---

UNITED
STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C.
20549FORM
10-QSB(Mark One)[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934For the quarterly period ended
****September 30,
2007****.[ ] TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934For the transition period from __________to
______________Commission File Number:
000-51936

|FORTIFIED HOLDINGS CORP.                                               
|-----------------------------------------------------------------------
|(formerly Aegis Industries Inc.)                                       
|(Exact name of small business issuer as
      specified in its charter)

|Nevada                                                 | 98-0420577                             
|------------------------------------------------------ | ---------------------------------------
|(State or other jurisdiction of
      incorporation or | (IRS Employer Identification
      No.)
|organization)                                          |                                        

125 Elm Street, New Canaan, Connecticut
06840(Address of principal executive
offices)(203)594-1686(Issuers telephone number)**Formerly located at 75200 Shady Grove Road, Suite 202, Rockville,
Maryland 20850**(Former name, former address
and former fiscal year, if changed since last report)Indicate by check mark whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act duringthe past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to suchfiling requirements for the past 90
days.Yes [X] No
[  ]Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).Yes [  ] No [X]As of November 12, 2007, the registrant had outstanding 55,600,000 shares
of common stock, par value $0.001 per share, of whichthere is only a single class.Transitional
Small Business Disclosure Format (Check one):[  ]
Yes [X] No

---

TABLE OF CONTENTS

PART I  FINANCIAL INFORMATION

ITEM 1.
      Condensed Consolidated Financial Statements
      1Condensed
          Consolidated Balance Sheet as of September 30, 2007 (unaudited)
      1Condensed
          Consolidated Statements of Operations for the Three and Nine Months
          Ended September 30, 2007 (unaudited) and September
          30, 2006 (unaudited)
      2Condensed
          Consolidated Statements of Changes in Stockholders Equity (Deficit)
          for the  Period January 1, 2007 (unaudited)
          to September 30, 2007 (unaudited)
      3Condensed
          Consolidated Statements of Cash Flows for the Nine Months Ended
           September 30, 2007 (unaudited) and September 30,
          2006 (unaudited)
      4Notes to Condensed Consolidated Financial Statements (unaudited)
      5ITEM 2.
      Managements Discussion and Analysis of Financial Condition
          and Results of Operations
      14ITEM 3.
      Controls and Procedures
      20


PART II  OTHER INFORMATION

ITEM 1.
    Legal Proceedings
    21ITEM
      2.
    Unregistered
      Sales of Equity Securities and Use of Proceeds
    21ITEM 3.
    Default Upon Senior Securities
    21ITEM
      4.
    Submission of
      Matters to Vote of Securities Holders
    21ITEM 5.
    Other Matters
    21ITEM
      6.
    Exhibits
    22


---

PART I  FINANCIAL INFORMATIONITEM 1  Condensed Consolidated Financial Statements

FORTIFIED HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE
SHEET(Unaudited)

|                                                |   | September 30, |  
|----------------------------------------------- | - | ------------- | -
|Assets                                          |   | 2007          |  
|Current assets:                                 |   |               |  
|Cash                                            | $ | 159,900       |  
|Accounts receivable, net                        |   | 25,054        |  
|Inventories,
      net                          |   | 214,430       |  
|Notes receivable, net                           |   | 1,274,815     |  
|Prepaid expenses
      and other current assets |   | 16,923        |  
|Total current assets                            |   | 1,691,122     |  
|                                                |   |               |  
|Property and equipment,
      net               |   | 95,951        |  
|Software costs, net                             |   | 61,845        |  
|Total assets                                    | $ | 1,848,918     |  
|                                                |   |               |  
|Liabilities
      and Stockholders' Equity      |   |               |  
|Current liabilities                             |   |               |  
|Accounts payable and accrued expenses           | $ | 1,139,553     |  
|Demand notes
      payable                      |   | 1,499,492     |  
|Convertible notes payable                       |   | 1,372,674     |  
|Term notes
      payable                        |   | 5,185,807     |  
|Other current liabilities                       |   | 70,245        |  
|Total current liabilities                       |   | 9,267,771     |  
|                                                |   | 9,267,771     |  
|Commitments and contingencies (Note 11)         |   |               |  
|                                                |   |               |  
|Stockholders' Equity (Deficit)                  |   |               |  
|Capital stock                                   |   |               |  
|Common stock, par
      value $.001 per share;  |   |               |  
|200,000,000 shares authorized                   |   |               |  
|55,600,000 shares issued and outstanding        |   | 55,600        |  
|Additional paid-in capital                      |   | (4,847,415    | )
|Retained earnings
      (deficit)               |   | (2,627,038    | )
|Total stockholders' equity (deficit)            |   | (7,418,853    | )
|Total liabilities and stockholders' equity      | $ | 1,848,918     |  

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

1

---

|FORTIFIED HOLDINGS CORP.                            
|----------------------------------------------------
|                                                    
|CONDENSED CONSOLIDATED STATEMENTS OF
      OPERATION
|(Unaudited)                                         

|                                             |   | For the three months
      ended |   |   | For the nine months
      ended |  
|-------------------------------------------- | - | -------------------------------- | - | - | ------------------------------- | -
|                                             |   | September 30,                    |   |   | September 30,                   |  
|                                             |   | 2007                             |   |   | 2006                            |  
|                                             |   |                                  |   |   |                                 |  
|Net sales                                    | $ | 25,054                           |   | $ | 58,761                          |  
|Cost of sales                                |   | 208,330                          |   |   | 35,357                          |  
|Gross profit (loss)                          |   | (183,276                         | ) |   | 23,404                          |  
|                                             |   |                                  |   |   |                                 |  
|Operating
      expenses                     |   |                                  |   |   |                                 |  
|Research and development                     |   | 133,977                          |   |   | -                               |  
|Selling, general and administrative          |   | 932,222                          |   |   | 18,838                          |  
|Consulting fees                              |   | 468,723                          |   |   | 56,000                          |  
|Total operating
      expenses               |   | 1,534,922                        |   |   | 74,838                          |  
|Loss from operations                         |   | (1,718,198                       | ) |   | (51,434                         | )
|Other income and
      expenses:             |   |                                  |   |   |                                 |  
|Interest income                              |   | 11,502                           |   |   | -                               |  
|Interest expense                             |   | (91,062                          | ) |   | -                               |  
|Loss before provision for income
      taxes |   | (1,797,758                       | ) |   | (51,434                         | )
|Provision for income
      taxes             |   | -                                |   |   | -                               |  
|Net loss                                     | $ | (1,797,758                       | ) | $ | (51,434                         | )
|                                             |   |                                  |   |   |                                 |  
|Basic and diluted net loss per
      share   | $ | (0.12                            | ) | $ | (0.01                           | )
|                                             |   |                                  |   |   |                                 |  
|Basic and diluted weighted
      average     |   |                                  |   |   |                                 |  
|number of shares
      outstanding           |   | 14,452,747                       |   |   | 5,000,000                       |  

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

2

---

|FORTIFIED HOLDINGS CORP.                            
|----------------------------------------------------
|                                                    
|CONDENSED CONSOLIDATED STATEMENT OF CHANGES
      IN
|STOCKHOLDERS EQUITY (DEFICIT)                      
|(Unaudited)                                         

|                                           |  |              |  |   |         |  |   | Additional |   |   | Retained   |   |   |            |  
|------------------------------------------ |  | ------------ |  | - | ------- |  | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                           |  | Common Stock |  |   | Paid-In |  |   | Earnings   |   |   |            |  
|                                           |  | Shares       |  |   | Amount  |  |   | Capital    |   |   | (Deficit)  |   |   | Total      |  
|Balance, January 1,
      2007 (Note 1)    |  | -            |  | $ | -       |  | $ | -          |   | $ | 85,729     |   | $ | 85,729     |  
|Net assets and Public company              |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|shares outstanding on
      date of merger |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|(September 13, 2007)                       |  | 50,600,000   |  |   | 50,600  |  |   | (659,323   | ) |   | -          |   |   | (608,723   | )
|                                           |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|Public company shares issued in            |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|exchange for private
      company shares  |  | 5,000,000    |  |   | 5,000   |  |   | (5,000     | ) |   | -          |   |   | -          |  
|                                           |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|Note payable to
      Shareholder          |  | -            |  |   | -       |  |   | (5,000,000 | ) |   | -          |   |   | (5,000,000 | )
|                                           |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|Stock based
      compensation             |  | -            |  |   | -       |  |   | 816,908    |   |   | -          |   |   | 816,908    |  
|                                           |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|Net loss                                   |  | -            |  |   | -       |  |   | -          |   |   | (2,712,767 | ) |   | (2,712,767 | )
|                                           |  |              |  |   |         |  |   |            |   |   |            |   |   |            |  
|Balance, September
      30, 2007          |  | 55,600,000   |  | $ | 55,600  |  | $ | (4,847,415 | ) | $ | (2,627,038 | ) | $ | (7,418,853 | )

