DigitalPost Interactive 10Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2008

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

For the transition period from __________ to __________

Commission File No. 333-124405

DIGITALPOST INTERACTIVE, INC.

(Exact Name of Registrant in its Charter)

Nevada	20-3183236
(State or Other Jurisdiction of	(IRS Employer
Incorporation)	Identification No.)

3240 El Camino Real, Suite 230, Irvine, CA 92602

(Address of Principal Executive Offices)(Zip Code)

(714) 824-3000

Registrant’s Telephone Number

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer o Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company) 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 August 14, 2008, there were 59,344,147, shares of the Registrant’s common stock issued and outstanding.

INDEX

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheet at June 30, 2008 (unaudited) and December 31, 2007	1

	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (unaudited)	2

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited)	3

	Notes to Condensed Consolidated Financial Statements (unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Submission of Matters to a Vote of Security Holders	25

Item 5.	Other Information	25

Item 6.	Exhibits	25

	Signatures	26

Item 1. Financial Statements

DIGITALPOST INTERACTIVE, INC.

CONDENSED CONSOLIDATED

BALANCE SHEETS

						June 30,		December 31,
						2008		2007
				Assets		(Unaudited)
Current assets
Cash and cash equivalents					$	232,700	$	88,400
Accounts receivable and other current assets						44,100		2,400
		Total current assets				276,800		90,800
Property and equipment, net						57,300		64,200
Web site development costs, net						136,100		103,300
Other assets						116,800		8,200
		Total assets			$	587,000	$	266,500

			Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable					$	72,400	$	41,700
Accrued expenses						89,400		86,900
Deferred revenue						93,100		58,900
Due to stockholder						39,600		54,000
		Total current liabilities				294,500		241,500

Convertible promissory notes, net (Note 7)						778,300		221,100
		Total liabilities				1,072,800		462,600

Commitments and contingencies (Note 10)

Stockholders’ deficit (Note 8)

Preferred Stock, $.001 par value; 20,000,000
	shares authorized; no shares
	issued and outstanding					-		-
Common Stock, $.001 par value; 480,000,000 shares authorized;
	59,344,147 and 53,550,840 shares issued and outstanding
	at June 30, 2008 and December 31, 2007, respectively					59,300		53,600
Additional paid in capital						5,403,900		3,244,500
Accumulated deficit						(5,949,000)		(3,494,200)
		Stockholders’ deficit				(485,800)		(196,100)
		Total liabilities and stockholders’ deficit			$	587,000	$	266,500

The accompanying notes to condensed unaudited consolidated financial statements are

an integral part of these balance sheets.

DIGITALPOST INTERACTIVE, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS (UNAUDITED)

				Three Months		Three Months		Six Months		Six Months
				Ended		Ended		Ended		Ended
				June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007

Revenues:
	Subscriptions		$	59,100	$	16,800	$	110,400	$	29,000
	Professional services			85,100		10,000		85,100		10,000
		Total Revenue		144,200		26,800		195,500		39,000

Cost of Revenues:
	Subscriptions			12,100		10,600		23,100		15,900
	Professional services			21,100		6,400		21,100		6,400
		Total Cost of Revenue		33,200		17,000		44,200		22,300

Gross Profit				111,000		9,800		151,300		16,700

Operating expenses:
	Research and development			180,400		43,600		239,100		72,600
	Sales and marketing			184,300		196,200		337,900		302,300
	General and administrative			1,091,500		294,600		1,789,700		937,000

		Total operating expenses		1,456,200		534,400		2,366,700		1,311,900

		Loss from operations		(1,345,200)		(524,600)		(2,215,400)		(1,295,200)

Interest (expense)				(127,400)		(2,000)		(237,500)		(3,400)
Other (expenses) income, net				(1,100)		(2,000)		(1,900)		(2,800)

		Net loss	$	(1,473,700)	$	(528,600)	$	(2,454,800)	$	(1,301,400)

		Weighted average outstanding shares		58,724,597		52,833,385		56,809,895		56,272,001

		Basic and diluted loss per share	$	(0.025)	$	(0.010)	$	(0.043)	$	(0.023)

The accompanying notes to condensed unaudited consolidated financial statements are

an integral part of these statements.

DIGITALPOST INTERACTIVE, INC.

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS (UNAUDITED)

						Six		Six
						Months Ended		Months Ended
						June 30, 2008		June 30, 2007
Cash flows from operating activities
	Net loss				$	(2,454,800)	$	(1,301,400)
	Adjustments to reconcile net loss to net cash
		used by operating activities:
		Depreciation and amortization				38,200		24,700
		Non-cash stock-based compensation				1,392,000		247,500
		Amortization of debt discount				181,600		-
		Finders fees and additional compensation due to stockholder accrued				-		92,500

		Changes in operating assets and liabilities:
			Accounts receivable and other assets			(41,800)		(8,900)
			Other assets			(42,600)
			Accounts payable			(11,900)		(31,100)
			Accrued expenses			32,100		55,400
			Deferred revenue			34,200		6,000
				Net cash used by operating activities		(873,000)		(915,300)
Cash flows from investing activities
	Acquisition of property and equipment					(3,300)		(56,000)
	Acquisition and development of software					(18,000)		(27,700)
				Net cash used by investing activities		(21,300)		(83,700)
Cash flows from financing activities
	Proceeds from the issuance of common stock					619,000		760,000
	Proceeds from short term loan					-		13,300
	Proceeds from convertible notes					500,000		-
	Payments made on shareholder loans					(14,400)		(25,000)
	Financing cost					(66,000)		(25,000)
				Net cash provided by financing activities		1,038,600		723,300
Net increase (decrease) in cash and cash equivalents						144,300		(275,700)
Cash and cash equivalents, beginning of period						88,400		337,000
Cash and cash equivalents, end of period					$	232,700	$	61,300

Supplemental disclosures:
Cash paid for income taxes					$	1,600	$	1,600
Cash paid for interest					$	2,900	$	700

Supplemental disclosures of non cash activities:
Finders fees and additional compensation due to stockholders accrued					$	-	$	92,500

The accompanying notes to condensed unaudited consolidated financial statements are

an integral part of these statements.

DIGITALPOST INTERACTIVE, INC.

NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION, ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Merger

Prior to January 30, 2007, the Company was known as HomAssist Corporation, a Nevada corporation (“HomAssist”). On January 30, 2007, the Company acquired The Family Post, Inc, a privately held California corporation (“Old TFP”). Immediately following the Merger (as defined below in Note 2), the Company changed its name to DigitalPost Interactive, Inc. (“DPI”, “we” or the “Company”) and began operating Old TFP’s business of internet content sharing as its operating subsidiary (“New TFP”).

The Company produces destination web sites that allow subscribers to securely share digital media, including photos, videos, calendars, message boards, and history. The Company’s proprietary web site administration system, Qwik-Post™, and online video uploading system, Video-PostSM, allow users of personal computers to manage these “virtual family rooms,” and provide a destination to display photo and video memories, discussions, and history.

Basis of Presentation

The accompanying condensed unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for the interim financial information and in accordance with the instructions per Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

As discussed further below in Note 2, immediately following the Merger, there were 52,833,385 shares of Company common stock outstanding, of which the pre-Merger stockholders of Old TFP owned approximately 70.4% and the pre-Merger stockholders of HomAssist owned approximately 29.6%. As a result, Old TFP has been treated as the acquiring company for accounting purposes. The Merger has been accounted for as a reverse acquisition in accordance with generally accepted accounting principles in the United States of America, or “U.S. GAAP.” Reported results of operations of the combined group after completion of the transaction reflects Old TFP’s operations.

In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair presentation have been included. The accompanying condensed unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company included in the Company’s 2007 Form 10-KSB as filed March 31, 2008 and Form 8-K/A Amendment No. 3 as filed April 30, 2007 . Operating results for the three and six month periods ended June 30, 2008 is not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2008.

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of DPI and New TFP (as defined below in Note 2) its wholly-owned subsidiary.

Cash and Cash Equivalents

For purposes of reporting within the statement of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.

Property and Equipment

The Company’s property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over estimated useful lives of three to five years. Maintenance and repairs are charged to operations when incurred. Significant betterments are capitalized and depreciated over the estimated useful life of the related asset.

Web Site and Software Development Costs

Under Emerging Issues TaskForce Statement 00-2, Accounting for Web Site Development Costs (“EITF 00-2”), costs and expenses incurred during the planning and operating stages of the Company’s web site are expensed as incurred. Under EITF 00-2, costs incurred in the web site application and infrastructure development stages are capitalized by the Company and amortized to expense over the web site’s estimated useful life or period of benefit.

