Securities
and Exchange Commission


Washington,
D.C.




FORM 10Q





(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, 2008





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





For
the transition period from 
 to






000-07693


(Commission
file number)




SoftNet Technology
Corporation


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





Nevada
            74-3035831(State
      or other jurisdiction
            (IRS
      Employerof
      incorporation or organization)
            Identification
      No.)





33 Wood
Ave., South - Suite


Iselin, New Jersey  
08830


(Address
of principal executive offices)





Woodbridge
Corporate Plaza


485 Route
1 South, Building C, Suite 350A


Iselin,New Jersey08830


(Former
Address of principal executive offices) (Zip Code)





(908)
212-1780


(Registrant's
telephone number, including area code)











Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 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 o.





State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date.





Class A
87,825,489 shares of Common Stock, $0.001 par value, as of November 14, 2008;
1,304,000 Class B $0.001 par value as of November 14, 2008.





Transitional
Small Business Disclosure Format (check one)   Yes o   No x





Indicate
if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No
x









SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


CONSOLIDATED
CONDESNED FINANCIAL STATEMENTS


SEPTEMBER  30,
2008 AND 2007





INDEX TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS




PagePart I.   Financial Information
                3Item 1.   Condensed consolidated Financial
      Statements and Notes to Financial
      Statements
                3(a)  Condensed consolidated Balance Sheets
      as of September 30, 2008 and
      December 31, 2007 (unaudited)
                4(b)  Condensed consolidated Statements of
      Operations for the Three
      and Nine Months Ended September 30, 2008 and 2007
      (unaudited)
                5(c)  Condensed consolidated Statements of
      Cash Flow for the Nine
      Months Ended September 30, 2008 and 2007
      (unaudited)
                6(d)  Notes to Condensed consolidated Financial
      Statements (unaudited)
                7Item 2.   Management's Discussion and
      Analysis of Financial Condition and
      Results of Operations
                15Item  3.     Quantitative
      and Qualitative Disclosures About Market Risk
                16Item 4.   Controls and
    Procedures
                16Part II.  Other Information
                17Item 1.   Legal Proceedings
                17Item 1A.  Risk Factors
                17Item 2.   Changes in Securities and Small
      Business Issuer Purchases of Equity
      Securities
                20Item 3.   Defaults Upon Senior
      Securities
                21Item 4.   Submission of Matters to a Vote
      of Security Holders
                21Item 5.   Other Information
                21Item 6.   Exhibits
                21Signatures
                22




2
 Table of Contents




PARTI.FINANCIAL
INFORMATION
  Item 1.   Financial Statements




General




The accompanying reviewed
financial statements have been prepared in accordance with the instructions
to Form 10-Q. Therefore, they do not include all information and footnotes
necessary for a complete presentation of financial position, results
of operations, cash flow, and stockholders' equity in conformity with
generally accepted accounting principles. Except as disclosed herein, there
has been no material change in the information disclosed in the notes to
the financial statements included in the Company's registration statement
on Form 10-KSB for the year ended December 31, 2007 (audited) and
the quarter ended September 30, 2008. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the
quarter ended September 30, 2008 are not necessarily indicative of the
results that can be expected for the year ending December 31,
2008.



































3
 Table of Contents




SOFTNET
      TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE
SHEETSEPTEMBER
      30, 2008 and DECEMBER 31, 2007DECEMBER 31,
              2007
            
            
            SEPTEMBER 30,
              2008ASSETSCurrent
      Assets:Cash and cash equivalents
            
            $
            2,381
            
            
            $
            19,233Accounts receivable
            
            
            333,933
            
            
            
            239,429Current portion of notes receivable
            
            
            36,800
            
            
            
            -Total Current Assets
            
            
            373,114
            
            
            
            258,662Fixed assets, net of depreciation
            
            
            77,518
            
            
            
            41,768Deposits
            
            
            21,100
            
            
            
            2,800TOTAL
      ASSETS
            
            $
            471,732
            
            
            $
            303,230LIABILITIES AND
      STOCKHOLDERS' EQUITY (DEFICIT)LIABILITIESCurrent
      Liabilities:Accounts payable and accrued expenses
            
            $
            1,360,658
            
            
            $
            1,391,372Due to related parties
            
            
            246,000
            
            
            
            246,000Notes payable
            
            
            599,980
            
            
            
            469,681Total Current Liabilities
            
            
            2,206,638
            
            
            
            2,107,053Total Liabilities
            
            
            2,206,638
            
            
            
            2,107,053STOCKHOLDERS'
      EQUITY (DEFICIT)Preferred Stock, Series A, $1.00 Par Value; 5,000,000
      sharesauthorized, 2,920,000  shares issued and
      outstanding
            
            
            -0-
            
            
            
            -0-Preferred Stock, Series B, $.001 Par Value; 5,000,000
      sharesauthorized, and 0 shares issued and outstanding
            
            
            4,740
            
            
            
            4,740
        -Common Stock, Class A, $.001  Par Value; 500,000,000shares authorized, 87,825,489 shares issued and
outstanding
            
            
            457,715
            
            
            
            87,825Common Stock, Class B, $.001  5,000,000 shares
    authorized
            
            
            1,306
            
            
            
            1,306and 1,304,000 shares issued and outstandingWarrants
            
            
            618,059
            
            
            
            618,059Additional paid-in capital
            
            
            30,448,070
            
            
            
            31,147,626Accumulated other comprehensive income (loss)
            
            
            65,498
            
            
            
            65,498Deficit
            
            
            (33,330,294
            )
            
            
            (33,728,877
            )Total Stockholders' Equity (Deficit)
            
            
            (1,734,906
            )
            
            
            (1,803,823
            )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
            
            $
            471,732
            
            
            $
            303,230








The
accompanying notes are an integral part of the consolidated condensed financial
statements.


