**UNITED      STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-QSB**

**|X|      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE      SECURITIES**

**EXCHANGE      ACT OF 1934**

**For      the quarterly period ended December 31, 2006**

**OR**

**|      | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**

**EXCHANGE      ACT OF 1934**

**For      the transition period from ________________to      ________________**

**Commission      file number: 000-28515**

**FP      TECHNOLOGY, INC.**

**(Exact      name of small business issuer as specified in its charter)**

**Delaware                          20-3446646**

** ------------------------------------------------------------------------------------------------------------------**

**          (State or other jurisdiction of        (IRS      Employer Identification Number)**

**                     **
**incorporation      or organization)**

**181      Wells Avenue, Newton, MA 02459**

**--------------------------------------------------------------------------------**

**(Address      of principal executive offices)**

**(617)      928-6001**

**(Issuer's      telephone number)**

**(Former      name, former address and former fiscal year, **

**if      changed since last report)**

**__________________________**

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Table          of Contents

**FP      TECHNOLOGY, INC.**

**INDEX**

**PART        I.  FINANCIAL INFORMATION**

Consolidated Balance        Sheet        - at December 31,        2006

Consolidated        Statement of Operations - for the Three and Six        Months 

Ended December        31,        2005 and 2006 

Consolidated        Statement of Stockholders' Equity – for the Six        Months Ended

December 31,        2006

Consolidated        Statement of Cash Flows – for the Six Months Ended 

December 31, 2005        and        2006

Notes        to Consolidated Financial        Statements

ITEM 2. MANAGEMENT'S DISCUSSION        AND ANALYSIS OR PLAN OF        OPERATION

ITEM 3. CONTROLS AND        PROCEDURES

**PART II.  OTHER        INFORMATION**

ITEM        1.  LEGAL        PROCEEDINGS

ITEM        2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF        PROCEEDS

ITEM        3.  DEFAULTS UPON SENIOR        SECURITIES

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

ITEM        5.  OTHER        INFORMATION

ITEM        6. EXHIBITS

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**FP      TECHNOLOGY, INC.**

**CONSOLIDATED      BALANCE SHEET**

**December      31, 2006**

**(Unaudited)**

----

| **ASSETS**                                                              |   |   |           |
|-------------------------------------------------------------------------|--------|--------|----------------|
|                                                                    |   |   |           |
| Current                    assets                                       |   |   |           |
| Cash                    and cash equivalents                            |   | $      | 171,009        |   |
| Restricted                    cash                                      |   |   | 50,000,000     |   |
| Accounts                    receivable, net of allowance for doubtful   |   |   |           |   |
| accounts                    of $10,000                                  |   |   | 1,055,876      |   |
| Other                    current assets                                 |   |   | 668,229        |   |
|                                                                    |   |   |           |   |
| Total                    current assets                                 |   |   | 51,895,114     |   |
|                                                                    |   |   |           |   |
| Property                    and equipment, net                          |   |   | 135,099        |   |
| Goodwill                                                                |   |   | 4,772,413      |   |
| Deposits                                                                |   |   | 13,449         |   |
|                                                                    |   |   |           |   |
| **Total                    assets**                                |   | **$**  | **56,816,075** |   |
|                                                                    |   |   |           |   |
| **LIABILITIES                    AND STOCKHOLDERS' EQUITY**             |   |   |           |   |
|                                                                    |   |   |           |   |
| Current                    liabilities                                  |   |   |           |   |
| Current                    portion of long-term debt                    |   | $      | 51,850,911     |   |
| Accounts                    payable                                     |   |   | 386,244        |   |
| Accrued                    liabilities                                  |   |   | 2,413,174      |   |
| Deferred                    revenue                                     |   |   | 1,920,204      |   |
|                                                                    |   |   |           |   |
| Total                    current liabilities                            |   |   | 56,570,533     |   |
|                                                                    |   |   |           |   |
| Commitments                    and contingencies                        |   |   |           |   |
|                                                                    |   |   |           |   |
| Stockholders'                    equity                                 |   |   |           |   |
| Preferred                    stock, $0.001 par value                    |   |   |           |   |
| Authorized                    - 5,000,000 shares                        |   |   |           |   |
| Issued                    and outstanding - none                        |   |   | -              |   |
| Common                    stock, $0.001 par value                       |   |   |           |   |
| Authorized                    - 100,000,000 shares                      |   |   |           |   |
| Issued                    and outstanding - 6,100,441 shares            |   |   | 6,100          |   |
| Additional                    paid in capital                           |   |   | 8,181,313      |   |
| Retained                    earnings (deficit)                          |   |   | (7,582,578     | ) |
| Deferred                    compensation                                |   |   | (359,293       | ) |
|                                                                    |   |   |           |   |
| Total                    stockholders' equity                           |   |   | 245,542        |   |
|                                                                    |   |   |           |   |
| **Total                    liabilities and stockholders' equity**  |   | **$**  | **56,816,075** |   |

