UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 PIPELINE DATA INC   Form 10-KSB (Amendment No. 1)    |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December 31, 2006  |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from __________ to __________
  Delaware
        
        13-3953764(State or other jurisdiction of
        
        (I.R.S. Employerincorporation or organization)
        
        Identification No.)
  1515 Hancock Street, Suite 301, Hancock Plaza, Quincy, Massachusetts 02169-5243 (Address of principal executive offices) (Zip Code)  Issuers telephone number: (617) 405-2600 Securities registered under Section 12(g) of the Exchange Act: Common Stock $0.001 par value  Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. |X| Yes No |_|  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |X|  State issuers revenues for its most recent fiscal year: $41,814,000
  State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act.) As of October 26, 2007, there were 49,731,937 shares of the registrants common stock, par value $0.001 issued and outstanding. As of October     26, 2007, the market value of securities held by non-affiliates is $17,973,603 based on the average of the high and low bid prices as reported by Yahoo.com. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not reflect actual transactions.         DOCUMENTS INCORPORATED BY REFERENCE  The following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: the proxy information statement for the year ended December 31, 2006.   Transitional Small Business Disclosure Format (Check one): Yes |_|; No |X|
      PIPELINE DATA INC. DECEMBER 31, 2006 ANNUAL REPORT ON FORM 10-KSBA EXPLANATORY NOTE  This amendment (the "Amendment") to the Annual Report on Form 10-KSB of Pipeline Data Inc. (the  "Company") for the fiscal year ended December 31, 2006, as originally filed with the  Securities  and Exchange  Commission  on April 4, 2006 (the "Original Form 10-KSB") is required as correction of an error pursuant to Statement of Financial Accounting Standards No. 154,  Accounting Changes and Error Corrections. The error was discovered regarding the Companys classification of common stock that is subject to a repurchase obligation, which previously had been considered to be conditional obligations under the terms of Statement of Financial Accounting Standards No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.  After reviewing this arrangement under the terms of Topic No. D-98: Classification and
Measurement of Redeemable Securities, the Company believes that these shares should be considered temporary equity and classified as common shares subject to put obligations.  The Company has reviewed this reclassification with its current and former independent registered public accounting firms.  Included in this Amendment are the amended and restated financial statements for the Company under Item 1 and Controls and Procedures under Item 4T.      ANNUAL REPORT ON FORM 10KSB FOR PIPELINE DATA INC.  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS  To the extent that the information presented in this Annual Report on Form 10-KSB for the year ended December 31, 2006 discusses financial projections, information or expectations about the products or markets of our company, or otherwise   makes   statements   about future events,   such   statements are forward-looking.  We are making these forward-looking statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.   Although  we  believe   that  the   expectations   reflected   in  these forward-looking  statements  are based on  reasonable  assumptions,  there are a number of risks and  uncertainties  that could  cause  actual  results to differ materially from such forward-looking statements.  These risks and uncertainties are described, among other places in this Annual Report, in "Management's Discussion and Analysis".  Readers are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.  In addition, we disclaim any obligations to update any forward-looking statements to reflect events or circumstances after the date of this Annual Report.  When considering  such  forward-looking  statements,  readers should keep in mind the risks  referenced  above  and the other  cautionary  statements  in this  Annual Report.     Item 7. Financial Statements. PART I   ITEM 1. FINANCIAL STATEMENTS   The consolidated financial statements included herein have been prepared By the Company, pursuant to the rules and regulations of the Securities and Exchange Commission.   In the opinion of the Company, all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the financial position of the Company as of December 31, 2006, and the results of its operations and changes in its financial position from January 1, 2006, through December 31, 2006 have been made.        INDEX TO FINANCIAL STATEMENTS   Part 1 - Financial InformationPageItem 1 - Financial StatementsBalance Sheets as of December 31, 2006 and 2005
        F-1Statements of Operations for the years ended December 31, 2006 and 2005
        F-2Statements of Stockholders' Equity for the years ended December 31, 2006 and 2005
        F-3  F-4Statements of Cash Flows for the years ended December 31, 2006 and 2005
        F-5Notes to Financial Statements
        F-6  F-29
       DRAKEFORD & DRAKEFORD, LLC NEW YORK, NEW YORK    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  To the Shareholders and Directors of Pipeline Data Inc.
  We have audited the consolidated balance sheet of Pipeline Data Inc.  as of December 31,2006 and the related consolidated statements of operations, changes in stockholders equity, and  cash flows for the years ended December 31, 2006 and 2005. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.  We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. Also, an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Pipeline Data Inc., as of December 31, 2006 and the consolidated results of its operations and its cash flows for the two years then ended, in conformity with accounting principles generally accepted in the United States of America.    /s/Drakeford & Drakeford, LLC ------------------------------------- New York, New York  March 27, 2007, except for Note A as to which the date is October 12, 2007      PIPELINE DATA INC.  CONSOLIDATED BALANCE SHEETS  December 31,ASSETS
        2006
        2005
  CURRENT ASSETSCash and cash equivalents
        $  2,770,494
        $  2,254,664Accounts receivable, net
        3,028,719
        1,518,830Interest receivable
        7,778
        57,214Inventory
        95,184
        71,689Advances and prepaid expenses
        243,125
        139,322Note receivable
        300,000
        175,000Total current assets
        6,445,300
        4,216,719PROPERTY AND EQUIPMENT, net
        1,117,380
        666,514OTHER ASSETSRestricted cash
        564,575
        75,489Merchant portfolio, residual rights and other intangibles
        15,585,602
        9,855,679Deferred acquisition and debt issuance costs
        1,748,814
        932,938Notes receivable, net
        693,792
        750,000Deposits
        46,991
        53,521Deferred tax assets, net
        0
        780,138Goodwill
        38,821,893
        24,556,638Total other assets
        57,461,667
        37,004,403TOTAL ASSETS
        $  65,024,347
        $  41,887,636LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIESAccounts payable and accrued expenses
        $   2,104,939
        $  1,320,334Lease obligations-equipment
        60,765
        35,376Notes payable
        0
        15,600,000Merchant deposits and loss reserve
        347,670
        0Total current liabilities
        2,513,374
        16,955,710LONG-TERM LIABILITIESNotes payable-senior secured convertible
        27,695,571
        1,400,000Notes payable-World Products shareholders
        525,000
        525,000Lease obligations-equipment
        53,443
        134,330Notes payable  current 8%
        0
        322,734Deferred tax liability, net
        3,640,109
        0Total long-term liabilities
        31,914,123
        2,382,064COMMITMENTS AND CONTINGENCIESTEMPORARY EQUITYCommon stock subject to put obligations, 9,398,058 shares, issued and outstanding
        12,576,951
        9,679,999Total temporary equity
        12,576,951
        9,679,999STOCKHOLDERS' EQUITYPreferred stock, $.001 par value: 5,000,000 shares authorized,no shares issued or outstanding at December 31, 2006Common stock,  $.001 par value: 150,000,000 shares authorized,38,588,079 and 29,196,012 shares issued and outstanding at December 31, 2006 and December 31, 2005, respectively
        38,618
        29,196Common stock subscribed
        0
        5,780,207Additional paid-in capital
        22,474,263
        9,230,347Retained earnings (deficit)
        (4,455,722)
        (2,169,887)Less: 30,000 shares of treasury stock, at cost
        (37,260)
        0Total stockholders' equity
        18,019,899
        12,869,863TOTAL LIABILITIES, TEMPORARY EQUITY  AND STOCKHOLDERS' EQUITY
        $   65,024,347
        $  41,887,636
  The accompanying notes are an integral part of these statements.   F-1    PIPELINE DATA INC.  CONSOLIDATED STATEMENTS OF OPERATIONS
   Year Ended December 31,2006
        2005
  Revenue
        $  41,813,817
        $ 24,097,575Interchange
        18,542,700
        12,049,353Cost of services sold
        7,971,977
        5,377,176Cost of goods sold
        373,408
        148,076Total cost of goods and services sold
        26,888,085
        17,574,605Gross profit
        14,925,732
        6,522,970Operating expensesSalaries and payroll cost
        6,403,301
        3,676,989Selling, general and administrative
        3,536,088
        1,705,680Depreciation and amortization
        2,372,503
        833,964Total operating expenses
        12,311,892
        6,216,633Income from operations
        2,613,840
        306,337Other income and expensesInterest and other income
        121,540
        75,375Interest expense
        (4,720,526)
        (792,788)Loss on early retirement of debt
        (2,140,107)
        0Total other income (expenses)
        (6,739,093)
        (717,413)(Loss) before income taxes
        (4,125,253)
        (411,076)Provision for income taxes
        (1,839,438)
        (779,833)Net income (loss) attributable to common equity holders for
purposes of computing basic and diluted earnings per share
        (2,285,815)
        368,757Deemed dividend on common stock subject to put obligation
        2,896,952
        0Net income (loss) for purposes computing basic and diluted
earnings per share
        $   (5,182,767)
        $    368,757Basic and diluted earnings (loss) per common share:Earnings (loss) per shareBasic
        $          (0.12)
        $          0.01Diluted
        N/A
        $          0.01Weighted average number of shares outstanding:Basic
        44,324,014
        27,909,673Diluted
        N/A
        29,312,083
  The accompanying notes are an integral part of these statements.  F-3    PIPELINE DATA INC.  CONSOLIDATED STATEMENT OF TEMPORARY EQUITY AND STOCKHOLDERS' EQUITY  Common Stock
        Common Stock
        Additional
        Accumulated
        Treasury
        TotalSubject to put obligation
        