The Company also applies Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed to costs incurred internally in creating its software products. Under SFAS No. 86, costs are charged to research and development expense until technological feasibility has been established for the related product. Technical feasibility is deemed to have been established upon completion of a detail program design or completion of a working model. Subsequent to technological feasibility having been established, software production costs shall be capitalized and reported at the lower of amortized cost or net realizable value.

As of June 30, 2008, and December 31, 2007 the Company capitalized $136,100 and $103,300, respectively, net of accumulated amortization, related to its web site and software development.

Research and Development Costs

The Company expenses research and development costs as incurred.

Revenue Recognition

The Company’s subscription revenues are generated from monthly subscriptions for web site hosting services. The typical subscription agreement includes the usage of a personalized web site and hosting services. The individual deliverables are not independent of each other and are not sold or priced on a standalone basis. Costs to complete the web site and prepare it for the use of an end customer are minimal, and are expensed to cost of revenues as incurred. Upon the completion of a customer’s signup and initial hosting of the web site, the subscription is offered free of charge for a two week trial period during which the customer can cancel at anytime. In accordance with SAB No. 104, after the two week trial period has ended, revenue is recognized when all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of the Company’s fees is probable. These criteria are met monthly as the Company’s service is provided on a month-to-month basis, and collections are generally made in advance of the services. There is no provision for refunds as of June 30, 2008, as the Company’s historical refund experience has been minimal.

Customers signup and agree to purchase the web site service on a monthly or annual basis, at the customer’s option. The monthly customers pay monthly in advance of the services, and as the services are performed, the Company recognizes subscription revenue on a daily basis.

For annual customers, upon payment of a full year’s subscription service, the subscription revenue is recorded as deferred revenue in the accompanying balance sheet. As services are performed, the Company recognizes subscription revenue ratably on a daily basis.

Professional services revenue is generated from custom website design services. The Company’s professional services revenue from contracts for custom website design is recorded using a proportional performance model based on labor hours incurred. The extent of progress toward completion is measured by the labor hours incurred as a percentage of total estimated labor hours to complete. Labor hours are the most appropriate measure to allocate revenue among reporting periods, as they are the primary input to the provision of our professional services.

Loss per Common Share

Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Due to the anti-dilutive nature of the Company’s stock options, there is no effect on the calculation of weighted average shares for diluted net loss per common share. As a result, the basic and diluted net losses attributable per common share amounts are identical. 48,383,736 shares of potentially dilutive securities have been excluded for three and six month periods ended June 30, 2008, respectively, because their effect was anti-dilutive. 13,308,117 shares of potentially dilutive securities have been excluded for three and six month periods ended June 30, 2007, respectively, because their effect was anti-dilutive.

Stock-Based Compensation

In December 2004, the Financial Accounting Standard Board (“FASB”) issued Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment, which addresses the accounting for employee stock options. SFAS No. 123R requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the consolidated financial statements based on the estimated fair value of the awards. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award—the requisite service period (usually the vesting period). The Company also applies the measurement provisions of EITF 96-18 to awards granted to nonemployees.

The Company adopted SFAS No. 123R on January 1, 2006, using the modified-prospective transition method. Under the modified-prospective transition method, prior periods of the Company’s financial statements are not restated for comparison purposes. In addition, the measurement, recognition and attribution provisions of SFAS No. 123R apply to new grants and grants outstanding on the adoption date. Estimated compensation expense for outstanding grants at the adoption date will be recognized over the remaining vesting period using the compensation expense calculated for the pro forma disclosure purposes under SFAS No. 123, Accounting for Stock-Based Compensation. The Company’s 2008 calculations were made using the Black-Scholes option-pricing model with the following weighted average assumptions: expected life of 4.5 years; 280% stock price volatility; risk-free interest rate of 3.1%; forfeitures rate of 10% and no dividends during the expected term. During three and six month period ended June 30, 2008, the Company recognized stock option expense of $299,100, and $429,100 respectively. During the three and six months ended June 30, 2007, the Company recognized stock option expense of approximately $17,700 negative expense and $247,500 expense, respectively.

Fair Value of Financial Instruments

The Company estimates the fair value of financial instruments using the available market information and valuation methods. Considerable judgment is required in estimating fair value. Accordingly, the estimates of fair value may not be indicative of the amounts the Company could realize in a current market exchange. As of June 30, 2008, the carrying value of accounts payable, loans from stockholders and accrued liabilities approximated fair value due to the short-term nature and maturity of these instruments. As of June 30, 2008, the carrying value of the long term convertible notes payables approximate fair value except for the fair value of the 2007 Convertible Promissory Notes (See Note 7) which has not been estimated since the cost of doing so would be excessively expensive and not practicable.

Concentration of Risk

As of June 30, 2008, the Company maintained its cash account at one commercial bank. The cash balance at June 30, 2008, exceeded the FDIC coverage limit by $145,300.

Advertising

Advertising and promotion costs are charged to operations when incurred. For the three and six months ended June 30, 2008, advertising and promotion costs amounted to $57,300 and $125,700 respectively. For the three and six months ended June 30, 2007, advertising and promotion costs amounted to $67,100, and $102,800, respectively.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets and the related estimated remaining lives when events or circumstances lead management to believe that the carrying value of an asset may not be recoverable. For the three and six months ended June 30, 2008 and 2007, no events or circumstances occurred for which an evaluation of the recoverability of long-lived assets was required.

Estimates

The consolidated financial statements are prepared on the basis of accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of June 30, 2008, and revenues and expenses for the three and six months ended June 30, 2008 and 2007. Actual results could differ from those estimates made by management.

Reclassification

Certain balances in the 2007 presentation periods have been reclassified to reflect the classification used in the 2008 balances.

2. MERGER

Prior to January 25, 2007, the Company was known as HomAssist. On January 30, 2007, HomAssist acquired Old TFP, pursuant to an agreement and plan of merger, dated as of January 16, 2007, as amended (the “Merger Agreement”), by and among HomAssist, Old TFP and our wholly-owned subsidiary (“Merger Sub”), providing for the merger of Merger Sub and Old TFP, with the Merger Sub being the surviving corporation as our wholly-owned subsidiary (the “Merger”). Immediately following the Merger, HomAssist changed its name to DigitalPost Interactive, Inc., the Merger Sub changed its name to The Family Post, Inc. (“New TFP”), and the Company began operating New TFPs business of internet content sharing.

Prior to the Merger, HomAssist had 15,660,000 shares of common stock issued and outstanding. As part of the Merger, HomAssist issued 37,173,385 shares of its common stock to the former stockholders of Old TFP in exchange for all of the issued and outstanding shares of common stock of Old TFP (16,478,175 shares). As part of the Merger, HomAssist also adopted the existing stock option agreements of Old TFP (“Old TFP Option Agreements”) outstanding under which options to purchase 7,724,850 shares of common stock of Old TFP outstanding prior to the Merger were converted into options to purchase 17,426,615 shares of common stock of DPI.

On January 30, 2007, immediately following the Merger, there were 52,833,385 shares of DPI common stock outstanding, of which the pre-Merger stockholders of HomAssist owned approximately 29.6% and the pre-Merger stockholders of Old TFP owned approximately 70.4%. As a result, Old TFP has been treated as the acquiring company for accounting purposes. The Merger has been accounted for as a reverse acquisition in accordance with generally accepted accounting principles in the United States of America, or “U.S. GAAP.” Reported results of operations of the combined group after completion of the transaction reflects Old TFP’s operations.

Unless otherwise indicated or the context otherwise requires, the terms “Company” and “DPI,” refer to DigitalPost Interactive, Inc. (formerly known as HomAssist Corporation) and its affiliates, including its subsidiary New TFP, after giving effect to the Merger.

3. GOING CONCERN AND MANAGEMENT’S PLANS

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate the continuation of the Company as a going concern. The Company has not established sufficient sources of revenue to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of June 30, 2008, the cash resources of the Company are insufficient to meet its current working capital needs and on going business plan. These and other factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

Since inception through December 31, 2007, the Company has raised approximately $3.1 million in private debt and equity financing. In January 2008, the Company entered into a $1 million private placement with foreign investors under a Regulation S Stock Purchase agreement, which the Company has received approximately $619,000 through June 30, 2008. Additionally, during the quarter ended June 30, 2008, the Company entered into convertible promissory notes in an aggregate amount of $584,800 that yielded cash proceeds to the Company of $500,000 (see Note 7). The Company expects to raise additional funds either through additional debt or equity financings during the remainder of 2008. The offer and sale of the securities above were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in (i) Rule 506 promulgated under the Securities Act and in Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of Regulation D or (ii) Rule 501 of Regulation S.