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**FP      TECHNOLOGY, INC.**

**CONSOLIDATED        STATEMENT OF OPERATIONS**

**For        the Three Months Ended December 31, 2005 and 2006**

**(Unaudited)**

----

|                                                             |   | 2005   |         | 2006   |   |
|------------------------------------------------------------------|--------|--------|--------------|--------|--------|
| Revenues                                                         |   |   |         |   |   |
| OnDemand                  revenues                               |   | $      | 40,684       |   | $      | 620,828 |   |
| Enterprise                  revenues                             |   |   | 649,386      |   |   | 523,886 |   |
| Total                  revenues                                  |   |   | 690,070      |   |   | 1,144,714 |   |
|                                                             |   |   |         |   |   |   |   |
| Cost                  of goods sold                              |   |   |         |   |   |   |   |
| OnDemand                  costs                                  |   |   | 106,505      |   |   | 172,139 |   |
| Enterprises                  costs                               |   |   | 399,265      |   |   | 342,910 |   |
| Total                  cost of goods                             |   |   | 505,770      |   |   | 515,049 |   |
|                                                             |   |   |         |   |   |   |   |
| Gross                  profit                                    |   |   | 184,300      |   |   | 629,665 |   |
|                                                             |   |   |         |   |   |   |   |
| Operating                  expenses                              |   |   |         |   |   |   |   |
| Sales,                  general and administrative               |   |   | 533,056      |   |   | 1,789,715 |   |
| Research                  and development                        |   |   | 400,824      |   |   | 511,001 |   |
| Restructuring                  and other special charges         |   |   | -            |   |   | (14,285 | ) |
| Settlement                  of claim                             |   |   | -            |   |   | (147,500 | ) |
|                                                             |   |   |         |   |   |   |   |
| Total                  operating expenses                        |   |   | 933,880      |   |   | 2,138,931 |   |
|                                                             |   |   |         |   |   |   |   |
| Income/(loss)                  from operations                   |   |   | (749,580     | )      |   | (1,509,266 | ) |
|                                                             |   |   |         |   |   |   |   |
| Other                  income (expense), net                     |   |   |         |   |   |   |   |
| Interest                  (expense)                              |   |   | (234,975     | )      |   | (1,364,056 | ) |
| Other                  income (expense)                          |   |   | (11,082      | )      |   | 606,043 |   |
| Total                  other income (expense), net               |   |   | (246,057     | )      |   | (758,013 | ) |
|                                                             |   |   |         |   |   |   |   |
| **Net                  Income (loss)**                           |   | **$**  | **(995,637** | **)**  | **$**  | **(2,267,279** | **)** |
|                                                             |   |   |         |   |   |   |   |
| Net                  income (loss) per share - basic and diluted |   |   |         |   |   |   |   |
| Basic                  and diluted income (loss) per share       |   | $      | (0.46        | )      | $      | (0.53 | ) |
|                                                             |   |   |         |   |   |   |   |
| Basic                  and diluted weighted average              |   |   |         |   |   |   |   |
| common                  shares outstanding                       |   |   | 2,177,414    |   |   | 4,285,916 |   |

