**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-QSB**




QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
      the
      fiscal quarter ended **September
      30, 2006**




Commission
      File Number: **333-86498**




**PROTOCALL
      TECHNOLOGIES INCORPORATED**


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




**NEVADA**
            **41-2033500**(State
                or other jurisdiction of incorporation)
            (I.R.S.
                Employer Identification No.)


**47
      Mall Drive, Commack, NY 11725-5717**


(Address
      of principal executive offices)




**(631)
      543-3655**


(Issuer’s
      telephone number, including area code)




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such
      shorter period that the issuer was required to file such reports), and (2)
      has
      been subject to such filing requirements for the past 90 days. Yes [X] No
      [   ]




Indicate
      by checkmark whether the Registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act). Yes [   ] No [ X ]





As
      of
      November 14, 2006, there were 69,614,514 shares of Common Stock
      outstanding.





Transitional
      Small Business Disclosure Format. Yes
      [   ] No [ X ]









**Protocall
      Technologies Incorporated and Subsidiaries**


**Condensed
      Consolidated Balance Sheet**




**Part
      I - Financial Information**




**Item
      1 - Financial Statements**




**September
                30,**
            
            **December
                31,****2006**
            
            **2005****(Unaudited)****ASSETS**Current
                assets:Cash
            
            $
            283,603
            
            $
            402,221Accounts
                receivable, net
            
            
            53,552
            
            
            56,980Inventory,
                net of reserve
            
            
            525,169
            
            
            28,106Prepaid
                expenses and other current assets
            
            
            12,835
            
            
            55,302Total
                current assets
            
            
            889,159
            
            
            542,609Property
                and equipment, net
            
            
            168,528
            
            
            510,670Patents,
                net
            
            
            23,807
            
            
            25,567Deferred
                lease and financing costs
            
            
            327,402
            
            
            97,405Other
                Assets
            
            
            50,000Security
                deposits
            
            
            20,825
            
            
            14,433**TOTAL
                ASSETS**
            
            $
            1,465,721
            
            $
            1,190,684**LIABILITIES
                AND STOCKHOLDERS' DEFICIENCY**Current
                liabilities:Accounts
                payable
            
            $
            766,818
            
            $
            689,968Accrued
                expenses
            
            
            700,166
            
            
            825,872Payroll
                taxes payable
            
            
            67,738
            
            
            67,264Accrued
                salaries - officers
            
            
            317,603
            
            
            394,272


Deferred
                revenue
            
            
            18,750
            
            
            —Loans
                payable
            
            
            53,355
            
            
            54,555Loan
                payable - related party
            
            
            7,927
            
            
            7,927Notes
                payable, including accrued interest of $6,966 at September 30,
                2006
            
            
            162,345Notes
                payable - related party, including accrued interest of $36,338 at
                September 30, 2006
            
            
            450,903Current
                portion of obligations under capital leases
            
            
            287,616
            
            
            300,799Total
                current liabilities
            
            
            2,833,221
            
            
            2,340,657Loans
                Payable, less current portion
            
            
            54,889
            
            
            56,160Obligations
                under capital leases, less current portion
            
            
            324,724
            
            
            461,227Convertible
                notes payable (net of discount)
            
            
            114,383
            
            
            —Financial
                instrument liabilities
            
            
            3,621,308
            
            
            —Notes
                payable, including accrued interest of $4,583 at December
                31,2005Notes
                payable - related party, including accrued interest of $23,901 at
                December
                31,2005Total
                liabilities
            
            
            6,948,525
            
            
            3,380,565Commitments
                and contingenciesStockholders'
                deficiency:Common
                stock, $0.001 par value, 100,000,000 shares authorized, 69,569,137
                and47,789,364
                issued or issuable and outstanding at September 30, 2006 and December
                31,
                2005respectively
            
            
            69,569
            
            
            47,789Additional
                paid-in capital
            
            
            36,023,204
            
            
            36,083,723Deferred
                consulting costs
            
            
            (15,138
            )
            
            —Deferred
                sales fee, net
            
            
            —
            
            
            (204,488
            )Accumulated
                deficit
            
            
            (41,560,438
            )
            
            (38,116,905
            )Total
                stockholders' deficiency
            
            
            (5,482,804
            )
            
            (2,189,881
            )**TOTAL
                LIABILITIES AND STOCKHOLDERS’ DEFICIENCY**
            
            $
            1,465,721
            
            $
            1,190,684


*See
      notes to condensed consolidated financial statements*


-2-


**Protocall
      Technologies Incorporated and Subsidiaries**


**Condensed
      Consolidated Statements of Operations**




**Nine
                Months Ended**
            
            **Three
                Months Ended****September
                30,**
            
            **September
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****(Unaudited)**
            
            **(Unaudited)**Net
                sales
            
            $
            544,993
            
            $
            341,857
            
            $
            190,572
            
            $
            140,886Cost
                of sales
            
            
            422,969
            
            
            256,734
            
            
            118,138
            
            
            107,942Gross
                profit
            
            
            122,024
            
            
            85,123
            
            
            72,434
            
            
            32,944Selling,
                general and administrative expenses
            
            
            (2,972,051
            )
            
            (3,730,961
            )
            
            (1,229,281
            )
            
            (1,104,639
            )Research
                and development expenses
            
            
            (58,991
            )
            
            (127,845
            )
            
            (10,348
            )
            
            (32,687
            )Operating
                loss
            
            
            (2,909,018
            )
            
            (3,773,683
            )
            
            (1,167,194
            )
            
            (1,104,382
            )Other
                income (expense):Interest
                expense, including amortization ofdebt
                discounts
            
            
            (1,718,834
            )
            
            (133,987
            )
            
            (1,614,757
            )
            
            (44,101
            )Change
                in fair value of derivative liability
            
            
            1,191,281
            
            
            
            
            
            1,191,281Loss
                on disposal of fixed assets
            
            
            (19,562
            )
            
            —
            
            
            
            
            
            —Other
                income
            
            
            12,600
            
            
            48,334
            
            
            4,200
            
            
            10,038Total
                other income (expense)
            
            
            (534,515
            )
            
            (85,653
            )
            
            (419,276
            )
            
            (34,063
            )


Net
                loss
            
            $
            (3,443,533
            )
            $
            (3,859,336
            )
            $
            (1,586,470
            )
            $
            (1,138,445
            )Net
                loss per share - basic and diluted
            
            $
            (.06
            )
            $
            (0.23
            )
            $
            (0.02
            )
            $
            (0.04
            )Weighted
                average number of shares-basic anddiluted
            
            
            57,854,316
            
            
            16,981,703
            
            
            68,297,350
            
            
            28,217,424


*See
        notes to condensed consolidated financial statement*  -3-


**Protocall
      Technologies Incorporated and Subsidiaries**


**Condensed
      Consolidated Statement of Changes in Stockholders’ Deficit**





**Additional**
            
            **Deferred**
              **Sales
                and**
            
            
            
            **Total****Common
                Stock**
            
            **Paid
                in**
            
            **consulting
                Fees**
            
            **Accumulated**
            
            **Stockholders'****Shares**
            
            **Amount**
            
            **Capital**
            
            **Fee
                (Net)**
            
            **Deficit**
            
            **Deficit****Balance
                December 31, 2005**
            
            
            47,789,364
            
            $
            47,789
            
            $
            36,083,723
            
            $
            (204,488
            )
            $
            (38,116,905
            )
            $
            (2,189,881
            )Common
                Shares issued in Januaryprivate
                placement
            
            
            2,222,222
            
            
            2,222
            
            
            297,778
            
            
            —
            
            
            —
            
            
            300,000Common
                Shares issued in Februaryprivate
                placement
            
            
            390,625
            
            
            391
            
            
            49,609
            
            
            —
            
            
            —
            
            
            50,000Common
                Shares issued for settlementof
                litigation
            
            
            1,000,000
            
            
            1,000
            
            
            139,000
            
            
            —
            
            
            —
            
            
            140,000Common
                Shares issued in Aprilprivate
                placements
            
            
            1,819,363
            
            
            1,820
            
            
            298,180
            
            
            —
            
            
            —
            
            
            300,000Common
                Shares issued in Mayprivate
                placements
            
            
            1,079,136
            
            
            1,079
            
            
            148,921
            
            
            —
            
            
            —
            
            
            150,000Common
                Shares issued in Juneprivate
                placement
            
            
            1,059,322
            
            
            1,059
            
            
            98,941
            
            
            —
            
            
            —
            
            
            100,000Common
                Shares issued in July private placement
            
            
            1,170,592
            
            
            1,171
            
            
            98,829
            
            
            
            
            
            
            
            
            100,000Common
                Shares for Conversion of Convertible note
            
            
            1,136,364
            
            
            1,136
            
            
            98,864
            
            
            
            
            
            
            
            
            100,000Common
                Shares issued due to anti dilution provisions
            
            
            9,990,889
            
            
            9,991
            
            
            (9,991
            )
            
            —
            
            
            —
            
            
            —Common
                Shares issued for consulting fees
            
            
            1,423,078
            
            
            1,422
            
            
            172,040
            
            
            —
            
            
            —
            
            
            173,463Common
                Shares forfeited
            
            
            (80,000
            )
            
            (80
            )
            
            (99,920
            )
            
            
            
            
            
            
            
            (100,000
            )Stock
                options issued for compensation expense
            
            
            —
            
            
            —
            
            
            312,063
            
            
            —
            
            
            —
            
            
            312,063


Costs
                of private placement offerings
            
            
            —
            
            
            —
            
            
            (70,000
            )
            
            —
            
            
            —
            
            
            (70,000
            )Warrants
                issued for consulting fees
            
            
            —
            
            
            —
            
            
            45,005
            
            
            (45,005
            )
            
            —
            
            
            —Warrant
                issued in connection with issuanceof
                convertible note
            
            
            —
            
            
            —
            
            
            20,700
            
            
            —
            
            
            —
            
            
            20,700Conversion
                of convertible note
            
            
            
            
            
            
            
            
            (20,700
            )
            
            
            
            
            
            
            
            (20,700
            )Common
                shares issuable for September financing
            
            
            568,182
            
            
            568
            
            
            49,432
            
            
            
            
            
            
            
            
            50,000Derivative
                Liability of tainted warrants
            
            
            
            
            
            
            
            
            (1,689,270
            )
            
            
            
            
            
            
            
            (1,689,270
            )Amortization
                of deferred consulting fees
            
            
            
            
            
            
            
            
            
            
            
            29,867
            
            
            
            
            
            29,867Amortization
                and write off of deferred sales fee
            
            
            
            
            
            
            
            
            
            
            
            204,488
            
            
            
            
            
            204,488Net
                loss
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            (3,443,533
            )
            
            (3,443,533
            )**Balance
                September 30, 2006**
            
            
            69,569,137
            
            $
            69,569
            
            $
            36,023,204
            
            $
            (15,138
            )
            $
            (41,560,438
            )
            $
            (5,482,804
            )


*See
        notes to condensed consolidated financial statements*


-4-


**Protocall
      Technologies Incorporated and Subsidiaries**


**Condensed
      Consolidated Statements of Cash Flows**





**Nine
                Months Ended**
            
            **Nine
                Months Ended****September
                30,**
              **2006**
            
            **September
                30,**
              **2005****(Unaudited)**
            
            **(Unaudited)****Cash
                flows from operating activities:**Net
                loss
            
            $
            (3,443,533
            )
            $
            (3,859,336
            )Adjustments
                to reconcile net loss to net cash used in operatingactivities:Interest
                expense for embedded derivative instruments
            
