|   | [X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE ACT OF 1934 For the quarterly period ended September 30,      2008 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE ACT OF 1934 For the transition period from _ to  _ |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| Nevada                               | 76-0640970                     |
|--------------------------------------|--------------------------------|
| (State      or other jurisdiction of | (I.R.S.      Employer          |
| incorporation      or organization)  |  Identification      No.) |
|                                 |                           |

| 701      North Post Oak Road, Suite 600, Houston,Texas | 77024                        |
|--------------------------------------------------------|------------------------------|
| (Address      of principal executive offices)          | (Zip      Code)              |
|                                                   |                         |
| voice:  713-686-1100                         | fax:  713-682-7402 |
| Issuer's      telephone number                         |

| Large      accelerated filer | [        ] | Accelerated      filer       | [        ] |
|------------------------------|----------------------|------------------------------|----------------------|
| Non-accelerated      filer   | [        ] | Small      reporting company | [X]                  |

----

| TABLE      OF CONTENTS                                                                                                   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                     |   |
| PART I. FINANCIALINFORMATION                                                                                             |   |
|                                                                                                                     |   |
| ITEM      1. FINANCIAL STATEMENTS                                                                                        |   |
|                                                                                                                     |   |
| Unaudited Consolidated Financial    Statements                                                                           | F-1    |
|                                                                                                                     |   |
|   Consolidated Balance Sheets as of September 30, 2008      and December 31, 2007                              | F-1    |
|                                                                                                                     |   |
|   Consolidated Statements of Operations for the      three and nine months ended September 30, 2008 and2007    | F-2    |
|                                                                                                                     |   |
|   Consolidated Statement of      Stockholders’ Deficit for the nine months ended September 30,      2008 | F-3    |
|                                                                                                                     |   |
|   Consolidated Statements of Cash Flows for the nine      months ended September 30, 2008 and 2007             | F-4    |
|                                                                                                                     |   |
|   Notes to Consolidated Financial      Statements                                                              | F-5    |
|                                                                                                                     |   |
| ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL      CONDITION AND RESULTS OF OPERATIONS                       | I-1    |
|                                                                                                                     |   |
| ITEM 4. CONTROLS AND PROCEDURES                                                                                          | I-6    |
|                                                                                                                     |   |
| PART II. OTHER      INFORMATION                                                                                          |   |
|                                                                                                                     |   |
| ITEM 1. LEGAL      PROCEEDINGS                                                                                           | II-1   |
|                                                                                                                     |   |
| ITEM 2. UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                 | II-1   |
|                                                                                                                     |   |
| ITEM 5. OTHER INFORMATION                                                                                                | II-1   |
|                                                                                                                     |   |
| ITEM 6. EXHIBITS                                                                                                         | II-1   |
|                                                                                                                     |   |
| SIGNATURES                                                                                                               | II-2   |
|                                                                                                                     |   |
| CERTIFICATIONS                                                                                                           | II-3   |