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**FP      TECHNOLOGY,      INC.**
**CONSOLIDATED        STATEMENT OF OPERATIONS**

**For        the Six Months Ended December 31, 2005 and 2006**

**(Unaudited)**

----

| Revenues                                                         |   | 2005   |         | 2006   |   |
|------------------------------------------------------------------|--------|--------|--------------|--------|--------|
| OnDemand                  revenues                               |   | $      | 82,239       |   | $      | 936,639 |   |
| Enterprise                  revenues                             |   |   | 1,755,560    |   |   | 1,236,087 |   |
| Total                  revenues                                  |   |   | 1,837,799    |   |   | 2,172,726 |   |
|                                                             |   |   |         |   |   |   |   |
| Cost                  of goods sold                              |   |   |         |   |   |   |   |
| OnDemand                  costs                                  |   |   | 183,354      |   |   | 305,197 |   |
| Enterprises                  costs                               |   |   | 788,338      |   |   | 725,250 |   |
| Total                  cost of goods sold                        |   |   | 971,692      |   |   | 1,030,447 |   |
|                                                             |   |   |         |   |   |   |   |
| Gross                  profit                                    |   |   | 866,107      |   |   | 1,142,279 |   |
|                                                             |   |   |         |   |   |   |   |
| Operating                  expenses                              |   |   |         |   |   |   |   |
| Sales,                  general and administrative               |   |   | 949,631      |   |   | 3,048,777 |   |
| Research                  and development                        |   |   | 896,098      |   |   | 1,034,217 |   |
| Restructuring                  and other special charges         |   |   | 4,617        |   |   | (14,285 | ) |
| Settlement                  of claim                             |   |   | (1,712,500   | )      |   | (147,500 | ) |
|                                                             |   |   |         |   |   |   |   |
| Total                  operating expenses                        |   |   | 137,846      |   |   | 3,921,209 |   |
|                                                             |   |   |         |   |   |   |   |
| Income/(loss)                  from operations                   |   |   | 728,261      |   |   | (2,778,930 | ) |
|                                                             |   |   |         |   |   |   |   |
| Other                  income (expense), net                     |   |   |         |   |   |   |   |
| Interest                  (expense)                              |   |   | (306,225     | )      |   | (3,198,174 | ) |
| Other                  income (expense)                          |   |   | (30,193      | )      |   | 1,205,718 |   |
| Total                  other income (expense), net               |   |   | (336,418     | )      |   | (1,992,456 | ) |
|                                                             |   |   |         |   |   |   |   |
| Net                  income/(loss) from continuing operations    |   |   | 391,843      |   |   | (4,771,386 | ) |
|                                                             |   |   |         |   |   |   |   |
| Loss                  from discontinued operations               |   |   | (616,704     | )      |   | - |   |
|                                                             |   |   |         |   |   |   |   |
| **Net                  Income (loss)**                           |   | **$**  | **(224,861** | **)**  | **$**  | **(4,771,386** | **)** |
|                                                             |   |   |         |   |   |   |   |
| Net                  income (loss) per share - basic and diluted |   |   |         |   |   |   |   |
| Income                  (loss) from continuing operations        |   | $      | 0.18         |   | $      | (1.18 | ) |
|                                                             |   |   |         |   |   |   |   |
| Loss                  from discontinued operations               |   | $      | (0.28        | )      | $      | - |   |
|                                                             |   |   |         |   |   |   |   |
| Basic                  and diluted income (loss) per share       |   | $      | (0.10        | )      | $      | (1.18 | ) |
|                                                             |   |   |         |   |   |   |   |
| Basic                  and diluted weighted average              |   |   |         |   |   |   |   |
| common                  shares outstanding                       |   |   | 2,177,414    |   |   | 4,035,916 |   |