            
            1,584,693
            
            
            —Depreciation
                and amortization
            
            
            325,690
            
            
            491,144Loss
                on disposal of fixed assets
            
            
            19,562
            
            
            —Common
                stock and warrants issued for services
            
            
            173,463
            
            
            —Warrants
                issued for settlement
            
            
            15,224
            
            
            —Equity
                compensation cost
            
            
            312,063
            
            
            86,976Subscription
                receivable write-off
            
            
            —
            
            
            1,665Change
                in value of derivative financial instrument
            
            
            (1,191,281
            )
            
            —Amortization
                of deferred financing costs
            
            
            7,825
            
            
            —Amortization
                of deferred lease costs
            
            
            58,437
            
            
            58,437Settlement
                of accounts payable and trade notes
            
            
            
            
            
            (15,750
            )Write
                off of deferred selling costs
            
            
            204,488
            
            
            —Amortization
                of deferred consulting fees
            
            
            29,867
            
            
            —Forfeiture
                of common stock previously issued for accrued salary
            
            
            (100,000
            )
            
            —Changes
                in:Accounts
                receivable
            
            
            3,428
            
            
            (9,219
            )Inventory
            
            
            (497,063
            )
            
            (15,172
            )Prepaid
                expenses and other current assets
            
            
            42,467
            
            
            (63,683
            )Accounts
                payable and accrued expenses
            
            
            (46,654
            )
            
            239,338Other
                Assets
            
            
            (50,000
            )
            
            —Deferred
                Financing Costs
            
            
            (40,000
            )
            
            —Security
                Deposits
            
            
            (6,392
            )
            
            —Other
                Liabilities
            
            
            —
            
            
            (4,220
            )Payroll
                taxes payable
            
            
            474
            
            
            —Accrued
                salaries
            
            
            (765
            )
            
            (180,072
            )Notes
                payable to officers/stockholders
            
            
            —
            
            
            (10,875
            )Deferred
                Revenue
            
            
            18,750
            
            
            —Accrued
                interest on notes payable
            
            
            14,821
            
            
            14,821


Net
                cash used in discontinued operations
            
            
            —
            
            
            (24,639
            )**Net
                cash used in operating activities**
            
            
            (2,564,436
            )
            
            (3,290,586
            )**Cash
                flows from investing activities:**Capital
                expenditures
            
            
            (1,350
            )
            
            (41,679
            )**Net
                cash used in investing activities**
            
            
            (1,350
            )
            
            (41,679
            )**Cash
                flows from financing activities:**Net
                proceeds from issuance of common stock
            
            
            980,000
            
            
            2,050,830Proceeds
                from issuance of convertible notes
            
            
            1,617,750
            
            
            —Repayment
                of loan payable
            
            
            (2,471
            )
            
            —Repayment
                of capitalized lease obligations
            
            
            (148,112
            )
            
            (261,281
            )**Net
                cash provided by financing activities**
            
            
            2,447,167
            
            
            1,789,549**Net
                decrease in cash**
            
            
            (118,619
            )
            
            (1,542,716
            )**Cash
                - beginning of period**
            
            
            402,221
            
            
            2,133,223**Cash
                - end of period**
            
            $
            283,602
            
            $
            590,507**Supplemental
                cash flow information:**Cash
                paid for:Interest
            
            $
            39,917
            
            $
            61,345Income
                taxes
            
            $
            —
            
            $
            1,832Non
                cash transactions:Conversion
                of accrued salaries to notes payable
            
            $
            75,906
            
            $
            —Warrants
                issued for services
            
            $
            45,005
            
            $
            —Stock
                issued for settlement
            
            $
            140,000
            
            $
            —Stock
                issued for anti-dilution provisions
            
            $
            9,991
            
            $
            —Discount
                on convertible note payable
            
            $
            1,403,367Derivative
                Liability for tainted warrants
            
            $
            1,689,270Conversion
                of note payable into equity
            
            $
            100,000Deferred
                Financing Costs
            
            $
            121,000Warrants
                issuable as finders fee for financing
            
            $
            135,259


*See
      notes to condensed consolidated financial statements*


-5-


**Basis
      of Presentation: The Accompanying unaudited condensed consolidated financial
      statements have been prepared in accordance with Generally Accepted Accounting
      Principles for interim financial information and with the instructions to Form
      10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
      of
      the information and footnotes required by Generally Accepted Accounting
      Principles for complete financial statements. In the opinion of management,
      all
      adjustments (consisting of normal recurring accruals) considered necessary
      for a
      fair presentation have been included. The condensed consolidated balance sheet
      as of December 31, 2005 is derived from the December 31, 2005 audited financial
      statements.**





**Note
      A -** **Summary
      of Significant Accounting Policies and Related Matters**





**[1]**  **Description
      of business**





The
      accompanying consolidated financial statements include the accounts of Protocall
      Technologies Incorporated and its wholly-owned subsidiaries, Protocall Software
      Delivery Systems, Inc. ("PSD") and Precision Type, Inc. (collectively, the
      "Company"). The Company has substantially focused all of its time and resources
      on its SoftwareToGo® product in its PSD subsidiary. PSD was founded in 1998 to
      develop and commercialize a proprietary system that enables software retailers
      to produce fully packaged software CDs, on-demand, at their stores and at their
      web site fulfillment centers. SoftwareToGo® (the “System”) is a software
      display, storage and production system, similar in size to an ATM cash machine.
      The System is designed to complement physical inventory systems and enable
      traditional resellers to create "on demand" inventory at point of sale for
      walk-in as well as Internet customers. The Company intends to market and
      distribute its System to major retailers. The Company signs license agreements
      with software publishers, allowing the Company to resell their software products
      to one or more of the Company’s retail customers.





**[2]**  **Going
      concern**





The
      Company incurred net losses for the nine months ended September 30, 2006 and
      2005 of $3,410,832 and $3,859,336, respectively, and has an accumulated deficit
      of $41,527,737 at September 30, 2006. Through September 30, 2006, the Company
      has been dependent upon investments through private offerings of convertible
      and
      non-convertible debt and equity securities from related and non-related parties
      to finance its business operations.





As
      of
      November 14, 2006, the Company had a cash balance of approximately $214,000
      .
      Management believes that cash on hand will enable the Company to continue its
      business plan through approximately early 2007 although there can be no
      assurances that this will be the case.





Management’s
      plan is to pursue additional long-term capital to fund its operations after
      further content and customer agreements have been signed, although there can
      be
      no assurances that any such agreements will be signed or that any financing
      will
      be available, or if available, that it will be on terms acceptable to the
      Company. Management believes that its ability to secure additional long-term
      financing is directly related to the Company’s progress with new customers and
      movie content agreements, which are actively being pursued by it.





The
      accompanying financial statements have been prepared on the basis that the
      Company will continue as a going concern, which assumes the realization of
      assets and satisfaction of liabilities in the normal course of
      business. The
      uncertainties regarding the availability of continued financing and commencement
      of adequate commercial revenues raise substantial doubt about the Company’s
      ability to continue as a going concern, which contemplates the realization
      of
      assets and satisfaction of liabilities in the normal course of business. The
      financial statements do not include any adjustments relating to the
      recoverability of the recorded assets or the classification of liabilities
      that
      may be necessary should the Company be unable to continue as a going
      concern .




**[3]**  **Revenue
      recognition**





The
      Company recognizes revenue from retailer sales of product through its software
      delivery system upon delivery to the consumer and revenue from retailer sales
      of
      product inventory when the items are shipped.


Part
      of
      the Company’s marketing strategy to acquire new consumers includes retail
      promotions in which the Company pays retailers if they are successful in
      marketing software products on our system to consumers. These payments are
      recorded as a reduction in revenue in accordance with EITF No. 01-9. As a result
      of this accounting treatment, these payments are not included in marketing
      expense, but instead, recorded as a reduction in revenue. Estimated customer
      rebates are reflected as a reduction in revenue in the period that
      the


-6-


related
      sale is recorded. Customer returns, although not material, are also reflected
      as
      a reduction in revenue in the period that they are returned or earlier if any
      such returns are anticipated.





**[4]**  **Use
      of estimates**





The
      preparation of the consolidated 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 and 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. Such
      estimates include valuation of warrants issued in connection with various forms
      of financing by the Company. Actual results could differ from those
      estimates.





**[5]**  **Accounting
      for stock options**





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123R “Share Based Payment” (“SFAS 123R”), which requires all share-based
      payments to employees, including grants of employee stock options, to be
      recognized in the statement of operations as an operating expense, based on
      their fair values on grant date. Prior to the adoption of SFAS 123R, the Company
      accounted for stock based compensation using Accounting Principles Board (APB)
      Opinion No. 25, Accounting for Stock Issued to Employees and Related
      Interpretations. The Company adopted the provisions of SFAS 123R effective
      January 1, 2006, using the modified prospective transition method. Under the
      modified prospective transition method, non-cash compensation expense is
      recognized for the portion of outstanding stock option awards granted prior
      to
      the adoption of SFAS 123R for which service has not been rendered, and for
      any
      future stock option grants. Accordingly, periods prior to adoption have not
      been
      restated. The Company recognizes share-based compensation costs on a
      straight-line basis over the requisite service periods of awards. That cost
      is
      recognized as compensation expense over the service period, which would normally
      be the vesting period of the options.





The
      following table illustrates the effect on net income and earnings per share
      if
      the fair value based method had been applied to the nine month period ended
      September 30, 2005:





Net
                loss as reported
            
            $
            (3,859,336
            )Stock-based
                employee compensation expense included in reported net loss, net
                of
                related tax effectsStock-based
                employee compensation determined under the fair value based
                method
            
            
            (287,195
            )Pro
                forma net loss
            
            $
            (4,146,531
            )Net
                loss per share-basic and dilutedas
                reported
            
            $
            (.24
            )Pro
                forma
            
            $
            (.24
            )





Stock
      based compensation expense recognized in the consolidated statement of
      operations for the nine months ended September 30, 2006 was $312,063, $227,303
      of which is employee compensation , $26,708 is for options issued to consultants
      and $58,052 is for options issued to directors. All of these expenses are
      recorded in selling general and administrative expense.. The compensation cost
      of $316,376 for non-vested options at September 30, 2006 will be recorded over
      the respective vesting periods.


-7-


Option
      transactions for the nine months ended September 30, 2006 are summarized as
      follows:




**2000
                Plan**
            
            **2004
                Plan****#
                of Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per**
              **Share**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual
                Term**
            
            **#
                of Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price
                per Share**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual
                Term**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at beginning of year
            
            
            2,537,785
            
            $
            1.64
            
            
            —
            
            
            4,142,988
            
            $
            .71
            
            
            —
            
            
            —Granted
                (1)
            
            
            —
            
            
            —
            
            
            —
            
            
            1,197,667
            
            $
            .34
            
            
            —
            
            
            —Exercised
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Forfeited
                (2)
            
            
            (462,134
            )
            $
            1.39
            
            
            —
            
            
            (1,790,313
            )
            $
            .52
            
            
            —
            
            
            —Outstanding
                at end of period
            
            
            2,075,651
            
            $
            1.70
            
            
            1.02
            
            
            3,550,342
            
            $
            .69
            
            
            8.58
            
            $
            0.00Exercisable
                at end of period
            
            
            2,075,651
            
            $
            1.70
            
            
            1.02
            
            
            2,711,835
            
            $
            .74
            
            
            8.33
            
            $
            0.00Non
                vested at end of period
            
            
            —
            
            
            —
            
            
            —
            
            
            838,507
            
            $
            .52
            
            
            9.38
            
            $
            0.00





(1)
            940,000
                of these options with an exercise price of $.025 were granted March
                31,
                2006 subject to shareholder approval. .These options were approved
                by
                shareholders on August 29, 2006 and are included in the stock option
                charge for the quarter ending September 30, 2006. The market value
                of the
                Company’s common stock on March 31, 2006 and August 29, 2006 was $0.25 and
                $0.14 respectively. These options have a ten year life with immediate
                vesting for half of these options and the balance, vesting March
                31, 2007.
                The remaining 257,667 options granted during the nine months ended
                September 2006, are fully vested and have a ten year life with exercise
                prices ranging from $0.33 to $1.35.





