**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**WASHINGTON,      DC 20549**

**FORM      10-Q**

**For      the quarterly period ended: September 30, 2008**

**Commission      File Number: 000-9500**

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**Secured      Digital Storage Corporation**

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| **New                Mexico**                                                               |   | **85-0280415**                                      |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or Other Jurisdiction of Incorporationor                Organization) |   | (I.R.S.                Employer Identification No.) |

**2001      Butterfield Road, Suite 1050, Downers Grove, IL 60615**

**(630-271-8593)**

| Indicate                by check mark whether the registrant (1) filed all reports required                to be                filed by Section 13 or 15(d) of the Securities Exchange Act of 1934                during                the past 12 months (or for such shorter period that the registrant                was                required to file such reports), and (2) has been subject to such                filing                requirements for the past 90 days. Yes x No o |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Indicate                by check mark whether the registrant is a large accelerated filer,                an                accelerated filer, a non-accelerated filer, or a smaller reporting                company. See definitions of “large accelerated filer”, “accelerated filer”                and "smaller reporting company" in Rule 12b-2 of the Exchange Act.                (Check                one):                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Large                accelerated filer o   Accelerated                filer o Non-accelerated                filer  o Smaller reporting company                x                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| Indicate                by check mark whether the registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act). Yes o No x                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| As                of November 12, 2008, 19,507,479 shares of Common Stock, $.001 par                value were outstanding.                                                                                                                                                                                                                                                                                                                                                                                      |

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**SECURED      DIGITAL STORAGE CORPORATION**

**CONTENTS      TO FORM 10-Q**

|                               |   |                                                                                                                      |   | Page   |
|------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|--------|
| **PART                I**          |   | **FINANCIAL                INFORMATION**                                                                                  |   |   |
|                               |   |                                                                                                                      |   |   |
| Item                1.             |   | Financial                Statements (unaudited)                                                                           |   | 3      |
|                               |   |                                                                                                                      |   |   |
|                               |   | Consolidated              Balance              Sheets                                                                     |   | 3      |
|                               |   |                                                                                                                      |   |   |
|                               |   | Consolidated                Statements of Operations                                                                      |   | 4-5    |
|                               |   |                                                                                                                      |   |   |
|                               |   | Consolidated                Statements of Cash Flows                                                                      |   | 6      |
|                               |   |                                                                                                                      |   |   |
|                               |   | Consolidated                Statements of Stockholders’ Equity                                                      |   | 7      |
|                               |   |                                                                                                                      |   |   |
|                               |   | Notes                to Consolidated Financial Statements                                                                 |   | 8      |
|                               |   |                                                                                                                      |   |   |
| Item                2.             |   | Management’s                Discussion and Analysis of Financial Condition and Results of                Operations |   | 15     |
|                               |   |                                                                                                                      |   |   |
| Item                3.             |   | Quantitative                and Qualitative Disclosures About Market Risk                                                 |   | 17     |
|                               |   |                                                                                                                      |   |   |
| Item                4T.            |   | Controls                and Procedures                                                                                    |   | 17     |
|                               |   |                                                                                                                      |   |   |
| **PART                II**         |   | **OTHER                INFORMATION**                                                                                      |   |   |
|                               |   |                                                                                                                      |   |   |
| Item                1.             |   | Legal                Proceedings                                                                                          |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Item                1A.            |   | Risk                Factors                                                                                               |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Item                2.             |   | Unregistered                Sales of Equity Securities and Use of Proceeds                                                |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Item                3.             |   | Defaults                Upon Senior Securities                                                                            |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Item                4.             |   | Submission                of Matters to a Vote of Security Holders                                                        |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Item                5.             |   | Other                Information                                                                                          |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Item                6.             |   | Exhibits                                                                                                                  |   | 18     |
|                               |   |                                                                                                                      |   |   |
| Signatures                         |   |                                                                                                                      |   | 19     |
|                               |   |                                                                                                                      |   |   |
| Exhibit                Index  |   | 20                                                                                                                        |