4
 Table of Contents




SOFTNET
      TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
      OPERATIONSFOR
      THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2008 AND
2007NINE
      MONTHS ENDED
            
            
            THREE
      MONTHS ENDEDSEPTEMBER
      30,
            
            
            SEPTEMBER
      30,2008
            
            
            2007
            
            
            2008
            
            
            2007OPERATING
      REVENUESRevenue
            
            $
            4,576,633
            
            
            $
            6,573,009
            
            
            $
            1,064,618
            
            
            $
            2,104,323COST
      OF SALES
            
            
            3,202,925
            
            
            
            5,127,347
            
            
            
            752,070
            
            
            
            1,659,438GROSS
      PROFIT
            
            
            1,373,708
            
            
            
            1,445,662
            
            
            
            312,548
            
            
            
            444,885OPERATING
      EXPENSESProfessional
      fees and compensation expenses
            
            
            1,190,373
            
            
            
            1,910,113
            
            
            
            241,088
            
            
            
            549,262Advertising
      and marketing expenses
            
            
            748
            
            
            
            17,646
            
            
            
            -
            
            
            
            893General
      and administrative expenses
            
            
            494,731
            
            
            
            346,597
            
            
            
            117,783
            
            
            
            268,250Depreciation,
      amortization and impairment
            
            
            69,720
            
            
            
            41,869
            
            
            
            8,500
            
            
            
            13,369Total
      Operating Expenses
            
            
            1,755,572
            
            
            
            2,316,225
            
            
            
            367,371
            
            
            
            831,774LOSS
      BEFORE OTHER (EXPENSE)
            
            
            (381,864
            )
            
            
            (870,563
            )
            
            
            (54,823
            )
            
            
            (386,889
            )OTHER
      INCOME (EXPENSE)Write
      down of notes receivable
            
            
            
            
            
            
            (65,000
            )
            
            
            -
            
            
            
            (65,000
            )Loss
      on conversion of debt warrantsInterest
      expense, net
            
            
            (16,720
            )
            
            
            (275,967
            )
            
            
            (7,325
            )
            
            
            (14,483
            )Total
      Other Income (Expense)
            
            
            (16,720
            )
            
            
            (340,967
            )
            
            
            (7,325
            )
            
            
            (79,483
            )NET
      LOSS FROM CONTINUING OPERATIONS
            
            
            (398,584
            )
            
            
            (1,211,530
            )
            
            
            (62,148
            )
            
            
            (466,372
            )DISCONTINUED
      OPERATIONSGain
      (loss) from disposal, net of income taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      Discontinued Operations
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -NET
      LOSS BEFORE PROVISION FOR INCOME TAXES
            
            
            (398,584
            )
            
            
            (1,211,530
            )
            
            
            (62,148
            )
            
            
            (466,372
            )Provision
      for Income Taxes
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (11,804
            )NET
      LOSS APPLICABLE TO COMMON SHARES
            
            $
            (398,584
            )
            
            $
            (1,211,530
            )
            
            $
            (62,148
            )
            
            $
            (481,176
            )NET
      LOSS PER BASIC AND DILUTED SHARES
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )From
      continuing operations
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.00
            )From
      discontinued operations
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -From
      sale of subsidiary
            
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -WEIGHTED
      AVERAGE NUMBER OF COMMONSHARES OUTSTANDING
            
            
            63,940,201
            
            
            
            356,314,645
            
            
            
            75,570,353
            
            
            
            385,483,647








The
accompanying notes are an integral part of the consolidated condensed financial
statements.




5
 Table of Contents








SOFTNET
      TECHNOLOGY CORP. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF CASH
      FLOWSFOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 20072008
            
            
            2007CASH
      FLOW FROM OPERTING ACTIVIITESContinuing
      Operations:Net loss
            
            $
            (398,584
            )
            
            $
            (1,211,530
            )Adjustments to Reconcile Net (Loss) to Net Cash (used in) operating
      activities:Depreciation
            
            
            25,750
            
            
            
            23,500Impairment of goodwillLoss
      on disposal of furniture
            
            
            10,000Common stock issued for consulting services
            
            
            329,667Changes in assets and liabilities(Increase) decrease in accounts receivable
            
            
            94,504
            
            
            
            (89,691
            )Decrease in prepaid expenses
            
            
            0
            
            
            
            25,757(Increase)decrease in deposits
            
            
            18,300
            
            
            
            (15,220
            )Increase
      in accounts payable and accrued expenses
            
            
            30,714
            
            
            
            469,418Total adjustments
            
            
            508,935
            
            
            
            413,764Net cash provided by(used in) Operating Activities
            
            
            110,351
            
            
            
            (797,766
            )CASH
      FLOWS FROM INVESTING ACTIVITIES:Continuing
      Operations:(Increase) decrease in amounts due to related parties
            
            
            0
            
            
            
            45,000Proceeds from draws on line of credit
            
            
            
            
            
            
            96,826(Increase) decrease in notes receivable
            
            
            36,800
            
            
            
            75,600Acquisition of fixed assets
            
            
            0
            
            
            
            (1,020
            )Net cash provided by investing activities
            
            
            36,800
            
            
            
            216,406CASH
      FLOWS FROM FINANCING ACTIVITESContinuing
      Operations:Shares
      issued for services
            
            
            
            
            
            
            314,909Proceeds
      from convertible notes payable
            
            
            -
            
            
            
            366,667Payments
      made on notes payable
            
            
            (130,299
            )
            
            
            120,156Net
      cash provided by (used in) financing activities
            
            
            (130,299
            )
            
            
            561,420


NET
      INCREASE (DECREASE) IN CASHAND CASH EQUIVALENTS
            
            
            16,852
            
            
            
            (19,940
            )CASH
      AND CASH EQUIVALENTS -BEGINNING OF PERIOD
            
            
            2,381
            
            
            
            25,137CASH
      AND CASH EQUIVALENTS - END OF PERIOD
            
            $
            19,233
            
            
            $
            5,197SUPPLEMENTAL
      DISCLOSURE OF CASH FLOWINFORMATION:CASH
      PAID DURING THE PERIOD FOR:Interest expense
            
            $
            16,720
            
            
            $
            275,967








The
accompanying notes are an integral part of the consolidated condensed financial
statements





6
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007





NOTE
1 -  ORGANIZATION AND BASIS OF
PRESENTATION





The
unaudited  consolidated condensed financial statements included herein
have been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC).  The  consolidated
condensed financial statements and notes are presented as permitted on Form
10-QSB and do not contain information included in the Company's annual
consolidated condensed statements and notes.  Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading.  It is suggested that these consolidated
condensed financial statements be read in conjunction with the December 31, 2007
Forms 10KSB and the audited financial statements and the accompanying notes
thereto.  While management believes the procedures followed in preparing
these  consolidated condensed financial statements are reasonable, the
accuracy of the amounts are in some respects dependent upon the facts that will
exist, and procedures that will be accomplished by the Company later in the
year.





These  consolidated
condensed unaudited financial statements reflect all adjustments, including
normal recurring adjustments which, in the opinion of management, are necessary
to present fairly the consolidated condensed operations and cash flows for the
periods presented.





The
publicly held entity that is today Softnet Technology Corporation (the Company
or "SoftNet"), was founded in March, 1971 as International Mercantile
Corporation (International Mercantile), organized under the laws of the State of
Missouri.




On
February 14, 2002, International Mercantile Corporation changed its name to T
& G2.  In
addition, the Company changed its domicile to Nevada, which brought about a
reverse 8 to 1 stock split, and a change in the par value of the stock to
$0.001.




