10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.20549

FORM 10-K

(Mark One)

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

For the fiscal year ended September 30, 2007

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 Number 000-17288

SECURE ALLIANCE HOLDINGS CORPORATION

(formerly known as Tidel Technologies, Inc.)

Delaware	75-2193593
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
5700 Northwest Central Drive, Suite 350	77092
Houston, Texas	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code (713) 783-8200

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

common stock, par value $.01 per share

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  *       No  T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  *       No  T

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 requirement for the past 90 days.  Yes  T  No  *

1

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   *

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer * Accelerated filer * Non-accelerated filer T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes  TNo  *

The aggregate market value of the 19,260,119 shares of common stock held by non-affiliates of the registrant based on the closing sale price on December 31, 2007 of $0.62 was $11,941,274. The number of shares of common stock outstanding as of the close of business on December 31, 2007 was 19,441,524.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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SECURE ALLIANCE HOLDINGS CORPORATION

TABLE OF CONTENTS

ANNUAL REPORT ON FORM 10-K

		PAGE
	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	6
Item 2.	Properties	7
Item 3.	Legal Proceedings	8
Item 4	Unregistered Sales of Equity Securities and Use of Proceeds	8
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities	9
Item 6.	Selected Financial Data	10
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A.	Quantitative and Qualitative Disclosure and Market Risk	21
Item 8.	Financial Statements and Supplementary Data	21
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	21
Item 9A.	Controls and Procedures	22
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	23
Item 11.	Executive Compensation	24
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	26
Item 13.	Certain Relationships and Related Transactions, and Director Independence	27
Item 14.	Principal Accounting Fees and Services	27
	PART IV
Item 15.	Exhibits and Financial Statement Schedules	28
Financial Statements		29
Signatures		51
Index to Exhibits		53

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PART I

ITEM 1. BUSINESS

(a) General Development of Business

Secure Alliance Holdings Corporation (the “Company,” “we,” “us,” or “our”) is a Delaware corporation which, through its wholly-owned subsidiaries, developed, manufactured, sold and supported automated teller machines (“ATMs”) and electronic cash security systems, consisting of the Timed Access Cash Controller (“TACC”) products and the Sentinel products (together, the “Cash Security” products).  On October 3, 2006 the Company changed its name from Tidel Technologies, Inc. to Secure Alliance Holdings Corporation.

We completed the sale of our ATM business on January 3, 2006 and the sale of our Cash Security business on October 2, 2006 as described more fully below.  On October 2, 2006, we became a shell public company with approximately $12.9 million in cash, cash equivalents and marketable securities held-to-maturity.

Before the sale of our Cash Security and ATM businesses, we were primarily engaged in the development, manufacturing, sale and support of ATM products and the Cash Security products, which were designed for the management of cash within various specialty retail markets.

Following the sale of our Cash Security and ATM businesses, we have had substantially no operations.

Subsequent events

On December 6, 2007, we entered into a definitive Agreement and Plan of Merger (“Merger Agreement”) by and among Sequoia Media Group, LC, a private Utah limited liability company (“Sequoia”), the Company and SMG Utah, LC, a Utah limited liability company and wholly owned subsidiary of the Company (“Merger Sub”).  Pursuant to the Merger Agreement, Merger Sub will merge with and into Sequoia (the “Merger”), with Sequoia continuing as the surviving entity in the Merger and each issued and outstanding Sequoia equity interest will automatically be converted into the right to receive 0.5806419 shares of the Company’s common stock, calculated after a 1 for 3 reverse stock split of the Company’s common stock contemplated to be effected prior to the Merger.  Immediately following the Merger, the members of Sequoia, in aggregate, will own approximately 80% of the equity interests in the Company and the stockholders of the Company will own the remaining approximately 20% equity interests in the combined company.

In addition, pursuant to a Loan and Security Agreement (“Loan Agreement”) entered into between the Company and Sequoia on December 6, 2007, the Company has agreed to extend up to $2.5 million in secured financing to Sequoia.  Under the terms of the Loan Agreement, Sequoia has agreed to pay interest on the loan at a rate per annum equal to 10%.  Interest on the loan is payable on the scheduled maturity date, December 31, 2008.  In addition, if the loan obligations have not been paid in full on or prior to the scheduled maturity date, a monthly fee equal to 10% of the outstanding loan obligations is payable to the Company by Sequoia on the last day of each calendar month for which the loan obligations remain outstanding.

In addition, prior to the effectiveness of the Merger, the Company proposes to (i) form a wholly owned subsidiary, and (ii) contribute to such subsidiary approximately $2.2 million in cash, 2,022,000 shares of Cashbox, a publicly listed UK company, and amounts receivable under certain promissory notes not associated with the Sequoia transaction.  The common stock of such subsidiary will be distributed, to the Company stockholders as of a date prior to the Merger, at such time as the distribution can be effected in compliance with applicable law, whether pursuant to an effective registration statement or a valid exemption from registration.

Our Board of Directors approved the Merger Agreement and the foregoing transactions at a special meeting on November 29, 2007.  The Merger is subject to stockholder approval and other customary conditions and is expected to be completed during the first quarter of 2008. If the Company terminates the Merger Agreement before the consummation of the Merger in connection with the Company’s acceptance of a superior proposal, the Company has agreed to pay Sequoia a termination fee of $1,000,000 in cash under certain circumstances. At closing of the Merger, outstanding stock options granted to our executive officers, Jerrell G. Clay and Stephen P. Griggs, to purchase an aggregate 1,900,000 shares of our common stock at exercise prices of $0.62 per share will fully vest and become immediately exercisable.

Sequoia is committed to revolutionizing the way life events and memories are shared and treasured through personal digital expressions.  Sequoia developed aVinci Experience products to simplify and automate the process of creating professional-quality multi-media productions using personal photos and videos.  The patented technology provides complete, refined products, including DVD’s, photo books and posters.  aVinci distributes products through leading retailers, photo websites and image service providers.

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(b) Financial Information about Operating Segments

Since October 2, 2006, we have had substantially no operations.  Prior to October 2, 2006, we conducted business within one operating segment, principally in the United States.

(c) Narrative Description of Business

Sale of Cash Security Business

On September 25, 2006, the holders of a majority of shares of our outstanding common stock approved the sale of our electronic cash security business, consisting of (a) timed access cash controllers, (b) the Sentinel products, (c) the servicing, maintenance and repair of the timed access cash controllers or Sentinel products and (d) all other assets and business operations associated with the foregoing (the “Cash Security Business Sale”) to Sentinel Operating, L.P., a purchaser led by a management buyout team that included our former director and Interim Chief Executive Officer, Mark K. Levenick, and our former director, Raymond P. Landry. The Asset Purchase Agreement for the Cash Security Business Sale provided for a cash purchase price of $15,500,000, less $100,000 as consideration for Sentinel Operating, L.P. assuming certain potential liability in connection with ongoing litigation, and less a working capital deficit adjustment of $1,629,968, resulting in a net purchase price of $13,770,032. In addition, Sentinel Operating L.P. paid a cash adjustment of $2,458,718 to the Company at closing. The Cash Security Business Sale was completed on October 2, 2006. During the year ended September 30, 2007, we recorded a gain on the sale of the Cash Security business of $13,605,066.

Sale of ATM Business

On February 19, 2005, the Company and its wholly-owned subsidiary, Secure Alliance, L.P. (formerly known as Tidel Engineering, L.P.), entered into an asset purchase agreement (the “NCR Asset Purchase Agreement”) with NCR EasyPoint LLC f/k/a NCR Texas LLC (“NCR EasyPoint”), a wholly owned subsidiary of NCR Corporation, for the sale of our ATM Business (the “ATM Business Sale”).  On December 28, 2005, the holders of a majority of our shares of outstanding common stock approved the NCR Asset Purchase Agreement.

On January 3, 2006, we completed the ATM Business Sale for a purchase price was $10,440,000 of which $8,200,000 was paid to Laurus into a collateral account to be held by Laurus as collateral for the satisfaction of all monetary obligations payable to Laurus and the remaining $2,240,000 was paid to the Company. This transaction resulted in a book gain of $3,536,105.

Agreements with Laurus

Pursuant to the Agreement Regarding the NCR Transaction and Other Asset Sales, dated November 26, 2004 (the “Asset Sales Agreement”), by and between the Company and Laurus Master Fund, Ltd. (“Laurus”), the Company agreed to pay to Laurus a portion of the excess net proceeds from the ATM Business Sale and the Cash Security Business Sale.

On June 9, 2006, we and Laurus entered into the Laurus Termination Agreement which, among other things, provided for the payment of a sale fee of $8,508,963 to Laurus (the “Sale Fee”) in full satisfaction of all amounts payable to Laurus under the Asset Sales Agreement, including fees payable in respect of the ATM Business Sale and the Cash Security Business Sale. The Laurus Termination Agreement further provided that, upon payment of the Sale Fee and performance by the Company of its obligations under the Stock Redemption Agreement described below, neither the Company nor any of its subsidiaries will have any further obligation to Laurus. Further, each of the Company and Laurus has granted each other and their respective affiliates and subsidiaries reciprocal releases from and against any claims and causes of action that may exist.

We and Laurus entered a Stock Redemption Agreement on January 12, 2006 and as subsequently amended. Pursuant to the terms of the Stock Redemption Agreement: we agreed, among other things, (i) to repurchase from Laurus, upon the closing of the Cash Security Business Sale, all shares of our common stock held by Laurus, and (ii) Laurus agreed to the cancellation as of the closing date of the Cash Security Business Sale of warrants it holds to purchase 4,750,000 shares of our common stock at an exercise price of $.30 per share, and not to exercise such warrants prior to the earlier to occur of September 30, 2006 and the date on which the Asset Purchase Agreement is terminated.

5

Following the Cash Security Business Sale, on October 2, 2006, the Company applied the net purchase price, the cash adjustment, and $5,400,000 in proceeds (together with accrued interest of $206,799) from the ATM Business Sale, to pay the following amounts to Laurus: (i) $8,508,963 pursuant to the terms of the Laurus Termination Agreement and (ii) $6,545,340 representing the purchase from Laurus by the Company of 19,251,000 shares of Company common stock pursuant to the terms of the Stock Redemption Agreement. Following both such payments to Laurus, the Company received $6,781,246 in net proceeds from the Cash Security Business Sale.

On October 2, 2006, following the foregoing payments to Laurus pursuant to the terms of the Laurus Termination Agreement and the Stock Redemption Agreement, no further fees remained payable by the Company to Laurus and, to our knowledge, Laurus does not own any shares of the Company.

Customers

We had no operations or customers during the fiscal year ended September 30, 2007. Only one customer accounted for more than 10% of net sales for the fiscal years ended 2006 and 2005.

Compliance with Federal, State and Local Environmental Laws

Compliance with federal, state and local environmental protection laws had no material effect upon our capital expenditures, earnings or competitive position for the years ended September 30, 2007, 2006 and 2005.

Employees

At September 30, 2007, we had two employees, which have served as executive officers since October 3, 2006.  Following the sale of our Cash Security business on October 2, 2006, we had no employees.  At September 30, 2006, we had 57 employees, which consisted of employees of the Cash Security business that became employees of the buyer following the closing of the Cash Security Business Sale on October 2, 2006.  At September 30, 2005, we employed approximately 107 people. On January 3, 2006, 56 employees associated with our ATM Business became employees of NCR EasyPoint following the closing of the ATM Business Sale.

(d) Financial Information about Geographic Areas

We had substantially no operations during the fiscal year 2007.  The vast majority of our sales in fiscal 2006 and 2005 were to customers within the United States. Sales to customers outside the United States, as a percentage of total revenues, were approximately 7% and 14% in the fiscal years ended September 30, 2006 and 2005, respectively.

Substantially all of our assets were located within the United States during fiscal years 2007, 2006 and 2005.

ITEM 1A. RISK FACTORS

There are several risks inherent in our business including, but not limited to, the following:

Risks Relating to Our Business

Following the Cash Security Business Sale, we have no operations.

Following the closing of the Cash Security Business Sale on October 2, 2006, we have substantially no operations and only two employees resulting in a development stage operation.

We have limited management and other resources.

Our ability to manage any future operations effectively will require us to hire new employees, to integrate new management and employees into any future operations, financial and management systems, controls and facilities. Our failure to handle the issues we face effectively, including any failure to integrate new management controls, systems and procedures, could materially adversely affect our company, results of operations and financial condition.

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Risks Relating to the Merger and Related Transactions

There is no assurance that the Merger will be consummated.

Consummation of the Merger is subject to a number of conditions including, without limitation, its approval by the holders of a majority of shares of our common stock.  There is no assurance that the Merger will receive requisite stockholder approval.  Should we fail to obtain requisite stockholder approval we will be unable to consummate the Merger.

Consummation of the Merger will result in a change of control and a fundamental change to our operations.

The Merger will result in a change of control of the Company.  In addition, following the Merger we will no longer be a shell company but will instead be an operating company and will be subject to any risks associated with Sequoia’s business.

The Merger will result in substantial dilution of the ownership interest of current stockholders.

Immediately following the Merger, our stockholders will own approximately 20% of the Company’s outstanding common stock on a nondiluted basis.  This represents substantial dilution of the ownership interest of current stockholders.

Failure to complete the Merger could cause our stock price to decline and could harm our future business and operations.

The Merger Agreement contains conditions that we must meet in order to consummate the Merger.  In addition, the Merger Agreement may be terminated by either us or Sequoia under certain circumstances.  If the Merger is not completed for any reason, we may be subject to a number of risks, including the following:

· depending on the reasons for termination, we may be required to pay a termination fee of $1,000,000 to Sequoia if we have selected a superior proposal;

· the market price of our common stock may decline to the extent that the current market price reflects a market assumption that the Merger will be completed; and

· many costs related to the Merger such as legal, accounting, financial advisor and financial printing fees, have to be paid regardless of whether the Merger is completed;

The reverse stock split may not increase the market price of our common stock by a multiple we expect.

While we expect that the reverse stock split to be effected prior to the Merger will result in an increase in the market price of our common stock, there can be no assurance that the reverse stock split will increase the market price of our common stock by a multiple equal to the exchange number or result in the permanent increase in the market price (which is dependent on many factors, including our performance and prospects).  Also, should the market price of our common stock decline, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would pertain in the absence of a reverse stock split.

The reverse stock split may increase our number of odd lot stockholders.

The reverse stock split to be effected prior to the Merger may increase the number of our stockholders who own odd lots (owners of less than 100 shares).  Stockholders who hold odd lots typically will experience an increase in the cost of selling their shares as well as possible greater difficulty in effecting such sales.

ITEM 2. PROPERTIES

At September 30, 2007, we had no owned or leased real property.  At September 30, 2006, the Cash Security business had a leased warehouse facility occupying approximately 50,000 square feet at 2025 W. Beltline Road, Suite 114Carrollton, Texas75006.  On October 2, 2006, this lease was transferred to the buyer at the closing of the Cash Security Business Sale.

At September 30, 2007, we owned no tangible property and equipment.  At September 30, 2006 and 2005, we owned tangible property and equipment with a cost basis of approximately $1.4 million and $5.5 million, respectively, which included assets held for sale from discontinued operations.

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ITEM 3. LEGAL PROCEEDINGS

On June 9, 2005, Corporate Safe Specialists, Inc. (“CSS”) filed a lawsuit against Secure Alliance Holdings Corporation and our wholly owned subsidiary, Secure Alliance, L.P. The lawsuit, Civil Action No. 02-C-3421, was filed in the United States District Court of the Northern District of Illinois, Eastern Division (the “CSS Lawsuit”). CSS alleges that the Sentinel product sold by Secure Alliance, L.P. infringes on one or more patent claims found in CSS patent U.S. Patent No. 6,885,281 (the ‘281 patent). CSS sought injunctive relief against future infringement, unspecified damages for past infringement and attorney’s fees and costs. Secure Alliance Holdings Corporation was released from this lawsuit, but Secure Alliance, L.P. remained a defendant.

As part of the Cash Security Business Sale, the buyer of the Cash Security business, Sentinel Operating, L.P., agreed to undertake and have the sole right to direct on behalf of itself and us, the defense of the CSS Lawsuit, with counsel of its choice, provided that in the event we incur any adverse consequences in connection with the CSS Lawsuit subsequent to the Cash Security Business Sale, then Sentinel Operating, L.P. will indemnify us from and against the entirety of any such adverse consequences to the extent they are incurred as a result of the breach of the Cash Security Asset Purchase Agreement or our negligent action or inaction.

On March 31, 2007, CSS, Secure Alliance Holdings Corporation and Secure Alliance, L.P. (formerly known as Tidel Engineering, L.P.) entered into a settlement and mutual release agreement whereby the parties jointly moved to dismiss all claims and counterclaims in the CSS Lawsuit. The parties agreed to pay no monetary settlement and each bear its own legal costs and expenses. Pursuant to the settlement, we agreed not to make, use, sell or offer for sale any safe that infringes upon the ‘281 patent during the period of time the ‘281 patent is valid; however, we and our predecessor may challenge, contest, or raise as a defense the validity of the ‘281 patent if CSS or any other party files a claim against us asserting infringement of the ‘281 patent.

On April 16, 2007, Fire King International, LLC (“Fire King”) filed a lawsuit against Corporate Safe Specialists, Inc., Tidel Technologies, Inc. and Tidel Engineering, LP. The lawsuit, Civil Action No. 03-07CV0655-G, was filed in the United States District Court of the Northern District of Texas, Dallas Division. Fire King alleges that the Sentinel product previously sold by the Company’s predecessor infringes on one or more patent claims found in Fire King patent U.S. Patent No. 7,063,252 (the ‘252 patent). Fire King sought injunctive relief against future infringement, unspecified damages for past infringement and attorney’s fees and costs.

On September 14, 2007, Fire King, Secure Alliance Holdings Corporation and Secure Alliance L.P. (formerly known as Tidel Engineering, L.P.) entered into a confidential settlement and mutual release agreement whereby the parties jointly moved to dismiss all claims in the Fire King lawsuit. In connection therewith, we paid an undisclosed amount to Fire King to settle a disputed claim and admitted no liability or wrongdoing.  The court has dismissed Fire King’s claims against the Company with prejudice.

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

None.

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PART II

ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock has traded over-the-counter on the Pink Sheets under the symbol “SAHC” since June 19, 2007.  From March 26, 2003 to June 18, 2007, our common stock traded over-the-counter on the Pink Sheets under the symbol “ATMS”.  From February 1998 to March 25, 2003, our common stock traded on the NASDAQ stock market under the symbol “ATMS”.  The following table sets forth the quarterly high and low bid information for our common stock for the three-year period ended September 30, 2007:

	2007				2006				2005
Fiscal Quarter Ended:	High		Low		High		Low		High		Low
December 31,	$	0.48	$	0.35	$	.40	$	.22	$	.72	$	.45
March 31,		0.67		0.46		.37		.23		.47		.14
June 30,		0.96		0.62		.35		.27		.36		.12
September 30,		0.90		0.71		.42		.31		.50		.27
Fiscal Year		0.96		0.35		.42		.22		.72		.12

Holders

As of September 30, 2007, there were approximately 975 holders of record of our common stock.

Dividends

We have not paid any dividends in the past, and do not anticipate paying dividends in the foreseeable future.  We were restricted from paying dividends pursuant to financing arrangements with Laurus which were terminated on October 2, 2006.

Securities Authorized for Issuance under Equity Compensation Plans

We adopted the Tidel Technologies, Inc. 1997 Long-Term Incentive Plan (the “1997 Plan”) effective July 15, 1997. The 1997 Plan permits the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock and other stock-based awards to our employees or directors or our subsidiaries. Under the 1997 Plan, up to 2,000,000 shares of common stock may be awarded. The number of shares issued or reserved pursuant to the 1997 Plan (or pursuant to outstanding awards) are subject to adjustment on account of mergers, consolidations, reorganization, stock splits, stock dividends and other dilutive changes in the common stock. Shares of common stock covered by awards that expire, terminate, or lapse, will again be available for grant under the 1997 Plan.  On March 21, 2007, the Company awarded Messrs. Griggs and Clay each 950,000 stock options to purchase our common stock at an exercise price of $0.62 per share pursuant to the Company's 1997 Long-Term Incentive Plan. Of this award, 34% of the options vest on the first anniversary of the date of the grant, 33% of the options vest on the second anniversary of the date of the grant and the remaining 33% of the options vest on the third anniversary of the date of the grant. In addition, 100% of the options vest upon a change of control.

The following table provides information regarding common stock authorized for issuance under our compensation plans as of September 30, 2007:

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Equity Compensation Plan Information

As of September 30, 2007

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		1,900,000		$0.62		32,950
Equity compensation plans not approved by security holders		—		—		—
Total		1,900,000		$0.62		32,950

Recent Sales of Unregistered Securities

At September 30, 2007, we had outstanding warrants to purchase 697,500 shares of common stock that expire at various dates through November 2010. The warrants had exercise prices ranging from $0.40 to $0.68 per share and, if exercised, would generate proceeds to us of approximately $419,000.

The following sales of unregistered securities were sold by the Company during the three years ended September 30, 2007 in reliance on the exemptions from registration contained in Section 4(2) and Regulation D promulgated under the Securities Act of 1933:

During the quarter ended March 31, 2007, we issued 21,739 shares of our restricted common stock with a value of $10,000 to a company pursuant to a consulting agreement.

During the quarter ended December 31, 2006, stock options issued pursuant to our 1997 Long-Term Incentive Plan were exercised by three individuals for 27,250 shares of our common stock generating aggregate proceeds of $6,813. During the quarter ended December 31, 2006, warrants were exercised by two holders for 56,825 shares of our common stock generating aggregate proceeds of $22,500.

In connection with the Cash Security Business Sale and pursuant to the terms of the Exercise and Conversion Agreement we entered into with Laurus on January 12, 2006, Laurus converted $5,400,000 in aggregate principal amount of convertible Company debt it held into 18,000,000 shares of our common stock.

On October 2, 2006, pursuant to the terms of the Stock Redemption Agreement (i) we agreed, among other things, to repurchase from Laurus, upon the closing of the Cash Security Business Sale, all shares of our common stock held by Laurus, and (ii) Laurus agreed to the cancellation as of the closing date of the Cash Security Business Sale of warrants it held to purchase 4,750,000 shares of our common stock at an exercise price of $.30 per share.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data presented below is derived from our Consolidated Financial Statements. This data should be read in conjunction with the Consolidated Financial Statements and its notes and with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.

The Consolidated Financial Statements for 2003 through 2007 were audited by Hein & Associates LLP.