----

ITEM  1.   FINANCIALSTATEMENTS

| BLUEGATE CORPORATION                                                                                                                                                                                                                                                                                      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED      BALANCE SHEETS                                                                                                                                                                                                                                                                          |   |
| UNAUDITED                                                                                                                                                                                                                                                                                                 |   |
|                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                      |   | September      30, |   |   | December      31, |   |
|                                                                                                                                                                                                                                                                                                      |   | 2008 |   |   | 2007 |   |
| ASSETS                                                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |
| Current      assets:                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |
| Cash      and cash equivalents                                                                                                                                                                                                                                                                            |   | $ | 22,071 |   |   | $ | 43,703 |   |
| Accounts      receivable, net                                                                                                                                                                                                                                                                             |   |   | 356,663 |   |   |   | 400,023 |   |
| Prepaid      expenses and other                                                                                                                                                                                                                                                                           |   |   | 13,782 |   |   |   | 23,917 |   |
| Total      current assets                                                                                                                                                                                                                                                                                 |   |   | 392,516 |   |   |   | 467,643 |   |
| Property      and equipment, net                                                                                                                                                                                                                                                                          |   |   | 40,772 |   |   |   | 63,525 |   |
| Intangibles,      net                                                                                                                                                                                                                                                                                     |   |   | - |   |   |   | 6,775 |   |
| Total      assets                                                                                                                                                                                                                                                                                         |   | $ | 433,288 |   |   | $ | 537,943 |   |
|                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS’      DEFICIT                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |
| Current      liabilities:                                                                                                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Accounts      payable                                                                                                                                                                                                                                                                                     |   | $ | 286,552 |   |   | $ | 289,583 |   |
| Accounts      payable to related party                                                                                                                                                                                                                                                                    |   |   | 40,071 |   |   |   | 40,089 |   |
| Accrued      liabilities                                                                                                                                                                                                                                                                                  |   |   | 61,300 |   |   |   | 149,221 |   |
| Notes      payable                                                                                                                                                                                                                                                                                        |   |   | 12,800 |   |   |   | 12,800 |   |
| Notes      payable to related parties                                                                                                                                                                                                                                                                     |   |   | 970,246 |   |   |   | 612,738 |   |
| Accrued      liabilities to related parties                                                                                                                                                                                                                                                               |   |   | 175,524 |   |   |   | 344,598 |   |
| Deferred      revenue                                                                                                                                                                                                                                                                                     |   |   | 175,900 |   |   |   | 153,579 |   |
| Total      current liabilities                                                                                                                                                                                                                                                                            |   |   | 1,722,393 |   |   |   | 1,602,608 |   |
|                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Stockholders’      deficit:                                                                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |
| Undesignated      preferred stock, $.001 par value, 9,999,952 shares authorized, none issued      and outstanding                                                                                                                                                                                         |   |   | - |   |   |   | - |   |
| Series      C Convertible Non-Redeemable  Preferred stock, $.001 par value,      48 shares authorized, issued and outstanding at September 30, 2008 and      December 31, 2007; $12,500 per share liquidation preference ($600,000      aggregate liquidation preference at September 30, 2008) |   |   | - |   |   |   | - |   |
| Common      stock, $.001 par value, 50,000,000 shares authorized, 24,783,565 and      15,163,565 shares issued and outstanding at September 30, 2008 and      December 31, 2007, respectively                                                                                                             |   |   | 24,784 |   |   |   | 15,164 |   |
| Additional      paid-in capital                                                                                                                                                                                                                                                                           |   |   | 26,124,597 |   |   |   | 24,746,778 |   |
| Accumulated      deficit                                                                                                                                                                                                                                                                                  |   |   | (27,438,486 | ) |   |   | (25,826,607 | ) |
| Total      stockholders’ deficit                                                                                                                                                                                                                                                                    |   |   | (1,289,105 | ) |   |   | (1,064,665 | ) |
| Total      liabilities and stockholders’ deficit                                                                                                                                                                                                                                                    |   | $ | 433,288 |   |   | $ | 537,943 |   |
|                                                                                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |

----

Table of Contents

| BLUEGATE CORPORATION                                                                        |   |
|---------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED      STATEMENTS OF OPERATIONS                                                  |   |
| UNAUDITED                                                                                   |   |
|                                                                                        |   | Three      Months EndedSeptember      30, |   |   | Nine      Months EndedSeptember      30, |   |
|                                                                                        |
|                                                                                        |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
| Service      revenue                                                                        |   | $ | 1,131,719 |   |   | $ | 1,280,525 |   |   | $ | 3,196,651 |   |   | $ | 4,448,847 |   |
| Cost      of services                                                                       |   |   | 751,437 |   |   |   | 938,600 |   |   |   | 2,354,462 |   |   |   | 2,940,899 |   |
| Gross      profit                                                                           |   |   | 380,282 |   |   |   | 341,925 |   |   |   | 842,189 |   |   |   | 1,507,948 |   |
| Selling,      general and administrative expenses                                           |   |   | 154,361 |   |   |   | 144,502 |   |   |   | 566,781 |   |   |   | 1,389,095 |   |
| Compensation      expense                                                                   |   |   | 325,028 |   |   |   | 1,437,448 |   |   |   | 1,739,583 |   |   |   | 4,474,604 |   |
| Loss      from operations                                                                   |   |   | (99,107 | ) |   |   | (1,240,025 | ) |   |   | (1,464,175 | ) |   |   | (4,355,751 | ) |
| Interest      expense                                                                       |   |   | (88,276 | ) |   |   | (11,267 | ) |   |   | (147,704 | ) |   |   | (58,781 | ) |
| Net      loss                                                                               |   |   | (187,383 | ) |   |   | (1,251,292 | ) |   |   | (1,611,879 | ) |   |   | (4,414,532 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Deemed      dividend on preferred stock                                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (600,000 | ) |
| Net      loss attributable to common shareholders                                           |   | $ | (187,383 | ) |   | $ | (1,251,292 | ) |   | $ | (1,611,879 | ) |   | $ | (5,014,532 | ) |
| Net      loss attributable to common shareholders per common share - basic and      diluted |   | $ | (0.01 | ) |   | $ | (0.09 | ) |   | $ | (0.07 | ) |   | $ | (0.37 | ) |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted weighted average shares outstanding                                  |   |   | 24,783,565 |   |   |   | 14,333,705 |   |   |   | 23,700,755 |   |   |   | 13,567,314 |   |
|                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Table of Contents

| BLUEGATE CORPORATION                                                                                       |   |
|------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED      STATEMENT OF STOCKHOLDERS' DEFICIT                                                       |   |
| NINE      MONTHS ENDED SEPTEMBER 30, 2008                                                                  |   |
| UNAUDITED                                                                                                  |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   | ADDITIONAL |   |   |   |   |   |   |   |
|                                                                                                       |   | COMMON      STOCK |   |   | PREFERRED      STOCK |   |   | PAID-IN |   |   | ACCUMULATED |   |   |   |   |
|                                                                                                       |   | SHARES |   |   | CAPITAL |   |   | SHARES |   |   | CAPITAL |   |   | CAPITAL |   |   | DEFICIT |   |   | TOTAL |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                                                          |   |   | 15,163,565 |   |   | $ | 15,164 |   |   |   | 48 |   |   | $ | - |   |   | $ | 24,746,778 |   |   | $ | (25,826,607 | ) |   | $ | (1,064,665 | ) |
| Issuance      of common stock and warrants for cash                                                        |   |   | 170,000 |   |   |   | 170 |   |   |   |   |   |   |   |   |   |   |   | 84,830 |   |   |   |   |   |   |   | 85,000 |   |
| Issuance      of common stock to related party for:                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -      cash                                                                                                |   |   | 111,111 |   |   |   | 111 |   |   |   |   |   |   |   |   |   |   |   | 9,889 |   |   |   |   |   |   |   | 10,000 |   |
| -      compensation                                                                                        |   |   | 188,889 |   |   |   | 189 |   |   |   |   |   |   |   |   |   |   |   | 16,811 |   |   |   |   |   |   |   | 17,000 |   |
| Issuance      of common stock for:                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| -      related party debt                                                                                  |   |   | 3,388,889 |   |   |   | 3,389 |   |   |   |   |   |   |   |   |   |   |   | 301,611 |   |   |   |   |   |   |   | 305,000 |   |
| -      compensation                                                                                        |   |   | 5,761,111 |   |   |   | 5,761 |   |   |   |   |   |   |   |   |   |   |   | 512,739 |   |   |   |   |   |   |   | 518,500 |   |
| Issuance      of common stock warrants as additional consideration to borrow funds from      related party |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 109,028 |   |   |   |   |   |   |   | 109,028 |   |
| Common      stock options issued for employee services                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 342,911 |   |   |   |   |   |   |   | 342,911 |   |
| Net      loss                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (1,611,879 | ) |   |   | (1,611,879 | ) |
| Balance      at September 30, 2008                                                                         |   |   | 24,783,565 |   |   | $ | 24,784 |   |   |   | 48 |   |   | $ | - |   |   | $ | 26,124,597 |   |   | $ | (27,438,486 | ) |   | $ | (1,289,105 | ) |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