----

**PART      1 – FINANCIAL INFORMATION**

**SECURED      DIGITAL STORAGE CORPORATION**

**Consolidated      Balance Sheets**

|                                                                                                                                                                                                                                                              |   | **(Unaudited)****September****30, 2008** |       | **(Audited)****December 31,****2007** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|--------------------------------------------|--------|
| **ASSETS:**                                                                                                                                                                                                                                                       |   |                                          |            |                                       |   |  |   |
| Current                Assets:                                                                                                                                                                                                                                    |   |                                          |            |                                       |   |  |   |
| Cash                                                                                                                                                                                                                                                              |   | $                                             | 163,057    |                                       | $      | 384,095 |   |
| Prepaid                Expenses                                                                                                                                                                                                                                   |   |                                          | -          |                                       |   | 316,316 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Total                Current Assets                                                                                                                                                                                                                               |   |                                          | 163,057    |                                       |   | 700,411 |   |
| Noncurrent                Assets                                                                                                                                                                                                                                  |   |                                          |            |                                       |   |  |   |
| Net                Fixed Assets                                                                                                                                                                                                                                   |   |                                          | 39,044     |                                       |   | 325,529 |   |
| Other                Assets                                                                                                                                                                                                                                       |   |                                          | 332,000    |                                       |   | 161,523 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Total                Noncurrent Assets                                                                                                                                                                                                                            |   |                                          | 371,044    |                                       |   | 487,052 |   |
|                                                                                                                                                                                                                                                              |   |                                          |       |                                       |   |   |   |
| **TOTAL                ASSETS**                                                                                                                                                                                                                                   |   | $                                             | 534,101    |                                       | $      | 1,187,463 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| **LIABILITIES                AND STOCKHOLDERS' EQUITY (DEFICIT):**                                                                                                                                                                                                |   |                                          |            |                                       |   |  |   |
| Current                Liabilities:                                                                                                                                                                                                                               |   |                                          |            |                                       |   |  |   |
| Accounts                Payable                                                                                                                                                                                                                                   |   | $                                             | 596,191    |                                       | $      | 504,930 |   |
| Accrued                Expenses                                                                                                                                                                                                                                   |   |                                          | 1,186,830  |                                       |   | 68,519 |   |
| Current                Portion of Debt                                                                                                                                                                                                                            |   |                                          | 1,804,387  |                                       |   | 480,335 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Total                Current Liabilities                                                                                                                                                                                                                          |   |                                          | 3,587,408  |                                       |   | 1,053,784 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Noncurrent                Liabilities:                                                                                                                                                                                                                            |   |                                          |            |                                       |   |  |   |
| Long-Term                Debt                                                                                                                                                                                                                                     |   |                                          | -          |                                       |   | 314,643 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Total                Liabilities                                                                                                                                                                                                                                  |   |                                          | 3,587,408  |                                       |   | 1,368,427 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Stockholders'                Equity:                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Common                Stock, $.001 par value; 50,000,000 shares authorized; 19,507,479                issued                and outstanding at September 30, 2008 and 10,753,604 shares issued                and                outstanding at December 31, 2007 |   |                                          | 19,507     |                                       |   | 10,754 |   |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Additional                Paid-in Capital                                                                                                                                                                                                                         |   |                                          | 5,649,266  |                                       |   | 3,492,548 |   |
| Retained                Earnings (Deficit)                                                                                                                                                                                                                        |   |                                          | (8,722,080 | )                                          |   | (3,684,266 | ) |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| Total                Stockholders' Equity (deficit)                                                                                                                                                                                                               |   |                                          | (3,053,307 | )                                          |   | (180,964 | ) |
|                                                                                                                                                                                                                                                              |   |                                          |            |                                       |   |  |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)**                                                                                                                                                                                            |   | $                                             | 534,101    |                                       | $      | 1,187,463 |   |