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	Years Ended September 30,
SELECTED STATEMENT OF OPERATIONS DATA:(1)	2007		2006		2005			2004		2003
Net income (loss) (2)	$	6,268	$	4,862	$	(3,286	)	$	11,318	$	(9,237	)
Net income (loss) per share:
Basic		0.33		0.15		(0.16	)		0.65		(0.53	)
Diluted		0.32		0.15		(0.16	)		0.37		(0.53	)

	As of September 30,
SELECTED BALANCE SHEET DATA: (1)	2007		2006		2005		2004		2003
Current assets	$	12,769	$	19,081	$	16,908	$	10,129	$	11,773
Current liabilities		141		11,408		13,177		8,190		32,109
Working capital (deficit)		12,628		7,673		3,731		1,939		(20,336	)
Total assets		12,773		19,085		17,537		10,778		14,430
Total short-term notes payable and long-term debt, net of debt discount		—		—		4,421		175		2,279
Shareholders’ equity (deficit)		12,632		7,677		2,263		2,588		(17,679	)

(1) All amounts are in thousands, except per share dollar amounts.

(2) Income tax expense (benefit) was $75,808, $159,546, $0, $(81,229) and $0, for the years ended September 30, 2007, 2006, 2005, 2004 and 2003, respectively.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(a) General

On January 3, 2006, we completed the ATM Business Sale. The total purchase price was $10,440,000 of which $8,200,000 was funded into a collateral account for the benefit of Laurus to be applied towards the repayment of our outstanding obligations due Laurus. See “Liquidity and Capital Resources” under this item for a detailed discussion of these financing transactions with Laurus.

On October 2, 2006 we completed the Cash Security Business Sale pursuant to the Cash Security Asset Purchase Agreement. The Cash Security Asset Purchase Agreement provided for a cash purchase price of $15,500,000, less $100,000 as consideration for the buyer, Sentinel Operating, L.P. assuming certain potential liability in connection with ongoing litigation and less a working capital deficit adjustment of $1,629,968, which resulted in a net purchase price of $13,770,032. In addition, Sentinel Operating, L.P. paid a cash adjustment of $2,458,718 to us at closing. We applied the net purchase price, the cash adjustment, and $5,400,000 in proceeds (together with accrued interest of $206,798) from the ATM Business Sale, to pay the following amounts to Laurus: (i) $8,508,963 pursuant to the terms of the Laurus Termination Agreement and (ii) $6,545,340 representing the purchase from Laurus by us of 19,251,000 shares of our common stock pursuant to the terms of the Stock Redemption Agreement. Following both such payments to Laurus, we received $6,781,245 in net proceeds from the Cash Security Business Sale.

Upon closing of the Cash Security Business Sale, we had cash, cash equivalents and marketable securities held-to-maturity of approximately $12.9 million, or approximately $0.66 per share based upon 19,426,210 shares outstanding.  Since October 2, 2006, we have had substantially no operations.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We must apply significant, subjective and complex estimates and judgments in this process. Among the factors, but not fully inclusive of all factors, that may be considered by management in these processes are: the range of accounting policies permitted by accounting principles generally accepted in the United States; management’s understanding of our business; expected rates of business and operational change; sensitivity and volatility associated with the assumptions used in developing estimates; and whether historical trends are expected to be representative of future trends. Among the most subjective judgments employed in the preparation of these financial statements are the collectibility of contract receivables and claims, the fair value of our inventory, the depreciable lives of and future cash flows to be provided by our equipment and long-lived assets, the expected timing of the sale of products, estimates for the number and related costs of insurance claims for medical care obligations, judgments regarding the outcomes of pending and potential litigation and certain judgments regarding the nature of income and expenditures for tax purposes. We review all significant estimates on a recurring basis and record the effect of any necessary adjustments prior to publication of our financial statements. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Because of the inherent uncertainties in this process, actual future results could differ from those expected at the reporting date.

11

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, assuming the Company continues as a going concern, which contemplates the realization of the assets and the satisfaction of liabilities in the normal course of business. Our significant accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements included in Part IV of this Annual Report. We consider certain accounting policies to be critical policies due to the significant judgments, subjective and complex estimation processes and uncertainties involved for each in the preparation of our Consolidated Financial Statements. We believe the following represents our critical accounting policies. We have discussed our critical accounting policies and estimates, together with any changes therein, with the audit committee of our Board of Directors.

(b) Impact of Recently Issued Accounting Standards

In July 2006, the FASB issued Final Interpretation No. (“FIN”) 48, Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS 109, which clarifies the accounting for income taxes by prescribing the minimum recognition threshold an uncertain tax position is required to meet before tax benefits associated with such uncertain tax position are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. In addition, FIN 48 excludes income taxes from the scope of SFAS 5, Accounting for Contingencies. FIN 48 is effective for fiscal years beginning after December 15, 2006. Differences between the amounts recognized in the consolidated balance sheets prior to the adoption of FIN 48 and the amounts reported after adoption are accounted for as a cumulative-effect adjustment to the beginning balance of retained earnings upon adoption of FIN 48. FIN 48 also requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as a current or non-current liability, based upon the timing of the ultimate payment to a taxing authority. We will adopt FIN 48 as of October 1, 2007 and are in the process of finalizing the effect FIN 48 will have on our financial statements. Under the guidance of FIN 48, management estimates that our income tax reserve may increase to approximately $2.3 million, which is subject to revision when management completes an analysis of the impact of FIN 48.  Upon completion of such analysis, it is possible that this difference will be recorded in retained earnings as a cumulative effect adjustment during the quarter ended December 31, 2007.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”).  SFAS 157 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  It establishes a fair value hierarchy and expands disclosures about fair value measurements in both interim and annual periods. SFAS 157 will be effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.  The Company does not expect SFAS 157 to have a material effect on the Company’s consolidated financial position or results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”).  SFAS 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”) and requires an entity to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred.  SFAS 159 will be effective for fiscal years beginning after November 15, 2007.  The Company does not expect SFAS 159 to have a material effect on the Company’s consolidated financial position or results of operations.

In November 2007, the FASB issued SFAS No. 141(R), Business Combination and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARBNo. 51 (FAS 160). FAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. FAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. FAS 141(R) and FAS 160 are effective for both public and private companies for fiscal years beginning on of after December 15, 2008.  FAS 141(R) will be applied prospectively. FAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests.  All other requirements of FAS 160 will be applied prospectively.  Early adoption is prohibited for both standards.  Management is currently evaluating the requirements of FAS 141(R) and FAS 160 but does not expect them to have a material effect on the Company’s consolidated financial position or results of operation.

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(c) Results of Operations

Operating Segments

Since October 2, 2006, we have had substantially no operations.  Prior to October 2, 2006, we conducted business within one operating segment, principally in the United States.

Product Net Sales for ATM Business and Cash Security Business

A breakdown of net sales by individual product line is provided in the following table:

	(dollars in thousands)
	2007		2006		2005
ATM Business	$	—	$	3,848	$	15,498
Cash Security Business:
TACC		—		4,219		5,269
Sentinel		—		10,342		12,468
Parts & Other		—		1,519		1,696
Total Cash Security Business		—		16,080		19,433
Total	$	—	$	19,928	$	34,931

Gross Profit, Operating Expenses and Non-Operating Items

Continuing Operations

Due to the requirement to classify our only two product lines as discontinued operations, the results of continuing operations consist primarily of the corporate overhead and debt-related costs.

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An analysis of continuing operations and assets and liabilities is provided in the following tables:

CONTINUING OPERATIONS

SELECTED BALANCE SHEET DATA

(UNAUDITED)

	September 30, 2007		September 30, 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	882,116	$	1,264,463
Certificates of deposits		11,177,567		—
Restricted cash		—		5,400,000
Marketable securities held-to-maturity		—		4,899,249
Marketable securities available-for-sale		505,500		851,939
Trade account receivable		—		—
Notes and other receivables		204,113		220,689
Prepaid expenses and other		—		132,036
Total current assets		12,769,296		12,768,376
Other assets		4,000		4,000
Total assets	$	12,773,296	$	12,772,376
LIABILITIES
Current Liabilities:
Accounts payable		—		221,295
Accrued interest payable		—		2,000,000
Shares to be redeemed		—		5,400,000
Other accrued liabilities		141,401		150,194
Total liabilities	$	141,401	$	7,771,489

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CONTINUING OPERATIONS

SELECTED OPERATING DATA

(UNAUDITED)

	Years Ended September 30,
	2007			2006			2005
Revenues	$	—		$	—		$	—
Selling, general and administrative		1,333,467			3,065,064			1,805,484
Depreciation and amortization		—			2,678			4,977
Operating loss		(1,333,467	)		(3,067,742	)		(1,810,461	)
Other income (expense):
Reorganization fee paid to Laurus		(6,508,963	)		—			—
Gain on investment in 3CI		—			5,380,121			—
Gain on collection of account receivable		—			598,496			—
Loss on disposal of fixed assets		—			(7,455	)		—
Recovery from CCC bankruptcy		—			105,000			—
Amortization of debt discount and deferred financing costs		—			(4,078,738	)		(3,816,178	)
Interest income		580,861			392,564
Interest expense		—			(235,765	)		(2,732,891	)
Total other income expense		(5,928,102	)		2,154,223			(6,549,069	)
Loss before income tax expense		(7,261,569	)		(913,519	)		(8,359,530	)
Income tax expense		75,808			159,546			—
Loss from continuing operations	$	(7,337,377	)	$	(1,073,065	)	$	(8,359,530	)

Year Ended September 30, 2007 Compared with the Year Ended September 30, 2006

Selling, general and administrative expenses for the year ended September 30, 2007 were $1,333,467, which is a decrease of approximately 56% from the year ended September 30, 2006. The decrease is primarily due to lower professional fees as a result of the sale of both the ATM business and the Cash Security business.

Depreciation and amortization for the year ended September 30, 2007 and 2006 was $0 and $2,678, respectively.  We closed our corporate office on March 31, 2006.

Interest expense was $0 for the year ended September 30, 2007 compared with $4,314,503 for the year ended September 30, 2006. Interest expense for the fiscal year ended September 30, 2006 included three months of amortization related to debt discount and other deferred debt issuance costs in the amount of $985,827, and a one-time charge in January 2006 of approximately $3.1 million of debt discount and deferred debt issuance costs as a result of the early extinguishment of the Laurus debt.

Income tax expense (benefit)related to alternative minimum tax of $75,808 and $159,546 incurred during fiscal years ended September 30, 2007 and 2006, respectively.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not, that some portion or all of the deferred tax assets will be realized. We have established a valuation allowance for such deferred tax assets to the extent such amounts are not utilized to offset existing deferred tax liabilities reversing in the same periods.

We recorded a loss from continuing operations of $(7,337,377) and $(1,073,065) for the years ended September 30, 2007 and 2006, respectively.  The significant change in the loss is primarily a result of the $6.5 million charge for the reorganization fee paid to Laurus partially offset by interest income of $0.6 million during the fiscal year ended September 30, 2007.

15

Year Ended September 30, 2006 Compared with the Year Ended September 30, 2005

Selling, general and administrative expenses for the year ended September 30, 2006 were $3,065,064, which is an increase of approximately 70% from the year ended September 30, 2005. The increase primarily related to increased legal and consulting fees and employee bonuses.

Depreciation and amortization for the year ended September 30, 2006 and 2005 was $2,678 and $4,977, respectively.

Interest expense was $4,314,503 for the year ended September 30, 2006 compared with $6,549,069 for the year ended September 30, 2005. The decrease is a result of the payoff of Laurus debt with the proceeds from the sale of the ATM Business in January 2006.

Income tax expense (benefit). In assessing the realizability of deferred tax asset, management considers whether it is more likely than not, that some portion or all of the deferred tax assets will be realized. We have established a valuation allowance for such deferred tax assets to the extent such amounts are not utilized to offset existing deferred tax liabilities reversing in the same periods.

We recorded a net loss from continuing operations of $(1,073,065) and $(8,359,530) for the years ended September 30, 2006 and 2005, respectively.  The improvement was principally a result of gains in 2006 from the disposal of the investment in 3CI common stock, collection of an account receivable and the recovery from the CCC bankruptcy.

Discontinued Operations (ATM Business)

We committed to a plan to sell the ATM Business during the first quarter ended December 31, 2004. On February 19, 2005, the Company and its wholly-owned subsidiary, Secure Alliance, L.P., entered into the NCR Asset Purchase Agreement with NCR EasyPoint, a wholly owned subsidiary of NCR Corporation, for the sale of our ATM Business. We classified our ATM Business as Assets Held for Sale as of September 30, 2005. On December 28, 2005, the holders of 62.2% of our shares of outstanding common stock approved the NCR Asset Purchase Agreement.

On January 3, 2006, we completed the ATM Business Sale for a purchase price was $10,440,000 of which $8,200,000 was paid to Laurus into a collateral account to be held by Laurus as collateral for the satisfaction of all monetary obligations payable to Laurus and the remaining $2,240,000 was paid to the Company. This sale resulted in a book gain of $3,536,105.

The ATM products are low-cost, cash-dispensing automated teller machines that are primarily designed for the off-premise, or non-bank, markets.  An analysis of the discontinued operations of the ATM Business is as follows:

DISCONTINUED OPERATIONS — ATM BUSINESS

SELECTED OPERATING DATA

(UNAUDITED)

	Years Ended September 30,
	2007		2006		2005
Net sales	$	—	$	3,847,874	$	15,497,834
Cost of sales		—		2,592,268		9,508,120
Gross profit		—		1,255,606		5,989,714
Selling, general and administrative		—		880,941		4,768,880
Depreciation and amortization		—		46,048		255,967
Operating income		—		328,617		964,867
Non-operating expense		—		—		—
Net income	$	—	$	328,617	$	964,867

Year ended September 30, 2007 Compared with Year Ended September 30, 2006

There were no operations from the ATM business during the fiscal year ended September 30, 2007.  The sale of the ATM business was completed on January 3, 2006 and $3,536,105 was recognized as a gain on sale of the ATM business during the fiscal year ended September 30, 2006.

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Year ended September 30, 2006 Compared with Year Ended September 30, 2005

Net Sales from the ATM Business were $3.8 million for the year ended September 30, 2006, representing a decrease of 75% from net sales of $15.5 million for the year ended September 30, 2005. The decrease was a result of the sale of the ATM Business completed on January 3, 2006.

Gross profit on net sales for the year ended September 30, 2006 decreased by approximately $4.7 million from a year ago. Gross profit as a percentage of sales was 33% and 39% for the year ended September 30, 2006 and 2005, respectively. The decrease in gross profit is primarily related to the sale of the ATM Business completed on January 3, 2006.

Selling, general and administrative expenses for the year ended September 30, 2006 decreased 82% compared with the year ended September 30, 2005. The decrease is primarily related to the sale of the ATM Business completed on January 3, 2006.

Depreciation and amortization for the year ended September 30, 2006 and 2005 was $46,048 and $255,967, respectively.

The ATM Business recorded a net income of $328,617 and $964,867 for the year ended September 30, 2006 and 2005, respectively.

Discontinued Operations (Cash Security Business)

We completed the Cash Security Business Sale on October 2, 2006. We classified the Cash Security Business as Assets Held for Sale as of September 30, 2006. An analysis of the discontinued operations of the Cash Security Business is as follows:

DISCONTINUED OPERATIONS — CASH SECURITY BUSINESS

SELECTED BALANCE SHEET DATA

(UNAUDITED)

	September 30, 2007		September 30, 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	2,048,275
Trade accounts receivable, net of allowance of approximately $0 and $45,000, respectively		—		1,591,522
Inventories		—		2,051,764
Prepaid expenses and other		—		73,089
Total current assets		—		5,764,650
Property, plant and equipment, at cost		—		316,608
Accumulated depreciation		—		(18,595	)
Net property, plant and equipment		—		298,013
Other assets		—		250,000
Total assets	$	—	$	6,312,663
LIABILITIES
Current Liabilities:
Current maturities		—		1,981
Accounts payable		—		1,514,731
Other accrued expenses		—		2,098,675
Total current liabilities		—		3,615,387
Long-term debt, net of current maturities		—		20,982
Total liabilities	$	—	$	3,636,369

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DISCONTINUED OPERATIONS — CASH SECURITY BUSINESS

SELECTED OPERATING DATA

(UNAUDITED)

	Years Ended September 30,
	2007		2006			2005
Net sales	$	—	$	16,080,069		$	19,435,222
Cost of sales		—		9,476,386			10,870,947
Gross profit		—		6,603,683			8,564,275
Selling, general and administrative		—		4,541,774			4,449,550
Depreciation and amortization		—		—			29,868
Operating income (loss)		—		2,061,907			4,084,857
Non-operating expense		—		(8,529	)		(23,884	)
Net income (loss)	$	—	$	2,070,436		$	4,108,741

Year ended September 30, 2007 Compared with Year Ended September 30, 2006

Net Sales from the Cash Security business were $0 for the year ended September 30, 2007 and $16.1 million for the year ended September 30, 2006. This decrease is due to the completion of the Cash Security Business Sale on October 2, 2006.

Gross profit on product sales for the year ended September 30, 2007 were $0 compared with $6.6 million for the year ended September 30, 2006. The decrease is due to the completion of the Cash Security Business Sale. Gross profit as a percentage of sales was 41% for the year ended September 30, 2006.

Selling, general and administrative expenses for the years ended September 30, 2007 and 2006 was $0 and $4.5 million, respectively.

Depreciation and amortization for the years ended September 30, 2007 and 2006 was $0 and $0, respectively.

Year ended September 30, 2006 Compared with Year Ended September 30, 2005

Net Sales from the Cash Security business were $16.1 million for the year ended September 30, 2006, representing a decrease of $3.4 million from net sales of $19.4 million for the year ended September 30, 2005. This decrease was primarily a result of decreased sales to a major convenience store operator.

Gross profit on product sales for the year ended September 30, 2006 decreased approximately $2.0 million from the year ended September 30, 2005. Gross profit as a percentage of sales was 41% for the year ended September 30, 2006, compared to 44% for the year ended September 30, 2005. The decline is directly related to a decrease in the volume of Sentinel units produced during the fiscal year ended September 30, 2006.

Selling, general and administrative expenses for the year ended September 30, 2006 decreased $92,225 or 2% from the year ended September 30, 2005.

Depreciation and amortization for the years ended September 30, 2006 and 2005 was $0 and $29,868, respectively.

(d) Liquidity and Capital Resources

Our liquidity was negatively impacted by our inability to collect outstanding receivables from certain customers, and under-absorbed fixed costs associated with the low utilization of our production facilities and reduced sales of our products resulting from general difficulties in the ATM market. In order to meet our liquidity needs during the past four years, we incurred a substantial amount of debt.

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On January 3, 2006, we completed the ATM Business Sale. The total purchase price was $10.4 million of which $8.2 million was funded into a collateral account for the benefit of Laurus to be applied towards the repayment of our outstanding loans from Laurus.  On January 13, 2006, we repaid all of our remaining outstanding debt to Laurus in the principal amount of $2,617,988 plus accrued but unpaid interest in the amount of $113,333. In connection therewith, the Company paid a prepayment penalty to Laurus in the amount of $59,180.

We completed the Cash Security Business Sale on October 2, 2006 pursuant to the Cash Security Asset Purchase Agreement. The Cash Security Asset Purchase Agreement provided for a cash purchase price of $15,500,000, less $100,000 as consideration for the Sentinel Operating, L.P., as buyer, assuming certain potential liability in connection with ongoing litigation, and less a working capital deficit adjustment of $1,629,968, resulting in a net purchase price of $13,770,032. In addition, the buyer paid a cash adjustment of $2,458,718 to the Company at closing. The Company applied the net purchase price, the cash adjustment, and $5,400,000 in proceeds (together with accrued interest of $206,798 from the ATM Business Sale, to pay the following amounts to Laurus: (i) $8,508,963 pursuant to the terms of the Laurus Termination Agreement and (ii) $6,545,340 representing the purchase from Laurus by the Company of 19,251,000 shares of Company common stock pursuant to the terms of the Stock Redemption Agreement. Following both such payments to Laurus, the Company received $6,781,246 in net proceeds from the Cash Security Business Sale.

On October 2, 2006, we became a shell public company with approximately $12.9 million in cash, cash equivalents and marketable securities held-to-maturity; or approximately $0.66 per share based upon 19,426,210 shares outstanding.

Following the foregoing payments to Laurus pursuant to the terms of the Laurus Termination Agreement and the Stock Redemption Agreement, no further fees remain payable by the Company to Laurus and, to our knowledge, Laurus does not own any shares of the Company.

	(dollars in 000’s)
	2007		2006		2005
Cash	$	882	$	6,164	$	1,004
Restricted cash		—		5,400		—
Working capital		12,628		7,673		3,731
Total assets		12,773		19,085		17,537
Shareholders’ equity		12,632		7,677		2,263

Cash Flows

Cash used in operations was $(707,789), $(2,771,470) and $(462,324) for 2007, 2006 and 2005, respectively.  The cash used in operations was primarily attributable to operating losses, the increase in trade accounts receivable and the delays in collection of these receivables.

Working Capital

As of September 30, 2007, we had a working capital of $12,627,895, compared with a working capital of $7,673,181 at September 30, 2006. The increase was due to the completion of the Cash Security Business Sale on October 2, 2006.

Indebtedness

Agreements with Laurus

Pursuant to the Agreement Regarding the NCR Transaction and Other Asset Sales, dated November 26, 2004 (the “Asset Sales Agreement”), by and between the Company and Laurus Master Fund, Ltd. (“Laurus”), the Company agreed to pay to Laurus a portion of the excess net proceeds from the ATM Business Sale and the Cash Security Business Sale.

19

On June 9, 2006, we and Laurus entered into the Laurus Termination Agreement which, among other things, provided for the payment of a sale fee of $8,508,963 to Laurus (the “Sale Fee”) in full satisfaction of all amounts payable to Laurus under the Asset Sales Agreement, including fees payable in respect of the ATM Business Sale and the Cash Security Business Sale. The Laurus Termination Agreement further provided that, upon payment of the Sale Fee and performance by the Company of its obligations under the Stock Redemption Agreement described below, neither the Company nor any of its subsidiaries will have any further obligation to Laurus. Further, each of the Company and Laurus has granted each other and their respective affiliates and subsidiaries reciprocal releases from and against any claims and causes of action that may exist.

We and Laurus entered a Stock Redemption Agreement on January 12, 2006 and as subsequently amended. Pursuant to the terms of the Stock Redemption Agreement: we agreed, among other things, (i) to repurchase from Laurus, upon the closing of the Cash Security Business Sale, all shares of our common stock held by Laurus, and (ii) Laurus agreed to the cancellation as of the closing date of the Cash Security Business Sale of warrants it holds to purchase 4,750,000 shares of our common stock at an exercise price of $.30 per share, and not to exercise such warrants prior to the earlier to occur of September 30, 2006 and the date on which the Asset Purchase Agreement is terminated.