        Paid-inShares
        Amount
        Shares
        Amount
        Capital
        Deficit
        Stock
  Balance at December 31, 2004
        
        
        26,102,022
        26,101
        8,033,837
        (2,538,664)
        
        5,521,274Common stock subscribed
        
        
        
        
        
        
        
        5,780,207Issuance of common stock for interest and conversion of principal on Laurus debt
        
        
        199,880
        200
        199,680
        
        
        199,880Conversion of 8% convertible notes and interest
tocommon stock
        
        
        828,571
        828
        289,171
        
        
        289,999Exercise of warrants
        
        
        342,857
        343
        121,342
        
        
        121,685Issuance of common stock for services
        
        
        297,332
        297
        78,420
        
        
        78,717Issuance of common stock for employment agreements/unvested stock bonus
        
        
        153,340
        153
        186,600
        
        
        186,753Conversion of stock options
        
        
        308,000
        308
        (308)
        
        
        0Acquisitions/Mergers
        9,398,058
        9,679,999
        964,010
        966
        321,625
        
        
        10,002,590Net income for the year ended December 31, 2005
        ________
        ________
        ________
        _______
        _________
        368,757
        ________
        368,757Balance at December 31, 2005
        9,398,058
        $  9,679,999
        29,196,012
        $  29,196
        $ 9,230,367
        (2,169,907)
        $        0
        $ 22,549,862Common stock previously subscribed
        
        
        5,999,628
        6,000
        5,774,207Common stock for services
        
        
        128,574
        129
        374,497
        
        
        374,626Vesting of options granted to employees
        
        
        
        
        282,979
        
        
        282,979Vesting of options granted to outside consultant
        
        
        
        
        7,574
        
        
        7,574Exercise of stock options
        
        
        356,098
        356
        37,541
        
        
        37,897Exercise of warrants
        
        
        674,281
        674
        708,369
        
        
        709,043Conversion of 8% convertible notes
        
        
        485,742
        485
        322,248
        
        
        322,733Interest on 8% convertible notes
        
        
        111,077
        111
        84,860
        
        
        84,971Fair value of warrants issued with convertible debt
        
        
        
        
        4,329,000
        
        
        4,329,000Fair value of warrants issued for      advisory/underwriting fee
        
        
        
        
        437,500
        
        
        437,500Beneficial conversion feature on convertible debt
        
        
        
        
        5,803,863
        
        
        5,803,863Deferred tax liability on beneficial conversion feature
and warrants
        
        
        
        
        (4,260,123)
        
        
        (4,260,123)Acquisitions/Mergers
        
        
        1,666,667
        1,667
        2,238,333
        
        
        2,240,000Deemed dividend on stock subject to put obligation
        
        2,896,952
        
        
        (2,896,952)
        
        
        0Purchase of treasury stock
        
        
        (30,000)
        
        
        
