**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)





[X]
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
                the quarterly period ended: September 30,
                2007





[
                 ]
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT





For
      the
      transition period from _______to_______





Commission
      file number:
      333-122113





**STRIKEFORCE
      TECHNOLOGIES, INC.**


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






**NEW
                JERSEY**
            **22-3827597**(State
                or other jurisdiction of
                incorporation or organization)
            (I.R.S.
                Employer Identification
                No.)







**1090
      King Georges Post Road, Suite 108**


**Edison,
      NJ 08837**


(Address
      of principal executive offices)





**(732)
      661-9641**


(Issuer’s
      telephone number)





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





Indicate
      by check whether the registrant is a shell company (as defined in Rule 12b
      of
      the Exchange Act).  Yes [ ] No [X]





**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**





Check
      whether the registrant filed all
      documents and reports required to be filed by Section 12, 13 or 15(d) of the
      Exchange Act after the distribution of securities under a plan confirmed by
      a
      court.  Yes
      [ ] No [ ]





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date: As of November 2, 2007, the issuer had
      72,078,404 outstanding shares of Common Stock.





Transitional
      Small Business Disclosure Format (Check one): Yes [_] No [X]











**STRIKEFORCE
        TECHNOLOGIES, INC.**
 
 **INDEX
        TO FINANCIAL STATEMENTS**
 
 **FOR
        THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**
 
 **(UNAUDITED)**
 
 Contents
                Page(s)Balance
                  Sheet at September 30, 2007
                F-2Statement
                  of Operations for the Three and Nine Months Ended September 30,
                  2007 and
                  2006
                F-3Statement
                  of Stockholders’ DefIcit for the Nine Months Ended September 30, 2007
                F-4Statement
                  of Cash Flows for the Nine Months Ended September 30, 2007 and
                  2006
                F-5Notes
                  to the Financial Statements
                F-6
                    to F-21








F-1




**STRIKEFORCE
        TECHNOLOGIES, INC.**
 **BALANCE
        SHEET**
 **(UNAUDITED)**







**ASSETS****September
                  30,****2007****Current
                  Assets:**Cash
                  and cash equivalents
              
              $
              27,034Accounts
                  receivable
              
              
              287,090Current
                  portion of deferred royalties
              
              
              326,808Prepaid
                  expenses and other current assets
              
              
              22,488**Total
                  current assets**
              
              
              663,420Property
                  and equipment, net
              
              
              20,461Deferred
                  royalties, net of current portion
              
              
              1,498,720Website
                  development cost, net
              
              
              5,744Patents
              
              
              4,329Security
                  deposit
              
              
              8,684**Total
                  Assets**
              
              $
              2,201,358**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT****Current
                  Liabilities:**Convertible
                  secured notes payable
              
              $
              862,096Derivative
                  financial instruments
              
              
              289,733Current
                  portion of convertible notes payable
              
              
              830,000Convertible
                  notes payable - related parties
              
              
              478,000Notes
                  payable
              
              
              318,750Notes
                  payable - related parties
              
              
              651,000Capital
                  leases payable
              
              
              5,532Accounts
                  payable
              
              
              755,364Accrued
                  expenses
              
              
              1,049,692Payroll
                  taxes payable
              
              
              53,375Due
                  to factor
              
              
              172,450Due
                  to employees
              
              
              48,216**Total
                  current liabilities**
              
              
              5,514,208Convertible
                  notes payable, net of discount of $173,343
              
              
              811,657**Total
                  Liabilities**
              
              
              6,325,865**Commitments
                  and contingencies****Stockholders'
                  Deficit**Preferred
                  stock at $0.10 par value; 10,000,000 shares authorized;none
                  issued or outstanding
              
              
              -Common
                  stock at $0.0001 par value; 100,000,000 shares authorized;65,624,331
                  shares issued and outstanding
              
              
              6,562Additional
                  paid-in capital
              
              
              10,362,540Accumulated
                  deficit
              
              
              (14,493,609
              )**Total
                  Stockholders' Deficit**
              
              
              (4,124,507
              )**Total
                  Liabilities and Stockholders' Deficit**
              
              $
              2,201,358
  See
          accompanying notes to the financial statements.
  F-2
  **STRIKEFORCE
          TECHNOLOGIES, INC.**
 **STATEMENT
          OF OPERATIONS**
 **FOR
          THE THREE  MONTHS ENDED SEPTEMBER  30, 2007 AND
          2006**
 **(UNAUDITED)**
   **For
                    the three months**
                
                
                **For
                    the nine months****ended
                    September 30,**
                
                
                **ended
                    September 30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**Revenues
                
                $
                70,364
                
                
                $
                99,155
                
                
                $
                623,696
                
                
                $
                244,244Cost
                    of sales
                
                
                34,152
                
                
                
                31,432
                
                
                
                52,705
                
                
                
                50,721Gross
                    profit
                
                
                36,212
                
                
                
                67,723
                
                
                
                570,991
                
                
                
                193,523Operating
                    expenses:Selling,
                    general and administrative expenses
                
                
                800,571
                
                
                
                706,489
                
                
                
                1,903,057
                
                
                
                2,921,100Research
                    and development
                
                
                92,370
                
                
                
                111,020
                
                
                
                273,872
                
                
                
                275,995Total
                    operating expenses
                
                
                892,941
                
                
                
                817,509
                
                
                
                2,176,929
                
                
                
                3,197,095Loss
                    from operations
                
                
                (856,729
                )
                
                
                (749,786
                )
                
                
                (1,605,938
                )
                
                
                (3,003,572
                )Other
                    (income) expense:Interest
                    expense
                
                
                2,953
                
                
                
                3,442
                
                
                
                12,090
                
                
                
                7,953Financing
                    expense
                
                
                124,344
                
                
                
                336,423
                
                
                
                471,258
                
                
                
                758,767Derivative
                    instruments (income) expense, net
                
                
                (711,698
                )
                
                
                42,481
                
                
                
                26,275
                
                
                
                (377,374
                )Total
                    other (income) expense
                
                
                (584,401
                )
                
                
                382,346
                
                
                
                509,623
                
                
                
                389,346Net
                    loss
                
                $
                (272,328
                )
                
                $
                (1,132,132
                )
                
                $
                (2,115,561
                )
                
                $
                (3,392,918
                )Net
                    loss per common share - basic and diluted
                
                $
                (0.01
                )
                
                $
                (0.05
                )
                
                $
                (0.06
                )
                
                $
                (0.15
                )Weighted
                    average number of common shares outstanding - basic and
                    diluted
                
                
                48,081,085
                
                
                
                24,669,084
                
                
                
                38,293,433
                
                
                
                22,134,823
   See
          accompanying notes to the financial statements.
   F-3
  **STRIKEFORCE
          TECHNOLOGIES, INC.**
 **STATEMENT
          OF STOCKHOLDERS' DEFICIT**
 **FOR
            THE THREE  MONTHS ENDED SEPTEMBER  30, 2007**
 **(UNAUDITED)**
    Common
                    Stock
                
                
                Paid-in
                
                
                Accumulated
                
                
                Total
                  Stockholders'Shares
                
                
                Amount
                
                
                Capital
                
                
                Deficit
                
                
                DeficitBalance
                    at December 31, 2006
                
                
                28,844,494
                
                
                $
                2,884
                
                
                $
                9,083,853
                
                
                $
                (12,378,048
                )
                
                $
                (3,291,311
                )Sale
                    of shares of common stock including warrants
                
                
                2,304,404
                
                
                
                230
                
                
                
                70,311
                
                
                
                -
                
                
                
                70,541Issuance
                    of shares of common stock for conversions of
                
                
                27,627,946
                
                
                
                2,763
                
                
                
                505,963
                
                
                
                -
                
                
                
                508,726notes
                    payable and accrued interestIssuance
                    of shares of common stock for consulting services
                
                
                1,774,238
                
                
                
                177
                
                
                
                64,225
                
                
                
                -
                
                
                
                64,402Issuance
                    of shares of common stock for financing
                
                
                5,073,249
                
                
                
                508
                
                
                
                140,455
                
                
                
                -
                
                
                
                140,963Issuance
                    of warrants in connection with convertible notes payable
                
                
                -
                
                
                
                -
                
                
                
                153,192
                
                
                
                -
                
                
                
                153,192Issuance
                    of warrants in connection with consulting services
                
                
                -
                
                
                
                -
                
                
                
                8,417
                
                
                
                -
                
                
                
                8,417Employee
                    stock option compensation
                
                
                -
                
                
                
                -
                
                
                
                336,124
                
                
                
                -
                
                
                
                336,124Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,115,561
                )
                
                
                (2,115,561
                )Balance
                    at September 30, 2007
                
                
                65,624,331
                
                
                $
                6,562
                
                
                $
                10,362,540
                
                
                $
                (14,493,609
                )
                
                $
                (4,124,507
                )
  See
          accompanying notes to the financial statements.
  F-4
  **STRIKEFORCE
          TECHNOLOGIES, INC.**
 **STATEMENT
          OF CASH FLOW**
 **FOR
            THE THREE  MONTHS ENDED SEPTEMBER  30, 2007 AND
            2006**
 **(UNAUDITED)**
 **2007**
                
                
                **2006****Cash
                    flows from operating activities:**Net
                    loss
                
                $
                (2,115,561
                )
                
                $
                (3,392,918
                )Adjustments
                    to reconcile net loss to net cashused
                    in operating activities:Depreciation
                    and amortization
                
                
                13,324
                
                
                
                17,925Amortization
                    of deferred financing costs
                
                
                -
                
                
                
                124,441Amortization
                    of discount on convertible notes
                
                
                173,343
                
                
                
                426,649Amortization
                    of deferred royalties
                
                
                200,034
                
                
                
                -Royalty
                    expense paid through the issuance of stock options
                
                
                -
                
                
                
                243,099Mark
                    to market on derivative financial instruments
                
                
                76,674
                
                
                
                (377,374
                )Employee
                    stock option compensation
                
                
                336,124
                
                
                
                106,021Issuance
                    of common stock, options and warrants for consulting
                    services
                
                
                72,819
                
                
                
                582,179Issuance
                    of common stock and warrants for financing expenses
                
                
                140,963
                
                
                
                28,000Changes
                    in assets and liabilities affecting operations:Accounts
                    receivable
                
                
                (268,014
                )
                
                
                (49,656
                )Prepaid
                    expenses
                
                
                (895
                )
                
                
                857Accounts
                    payable
                
                
                42,095
                
                
                
                467,073Accrued
                    expenses
                
                
                363,321
                
                
                
                520,269Payroll
                    taxes payable
                
                
                -
                
                
                
                (3,741
                )Due
                    to factor
                
                
                172,450
                
                
                
                -Due
                    to employees
                
                
                (11,141
                )
                
                
                14,154**Net
                    cash used in operating activities**
                
                
                (804,464
                )
                
                
                (1,293,022
                )**Cash
                    flows from investing activities:**Investment
                    in website
                
                
                -
                
                
                
                (4,830
                )Purchases
                    of property and equipment
                
                
                (3,987
                )
                
                
                (5,275
                )**Net
                    cash used in investing activities**
                
                
                (3,987
                )
                
                
                (10,105
                )**Cash
                    flows from financing activities:**Proceeds
                    from sale of common stock and warrants
                
                
                70,541
                
                
                
                192,000Proceeds
                    from convertible notes payable
                
                
                714,108
                
                
                
                450,000Proceeds
                    from convertible notes payable - related parties
                
                
                -
                
                
                
                113,000Proceeds
                    from notes payable
                
                
                250,000
                
                
                
                250,000Proceeds
                    from notes payable - related parties
                
                
                22,000
                
                
                
                447,000Payments
                    of convertible notes payable - related parties
                
                
                -
                
                
                
                (62,500
                )Payments
                    of notes payable
                
                
                (181,250
                )
                
                
                -Payments
                    of convertible notes payable
                
                
                (13,000
                )
                
                
                -Payments
                    of notes payable - related parties
                
                
                -
                
                
                
                (7,000
                )Principle
                    payments on capital leases
                
                
                (34,369
                )
                
                
                (2,168
                )**Net
                    cash provided by financing activities**
                
                
                828,030
                
                
                
                1,380,332**Net
                    increase (decrease) in cash**
                
                
                19,579
                
                
                
                77,205**Cash
                    and cash equivalents at beginning of period**
                
                
                7,455
                
                
                
                77,094**Cash
                    and cash equivalents at end of period**
                
                $
                27,034
                
                
                $
                154,299**Supplemental
                    disclosure of cash flow information:**Cash
                    paid during the period for:Interest
                
                $
                12,964
                
                
                $
                27,926Income
                    taxes
                
                $
                2,448
                
                
                $
                -**Supplemental
                    schedule of non-cash activities:**Conversion
                    of secured convertible notes payable into common stock
                
                $
                508,726
                
                
                $
                271,610Issuance
                    of warrants for convertible notes
                
                $
                153,192
                
                
                $
                121,222Revaluation
                    of stock options issued for deferred royalties
                
                $
                -
                
                
                $
                218,186Issuance
                    of common stock in connection with notes payable
                
                $
                -
                
                
                $
                166,100Issuance
                    of common stock for deferred consulting fees
                
                $
                -
                
                
                $
                25,200Issuance
                    of common stock for accrued services
                
                $
                -
                
                
                
                36,400




See
        accompanying notes to the financial statements.




F-5
  **STRIKEFORCE
        TECHNOLOGIES, INC.**
 **NOTES
        TO THE FINANCIAL STATEMENTS**
 **FOR
          THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**
 **(UNAUDITED)**
 **NOTE
                    1 -**
                **NATURE
                    OF OPERATIONS**
  StrikeForce
        Technical Services Corporation was incorporated in August 2001 under the
        laws of
        the State of New Jersey. On September 3, 2004, the stockholders approved
        an
        amendment to the Certificate of Incorporation to change the name to StrikeForce
        Technologies, Inc. (the “Company”).  Prior to December 2002, the
        Company was a reseller of computer hardware, software products, and
        telecommunications equipment and services. In December 2002, the Company
        began
        to acquire the rights to intangible technology, which upon the consummation
        changed the direction of the Company’s business.  The Company is a
        software development and services company.  The Company owns the
        exclusive right to license and develop various identification protection
        software products that were developed to protect computer networks from
        unauthorized access and to protect network owners and users from identity
        theft.  The Company has developed a suite of products based upon the
        licenses and the Company is seeking to commercially exploit the products
        in the
        areas of eCommerce, corporate, government and consumer sectors.  The
        technology developed by the Company and used in the Company’s ProtectIDTM and
        GuardedID® products is the subject of two pending patent
        applications.  The Company’s firewall product, which is in the
        research and design phase, is the subject of a pending provisional patent
        application.  A fourth patent application relating to the Company’s
        ProtectIDTM product was combined into the first ProtectIDTM pending patent
        application and was allowed to lapse.  The Company’s operations are
        based in Edison, New Jersey.
 
 **NOTE
                  2 -**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**
 Interim
          period
  The
        accompanying unaudited financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States of America
        (“US GAAP”) for interim financial information and the instructions to Form
        10-QSB and Items 303 and 310(B) of Regulation S-B. In the opinion of management,
        the unaudited financial statements have been prepared on the same basis as
        the
        annual financial statements and reflect all adjustments, which include only
        normal recurring adjustments, necessary to present fairly the financial position
        as of September 30, 2007, the results of operations for the three and nine
        months ended September 30, 2007, changes in stockholders’ deficiency and cash
        flows for the nine months ended September 30, 2007. The results of operations
        for the three and nine months ended September 30, 2007, are not necessarily
        indicative of the results to be expected for any subsequent quarter or the
        entire year ending December 31, 2007.
 
 Certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with US GAAP have been condensed or omitted pursuant
        to
        the Securities and Exchange Commission’s (“SEC”) rules and
        regulations.
 
 The
        accompanying unaudited financial statements should be read in conjunction
        with
        the Company’s audited financial statements and notes thereto for the year ended
        December 31, 2006 as included in the Company’s report on Form 10-KSB/A as
        amended and filed on April 18, 2007.
 
 Use
        of estimates
 
 The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and the reporting amounts of revenues and expenses
        during the reported period. Significant estimates include, but are not limited
        to, the estimated useful lives of property and equipment and website development
        costs. Actual results could differ from those estimates.
  Reclassification
 Certain
        amounts in the prior period financial statements have been reclassified to
        conform to the current period presentation. These reclassifications had no
        effect on reported losses.
  F-6
  Cash
        equivalents
 
 The
        Company considers all highly liquid investments with maturities of three
        months
        or less at the time of purchase to be cash equivalents
 Net
          loss per common share
 Net
        loss
        per common share is computed pursuant to SFAS No. 128, “Earnings Per
        Share”.  Basic loss per share is computed by taking net loss divided
        by the weighted average number of common shares outstanding for the
        period.  Diluted loss per share is computed by dividing net loss by
        the weighted average number of shares of common stock and potentially
        outstanding shares of common stock during each period to reflect the potential
        dilution that could occur from common shares issuable through stock options,
        warrants, and convertible debt, which excludes 18,395,669 shares of stock
        options, 11,182,439 shares of common stock issuable under warrants and
        35,324,159 shares of common stock issuable under the conversion feature of
        the
        convertible notes payable for the nine months ended September 30, 2007.
        These potential shares of common stock were not included as they were
        anti-dilutive.
 Recently
            issued accounting pronouncements
 
 In
            July
            2006, the Financial Accounting Standards Board (“FASB”) issued FASB
            Interpretation Number 48 *“Accounting for Uncertainty in Income Taxes, an
            Interpretation of FASB Statement No. 109”* (“FIN 48”). FIN 48 prescribes a
            recognition threshold and measurement attribute for the financial statement
            recognition and measurement of a tax position taken in a tax return.
            The Company
            must determine whether it is “more-likely-than-not” that a tax position will be
            sustained upon examination, including resolution of any related appeals
            or
            litigation processes, based on the technical merits of the position.
            Once it is
            determined that a position meets the more-likely-than-not recognition
            threshold,
            the position is measured to determine the amount of benefit to recognize
            in the
            financial statements. FIN 48 applies to all tax positions related to
            income
            taxes subject to SFAS 109*.*The interpretation clearly scopes out income
            tax positions related to FASB Statement No. 5, *“Accounting for
            Contingencies”.*The Company will adopt the provisions of this statement on
            July 1, 2007. The cumulative effect of applying the provisions of FIN
            48, if
            any, will be reported as an adjustment to the opening balance of retained
            earnings on July 1, 2007. The Company does not anticipate that the adoption
            of
            this statement will have a material effect on the Company’s financial condition
            and results of operations.
 
 On
            September 15, 2006, the FASB issued FASB Statement No. 157 *"Fair
            Value Measurements"* ("SFAS No. 157").  SFAS No. 157 defines fair
            value, establishes a framework for measuring fair value and expands disclosures
            about fair value measurements.  SFAS No. 157 is effective as of the
            beginning of the first fiscal year beginning after November 15,
            2007.  The Company does not anticipate that the adoption of this
            statement will have a material effect on the Company’s financial condition and
            results of operations.
 
 In
            September 2006, the FASB issued FASB Statement No.
*158****“**Employers' Accounting for Defined
            Benefit Pension and Other Postretirement Plans, an amendment of FASB
            Statements
            No 87, 88, 106 and 132(R)**”***(“SFAS No.
            158”)*.*  SFAS No. 158 requires the recognition of the
            overfunded or underfunded status of a defined benefit postretirement
            plan as an
            asset or liability in the statement of financial position and the recognition
            of
            changes in that funded status in the year in which the changes occur
            through
            comprehensive income. SFAS No. 158 also requires the measurement of the
            funded
            status of a plan as of the date of the year-end statement of financial
            position.
            The Company does not anticipate that the adoption of this statement will
            have a
            material effect on the Company’s financial condition and results of
            operations.
 
