





During
      the years ended June 30, 2007 and 2006, Wherify recognized option expense of
      approximately $445,000 and $490,000, respectively, related to the outstanding
      stock options according to the provisions of FAS 123R, using the
      modified-prospective transition method.





The
      following table summarizes stock option activities for the years ended June
      30,
      2007 and 2006:


**Weighted**
                  
                  
                  
                  **Weighted**
                  
                  
                  
                  **Weighted****Average**
                  
                  
                  
                  **Average**
                  
                  
                  
                  **Average****1999
                      Plan**
                  
                  **Exercise**
                  
                  **2001
                      Plan**
                  
                  **Exercise**
                  
                  **2004
                      Plan**
                  
                  **Exercise****Options**
                  
                  **Price**
                  
                  **Options**
                  
                  **Price**
                  
                  **Options**
                  
                  **Price****Outstanding
                      at June 30, 2005**
                  
                  
                  3,977,731
                  
                  $
                  0.37
                  
                  
                  -
                  
                  $
                  -
                  
                  
                  -
                  
                  $
                  -**Year
                      ended June 30, 2006:**Granted
                  
                  
                  -
                  
                  
                  -
                  
                  
                  325,000
                  
                  
                  3.22
                  
                  
                  2,556,567
                  
                  
                  1.48Exercised
                  
                  
                  (277,625
                  )
                  
                  0.37
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Forfeited
                      and Cancelled
                  
                  
                  (250,513
                  )
                  
                  0.37
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (110,000
                  )
                  
                  1.65**Outstanding
                      at June 30, 2006**
                  
                  
                  3,449,593
                  
                  
                  0.43
                  
                  
                  325,000
                  
                  
                  3.22
                  
                  
                  2,446,567
                  
                  
                  0.78**Year
                      ended June 30, 2007:**Granted
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,150,000
                  
                  
                  0.16Exercised
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -Forfeited
                      and Cancelled
                  
                  
                  (645,622
                  )
                  
                  0.55
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (1,085,520
                  )
                  
                  0.94**Outstanding
                      at June 30, 2007**
                  
                  
                  2,803,971
                  
                  
                  0.41
                  
                  
                  325,000
                  
                  
                  3.22
                  
                  
                  5,511,047
                  
                  
                  0.29





Options
      outstanding and exercisable as of June 30, 2007 :


**Outstanding**
              
              
              
              **Exercisable****Exercise
                  Price**
              
              **Number
                  of Shares**
              
              **Remaining
                  Life**
              
              **Number
                  of Shares**$0.16
                  - $0.18
              
              
              4,040,000
              
              
              9.92
              
              
              86,387$0.26
                  - $0.62
              
              
              3,735,174
              
              
              6.6
              
              
              2,681,716$1.21
                  - $1.70
              
              
              589,844
              
              
              7.6
              
              
              376,788$2.00
                  - $6.00
              
              
              275,000
              
              
              0.5
              
              
              275,000**8,640,018**
              
              
              8.04
              
              
              **3,419,891**




**Note
      16** **-** **Income Taxes**





Wherify
      uses the liability method, where deferred tax assets and liabilities are
      determined based on the expected future tax consequences of temporary
      differences between the carrying amounts of assets and liabilities for financial
      and income tax reporting purposes. During fiscal 2007 and 2006, Wherify incurred
      net losses and, therefore, has no tax liability. The net deferred tax asset
      generated by the loss carry-forward has been fully reserved. The cumulative
      net
      operating loss carry-forward is approximately $82 million at June 30, 2007,
      and
      will expire in the years from 2014 through 2027.





At
      June
      30, 2007, deferred tax assets consisted of the following:


Deferred
                  tax assets
              
              $
              28,500,000Less:
                  valuation allowance
              
              
              (28,500,000
              )Net
                  deferred tax assets
              
              $
              -




F-17




**Note
      17** **-** **Subsequent Events**





In
      August
      2007, Wherify sold 1,129 shares of Series B Convertible Preferred Stock and
      2,469,688 warrants for $856,000. The preferred stock can be converted into
      7,056,250 shares of common stock and the warrants have exercise prices ranging
      from $0.16 to $0.20.





F-18


**SIGNATURES**




Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this Form 10-KSB to be signed on its behalf
      by the undersigned, thereunto duly authorized, in the City of San Mateo,
      California on November 14, 2007.




WHERIFY
              WIRELESS,
              INC.By:
            /s/
                Vincent SheeranVincent
                Sheeran,
              Chief
                Executive Officer




**POWER
      OF ATTORNEY**




KNOW
      ALL
      PERSONS BY THESE PRESENTS, that each person whose signature appears below
      constitutes and appoints Vincent Sheeran as his true and lawful attorney-in-fact
      and agent, with full power of substitution and resubstitution, for him in any
      and all capacities, to sign any and all amendments to this report on Form
      10-KSB, and to file the same, with all exhibits thereto and all documents in
      connection therewith, with the Securities and Exchange Commission, granting
      unto
      said attorney-in-fact and agent, full power and authority to do and perform
      each
      and every act and thing requisite and necessary to be done in and about the
      premises, as fully to all intents and purposes as he or she might or could
      do in
      person, hereby ratifying and confirming that all said attorney-in-fact and
      agent, or his substitute, may lawfully do or cause to be done by virtue
      hereof.




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




**Name**
            
            **Title**
            
            **Date**/s/
                Vincent Sheeran
              
              Vincent
                Sheeran
            
            Chief
                Executive Officer
              (Principal
                Executive Officer)
              and
                  Director
            
            November
                14, 2007/s/
                Timothy Neher
              Timothy
                  Neher
            
            Director
            
            November
                14, 2007/s/
                Douglas Hajjar
              Douglas
                  Hajjar
            
            Director
            
            November
                14, 2007/s/
                Wade Fenn
              
              Wade
                  Fenn
            
            Director
            
            November
                14, 2007/s/
                Daniel McKelvey
              Daniel
                  McKelvey
            
            Director
            
            November
                14, 2007/s/
                Edna Carter
              Edna
                  Carter
            
            Chief
                Accounting Officer
              Controller
            
            November
                14, 2007




46