Secured Financial Network, Inc. (originally Loughran/Go Corporation prior to name change to 12 To 20 Plus, Inc.), was incorporated in April 26, 1996 and changed its name to Secured Financial Network, Inc. (“the Company”) on January 11, 2005. From January 2005 until December 2005 the Company engaged in investment of capital to fund short-term transactions of close-out or distressed container sized products.  From mid-2006, the Company restructured its focus entirely to payment processing and build-out of compliant Payment Gateway connecting merchants to processors and transaction acquiring banks.

On November 22, 2004, 12 To 20 Plus, Inc. entered into a share exchange agreement with Secured Financial Network, Inc. pursuant to which an aggregate of 14,737,343 shares of the Company’s common stock, were issued, representing 94% of the 15,693,478 shares of common stock outstanding after the closing. For accounting purposes, the transaction is reflected as if 12 To 20 Plus, Inc. was acquired by Secured Financial Network Inc. with the business of Secured Financial Network Inc. being the successor entity. The acquisition was accounted for as a recapitalization of the predecessor entity Secured Financial Network, Inc. with the management of the predecessor entity Secured Financial Network, Inc. controlling and operating the Company after the acquisition date. The consolidated financial statements presented primarily represent the operations of Secured Financial Network, Inc. from its inception date, November 10, 2004, to the share exchange date. In addition, the capital structure of Secured Financial Network, Inc. has been recapitalized to account for the equity structure subsequent to the acquisition as if Secured Financial Network, Inc. had been the issuer of the common stock for all periods presented.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company has incurred losses since inception and has negative cash flows from operations. For the years ended December 31, 2007 and 2006, the Company has incurred net losses of $1,676,894 and $2,166,311 respectively, incurred a net loss for the nine months ended September 30, 2008 of $859,993 and a substantial portion of the debt is in default and has a stockholders’ deficit of $3,887,481 as of September 30, 2008. The future of the Company is dependent upon its ability to obtain additional equity and/or debt financing and upon future successful development and marketing of the Company’s products and services. Management is pursuing various sources of equity and debt financing but cannot assure that the Company will be able to secure such financing or obtain financing on terms beneficial to the Company. Failure to secure such financing may result in the Company’s inability to continue as a going concern and the impairment of the recorded long-lived assets.

These consolidated financial statements do not include any adjustments relating to the recoverability and classifications of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

The accompanying consolidated financial statements of Secured Financial Network, Inc., a Nevada corporation (the "Company"), include the accounts of the Company and its wholly owned subsidiary, Virtual Payment Solutions, Inc, a Florida Corporation ("VPS"). The Company created VPS in September of 2007.  All significant inter-company accounts and transactions are eliminated in consolidation.

For purposes of the statement of cash flows, the Company considers cash and cash equivalents to include all stable, highly liquid investments with maturities of three months or less.

Accounts Receivable

The Company estimates an allowance for doubtful accounts, sales returns and allowances based on historical trends and other criteria.  At September 30, 2008 there were no allowances on trade receivables from product sales.  No bad debt expense was incurred during the quarter ending September 30, 2008.

The Company recognizes revenues associated with the sale of its products at the time of delivery to customers.

Inventories, which are finished goods, are stated at the lower of cost (first-in, first-out method) or market. A provision for excess or obsolete inventory is recorded at the time the determination is made.

Furniture and equipment are stated at cost. When such assets are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.

The Company depreciates its property and equipment under the straight-line method as follows:

In August 2001, SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” was issued establishing new rules and clarifying implementation issues with SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” by allowing a probability weighted cash flow estimation approach to measure the impairment loss of a long-lived asset. The statement also established new standards for accounting for discontinued operations. Transactions that qualify for reporting in discontinued operations include the disposal of a component of an entity’s operations that comprises operations and cash flow that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. The Company believes that, at December 31, 2007, an impairment existed as it related to it’s $385,000 Envoii License Asset and $15,000 pre-paid License Fee and as such has taken an impairment charge of $400,000.

Although the Company believes that it will ultimately be able to utilize this asset and the associated fee, valuing this asset has proven to be somewhat difficult. Due the unique and esoteric nature of the Envoii License technology, the Company’s has taken a conservative approach in valuing this asset and has taken an impairment for the entire purchase price.

The Company adopted SFAS No. 123R, “Share Based Payments.” SFAS No. 123R requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.