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

		June 30, 2008		December 31, 2007

Computer equipment and software	$	53,200	$	49,800
Furniture and fixtures		37,500		37,500
Less -accumulated depreciation and amortization		(33,400)		(23,100)
	$	57,300	$	64,200

5. WEB SITE DEVELOPMENT COSTS

Web site development costs consisted of the following:

		June 30, 2008		December 31, 2007

Website development costs	$	234,000	$	173,300
Less -accumulated amortization		(97,900)		(70,000)
	$	136,100	$	103,300

6. DUE TO STOCKHOLDER

As of June 30, 2008, $39,600 was due to an officer of the Company and principal stockholder. The amount due to the officer does not bear interest, is not collateralized and has no formal repayment terms. During the six months ended June 30, 2008, $14,400 of the net amount owed was paid to the officer.

7. CONVERTIBLE PROMISSORY NOTES

The 2007 Convertible Promissory Notes

During October 2007, the Company commenced a private offering of its securities for the purpose of raising capital whereby it entered into Convertible Notes with nine accredited investors, one of which is the chief financial officer of the Company. Pursuant to the terms of the offering, the investors purchased an aggregate of $767,000 of 8% senior secured convertible notes and were issued warrants to purchase shares of the Company’s common stock (the “2007 Convertible Notes”). The secured convertible notes in the event of default become secured by the Company’s assets and are due two years from the date of each note, but are subordinate to the AOI Fund Convertible Promissory Notes discussed below. Initially, each secured convertible note holder had the right, at any time, to convert their note into shares of the Company’s common stock at a conversion ratio of one share of common stock for each $0.40 of principal amount of their note for a maximum potential aggregate of 1,917,500 shares of common stock; in addition, the investors were issued warrants to purchase an aggregate of 1,917,500 shares of common stock at an exercise price of $0.50 per share that expire five years from the date of issuance. Half of these warrants are exercisable immediately and the remaining half are exercisable upon the conversion of the related

notes payable. For a period of twelve months after the effective date, if the Company sells common stock at a price per share below the conversion price of $.40 per share, the conversion price will adjust accordingly downward to the new lower sales price per share. Since then, the Company has sold securities at a lower price of $.123 per share, as a result the Company is obligated to lower the conversion price from $.40 per share to the same $.123 per share price which gives each investor the right, at any time, to convert their note into shares of the Company’s common stock at a conversion ratio of one share of common stock for each $0.123 of principal amount of their note for a maximum potential aggregate of 6,235,772 shares of common stock. In connection with this financing, a form of the convertible notes agreement was filed with the Securities and Exchange Commission on Form 8-K, dated October 4, 2007. The offer and sale of the securities underlying the convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

One of the five investors who entered into the 2007 Convertible Notes is the chief financial officer of the Company. The Company owed the chief financial officer $92,300 at the time of the offering, of which, the chief financial officer exchanged $45,000 of the $92,300 due for $45,000 of convertible notes. As a result, $45,000 of the $767,000 notes issued were purchased by the chief financial officer and the Company received $722,000 net cash proceeds from the $767,000 the convertible note financing.

The Company determined that the embedded conversion option in the 2007 Convertible Notes qualifies for equity classification under EITF 00-19, qualifies for the scope exception of paragraph 11(a) of SFAS 133, and is not bifurcated from the host contract. The Company also determined that the warrants issued to the note holders qualify for equity classification under the provisions of SFAS 133 and EITF 00-19. In accordance with the provisions of Accounting Principles Board Opinion No. 14, the Company allocated the net proceeds received in this transaction to each of the convertible notes and common stock purchase warrants based on their relative estimated fair values. As a result, the Company allocated $480,800 to the convertible notes and $143,200 to the vested portion of the common stock purchase warrants, which was recorded in additional paid-in-capital. In accordance with the consensus of EITF issues 98-5 and 00-27, management determined that the convertible notes contained a beneficial conversion feature based on the effective conversion price after allocating proceeds of the convertible notes to the vested portion of the common stock purchase warrants. The amounts recorded for the common stock purchase warrants are amortized as interest expense over the term of the convertible notes. If there are conversions of the convertible notes, then the Company will recognize the relative fair value of the warrants that vest upon such conversion in the amount of $143,200.

Interest charges associated with the convertible notes, including amortization of the discounts associated with the beneficial conversion feature and the vested warrants, totaled $98,300 and $191,700 for the three and six months ended June 30, 2008.

The 2008 Convertible Promissory Notes

In May 2008, four individual investors purchased an aggregate of $100,000 of 12% secured convertible notes and were issued warrants to purchase shares of the Company’s common stock (the “2008 Convertible Notes”). Each convertible note holder has the right, at any time, to convert their note into shares of the Company’s common stock at a conversion ratio of one share of common stock for each $0.14 of principal amount of their note for a maximum potential aggregate of 714,285 shares of common stock; in addition, the investors were issued warrants to purchase an aggregate of 357,143 shares of common stock at an exercise price of $.14 per share that expire five years from the date of issuance. Additionally, the convertible notes are secured by approximately 1.4 million restricted shares of the Company’s common stock held by a third party. These collateral shares return to the Company and become canceled when the terms of the convertible notes have been satisfied. The offer and sale of the securities underlying the convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

The Company determined that the embedded conversion option in the 2008 Convertible Notes qualifies for equity classification under EITF 00-19, qualifies for the scope exception of paragraph 11(a) of SFAS 133, and is not bifurcated from the host contract. The Company also determined that the warrants issued to the note holders qualify for equity classification under the provisions of SFAS 133 and EITF 00-19. In accordance with the provisions of Accounting Principles Board Opinion No. 14, the Company allocated the net proceeds received in this transaction to each of the convertible notes and common stock purchase warrants based on their relative estimated fair values. As a result, the Company allocated $46,300 to the convertible notes and $46,300 to the vested portion of the common stock purchase warrants, which was recorded in additional paid-in-capital. In accordance with the consensus of EITF issues 98-5 and 00-27, management determined that the convertible notes contained a beneficial conversion feature based on the effective conversion price after allocating proceeds of the convertible notes to the vested portion of the common stock purchase warrants. The amounts recorded for the common stock purchase warrants are amortized as interest expense over the term of the convertible notes.

Interest charges associated with the convertible notes, including amortization of the discounts associated with the beneficial conversion feature and the vested warrants, totaled $23,100 for each of three and six month periods ended June 30, 2008.

The AOI Fund Convertible Promissory Notes

In May 2008, an investor purchased $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock (the “AOI Convertible Notes”). The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000 which can only be exercised after the two year anniversary date of the convertible note. The Series B Warrants have no put option. The convertible notes included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

The Company determined that the embedded conversion option in the AOI Convertible Notes qualifies for equity classification under EITF 00-19, qualifies for the scope exception of paragraph 11(a) of SFAS 133, and is not bifurcated from the host contract. The Company also determined that the warrants issued to the note holders qualify for equity classification under the provisions of SFAS 133 and EITF 00-19. In accordance with the provisions of Accounting Principles Board Opinion No. 14, the Company allocated the net proceeds received in this transaction to each of the convertible notes and common stock purchase warrants based on their relative estimated fair values. As a result, the Company allocated no amounts to the convertible notes and $17,400 to the common stock purchase warrants, which was recorded in additional paid-in-capital. In accordance with the consensus of EITF issues 98-5 and 00-27, management determined that the convertible notes contained a beneficial conversion feature based on the effective conversion price after allocating proceeds of the convertible notes to the common stock purchase warrants. The amounts recorded for the common stock purchase warrants are amortized as interest expense over the term of the convertible notes.

Interest charges associated with the convertible notes, including amortization of the discounts associated with the original issue discount, put option and the vested warrants, totaled $12,300 for each of three and six month periods ended June 30, 2008.

In June 2008, the same investor purchased for a second investment, $242,400 of the AOI Convertible Notes (15% secured convertible notes) and were issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000 which can only be exercised after the two year anniversary date of the convertible note. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

to the convertible notes and $14,500 to the common stock purchase warrants, which was recorded in additional paid-in-capital. In accordance with the consensus of EITF issues 98-5 and 00-27, management determined that the convertible notes contained a beneficial conversion feature based on the effective conversion price after allocating proceeds of the convertible notes to the common stock purchase warrants. The amounts recorded for the common stock purchase warrants are amortized as interest expense over the term of the convertible notes.

Interest charges associated with the convertible ntoes, including amortization of the discounts associated with the original issue discount, put option and the vested warrants, totaled $200 for each of three and six month periods ended June 30, 2008.

8. STOCKHOLDERS’ DEFICIT

Stock Split and Amendments

Effective July 18, 2006, the Company filed a certificate of change to effect a forward stock split of its issued and outstanding common stock. The Board of Directors approved the forward split pursuant to the laws of the State of Nevada on July 13, 2006. The filing was incorrect in regard to the certificate of change and on August 14, 2006, the Company filed a certificate of correction in regard to the forward split. The forward split approved by the Board of Directors required the issuance of an additional twenty-five common shares for each one share issued. On December 13, 2006, the Board of Directors approved an increase in the authorized shares of common stock from 75,000,000 to 500,000,000. On January 25, 2007, the Board of Directors and shareholders approved the reclassification of 20,000,000 shares of the Company’s capital stock to preferred stock, no par value, without any series, rights or preferences ascribed to it.