        (37,260)
        (37,260)Net loss for the year December 31, 2006
        ________
        ________
        ________
        ________
        _________
        (2,285,815)
        ________
        (2,285,815)
   F-4     Balance at December 31, 2006
        9,398,058
        $ 12,576,951
        38,588,079
        $38,618
        $22,474,263
        $(4,455,722)
        $(37,260)
        $30,596,850
  The accompanying notes are an integral part of these statements.   F-5    PIPELINE DATA INC. CONSOLIDATED STATEMENTS OF CASH FLOWS  Year Ended December 31,2006
        2005
  OPERATING ACTIVITIES:Net Income (loss)
        $   (2,285,815)
        $   368,757Adjustments for noncash and nonoperating items:Depreciation and amortization
        2,372,504
        833,964Loss on early retirement of debt
        2,140,107
        0Stock based compensation
        423,250
        728,967Common stock for services and other
        272,876
        179,097Amortization of debt issuance cost and discount onlong term debt
        1,582,451
        414,176Deferred taxes, net
        (1,839,438)
        (780,138)Changes in operating assets and liabilities:Receivables
        (1,436,105)
        (508,718)Note receivable
        57,214
        (35,630)Inventory
        (23,495)
        (31,602)Advances and prepaid expenses
        (99,686)
        13,775Deposits and restricted cash
        (127,799)
        (97,141)Accounts payable and accrued expenses
        999,139
        (253,129)Income taxes payable
        0
        (15,547)Cash  provided by operating activities
        2,035,203
        816,831INVESTING ACTIVITIES:Capital expenditures
        (592,055)
        (389,952)Merchant portfolio and residual rights purchase
        (2,027,223)
        (4,139,436)Note receivable
        (140,900)
        (273,453)Acquisitions of businesses
        (15,717,318)
        (8,262,900)Change in restricted cash
        (355,795)
        2,011,022Cash used by investing activities
        (18,833,291)
        (11,054,719)FINANCING  ACTIVITIES:Proceeds from lease financing
        0
        129,059Proceeds from notes payable
        0
        17,525,000Proceeds from senior secured convertible notes, net
        26,349,693
        0Warrants and beneficial  conversion feature
        10,650,307
        0Debt issuance cost
        (1,477,060)
        (231,692)Debt service payments
        (17,000,000)
        (5,711,187)Loss on early retirement of debt
        (1,863,000)
        0Warrant and stock option exercise
        746,735
        124,356Purchase of treasury stock
        (37,260)
        0Lease obligation payments and loan payments
        (55,497)
        (36,836)Cash provided by financing activities
        17,313,918
        11,798,700NET  INCREASE  IN CASH
        515,830
        1,560,812CASH BALANCE BEGINNING OF PERIOD
        2,254,664
        693,852CASH BALANCE END OF PERIOD
        $    2,770,494
        $  2,254,664SUPPLEMENTAL DISCLOSURES:Cash paid during the year for:Interest
        $    2,678,740
        $    792,788Income taxes
        $                 0
        $              0
  The accompanying notes are an integral part of these statements  F-6    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE A  ORGANIZATION AND OPERATIONS  Nature of Operations  Pipeline Data Inc. (the "Company"), was incorporated in June 1997 in the state of Delaware. We are an integrated provider of merchant payment processing services and related software products throughout the United States. We deliver credit and debit card-based payment processing solutions primarily to small to medium-sized merchants who operate either in a physical business environment, over the Internet, or in mobile or wireless settings via cellular-based wireless devices that the Company sells. Basis of Financial Statement Presentation The accompanying consolidated financial statements include those of Pipeline Data, Inc. (the "Company") and its subsidiaries. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All intercompany balances and transactions with the Company's subsidiaries have been eliminated upon consolidation. Change in Accounting Principal RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (COMMITMENTS AND CONTINGENCIES  TEMPORARY EQUITY)  The accounting for certain stock repurchase obligations made in connection with our acquisition of Charge.com, Inc had previously been considered to be conditional obligations under the terms of Statement of Financial Accounting Standards No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.  After reviewing this arrangement under the terms of Topic No. D-98: Classification and Measurement of Redeemable Securities, we believe that the shares issued to the former Charge.com, Inc stockholders should be considered temporary equity and classified as common shares subject to put obligations.  The following table illustrates the correction of error as shown on the face of the Companys balance sheet and the effect on Earnings (loss) per shares:  As previously reported 12/31/06
        Restatement Adjustment 12/31/06
        As restated 12/31/06
        As previously reported 12/31/05
        Restatement Adjustment 12/31/05
        As restated 12/31/05Temporary EquityCommon shares subject to put obligation
        $    -
        $12,576,951
        $12,576,951
        $    --
        $9,679,999
        $9,679,999Common Stock
        48,016
        (9,398)
        38,618
        38,594
        (9,398)
        29,196Additional paid-in capital
        35,041,816
        (12,567,553)
        22,474,263
        18,900,948
        (9,670,601)
        9,230,347
   F-7     Total Stockholders Equity
        $30,596,850
        $(12,576,951)
        $18,019,899
        $22,549,862
        $(9,679,999)
        $12,869,863Earnings(loss) per share
        $    (0.05)
        $    (0.07)
        $    (0.12)
        $   0.01
        $ (0.0)
        $   0.01
  Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, among other things, capitalized customer acquisition costs, loss reserves, certain accounts payable and accrued expenses, certain tax assets and liabilities, and convertible debt. On an ongoing basis, we evaluate our estimates. Actual results could differ from those estimates. Concentrations The majority of the Company's merchant processing activity has been processed by two key vendors. The Company believes that these vendors maintain appropriate backup systems and alternative arrangements to avoid a significant disruption of processing in the event of an unforeseen event. Substantially all of the Company's revenue is derived from processing Visa and MasterCard bank card transactions. Because the Company is not a ''member bank'' as defined by Visa and MasterCard, in order to process these bank card transactions the Company has entered into  sponsorship agreements with banks that are "member banks" and paid applicable fees.. The agreements with the bank sponsors require, among other things, that the Company abide by the by-laws and regulations of the Visa and MasterCard associations.  F-8    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  We believe the following critical accounting policies and the related judgments and estimates affect the preparation of our consolidated financial statements. Cash and Cash Equivalents For purposes of reporting cash flows, highly liquid instruments purchased with original maturities of three months or less are considered cash equivalents. The carrying amounts reported in the Consolidated Balance Sheets for these instruments approximate their fair value. Restricted Cash  Cash held on deposit to cover potential merchant losses or cash set aside for contractual obligations is classified as Restricted Cash on the Consolidated Balance Sheets. Additional restricted cash is also set aside by the Company per the contractual obligation with the former owners of Valadata requiring the Company to escrow funds in the event the acquired entity meets earn-out thresholds through July 11, 2008.  Inventories  Inventories consist of point-of-sale terminal equipment held for sale to merchants, resellers and distributors. Inventories are valued at the lower of cost or market price. Cost is arrived at using the first-in, first-out method. Market price is estimated based on current sales of equipment.  Accounts Receivable, net  The Company uses the allowance method to account for uncollectible accounts receivable. We maintain allowances for the estimated losses from doubtful accounts which result when our customers are unable to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required which would result in an additional general and administrative expense in the period such determination was made. Accounts receivable are presented net of an allowance for doubtful accounts of $65,791 as of December 31, 2006 and $123,251 as of December 31, 2005.  Notes Receivable  The Company has two demand notes aggregating $300,000 at the simple rate of 10-18% per annum and a long term secured promissory note, due February 1, 2008, with a balance, net of discount of $693,792. The face amount of the note is $739,900. Interest is imputed at the rate of 6%. The note is secured by 1,000,000 shares of the Company's common stock  Property and Equipment, net  Property and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method for financial reporting purposes and primarily accelerated methods for tax purposes. For financial reporting purposes, equipment is depreciated over five to seven years. Leasehold improvements and property acquired under capital leases are amortized over the useful life of the asset or the lease term, whichever is shorter. Depreciation expenses for property and equipment for the years ended December 31, 2006 and 2005 was $ 141,189 and $ 88,266, respectively. Repairs and maintenance are expensed as incurred. Expenditures that increase the value or productive capacity of assets are capitalized.     F-9  PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue and Cost Recognition We derive revenues primarily from the electronic processing of credit, charge and debit card transactions that are authorized and captured through third-party networks. Typically, merchants are charged for these processing services based on a percentage of the dollar amount of each transaction and in some instances, additional fees are charged for each transaction. Certain merchant customers are charged a flat fee transaction and may also be charged miscellaneous fees, including fees for handling chargebacks, monthly minimums, equipment rentals, sales or leasing and other miscellaneous services. Revenues are reported gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations (MasterCard and Visa) under revenue sharing agreements pursuant to which such parties receive payments based primarily on processing volume for particular groups of
merchants. Included in cost of goods and services sold are the expenses covering interchange and bank processing directly attributable to the furnishing of transaction processing and other services to our merchant customers and are recognized simultaneously with the recognition of revenue. We follow the requirements of EITF 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent, in determining our revenue reporting. Generally, we report revenues at the time of sale on a gross basis where we are the primary obligor in the arrangement, have latitude in establishing the price of the services, change the product and perform part of the service, have discretion in supplier selection, have latitude in determining the product and service specifications to meet our clients needs and assume credit risk. Revenues generated from certain portfolios are reported net of interchange, as required by EITF 99-19, where we may not have credit risk, or the ultimate responsibility for the merchant accounts. This amount includes interchange paid to card issuing banks and assessments paid to credit card associations pursuant to which such parties receive payments based primarily on processing volume for particular groups of merchants.  Merchant Deposits and Loss Reserves  The Company follows the Financial Accounting Standards Board Interpretation No. 45: Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others ("FIN 45") requires all guarantees be recorded at their fair value at inception. We believe our potential liability for the full amount of the operating losses discussed above is a guarantee under FIN 45. We estimate the fair value of these guarantees by adding a fair value margin to our estimate of losses. This estimate of losses is comprised of known losses and a projection of future losses based on a percentage of direct merchant credit card and debit card sales volumes processed.  Disputes between a cardholder and a merchant periodically arise due to the cardholder's dissatisfaction with merchandise quality or the merchant's service, and the disputes may not always be resolved in
the merchant's favor. In some of these cases, the transaction is ''charged back'' to the merchant and the purchase price is refunded to the cardholder by the credit card-issuing institution. If the merchant is unable to fund the refund, the Company is liable for the full amount of the transaction. The Company maintains deposits from certain merchants as an offset to potential contingent liabilities that are the responsibility of such merchants. Additionally, the Company has a recovery team that is responsible for collecting "charge backs". The Company evaluates its ultimate risk and records an estimate of potential loss for chargebacks related to merchant fraud based upon an assessment of actual historical fraud loss rates compared to recent processing volume levels. The Company believes that the liability recorded as loss reserves approximates fair value.   F-10    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  Deferred Customer Acquisition Costs Deferred customer acquisition costs consist of up-front signing bonus payments made to sales personnel (the Company's sales force), and cash payments made to external vendors resulting in the establishment of new merchant relationships. Deferred acquisition costs represent incremental, direct customer acquisition costs that are recoverable through future operations, contractual minimums, and/or penalties in the case of early termination. The deferred customer acquisition costs are amortized over the three-year term of the contract the merchant enters into with the Company. In the event the customer cancels the contract or ceases operations, the Company expenses the un-amortized balance of deferred acquisition costs. Generally, the acceleration or expensing of any unamortized deferred acquisition cost is off-set by a termination fee the company charges the customer for opting out of their