The Company accounts for its income taxes under the provisions of Statement of Financial Accounting Standards 109 (“SFAS 109”). The method of accounting for income taxes under SFAS 109 is an asset and liability method. The asset and liability method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between tax bases and financial reporting bases of other assets and liabilities.

The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share” (“EPS”) that established standards for the computation, presentation and disclosure of earnings per share, replacing the presentation of Primary EPS with a presentation of Basic EPS. The Company has common stock equivalents outstanding of 5,914,000 warrants attributed to the convertible debt. In addition there are warrants authorized which are priced and calculated only upon conversion of the related convertible debt. Once such convertible debt may be converted and the number of warrants are determined, we will determine if the inclusion of such warrants would be anti-dilutive, if so, such warrants would be excluded from the computation of earnings per share. We have excluded the 2,975,000 pledged shares and 5,914,000 warrants issued, from the computation of earnings per share. See Convertible Debt note.

Management uses estimates and assumptions in preparing the Company’s consolidated financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. The reserves on the Company’s related party receivables could change in the near future.

Pursuant to SFAS No. 107, “Disclosures About Fair Value of Financial Instruments,” the Company is required to estimate the fair value of all financial instruments included on its balance sheet as of September 30, 2008. The Company considers the carrying value of accounts receivable, net of reserves, accounts payable and accrued expenses in the consolidated financial statements to approximate their face value. The Company has not made an evaluation of the fair value of the recorded related party assets and liabilities.

In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations. This Statement replaces FASB Statement No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This Statement’s scope is broader than that of Statement 141, which applied only to business combinations in which control was obtained by transferring consideration. By applying the same method of accounting—the acquisition method—to all transactions and other events in which one entity obtains control over one or more other businesses, this Statement improves the comparability of the information about business combinations provided in financial reports. 

This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. That replaces Statement 141’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values.

  

This Statement applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including those sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. This Statement applies to all business entities, including mutual entities that previously used the pooling-of-interests method of accounting for some business combinations. It does not apply to: (a) The formation of a joint venture, (b) The acquisition of an asset or a group of assets that does not constitute a business, (c) A combination between entities or businesses under common control, (d) A combination between not-for-profit organizations or the acquisition of a for-profit business by a not-for-profit organization.

This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. Management believes this Statement will have no impact on the financial statements of the Company once adopted, unless any contemplated acquisitions occur in the near future.

All other new accounting pronouncements have deemed not relevant, as a result the adoption of these other new accounting pronouncement is not expected to have any impact once adopted.

FASB 161 - -  Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued FASB Statement No. 161, which amends and expands the disclosure requirements of FASB Statement No. 133 with the intent to provide users of financial statements with an enhanced understanding of; how and why an entity uses derivative instruments, how the derivative instruments and the related hedged items are accounted for and how the related hedged items affect an entity’s financial position, performance and cash flows.

This Statement is effective for financial statements for fiscal years and interim periods beginning after November 15, 2008. Management believes this Statement will have minimal impact on the financial statements of the Company once adopted.

All other new accounting pronouncements issued but not yet effective are not deemed to have a material effect on the Company once adopted.

In November 2006, as amended in February 2007, the Company acquired for $385,000 an exclusive license agreement to provide e-commerce transaction processing through a proprietary ‘bank-grade’ electronic-vault and electronic-wallet based payment processing system (the “Envoii System”).

In addition, $15,000 was prepaid as an annual maintenance fee with regard to this electronic payment processing system, upon the purchase of the license agreement. Once such system is placed in service, the annual maintenance fee will be amortized over one year.

We currently anticipate the Envoii System to be placed in service by November 1, 2009 depending upon our ability to secure needed financing, of which no assurances are given.

We have recorded a full reserve of $400,000 against the license and prepaid maintenance fees, as we are currently unable to predict any reliable cash flow from the implementation of the Envoii System. This license agreement is for a two-year term, with an additional automatic twelve-month renewal, unless either party terminates such agreement for any reason.

In addition to the consideration paid for the purchase of such license agreement, royalties are required to be paid at $0.20 per transaction or 20% of the gross transaction, whichever is less, excluding micropayment transactions. The Company has guaranteed minimum royalties to be paid in the amount of $50,000 in year three starting November 1, 2008, $100,000 for year four and $250,000 for each year thereafter in order to keep exclusivity terms under this license agreement.

Included in accrued expenses is approximately $75,800 of delinquent payroll taxes, interest and penalties from 2005.

