----

POND, INC.

| PART      I. FINANCIAL INFORMATION                                                                                                                                            |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                      ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                         |   |
|   Consolidated Balance Sheet at September 30,      2008                                                                                                                  | F-1    |
|   Consolidated Statements of      Operations for the Three Months Ended September 30, 2007 and      2008                                                       | F-2    |
|   Consolidated Statement of Stockholders'      Equity (Deficit) for the Three Months Ended September 30,      2008                                                       | F-3    |
|   Consolidated Statement of Cash Flows for      the Three Months Ended September 30, 2007 and      2008                                              | F-4    |
|   Notes to Consolidated Financial Statements                                                                                                                             | F-5    |
|                      ITEM 2. MANAGEMENT'S DISCUSSION AND      ANALYSIS OR PLAN OF OPERATION        | 1      |
|  ITEM      3.  QUANTITATIVE AND QUALITATIVE      DISCLOSURES ABOUT MARKET RISK                                                                                 | 10     |
|                      ITEM 4. CONTROLS AND PROCEDURES                                               | 10     |
|  PART      II. OTHER INFORMATION                                                                                                                                         |   |
|                      ITEM 1. LEGAL      PROCEEDINGS                                                | 13     |
|                      ITEM 2. UNREGISTERED SALES OF EQUITY      SECURITIES AND USE OF PROCEEDS | 13     |
|                      ITEM 3. DEFAULTS UPON SENIOR      SECURITIES                                  | 13     |
|                      ITEM 4. SUBMISSION OF MATTERS TO A      VOTE OF SECURITY HOLDERS              | 13     |
|                      ITEM 5. OTHER      INFORMATION                                                | 13     |
|                      ITEM 6. EXHIBITS                                                              | 13     |

----

|   | PART      I.  FINANCIAL INFORMATION |
|--------|-----------------------------------------------|

| ITEM      1.  CONSOLIDATED FINANCIALSTATEMENTS |
|----------------------------------------------------------|

EPOND, INC.

| ASSETS                                              |                                                          |                                                                           |
|-----------------------------------------------------|---------------------------------------------------------------|--------------------------------------------------------------------------------|
|                                                |                                                          |                                                                           |   |   |   |   |
| Current      assets                                 |                                                          |                                                                           |
|                                                | Cash      and cash equivalents                                |                                                                           |  $         95,893 |
|                                                | Accounts      receivable, net of allowance for doubtful       |                                                                           |   |
|                                                |                                                          | accounts      of $10,000                                                       |   |        1,155,102 |
|                                                | Other      current assets                                     |                                                                           |           441,171 |
|                                                |                                                          |                                                                           |   |   |   |   |
|                                                |                                                          | Total      current assets                                                      |   |        1,692,166 |
|                                                |                                                          |                                                                           |   |   |   |   |
| Property      and equipment, net                    |                                                          |             47,933 |
| Debt      issuance costs                            |                                                          |           586,430            |
| Deposits      and other assets                      |                                                          |             39,638 |
|                                                |                                                          |                                                                           |   |   |   |   |
|                                                |                                                          |                                                                           |   | Total      assets |   |  $    2,366,167 |
|                                                |                                                          |                                                                           |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS' EQUITY (DEFICIT) |                                                          |                                                                           |
|                                                |                                                          |                                                                           |   |   |   |   |
| Current      liabilities                            |                                                          |                                                                           |
|                                                | Short-term      notes payable                                 |                                                                           |        3,346,290 |
|                                                | Accounts      payable                                         |                                                                           |           712,507 |
|                                                | Accrued      liabilities                                      |                                                                           |        1,199,881 |
|                                                | Deferred      revenue                                         |                                                                           |        1,624,593 |
|                                                |                                                          |                                                                           |   |   |   |   |
|                                                |                                                          | Total      current liabilities                                                 |   |        6,883,271 |
|                                                |                                                          |                                                                           |   |   |   |   |
|                                                | Non-current      deferred revenue                             |                                                                           |             58,917 |
|                                                | Long-term      debt net of unamortized discount of $1,566,667 |                                                                           |        3,697,333 |
|                                                |                                                          |                                                                           |   | Total      liabilities |   |      10,639,521 |
|                                                |                                                          |                                                                           |   |   |   |   |
| Commitments      and contingencies                  |                                                          |                                                                           |
|                                                |                                                          |                                                                           |   |   |   |   |
| Stockholders'      equity (deficit)                 |                                                          |                                                                           |
|                                                | 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      - 10,272,223 shares                                                |   |             10,272 |
|                                                | Treasury      Stock - 8,401 shares, at cost                   |                                                                           |                   (10) |
|                                                | Additional      paid-in capital                               |                                                                           |      33,232,380 |
|                                                | Accumulated      deficit                                      |                                                                           |     (41,444,161) |
|                                                | Deferred      compensation                                    |                                                                           |            (71,835) |
|                                                |                                                          |                                                                           |   |   |   |   |
|                                                |                                                          |                                                                           | Total      stockholders' equity (deficit) |   |       (8,273,354) |
|                                                |                                                          |                                                                           |   |   |   |   |
|                                                |                                                          |                                                                           |   | Total      liabilities and stockholders' equity |   |  $    2,366,167 |