contractual obligation. Management evaluates the deferred customer acquisition costs for impairment at each balance sheet date by comparing, on a pooled basis by vintage quarter of origination the active accounts against the original boarded accounts in relationship to the carrying amount of the deferred customer acquisition costs.  Accounting for Goodwill and Intangible Assets In July 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which requires that goodwill and certain other intangible assets having indefinite lives no longer be amortized to earnings, but instead be subject to periodic testing for impairment. Intangible assets determined to have definitive lives will continue to be amortized over their useful lives. Goodwill and intangible assets acquired after June 30, 2001 were subject immediately to the non-amortization and amortization provisions of this Statement. For the years 2005 and 2006, we applied Statement No. 142 to our merchant portfolios and residual rights purchases and revised our estimated life of our merchant portfolios. We estimate for accounting purposes the useful life to be seven years. The amortization expense represents a recognition and estimated allocation of the initial cost of the acquired merchant portfolios and residual rights as a non-cash expense against the income generated by these assets.  The Company has intangible assets which consist primarily of customer relationships and are recorded in connection with acquisitions at their fair value based the net present value of the customer relationship. Customer relationships are amortized over their estimated useful lives using a straight line basis which takes into consideration expected customer attrition rates over a seven -year period. Intangible assets with estimated useful lives are reviewed for impairment in accordance with SFAS No. 144 while intangible assets that are determined to have indefinite lives are reviewed for impairment at least annually in accordance with SFAS No. 142.  Reclassifications  The prior period presentation of certain accounts has been changed to conform to the current year presentation.      F-11  PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  Share-Based Payments In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment ("SFAS No. 123R"). This standard requires expensing of stock options and other share-based payments and supersedes SFAS No. 123, which had allowed companies to choose between expensing stock options and showing pro forma disclosure only. This standard is effective as of January 2006 and will apply to all awards granted, modified, cancelled or repurchased after that date as well as the unvested portion of prior awards. SFAS No. 123R permits public companies to adopt its requirements using one of three methods: the "modified prospective" method, the "modified retrospective" method to January 1, 2005, or the "modified retrospective" method to all prior years for which SFAS No. 123 was effective. We elected to adopt the modified prospective method described in FAS 123R which specifies that compensation expense for
options granted prior to the effective date be recognized in the consolidated statement of income over the remaining vesting period of those options, and that compensation expense for options granted subsequent to the effective date be recognized in the consolidated statement of income over the vesting period of those options. In addition, in accordance with the implementation of the modified prospective method, prior period amounts have not been restated. As permitted by SFAS No. 123, prior to January 1, 2006, we followed APB Opinion No. 25, which accounts for share-based payments to employees using the intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of SFAS No. 123R fair value method will have a significant impact on our consolidated results of operations, although it will have no impact on our cash flows. The impact of the adoption of SFAS No. 123R for the twelve months ended December 31, 2006 was to increase compensation expense of $282,979 with corresponding tax benefit of $85,870, resulting in a net reduction of earnings of $166,689. We made the decision to accelerate the vesting of outstanding stock options during the quarter ended, March 31, 2006 and in doing so recognize the remaining cost of stock options outstanding from prior years. Computer Software Computer software includes the fair value of software acquired in business combinations, purchased software and capitalized software development costs. Purchased software is recorded at cost and amortized using the straight-line method over a 3-5 year period and software acquired in business combinations is recorded at its fair value and amortized using straight-line method over their estimated useful lives, ranging from three to five years. Income Taxes The Company recognizes deferred income tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact on deferred income taxes of changes in tax rates and laws, if any, are reflected in the consolidated and combined financial statements in the period enacted.   F-12    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(continued)  Earnings per share Basic earnings per share is computed by dividing reported earnings available to common shareholders by the weighted average shares outstanding during the period. Earnings available to common shareholders are the same as reported net income for all periods presented. Diluted earnings per share is computed by dividing reported earnings available to common shareholders by the weighted average shares outstanding during the period and the impact of securities that, if exercised, would have a dilutive effect on earnings per share. All options with an exercise price less than theaverage market shareprice for the period generally are assumed to have a dilutive effect on earnings per share. Stock options and restricted share grants of 0 and 3,638,592 for the twelve months ended December 31, 2006 and 2005 respectively were not included in computing diluted earnings per share because their effects were anti-dilutive.  Year ended December 31,2006
        2005Net income (loss) available to common equity holders used to compute basic earnings per share
        $    (2,285,815)
        $     368,757Less: Deemed dividend on common stock subject to put obligation
        (2,896,952)
        -Net income (loss) used to compute basic and diluted earnings per share
        (5,182,767)
        $     368,757Weighted average shares outstanding  basic
        44,324,014
        27,909,673Plus:  Common stock equivalent shares assumed from conversion of options
        N/A
        1,402,410Weighted average shares outstanding  diluted
        N/A
        29,312,083Basic net earnings (loss) per share
        $            (0.12)
        $           0.01Diluted net earnings per share
        N/A
        $           0.01
  Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company reviews the terms of convertible debt, equity instruments and other financing arrangements to determine whether there are embedded derivative instruments, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Also, in connection with the issuance of financing instruments, the Company may issue freestanding options or warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. The Company may also issue options or warrants to non-employees in connection with consulting or other services they provide. Derivative financial instruments are initially measured at their fair value. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, the Company uses the Black-Scholes option pricing model to value the derivative instruments. To the extent that the initial fair values of the freestanding and/or bifurcated derivative instrument liabilities exceed the total proceeds received, an immediate charge to income is recognized, in order to initially record the derivative instrument liabilities at their fair value.  F-13    The discount from the face value of the convertible debt or equity instruments resulting from allocating some or all of the proceeds to the derivative instruments, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income, usually using the effective interest method.  F-14    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  Derivative Financial Instruments (continued) The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. If reclassification is required, the fair value of the derivative instrument, as of the determination date, is reclassified. Any previous charges or credits to income for changes in the fair value of the derivative instrument are not reversed. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. New accounting pronouncements  In February 2006, the FASB issued SFAS No. 155. "Accounting for certain Hybrid Financial Instruments an amendment of FASB Statements No. 133 and 140," or SFAS No. 155. SFAS No. 155 permits fair value  remeasurement  for any hybrid financial  instrument that contains an embedded  derivative that otherwise would require  bifurcation,  clarifies which  interest-only  strips and principal-only strips are not subject to the  requirements of Statement No. 133,  establishes a requirement to evaluate  interests in securitized  financial  assets to identify interests  that  are  freestanding  derivatives  or that  are  hybrid  financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not
embedded derivatives,  and  amends  SFAS  No. 140  to  eliminate  the  prohibition  on a qualifying special purpose entity from holding a derivative financial instrument that pertains to a beneficial  interest other than another derivative  financial instrument. SFAS 155 is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. We do not expect the adoption of SFAS 155 to have a material impact on our consolidated financial position, results of operations or cash flows.  In March 2006,  the FASB  issued FASB  Statement  No. 156,  Accounting  for Servicing  of  Financial  Assets  - an  amendment  to FASB  Statement  No. 140. Statement 156 requires that an entity recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a service contract under certain situations. The new standard is effective for fiscal years beginning after September 15, 2006. The adoption of SFAS No.156 did not have a material impact on the Company's financial position and results of operations.  In July 2006, the Financial Accounting Standards Board issued Interpretation No. 48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109. This interpretation clarifies the accounting for uncertainty in income taxes recognized in a company's financial statements and establishes guidelines for recognition and measurement of a tax position taken or expected to be taken in a tax return. We are currently evaluating the impact on our consolidated financial statements of this standard, which will become effective on June 1, 2007.  In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"). This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. We are currently evaluating the impact on our consolidated financial statements of FAS 157, which will become effective for us on June 1, 2008.   F-15    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE B  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  New accounting pronouncements (continued)  In September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)", which will require employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements. Under past accounting standards, the funded status of an employer's postretirement benefit plan (i.e., the difference between the plan assets and obligations) was not always completely reported in the balance sheet. Past standards only required an employer to disclose the complete funded status of its plans in the notes to the financial statements. SFAS No. 158 applies to plan sponsors that are public and private companies and nongovernmental not-for-profit organizations. The requirement to recognize the
funded status of a benefit plan and the disclosure requirements are effective as of the end of the fiscal year ending after December 15, 2006, for entities with publicly traded equity securities, and at the end of the fiscal year ending after June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The Company does not expect that the adoption of SFAS No. 158 will have a significant impact on the consolidated results of operations or financial position of the Company.  NOTE C  ACQUISITIONS  The results of operations and financial position of the entities acquired during the twelve month period ended December 31, 2006 are included in the Consolidated and Combined Financial Statements from and after the date of acquisition. The purchase price of each acquisition was allocated to the assets acquired and liabilities assumed based on independent and third party assisted valuations with any excess cost over fair value being allocated to goodwill.  The Paynet Systems Acquisition:  On July 3, 2006, we acquired Paynet Systems, Inc. by acquiring all of the outstanding capital stock of Paynet Systems, Inc, an e-commerce and retail merchant credit card processing provider. The total cost of Paynet Systems was $10,890,996. In the event certain milestones are reached, we may pay the former Paynet Systems shareholders up to an additional $3 million in cash and 1.61 million shares of restricted common stock. The assets acquired and liabilities assumed in the Paynet Systems acquisition were as follows:  Cash
        