Following the Cash Security Business Sale, on October 2, 2006, the Company applied the net purchase price, the cash adjustment, and $5,400,000 in proceeds (together with accrued interest of $206,799) from the ATM business sale, to pay the following amounts to Laurus: (i) $8,508,963 pursuant to the terms of the Laurus Termination Agreement and (ii) $6,545,340 representing the purchase from Laurus by the Company of 19,251,000 shares of Company common stock pursuant to the terms of the Stock Redemption Agreement. Following both such payments to Laurus, the Company received $6,781,246 in net proceeds from the Cash Security Business Sale.

On October 2, 2006, following the foregoing payments to Laurus pursuant to the terms of the Laurus Termination Agreement and the Stock Redemption Agreement, no further fees remained payable by the Company to Laurus and, to our knowledge, Laurus does not own any shares of the Company.

Marketable Securities Available- for- Sale

We own 2,022,000 of the common stock of Cashbox plc pursuant to our exercise of a warrant in September 2005. On or about March 27, 2006, shares of Cashbox plc began trading on the AIM Market of the London Stock Exchange. Prior to Cashbox plc going public, we considered their shares not marketable, thus the shares were carried at cost. Since the shares are now public and market value is readily available, we determined the market value of the shares and pursuant to SFAS No. 115 “Accounting for Investments in Equity and Debt Securities” we classified these shares as available for sale. Pursuant to the SFAS No. 115 the unrealized change in fair value was excluded from earnings and recorded net of tax as other comprehensive income.

As of September 30, 2007 and 2006, our common stock in Cashbox plc was recorded at a fair value of $505,500 and $851,939, respectively. Unrealized gains on these shares of common stock, which were added to other comprehensive income as a component of stockholders' equity as of September 30, 2007 and 2006, were $205,500 and $551,939, respectively.

As of September 30, 2007 we were restricted from selling any shares until the second anniversary of its admission to the London Stock Exchange unless we (i) consult with Cashbox’s primary broker prior to the disposal of any shares and (ii) effect the disposal of the shares through Cashbox’s primary broker from time to time and in such manner as such broker may require with a view to the maintenance of an orderly market in the shares of Cashbox.

Off-Balance Sheet Transactions

We do not have any significant off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Indebtedness

We had no indebtedness or obligations under operating leases at September 30, 2007.

Research and Development Expenditures

The Company had no research and development expenditures in fiscal 2007.  Our research and development expenditures for fiscal 2006 and 2005 were approximately $1,229,617 and $2,060,071, respectively. The majority of these expenditures were applicable to enhancements of existing product lines and the development of new technology to facilitate the dispensing of cash and cash-value products.

20

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2007, our exposure to market risk for changes in interest rates relates to our investment portfolio, which consists of taxable, short-term money market instruments and certificates of deposit and debt securities with maturities between 90 days and one year. We do not use derivative financial instruments in our investment portfolio. We place our investments with high-credit quality issuers and we mitigate default risk by investing in only safe and high-credit quality securities and by monitoring the credit rating of investment issuers.

Forward-Looking Statements

This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Investors are cautioned that all forward-looking statements involve risks and uncertainty (including without limitation, our future gross profit, selling, general and administrative expense, our financial position, working capital, as well as general market conditions). Though we believe that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this Annual Report on Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward- looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements, notes thereto and supplementary data appear in this report and are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 24, 2005, we engaged Hein & Associates LLP (“Hein”) to serve as our independent registered public accounting firm and dismissed KPMG LLP (“KPMG”). The change in independent registered public accounting firms was approved by the Audit Committee of our Board of Directors and reported on a Current Report on Form 8-K, dated March 24, 2005. KPMG audited our financial statements for the fiscal year ended September 30, 2002 and for all the prior years, and Hein audited our financial statements as of and for the fiscal years ended September 30, 2007, 2006, 2005 and 2004.

The audit report of KPMG on our consolidated financial statements for fiscal year ended September 30, 2002 did not contain an adverse opinion or disclaimer of opinion, and such audit report was not qualified or modified as to any uncertainty, audit scope or accounting practice.

During fiscal 2002 and subsequent interim periods through the date we changed independent registered public accounting firms, there were no disagreements between us and KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in connection with its report. In addition, during those same periods, no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K, occurred, and we did not consult with Hein regarding the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on our consolidated financial statements, or any other matters or reportable events as set forth in Item 304(a)(2) of Regulation S-K.

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ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures 

Jerrell G. Clay, our Chief Executive Officer and Stephen P. Griggs, our Principal Financial Officer, have evaluated the effectiveness of the design and operation of our “disclosure controls and procedures”, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all control systems, no evaluation of controls can provide absolute assurance that all errors, control issues and instances of fraud, if any, with a company have been detected. The design of any system of controls is also based in part on certain assumptions regarding the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our Chief Executive Officer and our Principal Financial Officer have concluded that the Company’s disclosure controls and procedures are effective at this reasonable assurance level as of September 30, 2007.

(b) Changes in Internal Controls

In the ordinary course of business, we routinely enhance our information systems by either upgrading our current systems or implementing new systems. There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to date of the evaluation.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below are the names and ages of our directors and executive officers and their principal occupations at present and for the past five years. There are, to our knowledge, no agreements or understandings by which these individuals were selected. No family relationships exist between any directors or executive officers (as such term is defined in Item 401 of Regulation S-K), except as otherwise stated below.

Name	Age	The Company’s Officers	Director Since
Jerrell G. Clay (1)	66	Chief Executive Officer	1990
Stephen P. Griggs (2)	50	President, Chief Operating Officer, Principal Financial Officer, and Secretary	2002

 (1) Jerrell G. Clay was appointed Chief Executive Officer of the Company effective October 3, 2006.

 (2) Stephen P. Griggs was appointed President and Chief Operating Officer of the Company effective October 3, 2006.  Mr. Griggs was appointed Principal Financial Officer and Secretary on April 20, 2007.

(a) Business Background

The following is a summary of the business background and experience of each of the persons named above:

JERRELLG.CLAY has served as a Director since December 1990, and as Chief Executive Officer since October 3, 2006. Mr. Clay is also the Chief Executive Officer of 3 Mark Financial, Inc., an independent life insurance marketing organization, and has served as president of one of its predecessors for in excess of five years. Mr. Clay also serves as a member of the Independent Marketing Organization’s Advisory Committee of Protective Life Insurance Company of Birmingham, Alabama.

STEPHEN P. GRIGGS has served as a Director since June 2002, as President and Chief Operating Officer since October 3, 2006, and as Principal Financial Officer and Secretary since April 20, 2007. Mr. Griggs has been primarily engaged in managing his personal investments since 2000. From 1988 to 2000, Mr. Griggs held various positions, including President and Chief Operating Officer, with RoTech Medical Corporation, a NASDAQ-traded company. He holds a Bachelor of Science degree in Business Management from EastTennesseeStateUniversity and a Bachelor of Science degree in Accounting from the University of Central Florida. Mr. Griggs was appointed to the Board of Directors during 2002 to fill the vacancy created by the mid-term resignation of a former director.

The Company had a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act, which is responsible for reviewing the financial information which will be provided to shareholders and others, the systems of internal controls, which management and the Board of Directors have established, and the financial reporting processes.  On August 26, 2005, Mr. Raymond P. Landry, director, resigned from the Audit Committee and Mr. Griggs was appointed as Chairman of the Audit Committee, and the Board of Directors determined that Mr. Griggs is an “audit committee financial expert” as defined in Item 401(h) of Regulation S-K.  On September 30, 2005, the Audit Committee consisted of Messrs. Griggs, and Clay.  During the 2007, 2006 and 2005 fiscal years, the Audit Committee held four, three and six meetings, respectively. Each member of the Audit Committee was an “independent director” as defined in Rule 4200 of the Marketplace Rules of the National Association of Securities Dealers, Inc. (“NASD”) as of September 30, 2006. Effective October 3, 2006, Messrs. Griggs and Clay were appointed executive officers of the Company and were no longer considered “independent directors".

The Compensation Committee consists of Messrs. Clay and Griggs and is responsible for reviewing the performance and development of management in achieving corporate goals and objectives and ensuring that the Company’s senior executives are compensated effectively in a manner consistent with the Company’s strategy, competitive practice, and the requirements of the appropriate regulatory bodies. Toward that end, the Compensation Committee oversees all of the Company’s compensation, equity and employee benefit plans and payments. The Compensation Committee held one meeting each year during the fiscal years 2007, 2006 and 2005.  For each of the 2006 and 2005 fiscal years, each of the members of the Compensation Committee was an “independent director” as defined in Rule 4200 of the Marketplace Rules of the NASD, and an “outside director” as defined in Section 162(m) of the Internal Revenue Code of 1986. Effective October 3, 2006, Messrs. Griggs and Clay were appointed executive officers of the Company and were no longer considered “independent directors" or “outside directors”.

23

Code of Conduct and Ethics

The Company has adopted a Code of Conduct and Ethics that applies to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. This Code of Conduct and Ethics was filed as an exhibit to our Annual Report on Form 10-K for the 2005 fiscal year. Our Code of Conduct and Ethics addresses conflicts of interest, usurpation of corporate opportunities, the protection and proper use of Company assets, confidentiality, compliance with laws, rules, and regulations, prompt reporting of any illegal or improper activity to an officer, supervisor, manager, or other appropriate personnel of the Company. A copy of the Code of Conduct and Ethics is available in print, free of charge, to any stockholder who requests a copy. Interested parties may address a written request for a printed copy of the Code of Conduct and Ethics to: Secure Alliance Holdings Corporation, 5700 Northwest Central Drive, Suite 350, Houston, Texas 77092, Attention: Corporate Secretary.

(b) Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and officers, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership of such equity securities with the Securities and Exchange Commission (“SEC”). Such entities are also required by SEC regulations to furnish us with copies of all Section 16(a) forms filed.

Based solely on a review of the copies of Forms 3, 4 and 5 furnished to us, and any amendments thereto, and any written representations with respect to the foregoing, we believe that our directors and officers, and greater than 10% beneficial owners, have complied with all Section 16(a) filing requirements.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Overview

This compensation discussion and analysis describes the material elements of compensation awarded to, earned by or paid to each of our executive officers who served as named executive officers during the fiscal year ended September 30, 2007. This compensation discussion focuses on the information contained in the following tables and related footnotes and narrative for primarily the last completed fiscal year, but we also describe compensation actions taken before or after the last completed fiscal year to the extent that it enhances the understanding of our executive compensation disclosure. The Board of Directors currently oversees the design and administration of our executive compensation program.  We currently have no operations and, accordingly, our current executive compensation program provides for a limited cash compensation to our executives in the form of base salary and for a stock option grant to each executive.

Executive Compensation Objectives

The objectives of our executive compensation program are to:

·       Ensure officer compensation is aligned with our corporate strategies, business objectives and the long-term interests of our stockholders; and

·       Provide stability for the Company.

Summary Compensation Table

The following table sets forth the amount of all cash and other compensation we have paid for services rendered during the fiscal years ended September 30, 2007, 2006 and 2005 to Jerrell G. Clay, Chief Executive Officer and Stephen P. Griggs, Principal Financial Officer.  On October 3, 2006, Messrs. Clay and Griggs became the sole executive officers of the Company

24

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compen-sation ($)		Non-qualified Deferred Compen-sation Earnings ($)		All Other Compen-sation ($)(3)		Total ($)
Jerrell G. Clay (1)	2007	$	100,000		—		—	$	69,746		—		—		—	$	169,746
Chief Executive	2006		—	$	100,000		—		—		—		—	$	12,000	$	112,000
Officer and director	2005		—		—		—		—		—		—	$	12,000	$	12,000
Stephen P. Griggs (2)	2007	$	100,000		—		—	$	69,746		—		—		—	$	169,746
Principal Financial	2006		—	$	100,000		—		—		—		—	$	12,000	$	112,000
Officer and director	2005		—		—		—		—		—		—	$	12,000	$	12,000

(1) Jerrell G. Clay was appointed Chief Executive Officer of the Company effective October 3, 2006.  All compensation for 2006 and 2005 was for Mr. Clay’s services as a director of the Company.

(2) Stephen P. Griggs was appointed President and Chief Operating Officer of the Company effective October 3, 2006.  Mr.Griggs was appointed Principal Financial Officer and Secretary on April 20, 2007. All compensation for 2006 and 2005 was for Mr.Griggs’s services as a director of the Company.

(3) Represents annual board fees paid to each of Mr.Clay and Mr.Griggs in their capacities as directors for such years.

Narrative Disclosure to Summary Compensation Table

The compensation paid to the named executive officers includes salary and equity compensation.  On March 21, 2007, the Company awarded Messrs. Griggs and Clay each 950,000 stock options to purchase our common stock at an exercise price of $0.62 per share pursuant to the Company's 1997 Long-Term Incentive Plan. Of this award, 34% of the options vest on the first anniversary of the date of the grant, 33% of the options vest on the second anniversary of the date of the grant and the remaining 33% of the options vest on the third anniversary of the date of the grant. In addition, 100% of the options vest upon a change of control.

For the year ended September 30, 2007, salaries accounted for approximately 59% of total compensation for our executive officers.

There is no employment agreement between the Company and either of our executive officers regarding their employment with the Company.

Grants of Plan-Based Awards

The following table sets forth information concerning each grant of an award made to named executive officers in the last completed fiscal year under the 1997 Long-Term Incentive Plan.

Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)		Estimated Future payouts Under Equity Incentive Plan Awards ($)		All Other Stock Awards: Number of Shares of Stock or Units (#)		All Other Option Awards: Number of Securities Underlying Options (#)		Exercise or Base Price of Option Awards ($/Sh)		Grant Date Fair Value of Stock and Option Awards
Jerrell G. Clay	03/21/2007		—		—		—		950,000	$	0.62	$	543,472
Stephen P. Griggs	03/21/2007		—		—		—		950,000	$	0.62	$	543,472

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The following table sets forth information concerning unexercised options; stock that has not vested; and equity incentive plan awards for each named executive officer in the last completed fiscal year under the 1997 Long-Term Incentive Plan.

Outstanding Equity Awards at Fiscal Year-End

	Option Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date	Stock Awards
Jerrell G. Clay		—		950,000		—	$	0.62	03/21/2017		—
Stephen P. Griggs		—		950,000		—	$	0.62	03/21/2017		—

Director Compensation

No member of our Board of Directors earned any compensation for his services as a member of our Board of Directors for the year ended September 30, 2007.  See the Summary Compensation Table above for a description of compensation earned by members of our Board in their capacities as officers of the Company for such period.

Deferred Compensation Agreements

Other than with respect to the vesting of stock options upon a change of control of the Company discussed above, no plan or arrangement exists which results in compensation to a named executive officer in excess of $100,000 upon such officer’s future termination of employment or upon a change-of-control.

Compensation Committee Interlocks and Insider Participation

Jerrell G. Clay and Stephen P. Griggs, the members of our Compensation Committee, have served as our Chief Executive Officer and Principal Financial Officer, respectively, since October 3, 2006.  None of our executive officers serves as a member of the board of directors or as a member of the compensation committee of any other company that has an executive officer serving as a member of our Board of Directors.

Compensation Committee Report

We recommend to the Board of Directors that the Executive Compensation and Compensation Discussion and Analysis provisions referred to above be included in the Company’s Annual Report on Form 10-K.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

Jerrell G. Clay

Stephen P. Griggs

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance under Equity Compensation Plans

Options to purchase 1,900,000 shares of our common stock have been issued to our executives under the Company’s 1997 Long-Term Incentive Plan as described under “Item 5 – Market For Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” above.  32,950 options remain available for future issuance under such plan.

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Security Ownership of Certain Beneficial Owners and Management

The following table sets forth as of December 31, 2007, the number of shares of common stock beneficially owned by (i) the beneficial owners of more than 5% of our voting securities, (ii) each of our directors and executive officers of the Company individually and (iii) all of our directors and the executive officers as a group. Except as otherwise indicated, and subject to applicable community property laws, each person has sole investment and voting power with respect to the shares shown. Ownership information is based upon information furnished by the respective holders and contained in our records or upon public filings made by such persons with the SEC.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Class (1)
Kellogg Capital Group LLC	2,190,023	11.3%
55 Broadway, 4th Floor
New York, New York10006
Alliance Developments	1,080,362	5.6%
One Yorkdale Rd., Suite 510
North York, OntarioM6A 3A1
Canada
Springview Group LLC	1,049,191	5.4%
666 Fifth Avenue, 8th Floor
New York, New York10103
JerrellG.Clay	181,405	*
1600 Highway 6, Suite 400
Sugarland, Texas77478
StephenP.Griggs	—	*
c/o Nexus Group
3305 Bartlett Blvd.
Orlando, Florida32811
Directors and Executive	181,405	*
Officers as a group (2 persons)

* Less than one percent.

(1) Based upon 19,441,524 shares outstanding as of December 31, 2007.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

For information concerning our directors and their independence, see “Item 10 – Directors, Executive Officers and Corporate Governance” above.

There were no transactions with related persons during the year ended September 30, 2007 other than the issuance of 950,000 stock options to each of JerrellG.Clay and StephenP.Griggs on March 21, 2007 as described under “Item 5 - Market For Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” above.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

(a) Audit Fees

The aggregate fees billed by Hein & Associates LLP for professional services rendered for the audit of our annual financial statements set forth in the Annual Reports on Form 10-K and the related reviews of interim financial statements included in the Quarterly Reports on Form 10-Q were approximately $60,000 for the fiscal year ended September 30, 2007 and $243,000 for the fiscal year ended September 30, 2006.

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(b) Other Audit-Related Fees

There were no other audit-related fees incurred during the fiscal years ended September 30, 2007 and 2006.

(c) Tax Fees

The aggregate fees billed by Hein & Associates LLP for tax services for the fiscal year ended September 30, 2007 were $70,000 consisting of $30,000 related to an IRS Audit and $40,000 related to tax compliance.  The aggregate fees billed for the fiscal year ended September 30, 2006 were $107,000 consisting of $12,000 related to an IRS Audit for the year 2005, $65,000 related to other tax services, and approximately $30,000 related to tax consulting.

(d) All Other Fees

There were no fees for other professional services rendered during the fiscal years ended September 30, 2007, 2006 and 2005.

Our Audit Committee has determined that the non-audit services rendered by Hein & Associates LLP during the most recent fiscal year are compatible with maintaining the independence of such auditors.

Our policy is to pre-approve all professional fees associated with audit, tax and audit-related services as they are proposed to us by Hein & Associates LLP and other professional service firms. The Audit Committee approved of 100% of the services described in each of sections (a) through (d) above pursuant to 17 CFR 210.2-01(C)(7)(i)(C).

PART IV

ITEM 15. FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K

Documents Filed

Financial Statements and Financial Statement Schedules

Our audited consolidated financial statements and related financial statement schedules and the report of an independent registered public accounting firm as required by Item 8 of Form 10-K and Regulation S-X are filed as a part of this Annual Report, as set forth in the accompanying Index to Financial Statements. Such audited financial statements and related financial statement schedules include, in the opinion of our management, all required disclosures in the accompanying notes.

Consolidated Financial Statements of Secure Alliance Holdings Corporation and Subsidiaries

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets — September 30, 2007 and 2006

Consolidated Statements of Operations for the years ended September 30, 2007, 2006 and 2005

Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2007, 2006 and 2005

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2007, 2006 and 2005

Consolidated Statements of Cash Flows for the years ended September 30, 2007, 2006 and 2005

Notes to Consolidated Financial Statements

Schedule II Valuation and Qualifying Accounts — as filed as part of this Annual Report on Form 10-K

Exhibits

The Exhibits required by Item 601 of Regulation S-K and Regulation S-X are filed as a part of this Report, and are listed in the accompanying Index to Exhibits.

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Index to Financial Statements

	Page
CONSOLIDATED FINANCIAL STATEMENTS OF SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm	29
Consolidated Balance Sheets — September 30, 2007 and 2006	30
Consolidated Statements of Operations for the years ended September 30, 2007, 2006 and 2005	31
Consolidated Statements of Comprehensive Income (Loss) for the years ended September 30, 2007, 2006 and 2005	32
Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2007, 2006 and 2005	33
Consolidated Statements of Cash Flows for the years ended September 30, 2007, 2006 and 2005	34
Notes to Consolidated Financial Statements	36
Schedule II Valuation and Qualifying Accounts — as filed as part of this Annual Report on Form 10-K	49

All other schedules are omitted because they are not required, are not applicable or the required information is presented elsewhere herein.

29

Report of Independent Registered Public Accounting Firm

The Board of Directors

Secure Alliance Holdings Corporation:

We have audited the consolidated financial statements of Secure Alliance Holdings Corporation and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Secure Alliance Holdings Corporation and subsidiaries as of September 30, 2007 and 2006, and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 2007 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As further discussed in notes 1 and 2 to the consolidated financial statements, the Company disposed of its remaining operating assets and liabilities in October 2006, and currently has no operations.