 On
            February 15, 2007, the FASB issued FASB Statement No.
            159 *“**The Fair Value Option for Financial Assets and Financial
            Liabilities: Including a**n amendment of FASB Statement No.
            115**”* (“SFAS No. 159”). SFAS No. 159 permits all entities to elect
            to measure many financial instruments and certain other items at fair
            value with
            changes in fair value reported in earnings. SFAS No. 159 is effective
            as of the
            beginning of the first fiscal year that begins after November 15, 2007,
            with
            earlier adoption permitted. The Company does not anticipate that the
            adoption of
            this statement will have a material effect on the Company’s financial condition
            and results of operations.
 Management
        does not believe that any other recently issued, but not yet effective
        accounting pronouncements, if adopted, would have a material effect on the
        accompanying consolidated financial statements.
  F-7
  **NOTE
                      3 -**
                  **GOING
                      CONCERN**
 ****
 The
        accompanying financial statements
        have been prepared assuming that the Company will continue as a going concern,
        which contemplates continuity of operations, realization of assets, and
        liquidation of liabilities in the normal course of business.  As
        reflected in the accompanying financial statements, the Company had an
        accumulated deficit of $14,493,609 and a working capital deficiency of
        $4,850,788 at September 30, 2007 and had a net loss and cash used in operations
        of $2,115,561 and $804,464 for the nine months ended September 30, 2007,
        respectively. These conditions raise substantial doubt about its ability
        to
        continue as a going concern.
 
 While
        the
        Company is attempting to increase sales, the Company’s cash position may not be
        sufficient to support the Company’s daily operations.  Management
        intends to attempt to raise additional funds by way of a public or private
        offering.  While the Company believes in the viability of its strategy
        to produce sales volume and in its ability to raise additional funds, there
        can
        be no assurances to that effect.   The ability of the Company to
        continue as a going concern is dependent upon the Company’s ability to further
        implement its business plan and generate sufficient revenues. The financial
        statements do not include any adjustments that might be necessary if the
        Company
        is unable to continue as a going concern.  Management believes that
        the actions presently being taken to further implement its business plan
        and
        generate revenues provide the opportunity for the Company to continue as
        a going
        concern.
 **NOTE
                        4  -**
                  **DEFERRED
                        ROYALTIES**
 On
        December 2, 2004, the Company issued NetLabs, as advance royalties, options
        to
        purchase 7,600,000 shares of the Company’s common stock at a price of $0.36 per
        share to vest as follows: 2,530,000 shares at September 11, 2004, 2,530,000
        shares at September 11, 2005 and 2,540,000 shares at September 11, 2006 for
        the
        exclusive rights to the intellectual property related to the patents pending
        for
        its “Out-of-Band” technology and firewall solutions, while clarifying that
        NetLabs still retains ownership.
 
 The
        fair
        values for these options are measured at the end of each reporting period
        and
        are fixed at each vesting date using the Black-Scholes Option Pricing
        Model.
 
 Measurement
        is based upon the Black-Scholes Model using the following
        assumptions:
  December
                  31, 2005
              December
                  31, 2006
              September
                  30, 2007Market
                  share price
              $0.900
              $0.050
              $0.021Expected
                  volatility
              29.00%
              152.00%
              390.00%Risk-free
                  interest rate
              4.35%
              4.96%
              4.23%Expected
                  life
              5
                  years
              5
                  years
              5
                  years
  As
        of
        September 30, 2007 the options to purchase 2,530,000 shares that vested at
        September 11, 2004 are valued (as fixed) at $1,066,395, the options to purchase
        2,530,000 shares that vested at September 11, 2005 are valued (as fixed)
        at
        $1,529,132, and the options to purchase the final 2,540,000 shares (which
        vested
        on September 11, 2006) are valued at September 30, 2007 at $264,160. The
        total
        value of the deferred royalties, net of accumulated amortization of $1,034,159,
        is $1,825,528.  The deferred royalties are being amortized over the
        term of the original NetLabs Agreement (10 years) which will terminate on
        August
        31, 2013.  For the nine months ended September 30, 2007 and 2006,
        $200,034 and $243,098 of royalties were expensed, respectively.
 
 The
        following table summarizes the annual amounts of deferred royalties that
        are
        amortized to general and administrative expenses over the next five (5)
        years and thereafter.
 
 2007
              
              $
              103,8002008
              
              303,8342009
              
              303,8342010
              
              303,8342011
                  and beyond
              
              810,226Total
                  deferred royalties
              
              1,825,528Less
                  current portion
              
              (326,808
              )Deferred
                  royalties, net of current portion
              
              $
              1,498,720
  F-8
 **NOTE
                            5 -**
                    **CONVERTIBLE
                            NOTES
                            PAYABLE**
 In
        June
        2005, the Company executed a non-interest bearing convertible note in the
        amount
        of $33,000 with a public relations firm for services rendered.  The
        holder is entitled, at its option, to convert, the debenture into shares
        of the
        Company’s common stock at $0.90 per share.  If not converted, the
        entire principal amount shall be due to the holder on the first year anniversary
        of the note.  In January 2007, the Company and the public relations
        firm reached an informal agreement whereby the Company has agreed to make
        periodic payments in order to repay the note in full by June 30,
        2008.
 
 In
        March
        2006, the Company extended the maturity date of a convertible debenture,
        executed with an investor in the amount of $125,000, to January 26,
        2007.  In January 2007, the Company extended the maturity date of the
        convertible debenture to January 26, 2008.  In connection with the
        extensions, the Company issued the investor 45,000 warrants with an exercise
        price of $0.20 per share and an expiration date of January 26, 2009, relating
        to
        the first extension, and 100,000 restricted shares of the Company’s common stock
        at $0.05 per share, relating to the second extension. The fair value of the
        warrants issued using the Black-Scholes Option Pricing Model was
        $4,878.  For the nine months ended September 30, 2007, the Company
        recorded $488 in financing expense related to the issuance of these
        warrants.
 
 In
        February 2007, in relation to the January 2007 term sheet executed with an
        investment firm (see Note 14), the Company sold a total of six units to six
        individuals, each unit consisting of an 18% convertible note payable in the
        amount of $16,667 and 66,667 bonus shares of the Company’s common stock, valued
        at $0.03988, for a total of $100,000 and 400,000 shares of common stock,
        with
        principal due August 31, 2007.  The holder is entitled to convert, the
        debenture, plus accrued interest, into shares of the Company’s common stock at
        the price of $0.05 per share.  Six months of prorated prepaid
        interest, for a total of $8,729, was due at closing and was paid directly
        to the
        note holders by the Company.  The Company paid a placement agent fee
        of $10,000 and issued 80,000 shares of the Company’s common stock, valued at
        $0.03988, in March 2007, relating to the convertible notes. The Company also
        paid an escrow agent fee of $500 and a legal fee of $1,000 relating to the
        convertible notes. For the nine months ended September 30, 2007, the Company
        expensed $19,142 of financing expenses related to the issuance of the shares.
        In
        November 2007 the notes were extended to April 30, 2008.  Per the
        terms of the extensions, the Company paid 20% of the note balances in November
        2007 for a total amount of $20,000.  The remaining balance shall be
        paid as follows: 20% due by January 31, 2008 and 60% plus accrued interest
        due
        by April 30, 2008.  In conjunction with the extensions, the note
        holders shall receive an aggregate total of 200,000 restricted shares of
        the
        Company’s common stock per month with a value based on the closing market price
        of the stock on the 18th of each
        month. All
        of the Company’s shares of common stock issued in connection with the
        convertible notes and the extensions have Rule 144 piggyback registration
        rights.
 
 In
        March
        2007, the Company executed an 18% convertible promissory note in the amount
        of
        $75,000 with an individual.  The holder is entitled, to convert the
        debenture, plus accrued interest, into shares of the Company’s common stock at
        the market value of the Company’s common stock at the date of note maturity,
        June 30, 2007.  If not converted, the entire principal amount and all
        accrued interest shall be due to the holder on June 30, 2007. In connection
        with
        the convertible promissory note payable, the Company issued to the individual
        an
        aggregate of 150,000 shares of the Company’s common stock, valued at $0.039 per
        share.  In June 2007, the maturity date of the note was extended to
        September 30, 2007 and the Company issued to the individual an additional
        aggregate of 150,000 shares of the Company’s common stock, valued at $0.022 per
        share. In September 2007, the maturity date of the note was extended to December
        31, 2007 and the Company issued to the individual an additional aggregate
        of
        150,000 shares of the Company’s common stock, valued at $0.021 per
        share.  The Company’s shares of common stock issued in connection with
        the convertible note and the note extensions have Rule 144 piggyback
        registration rights. For the nine months ended September 30, 2007, the Company
        expensed $12,300 in financing expenses related to the issuance of the
        shares.  In June 2007, the individual converted the interest owed on
        the note through June 30, 2007 of $3,513.70 into 159,714 shares of the Company’s
        common stock, valued at $0.022 per share. In September 2007, the individual
        converted the interest owed on the note from July 1, 2007 through September
        30,
        2007 of $3,402.74 into 162,035 shares of the Company’s common stock, valued at
        $0.021 per share.
 
 In
        April
        2007, in connection with the April 2007 term sheet executed with an investment
        firm, the Company sold a total of one unit to one individual, consisting
        of an
        18% convertible note payable in the amount of $25,000 and 120,000 bonus shares
        of the Company’s common stock, valued at $0.019, with principal due October 24,
        2007.  The holder is entitled, to convert, the debenture, plus accrued
        interest, into shares of the Company’s common stock at the price of $0.05 per
        share.  Six months of prorated prepaid interest, for a total of
        $2,250, was due at closing, in May 2007, and was withheld from the net proceeds
        remitted to the Company by the placement agent.  The Company paid a
        placement agent fee of $3,209 and issued 24,000 shares of the Company’s common
        stock, valued at $0.019, in May 2007, relating to the convertible
        note.  The Company also paid an escrow agent fee of $660, including
        expenses, relating to the convertible note. For the nine months ended September
        30, 2007, the Company expensed $2,736 in financing expenses related to the
        issuance of the shares. In November 2007 the note was extended to April 30,
        2008.  Per the terms of the extension, the Company paid 20% of the
        note balance in November 2007 in the amount of $5,000.  The remaining
        balance shall be paid as follows: 20% due by January 31, 2008 and 60% plus
        accrued interest due by April 30, 2008. In conjunction with the extension,
        the
        note holder shall receive an aggregate total of 50,000 restricted shares
        of the
        Company’s common stock per month with a value based on the closing market price
        of the stock on the 18th of each
        month. All
        of the Company’s shares of common stock issued in connection with the
        convertible notes and the extension have Rule 144 piggyback registration
        rights.
  F-9
  In
        May
        2007, the Company executed a 9% convertible promissory note in the amount
        of
        $100,000 with an individual.  The holder is entitled, to convert, the
        debenture, plus accrued interest, into shares of the Company’s common stock at
        $0.035 per share.  If not converted, the entire principal amount and
        all accrued interest shall be due to the holder on the second year anniversary
        of the debenture. In connection with the convertible promissory note payable,
        the Company issued to the individual 571,429 warrants with an exercise price
        of
        $0.07 per share.  The warrants are exercisable for a period of two
        years from date of issuance.  The fair value of the warrants issued
        using the Black-Scholes Option Pricing Model was $10,114.  For the
        nine months ended September 30, 2007, the Company recorded $2,107 in financing
        expense related to the issuance of these warrants.
 
 In
        June
        2007, the Company executed a 9% convertible promissory note in the amount
        of
        $15,000 with an individual.  The holder is entitled, to convert the
        debenture, plus accrued interest, into shares of the Company’s common stock at
        the market value of the Company’s common stock at a price of $0.015 per
        share.  If not converted, the entire principal amount and all accrued
        interest shall be due to the holder on June 21, 2009.  In connection
        with the convertible promissory note payable, the Company issued to the
        individual 1,200,000 warrants with an exercise price of $0.03 per
        share.  The warrants are exercisable for a period of two years from
        date of issuance.  The fair value of the warrants issued using the
        Black-Scholes Option Pricing Model was $17,880.  For the nine months
        ended September 30, 2007, the Company recorded $2,980 in financing expense
        related to the issuance of these warrants.
 
 In
        June
        2007, the Company executed two 8% convertible promissory notes in the amounts
        of
        $50,000 each with an individual.  The holder is entitled, to convert
        the debenture, plus accrued interest, into shares of the Company’s common stock
        at the market value of the Company’s common stock at a price of $0.02 per
        share.  If not converted, the entire principal amount and all accrued
        interest shall be due to the holder on June 29, 2009.  In connection
        with the convertible promissory note payable, the Company issued to the
        individual 1,000,000 warrants with an exercise price of $0.04 per
        share.  The warrants are exercisable for a period of two years from
        date of issuance.  The fair value of the warrants issued using the
        Black-Scholes Option Pricing Model was $21,800.  For the nine months
        ended September 30, 2007, the Company recorded $3,633 in financing expense
        related to the issuance of these warrants.
 
 In
        July
        2007, the Company executed an 8% convertible promissory note in the amount
        of
        $100,000 with an individual.  The holder is entitled, to convert the
        debenture, plus accrued interest, into shares of the Company’s common stock at
        the market value of the Company’s common stock at $0.02 per share.  If
        not converted, the entire principal amount and all accrued interest shall be due
        to the holder on July 2, 2009.  In connection with the convertible
        promissory note payable, the Company issued to the individual 1,000,000 warrants
        with an exercise price of $0.04 per share.  The warrants are
        exercisable for a period of two years from date of issuance. The fair value
        of
        the warrants issued using the Black-Scholes Option Pricing Model was
        $29,800.  For the nine months ended September 30, 2007, the Company
        recorded $3,725 in financing expense related to the issuance of these
        warrants.
 
 In
        August
        2007, the Company executed three 9% convertible promissory notes in the amounts
        of $20,000, $50,000 and $50,000, respectively, with three
        individuals.  The holders are entitled, to convert the debenture, plus
        accrued interest, into shares of the Company’s common stock at the market value
        of the Company’s common stock at a price of $0.025 per share.  If not
        converted, the entire principal amount and all accrued interest shall be
        due to
        the holders on August 9, 2009.  In connection with the convertible
        promissory note payable, the Company issued to the individuals 160,000, 400,000
        and 400,000 warrants, respectively, with an exercise price of $0.04 per
        share.  The warrants are exercisable for a period of three years from
        date of issuance.  The fair value of the warrants issued using the
        Black-Scholes Option Pricing Model was $23,040. For the nine months ended
        September 30, 2007, the Company recorded $1,280 in financing expense related
        to
        the issuance of these warrants.
 
 In
        August
        2007, the Company executed an 8% convertible promissory note in the amount
        of
        $200,000 with an individual.  The holder is entitled, to convert the
        debenture, plus accrued interest, into shares of the Company’s common stock at
        the market value of the Company’s common stock at $0.03 per share.  If
        not converted, the entire principal amount and all accrued interest shall
        be due
        to the holder on December 31, 2008.  In connection with the
        convertible promissory note payable, the Company issued to the individual
        1,500,000 warrants with an exercise price of $0.04 per share.  The
        warrants are exercisable for a period of five years from date of issuance.
        The
        fair value of the warrants issued using the Black-Scholes Option Pricing
        Model
        was $45,000.  For the nine months ended September 30, 2007, the
        Company recorded $5,625 in financing expense related to the issuance of these
        warrants.
 
 Interest
        expense for the convertible notes payable for the nine months ended September
        30, 2007 and 2006 was $91,541 and $40,574, respectively.
  F-10
 **NOTE
                          6 -**
                    **CONVERTIBLE
                          NOTES  PAYABLE – RELATED
                          PARTIES**
 Convertible
        notes payable - related parties at September 30, 2007, consisted of convertible
        promissory notes that the Company executed with the Chief Executive Officer
        (“CEO”), the Vice President of Technical Services (“VPTS”), relatives of a
        former officer of the Company, a relative of the Chief Financial Officer,
        the
        President, a Software Developer who is also a relative of the Chief Technology
        Officer and the Office Manager.
 
 The
        terms
        of the convertible promissory notes state that principal is payable in full
        in
        immediately available funds of $1,000,000 or more through any sales or
        investment.  With the exception of the notes issued to the CEO, all of
        the notes bear interest at a rate of prime, which was posted as 8.25% on
        March
        31, 2007 by the Wall Street Journal print edition, plus 2%, prime plus 4%,
        a
        straight 8% per year or a straight 21.90% per year. The notes issued to the
        CEO
        bear interest equal to the CEO’s private banking account monthly lending rate
        ranging between 8.625% and 11.00%.  In September 2006, the variable
        interest rate for the notes issued to the CEO was revised to a fixed rate
        of 8%,
        effective August 1, 2006.  In April 2007, the convertible promissory
        notes were amended to change the interest calculation from simple to compound
        effective April 1, 2007.  In August 2007, the maturity date of the
        convertible promissory notes was extended to December 31, 2007. Per the terms
        of
        the note extensions executed with the Office Manager, the Company shall pay
        principle payments of $1,000 per month, effective in November 2007, to the
        Office Manager. In the event the Company receives financing in excess of
        $2.5
        million, the principle payments to the Office Manager shall increase to $5,000
        per month.  Also, in any month where the Company’s revenues exceed
        $250,000, the Company shall make a principle payment of $5,000 to the Office
        Manager for that month.
 