        
        $0Trade receivables
        
        
        0Plant, property  and equipment
        
        
        0Computer software
        
        
        0Intangible assets
        
        
        3,304,249Goodwill
        
        
        7,586,747Liabilities assumed
        
        
        0Total Purchase Price
        
        
        $10,890,996
       F-16  PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE C  ACQUISITIONS (continued)  The Valadata Acquisition:  On July 11, 2006, we acquired Valadata, Inc., by acquiring all of the outstanding capital stock of Valadata, Inc, a retail merchant credit card processing provider catering primarily to the restaurant industry. The total cost of the Valadata acquisition was $5,766,456. In the event certain milestones are reached, we may pay the former Valadata shareholders up to an additional $1.5 million over the next two years. Our wholly owned subsidiary, Valadata Acquisition, Inc. was formed to merge into Valadata, Inc. The assets acquired and liabilities assumed in the Valadata acquisition were as follows:  Cash
        
        
        $134Trade receivables
        
        
        0Plant, property  and equipment
        
        
        0Computer software
        
        
        0Intangible assets
        
        
        2,609,901Goodwill
        
        
        3,156,421Liabilities assumed
        
        
        0Total Purchase Price
        
        
        $5,766,456
  World Products, Inc. D/B/A Aircharge  On October 7, 2005, the Company completed the purchase of World Products, Inc. d.b.a. AIRCHARGE, by acquiring all of the outstanding capital stock of World Products, Inc, for a total cost of $1,655,125. The assets acquired and liabilities assumed in the Aircharge acquisition were as follows:  Cash
        
        
        $      1,941Trade receivables
        
        
        15,047Plant, property  and equipment
        
        
        3,487Computer software
        
        
        0Intangible assets
        
        
        0Goodwill
        
        
        1,793,245Liabilities assumed
        
        
        (158,595)Total Purchase Price
        
        
        $1,655,125
   F-17    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE C  ACQUISITIONS (continued)  Charge.com, Inc. On December 19, 2005, the Company completed the purchase of Charge.com, Inc., by acquiring all of the outstanding capital stock of Charge.com, Inc. for a total purchase price of $25,288,839.  Cash
        
        
        $        878,627Trade receivables
        
        
        476,132Inventory
        
        
        1,250Plant, property and equipment
        
        
        1,000Computer Software
        
        
        12,000Intangible assets
        
        
        5,115,840Goodwill
        
        
        21,654,828Liabilities assumed
        
        
        (799,702)Deferred tax liability
        
        
        (2,051,136)Total Purchase Price
        
        
        $   25,288,839
  Subsequent to our initial purchase price allocation, we adjusted the price allocation to recognize the related deferred tax liability and corresponding adjustment to goodwill by 2,051,136.  Northern Merchant Services, Inc. As a part of our agreement to acquire Northern Merchant Services, Inc in 2002, we agreed to issue additional shares of our common stock to the sellers upon the achievement of certain milestones. The final one million shares earn-in was earned when Kevin and Nancy Weller successfully (i) oversaw and opened a new facility in Brasher Falls and (ii) developed and launched a government payment processing solution. The shares related to this milestone have been issued. This issuance of stock increased the amount of goodwill related to the acquisition by, $1,300,000.  NOTE D  GOODWILL  The changes to the goodwill balance during the twelve months ended December 31, 2005 and December 31, 2006 are as follows:  Goodwill balance as of December 31, 2004
        
        $  2,324,762Goodwill acquired
        
        22,231,876Goodwill amortized or impaired
        
        0Goodwill balance as of December 31, 2005
        
        $24,556,638Goodwill acquired
        
        14,265,255Goodwill amortized or impaired
        
        0Goodwill balance as of December 31, 2006
        
        $38,821,893
    F-18    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE E- INTANGIBLE ASSETS The changes to the intangible assets, which include merchant portfolios and customer relationships during the twelve months ended December 31, 2005 and December 31, 2006, are as follows:  Intangible assets balance as of December 31, 2004
        
        $5,222,654Intangible assets acquired
        
        5,036,123Intangible assets amortized
        
        (403,098)Intangible assets impaired
        
        0Intangible assets balance as of December 31, 2005
        
        $9,855,679Intangible assets acquired
        
        7,897,192Intangible assets amortized
        
        (2,167,269)Intangible assets impaired
        
        0Intangible assets balance as of December 31, 2006
        
        $15,585,602
   NOTE F- INCOME TAXES The Company provides for the tax effects of transactions reported in the financial statements. The provision if any, consists of taxes currently due plus deferred taxes related primarily to differences  between the basis of assets and liabilities for financial and income tax reporting. The deferred tax assets and liabilities,  if any,  represent  the future tax  return  consequences  of those differences,  which will  either be taxable  or  deductible  when the assets and liabilities  are recovered or settled. As of December 31, 2006, the Company had deferred tax assets of $2,284,498, deferred tax liabilities of $5,924,607, and no material current tax liability. At December 31, 2006, the Company has net operating loss carry forwards for income tax purposes of approximately $5,100,000. These carry forward losses are available to offset future taxable income, if any, and expire in the year 2026.  The components of income tax expense for the years ended December 31, were as follows:  2006
        2005Current:Federal
        $                 0
        $         0State
        0
        0Deferred:Federal
        (1,438,613)
        (779,833)State
        (400,825)
        0Total provision for income taxes
        $(1,839,438)
        $(779,833)
    F-19    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE F- INCOME TAXES (continued)  The components of the net deferred tax assets and liabilities are as follows:  December 31,2006
        2005Deferred tax assets:Net operating loss carry forward
        
        
        $846,078
        $706,312Current period (income) loss
        
        
        1,075,368
        139,766Prior period change in NOL carry forward
        
        
        121,465
        0Difference between book and tax depreciation and amortization
        
        
        104,539
        0Deferred revenue
        
        
        0
        306Stock-based compensation
        
        
        137,048
        10,131Total deferred tax assets before valuation               allowance
        
        
        2,284,498
        856,515Valuation allowance
        
        
        0
        0Total deferred tax assets
        
        
        2,284,498
        856,515Deferred tax liabilitiesDifference between book and tax depreciation and amortization
        
        
        $2,202,885
        $76,377Discount on debt
        
        
        3,721,722
        0Total deferred tax liabilities
        
        
        5,924,607
        76,377Net deferred tax asset (liability )
        