----

REPOND, INC.

|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          | 2007                                                                     | 2008   |
|----------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|--------|
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Revenues                               |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |
|                                   | OnDemand      revenues                                                              |                                                                                                          |  $              549,665                                                                        |  $              782,021                                  |
|                                   | Enterprise      revenues                                                            |                                                                                                          |                  616,421                                                             |                  529,854                       |
|                                   | Total      revenues                                                                 |                                                                                                          |                                                                                                                                                                      |               1,166,086                                       |               1,311,875                             |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Cost      of revenues                  |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |
|                                   |  OnDemand      costs                                                           |                                                                                                          |                                                                                                                                                                      |                  380,676                       |                  520,800             |
|                                   |  Enterprises      costs                                                        |                                                                                                          |                                                                                                                                                                      |                    78,166            |                    45,337  |
|                                   |  Total      cost of revenues                                                   |                                                                                                          |                  458,842                                                             |                  566,137                       |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Gross      profit                      |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                  707,244             |                  745,738 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Operating      expenses                |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |
|                                   | Sales      and marketing                                                            |                                                                                                          |                  554,514                                                             |                  326,366                       |
|                                   | General      and administrative                                                     |               1,013,542                 |                  462,849                                                             |
|                                   | Research      and development                                                       |                  470,293 |                  244,113                                                             |
|                                   | Restructuring      charges                                                          |                                                                                                          |                             - |                      7,524 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
|                                   |                                                                                |                                                                                                          | Total      operating expenses                                                                                                                                             |               2,038,349                                       |               1,040,852                             |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Profit      (Loss) from operations     |                                                                                |             (1,331,105)                           |                (295,114)                                                                       |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Other      income (expense), net       |                                                                                |                                                                                                          |                                                                                                                                                                      |
| Interest      expense                  |                                                                                |                                                                                                          |                                                                                                                                                                      |             (1,314,835)                                                 |                (730,766)                       |
| Other      income expense              |                                                                                |                                                                                                          |                    24,111                                                  |                    16,711            |
| Total      other income (expense), net |             (1,290,724) |                (714,055)           |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
| Net      Loss                          |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |  $         (2,621,829)                                      |  $         (1,009,169) |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
|                                   | Net      loss per share                                                             |                                                                                                          |                                                                                                                                                                      |  $                  (0.34)           |  $                  (0.10) |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                                |                                                                                                                      |                                                                                                          |                                                                     |   |
|                                   | Basic      and diluted weighted average                                             |                                                                                                          |                                                                                                                                                                      |
|                                   | common  shares      outstanding                                           | 7,676,451                                                                                                     | 10,085,251                                                                                                                                                                |

----

EPOND, INC.