 Interest
        is payable at such time as the principal on the note is due.  Each
        individual shall have the right to convert the outstanding principal amount,
        and
        all accrued interest thereon, into shares of the Company’s common stock,
        determined by dividing the amount of principal and interest outstanding by
        a
        conversion price of either $0.75 or $1.00, depending on the note.
  At
        September 30, 2007, accrued interest due for the convertible notes – related
        parties was $75,644 and is included in accrued expenses in the accompanying
        balance sheet. Interest expense for convertible notes payable – related parties
        for the nine months ended September 30, 2007 and 2006 was $29,896 and $34,211,
        respectively.
  **NOTE
                            7 -**
                    **NOTES
                            PAYABLE**
 In
        July
        2006, the Company sold a total of six units to six individuals, with each
        unit
        consisting of a 12% promissory note payable in the amount of $25,000 and
        250,000
        shares of the Company’s common stock for a total of $150,000 and 1,500,000
        shares of common stock.  The principal shall be payable in full by
        January 10, 2007.  Per the terms of the notes, if any of the notes are
        deemed unenforceable, then the remaining outstanding principal and accrued
        interest shall be convertible into shares of common stock of the Company
        at the
        sole option of the note holder, at a conversion price equal to $0.085 per
        share,****in addition to any other remedies or enforcement
        actions that the note holder may take to enforce collection of the
        note.  Six months of prepaid interest, for a total of $9,000, was due
        at closing, of which $6,750 was withheld by the escrow agent and $2,250 was
        paid
        directly to the note holder by the Company.  The Company paid a
        placement agent fee of $15,000 and issued 150,000 shares of the Company’s common
        stock, in August 2006, relating to the promissory notes. In addition, the
        Company paid an escrow agent fee of $3,000 and a due diligence fee of $7,500
        plus 50,000 shares of the Company’s common stock issued to the placement agent
        in July 2006 in connection with the promissory notes. All of the Company’s
        shares of common stock issued in relation to the promissory notes have Rule
        144
        piggyback registration rights. In January 2007, the Company extended the
        maturity date of five of the promissory notes, totaling $100,000, to March
        10,
        2007, inclusive of a ten day grace period. In connection with the extensions,
        the Company has agreed to increase the interest rate of the promissory notes
        to
        20% per annum and the Company has issued to the note holders 100,000 shares
        of
        the Company’s common stock at $0.0435 per share for the month of February
        2007.  Additionally, the Company issued 10,000 shares of the Company’s
        common stock at $0.0435 per share to the placement agent for the month of
        February 2007. The note holders and the placement agent are entitled to the
        aforementioned issuances on a pro-rated basis for every month that the notes
        are
        extended.  The Company paid $500 to the placement agent’s attorney for
        document review related to the extensions.  The remaining promissory
        note in the amount of $50,000 was paid in full in February 2007.  The
        Company issued to the note holders 100,000 shares of the Company’s common stock
        at $0.025 per share for the month of March 2007.  Additionally, the
        Company issued 10,000 shares of the Company’s common stock at $0.025 per share
        to the placement agent for the month of March 2007.  In March 2007,
        the Company partially repaid the five remaining notes in the amount of
        $50,000.  In April 2007, the Company and the remaining note holders
        reached an informal agreement whereby the note holders have agreed to extend
        the
        notes on a month-to month basis.  The Company issued to the note
        holders 50,000 shares of the Company’s common stock at $0.035 per share for the
        month of April 2007.  Additionally, the Company issued 5,000 shares of
        the Company’s common stock at $0.035 per share to the placement agent for the
        month of April 2007. In May 2007, the Company repaid one of the remaining
        notes
        in the amount of $6,250.  In May and June, 2007, the Company issued
        50,000 shares at $0.03 per share and 43,750 shares at $0.022 per share of
        the
        Company’s common stock, respectively, to the remaining note holders as bonus
        extension shares.  Additionally, the Company issued 5,000 shares at
        $0.03 per share and 4,375 shares at $0.022 per share, of the Company’s common
        stock, respectively, to the placement agent for the months of May and June,
        2007. In July 2007, the Company repaid one of the remaining notes in the
        amount
        of $12,500. In August 2007, the Company repaid one of the remaining notes
        in the
        amount of $12,500. In July, August and September, 2007, the Company issued
        31,250 shares valued at $0.029 per share, 31,250 shares valued at $0.03 per
        share and 18,750 shares valued at $0.026, respectively, of the Company’s common
        stock to the remaining note holders as bonus extension
        shares.  Additionally, the Company issued 3,125 shares valued at
        $0.029 per share, 3,125 shares valued at $0.03 per share and 1,875 shares
        valued
        at $0.026, respectively, of the Company’s common stock to the placement agent
        for the months of July, August and September, 2007. In May, June and July,
        2007,
        the Company issued 150,000 shares per month of the Company’s common stock valued
        at $0.03, $0.022 and $0.029 per share, respectively, to all of the original
        note
        holders as penalty shares per the terms of the notes.  Additionally,
        the Company issued 10,000 shares per month of the Company’s common stock at
        $0.03, $0.022 and $0.029 per share, respectively, to the placement agent
        for the
        months of May, June and July, 2007 relating to the bonus shares. All of the
        Company’s shares of common stock issued in connection with the extensions and
        penalty have Rule 144 piggyback registration rights. The remaining balance
        of
        the notes at September 30, 2007 was $18,750. For the nine months ended September
        30, 2007, the Company expensed $20,489 of financing expenses related to the
        issuance of the shares relating to the note extensions and penalties. In
        October, 2007, the Company issued 18,750 shares valued at $0.017 of the
        Company’s common stock to the remaining note holders as bonus extension
        shares.  Additionally, the Company issued 1,875 shares valued at
        $0.017 of the Company’s common stock to the placement agent for the month of
        October, 2007.
  F-11
  In
        January 2007, the Company executed a promissory note with an individual in
        the
        amount of $50,000. The note is non-interest bearing with principal due February
        15, 2007. Upon repayment, the Company shall make an additional lender’s fee
        payment of $3,000 to the individual.  In connection with the
        promissory note, the Company issued 30,000 restricted shares of common stock
        to
        the individual valued at $0.045 per share. In March 2007, the note was repaid
        in
        full along with the lender’s fee payment. For the nine months ended September
        30, 2007, the Company expensed $1,350 of financing expenses in connection
        with
        to the issuance of the shares.
 
 In
        February 2007, the Company executed a promissory note with an unrelated
        individual in the amount of $50,000. The note bears interest at 18% per annum
        with principal due June 5, 2007. Upon repayment, the Company shall make an
        additional lender’s fee payment of $4,000 to the individual.  In
        connection with the promissory note, the Company issued 100,000 restricted
        shares of common stock to two individuals at $0.04 per share and paid a legal
        fee of $500 to the lender’s attorney.  In addition, the Company’s CEO
        executed a Personal Guaranty Agreement guarantying $25,000 of the promissory
        note in the event the Company defaults on the note.  In May 2007, the
        Company issued 2,000,000 pledge shares, per the terms of the note, of the
        Company’s common stock valued at $0.024 per share.  The pledge shares
        are being held by the note holder’s attorney. In July 2007, the note was
        extended to December 31, 2007. In connection with the extension, the Company
        issued 50,000 restricted shares of the Company’s common stock valued at $0.04
        per share to the individual in July 2007.  In July 2007, the Company
        assigned the pending proceeds from its inclusion in the New Jersey Technology
        Business Certificate program towards repayment of this note and the July
        2007
        note executed with the same individual (see Note 7 below). For the nine months
        ended September 30, 2007, the Company expensed $54,350 of financing expenses
        related to the issuance of the shares.
 
 In
        June
        2007, the Company executed a promissory note with an unrelated individual
        in the
        amount of $50,000. The note bears interest at 9% per annum with principal
        due
        December 14, 2007.  In connection with the promissory note, the
        Company issued to the individual 100,000 warrants with an exercise price
        of
        $0.05 per share.  The warrants are exercisable for a period of five
        (5) years from date of issuance.  The fair value of the warrants
        issued using the Black-Scholes Option Pricing Model was $1,800.  For
        the nine months ended September 30, 2007, the Company recorded $300 in financing
        expense related to the issuance of these warrants.
  F-12
  In
        July
        2007, the Company executed a promissory note with an unrelated individual
        in the
        amount of $100,000. The note bears interest at 18% per annum with principal
        due
        December 31, 2007.The Company has
        assigned the pending proceeds from its inclusion in the New Jersey Technology
        Business Certificate program towards repayment of this note and the February
        2007 note executed with the same individual (see Note 7 above). The Company
        issued 2,000,000 shares of its common stock, issued in May 2007, to serve
        as
        collateral to the February 2007 note and this note.  In connection
        with the promissory note, the Company issued 300,000 restricted shares of
        common
        stock to the individual valued at $0.04 per share. All of the Company’s shares
        of common stock issued in connection with the promissory note have Rule 144
        piggyback registration rights. For the nine months ended September 30, 2007,
        the
        Company expensed $4,800 of financing expenses related to the issuance of
        the
        shares.
 
 Interest
        expense for notes payable for the nine months ended September 30, 2007 and
        2006
        was $23,155 and $7,422, respectively.
  **NOTE
                          8 -**
                    **NOTES
                            PAYABLE – RELATED
                            PARTIES**
 Notes
        payable – related parties at September 30, 2007 consisted of the
        following:
 
 Nine
        notes payable with its CEO aggregating $626,000:
 
 ·
              Three
                  notes, aggregating $189,000, with interest at a per annum rate
                  of 8%,
                  effective August 1, 2006 have been extended to December 31,
                  2007.
 ·
              Two
                  notes, aggregating $160,000 with interest at a rate equal to 8%
                  per annum
                  were extended to December 31, 2007.
 ·
              Two
                  notes, in the amount of $5,000 and $150,000 were extended to December
                  31,
                  2007 and the interest rate was revised to a fixed rate of 8%, effective
                  August 1, 2006.
 ·
              One
                  note in the amount of $100,000 bearing interest at a rate equal
                  to 9% per
                  annum with a maturity date of September 30, 2006 was extended to
                  December
                  31, 2007.
 ·
              The
                  remaining note was executed in February 2007 in the amount of
                  $22,000.  The note bears interest at a rate equal to 8% per
                  annum with principal due July 31, 2007.  The note was extended
                  to December 31, 2007.
 
 In
        connection with the $100,000 note and the $22,000 note, the Company issued
        warrants exercisable in the aggregate into 288,000 shares of the Company’s
        common stock at an exercise price of $0.05 per share for 88,000 warrants
        and
        $0.13 per share for 200,000 warrants.  These warrants are exercisable
        for a period of five years from issuance.  The fair value of the
        warrants issued using the Black-Scholes Option Pricing Model was
        $28,058.  For the nine months ended September 30, 2007, the Company
        recorded $3,758 in notes payable discount related to the issuance of the
        February 2007 warrants.
 
 At
        September 30, 2007, the Company had executed four notes payable with its
        President due May 31, 2007 aggregating $25,000. Notes totaling $10,000 are
        non-interest bearing. Notes totaling $15,000 bear interest at a rate equal
        to 8%
        per annum. The notes were extended to December 31, 2007.
 
 Interest
        expense for notes payable - related parties for the nine months ended September
        30, 2007 and 2006 was $39,103 and $31,040, respectively.
 **NOTE
                            9 -**
                    **ACCRUED
                            EXPENSES**
 Accrued
        expenses consisted of the following at September 30, 2007:
 
 Interest
              
              $
              543,497Commitment
                  fees
              
              
              32,697Professional
                fees
              
              
              153,146Other
              
              
              320,352Total
                  accrued expenses
              
              $
              1,049,692
  **NOTE
                            10 -**
                    **CONVERTIBLE
                            SECURED NOTES
                            PAYABLE**
 Prior
        to
        the maturity date of both convertible secured promissory notes, the Company
        notified Cornell and Highgate that it is currently evaluating available maturity
        options regarding the convertible notes.  Cornell and Highgate have agreed
        to extend the maturity date until the options afforded the company have been
        concluded.  In August 2007, the Company was notified by Cornell of its
        legal name change to YA Global Investments, LP.
  F-13
  Conversions
        to Common Stock
 
 For
        the
        nine months ended September 30, 2007, Cornell converted $407,500.00 of the
        April
        27, 2005 debenture into 27,037,486 shares of the Company’s common stock,
        pursuant to the terms of the Securities Purchase Agreement. The conversion
        price
        ranged from $0.0096 to $0.034 per share.
 
 For
        the
        nine months ended September 30, 2007, Highgate converted $20,279.64 of the
        May
        6, 2005 debenture into 590,460 shares of the Company’s common stock, pursuant to
        the terms of the Securities Purchase Agreement. The conversion price was
        $0.034
        per share.
 
 Interest
        expense for convertible secured notes payable for the nine months ended
        September 30, 2007 and 2006 was $66,326 and $86,608, respectively.
  **NOTE
                          11 -**
                    **FINANCIAL
                          INSTRUMENTS**
 ****
 The
        secured convertible notes payable are hybrid instruments which contain an
        embedded derivative feature which would individually warrant separate accounting
        as a derivative instrument under SFAS 133. The embedded derivative feature
        has
        been bifurcated from the debt host contract, referred to as the "Compound
        Embedded Derivative Liability". The embedded derivative feature includes
        the
        conversion feature within the note and an early redemption option. The value
        of
        the embedded derivative liability was bifurcated from the debt host contract
        and
        recorded as a derivative liability, which resulted in a reduction of the
        initial
        carrying amount (as unamortized discount) of the notes. The unamortized discount
        is amortized to interest expense using the effective interest method over
        the
        life of the notes, or 12 months.
 
 The
        secured convertible debentures issued to Cornell and Highgate have been
        accounted for in accordance with SFAS 133 and EITF 00-19.The Company has
        identified the above instruments having derivatives that require evaluation
        and
        accounting under the relevant guidance applicable to financial
        derivatives.  These compound embedded derivatives have been bifurcated
        from their respective host debt contracts and accounted for as derivative
        liabilities in accordance with EITF 00-19.  When multiple derivatives
        exist within convertible notes, they have been bundled together as a single
        hybrid compound instrument in accordance with SFAS 133 Derivatives
        Implementation Group Implementation Issue No. B-15, “Embedded Derivatives:
        Separate Accounting for Multiple Derivative Features Embedded in a Single
        Hybrid
        Instrument”. The compound embedded derivatives within the secured convertible
        notes have been recorded at fair value at the date of issuance; and are
        marked-to-market each reporting period with changes in fair value recorded
        to
        the Company’s statement of operations as “Derivative instrument expense,
        net”.  The Company has utilized a third party valuation consultant to
        fair value the compound embedded derivatives using a layered discounted
        probability-weighted cash flow approach. The fair value of the derivative
        liabilities are subject to the changes in the trading value of the Company’s
        common stock, as well as other factors.  As a result, the Company’s
        financial statements may fluctuate from quarter-to-quarter based on factors,
        such as the price of the Company’s stock at the balance sheet date and the
        amount of shares converted by note holders. Consequently, the financial position
        and results of operations may vary from quarter-to-quarter based on conditions
        other than operating revenues and expenses.
  **NOTE
                            12 -**
                    **STOCKHOLDERS’
                            DEFICIENCY**
 Issuance
        of Stock for Services
 
 In
        August
        2005, the Company entered into a retainer agreement with an attorney, whereas
        the attorney will act as in house counsel for the Company with respect to
        all
        general corporate matters.  The agreement is at will and requires a
        payment of 10,000 shares of common stock, valued at $0.90 per share, due
        upon
        execution.  The certificate for the 10,000 shares of common stock was
        issued in October 2005.   Commencing on September 1, 2005, the
        fee structure also includes a monthly cash fee of $1,000 and the monthly
        issuance of 2,500 shares of common stock, valued at market.  For the
        nine months ended September 30, 2007, the Company issued 22,500 shares of
        common
        stock, valued at $659, all of which has been expensed as legal fees, related
        to
        the agreement.
 
 In
        February 2006, the Company executed an agreement with an individual advisor
        whereby the advisor shall serve as a member of the Company’s Advisory Board and
        provide consulting, guidance and advice to the Company.  The advisor
        shall also assist the Company in obtaining revenues and financing.  As
        compensation for the advisory services, the advisor received 350,000 shares
        of
        the Company’s common stock valued at $0.18 per share.  The shares are
        restricted and have piggyback registration rights upon the next registration
        statement filed by the Company.  The advisor also received warrants to
        purchase 240,000 shares of the Company’s common stock at an exercise price of
        $0.30 per share with a term of six months from the effective date for 120,000
        shares and twelve months from the effective date for 120,000 shares. The
        fair
        value of all the warrants issued using the Black-Scholes Option Pricing Model
        was $63,096.  The advisor shall also receive a quarterly payment of
        $5,000 effective June 2006, a 10% commission on gross revenues for introduced
        customers and commission on introduced financing as follows:
  F-14
  Gross
                  Proceeds
              Cash
                  Commission
              Equity
                  Commission$500,000
                  to $      999,999
              $  25,000
              200,000
                  shares$1,000,000
                  to $1,999,999
              $  50,000
              400,000
                  shares$2,000,000
                  to $2,999,999
              $100,000
              800,000
                  shares$3,000,000
                  to $3,499,999
              $150,000
              1,000,000
                  shares$3,500,000
                  to $3,999,999
              $175,000
              1,200,000
                  shares$4,000,000
                  and up
              $200,000
              1,600,000
                  shares
 
 The
        term
        of the agreement is perpetual with thirty day written termination rights
        retained by both the Company and the advisor.  In February 2007, the
        Company executed two amendments to the agreement. The first amendment authorizes
        the Company to compensate the advisor 333,333 shares of the Company’s common
        stock, in lieu of cash, at $0.045 per share for all compensation owed to
        the
        advisor as of the date of the amendment. The shares are restricted and have
        piggy back registration rights upon the next registration statement filed
        by the
        Company. In connection with the amendment, the Company issued to the advisor
        an
        aggregate of 50,000 two year warrants to purchase shares of the Company’s common
        stock at an exercise price of $0.10 per share. Per the terms of the second
        amendment, the Company issued 100,000 restricted shares of the Company’s common
        stock at $0.045 per share in consideration for services rendered to date.
        In
        August 2007, the Company terminated the agreement and compensated the advisor
        via the issuance of 510,095 shares of the Company’s restricted common stock, in
        lieu of cash, valued at $0.021 per share for the compensation owed to the
        advisor as of the date of termination. For the nine months ended September
        30,
        2007, the Company expensed $19,500 of financing expenses related to the issuance
        of the shares.
 
 In
        February 2006, the Company executed an agreement with a firm to provide business
        development services to expand the Company’s sales and marketing efforts
        primarily in South America and Mexico.  As compensation for the
        services, the firm shall receive a fee of $10,000 per month beginning on
        February 15, 2006.  For the initial four months of the agreement, the
        fee will be in the form of the Company’s common stock.  For the second
        four months of the agreement, the fee shall be paid as $5,000 cash and $5,000
        in
        the Company’s common stock.  The stock price will be calculated based
        upon the ten days average bid price, prior to the 15th of each
        month,
        with the lowest bid price no lower than $0.25 per share.  The shares
        are restricted and have piggyback registration rights upon the next registration
        statement filed by the Company.  There shall be no fee for the last
        four months of the agreement’s first year.  The firm shall also
        receive a commission of 10% of the net sales from introduced
        customers.  The term of the agreement is perpetual with thirty day
        written termination rights retained by both the Company and the
        firm.  In March 2006, the agreement was amended to expand the
        territory outside of South America and Mexico on a case by case basis with
        written approval required by both the Company and the firm. In May 2007,
        the
        firm exercised its right to terminate the agreement.
  In
        April
        2006, the Company entered into a consulting agreement with an advisory firm,
        to
        provide review and advice concerning the technical design of existing and
        planned products or services, business development, sales assistance, financing
        advice, consulting services, market development and public relations, advising
        on issues regarding corporate structure, stock option plans and introducing
        the
        Company to potential investors.  The term of this agreement was one
        year, ending March 31, 2007.  The agreement calls for compensation in
        the amount of 350,000 shares of the Company’s common stock valued at $0.19 per
        share.
  In
          January 2007, the Company executed a consulting agreement with an investor
          relations firm whereby the firm shall provide public and investor relations
          services to the Company.  As consideration for the services, the firm
          shall receive 250,000 shares of the Company’s common stock, at $0.055 per share.
          The shares shall be restricted and have piggyback registration rights upon
          the
          next registration statement filed by the Company.  The term of the
          agreement is for ninety days and it can be renewed by the mutual consent
          of the
          Company and the firm.  For the nine months ended September 30, 2007,
          the Company expensed $13,750 of consulting expenses related to this
          agreement.
 F-15
  In
          February 2007, the Company issued 62,500 shares of its restricted common
          stock
          at $0.04 per share to a trade vendor as partial remuneration, in the amount
          of
          $2,500, of the Company’s open indebtedness to the vendor.
  In
          March
          2007, the Company issued 45,810 shares of its restricted common stock at
          $0.0247
          per share to a trade vendor as remuneration, in the amount of $1,132, of
          the
          Company’s open indebtedness to the vendor.
  In
        April
        2007, the Company executed a consulting agreement with an investor relations
        firm to provide public and investor relations services to the
        Company.  As compensation for the services, the firm shall receive a
        monthly retainer in the amount of $5,500. The firm also received 50,000 shares
        of the Company’s common stock, valued at $0.019 per share.  The shares
        are restricted and have piggyback registration rights upon the next registration
        statement filed by the Company.  The term of the agreement is for
        three months and can be renewed provided the Company and the firm both agree
        in
        writing.  In August 2007, the Company terminated the agreement. For
        the nine months ended September 30, 2007, the Company expensed $950 of
        consulting expenses related to this agreement.
 