        
        ($3,640,109)
        $780,138
  SFAS No. 109 requires that a valuation allowance be provided if it is more likely than not that some portion or all of a deferred tax asset will not be realized. Based on the Company's forecast of future taxable income, management determined that a valuation allowance related to deferred tax assets was not required as of December 31, 2006.  The differences in Federal taxes provided and the amounts determined by applying the federal statutory tax rate to income (loss) from continuing operations for the years ended December 31, 2006 and 2005 are as follows:  Year ended December 31,
 2006
        2005$ Amount
        Percentage
        $ Amount
        PercentageU.S Federal income tax at the statutory rate
        $(1,402,587)
        (34%)
        $(139,766)
        (34%)U.S State taxes
        (247,515)
        (6%)
        0
        (0%)Changes in valuation allowance
        (0)
        (0%)
        (619,907)
        (151%)Non-deductible expenses and other
        (189,337)
        (5%)
        (20,160)
        (5%)Provision for (benefit from) income taxes
        $(1,839,438)
        (45%)
        $(779,833)
        (n/a)
    F-20    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE G- COMMITMENTS AND CONTINGENCIES  Operating Leases  We lease various office spaces and certain equipment under operating leases with remaining terms ranging up to seven years. Our facilities are located in Quincy, Massachusetts, Brasher Falls, New York, Gurnee, Illinois, and Alpharetta, Georgia. The majority of the office space lease agreements contain renewal options.  Our future minimum lease commitments under noncancelable leases are as follows at December 31, 2006.  Twelve Months Ending
December 31
        Amount2007
        $ 356,5602008
        372,8562009
        377,2422010
        321,9682011
        270,691Later years
        334,052Total minimum payments required
        $ 2,033,369
  Total rent expense for the twelve months ended December 31, 2006 and 2005 was $ 275,954 and $ 193,248, respectively.  Lease-Related Party  The office of Northern Merchant Services, Inc. is located in Brasher Falls, New York, and has an annual lease with Kevin and Nancy Weller, officers of the Company. A five year lease commenced on January 1, 2006 with monthly rental of $3,000.  Capital Leases  The following is a schedule by year of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2006.  Twelve Months Ending
December 31
        Amount2007
        $ 75,0102008
        42,9872009
        13,9812010
        4,7462011
        0Later years
        0Total minimum payments required
        $ 136,724Less: amount representing interest
        22,516Present value of net minimum lease payments
        $ 114,208
      F-21  .PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE G- COMMITMENTS AND CONTINGENCIES (continued) Charge.com, Inc acquisition agreement amendment  The company amended its agreement with the selling shareholders of Charge.com, Inc giving the selling shareholders of Charge.com, Inc a put right whereby they have the right, between June 15, 2007 and June 29, 2007, to require the company to repurchase the shares of stock issued to them at a price per share of $1.33825 per share. We have reviewed this arrangement under the terms of SFAS-150 - Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity and consider this to be a conditional obligation. The provisions of this agreement will be assessed at each balance sheet date to determine if the agreement is no longer conditional.  Paynet Systems, Inc contingent payment  On July 3, 2006 when we acquired Paynet Systems, Inc., we agreed to pay up to an additional $3 million in cash and up to an additional 1.61 million shares of restricted stock upon reaching certain milestones on the later of reaching the milestone or July 1, 2007.  Valadata, Inc contingent payment On July 11, 2006, when we acquainted Valadata, Inc, we agreed to pay approximately an additional $1.5 million over the next two years to subject to performance milestones. These payments are secured by a security agreement granting a continuing security interest in the assets of Valadata, Inc.  NOTE H- STOCK OPTIONS AND WARRANTS  Stock-Based Compensation  The Company has adopted the provisions of FAS 123R, as of January 1, 2006. The provisions of FAS 133R require a company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date value of the award. That cost is recognized in the statement of operations over the period during which an employee is required to provide service for the award. FAS 123R also amends FASB Statement No. 95, "Statement of Cash Flows," to require that excess tax benefits, as defined, realized from the exercise of stock options be reported as a financing cash inflow rather as a reduction of taxes paid in cash flow from operations.  Prior to the adoption of FAS 123 R, the Company had followed the provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("FAS 123"), which allowed the Company to follow the intrinsic value method set forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and disclose the pro forma effects on net income (loss) had the fair value of the equity awards been expensed. In connection with adopting FAS 123R, the Company elected to adopt the modified prospective application method provided by FAS 123R. The following table illustrates the effect on net earnings for the year ended December 31, 2005 as if the Company had applied the fair value recognition provisions of SFAS No. 123 to all awards held by Pipeline Data employees, including those that were issued prior to the adoption of SFAS 123.  F-22    .PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE H - STOCK OPTIONS AND WARRANTS (continued) Stock-Based Compensation (continued)  Impact of Change for adoption of FAS 123RYear ended December 31,2006
        2005Net loss, as reported
        $(2,285,815)
        $    368,757Add: Stock-based compensation expense included in reported net earnings, net of related income tax effects
        n/a
        0Deduct: Total stock-based employee compensation expense determined under fair value based methods for all awards, net of related income tax effects
        n/a
        (144,787)Net earnings  Pro Forma
        $(2,285,815)
        $223,990Earnings per sharebasic, as reported
        $(0.05)
        $0.01Earnings per sharebasic, pro forma
        n/a
        $0.01Earnings per sharefully diluted, as reported
        n/a
        $0.01Earnings per sharefully diluted, as reported
        n/a
        $0.01
   In September 2005, the Company's Board of Directors approved the adoption of the 2005 Pipeline Data Inc Stock Incentive Plan in order to award restricted stock, nonqualified stock options and incentive stock options. This plan was approved by the Company's stockholders in January 2006.  Options  As of December 31, 2006, the Company has reserved an aggregate of 9,517,200 shares of common stock pending the exercise of the options.  Stock option activity is summarized as follows:
        OptionsOptions outstanding, December 31, 2004
        2,968,115Forfeited
        (130,250)Exercised
        (430,000)Issued
        6,979,964Options outstanding, December 31, 2005
        9,387,829Forfeited
        (544,837)Exercised
        (450,792)Issued
        1,125,000Options outstanding, December 31, 2006
        9,517,200
      F-23  PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE H - STOCK OPTIONS AND WARRANTS (continued)  Options (continued)  The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2006:Options Outstanding
        Options ExercisableRange of Exercise Prices
        Number of Options
        Weighted Average Remaining Contractual Life
        Weighted Average Exercise Price
        Number of Options
        Weighted Average Remaining Contractual Life
        Weighted Average Exercise Price0.00 - 0.99
        2,180,086
        2.02
        $         0.58
        2,180,086
        2.02
        $        0.581.00-1.24
        2,232,114
        3.29
        $        1.09
        2,232,114
        3.29
        $        1.091.25-1.39
        800,000
        4.04
        $        1.25
        800,000
        4.04
        $        1.251.40-1.74
        1,265,000
        4.36
        $        1.50
        1,040,000
        3.89
        $        1.501.75+
        3,040,000
        4.29
        $        2.19
        2,590,000
        3.90
        $        2.249,517,200
        3.52
        $        1.39
        8,842,200
        3.29
        $        1.36
  Warrants As of December 31, 2006, the Company has reserved an aggregate of 16,389,923 shares of common stock pending the exercise of the warrants.  Warrant activity is summarized as follows:WarrantsWarrants outstanding, December 31, 2005
        4,655,450Exercised
        (700,127)Expired
        (415,400)Issued
        12,850,000Warrants outstanding, December 31, 2006
        16,389,923
  The following table summarizes information related to warrants outstanding and exercisable as of December 31, 2006:Strike Price
        Number of Warrants
        Weighted Average Remaining Contractual Life
        Weighted Average Exercise Price0.00 - 0.99
        418,690
        1.13
        $   0.351.00-1.24
        700,000
        3.75
        $   1.101.25-1.39
        266,667
        4.55
        $   1.251.40-1.74
        11,950,001
        4.50
        $   1.401.75+
        3,054,565
        3.36
        $   2.0016,389,923
        4.17
        $   1.35
   F-24    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE H - STOCK OPTIONS AND WARRANTS (continued)  Deferred Shares Deferred shares vest ratably over the applicable vesting period from the date of the grant. On each vesting date the employee receives common stock of the Company equal in number to the deferred shares that have vested. Upon delivery of the Company common stock an equal number of deferred shares are terminated. The participants have no voting or dividend rights with the deferred shares. The deferred shares are valued at the price of the common stock on the date of grant and the expense is recorded ratably over the vesting period. Generally, grants of deferred shares are subject to forfeiture if a grantee, among other conditions, leaves our employment prior to the end of the vesting period. A summary of the non-vested deferred share activity for the year ended December 31, 2006 is presented below.  Yearended
December 31,2006Awards/UnitsNon-vested at December 31. 2005
        146,667Granted
        60,000Vested
        (109,999)Forfeited
        (3,334)Non-vested at December 31, 2006
        93,334
  NOTE I  RELATED PARTY TRANSACTIONS The Company's subsidiary, Northern Merchant Services, Inc., leases office space from Kevin and Nancy Weller. When Northern Merchant Services, Inc. was purchased, certain earn-in capabilities based upon milestones achieved were recorded as a contingency based on SFAS No.141-Business Combinations. To date, an additional 2,000,000 shares of our common stock have been issued pursuant to these milestones. The board of directors determined that it was in the best interest of the company to change the nature of the earn-in requirement for the final one million shares and requested that a new milestone be created. Thus, the final one million shares earn-in was earned when Kevin and Nancy Weller successfully (i) oversaw and opened a new facility in Brasher Falls and (ii) developed and launched a government payment processing solution. The shares related to this milestone have been issued. The Company entered into a consulting services agreement with Capital Advisory Services. Our Chairman, Jack Rubinstein, is a partner of Capital Advisory Services. The total charged to operating expenses for the year ending December 31, 2006 was $20,000. The amount payable to Capital Advisory Services was $20,000 as of December 31, 2006.   F-25    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE J  SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS  Debt/Financing:  (a) Senior Secured Convertible Notes  The Company, on June 29, 2006 entered into a series of Senior Secured Convertible Notes having an aggregate principal amount of $37,000,000 due on June 29, 2010 and warrants to purchase 11,100,000 shares of the Company's common stock at $1.40.  Interest will accrue at 8% per annum on the outstanding principal amount and is payable on the first day of each calendar quarter, starting October 1, 2006. The notes are convertible into common stock of the Company at a fixed conversion rate of $1.30 per share up to a maximum of 4.9% of the number of shares outstanding immediately after giving effect to the conversion and contains standard anti-dilution provisions.  The Company has the option, at any time, to redeem up to 25% of the original Debenture principal amount, in cash, in an amount equal to the sum of (i) 115% of the principal amount of the Debenture outstanding, plus accrued and unpaid interest through June 29 2008 and the sum of (ii) 110% of the principal amount of the Debenture outstanding, plus accrued and unpaid interest through maturity. The note is convertible at the sole discretion of the Holders unless value of the common stock exceeds 250% of the conversion price for 20 consecutive days. Then the Company may cause the holder to convert all or part of the then outstanding principal, up to 25% of the average trading volume. Any converted shares are not puttable back to the Company by the Holder.  In connection with the convertible note, the Company issued to the holder of the note a five-year warrant to purchase up to 11,100,000 shares of the Company's common stock at an exercise price of $1.40 per share. The warrants are exercisable at the sole discretion of the Holders. Any warrants converted to shares are not puttable back to the Company, nor can Holder's demand a cash settlement of warrants. Cashless exercises are permissible. The Company has entered into a Registration Rights Agreement with each of the Holders of our convertible notes and warrants issued in connection with Centrecourt Financing to register the underlying common stock thereunder. The Registration Rights Agreement provides that we will file a registration statement with the SEC within 45 days of June 29, 2006. The Registration Rights Agreement requires us to register an amount of Common Stock equal to 125% of the Registrable Securities which as defined under the Registration Rights Agreement includes the shares of our common stock issuable upon the conversion of the convertible note and the exercise of the warrants to purchase 11,100,000 shares of common stock at $1.40 per share. The Company is required to keep the Registration Statement continuously effective until all Registrable Securities have been sold. If the Company does not comply with certain requirements relating to filing the registration statement or maintaining its effectiveness, we are required to pay each holder monthly in cash as partial liquidated damages 1.25% of the aggregate purchase price paid by such holder for the convertible notes and warrants. A Registration Statement for 11,100,000 common stock underlying warrants at $1.40 and 10,000,000 Common Stock underlying convertible promissory note at $1.30 per share was deemed effective December 6, 2006. We are required to register the remaining 18,461,538 shares of our common stock underlying the convertible note as well as an additional 25% of the aggregate shares registered pursuant to our registration rights agreement. Effectiveness of these additional registrations is subject to the review by the Securities and Exchange Commission. The Company is in negotiations with