|                             |                                                        |                                                                                                                |  Common      Stock                                                                                             |                                                                                                                                                          |                                                                                                                                                          | Retained      Earnings                                                                 |                                                                                       |                                                                                                         |
|----------------------------------|-------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|
|                             |                                                        |                                                                                                                |                                                                                                                | $0.001                                                                                                                                                        |  Additional      Paid                                                                                                                                    |  Treasury                                                                         |  (Accumulated                                                                         |  Deferred                                                                                               |  Stockholders' |
|                             |                                                        |                                                                                                                |  Shares                                                                                                        |  Par      Value                                                                                                                                          |  In      Capital                                                                                                                                         |  Stock                                                                            |  Deficit)                                                                             |  Compensation                                                                                           |  Equity      (Deficit) |
|                             |                                                        |                                                                                                                |                                                                                                                |                                                                                                                                                          |                                                                                                                                                          |                                                                                   |                                                                                       |                                                                                                         |   |
| Balance,      June 30, 2008      |      9,915,080                     |  $         9,915                                                  |  $        32,695,863                                                   |  $                   (10)                                 |  $      (40,434,992)                                                                                                       |  $          (88,002)            |  $         (7,817,226)                   |
|                             |                                                        |                                                                                                                |                                                                                                                |                                                                                                                                                          |                                                                                                                                                          |                                                                                   |                                                                                       |                                                                                                         |   |
|                             | Imputed      executive compensation                         |                                                                                                                |                                                                                                                |                  46,875                                                  |                                                                                                                                                          |                                                                                   |                                                                                       |                  46,875 |
|                             |                                                        |                                                                                                                |                                                                                                                |                                                                                                                                                          |                                                                                                                                                          |                                                                                   |                                                                                       |                                                                                                         |   |
|                             | Sale      of common stock net of expenses                   |         357,143                                                             |               357                             |                489,642                                                             |                                                                                                                                                          |                                                                                   |                                                                                       |                489,999            |
|                             |                                                        |                                                                                                                |                                                                                                                |                                                                                                                                                          |                                                                                                                                                          |                                                                                   |                                                                                       |                                                                                                         |   |
|                             | Net      loss for the three months ended September 30, 2008 |                    - |                    - |                           - |                           - |           (1,009,169)                |               16,167 |               (993,002)                |
|                             |                                                        |                                                                                                                |                                                                                                                |                                                                                                                                                          |                                                                                                                                                          |                                                                                   |                                                                                       |                                                                                                         |   |
| Balance,      September 30, 2008 |     10,272,223                          |           10,272                                                  |            33,232,380                                        |                       (10)                      |          (41,444,161)                                                                                            |              (71,835) |             (8,273,354)        |

----

EPOND, INC.

|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |  2007                                                                                                        |  2008                                                                                   |
|----------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
| Cash      flows from operating activities                      |                                                                                        |                                                                                                                                                    |
|                                                           | Net      loss                                                                               |                                                                                                                                                    |                                                                                                                                                    |  $      (2,621,829)                                                                 |  $      (1,009,169)                                                            |
|                                                           | Adjustments      to reconcile net loss to net cash used in operating    activities          |                                                                                                                                                    |                                                                                                                                                    |
|                                                           |                                                                                        | Imputed      executive compensation                                                                                                                     |                          - |                 46,876                 |
|                                                           |                                                                                        | Depreciation      and amortization                                                                                                                      |            1,060,485                                                                             |               456,650                            |
|                                                           |                                                                                        | Amortization      of stock based compensation                                                                                                           |               442,375                                                             |                 16,167                 |
|                                                           | Changes      in assets and liabilities                                                      |                                                                                                                                                    |                                                                                                                                                    |
|                                                           |                                                                                        | Accounts      receivables                                                                                                                               |                 90,552                                                  |             (138,642)                                      |
|                                                           |                                                                                        | Other      current assets                                                                                                                               |                   3,856                                       |                 73,744                 |
|                                                           |                                                                                        | Accounts      payable                                                                                                                                   |                 70,493                                                  |                 (2,424)                |
|                                                           |                                                                                        | Accrued      liabilities                                                                                                                                |               124,220                                                             |                 71,337                 |
|                                                           |                                                                                        | Deferred      revenue                                                                                                                                   |             (124,721)                                                                       |                 (1,145)                |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
|                                                           |                                                                                        |                                                                                                                                                    | Net      cash used in operating activities                                                                                                              |             (954,569)                                      |             (486,606)                                 |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
| Cash      flows from investing activities                      |                                                                                        |                                                                                                                                                    |
|                                                           | Purchase      of property and equipment                                                     |               (30,958)                                                            |                          - |
|                                                           | Restricted      cash                                                                        |               152,810                                                             |                          - |
|                                                           | Other      assets                                                                           |                                                                                                                                                    |                 (6,031)                                                 |                   5,800      |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
|                                                           |                                                                                        |                                                                                                                                                    | Net      cash provided by investing activities                                                                                                          |               115,821                            |                   5,800 |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
| Cash      flows from financing activities                      |                                                                                        |                                                                                                                                                    |
|                                                           | Proceeds      from sale of stock net of expenses                                            |                          - |               490,000                                                             |
|                                                           | Borrowings      under notes payable                                                         |            3,000,000                                                                             |                          - |
|                                                           | Payments      under notes payable                                                           |          (1,191,328)                                                                                       |               (26,196)                                                            |
|                                                           | Deferred      offering costs                                                                |             (364,614)                                                                       |                          - |
|                                                           | Debt      issuance costs                                                                    |               112,145                                                             |                          - |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
|                                                           |                                                                                        |                                                                                                                                                    | Net      cash provided by financing activities                                                                                                          |            1,556,203                                            |               463,804                       |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    | Net      increase (decrease) in cash and cash equivalents                                                              |               717,455                       |               (17,002) |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
| Cash      and cash equivalents, on June 30, 2007 and 2008      |               689,972 |               112,895                                                             |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
| Cash      and cash equivalents, on September 30, 2007 and 2008 |  $        1,407,427                            |  $             95,893                                                             |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
|                                                           | Interest      paid                                                                          |                                                                                                                                                    |  $           136,430                                                                        |  $                  396 |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
| Non      cash investing and financing activities:              |                                                                                        |                                                                                                                                                    |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |                                                                                                                   |                                                                                                              |                                                                                         |
|                                                           | During      the quarter ended September 30, 2007, the Company issued 125,000      shares    |                                                                                                                                                    |                                                                                                                                                    |
|                                                           | of      common stock valued at $768,750 in connection with the bridge      loan.            |                                                                                                                                                    |                                                                                                                                                    |
|                                                           |                                                                                        |                                                                                                                                                    |                                                                                                                                                    |