On July
22, 2004, The Company changed its name to Softnet Technology Corp.





On or
about January 11, 2006, the Company entered into a certain Amended Plan and
Agreement of Reorganization (the Agreement) with InSpara. The Company previously
entered into a Plan and Agreement of Reorganization with InSpara, Inc. on
October 31, 2005, which was terminated on January 11,
2007.    Under the terms of the Agreement InSpara merged
with and into the Company. The closing took place on January 18, 2007 effective,
January 1, 2007. Pursuant to the Agreement: (i) certain key employees of InSpara
have entered into employment agreements with the Company; and (ii) all
registration rights held by stockholders of InSpara, if any, were terminated.
Under the Agreement, the stockholders of InSpara received, pro rata, a total of
49,999,998 shares of Softnet's Common Stock. The Acquisition Shares are not
registered shares and will only be free trading upon a filing of a Registration
Statement for the Acquisition Shares, or an exemption from the registration
thereof. Prior to the execution of the Agreement, there were no material
relationships between (i) InSpara or any of its affiliates, or any officer or
director of InSpara, and (ii) the Company or any of its affiliates, or any
officer or director of the Company. The Company filed the Articles of Merger
with the Secretary of State of the State of Nevada. The Company recognized
$4,320,760 of goodwill in this transaction and has impaired the entire amount as
of  the year ended December 31, 2007.





In June
of 2006, to achieve economies of scale and centralized organizational and
operational continuity, the Company performed a merger rollup whereby each of
its subsidiaries was rolled up and into SoftNet.  Accordingly, beginning in
the second quarter of 2006, the Company no longer had any wholly owned
subsidiaries and was one operating unit.





The
Company entered into a merger agreement with PeriNet Technologies LLC (Perinet),
a Pennsylvania based information technology firm, Inc. in September 2006
effective July 1, 2006. Under the merger agreement PeriNet was to merge into the
Company. Under the terms of the merger, the Company is to pay a total of
$300,000 in cash over a period of 180 days, and issue restricted Class A, Common
Stock of the Company with a  maximum value of $2,100,000, $1,000,000
of which is guaranteed and the remaining being vested based on future
performance.  The shares will be valued based on the average share price of
the stock the month preceding the vesting period. The Company in this
transaction acquired $171,057 of assets and $376,098 in liabilities. Based on
the initial payout of $100,000 and $1,000,000 of stock the difference of
$1,305,851 was recognized as goodwill. However the entire goodwill amount of
$1,305,851 was impaired in 2007.





NOTE
2 -   SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES





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 disclosures of contingent assets and liabilities at the date of
the  consolidated condensed financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.






7
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)





NOTE
2 -   SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)





Revenue
Recognition





Commencing
in 2002, the Company started generating revenues. The Company currently records
its revenue as follows:





Pursuant
to SAB 104, the general criteria for recognition of revenue are:





1)     
Persuasive evidence of an arrangement exists;


2)     
Delivery has occurred or services have been rendered;


3)     
The seller's price to the buyer is fixed or determinable, and


4)     
Collectibility is reasonably assured.




Although
SOP 97-2 specifically deals with software revenue recognition, there are basic
principles the Company follows contained in this pronouncement. They are 1)
Licensing vs. Sales, meaning transfers of rights to software by licenses rather
than by outright sales will have
the same impact on revenue recognition; 2) Product may not equate with delivery
of software, relating to specifically when the services do not entail
significant production, modification or customization of the software, the
services are accounted for as a


separate
element; 3) Delivery is the key threshold issue for revenue recognition, which
is consistent with CON #5, Recognition and Measurement in Financial Statements
of Business Enterprises; 4) Revenue must be allocated to all elements of the
sales arrangement, with recognition dependent upon meeting the criteria on an
element-by-element basis, this being vendor specific objective evidence (VSOE).
This principle does not apply to the Company at this time; and 5) The earnings
process is not complete if fees are subject to forfeiture.





EITF
99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, provides
guidance on whether an entity is an agent for a vendor-manufacturer, and thus
recognizes the net retainage (commission) for serving in that capacity, or
whether that entity is a seller of goods (principal), and thus recognizes
revenue for the gross amount billed to a customer and an expense for the amount
paid to the vendor-manufacturer. The Company, considers this EITF when
recognizing revenue for its WholesaleByUs subsidiary. The Company considers
themselves the primary obligor in an arrangement, and establishes the selling
price and assumes the credit risk, therefore recognizes revenue
gross.





Cash and Cash
Equivalents





The
Company considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents.





The
Company maintains cash and cash equivalent balances at several financial
institutions that are insured by the Federal Deposit Insurance Corporation up to
$100,000.





Fixed
Assets





Fixed
assets are stated at cost. Depreciation is computed  using the
straight-line method over the estimated useful life of the assets.





Furniture
      and fixtures
            5
      to7 YearsComputer
      Software and Equipment
            3
      to 5 Years





Income
Taxes





Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates.





Comprehensive
Income





The
Company adopted Statement of Financial Accounting Standards No, 130, Reporting
Comprehensive Income, (SFAS No. 130). SFAS No. 130 requires the reporting of
comprehensive income in addition to net income from operations. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of information that historically has not been recognized in the
calculation of net income.







8
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)





NOTE
2 -   SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES  (CONTINUED)




Segment
Information





The
Company follows the provisions of SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information . This standard requires that
companies disclose operating segments based on the manner in which management
disaggregates the Company in making internal operating decisions.





Advertising





Costs of
advertising and marketing are expensed as incurred. Advertising and marketing
costs were $748 and $17,646 for the nine months ended September 30, 2008 and
2007, respectively.





Goodwill and Other
Intangible Assets





In June
2001, the FASB issued Statement No. 142 Goodwill and Other Intangible Assets.
This statement addresses financial accounting and reporting for acquired
goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible Assets. It addresses how intangible assets that are acquired
individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition. This Statement also addresses how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. The Company tests for impairment of the goodwill at least
annually, if not more depending upon substantial changes in the Company that may
lead to a change in the goodwill during interim periods.





The
company has not obtained any intangible assets in the current quarter and no
impairment review is necessary.





Software Development
Costs





Internal
use software costs are recorded in accordance with Statement of Position (SOP)
No. 98-1,"Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use"
..  Qualifying costs incurred during the application development stage,
which consist primarily of outside services are capitalized and amortized over
the estimated useful life of the asset. All other costs are expensed as
incurred. The Company has determined that all costs for the nine months ended
September 30, 2008 and 2007 do not relate to the application development stage
and therefore have expensed these costs as they were incurred.





Reclassifications





Certain
amounts for the nine months ended September 30, 2007 have been reclassified to
conform to the presentation of the September 30, 2008 amounts. The
reclassifications have no effect on net income for the nine months ended
September 30, 2007.