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**FP      TECHNOLOGY,      INC.**

**CONSOLIDATED      STATEMENT OF STOCKHOLDERS' EQUITY**

**For      the Six Months Ended December 31, 2006**

**(Unaudited)**

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|                                                        |   | Common                  Stock |      |                       |   |                             |   |     |      |         |   |                              |   |
|-------------------------------------------------------------|--------|-------------------------------|-----------|----------------------------|--------|----------------------------------|--------|----------|-----------|--------------|--------|-----------------------------------|--------|
|                                                        |   |                          |      | $0.001                     |   | Additional                  Paid |   | Retained |      | Deferred     |   | Stockholders'                     |   |
|                                                        |   | Shares                        |      | Par                  Value |   | In                  Capital      |   | Deficit  |      | Compensation |   | Equity                  (Deficit) |   |
|                                                        |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |
| Balance,                  June 30, 2006                     |   |                          | 5,100,441 |                       | $      | 5,100                            |   | $        | 2,182,237 |         | $      | (2,811,192                        | )      | $ | (487,291 | ) | $ | (1,111,146 | ) |
|                                                        |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |   |   |   |   |   |   |
| Sale                  of common stock                  |   |                          | 1,000,000 |                       |   | 1,000                            |   |     | 6,999,000 |         |   |                              |   |   |   |   |   | 7,000,000 |   |
|                                                        |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |   |   |   |   |   |   |
| Expenses                  recorded in connection with  |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |   |   |   |   |   |   |
|  stock                  sale                           |   |                          |      |                       |   |                             |   |     | (999,924  | )            |   |                              |   |   |   |   |   | (999,924 | ) |
|                                                        |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |   |   |   |   |   |   |
| Net                  loss for the six months ended     |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |   |   |   |   |   |   |
|  December                  31, 2006                    |   |                          | -         |                       |   | -                                |   |     | -         |         |   | (4,771,386                        | )      |   | 127,998 |   |   | (4,643,388 | ) |
|                                                        |   |                          |      |                       |   |                             |   |     |      |         |   |                              |   |   |   |   |   |   |   |
| Balance,                  December 31, 2006                 |   |                          | 6,100,441 |                       | $      | 6,100                            |   | $        | 8,181,313 |         | $      | (7,582,578                        | )      | $ | (359,293 | ) | $ | 245,542 |   |

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**FP        TECHNOLOGY,        INC.**