/s/ HEIN & ASSOCIATES LLP

Houston, Texas

January14, 2008

30

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

	September 30,
	2007			2006
ASSETS
Current Assets:
Cash and cash equivalents	$	882,116		$	1,264,463
Certificates of deposit		11,177,567			—
Restricted cash		—			5,400,000
Marketable securities held-to-maturity		—			4,899,249
Marketable securities available-for-sale		505,500			851,939
Interest and other receivables		204,113			220,689
Prepaid expenses and other		—			132,036
Assets held for sale, net of accumulated depreciation of $0 and $1,352,463, respectively (See Note 2)		—			6,312,663
Total current assets		12,769,296			19,081,039
Other assets		4,000			4,000
Total assets	$	12,773,296		$	19,085,039
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	—		$	221,295
Accrued interest payable		—			2,000,000
Shares subject to redemption		—			5,400,000
Other accrued liabilities		141,401			150,194
Liabilities held for sale (See Note 2)		—			3,636,369
Total liabilities		141,401			11,407,858
Commitments and contingencies		—			—
Shareholders’ Equity:
Common stock, $.01 par value, authorized 100,000,000 shares; issued and outstanding 19,441,524 shares and 38,677,210 shares, respectively		194,415			386,772
Additional paid-in capital		30,008,008			30,782,187
Accumulated deficit		(17,776,028	)		(24,043,717	)
Accumulated other comprehensive income		205,500			551,939
Total shareholders’ equity		12,631,895			7,677,181
Total liabilities and shareholders’ equity	$	12,773,296		$	19,085,039

See accompanying Notes to Consolidated Financial Statements

31

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

	Years Ended September 30,
	2007			2006			2005
Revenues	$	—		$	—		$	—
Selling, general and administrative		1,333,467			3,065,064			1,805,484
Depreciation and amortization		—			2,678			4,977
Operating loss		(1,333,467	)		(3,067,742	)		(1,810,461	)
Other income (expense):
Reorganization fee paid to Laurus		(6,508,963	)		—			—
Gain on disposal of investment in 3CI pursuant to class-action settlement		—			5,380,121			—
Amortization of debt discount and deferred financing costs		—			(4,078,738	)		(3,816,178	)
Interest income		580,861			392,564			—
Interest expense		—			(235,765	)		(2,732,891	)
Gain on collection of receivable		—			598,496			—
Gain on CCC bankruptcy settlement		—			105,000			—
Other expense		—			(7,455	)		—
Total other income (expense)		(5,928,102	)		2,154,223			(6,549,069	)
Loss before taxes and discontinued operations		(7,261,569	)		(913,519	)		(8,359,530	)
Income tax expense		75,808			159,546			—
Loss from continuing operations		(7,337,377	)		(1,073,065	)		(8,359,530	)
Discontinued operations:
Income from discontinued operations		—			2,399,053			5,073,608
Gain on sale of ATM business, net of taxes		—			3,536,105			—
Gain on sale of Cash Security business, net of taxes		13,605,066			—			—
Total discontinued operations		13,605,066			5,935,158			5,073,608
Net income (loss)	$	6,267,689		$	4,862,093		$	(3,285,922	)
Basic earnings (loss) per share:
Loss from continuing operations	$	(0.37	)	$	(0.03	)	$	(0.41	)
Income from discontinued operations		0.70			0.18			0.25
Net income (loss)	$	0.33		$	0.15		$	(0.16	)
Basic weighted average common shares outstanding		19,563,447			33,499,128			20,292,796
Diluted earnings (loss) per share:
Loss from continuing operations	$	(0.37	)	$	(0.03	)	$	(0.41	)
Income from discontinued operations		0.69			0.18			0.25
Net income (loss)	$	0.32		$	0.15		$	(0.16	)
Diluted weighted average common and dilutive shares outstanding		19,674,772			33,499,128			20,292,796

See accompanying Notes to Consolidated Financial Statements

32

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Years Ended September 30,
	2007			2006		2005
Net income (loss)	$	6,267,689		$	4,862,093	$	(3,285,922	)
Other comprehensive income:
Unrealized gain (loss) on marketable securities available-for-sale		(346,439	)		551,939		—
Unrealized gain on investment in 3CI		—			—		35,093
Comprehensive income (loss)	$	5,921,250		$	5,414,032	$	(3,250,829	)

See accompanying Notes to Consolidated Financial Statements

33

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Shares Issued and Outstanding			Common Stock			Additional Paid-In Capital			Retained Earnings (Accumulated Deficit)			Other			Total Shareholders Equity
Balances, September 30, 2004		17,426,210		$	174,262		$	28,100,674		$	(25,619,888	)	$	(66,599	)	$	2,588,449
Net loss		—			—			—			(3,285,922	)		—			(3,285,922	)
Issuance of shares to Laurus in payment of fees		1,251,000			12,510			625,500			—			—			638,010
Issuance of shares in connection with settlement of class-action litigation		2,000,000			20,000			1,544,490			—			—			1,564,490
Shares received from officer in connection with settlement		—			—			(31,675	)		—			31,675			—
Unrealized gain on investment in 3CI		—			—			—			—			35,093			35,093
Issuance of warrants in connection with debt with beneficial conversion premium on convertible debt		—			—			723,198			—			—			723,198
Balances, September 30, 2005		20,677,210			206,772			30,962,187			(28,905,810	)		169			2,263,318
Net income		—			—			—			4,862,093			—			4,862,093
Issuance of shares subject to redemption		18,000,000			180,000			(180,000	)		—			—			—
Unrealized gain on marketable securities available-for-sale		—			—			—			—			551,939			551,939
Disposal of investment in 3CI pursuant to class-action settlement		—			—			—			—			(169	)		(169	)
Balances, September 30, 2006		38,677,210			386,772			30,782,187			(24,043,717	)		551,939			7,677,181
Net income		—			—			—			6,267,689			—			6,267,689
Redemption of shares from Laurus		(19,251,000	)		(192,510	)		(952,830	)		—			—			(1,145,340	)
Cancellation of shares received from officer in connection with settlement		(90,500	)		(905	)		905			—			—			—
Unrealized loss on marketable securities available-for-sale		—			—			—			—			(346,439	)		(346,439	)
Issuance of stock options to officers		—			—			139,491			—			—			139,491
Issuance of shares pursuant to consulting agreement		21,739			217			9,783			—			—			10,000
Issuance of shares on exercise of warrants and options		84,075			841			28,472			—			—			29,313
Balances, September 30, 2007		19,441,524		$	194,415		$	30,008,008		$	(17,776,028	)	$	205,500		$	12,631,895

See accompanying Notes to Consolidated Financial Statements.

34

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended September 30,
	2007			2006			2005
Cash flows from operating activities:
Net income (loss)	$	6,267,689		$	4,862,093		$	(3,285,922	)
Amortization of stock options issued to officers		139,491			—			—
Expenses related to issuance of stock pursuant to consulting agreement		10,000			—			—
Adjustments to reconcile net income (loss) to net cash used in continuing operating activities:
Reorganization fee expense		6,508,963			—			—
Depreciation and amortization		—			2,678			4,977
Amortization of debt discount and financing costs		—			4,078,738			3,816,178
Gain on disposal of investment in 3CI pursuant to class-action settlement		—			(5,380.121	)		—
Loss on disposal of fixed assets		—			7,455			—
Changes in assets and liabilities:
Trade accounts receivable, net		—			250,000			—
Interest and other receivables		16,576			(207,724	)		1,022,433
Prepaid expenses and other assets		132,036			38,196			(131,140	)
Accounts payable and accrued liabilities		(174,478	)		(487,110	)		2,013,106
Net cash flows used in discontinued operations		(13,605,066	)		(5,935,675	)		(3,901,956	)
Net cash used in operating activities		(707,789	)		(2,771,470	)		(462,324	)
Cash flows from continuing investing activities:
Increase in time deposits		(11,177,567	)		—			—
Proceeds from class-action settlement on investment in 3CI		—			5,659,507			—
Decrease (increase) in marketable securities held-to-maturity		4,899,249			(4,899,249	)		—
Purchases of property, plant and equipment, net		—			—			(11,566	)
Net cash provided by discontinued investing activities		16,228,750			10,440,000			—
Net cash provided by (used in) investing activities		9,950,432			11,200,258			(11,566	)
Cash flows from financing activities:
Redemption of shares held by Laurus		(6,545,340	)		—			—
Proceeds from exercise of warrants and options		29,313			—			—
Proceeds from borrowings		—			—			2,100,000
Repayments of notes payable		—			(2,767,988	)		(600,000	)
Borrowing on revolver		—			1,204,391			2,251,203
Payments of revolver		—			(1,204,391	)		(2,251,203	)
Repayments of convertible debentures		—			—			—
Decrease (increase) decrease in restricted cash		5,400,000			(5,400,000	)		—
Reorganization fee paid to Laurus		(8,508,963	)		—			—
Increase in deferred financing costs		—			—			(280,567	)
Net cash provided by discontinued financing activities		—			—			—
Net cash provided by (used in) financing activities		(9,624,990	)		(8,167,988	)		1,219,433
Net change in cash and cash equivalents		(382,347	)		260,800			745,543
Cash and cash equivalents at beginning of year		1,264,463			1,003,663			258,120
Cash and cash equivalents at end of year	$	882,116		$	1,264,463		$	1,003,663

See accompanying Notes to Consolidated Financial Statements.

35

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	Years Ended September 30,
	2007			2006		2005
Supplemental disclosure of cash flow information:
Cash paid for interest	$	—		$	314,314	$	755,808
Cash paid for taxes	$	94,402		$	70,962	$	—
Supplemental disclosure of non-cash financing activities:
Conversion of debt into common stock subject to redemption	$	—		$	5,400,000	$	—
Discount on issuance of debt with beneficial conversion premium and detachable warrants	$	—		$	—	$	723,198
Issuance of shares to lender in payment of fees	$	—		$	—	$	638,010
Issuance of shares in connection with settlement of class-action litigation	$	—		$	—	$	1,564,490
Unrealized gain on 3CI investment	$	—		$	—	$	35,093
Unrealized gain (loss) on marketable securities available-for-sale	$	(346,439	)	$	551,939	$	—

See accompanying Notes to Consolidated Financial Statements.

36

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2007, 2006 AND 2005

(1) Summary of Significant Accounting Policies for Continued Operations

Description of Business

Secure Alliance Holdings Corporation (the “Company,” “we,” “us,” or “our”) is a Delaware corporation which, through its wholly-owned subsidiaries, developed, manufactured, sold and supported automated teller machines (“ATMs”) and electronic cash security systems, consisting of the Timed Access Cash Controller (“TACC”) products and the Sentinel products (together, the “Cash Security” products).

We completed the sale of our ATM business on January 3, 2006 and the sale of our Cash Security business on October 2, 2006.  On October 2, 2006, we became a shell public company and have had substantially no operations.

Principles of Consolidation

The consolidated financial statements include our accounts and our wholly-owned subsidiaries. All significant intercompany items have been eliminated in consolidation.

Cash and Cash Equivalents

For purposes of consolidated financial statement presentation and reporting cash flows, all liquid investments with original maturities at the date of purchase of three months or less are considered cash equivalents.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets. Expenditures for major renewals and betterments are capitalized; expenditures for repairs and maintenance are charged to expense as incurred.

Federal Income Taxes

Income taxes are accounted for under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in determining income or loss in the period that includes the enactment date.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) includes all non-equity holder changes in shareholders’ equity. As of

September 30, 2007 and 2006, our only component of accumulated other comprehensive loss relates to unrealized gains and losses on our investment in Cashbox common stock.

Net Income (Loss) Per Share

In accordance with Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“SFAS No. 128”), we compute and present both basic and diluted earnings per share (“EPS”) amounts. Basic EPS is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period, and excludes the effect of potentially dilutive securities (such as options, warrants and convertible securities), which are convertible into common stock. Dilutive EPS reflects the potential dilution from options, warrants and convertible securities.

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Stock-Based Compensation

In December 2004, the FASB issued SFAS No. 123(R), which amends SFAS No. 123 and supersedes APB Opinion No. 25. SFAS No. 123(R) requires compensation expense to be recognized for all share-based payments made to employees based on the fair value of the award at the date of grant, eliminating the intrinsic value alternative allowed by SFAS No. 123. Generally, the approach to determining fair value under the original pronouncement has not changed. However, there are revisions to the accounting guidelines established, such as accounting for forfeitures that will change our accounting for stock-based awards in the future.

The statement allows companies to adopt its provisions using either of the following transition alternatives:

• The modified prospective method, which results in the recognition of compensation expense using SFAS 123(R) for all share-based awards granted after the effective date and the recognition of compensation expense using SFAS 123 for all previously granted share-based awards that remain unvested at the effective date; or

• The modified retrospective method, which results in applying the modified prospective method and restating prior periods by recognizing the financial statement impact of share-based payments in a manner consistent with the pro forma disclosure requirements of SFAS No. 123. The modified retrospective method may be applied to all prior periods presented or previously reported interim periods of the year of adoption.

We adopted SFAS No. 123(R) on October 1, 2005, using the modified prospective method. This change in accounting has not materially impacted our financial position. We applied the fair-value criteria established by SFAS No. 123(R) to previous stock option grants, the impact to our results of operations would have approximated the impact of applying SFAS No. 123, which was a decrease to net income of approximately $19,433 in 2005.

We recognize expense related to stock options and other types of equity-based compensation beginning in fiscal year 2006 and such cost must be recognized over the period during which an employee is required to provide service in exchange for the award. The requisite service period is usually the vesting period. The standard also requires us to estimate the number of instruments that will ultimately be issued, rather than accounting for forfeitures as they occur.

The following table reflects the pro forma effect of SFAS No. 123 (R) had it been in effect in 2005.

	2005
Net loss as reported	$	(3,285,922	)
Deduct:
Total stock-based employee compensation expense determined under SFAS 123, net of taxes		(19,433	)
Net loss pro forma	$	(3,305,355	)
Basic earnings (loss) per share:
As reported		(0.16	)
Pro forma		(0.16	)
Diluted earnings (loss) per share:
As reported		(0.16	)
Pro forma		(0.16	)

Use of Estimates

The preparation of the accompanying consolidated financial statements requires the use of estimates by management in determining our assets and liabilities at the date of the Consolidated Financial Statements and the reported amount of revenues and expenses during the period. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, “Disclosures About Fair Value of Financial Instruments,” requires the disclosure of estimated fair values for financial instruments. Fair value estimates are made at discrete points in time based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. We believe that the carrying amounts of our financial instruments included in current assets and current liabilities approximate the fair value of such items due to their short-term nature.

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The carrying amount of long-term debt, excluding the discounts related to the warrants issued with the debt, approximates its fair value because the interest rates approximate market.

New Accounting Pronouncements

In July 2006, the FASB issued Final Interpretation No. (“FIN”) 48,Accounting for Uncertainty in Income Taxes, an Interpretation of SFAS 109, which clarifies the accounting for income taxes by prescribing the minimum recognition threshold an uncertain tax position is required to meet before tax benefits associated with such uncertain tax position are recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. In addition, FIN 48 excludes income taxes from the scope of SFAS 5, Accounting for Contingencies. FIN 48 is effective for fiscal years beginning after December 15, 2006. Differences between the amounts recognized in the consolidated balance sheets prior to the adoption of FIN 48 and the amounts reported after adoption are accounted for as a cumulative-effect adjustment to the beginning balance of retained earnings upon adoption of FIN 48. FIN 48 also requires that amounts recognized in the balance sheet related to uncertain tax positions be classified as a current or non-current liability, based upon the timing of the ultimate payment to a taxing authority. We will adopt FIN 48 as of October 1, 2007 and are in the process of finalizing the effect FIN 48 will have on our financial statements. Under the guidance of FIN 48, management estimates that our income tax reserve may increase to approximately $2.3 million, which is subject to revision when management completes an analysis of the impact of FIN 48. Upon completion of such analysis, it is possible that this difference will be recorded in retained earnings as a cumulative effect adjustment during the quarter ended December 31, 2007.

In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”).  SFAS 157 defines fair value to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  It establishes a fair value hierarchy and expands disclosures about fair value measurements in both interim and annual periods. SFAS 157 will be effective for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.  The Company does not expect SFAS 157 to have a material effect on the Company’s consolidated financial position or results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”).  SFAS 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”) and requires an entity to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date.  Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred.  SFAS 159 will be effective for fiscal years beginning after November 15, 2007.  The Company does not expect SFAS 159 to have a material effect on the Company’s consolidated financial position or results of operations.

In November 2007, the FASB issued SFAS No. 141(R), Business Combination and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160). FAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. FAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. FAS 141(R) and FAS 160 are effective for both public and private companies for fiscal years beginning on of after December 15, 2008.  FAS 141(R) will be applied prospectively. FAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests.  All other requirements of FAS 160 will be applied prospectively.  Early adoption is prohibited for both standards.  Management is currently evaluating the requirements of FAS 141(R) and FAS 160 but does not expect them to have a material effect on the Company’s consolidated financial position or results of operation.

(2) Discontinued Operations

ATM Business

On February 19, 2005, the Company and its wholly-owned subsidiary, Secure Alliance, L.P., entered into NCR Asset Purchase Agreement with NCR EasyPoint, a wholly owned subsidiary of NCR Corporation, for the sale of our ATM Business.

On December 28, 2005, the holders of 62.2% of our shares of outstanding common stock approved the NCR Asset Purchase Agreement.

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On January 3, 2006, we completed the ATM Business Sale for a purchase price was $10,440,000 of which $8,200,000 was paid to Laurus into a collateral account to be held by Laurus as collateral for the satisfaction of all monetary obligations payable to Laurus and the remaining $2,240,000 was paid to the Company. This transaction resulted in a book gain of $3,536,105.

An analysis of the discontinued operations of the ATM business is as follows:

DISCONTINUED OPERATIONS — ATM BUSINESS

SELECTED OPERATING DATA

(UNAUDITED)

	Years Ended September 30,
	2007		2006		2005
Net sales	$	—	$	3,847,874	$	15,497,834
Cost of sales		—		2,592,268		9,508,120
Gross profit		—		1,255,606		5,989,714
Selling, general and administrative		—		880,941		4,768,880
Depreciation and amortization		—		46,048		255,967
Operating loss		—		328,617		964,867
Non-operating (income) expense		—		—		—
Net income (loss)	$	—	$	328,617	$	964,867

Cash Security Business

On September 25, 2006, the holders of a majority of shares of our outstanding common stock approved the sale of our electronic cash security business, consisting of (a) timed access cash controllers, (b) the Sentinel products, (c) the servicing, maintenance and repair of the timed access cash controllers or Sentinel products and (d) all other assets and business operations associated with the foregoing (the “Cash Security Business Sale”) to Sentinel Operating, L.P., a purchaser led by a management buyout team that included our former director and Interim Chief Executive Officer, Mark K. Levenick, and our former director, Raymond P. Landry. The Cash Security Asset Purchase Agreement provided for a cash purchase price of $15,500,000, less $100,000 as consideration for the Buyer assuming certain potential liability in connection with ongoing litigation, and less a working capital deficit adjustment of $1,629,968, resulting in a net purchase price of $13,770,032. In addition, Sentinel Operating L.P. paid a cash adjustment of $2,458,718 to the Company at closing. The Cash Security Business Sale was completed on October 2, 2006. During the year ended September 30, 2007, we recorded a gain on the sale of the Cash Security business, net of taxes, of $13,605,066.

We classified the Cash Security business as a discontinued operation for the year ended September 30, 2007.  We classified the Cash Security business as Assets Held for Sale as of September 30, 2006. 

An analysis of the discontinued operations of the Cash Security business is as follows:

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DISCONTINUED OPERATIONS — CASH SECURITY BUSINESS

SELECTED BALANCE SHEET DATA

(UNAUDITED)

	September 30, 2007		September 30, 2006
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	2,048,275
Trade accounts receivable, net of allowance of approximately $0 and $45,000, respectively		—		1,591,522
Inventories		—		2,051,764
Prepaid expenses and other		—		73,089
Total current assets		—		5,764,650
Property, plant and equipment, at cost		—		316,608
Accumulated depreciation		—		(18,595	)
Net property, plant and equipment		—		298,013
Other assets		—		250,000
Total assets	$	—	$	6,312,663
LIABILITIES
Current Liabilities:
Current maturities	$	—	$	1,981
Accounts payable		—		1,514,731
Other accrued expenses		—		2,098,675
Total current liabilities		—		3,615,387
Long-term debt, net of current maturities		—		20,982
Total liabilities	$	—	$	3,636,369

DISCONTINUED OPERATIONS — CASH SECURITY BUSINESS

SELECTED OPERATING DATA

(UNAUDITED)

	Years Ended September 30,
	2007		2006			2005
Net sales	$	—	$	16,080,069		$	19,435,222
Cost of sales		—		9,476,386			10,870,947
Gross profit		—		6,603,683			8,564,275
Selling, general and administrative		—		4,541,774			4,449,550
Depreciation and amortization		—		—			29,868
Operating income (loss)		—		2,061,907			4,084,857
Non-operating expense		—		(8,529	)		(23,884	)
Net income (loss)	$	—	$	2,070,436		$	4,108,741

(3) Notes to Discontinued Operations which are Classified as Assets Held For Sale

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the standard cost method and includes materials, labor and production overhead which approximates an average cost method. Reserves are provided to adjust any slow moving materials or goods to net realizable values.

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Warranties

Certain products are sold under warranty against defects in materials and workmanship for a period of one to three years. A provision for estimated warranty costs is included in accrued liabilities and is charged to operations at the time of sale.

Accounts Receivable

We had substantially no operations during the fiscal year 2007.  We had significant investments in billed receivables as of September 30, 2006. Billed receivables represent amounts billed upon the shipments of our products under our standard contract terms and conditions. Allowances for doubtful accounts and estimated non-recoverable costs primarily provide for losses that may be sustained on uncollectible receivables and claims. In estimating the allowance for doubtful accounts, we evaluate our contract receivables and thoroughly review historical collection experience, the financial condition of our customers, billing disputes and other factors. When we ultimately conclude that a receivable is uncollectible, the balance is charged against the allowance for doubtful accounts. As of September 30, 2007 and 2006, the allowance for doubtful contract receivables was $0 and $45,000, respectively.

Revenue Recognition

Revenues are recognized at the time products are shipped to customers. We have no continuing obligation to provide services or upgrades to our products, other than a warranty against defects in materials and workmanship. We only recognize such revenues if there is persuasive evidence of an arrangement, the products have been delivered; there is a fixed or determinable sales price and a reasonable assurance of our ability to collect from the customer.

Our products contain imbedded software that is developed for inclusion within the equipment. We have not licensed, sold, leased or otherwise marketed such software separately. We have no continuing obligations after the delivery of our products and we do not enter into post-contract customer support arrangements related to any software embedded into our equipment.

Research and Development Cost

Research and development costs are expensed as incurred. Research and development costs charged to expense were approximately $0, $1,229,617, and $2,060,071 for the years ended September 30, 2007, 2006 and 2005, respectively.

Shipping and Handling Cost

Shipping and handling costs billed to customers totaled $0, $429,881, and $781,442 for the years ended September 30, 2007, 2006, and 2005, respectively. We incurred shipping and handling costs of $0, $458,633, and $978,957 for the years ended September 30, 2007, 2006 and 2005 respectively. The net expense of $0, $28,752 and $197,515 is included in selling expenses in the accompanying statement of operations for the years ended September 30, 2007, 2006, and 2005, respectively.

(4) Major Customers and Credit Risks

We had substantially no operations during the fiscal year 2007.  Only one customer accounted for more than 10% of net sales for the fiscal years 2006 and 2005. Two customers accounted for more than 10% of our total outstanding trade receivable as of September 30, 2006 and 2005.

The vast majority of our sales in fiscal 2006 and 2005 were to customers within the United States. Sales to customers outside the United States, as a percentage of total revenues, were approximately 6.8 % and 14% in the fiscal years ended September 30, 2006 and 2005, respectively. Most of our foreign sales were to one customer.

(5) Inventories

Inventories related to discontinued operations consisted of the following at September 30, 2007 and 2006:

42

	2007		2006
Raw materials	$	—	$	1,953,305
Work in process		—		—
Finished goods		—		143,459
Other		—		—
				2,096,764
Inventory reserve		—		(45,000	)
Total, classified as assets held for sale	$	—	$	2,051,764

(6) Property, Plant and Equipment

Property, plant and equipment consisted of the following at September 30, 2007 and 2006:

	2007		2006			Useful Life
Machinery and equipment	$	—	$	544,498			2 - 10 years
Computer equipment and systems		—		605,712			2 - 7 years
Furniture, fixtures and other improvements		—		500,267			3 - 5 years
				1,650,476
Less classified as discontinued		—		(1,650,476	)
Total property, plant and equipment for continued operations	$	—	$	—

Depreciation expense was $0, $99,789, and $285,835 for the years ended September 30, 2007, 2006 and 2005, respectively. Repairs and maintenance expense was $0, $64,420, and $86,043 for the years ended September 30, 2007, 2006 and 2005 respectively. All such amounts are classified in discontinued operations.