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

3

---

|FORTIFIED HOLDINGS CORP.                             
|-----------------------------------------------------
|                                                     
|CONDENSED CONSOLIDATED STATEMENTS OF CASH
      FLOWS
|(Unaudited)                                          

|                                                             |   | Nine Months Ended          |   |   | Nine Months Ended          |  
|------------------------------------------------------------ | - | -------------------------- | - | - | -------------------------- | -
|                                                             |   | September
        30, 2007 |   |   | September
        30, 2006 |  
|Cash flows from operating activities:                        |   |                            |   |   |                            |  
|Net loss                                                     | $ | (2,712,767                 | ) | $ | (53,360                    | )
|Adjustments
      to reconcile net income to                 |   |                            |   |   |                            |  
|net cash provided
      by operating activities:             |   |                            |   |   |                            |  
|                                                             |   |                            |   |   |                            |  
|Depreciation
      and amortization                          |   | 16,576                     |   |   | 609                        |  
|Stock based compensation                                     |   | 816,908                    |   |   |                            |  
|Non-cash
      interest expense                              |   | 86,614                     |   |   |                            |  
|Non-cash interest income                                     |   | (16,900                    | ) |   |                            |  
|Loss
      on disposal of assets                             |   | 36,672                     |   |   |                            |  
|Provision for loss on transfer of assets                     |   | 44,409                     |   |   |                            |  
|Provision
      for obsolete inventory                       |   | 57,500                     |   |   |                            |  
|Provision for warranty costs                                 |   | 15,000                     |   |   |                            |  
|Changes
      in assets and liabilities:                     |   |                            |   |   |                            |  
|Accounts receivable                                          |   | 199,708                    |   |   |                            |  
|Inventories                                                  |   | (204,029                   | ) |   | (92,275                    | )
|Prepaid expenses and other current assets                    |   | (6,406                     | ) |   |                            |  
|Accounts
      payable and accrued expenses                  |   | 507,498                    |   |   | 42,490                     |  
|Other current liabilities                                    |   | 70,245                     |   |   |                            |  
|Net
      cash provided by (used in) operating activities    |   | (1,088,972                 | ) |   | (102,536                   | )
|                                                             |   |                            |   |   |                            |  
|Cash flows from investing activities:                        |   |                            |   |   |                            |  
|Purchases
      of property, plant and equipment             |   | (106,500                   | ) |   |                            |  
|Purchases of software for resale                             |   | (31,845                    | ) |   |                            |  
|Notes
      receivable                                       |   | (43,568                    | ) |   | (50,000                    | )
|Net
      cash provided by (used in) investing activities    |   | (181,913                   | ) |   | (50,000                    | )
|                                                             |   |                            |   |   |                            |  
|Cash flows from financing activities:                        |   |                            |   |   |                            |  
|Proceeds
      related to recapitalization                   |   | 1,271,649                  |   |   | 174,508                    |  
|Net
      cash provided by (used in) financing activities    |   | 1,271,649                  |   |   | 174,508                    |  
|                                                             |   |                            |   |   |                            |  
|Net
      change in cash                                     |   | 764                        |   |   | 21,972                     |  
|Cash,
      Beginning of period                              |   | 159,136                    |   |   | 636                        |  
|                                                             |   |                            |   |   |                            |  
|Cash, End of period                                          | $ | 159,900                    |   | $ | 22,608                     |  
|                                                             |   |                            |   |   |                            |  
|                                                             |   |                            |   |   |                            |  
|Supplemental Disclosures of Cash Flow Information:           |   |                            |   |   |                            |  
|                                                             |   |                            |   |   |                            |  
|Software for resale acquired through assumption of debt      | $ | 30,000                     |   | $ | -                          |  
|Net
      assets acquired through issuance of stock and debt | $ | (659,323                   | ) | $ | -                          |  

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

4

---

|FORTIFIED HOLDINGS CORP.                                  
|----------------------------------------------------------
|                                                          
|NOTES TO CONDENSED CONSOLIDATED FINANCIAL
      STATEMENTS
|(Unaudited)                                               

Note 1 - Basis of Presentation

The accompanying unaudited interim consolidated
financial statements of Fortified Holdings Corp. (we, Fortified or the
Company) have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the Securities and
Exchange Commission ("SEC"), and should be read in conjunction with the audited
financial statements and notes thereto contained in the Company's 2006 annual
report filed with the SEC on Form 10-KSB and prior reports for 2007. The
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Fortified Data Communications, Inc. (Fortified
DataCom). In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year.

Fortified Holdings Corp. was incorporated in the
  State of Nevada, on February 5, 2004 under the name Major Creations Incorporated
  (Major). On December 5, 2006, Major changed its name to Aegis Industries,
  Inc. At that time, Major, a reseller of vintage style tractors, had decided
  to pursue other business objectives including the acquisition of Aegis Industries,
  Inc., a Delaware corporation that was in the business of designing, developing
  and manufacturing intermediate force products for military, law enforcement
  and security forces. A definitive agreement was never finalized, however, and
  the parties ceased discussions (see Note 11). On June 5, 2007, the Company formed
  a wholly-owned subsidiary, Fortified Holdings Corp. in the State of Colorado,
  and on June 6, 2007, the Company merged with Fortified Holdings Corp. and changed
  its name to Fortified Holdings Corp. On September 13, 2007, Fortified completed
  the acquisition of Z5 Technologies LLC (Z5). The acquisition of
  Z5 was effected through the merger of Z5 with and into a subsidiary of Fortified
  (the Merger) formed for the purpose of the Merger, pursuant to the
  Agreement and Plan of Merger (the Merger Agreement). In connection
  with the Merger, the Company entered into a standby Financing Agreement with
  a third party, Clarus Capital Limited and one of its affiliates (collectively
  Clarus), under which Clarus has committed to direct or indirect
  investments up to an aggregate of $2.7 million.

Prior to the Merger, Fortified (then a development
stage enterprise), the legal acquirer, had no business operations and no working
capital and Z5 was a non-reporting privately held company. For accounting
purposes, the Merger has been treated as a recapitalization of Z5 using
accounting principles applicable to reverse acquisitions, with Z5 being treated
as the accounting parent (acquirer). Accordingly, all equity and options of Z5
prior to the Merger have been converted into shares and options of the Company.
The acquirer is considered to have issued shares of its Common Stock to
shareholders of Fortified in exchange for the net assets of Fortified. The net
assets consisted of $1,164,000 of notes receivable and $1,314,000 of other
current and non-current assets and $3,087,000 of notes payable and other current
liabilities. The cost of the net assets acquired has been allocated based on a
preliminary estimate of their relative fair values. Results of operations for
the periods prior to the Merger reflect the operations of Z5. Historical equity
of Z5 prior to the Merger has been retroactively restated to reflect the number
of shares outstanding immediately post-Merger. Per share information for periods
prior to the merger has been restated to reflect the number of equivalent shares
received by Z5s members. Pro forma information giving effect to the acquisition
of Z5 has not been provided since the combination is not considered a business
combination under Statement of Financial Accounting Standards No. 141,
Business Combinations. The
Company is quoted on the Over-the-Counter Bulletin Board under the symbol
FFDH.

Z5 was in the business of developing and selling a
line of man-portable Command and Control, Communications and Computer (C4)
solutions for field based incident management and emergency operations support.
Z5s products are marketed under the NOMAD brand, principally for use by the
military, first responders, relief workers and high risk industries. To effect
the Merger, Z5 merged with a new, wholly-owned subsidiary of Fortified, which
has been renamed Fortified Data Communications, Inc. or Fortified DataCom and
which now conducts the former Z5 business.

As consideration for the Merger, Fortified issued
5,000,000 shares of the Companys common stock and a promissory note in the
amount of $5,000,000 to Thomas Keenan Ventures LLC (TKV), the owner of all
Z5s equity outstanding at the time of the Merger. In addition, the Company has
agreed to issue TKV another 10,000,000 shares in two future tranches: 5,000,000
shares will be issued on January 15, 2008 or upon raising $2.75 million of new
capital, if earlier; and the final 5,000,000 shares will be issued on February
15, 2008 or upon raising a total of $6.0 million in new capital (including the
prior $2.75 million), if earlier.

The shares issued to TKV in the Merger are subject
to a Registration Rights Agreement, under which the Company undertook to
register the shares for resale as promptly as practicable, but no later than six
months after any registration of shares that the Company sells in a private
placement financing after the closing of the Merger, or one year after the
closing of the Merger, if earlier. The Agreement does not, however, stipulate
specific penalties if the foregoing deadlines are not met. As of the filing of
this report, no registration statement covering the shares had yet been filed
with the U.S. Securities and Exchange Commission.