Earnings (Loss) Per Share of
Common Stock





Historical
net income (loss) per common share is computed using the weighted average number
of common shares outstanding. Diluted earnings per share (EPS) includes
additional dilution from common stock equivalents, such as stock issuable
pursuant to the


exercise
of stock options and warrants. Common stock equivalents are not included in the
computation of diluted earnings per share when the Company reports a loss
because to do so would be antidilutive for the periods presented.





The
following is a reconciliation of the computation for basic and diluted
EPS:




September
      30,
            
            
            September
    30,2008
            
            
            2007Net Loss
            
            $
            (
      398,584
            )
            
            $
            (
      1,211,530
            )Weighted-average
      common shares  outstanding (Basic)
            
            
            63,940,201
            
            
            
            385,483,647Weighted-average
      common stock equivalents:Stock
      options/Warrants
            
            
            -
            
            
            
            -Weighted-average
      common shares outstanding (Diluted)
            
            
            63,940,201
            
            
            
            385,483,647




Options
and warrants outstanding to purchase stock were not included in the computation
of diluted EPS because inclusion would have been antidilutive.






9
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)





NOTE
2 -   SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES  (CONTINUED)





Fair Value of Financial
Instruments




The
carrying amount reported in the  consolidated condensed balance sheet
for cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and notes payable approximate fair value because of the immediate or
short-term maturity of these financial instruments.





Stock-Based
Compensation





The
Company as of January 1, 2007, has elected to follow the Financial Accounting
Standards Board (FASB) published Statement of Financial Accounting Standards No.
123 (Revised 2004), Share-Based
Payment  (SFAS 123R).  SFAS 123R requires that
compensation cost related to share-based payment transactions be recognized in
the financial statements. Share-based payment transactions within the scope of
SFAS 123R include stock options, restricted stock plans, performance-based
awards, stock appreciation rights, and employee share purchase plans.  The
provisions of SFAS 123R, as amended, are effective for small business issuers
beginning as of the next fiscal year after December 15, 2005.  The change
in accounting principle had no effect on the


consolidated
condensed financial statements.





Recent Accounting
Pronouncements





In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities" ("SFAS No. 161"). SFAS No. 161
amends and expands the disclosure requirement for FASB Statement No. 133,
"Derivative Instruments and Hedging Activities" ("SFAS No. 133"). It
requires enhanced disclosure about (i) how and why an entity uses
derivative instruments, (ii) how derivative instruments and related hedged
items are accounted for under SFAS No. 133 and its related interpretations,
and (iii) how derivative instruments and related hedged items affect an
entity’s financial position, financial performance, and cash flows. SFAS
No. 161 is effective for the Company as of January 1,
2009.





In April
2008, FASB Staff Position No. 142-3, Determination of the Useful Life of
Intangible Assets (FSP 142-3) was issued. This standard amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for
financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Early adoption is
prohibited. The Company has not determined the impact on its financial
statements of this accounting standard.





Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the consolidated financial statements
upon adoption.





Reclassifications





Certain
prior periods' balances have been reclassified to conform to the current
period's financial statement presentation. These reclassifications had no impact
on previously reported results of operations or stockholders'
equity.





NOTE
3 -   ACCOUNTS
RECEIVABLE





The
Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated credit risk by performing credit checks
and actively pursuing past due accounts. An allowance for doubtful
accounts  of $25,000 has been established at September 30,
2008.





Customer
Concentrations





As
of  September 30, 2008, the Company's has two customers that accounted
for approximately 25% of its accounts receivable. For the nine months ended
September 30, 2008, these two customers accounted for approximately 73% of its
revenues.





10
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)




NOTE
4 -   FIXED
ASSETS





Fixed
assets consist of the following at September 30, 2008:





Computer
      equipment
              
              $
              75,016Furniture and
      fixtures
              
              
              20,397Software
              
              
              30,000125,413(83,645
              )Total
              
              $
              41,768
  Depreciation
expense was $25,750 and $15,000 for the nine months ended September 30, 2008 and
2007. The Company acquired $155,000 of fixed assets in the acquisition of
InsPara and
Perinet.





NOTE
5 -   NOTES
PAYABLE – BANK





In the
acquisition of PeriNet the company was to assume a line of credit agreement with
Commerce Bank. The credit line has been closed and the  balance of, at
acquisition of approximately  $100,000 and $96,826 at September 30,
2008 is the subject of litigation as disclosed below.




In June
2007, the Company entered into an agreement with three companies to borrow
$366,667 with the ability to borrow up to$1.5 million based on certain
conditions being met. The loans carry an interest rate of 8% and is due to
mature and be paid in its entirely on June 26, 2008. Interest is payable on
October 1, 2007 and quarterly thereafter up to the maturity date. The loans have
a conversion option into the Company's common stock. The conversion price of the
stock shall be the lesser of (i) the Initial Market Price of the stock at the
time of the loan or (ii) Fifty-five percent (55%)  of the average of the
three lowest intra-day trading prices during the twenty trading days immediately
prior to the Conversion date.  In addition the Company will issue one Class
A warrant and one class B warrant will be issued for each two dollars loaned to
the company. The per warrant share exercise price to acquire a warrant share
upon exercise of Class A warrant shall be $0.03 and the exercise price of Class
B warrant shall be $0.06. Both Class A and Class B warrant shall be expire seven
years after the closing date. As of September 30, 2008 $57,500 of the debt has
been converted leaving a remaining balance of $239,167 outstanding.




NOTE
6 - RELATED PARTY
TRANSACTIONS





Amounts
due to related parties at September 30, 2008 consists of advances totaling
$246,000 from Jim Farinella, a former director of the company and Jim Booth
CEO.





NOTE
7 -   ACQUISITIONS




The
Company entered into a merger agreement with PeriNet Technologies LLC (Perinet),
a Pennsylvania based information technology firm, Inc. in September 2006
effective July 1, 2006. Under the merger agreement PeriNet would merge into the
Company. Under the terms of the merger, the Company will pay a total of $300,000
in cash over a period of 180 days, and issue restricted Class A, Common Stock of
the Company with a maximum value of $2,100,000, $1,000,000 of which is
guaranteed and remaining being vested based on future performance.  The
shares will be valued based on the average share price of the stock the month
preceding the vesting period. The Company in this transaction acquired $171,057
of assets and $376,098 in liabilities. Based on the initial payout of $100,000
and $1,000,000 of stock the difference of $1,305,851 was recognized as goodwill.
Due to the fact Perinet audited financial opinion was a going concern, the
entire goodwill amount of $1,305,851 has been impaired.