Authorized Capital Stock

The Company is authorized to issue 480,000,000 shares of common stock, par value $0.001 per share, and 20,000,000 shares of preferred stock, par value $.001 per share.

Common Stock

Immediately following the Merger on January 30, 2007 and as of June 30, 2008, there were 52,833,385 and 59,344,147 shares of our common stock issued and outstanding and no shares of preferred stock issued and outstanding (see Note 2 for further discussion on the Merger).

The common stock holders are entitled to one vote per share held and have the sole right and power to vote on all matters on which a vote of stockholders is taken. Voting rights are non-cumulative. Common stock holders are entitled to receive dividends when, as, and if declared by the Board of Directors, out of funds legally available therefore and to share pro rata in any distribution to stockholders. Upon liquidation, dissolution, or the winding up of the Company, common stock holders are entitled to receive the net assets of the Company in proportion to the respective number of shares held by them after payment of liabilities which may be outstanding. Common stock holders do not have any preemptive right to subscribe for or purchase

any shares of any class of stock of the Company. The outstanding shares of common stock will not be subject to further call or redemption and are fully paid and non-assessable. To the extent that additional stock is issued, the relative interest of existing stockholders will likely be diluted.

Shares Issued in Connection with the Merger

As part of the Merger, the Company issued 37,173,385 shares of its common stock to the former stockholders of Old TFP in exchange for all of the issued and outstanding shares of common stock of Old TFP. As part of the Merger, in exchange for options to purchase 7,724,850 shares of Old TFP common stock, the Company issued to the holders thereof options to purchase an aggregate of 17,426,615 shares of common stock under the same terms and conditions as the Old TFP Option Agreements. As a result of the Merger, the former stockholders of Old TFP became holders of Company common stock, and holders of Old TFP options became holders of options to acquire shares of Company common stock.

Following the Merger, there were 52,833,385 shares of Company common stock outstanding, of which the pre-Merger stockholders of HomAssist owned approximately 29.6% and the pre-Merger stockholders of Old TFP owned approximately 70.4%.

Shares Issued After the Merger

During April 2007, the Company agreed to a $4 million private placement for the issuance of up to 2,540,000 restricted common shares at $1.57 per share. As of October 2007, the Company had received $1,130,000 of the $4 million private placement and closed the $4 million private placement and issued 717,500 of restricted shares of the Company’s common stock for the $1,130,000 cash proceeds received. Subsequently, the Company commenced the convertible note offerings, pursuant to which it had issued $1,351,800 in aggregate of convertible notes (see Note 7 for further discussion). Under the convertible note agreements the Company may issue up to 8,889,449 restricted shares if all the outstanding principal amounts of the convertible notes convert into common stock of the Company. In January 2008, the Company entered into a $1 million private placement with foreign investors under a Regulation S Stock Purchase agreement, which the Company had received $619,000 cash proceeds for the issuance of 5,145,837, restricted shares as of June 30, 2008. In February 2008, the Company entered into a one month unsecured loan with an unrelated party for an amount of $50,000. The loan was fully paid in February 2008 and in conjunction with the loan, the Company issued 100,000 restricted common shares valued at $16,000 for a service fee related to the loan. The offer and sale of the securities above were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in (i) Rule 506 promulgated under the Securities Act and in Section 4(2) and Section 4(6) of the Securities Act and/or Rule 506 of Regulation D; or (ii) Rule 501 under Regulation S.

During the six months ended June 30, 2008, the Company issued 217,885 shares of common stock for $29,200 of interest due on the 2007 Convertible Promissory Notes.

During the six months ended June 30, 2008, the Company issued 329,535 shares of common stock for options exercised in the amount of $33,750 cash proceeds.

Options

Just prior to the Merger, there were no outstanding options to purchase HomAssist's stock.

Effective January 30, 2007, as part of the Merger, in exchange for options to purchase 7,724,850 shares of Old TFP common stock, the Company issued to the holders thereof options to purchase an aggregate of 17,426,615 shares of the Company’s common stock under the same terms and conditions as the Old TFP option agreements. As part of the terms and conditions of the Old TFP option agreements, 50% of the options granted and outstanding just prior to the Merger fully vested and became exercisable as a result of the Merger transaction itself. As a result, 8,713,308 of the 17,426,615 options issued became fully vested and exercisable. See Note 2 for further discussion on the Merger.

Stock options granted under those certain stock option agreements were granted at prices no less than the estimated fair value of the shares on the date of grant as determined by the board of directors, provided, however, that (i) the exercise price of an incentive stock option (“ISO”) shall not be less than 100% of the estimated fair value of the shares on the date of grant, respectively; and (ii) the exercise price of an ISO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, respectively. ISO and nonstatutory stock options (“NSO”) stock options generally vest every nine months, over a three year period.

Summary of the 2007 Option Plan

On January 30, 2007, the board of directors approved and a majority of the Company’s stockholders ratified by consent the Company’s 2007 incentive and nonstatutory stock option plan (“Plan”). The 17,426,615 options to purchase the Company’s

common stock issued under the terms of the Merger (discussed above) have been issued pursuant to the Plan. The Plan is intended to further the growth and financial success of the Company by providing additional incentives to selected employees, directors, and consultants to the Company and its subsidiary corporations, as those terms are defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (“Code”) (such subsidiary corporations hereinafter collectively referred to as “Affiliates”) so that such employees and consultants may acquire or increase their proprietary interest in the Company. Stock options granted under the Plan (hereinafter the “Options”) may be either “Incentive Stock Options,” as defined in Section 422A of the Code and any regulations promulgated under said Section, or “Nonstatutory Options” at the discretion of the Board of Directors of the Company (the “Board”) and as reflected in the respective written stock option agreements granted pursuant hereto.

The Plan reserves thirty five million (35,000,000) shares of the Company's common stock for issuance.

In accordance with the provisions of SFAS 123R, and for nonemployees, the measurement criteria of EITF 96-18, the Company recognized stock-based compensation expense of $312,800 for the six months ended June 30, 2008, respectively. The Company recognized stock-based compensation expense of $247,500 for the six months ended June 30, 2007, respectively. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model. Until the quarterly period ended March 31, 2008, the expected volatility is based on industry comparables as the Company recently became a publicly held company and trading volumes have been low. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term of options granted is based on the remaining expected life of the option. The following weighted average assumptions were used for the options granted during the three months ended June 30, 2008 and 2007:

	Six Months Ended June 30,
	2008		2007
Expected volatility		280%		45%
Risk-free rate		3.1%		4.8%
Expected term		3.5 years		4.5 years

A summary of stock option activity for the six months June 30, 2008, is as follows:

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding as of December 31, 2007		18,098,922	$	.21
Granted		9,840,000	$	.24
Exercised		329,535	$	.10
Cancelled		635,355	$	.41
Outstanding as of June 30, 2008		26,974,032	$	.16		4.1	$	--

A summary of the status of the nonvested options for the six months ended June 30, 2008 is presented below:

	Number of Shares		Weighted- Average Grant Date Fair Value
Nonvested as of December 31, 2007		7,270,870	$	.38
Granted		9,840,000	$	.20
Vested		(507,500)	$	.26
Cancelled		(533,840)	$	.48
Nonvested as of June 30, 2008		16,069,530	$	.16

Information regarding the weighted-average remaining contractual life and weighted-average exercise price of options outstanding and options exercisable at June 30, 2008, for selected price ranges is as follows:

Options Outstanding	Options Exercisable
Exercise Prices		Number Outstanding	Weighted Average Remaining Contractual Life(in Years)	Weighted Average Exercise Price per Share	Number Exercisable	Weighted Average Exercise Price per Share
$ .05 - .18		22,379,032	4.2	$ .12	10,422,002	$ .11
$ .18 - .27		4,595,000	4.1	$ .27	482,500	$ .25
		26,974,032			10,904,502

Warrants

Just prior to the Merger, there were no warrants to purchase HomAssist or Old TFP stock outstanding.

In conjunction with the $767,000 raised pursuant to the 2007 Convertible Notes, the Company issued warrants to purchase an aggregate of 1,917,500 shares of common stock of the Company at an exercise price of $0.50 per share that expire five years from the date of issuance (See Note 7).