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Table of Contents

| BLUEGATE CORPORATION                                                                                                       |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED      STATEMENTS OF CASH FLOWS                                                                                 |   |
| UNAUDITED                                                                                                                  |   |
|                                                                                                                       |   | Nine      Months Ended |   |
|                                                                                                                       |   | September      30, |   |
|                                                                                                                       |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                                                                                 |   |   |   |   |   |   |
| Net      loss                                                                                                              |   | $ | (1,611,879 | ) |   | $ | (4,414,532 | ) |
| Adjustments      to reconcile net loss to net cash used in operating      activities:                                      |   |   |   |   |   |   |   |   |
| Depreciation      and amortization                                                                                         |   |   | 42,398 |   |   |   | 50,331 |   |
| Common      stock issued for outside services                                                                              |   |   | - |   |   |   | 329,525 |   |
| Common      stock options issued for employee services                                                                     |   |   | 342,911 |   |   |   | 2,678,827 |   |
| Common      stock issued for delay in filing a registration statement                                                      |   |   | - |   |   |   | 98,655 |   |
| Common      stock warrants issued to borrow funds from related party                                                       |   |   | 109,028 |   |   |   | - |   |
| Contingent      shares issued for Trilliant acquisition accounted for as      compensation                                 |   |   | - |   |   |   | 33,580 |   |
| Common      stock issued for employee compensation                                                                         |   |   | - |   |   |   | 142,500 |   |
| Common      stock issued for compensation                                                                                  |   |   | 535,500 |   |   |   | - |   |
| Common      stock and warrants issued for services                                                                         |   |   | - |   |   |   | 172,850 |   |
| Changes      in operating assets and liabilities:                                                                          |   |   |   |   |   |   |   |   |
| Accounts      receivable                                                                                                   |   |   | 43,360 |   |   |   | (78,449 | ) |
| Prepaid      expenses and other current assets                                                                             |   |   | 10,135 |   |   |   | 34,814 |   |
| Accounts      payable and accrued liabilities                                                                              |   |   | (90,952 | ) |   |   | 48,539 |   |
| Accounts      payable to related party                                                                                     |   |   | (18 | ) |   |   | 127,118 |   |
| Accrued      liabilities to related party                                                                                  |   |   | 135,926 |   |   |   | - |   |
| Deferred      revenue                                                                                                      |   |   | 22,321 |   |   |   | (715,831 | ) |
| Net      cash used in operating activities                                                                                 |   |   | (461,270 | ) |   |   | (1,492,073 | ) |
| Cash      flows from investing activities:                                                                                 |   |   |   |   |   |   |   |   |
| Purchase      of property and equipment                                                                                    |   |   | (12,870 | ) |   |   | (29,102 | ) |
| Net      cash used in investing activities                                                                                 |   |   | (12,870 | ) |   |   | (29,102 | ) |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                 |   |   |   |   |   |   |   |   |
| Proceeds      from related party short term debt                                                                           |   |   | 515,000 |   |   |   | 595,117 |   |
| Payments      on related party short term debt                                                                             |   |   | (157,492 | ) |   |   | (555,455 | ) |
| Net      change in bank line of credit                                                                                     |   |   | - |   |   |   | (44,590 | ) |
| Proceeds      from note payable from individual                                                                            |   |   | - |   |   |   | 315,000 |   |
| Repayment      of note payable from individual                                                                             |   |   | - |   |   |   | (315,000 | ) |
| Common      stock and warrants issued for cash                                                                             |   |   | 95,000 |   |   |   | 700,000 |   |
| Preferred      stock and common stock warrants issued for cash                                                             |   |   | - |   |   |   | 600,000 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Net      cash provided by financing activities                                                                             |   |   | 452,508 |   |   |   | 1,295,072 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Net      decrease in cash and cash equivalents                                                                             |   |   | (21,632 | ) |   |   | (226,103 | ) |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at beginning of period                                                                      |   |   | 43,703 |   |   |   | 256,121 |   |
| Cash      and cash equivalents at end of period                                                                            |   | $ | 22,071 |   |   | $ | 30,018 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Non      Cash Transactions:                                                                                                |   |   |   |   |   |   |   |   |
| Deemed      dividend from beneficial conversion feature on preferred    stock                                              |   | $ | - |   |   | $ | 600,000 |   |
| Issuance      of common stock for conversion of related party accounts payable, accrued      expenses and accrued interest |   |   | 305,000 |   |   |   | - |   |
| Issuance      of common stock and warrants for conversion of accounts      payable                                         |   |   | - |   |   |   | 40,002 |   |
| Supplemental      information:                                                                                             |   |   |   |   |   |   |   |   |
| Cash      paid for interest                                                                                                |   |   | 106,204 |   |   |   | 58,781 |   |