----

**SECURED      DIGITAL STORAGE CORPORATION**

**Consolidated      Statements of Operations**

**(Unaudited)**

|                                                                |   | **Nine Months Ended**  |       |
|---------------------------------------------------------------------|--------|----------------------------------|------------|
|                                                                |   | **September                30,** |       |
|                                                                |   | **2008**                         |       | **2007** |   |
|                                                                |   |                             |       |   |   |
| **Revenue:**                                                        |   | $                                | 27,750     |   | $ | - |   |
|                                                                |   |                             |            |   |   |  |   |
| **Operating                Expenses:**                              |   |                             |            |   |   |  |   |
| Compensation                                                        |   |                             | 1,317,079  |   |   | 2,718 |   |
| Professional                Services                                |   |                             | 955,456    |   |   | 108,658 |   |
| Occupancy                                                           |   |                             | 156,238    |   |   | - |   |
| Operating                Leases                                     |   |                             | 232,950    |   |   | - |   |
| Depreciation                                                        |   |                             | 114,923    |   |   | - |   |
| Other                Administrative Expense                         |   |                             | 1,576,688  |   |   | 61,676 |   |
| Total                Operating Expenses                             |   |                             | 4,353,334  |   |   | 173,052 |   |
|                                                                |   |                             |            |   |   |  |   |
| **Total                Operating Profit (Loss)**                    |   |                             | (4,325,584 | ) |   | (173,052 | ) |
|                                                                |   |                             |            |   |   |  |   |
| Interest                Expense, net                                |   |                             | 712,230    |   |   | 203,119 |   |
|                                                                |   |                             |            |   |   |  |   |
| Loss                Before Taxes                                    |   |                             | (5,037,814 | ) |   | (376,171 | ) |
|                                                                |   |                             |            |   |   |  |   |
| Taxes                                                               |   |                             | -          |   |   | - |   |
|                                                                |   |                             |            |   |   |  |   |
| Net                Loss                                             |   | $                                | (5,037,814 | ) | $ | (376,171 | ) |
|                                                                |   |                             |            |   |   |  |   |
| **Per                Share Information:**                           |   |                             |            |   |   |  |   |
|                                                                |   |                             |            |   |   |  |   |
| Weighted                average number of common shares outstanding |   |                             | 18,231,228 |   |   | 1,385,576 |   |
|                                                                |   |                             |            |   |   |  |   |
| **Net                Loss per Common Share**                        |   | $                                | (0.28      | ) | $ | (0.27 | ) |

----

**SECURED      DIGITAL STORAGE CORPORATION**

**Consolidated      Statements of Operations**

**(Unaudited)**

|                                                                |   | **Three Months Ended** |       |
|---------------------------------------------------------------------|--------|----------------------------------|------------|
|                                                                |   | **September                30,** |       |
|                                                                |   | **2008**                         |       | **2007** |   |
|                                                                |   |                             |       |   |   |
| **Revenue:**                                                        |   | $                                | 27,750     |   | $ | - |   |
|                                                                |   |                             |            |   |   |  |   |
| **Operating                Expenses:**                              |   |                             |            |   |   |  |   |
| Compensation                                                        |   |                             | 364,719    |   |   | 2,718 |   |
| Professional                Services                                |   |                             | 41,460     |   |   | 29,579 |   |
| Occupancy                                                           |   |                             | 78,260     |   |   | - |   |
| Operating                Leases                                     |   |                             | 79,167     |   |   | - |   |
| Depreciation                                                        |   |                             | 38,641     |   |   | - |   |
| Other                Administrative Expense                         |   |                             | 1,237,441  |   |   | 26,247 |   |
| Total                Operating Expenses                             |   |                             | 1,839,688  |   |   | 58,544 |   |
|                                                                |   |                             |            |   |   |  |   |
| **Total                Operating Profit (Loss)**                    |   |                             | (1,811,938 | ) |   | (58,544 | ) |
|                                                                |   |                             |            |   |   |  |   |
| Interest                Expense, net                                |   |                             | 264,053    |   |   | 88,319 |   |
|                                                                |   |                             |            |   |   |  |   |
| Loss                Before Taxes                                    |   |                             | (2,075,991 | ) |   | (146,863 | ) |
|                                                                |   |                             |            |   |   |  |   |
| Taxes                                                               |   |                             | -          |   |   | - |   |
|                                                                |   |                             |            |   |   |  |   |
| Net                Loss                                             |   | $                                | (2,075,991 | ) | $ | (146,863 | ) |
|                                                                |   |                             |            |   |   |  |   |
| **Per                Share Information:**                           |   |                             |            |   |   |  |   |
|                                                                |   |                             |            |   |   |  |   |
| Weighted                average number of common shares outstanding |   |                             | 19,507,479 |   |   | 1,554,833 |   |
|                                                                |   |                             |            |   |   |  |   |
| **Net                Loss per Common Share**                        |   | $                                | (0.11      | ) | $ | (0.09 | ) |