5

---

Restatement of Financial
Statements

The amounts presented herein for the three and
nine month periods ended September 30, 2007 reflect the correction of previously
issued financial statements which had been filed with the SEC. The restatements
relate to the reduction of interest expense in previously issued financial
statements. This restatement pertains to the misapplication of applicable
standards for the amortization of discounts arising from certain beneficial
conversion features on convertible notes (BCF). Emerging Issues Task Force
(EITF) Issue No. 00-27 revised the amortization period to be the maturity of
the debt, as opposed to the conversion features vesting period under EITF Issue
No. 98-5. For the three months ended April 30, 2007, interest expense of
$500,000 was recorded related to notes issued in April with beneficial
conversion features. However, under EITF Issue No. 00-27, interest for that
period should have been $11,000 and $489,000 should have been amortized through
the maturity date of those notes, October 31, 2007. For the three months ended
July 31, 2007, interest expense of $250,000 was recorded related to additional
convertible notes issued in May 2007. Interest expense of $361,000 should have
been recorded during the three months ended July 31, 2007. The restatement,
through the date of the Merger, included a net decrease in interest expense of
approximately $197,000, with a corresponding reduction of notes payable. Because
the prior quarters being corrected preceded the Merger, the impact of the
correction changed the opening balance sheet of the acquired company by reducing
notes payable and increasing additional paid-in capital by $197,000. For the
period subsequent to the Merger, through September 30, 2007, BCF amortization of
$70,000 has been reflected in these consolidated condensed financial statements
as interest expense.

Note 2  Summary of Significant Accounting
Policies

Principles of Consolidation

The consolidated financial statements include the
accounts of Fortified Holdings Corporation and its wholly owned subsidiaries.
All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements and
related disclosures 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, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenue and expenses during the period reported. The Companys
most significant estimates include assessing the collectability of accounts
receivable and notes receivable, the use and recoverability of inventory,
determining the fair value of stock-based awards, useful lives of depreciation
and amortization periods of tangible and intangible assets, and long-lived asset
impairments, among others.

The markets for the Companys products are
characterized by intense competition, rapid technological developments, evolving
standards, short product life cycles and price competition, all of which could
impact the future realizable value of the Companys assets. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the period that they are determined to be necessary. Actual results could
differ from those estimates.

Long lived Assets

The Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An asset is considered to be
impaired when the sum of the undiscounted future net cash flows expected to
result from the use of the asset and its eventual disposition exceeds its
carrying amount. The amount of impairment loss, if any, is measured as the
difference between the net book value of the asset and its estimated fair
value.

Cash and Cash Equivalents

The Company maintains cash in bank deposits which,
at times, may exceed federally insured limits. The Company has not experienced
any losses on these accounts. Cash equivalents include all highly liquid debt
instruments with an original maturity of three months or less at the date of
acquisition. The carrying value of these instruments approximates fair value.

Accounts Receivable

The Company records an allowance for doubtful
accounts based on the Companys estimated losses resulting from the inability of
its customers to make required payments. The Company did not require an
allowance for doubtful accounts as of September 30, 2007.

6

---

Inventories

Inventories, consisting primarily of
sub-assemblies and purchased components, are stated at the lower of cost,
determined on a first-in, first-out basis, or market.

Property and Equipment

Property and equipment is stated at cost less
accumulated depreciation. Depreciation and amortization is determined using the
straight-line method over the estimated useful lives of the various asset
classes.

Estimated useful lives range from two to seven
years. Major renewals and improvements are capitalized and minor replacements,
maintenance, and repairs are charged to current operations as incurred. Upon
retirement or disposal of assets, the cost and related accumulated depreciation
are removed from the consolidated balance sheets and any gain or loss is
reflected in the consolidated statements of operations.

Convertible Instruments

When the Company issues convertible debt
securities with a non-detachable conversion feature that provides for an
effective rate of conversion that is below market value on the commitment date,
it is known as a beneficial conversion feature (BCF). Pursuant to EITF Issue
No, 98-5 Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratiosand EITF Issue No. 00-27,the conversion feature of a security that has
characteristics of an equity instrument is measured at its intrinsic value at
the commitment date and is recorded as additional paid in capital. A portion of
the proceeds of the security issued is allocated to the conversion feature equal
to its intrinsic value to a maximum of the amount allocated to the convertible
instrument. The resulting discount of the debt instrument is amortized into
income as interest expense over the term of the convertible instrument.

Revenue Recognition

Revenue is derived from the sale of the Companys
products. Revenue is recognized when persuasive evidence of an arrangement
exists, the product has been delivered and title and risk of loss have
transferred, the price is fixed and determinable and collection of the resulting
receivable is reasonably assured. Utilizing these criteria, product revenue is
generally recognized upon delivery of the product at the end customers location
when risk and rewards of ownership have passed to the customer. Revenue is
deferred from sales to distributors until the product is ultimately sold to the
end-customer. Sales revenue is not reduced to reflect estimated returns because
the Companys sales arrangements do not grant end-customers a right of return.
Products are not subject to post shipment customer acceptance. There are no post
shipment obligations such as installation or training. Accordingly, unless those
obligations are specifically contained in a contract, deferral of revenue is not
required for either customer acceptance or post shipment obligations.

Revenue from rental of the Companys products is
recognized when payments are due and collection of the resulting receivable is
reasonably assured. Revenue is recognized over the term of the lease which is
generally one year.

Research and Development Costs

Research and development costs are charged to
expense as incurred.

Income Taxes

The Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes,which requires the use of the assets and liabilities method of accounting for
deferred income taxes (see Note 8).

The provision for income taxes includes federal,
state and local income taxes currently payable and deferred taxes resulting from
temporary differences between the financial statement and tax bases of assets
and liabilities. Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be realized.

7

---

Stock-Based Compensation

The Company has begun recording compensation
expense associated with stock options and other forms of equity compensation in
accordance with Statement of Financial Accounting Standards No. 123 (revised
2004),Share-Based Payments(SFAS
123R), as interpreted by SEC Staff Accounting Bulletin No. 107. Accordingly, the
Company recognizes compensation expense on all options issued subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with
the provisions of SFAS 123R. A compensation charge is recorded when it is
probable that performance conditions, if any, will be satisfied. The probability
of vesting is updated at each reporting period and compensation is adjusted via
a cumulative catch-up adjustment or prospectively depending upon the nature of
the change. At September 30, 2007 total unrecognized compensation cost amounted
to $1,782,000, with respect to unvested options which will be amortized over the
ensuing 3 years.

Options or warrants issued to non-employees for
services are recorded at fair value and accounted for in accordance with
Emerging Issues Task Force (EITF) Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services. For equity instruments that are immediately vested, compensation cost
is measured on the date such instruments vest or performance commitment is
reached, as defined in EITF 96-18. Under this method of accounting, the Company
estimates the total amount of deferred compensation when the grant is issued for
the entire option value based on the binomial option-pricing model.
Subsequently, the deferred compensation is adjusted each reporting period until
vesting occurs and the charge is taken. Compensation attributable to non-vested
options is not recorded until vesting occurs.

Net Loss Per Share

Net loss per share is presented in accordance with
the provisions of SFAS No. 128, Earnings Per Share (EPS). Basic loss per share
is calculated by dividing net loss by the weighted average number of outstanding
common shares during the period. Diluted loss per share is calculated by
adjusting net loss and outstanding shares for all dilutive potential common
shares outstanding. Diluted net loss per common share is equal to basic net loss
per common share since all potentially dilutive securities are anti-dilutive for
each of the periods presented.

Recent Accounting Developments

In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. This statement defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. This statement is effective for financial statements issued for
fiscal years ending beginning after November 15, 2007, however earlier
application is encouraged. The Company does not expect the adoption of SFAS 157
will have a material impact on its consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No.109 (FIN 48), which clarifies the accounting for uncertainty in
tax positions. This statement requires that the Company recognize, in our
condensed consolidated financial statements, the impact of a tax position if
that position is more likely than not of being sustained on audit, based on the
technical merits of the position. The adoption of FIN 48 did not have any
material impact on the Companys financial statements.

In February 2007, the Financial Accounting
Standards Board (FASB) issued SFAS No. 159,The Fair
Value Option for Financial Assets and Financial Liabilities, including an
amendment to SFAS No. 115(SFAS No. 159). This
statement permits entities to choose to measure many financial instruments and
certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reporting earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting provisions. This
statement is expected to expand the use of fair value measurements, which is
consistent with the FASBs long-term measurement objectives for accounting for
financial instruments. SFAS No. 159 is effective for fiscal years beginning
after November 15, 2007. The Company does not expect that the adoption of SFAS
No. 159 will have a material impact on the Companys financial
statements.

8

---

Note 3  Going Concern

The financial statements have been prepared on a
going-concern basis, which assumes realization of all assets and settlement or
payment of all liabilities in the ordinary course of business. The Company has
limited capital resources, net operating losses and negative cash flows from
operations since inception and expects these conditions to continue for the
foreseeable future. In addition, it is not anticipated that the Company will
generate sufficient revenues from product sales during the next twelve months to
satisfy all of its current liabilities and provide ongoing working capital. The
Company is currently seeking to raise additional funds through the private sale
of equity securities, a portion of which has been raised between the balance
sheet date and the filing of this report (see Note 14), and the Company may in
the future seek other financing sources. There can be no assurance that such
additional financing, if at all available, can be obtained on terms acceptable
to the Company. In the event that sufficient funds are not available, the
Company will need to postpone or discontinue planned operations. Continuance of
the Company as a going concern is dependent upon, among other things, the
Companys ability to obtain adequate long-term financing and/or its attainment
of profitable operations. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

Note 4 - Notes Receivable(Note 11)

Notes receivable consist of the following demand
notes from Aegis Industries Inc. (AI) and from an employee:

September
          30,2007AI (a)
      (b)
      $295,283AI, accrues interest at 12% per
      annum (a) (c)
      250,000AI, accrues
      interest at 12% per annum (a) (c)
      175,000AI, accrues interest at 12% per
      annum (a) (c)
      75,000AI, accrues
      interest at 12% per annum (d)
      300,000Note receivable from employee
      (a)
      137,750Total
      Principal
      $1,233,033Accrued interest
      86,191Reserve
      (44,409)Notes receivable, net
      $1,274,815


| | (a) | Notes are unsecured                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Subsequent to demand for payment, principal and interest
      in arrears accrue interest at 10% per annum                                                     
| | (c) | Subsequent to demand for payment, principal and interest
      in arrears accrue interest at 30% per annum                                                     
| | (d) | Collateralized by the assets of the borrower; subsequent
      to demand for payment, principal and interest in arrears accrue interest
      at 12% per annum.