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Table of Contents

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Table of Contents

|  Notes      payable at September 30, 2008 and December 31, 2007 are summarized      below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | 9/30/2008    |          | 12/31/2007   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------|---------------|--------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |    |          |    |
| Unsecured notes      payable:                                                                   10%      note payable due upon demand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $      | 12,800       |   $ | 12,800       |
| Note      payable to related parties:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   |         |          |         |
| Secured note payable to related      party: During 2007, the Company entered into a line of credit      agreement with SAI Corporation ("SAIC"), a corporation controlled by our      CEO, Stephen Sperco, to borrow up to $500,000. On February 28, 2008, the      line of credit agreement with SAIC was amended to increase the borrowing      to $700,000 and on February 28, 2008, Bluegate borrowed the additional      $200,000 from SAIC for working capital purposes. As condition to and as      additional consideration for SAIC’s agreement to lend the funds to the      Company, the Company granted SAIC a security interest in its assets as      more specifically detailed in the Promissory Note and Security Agreement,      and increased the interest rate from 12% to 15% per annum. On July 14,      2008, the line of credit agreement with SAIC was amended to increase the      borrowing to $900,000 and on July 31, 2008, Bluegate borrowed the      additional $200,000 from SAIC for working capital purposes. Upon Bluegate      borrowing the additional $200,000, the Company agreed to pay (1) SAIC a      $40,000 origination fee and (2) Sperco Technology Group, Inc. (“STG”), a      corporation controlled by our CEO, Stephen Sperco, all past due amounts      totaling $104,972. On August 14, 2008, the Company entered into a short      term unsecured loan with SAIC to meet its working capital needs to borrow      $65,000. Upon borrowing the $65,000, the Company agreed to pay SAIC a      $6,500 origination fee and to repay SAIC with the first available funds      once the August 15, 2008 payroll and medical insurance premium was paid.      The Company paid the $65,000 loan and $6,500 fee on August 15, 2008. On      August 28, 2008, the Company borrowed $50,000 from SAIC and agreed to pay      SAIC a $5,000 origination fee. The Company paid the $50,000 funds borrowed      and $5,000 fee on September 11, 2008. See      footnote 5, Subsequent Events.Note      payable to SAI Corporation due on demand |   | $      | 900,000      |   $ | 500,000      |
| Unsecured notes payable to      related parties: During 2006, the Company entered into a line of      credit agreement with Manfred Sternberg ("MS"), Chief Strategy Officer and      William Koehler ("WK"), President and COO, for Bluegate to borrow up to      $500,000 from each of them. As of September 30, 2008, the interest rates      on the underlying credit cards pertaining to funds borrowed from MS and WK      were 17.24% and 17.23%, respectively. During the nine months ended      September 30, 2008, we made payments of $42,492 on these related party      notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |         |          |         |
| Notes      payable to William Koehler due on demand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   | 35,748       |          | 36,569       |
| Notes      payable to Manfred Sternberg due on demand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |   | 34,498       |          | 76,169       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |         |          |         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $      | 970,246      |   $ | 612,738      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |         |          |         |