During 2005 the Company issued seventeen (17) short-term notes (average 90-days) with a specific rate of return to acquire funds to invest in high yield activities (e.g. Container financing/investment). As of September 30, 2008, the Company’s short-term notes payable relating to its previous container financing business total $1,410,000. The Company has also accrued $63,972 interest on these notes. All seventeen Notes are in default and are accruing interest at the rate of 18% per annum.

During February 2007, the Company offered to the holders of its container financing notes the option to convert into equity. In February the Company exchanged $819,644 worth of principal, accrued interest, and profit participation debt into 2,457,000 shares if its restricted common stock, 2,457,000 warrants exercisable at $.10, and 2,457,000 warrants exercisable at $.50.

On June 11, 2007 the Company entered into a promissory note for $50,000. Terms are 180 days at 14% interest with interest to be paid quarterly. Lender has the option to convert principal into 2,000,000 shares of Company stock. Interest will still be payable. The note continues to accrue interest at 14% per annum with interest to be paid quarterly. The Company is in default on its note payments. The lender has not exercised their right to convert to common shares of the Company.

During the fourth quarter of 2007 the Company issued three promissory notes totaling $65,000. Terms are for 24 months at 10% interest per annum with interest to be paid quarterly. The Company is in default on its interest payments.

During the first quarter of 2008, the Company issued eight promissory notes totaling $165,200. Terms are for 24 months at 10% interest per annum with interest to be paid quarterly. This debt was paid off in the second quarter of 2008 by using our line of credit from Commercial Holding, AG.

During the second quarter of 2008, the Company issued one promissory note totaling $7,500. Terms are 10% interest per annum with interest to be paid quarterly and repayment to be made by December 31, 2008. This debt was paid off in the second quarter of 2008 by using our line of credit from Commercial Holding, AG.

The Convertible Notes, bear interest at 10% per annum, are convertible as follows: at any time, 90 days after funding is complete, but prior to repayment of all amounts due as provided under the Convertible Notes, all or any portion of the principal amount of the note shall be convertible at the option of the lender into fully paid and non-assessable shares of the Company’s common stock. The number of common shares of the Company that a Convertible Note holder (“Lender”) shall be entitled to receive upon conversion shall be equal to the number attained by dividing the principal, including accrued interest, pursuant to the Convertible Note by the conversion price. The conversion price is the lesser of $.10 per share, or one of the following times 60%:

The Lender shall not be entitled to convert, if such conversion would result in beneficial ownership by the Lender and its affiliates of more than 9.99% of the outstanding shares of common stock of the Company on such exercise or conversion date, including:

The Company may elect to make principal and interest payments in freely tradable shares in lieu of cash. The Company’s right to make such payment in shares in lieu of cash can only be made if the volume weighted average price of the Company’s common stock has been trading at a price of $0.25 or above per share for 10 consecutive days prior to the date of the payment date and the average daily trading volume is at least 15 times the number of shares to be so issued as payment.

At any time 90 days after funding is complete, but subject to customary equity conditions, the Company may at any time, upon 30 days written notice, prepay all of the outstanding Convertible Notes on a pro-rata basis at 110% of the outstanding principal balance only after the Convertible Note has amortized one year.

As security for the repayment of all liabilities arising under the Convertible Note, the Company granted to Lender a security interest in and a lien on 5,975,000 shares of common stock, issued with a restricted legend, hereafter referred to as the “Collateral”. Such collateral has been reduced by three million shares due to the aforementioned $300,000 reduction in such convertible note. The Lender has the right to sell or hypothecate such Collateral, to the extent permitted under applicable securities laws. However, the Lender shall not sell more than 10% of the average daily volume in any week.

If the Company raises money at a lower price than the Lender has purchased the shares, upon conversion of such Convertible Note, then the Company will re-price the Lender’s shares and warrants to that price. The Lender has the right of first refusal of any financing for eighteen (18) months after the Funding. The Lender will be notified prior to any other financing and have an option to respond with competitive financing terms upon notification. The Company will not raise any capital below 10 cents per share.

Notwithstanding anything herein to the contrary, the Company will be allowed to raise additional capital to complete its $1.5 million contemplated fund-raising.