(2)
            1,362,000
                options were rescinded subsequent to March 31, 2006 as a result of
                Board
                of Directors action to correct option grants in November 2005 inconsistent
                with the Company’s 2004 Stock Option Plan. The rescinded options include:
                (a) 300,000 of 500,000 shares granted to Don Hoffmann, former CEO,
                (b)
                103,750 of 150,000 shares granted to Brenda Newman, Senior VP Digital
                Rights and Content Management, (c) 479,125 of 750,000 shares granted
                to
                Peter Greenfield, Director, and (d) 479,125 of 750,000 shares granted
                to
                Bruce Newman, Director and current President and CEO.





These
      options were not included in the stock option charge for the quarters ending
      March 31 and June 30, 2006 and are incorporated above as being forfeited in
      the
      first quarter of 2006.







The
      weighted-average grant-date fair value of options gra nted
      during the nine months ended September 30, 2006 was $.13.





The
      weighted average fair value of stock options is estimated at the grant date
      using the Black-Scholes option-pricing model with the following weighted average
      assumptions:





**Nine
                Months Ended**
              **September,****2006**
            
            **2005**Risk-free
                interest rate
            
            
            4.72
            %
            
            3.84
            %Expected
                life of options
            
            
            5
                years
            
            
            4.98
                yearsExpected
                dividend yield
            
            
            0.00
            %
            
            0.00
            %Expected
                volatility
            
            
            189.99
            
            
            144.54Weighted
                average fair value
            
            $
            0.13
            
            $
            .91




-8-


**[6]**  **Loss
      per share and common share equivalent**





The
      Company's basic and diluted net loss per share is computed by dividing net
      loss
      by the weighted average number of outstanding common shares. Potentially
      dilutive securities, which were excluded from the computation of diluted loss
      per share because to do so would have been anti-dilutive, are as
      follows:




**Nine
                Months Ended**
              **September,
                30,****2006**
            
            **2005**Stock
                options
            
            
            5,625,993
            
            
            5,225,186Warrants
            
            
            39,543,930
            
            
            5,505,150Convertible
                notes (1)
            
            
            644,263
            
            
            —Total
                dilutive shares
            
            
            45,814,186
            
            
            10,730,336





(1)
            Represents
                aggregate principal and accrued interest of $82,466 convertible into
                common stock at $0.128 per share.





**[7]**  **Inventory**





Inventory,
      consisting primarily of blank CDs, CD cases and other supplies associated with
      products distributed on the Company's virtual inventory system, are valued
      at
      the lower of cost (first-in, first-out) or market. Recently acquired movie
      and
      television DVD’s are valued at cost.





**[8]**  **Financial
      instruments**





The
      Company evaluates its convertible debt, options, warrants or other contracts
      to
      determine if those contracts or embedded components of those contracts qualify
      as derivatives to be separately accounted for under Statement of Financial
      Accounting Standards 133 "Accounting for Derivative Instruments and Hedging
      Activities" (“SFAS 133”) and related interpretations including EITF 00-19
      "Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in, a Company's Own Stock" (“EITF 00-19”). The result of this accounting
      treatment is that the fair value of the embedded derivative is marked-to-market
      each balance sheet date and recorded as a liability. In the event that the
      fair
      value is recorded as a liability, the change in fair value is recorded in the
      consolidated statement of operations as other income or expense. Upon conversion
      or exercise of a derivative instrument, the instrument is marked to fair value
      at the conversion date and then that fair value is reclassified to
      equity.





In
      circumstances where the embedded conversion option in a convertible instrument
      is required to be bifurcated and there are also other embedded derivative
      instruments in the convertible instrument that are required to be bifurcated,
      the bifurcated derivative instruments are accounted for as a single, compound
      derivative instrument.





The
      classification of derivative instruments, including whether such instruments
      should be recorded as liabilities or as equity, is re-assessed at the end of
      each reporting period. Equity instruments that are initially classified as
      equity that become subject to reclassification under SFAS 133 are reclassified
      to liability at the fair value of the instrument on the reclassification date.
      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 is expected within 12 months of the balance sheet date.





**[9]**  **Reclassifications**





Certain
      accounts in the prior year financial statements have been reclassified for
      comparative purposes to conform with the presentation in the current year
      financial statements. These reclassifications have no effect on previously
      reported net loss





**[10]**  **Recent
      Accounting Pronouncements**





In
      September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP), and expands disclosures about
      fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The management is currently
      evaluating the effect of this pronouncement on financial
      statements.




In
      June
      2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), *“Accounting
      for Uncertainty in Income Taxes* .” 
      This interpretation applies to all tax positions accounted for in accordance
      with SFAS No. 109, *“Accounting
      for Income Taxes.”* FIN
      48 clarifies the application of SFAS No. 109 by defining the criteria that
      an
      individual tax position must meet in order for the position to be recognized
      within the financial statements and provides guidance on measurement,
      derecognition, classification, interest and


-9-


penalties,
      accounting in interim periods, disclosure and transition for tax
      positions.  The Company must adopt the interpretation by January 1,
      2007.  Management does not expect that the adoption of this new
      interpretation will have a material impact on the Company’s financial position,
      results of operations or cash flows.





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”)
      No. 108. Due to diversity in practice among registrants, SAB No. 108
      expresses SEC staff views regarding the process by which misstatements in
      financial statements are evaluated for purposes of determining whether financial
      statement restatement is necessary. SAB No. 108 is effective for fiscal years
      ending after November 15, 2006. The Company will adopt SAB No. 108 during
      the fourth quarter of fiscal year 2007. The Company’s management does not
      believe the adoption of SAB No. 108 will have a material impact on the Company’s
      consolidated financial statements.





**Note
      B - Related Party Transactions**





On
      October 14, 2003, a stockholder/director opened an irrevocable standby letter
      of
      credit on behalf of the Company as required by an equipment lease agreement,
      for
      the entire term of the lease obligation, in the amount of $1,040,000. As
      compensation, the Company issued a warrant to purchase 520,000 shares of common
      stock exercisable at the lower of $2.75 per share or the sales price of common
      stock in subsequent offerings. The fair value of the warrant was $269,470
      utilizing the Black-Scholes option-pricing model. The warrant was originally
      scheduled to expire on October 14, 2010, but was converted into approximately
      95,047 shares of common stock in connection with the reverse merger on July
      22,
      2004. The fair value of the warrant has been recorded as a deferred lease cost
      and is being amortized, on a straight-line basis, over the term of the lease
      obligation which terminates April 1, 2007. In November 2005, the letter of
      credit was reduced to $750,652 and extended through April 2008. The Company
      is
      contingently liable for the amounts of the letter of credit in the event the
      stockholder/director is obligated to make payments thereunder as a result of
      noncompliance with the terms of the lease agreement.





**Note
      C - Notes Payable - Related Party**





On
      July 22, 2004, in connection with the reverse merger, $414,565 of
      previously accrued interest on a convertible note payable due to a related
      party
      was converted into a new promissory note, bearing interest at 4% per annum. As
      of September 30, 2006, the total accrued interest on the note payable amounted
      to $36,338. All principal and accrued interest on the note is due and payable
      in
      full on July 22, 2007. The payee had a right to convert all or any portion
      of
      the outstanding principal balance and/or accrued interest of the notes into
      shares of common stock in the Company’s next round of equity financing
      subsequent to July 22, 2004, which
      occurred in June 2005 ,
      on the
      same terms and conditions as applicable to all other purchasers of such equity
      securities. The payee was notified by certified mail of their right to convert
      their note and all accrued interest into shares of common stock due to the
      equity financing that occurred in June 2005. The payee did not elect to convert
      all or any portion of the outstanding principal balance and/or accrued interest
      of the note.





**Note
      D - Notes Payable**





On
      July 22, 2004, in connection with the reverse merger, $79,473 of previously
      accrued interest on convertible notes payable was converted into a new
      promissory note, bearing interest at 4% per annum. As of September 30, 2006,
      the
      total accrued interest on the note payable amounted to $6,966. All principal
      and
      accrued interest on the note is due and payable in full on July 22, 2007.





Pursuant
      to a July 31, 2002 Salary Adjustment Agreement, upon the termination of
      employment of one of the participants, $75,906 of accrued, but unpaid, salary
      was converted to a note bearing interest at the rate of 12% per year.  The
      principal of the note is payable in four equal quarterly installments beginning
      January 2007. The accrued interest is due monthly .





**Note
      E - Convertible Notes Payable**





In
      April
      2006, the Company issued a Convertible Promissory Note (the “Note”) for $100,000
      in a private placement. The note holder has the option to convert the Note
      and
      receive shares of Protocall in any financing transaction with third parties
      conducted by Protocall under the same general terms and conditions as provided
      for in such a financing transaction (“conversion pricing provision”). The Note
      bears interest at 12% and is payable
      at the earlier of (i) October 31, 2006, or (ii) completion of a subsequent
      financing of no less than $5,000,000 in gross proceeds to the Company. In
      connection with the issuance of the Note, the Company issued the note holder
      a
      warrant to purchase 125,000 shares of common stock at an exercise price of
      $.20
      per share. The warrants may be exercised up to three years from date of
      issuance. The fair value of the warrants on the date of issuance was $20,700
      as
      determined utilizing the Black-Scholes option-pricing model with the following
      assumptions: 172.65% volatility, three year expected life, 4.96% risk free
      interest


-10-


rate,
      and
      a dividend yield ratio of 0%. The Company allocated the net proceeds between
      the
      Note and the warrants based on the relative fair value based method. The
      proceeds allocated to the value of the warrant were recorded as a finance
      expense. In July 2006, the Note was fully converted into 1,136,364 shares of
      common stock at a share price of $.088





The
      Note
      is a hybrid instrument which contains an embedded derivative feature which
      requires separate accounting as a derivative instrument under SFAS No. 133.
      The
      embedded derivative feature has been bifurcated from the debt host contract,
      referred to as the "Financial Instrument". The embedded derivative feature
      includes the conversion pricing provision within the note. The value of the
      embedded derivative liability of $5,682 was bifurcated from the debt host
      contract and recorded as a derivative financial instrument liability included
      in
      accrued expenses on the condensed consolidated balance sheet. The charge was
      reversed upon the conversion of the note in July 2006.





**Note
      F - Derivative Liabilities and Secured Convertible Notes
      Payable**





In
      August
      2006, the Company entered into an agreement with certain investors (the
      "Holder"), whereby the Company sold a Convertible Debenture (the "Convertible
      Note" or the “Note”) in the principal amount of $700,000. In September 2006, the
      company sold additional Convertible Notes in the aggregate amounts of $817,750
      under the same terms as the initial issue (total $1,517,750). The Holder was
      issued warrants for 15,000,000 shares in August and an additional warrant for
      2,512,500 shares were issued in September.





The
      notes
      bear interest of 6% per annum, computed based on a 365-day year and payable
      quarterly. No interest is due for any month in which the Trading Price is
      greater than $.14975 for each Trading Day. Any amount of principal or interest
      on this Note which is not paid when due bears interest at the rate of 15%
      (“Default Interest”). The principal payments on this note are payable in full on
      their respective maturity dates of August 8, 2009 and September 29, 2009.