----

**SECURED      DIGITAL STORAGE CORPORATION**

**Consolidated      Statements of Cash Flows**

**(Indirect      Method) (Unaudited)**

|                                                                                                     |   | **Nine Months Ended****September                30,** |        |
|----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------|-------------|
|                                                                                                     |   | **2008**                                                        |        | **2007** |   |
|                                                                                                     |   |                                                       |        |    |   |
| **Cash                Flows from Operating Activities:**                                                 |   |                                                            |             |   |   |  |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| Net                Loss                                                                                  |   | $                                                               | (5,037,814  | ) | $ | (376,171 | ) |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| Adjustments                to reconcile net loss to net cash used in operating                activities |   |                                                            |             |   |   |  |   |
| Depreciation                                                                                             |   |                                                            | 115,973     |   |   | - |   |
| Stock                Based Compensation Expense                                                          |   |                                                            | 198,692     |   |   | 2,718 |   |
| Stock                Warrant Expense Issued with Debt                                                    |   |                                                            | 633,349     |   |   | 73,426 |   |
| Write-off                of Development Center Assets                                                    |   |                                                            | 1,080,105   |   |   |   |   |
| Increase                in Prepaid Expenses                                                              |   |                                                            | 204,429     |   |   | - |   |
| Increase                in Accounts Payable                                                              |   |                                                            | 136,371     |   |   | 60,743 |   |
| Increase                (decrease) in Accrued Expenses                                                   |   |                                                            | 198,464     |   |   | 53,588 |   |
| **Net                Cash Flows Used by Operations**                                                     |   |                                                            | (2,470,431  | ) |   | (185,696 | ) |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Cash                Flows from Investing Activities:**                                                 |   |                                                            |             |   |   |  |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| Purchase                of Equipment & Leases                                                        |   |                                                            | (93,447     | ) |   | - |   |
| **Cash                Flows Used by Investing Activities**                                               |   |                                                            | (93,447     | ) |   | - |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Cash                Flows from Financing Activities:**                                                 |   |                                                            |             |   |   |  |   |
| Repayments                of Debt                                                                        |   |                                                            | (352,985    | ) |   | (353,000 | ) |
| Issuance                of Debt                                                                          |   |                                                            | 1,413,750   |   |   | 738,500 |   |
| Issuance of                Common Stock                                                             |   |                                                            | 1,210,100   |   |   | - |   |
| Exercise                of Stock Warrants to Common Stock                                                |   |                                                            | 71,975      |   |   | - |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Net                Cash Flows Provided by Financing Activities**                                       |   |                                                            | 2,342,840   |   |   | 385,500 |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Net                Increase (Decrease) in Cash**                                                       |   |                                                            | (221,038    | ) |   | 199,804 |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Cash                at Beginning of Period**                                                           |   |                                                            | 384,095     |   |   | 345 |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Cash                at End of Period**                                                                 |   | $                                                               | 163,057     |   | $ | 200,149 |   |
|                                                                                                     |   |                                                            |             |   |   |  |   |
| **Supplemental                Disclosure of Cash Flow Information**                                      |   |                                                            |             |   |   |  |   |
| Cash                Paid for Interest                                                                    |   | $                                                               | 87,570      |   | $ | 92,000 |   |
| Cash                Paid for Income Taxes                                                                |   | $                                                               | **–** |   | $ | **–** |   |
| **Supplemental                Disclosure of Cash Flow Information**                                      |   |                                                            |             |   |   |  |   |
| Conversion                of Debt to Common Stock                                                        |   | $                                                               | 200,000     |   | $ | **–** |   |
| Common                Stock Committed for Subscription for Debt                                          |   | $                                                               | -           |   | $ | 933,500 |   |