----

OTE 1 – ORGANIZATION AND LINES OF BUSINESS

----

----

----

----

| (i) | Additional      Funding.  Effective the business day after the closing of the      Funding Agreement and for a period expiring on June 30, 2009, the Company      granted to FP Tech or its assigns an option to purchase, at an exercise      price of $1.40 per share of Common Stock (such amount, the "AF Purchase      Price"), a total of $1.5 million in aggregate amount of Common Stock (the      "Additional Funding"). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (ii) | Exchange      Election.  During the period commencing on the closing of the      Additional Funding and ending on the earlier to occur of (a) June 30, 2009      and (b) the fifth (5th) Business Day following the closing of the      Additional Funding, the Company may, by written notice to each of the      Investors during such period, elect to consummate the Exchange (as defined      below) (the "Exchange Election"). |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (iii) | Exchanged      CAP Notes.  Upon the exercise of the Exchange Election, the      Company shall exchange (the "CAP Note Exchange") its Exchanged CAP Notes      of each Investor for new senior secured convertible notes (the "New      Exchanged CAP Notes"), which are convertible into Common Stock (as      converted, the "New Exchanged CAP Conversion Shares") and are identical to      the Exchanged CAP Notes except asfollows: |
|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|               a. | Maturity.  The      Maturity Date (as defined in the New Exchanged CAP Notes) shall be      December 31, 2010. |
|----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|

|               b. | Interest.  Interest      on the principal balance outstanding from time to time of the New Exchange      CAP Notes accruing at the rate of 12% per annum after December 31, 2009      shall be due and payable quarterly in arrears on the second business day      following the end of each fiscal quarter end beginning March 31, 2010      through the Maturity Date. |
|----------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|       c. | Conversion      Price.  The Conversion Price of the New Exchanged CAP Notes      shall be $2.00 per share of CommonStock. |
|----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|

| (iv)   | Exchanged      Bridge Notes. Upon exercise of the Exchange Election, the Company shall      exchange the Exchanged Bridge Notes  for a number of shares      of Common Stock (the "New Exchanged Common Shares") determined according      to the following formula: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                |
|   | Original      Principal Amount of the Exchanged Bridge Notes of each Exchanged      Bridge Note holder / (AF Purchase Price X 1.1) X 0.1 and senior secured      notes identical to the Exchanged Bridge Notes (the "New Exchanged Bridge      Notes"), except as follows:     |

|               a.                                     | Maturity      Date.  The Maturity Date in the New Exchanged Bridge Notes      shall be July 1, 2010.                                                                                                                                                                                                                                         |
|----------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                         |                                                                                                                                                                                                                                                                                                                                              |
|                     b. | Interest.      Interest accruing on the principal balance of the New Exchanged Bridge      Notes at the rate of 15% per annum beginning July 2, 2009 shall be due and      payable quarterly in arrears on the second business day following the end      of each fiscal quarter end beginning September 30, 2009 through the      Maturity Date. |
|                                                                                         |                                                                                                                                                                                                                                                                                                                                              |

| (v) | Waiver      of Existing Defaults.  Upon closing the Subject Financing all      existing defaults under the Exchanged CAP Notes and the Exchanged Bridge      Notes were waived. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