 In
        July
        2007, the Company appointed a new Chairman of its Advisory Board and added
        three
        new members. As compensation for serving on the Advisory Board, each of the
        six
        members received 50,000 restricted shares and the Chairman received 100,000
        restricted shares of the Company’s common stock, valued at $0.038 per share. For
        the nine months ended September 30, 2007, the Company expensed $15,200 of
        consulting expenses related to the stock issuance.
 
 Issuance
        of Stock for Financing
 
 In
        December 2006, in accordance with a letter of understanding executed with
        an
        investment firm, the Company issued 100,000 restricted shares of its common
        stock valued at $0.05 per share to the firm and 100,000 restricted shares
        were
        issued in January 2007 at $0.045 per share (see Note 14).  For the
        nine months ended September 30, 2007, the Company expensed $5,000 of financing
        expenses related to the issuance of the shares.
 
 In
        January 2007, in accordance with a term sheet executed with an investment
        firm,
        the Company issued 100,000 shares of common stock, valued at $0.045 per share,
        to the investment firm as additional consideration for services rendered
        (see
        Note 14).  The shares have Rule 144 piggyback registration
        rights.  For the nine months ended September 30, 2007, the Company
        expensed $4,500 of financing expenses related to the issuance of the
        shares.
 
 Issuance
        of Warrants for Services
 
 In
        January 2007, in accordance with a consulting agreement executed with a sales
        consultant, the consultant received warrants to purchase 150,000 shares of
        the
        Company’s common stock at an exercise price of $0.10 per share with a term of
        two years from the effective date.  For the nine months ended
        September 30, 2007, the Company recorded $6,375 of consulting expense related
        to
        the warrants (see Note 14).
 
 In
        February 2007, in accordance with an amendment to the advisory board agreement
        executed with an advisor, the advisor received warrants to purchase 50,000
        shares of the Company’s common stock at an exercise price of $0.10 per share
        with a term of two years from the effective date.  For the nine months
        ended September 30, 2007, the Company recorded $1,560 of consulting expense
        related to the warrants (see Note 12 above).
  F-16
  In
        May
        2007, in accordance with a consulting agreement executed with an individual
        software developer, the developer received warrants to purchase 19,500 shares
        of
        the Company’s common stock at an exercise price of $0.025 per share for 3,000
        shares, $0.035 per share for 3,000 shares, $0.045 for 6,000 shares, $0.05
        for
        3,000 shares and $0.08 per share for 4,500 shares, with a term of two years
        from
        the effective date.  For the nine months ended September 30, 2007, the
        Company recorded $482 of consulting expense related to the warrants (see
        Note
        14).
  Issuance
        of Options for Employment Services
 
 In
        January 2007, the Company issued stock options to purchase 643,079 shares
        of
        common stock to ten employees.  The options were issued in accordance
        with the Company’s 2004 Equity Incentive Plan. The option shares are exercisable
        at $0.05 per share and expire in January 2017.  The shares vest after
        a one year period.
 
 In
        February 2007, the Company issued stock options to purchase 1,158,890 shares
        of
        common stock to nine employees.  The options were issued in accordance
        with the Company’s 2004 Equity Incentive Plan. Options totaling 558,120 shares
        are exercisable at $0.045 per share and options totaling 600,770 shares are
        exercisable at $0.05 per share.  All of the options expire in February
        2017.  The shares vest after a one year period.
 
 In
        March
        2007, the Company issued stock options to purchase 1,704,231 shares of common
        stock to eleven employees.  The options were issued in accordance with
        the Company’s 2004 Equity Incentive Plan. Options totaling 785,255 shares are
        exercisable at $0.024 per share and options totaling 918,976 shares are
        exercisable at $0.0375 per share. All of the options expire in March
        2017.  The shares vest after a one year period.
 
 In
        April
        2007, the Company issued stock options to purchase 1,551,842 shares of common
        stock to eleven employees.  The options were issued in accordance with
        the Company’s 2004 Equity Incentive Plan. The option shares are exercisable at
        $0.023 per share and expire in April 2017.  The shares vest after a
        one year period.
 
 In
        April
        2007, the Company issued stock options to purchase 100,000 shares of common
        stock to one employee.  The options were issued in accordance with the
        Company’s 2004 Equity Incentive Plan. The option shares are exercisable at $0.50
        per share and expire in April 2017.  The shares vest annually over a
        three year period.
 
 In
        May
        2007, the Company issued stock options to purchase 1,648,081 shares of common
        stock to twelve employees.  The options were issued in accordance with
        the Company’s 2004 Equity Incentive Plan. The options are exercisable at $0.02
        per share and expire in May 2017.  The shares vest after a one year
        period.
 
 In
        June
        2007, the Company issued stock options to purchase 4,465,759 shares of common
        stock to twelve employees.  The options were issued in accordance with
        the Company’s 2004 Equity Incentive Plan. Options totaling 2,597,435 shares are
        exercisable at $0.015 per share and options totaling 1,868,324 shares are
        exercisable at $0.017 per share. All of the options expire in June
        2017.  The shares vest after a one year period.
 
 In
        July
        2007, the Company issued stock options to purchase 779,234 shares of common
        stock to twelve employees.  The options were issued in accordance with
        the Company’s 2004 Equity Incentive Plan. The options are exercisable at $0.05
        per share and expire in July 2017.  The shares vest after a one year
        period.
 
 Sale
        of Shares of Common Stock
 
 In
        January 2007, the Company sold to two individuals certain units which contained
        common stock and warrants. The Company issued 104,167 shares of its common
        stock
        at $0.048 per share and 20,833 warrants with an exercise price of $0.096
        per
        share, and 421,053 shares of its common stock at $0.0475 per share and 84,211
        warrants with an exercise price of $0.095 per share, respectively, all of
        which
        are exercisable for a period of two years from date of issuance.
 
 In
        February 2007, the Company sold to an individual 20,000 shares of common
        stock,
        at $0.05 per share.
 
 In
        March
        2007, the Company sold to two individuals certain units which contained common
        stock and warrants. The Company issued 384,615 shares of common stock at
        $0.0325
        per share and 76,923 warrants with an exercise price of $0.065 per share
        all of
        which are exercisable for a period of two years from the date of
        issuance.
 
 In
        March
        2007, the Company sold to five individuals 615,042 shares of common stock,
        at
        $0.0247 per share.
 
 In
        May
        2007, the Company sold to an individual certain units which contained common
        stock and warrants. The Company issued 166,667 shares of common stock at
        $0.03
        per share and 200,000 warrants with an exercise price of $0.06 per share
        all of
        which are exercisable for a period of two years from the date of
        issuance.
 
 In
        June
        2007, the Company sold to three individuals certain units which contained
        common
        stock and warrants. The Company issued 526,316 shares of its common stock
        at
        $0.019 per share and 35,294 shares of its common stock at $0.017 per share.
        In
        connection with the issuance of these shares, the Company issued 631,579
        warrants with an exercise price of $0.038 per share and 42,352 warrants with
        an
        exercise price of $0.034, all of which are exercisable for a period of two
        years
        from the date of issuance.
 
 In
        July
        2007, the Company sold to two individuals 31,250 shares of common stock,
        at
        $0.04 per share.
  F-17
  Warrants
 
 At
        September 30, 2007, the Company issued warrants related to its convertible
        notes
        payable.  The warrants entitle the note holders to purchase the
        Company’s common stock at: 66,667 warrants with an exercise price of $0.55 per
        share, 400,000 warrants with an exercise price of $0.25 per share, 45,000
        warrants with an exercise price of $0.20 per share, 562,500 warrants with
        an
        exercise price of $0.16 per share,  571,429 warrants with an exercise
        price of $0.07 per share,  4,460,000 warrants with an exercise price
        of $0.04 per share and 1,200,000 warrants with an exercise price of $0.03
        per
        share. 3,838,096 warrants have a two year exercise term, 1,005,000 warrants
        have
        a three year exercise term and 2,462,500 warrants have a five year exercise
        term.
 
 At
        September 30, 2007, the Company issued warrants related to its convertible
        notes
        payable – related parties.  The warrants entitle the note holders to
        purchase the Company’s common stock at $1.00 per share and have an exercise term
        of ten years.  At June 30, 2007, 31,000 warrants will expire in the
        year 2013, 16,500 warrants expire in the year 2014, 21,700 warrants in the
        year
        2015 and 11,300 warrants in the year 2016.
 
 At
        September 30, 2007, the Company issued warrants related to its notes
        payable.  The warrants entitle the note holder to purchase the
        Company’s common stock at $0.05 per share for 100,000 warrants with an exercise
        term of five years.
 
 At
        September 30, 2007, the Company issued warrants related to its notes payable
–
related parties.  The warrants entitle the note holder to purchase the
        Company’s common stock at $0.05 per share for 88,000 warrants and $0.13 per
        share for a 200,000 warrants with an exercise term of five years.
  **NOTE
                              13 -**
                      **STOCK
                              BASED
                              COMPENSATION**
 ****
 In
        September 2004, the stockholders approved the Equity Incentive Plan for its
        employees (“Incentive Plan”), effective April 1, 2004.  Of the total
        authorized for issuance at September 30, 2007, 1,604,331 shares were available
        for future issuance.
 2004
          Equity Incentive Plan
  The
        number of shares authorized for issuance under the Incentive Plan was increased
        to 10,000,000 in September 2006, 15,000,000 in March 2007 and 20,000,000
        in June
        2007, by unanimous consent of the Board of Directors. Option shares totaling
        4,705,000 vest equally over a three year period beginning one-year from the
        date
        of grant and option shares totaling 13,690,669 vest over a one-year period
        from
        the date of grant.
 
 The
        table
        below summarizes the Company’s Incentive Plan stock option activity through
        September 30, 2007:
  **Number of**
                **Option Shares**
              
              
              **Exercise Price Range**
                **Per Share**
              
              
              **Weighted Average**
                **Exercise Price**
              
              **Weighted**
                **Average**
                **Remaining**
                **Contractual Term**
                  **(in years)**
              
              **Aggregate**
                **Intrinsic**
                **Value(in thousands**)****Balance,
                  December 31, 2005
              
              
              1,830,000
              
              
              $
              1.00
              
              
              $
              1.0000
              
              
              
              $
              --Granted
              
              
              4,514,553
              
              
              $
              0.0698
                  - $ 0.10
              
              
              $
              0.0920
              
              
              
              $
              --Balance,
                  December 31, 2006
              
              
              6,344,553
              
              
              $
              0.0698
                  - $ 0.10
              
              
              $
              0.3539
              
              
              
              $
              --Granted
              
              
              12,051,116
              
              
              $
              0.015
                  - $ 0.50
              
              
              $
              0.0306
              
              
              
              $
              --Balance,September
                  30, 2007
              
              
              18,395,669
              
              
              $
              0.015
                  -  $ 1.00
              
              
              $
              0.1421
              
              
              
              $
              --Vested
                  and  Exercisable, September 30, 2007
              
              
              10,154,014
              
              
              
              
              
              
              $
              0.1421
              
              
              
              $
              --
  As
        of
        September 30, 2007, an aggregate of 18,395,669 options were outstanding under
        the incentive plan.  The exercise price for 1,830,000 options is
        $1.00, for 100,000 options is $0.50, for 2,775,000 options is $0.10, for
        348,096
        options is $0.099, for 405,432 options is $0.085, for 492,309 options is
        $0.07,
        for 493,716 options is $0.0698, for 2,023,084 is $0.05, for 558,119 is $0.045,
        for 918,976 is $0.0375, for 785,255 is $0.024, for 1,551,842 options is $0.023,
        for 1,648,081 options is $0.02, for 1,868,324 options is $0.017 and for
        2,597,435 options is $0.015.  As of September 30, 2006, an aggregate
        of 6,344,553 options were outstanding under the incentive plan. The exercise
        price for 1,830,000 options was $1.00, for 2,775,000 options was $0.10, for
        348,096 options was $0.099, for 405,432 options was $0.085, for 492,309 options
        was $0.07 and for 493,716 options was $0.0698. At September 30, 2007, there
        were
        10,154,014 vested incentive plan stock options outstanding of which 865,812
        options are exercisable at $0.015, 622,775 options are exercisable at $0.017,
        686,700 options are exercisable at $0.02, 775,921 options are exercisable
        at
        $0.023, 458,065 options are exercisable at $0.024, 536,069 options are
        exercisable at $0.0375, 372,079 options are exercisable at $0.045, 1,077,633
        options are exercisable at $0.05, 534,859 options are exercisable at $0.0698,
        533,335 options are exercisable at $0.07, 439,218 options are exercisable
        at
        $0.085, 377,104 options are exercisable at $0.099, 1,114,583 options are
        exercisable at $0.10, 16,667 options are exercisable at $0.50 and 1,743,194
        options are exercisable at $1.00.
  F-18
  As
        of
        September 30, 2007, there was $322,323 of total unrecognized compensation
        cost
        related to unvested share-based compensation arrangements that is expected
        to be
        recognized over a weighted-average period of 12 months.
 
 The
        following table summarizes information concerning outstanding and exercisable
        Incentive Plan options as of September 30, 2007:
  **Options
                  Outstanding**
              
              **Options
                  Exercisable****Range
                  of Exercise Prices**
              
              **Number
                  Outstanding**
              
              **Average
                  Remaining Contractual Life (in years)**
              
              **Weighted-Average
                  Exercise Price**
              
              **Number
                  Exercisable**
              
              **Weighted-Average
                  Exercise Price**$1.0000
              
              
              1,830,000
              
              
              7.00
              
              $
              1.0000
              
              
              1,743,194
              
              $
              1.0000$0.0698
                  - $0.50
              
              
              4,614,553
              
              
              9.00
              
              
              0.1008
              
              
              3,015,766
              
              
              0.1008$0.0150 -
                  $0.05
              
              
              11,951,116
              
              
              10.00
              
              
              0.0267
              
              
              5,395,054
              
              
              0.026718,395,669
              
              
              8.67
              
              $
              0.1421
              
              
              10,154,014
              
              $
              0.1421
 
 Non-Incentive
        Plan Stock Option Grants
 
 Since
        December 31, 2005, the Company has outstanding an aggregate of 7,618,889
        non-plan, non-qualified options for non-employees with 7,600,000 exercisable
        at
        $0.36 and 18,889 exercisable at $0.90 yielding a weighted average exercise
        price
        of $0.3613 and no outstanding incentive options outside of the
        Plan.
  **NOTE
                              14  -**
                      **COMMITMENTS
                              AND
                              CONTINGENCIES**
 ****
 Payroll
        Taxes
 
 As
        of
        September 30, 2007, the Company owes $53,375 of payroll taxes, of which
        approximately $45,000 are delinquent from the year ended December 31, 2003.
        The
        Company has also recorded $32,462 of related estimated penalties and interest
        on
        the delinquent payroll taxes.  Although the Company has not entered
        into any formal repayment agreements with the respective tax authorities,
        management plans to make payment as funds become available.
 
 Consulting
        Agreements
 
 In
        January 2007, the Company executed an amendment to a consulting
        agreement.  Per the terms of the amendment, the firm, in consideration
        for services rendered, received warrants to purchase an additional 150,000
        shares of the Company’s common stock at an exercise price of $0.10 per share and
        a term of two years from the date of signing.  As of September 30,
        2007, the fair value of the warrants issued using the Black-Scholes Option
        Pricing Model of $6,375 was included in consulting expense.
 
 In
        May
        2007, the Company executed a consulting agreement with an individual software
        developer whereby the consultant will provide systems analysis, design, computer
        programming and engineering services to the Company as an independent
        contractor.  The term of the agreement is perpetual with thirty day
        written termination rights retained by both the Company and the
        consultant.  Per the terms of the agreement, billable projects shall
        be defined through the completion of a task order.  Upon execution of
        the agreement, the Company agreed to record a prorated fee for the period
        October 15, 2006 to April 30, 2007 for $1,500 plus 3,000 warrants per
        month.  The warrants shall be valued at the closing market value of
        the Company’s common stock on the last day of each month. In May 2007, in
        accordance with the agreement, the developer received warrants to purchase
        19,500 shares of the Company’s common stock at an exercise price of $0.025 per
        share for 3,000 shares, $0.035 per share for 3,000 shares, $0.045 for 6,000
        shares, $0.05 for 3,000 shares and $0.08 per share for 4,500
        shares.  The warrants are exercisable for a period of two years from
        issuance.  For the nine months ended September 30, 2007, the Company
        recorded $482 of consulting expense related to the warrants.
  F-19
  Letter
          of Understanding
 In
          December 2006, the Company executed a Letter of Understanding with an investment
          firm whereby the Company and the firm agreed to pursue further agreements
          on an
          ongoing best efforts basis in order for the Company to obtain financing
          of $3
          million to $5 million.  Per the letter, the Company will pay to the
          investment firm a retainer fee in cash of $40,000 payable as $2,500 upon
          execution of the letter, paid in December 2006, and $37,500 upon closing
          of the
          funding transaction. Also upon closing of the funding transaction, the
          Company
          will pay the firm an expense fee of $5,000 per month and a finder’s fee equal to
          $400,000 in cash and $400,000 in equity on a pro-rated basis assuming a
          total
          funding transaction of $5 million. In connection with the letter, the firm
          received 200,000 restricted shares of the Company’s common stock at $0.05 per
          share.  Per the terms of the letter, 100,000 shares were issued in
          December 2006 and 100,000 shares were issued in January 2007 (see Note
          12).
  Term
        Sheet with Investment Firm
 
 In
        January 2007, the Company executed a term sheet with an investment firm whereby
        the firm will assist the Company on an ongoing best efforts basis in order
        for
        the Company to obtain financing of up to $100,000.  Per the term
        sheet, the Company will pay to the investment firm a placement agent fee
        in cash
        equal to 10% of the amount of convertible notes sold and in shares of the
        Company’s common stock in a number equal to 20% of the total bonus shares issued
        to the note holders. The notes were executed in February 2007 and the closing
        and transfer of funds occurred in March 2007 (see Notes 5 and 12).
 
 In
        February 2007, the Company executed a term sheet with an investment firm
        whereby
        the firm will assist the Company on an ongoing best efforts basis in order
        for
        the Company to obtain financing of up to $3,000,000, including short term
        bridge
        financing in the amount of $500,000 within sixty to ninety days of the date
        of
        the term sheet.  In connection with the term sheet, the Company paid
        an engagement fee to the firm in the amount of $3,750.  An additional
        $3,750 is due to the firm thirty days from the effective date of the term
        sheet.  The balance of the engagement fee in the amount of $7,500 will
        be due to the firm upon the closing of a financing deal, relating to the
        term
        sheet, of $500,000 or greater.  The Company will also pay the firm a
        performance fee of 5% of any non-convertible debt financing, upon closing,
        and
        8% of any equity or convertible debt financing, upon closing, as a result
        of
        introduction to the Company of the lender or investor by the firm.
 
 In
        April
        2007, the Company executed a term sheet with an investment firm whereby the
        firm
        will assist the Company on an ongoing best efforts basis in order for the
        Company to obtain financing of up to $50,000.  Per the term sheet, the
        Company will pay to the investment firm a placement agent fee in cash equal
        to
        10% of the amount of convertible notes sold and in shares of the Company’s
        common stock in a number equal to 20% of the total bonus shares issued to
        the
        note holders. Also, the Company will pay a legal fee of $1,000 to the placement
        agent’s attorney for document review and $500 plus expenses to the escrow agent
        upon the closing and transfer of funds related to the term sheet. All of
        the
        Company’s shares of common stock issued in relation to the term sheet will have
        Rule 144 piggyback registration rights. A note was executed in April 2007
        in the
        amount of $25,000 and the closing and transfer of funds occurred in May
        2007.  The Company’s shares of common stock issued have Rule 144
        piggyback registration rights.
 