----

**SECURED      DIGITAL STORAGE CORPORATION**

**Consolidated      Stockholders’ Equity (Deficit)**

**September      30, 2008**

**(Unaudited)**

|                                                                    |   | **Common Stock**   |       |  **Additional** |   | **Retained**           |   |                      |      |
|-------------------------------------------------------------------------|--------|-------------------------|------------|----------------------|--------|------------------------|--------|---------------------------|-----------|
|                                                                    |   | **# of****Shares** |       | **Amount**           |   | **Paid-in****Capital** |   | **Earnings****(Deficit)** |      | **Totals** |   |
|                                                                    |   |                    |       |                 |   |                   |   |                      |      |   |   |
| Balance                - December 31, 2007                              |   |                    | 10,753,604 |                 | $      | 10,754                 |   | $                         | 3,492,548 |   | $ | (3,684,266 | ) | $ | (180,964 | ) |
|                                                                    |   |                    |            |                 |   |                        |   |                      |           |   |   |  |   |   |  |   |
| Net                Loss                                                 |   |                    | -          |                 |   | -                      |   |                      | -         |   |   | (5,037,814 | ) |   | (5,037,814 | ) |
| Stock                Based Compensation Expense                         |   |                    | -          |                 |   | -                      |   |                      | 198,692   |   |   | - |   |   | 198,692 |   |
| Issuance                of Stock Warrants for Debt                      |   |                    | -          |                 |   | -                      |   |                      | 484,704   |   |   | - |   |   | 484,704 |   |
| Issuance of                Common Stock                            |   |                    | 2,681,375  |                 |   | 2,681                  |   |                      | 1,407,419 |   |   | - |   |   | 1,410,100 |   |
| Proceeds                from Exercise of Stock Warrants to Common Stock |   |                    | 6,072,500  |                 |   | 6,072                  |   |                      | 65,903    |   |   | - |   |   | 71,975 |   |
|                                                                    |   |                    |            |                 |   |                        |   |                      |           |   |   |  |   |   |  |   |
| Balance                **–**                September 30, 2008    |   |                    | 19,507,479 |                 | $      | 19,507                 |   | $                         | 5,649,266 |   | $ | (8,722,080 | ) | $ | (3,053,307 | ) |

----

**SECURED      DIGITAL STORAGE CORPORATION**

**Notes      to Consolidated Financial Statements**

**September      30, 2008**

**(Unaudited)**

**Note      1 - Presentation of Interim Information and Significant Accounting      Policies:**

**Basis      of Accounting**

**Cash      and Cash Equivalents**

**Property      and Equipment**

**Use      of Estimates**

**Accounting      for Stock-Based Compensation**

----

|                                      |   | 2008   |   | 2007   |   |
|-------------------------------------------|--------|--------|--------|--------|--------|
| Expected                volatility factor |   |   | 200    | %      |   | 10 | % |
| Risk                free interest rate    |   |   | 2.85   |   |   | 4.50 | % |
| Expected                lives             |   |   | 5      |   |   | 5 |   |