NOTE
8 -   STOCKHOLDERS' EQUITY
(DEFICIT)





Class
B Common Stock





As of
September 30, 2008, there were 5,000,000 shares authorized, and 1,304,000 shares
issued and outstanding of the Company's Class B common stock with a par value of
$.001.  Of the 5,000,000 shares authorized and issued ,as of September 30,
2008, Mr. David Facciani, a former officer and director, holds 1,304,000 shares
of Class B common stock.





11
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)




Stock
Options




As of
January 1, 2000, STI adopted a stock option plan under which 20,000,000 shares
of common stock are available for issuance with respect to awards granted to
officers, management, consultants, and any other key employees of STI.  The
options were to be exercised at not less than 85% of the fair market value of
the shares on the date of grant.  The options were to expire after 10 years
from the date of grant.  The options were to be exercisable immediately
when granted and are were subject to restrictions on transfer, repurchase and
right of first refusal. When in 2002, STI was acquired by the Company, these
options were cancelled and replaced with identical options of the Company. The
Company did not record any compensation expense for the granting of options in
the year ended December 31, 2007 and 2005.





Warrants





Effective
September 30, 2007, the Company converted the $500,000 debt in exchange for
20,000,000 warrants to purchase Class A Common Stock at an exercise price of
$0.035 per share. The warrants expired April 30, 2007. The value of the warrants
using the Black-Scholes
method is $618,059 and is reflected on the consolidated condensed balance sheet.
The difference of $49,374 represents a loss on conversion of the debt to
warrants and is reflected in the consolidated condensed statements of operations
of the year ended December 31, 2007. The Black-Scholes assumptions utilized were
as follows: expected life in years – 2 years; annualized volatility – 125%; and
discount rate – 5%.





Options
            
            Weighted
      Average
              Exercise PriceOptions
      outstanding at December 31, 2007
            
            
            .0025Granted during the year
            9,400,00
            
            .0025Surrendered, forfeited or expired
            500,000
            
            -Exercised
            (500,000)
            
            .0025Options
      outstanding at September 30, 2008
            9,400,000
            
            $
            .0025




Exercisable
options outstanding, and the related weighted average exercise price at
September 30, 2008 and 2007 were 9,400,000 and 9,400,000, and $0.0025 and
$.0025, respectively.





The
following tabulation summarizes certain information concerning outstanding and
exercisable options at September 30, 2008 and 2007.





2008
            
            
            2007Outstanding
      options:Number outstanding
            
            $
            9,400,000
            
            
            $
            9,400,000Weighted average exercise price
            
            
            .0025
            
            
            
            .0025Weighted average remaining contractual life in years
            
            
            4.50
            
            
            
            4.50Exercisable
      options:Number outstanding
            
            $
            9,400,000
            
            
            $
            9,400,000Weighted average exercise price
            
            
            .0025
            
            
            
            .0025





If the
Company had elected to recognize compensation based on the fair value of the
options granted at the grant date, net loss and loss per share would have been
increased to the following pro forma amounts shown below:





Preferred
Stock





At
September 30, 2008, there are 5,000,000  shares of Series A Preferred
Stock, par value $.001 authorized and 2,920,000 shares issued and
outstanding.





Additionally,
the Company passed a board resolution to authorize 5,000,000 shares of Series B
Preferred Stock, par value $.001. As of September 30, 2008, the Company has 0
shares issued and outstanding.








12
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)




Common Stock





In
February 2003, the Company upon an approved board resolution increased the
authorized limit of the Class A common shares to 250,000,000 and increased it to
500,000,000 in 2004.





As of
September 30, 2008, there were 500,000,000 shares authorized, and 49,815,532
shares issued and outstanding, of the Company's common stock A with a par value
of $.001.





Reverse Stock
Split





The Board
of the Company approved a resolution on July 25, 2007, pursuant to the
requirements of Nevada Revised Statutes, section 78.207, for a Reverse Stock
Split on a one for ten basis so that ten shares of old Common Stock shall be
converted into one share of new Class A Common Stock, par value
$0.001.  The reverse stock split became effective April 28,
2008.





As of
September 30, 2008, there were 5,000,000 shares authorized, and 1,304,000 shares
issued and outstanding of the Company's Class B common stock with a par value of
$.001.





In
February 2003, the Company upon an approved board resolution increased the
authorized limit of the Class B common shares to 5,000,000. Subsequent to this
board resolution, the Company cancelled the outstanding 1,142,858 shares and
issued the entire 5,000,000 shares to two of its officers. Of the 5,000,000
shares authorized and issued to the then officers of the Company, James
Farinella and David Facciani,  As of  September 30, 2008, Mr.
Farinella holds zero shares of Class B common stock, and Mr. Facciani holds
1,304,000 shares of Class B common stock.





NOTE
10 -   NOTES
RECEIVABLE





Indigo
entered into a loan agreement with Pearlnet LLC, an Atlanta, Georgia based
limited liability company on March 1, 2005. Indigo lent Pearlnet LLC, $165,000,
which is to be repaid in two annual installments of $25,000, and the remaining
$115,000 in the third year. Interest is payable to Indigo at the rate of .007
percent compounded daily. As of September 30, 2008, all principal and interest
have been paid in full.





NOTE
11 -   GOING
CONCERN





As shown
in the accompanying  consolidated condensed financial statements the
Company has incurred significant recurring losses of $398,584 and $1,211,530 for
the nine months ended September 30, 2008 and 2007, and has a working capital
deficiency of $1,848,391 as of September 30, 2008.  There is no guarantee
that the Company will be able to raise enough capital or generate revenues to
sustain its operations.  These conditions raise substantial doubt about the
Company's ability to continue as a going concern for a reasonable
period.





Management
believes that the Company's capital requirements will depend on many factors
including the success of the Company's  future growth and ability to
cut costs. The Company's ability to continue as a going concern is also
dependent upon management's ability to raise additional interim capital and,
ultimately, achieve profitable operations.  There can be no assurance that
management will be able to raise sufficient capital, under terms satisfactory to
the Company, if at all.





The
consolidated condensed financial statements do not include any adjustments
relating to the carrying amounts of recorded assets or the carrying amounts and
classification of recorded liabilities that may be required should the Company
be unable to continue as a going concern.





NOTE
12 -   PROVISION FOR INCOME
TAXES





Deferred
income taxes will be determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company's assets and liabilities.  Deferred income taxes will be measured
based on the tax rates expected to be in effect when the temporary differences
are included in the Company's consolidated condensed tax return.  Deferred
tax assets and liabilities are recognized based on anticipated future tax
consequences attributable to differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases.