In November 2007, pursuant to an investor relations fee agreement, the Company agreed to grant warrants to purchase up to 3,000,000 common shares of the Company. As of December 31, 2007, the Company had issued warrants to purchase an aggregate of 1,000,000 shares of common stock of the Company at an exercise price of $1.20 per share that expire in May 2008. In January 2008, these warrants were cancelled and the Company granted new warrants to purchase up to an aggregate of 4,600,000 shares of common stock of the Company at an exercise price of $.65 per share that expire in May 2008. In accordance with FAS 123R, the Company recognized an expense of $223,000 for the incremental fair value of the revised award on the modification date. In May 2008, these warrants were cancelled and the Company granted new warrants to purchase up to an aggregate of 6,600,000 shares of common stock of the Company at an exercise price of $.45 per share that expire in July 2008. In accordance with FAS 123R, the Company recognized an expense of $268,000 for the incremental fair value of the revised award on the modification date.

In April 2008, pursuant to a marketing partnership agreement, the Company agreed to issue a warrant to purchase up to an aggregate of 2,025,000 shares of common stock at an exercise price of $.32 per share. These warrants vest based upon certain sales targets achieved and expire April 2013.

In April 2008, a warrant to purchase 350,000 common shares issued in October 2007 pursuant to a financial advisory agreement were cancelled pursuant to a new financial advisory agreement entered into by the Company which obligated the Company to issue 10% of any related proceeds raised by the financial advisor and 10% of any other consideration received by the investor. Pursuant to this new agreement, in June 2008, the Company issued warrants to purchase up to 213,334 shares of common stock at an exercise price of $.25 per share and 19,394 shares of common stock at an exercise price of $.30 per share.

In May 2008, in conjunction with the issuance of The 2008 Convertible Notes (See Note 7) the Company issued warrants to purchase shares of up to 357,143 shares of common stock at an exercise price of $.14 per share that expire five years from the date of issuance.

In May 2008, in conjunction with the issuance of The AOI Fund Convertible Promissory Notes (See Note 7) the Company issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000. The Series B Warrants have no put option.

In May 2008 and June 2008, the Company entered into subordination agreements with the holders of the 2007 Convertible Notes. As a result, the Company issued to the holders warrants to purchase up to an aggregate 500,000 shares of the Company’s common stock at an exercise price of $.18 per share in exchange for the holders to subordinate their convertible promissory notes.

In June 2008, in conjunction with the second issuance of The AOI Fund Convertible Notes (See Note 7) the Company issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years

from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000. The Series B Warrants have no put option.

A summary of warrant activity for the six months ended June 30, 2008, is as follows:

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding as of December 31, 2007		3,267,500	$	.74		3.5	$	-
Granted		15,702,751		.47
Cancelled		(6,450,000)		.74
Outstanding as of June, 2008		12,520,251	$	.40		4.8	$	-

A summary of the status of the non-vested warrants for the six months ended June 30, 2008 is presented below:

	Number of Shares		Weighted- Average Grant Date Fair Value
Non-vested as of December 31, 2007		958,750	$	.37
Granted		15,702,751	$	.28
Vested		(7,877,751)	$	.41
Cancelled		(5,100,000)	$	.08
Non-vested as of June 30, 2008		3,683,750	$	.30

9. RELATED PARTY TRANSACTIONS

As of June 30, 2008 the Company owed an executive officer $39,600 (see further discussion in Note 6).

On May 13, 2008, our Board of Directors approved the re-pricing of compensation options granted in 2007 to the Company’s employees and consultants to purchase up to 3,355,000 shares of the Company’s common stock from a weighted average exercise price of $0.70 per share to a weighted average price of $0.27 per share; included in this re-price event was an option owned by an executive officer of the Company to purchase 875,000 common shares.

10. COMMITMENTS

In February 2007, the Company entered into a two year lease for its new principal offices. Monthly rent is $8,400 under this lease. Rent expense during the three and six months ended June 30, 2008 was $25,200 and $50,400, respectively. Rent expense during the three and six months ended June 30, 2007 was $24,700 and $33,500, respectively.

Pursuant to the office lease agreement, as of June 30, 2008 total remaining rental payments of $50,400 are due through December 31, 2008; and; total payments of $16,400 are due through December 31, 2009.

11. RECENT ACCOUNTING PRONOUNCEMENTS

measurement, the FASB having previously concluded in those accounting pronouncement that fair value is the relevant measurement attribute. This statement does not require any new fair value measurements. However, for some entities, the application of the statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company is currently reviewing the effect, if any, that this new pronouncement will have on its consolidated financial statements.

unrestricted net assets for a not-for-profit organization. This statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. This statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of SFAS No. 158 is not expected to have a material impact on the Company’s consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of SFAS No.115, Accounting for Certain Investments in Debt and Equity Securities”, which applies to all entities with available-for-sale and trading securities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The adoption of SFAS No. 159 did not have a material impact on the Company’s consolidated financial statements.

In December 2007, FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which retains the underlying concepts of SFAS 141 in that all business combinations are still required to be accounted for at fair value under the acquisition method of accounting but SFAS 141R changed the method of applying the acquisition method in a number of significant aspects. Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. The provisions of SFAS 141R are effective for fiscal years beginning after December 15, 2008 with earlier adoption prohibited. Management is currently analyzing the effect of adopting SFAS 141R.

In December 2007, FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160), which requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. It also amends certain aspects of ARB No. 51’s consolidation procedures for consistency with the requirements of SFAS 141R. This statement also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The provisions of SFAS 160 are effective for fiscal years beginning after December 15, 2008 with earlier adoption prohibited. Management is currently analyzing the effect of adopting SFAS 160.

12. SUBSEQUENT EVENTS

In July 2008, an investor purchased for a third investment, $242,400 of the AOI Convertible Notes (15% secured convertible notes) and were issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000 which can only be exercised after the two year anniversary date of the convertible note. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

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

The statements, other than statements of historical fact, included in this report are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “plan,” “seek,” or “believe.” We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot assure you that such expectations will occur. Our actual future performance could differ materially from such statements. You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we are not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events.

This section should be read in conjunction with our condensed unaudited consolidated financial statements and the related notes thereto as of June 30, 2008 and for the three and six months then ended, which are included elsewhere in this report, with the audited consolidated financial statements and related notes thereto as of December 31, 2007 and for the year then ended, included in our Form 10-KSB filed with the Securities and Exchange Commission (“SEC”) on March 31, 2008 and with other company filings made with the SEC.

Business Overview

We are a SaaS (Software as a Service) and application provider that delivers digital media sharing solutions. We produce destination websites that allow subscribers and other users to securely share digital media, including photos, calendars, videos, message boards and history. Our proprietary website administration system, Qwik-Post™, and online video uploading system, Video-PostSM allow PC users to manage these “virtual family rooms” and provides a destination to display photo and video memories, discussions, and history.

We earn revenue primarily from subscriptions generated from monthly subscriptions for Website hosting services. The typical subscription agreement includes the usage of a personalized website and hosting services. As of August 14, 2008, we have generated 5,059 subscribers, have 8,116 users, and have transferred more than 2,977 gigabytes of consumer digital media across our systems. However, our revenues are not sufficient to cover our operating costs and expenses. During the three and six months ended June 30, 2008, our revenues were $144,200 and $195,500, respectively. We are in the early phases of revenue generating activities and we intend to market our product more aggressively upon the implementation of business arrangements we’ve recently entered into with marketing partners and completion of additional debt or equity financing.

Current Conditions

Historically, we have incurred significant losses and we continue to incur additional losses during the current quarter ended June 30, 2008. Our net loss was $1,473,700 and $2,454,800, for the three and six months ended June 30, 2008, respectively. Our cash used in operations was $873,000 and $915,300 for the six months ended June 30, 2008 and 2007, respectively. As of June 30, 2008, we had an accumulated deficit of approximately $5,949,000. We expect operating losses and negative cash flow to continue for the foreseeable future. We anticipate that our losses will increase significantly from current levels because we expect to incur significant additional costs and expenses related to being a public company, brand development, advertising, marketing and promotional activities, as well as the employment of additional personnel as our business activities expand. Our ability to become profitable depends on our ability to generate new revenue and sustain substantially higher revenue while maintaining reasonable expense levels. In particular, although we intend to increase significantly our spending on marketing and promotional activities, these efforts may not be effective in growing our brand, increasing our subscriber base or generating new revenues. If we do not achieve profitability, we may not be able to continue our operations.

Historically, we have relied upon private debt and equity financings as our source of cash and we continue to rely on these financings to meet our working capital needs. In January 2008, we entered into a $1 million private placement with foreign investors under a Regulation S Stock Purchase agreement, which we received approximately $619,000 as of June 30, 2008. Additionally, in May 2008 and June 2008, we received approximately $500,000 pursuant to convertible notes offerings (see Note 7 to the condensed unaudited financial statements included elsewhere in this report). Additionally, in July 2008, we received $200,000 pursuant to another convertible note offering (see Note 12 to the condensed unaudited financial statements

included elsewhere in this report). We plan to use the proceeds of the most recent offering for marketing of our product, increasing revenue generating activities and for general working capital purposes.