(7) Agreements with Laurus

Pursuant to the Agreement Regarding the NCR Transaction and Other Asset Sales, dated November 26, 2004 (the “Asset Sales Agreement”), by and between the Company and Laurus Master Fund, Ltd. (“Laurus”), the Company agreed to pay to Laurus a portion of the excess net proceeds from the ATM business sale and the Cash Security Business Sale.

On June 9, 2006, we and Laurus entered into the Laurus Termination Agreement which, among other things, provided for the payment of a sale fee of $8,508,963 to Laurus (the “Sale Fee”) in full satisfaction of all amounts payable to Laurus under the Asset Sales Agreement, including fees payable in respect of the ATM business sale and the Cash Security Business Sale. The Laurus Termination Agreement further provided that, upon payment of the Sale Fee and performance by the Company of its obligations under the Stock Redemption Agreement described below, neither the Company nor any of its subsidiaries will have any further obligation to Laurus. Further, each of the Company and Laurus has granted each other and their respective affiliates and subsidiaries reciprocal releases from and against any claims and causes of action that may exist.

We and Laurus entered a Stock Redemption Agreement on January 12, 2006 and as subsequently amended. Pursuant to the terms of the Stock Redemption Agreement: we agreed, among other things, (i) to repurchase from Laurus, upon the closing of the Cash Security Business Sale, all shares of our common stock held by Laurus, and (ii) Laurus agreed to the cancellation as of the closing date of the Cash Security Business Sale of warrants it holds to purchase 4,750,000 shares of our common stock at an exercise price of $.30 per share, and not to exercise such warrants prior to the earlier to occur of September 30, 2006 and the date on which the Asset Purchase Agreement is terminated.

Following the Cash Security Business Sale, on October 2, 2006, the Company applied the net purchase price, the cash adjustment, and $5,400,000 in proceeds (together with accrued interest of $206,799) from the ATM business sale, to pay the following amounts to Laurus: (i) $8,508,963 pursuant to the terms of the Laurus Termination Agreement and (ii) $6,545,340 representing the purchase from Laurus by the Company of 19,251,000 shares of Company common stock pursuant to the terms of the Stock Redemption Agreement. Following both such payments to Laurus, the Company received $6,781,246 in net proceeds from the Cash Security Business Sale.

43

On October 2, 2006, following the foregoing payments to Laurus pursuant to the terms of the Laurus Termination Agreement and the Stock Redemption Agreement, no further fees remained payable by the Company to Laurus and, to our knowledge, Laurus does not own any shares of the Company.

(8) Accrued Expenses

Accrued expenses consisted of the following at September 30, 2007 and 2006:

	2007		2006
Reserve for warranty charges	$	—	$	826,152
Taxes:		—		—
Sales and use		—		11,049
Ad valorem		—		44,000
Wages and related benefits		—		662,348
Other		—		555,126
Other accrued expenses related to continuing operations		141,401		150,194
Total accrued expenses	$	141,401	$	2,248,869
Less: discontinued liabilities				(2,098,675	)
Total accrued expenses related to continuing operations	$	141,401	$	150,194

(9) Warrants

At September 30, 2007, we had outstanding warrants to purchase 697,500 shares of common stock that expire at various dates through November 2010. The warrants have exercise prices ranging from $0.40 to $0.68 per share and, if exercised, would generate proceeds to us of approximately $419,000.

Common Stock Purchase Warrants:

	Warrants		Expiration Date		Exercise Price		Relative Fair Value
Other parties in connection with Laurus financing (1)		197,500		11/24/2010		0.40		127,951
AIG/National Union Fire Insurance Co. (2)		500,000		11/01/2007		0.68		224,490
Outstanding warrants as of September 30, 2007		697,500					$	352,441

Value calculated using Black-Scholes:

		Stock Price At Issuance		Expected Term		Volatility			Risk Free Rate
(1)	Variables	$	0.72		7 years		111.00	%		3.72	%
(2)	Variables	$	0.67		3 years		108.00	%		3.85	%

(10) Employee Stock Option Plans

We adopted a Long-Term Incentive Plan in 1997 (the “1997 Plan”) pursuant to which our Board of Directors may grant stock options to officers and key employees. The 1997 Plan, as amended, authorizes grants of options to purchase up to 2,000,000 shares of our common stock. Options are granted with an exercise price equal to the fair market value of the common stock at the date of grant. Options granted under the 1997 Plan vest over three-year periods and expire no later than 10 years from the date of grant.  At September 30, 2007, there were 1,900,000 options outstanding and 32,950 shares available for grant under the 1997 Plan,.  There were 648,150 options outstanding and 1,310,800 shares available for grant at September 30, 2006. There were 1,099,810 options outstanding and 855,890 shares available for grant at September 30, 2005.

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On March 21, 2007, the Company awarded Messrs. Griggs and Clay an aggregate of 1,900,000 stock options to purchase our common stock at an exercise price of $0.62 per share pursuant to the Company's 1997 Long-Term Incentive Plan. Of this award, 34% of the options vest on the first anniversary of the date of the grant, 33% of the options vest on the second anniversary of the date of the grant and the remaining 33% of the options vest on the third anniversary of the date of the grant. In addition, 100% of the options vest upon a change of control.  There were no stock options granted during the fiscal year ended 2006 and 363,810 stock options granted during the fiscal year ended 2005.

At September 30, 2007, the options outstanding under the 1997 Plan had exercise prices of $0.62 per share with a remaining contractual life of 9.47 years.  At September 30, 2006, the range of exercise prices was $2.50 to $0.25 per share with a weighted average remaining contractual life of 4.56 years. At September 30, 2005, the range of exercise prices was $2.50 to $0.25 per share with a weighted-average remaining contractual life of the outstanding options was 5.32 years.

Activity during the periods indicated was as follows:

	Number of Shares			Weighted Average Exercise Price
Balance at September 30, 2004		786,000			1.67
Granted		363,810			0.25
Exercised		—			—
Canceled		(50,000	)		1.16
Balance at September 30, 2005		1,099,810			1.22
Granted		—			—
Exercised		—			—
Canceled		(451,660	)		1.19
Balance at September 30, 2006		648,150			1.24
Granted		1,900,000			0.62
Exercised		(27,250	)		0.25
Canceled		(620,900	)		1.28
Balance at September 30, 2007		1,900,000			0.62

(11) Income Taxes

Income tax expense (benefit) attributable to income from operations consisted of the following for the years ended September 30, 2007, 2006 and 2005:

	2007		2006		2005
Federal current tax Expense (Benefit)	$	75,808	$	159,546	$	—
Federal deferred tax benefit		—		—		—
State tax		—		—		—
	$	75,808	$	159,546	$	—

The income tax differed from the amounts computed by applying the U.S. statutory federal income tax rate of 34% to income (loss) before taxes as a result of the following:

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	2007			2006			2005
Computed “expected” tax expense (benefit)	$	2,156,789		$	1,707,357		$	(1,117,213	)
Change in valuation allowances		(1,867,170	)		(4,156,100	)		1,638,969
Nondeductible items and permanent differences		(272,618	)		1,499,031			(521,756	)
AMT		75,808			70,962			—
Other		(17,001	)		1,038,296			—
	$	75,808		$	159,546		$	(0	)

The tax effects of temporary differences that were the sources of the deferred tax assets consisted of the following at September 30, 2007 and 2006:

	2007			2006
Deferred tax assets:
Fixed assets	$	—		$	286,643
Accounts receivable		—			15,151
Inventories		—			268,704
Accrued expenses		—			511,398
Stock Option		47,427
Other		—			39,332
Net operating losses		138,304			931,673
Total gross deferred tax assets		185,731			2,052,900
Less: valuation allowance		(185,731	)		(2,052,900	)
Net deferred tax assets		—			—
Other deferred tax liabilities		—			—
Net deferred tax assets	$	—		$	—

In assessing the realizability of deferred assets, management considers whether it is more likely than not some portion or all of the deferred tax assets will be realized. The Company has established a valuation allowance for such deferred tax assets to the extent such amounts are not utilized to offset existing deferred tax liabilities reversing in the same periods.

As of September 30, 2007, the Company had remaining net operating losses of approximately $406,775, which will begin to expire in 2024.  The Company utilized net operating loss carryforwards of $4,190,420, $2,964,614 and $3,273,117 in the fiscal years ended September 30, 2007, 2006 and 2005, respectively, to offset gains as a result of the Cash Security Business Sale, the ATM Business Sale and other income from discontinued operations.

(12) Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted computations for the years ended September 30, 2007, 2006 and 2005:

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	2007		2006		2005
Net income (loss) (numerator for diluted earnings (loss) per share)	$	6,267,689	$	4,862,093	$	(3,285,922	)
Weighted average common shares outstanding (denominator for basic earnings (loss) per share)		19,563,447		33,499,128		20,292,796
Dilutive shares outstanding		111,325		—		—
Weighted average common and dilutive shares outstanding		19,674,772		33,499,128		20,292,796
Basic earnings  (loss) per share	$	0.33	$	0.15	$	(0.16	)
Diluted earnings (loss) per share	$	0.32	$	0.15	$	(0.16	)

Common stock equivalent shares consisting of warrants, options and convertible debt of 1,127,725; 5,874,687 and $29,717,185 were excluded from the computation of diluted earnings per share due to their anti-dilutive effect for the years ended September 30, 2007, 2006 and 2005, respectively.

(13) Marketable Securities Available- for- Sale

We own 2,022,000 of the common stock of Cashbox plc pursuant to our exercise of a warrant in September 2005. On or about March 27, 2006, shares of Cashbox plc began trading on the AIM Market of the London Stock Exchange. Prior to Cashbox plc going public, we considered their shares not marketable, thus the shares were carried at cost. Since the shares are now public and market value is readily available, we determined the market value of the shares and pursuant to SFAS No. 115 “Accounting for Investments in Equity and Debt Securities” we classified these shares as available for sale. Pursuant to the SFAS No. 115 the unrealized change in fair value was excluded from earnings and recorded net of tax as other comprehensive income.

As of September 30, 2007 and 2006, our common stock in Cashbox plc was recorded at a fair value of $505,500 and $851,939, respectively. Unrealized gains on these shares of common stock, which were added to stockholders' equity as of September 30, 2007 and 2006, were $205,500 and $551,939, respectively.

As of September 30, 2007 we were restricted from selling any shares until the second anniversary of its admission to the London Stock Exchange unless we (i) consult with Cashbox’s primary broker prior to the disposal of any shares and (ii) effect the disposal of the shares through Cashbox’s primary broker from time to time and in such manner as such broker may require with a view to the maintenance of an orderly market in the shares of Cashbox.

(14) Investment in 3CI Complete Compliance Corporation

We formerly owned 100% of 3CI Complete Compliance Corporation (“3CI”), a company engaged in the transportation and incineration of medical waste, until we divested our majority interest in February 1994. At September 30, 2005, we continued to own 698,889 shares of the common stock of 3CI and the value of our investment was marked to the market value of $279,556, or $.40 per share.

On May 30, 2006, we received a settlement payment of $4,489,963 and on September 6, 2006, the Company received an additional settlement payment in the amount of $1,169,544 arising out of our ownership of the 3CI shares under a class action settlement paid out to minority shareholders of 3CI. Under the terms of the settlement and in order to participate in the settlement, we tendered all 698,889 shares that we owned to Stericycle, Inc., the current majority shareholder of 3CI and the defendant under the class action, and accordingly we no longer hold any ownership interest in 3CI. As a result, we recognized a gain of $5,380,121 on the disposal of these shares during the year ended September 30, 2006, which represented the difference between the settlement payment amount and our carrying amount.

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(15) Leases

We had no leases for real property or equipment in 2007.   We leased office and warehouse space, transportation equipment and other equipment under terms of operating leases which were transferred in the sale of the Cash Security business and the sale of the ATM business.  Rental expense under those leases for the years ended September 30, 2006 and 2005, was approximately $210,820 and $453,000, respectively.

(16) Litigation

We and our subsidiaries are each subject to certain other litigation and claims arising in the ordinary course of business. In our management’s opinion, the amounts ultimately payable, if any, resulting from such litigation and claims will not have a materially adverse effect on our financial position.

On June 9, 2005, Corporate Safe Specialists, Inc. (“CSS”) filed a lawsuit against Secure Alliance Holdings Corporation and our wholly owned subsidiary, Secure Alliance, L.P. The lawsuit, Civil Action No. 02-C-3421, was filed in the United States District Court of the Northern District of Illinois, Eastern Division (the “CSS Lawsuit”). CSS alleges that the Sentinel product sold by Secure Alliance, L.P. infringes on one or more patent claims found in CSS patent U.S. Patent No. 6,885,281 (the ‘281 patent). CSS sought injunctive relief against future infringement, unspecified damages for past infringement and attorney’s fees and costs. Secure Alliance Holdings Corporation was released from this lawsuit, but Secure Alliance, L.P. remained a defendant.

As part of the Cash Security Business Sale, the buyer of the Cash Security business, Sentinel Operating, L.P., agreed to undertake and have the sole right to direct on behalf of itself and us, the defense of the CSS Lawsuit, with counsel of its choice, provided that in the event we incur any adverse consequences in connection with the CSS Lawsuit subsequent to the Cash Security Business Sale, then Sentinel Operating, L.P. will indemnify us from and against the entirety of any such adverse consequences to the extent they are incurred as a result of the breach of the Cash Security Asset Purchase Agreement or our negligent action or inaction.

On March 31, 2007, CSS, Secure Alliance Holdings Corporation and Secure Alliance, L.P. (formerly known as Tidel Engineering, L.P.) entered into a settlement and mutual release agreement whereby the parties jointly moved to dismiss all claims and counterclaims in the CSS Lawsuit. The parties agreed to pay no monetary settlement and each bear its own legal costs and expenses. Pursuant to the settlement, we and our predecessor agreed not to make, use, sell or offer for sale any safe that infringes upon the ‘281 patent during the period of time the ‘281 patent is valid; however, we and our predecessor may challenge, contest, or raise as a defense the validity of the ‘281 patent if CSS or any other party files a claim against us asserting infringement of the ‘281 patent.

On April 16, 2007, Fire King International, LLC (“Fire King”) filed a lawsuit against Corporate Safe Specialists, Inc., Tidel Technologies, Inc. and Tidel Engineering, LP. The lawsuit, Civil Action No. 03-07CV0655-G, was filed in the United States District Court of the Northern District of Texas, Dallas Division. Fire King alleges that the Sentinel product previously sold by the Company’s predecessor infringes on one or more patent claims found in Fire King patent U.S. Patent No. 7,063,252 (the ‘252 patent). Fire King sought injunctive relief against future infringement, unspecified damages for past infringement and attorney’s fees and costs.

On September 14, 2007, Fire King, Secure Alliance Holdings Corporation and Secure Alliance, L.P. entered into a confidential settlement and mutual release agreement whereby the parties jointly moved to dismiss all claims in the Fire King lawsuit. In connection therewith, we paid an undisclosed amount to Fire King to settle a disputed claim and admitted no liability or wrongdoing.  The court has dismissed Fire King’s claims against the Company with prejudice.

(17) Subsequent Events

On December 6, 2007, we entered into a definitive Agreement and Plan of Merger (“Merger Agreement”) by and among Sequoia Media Group, LC, a private Utah limited liability company (“Sequoia”), the Company and SMG Utah, LC, a Utah limited liability company and wholly owned subsidiary of the Company (“Merger Sub”).  Pursuant to the Merger Agreement, Merger Sub will merge with and into Sequoia (the “Merger”), with Sequoia continuing as the surviving entity in the Merger and each issued and outstanding Sequoia equity interest will automatically be converted into the right to receive 0.5806419 shares of the Company common stock, calculated after a 1 for 3 reverse stock split of the Company’s common stock contemplated to be effected prior to the Merger.  Immediately following the Merger, the members of Sequoia, in aggregate, will own approximately 80% of the equity interests in the Company and the stockholders of the Company will own the remaining approximately 20% equity interests in the combined company.

In addition, pursuant to a Loan and Security Agreement (“Loan Agreement”) entered into between the Company and Sequoia on December 6, 2007, the Company has agreed to extend up to $2.5 million in secured financing to Sequoia.  Under the terms of the Loan Agreement, Sequoia has agreed to pay interest on the loan at a rate per annum equal to 10%.  Interest on the loan is payable on the scheduled maturity date, December 31, 2008.  In addition, if the loan obligations have not been paid in full on or prior to the scheduled maturity date, a monthly fee equal to 10% of the outstanding loan obligations is payable to the Company by Sequoia on the last day of each calendar month for which the loan obligations remain outstanding.

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In addition, prior to the effectiveness of the Merger, the Company proposes to (i) form a wholly owned subsidiary, and (ii) contribute to such subsidiary approximately $2.2 million in cash, 2,022,000 shares of Cashbox, a publicly listed UK company, and amounts receivable under certain promissory notes not associated with the Sequoia transaction.  The common stock of such subsidiary will be distributed, to the Company stockholders as of a date prior to the Merger, at such time as the distribution can be effected in compliance with applicable law, whether pursuant to an effective registration statement or a valid exemption from registration.

Our Board of Directors approved the Merger Agreement and the foregoing transactions at a special meeting on November 29, 2007.  The Merger is subject to stockholder approval and other customary conditions and is expected to be completed during the first quarter of 2008.  If the Company terminates the Merger Agreement before the consummation of the Merger in connection with the Company’s acceptance of a superior proposal, the Company has agreed to pay Sequoia a termination fee of $1,000,000 in cash under certain circumstances. At closing of the Merger, outstanding stock options granted to our executive officers, Jerrell G. Clay and Stephen P. Griggs, to purchase an aggregate 1,900,000 shares of our common stock at exercise prices of $0.62 per share will fully vest and become immediately exercisable.

Sequoia is committed to revolutionizing the way life events and memories are shared and treasured through personal digital expressions.  Sequoia developed aVinci Experience products to simplify and automate the process of creating professional-quality multi-media productions using personal photos and videos.  The patented technology provides complete, refined products, including DVD’s, photo books and posters.  aVinci distributes products through leading retailers, photo websites and image service providers.

(18) Status of Company

On October 2, 2006, we completed the Cash Security Business Sale and became a shell public company with approximately $12.9 million in cash, cash equivalents and marketable securities held-to-maturity; or approximately $0.66 per share based on 19,426,210 shares outstanding.  See Note (17) above for a discussion of the Merger Agreement and other matters.

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SCHEDULE II

SECURE ALLIANCE HOLDINGS CORPORATION AND SUBSIDIARIES

(FORMERLY TIDEL TECHNOLOGIES, INC.)

VALUATION AND QUALIFYING ACCOUNTS

Classification	Balance at Beginning of Period		Additions Charged to Costs and Expenses		Charged to Other Accounts		Deductions		Balance at End of Period
For the year ended September 30, 2007:
Allowance for doubtful accounts and notes receivable	$	44,943	$	—		—		44,943	$	—
Inventory reserve		45,000		—		—		45,000		—
	$	89,943	$	—		—	$	89,943	$	—
For the year ended September 30, 2006:
Allowance for doubtful accounts and notes receivable	$	1,132,382	$	—		—		1,087,439	$	44,943
Inventory reserve		100,558		—		—		55,558		45,000
	$	1,232,940	$	—		—	$	1,142,997	$	89,943
For the year ended September 30, 2005:
Allowance for doubtful accounts and notes receivable	$	1,076,055	$	56,327		—		—	$	1,132,382
Reserve for settlement of class action litigation		1,564,490		—		—		1,564,490		—
Inventory reserve		1,900,000		—		—		1,799,442		100,558
	$	4,540,545	$	56,327		—	$	3,363,932	$	1,232,940

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SECURE ALLIANCE HOLDINGS CORPORATION
	(Company)
January 14, 2008	/s/ Jerrell G. Clay
	Jerrell G. Clay
	Principal Executive Officer
January 14, 2008	/s/ Stephen P. Griggs
	Stephen P. Griggs
	Principal Financial Officer

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POWER OF ATTORNEY

Secure Alliance Holdings Corporation and each of the undersigned do hereby appoint Jerrell G. Clay its or his true and lawful attorney to execute on behalf of Secure Alliance Holdings Corporation and the undersigned any and all amendments to this Annual Report on Form 10-K and to file the same with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission; each of such attorneys shall have the power to act hereunder with or without the other.

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

SIGNATURE	TITLE	Date
/s/ Jerrell G. Clay	Director and Chief Executive Officer	January 14, 2008
Jerrell G. Clay
/s/ Stephen P. Griggs	Director, President, Principal Financial Officer, Operating Officer and Secretary	January 14, 2008
Stephen P. Griggs

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INDEX TO EXHIBITS

Except as otherwise indicated, the following documents are incorporated by reference as Exhibits to this Report:

Exhibit Number	Description
2.01.	Asset Purchase Agreement dated February 19, 2005 by and among Tidel Engineering, L.P., NCR Texas LLC and us (incorporated by reference to Exhibit 2.01 of our Annual Report on Form 10-K for the fiscal years ended September 30, 2004 and 2003).
2.02.	Asset Purchase Agreement, dated as of January 12, 2006, by and among Sentinel Operating, L.P., Tidel Technologies, Inc., and Tidel Engineering, L.P.(incorporated by reference to Exhibit 10.1 of Form 8-K filed on January 19, 2006).
2.03.	Amended and Restated Asset Purchase Agreement, dated as of June 9, 2006, by and among Sentinel Operating, L.P., Tidel Technologies, Inc. and Tidel Engineering, L.P.(incorporated by reference to Exhibit 10.1 of Form 8-K filed on June 14, 2006).
2.04.	Agreement and Plan of Merger, dated as of December 6, 2007, by and among Sequoia Media Group, LC, Secure Alliance Holdings Corporation, and SMG Utah, LC (incorporated by reference to Exhibit 10.1 of Form 8-K filed on December 6, 2007).
3.01.	Certificate of Incorporation of American Medical Technologies, Inc. (filed as Articles of Domestication with the Secretary of State, State of Delaware on November 6, 1987 and incorporated by reference to Exhibit 2 of our Form 10 dated November 7, 1988 as amended by Form 8 dated February 2, 1989).
3.02.	Amendment to Certificate of Incorporation dated July 16, 1997 (incorporated by reference to Exhibit 3 of our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997).
3.03.	Our By-Laws (incorporated by reference to Exhibit 3 of our Form 10 dated November 7, 1988 as amended by Form 8 dated February 2, 1989).
3.04.	Certificate of Amendment of Certificate of Incorporation, filed with the State of Delaware Secretary of State on October 3, 2006 (incorporated by reference to Exhibit 3.04 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2006).
4.01.	Form of Agreement under our 1997 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.3 of our Form S-8 dated February 14, 2000).
4.02.	Convertible Term Note in favor of Laurus Master Fund, Ltd. in the principal amount of $6,450,000 dated November 25, 2003 (incorporated by reference to Exhibit 4.35 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
4.03.	Convertible Term Note in favor of Laurus Master Fund, Ltd. in the principal amount of $400,000 dated November 25, 2003 (incorporated by reference to Exhibit 4.36 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
4.04.	Equity Pledge Agreement by and between Laurus Master Fund, Ltd. and us dated November 25, 2003 (incorporated by reference to Exhibit 4.39 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
4.05.	Partnership Interest Pledge Agreement by and among Tidel Cash Systems, Inc., Tidel Services, Inc. and Laurus Master Fund, Ltd., dated as of November 25, 2003 (incorporated by reference to Exhibit 4.40 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
4.06.	Registration Rights Agreement by and between Laurus Master Fund, Ltd. and us, dated November 25, 2003 (incorporated by reference to Exhibit 4.41 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).