Note 5 - Property and Equipment

Property and equipment, at
cost, consists of the following:

September
          30,2007Demonstration Equipment
      $91,712Computer equipment
      16,536Office furniture and fixtures
      1,603109,851Accumulated Depreciation
      (13,900)Net book value
      $95,951


Depreciation expense amounted to $16,576 and $609
for the nine months ended September 30, 2007 and 2006, respectively. In
September, 2007, obsolete demonstration equipment and related accumulated
depreciation of $34,848 and $30,252, respectively, were written off.

9

---

Note 6 - Notes Payable (including Notes Payable
to Shareholder)

Notes payable consists of
the following:

|                                                           | September 30, |  |                                                                                                                                  
|---------------------------------------------------------- | ------------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|                                                           | 2007          |  |                                                                                                                                  
|(A) Demand note, bears interest
      at 12% per annum     | $315,000      |  | Unsecured note                                                                                                                   
|(B) Demand notes, bear interest at 12% per annum           | 1,085,000     |  | Unsecured notes,
        amounts in arrears accrue at 30% per annum                                                              
|Accrued interest                                           | 99,492        |  |                                                                                                                                  
|                                                           | $1,499,492    |  |                                                                                                                                  
|(C) Promissory note payable to
      TKV                   | $5,000,000    |  | Secured note; see
      (C) below                                                                                                
|(D) Promissory note, bears interest at 12% per
      annum | 160,130       |  | Unsecured note
        payable to an officer of the Company, due December 31, 2007, or upon equity raise of $1 million if earlier
|                                                           |               |  |                                                                                                                                  
|                                                           |               |  |                                                                                                                                  
|Accrued interest                                           | 25,677        |  |                                                                                                                                  
|                                                           | $5,185,807    |  |                                                                                                                                  

(C) Secured note, as
amended, payable to TKV in conjunction with the acquisition of Z5 on September
13, 2007; bearing interest at 5% per annum (increasing to 13% if not paid in
full on or before March 15, 2008, or upon occurrence of certain default events
as defined in the note), guaranteed by the Companys operating subsidiary,
Fortified DataCom and collateralized by Fortified DataComs assets (Note
14).

Note 7 - Convertible notes
payable

During the period April 26, 2007 through May 11,
2007, the Company issued a series of convertible notes upon receiving cash
proceeds aggregating $750,000. The notes are unsecured and are due upon the
occurrence of either (i) the consummation of one or more related transactions
pursuant to which no less than $15,000,000 of equity securities of the Company
are sold for cash or (ii) October 31, 2007. The principal amount bears interest
at 12% per annum. At any time that the principal and accrued interest remains
outstanding, the lender of each note has the right to convert such principal and
accrued interest into shares of the Companys common stock at a rate of $.50 per
share, which was less than the fair value of the Companys common stock on the
date of issue. Accrued interest of $41,540 is included in convertible notes
payable at September 30, 2007.

The convertible notes payable had a beneficial
conversion discount because the conversion prices of the notes were less than
the fair value of the Companys common stock. An amount of $750,000 has been
recorded in additional paid in capital for the fair market value of the
beneficial conversion feature (the BCF). The resulting discount (BCF) is being
amortized into income as interest expense over the term of the debt. As of
September 30, 2007, unamortized BCF of $127,447 is included as an offset to
convertible notes payable.

On July 23, 2007, the Company issued a convertible
note in the principal amount of $200,000 for cash proceeds. The principal amount
bears interest at 12% per annum. The principal and interest are immediately
convertible upon the consummation of subsequent financing transactions in which
the Company raises a minimum of $500,000 through the sale and issuance of equity
or equity-linked securities. The convertible note will be converted at the price
determined for the contemplated private placement. Accrued interest of $4,537 is
included in convertible notes payable at September 30, 2007.

On September 5 and 6, 2007, pursuant to its
standby funding agreement with Clarus, the Company issued convertible notes upon
receiving cash proceeds of $500,000. The notes are unsecured and mature on
September 5 and 6, 2008, respectively. The principal amounts bear interest at
12% per annum and any payments in arrears bear interest at 18% per annum. The
principal and interest are mandatorily and automatically convertible upon the
consummation, before the maturity date, of subsequent financing transactions in
which the Company raises a minimum of $500,000 through the sale and issuance of
equity or equity-linked securities. The convertible notes will be converted at
the price determined for the contemplated private placement. Accrued interest of
$4,044 is included in convertible notes payable at September 30,
2007.

The initial closing under the private placement
was completed as of November 16, 2007 in an amount greater than $500,000 (Note
14). Accordingly, the July 2007 and September 2007 notes converted to equity
contemporaneously with such closing.

10

---

NOTE 8 - Income Taxes

The Company has accumulated net losses since
inception, accordingly, the Company has not provided for income taxes for the
periods ended September 30, 2007 and 2006.

In assessing the realizability of deferred tax
assets, the Company considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Based on the Companys historical net losses, management does not
believe that it is more likely than not that the Company will realize the
benefits of these deferred tax assets and, accordingly, a full valuation
allowance has been recorded against the deferred tax assets as of September 30,
2007.

The Company has adopted the provisions of FASB
Interpretation No 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109" ("FIN 48"). FIN 48 addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under FIN 48, the Company
may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities, based on the technical merits of the position. The Company
has determined that the Company has no uncertain tax positions requiring
recognition under FIN 48.

The Company is subject to U.S. federal income tax
as well as income tax of certain state jurisdictions. The Company has not been
audited by the U.S. Internal Revenue Service or any states in connection with
income taxes. Tax fiscal year 2004 and forward remain open to examination by the
U.S. Internal Revenue Service and state authorities.

We recognize interest accrued related to
unrecognized tax benefits and penalties, if incurred, as a component of income
tax expense.

Note 9 - Capital Stock

At September 30, 2007, the Company had 200,000,000
shares authorized at a par value of $.001 per share.

Note 10 - Stock Based Compensation

The Companys stock option plan, adopted on
September 13, 2007, allows the board of directors to grant incentives to
employees, directors and consultants in the form of incentive stock options
(ISOs); nonqualified stock options; stock appreciation rights (SARs); and
restricted and unrestricted stock awards. Stock awards under the Companys plan
are granted at prices which are no less than the fair market price of the stock
on the date of grant. ISO grants and SARs granted to ten percent shareholders,
however, are issued at 110% of fair market value. Options granted under this
plan can be time based or performance based options and vesting varies
accordingly. Options under this plan expire ten years from the date of grant.
Compensation expense recognized in the Statement of Operations during the three
and nine months ended September 30, 2007 amounted to approximately $760,000 and
$817,000, respectively.

The fair value of each option award granted is
estimated on the date of grant using the Black-Scholes option valuation model
and assumptions as noted in the following table:

For the nine monthsEnded September 30,
      2007Expected
      life
    2-5 yearsExpected
      volatility
    53-6% - 83.43%Risk-free
      interest rate
    4.47%Dividend yield
    0%


The expected life of options is based on the
observed and expected time to post-vesting, forfeiture and exercise. Groups of
employees that have similar historical exercise behavior are considered
separately for valuation purposes. The expected volatility pre-Merger was based
on an index, and post-Merger is based on volatility of the Companys stock. The
risk-free interest rate is based on the continuous rates provided by the U.S.
Treasury with a term equal to the expected life of the options. The expected
dividend yield is zero as the Company has never paid dividends and does not
currently anticipate paying any in the foreseeable future.

11

---

The status of the Companys stock option plan at
September 30, 2007 is summarized as follows

| |                                      | Number of
      Shares Under Option
      (000s) | Weighted
      Average Exercise Price
      per Share | Weighted Average Remaining Contractual Term in Years | Aggregate
      Intrinsic Value ($000s)
| | ------------------------------------ | ------------------------------------------------- | ----------------------------------------------------- | ---------------------------------------------------- | ----------------------------------------
|
|
|
|
| | Outstanding, January 1,
      2007   | -                                                 | -                                                     | -                                                    | -                                       
| | Granted                              | 9,987                                             | $.51                                                  | 4.72                                                 |                                         
| | Exercised                            | -                                                 | -                                                     | -                                                    |                                         
| | Canceled or Forfeited                | 882                                               | $.28                                                  | -                                                    |                                         
| | Outstanding September 30,
      2007 | 9,105                                             | $.53                                                  | 3.57                                                 | $2,427                                  

During the nine months ended September 30, 2007
the weighted average fair value of each option granted, estimated as of the
grant date using the Black-Scholes option valuation model, was $.21 per share.
The requisite service period for options granted during 2007 was 1 to 3
years.