 In
        July
        2007, the Company executed a term sheet with an investment firm whereby the
        firm
        will assist the Company on an ongoing best efforts basis in order for the
        Company to obtain financing of up to $5,000,000 with a term of 24 months
        from
        the date of the term sheet.  In connection with the term sheet, the
        Company paid a due diligence fee to the firm in the amount of
        $75,000.  Upon closing of funds, the Company will owe a 5% closing
        fee, a $150,000 success fee, a collateral management fee of $3,000 per month
        and
        7,000,000 warrants at $0.01 per share. In August 2007, the Company received
        a
        commitment letter from the investment firm that included a closing date of
        September 15, 2007, at which date the commitment letter expired.
 Due
          to
          Factor
 In
          March
          2007, the Company entered into a sale and subordination agreement with
          a
          factoring firm whereby the Company sold its rights to two invoices, from
          February 2007 and March 2007, totaling $470,200 to the factor.  Upon
          signing the agreement and providing the required disclosures, the factor
          remitted 65%, or $144,440, of the February 2007 invoice and a certain percentage
          of $53,010 of the March 2007 invoice to the Company.  The Company paid
          a $500 credit review fee to the factor relating to the agreement.  Per
          the terms of the agreement, once the Company’s client remits the invoice amount
          to the factor, the factor deducts a discount fee from the remaining balance
          of
          the factored invoices and forwards the net proceeds to the
          Company.  The discount fee is computed as a percentage of the face
          amount of the invoice as follows: 2.25% fee for invoices paid within 30
          days of
          the down payment date with an additional 1.125% for each 15 day period
          thereafter. In September 2007, the February 2007 factored invoice was deemed
          uncollectible and was written off as bad debt expense. As of September
          30, 2007,
          the remaining factored invoice has not been paid. In the event that both
          invoices are deemed uncollectible, the Company and the factor have agreed
          in
          principle to a one year promissory note that will be due in September 2008
          in
          order to facilitate the Company’s reimbursement of the funds owed to the
          factor.
  F-20
  **NOTE
                              15 -**
                      **CONCENTRATION
                              OF CREDIT
                              RISK**
 (i)*Customers and Credit
                Concentrations*
 ****
 Three
          customers accounted for 75.4%, 7.9% and 4.0% of net sales for the nine
          months
          ended September 30, 2007 and 86.6%, 7.0% and 5.0% of the total accounts
          receivable as of September 30, 2007, respectively.  Four customers
          accounted for 26.5%, 23.7%, 15.6% and 6.6% of net sales for the nine months
          ended September 30, 2006 and 64.0%, 9.0%, 8.1% and 6.2% of the total accounts
          receivable as of September 30, 2006, respectively.
  **NOTE
                              16 -**
                      **SUBSEQUENT
                              EVENTS**
  Conversion
                of Convertible Notes Payable to shares of Common Stock
  In
                October 2007, Cornell converted $79,000 of the April 27, 2005 debenture
                into
                6,420,455 shares of the Company’s common stock, pursuant to the terms of the
                Securities Purchase Agreement. The price of the conversion ranged
                from $0.0088
                to $0.016 per share.
  Sale
                of Shares of Common Stock
  In
                October 2007, the Company sold to an individual certain units which
                contained
                common stock and warrants. The Company issued 416,667 shares of common
                stock at
                $0.012 per share and 83,333 warrants with an exercise price of $0.036
                per share
                all of which are exercisable for a period of three years from the
                date of
                issuance.






F-21





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





**Forward-Looking
      Statements**





The
      information in this quarterly report contains forward-looking statements within
      the meaning of the Private Securities Litigation Reform Act of 1995. This Act
      provides a “safe harbor" for forward-looking statements to encourage companies
      to provide prospective information about themselves so long as they identify
      these statements as forward looking and provide meaningful cautionary statements
      identifying important factors that could cause actual results to differ from
      the
      projected results. All statements other than statements of historical fact
      made
      in this report are forward looking. In particular, the statements herein
      regarding industry prospects and future results of operations or financial
      position are forward looking statements. Forward-looking statements reflect
      management's current expectations and are inherently uncertain. Our actual
      results may differ significantly from management's expectations. Important
      factors that could cause actual results to differ materially from our
      expectations are disclosed in this quarterly report as well as in our annual
      report on Form 10-KSB/A for the fiscal year ended December 31,
      2006.




The
      following discussion and analysis should be read in conjunction with the
      financial statements of StrikeForce Technologies, Inc., included herewith.
      This
      discussion should not be construed to imply that the results discussed herein
      will necessarily continue into the future, or that any conclusion reached herein
      will necessarily be indicative of actual operating results in the future. Such
      discussion represents only the best present assessment of our
      management.





**Background**





We
      are a
      software development and services company that offers a suite of integrated
      computer network security products using proprietary technology. We were
      organized in August 2001 under New Jersey law as Strike Force Technical
      Services, Inc. We initially conducted operations as an integrator and reseller
      of computer hardware and telecommunications equipment and services. In December
      2002, and formally memorialized by an agreement in September 2003, we acquired
      certain intellectual property rights and patent pending technology from
      NetLabs.com including the rights to further develop and sell their principal
      technology and certain officers of NetLabs.com joined StrikeForce as officers
      and directors of our Company. We subsequently changed our name to StrikeForce
      Technologies, Inc., under which we had conducted our business since August
      2001.
      Our strategy is to develop and exploit our suite of network security products
      for customers in the corporate, financial, government, insurance, e-commerce
      and
      consumer sectors. We plan to grow our business through the channel and
      internally generated sales, rather than by acquisitions. We have no subsidiaries
      and we conduct our operations from our corporate office in Edison, New
      Jersey.





We
      began
      our operations in 2001 as a reseller and integrator of computer hardware and
      iris biometric technology. We derived the majority of our revenues as an
      integrator from the time we started our operations through the first half of
      2003. In December 2002, upon the acquisition of the licensing rights to certain
      intellectual property and patent pending technology from NetLabs.com, we shifted
      the focus of our business to developing and marketing our own suite of security
      products. Based upon the acquired licensing rights the Company has now developed
      various identification protection software products to protect computer networks
      from unauthorized access and to protect network owners and users from identity
      theft. The Company is seeking to commercially exploit the products in the
      areas of eCommerce, corporate, government, insurance and consumer
      sectors. We have had increasing nominal revenues since our
      formation.  We have maintained our relationship with Panasonic and LG
      as a reseller, primarily for the resale of biometric identification equipment,
      such as iris scanners, that can be used with our software products. We generated
      nominal revenues from our activities as a reseller during 2006 and
      2005.





We
      completed most of the development of our suite of security products at the
      end
      of 2006 and we began to make these products available to the marketplace. For
      the nine months ended September 30, 2006, we generated $163,024 of our 2006
      revenues from the sales of our security products and for the nine months ended
      September 30, 2007 we generated all of our 2007 revenues of $623,696 from the
      sales of our security products. We seek to locate customers in a variety of
      ways. These include contracts with value added resellers, bundling with other
      products, direct sales calls initiated by our sales staff, exhibitions at
      security and technology trade shows, through the media, consulting agreements
      and through word of mouth. Our sales generate revenue either as an Original
      Equipment Manufacturer (OEM) model, through a Hosting/License agreement, or
      through direct purchase by customers. We price our products for consumer
      transactions based on the number of transactions in which our software products
      are utilized or monthly/yearly recurring fees, and we price our products for
      business applications based on the number of users. We also expect to generate
      revenue from annual maintenance contracts, renewal fees and the execution of
      international agreements.






3





We
      have
      incurred substantial operating losses since commencing operations. We believe
      that our products provide a cost-effective and technologically competitive
      solution to address the problems of network security and identity theft in
      general. There can be no assurance, however, that our products will continue
      to
      gain acceptance in the commercial marketplace or that one of our competitors
      will not introduce a technically superior product.  The products that
      we offer to customers are discussed in Item 1, Description of Business of
      our annual report on Form 10-KSB/A filed on April 18, 2007.





Management,
      in late 2004, introduced procedures that assess our business performance through
      a number of financial and non-financial indicators. Since we are still in the
      process of introducing our products to the commercial marketplace, we attempt
      to
      assess our performance principally through indications of past, present and
      potential sales. These include the following:





o
      Number
      of contracts signed, or projected to be signed within 30 and 90 day
      periods;





o
      Number
      of prospects in our sales pipeline;





o
      Number
      of Requests for Information and Requests for Proposal in which we are invited
      to
      participate; and





o
      The
      frequency with which we are mentioned in trade or consumer publications, product
      reviews and other media.





We
      also
      assess the number of problems that are reported with each product and over
      specific time frames, e.g. monthly, quarterly. We review our revenues generated
      in the aggregate per quarter and the average revenue generated per
      customer.





**Use
      of Estimates**





Management's
      Discussion and Analysis or Plan of Operations are based upon our financial
      statements, which have been prepared in accordance with accounting principles
      generally accepted in the United States of America. When preparing our financial
      statements, we make estimates and judgments that affect the reported amounts
      on
      our balance sheets and income statements, and our related disclosure about
      contingent assets and liabilities. We continually evaluate our estimates,
      including those related to revenue, allowance for doubtful accounts, reserves
      for income taxes, and litigation. We base our estimates on historical experience
      and on various other assumptions, which we believe to be reasonable in order
      to
      form the basis for making judgments about the carrying values of assets and
      liabilities that are not readily ascertained from other sources. Actual results
      may deviate from these estimates if alternative assumptions or conditions are
      used.





**Results
      of Operations**





**THREE
      MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER
      30,
      2006**





Revenues
      for the three months ended September 30, 2007 were $70,364 compared to $99,155
      for the three months ended September 30, 2006, a decrease of $28,791 or 29%.
      The
      decrease in revenues was primarily due to a decrease in the number of
      transactions in the use of our hosted technology.





Revenues
      generated consisted of hardware sales, software sales, revenue from sign on
      fees
      and transaction revenues. Hardware sales for the three months ended September
      30, 2007 were $0 compared to $5,968 for the three months ended September 30,
      2006, a decrease of $5,968. The decrease in hardware revenues was primarily
      due
      to the change in the Company’s sales focus from the sale of our technology that
      requires hardware to our security software products.  Software sales
      for the three months ended September 30, 2007 were $33,515 compared to $400
      for
      the three months ended September 30, 2006, an increase of $33,115. The resultant
      increase in software revenues was primarily due to an increase in the sales
      of
      our technology platform, ProtectIDTM and GuardedID®. Sign on fees for our ASP
      transaction model amounted to $2,000 for the three months ended September 30,
      2007 compared to $7,000 for the three months ended September 30, 2006, a
      decrease of $5,000. The decrease was due to the lack of signing up new clients
      for the hosted service, as the Company focused its attention on its new product,
      GuardedID®. Transaction revenues from the ASP hosting model and the
      implementation of new technology projects were $34,849 for the three months
      ended September 30, 2007 and $85,787 for the three months ended September 30,
      2006, a decrease of $50,938. The decrease was due primarily to the timing of
      several technology projects that were completed in the third quarter of
      2006.






4





Cost
      of
      revenues for the three months ended September 30, 2007 was $34,152 compared
      to
      $31,432 for the three months ended September 30, 2006, an increase of $2,720,
      or
      8.7%. The increase was primarily due to the processing fees incurred as a
      result of the increase in transactions relating to our ASP hosting
      service.





Gross
      profit for the three months ended September 30, 2007 was $36,212 compared to
      $67,723 for the three months ended September 30, 2006, a decrease of $31,511,
      or
      46.5%. The decrease was primarily due to the change in the Company’s sales focus
      from ProtectIDTM platform to our GuardedID® keyboard encryption security
      products.  Gross profit as a percentage of sales decreased from 68.3%
      to 51.5% due to the increase in transactions processed by the Company’s
      ValidateIDTM identity authentication clients which entails a lower gross margin
      than the new technology projects that were completed in the third quarter of
      2006.





Research
      and development expenses for the three months ended September 30, 2007 were
      $92,370 compared to $111,020 for the three months ended September 30, 2006,
      a
      decrease of $18,650, or 16.8%. The decrease is primarily attributable to the
      decrease in resources relating to our GuardedID® keyboard encryption &
anti-keylogger technology which is now in beta release and testing. The
      salaries, benefits and overhead costs of personnel conducting research and
      development of our software products comprise research and development
      expenses.





Selling,
      general and administrative expenses for the three months ended September 30,
      2007 were $800,571 compared to $706,489 for the three months ended September
      30,
      2006, an increase of $94,082 or 13.3%.  The net increase was due
      primarily to the write-off of an uncollectible receivable as bad debt expense
      in
      the third quarter of 2007. Selling, general and administrative expenses consist
      primarily of salaries, benefits and overhead costs for executive and
      administrative personnel, insurance, fees for professional services, including
      consulting, legal, and accounting fees, travel costs, non-cash stock
      compensation expense for the issuance of stock and stock options to
      non-employees and other general corporate expenses.





Other
      expense (income) for the three months ended September 30, 2007 was ($584,401)
      as
      compared to $382,346 for the three months ended September 30, 2006, representing
      a decrease in other expenses of $966,747, or 253%. The decrease was primarily
      due to net mark to market changes of ($711,698) in the fair value of derivative
      financial instruments relating to the convertible secured promissory
      notes.





Derivative
      expense (gain) represents the change in the fair value of the net derivative
      liability at quarter end, using a layered discounted probability-weighted cash
      flow approach. Interest expense derivatives represent the amortization of
      discount on the initial valuation of the derivatives, or the amortization of
      the
      change after any modification of debt. The change represents the amortization
      for both the Cornell and Highgate debentures.





Our
      net
      loss for the three months ended September, 30, 2007 was $272,328 compared to
      a
      net loss of $1,132,132 for the three months ended September 30, 2006, a decrease
      of $859,804, or 76%. The decrease was primarily due to a decrease in net mark
      to
      market changes in the fair value of derivative instruments relating to the
      convertible promissory notes.





**NINE
      MONTHS ENDED SEPTEMBER 30, 2007 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
      30,
      2006**





Revenues
      for the nine months ended September 30, 2007 were $623,696 compared to $244,244
      for the nine months ended September 30, 2006, an increase of $379,452 or 155%.
      The increase in revenues was primarily due to the sales of our newly developed
      GuardedID® keyboard encryption and anti-keylogger technology.






5





Revenues
      generated consisted of hardware sales, software sales, revenue from sign on
      fees
      and transaction revenues. Hardware sales for the nine months ended September
      30,
      2007 were $8,333 compared to $78,470 for the nine months ended September 30,
      2006, a decrease of $64,170. The resultant decrease in hardware revenues was
      primarily due to the change in the Company’s sales focus from the sale of our
      technology that requires hardware to our security software products. Software
      sales for the nine months ended September 30, 2007 were $534,121 compared to
      $17,625 for the nine months ended September 30, 2006, an increase of $516,496.
      The resultant increase in software revenues was primarily due to the sales
      of
      our unique GuardedID® keystroke encryption and anti-keylogger product. Sign on
      fees for our ASP transaction model amounted to $2,000 for the nine months ended
      September 30, 2007 compared to $15,000 for the nine months ended September
      30,
      2006, a decrease of $13,000. The decrease was due to the lack of signing up
      new
      eCommerce clients as the Company focused its attention on its new product,
      GuardedID®. Transaction revenues from the ASP hosting model were $79,242 for the
      nine months ended September 30, 2007 and $133,149 for the nine months ended
      September 30, 2006, a decrease of $53,907. The decrease was due primarily to
      the
      timing of several technology projects that were completed in the third quarter
      of 2006.





Cost
      of
      revenues for the nine months ended September 30, 2007 was $52,705 compared
      to
      $50,721 for the nine months ended September 30, 2006, an increase of $1,984,
      or
      3.9%. The increase was primarily due to the processing fees incurred as a
      result of the increase in transactions relating to our ASP hosting
      service.




Gross
      profit for the nine months ended September 30, 2007 was $570,991 compared to
      $193,523 for the nine months ended September 30, 2006, an increase of $377,468,
      or 195%. The increase in gross profit was primarily due to the sales of our
      GuardedID® keyboard encryption and anti-keylogger technology. Gross profit as a
      percentage of sales increased to 91.6% from 79.2% due to the increase in the
      sales of our own security software products which entails a higher gross margin
      and the decrease in our resale of biometric hardware technology which has a
      lower gross margin.




Research
      and development expenses for
      the nine months ended September 30, 2007 were $273,872 compared to $275,995
      for
      the nine months ended September 30, 2006, a decrease of $2,123, or 0.77%. The
      decrease is primarily attributable to the decrease in resources relating to
      our
      GuardedID® keyboard encryption & anti-keylogger technology which is now in
      beta release and testing.The salaries, benefits
      and overhead
      costs of personnel conducting research and development of our software products
      comprise research and development expenses.




Selling,
      general and administrative expenses for the nine months ended September 30,
      2007
      were $1,903,057 compared to $2,921,100 for the nine months ended September
      30,
      2006, a decrease of $1,018,043 or 34.9%. The net decrease was due primarily
      to
      decreases in our staffing, promotion and marketing and professional fees which
      occurred in the nine months ended September 30, 2007. Selling, general and
      administrative expenses consist primarily of salaries, benefits and overhead
      costs for executive and administrative personnel, insurance, fees for
      professional services, including consulting, legal, and accounting fees, travel
      costs, non-cash stock compensation expense for the issuance of stock to
      non-employees and other general corporate expenses.





Other
      expense for the nine months ended September 30, 2007 was $509,623 as compared
      to
      $389,346 for the nine months ended September 30, 2006, representing an increase
      in other expenses of $120,277, or 30.9%. The increase was primarily due to
      interest charges for notes payable of $471,258 and net, mark to market changes
      of $26,275 in the fair value of derivative financial instruments relating to
      the
      convertible secured promissory notes.





Our
      net
      loss for the nine months ended September 30, 2007 was $2,115,561 compared to
      a
      net loss of $3,392,918 for the nine months ended September 30, 2006, a decrease
      of $1,277,357, or 37.7%. The decrease in our net loss was primarily due to
      the
      increase in revenues generated from the sales of our GuardedID® keyboard
      encryption technology and to a decrease in net mark to market changes in the
      fair value of derivative instruments relating to the convertible promissory
      notes.





**Liquidity
      and Capital Resources**





Our
      total
      current assets at September 30, 2007 were $663,420, including $27,034 in cash
      as
      compared with $696,598 in total current assets at September 30, 2006, which
      included cash of $154,299. Additionally, we had a stockholders’ deficiency in
      the amount of $4,124,507 at September 30, 2007 as compared to a stockholders’
deficiency of $3,789,784 at September 30, 2006. The increase in the deficiency
      is a result of the Company’s net losses and funding through an increased debt
      position from convertible debentures and promissory notes rather than the sale
      of stock. We have historically incurred recurring losses and have financed
      our
      operations through loans, principally from affiliated parties such as our
      directors, and from the proceeds of debt and equity financing. The liabilities
      include a computed liability for the fair value of derivatives of $289,733,
      which will only be realized on the conversion of the derivatives, or settlement
      of the debentures.