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4.07.	Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd. dated November 25, 2003 (incorporated by reference to Exhibit 4.42 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
4.08.	Guaranty by and among Tidel Engineering, L.P., Tidel Cash Systems, Inc., Tidel Services, Inc., Laurus Master Fund, Ltd. and us, dated as of November 25, 2003 (incorporated by reference to Exhibit 4.44 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
4.09.	Convertible Term Note in favor of Laurus Master Fund, Ltd. in the principal amount of $600,000 dated November 26, 2004 (incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K dated November 26, 2004).
4.10.	Convertible Term Note in favor of Laurus Master Fund, Ltd. in the principal amount of $1,500,000 dated November 26, 2004 (incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K dated November 26, 2004).
4.11.	Common Stock Purchase Warrant issued to Laurus Master Fund, Ltd. dated November 26, 2004 (incorporated by reference to Exhibit 10.4 of our Current Report on Form 8-K dated November 26, 2004).
4.12.	Agreement of Amendment and Reaffirmation by and among Tidel Engineering, L.P., Tidel Cash Systems, Inc., AnyCard International, Inc., Tidel Services, Inc., Laurus Master Fund, Ltd., and us, dated as of November 26, 2004 (incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K dated November 26, 2004).
4.13.	Convertible Promissory Note in favor of Laurus Master Fund, Ltd. in the principal amount of $1,250,000 dated November 26, 2004 (incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K dated November 26, 2004).
4.14.	Guaranty in favor of Laurus Master Fund, Ltd. dated as of November 26, 2004 (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K dated November 26, 2004).
9.01.	Voting Agreement, dated as of January 12, 2006, by and between Tidel Technologies, Inc., Sentinel Technologies, Inc., Sentinel Operating, L.P. and the individuals named therein (incorporated by reference to Exhibit 10.6 of Form 8-K/A filed on January 31, 2006).
9.02.	Voting Agreement, dated as of January 12, 2006, by and between Tidel Technologies, Inc., Sentinel Technologies, Inc., Sentinel Operating, L.P. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.7 of Form 8-K/A filed on January 31, 2006).
9.03.	Amendment to Voting Agreement, dated as of February 28, 2006, by and among Tidel Technologies, Inc., Sentinel Technologies, Inc., Sentinel Operating, L.P. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.3 of Form 8-K filed on March 7, 2006).
9.04.	Second Amendment to Voting Agreement, dated as of June 9, 2006, by and among Tidel Technologies, Inc., Sentinel Technologies, Inc., Sentinel Operating, L.P. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.5 of Form 8-K filed on June 14, 2006).
(1) 10.01.	1997 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.1 of our Form S-8 dated February 14, 2000).
10.02.	Securities Purchase Agreement by and between Laurus Master Fund, Ltd. and us dated November 25, 2003 (incorporated by reference to Exhibit 10.17 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2002, filed February 1, 2005).
10.03.	Securities Purchase Agreement by and between Laurus Master Fund, Ltd. and us dated November 26, 2004 (incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K dated November 26, 2004).

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10.04.	Purchase Order Finance and Security Agreement dated as of November 26, 2004 between Laurus Master Fund, Ltd. and Tidel Engineering, L.P. (incorporated by reference to Exhibit 10.6 of our Current Report on Form 8-K dated November 26, 2004).
10.05.	Agreement Regarding NCR Transaction and Other Asset Sales by and between Laurus Master Fund, Ltd., and us, dated November 26, 2004 (incorporated by reference to Exhibit 10.22 of our Annual Report on Form 10-K for the fiscal years ended September 30, 2004 and 2003).
(1) 10.06.	Tidel/Peltier Agreement dated February 23, 2005 (incorporated by reference to Exhibit 99.1 to this Annual Report on Form 8-K dated February 23, 2005).
(1) 10.07.	Settlement Agreement by and between Tidel Engineering, L.P., Michael F. Hudson and us, dated June 22, 2005.
10.08.	Exercise and Conversion Agreement, dated as of January 12, 2006, by and among Sentinel Technologies, Inc., Sentinel Operating, L.P., Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.2 of Form 8-K filed on January 19, 2006).
10.09.	Cash Collateral Deposit Letter, dated as of January 12, 2006, by and between Laurus Master Fund, Ltd., Tidel Technologies, Inc., Tidel Engineering, L.P., Tidel Cash Systems, Inc., Tidel Services, Inc. and AnyCard International, Inc. (incorporated by reference to Exhibit 10.3 of Form 8-K filed on January 19, 2006).
10.10.	Stock Redemption Agreement, dated as of January 12, 2006, by and among Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.4 of Form 8-K filed on January 19, 2006).
10.11.	Reaffirmation, Ratification and Confirmation Agreement, dated as of January 12, 2006, by and between Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.5 of Form 8-K filed on January 19, 2006).
10.12.	Amendment to Exercise and Conversion Agreement, dated as of February 28, 2006, by and among Sentinel Technologies, Inc., Sentinel Operating, L.P., Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.1 of Form 8-K filed on March 7, 2006).
10.13.	Amendment to Stock Redemption Agreement, dated as of February 28, 2006, by and between Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.2 of Form 8-K filed on March 7, 2006).
10.14.	Agreement, dated as of June 9, 2006, by and between Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.2 of Form 8-K filed on June 14, 2006).
10.15.	Second Amendment to Stock Redemption Agreement, dated as of June 9, 2006, by and among Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.3 of Form 8-K filed on June 14, 2006).
10.16.	Second Amendment to Exercise and Conversion Agreement, dated as of June 9, 2006, by and among Sentinel Technologies, Inc., Sentinel Operating, L.P., Tidel Technologies, Inc. and Laurus Master Fund, Ltd. (incorporated by reference to Exhibit 10.4 of Form 8-K filed on June 14, 2006).
(1) 10.17.	Agreement, dated as of June 9, 2006, between Tidel Engineering, L.P. and Mark K. Levenick. (incorporated by reference to Exhibit 10.6 of Form 8-K filed on June 14, 2006).
*10.18.	Loan and Security Agreement, dated as of December 6, 2007, between Sequoia Media Group, LC and Secure Alliance Holdings Corporation.
14.01.	Code of Conduct and Ethics of Tidel Technologies, Inc (incorporated by reference to Exhibit 2.01 of our Annual Report on Form 10-K for the fiscal years ended September 30, 2004 and 2003).

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21.01.	Subsidiaries.
*31.1.	Certification of Chief Executive Officer, Jerrell G. Clay, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2.	Certification of Principal Financial Officer, Stephen P. Griggs, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1.	Certification of Chief Executive Officer, Jerrell G. Clay, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2.	Certification of Principal Financial Officer, Stephen P. Griggs, pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

____________

* Filed herewith.

(1) Indicates management contract or compensatory plan or arrangement.

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EX-10.18

Exhibit 10.18

*******************************

LOAN AND SECURITY AGREEMENT

Dated as of December 6, 2007

between

SEQUOIA MEDIA GROUP, LC,

As Borrower

and

SECURE ALLIANCE HOLDINGS CORPORATION,

As Lender

*******************************

Table of Contents

		Page
ARTICLE I.	DEFINITIONS AND ACCOUNTING TERMS	1
SECTION 1.1.	Certain Defined Terms	1
SECTION 1.2.	Terms Generally	6
SECTION 1.3.	Computation of Time Periods	6
SECTION 1.4.	Accounting Terms	7
ARTICLE II.	AMOUNTS AND TERMS OF THE ADVANCE	7
SECTION 2.1.	Advances	7
SECTION 2.2.	The Notes	7
SECTION 2.3.	Interest	7
ARTICLE III.	PAYMENTS, PREPAYMENTS, INCREASED  COSTS AND TAXES	8
SECTION 3.1.	Payments and Computations.	8
SECTION 3.2.	Mandatory Prepayments	8
SECTION 3.3.	Voluntary Prepayments	8
SECTION 3.4.	Taxes	8
ARTICLE IV.	SECURITY	9
SECTION 4.1.	Grant of Security Interest.	9
SECTION 4.2.	Delivery of Additional Documentation Required	9
SECTION 4.3.	Lender Appointed Attorney-in-Fact	9
SECTION 4.4.	Lender’s Duties	10
ARTICLE V.	CONDITIONS OF LENDING	11
SECTION 5.1.	Conditions Precedent to the Advance	11
ARTICLE VI.	REPRESENTATIONS AND WARRANTIES	12
SECTION 6.1.	Representations in merger Agreement are True and Correct	12
SECTION 6.2.	Authority, Due Execution, Binding Obligation	12
SECTION 6.3.	Location	13
SECTION 6.4.	Organization and Name	13
SECTION 6.5.	No Liens	13
SECTION 6.6.	No Claims	13
SECTION 6.7.	Non-Contravention	13
SECTION 6.8.	No Default or Event of Default	13
ARTICLE VII.	AFFIRMATIVE COVENANTS OF THE BORROWER	14
SECTION 7.1.	Compliance with Laws, Etc	14
SECTION 7.2.	Reporting and Notice Requirements	14
SECTION 7.3.	Use of Proceeds	14
SECTION 7.4.	Taxes and Liens	14
SECTION 7.5.	Maintenance of Property	14
SECTION 7.6.	Right of Inspection	14

Table of Contents

( continued)

		Page
SECTION 7.7.	Insurance	15
SECTION 7.8.	Notice of Litigation	15
SECTION 7.9.	Maintenance of Office	15
SECTION 7.10.	Existence	15
SECTION 7.11.	Financial Statements	16
SECTION 7.12.	Further Assurances	16
ARTICLE VIII.	NEGATIVE COVENANTS	16
SECTION 8.1.	Impairment of Rights	16
SECTION 8.2.	Restrictions on Debt	17
SECTION 8.3.	Restrictions on Liens	17
SECTION 8.4.	Mergers and Acquisitions	18
SECTION 8.5.	Issuance of Equity Interests	18
ARTICLE IX.	EVENTS OF DEFAULT	19
SECTION 9.1.	Events of Default	19
SECTION 9.2.	Remedies	20
SECTION 9.3.	Remedies Cumulative	21
SECTION 9.4.	Marshaling	22
ARTICLE X.	MISCELLANEOUS	22
SECTION 10.1.	Survival of Representations and Warranties	22
SECTION 10.2.	Amendments, Etc	22
SECTION 10.3.	Notices, Etc	22
SECTION 10.4.	No Waiver; Remedies	22
SECTION 10.5.	Expenses and Attorneys’ Fees	23
SECTION 10.6.	Indemnity	23
SECTION 10.7.	Right of Set-off	24
SECTION 10.8.	Binding Effect	24
SECTION 10.9.	Assignments and Participations	24
SECTION 10.10.	Limitation on Agreements	24
SECTION 10.11.	Severability	25
SECTION 10.12.	Governing Law	25
SECTION 10.13.	SUBMISSION TO JURISDICTION; WAIVERS	25
SECTION 10.14.	Reserved.	26
SECTION 10.15.	Execution in Counterparts	26

EXHIBITS:

Exhibit A - Form of Note

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LOAN AND SECURITY AGREEMENT

This Loan and Security Agreement, dated as of December 6, 2007 (this “Agreement”), is made between Sequoia Media Group, LC, a Utah limited liability company (“Borrower”), and Secure Alliance Holdings Corporation, a Delaware corporation (“Lender”).

RECITALS:

WHEREAS, Borrower, Lender and SMG Utah, LC, a Utah limited liability company and a wholly owned subsidiary of Lender (“SMG”) have entered into a Plan and Agreement of Merger dated December 6, 2007 (the “Merger Agreement”) wherein upon closing of the Merger Agreement (the “Closing”), SMG shall be merged with and into Borrower (the “Merger”), with Borrower becoming a wholly-owned subsidiary of Lender, upon the terms and subject to the conditions set forth in the Merger Agreement.

WHEREAS, Lender has agreed to loan money to the Borrower as a bridge loan for working capital purposes from the date hereof until the Closing, on the terms and subject to the provisions contained herein.

NOW THEREFORE, in consideration of the premises and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.1. Certain Defined Terms.  As used in this Agreement, the following terms shall have the following meanings:

“Advance” means an advance under Section 2.1.

“Affiliate” means any Person which, directly or indirectly, controls or is controlled by or is under common control with another Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or by contract or otherwise.

“Bankruptcy Code” means The Bankruptcy Reform Act of 1978, as amended, and codified as 11 U.S.C. Sections 101 et seq.

“Borrower” has the meaning in the preamble.

“Business Day” means a day of the year on which banks are not required or authorized to close in New York, New York.

“Capital Lease” means any obligation to pay rent or other amounts under a lease of (or other agreement conveying the right to use) any property (whether real, personal or mixed, immovable or movable) that is required to be classified and accounted for as a capitalized lease obligation under GAAP.

"Change of Control" shall be deemed to have occurred, other than upon the occurrence of the Merger, at such time as:

(i)           any "person" (as that term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”)) (other than Lender or its Affiliates) becomes, directly or indirectly, the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act as in effect on the date hereof) of securities representing fifty percent (50%) or more of the combined voting power of the then outstanding voting membership interests of the Borrower or any successor of the Borrower;

(ii)         during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the Board of Managers of the Borrower cease, for any reason, to constitute at least a majority of such Board of Managers, unless the election or nomination for election of each new member of such Board of Managers was approved by a vote of at least two-thirds of the members of such Board of Managers then still in office who were members of such Board of Managers at the beginning of the period;

(iii)         the members of the Borrower approve any merger or consolidation to which any of the Borrower is a party as a result of which the persons who were members of the Borrower immediately prior to the effective date of the merger or consolidation (and excluding, however, any shares held by any party to such merger or consolidation and its Affiliates) shall have beneficial ownership of less than fifty percent (50%) of the combined voting power for election of members of the Board of Managers (or equivalent) of the surviving entity following the effective date of such merger or consolidation; or

(iv)         the members of the Borrower approve any merger or consolidation as a result of which the equity interests of the Borrower shall be changed, converted or exchanged (other than a merger with a wholly-owned Subsidiary of the Borrower) or any liquidation of the Borrower or any sale or other disposition of fifty percent (50%) or more of the assets or earnings power of the Borrower.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute.

“Collateral” means all right, title and interest in, to and under, all of the property and assets currently owned or owing to, or hereafter acquired or arising in favor of, Borrower and its Subsidiaries, wherever located, including, but not limited to, all accounts, deposit accounts, chattel paper, instruments, documents, securities, letter of credit rights, contract rights, receivables, equipment, goods, inventory, investment property, goodwill, general intangibles, intellectual property, patents, patent applications, trademarks, trademark applications, trade names, copyrights, copyright applications, Internet domain names, service marks, trade secrets, know-how, technology, software, hardware, commercial tort claims, warranties and guarantees, as any of the foregoing terms may be defined in the Uniform Commercial Code of the State of Utah (the “UCC”), and including any products, proceeds (including insurance proceeds) or income derived therefrom, whether by disposition or otherwise.

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“Commitment” means a total of $2,500,000, which shall be advanced to Borrower as follows: (i) $1,000,000 at the time of the execution of this Agreement; (ii) $1,000,000 on January 15, 2008; and (iii) $500,000 on February 15, 2008.

“Control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Debt” means (without duplication), for any Person, (a) indebtedness of such Person for borrowed money or arising out of any extension of credit to or for the account of such Person (including, without limitation, extensions of credit in the form of reimbursement or payment obligations of such Person relating to letters of credit issued for the account of such Person) or for the deferred purchase price of property or services; (b) indebtedness of the kind described in clause (a) of this definition which is secured by (or for which the holder of such debt has any existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness or obligations; (c) all obligations as lessee under any Capital Lease; (d) all contingent liabilities and obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (c) above; and (e) any monetary obligation of a Person under or in connection with a sale-leaseback or similar arrangement.

“Debtor Laws” means all applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or similar laws including the Bankruptcy Code, or general equitable principles from time to time in effect affecting the rights of creditors generally.

“Default” means any event the occurrence of which does, or with the lapse of time or giving of notice or both would, constitute an Event of Default.

“Equity Interests” of any Person shall mean any and all shares, rights to purchase, options, warrants, general, limited or limited liability partnership interests, membership interests, participation or other equivalents of or interest in (regardless of how designated) equity of such Person, whether voting or nonvoting, including common stock, preferred stock, convertible securities or any other “equity security” (as such term is defined in Rule 3a11-1 under the Securities Exchange Act of 1934).

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“Events of Default” has the meaning specified in Section 9.1.

“Fee” has the meaning specified in Section 2.3.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants, and statements and pronouncements of the Financial Accounting Standards Board.

“Governmental Authority” means any (domestic or foreign) federal, state, county, municipal, parish, provincial, or other government, or any department, commission, board, court, agency, or any other instrumentality of any of them or any other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of, or pertaining to, government, including, without limitation, any arbitration panel, any court, or any commission.

“Highest Lawful Rate” means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged, or received with respect to any Note or on other amounts, if any, due to the Lender pursuant to this Agreement or any other Loan Document under laws applicable to the Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect.

“Insolvency Proceeding” means in any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of such Person to, (a) the entry of an order for relief under the U.S. Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for such Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.

“Interest Rate” has the meaning specified in Section 2.3.

“Issue Date” means the date on which a Note is issued pursuant to this Agreement. The Commitment shall be Advanced on three separate Issue dates as to in Section 2.1.

“Legal Requirement” means any order, constitution, law, ordinance, principle of common law, regulation, rule, statute or treaty of any applicable Governmental Authority.

“Lien” means any security interest, mortgage, pledge, hypothecation, charge, claim, option, right to acquire, adverse interest, assignment, deposit arrangement, encumbrance, restriction, statutory or other lien, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease involving substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction).

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“Loan Documents” means this Agreement, the Notes, and each other certificate, instrument, agreement or document delivered by any Loan Party in connection with the transactions contemplated by this Agreement.

“Loan Party” means the Borrower and any Borrower’s Subsidiary.

“Material Adverse Effect” means (i) a material adverse effect on the transactions contemplated hereby (including a material adverse effect on the ability of any party hereto to perform its obligations hereunder) or (ii) an adverse effect on the business, Property, assets, liabilities, operations, results of operations, condition (financial or otherwise) or prospects of the Loan Parties, if any, that is material to the Loan Parties, taken as a whole, other than as a result of adverse economic conditions in the United States generally or as a result of any act or omission contemplated by this Agreement.

“Maturity Date” means the earliest to occur of (a) December 31, 2008 or (b) such earlier time to which the Obligations may be accelerated under Section 9.1 hereof.

“Merger” has the meaning in the recitals.

“Merger Termination Date” means the earliest to occur of (a) May 31, 2008, or (b) the date the Merger Agreement is terminated pursuant to Section 9.1 thereof.

“Note” means each promissory note issued under this Agreement  evidencing an Advance pursuant to Section 2.2.

“Obligations” means all of the obligations of the Borrower now or hereafter existing under the Loan Documents, whether for principal, interest, fees, expenses, indemnification or otherwise.

            “Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

“Permitted Liens” has the meaning specified in Section 8.3.

“Person” means an individual, partnership, limited liability company (including a business trust or a real estate investment trust), joint stock company, trust, unincorporated association, corporation, joint venture or other entity, or a government or any political subdivision or agency thereof.

“Property” means any interest or right in any kind of property or asset, whether real, personal, or mixed, owned or leased, tangible or intangible, and whether now held or hereafter acquired.

“Responsible Officer” means with the chief financial officer or the chief accounting officer of Borrower, as designated in reports filed with the Securities and Exchange Commission (“SEC”).

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“Solvent” means as to any Person, such Person (a) owns Property whose fair salable value is greater than the amount required to pay all of its debts (including contingent, subordinated, unmatured and unliquidated liabilities); (b) owns Property whose present fair salable value (as defined below) is greater than the probable total liabilities (including contingent, subordinated, unmatured and unliquidated liabilities) of such Person as they become absolute and matured; (c) is able to pay all of its debts as they mature; (d) has capital that is not unreasonably small for its business and is sufficient to carry on its business and transactions and all business and transactions in which it is about to engage; (e) is not "insolvent" within the meaning of Section 101(32) of the U.S. Bankruptcy Code; and (f) has not incurred (by way of assumption or otherwise) any obligations or liabilities (contingent or otherwise) under any Loan Documents, or made any conveyance in connection therewith, with actual intent to hinder, delay or defraud either present or future creditors of such Person or any of its Affiliates.  "Fair salable value" means the amount that could be obtained for assets within a reasonable time, either through collection or through sale under ordinary selling conditions by a capable and diligent seller to an interested buyer who is willing (but under no compulsion) to purchase.

“Subsidiary” when used with respect to any Person, shall mean any corporation or other organization, whether incorporated or unincorporated, of which (i) such Person or any other Subsidiary of such Person is a general partner or (ii) at least such number and kind of the securities or other interests having by their terms ordinary voting power to elect at least 50% of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person, by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

SECTION 1.2. Terms Generally.  The definitions in Section 1.1 apply equally to both the singular and plural forms of the terms defined.  Whenever the context requires, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including” shall be construed as if followed by the words “without limitation”.  The words “herein”, “hereof” and “hereunder” and words of similar import refer to this Agreement (including the Exhibits hereto) in its entirety and not to any part hereof, unless the context otherwise requires.  All references herein to Articles, Sections, and Exhibits are references to Articles and Sections of, and Exhibits to, this Agreement unless the context otherwise requires.  Unless the context otherwise requires, any references to any agreement or other instrument or statute or regulation are to such agreement, instrument, statute or regulation as amended and supplemented from time to time (and, in the case of a statute or regulation, to any successor provisions).  Any reference in this Agreement to a “day” or number of “days” (without the explicit qualification of “business”) shall mean a calendar day or number of calendar days.  If any action or notice is to be taken or given on or by a particular day, and such day is not a business day, then such action or notice shall be deferred until, or may be taken or given on, the next Business Day.