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

| Executive      Summary |   |
|------------------------|--------|

----

----

----

|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                | 2007                                                                                                          |                                                                                                                                | 2008                                                                                                                     |
|----------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                | Amount                                                                                                        |                                                                                                                                | Percent      of                                                                                                          |   |   | Amount |   | Percent      of |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                | Revenues                                                                                                                 |   |   |   |   | Revenues |
| Revenues                               |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |
|                                   | OnDemand      revenues                                                              |                                                                                                          |  $              549,665                                                                        |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |  $              782,021                                  |                                                                                                                     |   |
|                                   | Enterprise      revenues                                                            |                                                                                                          |                  616,421                                                             |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                  529,854                       |                                                                                                                     |   |
|                                   | Total      revenues                                                                 |                                                                                                          |                                                                                                                                                                      |               1,166,086                            |                                                                                                          | 100.0                                                                                               |                                                                                                          |                                                                                                                                |               1,311,875                            |   | 100.0 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
| Cost      of revenues                  |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |
|                                   |  OnDemand      costs                                                           |                                                                                                          |                                                                                                                                                                      |                  380,676            |                                                                                                          | 32.6                                                                                                |                                                                                                          |                                                                                                                                |                  520,800            |   | 39.7 |
|                                   |  Enterprises      costs                                                        |                                                                                                          |                                                                                                                                                                      |                    78,166 |                                                                                                          | 6.7                                                                                                 |                                                                                                          |                                                                                                                                |                    45,337 |   | 3.5 |
|                                   |  Total      cost of revenues                                                   |                                                                                                          |                  458,842                                                             |                                                                                                                     | 39.3                                                                                                          |                                                                                                |                                                                                                          |                  566,137                       |                                                                                                                     | 43.2 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
| Gross      profit                      |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                  707,244 |                                                                                                | 60.7                                                                                                          |                                                                                                                                |                                                                                                                     |                  745,738 |   | 56.8 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
| Operating      expenses                |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |
|                                   | Sales      and marketing                                                            |                                                                                                          |                  554,514                                                             |                                                                                                                     | 47.6                                                                                                          |                                                                                                |                                                                                                          |                  326,366                       |                                                                                                                     | 24.9 |
|                                   | General      and administrative                                                     |               1,013,542                 |                                                                                                                                                                      | 86.9                                                                                                                     |                                                                                                          |                                                                                                |                  462,849 |                                                                                                                                | 35.3                                                                                                                     |
|                                   | Research      and development                                                       |                  470,293 |                                                                                                                                                                      | 40.3                                                                                                                     |                                                                                                          |                                                                                                |                  244,113 |                                                                                                                                | 18.6                                                                                                                     |
|                                   | Restructuring      charges                                                          |                                                                                                          |                             - |                                                                                                                     |                   - |                                                                                                |                                                                                                          |                      7,524 |                                                                                                                     | 0.5 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
|                                   |                                                                                |                                                                                                          | Total      operating expenses                                                                                                                                             |               2,038,349                            |                                                                                                          | 174.8                                                                                               |                                                                                                          |                                                                                                                                |               1,040,852                            |   | 79.3 |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
| Profit      (Loss) from operations     |                                                                                |             (1,331,105)                           |                                                                                                                                                                      | (114.1)                                                                                                                  |                                                                                                          |                                                                                                |                (295,114)           |                                                                                                                                | (22.5)                                                                                                                   |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
| Other      income (expense), net       |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |
| Interest      expense                  |                                                                                |                                                                                                          |                                                                                                                                                                      |             (1,314,835)                                      |                                                                                                          | (112.8)                                                                                             |                                                                                                          |                                                                                                                                |                (730,766)                      |   | (55.7) |
| Other      income expense              |                                                                                |                                                                                                          |                    24,111                                                  |                                                                                                                     | 2.1                                                                                                           |                                                                                                |                                                                                                          |                    16,711            |                                                                                                                     | 1.3 |
| Total      other income (expense), net |             (1,290,724) |                                                                                                          | (110.7)                                                                                                                                                                   |                                                                                                                     |                                                                                                          |                (714,055) |                                                                                                          | (54.4)                                                                                                                              |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |
| Net      Loss                          |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |  $         (2,621,829)                            |                                                                                                          | (224.8)                                                                                                                             |                                                                                                                     |   |  $         (1,009,169) |   | (76.9) |
|                                   |                                                                                |                                                                                                          |                                                                                                                                                                      |                                                                                                                     |                                                                                                          |                                                                                                |                                                                                                          |                                                                                                                                |                                                                                                                     |   |   |   |   |   |