6





We
      financed our operations during the nine months ended September 30, 2007 through
      debt and equity financing, recurring revenues from our ProtectIDTM hosting
      platform and sales of our GuardedID® keystroke encryption technology. We expect
      that we will rely, at least in the near future, on a substantial percentage
      of
      the sales of our GuardedID® product and a limited number of customers for our
      other products revenues and may continue to have customer concentrations.
      Inherently, as time progresses and corporate exposure in the market grows,
      we
      will attain greater numbers of customers and the concentrations will diminish.
      Until this is accomplished, we will continue to attempt to secure additional
      financing through both the public and private market sectors to meet our
      continuing commitments of capital expenditures and until our sales revenue
      can
      provide greater liquidity.





The
      number of common shares outstanding increased from 26,535,803 shares at the
      period ended September 30, 2006 to 65,624,331 at the period ended September
      30,
      2007, an increase of 147%.





We
      do not
      expect to resell a significant amount of biometric iris equipment over the
      next
      twelve months as we concentrate more on our core authentication and keyboard
      encryption and anti-keylogger software products.





We
      have
      historically incurred losses and we anticipate that we will not generate any
      significant revenues until the third quarter of 2008. Our operations presently
      require funding of approximately $135,000 per month. Our current forecast and
      potential pipeline substantiates our becoming profitable by the third quarter
      of
      the 2008 calendar year based on some key potential clients contracting with
      the
      Company in the financial industry, technology, insurance, enterprise, government
      and consumer sectors in the United States, Latin America, Europe and Asia.
      There
      can be no assurance, however, that the sales anticipated will materialize or
      that we will achieve the profitability we have forecasted.





At
      September 30, 2007, $617,376 in aggregate principal amount of the Cornell
      debentures was issued and outstanding.





At
      September 30, 2007, $244,720 in aggregate principal amount of the Highgate
      debentures remained outstanding.





Prior
      to
      the maturity date of both convertible secured promissory notes, the Company
      notified Cornell and Highgate that it is currently evaluating available maturity
      options regarding the convertible notes.  Cornell and Highgate have agreed
      to extend the maturity date until the options afforded the company have been
      concluded.  In August 2007, the Company was notified by Cornell of its
      legal name change to YA Global Investments, LP.





During
      the nine month period ended September 30, 2007, the Company sold units
      containing common stock and warrants for an aggregate total of $70,542 to
      fourteen individuals. The issuance is exempt from registration under the
      Securities Act of 1933. The individuals purchased a total of 2,304,404 shares
      of
      common stock from the Company at prices ranging from $0.017 to $0.05 per share
      and six of the individuals received an aggregate of 1,055,898 warrants with
      exercise prices ranging from $0.034 to $0.096 per share which are exercisable
      for a period of two years from issuance.





Additionally,
      the Company issued unsecured convertible notes during the nine month period
      ended September 30, 2007 in an aggregate total of $835,000 to fifteen unrelated
      parties. Additionally, during the nine month period ended September 30, 2007,
      the Company repaid a total of $13,000 of unsecured notes to an unrelated
      party.





The
      Company issued unsecured notes during the nine month period ended September
      30,
      2007 in an aggregate total of $250,000 to three unrelated parties. Additionally,
      during the nine month period ended September 30, 2007, the Company repaid a
      total of $181,250 of unsecured notes to seven unrelated parties. In accordance
      with the terms of six of the notes the Company is issuing restricted common
      shares as bonus extension shares on a monthly basis to the two remaining note
      holders.





The
      Company issued unsecured notes during the nine month period ended September
      30,
      2007 in an aggregate total of $22,000 to a related party.





*Summary
      of Funded Debt*






7





As
      of
      September 30, 2007 the Company’s open unsecured promissory note balance was
      $318,750, listed as follows:





o
      $100,000 to Cornell (this note by its terms became convertible into shares
      of
      common stock as of September 17,   2006 at the lesser of $0.22
      per share or 90% of VWAP thirty day average prior to the date of
      conversion)


o
      $18,750 to two unrelated individuals
      through investment firm placement


o
      $150,000 to one unrelated
      individual


o
      $50,000
      to one unrelated individual





As
      of
      September 30, 2007 the Company’s open unsecured related party promissory note
      balances were $651,000, listed as follows:





o
      $626,000 to our CEO


o
      $25,000 to our President





As
      of
      September 30, 2007 the Company’s open convertible secured note balances were
      $862,096, listed as follows:





o
      $617,376 to Cornell (04/05 amended
      secured debenture)


o
      $244,720 to Highgate (05/05 secured
      debenture)





As
      of
      September 30, 2007 the Company’s open convertible note balances were $1,641,657,
      net of discount on convertible notes of $173,343, listed as
      follows:





o
      $125,000 to an unrelated individual
      (01/05 unsecured debenture) - current portion


o
      $235,000 to an unrelated company
      (03/05 unsecured debenture) - current portion


o
      $20,000 to an unrelated company
      (06/05 unsecured debenture) – current portion


o
      $10,000 to an unrelated individual
      (06/05 unsecured debenture) - current portion


o
      $140,000 to four unrelated
      individuals (07/05 unsecured debentures) - current portion


o
      $100,000 to an unrelated individual
      (03/06 unsecured debenture) - current portion


o
      $200,000 to an unrelated individual
      (06/06 unsecured debenture)


o
      $150,000 to an unrelated individual
      (09/06 unsecured debenture)


o
      $100,000 to six unrelated individuals
      (02/07 unsecured debentures) - current portion


o
      $75,000 to an unrelated individual
      (03/07 unsecured debenture) - current portion


o
      $25,000
      to an unrelated individual (04/07 unsecured debenture) – current
      portion


o
      $100,000 to an unrelated individual (05/07 unsecured debenture)


o
      $15,000
      to an unrelated individual (06/07 unsecured debenture)


o
      $100,000 to an unrelated individual (06/07 unsecured debentures)


o
      $100,000 to an unrelated individual (07/07 unsecured debenture)


o
      $320,000 to four unrelated individuals (08/07 unsecured debentures)





As
      of
      September 30, 2007 the Company’s open convertible note balances - related
      parties were $478,000, listed as follows:





o
      $268,000 to our CEO


o
      $ 57,500 to our VP of Technical
      Services


o
      $ 30,000 to a relative of our CTO
& one of our Software Developers


o
      $ 50,000 to our
      President


o
      $ 5,000 to a relative of our
      CFO


o
      $ 67,500 to our Office
      Manager





It
      is
      unlikely that we will be able to generate sufficient funds internally to sustain
      our operations until the third quarter of 2008. We will seek to raise additional
      funds to continue our operations.  It is management’s plan to seek
      additional funding through the sale of common stock and the issuance of notes
      and debentures, including notes and debentures convertible into common stock.
      If
      we issue additional shares of common stock, the value of shares of existing
      stockholders is likely to be diluted.






8





However,
      the terms of the convertible secured debentures issued to certain of the
      existing stockholders require that we obtain the consent of such stockholders
      prior to our entering into subsequent financing arrangements. No assurance
      can
      be given that we will be able to obtain additional financing, that we will
      be
      able to obtain additional financing on terms that are favorable to us or that
      the holders of the secured debentures will provide their consent to permit
      us to
      enter into subsequent financing arrangements.





Our
      future revenues and profits, if any, will primarily depend upon our ability
      to
      secure sales of our suite of network security and anti-malware products. We
      do
      not presently generate significant revenue from the sales of our products.
      Although management believes that our products are competitive for customers
      seeking a high level of network security, we cannot forecast with any reasonable
      certainty whether our products will gain acceptance in the marketplace and
      if so
      by when. In addition, we are a reseller and potential distributor for various
      security and telecommunications related products, for which we anticipate that
      we will not generate any significant revenues until the third quarter of
      2008.





Except
      for the limitations imposed upon us respective to the convertible secured
      debentures of Cornell and Highgate, there are no material or known trends that
      will restrict either short term or long-term liquidity.





**Off-Balance
      Sheet Arrangements**




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




**Going
      Concern**





We
      are
      assuming that we will continue as a going concern, which contemplates the
      realization of assets and the satisfaction of liabilities in the normal course
      of business. We have incurred net operating losses of $2,115,561 for the nine
      months ended September 30, 2007, compared to a net operating loss of $3,392,918
      for the nine months ended September 30, 2006. At September 30, 2007, the
      Company's accumulated deficit was $14,493,609, its working capital deficiency
      was $4,850,788 and approximately 83% of its assets consist of deferred
      royalties. Additionally, for the nine months ended September 30, 2007, we had
      negative cash flows from operating activities of $804,464. Since our inception,
      we have incurred losses, had an accumulated deficit, and have experienced
      negative cash flows from operations. The expansion and development of our
      business may require additional capital. These conditions raise substantial
      doubt about our ability to continue as a going concern.





We
      have
      issued three-year and two-year secured debentures in 2004 and 2005 that are
      convertible into shares of our common stock to Cornell Capital Partners, LP
      and
      Highgate House Funds, Ltd., respectively. Under the terms of the secured
      debentures, we are restricted in our ability to issue additional securities
      as
      long as any portion of the principal or interest on the secured debentures
      remains outstanding.





Currently,
      the Company is aggressively attempting to increase revenues and improve gross
      margins by implementing a revised sales strategy. In principle, the Company
      is
      redirecting its sales focus from direct sales to companies using an internal
      sales force, to selling through a distribution channel of Value Added Resellers
      and Original Equipment Manufacturers. The profit margin from this approach
      is
      more lucrative than selling direct due to the increase in sales volume of
      GuardedID®. This revised sales approach should increase the Company’s sales and
      revenues allowing us to mitigate future losses. In addition, management has
      raised funds through convertible debt instruments and the sale of equity in
      order to alleviate the working capital deficiency. Through the utilization
      of
      the public capital markets, the Company plans to raise the funds necessary
      to
      continue to expand and enhance its growth; however, there can be no assurance
      that we will be able to increase revenues or raise additional capital. The
      Company is currently in negotiations with other investors to conclude the
      necessary working capital needs of the Company.





Our
      management expects cash flows from operating activities to improve by the middle
      of 2008, primarily as a result of an increase in sales, and plans to raise
      financing through various methods to achieve the business plans, although there
      can be no assurance thereof.  The accompanying consolidated financial
      statements do not include any adjustments that might be necessary should we
      be
      unable to continue as a going concern. If we fail to generate positive cash
      flows or obtain additional financing when required, we may have to modify,
      delay
      or abandon some or all of our business and expansion plans.





9





**Critical
      Accounting Policies**




In
      accordance with accounting principles generally accepted in the United States
      of
      America (“U.S. GAAP”), we record certain assets at the lower of cost or fair
      market value. In determining the fair value of certain of our assets, we must
      make judgments, estimates and assumptions regarding circumstances or trends
      that
      could affect the value of theses assets, such as economic conditions. Those
      judgments, estimates and assumptions are based on information available to
      us at
      that time. Many of those conditions, trends and circumstances are outside our
      control and if changes were to occur in the events, trends or other
      circumstances on which our judgments or estimates were based, we may be required
      under U.S. GAAP to adjust those estimates that are affected by those changes.
      Changes in such estimates may require that we reduce the carrying value of
      the
      affected assets on our balance sheet (which are commonly referred to as “write
      downs” of the assets involved).





It
      is our
      practice to establish reserves or allowances to record adjustments or
“write-downs” in the carrying value of assets, such as accounts receivable. Such
      write-downs are recorded as charges to income or increases in the expense in
      our
      Statement of Operations in the periods when such reserves or allowances are
      established or increased. As a result, our judgments, estimates and assumptions
      about future events can and will affect not only the amounts at which we record
      such assets on our balance sheet but also our results of
      operations.





In
      making
      our estimates and assumptions, we follow U.S. GAAP applicable to our business
      and those that we believe will enable us to make fair and consistent estimates
      of the fair value of assets and establish adequate reserves or allowances.
      Set
      forth below is a summary of the accounting policies that we believe are material
      to an understanding of our financial condition and results of
      operations.





**Derivative
      Financial Instruments**





We
      do not
      use derivative instruments to hedge exposures to cash flow, market, or foreign
      currency risks.





We
      review
      the terms of convertible debt and equity instruments that we issue to determine
      whether there are embedded derivative instruments, including the embedded
      conversion option, that are required to be bifurcated and accounted for
      separately as a derivative financial instrument. When the risks and rewards
      of
      any embedded derivative instrument are not “clearly and closely” related to the
      risks and rewards of the host instrument, the embedded derivative instrument
      is
      generally required to be bifurcated and accounted for separately. If the
      convertible instrument is debt, or has debt-like characteristics, the risks
      and
      rewards associated with the embedded conversion option are not “clearly and
      closely” related to that debt host instrument. The conversion option has the
      risks and rewards associated with an equity instrument, not a debt instrument,
      because its value is related to the value of our common stock. Nonetheless,
      if
      the host instrument is considered to be “conventional convertible debt” (or
“conventional convertible preferred stock”), bifurcation of the embedded
      conversion option is generally not required. However, in certain circumstances,
      if the instrument is not considered to be conventional convertible debt (or
      conventional convertible preferred stock), bifurcation of the embedded
      conversion option may be required. Generally, where the ability to physical
      or
      net-share settle the conversion option is deemed to be not within our control,
      the embedded conversion option is required to be bifurcated and accounted for
      as
      a derivative financial instrument liability.





In
      connection with the sale of convertible debt and equity instruments, we may
      also
      issue freestanding options or warrants. Additionally, we may issue options
      or
      warrants to non-employees in connection with consulting or other services they
      provide. Although the terms of the options and warrants may not provide for
      net-cash settlement, in certain circumstances, physical or net-share settlement
      may be deemed to be out of our control and, accordingly, we may be required
      to
      account for these freestanding options and warrants as derivative financial
      instrument liabilities, rather than as equity.





Derivative
      financial instruments are required to be initially measured at their fair value.
      For derivative financial instruments that shall be accounted for as liabilities,
      the derivative instrument is initially recorded at its fair value and is then
      re-valued at each reporting date, with changes in the fair value reported as
      charges or credits to income.





In
      circumstances where the embedded conversion option in a convertible instrument
      may be 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.





10






If
      the
      embedded derivative instrument is to be bifurcated and accounted for as a
      liability, the total proceeds received will be first allocated to the fair
      value
      of the bifurcated derivative instrument. If freestanding options or warrants
      were also issued and are to be accounted for as derivative instrument
      liabilities (rather than as equity), the proceeds are next allocated to the
      fair
      value of those instruments. The remaining proceeds, if any, are then allocated
      to the convertible instrument itself, usually resulting in that instrument
      being
      recorded at a discount from its face amount. In circumstances where a
      freestanding derivative instrument is to be accounted for as an equity
      instrument, the proceeds are allocated between the convertible instrument and
      the derivative equity instrument, based on their relative fair
      values.





The
      identification of, and accounting for, derivative instruments is complex.
      Derivative instrument liabilities are re-valued at the end of each reporting
      period, with changes in fair value of the derivative liability recorded as
      charges or credits to income in the period in which the changes occur. For
      options, warrants and bifurcated conversion options that are accounted for
      as
      derivative instrument liabilities, we determine the fair value of these
      instruments using the Black-Scholes option pricing model, binomial stock price
      probability trees, or other valuation techniques, sometimes with the assistance
      of a valuation consultant. These models require assumptions related to the
      remaining term of the instruments and risk-free rates of return, our current
      common stock price and expected dividend yield, and the expected volatility
      of
      our common stock price based on not only the history of our stock price but
      also
      the experience of other entities considered comparable to us. The identification
      of, and accounting for, derivative instruments and the assumptions used to
      value
      them can significantly affect our financial statements.


The
        derivatives (convertible
        debentures) issued on December 20, 2004 and January 18, 2005 (amended April
        27,
        2005) and on April 27, 2005 and May 6, 2005 have been accounted for in
        accordance with Statement of Financial Accounting Standards No. 133,*“Accounting for
        Derivative Instruments and Hedging Activities”*(“SFAS No. 133”) and the related
        interpretations. SFAS No. 133, as amended and the Financial Accounting Standards
        Board Emerging Issues Task Force Issue*“Accounting for
        Derivative
        Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
        Stock”*(“EITF No.
        00-19”).


The
      Company has identified the Cornell and Highgate debentures have compound
      embedded derivatives. These compound embedded derivatives have been bifurcated
      from their respective host debt contracts and accounted for as derivative
      liabilities in accordance with EITF 00-19. When multiple derivatives exist
      within the Convertible Notes, they have been bundled together as a single hybrid
      compound instrument in accordance with SFAS No. 133 Derivatives Implementation
      Group Implementation Issue No. B-15, Embedded Derivatives: Separate Accounting
      for Multiple Derivative Features Embedded in a Single Hybrid
      Instrument”.





The
      compound embedded derivatives within the Convertible Notes have been recorded
      at
      fair value at the date of issuance; and are marked-to-market each reporting
      period with changes in fair value recorded to the Company’s Statement of
      Operations as “Net change in fair value of derivative liabilities”. The Company
      has utilized a third party valuation consultant to fair value the embedded
      derivatives using layered discounted probability-weighted cash flow approach.
      We
      have developed a financial model to value the compound embedded derivatives
      analyzing the conversion features, redemption options and penalty provisions.
      Additionally, our model has been developed to incorporate management’s
      assessment of the various potential outcomes relating to the specific features
      and provisions contained in the convertible debt instruments.





The
      six
      primary events that can occur which will affect the value of the compound
      embedded derivatives are (a) payments made in cash, (b) payments made with
      stock, (c) the holder converts the note(s), (d) the company redeems the note(s),
      (e) the company fails to register the common shares related to the convertible
      debt and (f) the company defaults on the note (s).





The
      primary factors driving the economic value of the embedded derivatives are
      the
      same as the Black-Scholes factors, except that they are incorporated
      intrinsically into the binomial calculations for this purpose. Those factors
      are
      stock price, stock volatility, trading volume, outstanding shares issued,
      beneficial shares owned by the holder, interest rate, whether or not a timely
      registration has been obtained, change in control, event of default, and the
      likelihood of obtaining alternative financing. We assigned probabilities to
      each
      of these potential scenarios over the initial term, and at each quarter, the
      remaining term of the underlying financial instrument. The financial model
      generates a quarterly cash flow over the remaining life of the underlying
      debentures and assigns a risk-weighted probability to the resultant cash flow.
      We then assigned a discounted weighted average cash flow over the potential
      scenarios which were compared to the discounted cash flow of the debentures
      without the subject embedded derivatives. The result is a value for the compound
      embedded derivatives at the point of issue and at subsequent
      quarters.





The
      fair
      value of the derivative liabilities are subject to the changes in the trading
      value of the Company’s common stock, as well as other factors. As a result, the
      Company’s financial statements may fluctuate from quarter-to-quarter based on
      factors, such as the price of the Company’s stock at the balance sheet date and
      the amount of shares converted by the Cornell and Highgate. Consequently, our
      financial position and results of operations may vary from quarter-to-quarter
      based on conditions other than our operating revenues and expenses.





11




**Software
      Development Costs**


Statement
        of Financial Accounting Standards No. 86, *“Accounting for the Costs of
        Computer Software to be Sold, Leased, or Otherwise Marketed”* (“SFAS No.
        86”) requires capitalization of software development costs incurred subsequent
        to establishment of technological feasibility and prior to the availability
        of
        the product for general release to customers. Systematic amortization of
        capitalized costs begins when a product is available for general release
        to
        customers and is computed on a product-by-product basis at a rate not less
        than
        straight-line basis over the product’s remaining estimated economic life. To
        date, all costs have been accounted for as research and development costs
        and no
        software development cost has been capitalized.


Management
      will evaluate the net realizable value of software costs capitalized by
      comparing estimated future gross revenues reduced by the estimated future costs
      of completing, disposing of and maintaining the software. These costs also
      include the costs of performing maintenance and customer support required by
      us.