**Other      Comprehensive Income**

**Loss      Per Share**

**Fair      Value of Financial Instruments**

----

**Unaudited      Pro Forma Financial Information**

|                                                |   | **Nine                months ended** |       |
|-----------------------------------------------------|--------|--------------------------------------|------------|
|                                                |   | **September                30,**     |       |
|                                                |   | **2008**                             |       | **2007** |   |
| Net                revenues                         |   | $                                    | 0          |   | $ | 0 |   |
|                                                |   |                                 |       |   |   |   |   |
| Net                loss                             |   | $                                    | (5,037,814 | ) | $ | (717,112 | ) |
|                                                |   |                                 |       |   |   |   |   |
| Net                loss per share:                  |   |                                 |       |   |   |   |   |
|                                                |   |                                 |       |   |   |   |   |
| Basic                and diluted                    |   | $                                    | (0.28      | ) | $ | (0.08 | ) |
| Weighted                average shares outstanding: |   |                                 |       |   |   |   |   |
| Basic                and diluted                    |   |                                 | 18,231,228 |   |   | 8,885,580 |   |

**Going      Concern**

**Reclassifications**

----

**Note      2 – Debt**

|                                                                                                                                              |   | **September****30, 2008** |       | **December****31, 2007** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|------------|-------------------------------|--------|
|                                                                                                                                              |   |                           |       |                          |   |
| Note                payable, TAPO Ventures, LLC, related party, non-interest bearing                loan,                open ended               |   | $                              | 64,000     |                          | $      | 100,000 |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Short                term loan, David Hoffman, 18% interest per annum, due October 1,                2008                                         |   |                           | 1,200,000  |                          |   | – |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Short                term loan, sr. management, related parties, non-interest bearing,                due upon                demand              |   |                           | 23,000     |                          |   |   |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Short                term loan, unrelated party, stated interest of $5,000, due upon                demand                                        |   |                           | 85,000     |                          |   |   |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Short                term loan, Doug Stukel, related party, non-interest bearing, due                upon                demand                   |   |                           | –    |                          |   | 75,000 |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Note                payable, two individuals, 7% interest per annum, 750,000 warrants                issued,                due February 28, 2008 |   |                           | –    |                          |   | 300,000 |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Debt                obligation under capital lease                                                                                                |   |                           | 432,387    |                          |   | 468,623 |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Total                debt                                                                                                                         |   |                           | 1,804,387  |                          |   | 943,623 |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Less:                Contra debt for stock warrants                                                                                               |   |                           | –    |                          |   | (148,645 | ) |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Net                debt                                                                                                                           |   |                           | 1,804,387  |                          |   | 794,978 |   |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Less:                Current Portion                                                                                                              |   |                           | (1,804,387 | )                             |   | (480,335 | ) |
|                                                                                                                                              |   |                           |       |                          |   |   |   |
| Long                Term Debt                                                                                                                     |   | $                              | -          |                          | $      | 314,643 |   |

| 2008  |   | $      | 1,417,636 |   |
|-------|--------|--------|-----------|--------|
| 2009  |   |   | 185,371   |   |
| 2010  |   |   | 190,033   |   |
| 2011  |   |   | 11,348    |   |
| Total |   | $      | 1,804,387 |   |

**Note      3 – Stock Options**

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|                                             |   | Number ofShares |      | Price perShare |   | WeightedAverageShare Price |   |
|--------------------------------------------------|--------|----------------------|-----------|---------------------|--------|---------------------------------|--------|
| January                1, 2007                   |   |                 | -         |                |   | —                         |   |   | — |   |
| 2007                grants                       |   |                 | 4,100,000 |                | $      | 0.51                            |   | $ | 0.51 |   |
| December                31, 2007                 |   |                 | 4,100,000 |                |   | 0.51                            |   |   | 0.51 |   |
|                                             |   |                 |      |                |   |                            |   |   |   |   |
| 2008                grants                       |   |                 | 1,230,000 |                |   | 0.80                            |   |   | 0.80 |   |
| September                30, 2008                |   |                 | 5,330,000 |                | $      | 0.51-                0.80       |   | $ | 0.58 |   |
|                                             |   |                 |      |                |   |                            |   |   |   |   |
| Vested                Shares, September 30, 2008 |   |                 | 2,952,000 |                | $      | 0.51-                0.80       |   | $ | 0.56 |   |

|                                                 |   | Options |      | WeightedAverageGrant DateFair Value |   |
|------------------------------------------------------|--------|---------|-----------|-----------------------------------------------|--------|
| Non                Vested Shares, September 30, 2008 |   |    | 2,378,000 |                                          | $      | 0.60 |   |