The Company shall file a Registration Statement with the U.S. Securities and Exchange Commission (“the Commission”) in order to register the common shares issuable upon conversion of the Convertible Note within sixty (60) calendar days after the Funding Date (the “Filing Date”), and use its best efforts to cause, such registration statement, to be declared effective not later than one hundred and twenty (120) calendar days after the Funding Date (the “Effective Date”). The Company will register not less than a number of shares of common stock in the aforedescribed registration statement that is equal to 175% of the common shares issuable upon conversion of all of the Collateral, and 100% of the warrant shares issuable upon exercise of the warrants (collectively the “Registrable Securities”). The Registrable Securities shall be reserved and set aside exclusively for the benefit of the Lender, and not issued, employed or reserved for anyone other than the Lender. The Registration Statement will immediately be amended or additional registration statements will be immediately filed by the Company as necessary to register additional shares of common stock to allow the public resale of all common stock included in and issuable by virtue of the Registrable Securities. Except with the written consent of the Lender, or as described on Schedule 11.1, no securities of the Company other than the Registrable Securities will be included in the Registration Statement. It shall be deemed a Non-Registration Event if, at any time after the date the Registration Statement is declared effective by the Commission, the Company has registered for unrestricted resale on behalf of the Lenders fewer than 125% of the amount of common shares issuable upon full conversion of all sums due hereunder and 100% of the warrant shares issuable upon exercise of the warrants.

Liquidated Damages will neither accrue nor be payable pursuant to Section 11.4 nor will a Non-Registration Event be deemed to have occurred for times during which Registrable Securities are transferable by the Lender of Registrable Securities pursuant to Rule 144(k) under the Securities Act of 1933, as ammended.

In addition to any other rights available to Lender, if the Company fails to deliver to Lender unlegended shares as required pursuant to the Agreement, within seven (7) business days after the unlegended shares delivery date and the Lender purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by Lender of the shares of common stock which the Lender was entitled to receive from the Company (a “Buy-In”), then the Company shall pay in cash to the Lender (in addition to any remedies available to or elected by the Lender) the amount by which (A) the Lender’s total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds (B) the aggregate purchase price of the shares of common stock delivered to the Company for reissuance as unlegended shares together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full (which amount shall be paid as liquidated damages and not as a penalty). For example, if Lender purchases shares of common stock having a total purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase price of shares of common stock delivered to the Company for reissuance as unlegended shares, the Company shall be required to pay the Lender $1,000, plus interest. The Lender shall provide the Company written notice indicating the amounts payable to the Lender in respect of the Buy-In.

The Company shall pay to Lender, at Closing, a fixed non-accountable allowance to cover due diligence expenses of $1,500, plus 1.25% of the total amount invested pursuant to each Closing. At the election of the Lender, or its designees, any or all of the foregoing compensation and expense allowances can be taken in kind, pursuant to the same terms and conditions as that of an investment herein, for a like amount. Of the amounts advanced by the Lender to the Company, 10% will be paid directly to Brass Bulls, Corp. on the Company’s behalf, as a finder’s fee. This will be the Company’s expense and thus reduce the amount otherwise payable to the Company. The Company has recorded $62,875 of fees attributed to this financing, as deferred financing fees and will be expensed ratably over the term of the Convertible Notes. There was $3,495 of amortization recorded for the year ended December 31, 2006, attributed to these deferred financing fees. The balance was expensed in 2007.

The Lender or its designee, shall also be entitled to a commission of 5% of any and all amounts received, directly or indirectly, by the Company and/or its principals as a consequence of a merger, license or any other similar arrangement or remuneration as a consequence of the efforts of the Lender or its designee or agent.

In connection with the issuance of the Convertible Notes, the Company issued 5-year warrants to purchase an amount of Company stock up to a limit of 30% of the principal amount of the note. The exercise price of the warrants is equal to 300% of the conversion price of the Convertible Note.

The Company recognized a debt discount of $ 540,039 at the date of issuance of the Convertible Notes. The debt discount of $540,039 is comprised of $69,605 for the detachable warrants and $470,434 for the beneficial conversion features of the Convertible Notes. The beneficial conversion features were recorded in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments and EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios”. The debt discount is recognized over the term of the Convertible Notes of one year. There was $65,065 of amortization recorded for the year ended December 31, 2006, attributed to this debt discount. The balance was expensed in 2007.

On August 31, 2007 the Company sold its interest in the “All In Mall” to Goldmill Productions, LLC (“Goldmill”) for the sum of $75,000. Payments were to be made in 24 monthly payments of $3,125 beginning no later than December 1, 2007. Goldmill is currently in default on said payments to the Company. As a result of the note being in default the Company has recorded a full reserve of $75,000. The Company has not received any of the scheduled payments as of September 30, 2008.