The
      Notes
      are convertible into shares of the Company's common stock at a variable
      conversion price, subject to adjustment if the Company were to issue any
      additional shares of common stock at a price per share less than the applicable
      conversion rate then in effect, without a floor. The “Variable Conversion Price”
is the Applicable Percentage (50% at initial filing for registration, 55% prior
      to effectivity and 60% once registered) multiplied by the average of the lowest
      3 Trading Prices for the Common Stock during the 20 Trading Day periods.
      Conversions, including warrant exercises (as noted below), are limited monthly
      to the greater of $80,000 or the 10 day average daily volume, and in total
      are
      limited to the beneficial ownership of 4.99%. The Conversion Price and the
      number of shares to be issued upon conversion are subject to adjustment upon
      the
      occurrence of the events: major announcements  defined
      as an intent to consolidate or merge with  any
      other
      corporation other than a merger in which the Company is the surviving or
      continuing corporation and its capital stock is unchanged or sell or transfer
      all or substantially all of the assets of the Company or if any person, group
      or
      entity publicly announces a tender offer to purchase 50% or more of the
      Company’s Common Stock  any
      common stock reclassification; stock splits, combinations and dividends. In
      addition, the Fixed Conversion Price and the Variable Conversion Price are
      subject, in each case, to equitable adjustments for stock splits, stock
      dividends or rights offerings by the Company relating to the Company’s
      securities or the securities of any subsidiary of the Company, combinations,
      recapitalization, reclassifications and similar events.





Events
      of
      default under the Convertible Note include: the Company’s failure to perform any
      of its obligations, pay principal, interest and other fees, breach of covenant,
      breach of representations and warranties, default under related agreements,
      bankruptcy, and failure to deliver the common stock or replacement note to
      Investor free of restrictions and other conditions. The default interest rate
      is
      fifteen percent (15%). Upon occurrence of default, Holder may demand immediate
      repayment of the Convertible Note at 140% of the principal balance.





The
      Company has registration requirements as detailed in the Registration Rights
      Agreement. If the Company fails to meet the registration deadlines, then the
      Company must pay Holder liquidated damages equal to 2.0% of the principal
      balance per month pro-rated for each month in which the registration
      requirements are not met, but capped at 6%. The Company is required to file
      an
      SB-2 Registration Statement within 45 days from the Closing Date to register
      100% of the then shares to be issued upon conversion of the note. The debentures
      are secured by all of the assets of the Company. In
      November 2006, the Company entered into a revised registration agreement with
      the Holder whereby the Company is obligated to file an SB-2 registration
      statement by November 17, 2006.





The
      Company has the call option to prepay (“redeem”) the Notes assuming the Common
      Stock is trading at or below $.20 per share. The Company will pay in cash for
      prepayments: 120% if occurring within 30 days of the Issue Date; 130% for
      prepayments occurring between 31 and 60 days of the Issue Date, or 140% for
      prepayments occurring after the 60 th day
      following the Issue Date. The Company has a partial call option if the volume
      weighted average price of the Common Stock for the 5 trading days is below
      $.1198. For a partial


-11-


call
      option the Company will prepay a portion of the outstanding principal amount
      of
      the Notes equal to 101% of the principal divided by 36 plus one month’s interest
      and this will apply to all conversions for the month.





The
      derivative financial instrument, (the Convertible Note) has been accounted
      for
      in accordance with SFAS No. 133. These derivative financial instruments were
      recorded as liabilities in the consolidated balance sheet and measured at fair
      value. The Company will mark to market these derivative liabilities each quarter
      and record the change in fair value in the income statement. The recorded value
      of these debt features may fluctuate significantly based on fluctuations in
      the
      fair value of the Company’s common stock, as well as the volatility of the stock
      price during the term used for observation and the term remaining for the
      warrants. These significant fluctuations can create significant income and
      expense items on the financial statements of the Company.





The
      Convertible Note contains more than one embedded derivative feature which would
      individually warrant separate accounting as derivative instruments under SFAS
      133. The various embedded derivative features have been bundled together as
      a
      single, compound embedded derivative instrument that has been bifurcated from
      the debt host contract, and referred to as the "Single Compound Embedded
      Derivatives within Convertible Note". The single compound embedded derivative
      features include the conversion feature with the reset provisions within the
      Convertible Note, the call/redemption options, the interest rate adjustment,
      the
      cash prepayment penalties, and liquidated damages. The value of the single
      compound embedded derivative liability was bifurcated from the debt host
      contract and recorded as a derivative liability, which results in a reduction
      of
      the initial carrying amount (as unamortized discount) of the Convertible Note
      of
      the value at inception. The unamortized discount has been amortized to interest
      expense using the effective interest method over the life of the Convertible
      Note.





In
      August
      2006, in connection with the Securities Purchase Agreement, the Company granted
      the Holders a seven year Common Stock Purchase Warrant ("Holder Warrant") to
      purchase a total of 15,000,000 shares of common stock at an exercise price
      of
      $0.10 per share, subject to adjustment for dilutive share issuances.





The
      Warrant is exercisable immediately and allows the Holder to purchase the shares
      within 7 years of the issue date. The exercise price is subject to adjustment
      upon the occurrence of the following events during the period that the
      conversion right remains outstanding: common stock reclassification; stock
      splits, combinations and dividends. An additional 2,512,500 Warrants were issued
      in September, 2006 under the same terms.





Due
      to
      the floorless conversion feature of the convertible debt, the Company cannot
      necessarily share settle the existing debt or any outstanding warrants/options.
      This is due to the fact that the Company may not have sufficient authorized
      and
      un-issued shares available to share settle these obligations. Therefore, all
      existing outstanding warrants and options as of August 8, 2006 are “tainted” and
      have been treated as derivative liabilities under SFAS 133 and EITF
      00-19.





The
      warrants outstanding as of August 8, (referred to as “Tainted Warrants”) in
      aggregate allow the Holders to purchase 20,280,180 shares with various
      expirations dates ending August 4, 2009 (3 and 5 year terms). The Tainted
      Warrants were valued at $1,689,270 using a Black Scholes valuation
      model.





At
      the
      time of issue, the Company determined the probability weighed discounted cash
      flow of the note with the various embedded derivatives and determined the
      discounted cash flow of the note without the embedded derivatives. The cash
      flows were discounted by the risk-free rate based on the remaining term of
      the
      note. The implied value of the compound embedded derivatives was $608,021 for
      the Convertible Note issued in August 2006. In addition, warrants were issued
      to
      the Holder that were valued at $1,611,366 based on a Black-Scholes valuation
      model using a weighted average exercise price. Finally, the existing outstanding
      Tainted Warrants were valued at $1,689,270 using a Black-Scholes valuation
      model. The implied value of the compound embedded derivatives within the
      September 2006 note was $529,324 and warrants issued to the Holder were valued
      at $194,066 at the date of issue.





The
      fair
      value of the embedded derivatives at September 30, 2006 was valued at $982,429,
      the warrants issued with the Convertible Notes were valued at $1,487,847 and
      the
      tainted warrants were valued at $1,151,032. The valuation was calculated with
      the following assumptions: the stock price would increase in the short term
      at
      the cost of equity with a 130% volatility, there was a 85% probability the
      Company would not be in default of its registration requirements, assuming
      an
      event of default occurring 5% of the time increasing 10% per month, reset events
      projected to occur 25% of the time at an exercise price of $0.085, the Holder
      would automatically convert at a stock price of $.20 if the registration was
      effective and the Company was not in default, the Company would trigger
      redemption of the note when available at a stock price of $0.15 or higher,
      alternative financing would be initially available to redeem the note 0% of
      the
      time and increase monthly by 5% to a maximum of 25% and the trading volume
      would
      increase at 1% per month.


-12-


The
      Mark
      to Market change in the value of the Convertible Note Warrants is $(452,843).
      The mark to market change in the Compound Embedded Derivatives is $(154,916)
      and
      the mark to market change in the value of the Tainted Warrants is
      $(538,238).





The
      Company incurred legal and finder’s fees totaling $296,259 (of which $135,259 is
      the value of a warrant issued to the finder) associated with these notes. These
      fees are treated as deferred financing costs and are being amortized over the
      term of the convertible notes. $7,825 has been expensed as of September 30,
      2006.





**Note
      G - Consulting Agreements**





In
      April
      2006, the Company entered into an investor relations consulting agreement with
      a
      third party. Pursuant to this agreement, the Company issued the consultant
      a
      warrant to purchase 100,000 shares of the Company’s common stock at an exercise
      price of $.019 per share in exchange for all past due invoices. The warrant
      is
      exercisable over 4 years and has a fair value of $17,550. The warrant is
      recorded as an investor relations expense in selling, general and administrative
      expense on the condensed consolidated statement of operations. The Company
      also
      issued a warrant to purchase 60,000 shares of the Company’s common stock at an
      exercise price of $.019 per share, for future services. The warrant is
      exercisable over 4 years and has a fair value of $10,530. The warrant is being
      amortized over the one year life of the consulting contract. As of September
      30,
      2006, $5,265 has been recorded as an investor relations expense in selling,
      general and administrative expense on the condensed consolidated statement
      of
      operations.





In
      June
      2006, the Company entered into an investor relations consulting agreement with
      a
      third party. Pursuant to the terms of the agreement, the Company is obligated
      to
      issue the consultant a warrant to purchase 250,000 shares of common stock at
      an
      exercise price of $.013 per share. The fair value of the warrant is $16,925,
      which has been recorded and is being amortized over the one year term of the
      consulting agreement. As of September 30, 2006, $7,052 has been recorded as
      an
      investor relations expense in selling, general and administrative expense on
      the
      condensed consolidated statement of operations.





In
      August
      2006, the Company entered into an agreement with a third party intellectual
      property patent consultant. The Company agreed to issue the third party 269,230
      shares at $0.13 per share as payment for services rendered. The shares were
      valued at $35,000 and expensed in full.




**Note
      H - Litigation**





Upon
      his
      termination from employment with the Company, the former CEO Mark Benedikt
      asserted monetary claims under his employment agreement, and by demand dated
      October 19, 2005, sought arbitration of those claims which for purposes of
      the
      arbitration demand he had valued at $366,979. The Company settled on January
      23,
      2006. The terms of the settlement require the Company to make periodic cash
      payments totaling $100,000 and the issuance of a warrant to purchase 240,000
      shares of common stock at an exercise price of $1.06 per share with registration
      rights. The warrant was valued at $24,274 on the settlement date and recorded
      as
      expense and as a liability in 2006. In accordance with EITF 00-19, this
      liability is marked to fair value at each reporting date until the warrant
      is
      exercised. On September 30, 2006, the warrant was valued at $15,224. The Company
      will incur a liability of up to $25,000 if it fails to register the warrants
      as
      per the terms of the agreement. The Company had accrued the $100,000 due to
      Mr.
      Benedikt as of December 31, 2005. The Company has paid $62,215 against this
      liability as of September 30, 2006. In November 2006, as per the terms of the
      settlement, the Company paid the remaining balance due to Mr.
      Benedikt.





On
      August
      23, 2005, First Providence Financial Group, LLC (“First Providence”) filed a
      Demand for Arbitration against the Company with the American Arbitration
      Association. The demand alleged that the Company breached a January 2000
      placement agency agreement with First Providence. The demand sought $5 million
      in damages, plus fees and costs. The demand alleged that First Providence had
      a
      right of first refusal and that the Company disregarded it. The Company believed
      that First Providence was not then in business, incapable of performing and
      failed to do so when requested to perform. The Company reached a settlement
      agreement with First Providence on January 31, 2006. The Company issued First
      Providence 1,000,000 shares of common stock and reimbursed First Providence
      $8,000 for out of pocket costs. The shares valued at $140,000 were accrued
      in
      December 2005. First Providence withdrew the arbitration request.