In addition to the $1 million Regulation S Stock Purchase agreement and convertible notes offerings, we plan to continue to raise capital by sales of additional private placement equity or debt offerings during the remainder of 2008, although we have no assurance that such financings will be completed.

Going Concern

We have not established sufficient sources of revenue to cover our operating costs and, as such, we have incurred operating losses since inception. Further, as of June 30, 2008, our cash resources were insufficient to meet our current working capital needs and on going business plan. These and other factors raise substantial doubt about our ability to continue as a going concern. The report of the independent registered public accounting firm accompanying the audit of our financial statements for the year ended December 31, 2007, as filed with our Form 10-KSB with the SEC in March 2008, contains an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern because of our operating losses and our need for additional capital. Such doubt could make it more difficult for us to raise additional capital and may materially and adversely affect the terms of any financing that we may obtain. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of us to continue as a going concern.

Results of Operations

The Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

Total revenue was $144,200 and $26,800 for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $117,400 or 438%. The increase was due to an increase in subscription revenues of $42,300 or 252% during the three months ended June 30, 2008 as compared to the same period last year and an increase in professional services revenues of $75,100 or 751% during the three months ended June 30, 2008 as compared to the same period last year

Subscription revenue was $59,100 and $16,800 for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $42,300 or 252%. Subscription revenue increased $42,300 due to an increase in our customers to 4,541 subscribers as of June 30, 2008 from 1,152 subscribers as of June 30, 2007. The increase in subscriptions was due to additional marketing activities performed during the three months ended June 30, 2008 as compared to the same period last year and renewals of subscribers. As we continue marketing activities and promotions, subscription revenues continued to increase through June 30, 2008. Digital media and related Web 2.0 products and services are relatively new, and as a result, it is difficult to determine our current market share or predict our future market share. We believe that the market for digital media sharing products and services is growing and that related market opportunities are also expected to grow. Our revenue, profitability and future growth depend not only on the anticipated market growth, but also our ability to execute our business plan and ultimate customer acceptance of our products and services and the success or failure of our competitors. As a result, we expect the trend of our revenues to be positive, however, provide no assurance that such will occur.

Professional services revenues for the three months ended June 30, 2008 was $85,100 as compared to $10,000 during the same period last year. The increase was due to us providing custom website design services under software development contracts completed during the three months ended June 30, 2008. We did not have similar contracts during the same period last year. We have entered into additional agreements for similar levels of professional services for the remainder of 2008, however, we do not expect that professional services will be recurring beyond 2008 at this time.

Cost of revenue was $33,200 and $17,000 for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $16,200 or 95%. The increase in cost of revenues for the three months ended June 30, 2008 as compared to the same period last year is due an increase in cost of subscription sales of $1,500 or 14% and an increase in cost of professional services of $14,700 or 230%.

Cost of subscription revenues for the three months ended June 30, 2008 was $12,100 as compared to $10,600 during the same period last year. The increase was due to having an increase in subscription sales. Cost of subscription revenues for the

three months ended June 30, 2008 were mostly derived from hosting and setup services incurred from website services provided to our subscribers.

Cost of professional service revenues for the three months ended June 30, 2008 was $21,100 as compared to $6,400 during the same period last year. The increase in cost of professional services revenues for the three months ended June 30, 2008 as compared to the same period last year is due to having provided a higher volume of professional services during the three months ended June 30, 2008 as compared to the same period last year.

Research and development expense was $180,400 and $43,600 for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $136,800 or 314%. The increase was primarily due to higher amounts of research and development activities, including increased costs of hiring new development personnel and consultants during the three months ended June 30, 2008 as compared to the same period last year.

Sales and marketing expense was $184,300 and $196,200 for the three months ended June 30, 2008 and 2007, respectively, representing a decrease of $11,900 or 6%. The decrease was primarily due to having fewer marketing personnel during the three months ended June 30, 2008 as compared to the same period last year.

General and administrative expense was $1,091,500 and $294,600 for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $796,900 or 271%. The increase was primarily due to: i) warrant expense of $652,300 a majority of which relates to warrants granted to our investor relations firm in May 2008, ii) an increase in non cash stock compensation expense of $154,000, iii) an increase of $100,800 in professional legal, accounting and consulting expenses, and, iv) partially offset by decrease in employee benefits of $20,100.

Interest expense was $127,400 and $2,000 for the three months ended June 30, 2008 and 2007, respectively, representing an increase of $125,400 or 6,270%. The increase was attributable to interest and debt discount amortization expense of $127,400 during the three months ended June 30, 2008 which was mostly related to our convertible notes outstanding during the three months ended June 30, 2008. There were no such notes outstanding during the same period last year.

The Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007

Total revenue was $195,500 and $39,000 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $156,500 or 401%. The increase was due to an increase in subscription revenues of $81,400 or 281% during the six months ended June 30, 2008 as compared to the same period last year and an increase in professional services revenues of $75,100 or 751% during the six months ended June 30, 2008 as compared to the same period last year

Subscription revenue was $110,400 and $29,000 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $81,400 or 281%. Subscription revenue increased $81,400 due to an increase in our customers to 4,541 subscribers as of June 30, 2008 from 1,152 subscribers as of June 30, 2007. The increase in subscriptions was due to additional marketing activities performed during the six months ended June 30, 2008 as compared to the same period last year and renewals of subscribers. As we continue marketing activities and promotions, subscription revenues continued to increase through June 30, 2008. Digital media and related Web 2.0 products and services are relatively new, and as a result, it is difficult to determine our current market share or predict our future market share. We believe that the market for digital media sharing products and services is growing and that related market opportunities are also expected to grow. Our revenue, profitability and future growth depend not only on the anticipated market growth, but also our ability to execute our business plan and ultimate customer acceptance of our products and services and the success or failure of our competitors. As a result, we expect the trend of our revenues to be positive, however, provide no assurance that such will occur.

Professional services revenues for the six months ended June 30, 2008 was $85,100 as compared to $10,000 during the same period last year. The increase was due to us providing custom website design services under software development contracts completed during the six months ended June 30, 2008. We did not have similar contracts during the same period last year. We have entered into additional agreements for similar levels of professional services for the remainder of 2008, however, we do not expect that professional services will be recurring beyond 2008 at this time.

Cost of revenue was $44,200 and $22,300 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $21,900 or 98%. The increase in cost of revenues for the six months ended June 30, 2008 as compared to the

same period last year is due an increase cost of subscription sales of $7,200 or 45% and an increase in cost of professional services of $14,700 or 230%.

Cost of subscription revenues for the six months ended June 30, 2008 was $23,100 as compared to $15,900 during the same period last year. The increase was due to having an increase in subscription sales. Cost of subscription revenues for the six months ended June 30, 2008 were mostly derived from hosting and setup services incurred from website services provided to our subscribers.

Cost of professional service revenues for the six months ended June 30, 2008 was $21,100 as compared to $6,400 during the same period last year. The increase in cost of professional services revenues for the six months ended June 30, 2008 as compared to the same period last year is due to having provided a higher volume of professional services during the six months ended June 30, 2008 as compared to the same period last year.

Research and development expense was $239,100 and $72,600 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $166,500 or 229%. The increase was primarily due to higher amounts of research and development activities, including increased costs of hiring new development personnel and consultants during the six months ended June 30, 2008 as compared to the same period last year.

Sales and marketing expense was $337,900 and $302,300 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $35,600 or 12%. The increase was primarily due to higher sales and marketing activities partially offset by having fewer marketing personnel during the six months ended June 30, 2008 as compared to the same period last year.

General and administrative expense was $1,789,700 and $937,000 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $852,700 or 91%. The increase was primarily due to: i) warrant expense of $901,100 a majority of which relates to warrants granted to our investor relations firm in May 2008, ii) an increase of $55,100 in professional legal, accounting and consulting expenses, and, iii) partially offset by a decrease in non cash stock compensation expense of $35,400, and decrease of employee benefit related expense of $10,400.

Interest expense was $237,500 and $3,400 for the six months ended June 30, 2008 and 2007, respectively, representing an increase of $234,100 or 6,885%. The increase was attributable to interest and debt discount amortization expense of $237,500 during the six months ended June 30, 2008 which was mostly related to our convertible notes outstanding during the six months ended June 30, 2008. There were no such notes outstanding during the same period last year.

Liquidity and Capital Resources

Cash Flows

At June 30, 2008, our cash and cash equivalents were $232,700, an increase of $144,300 from $88,400 as of December 31, 2007. The increase was due to receiving $619,000 related to our Regulation S Stock Purchase agreement entered into January 2008, $500,000 related to our convertible notes entered into in May 2008 and June 2008, which was partially offset by cash used in operating activities of $873,000 and $18,000 of cash used in the acquisition of and development of software.