During the year ended 2007, the Company recognized derivative liabilities in the amount of $776,816 pursuant to EITF 00-19, Accounting for Derivative Financial Instruments Indexed to and Potentially Settled in a Company’s Own Stock and $169,375 of liquidating damages liabilities pursuant to Financial Accounting Standards Board Staff Position - FSP No. EITF 00-19-2, Accounting for Registration Payment Arrangements, all attributed to the terms of the Convertible Notes. A derivative liability was required to be recorded fundamentally due to the nature of the conversion terms, provide that the Company could potentially be in the position of delivering more shares than the Company has authorized to issue for the satisfaction of the conversion of the Convertible Notes and the exercise of the related warrants. Due to the nature of calculating the amount of warrants to issue and the exercise price, the Company is in the position of issuing another 10% more shares over the shares issued for the conversion of the Convertible Notes.

The Liquidating Damages liability relates to the recognition of an expense for the anticipated failure by the Company to comply with certain registration rights held by the holders of the Convertible Notes and obtain an effective registration of the required shares issuable upon conversion of the Convertible Notes and the exercise of related the warrants, described earlier. We have recorded the maximum anticipated penalties to be incurred for the failure to register the required common shares potentially issuable for the conversion of the Convertible Notes and the exercise of the warrants, through September 26, 2007, the maturity date of the first installment of such Convertible Notes. The penalty calculated was based on 5% of the outstanding Convertible Notes, commencing on 180 days from the date of such Convertible Note agreements executed, through September 26, 2007. Income has been recorded for the decrease in the derivative liability during the nine months ended September 30, 2008 in the amount of $52,277 as a cost of maintaining such debt arrangements, as the terms of such debt arrangements are overly burdensome. There are no maximum penalty terms for the failure to obtain an effective Registration.

During the quarter ended September 30, 2008, the Company used $105,200 of the $500,000 Line of Credit from Commercial Holding, AG. Cumulative advances against the Line of Credit through September 30, 2008 were $434,200.

During the quarter ended September 30, 2008, the Company issued 500,000 shares of Rule 144 restricted Company stock to an officer of the Company relating to the renewal of an employment contract. These shares were valued at the sum of $5,000. An additional 250,000 shares were issued to the same individual for services to the Company as a Director. These shares were valued at $2,500.

During the quarter ended September 30, 2008, the Company issued 500,000 shares of Rule 144 restricted Company stock to an officer of the Company relating to the renewal of an employment contract. These shares were valued at the sum of $5,000. An additional 250,000 shares were issued to the same individual for services to the Company as a Director. These shares were valued at $2,500.

During the quarter ended September 30, 2008, the Company engaged Lowell Schultz as a sales Consultant for a period of 6 months. Payment terms were $650 per week and 40% commission on profit above published pricing. Lowell Schultz is the brother of Jeffrey Schultz, the Company’s CEO.

The Company currently leases its office space with a 36-month term lease expiring at October 31, 2010 at a rate of $2,255 per month. 

This report on Form 10-Q contains forward -looking statements within the meaning of and which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from historical results or form any results expressed or implied by such forward-looking statements.  Forward-looking statements generally are accompanied by words such as "anticipates," "believes," "estimates," "expects," "intends," "plans" and similar statements and should be considered uncertain and forward-looking.  Any forward-looking statements speak only as of the date on which such statement is made, are not guarantees of future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict.  Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements, whether as a result of new information, future events or otherwise.

Factors that could cause such results to differ materially from the results discussed in such forward looking statements include, without limitation: uncertain continued ability to meet our operational needs in view of continued ongoing working capital constraints; need for substantial additional capital to fully implement our plan of operations; no assurances of and uncertainty of profitability; need for additional management, sales and marketing personnel, which is contingent upon our receipt of additional capital; competition from companies having substantially greater financial, marketing and other resources than the Company, including name and brand recognition; the impact of competitive services and pricing; and the legal, auditing and administrative cost of compliance associated with the Sarbanes Oxley Act.

 Many of such factors are beyond our control.  New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each factor on our business or the extent to which any factor, or combination of factors may cause actual results to differ materially from those contained In any forward looking statements.  In light of these risks and uncertainties, there can be no assurance that the results anticipated in these forward-looking statements in this report will in fact occur.  All forward-looking statements wherever they may appear are expressly qualified in their entirety by the cautionary statements in this section.  We undertake no obligation to update any such forward-looking statements.