The
      case
      of Code Ventures LLC v. Protocall Software Delivery Systems, Inc., et al. was
      filed in the Superior Court of the State of California, San Diego Judicial
      District, on or about August 31, 2005. The complaint asserts claims for: (i)
      breach of a software development agreement between the parties dated October
      13,1999; (ii) quantum merit; and (iii) goods sold, and seeks damages of at
      least
      $200,000, plus interest, attorneys’ fees, and cost. The plaintiff also seeks a
      judgment declaring that it is entitled to exercise certain options for stock
      in
      Protocall Software Delivery Systems, Inc. The Company filed a cross complaint
      asserting claims for breach of contract, restitution, money had and received,
      conversion and declaratory relief. The Company is also seeking recovery of
      $43,700 for the value of equipment not returned to the


-13-


Company
      by Code Ventures. On September 13, 2006, the parties participated in a
      mediation. As a result of the mediation, the parties settled the matter for
      $100,000, with payments to be made in four installments from October 16, 2006
      through February 20, 2007. The first installment payment of $25,000 has been
      paid. The Court is currently scheduled to dismiss the lawsuit on December 4,
      2006. The Company accrued the $100,000 settlement in the quarter ended September
      30, 2006.





**Note
      I - Private Offerings**





In
      January 2006, the Company entered into a securities purchase agreement with
      an
      investor in a private placement. In connection with the private placement,
      the
      Company sold 2,222,222 shares of common stock, at $.135 per share, and warrants
      (the “January Warrants”) to purchase up to 1,111,111 shares of the Company’s
      common stock, for an aggregate of $300,000.





The
      January Warrants have an exercise price of $.50 per share of common stock,
      are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the January Warrants is subject to
      adjustment in the event of specified dilutive or accretive events, such as
      stock
      splits and stock combinations. The exercise price, as well as the per share
      price of the common stock sold in the private placement, is subject to further
      adjustment if the Company issues any shares of common stock or securities
      convertible or exercisable into common stock (subject to customary exceptions
      such as securities issued pursuant to equity incentive plans) through January
      2007 at a price per share less than the per share price of the common stock
      and/or the exercise price of the January Warrants, in which case the per share
      price and/or the exercise price, as applicable, will be adjusted to equal the
      price of the securities in the new issuance. The adjustment in the per share
      price would result in the issuance of additional shares of common stock to
      the
      holder. Due to the private offering entered into in June 2006 (see below) ,
      the
      Company issued additional shares of common stock and adjusted the January
      Warrants’ exercise price to $.083 per share pursuant to the anti-dilution
      provisions of the January 2006 securities purchase agreement.





In
      February 2006, the Company entered into a securities purchase agreement with
      an
      investor in a private placement. In connection with the private placement,
      the
      Company sold 390,625 shares of common stock, at $.128 per share, and warrants
      (the “February Warrants”) to purchase up to 585,938 shares of the Company’s
      common stock, for an aggregate of $50,000.





The
      February Warrants have an exercise price of $.128 per share of common stock,
      are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the February Warrants is subject to
      adjustment in the event of specified dilutive or accretive events, such as
      stock
      splits and stock combinations. The exercise price, as well as the per share
      price of the common stock sold in the private placement, is subject to further
      adjustment if the Company issues any shares of common stock or securities
      convertible or exercisable into common stock (subject to customary exceptions
      such as securities issued pursuant to equity incentive plans) through February
      2007 at a price per share less than the per share price of the common stock
      and/or the exercise price of the February Warrants, in which case the per share
      price and/or the exercise price, as applicable, will be adjusted to equal the
      price of the securities in the new issuance. The adjustment in the per share
      price would result in the issuance of additional shares of Common Stock to
      the
      holder. Due to the private offering entered into in July 2006 (see below),
      the
      Company issued additional shares of common stock and adjusted the February
      Warrants’ exercise price to $.083 per share pursuant to the anti dilution
      provisions of the February 2006 securities purchase agreement.





In
      April
      2006, the Company entered into a securities purchase agreement with investors
      in
      a private placement. In connection with the private placement, the Company
      sold
      1,234.568 shares of common stock, at $.162 per share, 584,795 shares of common
      stock at $.171 per share and warrants (the “April Warrants”) to purchase up to
      1,218,324 shares of the Company’s common stock, for an aggregate of $300,000.





The
      April
      Warrants have an exercise price of $.20 per share of common stock, are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the April Warrants is subject to adjustment
      in the event of specified dilutive or accretive events, such as stock splits
      and
      stock combinations. The exercise price, as well as the per share price of the
      common stock sold in the private placement, is subject to further adjustment
      if
      the Company issues any shares of common stock or securities convertible or
      exercisable into common stock (subject to customary exceptions such as
      securities issued pursuant to equity incentive plans) through April 2007 at
      a
      price per share less than the per share price of the common stock and/or the
      exercise price of the April Warrants, in which case the per share price and/or
      the exercise price, as applicable, will be adjusted to equal the price of the
      securities in the new issuance. The adjustment in the per share price would
      result in the issuance of additional shares of common stock to the holder. Due
      to
      the private offerings entered into in July 2006 (see below) , the Company
      additional shares of common stock to the April investors and adjusted the April
      Warrants’ exercise price to $.083 per share pursuant to the anti-dilution
      provisions of the April 2006 securities purchase agreement.


-14-


In
      May
      2006, the Company entered into a securities purchase agreement with investors
      in
      a private placement. In connection with the private placement, the Company
      sold
      an aggregate of 1,079,136 shares of common stock, at $.139 per share, and
      warrants (the “May Warrants”) to purchase up to 539,568 shares of common stock,
      for an aggregate of $150,000.





The
      May
      Warrants have an exercise price of $.20 per share of common stock, are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the May Warrants is subject to adjustment
      in
      the event of specified dilutive or accretive events, such as stock splits and
      stock combinations. The exercise price, as well as the per share price of the
      common stock sold in the private placement, is subject to further adjustment
      if
      the Company issues any shares of common stock or securities convertible or
      exercisable into common stock (subject to customary exceptions such as
      securities issued pursuant to equity incentive plans) through May 2007 at a
      price per share less than the per share price of the common stock and/or the
      exercise price of the May Warrants, in which case the per share price and/or
      the
      exercise price, as applicable, will be adjusted to equal the price of the
      securities in the new issuance. The adjustment in the per share price would
      result in the issuance of additional shares of common stock to the holder. Due
      to
      the private offering entered into in July 2006 (see below) , the Company issued
      additional shares of common stock to the May investors and adjusted the May
      Warrants’ exercise price to $.083 per share pursuant to the anti-dilution
      provisions of the May 2006 securities purchase agreement.





In
      June
      2006, the Company entered into a securities purchase agreement with an investor
      in a private placement. In connection with the private placement, the Company
      sold an aggregate of 1,059,322 shares of common stock, at $.094 per share,
      and
      warrants (the “June Warrants”) to purchase up to 1,059,322 shares of common
      stock, for an aggregate of $100,000.





The
      June
      Warrants have an exercise price of $.20 per share of common stock, are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the June Warrants is subject to adjustment
      in the event of specified dilutive or accretive events, such as stock splits
      and
      stock combinations. The exercise price, as well as the per share price of the
      common stock sold in the private placement, is subject to further adjustment
      if
      the Company issues any shares of common stock or securities convertible or
      exercisable into common stock (subject to customary exceptions such as
      securities issued pursuant to equity incentive plans) through June 2007 at
      a
      price per share less than the per share price of the common stock and/or the
      exercise price of the June Warrants, in which case the per share price and/or
      the exercise price, as applicable, will be adjusted to equal the price of the
      securities in the new issuance. The adjustment in the per share price would
      result in the issuance of additional shares of common stock to the holder.
      Due
      to the private offering entered into in July 2006 (see below), the Company
      issued additional shares of common stock to the June investor and adjusted
      the
      June Warrants’ exercise price to $.083 per share pursuant to the anti dilution
      provisions of the June 2006 securities purchase agreement.





In
      July
      2006, the Company entered into securities purchase agreements with two investors
      in a private placement with each investor. In connection with the private
      placements, the Company sold an aggregate of 1,170,592 shares of common stock,
      at a share price of $.083 and $.088 per share, and warrants (the “July
      Warrants”) to purchase up to 1,170,592 shares of common stock, for an aggregate
      of $100,000.





The
      July
      Warrants have an exercise price of $.20 per share of common stock, are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the July Warrants is subject to adjustment
      in the event of specified dilutive or accretive events, such as stock splits
      and
      stock combinations. The exercise price, as well as the per share price of the
      common stock sold in the private placement, is subject to further adjustment
      if
      the Company issues any shares of common stock or securities convertible or
      exercisable into common stock (subject to customary exceptions such as
      securities issued pursuant to equity incentive plans) through July 2007 at
      a
      price per share less than the per share price of the common stock and/or the
      exercise price of the July Warrants, in which case the per share price and/or
      the exercise price, as applicable, will be adjusted to equal the price of the
      securities in the new issuance. The adjustment in the per share price would
      result in the issuance of additional shares of common stock to the
      holder.





In
      July
      2006, the $100,000 convertible note was converted into equity at a share price
      of $.088. The Company issued the investor 1,136,364 shares of common stock
      at a
      share price of $.088 and warrants to purchase up to 1,136,364 shares of common
      stock at an exercise price of $.20 per share.





**Note
      J - Inventory Purchase**





On
      September 29, 2006, the Company purchased movie and music media at a purchase
      price of $625,000 and movie and television show masters at a purchase price
      of
      $50,000.  The masters were classified as other assets. Under the terms of
      the agreement, the Company was contractually obligated to sell inventory with
      a


-15-


cost
      of
      $273,000 to a stipulated third party by September 30, 2006.  The third
      party is obligated to return any unsold inventory by December 31,2006 to the
      Company for destruction. The Company has set up a reserve of $114,964 against
      this inventory.





**Note
      K - Stock Forfeiture**





In
      July
      2006, an officer of the Company forfeited 80,000 shares of common stock issued
      upon conversion of accrued salary in July 2004. The accrued salary of $100,000
      was also forgiven by the officer.





**Note
      L -Subsequent Events**





In
      October 2006, the Company increased its number of authorized shares to
      200,000,000.





In
      October 2006, the Company entered into a securities purchase agreement with
      an
      investor in a private placement. In connection with the private placement,
      the
      Company sold an aggregate of 568,182 shares of common stock, at $.088 per share,
      and warrants (the “October Warrants”) to purchase up to 568,182 shares of common
      stock, for an aggregate of $50,000. The $50,000 was received in September 2006
      and shares are reported as issuable at September 30, 2006.





The
      October Warrants have an exercise price of $.20 per share of common stock,
      are
      exercisable immediately and expire on the third year anniversary of the initial
      warrant date. The exercise price of the October Warrants is subject to
      adjustment in the event of specified dilutive or accretive events, such as
      stock
      splits and stock combinations. The exercise price, as well as the per share
      price of the common stock sold in the private placement, is subject to further
      adjustment if the Company issues any shares of common stock or securities
      convertible or exercisable into common stock (subject to customary exceptions
      such as securities issued pursuant to equity incentive plans) through October
      2007 at a price per share less than the per share price of the common stock
      and/or the exercise price of the October Warrants, in which case the per share
      price and/or the exercise price, as applicable, will be adjusted to equal the
      price of the securities in the new issuance. The adjustment in the per share
      price would result in the issuance of additional shares of common stock to
      the
      holder.





In
      October 2006, the holder of a convertible note issued in July 2004 (see note
      E),
      elected to convert the principal and accrued interest into common stock. The
      Company issued the investor 45,377 shares of common stock at a conversion price
      of $.128 and a warrant to purchase 3,978 shares of common stock at an adjusted
      exercise price of $.128. The remaining July 2004 convertible noteholders, waived
      their conversion rights.





In
      November 2006, the Company entered into a joinder agreement to the financing
      agreement of August 8, as amended on September 30, with the initial Investors
      and two additional accredited investors. Under the terms of the joinder
      agreement, the additional investors purchased callable convertible notes in
      the
      aggregate amount of $500,000 under the same terms as the initial Investors.
      The
      additional investors were each issued a warrant to purchase 2,884,615 shares
      of
      common stock at an exercise price of $.10. The initial Investors are no longer
      obligated to fund any additional amounts pursuant to the original August 2006
      financing agreement. The Company has until November 17, 2006 to file a
      registration statement.