The following table summarizes information about
stock options outstanding at September 30, 2007:

| | Exercise Prices | Number
      Outstanding (000s) | Weighted Average
      Remaining Contractual Life
      (Years) | Number
      Exercisable (000s)
| | --------------- | -------------------------------- | --------------------------------------------------------------- | --------------------------------
|
|
|
| | $.28            | 2,647                            | 4.3                                                             | 1,853                           
| | $.41            | 2,353                            | 4.9                                                             | 2,353                           
| | $.76            | 3,000                            | 5.0                                                             | -                               
| | $.77            | 1,105                            | 5.0                                                             | -                               

As of September 30, 2007, there was $1,782,000 of
total unrecognized compensation cost related to nonvested options.

Note 11 - Commitments and
Contingencies

The Company presently leases approximately 1,200
square feet of office space in New Canaan, Connecticut for the Companys
headquarters under a month-to-month lease. In addition, the Company leases 500
square feet of office space in Englewood, Colorado.

Rent expense charged to operations amounted to
$21,000 and $0 for the nine months ended September 30, 2007 and 2006,
respectively.

On December 1, 2006, the Company entered into a
contract for investor relations services requiring the payment of $10,000 per
month expiring on November 30, 2008. This commitment can be terminated by either
party with 30 days written notice.

On October 22, 2007, the Company entered into a
contract for public relations services with a firm independent of the investor
relations firm requiring the payment of $5,000 per month expiring on October 21,
2008. This commitment can be terminated by either party without penalty upon 60
days written notice.

On or about June 8, 2007, Aegis Industries, Inc.,
(a privately held Delaware Corporation) (AI) filed an action against
Fortified, two of its directors and several other additional parties in the
Second Judicial District Court, County of Washoe, State of Nevada. Plaintiffs
allege claims for, among other claims, breach of contract related to a
non-binding letter of intent entered into by AI and Fortified in November
2006.

The parties have agreed on settlement terms,
effective upon certain payments made by a third party to AI, which provide
Fortified with a full release of all claims against it. Under terms of the
settlement, Fortified agreed to assign to a third party certain promissory notes
receivable issued to Fortified by AI totaling approximately $1,174,000 in
principal and accrued interest thereon, in full satisfaction of demand notes
payable that Fortified had previously issued to that third party, and loans
payable to AI, which together total approximately $1,130,000 as of September 30,
2007 in principal and accrued interest. The difference between the assigned
notes receivable and the assigned liabilities of approximately $44,000 was
recorded as an expense at September 30, 2007. Final settlement is expected
during 2007.

12

---



Note 12 - Related Party
Transactions

Management Fees

During the three and nine months ended September
30, 2007, pursuant to a contract that expires November 30, 2008, the Company
paid management fees totaling $14,000 and $64,000, respectively, to a company
controlled by a director and former officer of the Company.

Reseller agreement

During the nine months ended September 30, 2007,
the Company was paid $179,000 for products sold as a reseller by a company in
which a director and officer of the Company indirectly holds a minority
interest.

Loans and Advances from Related
Party

During the nine months ended September 30, 2007,
the Company paid approximately $65,000 to reimburse expenses paid on behalf of
the Company by a company controlled by a director and officer of the
Company.

Note 13  Product Warranty

During the three months ended September 30, 2007,
the Company upgraded product sold to certain customers during 2006. These
upgrades were not contemplated at the time of sale, and accordingly, were
recorded as warranty cost. The cost of these upgrades, net of the value of
exchanged product totaled $94,000 and was charged to Cost of Goods Sold. In
addition, a reserve for $15,000 was established for similar upgrades to be
completed after September 30, 2007.

Note 14 - Subsequent Events

As of November 16, 2007, the Company completed the
initial closing under a private placement of its equity securities. Under the
terms of the private placement, the Company will issue units to investors,
consisting of one common share and one warrant for the purchase of a common
share (Unit). Pursuant to the initial closing, 4,850,386 Units were issued in
exchange for a combination of cash and conversion of certain convertible notes
totaling $1,838,000, net of associated fees (Note 7).

On November 15, 2007, TKV and the Company entered
into a Note Modification Agreement (the Note Amendment), amending the Note
issued to TKV in connection with the Merger to revise the payment schedule
thereunder. The Note Amendment defers $750,000 of the payments previously
scheduled to be made in 2007 until 2008, in consideration of a modest
acceleration of payments previously scheduled for March 31, 2008 to various
earlier dates in 2008. The Note Amendment was made effective October 16, 2007,
upon the expiration of the cure period applicable to the original due date of
the first payment to TKV. Pursuant to the Note Amendment, TKV also waived the
Companys failure to make that payment and the subsequent payment on a timely
basis (although no acceleration notice had previously been given by TKV). No
other terms of the Note were amended.

Pursuant to the Note Amendment, the revised
payment schedule is as follows:

- $250,000 on or before November 19, 2007
- $500,000 on or before December 14, 2007
- $1,000,000 on or before January 15, 2008
- $1,000,000 on or before January 31, 2008
- $1,000,000 on or before February 15, 2008
- $1,000,000 on or before February 28, 2008
- Final installment in the amount equal to the then outstanding
  principal and interest on or before March 15, 2008.

13

---

ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS

This report on Form 10-QSB, press releases and
certain information provided periodically in writing or verbally by our officers
or our agents contain statements which constitute forward-looking statements.
The words may, would, could, will, expect, estimate, anticipate,
believe, intend, plan, goal, and similar expressions and variations
thereof are intended to specifically identify forward-looking statements. These
statements appear in a number of places in this Form 10-QSB and include all
statements that are not statements of historical fact regarding the intent,
belief or current expectations of us, our directors or our officers, with
respect to, among other things: (i) our liquidity and capital resources; (ii)
our financing opportunities and plans; (iii) our ability to generate revenues;
(iv) market and other trends affecting our future financial condition or plan of
operation; and (v) our growth and operating strategy.

Investors and prospective investors are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. The factors that might cause such differences
include, among others, those set forth in Part I, Item 2 of this report on Form
10-QSB, entitled Managements Discussion and Analysis or Plan of Operation,
and including, without limitation, the Risk Factors contained below. We
undertake no obligation to update any of the forward-looking statements in this
Form 10-QSB after the date of this report.

The following discussion and analysis of our
financial condition, plan of operation and liquidity should be read in
conjunction with our unaudited pro forma fiscal year and interim financial
statements and the notes thereto included in this report on Form 10-QSB, our
audited financial statements and the notes thereto included in Exhibit 99.1 and
our Managements Discussion and Analysis or Plan of Operation contained in our
current report on Form 8-K/A filed September 28,2007. Our financial statements
have been prepared in accordance with United States generally accepted
accounting principles (GAAP), contemplate that we will continue as a going
concern, and do not contain any adjustments that might result if we were unable
to continue as a going concern.

OVERVIEW

On September 13, 2007, Fortified Holdings Corp.
(we, Fortified or the Company) completed the acquisition of Z5
Technologies LLC (respectively, Z5 and the Merger). Prior to our acquisition
of Z5, we had minimal operations, and consequently the Merger is being accounted
for as a recapitalization of Z5. In this Report, unless the context indicates to
the contrary, the term we includes the business operations of Z5 prior to its
acquisition by Fortified.

Since the closing of the Merger, we have continued
Z5s prior business of developing and selling a line of man-portable Command and
Control, Communications and Compute (C4) solutions for field based incident
management and emergency operations support. Z5s products were marketed under
the NOMADTMbrand,
principally for use by the military, first responders, relief workers and high
risk industries, and we have adopted that brand subsequent to the Merger. To
effect the Merger, Z5 merged with a new, wholly-owed subsidiary of the Company,
which has been renamed Fortified Data Communications, Inc. or Fortified
DataCom and which will conduct the former Z5 business in the future.

As consideration for the Merger, we issued
5,000,000 shares of the Companys common stock and a promissory note in the
amount of $5,000,000 to Thomas Keenan Ventures LLC (TKV), the owner of all Z5s
equity outstanding at the time of the closing. In addition, we have agreed to
issue TKV another 10,000,000 shares in two future tranches: 5,000,000 shares
will be issued on January 15, 2008 or upon our raising $2.75 million in new
capital, if earlier; and the final 5,000,000 shares will be issued on February
15, 2008 or upon our raising a total of $6.0 million in new capital (including
the prior $2.75 million), if earlier. The shares issued to TKV in the Merger are
subject to registration rights. As amended following the closing of the Merger,
the promissory note will be payable in seven payments on specified dates between
November 2007 and March 2008. In the Merger, the Company also granted
replacement stock options to pre-closing holders of Z5 options, entitling them
to purchase up to an additional 5,000,000 shares of the Companys common stock.
Additionally, the Merger Agreement contains customary indemnification
provisions, under which Fortified and TKV, respectively, have agreed to
indemnify one another with respect to certain matters, subject to specified
limitations and conditions.