SECTION 1.3. Computation of Time Periods.  In this Agreement in the computation of periods of time from a specified date to a later specified date, unless otherwise specified herein the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”.

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SECTION 1.4. Accounting Terms.  All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistent with those applied in the preparation of the financial statements filed by Borrower with the SEC under the Exchange Act.

ARTICLE II.

AMOUNTS AND TERMS OF THE ADVANCE

SECTION 2.1. Advances.  Lender agrees, on the terms and conditions hereinafter set forth, to make an advance (“Advance”) on each of the following Issue Dates:

(i) $1,000,000 on the date of the execution of this Agreement;

(ii) $1,000,000 on January 15, 2008; and

(iii) $500,000 on February 15, 2008 .

The amount outstanding on each of such Advance shall be payable in accordance with Section 3.1 hereof and shall mature and all outstanding principal thereof, together with accrued and unpaid interest thereon, shall be due and payable on the Maturity Date.

SECTION 2.2. The Notes. To evidence each Advance, the Borrower shall execute and deliver to the Lender , a term note (the “Note”) in the amount of the Advance.  Each Note shall be substantially in the form of Exhibit A hereto with the blanks appropriately filled, and shall mature on the Maturity Date, at which time all principal and accrued and unpaid interest then outstanding thereunder shall become due and payable.

SECTION 2.3. Interest.  Each Advance shall bear interest from and including the respective Issue Date of such Advance, at a rate per annum equal at all times to ten percent (10%) (the “Interest Rate”).  Subject to Section 3.3, interest shall be payable in full at the Maturity Date.

After the occurrence and during the continuance of an Event of Default the Advance and all other Obligations shall, at the election of the Lenders, bear interest at a rate per annum equal to two percent (2%) plus the Interest Rate (the “Default Rate”).  The additional interest amount shall be paid in cash monthly in arrears.

In addition, if the Obligations have not been paid in full or prior to the Maturity Date, a monthly fee equal to 10% of the outstanding Obligations (the “Fee”) shall be paid in cash on the last day of each calendar month for which the Obligations remain outstanding, to be paid by Borrower to Lender.

All computations of interest hereunder pursuant to this Article II shall be made on the basis of a year of 360 days, in each case including the first day but excluding the last day occurring in the period for which such interest is payable.

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ARTICLE III.

PAYMENTS, PREPAYMENTS, INCREASED COSTS AND TAXES

SECTION 3.1.   Payments and Computations.

(a)     The outstanding principal balance of each Advance shall be payable on the Maturity Date, when all unpaid principal of, and accrued and unpaid interest on, each Advance shall be due and payable.

(b)     Interest due under the Notes shall be payable in cash on the Maturity Date.

(c)     Whenever any payment under any Note shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest.

SECTION 3.2. Mandatory Prepayments.  If, while any amount of principal or accrued but unpaid interest remain outstanding on any Note, the Borrower receives additional capital or conducts any sale of its assets, other than sales made in the Ordinary Course of Business, and other sales permitted under the Loan Documents, the Borrower and its Subsidiaries shall, immediately upon receipt of the net proceeds of such capital contribution or sale, pay to the Lender all of such net proceeds up to an amount equal to the aggregate amount of principal of and accrued interest on the Notes.  Lender shall apply any such proceeds, in its sole discretion, to prepay amounts of principal of and/or accrued interest on the Notes then outstanding, without any penalty or premium.

SECTION 3.3. Voluntary Prepayments.  The Borrower may, upon at least five (5) Business Days’ prior written notice to the Lender, prepay all or any portion of the principal balance of the Obligations without penalty or premium.  Such notice shall be irrevocable and the payment amount specified in such notice shall be due and payable on the prepayment date described in such notice.  Any portion of the principal amount of an Advance which is prepaid in accordance with this Section shall reduce the principal amount of the Note evidencing such Advance and may not be reborrowed.  Any prepayment of principal under this Section 3.3 shall be accompanied by a payment of all accrued interest.

SECTION 3.4. Taxes

(a)     Any and all payments by the Borrower under the Notes shall be made, in accordance with Section 3.1, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of the Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which the Lender is organized or any political subdivision thereof. If the Borrower shall be required by law to deduct any such amounts from or in respect of any sum payable under the Notes to the Lender, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.4) the Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. The Borrower further agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made under the Notes or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or the Notes.

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(b)     The Borrower will indemnify the Lender for the full amounts payable pursuant to Section 3.4(a) (including, without limitation, any taxes or such other amounts imposed by any Governmental Authority on amounts payable under this Section 3.4) paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such amounts were correctly or legally asserted.

Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 3.4 shall survive the payment in full of principal and interest under the Notes.

ARTICLE IV.

SECURITY

SECTION 4.1. Grant of Security Interest.

(a)     The Borrower hereby pledges to Lender, as security for the Obligations, and grants to Lender a continuing security interest in, lien on and right of set-off against the Collateral, subject only to those Liens described in Section 8.3(a), (b), (c), (d), and (e), to secure prompt repayment of any and all Obligations and in order to secure prompt performance by the Borrower of its covenants and duties under the Loan Documents.

SECTION 4.2. Delivery of Additional Documentation Required.  Borrower shall execute and deliver to the Lender, prior to or concurrently with the Borrower’s execution and delivery of this Agreement and at any time thereafter at the request of the Lender, all financing statements, continuation financing statements, fixture filings, security agreements, assignments, endorsements of certificates of title, applications for title, affidavits, reports, notices, schedules of accounts, letters of authority, and all other documents that the Lender may reasonably request, in form satisfactory to Lender, to perfect and maintain perfected the Lender’s security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents.

SECTION 4.3. Lender Appointed Attorney-in-Fact.  Borrower hereby irrevocably appoints Lender its attorney-in-fact, with full authority in the place and stead of Borrower and in the name of Borrower or otherwise, at such time as an Event of Default has occurred and is continuing hereunder, to take any action and to execute any instrument which Lender may reasonably deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation:

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(a)     to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the accounts or any other collateral of Borrower;

(b)     to receive, indorse, and collect any drafts or other instruments, documents, negotiable collateral or chattel paper;

(c)     to file any claims or take any action or institute any proceedings which Lender may deem necessary or desirable for the collection of any of the collateral of Borrower or otherwise to enforce the rights of Lender with respect to any of the collateral;

(d)     to repair, alter, or supply goods, if any, necessary to fulfill in whole or in part the purchase order of any person obligated to Borrower in respect of any account of Borrower;

(e)     to use any labels, patents, trademarks, trade names, URLs, domain names, industrial designs, copyrights, advertising matter or other industrial or intellectual property rights, in advertising for sale and selling Inventory and other Collateral and to collect any amounts due under accounts, contracts or negotiable collateral of Borrower; and

(f)     Lender shall have the right, but shall not be obligated, to bring suit in its own name to enforce the trademarks, patents, copyrights and intellectual property licenses and, if Lender shall commence any such suit shall, at the request of Lender, do any and all lawful acts and execute any and all proper documents reasonably required by Lender in aid of such enforcement.

To the extent permitted by law, Borrower hereby ratifies all that such attorney-in-fact shall lawfully do or cause to be done by virtue hereof.  This power of attorney is coupled with an interest and shall be irrevocable until this Agreement is terminated.

SECTION 4.4. Lender’s Duties.  The powers conferred on Lender hereunder are solely to protect Lender’s interest in the Collateral, and shall not impose any duty upon Lender to exercise any such powers.  Except for the safe custody of any Collateral in its actual possession and the accounting for moneys actually received by it hereunder, Lender shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.  Lender shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its actual possession if such Collateral is accorded treatment substantially equal to that which Lender accords its own property.

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ARTICLE V.

CONDITIONS OF LENDING

SECTION 5.1. Conditions Precedent to the Advance.  The obligation of the Lender to make an Advance is subject to the condition precedent that the Lender shall have received, in form and substance satisfactory to the Lender:

(a)     Note.  A Note representing the aggregate amount of the Advance, duly executed by Borrower and payable to the order of the Lender.

(b)     Executed Loan and Security Agreement.  This Agreement, duly executed by the Borrower.

(c)     Authorizations.  Resolutions of the Board of Managers of the Borrower approving and authorizing the execution, delivery, and performance by the Borrower of each Loan Document, the notices and other documents to be delivered by the Borrower pursuant to each Loan Document, and the transactions contemplated thereunder.

(d)     Good Standing.  Certificates of appropriate officials as to the existence and good standing of the Borrower in its jurisdiction of organization.

(e)     Closing Deliveries.  Lender shall have received, in form and substance reasonably satisfactory to Lender, all other agreements, notes, certificates, orders, authorizations, financing statements, and other documents which Lender may at any time reasonably request.

(f)     Security Interests.  Lender shall have received satisfactory evidence that all security interests and liens granted to Lender for the benefit of Lender pursuant to this Agreement or the other Loan Documents have been duly perfected and constitute first priority liens on the Collateral, subject only to Permitted Liens.

(g)     Representations and Warranties.  The representations and warranties of the Borrower contained herein and in the Loan Documents shall be true, correct and complete on and as of the Issue Date to the same extent as though made on and as of that date, except for any representation or warranty limited by its terms to a specific date.

(h)     No Default.  No event shall have occurred and be continuing or would result from funding the Advance that would constitute an Event of Default or a Default.

(i)      Performance of Agreements.  Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which any Loan Document provides shall be performed by it on or before the Issue Date, in each case to the satisfaction of the Lender.

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(j)      No Prohibition.  No order, judgment or decree of any court, arbitrator or Governmental Authority shall purport to enjoin or restrain Lender from making the Advance.

(k)     No Litigation.  There shall not be pending or, to the knowledge of any Loan Party, threatened, any action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration by, against or affecting any Loan Party or any Property of any Loan Party that has not been disclosed to Lender by Loan Parties in writing, and there shall have occurred no development in any such action, charge, claim, demand, suit, proceeding, petition, governmental investigation or arbitration that, in the reasonable opinion of Lender, would reasonably be expected to have a Material Adverse Effect.

(l)      Insurance.  Lender shall receive, within ten business days following the Issue Date, certificates of insurance, insurance policies or binders for insurance with respect to each Loan Party in types and amounts, under terms and conditions satisfactory to Lender with appropriate endorsements naming Lender as loss payee and/or additional insured, as appropriate.

(m)     Material Adverse Change.  Since December 31, 2006, there shall have been no material adverse change in the business, operations, assets, properties, liabilities, profits, prospects or financial position of the Loan Parties taken as a whole as determined by the Lender in its sole discretion

(n)     Solvency.  Each Loan Party shall have demonstrated to Lender that after giving effect to the transactions contemplated hereby, such Loan Party is solvent, able to meet its obligations (including the Obligations) as they mature and has sufficient capital to enable it to operate its business as currently conducted or proposed to be conducted.

ARTICLE VI.

REPRESENTATIONS AND WARRANTIES

In order to induce the Lender to enter into this Agreement, the Borrower represents and warrants to the Lender as of the date hereof and as of the Issue Date that:

SECTION 6.1. Representations in Merger Agreement are True and Correct. Each of the Representations and Warranties made by Borrower in Article III of the Merger Agreement are true and correct as of the date of execution of this Agreement.

SECTION 6.2.  Authority, Due Execution, Binding Obligation. Borrower has the requisite limited liability company and all other power and authority to enter into this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery and performance by the Borrower of this Agreement and the filings contemplated therein have been duly authorized by all necessary action on the part of the Borrower and no further action is required by the Borrower.  This Agreement has been duly executed by the Borrower.  This Agreement constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization and similar laws of general application relating to or affecting the rights and remedies of creditors and by general principles of equity.

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SECTION 6.3.  Location. The Borrower has no place of business or offices where its books of account and records are kept or places where Collateral is stored or located, except its executive offices.

SECTION 6.4.  Organization and Name. The Borrower was organized and remains organized solely under the laws of the State of Utah.  The Borrower has no trade name.  The Borrower was formed under the name of Life Dimensions, LC but changed its name to Sequoia Media Group, LC on August 8, 2003.

SECTION 6.5.  No Liens. Except for Permitted Liens, the Borrower is the sole owner of the Collateral (except for non-exclusive licenses granted by the Borrower in the ordinary course of business), free and clear of any liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the Security Interests.  There is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Lender pursuant to this Agreement) covering or affecting any of the Collateral.

SECTION 6.6.  No Claims. No written claim has been received that any Collateral or the Borrower’s use of any Collateral violates the rights of any third party. There has been no adverse decision to the Borrower's claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to the Borrower's right to keep and maintain such Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of the Borrower, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

SECTION 6.7.  Non-Contravention. The execution, delivery and performance of this Agreement by the Borrower does not (i) violate any of the provisions of any organizational document of the Borrower or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to the Borrower or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing the Borrower's debt or otherwise) or other understanding to which the Borrower is a party or by which any property or asset of the Borrower is bound or affected. If any, all required consents (including, without limitation, from stockholders or creditors of the Borrower) necessary for the Borrower to enter into and perform its obligations hereunder have been obtained.

SECTION 6.8. No Default or Event of Default.  No event has occurred or is continuing which constitutes a Default or Event of Default hereunder.

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ARTICLE VII.

AFFIRMATIVE COVENANTS OF THE BORROWER

Until such time as all Obligations shall be indefeasibly paid in full, the Borrower covenants and agrees that, unless the Lender shall otherwise consent in writing:

SECTION 7.1.  Compliance with Laws, Etc.  The Borrower will comply, in all material respects with all applicable Legal Requirements; provided, however, that the Borrower will comply in full with any applicable Legal Requirements the failure with which to comply could reasonably be expected to have a Material Adverse Effect.

SECTION 7.2.   Reporting and Notice Requirements.  The Borrower will furnish to the Lender:

(a)     Notice of Default.  Promptly after any officer of the Borrower knows or has reason to know that any Default or Event of Default has occurred, a written statement of such officer of the Borrower setting forth the details of such Default or Event of Default and the action which the Borrower has taken or proposes to take with respect thereto.

(b)     Notification of Claim against the Collateral.  The Borrower will, immediately upon becoming aware thereof, notify the Lender in writing of any setoff, withholdings or other defenses to which any of the Collateral, or the Lender’s rights with respect to the Collateral, are subject.

SECTION 7.3.  Use of Proceeds. The proceeds of the Advance will be exclusively used by the Borrower for (i) general working capital purposes, (ii) to fund the Borrower’s operations conducted in the Ordinary Course of Business, and (iii) to pay expenses incurred in connection with the Merger Agreement.

SECTION 7.4.  Taxes and Liens.  The Borrower will pay and discharge, or will cause to be paid and discharged, promptly all taxes, assessments, and governmental charges or levies imposed upon the Borrower or upon the income of any Property of the Borrower as well as all claims of any kind (including, without limitation, claims for labor, materials, supplies, and rent) which, if unpaid, might become a Lien upon any Property of the Borrower, except such taxes, assessments, governmental charges or levies contested in good faith by the Borrower and which adequate reserves are maintained in accordance with GAAP.

SECTION 7.5.  Maintenance of Property.  The Borrower will at all times maintain, preserve, protect, and keep, or cause to be maintained, preserved, protected, and kept, its Property in good repair, working order, and condition (ordinary wear and tear excepted) and consistent with past practice.

SECTION 7.6.  Right of Inspection.  From time to time upon reasonable notice to the Borrower, the Borrower will permit any officer or employee of, or agent designated by, the Lender to visit and inspect any of the Properties of any Loan Party, examine such Loan Party’s corporate books or financial records, take copies and extracts therefrom, and discuss the affairs, finances, and accounts of such Loan Party with its officers, certified public accountants and legal counsel, all as often as the Lender may reasonably desire, provided that such visits and inspections shall be made only during business hours and so as not to interfere unreasonably with the business and operations of such Loan Party.  All confidential or proprietary information provided to or obtained by the Lender under this section or under any other provision of this Agreement shall be held in confidence by the Lender in the same manner and with the same degree of protection as the Lender exercises with respect to its own confidential or proprietary information.  For purposes of this section, all information provided to the Lender pursuant hereto shall be presumed to constitute “confidential and proprietary information” unless (i) the Borrower indicates otherwise in writing, (ii) the information was or becomes generally available to the public other than as a result of a disclosure in violation of this section by the Lender or its representatives, (iii) the information was or becomes available to the Lender or its representatives on a non-confidential basis from a source other than such Loan Party, (iv) the information was within the possession of the Lender or any of its representatives prior to being furnished by or on behalf of such Loan Party, provided that in each case the source of such information was not bound by a confidentiality agreement known to Lender in respect thereof preventing disclosure to the Lender or its representatives or (v) the information is independently developed by the Lender (but only if it does not contain or reflect, and is not based upon, in whole or in part, any information furnished hereunder which constitutes “confidential or proprietary information”).

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SECTION 7.7.  Insurance.  The Borrower will maintain insurance of similar types and coverages as maintained on the date hereof and consistent with past practice with financially sound and reputable insurance companies and associations acceptable to the Lender based on the Lender’s reasonable judgment (or as to workers’ compensation or similar insurance, in an insurance fund or by self-insurance authorized by the jurisdiction in which its operations are carried on).

SECTION 7.8.  Notice of Litigation.  The Borrower will promptly notify Lender in writing of any litigation, legal proceeding or dispute, other than disputes in the ordinary course of business or, whether or not in the ordinary course of business, involving amounts in excess of $25,000, and any investigation of the Borrower by any Governmental Authority, which could reasonably be expected to adversely affect the Borrower or any Loan Party whether or not fully covered by insurance, and regardless of the subject matter thereof.

SECTION 7.9.  Maintenance of Office.  The Borrower will maintain its chief executive office at 11781 Lone Peak Parkway, Suite 270, Draper, Utah 84020, or at such other place in the United States of America as it shall designate upon written notice to the Lender, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents to which it is a party may be given or made.  The Borrower shall notify the Lender in writing of its intent to relocate any of its Property at least ten Business Days prior to the date of such proposed relocation, specifying the Property to be relocated and the location to which it will be relocated.

SECTION 7.10. Existence.  The Borrower will, and will cause each Loan Party to preserve and maintain its legal existence and all of its material rights, privileges, licenses, contracts and Property and assets used or useful to its business.

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SECTION 7.11.  Financial Statements.  Borrower shall furnish Lender within one hundred and five (105) days after the end of each fiscal year of Borrower, financial statements of Borrower and its Subsidiaries on a consolidated basis including, but not limited to, statements of income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and reported upon without qualification by the Borrower’ public accountants.  Buyer’s annual financial statements required hereunder shall be accompanied by a certificate of Borrower’s Chief Financial Officer which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrower with respect to such event.

In addition, Borrower shall furnish Lender within thirty (30) days after the end of each month, an unaudited balance sheet of Borrower and its Subsidiaries on a consolidated basis and unaudited statements of income and stockholders’ equity and cash flow of Borrower and its Subsidiaries on a consolidated basis reflecting results of operations from the beginning of the fiscal year to the end of such month and for such month, prepared on a basis consistent with prior practices and complete and correct in all material respects, subject to normal and recurring year end adjustments that individually and in the aggregate are not material to the business of Borrower. Each such balance sheet, statement of income and stockholders’ equity and statement of cash flow shall set forth a comparison of the figures for (w) the current fiscal period and (x) the current year-to-date with the figures for (y) the same fiscal period and year-to-date period of the immediately preceding fiscal year and (z) the projections for such fiscal period and year-to-date period.  The monthly financial statements shall be accompanied by a certificate of Borrower’ Chief Financial Officer, which shall state that, based on an examination sufficient to permit him to make an informed statement, no Default or Event of Default exists, or, if such is not the case, specifying such Default or Event of Default, its nature, when it occurred, whether it is continuing and the steps being taken by Borrower with respect to such event.

SECTION 7.12. Further Assurances.  The Borrower will cooperate with the Lender and execute, and will cause each Loan Party to execute, such further instruments and documents as the Lender shall reasonably request to carry out to its satisfaction the transactions contemplated by this Agreement and the other Loan Documents.

ARTICLE VIII.

NEGATIVE COVENANTS

Until such time as all Obligations shall be indefeasibly paid in full, the Borrower covenants and agrees that, without the written consent of the Lender:

SECTION 8.1. Impairment of Rights.  The Borrower will not undertake, or permit any Loan Party to undertake, any action or engage in any transaction or activity the intent or reasonably expected consequences of which may be to impair the Lender’s rights hereunder.

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SECTION 8.2. Restrictions on Debt.  The Borrower and its Subsidiaries will not create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Debt other than:

(a)     Debt to the Lender arising under any of the Loan Documents;

(b)     liabilities of Borrower or its Subsidiaries incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services;

(c)     outstanding liabilities of Borrower as of the date of execution of this Agreement all of which are listed on Schedule 8.2 attached hereto;

(d)     Debt incurred in the Ordinary Course of Business in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 7.4;

(e)     Debt in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or any its Subsidiaries shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review;

(f)      endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; and

(g)     Debt owed by the Borrower or its Subsidiaries to trade vendors, in the amount of the cost to the Loan Party of inventory held on consignment from such trade vendors, including, without limitation, in connection with and pursuant to agreements with such trade vendors.

SECTION 8.3. Restrictions on Liens.  The Borrower and its Subsidiaries shall not (i) create or incur or suffer to be created or incurred or to exist any Lien upon any of their respective Property, or upon the income or profits therefrom; (ii) transfer any of such Property or the income or profits therefrom for the purpose of subjecting the same to the payment of Debt or performance of any other obligation in priority to payment of its general creditors; (iii) except in the Ordinary Course of Business, acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (iv) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Debt or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (v) except in the Ordinary Course of Business, sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; provided that the Borrower and its Subsidiaries may create or incur or suffer to be created or incurred or to exist (the “Permitted Liens”):

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(a)     liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue;

(b)     deposits or pledges made in connection with, or to secure payment of, workmen’s compensation, unemployment insurance, old age pensions or other social security obligations;

(c)     liens on properties in respect of judgments or awards, the Debt with respect to which is permitted by Section 8.2(d);

(d)     encumbrances on real estate consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord’s or lessor’s liens under leases to which the Borrower or its Subsidiaries is a party, and other minor liens or encumbrances none of which in the opinion of the Lender interferes materially with the use of the Property affected in the ordinary conduct of the business of the such Loan Party, which defects do not individually or in the aggregate have a Material Adverse Effect on the business of the Borrower and its Subsidiaries, individually or on a consolidated basis; and

(e)     purchase money security interests incurred in the ordinary course.