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|               |   |     |                         |   |          |                                          |   |      |   |               |               |    |                                          |
|--------------------|--------|----------|------------------------------|--------|---------------|-----------------------------------------------|--------|-----------|--------|--------------------|--------------------|---------|-----------------------------------------------|
|               |   |     |                         |   |          |                                          |   |      |   |               |               |    |                                          |
|               |   | Exercise |                         | Fair   |          | Expiration                                    |   | Vesting   |   | 2008               |
| Options            |   | Price    |                         | Value  |          | Date                                          |   | Period    |   | Expense            |
| 15,000             |   | $        |     0.25 |   | $             |      1,811           |   | 1/2/2013  |   | Through      6/08  |          | $       |      1,811           |
|  3,332        |   |     |     0.25 |   |          |        280 |   | 1/15/2013 |   | Through      4/08  |               |    |        280 |
| 5,000              |   |     |     0.25 |   |          |        465 |   | 1/21/2013 |   | Through      12/08 |               |    |        351 |
| 50,000             |   |     |     0.25 |   |          |      3,743           |   | 2/1/2011  |   | Immediately        |               |    |      3,743           |
|               |   |     |                         |   |          |                                          |   |      |   |               |               |    |                                          |
|        73,332 |   |     |                         |   |        $ |        6,299                             |   |      |   |               |               |  $ |        6,185                             |

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ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

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| -   | Access      and content providers, such as AOL, Microsoft, EarthLink and Time      Warner; |
|---------------|--------------------------------------------------------------------------------------------|

| -   | Professional      Service organizations, such as IBM, CSC, Perot Systems, and      EDS; |
|---------------|-----------------------------------------------------------------------------------------|

| -   | Regional,      national and international telecommunications companies, such as AT&T,      Verizon, Qwest, and Sprint; |
|---------------|----------------------------------------------------------------------------------------------------------------------------|

| -   | On-line      services offered by incumbent cable providers such as Comcast and      Cox; |
|---------------|------------------------------------------------------------------------------------------|

| -   | DSL      providers such as the RBOC’s andCLEC’s. |
|---------------|--------------------------------------------------------------|

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|                                              |   | Nine Months Ended September    30, |       |
|---------------------------------------------------|--------|------------------------------------|------------|
|                                              |   | 2008                               |       |   | 2007 |   |
|                                              |   |                               |       |   |   |   |
| Net      loss attributable to common shareholders |   | $                                  | (1,611,879 | ) |   | $ | (5,014,532 | ) |
| Negative      cash flow from operations           |   |                               | (461,270   | ) |   |   | (1,492,073 | ) |
| Negative      working capital                     |   |                               | (1,329,877 | ) |   |   | (762,935 | ) |
| Stockholders'      deficit                        |   |                               | (1,289,105 | ) |   |   | (679,831 | ) |

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|   | -      Our ability to locate sources of debt or equity funding to meet current      commitments and near-term futurerequirements. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | -      Our ability to achieve profitability and ultimately generate sufficient      cash flow from operations to sustain our continuing      operations. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

| $      | (823,000) | decrease      related to options issued for employee services |
|--------|-----------|---------------------------------------------------------------|
|   | (400,000) | decrease      related to the reduction in personnel           |
|   |      |                                                          |