As a condition to the Merger, our majority
stockholder tendered back to the Company an aggregate of 41,200,000 shares of
Company common stock, for cancellation, without payment. As a result of the
Merger and the cancellation of those shares, TKV now owns 9% of the Companys
issued and outstanding common stock, excluding the stock to be issued in the
future. When the additional shares described above are issued (and excluding
other shares that will have been issued by such time), TKV will own 23% of the
Companys issued and outstanding common stock.

14

---

In connection with the Merger, Brendan T. Reilly
was appointed as the Companys President, Chief Executive Officer and Chairman,
and Alan Hurwitz was appointed as the Companys Executive Vice President and
Chief Financial Officer. Mr. Reilly holds a controlling interest in TKV, and may
be deemed to control all shares of Company common stock held by TKV. Mr. Hurwitz
holds a minority interest in TKV.

For tax and accounting purposes, the Merger is
effective as of September 13, 2007, and for accounting purposes the Merger is
treated as a recapitalization of Z5.

PLAN OF OPERATIONS

The consummation of the Merger with Z5 marked the
commencement of operations for Fortified in its current line of business,
providing solutions to the Emergency Management and Response sector. Z5 operated
in this sector since early 2006. Historical aspects of the discussion below
relate to the operations of Z5 during the stated periods.

We have secured a standby commitment from a third
party for $2.7 million of funding in specified tranches through 2007 (of which
$700,000 has been funded through November 12, 2007), to provide funding while we
work with investment bankers to obtain private funding from accredited investors
and institutions, in an amount targeted to be between $12,000,000 and
$20,000,000. If the latter financing is obtained, it may not be on commercially
acceptable terms or may otherwise substantially dilute the equity interests of
current stockholders in the Company.

The funding, if raised, will be used for working
capital, to fund continuing research and development, and to finance
acquisitions of synergistic businesses. We have reached an understanding with
FastNet Solutions, Inc. (FastNet), based in Lynn, Massachusetts, to acquire
FastNet. If consummated, Fortifieds acquisition of FastNet would add to our
portfolio a unique research and engineering company that also manufactures
wireless equipment. FastNet offers products consisting of range extenders,
commercial-grade sector antennas, and omnidirectional antennas. In addition,
FastNets Mobile Rugged Division designs custom enclosures and equipment
integration for commercial and military equipment. These enclosures are designed
to meet strict and demanding field requirements such as JTRS Cluster 5, and are
fabricated for maximum reuse, expansion, and ruggedness. We contemplate adopting
these enclosures for our existing NOMADTMline of C4ISR products, in addition to
continuing to sell them to third-party customers. FastNet currently employs 4
full time people. There is no assurance, however, that the acquisition of
FastNet will be consummated and there remains no definitive agreement in place
regarding such transaction at this time.

Liquidity and Capital
Resources

Since inception, we have operated at a loss.

Net cash used in operating activities increased
$987,000 from $102,000 for the nine months ended September 30, 2006 to
$1,089,000 for the nine months ended September 30, 2007. This increase is
primarily attributable to the increases in operating expenses for which there
were no comparable expenditures during the nine months ended September 30,
2006.

Net cash used in investment activities increased
$132,000, from $50,000 for the nine months ended September 30, 2006 to $182,000
for the nine months ended September 30, 2007. This increase is primarily
attributable to purchases of demonstration equipment and software for resale
made during the nine months ended September 30, 2007 as compared to the same
period in 2006.

During the nine months ended September 30, 2007,
cash provided by financing activities included $1,272,000 raised through the
sale of notes, certain of which are convertible into equity, compared to
$175,000 in during the same period in 2006. In addition, $200,000 was raised
through convertible notes subsequent to September 30, 2007. Further, during the
first half of November 2007, we completed the initial closing under the private
offering, including $918,000 of cash (net of fees) and the conversion of
principal and accrued interest on convertible notes totaling $920,000. As of
November 15, 2007, we had a cash balance of approximately $600,000.

In connection with the Merger, we entered into a
Standby Financing Commitment with a third party, Clarus Capital Limited and one
of its affiliates (collectively, Clarus), under which Clarus has committed to
direct or indirect investments up to an aggregate of $2.7 million in Fortified.
Of this amount, $700,000 was funded through November 12, 2007, and $2.0 Million
is committed to be available for funding through 2007.

15

---

Clarus obligation consists of a standby
commitment, which will be offset by funds that we expect to raise through a
private offering of equity and/or equity-linked securities. As noted above, we
are actively working with investment bankers to manage this offering, which
commenced in October 2007. This offering is being made to a limited number of
accredited investors, and is targeted to raise gross proceeds of between $12
million and $20 million (the Private Offering). Clarus investment, if any,
will be made on the same terms as those in the Private Offering.

Based on our current operating plan, and assuming
we will raise the maximum targeted amount in the Private Offering, we anticipate
that we will expend a minimum of $15 million of proceeds from the Private
Offering through December 2008. In addition to costs associated with production
of units of the NOMAD units (which, as noted above, will vary based on the
number of units that we manufacture), we anticipate that our most significant
costs during that time frame will be the following items:

- Mergers and Acquisition costs, including the cash portion of
  purchase price, if any, and transaction related costs, which are currently anticipated to total approximately $12.0 million.
  This includes $5 million payable under the promissory note
  resulting from the Merger with Z5, and other costs associated with the
  Merger.
- Research and development expenses, including salaries and
  associated employee benefits and travel, outsourced engineering and design services, and testing, which are currently
  anticipated to total approximately $1.0 million.
- Sales and marketing expenses, which consist primarily of
  salaries, associated employee benefits, travel expenses of sales and marketing personnel, promotional expenses and the costs of
  programs aimed at increasing revenue such as advertising,
  trade shows, public relations and other market development programs, which are
  currently anticipated to total approximately $ 1.0
  million; and
- General and administrative expenses, which consist of
  salaries of our management, finance and administrative staff, and associated employee benefits and travel; facilities costs;
  information systems costs; legal, accounting and other professional fees; and other corporate costs, which are currently
  anticipated to total approximately $ 1.0 million.

We anticipate that the additional capital will
come principally from one or more of the following: sale of additional
securities, debt financing, customer deposits, working capital generated from
unit sales or vendor credit terms. We do not currently have any working capital
or long-term debt financing arrangements or lines of credit with lenders. Since
inception, we have not generated significant revenue and there can be no
assurance that we will generate significant revenue in the future.

If the amount raised in the Private Offering is
less than the $20 million currently targeted as the maximum offering amount, the
first area of reduced spending would likely be in Mergers and Acquisitions. Such
a reduction would likely slow the pace of our anticipated acquisition of
synergistic businesses in the Emergency Management and Response
sector.

Prior to the Merger, the Company relied on
convertible notes and advances from related parties to meet working capital
needs at times when operating cash flows were insufficient on their own. The
principal uses of cash have been for product development and manufacture,
general and administrative expenses, advances to a related party, and
investments in demonstration equipment. While we expect revenues to increase
materially during the next ninety days relative to prior periods, our revenues
(and gross profits from those revenues) are still expected to fluctuate widely
from period to period, and in any event are not expected to be sufficient to
fund core operating expenses for the near future.

Since inception, we have incurred approximately
$125,000 in capital asset expenditures, primarily related to demonstration
equipment, office equipment and furniture. Future requirements will include
similar types of expenditures. We anticipate capital expenditure spending of
less than $50,000 during the remainder of 2007, primarily consisting of computer
equipment, demonstration units, and assembly and test equipment. We do not
anticipate significant investment in manufacturing equipment while production
remains outsourced.

Based on the expected pace of sales activity for
our NOMADTMproducts, coupled
with financing proceeds that we have received to date through the Private
Offering and the funds that remain available to us under the Standby Financing
Commitment from Clarus, we believe that even if we are unable to raise
additional funds in the Private Offering, we will have sufficient liquidity to
fund our operations for at least the next 12 months. However, in light of our
current limited stockholders equity as well as our lack of operating history,
if we are unable to raise sufficient capital in the Private Offering there can
be no assurance that we will be able to fund the development of our business in
the manner we currently contemplate. In that event, the growth of our business
and our prospects would be materially and adversely affected. Moreover, even if
we are able to obtain the necessary additional capital on a timely basis and on
acceptable terms, the holders of the Common Stock may experience substantial
dilution from the Private Offering. In addition, we would be unable to repay the
$5 million note payable to TKV for the acquisition of Z5 (the TKV Note). The
TKV Note is collateralized by the

---

assets of Fortified DataCom. On November 15, 2007,
TKV and the Company entered into a Note Modification Agreement (the Note
Amendment), amending the TKV Note to revise the payment schedule thereunder.
The Note Amendment defers $750,000 of the payments previously scheduled to be
made in 2007 until 2008, in consideration of a modest acceleration of a portion
of the payments previously scheduled for March 31, 2008 to various earlier dates
in 2008. The Note Amendment was made effective October 16, 2007, upon the
expiration of the cure period applicable to the original due date of the first
payment to TKV. Pursuant to the Note Amendment, TKV also waived the Companys
failure to make that payment and the subsequent payment on a timely basis
(although no acceleration notice had previously been given by TKV). No other
terms of the Note were amended.