**Revenue
      Recognition**




The
      Company considers revenue realized or realizable and earned when it has
      persuasive evidence of an arrangement that the product has been shipped or
      the
      services have been rendered to the customer, the sales price is fixed or
      determinable, and collectibility is reasonably assured. In addition to the
      aforementioned general policy, the following are the specific revenue
      recognition policies for each major category of revenue:





We
      recognize revenue from the sales of software licenses when persuasive evidence
      of an arrangement exists, the product has been delivered, the fee is fixed
      and
      determinable and collection of the resulting receivable is reasonably assured.
      Delivery generally occurs when the product is delivered to a common
      carrier.





We
      assess
      collection based on a number of factors, including past transaction history
      with
      the customer and the creditworthiness of the customer. We do not request
      collateral from our customers. If we determine that collection of a fee is
      not
      reasonably assured, we defer the fee and recognize revenue at the time
      collection becomes reasonably assured, which is generally upon the receipt
      of
      cash.





For
      technology arrangements with multiple obligations (for example, undelivered
      software, maintenance and support), we allocate revenue to each component of
      the
      arrangement using the residual value method based on the fair value or the
      fixed
      agreement of the undelivered elements. Accordingly, we defer technology revenue
      in the amount equivalent to the fair value or the fixed agreement of the
      undelivered elements.





We
      recognize revenue for maintenance services ratably over the contract term.
      Our
      training and consulting services are billed at hourly rates and we generally
      recognize revenue as these services are performed. However, upon execution
      of a
      contract, we determine whether any services included within the arrangement
      require us to perform significant work either to alter the underlying software
      or to build additional complex interfaces so that the software performs as
      the
      customer requests. If these services are included as part of an arrangement,
      we
      recognize the fee using the percentage of completion method. We determine the
      percentage of completion based on our estimate of costs incurred to date
      compared with the total costs budgeted to complete the project.





**Stock
      Based Transactions**





We
      have
      concluded various transactions where we paid the consideration in shares of
      our
      common stock and/or warrants or options to purchase shares of our common stock.
      These transactions include:





-
            Acquiring
                the services of various professionals who provided us with a range
                of
                corporate consultancy services, including developing business and
                financial models, financial advisory services, strategic planning,
                development of business plans, investor presentations and advice
                and
                assistance with investment funding;




-
            Retaining
                the services of our Advisory Board to promote the business of the
                Company;






12




-
            Settlement
                of our indebtedness; and




-
            Providing
                incentives to attract, retain and motivate employees who are important
                to
                our success.





When
      our
      stock is used, the transactions are valued using the price of the shares on
      the
      date they are issued or if the value of the asset or service being acquired
      is
      available and is believed to fairly represent its market value, the transaction
      is valued using the value of the asset or service being provided.





When
      options or warrants to purchase our stock are used in transactions with third
      parties or our employees, the transaction is valued using the Black-Scholes
      valuation method. The Black-Scholes valuation method is widely used and accepted
      as providing the fair market value of an option or warrant to purchase stock
      at
      a fixed price for a specified period of time. Black-Scholes uses five (5)
      variables to establish market value of stock options or warrants:





-
      strike
      price (the price to be paid for a share of our stock);





-
      price
      of our stock on the day options or warrants are granted;





-
      number
      of days that the options or warrants can be exercised before they
      expire;





-
      trading
      volatility of our stock; and





-
      annual
      interest rate on the day the option or warrant is granted.





The
      determination of expected volatility requires management to make an estimate
      and
      the actual volatility may vary significantly from that estimate. Accordingly,
      the determination of the resulting expense is based on a management
      estimate.





**Recent
      Accounting Pronouncements**




In
        July
        2006, the Financial Accounting Standards Board (“FASB”) issued FASB
        Interpretation Number 48 *“Accounting for Uncertainty in Income Taxes, an
        Interpretation of FASB Statement No. 109”* (“FIN 48”). FIN 48 prescribes a
        recognition threshold and measurement attribute for the financial statement
        recognition and measurement of a tax position taken in a tax return. The
        Company
        must determine whether it is “more-likely-than-not” that a tax position will be
        sustained upon examination, including resolution of any related appeals or
        litigation processes, based on the technical merits of the position. Once
        it is
        determined that a position meets the more-likely-than-not recognition threshold,
        the position is measured to determine the amount of benefit to recognize
        in the
        financial statements. FIN 48 applies to all tax positions related to income
        taxes subject to SFAS 109*.*The interpretation clearly scopes out income
        tax positions related to FASB Statement No. 5, *“Accounting for
        Contingencies”.*The Company will adopt the provisions of this statement on
        July 1, 2007. The cumulative effect of applying the provisions of FIN 48,
        if
        any, will be reported as an adjustment to the opening balance of retained
        earnings on July 1, 2007. The Company does not anticipate that the adoption
        of
        this statement will have a material effect on the Company’s financial condition
        and results of operations.
  On
        September 15, 2006, the FASB issued FASB Statement No. 157 *"Fair Value
        Measurements"* ("SFAS No. 157").  SFAS No. 157 defines fair value,
        establishes a framework for measuring fair value and expands disclosures
        about
        fair value measurements.  SFAS No. 157 is effective as of the
        beginning of the first fiscal year beginning after November 15,
        2007.  The Company does not anticipate that the adoption of this
        statement will have a material effect on the Company’s financial condition and
        results of operations.
  In
        September 2006, FASB issued FASB Statement No. 158 *“Employers'
        Accounting for Defined Benefit Pension and Other Postretirement Plans, an
        amendment of FASB Statements No 87, 88, 106 and
        132(R)”***(“SFAS No. 158”)*.*  SFAS No. 158
        requires the recognition of the overfunded or underfunded status of a defined
        benefit postretirement plan as an asset or liability in the statement of
        financial position and the recognition of changes in that funded status in
        the
        year in which the changes occur through comprehensive income. SFAS No. 158
        also
        requires the measurement of the funded status of a plan as of the date of
        the
        year-end statement of financial position. The Company does not anticipate
        that
        the adoption of this statement will have a material effect on the Company’s
        financial condition and results of operations.
  On
        February 15, 2007, the FASB issued FASB Statement No. 159 *“The Fair
        Value Option for Financial Assets and Financial Liabilities: Including an
        amendment of FASB Statement No. 115”* (“SFAS No. 159”). SFAS No. 159 permits
        all entities to elect to measure many financial instruments and certain other
        items at fair value with changes in fair value reported in earnings. SFAS
        No.
        159 is effective as of the beginning of the first fiscal year that begins
        after
        November 15, 2007, with earlier adoption permitted. The Company does not
        anticipate that the adoption of this statement will have a material effect
        on
        the Company’s financial condition and results of operations.




13





The
      Company does not believe that any other recently issued and adopted, but not
      yet
      effective, accounting standards would have a material effect on the accompanying
      financial statements.




**ITEM
      3. CONTROLS AND PROCEDURES**




(a)
            Evaluation
                of disclosure controls and
                procedures.




Our
      principal executive officer and our principal financial officer evaluated the
      effectiveness of our disclosure controls and procedures as of the end of the
      period covered by this report. Such disclosure controls and procedures are
      designed to ensure that information required to be disclosed by the Company
      is
      accumulated and communicated to the appropriate management, including the
      principal executive and financial officers, on a basis that permits timely
      decisions regarding timely disclosure. Based on that evaluation, such principal
      executive officer and principal financial officer concluded that, the Company’s
      disclosure controls and procedures as of the end of the period covered by this
      report have been designed and are functioning effectively, except for the
      ability to identify and analyze derivatives and formation of an Audit Committee
      including an independent member, to provide reasonable assurance that the
      information required to be disclosed by the Company in reports filed under
      the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the SEC’s rules and forms.





(b)
            Change
                in Internal Control over Financial
                Reporting.





No
      change
      in our internal control over financial reporting occurred during our most recent
      fiscal quarter that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





We
      believe that a controls system, no matter how well designed and operated, can
      not provide absolute assurance that the objectives of the controls system are
      met, and no evaluation of controls can provide absolute assurance that all
      control issues and instances of fraud, if any, within a company have been
      detected.





**PART
      II - OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is not currently a party to, nor is any of its property currently the
      subject of, any pending legal proceeding. None of the Company's directors,
      officers or affiliates is involved in a proceeding adverse to the Company's
      business or has a material interest adverse to the Company's
      business.





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





In
      January 2007, the Company executed a promissory note with an individual in
      the
      amount of $50,000. The note is non-interest bearing with principal due February
      15, 2007. Upon repayment, the Company shall make an additional lender’s fee
      payment of $3,000 to the individual.  In connection with the
      promissory note, the Company issued 30,000 restricted shares of common stock
      to
      the individual at a price of $0.045 per share. In March 2007, the note was
      repaid in full along with the lender’s fee payment.





In
      January 2007, the Company executed a consulting agreement with an investor
      relations firm whereby the firm shall provide public and investor relations
      services to the Company.  As consideration for the services, the firm
      shall receive 250,000 shares of the Company’s common stock, at $0.055 per share.
      The shares shall be restricted and have piggyback registration rights upon
      the
      next registration statement filed by the Company.  The term of the
      agreement was for ninety days. The Company and the firm executed a new agreement
      in April 2007.






14





In
      January 2007, in accordance with a letter of understanding executed with an
      investment firm, the Company issued 100,000 restricted shares of its common
      stock valued at $0.05 per share.





In
      January 2007, in accordance with a term sheet executed with an investment firm,
      the Company issued 100,000 shares of common stock, valued at $0.45 per share,
      as
      additional consideration for services rendered. The Company’s shares of common
      stock issued have Rule 144 piggyback registration rights.





In
      January 2007, in accordance with a consulting agreement executed with a sales
      consultant, the consultant received warrants to purchase 150,000 shares of
      the
      Company’s common stock at an exercise price of $0.10 per share with a term of
      two years from the effective date.





In
      January 2007, the Company issued stock options to purchase 643,079 shares of
      common stock to ten employees.  The options were issued in accordance
      with the Company’s 2004 Equity Incentive Plan. The option shares are exercisable
      at $0.05 per share and expire in January 2017.  The shares vest after
      a one year period.





In
      January 2007, the Company sold to two individuals certain units which contained
      common stock and warrants. The Company issued 104,167 shares of its common
      stock
      at $0.048 per share and 20,833 warrants with an exercise price of $0.096 per
      share, and 421,053 shares of its common stock at $0.0475 per share and 84,211
      warrants with an exercise price of $0.095 per share, respectively, all of which
      are exercisable for a period of two years from date of issuance.





In
      February 2007, in relation to the January 2007 term sheet executed with an
      investment firm, the Company sold a total of six units to six individuals,
      each
      unit consisting of an 18% convertible note payable in the amount of $16,667
      and
      66,667 bonus shares of the Company’s common stock, valued at $0.03988, for a
      total of $100,000 and 400,000 shares of common stock, with principal due August
      31, 2007.  The holder is entitled, at its option, to convert, the
      debenture, plus accrued interest, into shares of the Company’s common stock at
      the price of $0.05 per share.  Six months of prorated prepaid
      interest, for a total of $8,729, was due at closing and was paid directly to
      the
      note holders by the Company.  The Company paid a placement agent fee
      of $10,000 and issued 80,000 shares of the Company’s common stock, valued at
      $0.03988, in March 2007, relating to the convertible notes.  The
      Company also paid an escrow agent fee of $500 and a legal fee of $1,000 relating
      to the convertible notes. All of the Company’s shares of common stock issued in
      connection with the convertible notes have Rule 144 piggyback registration
      rights.





In
      February 2007, the Company executed a promissory note with an unrelated
      individual in the amount of $50,000. The note bears interest at 18% per annum
      with principal due June 5, 2007. Upon repayment, the Company shall make an
      additional lender’s fee payment of $4,000 to the individual.  In
      connection with the promissory note, the Company issued 150,000 restricted
      shares of common stock to two individuals at $0.04 per share and paid a legal
      fee of $500 to the lender’s attorney.  In addition, the Company’s CEO
      executed a Personal Guaranty Agreement guarantying $25,000 of the promissory
      note in the event the Company defaults on the note.  In July 2007, the
      note was extended to December 31, 2007.  In connection with the
      extension, the Company issued 50,000 restricted shares of the Company’s common
      stock valued at $0.04 per share to the individual.  In July 2007, the
      Company assigned the pending proceeds from its inclusion in the New Jersey
      Technology Business Certificate program towards repayment of this note and the
      July 2007 note executed with the same individual.





In
      February 2007, the Company executed a promissory note with its CEO in the amount
      of $22,000. The note bears interest at 8% per annum with principal due July
      31,
      2007.  In connection with the promissory note, the Company issued
      warrants exercisable in the aggregate into 88,000 shares of the Company’s common
      stock to its CEO at an exercise price of $0.05 per share.  The
      warrants are exercisable for a period of five years from issuance.  In
      June 2007, the note was extended to August 31, 2007 and in August, 2007, further
      extended to December 31, 2007.





In
      February 2007, Cornell converted $20,000 of the April 27, 2005 debenture into
      588,235 shares of the Company’s common stock, pursuant to the terms of the
      Securities Purchase Agreement. The conversion was made on February 14, 2007
      at
      $0.034 per share.





In
      February 2007, Highgate converted $20,280 of the May 6, 2005 debenture into
      590,460 shares of the Company’s common stock, pursuant to the terms of the
      Securities Purchase Agreement. The conversion was made on February 14, 2007
      at
      $0.034 per share.






15





In
      February 2007, the Company executed two amendments to an advisory board
      agreement executed in February 2006. The first amendment authorizes the Company
      to compensate the advisor 333,333 shares of the Company’s common stock, in lieu
      of cash, at $0.045 per share for all compensation owed to the advisor as of
      the
      date of the amendment. The shares are restricted and have piggy back
      registration rights upon the next registration statement filed by the Company.
      In connection with the amendment, the Company issued to the advisor an aggregate
      of 50,000 two year warrants to purchase shares of the Company’s common stock at
      an exercise price of $0.10 per share. Per the terms of the second amendment,
      the
      Company issued 100,000 restricted shares of the Company’s common stock at $0.045
      per share in consideration for services rendered to date. In August 2007, the
      Company terminated the agreement and compensated the advisor via the issuance
      of
      510,095 shares of the Company’s restricted common stock, in lieu of cash, valued
      at $0.021 per share for the compensation owed to the advisor as of the date
      of
      termination.





In
      February 2007, the Company issued 62,500 shares of its restricted common stock
      at $0.04 per share to a trade vendor as partial remuneration, in the amount
      of
      $2,500, of the Company’s open indebtedness to the vendor.





In
      February 2007, the Company issued stock options to purchase 1,158,890 shares
      of
      common stock to nine employees.  The options were issued in accordance
      with the Company’s 2004 Equity Incentive Plan. Options totaling 558,120 shares
      are exercisable at $0.045 per share and options totaling 600,770 shares are
      exercisable at $0.05 per share.  All of the options expire in February
      2017.  The shares vest after a one year period.





In
      February 2007, the Company sold to an individual 20,000 shares of common stock,
      at $0.05 per share.





In
      March
      2007, the Company executed an 18% convertible promissory note in the amount
      of
      $75,000 with an individual.  The holder is entitled, to convert the
      debenture, plus accrued interest, into shares of the Company’s common stock at
      the market value of the Company’s common stock at the date of note maturity,
      June 30, 2007.  If not converted, the entire principal amount and all
      accrued interest shall be due to the holder on June 30, 2007. In connection
      with
      the convertible promissory note, the Company issued to the individual an
      aggregate of 150,000 shares of the Company’s common stock, valued at $0.039 per
      share.  In June 2007, the maturity date of the note was extended to
      September 30, 2007 and the Company issued to the individual an additional
      150,000 shares of the Company’s common stock, valued at $0.022 per share.
      Additionally, the individual converted the interest owed on the note through
      June 30, 2007 of $3,513.70 into 159,714 shares of the Company’s common stock,
      valued at $0.022 per share. In September 2007, the maturity date of the note
      was
      extended to December 31, 2007 and the Company issued to the individual an
      additional 150,000 shares of the Company’s common stock, valued at $0.021 per
      share. Additionally, the individual converted the interest owed on the note
      from
      July 1, 2007 through September 30, 2007 of $3,402.74 into 162,035 shares of
      the
      Company’s common stock, valued at $0.021 per share.




The
      shares have Rule 144 piggyback registration rights.





In
      March
      2007, Cornell converted $15,000 of the April 27, 2005 debenture into 1,250,000
      shares of the Company’s common stock, pursuant to the terms of the Securities
      Purchase Agreement. The conversion was made on March 22, 2007 at a conversion
      price of $0.012 per share.





In
      March
      2007, the Company issued 7,500 shares of its common stock, valued at $0.05
      per
      share for 2,500 shares, $0.045 for 2,500 shares and $0.0375 for 2,500 shares,
      issuable to a law firm as compensation for general counsel legal services
      rendered.





In
      March
      2007, the Company issued 45,810 shares of its restricted common stock at $0.0247
      per share to a trade vendor as remuneration, in the amount of $1,132, of the
      Company’s open indebtedness to the vendor.





In
      March
      2007, the Company issued stock options to purchase 1,704,231 shares of common
      stock to eleven employees.  The options were issued in accordance with
      the Company’s 2004 Equity Incentive Plan. Options totaling 785,255 shares are
      exercisable at $0.024 per share and options totaling 918,976 shares are
      exercisable at $0.0375 per share. All of the options expire in March
      2017.  The shares vest after a one year period.





In
      March
      2007, the Company sold to two individuals certain units which contained common
      stock and warrants. The Company issued 384,615 shares of common stock at $0.0325
      per share and 76,923 warrants with an exercise price of $0.065 per share all
      of
      which are exercisable for a period of two years from the date of
      issuance.





In
      March
      2007, the Company sold to five individuals 615,042 shares of common stock,
      at
      $0.0247 per share.






16





In
      April
      2007, in relation to the April 2007 term sheet executed with an investment
      firm,
      the Company sold a total of one unit to one individual consisting of an 18%
      convertible note payable in the amount of $25,000 and 120,000 bonus shares
      of
      the Company’s common stock, valued at $0.019, with principal due October 24,
      2007.  The holder is entitled, to convert, the debenture, plus accrued
      interest, into shares of the Company’s common stock at the price of $0.05 per
      share.  Six months of prorated prepaid interest, for a total of
      $2,250, was due at closing, in May 2007, and was withheld from the net proceeds
      remitted to the Company by the placement agent.  The Company paid a
      placement agent fee of $3,209 and issued 24,000 shares of the Company’s common
      stock, valued at $0.019, in May 2007, relating to the convertible
      note.  The Company also paid an escrow agent fee of $660, including
      expenses, relating to the convertible note. All of the Company’s shares of
      common stock issued in connection with the convertible notes have Rule 144
      piggyback registration rights.





In
      April
      2007, the Company issued 50,000 shares of the Company’s common stock at $0.035
      per share to the five remaining note holders relating to promissory notes
      executed in July 2006, as bonus extension shares.  In connection with
      the issuance of these shares, the Company issued 5,000 shares of the Company’s
      common stock at $0.035 per share to the placement agent.





In
      April
      2007, Cornell converted $40,000.00 of the April 27, 2005 debenture into shares
      of the Company’s common stock, of which $20,000 was converted to 1,136,364
      shares of the Company’s common stock at $0.0176 per share on April 17, 2007 and
      $20,000 was converted to 1,315,789 shares of the Company’s common stock at
      $0.0152 per share on April 26, 2007, pursuant to the terms of the Securities
      Purchase Agreement.