**CONSOLIDATED        STATEMENT OF CASH FLOWS**

**For        the Six Months Ended December 31, 2005 and 2006**

**(Unaudited)**

----

|                                                                                                         |   | 2005   |        | 2006   |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|
| **Cash                  flows from operating activities**                                                    |   |   |        |   |   |
| Net                  income (loss)                                                                           |   | $      | (224,861    | )      | $      | (4,771,386 | ) |
| Adjustments                  to reconcile net loss to net cash used in operating                  activities |   |   |        |   |   |   |   |
| Settlement                  of claim                                                                         |   |   | (1,712,500  | )      |   | - |   |
| Depreciation                  and amortization                                                               |   |   | 257,131     |   |   | 2,033,489 |   |
| Loss                  from discontinued operations                                                           |   |   | 616,704     |   |   | - |   |
| Changes                  in assets and liabilities                                                           |   |   |        |   |   |   |   |
| Accounts                  receivables                                                                        |   |   | 242,701     |   |   | (940,670 | ) |
| Debt                  issuance costs                                                                         |   |   | (114,150    | )      |   | - |   |
| Unbilled                  services                                                                           |   |   | 2,748       |   |   | - |   |
| Prepaid                  expenses and other assets                                                           |   |   | (12,197     | )      |   | (83,961 | ) |
| Accounts                  payable                                                                            |   |   | 39,803      |   |   | (137,927 | ) |
| Accrued                  liabilities                                                                         |   |   | (156,618    | )      |   | 330,715 |   |
| Restructuring                  accrual                                                                       |   |   | (23,084     | )      |   | - |   |
| Deferred                  revenue                                                                            |   |   | 274,489     |   |   | 310,547 |   |
|                                                                                                         |   |   |        |   |   |   |   |
| Net                  cash used in operating activities                                                  |   |   | (809,834    | )      |   | (3,259,193 | ) |
|                                                                                                         |   |   |        |   |   |   |   |
| **Cash                  flows from investing activities**                                                    |   |   |        |   |   |   |   |
| Restricted                  cash                                                                             |   |   | -           |   |   | (2,500,000 | ) |
| Purchase                  of property and equipment                                                          |   |   | (13,819     | )      |   | (18,763 | ) |
| Other                  assets                                                                                |   |   | 20,802      |   |   | 41,767 |   |
|                                                                                                         |   |   |        |   |   |   |   |
| Net                  cash provided by (used in) investing activities                                    |   |   | 6,983       |   |   | (2,476,996 | ) |
|                                                                                                         |   |   |        |   |   |   |   |
| **Cash                  flows from financing activities**                                                    |   |   |        |   |   |   |   |
| Proceeds                  from sale of stock net of expenses                                                 |   |   | -           |   |   | 6,000,076 |   |
| Proceeds                  from notes payable                                                                 |   |   | 2,500,000   |   |   | - |   |
| Debt                  issuance costs                                                                         |   |   | -           |   |   | (24,973 | ) |
| Payments                  on notes payable                                                                   |   |   | (1,250,000  | )      |   | (899,089 | ) |
|                                                                                                         |   |   |        |   |   |   |   |
| Net                  cash provided by financing activities                                              |   |   | 1,250,000   |   |   | 5,076,014 |   |
|                                                                                                         |   |   |        |   |   |   |   |
|  Net                  (decrease) increase in cash and cash equivalents                                  |   |   | 447,149     |   |   | (660,175 | ) |
|                                                                                                         |   |   |        |   |   |   |   |
| **Cash                  and cash equivalents, on June 30, 2005 and 2006**                                    |   |   | 24,379      |   |   | 831,184 |   |
|                                                                                                         |   |   |        |   |   |   |   |
| **Cash                  and cash equivalents, on December 31, 2005 and                  2006**               |   | **$**  | **471,528** |   | **$**  | **171,009** |   |
|                                                                                                         |   |   |        |   |   |   |   |
| **Supplemental                  cash flow information:**                                                     |   |   |        |   |   |   |   |
|                                                                                                         |   |   |        |   |   |   |   |
| **Interest                  paid**                                                                           |   | **$**  | **126,388** |   | **$**  | **1,380,490** |   |
|                                                                                                         |   |   |        |   |   |   |   |
| **Non                  Cash Financing and Investing Activities:**                                            |   |   |        |   |   |   |   |
| During                  the six months ended December 31, 2005 the Company issued                            |   |   |        |   |   |   |   |
| convertible                  notes and warrants and valued the conversion right and the                      |   |   |        |   |   |   |   |
| warrants                  at $510,000.                                                                       |   |   |        |   |   |   |   |

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**Notes        to Financial Statements (Unaudited)**

**NOTE 1. Organization,        Basis of Presentation and Significant Accounting        Policies**

**Organization**

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**Basis of Presentation and Continuance        of Operations**

**Significant Accounting        Policies**

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**NOTE 2. Income          Taxes**

**NOTE 3.           Recent Financings**

**NOTE 4.           Notes Payable**

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**NOTE 5. Litigation**

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**NOTE 6. Subsequent        Events**

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    - $45,000,000 in principal repayment of the Nonconvertible Notes, plus          accrued interest thereon;          
    - A new issue of Senior Secured Convertible Notes Due 2009 in the aggregate          principal amount of $5,600,000 (the “New Convertible Notes”), issued under an          indenture with The Bank of New York (the “New Indenture”);          
    - Warrants to purchase an aggregate of 1,214,285 shares of Common Stock          at          an exercise price of $7.00 per share; and          
    - 1,500,000 fully-paid shares of Common Stock. 