Pursuant to the Note Amendment, the revised
payment schedule is, which is payable as follows:

- $250,000 on or before November 19, 2007
- $500,000 on or before December 14, 2007
- $1,000,000 on or before January 15, 2008
- $1,000,000 on or before January 31, 2008
- $1,000,000 on or before February 15, 2008
- $1,000,000 on or before February 28, 2008
- Final installment in the amount equal to the then outstanding
  principal and interest on or before March 15, 2008.

Financial Condition and Results of
Operations

Since inception, we have operated at a loss. In
early 2006, we were primarily engaged in organizational activity including
product development, negotiating vendor contracts, engaging and developing our
initial customer base, and recruiting and managing staff. Our first products
shipped in the third calendar quarter of 2006, to the City of New Orleans Police
Department, and sales of military products began during the fourth calendar
quarter of 2006. Total sales for 2006 were approximately $671,000. During the
first three calendar quarters of 2007, we returned our focus to the development
and release of next generation products, and consequently sales were limited
(with immaterial exceptions) to a single customer during this period, totaling
approximately $84,000. We currently have a sales backlog of $214,000 for
products that are expected to be shipped in the next 30 days. Further, due to
the current stage of our business, the relationships between revenue, cost of
revenue and operating expenses reflected in the financial information included
herein do not represent future expected financial results.

Costs associated with manufacture and distribution
of NOMAD and associated products are variable based on quantities and the
specific units that we sell during a given period. Since inception, the Company
has outsourced production to third party manufacturers. While this is expected
to continue for the immediate future (at least into mid-2008), management is
investigating opportunities to acquire assembly facilities to improve gross
margins, improve quality and ensure production needs can be met.

We expect our operating expenses will increase as
we increase our transaction volumes, research and development activities, and
sales and marketing activities. We anticipate developing new product versions
with improved functionality or additional features which will require retesting
along with accessories. However, we also anticipate that revenues will increase
at a faster rate than operating expenses during the next 12 months. Our
anticipated areas of expansion and associated expenditures are summarized above
under Plan of Operation.

We anticipate funding for the activities described
above will come principally from some or all of the following sources: working
capital generated from sales of products and services, additional funding
through continued sale of securities, and debt financing. We do not currently
have any financing arrangements or lines of credit with lenders.

We have completed development of the next
generation of NOMAD products, and are able to produce sufficient quantities to
meet current demand.

Revenue

Since inception, we have sold 45
NOMADTMunits, generating
approximately $755,000 of revenue. We began initial production during 2006 and
have established a suggested base retail unit list prices ranging between
$16,000 and $32,000 within the NOMAD models. Unit prices for resellers and for
purchases under GSA contracts reflect discounts off of the retail pricing.
Revenues for the third quarter of 2007 and year to date were $25,000 and $84,000
respectively, compared to $59,000 for the same periods in 2006. We currently
have a sales backlog of $214,000 for products that are expected to be shipped in
the next 30 days.

17

---

Cost of Sales

Cost of goods sold consists primarily of direct
costs of the manufactured units. Many factors are anticipated to affect our
gross margin, including, but not limited to, market conditions, competition,
production order volumes and supplier pricing. As noted above, the Company
currently does not operate its own production facilities, and we intend to
continue to outsource production to a third party manufacturer as we investigate
opportunities to acquire our own assembly capabilities. At volume production
levels, we expect the gross margin to be approximately 45%. Our current margins
for initial sales have been approximately 40%, reflecting low-volume production
coupled with other one-time costs specifically associated with producing these
units. For the third quarter of 2007 and year to date, we incurred negative
gross profit of ($183,000) and ($159,000), respectively, driven by an upgrade
program that has not been billed, combined with additional warranty and
obsolescence reserves stemming from the rollout of the new NOMAD C4 design.
During the three months ended September 30, 2007, the Company upgraded product
sold to certain customers during 2006 without charge to those customers. These
upgrades were not contemplated at the time of sale, and accordingly, were
recorded as warranty cost at the time the costs were incurred. The cost of these
upgrades, net of the value of exchanged product, totaled $94,000 and was charged
to Cost of Goods Sold. In addition, a reserve for $15,000 was established for
similar upgrades to be completed after September 30, 2007, and the reserve for
obsolete inventory was increased by $57,500 to $65,000. For the three and nine
months ended September 30, 2006, no such reserves were recorded.

Management believes that the warranty reserve of
$25,000 as of September 30, 2007 is sufficient. However, given our limited
operating history, we cannot reliably predict the level of warranty claims, and
such claims may exceed the warranty reserve. We will continue to develop an
estimate for warranty claims based on experience.

Research and Development

Research and development expenses incurred in the
design, development and testing of our product include compensation and benefits
for management and staff, outsourced engineering and consulting services,
electronic parts, testing, and other miscellaneous expenses.

Research and development expenses of approximately
$134,000 during the third quarter of 2007 are net of $32,000 of costs related to
the improvements to the VantagePointTMsoftware in preparation for its general
release that were incurred and then capitalized as of September 30, 2007. Year
to date research and development costs totaled $332,000 through the third
quarter 2007, and represent approximately 13% of total operating expenses during
the same period. Research and development costs for the third quarter and nine
months ended September 30, 2006 were $0. We expect that research and development
spending related to new products and the NOMAD family of products will increase
as we continue to define new versions to meet additional market needs and
integrate new capabilities and components.

Consulting, Selling, General and
Administrative

Consulting, selling, general and administrative
expenses include all corporate and administrative functions that serve to
support our current and future operations and provide an infrastructure to
support future growth. Major items in this category include compensation and
benefits for management, staff and consultants, travel related expenses and
professional services.

Selling, general and administrative expenses
increased during the three and nine months ended September 30, 2007 compared to
the same periods during 2006 due to increased number of employees, costs
associated with the Merger, and stock based compensation. Future spending is
expected to increase as we continue to add employees for sales and marketing,
shared services, and management, however, we expect these costs to decrease as a
percentage of revenues over the next year as revenues continue to ramp
up.

Stock-based compensation expense during total
$817,000 on a year to date basis, comprised of $481,000 related to
non-employees, including members of the Companys Board of Advisors and other
consultants, and $336,000 for sales, general and administrative employees.
$746,000 of these costs were recorded during the third quarter, and include
accelerated amortization of compensation related to stock option grants based
upon the Merger. There were no stock-based compensation costs during
2006.

Fair value of the options for non-employees is
remeasured at each reporting date and compensation expense being amortized is
adjusted accordingly. The aggregate non-cash compensation expense to be
recognized in the future for awards that were unvested at September 30, 2007 is
approximately $1,782,000, which will be recognized through 2010. We expect to
continue issuing stock options as an important component of incentive
compensation. Stock-based compensation charges can fluctuate substantially from
period to period based on the fair market value of our stock and the number of
options granted during each period.

18

---

Interest Income

Interest income for the nine months ended
September 30, 2007 is a result of interest earned on amounts due from loans to
Aegis Industries, Inc. (a private company, formerly an acquisition target) and a
non-executive employee.

Income Tax Expense

Prior to the merger, Z5 was not required to pay
income taxes because it was a Limited Liability Company, whose tax obligations
were passed through to its equity holders. The business of Fortified prior to
the Merger has incurred operating losses since inception and accordingly has not
recorded a provision for income taxes for any of the periods presented.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies, including the
assumptions and judgments underlying those policies, are more fully described in
the notes to our audited financial statements contained in our current report on
Form 8-K/A filed on September 28, 2007. We have consistently applied these
policies in all material respects except as specifically identified herein.
Investors are cautioned, however, that these policies are not guarantees of
future performance and involve risks and uncertainties, and that actual results
may differ materially. Set forth below are the accounting policies that we
believe most critical to an understanding of our financial condition and
liquidity.

Development Stage Company

Prior to the acquisition of Z5, the Company was a
development stage company, as defined by Statement of Financial Accounting
Standard (SFAS) No. 7,Accounting and Reporting by
Development Stage Enterprises.

Below is a brief description of key accounting
principles which we have adopted in determining our recognition of revenues and
expenses:

Convertible Instruments

When the Company issues convertible debt
securities with a non-detachable conversion feature that provides for an
effective rate of conversion that is below market value on the commitment date,
it is known as a beneficial conversion feature (BCF). Pursuant to EITF Issue
No. 98-5 Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios and EITF Issue No. 00-27, the conversion feature
of the security that has characteristics of an equity instrument is measured at
its intrinsic value at the commitment date and is recorded as additional paid in
capital. A portion of the proceeds of the security issued is allocated to the
conversion feature equal to its intrinsic value to a maximum of the amount
allocated to the convertible instrument. The resulting discount of the debt
instrument is amortized into income as interest expense over the conversion
features vesting period.

Revenue Recognition

We recognize revenue in accordance with SEC Staff
Accounting Bulletin (SAB) No. 104, Revenue Recognition. Under these guidelines,
revenue is recognized when persuasive evidence of an arrangement exists,
shipment has occurred or services rendered, the price is fixed or determinable
and payment is reasonably assured. Under these requirements, when the terms of
sale include customer acceptance provisions, and compliance with those
provisions has not been previously demonstrated, revenues are deferred and
recognized upon acceptance. Revenue will be deferred and recognized once
acceptance has occurred.