**Item
      2 - Management’s Discussion and Analysis or Plan of
      Operation**





**Unless
      the context otherwise requires, “we,” “our”, “us” and similar phrases refer to
      Protocall Technologies Incorporated together with is wholly-owned subsidiaries,
      Protocall Software Delivery Systems, Inc. and Precision Type,
      Inc.**





**Overview**





Protocall
      Technologies Incorporated was formed in New York in December 1992. Until 1998,
      Protocall was focused primarily on licensing proprietary font software to large
      businesses and operated through its recently discontinued Precision Type, Inc.
      subsidiary. Active marketing of Protocall's font software licensing business
      was
      discontinued in 2001, when Protocall determined to focus solely on developing
      its current software distribution business (SoftwareToGo); however, revenues
      from the font software business continued through June 2004. For
      much
      of 2005 and 2006, we have focused on supporting our SoftwareToGo system,
      pursuing new customers and publishers and developing our new TitleMatch
      System.





Our
      system is currently utilized for delivery of software products under the product
      name “SoftwareToGo®;” however, we are vigorously pursuing an expansion of
      available products to include movie and television content. We believe our
      technology is readily adaptable to these and other types of digital products
      without additional significant investment. In connection with movie and
      television content, we recently announced


-16-


our
      new
‘TitleMatch’ system name, which was selected to reflect the inclusion of
      products other than consumer software.





Due
      to
      very limited revenues to date, management has not yet developed nor relied
      on
      any key performance indicators to assess our business.





**Risk
      Factors**





**We
      have incurred significant losses in the past and expect losses in the future,
      which can have a detrimental**  **effect
      on the long-term capital appreciation of our common stock.**





We
      have a
      limited operating history on which to base an evaluation of our business and
      prospects. Our prospects must be considered in light of inherent risks, expenses
      and difficulties encountered by companies in their early stage of development,
      particularly companies in new and evolving markets. Such risks include
      acceptance by software publishers, retailers and consumers in an evolving and
      unpredictable business environment, the lack of a well developed brand identity
      and the ability to bring products to market on a timely basis.




**Due
      to our continual dependence upon outside financing, there is substantial doubt
      as to whether we can**  **continue
      as a going concern.**





Through
      November, 2006 we have been continually dependent upon borrowings through
      private offerings of convertible and non-convertible debt and equity from
      related and non-related parties to finance its business operations.





**Management
      believes that cash on hand at November 14, 2006 will enable us to continue
      our
      business plan through**  **early,
      2007 although there can be no assurances that this will be the
      case.**





We
      are
      currently seeking additional financing to meet its short-term and long-term
      liquidity requirements, although there can be no assurances that such financing
      will be available, or if available, that it will be on terms acceptable to
      us.
      The accompanying financial statements have been prepared on the basis that
      we
      will continue as a going concern, which assumes the realization of assets and
      satisfaction of liabilities in the normal course of business. The
      uncertainties regarding the availability of continued financing and commencement
      of adequate commercial revenues raise substantial doubt about our ability to
      continue as a going concern, which contemplates the realization of assets and
      satisfaction of liabilities in the normal course of business.





**Until
      such time as we can rely on revenues generated from operations, we have a need
      for subsequent**  **funding;
      if we are not successful in obtaining such funding, we will be forced to curtail
      or cease our**  **activities.**





We
      estimate that we will require additional cash resources by early 2007. Our
      continued operations thereafter will depend upon the availability of cash flow,
      if any, from our operations or our ability to raise additional funds through
      equity or debt financing. There can be no assurance that we will be able to
      obtain additional funding when it is needed, or that such funding, if available,
      will be obtainable on terms favorable to or affordable by us. If we cannot
      obtain needed funds, we may be forced to curtail or cease our activities. The
      uncertainties regarding the availability of subsequent funding and commencement
      of adequate commercial revenues raise substantial doubt about our ability to
      continue as a going concern, which contemplates the realization of assets and
      satisfaction of liabilities in the normal course of business.




**We
      depend on continuing relationships with our software publishers, and if we
      lose
      these relationships our**  **product
      offerings would be limited and less desirable to consumers and
      retailers.**





We
      generate revenue as a just-in-time software distributor to retail stores and
      e-commerce retailers. If we cannot develop and maintain satisfactory
      relationships with software publishers on acceptable commercial terms, we will
      likely experience a decline in revenue. We also depend on these software
      publishers to create, support and provide updates for software products that
      consumers will purchase. If we are unable to license a sufficient number of
      titles from software publishers, or if the quality of titles provided by these
      software publishers does not reach a satisfactory level, we may not be able
      to
      generate adequate interest among retailers or consumers to utilize the system.
      Our contracts with our software publisher clients are generally one to two
      years
      in duration, with an automatic renewal provision for additional one-year
      periods, unless we are provided with a written notice at least 90 days before
      the end of the contract. As is common in our industry, we have no long-term
      or
      exclusive contracts or arrangements with any software publishers that guarantee
      the availability of software products. Software publishers that currently supply
      software to us may not continue to do so and we may be unable to establish
      new
      relationships with software publishers to supplement or replace existing
      relationships.


-17-


**We
      are not up to date with payments to many of our suppliers which may put us
      in
      default of our contracts with the respective supplier.**





If
      these
      suppliers decline to do business with us, it would have a material impact on
      us
      and could possibly result in the loss of substantial business and the inability
      to continue as a going concern.





**Our
      publisher license acquisition process is lengthy, which may cause us to incur
      substantial expenses and expend management time without generating corresponding
      revenue, which would impair our cash flow.**





We
      market
      our services directly to software publishers and retailers. These relationships
      are typically complex and take time to finalize. Due to operating procedures
      in
      many organizations, a significant amount of time may pass between selection
      of
      our products and services by key decision-makers and the signing of a contract.
      The period between the initial sales call and the signing of a contract with
      significant sales potential is difficult to predict and typically ranges from
      one to twelve months for software publishers. If, at the end of a sales effort,
      a prospective publisher does not license its products to us, we may have
      incurred substantial expenses and expended management time that cannot be
      recovered and that will not generate corresponding revenue. As a result, our
      cash flow and our ability to fund expenditures incurred during the publisher
      license acquisition process may be impaired.





**Software-on-demand
      and DVD-on-demand technology is still evolving and unproven and the industry
      may
      ultimately fail to accept this technology, resulting in our products not being
      in demand.**





Our **** success
      will depend in large part on the growth in consumer acceptance of
      software-on-demand and DVD-on-demand technology as a method of distributing
      software products. Software-on-demand is a relatively new method of distributing
      software products to consumers, and unless it gains widespread market
      acceptance, we will be unable to achieve our business plan. Factors that will
      influence the market acceptance of the technology include:





The
      willingness of software publishers and movie and television content owners
      to
      license content for distribution through our system.





·
            Continuing
                demand by consumers for software products distributed on CD media
                and
                movie and television content on DVD
                media;


·
            Consumer
                behavior relating to product selection through touch-screen terminals
                for
                walk-in store deployments; and


·
            Consumer
                acceptance of DVD-style packages, which are the same as traditional
                packages for movie and television content on DVD, but smaller than
                traditional software packages.


**Even
      if our technology achieves widespread acceptance, we may be unable to overcome
      the substantial existing and future technical challenges associated with on-site
      delivery of software and movies reliably and consistently on a long-term
      basis.**





Our
      failure to do so would impair our ability to execute our business
      plan.




**Our
      industry is characterized by rapid technological change that may make our
      technology and systems obsolete or cause us to incur substantial costs to adapt
      to these changes.**





To
      remain **** competitive,
      we must continue to enhance and improve the responsiveness, functionality and
      features of our system and the underlying network infrastructure. If we incur
      significant costs without adequate results, or are unable to adapt rapidly
      to
      technological changes, we may fail to achieve our business plan. The electronic
      commerce industry is characterized by rapid technological change, changes in
      user and client requirements and preferences, frequent new product and service
      introductions embodying new technologies and the emergence of new industry
      standards and practices that could render our technology and systems obsolete.
      To be successful, we must adapt to rapid technological change by licensing
      and
      internally developing leading technologies to enhance our existing services,
      developing new products, services and technologies that address the increasingly
      sophisticated and varied needs of our clients, and responding to technological
      advances and emerging industry standards and practices on a cost-effective
      and
      timely basis. The development of our system and other proprietary technologies
      involves significant technical and business risks. We may fail to use new
      technologies effectively or fail to adapt our proprietary technology and systems
      to client requirements or emerging industry standards.


-18-


**System
      failures could reduce the attractiveness of our service offerings; any prolonged
      interruptions in our operations could cause consumers to seek alternative
      providers** **of software.**





We
      provide electronic **** delivery
      of digital media products and product marketing services to our clients and
      end-users through our proprietary technology and rights management systems.
      These systems also maintain an electronic inventory of products. The
      satisfactory performance, reliability and availability of the technology and
      the
      underlying network infrastructure are critical to our operations, level of
      client service, reputation and ability to attract and retain clients. While
      we
      have engaged an outside service company to perform regular service on the
      systems in the field, we have experienced periodic interruptions, affecting
      all
      or a portion of our systems, which we believe will continue to occur from time
      to time. Any systems damage or interruption that impairs our ability to accept
      and fill client orders could result in an immediate loss of revenue to us,
      and
      could cause us to lose clients. In addition, frequent systems failures could
      harm our reputation.




**We
      may become liable to clients who are dissatisfied with our system, which would
      directly impact our prospects.**





We
      design, develop, implement and manage electronic commerce solutions that are
      crucial to the operation of our clients’ businesses. Defects in the solutions we
      develop could result in delayed or lost revenue, adverse consumer reaction,
      and/or negative publicity which could require expensive corrections. As a
      result, clients who experience these adverse consequences either directly or
      indirectly as a result of our services could bring claims against us for
      substantial damages. Any claims asserted could exceed the level of any insurance
      coverage that may be available to us. Moreover, the insurance we carry may
      not
      continue to be available on economically reasonable terms, or at all. The
      successful assertion of one or more large claims that are uninsured, that exceed
      insurance coverage or that result in changes to insurance policies (including
      premium increases) could adversely affect our operating results or financial
      condition.




**Because
      of the relatively small number of employees each of whom possess specialized
      knowledge about our business we would be adversely impacted if any one of those
      employees were to become unavailable** .





We
      do not
      currently carry key-man life insurance on the lives of any of our executive
      officers.




**Our
      liability insurance may not be adequate in a catastrophic situation.** **Substantially
      all of our products are produced at our headquarters in Commack, New York or
      assembled in retailers’ stores.**





We
      currently maintain property damage insurance covering our inventory, furniture
      and equipment in our corporate headquarters. We maintain liability insurance,
      products and completed operations liability insurance and an umbrella liability
      policy. We also maintain insurance coverage for liability claims resulting
      from
      the use of our equipment located in retail stores and for equipment in-transit
      to and from retail stores. We also purchase business interruption insurance
      for
      losses relating to our facilities. Nevertheless, material damage to, or the
      loss
      of, our facilities, equipment or system data files, due to fire, severe weather,
      flood or other catastrophe, even if insured against, could result in a
      significant loss to us. We are currently preparing a disaster recovery
      plan.