13
 Table of Contents




SOFTNET
TECHNOLOGY CORP. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


SEPTEMBER
30, 2008 AND 2007


(CONTINUED)





At
September 30, 2008, deferred tax assets approximated the following:




Net operating loss
      carryforwards
              
              $
              9,900,000Less: 
      valuation allowance
              
              
              (9,900,000
              )$
              -0-
  At
September 30, 2008, the Company had accumulated deficits  approximating
$33,728,877 available to offset future taxable income through 2027.  The
Company established valuation allowances equal to the full amount of the
deferred tax assets due to the uncertainty of the utilization of the operating
losses in future periods.
  A
reconciliation of the Company's effective tax rate as a percentage of income
before taxes and federal statutory rate for the six months ended September 30,
2008 and 2007 is summarized as follows:





2008
            
            2007Federal
      statutory rate
            (34.0)%
            
            (34.0)%State
      income taxes, net of federal benefits
            4.0
            
            4.0Valuation
      allowance
            30.0
            
            30.00%
            
            0%


























14
 Table of Contents


Item 2.   Management's Discussion and Analysis of
Financial Condition and Results of Operations.





Introduction
and Forward Looking Statements




This
document contains forward-looking statements which may involve known and unknown
risks, uncertainties and other factors that may cause SoftNet Technology Corp's
(SoftNet) actual results and performance in future periods to be materially
different from any future results or performance suggested by these statements.
SoftNet cautions investors not to place undue reliance on forward-looking
statements, which speak only to management's expectations on this
date.





Certain
statements contained herein, constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the Act). Such
forward-looking statements are identified by words such as intends, anticipates,
hopes and expects, among others, and include, without limitation, statements
regarding the Company's plan of business operations, anticipated revenues,
related expenditures, and the results of any business transactions. Factors that
could cause actual results to differ materially include, among others, the
following: acceptability of the Company's services in the market place, general
economic conditions, political and economic conditions in the United States and
abroad, and competition.





The
following discussion and analysis highlights the financial position and results
of operations of SoftNet for the nine months ended September 30, 2008 compared
to the nine months ended September 30, 2007. The business activities of the
Company are now that of the wholly owned  Perinet Technologies and
InsPara Networking Technologies, Inc.





The
Company anticipates that their sources of liquidity will come from the private
sale of the Company's securities to cover the funding of corporate expenses,
such as legal and accounting and filing fees, as well as Sarbanes-Oxley
compliance.





During
the nine months ended September 30, 2007, the Company sold Solutions Technology,
Inc. for $100,000, and also disposed of its German subsidiary SoftNet
International, Inc. The resulting gains from disposal are included in the
Company's financials for the nine months ended September 30, 2007.





Results
of Operations





Nine
Months Ended September 30, 2008 and September 30, 2007





Revenues
for the nine months ended September 30, 2008 were $4,576,633 as compared to
$6,573,009 for the nine months ended September 30, 2007. The Company's
acquisitions, increased engagements in the core business and combination of
operations in the past were the reasons the Company experienced fast revenue
growth. The decrease in revenue for the period over prior year is attributable
to Company’s decision to exit hardware sales.





Cost of
sales for the nine months ended September 30, 2008 was $3,202,925 compared to $
5,127,347 for the nine months ended September 30, 2007. The The decrease in
cost of sales was mainly due to the previously announced decision to discontinue
the sale of hardware and the costs associated with revenue from hardware
sales.





Operating
expenses for the nine months ended 2008 were $1,755,572 as compared to
$2,316,225  in the first nine months of 2007, a decrease of
approximately $560,653 due in large part to the decrease in marketing and
promotional activity and in corporate expenses for legal and accounting and
operating expenditures.





Other
income (expense) was $(16,720) for the first nine months of 2008 compared to
$(340,967) for the first nine months of 2007.  The decrease was due to
a reduction of interest expense.





The gross
margin of  30% in the first nine months of 2008 was attributable to
the acquisitions being brought into the overall company.  This figure is
not being compared to previous years of operations as the operations of the
Company are significantly different than previous years.  Going forward
these margins should remain steady and there is no reason to believe outside
competitive pressure would cause a decrease.





During
the period Mr. John Stopper resigned as CEO for personal reasons but will remain
on the Board. In this capacity the Company will continue to benefit from his
expertise and guidance. The Board appointed Mr. James Booth as interim CEO until
a new search can be completed. Mr. Booth will be compensated his normal salary
of $144,000 per year, and may be eligible for additional remuneration as
recommended and approved by the Board of Directors. As a former CEO of the
Company Mr. Booth will provide continuity at the senior management level and
continue to execute upon the strategies put in place by Mr. Stopper. An
additional organizational change during the period was the resignation of Mr.
Kevin Holt, C.O.O. from the Company and the Board of Directors.





Results
of Operations





Three
Months Ended September 30, 2008 and September 30, 2007





Revenues
for the three months ended September 30, 2008 were $1,064,618 as compared to
$2,104,323 for the three months ended September 30, 2007. The Company's
acquisitions, increased engagements in the core business and combination of
operations in the past were the reasons the Company experienced fast revenue
growth. The decrease in revenue for the period over prior year is attributable
to Company’s decision to exit hardware sales.





15
 Table of Contents




Cost of
sales for the three months ended September 30, 2008 was $752,070 compared to $
1,659,438 for the three months ended September 30, 2007. The decrease in cost of
sales was mainly due to the previously announced decision to discontinue the
sale of hardware and the costs associated with revenue from hardware sales
..





Operating
expenses for the three months ended 2008 were $367,371 as compared to
$831,774  in the first three months of 2007, a decrease of
approximately $464,403 due in large part to the decrease in marketing and
promotional activity and in corporate expenses for legal and accounting and
operating expenditures.





Other
income (expense) was $(7,325) for the first three months of 2008 compared to
$(14,483) for the first three months of 2007.





The gross
margin of 33% in the first three months of 2008 was attributable to the
acquisitions being brought into the overall company.  This figure is not
being compared to previous years of operations as the operations of the Company
are significantly different than previous years.  Going forward these
margins should remain steady and there is no reason to believe outside
competitive pressure would cause a decrease.





Liquidity
and Capital Resources





For the
nine-months ended September 30, 2008, the Company had $110,351 provided by
operating activities compared to a usage of $797,766 for the nine-months ended
September 30, 2007. The increase in cash provided by operating activities of
approximately $900,000 is most attributable to the increase in shares of stock
being issued for services and the lower net loss incurred by the company in each
quarter.   The Company has continued to borrow certain amounts from
related parties to finance the operations brought in to the company through the
acquisitions. The Company has made significant progress with respect to future
funding through  unrelated third parties.  Funding is being
sought which will enable the Company to market, and continue to expand
operations at a quickened pace. We anticipate that going forward; we will
continue to streamline administrative and professional fees to conserve cash
flow. Once the recognition of increased revenues occurs, certain expenses will
increase, but only in accordance with the increase in revenues.