the Holder's pertaining to the registration payment arrangement and filing a new Registration Statement. We have accrued an additional and  probable settlement to interest expense, estimated at $116,000 related to the registration payment arrangement. This most likely will be settled in additional warrants issued to the holders of the notes.  F-26    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE J  SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS (continued)  Debt/Financing (continued):  In accordance with APB No. 14, EITF 00-19-2 and related amendments, the warrants issued represents a premium paid by the Company at the date of issuance of the Convertible Note in the form of additional interest, which should be bifurcated from the Convertible Note and recognized as interest expense over the initial term of the notes. The fair value for these warrants was estimated at the grant date using the Black-Scholes option pricing model based upon the closing price per share of the Company's common stock on the date of issuance, the Company estimated the fair value of the warrant and allocated $4,329,000 of the proceeds from the note to the warrant, which is presented as a discount on the convertible note, net of amortization to be taken over the four -year term of the note using the effective interest method.  Due to the convertible nature of the Senior Secured Convertible Notes, the
Company recorded a charge due to the beneficial conversion feature of $7,003,807 in accordance with EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF Issue No. 00-27, Application of EITF Issue No. 98-5 to Certain Convertible Instruments. The value of the beneficial conversion feature was measured using the intrinsic value and was being amortized over the four -year term of the note using the effective interest method.  Proceeds from the Senior Secured Convertible Notes replaced the $15,000,000 Sheridan Asset Management LLC note, dated December 20, 2005. On June 29, 2006 the company repaid the full outstanding amount and incurred remaining amounts of unamortized debt issuance costs and prepayment fees totaling approximately $1,535,607 were charged as a loss on early extinguishment of debt.  Proceeds from the Senior Secured Convertible Notes were used to retire the remaining portion of the $2,000,000 Centrecourt Asset Management note, dated September 30, 2005. The holders of the Convertible Note had the option to convert all or part of their notes into shares of the Company's Common Stock on June 29, 2006, the Company prepaid the Convertible Note plus accrued interest in full using the proceeds from the issuance of Senior Secured Convertible Notes on that date. Consequently, on that date, the remaining amounts of unamortized original issue discount, unamortized debt issuance costs and prepayment fees totaling approximately $604,500 were charged as a loss on early extinguishment of debt. The warrants issued in connection with the Subordinated Note remain outstanding.   F-27    PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE J  SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS (continued)  Long-term debt as of December 31, 2006 and December 31, 2005 consists of the following:  December 31,2006
        2005World Products interest payable at LIBOR, convertible at $1.50 per share, due March 2013
        $525,000
        $525,000Sheridan Asset Management LLC, secured, interest payable at 17% due December 20, 2005
        0
        15,000,000Centrecourt Asset Management, interest payable at prime rate plus 2.5%
        0
        2,000,0008 % convertible note
        0
        322,734Other promissory notes and capital leases
        114,208
        169,706Senior secured, interest payable at 8.00% due June 29, 2010, convertible at $1.30 per share
        37,000,000
        037,639,208
        18,017,440Less current portion
        (60,765)
        (15,635,376)Unamortized discount on long term debt of beneficial conversion feature and warrants
        (9,304,429)
        0Long-term debt, excluding current portion
        $28,274,014
        $2,382,064
   Capital Lease Obligations  See Note G-Lease Agreements for lease obligations with American Express Business Finance, Highline Funding, LLC, Ikon Financial Services and US Express Leasing. As of December 31, 2006, the current portion amounted to $60,765, and the long-term portion amounted to $53,443. NOTE K PENSION PLAN-DEFINED CONTRIBUTION  During the third quarter of 2006, the Company adopted a Simple IRA Plan. Under this plan the Company will match employee contribution up to one percent of eligible compensation. The amount recognized as an expense during the year ended December 31, 2006 was $18,378 and for the year ended December 31, 2005 was $0.  NOTE M  TEMPORARY EQUITY  Common shares subject to put obligation  In December 2006, the company amended its agreement with the selling shareholders of Charge.com, Inc giving them a put right whereby they have the right, between June 15, 2007 and June 29, 2007, to require the company to repurchase the shares of stock issued to them at a price per share of $1.33825 per share or $12,576,951. Each shareholder may continue to hold their shares as quoted on the OTCBB.  If a shareholder chooses to have the company repurchase the shares of stock, then the company is required to pay such shareholder in cash by October 30, 2007, the per share purchase price, plus interest.     F-28  PIPELINE DATA INC.  NOTES TO FINANCIAL STATEMENTS  December 31, 2006  NOTE M  TEMPORARY EQUITY(continued)  Common shares subject to put obligation(continued)   Due to the companys not achieving a listing on the Nasdaq or AMEX prior to September 30, 2006 and as a result of the renegotiation of the put right, the company recognized a deemed dividend or increase in redemption value of the put right of $2,896,952.  This increase in redemption value of the common shares subject to the put obligation is offset by a charge to additional paid in capital.  This reflects the increase in the put obligation price per share from $1.03 to $1.33825 per share.  NOTE N  SUBSEQUENT EVENTS  Charge.com, Inc acquisition agreement amendment  On July 3, 2007, the Company and the former shareholders of Charge.com amended the Agreement and Plan of Merger dated as of December 19, 2005 giving the former shareholders the right, between December 17, 2007 and 5:00 PM (Eastern Standard Time) on December 28, 2007, to require the Company to repurchase the shares of stock issued to them at a price of $1.37785 per share. If a former shareholder exercises its put right, the Company must purchase the shares by no later than January 4, 2008 at the purchase price, plus interest at an annual rate of 12% accruing from September 28, 2007 and at an annual rate of 18% from October 31, 2007.  The Company has a call right until no later than December 26, 2007 to purchase some or all of the former shareholders stock at $1.37785 per share, plus interest at an annual rate of 12% accruing from September 28, 2007 and at an annual rate of 18% from October 31, 2007.
Management believes it has a number of solutions to address this upcoming deadline.   F-29     Item 8. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.  There have been no changes in, and no disagreements with, our company's public accountants.  Item 8A. Controls and Procedures.  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES  The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of disclosure controls and procedures in Rule 13a-15(e). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officers and principal
financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.     CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING  In connection with the restatement of the Companys financial statements for the years ended December 31, 2005 we re-evaluated the effectiveness of the design and operation of our disclosure controls and procedures to determine their effectiveness (as defined in Rule 13a-15(e) under the Securities Act, as amended) as of  the periods then ended.  While we previously disclosed the existence of certain common stock of our Company that is subject to a repurchase obligation, we had considered this to be a conditional obligation under the terms of Statement of Financial Accounting Standards No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.  We previously re-evaluated this and concluded that this arrangement should be reviewed under the terms of Topic No. D-98: Classification and Measurement of Redeemable Securities.  Thus, the
Company believes that these shares should be considered temporary equity and classified as common shares subject to put obligations.  The Company views its previous review of the arrangement under the terms of Statement of Financial Account Standards No. 150 as opposed Topic D-98 to be a weakness in our controls over financial reporting.  Auditing Standard Number 2 issued by the Public Company Accounting Oversight Board, or PCAOB, indicates that a restatement of previously issued financial statements is a strong indicator that a material weakness in internal control over financial reporting exists.  As a result of this weakness, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls were not adequate to provide reasonable assurance that material information required to be included in our periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms.  We looked
specifically into the effectiveness of our disclosure controls and procedures in terms of classification issues involved in the evaluation of accounting implications associated with non-routine contracts and non-routine complex equity transactions.  We found that we needed further support in classifying and reporting these transactions.    As a result, we have expanded our accounting staff to include a staff member we believe to be versed in reviewing non-routine transactions and will retain qualified third-party advisors with respect to more complex equity transactions.  Our independent audit committee advised that they expect us to expand our staff to ensure that accounting and reporting are promptly and properly handled.  We sought the help of an additional qualified professional who will commence his duties during the fourth quarter of 2007.  We retained the assistance of a qualified third party accounting firm to assist in the preparation of the Companys financial statements for this quarter. We have subscribed to accounting journals and have implemented additional review procedures.  We have held staff meetings to ensure the prompt flow of corporate communication and information flow. We are currently scheduling members of our accounting staff for continuing professional education.  Based on these changes, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures to determine their effectiveness (as defined in Rule 13a-15(e) under the Securities Act, as amended) as of September 30, 2007.  Based on that evaluation and the changes that we have discussed above, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report our disclosure controls and procedures were not effective.  As result of the actions taken as discussed in the preceding paragraph, we believe that our disclosure controls and procedures have vastly improved but the full effect of these changes will not be experienced until the fourth quarter of 2007.  Item 8B.  Other Information.  N/A      PART III  Item 10. Directors, Executive Officers, Promoters and Control Persons. Directors, Executive Officers, Promoters and Control Persons  The information required by this Item 10 is incorporated herein by reference from the section captioned Corporate Governance, Our Management Team, and Section 16(a) Beneficial Ownership Reporting Compliance of the Companys definitive proxy statement for the 2007 annual meeting of stockholders to be filed not later than April 30, 2007 with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the 2007 Proxy Statement).  Item 11.  Executive Compensation  The information required by this Item 11 is incorporated by reference from the section captioned Executive Compensation of the 2007 Proxy Statement.  Item 12. Security Ownership of Certain Beneficial Owners and Management.  The information required by this Item 12 is incorporated by reference from the section captioned Stock Ownership Information of the 2007 Proxy Statement  Item 13. Certain Relationships and Related Transactions, and Director Independence.  The information required by this Item 13 is incorporated by reference from the section captioned Certain Relationships and Related Party Transactions of the 2007 Proxy Statement.  Item 14.  Principal Accountant Fees and Services.  The following table sets forth the aggregate fees billed to Pipeline Data Inc for the years ended December 31, 2006 and 2005, by Drakeford & Drakeford, LLC .  2006
        