**Our
      failure to protect our intellectual property could cause an erosion of our
      current competitive strengths** **.** **** **We
      regard the protection of our patents, trademarks, copyrights, trade secrets
      and
      other intellectual property**  **as
      critical to our success.**





We
      rely
      on a combination of patent, copyright, trademark, service mark and trade secret
      laws and contractual restrictions to protect our proprietary rights. We have
      entered into confidentiality and non-disclosure agreements with our employees
      and contractors, and non-disclosure agreements with parties with whom we conduct
      business, in order to limit access to and disclosure of our proprietary
      information. See “Business -- Patents and Intellectual Property.” These
      contractual arrangements and the other steps taken by us to protect our
      intellectual property may not prevent misappropriation of our technology or
      deter independent third-party development of similar technologies. We also
      seek
      to protect our proprietary position by filing U.S. and foreign patent
      applications related to our proprietary technology, inventions and improvements
      that are important to the development of our business. Proprietary rights
      relating to our technologies will be protected from unauthorized use by third
      parties only to the extent they are covered by valid and enforceable patents
      or
      are effectively maintained as trade secrets. We pursue the registration of
      our
      trademarks and service marks in the United States and internationally. Effective
      patent, trademark, service mark, copyright and trade secret protection may
      not
      be available in every country in which our services are made available
      online.


-19-


**The
      steps we have taken to protect our proprietary rights may be inadequate and
      third parties may infringe or misappropriate our trade secrets, trademarks
      and
      similar proprietary rights.**




Any **** significant
      failure on our part to protect our intellectual property could make it easier
      for our competitors to offer similar services and thereby adversely affect
      our
      market opportunities. In addition, litigation may be necessary in the future
      to
      enforce our intellectual property rights, to protect our trade secrets or to
      determine the validity and scope of the proprietary rights of others. Litigation
      could result in substantial costs and diversion of management and technical
      resources and may not be successful.




**Claims
      against us related to the products that we deliver electronically and the
      products that we deliver**  **physically
      could also require us to expend significant resources.**





Claims
      may be made against us for negligence, copyright or trademark infringement,
      product liability or other theories based on the nature and content of software
      products or tangible goods that we deliver electronically and physically.
      Because we did not create these products, we are generally not in a position
      to
      know the quality or nature of the content of these products. Although we carry
      general liability insurance that requires our customers to indemnify us against
      consumer claims, our insurance and indemnification measures may not cover
      potential claims of this type, may not adequately cover all costs incurred
      in
      defense of potential claims, or may not reimburse us for all liability that
      may
      be imposed. Any costs or imposition of liability that are not covered by
      insurance or indemnification measures could be expensive and time-consuming
      to
      address, distract management and/or delay product deliveries, even if we are
      ultimately successful in the defense of these claims.




**Security
      breaches could hinder our ability to securely transmit confidential information
      and could harm our clients** **.** **** **A
      significant barrier to electronic commerce and communications is the secure
      transmission of**  **confidential
      information over public networks.**





Any
      compromise or elimination of our security could be costly to remedy, damage
      our
      reputation and expose us to liability, and dissuade existing and new clients
      from using our services. We rely on encryption and authentication technology
      licensed from third parties to provide the security and authentication necessary
      for secure transmission of confidential information, such as consumer credit
      card numbers. A party who circumvents our security measures could misappropriate
      proprietary information or interrupt our operations.




**We
      may be required to expend significant capital and other resources to protect
      against security breaches or address problems caused by
      breaches.**





Concerns
      over the security of the Internet and other online transactions and the privacy
      of users could deter people from using the Internet to conduct transactions
      that
      involve transmitting confidential information, thereby inhibiting the growth
      of
      our business. To the extent that our activities or those of third-party
      contractors involve the storage and transmission of proprietary information,
      such as credit card numbers, security breaches could damage our reputation
      and
      expose us to a risk of loss or litigation and possible liability. Our security
      measures may not prevent security breaches and failure to prevent security
      breaches could lead to a loss of existing clients and deter potential clients
      away from our services.




**We
      rely to a large degree on third parties for the manufacture and maintenance
      of
      our system, who could subject us to delays in satisfying customer
      needs.**





We
      rely
      heavily upon third parties to perform **** such
      tasks as assembly and on-site maintenance of our system. Our ability to enter
      new markets and sustain satisfactory levels of sales in each market will depend
      in significant part upon the ability of these companies to perform effectively
      on our behalf. There can be no assurance that we will be successful in entering
      into agreements with all of these companies when necessary. In addition, once
      we
      enter into such manufacturing contracts, we face the possibility that such
      contracts will not be extended or replaced. We anticipate that we can obtain
      in
      a timely manner alternative third party services and that the failure to extend
      or replace existing contracts would not have a material adverse effect on us,
      although we can give no assurance in this regard.




**Implementation
      of our system requires capital, which we may not be able to
      provide** **,
      which could preclude us**  **from
      entering into otherwise promising agreements** **.**




Utilizing
      our system in a retail environment requires a capital commitment for equipment
      and deployment costs, which we may not be able to provide. In agreements that
      call for users of our system to fund equipment and deployment costs themselves,
      we may be required to reduce our selling prices when
      compared to agreements in which we finance equipment and deployment costs. 
The retailer’s financial risk/reward decision might prevent it from
      entering an agreement with us or it may
      demand price concessions to mitigate the financial risk, which may ultimately
      result in the agreement not being economically feasible for us to
      perform .


-20-


**Sales
      are highly** **dependent** **on obtaining license rights** **,
      the failure of which would result in insufficient revenue to pay for system
      equipment and deployment costs** **.**





Sales
      of
      products through our system are highly dependent on the qualitative mix of
      titles that we are able to license from software publishers and movie studios
      for inclusion on our system. Although we have executed licensing agreements
      with more
      than 214
      software publishers covering
      approximately 1,048 titles , our current
      product offering is not adequate to achieve sufficient revenue for either a
      retailer or us to pay for system equipment and deployment costs. In
      order
      for us to be successful, we will need to improve the quality of titles on our
      system.




**Our
      common stock may be considered a “penny stock” and may be difficult to sell when
      desired.**





The
      SEC
      has adopted regulations which generally define “penny stock” to be an equity
      security that has a market price of less than $5.00 per share or an exercise
      price of less than $5.00 per share, subject to specific exemptions. The market
      price of our common stock is less than $5.00 per share and therefore may be
      designated as a “penny stock” according to rules of the SEC. This designation
      requires any broker or dealer selling these securities to disclose certain
      information concerning the transaction, obtain a written agreement from the
      purchaser and determine that the purchaser is reasonably suitable to purchase
      the securities. These rules may restrict the ability of brokers or dealers
      to
      sell our common stock and may affect the ability of our stockholders to sell
      their shares. In addition, since our common stock is currently quoted on the
      OTC
      Bulletin Board, stockholders may find it difficult to obtain accurate quotations
      of our common stock and may experience a lack of buyers to purchase the stock
      or
      a lack of market makers to support the stock price.




**Investors
      should not anticipate receiving cash dividends on our common
      stock** **.**





We
      have
      never declared or paid any cash dividends or distributions on our capital stock.
      We currently intend to retain any future earnings to support operations and
      to
      finance expansion and, therefore, we do not anticipate paying any cash dividends
      on our common stock in the foreseeable future.




**Revenue
      Model**





We
      employ
      two revenue models in our existing retailer agreements: one for conventional
      ("bricks and mortar") retailers, and another for online/catalog retailers.
      Under
      the "bricks and mortar" revenue model, which is applicable to our agreement
      with
      CompUSA, we license content, integrate, install and maintain SoftwareToGo site
      equipment, provide system training to store personnel, supply the physical
      deliverables (CD, case, packaging and labeling), provide system help desk
      support during store hours and act as an on-demand distributor to the retailer.
      The retailer, in accordance with store configuration and consumer
      merchandising/promotion plans developed jointly with us, supplies prominent
      space for the Product Preview Stations within their stores as well as an
      appropriate location for the Order Fulfillment Station, and provides
      SoftwareToGo system promotion. Prior to deployment, we and the retailer jointly
      develop plans relating to sales reporting procedures, communication line setup,
      network wiring, POS system integration and product pricing.





For
      online and catalog retailers, which is applicable to our agreement with
      TigerDirect.com, the business model differs somewhat. For these retailers,
      a
      high-capacity SoftwareToGo Order Fulfillment Station is used without the need
      for a Product Preview Station. The system can be installed either at our
      facilities or at the customer's shipping center. If the system is installed
      at
      our facility, the system is operated by us and our employees ship the products.
      Under this model, we expect much higher capacity utilization for the Order
      Fulfillment Station and, consequently, a faster payback on deployed
      capital.





We
      secure
      the right to replicate titles through licensing agreements with software
      publishers, paying a licensing fee to each publisher per product vended. In
      instances where a consumer returns SoftwareToGo-produced products, the publisher
      license fee is credited to us.





We
      expect
      to be able to improve our licensing terms as the number of installed
      SoftwareToGo sites increase. Because our agreements with publishers provide
      for
      a longer time period to pay the licensing fees due for products sold than the
      period of time provided to the retailers to pay us for the software produced
      by
      the SoftwareToGo system, we do not anticipate an increase to working capital
      requirements from this aspect of the business as the business grows. We do
      not
      prepay or guarantee any minimum license fees to publishers. Our agreements
      provide for a fixed selling price for each product licensed through our system.
      We invoice our customers on a monthly basis, based on 30-day payment terms,
      for
      each unit sold during the prior month.





Revenue
      from the sale of recently purchased movie and television DVDs is recognized
      when
      the products are shipped to the customer. We invoice these customers at time
      of
      shipment.


-21-


**Critical
      Accounting Policies**





Our
      discussion and analysis of results of operations and financial condition are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these consolidated financial statements requires
      us
      to make estimates and judgments that affect the reported amounts of assets,
      liabilities, revenues and expenses, and related disclosure of contingent assets
      and liabilities. We evaluate our estimates on an ongoing basis, including those
      related to provisions for uncollectible accounts receivable, inventories, and
      contingencies and litigation. We base our estimates on historical experience
      and
      on various other assumptions that are believed to be reasonable under the
      circumstances, the results of which form the basis for making judgments about
      the carrying values of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.





The
      accounting policies that we follow are set forth in Note A to our condensed
      consolidated financial statements as included in this report. These accounting
      policies conform to accounting principles generally accepted in the United
      States of America, and have been consistently applied in the preparation of
      the
      financial statements.





**Revenue
      Recognition**





We
      recognize revenue from retailers’ sales of product through our software delivery
      system and through catalogues, upon delivery to the retail customer or
      consumer.





Revenue
      from the sale of recently purchased movie and television DVDs will be recognized
      when the products are shipped to the customer.





Part
      of
      our marketing strategy to acquire new consumers includes retail promotions
      in
      which we pay retailers if they are successful in marketing software products
      on
      our system to consumers. These payments are recorded as a reduction in revenue
      in accordance with EITF No. 01-9. As a result of this accounting treatment,
      these payments, which we consider to be marketing costs, are not included in
      marketing expense, but instead, recorded as a reduction in revenue. Estimated
      customer rebates are reflected as a reduction in revenue in the period that
      the
      related sale is recorded. Customer returns, although not material, are also
      reflected as a reduction in revenue in the period that they are returned or
      earlier if any such returns are anticipated.





**Software
      Development Costs**





Costs
      associated with the development and enhancement of proprietary software incurred
      between the achievements of technological feasibility and availability for
      general release to the public were insignificant, and therefore not
      capitalized.





**Principles
      of Consolidation**





The
      consolidated financial statements include the accounts of Protocall Technologies
      Incorporated and its wholly-owned subsidiaries. All intercompany balances and
      transactions have been eliminated in consolidation.





**Results
      of Operations - Three months ended September 30, 2006 compared to three months
      ended September 30, 2005**





**Net
      Loss**





We
      had
      net losses of $1,586,470 and $1,138,445 for the three months ended September
      30,
      2006 and 2005, respectively. During these periods, operations were financed
      through various equity and debt private financing transactions.





**Net
      Sales**





Net
      sales
      for the three months ended September 30, 2006 increased $49,668, or 35.27%,
      to
      $190,572 compared to $140,886 for the three months ended September 30, 2005.
      This increase is principally due to increased sales from TigerDirect.com which
      accounts for 93% of revenue.