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. The Company has suffered recurring losses from
operations and at September 30, 2008 had working capital deficits as noted
above. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.  Additional capital would be required
to increase the pace of growth for the overall company.  It is expected in
the short term through organic growth and strategically targeted acquisitions
that the Company will be able to sustain a very high rate of growth however it
will require additional capital.




ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK




We do not
hold any derivative instruments and do not engage in any hedging activities.
Most of our activity is the litigation of our patent technology that is still
under litigation.





ITEM 4.  CONTROLS AND PROCEDURES




(a)
Evaluation of Disclosure Controls and Procedures.Our management,
with the participation of our President, evaluated the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report. Based on that evaluation, our President concluded that our disclosure
controls and procedures as of the end of the period covered by this report were
effective such that the information required to be disclosed by us in reports
filed under the Securities Exchange Act of 1934 is (i) recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms and (ii) accumulated and communicated to our management, including
our President, as appropriate to allow timely decisions regarding disclosure. A
controls system cannot provide absolute assurance, however, 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.




Management’s
Report on Internal Control over Financial Reporting.Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act).
Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in theUnited States.




16
 Table of Contents




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives. Furthermore, smaller reporting companies face additional
limitations.  Smaller reporting companies employ fewer individuals and find
it difficult to properly segregate duties.  Often, one or two individuals
control every aspect of the Company’s operation and are in a position to
override any system of internal control.  Additionally, smaller reporting
companies tend to utilize general accounting software packages that lack a
rigorous set of software controls.




Our
management, with the participation of the Chief Executive Officer, evaluated the
effectiveness of the Company’s internal control over financial reporting as of
September 30, 2008.  In making this assessment, our management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control — Integrated Framework.  Based
on this evaluation, our management, with the participation of the President,
concluded that, as of September 30, 2008, our internal control over financial
reporting was effective.




(b)
 Changes in Internal
Control over Financial Reporting.  There were no changes in our
internal control over financial reporting, as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, during our most recently completed fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.





PART II OTHER INFORMATION




ITEM
1.LEGAL
PROCEEDINGS





Except as
set forth below, the Company is not a party to any litigation and, to its
knowledge, no action, suit or proceeding has been threatened against the Company
which would, if ruled against the Company, have a material impact on the
Company’s financial condition.  For the purposes of this disclosure,
the Company deems any determination in excess of $50,000 to be
material:





Piscopo
v. SoftNet  - Pending in the Federal District Court in the Eastern
District of Pennsylvania.  In this suit the former owners of PeriNet
Technologies, LLC seek certain relief, including the issuance of SoftNet class A
common stock, under the Merger Agreement entered into by PeriNet and the Company
and reimbursement for the payment of the outstanding balance on the Commerce
Bank line of credit (see above).  The Company has answered the
Complaint and has asserted its contention that material misrepresentations, or
omissions, were made at the time the Merger Agreement was entered
into.  This action is still in it’s early stages and discovery is to
be concluded early 2009.





ITEM 1A.  RISK FACTORS




POSSIBLE
“PENNY STOCK” REGULATION




Any
trading of our common stock in the Pink Sheets or on the OTC Bulletin Board may
be subject to certain provisions of the Securities Exchange Act of 1934,
commonly referred to as the “penny stock” rule.




Our
common stock is deemed to be “penny stock” as that term is defined in Rule
3a51-1 promulgated under the Securities Exchange Act of 1934. Penny stocks are
stock:




•
            With
      a price of less than $5.00 per
share;




•
            That
      are not traded on a “recognized” national
  exchange;




•
            Whose
      prices are not quoted on the Nasdaq automated quotation system (Nasdaq
      listed stock must still have a price of not less than $5.00 per share);
      or




17
 Table of Contents




•
            In
      issuers with net tangible assets less than $2.0 million (if the issuer has
      been in continuous operation for at least three years) or $5.0 million (if
      in continuous operation for less than three years), or with average
      revenues of less than $6.0 million for the last three
    years.




Broker/dealers
dealing in penny stocks are required to provide potential investors with a
document disclosing the risks of penny stocks. Moreover, broker/dealers are
required to determine whether an investment in a penny stock is a suitable
investment for a prospective investor. These requirements may reduce the
potential market for our common stock by reducing the number of potential
investors. This may make it more difficult for investors in our common stock to
sell shares to third parties or to otherwise dispose of them. This could cause
our stock price to decline.




BECAUSE
WE ARE QUOTED ON THE OTCBB INSTEAD OF AN EXCHANGE OR NATIONAL QUOTATION SYSTEM,
OUR INVESTORS MAY HAVE A TOUGHER TIME SELLING THEIR STOCK OR EXPERIENCE NEGATIVE
VOLATILITY ON THE MARKET PRICE OF OUR STOCK




Our
common stock is traded on the OTCBB. The OTCBB is often highly illiquid, in part
because it does not have a national quotation system by which potential
investors can follow the market price of shares except through information
received and generated by a limited number of broker-dealers that make markets
in particular stocks. There is a greater chance of volatility for securities
that trade on the OTCBB as compared to a national exchange or quotation system.
This volatility may be caused by a variety of factors, including the lack of
readily available price quotations, the absence of consistent administrative
supervision of bid and ask quotations, lower trading volume, and market
conditions. Investors in our common stock may experience high fluctuations in
the market price and volume of the trading market for our securities. These
fluctuations, when they occur, have a negative effect on the market price for
our securities. Accordingly, our stockholders may not be able to realize a fair
price from their shares when they determine to sell them or may have to hold
them for a substantial period of time until the market for our common stock
improves.




RISKS
RELATING TO OWNERSHIP OF OUR COMMON STOCK




Although
there is presently a market for our common stock, the price of our common stack
may be extremely volatile and investors may not be able to sell their shares at
or above their purchase price, or at all. We anticipate that the market may be
potentially highly volatile and may fluctuate substantially because
of:




•
            Actual
      or anticipated fluctuations in our future business and operating
      results;




•
            Changes
      in or failure to meet market
expectations;




•
            Fluctuations
      in stock market price and volume




WE
DO NOT INTEND TO PAY DIVIDENDS




We do not
anticipate paying cash dividends on our common stock in the foreseeable future.
We may not have sufficient funds to legally pay dividends. Even if funds are
legally available to pay dividends, we may nevertheless decide in our sole
discretion not to pay dividends. The declaration, payment and amount of any
future dividends will be made at the discretion of the board of directors, and
will depend upon, among other things, the results of our operations, cash flows
and financial condition, operating and capital requirements, and other factors
our board of directors may consider relevant. There is no assurance that we will
pay any dividends in the future, and, if dividends are rapid, there is no
assurance with respect to the amount of any such dividend.