  

During the quarter ending June 30, 2008 the Company continued to build out its PCI (Payment Card Industry Data Security Standard) Certified Payment Gateway with Blue Bamboo, a division of Shera International Shanghai, China. The Payment Gateway will allow the Company to connect merchants, both online and brick and mortar, with acquiring processors and banks.  The Payment Gateway provides certified processing of credit/debit card transactions, bill payment, money transfer, check signature verification, ACH (Automated Clearing House) and a host of other payment services. We market the Payment Gateway under the RedFin Network name.

The PCI Standard was developed by the major credit card companies as a guideline to help organizations that process card payments prevent credit card fraud, cracking and various other security vulnerabilities and threats. A company processing, storing, or transmitting payment card data must be PCI compliant or risk losing their ability to process credit card payments and being audited and/or fined. Merchants and payment card service providers must validate their compliance periodically.

The Payment Gateway is marketed under reseller agreements with ISO’S (Independent Sales Organizations) and VAR’s (Value Added Resellers) selling products and merchant services to end customers throughout the U.S.  Revenue is anticipated to be generated from a monthly and per transaction fee charged for each transaction passing through the Payment Gateway to end acquiring processors such as Vital, Global all First Data Networks, PaymentTech, Heartland, Valutec and others already integrated with the Payment Gateway.  The Payment Gateway is also integrated with all processing terminals in the marketplace that require a payment gateway.  All Internet merchants and certain brick and mortar merchants require a gateway to pass transactions from their customer’s use of a payment form to the acquiring bank/processor.

The Payment Gateway has incorporated a shopping cart emulator, which allows Internet merchants currently using other competitive Payment Gateway’s to integrate with the RedFin Network in a quick and efficient manner without disruption of their business.  The shopping cart emulator has integrated the top 120 carts currently used by Internet merchants.

The RedFin Network Payment Gateway requires an annual renewal and certification under PCI and CISP protocols.  Third party auditors do independent scans randomly to assure the payment gateway is in compliance with all regulations and industry standards.

  

The mobile wireless merchant terminals are planned to be marketed and distributed under reseller agreements with ISO’S (Independent Sales Organizations) and VAR’s (Value Added Resellers) selling products and merchant services to end customers throughout the U.S. on a non-exclusive basis.

The Company has also entered into an agreement to resell AT&T and T-Mobile data plans used to transmit transactions wirelessly, which will generate a monthly recurring revenue stream.

The Company faces significant competition in the marketplace from payment gateways in operation for the past 10 years such as Authorized.net, a company recently acquired by Cybersource for nearly $700 million.  Authorized represents transaction volume from approximately 190,000 Internet merchants.   Additional gateway competitors include EFS Net and LinkPoint.  The Company is positioning itself in a niche market providing high volume merchants a very competitive pricing model per transaction, excellent gateway technology, superior customer service, and features not available from other gateway’s such as merchant terminal integration, ACH, and recurring billing, to name a few. Currently, the are in excess of 5 million Internet merchants with nearly 5000 new ones opening on a daily basis requiring a shopping cart and payment gateway. (Statistics gathered from SIC Code Info and the Green Sheet, an industry trade source).

The marketplace for wireless merchant terminals is comprised of approximately six major players, including Verifone, Way Systems, and Nurit.  The Company believes it will be successful in marketing the Blue Bamboo wireless merchant terminal product line based on its cost to end users.  It is nearly 40% less than the competitors product’s which do not include features such as Pin Debit and Check Guarantee/Verification.  The terminals come ready to use out of the box because of its integration with the RedFin Network Gateway.  There are approximately 2.3 mobile merchants in the US with  less than 10% of them having a wireless payment method installed. (Statistics gathered from SIC Code info and Green Sheet)

The Company generated $88,696 in revenue in the quarter ending September 30, 2008 compared to $0 in the same period in 2007. The increase in sales was attributable to the sales of the Company’s Blue Bamboo wireless terminals, the associated product accessories, and the sales of the data plans required to operate the terminals.

 Net loss for the quarter ending September 30, 2008 was ($254,631) compared to a net loss of ($252,248) for the same period ending September 30, 2007. The losses in both periods are due to the Company’s continuing working capital constraints that have hindered the execution of our sales and marketing plan.