-22-


**Gross
      Profit**




Gross
      profit for the three months ended September 30, 2006 was $72,434, or 38% of
      net
      sales, as compared to $32,944, or 23.8% of net sales, for the comparable period
      ended September 30, 2005




**Research
      and Development Expenses**





Research
      and development expense, or R&D, decreased $22,339 or 68.34%, from $32,687
      to $10,348, for the three months ended September 30, 2006 as compared to the
      same period ended September 30, 2005 due to decreased spending resulting from
      cash flow constraints.





**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses increased $124,643 or 11.28%, to $1,229,282
      for the three months ended September 30, 2006 from $1,104,639  for
      the
      three months ended September 30, 2005.





Consulting
      expenses increased $106,849 in 2006, or 168.93%, to $170,100 from
      $63,251  in
      2005,
      due to the greater use of outside consultants in 2006 to assist in financing,
      sales, marketing, new business and accounting matters.





Marketing
      expenses decreased $6,863 in 2006, or 14.98%, to $38,955 from $45,818 in 2005,
      due to increased marketing and advertising of our SoftwareToGo system in 2005
      and an effort to reduce costs in 2006.





Employee
      compensation decreased $185,294 or 45.93% from $403,464 in 2005 to $318,171
      in
      2006 due to a reduction in personnel in 2006, offset by the Company’s adoption
      of SFAS 123R in January 2006 and resulting third quarter charge of $109,176
      for
      the fair value of stock options vested during the quarter and the forgiveness
      of
      accrued salary of $100,000 converted into equity forfeited in July
      2006.





Investor
      Relations **** increased
      by $16,793 or 74.64% to $39,293 in 2006 from $22,500 in 2005 **** due
      to
      increased **** use
      of
      public relations and investor relations consultants.





Employee
      benefits decreased $19,049 or 64.49% from $29,536 in 2005 to $10,487 in 2006
      due
      to the reduced number of employees in the Company.





**Interest
      and Finance Charges**





Interest
      and finance expenses combined increased by $1,570,656, or 3561.47%, to
      $1,614,757 from $44,101 for the three months ended September 30, 2006 compared
      to the three months ended September 30, 2005 due to the interest recorded on
      convertible notes issued in August and September 2006. The finance charges
      were
      primarily due to the value of the warrants and the derivative financial
      instrument imbedded in the convertible notes which are treated as debt
      discount.





**Results
      of Operations - Nine months ended September 30, 2006 compared to nine months
      ended September 30, 2005**





**Net
      Loss**





We
      had
      net losses of $3,443,533 and $3,859,336 for the nine months ended September
      30,
      2006 and 2005, respectively. During these periods, operations were financed
      through various equity and debt private financing transactions.





**Net
      Sales**





Net
      sales
      for the nine months ended September 30, 2006 increased $203,136, or 59.42%,
      to
      $544,993 compared to $341,857 for the nine months ended September 30, 2005.
      This
      increase is principally due to an increase in sales to TigerDirect.com which
      accounts for 95% percent of revenue..





**Gross
      Profit**





Gross
      profit for the nine months ended September 30, 2006 was $122,024, or 22% of
      net
      sales, as compared to $85,123, or 26.0% of net sales, for the comparable period
      ended September 30, 2005.





**Research
      and Development Expenses**





Research
      and development expense, or R&D, decreased $68,854 or 53.86%, from $127,845
      to $58,991, for the nine months ended September 30, 2006 as compared to the
      same
      period ended September 30, 2005. The decrease in R&D was primarily due to
      decreased spending in 2006 and enhancements made to the latest version of our
      SoftwareToGo system during the first quarter of 2005.


-23-


**Selling,
      General and Administrative Expenses**





Selling,
      general and administrative expenses decreased $901,028, or 24.15%, to $2,829,933
      for the nine months ended September 30, 2006 from $3,730,961 for the nine months
      ended September 30, 2005.





Consulting
      expenses decreased $72,348 in 2006, or 18.20%, to $325,206 from $334,303 in
      2005, due to the use of outside consultants in 2005 to assist in financing,
      marketing and accounting matters associated with being a public
      company.





Legal
      expenses decreased $87,261 in 2006, or 33.53%, to $173,012 from $260,273 in
      2005, due to an effort to reduce costs in 2006.





Marketing
      expenses decreased $114,843 in 2006, or 54.08%, to $97,534 from $212,377 in
      2005, due to increased marketing and advertising of our SoftwareToGo system
      in
      2005 and an effort to reduce costs in 2006.





Employee
      compensation decreased $648,395 or 46.69% from $1,368,632 in 2005 to $740,237
      in
      2006 due to a greater number of personnel in 2005 and the accrual of $243,750,
      at June 30, 2005, to be paid to the then former President and Chief Executive
      Officer of the Company over the 15 month period subsequent to his resignation,
      pursuant to his separation agreement, offset by the Company’s adoption of SFAS
      123R in January 2006 which resulted in a charge of $109,176 for the fair value
      of stock options vested during the nine months ended September 30, 2006 and
      the
      forgiveness of $100,000 of accrued salary converted into equity and forfeited
      in
      July 2006.





Investor
      Relations (“IR”) increased $210,455 in 2006, or 397.67% from $52,923 for the
      nine months ended September 30, 2005 to $263,378 for the nine months ended
      September 30, 2006 due primarily to a charge of $129,116 for stock issued a
      third party IR firm and increased use of IR firms in 2006.





Employee
      benefits decreased $101,199 or 71.67% from $141,195 in 2005 to $39.996 in 2006
      due to the reduced number of employees in the Company.





**Interest
      and Finance Charges**





Interest
      and finance expenses combined increased by $1,584,847 or 1182.84%, to $1,718,834
      from $133,987 for the nine months ended September 30, 2006 compared to the
      nine
      months ended September 30, 2005. The finance charges were primarily due to
      the
      value of the warrants and the derivative financial instrument imbedded in the
      convertible notes which are treated as debt discount.





**Liquidity
      and Capital Resources**





At
      September 30, 2006, our working capital deficit amounted to $1,921,665 as
      compared with a working capital deficit of $1,798,048 at December 31, 2005.
      At
      September 30, 2006, we had an accumulated deficit in the amount of $41,560,438.
      The accumulated losses resulted principally from costs incurred in developing
      our business plan, research and development, general and administrative
      expenses, seeking and establishing sales channels and capital raising
      activities.





As
      of
      November 14, 2006, the Company had a cash balance of approximately $214,000.
      .
      Management believes that cash on hand will enable the Company to continue its
      business plan through approximately early 2007 although there can be no
      assurances that this will be the case.





Management’s
      plan is to pursue additional long-term capital to fund its operations after
      further content and customer agreements have been signed, although there can
      be
      no assurances that any such agreements will be signed or that any financing
      will
      be available, or if available, that it will be on terms acceptable to the
      Company. Management believes that its ability to secure additional long-term
      financing is directly related to the Company’s progress with new customers and
      movie content agreements, which are actively being pursued by it.





The
      accompanying financial statements have been prepared on the basis that the
      Company will continue as a going concern, which assumes the realization of
      assets and satisfaction of liabilities in the normal course of
      business. The
      uncertainties regarding the availability of continued financing and commencement
      of adequate commercial revenues raise substantial doubt about the Company’s
      ability to continue as a going concern, which contemplates the realization
      of
      assets and satisfaction of liabilities in the normal course of business. The
      financial statements do not include any adjustments relating to the
      recoverability of the recorded assets or the classification of liabilities
      that
      may be necessary should the Company be unable to continue as a going
      concern .


-24-


**Item
      3 - Controls and Procedures**





As
      required by U.S. Securities and Exchange Commission rules, we have evaluated
      the
      effectiveness of the design and operation of our disclosure controls and
      procedures at the end of the period covered by this report, the three months
      ended September 30, 2006. This evaluation was carried out under the supervision
      and with the participation of our management, including our principal executive
      officer and principal financial officer. Based upon the controls evaluation,
      our
      principal executive officer and principal financial officer have concluded
      that,
      as of the end of the period covered by this report, our disclosure controls
      are
      effective to provide reasonable assurance that information required to be
      disclosed in our reports filed under the Securities Exchange Act of 1934 such
      as
      this report, is recorded, processed, summarized and reported within the time
      periods specified in the SEC’s rules and forms.





On
      May
      17, 2006, Don Hoffmann resigned as the Company’s Chief Executive Officer and
      from the Board of Directors.  Bruce Newman, our former Chief Executive
      Officer and a director was renamed Chief Executive Officer.





With
      the
      exception of the above, there has been no change in our internal controls over
      financial reporting during the fiscal quarter ended September 30, 2006 that
      has
      materially affected, or is reasonably likely to materially affect, our internal
      controls over financial reporting.





Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Exchange Act is recorded, processed, summarized and
      reported, within the time periods specified in the SEC’s rules and forms.
      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 principal executive officer and principal financial
      officer, as appropriate, to allow timely decisions regarding required
      disclosure.





**Part
      II - Other Information**





**Item
      1 - Legal Proceedings**


None.





**Item
      2 - Unregistered Sales of Equity Securities and Use of
      Proceeds**


None





**Item
      3 - Default Upon Senior Securities**


None





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


On
      August
      29, 2006, holders of approximately 63% of our common stock voted to increase
      the
      number of authorized shares from 100,000,000 to 200,000,000. The shareholders
      also voted to increase the stock option pool of the 2004 plan by 14,500 shares.
      These shareholders also voted to approve the stock option grant of March 31,
      2006. An information statement was filed on August 29,2006 and mailed on
      September 11, 2006 to shareholders of record at August 29, 2006. Immediately
      after the completion of the required waiting period, in October 2006, we
      increased the number of authorized shares to 200,000,000.





**Item
      5 - Other Information**


None





**Item
      6 - Exhibits And Reports On Form 8-K**




***Exhibits***




31.1
            Certification
                of Principal Executive Officer Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.




31.2
            Certification
                of Principal Financial and Accounting Officer Pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002.




32.1
            Certificate
                Pursuant To 10 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley
                Act
                of 2002.




-25-


**Reports
      on Form 8-K**




1.
            We
                filed a Current Report on Form 8-K on January 5, 2006 regarding the
                completion of a private placement of common stock and a warrant to
                purchase common stock.





2.
            We
                filed a Current Report on Form 8-K on February 28, 2006 regarding
                the
                completion of a private placement of common stock and a warrant to
                purchase common stock.





3.
            We
                filed a Current Report on Form 8-K on April 17, 2006 regarding the
                completion of a private placement of common stock and a warrant to
                purchase common stock.





4.
            We
                filed a Current Report on Form 8-K on May 17, 2006 regarding the
                departure
                of a principal officer.





5.
            We
                filed a Current Report on Form 8-K on May 25,2006 regarding the completion
                of a private placement of common stock and a warrant to purchase
                common
                stock.





6.
            We
                filed a Current Report on Form 8-K on July 21,2006 regarding the
                completion of a private placement of common stock and a warrant to
                purchase common stock.





7.
            We
                filed a Current Report on Form 8-K on August 10, 2006 regarding the
                entry
                into a material definitive
                agreement.




8.
            We
                filed a Current Report on Form 8-K on August 10, 2006 regarding the
                completion of a private placement.





9.
            **We
                filed an Information Statement on Form 14C on August 29, 2006 regarding
                the increase of our authorized
                shares.





10.
            We
                filed a Current Report on Form 8-K on October 5, 2006 regarding the
                entry
                into a material definitive agreement and an unregistered sale of
                equity.




-26-


**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Date:
      November 15, 2006




**PROTOCALL
      TECHNOLOGIES INCORPORATED**






By: 
      /s/ Bruce Newman


Bruce
      Newman, President and Chief Executive Officer


(Principal
      Executive Officer, Principal Financial Officer


and
      Principal Accounting Officer)


-27-