FAILURE
TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE
WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS





It may be
time consuming, difficult and costly for us to develop and implement the
additional internal controls, processes and reporting procedures required by the
Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal
auditing and other finance staff in order to develop and implement appropriate
additional internal controls, processes and reporting procedures. If we are
unable to comply with these requirements of the Sarbanes-Oxley Act, we may not
be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.





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If we
fail to comply in a timely manner with the requirements of Section 404 of the
Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.





Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations, beginning
with our annual report on Form 10-K for our fiscal period ending December 31,
2007, we will be required to prepare assessments regarding internal controls
over financial reporting and beginning with our annual report on Form 10-K for
our fiscal period ending December 31, 2008, furnish a report by our management
on our internal control over financial reporting. We have begun the process of
documenting and testing our internal control procedures in order to satisfy
these requirements, which is likely to result in increased general and
administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
issue an unqualified opinion on management's assessment of the effectiveness of
our internal control over financial reporting. Failure to achieve and maintain
an effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock
price.





In
addition, in connection with our on-going assessment of the effectiveness of our
internal control over financial reporting, we may discover “material weaknesses”
in our internal controls as defined in standards established by the Public
Company Accounting Oversight Board, or the PCAOB. A material weakness is a
significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected. The PCAOB
defines “significant deficiency” as a deficiency that results in more
than a remote likelihood that a misstatement of the financial statements
that is more than inconsequential will not be prevented or
detected.





In the
event that a material weakness is identified, we will employ qualified personnel
and adopt and implement policies and procedures to address any material
weaknesses that we identify. However, the process of designing and implementing
effective internal controls is a continuous effort that requires us to
anticipate and react to changes in our business and the economic and regulatory
environments and to expend significant resources to maintain a system of
internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future.





Any
failure to complete our assessment of our internal control over financial
reporting, to remediate any material weaknesses that we may identify or to
implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could
also cause investors to lose confidence in our reported financial
 information, which could have a negative effect on the trading price of
our common stock.




THE
MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS
A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT,
LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE
FLUCTUATIONS IN OUR SHARE PRICE




The
market for our common shares is characterized by significant price volatility
when compared to seasoned issuers, and we expect that our share price will
continue to be more volatile than a seasoned issuer for the indefinite future.
The volatility in our share price is attributable to a number of factors. First,
as noted above, our common shares are sporadically and thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small






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quantities
of shares by our shareholders may disproportionately influence the price of
those shares in either direction. The price for our shares could, for example,
decline precipitously in the event that a large number of our common shares are
sold on the market without commensurate demand, as compared to a seasoned issuer
which could better absorb those sales without adverse impact on its share price.
Secondly, we are a speculative or “risky” investment due to our limited
operating history and lack of profits to date, and uncertainty of future market
acceptance for our potential products. As a consequence of this enhanced risk,
more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined
to sell their shares on the market more quickly and at greater discounts than
would be the case with the stock of a seasoned issuer. Many of these factors are
beyond our control and may decrease the market price of our common shares,
regardless of our operating performance. We cannot make any predictions or
projections as to what the prevailing market price for our common shares will be
at any time, including as to whether our common shares will sustain their
current market prices, or as to what effect that the sale of shares or the
availability of common shares for sale at any time will have on the prevailing
market price.




Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask
differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have
been manipulated to a desired level, along with the resulting inevitable
collapse of those prices and with consequent investor losses. Our management is
aware of the abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the behavior of the
market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described
patterns from being established with respect to our securities. The occurrence
of these patterns or practices could increase the volatility of our share
price.




VOLATILITY
IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY
DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND
RESULTS OF OPERATIONS




As
discussed in the preceding risk factors, the market for our common shares is
characterized by significant price volatility when compared to seasoned issuers,
and we expect that our share price will continue to be more volatile than a
seasoned issuer for the indefinite future. In the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and
resources.




OUR
BUSINESS PLAN CALLS FOR EXTENSIVE AMOUNTS OF FUNDING AND WE MAY NOT BE ABLE TO
OBTAIN SUCH FUNDING WHICH COULD ADVERSELY AFFECT OUR BUSINESS, OPERATIONS AND
FINANCIAL CONDITION




We will
be relying on additional financing and funding. We are currently in discussions
with potential sources of financing but no definitive agreements are in place.
If we cannot achieve the requisite financing or complete the projects as
anticipated, this could adversely affect our business, the results of our
operations, prospects and financial condition.




SHOULD
ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE
UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY
FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDEDOR
PLANNED




ITEM
2.CHANGES IN SECURITIES AND SMALL
BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES




The Board
of Directors ("Board") of SoftNet Technology Corp. (the "Corporation"), a Nevada
corporation, acting
pursuant to the governing documents of the Corporation and the applicable
sections of the Nevada Corporations Code, hereby consent to and adopt the
following resolutions effective as the date above:




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Reverse Stock
Split





The Board
approved a resolution on July 25, 2007, pursuant to the requirements of
Nevada Revised Statutes, section 78.207, which proposed and approved a Reverse
Stock Split on a one for ten basis so that ten shares of old Common Stock shall
be converted into one share of new Class A Common Stock, par value $0.001
..  The reverse became effective on April 28, 2008.





Retirement of Fractional
Shares





Board
approved a resolution to retire any fractional shares resulting from the Reverse
Stock Split and holders thereof shall receive, in cash, the amount equal to one
New Common Stock share on the effective date.




ITEM 3.  DEFAULTS UPON SENIOR
SECURITIES





There
were no defaults upon senior securities during the period ended September 30,
2008.





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





A
Majority Written Consent in Lieu of an Annual Meeting of Stockholders (the
"Written Consent") has been executed authorizes the following corporate
action:





1. 
The election of five Directors for a term of one year or until their successors
are duly elected and qualified;


2. 
The authorization of our Stock Option Plan;


3. 
An amendment our Articles of Incorporation to authorize 10,000,000 shares of
preferred stock; and


4. 
An amendment to our Articles of Incorporation to effect a one for ten reverse stock
split.




ITEM 5.   OTHER INFORMATION




None.





ITEM 6.   EXHIBITS





Exhibits:




31.1
              Certification of Chief Executive Officer
      Pursuant to Section 302 of the Sarbanes-Oxley Act.32.1
              Certification of Chief Executive Officer
      Pursuant to Section 906 of the Sarbanes-Oxley
      Act.


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SIGNATURES




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




SoftNet
      Technology CorporationDate:
      November 14, 2008
              By:
              /s/ Jim
      BoothJim
      BoothPresident/Interim
      CEO




























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