----

----

----

----

----

|        (i) | Additional      Funding.  Effective the business day after the closing of the      Funding Agreement and for a period expiring on June 30, 2009, the Company      granted to FP Tech or its assigns an option to purchase, at an exercise      price of $1.40 per share of Common Stock (such amount, the "AF Purchase      Price"), a total of $1.5 million in aggregate amount of Common Stock (the      "Additional Funding"). |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                   (ii) | Exchange      Election.  During the period commencing on the closing of the      Additional Funding and ending on the earlier to occur of (a) June 30, 2009      and (b) the fifth (5th) Business Day following the closing of the      Additional Funding, the Company may, by written notice to each of the      Investors during such period, elect to consummate the Exchange (as defined      below) (the "Exchange Election"). |
|------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|             (iii) | Exchanged      CAP Notes.  Upon the exercise of the Exchange Election, the      Company shall exchange (the "CAP Note Exchange") its Exchanged CAP Notes      of each Investor for new senior secured convertible notes (the "New      Exchanged CAP Notes"), which are convertible into Common Stock (as      converted, the "New Exchanged CAP Conversion Shares") and are identical to      the Exchanged CAP Notes except asfollows: |
|-------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  a. | Maturity.  The      Maturity Date (as defined in the New Exchanged CAP Notes) shall be      December 31, 2010. |
|----------|--------------------------------------------------------------------------------------------------------------------------|

|  b. | Interest.  Interest      on the principal balance outstanding from time to time of the New Exchange      CAP Notes accruing at the rate of 12% per annum after December 31, 2009      shall be due and payable quarterly in arrears on the second business day      following the end of each fiscal quarter end beginning March 31, 2010      through the Maturity Date. |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  c. | Conversion      Price.  The Conversion Price of the New Exchanged CAP Notes      shall be $2.00 per share of CommonStock. |
|----------|--------------------------------------------------------------------------------------------------------------------------------|

| (iv)   | Exchanged      Bridge Notes. Upon exercise of the Exchange Election, the Company shall      exchange the Exchanged Bridge Notes  for a number of shares      of Common Stock (the "New Exchanged Common Shares") determined according      to the following formula: |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                |
|   | Original      Principal Amount of the Exchanged Bridge Notes of each Exchanged      Bridge Note holder / (AF Purchase Price X 1.1) X 0.1 and senior secured      notes identical to the Exchanged Bridge Notes (the "New Exchanged Bridge      Notes"), except as follows:     |

|  a. | Maturity      Date.  The Maturity Date in the New Exchanged Bridge Notes      shall be July 1, 2010.                                                                                                                                                                                                                                         |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                              |
|  b. | Interest.      Interest accruing on the principal balance of the New Exchanged Bridge      Notes at the rate of 15% per annum beginning July 2, 2009 shall be due and      payable quarterly in arrears on the second business day following the end      of each fiscal quarter end beginning September 30, 2009 through the      Maturity Date. |
|     |                                                                                                                                                                                                                                                                                                                                              |

|  (v) | Waiver      of Existing Defaults.  Upon closing the Subject Financing all      existing defaults under the Exchanged CAP Notes and the Exchanged Bridge      Notes were waived. |
|-----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

EM 3.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK

| ITEM 4.  CONTROLS AND  PROCEDURES |
|----------------------------------------|

----

----

----

| ITEM 1.   | LEGAL      PROCEEDINGS |
|----------------|------------------------|

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

TEM 3.  DEFAULTS UPON SENIOR SECURITIES

EM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

EM 6.  EXHIBITS

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

or Rule 15d-14(a)

31.2 Certification of Principal Financial Officer pursuant toRule

13a-14(a) or Rule 15d-14(a)

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

To Section 906 of the Sarbanes-Oxley Act Of2002

----

| Date:  | As      of November 12, 2008  | Firepond,      Inc. (Registrant) |
|--------|------------------------------------|----------------------------------|
|   |

|                                   |   |   |                      |
|----------------------------------------|--------|--------|---------------------------|
| /s/ L.      Bradlee Sheafe        |   |   | /s/      William P. Stelt |
|                                   |   |   |                      |
| L.      Bradlee Sheafe, President |   |   | William      P. Stelt,CFO |