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| $      | (2,336,000 | )      | decrease      related to options issued for employee services                      |
|--------|------------|--------|------------------------------------------------------------------------------------|
|   | (900,000   | )      | decrease      related to the reduction in personnel                                |
|   | (143,000   | )      | decrease      related to issuance of shares for employee compensation              |
|   | 519,000    |   | increase      related to conversion of related party debt for common    stock      |
|   | 109,000    |   | increase      related to warrants issued to borrow funds from a related      party |
|   | 17,000     |   | increase      related to related party purchase of common stock for  cash          |

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| -   | The      cost of operating delivering the Medical Grade Network®      services |
|---------------|-------------------------------------------------------------------------------------|

| -   | The      cost of sales and marketing |
|---------------|--------------------------------------|

| -   | The      rate at which we expand ouroperations |
|---------------|------------------------------------------------|

| -   | Attractive      acquisition opportunities |
|---------------|-------------------------------------------|

| -   | The      response of competitors |
|---------------|----------------------------------|

| -   | Capital      expenditures |
|---------------|---------------------------|

ITEM

|   | (a)      Evaluation of disclosure controls and  procedures. |
|--------|-------------------------------------------------------------|

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PART

ITEM

ITEM2.                      UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM

ITEM

| Exhibit |                                                                                                                                                                                                                                                                                                                                                                                          |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  | Name                                                                                                                                                                                                                                                                                                                                                                                          |
|    |                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.1    | CERTIFICATION      REQUIRED BY RULE 13a - 14(a) OR RULE 15d - 14(a) OF THE SECURITIES      EXCHANGE ACT      OF  1934,  AS  ADOPTED  PURSUANT  TO  SECTION  302  OF  THE  SARBANES-OXLEY  ACT      OF 2002 OF THE CHIEF EXECUTIVE OFFICER                                       |
|    |                                                                                                                                                                                                                                                                                                                                                                                          |
| 31.2    | CERTIFICATION      REQUIRED BY RULE 13a - 14(a) OR RULE 15d - 14(a) OF THE SECURITIES      EXCHANGE ACT      OF  1934,  AS  ADOPTED  PURSUANT  TO  SECTION  302  OF  THE  SARBANES-OXLEY  ACT      OF 2002 OF THE CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING      OFFICER |
|    |                                                                                                                                                                                                                                                                                                                                                                                          |
| 32.1    | CERTIFICATION      PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C.      SECTION 1350), OF THE CHIEF EXECUTIVE OFFICER                                                                                                                                                                                                                                                    |
|    |                                                                                                                                                                                                                                                                                                                                                                                          |
| 32.2    | CERTIFICATION      PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C.      SECTION 1350), OF THE CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING      OFFICER                                                                                                                                                                                                              |

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| SIGNATURES                                                                                                                                                                                              |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                    |   |   |   |
| Pursuant      to the requirements of the Securities Exchange Act of 1934, the registrant      has duly caused this report to be signed on its behalf by the undersigned      thereunto duly authorized. |
|                                                                                                                                                                                                    |   |   |   |
| Bluegate      Corporation                                                                                                                                                                               |
|                                                                                                                                                                                                    |   |   |   |
| Date:                                                                                                                                                                                                   | October       23, 2008 | /s/ | Stephen      J. Sperco |
|                                                                                                                                                                                                    |   |   |   |
|                                                                                                                                                                                                    |   |   | Stephen      J. Sperco, |
|                                                                                                                                                                                                    |   |   | Chief      Executive Officer |
|                                                                                                                                                                                                    |   |   |   |
|                                                                                                                                                                                                    |   |   |   |
| Bluegate      Corporation                                                                                                                                                                               |
|                                                                                                                                                                                                    |   |   |   |
| Date:                                                                                                                                                                                                   | October       23, 2008 | /s/ | Charles      E. Leibold |
|                                                                                                                                                                                                    |   |   |   |
|                                                                                                                                                                                                    |   |   | Charles      E. Leibold, |
|                                                                                                                                                                                                    |   |   | Chief      Financial Officer and Principal Accounting Officer |
|                                                                                                                                                                                                    |   |   |   |