        2005Audit Fees
        $134,440
        (a)
        $ 66,200
        (b)Audit Related Fees
        0
        
        0Tax Fees
        5,800
        
        5,800All Other Fees
        62,000
        (c)
        49,500
        (d)$202,240
        
        $121,800
   (a)
        
        Comprised of fees for financial statement audit and review of financial statements included in our Form 10-QSB quarterly reports, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.(b)
        
        Comprised of fees for financial statement audit and review of financial statements included in our Form 10-QSB quarterly reports, and services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.(c)
        
        For the year ended December 31, 2006, fees in the amount of $62,000 were billed for audits and due diligence work related to the acquisitions of Paynet Systems, Inc and Valadata, Inc(d)
        
        For the year ended December 31, 2005, fees in the amount of $49,500 were billed for audits and due diligence work related to the acquisitions of World Products, Inc and Charge.com, Inc
       SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIPELINE DATA INC. (Registrant)  By:
        /s/ MacAllister Smith
        
        By:
        /s/ Donald GruneisenName:
        MacAllister Smith
        
        Name:
        Donald GruneisenTitle:
        Chief Executive Officer and President
        
        Title:
        Chief Financial Officer(Principal Financial and Accounting Officer)
  Date: November 28, 2007 Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in their capacities as directors and on the dates indicated.  /s/  JACK RUBINSTEIN
        
        
        
        DirectorJACK RUBINSTEIN
        
        November 28, 2007/s/  KEVIN WELLER
        
        
        
        DirectorKEVIN WELLER
        
        November 28, 2007/s/  MACALLISTER SMITH
        
        
        
        DirectorMACALLISTER SMITH
        
        November 28, 2007/s/  JOHN M REEDER
        
        
        
        DirectorJOHN M REEDER
        
        November 28, 2007/s/  HAROLD DENTON
        
        
        
        DirectorHAROLD DENTON
        
        November 28, 2007/s/  MICHAEL GREENBURG
        
        
        
        DirectorMICHAEL GREENBURG
        
        November 28, 2007/s/  LARRY GOLDSTEIN
        
        ________________________________
        
        DirectorLARRY GOLDSTEIN
        
        November 28, 2007