The Company had total assets of $86,322 at the end of the quarter September 30, 2008, compared to $70,811 for the period ended December 31, 2007.  This increase is primarily due to the purchase of inventory for our Virtual Payment Systems, Inc. subsidiary with the profits derived from our increased sales.

The Company had total liabilities of $3,973,804 at the quarter ended September 30, 2008, compared to $3,934,668 for the year ended December 31, 2007.

At September 30, 2008, the Company had $31,646 cash on hand compared to $15,041 at December 31, 2007.

At September 30, 2008, the Company had accounts receivable of $12,662 compared to $0 at December 31, 2007. This increase in accounts receivable is due to sales of the Company’s Blue Bamboo wireless terminals, the associated product accessories, and the sales of the data plans required to operate the terminals.

Although the Company expects to continue to increase revenues going forward, the Company expects to continue to incur losses through the fourth quarter of 2008. There can be no assurance that the Company will achieve or maintain profitability, generate revenue or sustain future growth. Management does not view our business as having any seasonal aspects.

We have no off-balance sheet arrangements.

The Company generated $137,400 in revenue in the nine months ending September 30, 2008 compared to $25,000 in the same period in 2007. The increase in sales was attributable to the sales of the Company’s Blue Bamboo wireless terminals, the associated product accessories, and the sales of the data plans required to operate the terminals.

Net loss for the nine months ending September 30, 2008 was ($859,993) compared to a net loss of ($844,936) for the same period ending September 30, 2007. The losses in both periods are due to the Company’s continuing working capital constraints that have hindered the execution of our sales and marketing plan.

Our financial statements appearing elsewhere in this Report have been prepared on a going concern basis that contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. Management realizes that we must generate capital and revenue resources to enable us to achieve profitable operations. To the extent we are unable to obtain additional working capital from operations and/or other sources as required or otherwise desired, our condensed financial statements will be materially effected.

At September 30, 2008, the Company’s total assets of $86,322 were exceeded by our total liabilities of $3,973,804. We had a working capital deficit of $3,887,481. We believe that additional working capital of up to approximately $2,000,000 will need to be raised in the form of debt, equity or some other financing to meet our anticipated cash needs for at least the next 12 months. In the event financing is needed in the future, there can be no assurance that it will be available to the Company in an amount and on terms acceptable to us.  With the exception of our limited existing credit line with Commercial Holding AG, we have no current agreements, arrangements, or understanding for such needed capital. 

On August 31, 2007 the Company sold its interest in the “All In Mall” to Goldmill Productions, LLC (“Goldmill”) for the sum of $75,000. Payments were to be made in 24 monthly payments of $3,125 beginning no later than December 1, 2007. Goldmill is currently in default on such amounts, accordingly the Company has fully reserved against the collection of such receivables although Goldmill has still committed to pay such aggregate amount.

As of September 30, 2008, the Company is in default on certain of its debt obligations, specifically its convertible debt in the principal amount of $297,500 together with total unpaid interest due and accruing in the amount of $78,974, a promissory note in the principal amount of $50,000 together with total unpaid interest due and accruing in the amount of $9,148, Thirteen Container Notes debt in the principal amount of $1,410,000 together with total unpaid interest due and accruing in the amount of $753,788, and 3 Notes in the principal amount of $65,000 together with total unpaid interest of  $5,953 as of September 30, 2008.

During the quarters ended March 31, 2008, and June 30, 2008 the Company borrowed funds in the amount of $165,200 and $7,500 respectively from HEB LLC. Terms of these borrowings were 10% per annum interest and repayment of principal by December 31, 2008. These borrowings were recapitalized with the line of credit discussed hereafter.

During the quarter ended June 30, 2008, on April 29, 2008, the Company secured a line of credit with Commercial Holding AG (“Commercial Holding”) of Lexington, KY in the amount of $500,000. Terms of the line of credit include interest payable at the rate of 10% per annum and repayment of the principal by December 31, 2008. As additional consideration for entering into the line of credit, the Company agreed to immediately issue Commercial Holding 2,000,000 shares of the Company’s restricted common stock and a warrant to acquire an additional 1,000,000 shares of the Company’s restricted common stock exercisable at $.25 per share for a period of 5 years from issuance subject to customary adjustments.