**Note      4 – Fixed Assets**

|                                             |   | September30, 2008 |    | December 31,2007 |   |
|--------------------------------------------------|--------|------------------------|---------|-----------------------|--------|
| Computer                Software & Equipment |   | $                      | 38,692  |                  | $      | 290,674 |   |
| Leasehold                Improvements            |   |                   | 30,000  |                  |   | 30,000 |   |
| Furniture                and Fixtures            |   |                   | 2,228   |                  |   | 8,141 |   |
| Gross                Fixed Assets                |   |                   | 70,920  |                  |   | 328,815 |   |
| Less:                Accumulated Depreciation    |   |                   | (31,876 | )                     |   | (3,286 | ) |
|                                             |   | $                      | 39,044  |                  | $      | 325,529 |   |

**Note      5 – Capital Stock Transactions**

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|                                                |   | Issue Date |       | ExpirationDate |   | ExercisePrice |   | Granted |   | Exercised |   | Outstanding |   |
|-----------------------------------------------------|--------|-----------------|------------|----------------|--------|---------------|--------|---------|--------|-----------|--------|-------------|--------|
| LD                Acquisition Warrants              |   |            | 11/15/2005 |           |   | 11/15/2015    |   | $       | 0.01   |      |   | 10,000,000  |   |   | 6,050,000 |   |   | 3,950,000 |   |
| Conversion                of Debt                   |   |            | 9/19/2007  |           |   | 12/31/2012    |   | $       | 0.51   |      |   | 724,500     |   |   | 22,500 |   |   | 702,000 |   |
| Notes                Payable Issuance               |   |            | 11/12/2007 |           |   | 11/12/2012    |   | $       | 0.80   |      |   | 750,000     |   |   | - |   |   | 750,000 |   |
| Personal                Guarantee – Equipment |   |            | 11/15/2007 |           |   | 11/15/2012    |   | $       | 0.80   |      |   | 750,000     |   |   | - |   |   | 750,000 |   |
| Short-term                debt                      |   |            | 4/1/2008   |           |   | 4/1/2010      |   | $       | 0.80   |      |   | 1,200,000   |   |   | - |   |   | 1,200,000 |   |
| Guarantee-Equipment                                 |   |            | 4/1/2008   |           |   | 10/18/2012    |   | $       | 3.00   |      |   | 25,000      |   |   | - |   |   | 25,000 |   |
|                                                |   |            |       |           |   |          |   |    |   |      |   | 13,449,500  |   |   | 6,072,500 |   |   | 7,377,000 |   |

**NOTE      6 **
**Commitments      and Contingencies**

*Operating      and Capital Leases: *

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|                                         |   | September30, 2008 |   | December 31,2007 |   |
|----------------------------------------------|--------|------------------------|--------|-----------------------|--------|
| Computer                Equipment            |   | $                      | -      |                  | $      | 158,980 |   |
| Purchased                Software            |   |                   | -      |                  |   | 106,657 |   |
| Less                Accumulated Depreciation |   |                   | -      |                  |   | - |   |
| Net                                          |   | $                      | -      |                  | $      | 265,637 |   |

| For the years ended December, 31, |   | OperatingLeases |      | CapitalLeases |   |
|------------------------------------------------------------|--------|-----------------|-----------|---------------|--------|
| Remaining                three months of 2008              |   | $               | 207,581   |          | $      | 48,336 |   |
| 2008                                                       |   |            | 377,948   |          |   | 193,343 |   |
| 2009                                                       |   |            | 375,582   |          |   | 193,343 |   |
| 2010                                                       |   |            | 72,703    |          |   | 11,543 |   |
| 2011                                                       |   |            | 50,358    |          |   | - |   |
|                                                       |   | $               | 1,084,172 |          | $      | 446,565 |   |