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**ITEM        2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR        PLAN OF OPERATION**

**Executive        Summary**

***Corporate        Overview***

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Table            of Contents

***Corporate        History***

***Recent        Financings***

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Table            of Contents

**Financial        Condition**

**Results of Operations**

***Three        Months Ended December 31, 2005 and December 31, 2006***

|                                                              |   | Three                      Months Ended December 31 |      |                               |   |    |   |                               |        |
|-------------------------------------------------------------------|--------|-----------------------------------------------------|-----------|------------------------------------|--------|---------|--------|------------------------------------|-------------|
|                                                              |   | 2005                                                |      |                               |   | 2006    |   |                               |        |
|                                                              |   | Amount                                              |      | %                      of Revenues |   | Amount  |   | %                      of Revenues |        |
|                                                              |   |                                                |      |                               |   |    |   |                               |        |
| Revenues                                                          |   | $                                                   | 690,070   |                               |   |    |   | $                                  | 1,144,714   |   |   |   |   |
| Cost                      of sales                                |   |                                                | 505,770   |                               |   | 73.3    |   |                               | 515,049     |   |   | 45 |   |
| Gross                      profit                                 |   |                                                | 184,300   |                               |   | 26.7    |   |                               | 629,665     |   |   | 55 |   |
|                                                              |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
| Operating                      expenses                           |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
| Sales,                      general and administrative            |   |                                                | 533,056   |                               |   | 77.2    |   |                               | 1,789,715   |   |   | 156.4 |   |
| Research                      and development                     |   |                                                | 400,824   |                               |   | 58.1    |   |                               | 511,001     |   |   | 44.6 |   |
| Restructuring                                                     |   |                                                | -         |                               |   | -       |   |                               | (14,285)    |   |   | (1.2) |   |
| Settlement                      of claim                          |   |                                                | -         |                               |   | -       |   |                               | (147,500)   |   |   | (12.9) |   |
| Total                      operating expenses                     |   |                                                | 933,880   |                               |   | 135.3   |   |                               | 2,138,931   |   |   | 186.9 |   |
|                                                              |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
| Income/(loss)                      from continuing operations     |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
|                                                              |   |                                                | (749,580) |                               |   | (108.6) |   |                               | (1,509,266) |   |   | (131.9) |   |
|                                                              |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
| Other                      income (expense), net                  |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
| Interest                      expense                             |   |                                                | (234,975) |                               |   | (34.1)  |   |                               | (1,364,056) |   |   | (119.1) |   |
| Other                      income (expense)                       |   |                                                | (11,082)  |                               |   | (1.6)   |   |                               | 606,043     |   |   | 52.9 |   |
| Total                      other income (expense), net            |   |                                                | (246,057) |                               |   | (35.7)  |   |                               | (758,013)   |   |   | (66.2) |   |
|                                                              |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
| Net                      income (loss) from continuing operations |   |                                                |      |                               |   |    |   |                               |        |   |   |   |   |
|                                                              |   |                                                | (995,637) |                               |   | (144.3) |   |                               | (2,267,279) |   |   | (198.1) |   |