SECTION 8.4. Mergers and Acquisitions.  The Borrower and its Subsidiaries will not become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices) other than the Merger, unless such transaction expressly requires the repayment of the Notes and any and all outstanding interest and the Notes and all interest thereon are in fact paid in full at the closing of such transaction.

The Borrower and its Subsidiaries will not agree to or effect any asset acquisition, except for raw materials and inventory in the Ordinary Course of Business, or issue additional membership interest, other than pursuant to the Merger Agreement, without the prior written consent of the Lender, unless such transaction expressly requires the repayment of the Note and any and all outstanding interest at the closing of such transaction and the Notes and all interest thereon are in fact paid in full at the closing of such transaction. The Borrower and its Subsidiaries will not create or form any new Subsidiaries without the prior written consent of Lender.

SECTION 8.5. Issuance of Equity Interests.  Except for the Equity Interests set forth in  Section  3.3  of the Sequoia Disclosure Schedule to the Merger Agreement, the Borrower and its Subsidiaries will not issue any Equity Interests, as the case may be, including, without limitation, any issuance of warrants, options or subscription or conversion rights (other than under any existing employee compensation scheme), unless (i) the Borrower or its Subsidiaries receives solely cash proceeds from each such issuance, (ii) the net proceeds from such issuance are applied in accordance with Section 3.2 hereof and (iii) no Default or Event of Default has occurred and is continuing at the time any such issuance is consummated and none would exist (whether or not after the expiration of time or giving of notice or both) after giving effect thereto.  The parties agree that any proceeds received by Borrower pursuant to the exercise of Equity Interests set forth in Section  3.3  of the Sequoia Disclosure Schedule  to  the Merger Agreement, need not be applied in accordance with Section 3.2 and may be retained by Borrower for use in its operations.

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ARTICLE IX.

EVENTS OF DEFAULT

SECTION 9.1. Events of Default.  If any of the following events (“Events of Default”) shall occur and shall not have been cured within one calendar day (in the case of monetary defaults) or 7 calendar days (in the case of all other defaults) unless a shorter period of time is specified below:

(a)     the Borrower shall fail to pay principal of or interest on the Notes or other amounts due under the Notes or this Agreement or any other Loan Document, when the same becomes due and payable; or

(b)     any representation or warranty made any Loan Party (or any of its officers) under or in connection with any Loan Document shall prove to have been untrue or incorrect in any material respects, when made or deemed made; or

(c)     any Loan Party shall fail to perform or observe any term, covenant or agreement contained herein or in any other Loan Document within 15 days after a senior officer has knowledge thereof or receives notice thereof, written notice from the Lender to cure same, whichever is sooner; or

(d)     any Loan Party shall fail to pay any principal of, or premium or interest on, any Debt in excess of $25,000 when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) unless being contested in good faith, and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event constituting a default (however defined) shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, which would give rise to a right to accelerate such Debt; or

(e)     the Borrower fails to use the proceeds from the Advance in accordance with the stated use therefor as contemplated by Section 7.3; or

(f)     any Loan Party is enjoined, restrained or in any way prevented by any Governmental Authority from conducting any material part of its business; any Loan Party suffers the loss, revocation or termination of any material license, permit, lease or agreement necessary to its business; there is a cessation of any material part of an Loan Party's business for a material period of time; any material Collateral or Property of an Loan Party is taken or impaired through condemnation; any Loan Party agrees to or commences any liquidation, dissolution or winding up of its affairs; or any Loan Party ceases to be Solvent;

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(g)     any Insolvency Proceeding is commenced by any Loan Party; an Insolvency Proceeding is commenced against any Loan Party and: such Loan Party consents to the institution of the proceeding against it, the petition commencing the proceeding is not timely controverted by such Loan Party, such petition is not dismissed within 30 days after its filing, or an order for relief is entered in the proceeding; a trustee (including an interim trustee) is appointed to take possession of any substantial Property of or to operate any of the business of any Loan Party; or any Loan Party makes an offer of settlement, extension or composition to its unsecured creditors generally;

(h)     the Borrower shall attempt to liquidate or dissolve itself, without the prior written consent of the Lender; or

(i)      there shall occur any Change of Control.

then, and in any such event, Lender (after providing the notice and opportunity to cure set forth in the first clause of this Section) may, by notice to the Borrower, declare the principal amount of the Note, all interest thereon and all other Obligations or amounts payable under this Agreement or any other Loan Document to be forthwith due and payable, whereupon the Note, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and all interest on and principal of all other Debt owed by the Borrower to the Lender shall likewise become and be forthwith due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided however, that in the case of any Default pursuant to Subsections (g), and (j) of this Section 9.1, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest, right to cure or any notice of any kind, all of which are hereby expressly waived by the Borrower.

SECTION 9.2. Remedies.  Upon the occurrence and during the continuance of an Event of Default:

(a)     Lender may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein, in the other Loan Documents, or otherwise available to it, all the rights and remedies of a secured party on default under the UCC or any other applicable law. Without limiting the generality of the foregoing, Borrower expressly agrees that, in any such event, Lender without demand of performance or other demand, advertisement or notice of any kind (except a notice specified below of time and place of public or private sale) to or upon Borrower or any other Person (all and each of which demands, advertisements and notices are hereby expressly waived to the maximum extent permitted by the UCC or any other applicable law), may take immediate possession of all or any portion of the Collateral and (i) require Borrower to, and Borrower hereby agrees that it will at its own expense and upon request of Lender forthwith, assemble all or part of the Collateral as directed by Lender and make it available to Lender at one or more locations where Borrower regularly maintains inventory, and (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of Lender’s offices or elsewhere, for cash, on credit, and upon such other terms and at such prices as Lender may deem commercially reasonable.  Borrower agrees that, to the extent notice of sale shall be required by law, at least 10 days notice to Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification and specifically such notice shall constitute a reasonable “authenticated notification of disposition” within the meaning of Section 9-611 of the UCC.  Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given.  Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

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(b)     Lender is hereby granted an irrevocable license or other right to use, without liability for royalties or any other charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks and advertising matter, URLs, domain names, industrial designs, other industrial or intellectual property or any property of a similar nature, whether owned by any Borrower or with respect to which any Borrower has rights under license, sublicense, or other agreements, as it pertains to the Collateral, in preparing for sale, advertising for sale and selling any Collateral, and Borrower’s rights under all licenses and all franchise agreements shall inure to the benefit of Lender.

(c)     Any cash held by Lender as Collateral and all cash proceeds received by Lender in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied against the Obligations in the order set forth in the Credit Agreement. In the event the proceeds of Collateral are insufficient to satisfy all of the Obligations in full, Borrower shall remain jointly and severally liable for any such deficiency.

(d)     Borrower hereby acknowledges that the Obligations arose out of a commercial transaction, and agrees that if an Event of Default shall occur Lender shall have the right to an immediate writ of possession without notice of a hearing. Lender shall have the right to the appointment of a receiver for the properties and assets of Borrower, and Borrower hereby consents to such rights and such appointment and hereby waives any objection Borrower may have thereto or the right to have a bond or other security posted by Lender.

SECTION 9.3. Remedies Cumulative.  Each right, power, and remedy of Lender as provided for in this Agreement or in the other Loan Documents or now or hereafter existing at law or in equity or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power, or remedy provided for in this Agreement or in the other Loan Documents or now or hereafter existing at law or in equity or by statute or otherwise, and the exercise or beginning of the exercise by Lender, of any one or more of such rights, powers, or remedies shall not preclude the simultaneous or later exercise by Lender of any or all such other rights, powers, or remedies.

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SECTION 9.4. Marshaling.  Lender shall not be required to marshal any present or future collateral security (including but not limited to the Collateral) for, or other assurances of payment of, the Obligations or any of them or to resort to such collateral security or other assurances of payment in any particular order, and all of its rights and remedies hereunder and in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights and remedies, however existing or arising.  To the extent that it lawfully may, Borrower hereby agrees that it will not invoke any law relating to the marshaling of collateral which might cause delay in or impede the enforcement of Lender’s rights and remedies under this Agreement or under any other instrument creating or evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, Borrower hereby irrevocably waives the benefits of all such laws.

ARTICLE X.

MISCELLANEOUS

SECTION 10.1. Survival of Representations and Warranties.  All representations and warranties in each Loan Document shall survive the delivery of the Notes and the making of the Advance, and shall continue after the repayment of the Notes and the Maturity Date until all Obligations are indefeasibly paid in full, and any investigation at any time made by or on behalf of the Lender shall not diminish the Lender’s right to rely thereon.

SECTION 10.2. Amendments, Etc.  No amendment or waiver of any provision of this Agreement or the Note, or any other Loan Document, nor consent by Lender to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

SECTION 10.3. Notices, Etc.  All notices and other communications provided for hereunder shall be in writing (including by telex or telefacsimile transmission) and shall be effective when actually delivered, or in the case of telex notice, when sent, answerback received, or in the case of telefacsimile transmission, when received and telephonically confirmed, addressed as follows:  if to Borrower or any other Loan Party, to Sequoia Media Group, LC at its address at 11781 Lone Peak Parkway, Suite 270, Draper, Utah 84020, Attention:  Edward B. Paulsen, Facsimile Number: (801) 495-5701; if to the Lender, at its address at 2900 Wilcrest Drive, Suite 105, Houston, Texas 77042, Attention:  Chief Executive Officer, Facsimile Number: (713) 895- 7773 ; or as to the Borrower or the Lender at such other address as shall be designated by such party in a written notice to the other parties.

SECTION 10.4. No Waiver; Remedies.  No failure on the part of the Lender to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right.  The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

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SECTION 10.5. Expenses and Attorneys’ Fees.  Whether or not the transactions contemplated hereby shall be consummated, each Loan Party agrees to promptly pay all fees, costs and expenses incurred in connection with any matters contemplated by or arising out of this Agreement or the other Loan Documents including the following, and all such fees, costs and expenses shall be part of the Obligations, payable on demand and secured by the Collateral: (a) fees, costs and expenses incurred by Lender (including reasonable attorneys’ fees and expenses and fees of consultants, accountants and other professionals retained by Lender) incurred in connection with the examination, review, due diligence investigation, documentation and closing of the financing arrangements evidenced by the Loan Documents; (b) fees, costs and expenses incurred by Lender (including reasonable attorneys’ fees and expenses, the allocated costs of Lender’s internal legal staff and fees of environmental consultants, accountants and other professionals retained by Lender) incurred in connection with the review, negotiation, preparation, documentation, execution, syndication and administration of the Loan Documents, the Loans, and any amendments, waivers, consents, forbearances and other modifications relating thereto or any subordination or intercreditor agreements, including reasonable documentation charges assessed by Lender for amendments, waivers, consents and any other documentation prepared by Lender’s internal legal staff; (c) fees, costs and expenses (including reasonable attorneys’ fees) incurred on behalf of Lender in creating, perfecting and maintaining perfection of Liens in favor of Lender; (d) fees, costs and expenses incurred by Lender in connection with forwarding to Borrower the proceeds of Loans including Lender’s bank’s standard wire transfer fee; (e) fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by Lender in establishing, maintaining and handling lock box accounts, blocked accounts or other accounts for collection of the Collateral; and (f) fees, costs, expenses (including reasonable attorneys’ fees and allocated costs of internal legal staff) of Lender and costs of settlement incurred in collecting upon or enforcing rights against the Collateral or incurred in any action to enforce this Agreement or the other Loan Documents or to collect any payments due from the Borrower or any other Loan Party under this Agreement or any other Loan Document or incurred in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement, whether in the nature of a “workout” or in connection with any insolvency or bankruptcy proceedings or otherwise.

SECTION 10.6. Indemnity.  In addition to the payment of expenses pursuant to Section 10.5, whether or not the transactions contemplated hereby shall be consummated, each Loan Party agrees to indemnify, pay and hold Lender, and the officers, directors, and employees of, or consultants, auditors and other persons engaged by Lender, to evaluate or monitor the Collateral, affiliates and attorneys of Lender and such holders (collectively called the “Indemnitees”) harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disburse­ments of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of this Agreement or the other Loan Documents, the consummation of the transactions contemplated by this Agreement, the statements contained in the commitment letters, if any, delivered by Lender, and the Lender’s agreement to make the Loans hereunder, the use or intended use of the proceeds of any of the Loans or the exercise of any right or remedy hereunder or under the other Loan Documents (the “Indemnified Liabilities”); provided that no Loan Party shall have any obligation to an Indemnitee hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of that Indemnitee as determined by a final non-appealable judgment by a court of competent jurisdiction.

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SECTION 10.7. Right of Set-off.  Upon the occurrence and during the continuance of any Event of Default, the Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other Debt at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Document, whether or not the Lender shall have made any demand under the Notes and although such obligations may be unmatured.  Lender agrees promptly to notify Borrower after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application.  The rights of the Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such the Lender may have.

SECTION 10.8. Binding Effect.  This Agreement shall become effective when it shall have been executed by the Borrower and the Lender and thereafter shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that neither the Borrower nor the Lender (except as provided in Section 10.9) shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other.

SECTION 10.9. Assignments and Participations.  The Lender may assign all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of the Notes held by it), whether pursuant to a sale of participations or otherwise.

SECTION 10.10. Limitation on Agreements.  All agreements between the Borrower or the Lender, whether now existing or hereafter arising and whether written or oral, are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of demand being made in respect of an amount due under any Loan Document or otherwise, shall the amount paid, or agreed to be paid, to the Lender for the use, forbearance, or detention of the money to be loaned under the Notes or any other Loan Document or otherwise or for the payment or performance of any covenant or obligation contained herein or in any other Loan Document exceed the Highest Lawful Rate.  If, as a result of any circumstance whatsoever, fulfillment of or compliance with any provision hereof or of any of such Loan Documents at the time performance of such provision shall be due or at any other time shall involve exceeding the amount permitted to be contracted for, taken, reserved, charged or received by the Lender under applicable usury law, then, ipso facto, the obligation to be fulfilled or complied with shall be reduced to the limit prescribed by such applicable usury law, and if, from any such circumstance, the Lender shall ever receive interest or anything which might be deemed interest under applicable law which would exceed the Highest Lawful Rate, such amount which would be excessive interest shall be applied, in the Lender’s sole discretion, to the reduction of the principal amount owing on account of the Notes or the amounts owing on other Obligations of the Loan Parties to the Lender under any Loan Document and not to the payment of interest, or if such excessive interest exceeds the unpaid principal balance of the Notes and the amounts owing on other Obligations of the Borrower to the Lender under any Loan Document, as the case may be, such excess shall be refunded to the Borrower.  All sums paid or agreed to be paid to the Lender for the use, forbearance, or detention of the indebtedness of the Borrower to the Lender shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full term of such indebtedness until payment in full of the principal (including the period of any renewal or extension thereof) so that the interest on account of such indebtedness shall not exceed the Highest Lawful Rate.  Notwithstanding anything to the contrary contained in any Loan Document, it is understood and agreed that if at any time the rate of interest which accrues on the outstanding principal balance of the Notes shall exceed the Highest Lawful Rate, the rate of interest which accrues on the outstanding principal balance of the Notes shall be limited to the Highest Lawful Rate, but any subsequent reductions in the rate of interest which accrues on the outstanding principal balance of the Notes shall not reduce the rate of interest which accrues on the outstanding principal balance of such Notes below the Highest Lawful Rate until the total amount of interest accrued on the outstanding principal balance of the Notes, taken in the aggregate, equals the amount of interest which would have accrued if such interest rate had at all times been in effect and not been reduced.  In the event that any rate of interest under the Notes or any Loan Document is reduced due to the effect of this Section 10.10 and there is a subsequent increase in the Highest Lawful Rate, such interest rate shall, automatically without any action of the Borrower or Lender, be increased to the then applicable Highest Lawful Rate.  The terms and provisions of this Section 10.10 shall control and supersede every other provision of all Loan Documents.

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SECTION 10.11. Severability.  In case any one or more of the provisions contained in any Loan Document to which the Borrower is a party or in any instrument contemplated thereby, or any application thereof, shall be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained therein, and any other application thereof, shall not in any way be affected or impaired thereby.

SECTION 10.12. Governing Law.  This Agreement and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts made and to be performed entirely within such state.

SECTION 10.13. SUBMISSION TO JURISDICTION; WAIVERS.  THE BORROWER AND THE LENDER IRREVOCABLY AND UNCONDITIONALLY:

(a)     SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

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(b)     WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c)     AGREES THAT SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING OF A COPY THEREOF (BY REGISTERED OR CERTIFIED MAIL OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL POSTAGE PREPAID) TO THE ADDRESS SET FORTH IN SECTION 10.3 HEREOF OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED IN WRITING PURSUANT TO SECTION 10.3.

(d)     THE BORROWER AND THE LENDER EACH WAIVES ITS RIGHT TO JURY TRIAL WITH RESPECT TO ANY LEGAL ACTION ARISING UNDER THIS AGREEMENT.

SECTION 10.14.  Reserved.

SECTION 10.15. Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by facsimile, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

SEQUOIA MEDIA GROUP, LC
By:	/S/ Edward B. Paulsen
	Name:	Edward B. Paulsen
	Title:	Secretary/Treasurer/CEO
SECURE ALLIANCE HOLDINGS CORPORATION
By:	/S/ Stephen P. Griggs
	Name:	Stephen P. Griggs
	Title:	President

SECURED NOTE

$1,000,000 __________, 2007

FOR VALUE RECEIVED, the undersigned (the “Borrower”), HEREBY PROMISES TO PAY to the order of Secure Alliance Holdings Corporation (the “Lender”), on or before the Maturity Date (as such term is defined in the Loan Agreement), the principal sum of One Million and No/100 Dollars ($1,000,000.00) in accordance with the terms and provisions of that certain Loan and Security Agreement dated as of ________, 2007 by and between the Borrower and the Lender (as same may be amended, modified, increased, supplemented and/or restated from time to time, the “Loan Agreement”; capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement).

The outstanding principal balance of this Note, together with all accrued and unpaid interest thereon, shall be due and payable on the Maturity Date.  The Borrower promise to pay interest on the unpaid principal balance of this Note from the Issue Date until the principal balance thereof is paid in full.  Interest shall accrue on the outstanding principal balance of this Note from and including the Issue Date to and including the Maturity Date at the rate or rates, and shall be due and payable on the dates and paid in accordance with the terms and conditions, set forth in the Loan Agreement.

Payments of principal and interest, and all Fees, and amounts due with respect to costs and expenses pursuant to the Loan Agreement, shall be made in lawful money of the United States of America in immediately available funds, without deduction, set-off or counterclaim to the Lender to the account maintained by the Lender not later than 11:59 a.m. (New York time) on the dates on which such payments shall become due pursuant to the terms and provisions set forth in the Loan Agreement.  Interest due under the Note shall be payable monthly in arrears on the first day of each succeeding month, commencing one month from the Issue Date, at the Interest Rate, in cash. All interest payable on the Maturity Date shall be paid in cash.  Lender is hereby authorized by Borrower to enter and record on the schedule attached hereto the amount outstanding from time to time under this Note and each payment and prepayment of principal thereon without any further authorization on the part of Borrower.

After the occurrence and during the continuance of an Event of Default, interest shall be payable at the Default Rate.

At its option, Borrower may make prepayments of principal hereof without penalty, in whole or in part, at any time, provided that on the date of each such prepayment Borrower shall pay all then accrued and unpaid interest on the principal amount hereof.  The Obligations of the Borrower under this Note and any additional note issued hereunder are secured by the Liens and security interests granted pursuant to the Loan Agreement and the other Loan Documents and are entitled to the benefit of the Loan Agreement and the other Loan Documents, and are subject to all of the agreements, terms and conditions therein combined.

If any payment of principal or cash interest on this Note shall become due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in such case be included in computing cash interest in connection with such payment.

This Note is the Note provided for in, and is entitled to the benefits of the Loan and Security Agreement, which, among other things, contain provisions for acceleration of the maturity hereof upon the happening of certain stated events, for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions and with the effect therein specified, and provisions to the effect that no provision of the Loan Agreement or this Note shall require the payment or permit the collection of interest in excess of the Highest Lawful Rate.

The Borrower and any and all endorsers, guarantors and sureties severally waive grace, demand, presentment for payment, notice of dishonor or default, protest, notice of protest, notice of intent to accelerate, notice of acceleration and diligence in collecting and bringing of suit against any party hereto, and agree to all renewals, extensions or partial payments hereon and to any release or substitution of security hereof, in whole or in part, with or without notice, before or after maturity.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.

IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed and delivered effective as of the date first above written.

SEQUOIA MEDIA GROUP, LC
By:
	Name:
	Title:

SCHEDULE TO NOTE

Borrower:  Sequoia Media Group, LC Date of Note:  _______, 2007

DATE AMOUNT OF INTEREST PRINCIPAL PAYMENTS UNPAID PRINCIPAL BALANCE OF NOTE NAME OF PERSON MAKING NOTATION

EX-31.1

Exhibit 31.1

Section 302 Certification

I, JERRELL G. CLAY, certify that:

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended September 30, 2007 of Secure Alliance Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  January 14, 2008

/s/ JERRELLG.CLAY

JERRELLG.CLAY

Principal Executive Officer

Secure Alliance Holdings Corporation

EX-31.2

Exhibit 31.2

Section 302 Certification

I, STEPHEN P. GRIGGS, certify that:

1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended September 30, 2007 of Secure Alliance Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  January 14, 2008

/s/ STEPHENP.GRIGGS

STEPHENP.GRIGGS

Principal Financial Officer

Secure Alliance Holdings Corporation

EX-32.1

Exhibit 32.1

Certification Pursuant To

18 U.S.C. Section 1350

As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

This certification is provided pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. ss. 1350, and accompanies the  Annual Report on Form 10-K for the fiscal year ended September 30, 2007 of Secure Alliance Holdings Corporation (the Company) as filed with the Securities and Exchange Commission on the date hereof (the Report).

I, JERRELL G. CLAY, Principal Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JERRELLG.CLAY

JERRELLG.CLAY

Principal Executive Officer

January 14, 2008

EX-32.2

Exhibit 32.2

Certification Pursuant To

18 U.S.C. Section 1350

As Adopted Pursuant To

Section 906 of the Sarbanes-Oxley Act of 2002

This certification is provided pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. ss. 1350, and accompanies the  Annual Report on Form 10-K for the fiscal year ended September 30, 2007 of Secure Alliance Holdings Corporation (the Company) as filed with the Securities and Exchange Commission on the date hereof (the Report).

I, Stephen P. Griggs, Principal Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ STEPHENP.GRIGGS

STEPHENP.GRIGGS

Principal Financial Officer

January 14, 2008