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**Item      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS**

*Cautionary      and Forward Looking Statements*

| (a)    | volatility                or decline of the Company’s stock price;                                                                                                 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                     |
| (b)    | potential                fluctuation in quarterly results;                                                                                                               |
|   |                                                                                                                                                                     |
| (c)    | failure                of the Company to earn revenues or profits;                                                                                                       |
|   |                                                                                                                                                                     |
| (d)    | inadequate                capital to continue or expand its business, inability to raise additional                capital or financing to implement its business plans; |
|   |                                                                                                                                                                     |
| (e)    | failure                to make sales;                                                                                                                                    |
|   |                                                                                                                                                                     |
| (f)    | rapid                and significant changes in markets;                                                                                                                 |
|   |                                                                                                                                                                     |
| (g)    | litigation                with or legal claims and allegations by outside parties;                or                                                                     |
|   |                                                                                                                                                                     |
| (h)    | insufficient                revenues to cover operating costs.                                                                                                           |

*Changes      in Financial Condition*

----

*Results      of Operations for the Three-Months and Nine-Months Ended September 30, 2008      compared to Same Period in 2007*

*Liquidity      and Capital Resources*

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**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET      RISK**

**ITEM      4T. CONTROLS AND PROCEDURES**

*Disclosure      Controls and Procedures*

*Internal      Control over Financial Reporting*

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**PART      II – OTHER INFORMATION**

**ITEM      1. LEGAL PROCEEDINGS**

**ITEM      1A. RISK FACTORS**

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

**ITEM      3. DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM      5. OTHER INFORMATION**

**ITEM      6. EXHIBITS**

| **Exhibit****Numbe****r** |   | **Description of Document**                                                                                                                                                                          |
|---------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                      |   | Officer’s                Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section                302                of the Sarbanes-Oxley Act of 2002.                                     |
|                      |   |                                                                                                                                                                                                           |
| 31.2                      |   | Officer’s                Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section                302                of the Sarbanes-Oxley Act of 2002.                                     |
|                      |   |                                                                                                                                                                                                           |
| 32.1                      |   | Certification                of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as                Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002. |
|                      |   |                                                                                                                                                                                                           |
| 32.2                      |   | Certification                of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as                Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002. |

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**SIGNATURES**

| Date:                November 19, 2008   | By:  | /s/                William M. Lynes                                                                                                         |
|-----------------------------------------------|-----------|---------------------------------------------------------------------------------------------------------------------------------------------|
|                                          |      | William                M. LynesChief                Executive Officer and Chairman of the Board(Principal                Executive Officer) |
|                                          |      |                                                                                                                                        |
| Date:                November 19, 2008        | By:  | /s/                Patrick J. Gainer                                                                                                        |
|                                          |      | Chief                Financial Officer(Principal                Financial and Accounting                Officer)                            |

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**EXHIBIT      INDEX**

| **Exhibit****Number** |   | **Description of Document**                                                                                                                                                                          |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |   |                                                                                                                                                                                                           |
| 31.1                  |   | Officer’s                Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section                302                of the Sarbanes-Oxley Act of 2002.                                     |
|                  |   |                                                                                                                                                                                                           |
| 31.2                  |   | Officer’s                Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section                302                of the Sarbanes-Oxley Act of 2002.                                     |
|                  |   |                                                                                                                                                                                                           |
| 32.1                  |   | Certification                of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as                Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002. |
|                  |   |                                                                                                                                                                                                           |
| 32.2                  |   | Certification                of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as                Adopted                Pursuant to Section 906 of the Sarbanes-Oxley Act of                2002. |

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