In
      April
      2007, the Company issued stock options to purchase 1,551,842 shares of common
      stock to eleven employees.  The options were issued in accordance with
      the Company’s 2004 Equity Incentive Plan. The option shares are exercisable at
      $0.023 per share and expire in April 2017.  The shares vest after a
      one year period.





In
      April
      2007, the Company issued stock options to purchase 100,000 shares of common
      stock to one employee.  The options were issued in accordance with the
      Company’s 2004 Equity Incentive Plan. The option shares are exercisable at $0.50
      per share and expire in April 2017.  The shares vest annually over a
      three year period.





In
      April
      2007, the Company executed a consulting agreement with an investor relations
      firm to provide public and investor relations services to the
      Company.  As compensation for the services, the firm shall receive a
      monthly retainer in the amount of $5,500 and 50,000 shares of the Company’s
      common stock, valued at $0.019 per share.  The shares shall be
      restricted and have piggyback registration rights upon the next registration
      statement filed by the Company.  The term of the agreement was for
      three months and can be renewed provided the Company and the firm both agree
      in
      writing. In August 2007, the Company terminated the agreement.





In
      April
      2007, in relation to a retainer agreement executed with an attorney in August
      2005, the Company issued 2,500 shares of the Company’s common stock valued at
      $0.025 per share.





In
      May
      2007, the Company issued 50,000 shares of the Company’s common stock at $0.03
      per share to the five remaining note holders relating to promissory notes
      executed in July 2006, as bonus extension shares.  In connection with
      the issuance of these shares, the Company issued 5,000 shares of the Company’s
      common stock at $0.03 per share to the placement agent.





In
      May
      2007, the Company issued 150,000 shares of the Company’s common stock at $0.03
      per share to six note holders relating to promissory notes executed in July
      2006, as penalty shares.  In connection with the issuance of these
      shares, the Company issued 10,000 shares of the Company’s common stock at $0.03
      per share to the placement agent.





In
      May
      2007, the Company executed a 9% convertible promissory note in the amount of
      $100,000 with an individual.  The holder is entitled, at its option,
      to convert, the debenture, plus accrued interest, into shares of the Company’s
      common stock at $0.035 per share.  If not converted, the entire
      principal amount and all accrued interest shall be due to the holder on the
      second year anniversary of the debenture. In connection with the convertible
      promissory note payable, the Company issued to the individual 571,429 warrants
      with an exercise price of $0.07 per share.  The warrants are
      exercisable for a period of two years from issuance.





In
      May
      2007, Cornell converted $20,000.00 of the April 27, 2005 debenture into
      1,470,588 shares of the Company’s common stock at $0.0135 per share on May 14,
      2007, pursuant to the terms of the Securities Purchase Agreement.






17





In
      May
      2007, the Company executed a consulting agreement with an individual software
      developer whereby the consultant will provide systems analysis, design, computer
      programming and engineering services to the Company as an independent
      contractor.  The term of the agreement is perpetual with thirty day
      written termination rights retained by both the Company and the
      consultant.  Per the terms of the agreement, billable projects shall
      be defined through the completion of a task order.  Upon execution of
      the agreement, the Company agreed to record a prorated fee for the period
      October 15, 2006 to April 30, 2007 for $1,500 plus 3,000 warrants per
      month.  The warrants shall be valued at the closing market value of
      the Company’s common stock on the last day of each month. In accordance with the
      agreement, the developer received warrants to purchase 19,500 shares of the
      Company’s common stock at an exercise price of $0.025 per share for 3,000
      shares, $0.035 per share for 3,000 shares, $0.045 for 6,000 shares, $0.05 for
      3,000 shares and $0.08 per share for 4,500 shares. The warrants are exercisable
      for a period of two years from date of issuance.





In
      May
      2007, in connection with a retainer agreement executed with an attorney in
      August 2005, the Company issued 2,500 shares of the Company’s common stock
      valued at $0.018 per share.





In
      May
      2007, the Company issued stock options to purchase 1,648,081 shares of common
      stock to twelve employees.  The options were issued in accordance with
      the Company’s 2004 Equity Incentive Plan. The options are exercisable at $0.02
      per share and expire in May 2017.  The shares vest after a one year
      period.





In
      May
      2007, the Company sold to one individual certain units which contained common
      stock and warrants. The Company issued 166,667 shares of common stock at $0.03
      per share and 200,000 warrants with an exercise price of $0.06 per share all
      of
      which are exercisable for a period of two years from the date of
      issuance.





In
      June
      2007, the Company executed a 9% convertible promissory note in the amount of
      $15,000 with an individual.  The holder is entitled, to convert the
      debenture, plus accrued interest, into shares of the Company’s common stock at
      $0.015 per share.  If not converted, the entire principal amount and
      all accrued interest shall be due to the holder on June 21, 2009.  In
      connection with the convertible promissory note payable, the Company issued
      to
      the individual 1,200,000 warrants with an exercise price of $0.03 per
      share.  The warrants are exercisable for a period of two years from
      date of issuance.





In
      June
      2007, the Company executed two 8% convertible promissory notes in the amounts
      of
      $50,000 each with an individual.  The holder is entitled, to convert
      the debenture, plus accrued interest, into shares of the Company’s common stock
      at the market value of the Company’s common stock at a price of $0.02 per
      share.  If not converted, the entire principal amount and all accrued
      interest shall be due to the holder on June 29, 2009.  In connection
      with the convertible promissory note payable, the Company issued to the
      individual 1,000,000 warrants with an exercise price of $0.04 per
      share.  The warrants are exercisable for a period of two years from
      date of issuance.





In
      June
      2007, the Company executed a promissory note with an unrelated individual in
      the
      amount of $50,000. The note bears interest at 9% per annum with principal due
      December 14, 2007.  In connection with the promissory note payable,
      the Company issued to the individual 100,000 warrants with an exercise price
      of
      $0.05 per share.  The warrants are exercisable for a period of five
      years from date of issuance.





In
      June
      2007, the Company issued 43,750 shares of the Company’s common stock at $0.022
      per share to the four remaining note holders relating to promissory notes
      executed in July 2006, as bonus extension shares.  In connection with
      the issuance of these shares, the Company issued 5,000 shares of the Company’s
      common stock at $0.022 per share to the placement agent.





In
      June
      2007, the Company issued 150,000 shares of the Company’s common stock at $0.022
      per share to six note holders relating to promissory notes executed in July
      2006, as penalty shares.  In connection with the issuance of these
      shares, the Company issued 10,000 shares of the Company’s common stock at $0.022
      per share to the placement agent.





In
      June
      2007, Cornell converted $45,500.00 of the April 27, 2005 debenture into shares
      of the Company’s common stock, of which $17,000 was converted to 1,370,968
      shares of the Company’s common stock at $0.0124 per share on June 6, 2007,
      $14,000 was converted to 1,458,333 shares of the Company’s common stock at
      $0.0096 per share on June 15, 2007 and $14,500 was converted to 1,510,417 shares
      of the Company’s common stock at $0.0096 per share on June 20, 2007, pursuant to
      the terms of the Securities Purchase Agreement.





18


In
      June
      2007, in connection with a retainer agreement executed with an attorney in
      August 2005, the Company issued 2,500 shares of the Company’s common stock
      valued at $0.016 per share.





In
      June
      2007, the Company issued stock options to purchase 4,465,759 shares of common
      stock to twelve employees.  The options were issued in accordance with
      the Company’s 2004 Equity Incentive Plan. Options totaling 2,597,435 shares are
      exercisable at $0.015 per share and options totaling 1,868,324 shares are
      exercisable at $0.017 per share. All of the options expire in June
      2017.  The shares vest after a one year period.





In
      June
      2007, the Company sold to three individuals certain units which contained common
      stock and warrants. The Company issued 561,610 shares of common stock, of which
      526,316 shares at $0.019 per share and 35,294 shares at $0.017 per
      share.  In connection with the issuance of these shares, the Company
      issued 673,931 warrants, of which 631,931 warrants with an exercise price of
      $0.038 per share and 42,352 warrants with an exercise price of $0.034. These
      warrants are exercisable for a period of two years from the date of
      issuance.




In
                July 2007, the Company executed an 8% convertible promissory note
                in the
                amount of $100,000 with an individual.  The holder is entitled,
                to convert the debenture, plus accrued interest, into shares of the
                Company’s common stock at the market value of the Company’s common stock
                at $0.02 per share.  If not converted, the entire principal
                amount and all accrued interest shall be due to the holder on July
                2,
                2009.  In connection with the convertible promissory note
                payable, the Company issued to the individual 1,000,000 warrants
                with an
                exercise price of $0.04 per share.  The warrants are exercisable
                for a period of two years from date of
                issuance.




In
                July 2007, the Company executed a promissory note with an unrelated
                individual in the amount of $100,000. The note bears interest at
                18% per
                annum with principal due December 31, 2007.The Company
                has assigned the pending proceeds from its inclusion in the New Jersey
                Technology Business Certificate program towards repayment of this
                note and
                the February 2007 note executed with the same individual. The Company
                issued 2,000,000 shares of its common stock, issued in May 2007,
                to serve
                as collateral to the February 2007 note and this note.  In
                connection with the promissory note, the Company issued 300,000 restricted
                shares of common stock to the individual valued at $0.04 per share.
                All of
                the Company’s shares of common stock issued in connection with the
                promissory note have Rule 144 piggyback registration
                rights.




In
      July
      2007, the Company issued 31,250 shares of the Company’s common stock at $0.029
      per share to the three remaining note holders relating to promissory notes
      executed in July 2006, as bonus extension shares.  In connection with
      the issuance of these shares, the Company issued 3,125 shares of the Company’s
      common stock at $0.029 per share to the placement agent.





In
      July
      2007, the Company issued 150,000 shares of the Company’s common stock at $0.029
      per share to six note holders relating to promissory notes executed in July
      2006, as penalty shares.  In connection with the issuance of these
      shares, the Company issued 10,000 shares of the Company’s common stock at $0.029
      per share to the placement agent.





In
      July
      2007, Cornell converted $73,500.00 of the April 27, 2005 debenture into shares
      of the Company’s common stock, of which $21,000 was converted to 1,875,000
      shares of the Company’s common stock at $0.0112 per share on July 2, 2007,
      $21,000 was converted to 1,750,000 shares of the Company’s common stock at
      $0.012 per share on July 5, 2007, $21,000 was converted to 1,544,118 shares
      of
      the Company’s common stock at $0.0136 per share on July 6, 2007 and $10,500 was
      converted to 656,250 shares of the Company’s common stock at $0.016 per share on
      July 9, 2007, pursuant to the terms of the Securities Purchase
      Agreement.




In
      July
      2007, the Company appointed a new Chairman of its Advisory Board and added
      three
      new members. As compensation for serving on the Advisory Board, each of the
      six
      members received 50,000 restricted shares and the Chairman received 100,000
      restricted shares of the Company’s common stock, valued at $0.038 per
      share.




In
      July
      2007, in connection with a retainer agreement executed with an attorney in
      August 2005, the Company issued 2,500 shares of the Company’s common stock
      valued at $0.022 per share.




In
      July
      2007, the Company sold to two individuals 31,250 shares of common stock, at
      $0.04 per share.




19




In
      July
      2007, the Company issued stock options to purchase 779,234 shares of common
      stock to twelve employees.  The options were issued in accordance with
      the Company’s 2004 Equity Incentive Plan. The options are exercisable at $0.05
      per share and expire in July 2017.  The shares vest after a one year
      period.




In
      August
      2007, the Company executed three 9% convertible promissory notes in the amounts
      of $20,000, $50,000 and $50,000, respectively, with three
      individuals.  The holders are entitled, to convert the debenture, plus
      accrued interest, into shares of the Company’s common stock at the market value
      of the Company’s common stock at a price of $0.025 per share.  If not
      converted, the entire principal amount and all accrued interest shall be due
      to
      the holders on August 9, 2009.  In connection with the convertible
      promissory note payable, the Company issued to the individuals 160,000, 400,000
      and 400,000 warrants, respectively, with an exercise price of $0.04 per
      share.  The warrants are exercisable for a period of three years from
      date of issuance.




In
                August 2007, the Company executed an 8% convertible promissory note
                in the
                amount of $200,000 with an individual.  The holder is entitled,
                to convert the debenture, plus accrued interest, into shares of the
                Company’s common stock at the market value of the Company’s common stock
                at $0.03 per share.  If not converted, the entire principal
                amount and all accrued interest shall be due to the holder on December
                31,
                2008.  In connection with the convertible promissory note
                payable, the Company issued to the individual 1,500,000 warrants
                with an
                exercise price of $0.04 per share.  The warrants are exercisable
                for a period of five years from date of
                issuance.




In
      August
      2007, the Company issued 31,250 shares of the Company’s common stock at $0.03
      per share to the three remaining note holders relating to promissory notes
      executed in July 2006, as bonus extension shares.  In connection with
      the issuance of these shares, the Company issued 3,125 shares of the Company’s
      common stock at $0.03 per share to the placement agent.





In
      August
      2007, Cornell converted $138,500.00 of the April 27, 2005 debenture into shares
      of the Company’s common stock, of which $45,000 was converted to 2,556,818
      shares of the Company’s common stock at $0.0176 per share on August 2, 2007,
      $45,000 was converted to 2,678,571 shares of the Company’s common stock at
      $0.0168 per share on August 15, 2007 and $48,500 was converted to 2,886,905
      shares of the Company’s common stock at $0.0168 per share on August 20, 2007,
      pursuant to the terms of the Securities Purchase Agreement.





In
      August
      2007, in connection with a retainer agreement executed with an attorney in
      August 2005, the Company issued 2,500 shares of the Company’s common stock
      valued at $0.022 per share.





In
      September 2007, the Company issued 18,750 shares of the Company’s common stock
      at $0.026 per share to the two remaining note holders relating to promissory
      notes executed in July 2006, as bonus extension shares.  In connection
      with the issuance of these shares, the Company issued 1,875 shares of the
      Company’s common stock at $0.026 per share to the placement agent.





In
      September 2007, Cornell converted $55,000.00 of the April 27, 2005 debenture
      into 2,989,130 shares of the Company’s common stock at $0.0184 per share on
      September 17, 2007, pursuant to the terms of the Securities Purchase
      Agreement.





In
      September 2007, in connection with a retainer agreement executed with an
      attorney in August 2005, the Company issued 2,500 shares of the Company’s common
      stock valued at $0.028 per share.




All
      of
      the above offerings and sales were deemed to be exempt under Rule 506 of
      Regulation D and Section 4(2) of the Securities Act of 1933, as
      amended.






20




**ITEM
      3. DEFAULTS UPON SENIOR
      SECURITIES**





Not
      applicable.





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





Not
      applicable.





**ITEM
      5. OTHER INFORMATION**





Not
      applicable.




21





**ITEM
      6. EXHIBITS**





Exhibit
                Number
            Description3.1
            Amended
                and Restated Certificate of Incorporation of StrikeForce Technologies,
                Inc.(1)3.2
            By-laws
                of StrikeForce Technologies, Inc. (1)10.1
            2004
                Stock Option Plan. (1)10.2
            Securities
                Purchase Agreement dated December 20, 2004, by and among StrikeForce
                Technologies, Inc. and Cornell Capital Partners, LP.
                (1)10.3
            Secured
                Convertible Debenture with Cornell Capital Partners, LP.
                (1)10.4
            Investor
                Registration Rights Agreement dated December 20, 2004, by and between
                StrikeForce Technologies, Inc. and Cornell Capital Partners, LP in
                connection with the Securities Purchase Agreement.(2)10.5
            Escrow
                Agreement, dated December 20, 2004, by and between StrikeForce
                Technologies, Inc. and Cornell Capital Partners, LP in connection
                with the
                Securities Purchase Agreement. (2)10.6
            Security
                Agreement dated December 20, 2004, by and between StrikeForce
                Technologies, Inc. and Cornell Capital Partners, LP in connection
                with the
                Securities Purchase Agreement. (1)10.7
            Secured
                Convertible Debenture with Cornell Capital Partners, LP dated January
                18,
                2005. (1)10.8
            Royalty
                Agreement with NetLabs.com, Inc. and Amendments. (1)10.9
            Employment
                Agreement dated as of May 20, 2003, by and between StrikeForce
                Technologies, Inc. and Mark L. Kay. (1)10.10
            Amended
                and Restated Secured Convertible Debenture with Cornell Capital Partners,
                LP dated April 27, 2005. (1)10.11
            Amendment
                and Consent dated as of April 27, 2005, by and between StrikeForce
                Technologies, Inc. and Cornell Capital Partners, LP.
                (1)10.12
            Securities
                Purchase Agreement dated as of April 27, 2005 by and between StrikeForce
                Technologies, Inc. and Highgate House Funds, Ltd. (1)10.13
            Investor
                Registration Rights Agreement dated as of April 27, 2005 by and between
                StrikeForce Technologies, Inc. and Highgate House Funds, Ltd.
                (2)10.14
            Secured
                Convertible Debenture with Highgate House Funds, Ltd. dated April
                27,
                2005. (2)10.15
            Escrow
                Agreement dated as of April 27, 2005 by and between StrikeForce
                Technologies, Inc., Highgate House Funds, Ltd. and Gottbetter &
                Partners, LLP. (1)10.16
            Escrow
                Shares Escrow Agreement dated as of April 27, 2005 by and between
                StrikeForce Technologies, Inc., Highgate House Funds, Ltd. and Gottbetter
                & Partners, LLP. (1)10.17
            Security
                Agreement dated as of April 27, 2005 by and between StrikeForce
                Technologies, Inc. and Highgate House Funds, Ltd. (1)10.18
            Network
                Service Agreement with Panasonic Management Information Technology
                Service
                Company dated August 1, 2003 (and amendment). (1)10.19
            Client
                Non-Disclosure Agreement. (1)10.20
            Employee
                Non-Disclosure Agreement. (1)10.21
            Secured
                Convertible Debenture with Highgate House Funds, Ltd. dated May 6,
                2005.
                (2)10.22
            Termination
                Agreement with Cornell Capital Partners, LP dated February 19, 2005.
                (1)10.23
            Securities
                Purchase Agreement with WestPark Capital, Inc. (4)10.24
            Form
                of Promissory Note with WestPark Capital, Inc. (4)10.25
            Investor
                Registration Rights Agreement with WestPark Capital, Inc.
                (4)31.1
            Certification
                by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act, promulgated pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002. (3)31.2
            Certification
                by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
                of the Exchange Act, promulgated pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002. (3)32.1
            Certification
                by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
                of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of
                the
                United States Code, promulgated pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002. (3)32.2
            Certification
                by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
                of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of
                the
                United States Code, promulgated pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002. (3)




(1)
            Filed
                as an exhibit to the
                Registrant’s Form SB-2 dated as of May 11, 2005 and incorporated herein by
                reference.




(2)
            Filed
                as an exhibit to the
                Registrant’s Amendment No. 1 to Form SB-2 dated as of June 27, 2005 and
                incorporated herein by
                reference.




(3)
            Filed
                herewith.




(4)
            Filed
                as an exhibit to the Registrant’s Form 8-K dated August 1, 2006 and
                incorporated herein by reference.




22













**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.






**STRIKEFORCE
      TECHNOLOGIES, INC.**


*Dated:
                November13,
                2007*
            *By:
                /s/ Mark L. Kay**Mark
                L. Kay**Chief
                Executive Officer**Dated:
                November 13,
                2007*
            *By:
                /s/ Mark Joseph Corrao**Mark
                Joseph Corrao**Chief
                Financial Officer and Principal Accounting Officer*








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