Historically, we have incurred losses and have had capital and stockholders’ deficits and limited cash to fund our operations. During the six months ended June 30, 2008, we raised approximately $1.1 million through equity and debt financings and have no other significant source of cash. Although we expect to grow our revenues, they are not a significant source of cash at this time. Because we expect that revenues from operations will continue to be insufficient to meet our working capital needs, we will need to raise additional capital through equity or debt financings in the near future. We cannot be certain that such capital will be available to us or whether such capital will be available on terms that are acceptable to us. Such financing likely would be dilutive to existing stockholders and could result in significant financial and operating covenants that would negatively impact our business. If we are unable to complete additional financings or to raise sufficient additional capital on acceptable terms, we will have insufficient funds to operate our business or pursue our planned growth.

Foreign Private Placement Equity Financing

In January 2008, we entered into a $1 million private placement with foreign investors under a Regulation S Stock Purchase agreement, which we issued 5,145,837 restricted shares for cash proceeds of $619,000 as of June 30, 2008. The offer and sale of the securities above were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 501 promulgated under the Securities Act of Regulation S.

The 2008 Convertible Promissory Notes

In May 2008, four individual investors purchased an aggregate of $100,000 of 12% secured convertible notes and were issued warrants to purchase shares of our common stock. Each convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $.14 of principal amount of their note for a maximum potential aggregate of 714,285 shares of common stock; in addition, the investors were issued warrants to purchase an aggregate of 357,143 shares of common stock at an exercise price of $.14 per share that expire five years from the date of issuance. Additionally, the convertible notes are secured by approximately 1.4 million restricted shares of our restricted common stock held by a third party. These collateral shares return to us and become canceled when

the terms of the convertible notes have been satisfied. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

The AOI Fund Convertible Promissory Notes

In May 2008, an investor purchased $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000 which can only be exercised after the two year anniversary date of the convertible note. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

In June 2008, the same investor purchased for a second investment, $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000 which can only be exercised after the two year anniversary date of the convertible note. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

In July 2008, the same investor purchased for a third investment, $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000 which can only be exercised after the two year anniversary date of the convertible note. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible

notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

Other Financings

In addition to the equity and debt financing discussed above, we intend to conduct additional capital raising activities seeking additional private financings through the issuance of our common stock or issuance of debt instruments to increase our required working capital, increase the marketing of our product and increase revenue generating activities. We plan to complete additional private placement offerings during 2008, although we have no assurance that such financing will be completed.

Off-Balance Sheet Arrangements

As of June 30, 2008, we had no off-balance sheet arrangements.

Related Party Transactions

As of June 30, 2008, $39,600 was due to an executive officer and principal stockholder. The amount due to the executive officer does not bear interest, is not collateralized and has no formal repayment terms. During the six months ended June 30, 2008, $14,400 of the net amount owed was paid to the officer.

On May 13, 2008, our Board of Directors approved the re-pricing of compensation options granted in 2007 to our employees and consultants to purchase up to 3,355,000 shares of our common stock from a weighted average exercise price of $0.70 per share to a weighted average price of $0.27 per share; included in this re-price event was an option owned by an executive officer to purchase 875,000 common shares.

Critical Accounting Policies and Estimates

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Web Site and Software Development Costs—Under Emerging Issues Taskforce Statement 00-2, Accounting for Web Site Development Costs (“EITF 00-2”), costs and expenses incurred during the planning and operating stages of the Company’s web site are expensed as incurred. Under EITF 00-2, costs incurred in the web site application and infrastructure development stages are capitalized by the Company and amortized to expense over the web site’s estimated useful life or period of benefit.

Research and Development Costs—We expense research and development costs as incurred.

Revenue Recognition— Our subscription revenue is generated from monthly subscriptions for Website hosting services. The typical subscription agreement includes the usage of a personalized website and hosting services. The individual deliverables are not independent of each other and are not sold or priced on a standalone basis. Costs to complete the Website and ready it for the end customer are minimal and are expensed to cost of revenue as incurred. Upon the completion of a customer’s signup and initial hosting of the Website, the subscription is offered free of charge for a two week trial period during which the customer can cancel at anytime. In accordance with Staff Accounting Bulletin (SAB) No. 104, after the two week trial period has ended, revenue is recognized when all of the following conditions are satisfied: (1) there is persuasive evidence of

an arrangement; (2) the service has been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection of our fees is probable. These criteria are met monthly as our service is provided on a month-to-month basis and collections are generally made in advance of the services. There is no provision for refunds as of June 30, 2008 or December 31, 2007, as the Company’s historical refund experience has been minimal.

Customers signup and agree to purchase the website service on a monthly or annual basis, at the customer’s option. The monthly customers pay monthly in advance of the services and as the services are performed we recognize subscription revenue on a daily basis.

For annual customers, upon payment of a full year’s subscription service, the subscription revenue is recorded as deferred revenue in our balance sheet. As services are performed, we recognize subscription revenue ratably on a daily basis.

Professional services revenue is generated from custom website design services. Our professional services revenue from contracts for custom website design is recorded using a proportional performance model based on labor hours incurred. The extent of progress toward completion is measured by the labor hours incurred as a percentage of total estimated labor hours to complete. Labor hours are the most appropriate measure to allocate revenue among reporting periods, as they are the primary input to the provision of our professional services.

Stock-Based Compensation—Accounting for stock options issued to employees follows the provisions of SFAS No. 123R, Share-Based Payment. This statement requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the award. We use the Black-Scholes option pricing model to measure the fair value of options granted to employees. This model requires significant estimates related to the award’s expected life and future stock price volatility.

Derivatives - We may issue notes payable to investors that contain rights to covert the note payable into shares of our common stock. We may also issue warrants to investors and to others for services rendered. When we issue such instruments, we are required to determine whether such instruments are required to be accounted for as equity or debt instruments under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (and its corresponding amendments) and EITF 00-19, Accounting for Derivative Financial Instruments Indexed To, and Potentially Settled In a Company’s Own Stock, as well as other applicable guidance. Related analyses vary based on the specific terms of each consummated transaction and the application of U.S. Generally Accepted Accounting Principles in this area can be complex.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurement, the FASB having previously concluded in those accounting pronouncement that fair value is the relevant measurement attribute. This statement does not require any new fair value measurements. However, for some entities, the application of the statement will change current practice. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We are currently reviewing the effect, if any, that this new pronouncement will have on our financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 123(R).” This statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets for a not-for-profit organization. This statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. We have reviewed the pronouncement, and we have determined it has no material impact on our consolidated financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities”, which applies to all entities with available-for-sale and trading securities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The adoption of SFAS 159 did not have any material impact on our consolidated financial position or results of operations.

In December 2007, FASB issued SFAS No. 141R, Business Combinations (SFAS 141R), which retains the underlying concepts of SFAS 141 in that all business combinations are still required to be accounted for at fair value under the acquisition method of accounting but SFAS 141R changed the method of applying the acquisition method in a number of significant aspects. Acquisition costs will generally be expensed as incurred; noncontrolling interests will be valued at fair value at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense. The provisions of SFAS 141R are effective for fiscal years beginning after December 15, 2008 with earlier adoption prohibited. We are currently analyzing the effect of adopting SFAS 141R.

In December 2007, FASB issued SFAS No. 160, Accounting and Reporting of Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS 160), which requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. It also amends certain aspects of ARB No. 51’s consolidation procedures for consistency with the requirements of SFAS 141R. This statement also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. The provisions of SFAS 160 are effective for fiscal years beginning after December 15, 2008 with earlier adoption prohibited. We are currently analyzing the effect of adopting SFAS 160.

Item 3. Quantitative and Qualitative Disclosures About Market Risk – N/A

Item 4. Controls and Procedures

Disclosure Controls And Procedures

As required by SEC Rule 13a-15 or Rule 15d-15, our Chief Executive and Chief Financial Officers carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing evaluation, we have concluded that our disclosure controls and procedures are not effective as of June 30, 2008 and that they do not allow for information required to be disclosed by us in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms; specifically, we had material weaknesses in our internal control over financial reporting as described in Item 8A and 8A(T) in our annual report on Form 10-KSB filed with the SEC on March 31, 2008 and those deficiencies have not yet been remediated by us. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive and Chief Financial Officers as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

Pursuant to Rule 13a-15(d) or Rule 15d-15(d) of the Exchange Act, our management, with participation with the Company’s Chief Executive and Chief Financial Officers, is responsible for evaluating any change in the company's internal control over financial reporting (as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act), that occurred during each of the issuer's fiscal quarters that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting.