Stock Based Compensation

Awards under our stock option plans are accounted
for in accordance with Statement of Financial Accounting Standards (SFAS) No.
123R (SFAS 123R) Share Based Payment, EITF 96-18 Accounting for Equity
Instruments That Are Issued to Other Than Employees For Acquiring, Or In
Conjunction With Selling, Goods or Services and SAB No. 107, Share-Based
Payment. Compensation is measured on the grant date of an award and recognized
over the service period for which the award was granted, generally the vesting
period. For awards with graded vesting, compensation is recorded using the
straight line method over the vesting period, but in no event shall total
compensation recognized under the awards be less than the aggregate fair value
of shares vested under such awards. Stock option related compensation is equal
to the fair value of the award which we determine using a binomial
option-pricing model.

19

---

Income Taxes

We account for income taxes using the asset and
liability method, as provided by SFAS 109, Accounting for Income Taxes (SFAS
109) which requires the recognition of different tax assets and liabilities for
the future tax consequences of temporary differences between the financial
statement and tax basis carrying amounts of assets and liabilities. No income
taxes were provided because we have incurred losses from our inception. Due to
the companys limited operating history and, therefore, uncertainty of future
taxable income, no future tax benefits have been recognized.

Recent Accounting
Pronouncements

In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements. This statement defines fair value, establishes a
framework for measuring fair value and expands disclosures about fair value
measurements. This statement is effective for financial statements issued for
fiscal years ending beginning after November 15, 2007, however earlier
application is encouraged. The Company does not expect the adoption of SFAS 157
will have a material impact on its consolidated financial statements.

In July 2006, the FASB issued FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB
Statement No.109 (FIN 48), which clarifies the accounting for uncertainty in
tax positions. This statement requires that the Company recognize, in our
condensed consolidated financial statements, the impact of a tax position if
that position is more likely than not of being sustained on audit, based on the
technical merits of the position. The adoption of FIN 48 did not have any
material impact on the Companys financial statements.

In February 2007, the Financial Accounting
Standards Board (FASB) issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment to SFAS No.
115 (SFAS No. 159). This statement permits entities to choose to measure many
financial instruments and certain other items at fair value. The objective is to
improve financial reporting by providing entities with the opportunity to
mitigate volatility in reporting earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This statement is expected to expand the use of fair value
measurements, which is consistent with the FASBs long-term measurement
objectives for accounting for financial instruments. SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007. The Company does not expect
that the adoption of SFAS No. 159 will have a material impact on the Companys
financial statements.

Critical Accounting
Estimates

The preparation of financial statements and
related disclosures 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, the
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenue and expenses during the period reported. The Companys
most significant estimates include assessing the collectability of accounts
receivable and notes receivable, the use and recoverability of inventory,
determining the fair value of stock-based awards, useful lives of depreciation
and amortization periods of tangible and intangible assets, and long-lived asset
impairments, among others.

The markets for the Companys products are
characterized by intense competition, rapid technological developments, evolving
standards, short product life cycles and price competition, all of which could
impact the future realizable value of the Companys assets. Estimates and
assumptions are reviewed periodically and the effects of revisions are reflected
in the period that they are determined to be necessary. Actual results could
differ from those estimates.

ITEM 3. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND
PROCEDURES

Based on an evaluation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended) required by paragraph (b) of Rule 13a-15 or
Rule 15d-15, as of September 30, 2007, our Chief Executive Officer and Principal
Financial Officer have concluded that our disclosure controls and procedures
were not effective due to the fact that we lack sufficient internal accounting
personnel and segregation of duties necessary to ensure that an adequate review
of the financial statements and notes thereto is performed and to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our Chief Executive Officer and Principal Financial Officer, all in a
manner that allows timely decisions regarding required disclosure. We
undertaking planning and actions to provide effective disclosure controls and
procedures.

20

---

In designing and evaluating our disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily is
required to apply its judgment in evaluating the relationship between the
benefit of desired controls and procedures and the cost of implementing new
controls and procedures.

The consolidated financial statements include all
adjustments identified as a result of the evaluation performed.

There were no changes in our internal controls
over financial reporting that could significantly affect internal controls over
financial reporting during the quarter ended September 30, 2007.

PART II  OTHER INFORMATION

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

On or about June 8, 2007, Aegis Industries, Inc.
(a Delaware corporation) (AI), Ken Stethem, Paul Evancoe, Carl Sangree,
Anthony Passante, Mariella Marquez, Paul Archinard and Stan Hollaway
(collectively, Plaintiffs) filed an action against Fortified Holdings Corp.,
two of its directors, David Kirby and Dennis Mee, and other additional parties
(collectively, Defendants) in the Second Judicial District Court, County of
Washoe, State of Nevada (assigned Case No. CV 0701304). Plaintiffs allege claims
for (1) Breach of Contract; (2) Breach of the Implied Covenant of Good Faith and
Fair Dealing; (3) Unjust Enrichment; (4) Fraud/Fraudulent Misrepresentation; (5)
Violation of Nevada Revised Statute 207.400 (RICO); (6) Conversion; and (7)
Conspiracy against all defendants related to a non-binding letter of intent
entered into between AI and Fortified Holdings Corporation in November 2006.
Fortified Holdings Corporation and its directors strongly dispute the claims
alleged by Plaintiffs and shall vigorously defend the action and assert all
appropriate counterclaims. Motions to Dismiss were filed by Fortified Holdings
Corporations and its directors in response to the Complaint. No trial date has
been set.

The parties have agreed on settlement terms,
effective upon certain payments made by a third party to AI, which provide
Fortified with a full release of all claims against it. Under terms of the
settlement, Fortified agreed to assign to a third party certain promissory notes
receivable issued to Fortified by AI totaling approximately $1,174,000 in
principal and accrued interest thereon, in full satisfaction of demand notes
payable that Fortified had previously issued to that third party, and loans
payable to AI, which together total approximately $1,130,000 as of September 30,
2007 in principal and accrued interest. The difference between the assigned
notes receivable and the assigned liabilities of approximately $44,000 was
recorded as an expense at September 30, 2007. Final settlement is expected
during 2007.

Except as otherwise disclosed above, there are no
pending material legal proceedings to which we are a party and we are not aware
that any are contemplated. There can be no assurance, however, that we will not
be made a party to litigation in the future. Any finding of liability imposed
against us is likely to have an adverse effect on our business, our financial
condition, including liquidity and profitability, and our plan of
operation.

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

There were no reportable events under this Item 2
during the quarterly period ended September 30, 2007. Subsequently, in November
2007, the Company completed the initial closing under a private placement for
4,850,386 common shares and the identical number of warrants in exchange for
$918,000 of cash (net of fees) plus the conversion of $920,000 of outstanding
principal and accrued interest under convertible notes.

|ITEM 3. DEFAULT UPON SENIOR
      SECURITIES.
|---------------------------------------------

There were no reportable events under this Item 3
during the quarterly period ended September 30, 2007.

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

There were no matters submitted to a vote of our
stockholders, through the solicitation of proxies or otherwise, during the
quarterly period ended September 30, 2007.

|ITEM 5. OTHER INFORMATION.
|--------------------------

There were no reportable events under this Item 5
during the quarterly period ended September 30, 2007.

21

---

|ITEM 6. EXHIBITS.
|-----------------

|No.  | Description of Exhibit                                                                                                                                                                                                                                                                
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                       
|2.1  | Note
        Modification Agreement by and among Fortified Holdings Corp. and Thomas
        Kennan Ventures, LLC, dated November 15, 2007, FILED HEREWITH.                                                                                                                           
|     |                                                                                                                                                                                                                                                                                       
|31.1 | Certification of Fortified Holdings Corp.
        Chief Executive Officer, Brendan Reilly, required by Rule 13a-14(a) orRule 15d-14(a), dated
        November 19, 2007. FILED HEREWITH                                                                                               
|     |                                                                                                                                                                                                                                                                                       
|31.2 | Certification of Fortified Holdings Corp.
        Chief Financial Officer Alan Hurwitz, required by Rule 13a-14(a) or Rule15d-14(a), dated November 19, 2007. FILED HEREWITH                                                                                                          
|     |                                                                                                                                                                                                                                                                                       
|32.1 | Certification of Fortified Holdings Corp.
        Chief Executive Officer, Brendan Reilly, required by Rule 13a-14(b) or
        Rule15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United
        States Code (18 U.S.C. 1350), dated November 19, 2007. FILED HEREWITH.
|     |                                                                                                                                                                                                                                                                                       
|32.2 | Certification of Fortified Holdings Corp.
        Chief Financial Officer, Alan Hurwitz, required by Rule 13a-14(b) or Rule15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United
        States Code (18 U.S.C. 1350), dated November 19, 2007. FILED HEREWITH.          

22

---

Signatures

In accordance with Section 13 or 15(d) of the
Exchange Act, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.

Date: November 19, 2007

| | **FORTIFIED HOLDINGS CORP.**
| | ----------------------------
| |                             
| | By:                         
| |                             
| |                             
| |                             
| |                             
| | By:                         
| |                             
| |                             

23

---