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**Revenues.**

**Cost of        Sales**

**Operating        Expenses.**

**Other Income        (Expense).**

***Six        Months Ended December 31, 2005 and December 31, 2006***

|                                                            |   | Six                    Months Ended December 31 |        |                             |   |   |   |                             |        |
|-----------------------------------------------------------------|--------|-------------------------------------------------|-------------|----------------------------------|--------|--------|--------|----------------------------------|-------------|
|                                                            |   | 2005                                            |        |                             |   | 2006   |   |                             |        |
|                                                            |   | Amount                                          |        | %                    of Revenues |   | Amount |   | %                    of Revenues |        |
|                                                            |   |                                            |        |                             |   |   |   |                             |        |
| Revenues                                                        |   | $                                               | 1,837,799   |                             |   |   |   | $                                | 2,172,726   |   |   |   |   |
| Cost                    of revenues                             |   |                                            | 971,692     |                             |   | 52.9   |   |                             | 1,030,447   |   |   | 47.4 |   |
| Gross                    profit                                 |   |                                            | 866,107     |                             |   | 47.1   |   |                             | 1,142,279   |   |   | 52.6 |   |
|                                                            |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
| Operating                    expenses                           |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
| Sales,                    general and administrative            |   |                                            | 949,631     |                             |   | 51.7   |   |                             | 3,048,777   |   |   | 140.3 |   |
| Research                    and development                     |   |                                            | 896,098     |                             |   | 48.8   |   |                             | 1,034,217   |   |   | 47.6 |   |
| Restructuring                                                   |   |                                            | 4,617       |                             |   | 0.2    |   |                             | (14,285)    |   |   | (0.6) |   |
| Settlement                    of claim                          |   |                                            | (1,712,500) |                             |   | (93.2) |   |                             | (147,500)   |   |   | (6.8) |   |
| Total                    operating expenses                     |   |                                            | 137,846     |                             |   | 7.5    |   |                             | 3,921,209   |   |   | 180.5 |   |
|                                                            |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
| Income/(loss)                    from operations                |   |                                            | 728,261     |                             |   | 39.6   |   |                             | (2,778,930) |   |   | (127.9) |   |
|                                                            |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
| Other                    income (expense), net                  |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
| Interest                    expense                             |   |                                            | (306,225)   |                             |   | (16.7) |   |                             | (3,198,174) |   |   | (147.2) |   |
| Other                    income (expense)                       |   |                                            | (30,193)    |                             |   | (1.6)  |   |                             | 1,205,718   |   |   | 55.5 |   |
| Total                    other income (expense), net            |   |                                            | (336,418)   |                             |   | (18.3) |   |                             | (1,992,456) |   |   | (91.7) |   |
|                                                            |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
| Net                    income (loss) from continuing operations |   |                                            |        |                             |   |   |   |                             |        |   |   |   |   |
|                                                            |   |                                            | 391,843     |                             |   | 21.3   |   |                             | (4,771,386) |   |   | (219.6) |   |

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**Liquidity        and Capital Resources**

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**Revenue        Recognition**

***Enterprise        Software Revenue Recognition***

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***OnDemand        Hosted License Revenue***

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|                                    | Period                  Ended               | Period                  Ended                                 |
|-----------------------------------------|---------------------------------------------|---------------------------------------------------------------|
|                                    | December                  31, 2005          | December                  31, 2006                            |
| On Demand                               |    $                  91,195 | $                  1,058,719                                  |
| Enterprise                  maintenance |  1,371,581                             |                         861,485 |
| Total                                   | $1,462,776                                  |  $                  1,920,204                            |

**Cost        of Revenue**

**Property        and Equipment**

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**Goodwill**

**Computer      Software Development Costs and Research and Development Expenses**

**ITEM      3.    CONTROLS AND PROCEDURES**

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**PART        II - OTHER INFORMATION**

**ITEM        1.    LEGAL PROCEEDINGS**

**ITEM        2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE        OF PROCEEDS**

**ITEM        3.    DEFAULTS UPON SENIOR        SECURITIES**

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

**ITEM        5.    OTHER INFORMATION**

**ITEM        6.   EXHIBITS **

31.1 Certification        of Principal Executive Officer        pursuant to Rule 13a-14(a) 

or Rule 15d-14(a)

31.2 Certification        of Principal Financial Officer        pursuant to Rule 

-14(a)        or Rule 15d-14(a)

32.1 Certifications        pursuant to 18 U.S.C. Section 1350,        as adopted pursuant 

To Section 906 of the Sarbanes-Oxley Act Of        2002

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