Based on the foregoing evaluation, we have concluded that there was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2008, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We continue to have material weaknesses in our internal control over financial reporting as described in Item 8A and 8A(T) in our annual report on Form 10-KSB filed with the SEC on March 31, 2008 and those deficiencies have not yet been remediated by us.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings - None

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2008, four individual investors purchased an aggregate of $100,000 of 12% secured convertible notes and were issued warrants to purchase shares of our common stock. Each convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.14 of principal amount of their note for a maximum potential aggregate of 714,285 shares of common stock; in addition, the investors were issued warrants to purchase an aggregate of 357,143 shares of common stock at an exercise price of $.14 per share that expire five years from the date of issuance. Additionally, the convertible notes are secured by approximately 1.4 million restricted shares of our restricted common stock held by a third party. These collateral shares return to us and become canceled when the terms of the convertible notes have been satisfied. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

In May 2008, an investor purchased $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

In June 2008, the same investor purchased for a second investment, $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

In July 2008, the same investor purchased for a third investment, $242,400 of 15% secured convertible notes and was issued warrants to purchase shares of our common stock. The convertible note holder has the right, at any time, to convert their note into shares of our common stock at a conversion ratio of one share of common stock for each $0.25 of principal amount of their note for a maximum potential aggregate of 969,696 shares of common stock; in addition, the investors were issued “Series A Warrants" to purchase 96,969 shares of common stock at an exercise price of $.25 per share that expire five years from the date of issuance and “Series B Warrants” to purchase 96,969 shares of common stock at an exercise price of $.30 per share that expire five years from the date of issuance. The Series A Warrants also have a put option in the amount of $60,000. The Series B Warrants have no put option. The convertible note included an original issue discount of $42,400. Additionally, the convertible notes are secured by a security interest in all assets of the Company. The offer and sale of the securities underlying these convertible notes were effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Sections 4(2) and Section 4(6) of the Securities Act of 1933 and/or Rule 506 of Regulation D adopted thereunder.

Item 3. Defaults Upon Senior Securities – None

Item 4. Submission of Matters to a Vote of Security Holders

Effective May 9, 2008, a majority of our stockholders approved a written consent for the following items:

appoint, elect and ratify Mike Sawtell to hold the same office of Sole Director of the Board of the Directors until the 2009 annual meeting of Company shareholders or written consent of shareholders in lieu thereof.

ratify and approve the our reservation of thirty five million shares (35,000,000) of our common stock for issuance under the approved 2007 Incentive and Non-Statutory Stock Option Plan and corresponding amendment to such plan;

ratify the appointment of Haskell & White LLP, to be our Independent Accountants for fiscal year 2008.

Item 5. Other Information – None

Item 6. Exhibits

Exhibit No.		Description
2.1		Merger Agreement, dated January 16, 2007, between HomAssist Corporation and The Family Post, Inc. as filed on Form 8-K, filed February 1, 2007, incorporated by reference
3.1		Articles of Incorporation as filed on Form SB-2, filed April 28, 2005, incorporated by reference
3.2		Bylaws as filed on Form SB-2, filed April 28, 2005, incorporated by reference
3.3		Amendment to Bylaws as filed on Form 8-K, filed January 17, 2007, incorporated by reference
3.4		Certificate of Amendment to Articles of Incorporation as filed on Form 8-K, filed January 25, 2007, incorporated by reference
10.1		2007 Incentive and Non Statutory Stock Option Plan as filed on Form 8-K, filed February 1, 2007, incorporated by reference
10.2		Independent Consultant Stock Option Agreement dated as of July 1, 2005 between The Family Post and William Sawtell as filed on Form 8-K, filed February 1, 2007, incorporated by reference
10.3		Employment Agreement and Stock Option Agreement dated as of March 15, 2006 between The Family Post and Samir Patel as filed on Form 8-K, filed February 1, 2007, incorporated by reference
10.4		Executive Employment and Indemnification Agreement dated as of January 30, 2007, between us and Michael Sawtell as filed on Form 8-K, filed February 1, 2007, incorporated by reference
10.5		Executive Employment and Indemnification Agreement dated as of January 30, 2007, between us and Steven Dong as filed on Form 8-K, filed February 1, 2007, incorporated by reference
10.6		Form Stock Subscription Agreement, Form Stock Option Agreement, Form Amended Stock Subscription Agreement as filed on Form 8-K, filed February 1, 2007, incorporated by reference
10.7		Form of Stock Subscription Agreement, incorporated by reference from the Registrant’s Form 10-QSB, filed with the Securities and Exchange Commission on May 14, 2007.
10.8		Form of Convertible Note and Warrant Agreement, incorporated by reference from the Registrant’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 9, 2007.
10.9		Form of Regulation-S Stock Purchase Agreement between the Registrant and Imini Enterprises Corporation, dated January 8, 2008, incorporated by reference from the Registrant’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2008.
10.10		Form of Stock Subscription Agreement between the Registrant and Step Management Limited dated April 20, 2007, incorporated by reference from the Registrant’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2008.
10.11		Financial Advisory Agreement between the Registrant and Norm Farra dated September 29, 2007, incorporated by reference from the Registrant’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2008.
10.12		Investor Relations Agreement between the Registrant and Crown Financial dated November 13, 2007, incorporated by reference from the Registrant’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2008
10.13		Amendment to Investor Relations Agreement between the Registrant and Crown Financial Investment Group, LTD dated February 12, 2008, incorporated by reference from the Registrant’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2008
10.14		Partner Agreement between DigitalPost Interactive, Inc and BowTie, Inc. dated October 26, 2007 incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on November 1, 2007.
10.15		Agreement between DigitalPost Interactive, Inc and Upromise, Inc. dated November 9, 2007 incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on November 9, 2007.
10.16		Agreement between DigitalPost Interactive, Inc and Pictage, Inc. dated November 27, 2007 incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on November 28, 2007.
10.17		Agreement between DigitalPost Interactive, Inc. and Mitsubishi Digital Electronics America, Inc. dated January 8, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on January 9, 2008.
10.18		Agreement between DigitalPost Interactive, Inc. and Onscribe, Inc. dated February 12, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 15, 2008.
10.19		Agreement between DigitalPost Interactive, Inc. and Disneyland® Resort, A Division of Walt Disney World Co. dated March 21, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 21, 2008.
10.20		Agreement between DigitalPost Interactive, Inc. and Disneyland® Resort, A Division of Walt Disney World Co. and Taylor Morrison, Inc. dated March 21, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on March 21, 2008.
10.21		Form of Convertible Note and Warrant Agreement entered into by DigitalPost Interactive, Inc. in May 2008, incorporated by reference from the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on May 14, 2008.
10.22		Amendment to 2007 Incentive and Non-Statutory Stock Option Plan, as amended on May 9, 2008, incorporated by reference from the Registrant’s Form 10-Q filed with the Securities and Exchange Commission on May 14, 2008.
10.23		Agreement between DigitalPost Interactive, Inc. and Online Solutions, LLC, an affiliate of Kiddie Kandids Holdings, LLC, dated May 28, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 3, 2008.
10.24		Agreement between DigitalPost Interactive, Inc. and Disneyland® Resort, A Division of Walt Disney World Co. dated June 6, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on June 13, 2008.
10.25		Agreement between DigitalPost Interactive, Inc. and Disneyland® Resort, A Division of Walt Disney World Co. dated July 8, 2008, incorporated by reference from the Registrant’s Form 8-K filed with the Securities and Exchange Commission on July 10, 2008.
10.26		Form of Securities and Purchase Agreement, Convertible Note and Warrant Agreements entered into by DigitalPost Interactive, Inc. in May 2008, June 2008 and July 2008, filed with the Securities and Exchange Commission with this report.
10.27		Amendment to Investor Relations Agreement between the Registrant and Crown Financial Investment Group, LTD dated May 19, 2008, filed with the Securities and Exchange Commission with this report.
21.1		List of Subsidiaries of the Company as filed on form 8-K, filed January 30, 2007, as filed on form 8k, filed February 1, 2007, incorporated by reference from the Registrant’s Form 8-K/A No.3 filed with the Securities and Exchange Commission on April 30, 2007.
31.1		Rule 13a-14(a)/ 15d-14(a) Certification of Michael Sawtell
31.2		Rule 13a-14(a)/ 15d-14(a) Certification of Steven Dong
32.1		Certification Pursuant to 18 U.S.C. section 1350 of Michael Sawtell
32.2		Certification Pursuant to 18 U.S.C. section 1350 of Steven Dong

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

DIGITALPOST INTERACTIVE, INC. (Registrant)

August 14, 2008	/s/ Michael Sawtell
	Michael Sawtell
	Chief Executive Officer, President, and Sole Director


August 14, 2008	/s/ Steven Dong
	Steven Dong
	Chief Financial Officer

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DigitalPost Interactive (DGLP) Inactive 10-Q2008 Q2 Quarterly report

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