The $500,000 line of credit included the assumption by Commercial Holding, AG, of $172,700 in notes due to HEB, LLC by the Company issued in 2008 resulting in net new funds available to the Company in the amount of $327,300. As of September 30, 2008 the Company has used $434,200 of it’s $500,000 line of Credit.

This credit line has substantially improved the Company’s ability to carry out its sales and marketing efforts.

Not Applicable

Our management, including our Principal Executive Officer (“PEO”) and our Chief Financial Officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report on Form 10-Q.  Based on such evaluation, for reasons discussed in our report on internal control over financial reporting contained in our 2007 Form 10-KSB and as discussed in greater detail below, our Principal Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Report on Form 10-Q, our disclosure controls and procedures were not effective:

Due to the small size and limited financial resources, the Company’s PEO and CFO are the only individuals involved in the accounting and financial reporting. Furthermore, our PEO performs his duties in FL while our CFO performs his in MA. As a result, there is no segregation of duties within the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of the same individual, our CFO.  Usually, this lack of segregation of duties represents a material weakness; however, to remedy the matter, the Company plans to hire additional in-house accounting personnel in FL as we expect sales in the short-term to reach levels where it is warranted. This will allow our CFO to spend more time performing high end accounting duties and make better use of his time. The PEO and CFO (both of whom also comprise the Board of Directors) examine and approve all cash transactions.

There were no changes in our internal control over financial reporting that occurred during the last fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.  We plan to shortly start interviewing prospective in-house accounting personnel, and we will continue to periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.

We were not a party to any legal proceedings during the reporting period, and we know of no legal proceedings pending or threatened or judgments entered against any director or officer of the Company in his or her capacity as such.

The Company is in default on certain of its debt obligations, specifically its convertible debt in the principal amount of $297,500 together with total unpaid interest due and accruing in the amount of $78,974, a promissory note in the principal amount of $50,000 together with total unpaid interest due and accruing in the amount of $9,148, and 17 Container Notes debt in the principal amount of $1,410,000 together with total unpaid interest due and accruing in the amount of $753,788, and 3 Notes in the principal amount of $65,000 together with total unpaid interest of $4,953 as of September 30, 2008

Negotiations are ongoing with these creditors. While there are currently no legal proceedings against the Company, some of the Company’s creditors have the legal right to initiate such proceedings in the event of default and upon unsuccessful renegotiation of the Company’s debt.

During the quarter ending September 30, 2008, we sold the following securities pursuant to Section 4(2) under the Securities Act of 1933, as amended, (the “Securities Act”) based upon the limited number of offerees, their relationship to the Company, their degree of sophistication, the number of shares or other securities offered, the size of the offering, and the number of such offerings.

During the quarter ending September 30, 2008, the following equity transactions occurred:

As of September 30, 2008, the Company had used $434,200 of the $500,000 Line of Credit from Commercial Holding, AG. This amount includes $172,700 of debt previously owed to HEB, LLC by the Company for borrowings in 2008. The funds were used for general business purposes.

During the quarter ended September 30, 2008, the Company issued 500,000 shares of Rule 144 restricted Company stock to an officer of the Company relating to the renewal of an employment contract. These shares were valued at the sum of $5,000. An additional 250,000 shares were issued to the same individual for services to the Company as a Director. These shares were valued at $2,500.

During 2005, the Company issued seventeen (17) short-term notes (average 90-days) with a specific rate of return to acquire funds to invest in high yield activities (e.g. Container financing/investment). As of September 30, 2008, the Company’s short-term notes payable relating to its previous container financing business total $1,410,000. The Company has also accrued $753,788 interest on these notes. All seventeen Notes are in default and are accruing interest at the rate of 18% per annum.

On June 11, 2007, the Company entered into a promissory note for $50,000. Terms are 180 days at 14% interest with interest to be paid quarterly. Lender has the option to convert principal into 2,000,000 shares of Company stock. Interest will still be payable. The note continues to accrue interest at 14% per annum with interest to be paid quarterly. The Company is in default on its note payments. The lender has not exercised their right to convert to common shares of the Company.

During the fourth quarter of 2007 the Company issued three promissory notes totaling $65,000. Terms are for 24 months at 10% interest per annum with interest to be paid quarterly. The Company is in default on its note payments.

As of September 30, 2008, the Company still had $297,500 of outstanding principal and $78,974 accrued interest associated with its 2006 convertible notes. The Company is in default of its principal and accrued interest payments on these notes.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report , as amended,  to be signed on its behalf by the undersigned thereunto duly authorized.